SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No. )

 

(Name of Registrant as Specified In Its Charter)

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

 

 

Hologic values the views of its stockholders, which is why we regularly and proactively engage with our largest stockholders throughout the year. During fiscal 2021, management met or offered to meet with stockholders representing approximately 50% of our outstanding shares to discuss our business strategy, our approach to executive compensation and supporting employees in light of the evolving COVID-19 pandemic as well as ESG progress. Stockholder feedback and perspectives are shared with the Board. See also Stockholder Engagement on page 15 of this proxy statement.

As a public company, we understand that creating value for our stockholders is one of our fundamental obligations, but we believe how we create that value is important. By focusing on our unique Purpose, Passion and Promise, we strive to generate long-term, profitable growth that benefits not just our stockholders, but also our customers and patients around the globe. These principles inspired our team’s incredible efforts since the pandemic began and put us in a position to seize the opportunities COVID-19 presented as well as mitigate the risks. While we certainly did not predict the COVID-19 pandemic, we did put in place people, processes and capabilities that enabled us to adapt quickly, make a massive contribution to human health, drive value for customers, employees and stockholders and strengthen our base businesses.

The Compensation Committee has responsibility for oversight of the Company’s executive compensation framework, and within that framework, works with management to align pay with performance.

 

 

The charts above, which reflect target total direct compensation, exclude the value of other benefits and perquisites.

The Company has invested significantly in its people, infrastructure and products. The power of focused, motivated people is evident, and has driven growth in revenue and profits over the past eight years. Under Mr. MacMillan’s leadership, revenue, on average, has increased by 12% annually over that time period, and our excellent financial results in fiscal 2021 bolstered this trend.

Under the stewardship of our management team, with significant contributions by our commercial teams, we have accomplished the following:

This proxy contains forward-looking information that involves risks and uncertainties, including statements about the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company’s strategies, positioning, resources, capabilities, and expectations for future performance including with regard to sustainability and human capital matters; and the Company’s business and financial outlook. These forward-looking statements are based upon current expectations and assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.

These risks and uncertainties include, without limitation: the severity and duration of the COVID-19 pandemic (including variants) and its impact on the U.S. healthcare system, the U.S. economy and worldwide economy; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses, including emerging vaccine mandates, to the COVID-19 pandemic; disruption of supply chains, including the availability of critical raw materials and components, including semiconductor chips, as well as cost inflation in materials, packaging and transportation; manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; continued demand for the Company’s COVID-19 assays; the Company’s ability to manufacture, on a scale necessary to meet demand, its COVID-19 assays, as well as the Panther systems on which the assay runs; U.S., European and general worldwide economic conditions, trade relations, and related uncertainties; the Company’s ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees and maintain engagement and efficiency in remote work environments; the Company’s reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; changes to applicable laws and regulations, including tax laws, global health care reform, and import/export trade laws; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company’s ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company’s international activities and businesses; the early stage of market development for certain of the Company’s products; the Company’s leverage risks, including the Company’s obligation to meet payment obligations and financial covenants associated with its debt; cybersecurity risks; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.

The risks included above are not exhaustive. Other factors that could adversely affect the Company’s business and prospects are described in the filings made by the Company with the SEC. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.

Website references and hyperlinks throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated into, nor does it form a part of, this proxy statement.

We take a comprehensive, year-round view of corporate governance and our adoption of good governance practices enhances our accountability to stockholders. Hologic’s governance responsibilities are built on a foundation of interactive dialogue with stockholders, written principles and continuous improvement, which we believe will help us sustain our success, build trust in the Company and continue to create long-term stockholder value. To that end, the Company has in place Corporate Governance Guidelines, which are reviewed annually and are designed to assist the Company and the Board in implementing effective corporate governance practices. The Board has also adopted a Code of Conduct that applies to all of our employees, officers and directors and a Code of Ethics that applies specifically to senior financial officers (included as Appendix A to our Code of Conduct) setting the tone from the top. We review our Code of Conduct annually and make revisions as needed. The Company maintains a comprehensive compliance program, which is overseen by the Audit and Finance Committee, and a library of compliance policies which provide more detailed guidance to employees on a variety of topics, such as anti-bribery and anti-corruption laws, anti-discrimination and anti-harassment laws, privacy laws and many others. Hologic is a proud supporter of the ideals and values articulated by AdvaMed and is a signatory to the 2020 AdvaMed Code of Conduct. The Company also maintains a compliance hotline whereby compliance questions and concerns may be voiced via email or phone by employees and third parties alike, with an option to remain anonymous.

We also have written charters for each of the Board of Directors’ standing committees, which are reviewed annually. Information about Hologic’s corporate governance practices and copies of the Corporate Governance Guidelines, committee charters and Code of Conduct are available at investors.hologic.com. Hologic posts additional information on our website from time to time as the Board makes changes to our corporate governance practices.

Our Board believes that good governance requires not only an effective set of specific practices, but also a culture of responsibility and accountability throughout the organization. Governance at Hologic is intended to achieve both. Good governance ultimately depends on the quality of an organization’s leadership, and our Board is committed to recruiting and retaining directors and officers with proven leadership ability and personal integrity.

The Board has implemented corporate governance practices that it believes are both in the best interests of Hologic and our stockholders, as well as compliant with the rules and regulations of the SEC and the listing standards of Nasdaq. The Board reviews these practices on an ongoing basis.

Our Board has an ongoing commitment to Board refreshment and to having highly qualified, independent voices in the boardroom. The Board believes the fresh perspectives brought by new directors are critical to a forward-thinking and strategic Board when appropriately balanced with the deeper understanding of our business provided by longer-serving directors. The Board believes that its members, collectively, should possess diverse and complementary skills and experience in order to oversee our business and evaluate management strategy effectively.

Recognizing that the selection of qualified directors is complex and crucial to the long-term success of the Company, the Nominating and Corporate Governance Committee seeks to identify candidates who are prominent in their fields or otherwise possess exemplary qualities that will enable them to effectively function as directors. While the Committee does not believe it is appropriate to establish any specific minimum qualifications for directors, it focuses on character, reputation, and personal integrity, as well as candidates who reflect diverse backgrounds, including diversity of race, gender, ethnicity, culture and geography. The Board’s recruitment process reflects both a deliberate search for specific skills and experiences, as needed. This practice keeps our Board energized with valuable expertise and additional perspectives. Through purposeful refreshment, four new independent directors have been elected to our Board since December 2016.

Currently, 50% percent of our directors have been on our Board for six years or less.

The Board recognizes that one of its key responsibilities is to evaluate and determine the optimal leadership structure to best serve the interests of our stockholders. Given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. The Company’s Corporate Governance Guidelines provide the Board the flexibility to determine whether to have a combined or separate Chairman of the Board and Chief Executive Officer. In its annual review, the Board has affirmed combining the roles because it provides unified leadership and accountability in quickly and seamlessly identifying and carrying out the strategic priorities of the Company and designating a Lead Independent Director. With its Lead Independent Director, this governance structure also provides a form of leadership that allows the Board to function independently from management and exercise objective judgment regarding management’s performance and enables the Board to fulfill its duties effectively and efficiently. Hologic’s Corporate Governance Guidelines establish clearly defined roles and responsibilities designed to ensure that the Lead Independent Director retains a strong and independent voice in leading the Board.

 

The Board, on behalf of the Company and its stockholders, oversees the management of the Company. While the Company’s senior officers, under the direction of the Chief Executive Officer, are responsible for the day-to-day operations of the Company, the Board oversees the strategic, financial and management policies of the Company, and preparation of financial statements and other reports that accurately reflect requisite information about the Company. Taking an active role in the Company’s strategic direction, the Board regularly educates itself on the Company’s products, markets, customers, competition and culture. The Board assesses risk, evaluates management’s performance, plans for successors and provides overall guidance and direction to the Company.

One of the Board’s key responsibilities is overseeing the Company’s corporate strategy. The Board has deep expertise in strategy development and insight into the most important issues facing the Company. Using its knowledge, expertise and diverse composition, the Board regularly discusses the key priorities of our Company and its businesses, taking into consideration global economic, socioeconomic and regulatory trends, stakeholder interests and developments in healthcare.

Our Board is responsible for risk oversight. A fundamental part of risk oversight is understanding the risks that we face, the steps management is taking to manage those risks, and assessing our appetite for risk. Risk management systems, including our internal auditing procedures, internal control over financial reporting and corporate compliance programs, are designed in part to inform management about our material risks. Our Board receives regular reports from management on matters relating to strategic and operational initiatives, financial performance and legal developments, including the related enterprise-risk exposures. The involvement of the Board in the oversight of our strategic planning process is a key part of its assessment of the risks inherent in our corporate strategy.

Each year, the Board also reviews an enterprise risk management report (ERM report) compiled by business leaders who have assessed risk throughout the business over a three-year horizon, focusing on financial risk, legal/compliance risk and operational/strategic risk. The ERM report details the Company’s top ten risks as well as mitigating actions and plans relating to those risks. The ERM report includes a rolling three-year evaluation period reflecting mitigation activity progress and risk rating changes and is presented to and discussed with the Board each year. Underscoring the Board’s and management’s focus on enterprise risk are the individual performance objectives of the executive leadership team for fiscal 2021, which are aligned with the Company’s top enterprise risks, as identified in the ERM report.

While the Board has overall responsibility for risk oversight, each of the three standing committees of the Board regularly assesses risk in connection with executing their responsibilities.

Succession planning starts with Mr. MacMillan, his team and the Compensation and Nominating and Corporate Governance Committees but is continued with the full Board. The Board devotes significant time on its agenda to reviewing and discussing the succession plans for the CEO and each of his direct reports as part of building a diverse and inclusive workforce. In recent years, the Board and Mr. MacMillan have intensified their focus on succession planning. Mr. MacMillan provides a talent update at every Board and Compensation Committee meeting and the Board reviews in-depth succession plans at least annually, considering long-term, medium-term and short-term options. The Board also has exposure to succession candidates through their periodic participation in Board meetings and/or engagement outside of Board meetings.

While the Board, through the Nominating and Corporate Governance Committee, oversees stockholder matters and participates in meetings with stockholders, as appropriate, management has the principal responsibility for stockholder communications and engagement. As discussed below, management provides written and oral updates to the Board concerning stockholder feedback.

During fiscal 2021, we continued the year-round approach to stockholder engagement we implemented in 2015. In addition to discussions just before our Annual Meeting, we initiated discussions during a quieter period several months later, reaching out to a number of our largest stockholders, representing approximately 50% of our outstanding shares. Directors participate in these discussions as requested and are updated on any feedback.

As discussed above, our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, environmental, social and other governance matters. We value stockholder views and insights and believe that positive two-way dialogue builds informed relationships that promote transparency and accountability. We continued with our year-round approach to engagement and during fiscal 2021 we reached out to our top ten institutional stockholders, representing approximately 50% of our shares. Three of the ten institutional investors did not feel a meeting was necessary at this time. We also had numerous conversations with stockholders and investment analysts as part of our normal investor relations activities, frequently along with Mr. MacMillan. Details of stockholder feedback are incorporated throughout this proxy statement.

Overall, the meetings were positive and productive with our stockholders supporting our compensation programs and recognizing our compensation approach is truly performance based. Stockholders positively viewed the Company’s continued approach to recognizing and rewarding employees whose incredible efforts contributed to our improved performance throughout the COVID-19 pandemic (as discussed on page 17 in the section “Supporting employees in response to the COVID-19 pandemic” and in the Compensation Discussion and Analysis section). Investors also appreciated hearing that we reflected on their feedback as we evaluated our compensation program and structure and as a result introduced a three-year cumulative measurement to Free Cash Flow Performance Stock Units (FCF PSUs) and returned to a three-year measurement period for Return on Invested Capital Performance Stock Units (ROIC PSUs). The Compensation Committee also introduced a cap at target to the relative Total Shareholder Return Performance Stock Units (TSR PSUs) in the event of negative absolute TSR. Additionally, they were encouraged by the monthly Board meetings during the height of the COVID-19 pandemic and the level of Board engagement throughout this time, including continued in-person board meetings over the last two fiscal years. Lastly, stockholders recognized the Company’s progress on the ESG front, particularly regarding our high employee engagement, inclusion in the Dow Jones Sustainability Index for North America, and focus on important social initiatives to help improve healthcare access and equality (Hologic Global Women’s Health Index, Project Health Equality and Global Access Initiative).

In general, any stockholder communication directed to our Board or one of its committees will be delivered to our Board or the appropriate committee. However, the Company reserves the right not to forward to our Board any abusive, threatening or otherwise inappropriate materials. Stockholders may contact our Board and committees thereof by writing to them in care of Corporate Secretary, Hologic, Inc., 250 Campus Drive, Marlborough, MA 01752.

Led by our senior management team and overseen by our Nominating and Corporate Governance Committee along with the Board of Directors, Hologic’s sustainability efforts are founded on the principle that virtually all business decisions have economic, environmental and social implications. We believe that integrating these considerations into our business strategy and decisions is an important part to growing the long-term success of the Company and benefits our stockholders, customers and employees. Likewise, we strive to nurture and engage our employees and to respect our suppliers and our communities. We are compelled through our Purpose, Passion and Promise to improving the health of our communities, customers, patients and employees, and to ensuring that the decisions we make today have a positive effect on future generations.

We have strived to build upon and expand from our initial sustainability disclosure in 2016 and published our second Sustainability Report in February 2021, which is available on investors.hologic.com. To manage the process, we formed a cross-functional internal steering committee consisting of senior leaders across all areas of the Company, which then presented its findings to the Nominating and Corporate Governance Committee and the full Board. The steering committee held meetings and reviewed sustainability frameworks, including those published by the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and the Task Force on Climate-related Finance Disclosures (TCFD) which helped us develop our framework for the report and identify relevant topics for disclosure. We are committed to incorporating these issues into our business operations, and to continually evaluate our sustainability issues for future reporting. Our efforts were recognized by MSCI, a leading provider of ESG support tools for the global investment community, where our rating improved from A to AA, placing us within the top quartile among our peers of ESG performance, Investors Business Daily named us one of their top 100 ESG stocks; we were added to the Dow Jones Sustainability Index for North America; and Newsweek named us one of America’s 500 most responsible companies. We look to build on sharing our efforts through subsequent Sustainability Reports in the journey that began several years ago to demonstrate our commitment to sustainable business practices.

Attracting and retaining key talent is a high priority for our management team and our Board. To enhance the Board’s understanding of the Company’s culture and talent pipeline, the Board conducts meetings and schedules site visits at the Company’s locations, meets regularly with high-potential executives in formal and informal settings and also reviews and discusses the results of the Company’s annual employee engagement survey.

At Hologic, our approximately 6,700 employees worldwide deliver on our Purpose, Passion and Promise with great ideas, innovations and leadership to propel our organization forward.

Our goal is to develop and maintain a talented, engaged and diverse workforce that has a positive impact on our performance, and our customers and their patients. We have been conducting an annual engagement survey since 2015 in which most of our employees regularly participate. We believe our foundation of employee engagement, our commitment to our employees and their commitment to each other, fortifies our leaders and teams and their performance. We also offer a range of programs to develop our managers and enhance our leadership across the Company. Our efforts are aimed at increasing organizational talent and capabilities and identifying and developing potential successors for key leadership positions.

We invest in the physical, emotional and financial well-being of our employees by providing robust compensation and benefits programs. These programs (which vary by country/region) include a variety of health plan options, tax-favorable savings accounts and other wellness offerings to help make life better.

 

 

As our passion is to be global champions for women’s health, we are committed to creating an inclusive and diverse work environment that promotes equal opportunity, dignity and respect, starting with our Board and our Leadership team. Currently, three of our directors, representing 38% of the Board, are women and one of our directors self-identifies as Asian. For each of the past 11 years, women have comprised over 30% of our Board. Also, three of our directors were born outside of the United States, and two were predominantly educated outside of the United States, which promotes global diversity for our Board. We believe that our focus on the lives of women has enabled us to organically attract a diverse workforce and build an inclusive ethos where different perspectives are valued and respected. Building a diverse workforce begins with our hiring practices and extends to our access to opportunities, strategic development and promotion of internal talent. We seek to identify and develop high-potential women and other diverse individuals within the Company. In addition to women holding several key roles (Chief Financial Officer; Chief HR Officer; Division President, Breast and Skeletal Health; Vice President, Diagnostic Sales and Commercial Excellence; Treasurer; Vice President of Tax, and Chief of Staff), African American leaders have assumed important commercial leadership roles as Division President, GYN Surgical, and Vice President of Sales, Breast and Skeletal Health. Additionally, given that our commercial teams are an important pipeline for senior management, we are pleased that a significant number of our commercial team members below the level of vice president are women and/or people of color. As our Company has expanded globally, we have built and grown local teams with in-country expertise and knowledge that represent more than 35 countries.

We strive to hire the most talented person for the job and believe that, over time, this will lead to an increasingly diverse workforce. As a part of finding the most qualified people, we seek to identify and consider diverse slates of candidates for roles across the organization, from the boardroom and c-suite to all levels of the workforce. We believe our focus on talent identification, development, engagement and succession planning has been particularly successful in developing a deep and diverse talent pipeline. For example, when Mr. MacMillan became CEO in late 2013, the GLT he joined was comprised entirely of white men. As of January 1, 2022, the GLT consisted of 31% women and 23% ethnically diverse members, demonstrating our commitment to diversity while understanding more progress will be made.

At Hologic, we take the role we play as leaders in the communities where we live and work seriously. Our Company’s response to the COVID-19 pandemic highlighted our ability to “do well by doing good” and allowed us to significantly expand our philanthropic activities. We center our giving efforts in three specific areas in an effort to maximize our impact in ways that align with the values of our employees and customers, as well as with organizations that share our values and commitment to promoting healthier lives. For us, those areas are: women’s health and other healthcare fields in which we operate; science, technology, engineering and math education (STEM), especially for underprivileged groups; and social and racial equality, especially in healthcare. In 2021, the Company contributed $25 million to its corporate charitable fund, the largest contribution in Company history. Over the next several years, we intend to increase and expand our support of causes and issues that align with Hologic’s mission. In the first quarter of fiscal 2022, we announced a further expansion to our philanthropic efforts with a pledge to make $5 million in donations to non-profit organizations located near our major facilities during the fiscal year. In addition, based on the belief that education is the key to social equality, we created two scholarship programs focused on lower-income and first-generation college students – one for families of Company employees and another for non-profit groups that provide college readiness programs. We also introduced an employee matching program to supplement donations that many of our employees make to non-profit organizations of their choice and support employees in giving back to community organizations through volunteering.

In October 2020, Hologic announced Project Health Equality, a multi-year partnership with the Black Women’s Health Imperative, the only nonprofit organization created by Black women to help protect and advance the health and wellness of Black women and girls through awareness and education, and RAD-AID, a nonprofit dedicated to ensuring equal access to radiology health services for medically underserved communities. Through this partnership, we are committed to decreasing breast cancer screening disparities for Black and Hispanic women and can help see that minorities and financially underprivileged women have access to the best technology for early detection of disease.

In September 2021, we announced the year-one results of the Hologic Global Women’s Health Index. Developed in partnership with leading analytics and advice firm Gallup, the Hologic Global Women’s Health Index is an unprecedented, in-depth examination of critical markers for women’s health, by country and territory, and over time. The Hologic Global Women’s Health Index provides an actionable, science-backed data roadmap for improving life expectancy and quality of life for women and girls worldwide. We are committed to conducting the Global Women’s Health Index on a regular basis. This commitment builds on Hologic’s more than 30 years of championing women’s health around the world through its products for breast and cervical cancer screening, infectious disease detection, and gynecologic surgery, and its partnerships with numerous global initiatives promoting better access to healthcare.

More specifically, the following chart lists the self-identified diverse attributes of our Directors:

 

Directors who were born outside the United States: 3

Directors who were predominantly educated outside of the United States: 2

The Board has also employed a variety of assessment formats, depending on the perceived needs of the Board at the time. Formats over the past few years have included individual Board member peer reviews managed by the general counsel, a facilitated discussion with the full Board, and individual Board and committee written evaluations followed by a discussion at each committee level and with the full Board. As a part of these evaluations, the Nominating and Corporate Governance Committee as well as the Board examine characteristics which they believe will augment the current skill set of the Board. Over the past five years, the Board has identified key skill sets it felt would benefit the Board, including experience as a senior executive in a large, complex, global company, deep understanding of the Company’s markets and/or customers, a product background, and extensive global experience. As a result, Ms. Wendell and Mr. Dockendorff joined the Board in 2016 and 2017, respectively; both of whom had been senior executives in a large, complex, global medical device company, have operational and transactional experience and an understanding of the Company’s markets and customers. Ms. Wendell brings particular expertise in business development and strategy, which is key at a time when the Company is increasing its business development activity. Mr. Dockendorff brings extensive financial expertise for complex global healthcare organizations. In 2018, Mr. Nawana and Dr. Hantson joined the Board, each bringing strong global perspectives, hailing from and being educated outside of the United States, industry knowledge and executive leadership experience – key attributes as we seek to expand internationally and continue to focus on commercial and operational execution.

 

 

As provided in its charter, the Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become directors. As the Nominating and Corporate Governance Committee seeks to identify and evaluate director candidates, it may rely on input provided by a number of sources, including the Nominating and Corporate Governance Committee members, our other directors or officers, our stockholders, and third parties such as professional search and screening firms. A copy of the Nominating and Corporate Governance Committee’s current charter is publicly available on our website at investors.hologic.com. See also our Board Refreshment and Recruitment process on page 11 of this proxy statement for further information.

The Nominating and Corporate Governance Committee will consider stockholder recommendations for Board nominees using the criteria described in the preceding paragraphs. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve, if elected, and evidence of the nominating stockholder’s ownership of the Company’s stock should be sent to the attention of our Corporate Secretary, Hologic, Inc., 250 Campus Drive, Marlborough, Massachusetts 01752. If you wish to formally nominate a candidate, you must follow the procedures described in our Bylaws.

Set forth below is certain biographical information regarding the nominees as of January 1, 2022, as well as the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the person should serve as a director.

Our Bylaws and Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon the Company’s needs and the Board’s assessment of its leadership from time to time. The Board and the Nominating and Corporate Governance Committee review the structure of the Board and Hologic leadership as part of the succession planning process on an ongoing basis. The Board also reviews its structure during its annual self-assessment.

The Board believes that Hologic and its stockholders are best served at this time by having our CEO, Stephen P. MacMillan, also serve as our Chairman, and Sally W. Crawford, an independent director, serve as our Lead Independent Director. Combining the roles of Chairman and CEO makes clear that we have a single leader who is directly accountable to the Board and, through the Board, to our stockholders. It establishes one voice who speaks for the Company to customers, employees, stockholders and other stakeholders. This structure reinforces Mr. MacMillan’s overall responsibility for the Company’s business and strategy, under the oversight and subject to the review of the Board. It strengthens the Board and the Board’s decision-making process because Mr. MacMillan, who has first-hand knowledge of our operations and the major issues facing Hologic, chairs the Board meetings where the Board discusses strategic and business issues. The combined roles facilitate a Board process that is able to identify and respond to challenges and opportunities in a more timely and efficient manner than a non-executive chairman structure would provide. A perfect example of the benefits to this structure was the ability for Mr. MacMillan to rapidly respond to the shifting business priorities as a result of the COVID-19 pandemic while keeping the Board fully informed. This structure also enables Mr. MacMillan to act as the key link between the Board and other members of management and facilitate an efficient Board process.

The Board recognizes the importance of having a strong independent Board leadership structure to provide accountability. Accordingly, our Corporate Governance Guidelines provide that if the Chairman is not an independent director, then the independent directors will select a Lead Independent Director. The Board believes that a Lead Independent Director is an integral part of our Board structure and facilitates the effective performance of the Board in its role of providing governance and oversight. In December 2017, the Board appointed Sally W. Crawford to serve as Lead Independent Director. During 2021, the Board again considered and affirmed the current efficacy of the Lead Independent Director and combined Chairman/CEO structure for the Company. We have also discussed this structure with a number of our largest stockholders. While several advised that they do scrutinize combined Chair/CEO structures as a matter of practice, none expressed concern over this structure for Hologic.

In addition to discharging the specific responsibilities identified below, Mr. MacMillan consults with Ms. Crawford on a variety of matters, including governance and strategy. As Lead Independent Director and Chair of the Nominating and Corporate Governance Committee, Ms. Crawford takes the lead in Board structure and composition. In addition, Ms. Crawford’s ability to assert independent leadership while working collaboratively with other directors, particularly evident when she served as chair of the Compensation Committee, as well as her diligence and preparedness, enable her to serve effectively as our Lead Independent Director and as Chair of our Nominating and Corporate Governance Committee.

The Board meets in executive session without the CEO in connection with each regularly scheduled Board meeting as well as any other times it deems appropriate. The active involvement of the independent directors, combined with the qualifications and significant responsibilities of our Lead Independent Director, promote strong, independent oversight of Hologic’s management and affairs.

The standing committees of the Board currently are the Audit and Finance Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The Board has adopted a charter for each of the three standing committees that addresses the make-up and functioning of each committee. The charters for each of the three standing committees are publicly available on our website at investors.hologic.com.

All of the Board committees are composed entirely of “independent” directors, as such term is defined in the listing standards of Nasdaq. The Board has determined that the following current directors are “independent,” according to the above definition: Sally W. Crawford, Charles J. Dockendorff, Scott T. Garrett, Ludwig N. Hantson, Namal Nawana, Christiana Stamoulis, and Amy M. Wendell. Mr. MacMillan is not considered independent because he is an active officer of the Company. In addition, both the Audit and Finance Committee and the Compensation Committee are composed entirely of independent directors who meet the heightened independence standards applicable to directors serving on such committees under Nasdaq listing standards and the rules of the Securities Exchange Act of 1934, as amended (the Exchange Act).

The current membership of each committee is listed below.

When a new director joins the Board, or just before joining (assuming entry into a confidentiality agreement), he or she is provided with a business briefing book, which gives an overview of Hologic and its businesses, products, markets, strategic plans, and risks. Once elected to the Board, the new director generally has the opportunity to have individual meetings with members of the senior management team. They also receive a governance handbook, which includes general Board information, Board committee charters, the Company’s charter and Bylaws and all of the Company’s governance policies. Directors also have opportunities for continuing education, including access to third-party programs as well as regular presentations at Board meetings.

The Board met nine times during the fiscal year ended September 25, 2021 and each of our directors attended at least 89% of the total number of meetings of the Board and all committees of the Board on which he or she served, with no director missing more than two meetings. In fiscal 2021, overall attendance for our directors at all Board and committee meetings was approximately 99% and approximately 97%, respectively. During fiscal 2021, the independent directors of the Board met in executive session during each of the Board’s regular quarterly meetings and at such other Board and committee meetings as the independent directors elected.

Our Board has scheduled a Board meeting in conjunction with the Annual Meeting of Stockholders. Our directors are encouraged to attend the Annual Meeting of Stockholders on March 10, 2022. Last year, all eight of our directors who were nominated for election attended the Annual Meeting of Stockholders held on March 11, 2021.

Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of Ethics for Senior Financial Officers that applies to our principal executive officer, principal financial officer, principal accounting officer and controller, and other persons performing similar functions. The Company’s Code of Conduct applies to all directors, officers and employees. The Company requires all of its directors, officers and employees to adhere to this code in addressing legal and ethical issues that they encounter in the course of doing their work. This code requires our directors, officers, and employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest. All newly hired employees are required to certify that they have reviewed and understand this code. Our Code of Ethics for Senior Financial Officers is publicly available on our website at investors.hologic.com as Appendix A to our Code of Conduct.

As provided in its charter, the Audit and Finance Committee reviews and approves related-party transactions (unless such review and approval has been delegated to another committee consisting solely of disinterested independent directors). The non-exclusivity of this delegation provides the Board with flexibility to address the particular circumstances of any related-party transaction. Additionally, if one or more members of the Audit and Finance Committee are otherwise conflicted, or for any other reason, the Board reserves the right to establish a separate committee of disinterested independent directors to review a particular transaction. Regardless of the deliberative body of disinterested independent directors reviewing a related-party transaction, the standard applied in reviewing such transaction is whether the transaction is on terms no less favorable to the Company than terms generally available from an unaffiliated third party under the same or similar circumstances. The Board generally considers related-party transactions to be those transactions that are required to be disclosed pursuant to Item 404 of Regulation S-K.

 

 

The following table sets forth the compensation paid to our non-employee directors for service on our Board during the fiscal year ended September 25, 2021. Compensation for Stephen P. MacMillan, our Chairman, President and Chief Executive Officer, is set forth in the Summary Compensation Table on page 68. Mr. MacMillan does not receive any additional compensation for his service as a director.

The following table sets forth the aggregate number of Stock Awards and Option Awards (representing unexercised option awards, both exercisable and unexercisable, and unvested RSUs) held at September 25, 2021 by each person (other than Mr. MacMillan) then serving as a director.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the provisions of Section 14A of the Exchange Act, require that we provide our stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. Our Board has determined to provide our stockholders this opportunity on an annual basis.

As described in the Compensation Discussion and Analysis (the CD&A), our executive compensation philosophy is to provide appropriate competitive compensation opportunities to our executives with actual pay outcomes heavily influenced by the achievement of Company performance targets and individual performance objectives (in other words, “pay for performance”) in support of our business strategy and creation of long-term stockholder value. The Company’s management team has been embracing a performance culture and driving growth of the business. Over the past eight years, under the guidance of a focused and motivated senior management team, we have built a sustainable growth company. On average, revenue has increased by 12% annually over that time period, our stock price has increased 243% and the engagement of our employees has also increased significantly.

Our Compensation Committee continually evaluates the design and direction of our compensation structure and each year, we take into account the result of the “say-on-pay” vote cast by our stockholders. Previously, in response to stockholder feedback, we introduced performance stock units (PSUs) tied to return on invested capital (ROIC) as a significant component of long-term equity awards. After careful consideration, effective for fiscal 2017 long-term equity awards, the Compensation Committee determined to add relative total shareholder return (TSR) as an additional performance metric applicable to the PSUs. In our discussions with stockholders, there continues to be strong support for the TSR and ROIC metrics, as well as our TSR construct, which sets target at median and does not have an absolute component. Effective for fiscal 2020 long-term equity awards, the Compensation Committee added adjusted free cash flow (FCF) as an additional performance metric applicable to the PSUs. Stockholders expressed appreciation for the considered, balanced approach in utilizing two consistent absolute metrics (ROIC and FCF) and a relative metric (TSR) for PSUs.

During the tenure of our current management team, we have seen our say-on-pay vote approval increase from 34% at our 2014 Annual Meeting of Stockholders to 82% at our 2020 Annual Meeting of Stockholders. In 2021, we saw a decline in say-on-pay approval (69% approval). We believe the decrease was driven by one-year performance measurement periods on certain PSU awards granted in fiscal 2020 and fiscal 2021 and benefits offered to a former executive officer in connection with his retirement, as well as a special bonus awarded to the executive officer who spearheaded our exceptional COVID-19 pandemic response. By way of background regarding the PSU awards, the ROIC and TSR performance measures prior to fiscal 2021 included a three-year performance period. In light of uncertainty resulting from the COVID-19 pandemic, we made a conscious decision for fiscal 2021 to change the ROIC performance period from three years to one year (with a three-year service requirement) and to keep the TSR performance period at three years. Our consistent practice has been not to adjust or change PSU performance measures following PSU grants, whether based on business results or outside impacts (such as a pandemic). To continue this practice, changing the ROIC performance period to one year for fiscal 2021 was, in our judgment, the right decision for management and our stockholders given the unknown impact from the COVID-19 pandemic. Our expectation was to revisit the ROIC performance period in future years and to return to the three-year period, as appropriate. Also, we introduced FCF in fiscal 2020 as another performance measure and selected a one-year performance period based on the nature of this measure as well as benchmarking information. In response to our say-on-pay vote result and stockholder feedback, for PSU awards granted in November 2021 with respect to the 2022 fiscal year, ROIC, relative TSR and adjusted FCF will each be measured over a three-year performance period, and no PSU awards will contain a one-year measurement period. Additionally, for relative TSR PSUs awarded for fiscal 2022, the Compensation Committee approved a payout cap at 100% for negative TSR performance that otherwise warrants above-target funding. Further, the retirement benefits offered to our former executive officer and a special bonus awarded to the current executive officer were exceptional in nature and did not reflect a policy change regarding the Board’s or the Compensation Committee’s view towards retirement benefits or special bonuses. We continue to discuss compensation plan design and incentive plan performance metrics with our investors and take into account the feedback as we evaluate the design of our compensation structure.

We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives you as a stockholder the opportunity to express your views on our NEOs’ compensation. This vote is not intended to address any specific element of our compensation programs, but rather to address our overall approach to the compensation of our NEOs described in this proxy statement. To that end, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

RESOLVED, that stockholders of Hologic, Inc., hereby approve the compensation paid to the Company’s named executive officers, as described in this proxy statement under the “Compensation Discussion and Analysis” section, the “Executive Compensation Tables” section and other narrative disclosure contained therein, pursuant to the SEC’s compensation disclosure rules.

Because your vote is advisory, it will not be binding upon the Company, the Compensation Committee or our Board. However, the Company values the opinions expressed by stockholders in their vote on this proposal and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs.

Approval of this proposal requires the affirmative vote of a majority of shares present, in person or represented by proxy, and voting on this proposal at the Annual Meeting. Abstentions and broker “non-votes” will not have any effect on the proposal to approve executive compensation as disclosed in this proxy statement.

 

 

In this Compensation Discussion and Analysis section (CD&A), we describe the executive compensation program for our CEO, CFO and our three other most highly compensated executive officers serving as of September 25, 2021 (collectively, our named executive officers, or NEOs). We also explain how the Compensation Committee determined the pay of our NEOs and its rationale for specific decisions related to fiscal 2021 compensation. As a reminder, our fiscal year ends on the last Saturday in September. Fiscal 2021 began on September 27, 2020 and ended on September 25, 2021.

Hologic had an exceptional year in fiscal 2021, driven by the recovery of our core women’s health businesses and our continued, substantial contributions to the fight against the COVID-19 pandemic.

We significantly exceeded our financial goals overall. Total revenue grew 49%, or 47% in constant currency, to $5.63 billion. Profits grew even faster. GAAP diluted earnings per share (EPS) were $7.21, an increase of 71% versus the prior year, while adjusted EPS were $8.41, up 111% compared to 2020.⁽¹⁾

Cash flow was also very strong in fiscal 2021. Operating cash flow was $2.33 billion, an increase of 160% compared to the prior year. And we put this cash flow to work to strengthen our businesses and accelerate future growth. Specifically, we acquired five companies in our Diagnostics and Breast Health divisions for $1.18 billion. At the same time, we acquired six million shares of our own stock for $410 million, helping improve future earnings growth.

We believe Hologic is a much stronger company today than before the pandemic due to the continued development of our core women’s health franchises, our increased installed base of Panther instruments, our international expansion, and the acquisitions we have completed. As a result, late in fiscal 2021 we established long-term revenue guidance for the first time. We expect to generate top-line growth of 5% to 7% through 2025, materially faster growth than before the pandemic.

Finally, our financial success enabled us to broaden and deepen our impact on the world in important ways. We released the findings of our inaugural Hologic Global Women’s Health Index, the first study to represent the health of 2.5 billion women and girls worldwide. And we launched Project Health Equality to address the structural and cultural barriers that prevent Black and Hispanic women in the United States from receiving the high-quality healthcare they deserve.

In establishing the executive compensation program for fiscal 2021, the Committee continued to focus on pay for performance and competitive pay, with an emphasis on total direct compensation.

The components of Total Direct Compensation (TDC) are Base Salary, Short-Term Incentives, Long-Term Incentives and Deferred Compensation Awards.

The charts below, which show the TDC of our CEO and our other NEOs for fiscal 2021, illustrate that a majority of NEO TDC is performance based (91.5% for our CEO and an average of 80.3% for our other NEOs). These charts include the full value of equity awards granted during fiscal 2021 and exclude the value of other benefits and perquisites.

 

 

In setting performance measures for the incentive compensation plans, the Committee first considers the Company’s strategy, contemplating the Company’s long- and short-term goals and how those goals are measured.

As the Company has been focused on growth as well as efficient use of capital and creating value for stockholders, the Committee determined that using the measures of adjusted revenue, adjusted EPS and ROIC were appropriate for the incentive compensation plans. These are all non-GAAP measures that are used by management to facilitate its operational decision-making and provide key insights into the Company and management’s achievements. Additionally, the use of ROIC was specifically supported in discussions with stockholders. The Committee added the measure of relative TSR in fiscal 2017 to provide an external performance measure and link executive compensation directly to the creation of stockholder value. In fiscal 2020, the Committee added the measure of adjusted free cash flow (FCF). FCF is an important metric for the Company as it seeks to continue to deploy capital efficiently with continued business development activity and share repurchases.

The Committee takes a balanced approach to long-term incentives, and for fiscal 2021 annual grants:

Threshold adjusted revenue and adjusted EPS are generally set in line with prior year adjusted results, but we also factor in unpredictability regarding the future demand for SARS-CoV-2 tests and the exceptional demand for SARS-CoV-2 tests that we saw in fiscal 2021 to create challenging targets with maximum funding only occurring through exceptional results.

The Committee has made several decisions relating to executive pay for fiscal 2022, including:

Each year, we take into account the result of the say-on-pay vote cast by our stockholders. As our journey to sustainable growth continues, so does the evolution of our compensation program. At our 2021 Annual Meeting of Stockholders, we saw a decline in our say-on-pay vote approval to 69%, which we believe was driven by one-year performance measurement periods on certain PSU awards granted in 2020 and 2021 and benefits offered to a former executive officer in connection with his retirement, as well as a special bonus awarded to the executive officer who spearheaded our exceptional COVID-19 pandemic response. By way of background regarding the PSU awards, the ROIC and TSR performance measures prior to fiscal 2021 included a three-year performance period. In light of uncertainty resulting from the COVID-19 pandemic, we made a conscious decision for fiscal 2021 to change the ROIC performance period from three years to one year (with a three-year service requirement) and to keep the TSR performance period at three years. Our consistent practice has been not to adjust or change PSU performance measures following PSU grants, whether based on business results or outside impacts (such as a pandemic). To continue this practice, changing the ROIC performance period to one year for fiscal 2021 was, in our judgment, the right decision for management and our stockholders given the unknown impact from the COVID-19 pandemic. Our expectation was to revisit the ROIC performance period in future years and to return to the three-year period, as appropriate. Also, we introduced FCF in fiscal 2020 as another performance measure and selected a one-year performance period based on the nature of this measure as well as benchmarking information. In response to the say-on-pay result and stockholder feedback, for PSU awards granted in November 2021 with respect to the 2022 fiscal year, ROIC, relative TSR and adjusted FCF will be measured over a three-year performance period, and no PSU awards will contain a one-year measurement period. Additionally, for relative TSR PSUs awarded for fiscal 2022, the Compensation Committee approved a payout cap at 100% for negative TSR performance that otherwise warrants above-target funding. Further, the retirement benefits offered to our former executive officer and a special bonus awarded to the current executive officer were exceptional in nature and did not reflect a policy change regarding the Board’s or the Compensation Committee’s view towards retirement benefits or special bonuses.

Based on our continued discussions with our largest stockholders, as described below, we believe they continue to endorse our annual compensation program as it has evolved, even in light of the results at the 2021 Annual Meeting. Our Compensation Committee regularly evaluates our executive compensation structure and assesses its effectiveness to ensure the design is incenting performance that is in the best interests of the Company as well as our stockholders.

While say-on-pay is a key indicator of stockholder feedback, we also are committed to maintaining an open dialogue with our institutional investors and stockholders throughout the year. Similar to previous years, in the proxy “offseason”, we reach out to discuss business topics, seek feedback on our performance and address other matters of importance to our stockholders. Since our 2021 Annual Meeting, we have actively engaged with a number of our largest institutional investors specifically on governance issues, including by reaching out to our top ten institutional investors, representing approximately 50% of our outstanding shares. We ultimately met with seven of those top ten institutional investors, with our General Counsel; Vice President, Investor Relations; Vice President, Corporate Secretary; and Director, Investor Relations all participating in the meetings. To the extent requested by investors, directors also participate in these discussions. As in previous years, the management team provided detailed feedback on the meetings to our Lead Independent Director as well as to our Compensation Committee and Nominating and Corporate Governance Committee. The full Board is also updated on feedback received. Through this dialogue with investors, we received additional validation on the design of our executive compensation program and the compensation-related actions we continue to take in response to the COVID-19 pandemic. See below for additional information about our discussions with investors on these items.

 

 

 

 

Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain talent. It is the minimum payment for a satisfactory level of individual performance as long as the executive remains employed with us. Base salary is set at the Committee’s discretion after taking into account the competitive landscape including the compensation practices of the companies in our selected peer groups (and where appropriate, survey data from a broader index of comparable public companies), our business strategy, our short- and long-term performance goals and certain individual factors, such as position, salary history, individual performance and contribution, length of service with the Company and placement within the general base salary range offered to our NEOs.

The base salaries for our NEOs for fiscal 2021 were as follows:

Based on the Company’s financial performance in fiscal 2020, base salary increases ranged from 0.0% to 10.0%.

The STIP provides our NEOs the opportunity to earn a performance-based cash bonus based on the achievement of a combination of financial and non-financial corporate, divisional, and/or individual goals.

 

The Committee believed the financial performance components of the 2021 STIP were achievable, but appropriately challenging, based on market climate and internal budgeting and forecasting. The following table outlines the threshold, target and maximum financial performance objectives for the 2021 STIP, as well as the results achieved:

 

 

 

 

 

For fiscal 2021, the Company’s adjusted revenue performance was 176% of target and adjusted EPS was 169% of target. With adjusted revenue weighted 60% and adjusted EPS weighted 40%, these performance results yield a payout at 173% of target. Individual bonus awards for NEOs were then calculated based on this overall funding level as well as the targeted payout levels and individual performance objectives for each NEO, as discussed in more detail below.

Individual performance objectives reflected the top priorities for our NEOs and were aligned with the top risks identified in our annual enterprise risk management process, including driving global growth, strengthening the pipeline for 2022 and beyond and succession planning and talent development. Mr. Daugherty’s individual performance objectives also included revenue growth for his group, and Mr. Thornal’s individual performance objectives also included revenue growth performance for his division.