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)

 

 

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement and the Company’s most recent Annual Report on Form 10-K before casting your vote. References to “Hologic,” the “Company,” “we,” “us” or “our” refer to Hologic, Inc. and its subsidiaries.

 

For each of the past 12 years, women have comprised over 30% of our board.

 

Hologic is committed to good corporate governance, which we believe helps us to sustain our success and build long-term stockholder value. We are committed to sound governance practices that provide our stockholders with meaningful rights and foster strong independent leadership in our boardroom.

Risk oversight is handled by the full Board as well as at the individual committee level, with the Board focusing on the evolving business and risk landscape. The Company’s risk management process focuses on a comprehensive but targeted annual enterprise risk management assessment which is presented to the Board as well as periodic reports on evolving risks and mitigating actions, as warranted. Additionally, the executive leadership team’s individual performance objectives are aligned with the top risks identified in the annual enterprise risk management process. See also Oversight Responsibilities on page 14 of this proxy statement for further information.

Hologic values the views of its stockholders, which is why we regularly and proactively engage with our largest stockholders throughout the year. During fiscal 2022, management met or offered to meet with stockholders representing approximately 55% of our outstanding shares to discuss our business strategy, our approach to executive compensation 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.

⬤ Fixed ⬤ Variable

 

 

 

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

The Company continues to invest significantly in its people, infrastructure and products. The power of our focused, and motivated teams is palpable, which has driven growth in revenue and profits over the past nine years. Under Mr. MacMillan’s leadership, revenue, on average, has increased by 9% annually over that time period.

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 ongoing and possible future effects of global challenges, including macroeconomic uncertainties, the war in Ukraine, other economic disruptions and U.S. and global recession concerns, on the Company’s customers and suppliers and on the Company’s business, financial condition, results of operations and cash flows and the Company’s ability to draw down its revolver; the effect of the worldwide political and social uncertainty and divisions, including the impact on trade regulation and tariffs, that may adversely impact the cost and sale of the Company’s products in certain countries, or increase the costs the Company may incur to purchase materials, parts and equipment from its suppliers; the ongoing and possible future effects of supply chain constraints, including the availability of critical raw materials and components, including semiconductor chips, as well as cost inflation in materials, packaging and transportation; the possibility of interruptions or delays at the Company’s manufacturing facilities, or the failure to secure alternative suppliers if any of the Company’s sole source third-party manufacturers fail to supply the Company; the development of new competitive technologies and products and competition; the Company’s ability to predict accurately the demand for its products, and products under development and to develop strategies to address markets successfully; continued demand for the Company’s COVID-19 assays; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic and any future public health crises; potential cybersecurity threats and targeted computer crime; the ability to execute acquisitions and the impact and anticipated benefits of completed acquisitions and acquisitions the Company may complete in the future; the ability to consolidate certain of the Company’s manufacturing and other operations on a timely basis and within budget, without disrupting its business and to achieve anticipated cost synergies related to such actions; 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 ability to obtain regulatory approvals and clearances for the Company’s products, including the implementation of the European Union Medical Device Regulations, and to maintain compliance with complex and evolving regulations; 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; 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; 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; and technical innovations that could render products marketed or under development by the Company obsolete.

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 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 insight and 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. Through purposeful refreshment, five new independent directors have been elected to our Board since December 2016.

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 a deliberate search for both specific skills and experiences, as needed. This practice keeps our Board energized with valuable expertise and additional perspectives. Ms. Stewart joined our Board as an independent director effective January 2, 2023. We believe she further strengthens our Board’s mix of diverse perspectives and brings operational experience leading large purpose-driven organizations, a background in finance and valuable knowledge and viewpoints on healthcare, policy, and health equity.

Currently, approximately 56% percent of our directors have been on our Board for seven years or less.

Each year, the Nominating and Corporate Governance Committee, together with the Lead Independent Director, oversees an annual evaluation process. Our Lead Independent Director also serves as Chair of the Nominating and Corporate Governance Committee. As such, she oversees the annual Board evaluation process. The evaluations help inform the Committee’s discussions regarding Board succession planning and refreshment and complement the Committee’s evaluation of the size and composition of the Board. The Board also recognizes that a robust and constructive evaluation process is an important part of good corporate governance and board effectiveness. Our Board is committed to an annual evaluation process and recognizes this process promotes continuous improvement. The annual self-assessment evaluates the performance of the Board and its committees in accordance with a procedure established by the Nominating and Corporate Governance Committee. In 2022, the full Board and each Board committee completed anonymous written questionnaires that requested subjective comment in key areas and solicited input for areas of development. The results were compiled and discussed by the Board and each committee, as applicable, and changes in practices or procedures were considered, as necessary. The evaluation results were reviewed in detail by the Chairman and the Lead Independent Director, who led a discussion with the full Board highlighting both areas of strength and areas of opportunity.

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. For more detail on the roles and responsibilities of both the Chairman and Lead Independent Director, see Board Leadership Structure on page 28 of this proxy statement.

 

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.

The Board has oversight of the risk management process, which includes overseeing our process for identifying, assessing and mitigating significant financial, operational, strategic, cybersecurity and other risks that may affect the Company. 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. The risk assessment process also considers whether risks are short-, medium-, or long-term, such that the management of significant risks can be prioritized, in part, based on the timeframe of such risks. 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 2022, 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. In performing this function, each committee meets in executive session with key management personnel and representatives of outside advisors as needed and has full access to management, as well as the ability to engage advisors. The Board believes its leadership structure described in the “Board Leadership Structure” section of this proxy statement enables the Board’s oversight of risk management because it allows the Board, with leadership from the Lead Independent Director and working through each of the three standing committees, to proactively participate in the oversight of management’s actions. The committees also provide reports to the full Board on these and other areas for review.

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 2022, we continued the year-round approach to stockholder engagement we implemented in 2015. Just before our Annual Meeting we reached out to our largest stockholders along with a number of our smaller stockholders. 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 55% 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 take our say-on-pay results seriously and also discussed the results of our previous say-on-pay results with our stockholders during our fall engagement. 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 2022 we reached out to our top 20 institutional stockholders, representing approximately 55% of our shares. Seventeen of the 20 institutional investors did not feel a meeting was necessary at this time or did not respond. We also had numerous conversations with stockholders and investment analysts as part of our normal investor relations activities, at times 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 while recognizing our compensation approach is truly performance based. Stockholders appreciated hearing that we continue to consider their feedback as we evaluate our compensation program and structure. Stockholders were supportive that for fiscal 2023 PSU awards granted in November 2022, 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. This is the same practice we employed in fiscal 2022. Additionally, for relative TSR PSUs awarded for fiscal 2023, we again include a payout cap at 100% for negative TSR performance that otherwise warrants above-target funding. Additionally, stockholders were encouraged by the level of Board engagement, and the election of Stacey Stewart to our Board. Lastly, stockholders recognized the Company’s progress on ESG, particularly regarding our 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). For more detail, see Proposal No. 2 − Non-Binding Advisory Vote to Approve Executive Compensation on page 39 of this proxy statement.

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 work to improve the health of our communities, customers, patients and employees, and seek to ensure that the decisions we make today have a positive effect on future generations.

We continue to build upon and expand from our initial sustainability disclosure in 2016 and published our third annual Sustainability Report in February 2022, 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 holds meetings and reviews 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 continue to be recognized. For example, MSCI, a leading provider of ESG support tools for the global investment community, where our rating of AA, places us within the top quartile among our peers of ESG performance, Newsweek once again named Hologic as one of America’s 500 Most Responsible Companies, we were included in the Dow Jones Sustainability Index of North America for the second year in a row, and the Drucker Institute again recognized Hologic on their list of Best-Managed Companies. We look to continue to share our efforts through subsequent Sustainability Reports building on 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 7,000 employees worldwide work to 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 both on our performance and on our customers and their patients. We have been conducting an annual engagement survey since 2015 in which a significant majority 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 enhances 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.

In support of Hologic’s vision to be a great place to work for all employees, 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. In 2022, Hologic was named to the annual lists of Top Workplaces by both The Boston Globe and The San Diego Union-Tribune, ranking fifth on the list for largest companies in Massachusetts and fourth for large companies in San Diego County. Our sites in Marlborough, Massachusetts and San Diego, California represent two of our three largest employee campuses.

In addition, in response to the continuing challenges stemming from the COVID-19 pandemic, we developed several employee-focused initiatives to support the physical, mental, and financial well-being of our employees. These initiatives include providing enhanced accident and critical illness insurance, increasing access to telehealth services, developing an employee assistance program that provides mental health therapy, wellness coaching, and medication management, and offering subscriptions to self-care mobile apps.

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. Of our nine directors, four, representing 44% of the Board, are women, one of our directors self-identifies as African American and another self-identifies as Asian. For each of the past 12 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 we believe promotes diverse perspectives on our Board. We believe that our focus on the lives of women has helped us to 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 within the Company (Chief Financial Officer; Chief Human Resources Officer; Vice President, Global Tax and Treasury; Vice President of Finance, Breast and Skeletal Health; Vice President of Internal Audit; and Chief of Staff), persons of color have assumed important leadership roles as Division President, GYN Surgical; Vice President of Sales, Breast and Skeletal Health; Vice President, Investor Relations; and Corporate Secretary. 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 36 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 and reflect the communities in which we operate. 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 Global Leadership Team (GLT) he joined was comprised entirely of white men. As of January 1, 2023, the GLT consisted of 27% women and 18% ethnically diverse members, demonstrating our commitment to diversity while understanding more progress will be made. As part of our continued commitment to transparency on diversity, our U.S. Federal Employment Information Report (EEO-1) is also publicly available on our website at investors.hologic.com.

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 thoughtfully and strategically reinvested our upside earnings into both our business and into our passion to be champions for women’s health. 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 $20 million to its corporate charitable fund, the largest contribution in Company history, and 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 2022 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.

At Hologic, our actions begin with our Purpose, Passion and Promise, and our industry-leading employee engagement (in the top five percent of companies according to Gallup), which fuels our strong performance. Our strong financial performance – growing revenue and profits – enables us to invest more aggressively in initiatives that deepen our impact on the world, initiatives such as the Hologic’s Global Women’s Health Index, Project Health Equality and the Global Access Initiative. We believe these important efforts help increase awareness, boost access to state-of-the-art care, promote a more appropriate public policy environment, and ultimately lead to better, more timely diagnoses for patients.

In September 2022, we announced the year-two 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 an annual 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.

 

 

Nine directors are to be elected at the Annual Meeting. Our Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated the individuals listed below for election as directors. All of the director nominees, other than Ms. Stewart, were previously elected by our stockholders at the 2022 Annual Meeting. The Board used a professional search firm to identify potential directors. It reviewed a number of qualified candidates and, after considering her qualifications and conducting personal interviews, the Nominating and Corporate Governance Committee unanimously recommended that Ms. Stewart be appointed to the Board. In December 2022, the Board of Directors unanimously appointed her to the Board, effective January 2, 2023.

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Board’s nominees named below. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for the nominee, if any, who shall be designated by the present Board to fill the vacancy. Each nominee has consented to serve as a director if elected. The proposed nominees are being nominated in accordance with the provisions of our Seventh Amended and Restated Bylaws (our “Bylaws”). The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders or until a successor has been elected and qualified.

Under our Bylaws, a nominee will be elected to the Board of Directors if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Abstentions and broker non-votes will not have any effect on this proposal.

 

 

Understanding the importance of its responsibility to provide effective oversight, our Board strives to maintain an appropriate balance of tenure, diversity, skills and experience on the Board. In evaluating potential candidates for director, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials, including: character and integrity, business acumen, experience, commitment and diligence. The Nominating and Corporate Governance Committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The Nominating and Corporate Governance Committee views diversity broadly to include diversity of experience, skills and viewpoint, as well as diversity of gender, race and ethnicity. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee believes that the backgrounds and qualifications of the directors considered as a whole should provide a significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities. Generally, directors should be individuals who have succeeded in their particular fields and who demonstrate integrity, reliability and extensive knowledge of corporate affairs. The Nominating and Corporate Governance Committee also considers other relevant factors as it deems appropriate, including the current composition of the Board.

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 and the Board examine characteristics which they believe will augment the current skill set of the Board. Over the past six 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 at large, complex, global medical device companies, 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 grow internationally and continue to focus on commercial and operational execution. In 2023, Ms. Stewart joined the Board, bringing experience leading large purpose-driven organizations, a background in finance and valuable knowledge and perspective on healthcare, policy, and health equity.

 

 

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, which are the same as those used to evaluate candidates from other sources. 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 2, 2023, 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 2022, 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.

 

 

In evaluating its leadership structure, the Board also considered that, other than Mr. MacMillan, all of our directors are independent. Our independent directors appropriately challenge management and demonstrate independent judgment in making important decisions for our Company. In addition, each of the Board’s standing committees – Audit and Finance, Compensation, and Nominating and Corporate Governance – is composed entirely of independent directors. As a result, oversight of key matters, such as the integrity of Hologic’s financial statements, executive compensation, the nomination of directors and evaluation of the Board and its committees, is entrusted solely to independent directors.

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, Stacey D. Stewart 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 six times during the fiscal year ended September 24, 2022 and each of our directors attended at least 83% 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 one meeting. In fiscal 2022, overall attendance for our directors at all Board and committee meetings was approximately 94% and 100%, respectively. During fiscal 2022, 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 each year. Last year, all eight of our directors who were nominated for election attended the Annual Meeting of Stockholders held on March 10, 2022.

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 the Code of Conduct in addressing legal and ethical issues that they encounter in the course of doing their work. The Code of Conduct 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, understand and agree to comply with the Code of Conduct. 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. Pursuant to the policy, the Audit and Finance Committee reviews and considers relevant facts and circumstances in determining whether or not to approve or ratify such a transaction.

The Audit and Finance Committee reviewed and approved one transaction with respect to fiscal 2022 that qualified as a related-party transaction. The stepson of Sally Crawford, a member of our Board, is employed by the Company as an IT Business Analyst. Ms. Crawford was not involved in the hiring of Peter Wells. Mr. Wells earned approximately $148,800 in annual compensation during fiscal 2022 and participated in the Company’s standard benefit plans which was commensurate with his peers’ compensation and established in accordance with the Company’s compensation practices applicable to all employees with equivalent qualifications, experiences, and responsibilities. He did not serve as an executive officer of the Company during this period and did not have a key Company-level strategic role within the Company, in that he did not drive the strategy or direction of the Company, nor was he personally accountable for the Company’s financial results.

The Board of Directors has a compensation structure consisting of a cash retainer, an annual equity award and, for some positions, a supplemental cash retainer, as described below. As with our executive compensation program, the director compensation program emphasizes equity incentives. This reflects our belief that equity awards serve to align the interests of our directors with those of our stockholders.

 

 

The Company reimburses all directors for reasonable travel expenses incurred in connection with Board and committee meetings and offers private air travel for meetings as may be necessary. We also extend coverage under our directors’ and officers’ indemnity insurance policies and have entered into our standard form of Indemnification Agreement with each director. We do not provide any other benefits, including retirement benefits or perquisites, to our non-employee directors.

 

 

 

 

 

 

The following table sets forth the compensation paid to our non-employee directors for service on our Board during the fiscal year ended September 24, 2022. Compensation for Stephen P. MacMillan, our Chairman, President and Chief

Executive Officer, is set forth in the Summary Compensation Table on page 72. Mr. MacMillan does not receive any additional compensation for his service as a director. Additionally, Stacey D. Stewart was appointed to our Board in fiscal 2023 and thus did not receive any compensation in fiscal 2022.

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 24, 2022 by each person (other than Mr. MacMillan and Ms. Stewart) then serving as a director.

Executive officers are chosen by and serve at the discretion of the Board. Set forth below are the names and ages of our executive officers, as of January 11, 2023, along with certain biographical information for all but Stephen P. MacMillan, our Chairman, President and Chief Executive Officer. For Mr. MacMillan’s biographical information, please see page 23.

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 embraces a performance culture and is focused on driving growth of the business. Over the past nine years, under the guidance of a focused and motivated senior management team, we have built a sustainable growth company, our stock price has increased 182% 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. In recent years, following stockholder feedback, our say-on-pay vote results and issues raised by proxy advisory firms, we have taken a number of actions, including those described below, which we believe demonstrate our Board’s responsiveness and commitment to incorporating stockholder feedback as we review our governance and compensation structure.

Overall, following our actions, our meetings have been positive and productive with our stockholders communicating support for our compensation programs. Although we did not hear common themes, consistent suggestions or any areas of concern on compensation matters during this year’s annual stockholder outreach, we value all stockholder feedback we receive, and 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. Our Compensation Committee continues to regularly evaluate 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 and considers the varied perspectives as it continues to design and evolve our executive compensation program. 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 to support our employees. For additional context, see below for information about our discussions with investors on governance and executive compensation matters in recent years.

Below is a summary of the feedback we received through our fall 2021 investor engagement program and how we responded.

By way of background, at our 2021 Annual Meeting of Stockholders, we saw a decline, compared to the prior year, 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. 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.

 

 

Below is a summary of the feedback we received through our fall 2022 investor engagement program and how we responded.

At our 2022 Annual Meeting of Stockholders, we saw a small increase, compared to the prior year, in our say-on-pay vote approval to 70.47%. While say-on-pay is a key indicator of stockholder feedback, we were disappointed that we did not see a higher level of support for our say-on-pay vote approval at the 2022 Annual Meeting, since based on our discussions with our largest stockholders, we believed they continued to support our compensation program as it has evolved and did not express concerns of responsiveness following our say-on-pay vote at our 2021 Annual Meeting of Stockholders. That said, following the results of our say-on-pay vote approval at the 2022 Annual Meeting, we conducted a more extensive outreach initiative directed at our top 20 institutional investors, representing approximately 55% of our outstanding shares. We also had numerous conversations with stockholders and investment analysts as part of our normal investor relations activities. For this year, the investors we reached out to indicated they were satisfied with our executive compensation program, did not have concerns they wished to share with us, or did not respond. For the investors we spoke to as part of our annual outreach, they understood and supported our overall executive compensation program design and felt our stockholder outreach, the significant changes we made to our compensation program and the previous confirmation of our view on retirement benefits and special bonuses addressed any specific concerns they raised, along with historical proxy advisory firm areas of concern. See also Stockholder Engagement on page 15 of this proxy statement.

 

 

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.

 

 

We, the Compensation Committee of the Board of Directors of Hologic, Inc., have reviewed and discussed the Compensation Discussion and Analysis (CD&A) set forth below with management of the Company, and based on such review and discussion, recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K.

Compensation Committee

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 24, 2022 (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 2022 compensation. As a reminder, our fiscal year ends on the last Saturday in September. Fiscal 2022 began on September 26, 2021 and ended on September 24, 2022.

Hologic had an exceptional year in fiscal 2022, driven by the strong performance of our Molecular Diagnostics and Surgical businesses, and our continued contributions to the fight against the COVID-19 pandemic.

We significantly exceeded our financial goals overall, although total revenue and EPS were down compared to fiscal 2021, as expected. Both decreases were driven primarily by lower COVID assay sales, and lower sales of capital equipment in our Breast Health division as a result of global semiconductor supply chain shortages. Total revenue decreased 13.7%, or 12.3% in constant currency, to $4.86 billion. GAAP diluted earnings per share (EPS) were $5.13, a decrease of 28.8% versus the prior year, while adjusted EPS were $6.02, down 28.4% compared to fiscal 2021.⁽¹⁾ Notably, our Molecular Diagnostics business grew 10.2%, excluding COVID-19 revenue on an organic, constant currency basis, and our Surgical business grew 8.3% in constant currency.

Cash flow continued to be strong in fiscal 2022. Operating cash flow was $2.13 billion, a decrease of 8.8% compared to fiscal 2021, yet remained significantly above pre-COVID levels. Similar to revenue and EPS, cash flow was lower compared to the prior year, driven by lower COVID assay revenue and lower capital equipment revenue in Breast Health. As a result of our robust cash flow, in fiscal 2022, we repurchased 7.7 million shares of our own stock for $542 million, reflecting great confidence in our future.

We believe Hologic is a much stronger company today than prior to the pandemic. Driven by growth in our core women’s health franchises, a significantly larger Panther installed base, international expansion, and strategic acquisitions completed over the past two years, we have more growth drivers across our business than ever before. As we look ahead, we expect each of our core franchises – Diagnostics, Breast and Skeletal Health, and Surgical, to produce low double-digit organic top line growth for fiscal 2023, excluding the impact of COVID-19. Further, with our strong cash flow, we plan to continue to prioritize tuck-in M&A opportunities and share repurchases.

Finally, our commitment to our Purpose, Passion and Promise remains at the center of all that we do at Hologic. Our dedication to helping more women, while strategically investing in our business to deliver innovative, life-changing technologies remains steadfast. These technologies power our perpetual cycle of reaching and helping more patients around the world, all while delivering value and strong financial results for our shareholders.

 

 

 

 

 

In establishing the executive compensation program for fiscal 2022, the Compensation 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 2022, illustrate that a majority of NEO TDC is performance based (91.4% for our CEO and an average of 79.8% for our other NEOs). These charts include the full value of equity awards granted during fiscal 2022 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 continues to be 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). Adjusted 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 2022 annual grants:

 

 

 

The Committee has made several decisions relating to executive pay for fiscal 2023, including:

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. In recent years, following stockholder feedback, our say-on-pay vote results and issues raised by proxy advisory firms, we have taken a number of actions, including those described below, which we believe demonstrate our Board’s responsiveness and commitment to incorporating stockholder feedback as we review our governance and compensation structure. 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 2022 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 20 institutional investors, representing approximately 55% of our outstanding shares. We ultimately met with three of those top 20 institutional investors, with our General Counsel; Vice President, Investor Relations; Vice President, Corporate Secretary; and Senior Director, Investor Relations all participating in the meetings. To the extent requested by investors, directors also participate in these discussions.

Overall, our “offseason” meetings have been positive and productive with our stockholders communicating support for our compensation programs. Although we did not hear common themes, consistent suggestions or any areas of concern on compensation matters during this year’s annual stockholder outreach, we value all stockholder feedback we receive, and 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. Our Compensation Committee continues to regularly evaluate 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 and considers the varied perspectives as it continues to design and evolve our executive compensation program. 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 to support our employees.

For additional context, see below for information about our discussions with investors on executive compensation matters in recent years.

Below is a summary of the feedback we received through our fall 2021 investor engagement program and how we responded.

By way of background, at our 2021 Annual Meeting of Stockholders, we saw a decline, compared to the prior year, 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. 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.

 

 

Below is a summary of the feedback we received through our fall 2022 investor engagement program and how we responded.

At our 2022 Annual Meeting of Stockholders, we saw a small increase, compared to the prior year, in our say-on-pay vote approval to 70.47%. While say-on-pay is a key indicator of stockholder feedback, we were disappointed that we did not see a higher level of support for our say-on-pay vote approval at the 2022 Annual Meeting, since based on our discussions with our largest stockholders, we believed they continued to support our compensation program as it has evolved and did not express concerns of responsiveness following our say-on-pay vote at our 2021 Annual Meeting of Stockholders. That said, following the results of our say-on-pay vote approval at the 2022 Annual Meeting, we conducted a more extensive outreach initiative directed at our top 20 institutional investors, representing approximately 55% of our outstanding shares. We also had numerous conversations with stockholders and investment analysts as part of our normal investor relations activities. For this year the investors we reached out to indicated they were satisfied with our executive compensation program, did not have concerns they wished to share with us, or did not respond. For the three investors we spoke to as part of our annual outreach, they understood and supported our overall executive compensation program design and felt our stockholder outreach, the significant changes we made to our compensation program and the previous confirmation of our view on retirement benefits and special bonuses addressed any specific concerns they raised, along with historical proxy advisory firm areas of concern.

 

 

Based on our continued discussions with our largest stockholders, as described above, we believe they continue to endorse our annual compensation program as it has evolved, even in light of the results at the 2022 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.

We have in place a number of industry-leading practices.

The ability to compete effectively in the markets within which we operate depends to a large extent on our success in identifying, recruiting, developing and retaining management talent. We also need to remain focused on creating sustainable long-term growth and stockholder value. To this end, the design of our executive compensation program and the decisions made by the Committee are guided by the following principles:

Our compensation philosophy is supported by the following principal elements in our annual executive compensation program:

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 2022 were as follows:

Based on the Company’s financial performance in fiscal 2021, base salary increases ranged from 3.5% to 21.1%.

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 2022 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 2022 STIP, as well as the results achieved:

 

 

 

 

 

For fiscal 2022, the Company’s adjusted revenue performance was 146% of target and adjusted EPS was 157% of target. With adjusted revenue weighted 60% and adjusted EPS weighted 40%, these performance results yield a payout at 150% 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 2023 and beyond and succession planning and talent development. Messrs. Thornal’s and Verstreken’s individual performance objectives also included revenue growth performance for their respective divisions.

Mr. MacMillan’s individual performance objectives were designed to reward the achievement of the following goals:

Ms. Oberton’s individual performance objectives were designed to reward the achievement of the following goals:

Mr. Griffin’s individual performance objectives were designed to reward the achievement of the following goals:

Mr. Thornal’s individual performance objectives were designed to reward the achievement of the following goals: