Historical Resolution Tracking Feature » Discussion of CEO Compensation and Contract
Important note: The explanatory text provided through this database (including the summary, implementation actions, identification of related resolutions, and additional information) is an interpretation or an explanation that has no official authority and does not represent the purpose behind the Board actions, nor does any explanations or interpretations modify or override the Resolutions themselves. Resolutions can only be modified through further act of the ICANN Board.
Discussion of CEO Compensation and Contract
Board approves to extend the employment agreement of the President and CEO thru 30 June 2017
Whereas, under its Charter, the Compensation Committee is charged with recommending to the full Board the appropriate elements of individual compensation arrangements (base salary, at-risk component, and benefits) for Officers of ICANN, and in particular the President and Chief Executive Officer ("CEO").
Whereas, on 14 July 2014, the Compensation Committee recommend that the Board extend Fadi Chehadé's Employment Agreement as ICANN's President and CEO through 30 June 2017.
Whereas, on 14 July 2014, the Compensation Committee further recommended that ICANN increase Mr. Chehadé's annual compensation to the following: (i) annual base salary of US$630,000.00; and (ii) at-risk compensation component of up to US$270,000.00 per year based on the President and CEO's achievement of the established performance goals, to be paid out on a semi-annual basis. No changes to the President and CEO's benefits package are recommended.
Whereas, as a not-for-profit California public benefit corporation that is exempt from Federal income taxes because it is an organization described in § 501(c)(3) of the Internal Revenue Code of 1986, as amended, ICANN may not pay more than "reasonable compensation" for services rendered to ICANN.
Whereas, under its Charter, the Compensation Committee is required to obtain, review, and consider comparable compensation data for officer-level positions, like the President and CEO, taking into account size, geographic considerations, international presence, complexity and other relevant factors.
Whereas, under its Charter, the Compensation Committee is authorized to engage and to seek advice from independent professionals with appropriate expertise in compensation arrangements for U.S.-based, not for profit, tax-exempt organizations possessing a global employee base.
Whereas, in connection with its evaluation of a potential increase in the Mr. Chehadé's compensation package, the Compensation Committee exercised its authority and directed staff to engage the services of Towers Watson, an international expert compensation firm, to assist the Compensation Committee in compiling and analyzing appropriate data as to comparability with respect to compensation for the President and CEO position for ICANN.
Whereas, the Compensation Committee also directed staff to engage a second international expert compensation firm for confirmation of the comparable data; this second firm's recommendations were consistent with those of Towers Watson.
Whereas, in reviewing the terms and conditions of the compensation to be paid to the Mr. Chehadé as ICANN's President and CEO, the Compensation Committee followed the process set forth in U.S. Treasury Regulation § 53.4958-6, which was intended by the Compensation Committee to enable the Board to establish the presumption that the compensation to be paid to the ICANN President and CEO is reasonable compensation for Federal income tax purposes.
Whereas, upon due inquiry of its members, the Compensation Committee concluded that no member of the Committee had a conflict of interest with respect to the increases recommended for Board approval to Mr. Chehadé's compensation package as ICANN's President and CEO.
Whereas, the Compensation Committee has reported its activities to the Board.
Whereas, the Compensation Committee has shared with the Board the Towers Watson comparability materials, including the recommendation and advice received from Towers Watson, and, has been available to answer questions from the Board regarding the compensation recommended for Mr. Chehadé as ICANN's President and CEO.
Whereas, under ICANN's Articles of Incorporation and California law, the Board is the authorized body of ICANN vested with the authority to determine, among other things, the compensation to be paid to Mr. Chehadé as ICANN's President and CEO.
Whereas, upon due inquiry of its members, the Board has concluded that no member of the Board has a conflict of interest with respect to the compensation arrangement recommended by the Compensation Committee for Mr. Chehadé as ICANN's President and CEO.
Whereas, the Board has considered the comparability data provided by the Towers Watson, and the advice and counsel of Towers Watson.
Whereas, the Board has discussed Mr. Chehadé's performance and the terms and conditions of his continued employment, including the compensation package for Mr. Chehadé as ICANN's President and CEO.
Whereas, in reviewing the recommendations of the Compensation Committee regarding the compensation to be paid to Mr. Chehadé as ICANN's President and CEO, the Board has followed the process set forth in Treasury Regulation § 53.4958-6, which is intended by the Board to enable the Board to establish the presumption that the compensation to be paid to the President and CEO is reasonable compensation for Federal income tax purposes.
Whereas, after consideration of all the relevant facts and circumstances, the Board has concluded that Compensation Committee's of compensation to be paid to Mr. Chehadé as President and CEO, effective 1 July 2014, is in its entirety reasonable compensation for the services to be rendered by Mr. Chehadé as ICANN's President and CEO.
Whereas, based upon the foregoing, the Board has concluded that it is in the best interests of ICANN to extend Mr. Chehadé's Employment Agreement as ICANN's President and CEO through 30 June 2017, and to pay Mr. Chehadé the compensation described below, beginning on 1 July 2014.
Resolved (2014.07.30.18):
a. It is in the best interests of ICANN to extend Fadi Chehadé's Employment Agreement to serve as President and CEO of ICANN through 30 June 2017.
b. It is in the best interests of ICANN to increase Fadi Chehadé's compensation as ICANN's President and CEO, effective 1 July 2014, as follows: (i) a base salary of a fixed amount of US$630,000.00 per year; and (ii) an at-risk component of compensation of up to US$270,000.00 per year based on the President and CEO's achieving the performance goals as agreed by the Board.
c. The extension of Fadi Chehadé's Employment Agreement as ICANN's President and CEO through 30 June 2017, and the increased compensation as referenced above, shall be evidenced by an appropriate amendment to the Agreement already in place between ICANN and Mr. Chehadé, which per Amendment No. 1, was effective 14 September 2012.
d. ICANN's Chairman and its General Counsel are authorized to finalize the Amendment to Fadi Chehadé's Employment Agreement as ICANN's President and CEO based on the general terms set forth above.
ICANN's current President and CEO, Fadi Chehadé, has been working with ICANN, first as an independent contractor and then as employee, for over two years. The initial term of his current Employment Agreement, absent extension, is set to end on 1 July 2015. Both ICANN and Mr. Chehadé are interested in having Mr. Chehadé continue as ICANN's President and CEO, at least for two years beyond the initial term of his current Agreement.
The full Board has discussed and agreed, following a recommendation from the Compensation Committee, to extend Mr. Chehadé's Employment Agreement through 30 June 2017. In addition, the Board has determined to increase Mr. Chehadé's base and at-risk compensation components. The decision to increase Mr. Chehadé's compensation was done with recognition and acknowledgment of the work done by the Compensation Committee with Towers Watson to ensure that the increase recommended is reasonable and in line with comparable positions, as noted in the resolution above, which is incorporated by reference as though fully set forth as part of this rationale.
Taking this action will help ensure the stability in leadership that it is important for ICANN to have, particularly during this time. It also shows the support for, and confidence that the Board has in, Mr. Chehadé in his role as ICANN's President and CEO. This action will have a financial impact on ICANN, but it is not an impact that cannot be covered by ICANN's FY15 budget. This action will not have any direct impact on the security, stability and resiliency of the domain name system.
This is an Organizational Administrative Function that is not subject to public comment.