Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2019    Commission File Number: 1-31349

 

 

THOMSON REUTERS CORPORATION

(Translation of registrant’s name into English)

 

 

333 Bay Street, Suite 400

Toronto, Ontario M5H 2R2, Canada

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

The information contained in Exhibit 99.1 of this Form 6-K is incorporated by reference into, or as an additional exhibit to, as applicable, the registrant’s outstanding registration statements.

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   

THOMSON REUTERS CORPORATION

(Registrant)

    By:   /s/ Marc E. Gold
      Name: Marc E. Gold
      Title: Assistant Secretary
Date: April 17, 2019      


EXHIBIT INDEX

 

Exhibit
Number

  

Description

99.1    Notice of Annual Meeting of Shareholders and Management Proxy Circular dated April 17, 2019
99.2    Form of Proxy for Registered Shareholders
99.3    Notice of Availability of Proxy Materials
99.4    Corporate Governance Guidelines
EX-99.1 Notice of Annual Meeting of Shareholders and Management Proxy Circular
Table of Contents

 

Exhibit 99.1

LOGO

 

 

 

Management Proxy Circular and

Notice of Annual Meeting of Shareholders

June 5, 2019

 

 

 

LOGO

 

 

YOUR VOTE AND PARTICIPATION AS A SHAREHOLDER IS IMPORTANT.

                                 Please read this document and vote.

  


Table of Contents

Notice of Annual Meeting of Shareholders of Thomson Reuters Corporation

We are pleased to invite you to attend our 2019 annual meeting of shareholders.

 

  When    Where   

                    

 

Wednesday, June 5, 2019

12:00 p.m. (Eastern Daylight Time)

  

Roy Thomson Hall

60 Simcoe Street

Toronto, Ontario, Canada

    

A live audio webcast will be available at

www.thomsonreuters.com. A replay of the

webcast will be posted on our website after the

meeting.

Business of the Meeting

At the meeting, shareholders will be asked to:

1. Receive our consolidated financial statements for the year ended December 31, 2018 and the auditor’s report on those statements;

2. Elect directors;

3. Appoint the auditor and authorize the directors to fix the auditor’s remuneration;

4. Consider an advisory resolution on executive compensation;

5. Consider the shareholder proposal set forth in the accompanying management proxy circular; and

6. Transact any other business properly brought before the meeting and any adjourned or postponed meeting.

You can read about each of these items in more detail in the accompanying management proxy circular. At the meeting, you will also have an opportunity to hear about our 2018 performance and our plans for Thomson Reuters going forward. Shareholders in attendance will have an opportunity to ask questions.

Record Date

You are entitled to vote at the meeting, and any adjourned or postponed meeting, if you were a holder of our common shares as of 5:00 p.m. (Eastern Daylight Time) on April 11, 2019.

Notice-And-Access

We are using the “notice-and-access” system for the delivery of our proxy materials through our website, www.thomsonreuters.com, similar to last year’s meeting. Shareholders who receive a notice have the ability to access the proxy materials on our website and to request a paper copy of the proxy materials. Instructions on how to access the proxy materials through our website or to request a paper copy may be found in the notice. Electronic delivery reduces the cost and environmental impact of producing and distributing paper copies of documents in very large quantities. It also provides shareholders with faster access to information about Thomson Reuters.

Shareholders who have already signed up for electronic delivery of proxy materials will continue to receive them by e-mail.

Voting

Your vote is important. If you’re unable to attend the meeting in person, please vote by proxy. A proxy is a document that authorizes someone else to attend the meeting and cast votes for you. The proxy form contains instructions on how to complete and send your voting instructions. If you hold your shares through a broker or other intermediary, you should follow the procedures provided by your broker or intermediary.

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders

 



Table of Contents

 


If you’re a registered shareholder, our transfer agent, Computershare Trust Company of Canada, must receive your proxy or voting instructions no later than 5:00 p.m. (Eastern Daylight Time) on Monday, June 3, 2019, or if the meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and holidays) before any adjourned or postponed meeting. If you’re a registered shareholder and have any questions or need assistance voting your shares, please call Computershare Trust Company of Canada, toll-free in Canada and the United States, at 1.800.564.6253.

Non-registered/beneficial shareholders will be subject to earlier voting deadlines as specified in their proxy or voting instructions.

Thank you for your continued support of, and interest in, Thomson Reuters.

Very truly yours,

 

LOGO

   LOGO

David Thomson

Chairman of the Board

  

James C. Smith

President & Chief Executive Officer

April 17, 2019   

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Letter to Shareholders

To our Shareholders,

Across industries and borders, the digital transformation is in full force.

Markets, business models and platforms are evolving rapidly. Once emerging technologies – especially artificial intelligence and cognitive computing – have arrived and are impacting every industry in profound ways that professionals are just beginning to understand. Meanwhile, geopolitical uncertainty remains widespread, regulatory complexity is growing and economic and competitive pressures on our customers remain high.

Despite this upheaval, we are as confident as ever that we can help our customers succeed. Why?

At Thomson Reuters, we work best at the intersection of commerce and regulation, where the world is complex. We make it our mission every day to serve our customers with essential news and information-enabled tools that help them to make the best decisions, while also making the best use of their time.

We do this by combining a deep understanding of their industries with expertly curated information and tailored technology. This raises their productivity, liberating them from routine tasks and creating more time to focus on the things that matter most: advising, advocating, negotiating, governing and informing.

Our business is built on a proven track record combining trusted content with cutting edge technology and deep domain expertise, which has resulted in longstanding customer relationships and leading positions in our markets. Our customers know that they can count on us. In many cases, this trust has been earned over many decades.

From this long-established position of strength and trust, we are evolving.

2018 was a transformational year for Thomson Reuters. We sold 55% of our Financial & Risk business to private equity funds managed by Blackstone for approximately $17 billion, creating a new partnership now known as Refinitiv. Following the completion of this deal, we returned $10 billion of the proceeds to shareholders, paid down $4 billion of debt, covered costs associated with the transaction and set aside $2 billion to reinvest for growth in our core markets.

While separating the two businesses, we worked to reposition the new Thomson Reuters with a new structure that makes customers more central to our decision making. We built a flatter organization with fewer management layers, reducing hierarchy and empowering those closest to the customer. The new structure, which is organized around our Legal Professionals, Tax Professionals, Corporates, Reuters News and Global Print customers, allows us to bring the full power of our enterprise to market with greater speed and focus on solving customer problems.

Through momentous change, we saw an acceleration in our underlying sales momentum and were able to grow the business. We launched innovative products like Westlaw Edge, which incorporates state-of-the-art artificial intelligence and predictive analytics to enable legal professionals to deliver faster and more accurate results to their clients.

In 2018 (and for the seventh consecutive year), our full-year financial performance met our guidance for all key metrics. We grew revenues 3% organically overall, and grew 4% in our core Legal Professionals, Tax Professionals and Corporates segments (which represent 80% of our revenue base). This was our best performance since 2008.

In 2019, our aim is to maintain the focus, pace and determination with which we ended 2018. A strong capital structure will enable us to invest organically and inorganically to reach new customers, to better serve and expand our relationship with existing customers where we don’t serve their existing information, technology and software needs today and to eventually access new customers in adjacent markets.

We are investing behind a digital-first strategy that will make it easier for existing customers to work with us, and allow us to reach thousands of smaller prospective customers we do not sell to today. Embedding customer insights and analytics in our digital offerings should help us be quicker to deliver the product innovations they most want, be easier to do business with and improve retention.

We are confident that these priorities will lead to faster growth and sustainable, long-term value creation for our shareholders. Earlier this year, we announced plans to repurchase up to an additional $250 million worth of shares in 2019. And, we announced a $0.04 cent increase in our annualized dividend to $1.44 per share, the 26th consecutive year of dividend increases for the company – an achievement that we are very proud of.

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders

 



Table of Contents

 


We live in a time when trusted information, news and data have never been more important.

For more than a year, Reuters journalists Wa Lone and Kyaw Soe Oo have been imprisoned in Myanmar for simply doing their jobs and telling the truth. Journalism is not a crime and we will not rest until they are released and back with their families.

At a time when the virtues of objectivity, accuracy, fairness and transparency are under attack, we consider it our duty to pursue them – just as we have for more than 100 years.

With a strong foundation, leading brands and a simpler, more focused go-to-market proposition, our prospects are truly brighter now than ever before. We are pleased that those who matter the most – our customers, our employees and our shareholders – will be along for the ride.

 

LOGO

 

LOGO

David Thomson

Chairman of the Board

 

James C. Smith

President & Chief Executive Officer

Certain statements in the letter are forward-looking. These forward-looking statements are based on certain assumptions and reflect our current expectations. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of the factors that could cause actual results to differ materially from current expectations are discussed in the “Risk Factors” section of our 2018 annual report as well as in other materials that we from time to time file with, or furnish to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of this date. Except as may be required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements.

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Table of Contents

 

Fast Facts About Thomson Reuters

     3  

About this Circular and Related Proxy Materials

     4  

Business of the Meeting

     5  

Voting Information

     7  

Voting by Proxy

     7  

Voting In Person

     8  

Annual and Quarterly Financial Statements and Related MD&A

     10  

Notice-and-Access

     10  

Electronic Delivery of Shareholder Communications

     10  

Principal Shareholder and Share Capital

     11  

About Our Directors

     12  

Nominee Information

     14  

Director Compensation and Share Ownership

     21  

Corporate Governance Practices

     25  

Board Composition and Responsibilities

     25  

Director Attendance

     29  

Controlled Company

     30  

Board Committees

     31  

Audit Committee

     31  

Corporate Governance Committee

     36  

HR Committee

     40  

Risk Committee

     42  

About Our Independent Auditor

     43  

Advisory Resolution on Executive Compensation (Say On Pay)

     44  

Compensation Discussion and Analysis

     45  

Executive Summary

     45  

Our 2018 Compensation Program

     48  

Our Process for Designing and Determining Executive Compensation

     49  

Our Key Compensation Principles

     51  

2018 Compensation

     56  

2018 Named Executive Officer Compensation and Key Accomplishments

     62  

Performance Graphs

     69  

Historic Named Executive Officer Compensation

     70  

2019 Key Compensation Decisions

     70  

Executive Compensation

     71  

Summary Compensation Table

     71  

Incentive Plan Awards

     73  

Pension and Other Retirement Benefits

     75  

Termination Benefits

     77  

Indebtedness of Officers, Directors and Employees

     82  

Directors’ and Officers’ Indemnification and Insurance

     82  

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 1

 



Table of Contents

 


Additional Information

     83  

Non-IFRS Financial Measures

     83  

How to Contact the Board

     83  

2019 Annual Meeting – Questions from Shareholders

     83  

Where to find Corporate Governance and Continuous Disclosure Documents

     83  

Thomson Reuters Trust Principles and Thomson Reuters Founders Share Company

     84  

Share Repurchases – Normal Course Issuer Bid

     84  

Directors’ Approval

     85  

Appendix A – Equity Compensation and Other Plan Information

     A-1  

Appendix B – Shareholder Proposal

     B-1  

 

 

 

Page 2    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Fast Facts About Thomson Reuters

 

 

Thomson Reuters is a leading provider of news and information-based tools to professionals. Our worldwide network of journalists and specialist editors keep customers up to speed on global developments, with a particular focus on legal, regulatory and tax changes.

 

 

The table below describes some of our key operating characteristics:

 

       

Attractive Industry

  Balanced and Diversified Leadership   Attractive Business Model   Strong Competitive Positioning   Disciplined Financial Policies

·   Customer segments operate in an estimated $32 billion market segment which we estimate grew mid-single digits in 2018

 

·   A leader in key Legal Professionals, Corporates and Tax Professionals market segments

 

·   Products and services tailored for professionals

 

·   Deep broad industry knowledge

 

·   Distinct core customer group revenues

 

·   Geographical diversity

 

·   Largest customer is approximately 1% of revenues

 

·   75% of revenues are recurring

 

·   87% of total revenues are delivered electronically or as software as a service

 

·   Strong consistent cash generation capabilities

 

·   Proprietary databases and deeply embedded workflow tools and analytics

 

·   Technology and operating platforms built to address the global marketplace

 

·   Focused on free cash flow growth

 

·   Balance investing in business and returning capital to shareholders

 

·   Commitment to maintaining investment grade rating with stable capital structure

 

·   $2 billion investment fund to bolster positions in key growth areas or to repurchase shares

 

 

2018 full-year results:

 

 

Stock prices (2018):

 

·   Revenues – US$5.5 billion

 

·   Operating profit – US$780 million

 

·   Adjusted EBITDA margin* – 24.8%

 

·   Diluted earnings per share (EPS) – US$5.91

 

·   Adjusted EPS* – US$0.75

 

·   Cash flow from operations – US$2.1 billion

 

·   Free cash flow* – US$1.1 billion

 

Stock exchange listings (Symbol: TRI):

 

·   Toronto Stock Exchange (TSX)

 

·   New York Stock Exchange (NYSE)

 

 

Closing price (12/31/2018): C$65.93 / US$48.31

 

High: C$68.61 / US$51.38

 

Low: C$48.14 / US$37.64

 

Market capitalization (12/31/2018):

 

Over US$24 billion

 

Dividend per common share (as of April 2019):

 

$0.36 quarterly ($1.44 annualized)

 

We have increased our common share dividend for 26 consecutive years.

All revenue information reflected in the first table above is based on our 2018 full-year results.

For more information about our company, visit www.thomsonreuters.com

* Non-International Financial Reporting Standards (non-IFRS) financial measures. Please see the note in the “Additional Information” section of this circular.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 3

 



Table of Contents

 


About this Circular and Related Proxy Materials

 

 

We are providing this circular and proxy materials to you in connection with our annual meeting of shareholders to be held on Wednesday, June 5, 2019. As a shareholder, you are invited to attend the meeting. If you are unable to attend, you may still vote by completing the enclosed proxy form.

 

 

This circular describes the items to be voted on at the meeting and the voting process and contains additional information about executive compensation, corporate governance practices and other matters that will be discussed at the meeting.

Unless otherwise indicated, all dollar amounts in this circular are expressed in U.S. dollars, and information is as of April 11, 2019. In this circular, the terms “we”, “us” and “our” refer to Thomson Reuters Corporation and our consolidated subsidiaries. The term “Woodbridge” refers to The Woodbridge Company Limited and other companies affiliated with it.

Please see the “Voting Information” section of this document for an explanation of how you can vote on the matters to be considered at the meeting, whether or not you decide to attend the meeting.

We are a Canadian company that is considered to be a “foreign private issuer” for U.S. federal securities law purposes. As a result, we have prepared this circular in accordance with applicable Canadian disclosure requirements.

Information contained on our website or any other websites identified in this circular is not part of this circular. All website addresses listed in this circular are intended to be inactive, textual references only. The Thomson Reuters logo and our other trademarks, trade names and service names mentioned in this circular are the property of Thomson Reuters.

Front cover photo credit: REUTERS/Mark Blinch.

 

 

 

Page 4    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Business of the Meeting

Highlights

This year’s meeting will cover the following items of business:

 

   
Item of Business   Highlights   Board Vote
Recommendation
1. Financial
statements
 

Receipt of our 2018 audited financial statements.

 

· Our 2018 annual consolidated financial statements are included in our 2018 annual report, which is available in the “Investor Relations” section of our website, www.thomsonreuters.com.

 

· Shareholders who requested a copy of the 2018 annual report will receive it by mail or e-mail.

 

· Representatives from Thomson Reuters and our independent auditor, PricewaterhouseCoopers LLP, will be available to discuss any questions about our financial statements at the meeting.

  N/A

2. Directors

 

At the meeting, 11 individuals are proposed to be elected to our board of directors. All of these individuals are currently directors of our company.

 

· A majority of our directors are independent.

 

· The roles and responsibilities of the Chairman and the CEO are separate.

 

· Shareholders vote annually for individual directors.

 

The director nominees are:

  FOR each director
nominee
   
  Name   Director Since   Independent  

Affiliated with

Principal

Shareholder

 

Thomson

Reuters

Management

 
  David Thomson   1988        
  James C. Smith   2012        
  Sheila C. Bair   2014        
  David W. Binet   2013        
  W. Edmund Clark, C.M.   2015        
  Michael E. Daniels   2014        
  Vance K. Opperman   1996        
  Kristin C. Peck   2016        
  Barry Salzberg   2015        
  Peter J. Thomson   1995        
    Wulf von Schimmelmann   2011              
3. Auditor   We are proposing to re-appoint PricewaterhouseCoopers LLP as our independent auditor for another year until the 2020 annual meeting of shareholders. Our Audit Committee is directly responsible for overseeing the independent auditor during the year.   FOR

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 5

 



Table of Contents

 


   
Item of Business   Highlights   Board Vote
Recommendation
4. Advisory resolution
on executive compensation
 

We will have a non-binding advisory resolution on executive compensation, which is sometimes called “say on pay”. This will provide you with an opportunity to provide a view on our company’s approach to executive compensation, as described in this circular.

 

“Pay for performance” is a key part of our compensation philosophy for our named executive officers.

 

    2018 compensation decisions were aligned with our strategic objectives – During 2018, the Human Resources Committee of the board of directors (HR Committee) was actively engaged in reviewing and discussing the design and approach to our compensation, talent and culture programs to fit the Thomson Reuters of the future. In 2018, a significant portion of executive pay was at risk and linked to both operational performance and stock price. Our incentive plan goals reflected our published business outlook, operating plan and long-term strategy. Annual incentive awards focused on growth objectives for the year.

 

    Our compensation program is strongly aligned with shareholder return and value – Our executive officer compensation over the last five years has been strongly aligned with total shareholder return. We also require our executive officers to maintain meaningful levels of share ownership that are multiples of their respective base salaries, creating a strong link to our shareholders and the long-term success of our company.

 

    We benchmark executive compensation and performance against global peer companies that we compete with for customers and talent – In 2018, the HR Committee approved a new global peer group for executive compensation purposes to reflect our company’s smaller size once the Financial & Risk (F&R) transaction closed. When constructing our new global peer group, the HR Committee did not include other Canadian companies with a common Global Industry Classification System (GICS) code. While we acknowledge that proxy advisors tend to focus on these companies, we believe that they do not provide a meaningful or relevant comparison of our competitive market for talent given the particular executive talent pool from which we recruit and the significant differences in industries, businesses and operational strategy between our companies and other Canadian companies with a common GICS code. The HR Committee did, however, also approve a new Canadian peer group in 2018 given our company’s increasing presence in Toronto. This Canadian peer group is also referenced by the HR Committee as part of executive compensation benchmarking.

 

    Our compensation program is aligned with good governance practices and has received strong shareholder support in recent years – Our plans and programs reflect strong governance principles. The HR Committee has an independent advisor (FW Cook) for executive compensation matters. We also engage with our shareholders on compensation matters during the year and we provide a “say on pay” resolution each year at our annual meeting of shareholders. Over the last five years, approximately 98% of votes have been cast “for” our “say on pay” advisory resolutions.

 

    We do not believe that we have any problematic pay practices and risk is taken into account in our compensation programs – The HR Committee’s independent advisor is of the view that our compensation program appears unlikely to create incentives for excessive risk taking and includes meaningful safeguards to mitigate compensation program risk.

 

Please see the “Compensation Discussion and Analysis” section of the circular for additional information.

  FOR

5. Shareholder proposal

 

Consider the shareholder proposal set out in Appendix B of this circular.

  AGAINST

6. Other business

  If any other items of business are properly brought before the meeting (or any adjourned or postponed meeting), shareholders will be asked to vote. We are not aware of any other items of business at this time.   N/A

 

 

 

Page 6    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Voting Information

Who can vote at the meeting?

If you held common shares as of 5:00 p.m. (Eastern Daylight Time) on April 11, 2019 (the record date), then you are entitled to vote at the meeting or any adjourned or postponed meeting. Each share is entitled to one vote. As of April 11, 2019, there were 500,313,308 common shares outstanding.

We also have 6,000,000 Series II preference shares outstanding, but these shares do not have voting rights at the meeting.

How many votes are required for approval?

A simple majority (more than 50%) of votes cast, in person or by proxy, is required to approve each item of business.

Woodbridge, our principal and controlling shareholder, beneficially owned approximately 66% of our outstanding common shares as of April 11, 2019. Woodbridge has advised our company that it will vote FOR the election of each director nominee, the appointment of PricewaterhouseCoopers LLP as auditor, and the advisory resolution on executive compensation and AGAINST the shareholder proposal set out in Appendix B of this circular.

How do I vote?

You have two choices – you can vote by proxy, or you can attend the meeting and vote in person. The voting process is different for each choice. The voting process also depends on whether you are a registered or non-registered shareholder.

You should first determine whether you are a registered or non-registered holder of our common shares. Most of our shareholders are non-registered holders.

 

·   

You are a registered shareholder if your name appears directly on your share certificates, or if you hold your common shares in book-entry form through the direct registration system (DRS) on the records of our transfer agent, Computershare Trust Company of Canada.

 

·   

You are a non-registered shareholder if you own shares indirectly and the shares are registered in the name of an intermediary. For example, you are a non-registered shareholder if:

 

   

your common shares are held in the name of a bank, trust company, securities broker, trustee or custodian; or

 

   

you hold Depositary Interests representing our common shares which are held in the name of Computershare Company Nominees Limited as nominee and custodian.

Non-registered shareholders are sometimes referred to as “beneficial owners”.

Voting by Proxy

If it is not convenient for you to attend the meeting, you may vote by proxy on the matters to be considered at the meeting. A proxy is a document that authorizes someone else to attend the meeting and cast votes for you.

Non-registered shareholders

If you are a non-registered shareholder who receives a proxy form or voting instruction form (VIF), you should follow your intermediary’s instruction for completing the form. Holders of Depositary Interests will receive a voting form of instruction or direction from Computershare Investor Services PLC.

Registered shareholders

 

·   

You may authorize our directors who are named on the enclosed proxy form to vote your shares as your proxyholder. You may give voting instructions by mail, the Internet or telephone. Please refer to your proxy form for instructions.

 

·   

You may appoint another person to attend the meeting on your behalf and vote your shares as your proxyholder. If you choose this option, you can appoint your proxy by mail or through the Internet. If you mail the proxy form, you must print that person’s name in the blank space provided on the back of the enclosed proxy form and you should indicate how you want your shares voted. Sign, date and return the proxy form in the envelope provided. If you vote through the Internet, you may also appoint another person to be your proxyholder. You may choose anyone to be your proxyholder; the person does not have to be another shareholder.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 7

 



Table of Contents

 


You may be able to appoint more than one proxyholder, provided that each proxyholder is entitled to exercise the rights attaching to different shares held by you. If you do appoint more than one proxyholder, you must do so by mail, and please enter the number of shares next to the proxyholder’s name that he or she is entitled to vote. The person you appoint must attend the meeting and vote on your behalf in order for your votes to be counted. Proxyholders should register with representatives of Computershare Trust Company of Canada when they arrive at the meeting.

Voting In Person

Non-registered shareholders

You should do one of the following if you plan to attend the meeting:

 

·   

If you have received a proxy form from your intermediary, insert your own name in the blank space provided on the proxy form to appoint yourself as proxyholder. If the intermediary has not signed the proxy form, you must sign and date it. Follow your intermediary’s instructions for returning the proxy form; or

 

·   

If you have received a VIF from your intermediary, follow your intermediary’s instructions for completing the form.

Registered shareholders

You do not need to do anything except attend the meeting. Do not complete or return your proxy form, as your vote will be taken at the meeting. You should register with representatives of Computershare Trust Company of Canada when you arrive at the meeting. If you wish to vote common shares registered in the name of a legal entity, that entity must submit a properly executed proxy form to Computershare Trust Company of Canada by the proxy cut-off time which appoints you to vote the common shares on its behalf.

Can I vote my shares by filling out and returning the notice?

No. The notice sets forth the items to be voted on at the meeting, but you cannot vote by marking the notice and returning it. The notice provides instructions on how to vote.

What’s the deadline for receiving my proxy or voting instructions?

If you are a registered shareholder, your proxy or voting instructions must be received by 5:00 p.m. (Eastern Daylight Time) on Monday, June 3, 2019.

Non-registered shareholders may be subject to earlier deadlines as specified in their proxy or voting instructions.

If the meeting is adjourned or postponed, the proxy cut-off deadline will be no later than 48 hours (excluding Saturdays, Sundays and holidays) before any adjourned or postponed meeting.

How will my shares be voted if I appoint a proxyholder?

Your proxyholder must vote your shares on each matter according to your instructions if you have properly completed and returned a proxy form. If you have not specified how to vote on a particular matter, then your proxyholder can vote your shares as he or she sees fit. If you have appointed our directors named on the enclosed proxy form as your proxyholder, and you have not specified how you want your shares to be voted, your shares will be voted FOR the election of each director nominee, the appointment of PricewaterhouseCoopers LLP as auditor, and the advisory resolution on executive compensation and AGAINST the shareholder proposal set out in Appendix B of this circular.

What happens if any amendments are properly made to the items of business to be considered or if other matters are properly brought before the meeting?

Your proxyholder will have discretionary authority to vote your shares as he or she sees fit. As of the date of this circular, management knows of no such amendment, variation or other matter expected to come before the meeting.

If I change my mind, how do I revoke my proxy or voting instructions?

Non-registered shareholders

You may revoke your proxy or voting instructions by sending written notice to your intermediary, so long as the intermediary receives your notice at least seven days before the meeting (or as otherwise instructed by your intermediary). This gives your intermediary time to submit the revocation to Computershare Trust Company of Canada. If your revocation is not received in time, your intermediary is not required to act on it.

 

 

 

Page 8    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Registered shareholders

You may revoke your proxy or voting instructions in any of the following ways:

 

·   

By completing and signing a proxy form with a later date than the proxy form you previously returned, and delivering it to Computershare Trust Company of Canada at any time before 5:00 p.m. (Eastern Daylight Time) on Monday, June 3, 2019. If the meeting is adjourned or postponed, the deadline will be no later than 48 hours before any adjourned or postponed meeting;

 

·   

By completing a written statement revoking your instructions, which is signed by you or your attorney authorized in writing, and delivering it:

 

   

To the offices of Computershare Trust Company of Canada at any time before 5:00 p.m. (Eastern Daylight Time) on Tuesday, June 4, 2019. If the meeting is adjourned or postponed, the deadline will be no later than 48 hours before any adjourned or postponed meeting; or

 

   

To the Chair of the meeting before the meeting starts; or

 

   

In any other manner permitted by law.

Who is soliciting my proxy and distributing proxy-related materials?

Thomson Reuters management and directors may solicit your proxy for use at the meeting and any adjourned or postponed meeting. Our management and directors may solicit proxies by mail and in person. We are paying all costs of solicitation. Intermediaries will distribute proxy-related materials directly to non-objecting beneficial owners on our behalf. We are paying for intermediaries to send proxy-related materials to both non-objecting beneficial owners and objecting beneficial owners.

Is my vote confidential?

Yes. Our registrar, Computershare Trust Company of Canada, independently counts and tabulates the proxies to preserve the confidentiality of individual shareholder votes. Proxies are referred to us only in cases where a shareholder clearly intends to communicate with management, in the event of questions as to the validity of a proxy or where it is necessary to do so to meet applicable legal requirements.

Voting results

Following the meeting, we will post the voting results in the “Investor Relations” section of our website, www.thomsonreuters.com. We will also file a copy of the results with the Canadian securities regulatory authorities at www.sedar.com and the U.S. Securities and Exchange Commission at www.sec.gov. For more information, see the “Additional Information” section of this circular.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 9

 



Table of Contents

 


Annual and Quarterly Financial Statements and Related MD&A

Our annual and quarterly reports and earnings releases are available in the “Investor Relations” section of our website, www.thomsonreuters.com. Please also see the “Electronic Delivery of Shareholder Communications” section below for information about electronic delivery of these reports and other shareholder communications.

Notice-and-Access

Why did I receive a notice in the mail regarding the website availability of this circular and proxy materials?

We are using the “notice-and-access” system for the delivery of our proxy materials through our website, similar to last year’s meeting. Shareholders who receive a notice have the ability to access the proxy materials on our website and to request a paper copy of the proxy materials. Instructions on how to access the proxy materials through our website or to request a paper copy may be found in the notice.

Electronic delivery reduces the cost and environmental impact of producing and distributing paper copies of documents in very large quantities. It also provides shareholders with faster access to information about Thomson Reuters.

Why didn’t I receive a printed notice in the mail about the website availability of the proxy materials?

Shareholders who previously signed up for electronic delivery of our proxy materials will continue to receive them by e-mail and will not receive a printed notice in the mail.

How do I vote under the “notice-and-access” system?

The voting process is the same as described in the “Voting Information” section of this circular. You have two choices – you can vote by proxy, or you can attend the meeting and vote in person.

Electronic Delivery of Shareholder Communications

Does Thomson Reuters provide electronic delivery of shareholder communications?

Yes. Electronic delivery is a voluntary program for our shareholders. Under this program, an e-mail notification (with links to the documents posted on our website) is sent to you.

Electronic delivery reduces the cost and environmental impact of producing and distributing paper copies of documents in very large quantities. It also provides shareholders with faster access to information about Thomson Reuters.

How can I enroll for electronic delivery of shareholder communications?

For most non-registered shareholders (other than holders of our Depositary Interests), please go to www.proxyvote.com for more instructions and to register. You will need your Enrollment Number/Control Number. You can find this number on your voting instruction form/proxy form.

If you are a registered shareholder, please go to www.investorcentre.com (country – Canada) and click on “Sign up for eDelivery” at the bottom of the page. You will need information from your proxy form to register.

 

 

 

Page 10    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Principal Shareholder and Share Capital

As of April 11, 2019, Woodbridge beneficially owned 328,297,621 of our common shares, or approximately 66% of our outstanding common shares. Woodbridge is the principal and controlling shareholder of Thomson Reuters.

Woodbridge, a private company, is the primary investment vehicle for members of the family of the late Roy H. Thomson, the first Lord Thomson of Fleet. Woodbridge is a professionally managed company that, in addition to its controlling interest in Thomson Reuters, has other substantial investments.

Prior to his passing in 2006, Kenneth R. Thomson controlled our company through Woodbridge. He did so by holding shares of a holding company of Woodbridge, Thomson Investments Limited. Under his estate arrangements, the 2003 TIL Settlement, a trust of which the trust company subsidiary of a Canadian chartered bank is trustee and members of the family of the late first Lord Thomson of Fleet are beneficiaries, holds those holding company shares. Kenneth R. Thomson established these arrangements to provide for long-term stability of the business of Woodbridge. The equity of Woodbridge continues to be owned by members of successive generations of the family of the first Lord Thomson of Fleet.

Under the estate arrangements of Kenneth R. Thomson, the directors and officers of Woodbridge are responsible for its business and operations. In certain limited circumstances, including very substantial dispositions of our company’s common shares by Woodbridge, the estate arrangements provide for approval of the trustee to be obtained.

Note 31 to our 2018 annual consolidated financial statements provides information on certain transactions that we entered into with Woodbridge in 2018 and 2017.

To our knowledge, no other person beneficially owns, directly or indirectly, 10% or more of our common shares.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 11

 



Table of Contents

 


About Our Directors

This section includes the following information:

 

·   

Profiles for each director nominee;

 

·   

Compensation that we paid to our directors in 2018; and

 

·   

Our corporate governance structure and practices.

 

 

HIGHLIGHTS

 

· 

A majority of our directors are independent;

 

· 

The roles and responsibilities of the Chairman and the CEO are separate; and

 

· 

All of the nominees are currently directors of our company.

 

 

Voting

You will be asked to vote for each director on an individual basis. Each nominee is proposed to be elected for a term ending at our 2020 annual meeting of shareholders. All of the nominees are currently directors of our company who were elected at our 2018 annual and special meeting of shareholders. Profiles for each nominee are provided on the following pages.

The board unanimously recommends that you vote FOR the election of the following 11 nominees to the Thomson Reuters board of directors: David Thomson, James C. Smith, Sheila C. Bair, David W. Binet, W. Edmund Clark, C.M., Michael E. Daniels, Vance K. Opperman, Kristin C. Peck, Barry Salzberg, Peter J. Thomson and Wulf von Schimmelmann.

Management does not believe that any of the nominees will be unable to serve as a director but, if this should occur for any reason prior to the meeting, the persons named in the enclosed proxy form may vote for another nominee at their discretion.

Following the meeting, we will issue a press release that includes the number of votes cast for and withheld from each individual director. At last year’s annual meeting, our director nominees received an average of 98% “for” votes. Additional information is provided in each nominee’s profile on the following pages.

Majority voting policy

We have a majority voting policy that applies to the election of directors at the annual meeting of shareholders. This means that if a director receives more “withhold” votes than “for” votes at the meeting, then the director will immediately tender his or her resignation to the Chairman. This would be effective if accepted by the board. The Corporate Governance Committee will consider a director’s offer to resign and make a recommendation to the board as to whether to accept it. The board will accept resignations, except in exceptional circumstances. The board will have 90 days from the annual meeting to make and publicly disclose its decision by news release either to accept or reject the resignation (including reasons for rejecting the resignation, if applicable).

Director qualifications

We believe that all of the director nominees possess character, integrity, judgment, business experience, a record of achievement and other skills and talents which enhance the board and the overall management of the business and affairs of Thomson Reuters. Each director nominee has an understanding of our company’s principal operational and financial objectives, plans and strategies, financial position and performance and the performance of Thomson Reuters relative to our principal competitors. The Corporate Governance Committee considered these qualifications in determining to recommend the director nominees for election. Additional information is provided in the individual director nominee profiles below and in the “Board Committees – Corporate Governance Committee” section of this circular, which contains a “skills matrix” highlighting individual director nominee skills and experiences.

 

 

 

Page 12    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Independence

A majority of the board is independent. Under the corporate governance guidelines adopted by the board, a director is not considered independent unless the board affirmatively determines that the director has no “material relationship” with Thomson Reuters. In determining the independence of directors, the board considers all relevant facts and circumstances. In March 2019, the board conducted its annual assessment of the independence of each of its current members and determined that six of the 11 directors (approximately 55%) serving on the board are independent.

In determining independence, the board examined and relied on the applicable definitions of “independent” in the NYSE listing standards and Canadian Securities Administrators’ National Instrument 58-101. The board also reviewed the results of questionnaires completed by directors.

In order for the board to function independently from management:

 

·   

The roles and responsibilities of the Chairman (David Thomson) and the CEO (Jim Smith) are separate;

 

·   

We have a Lead Independent Director (Vance K. Opperman); and

 

·   

The Audit Committee is comprised entirely of independent directors (as required by applicable law) and the Corporate Governance Committee, Human Resources Committee and Risk Committee each have a majority of independent directors.

 

    Director Independence
       

Name of Director Nominee

  Management   Independent   Not Independent    Reason for Non-Independence

David Thomson

             A Chairman of Woodbridge

James C. Smith

           President & Chief Executive Officer of Thomson Reuters

Sheila C. Bair

              

David W. Binet

             President of Woodbridge

W. Edmund Clark, C.M.

             Advisor to the trustee of the 2003 TIL Settlement and Woodbridge

Michael E. Daniels

              

Vance K. Opperman

              

Kristin C. Peck

              

Barry Salzberg

              

Peter J. Thomson

             A Chairman of Woodbridge

Wulf von Schimmelmann

              

Total

  1   6   5     

None of Messrs. D. Thomson, Binet or P. Thomson is a member of Thomson Reuters executive management team. With its substantial equity investment in Thomson Reuters, Woodbridge considers that its interests as a shareholder are aligned with those of all other shareholders.

In determining the independence of directors, the board also considers that in the normal course of business, we provide services to, and receive services from, companies with which some of the independent directors are affiliated. Based on the specific facts and circumstances, the board determined in March 2019 that these relationships were immaterial.

Interlocking Directorships

We do not have any director nominees who serve together on boards of other public companies. The board has adopted a policy that no more than two of our directors may serve together on the boards of other public companies without the consent of the Corporate Governance Committee.

Service on Other Boards

Our directors are not restricted from serving on the boards of other public or private companies so long as their commitments do not materially interfere with or are not incompatible with, their ability to fulfill their duties as a member of our company’s board. However, directors must receive approval from the Chair of the Corporate Governance Committee in advance of accepting an invitation to serve on the board of another public company and must notify the Chair of the Corporate Governance Committee in connection with accepting an invitation to serve on the board of a for-profit private company that is not a family business. The

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 13

 



Table of Contents

 


Corporate Governance Committee monitors the outside boards that our directors sit on to determine if there are circumstances that would impact a director’s ability to exercise independent judgment and to ensure that a director has sufficient time to fulfill his or her commitments to Thomson Reuters.

Tenure

Our board has not adopted a mandatory retirement age or term limits for individual directors. We believe that individuals can continue to remain effective directors beyond a mandated retirement age or maximum period of service. Without having a mandatory retirement age or term limits, we have experienced turnover on our board that has brought directors with new perspectives and approaches. This has complemented the depth of knowledge and insight about our company and business operations that some of our more long-standing directors have developed over time.

Of the 11 directors proposed to be elected at this year’s meeting, only three (approximately 27%) were members of our board in 2008 when Thomson Reuters was formed. The following table shows the tenure of our director nominees on our board.

 

 

LOGO

 

 

The average tenure of all director nominees is 10.9 years and the average tenure of nominees who are considered independent is 8 years.

 

 

Two of our directors who have been members of the board for more than 10 years (David Thomson and Peter Thomson) are affiliated with our company’s principal shareholder, Woodbridge.

Countries of Residence

The following table shows the countries where our director nominees ordinarily reside.

 

LOGO

Nominee Information

The following provides information regarding the 11 director nominees who are proposed to be elected at the meeting, including a brief biography, city and country of residence, the year that they were appointed to our board, independence status, primary areas of expertise, committee membership, attendance at board and committee meetings in 2018 and ownership of Thomson Reuters securities. This information also reflects the percentage of “for” votes received by each director at our 2018 annual and special meeting of shareholders.

In the director nominee profiles on the following pages, “securities held” by a director nominee includes common shares over which a director nominee exercised control or direction, and the number of restricted share units (RSUs), deferred share units (DSUs) and options held by, or credited to, each individual as of April 11, 2019. Information regarding common shares beneficially owned does not include shares that may be obtained through the exercise or vesting of options, RSUs or DSUs. Each director nominee provided us with information about how many common shares he or she beneficially owns.

 

 

 

Page 14    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

The market value of shares beneficially owned is based on the closing price of our common shares on the New York Stock Exchange (NYSE) on April 11, 2019, which was $59.03. The market value of DSUs is also based on the closing price of our common shares on the NYSE on that date.

We have also included information about each director nominee’s ownership of Thomson Reuters common shares and DSUs as of April 11, 2019 as a multiple of their annual retainer. All of our directors exceeded their ownership guideline as of such date. Additional information about director share ownership guidelines is provided later in this section.

 

 

LOGO

 

David Thomson1

 

Age: 61

 

Toronto, Ontario, Canada

 

Director since 1988

 

Non-independent

 

Primary areas of expertise: investment management, retail, media/publishing

 

2018 votes for: 98.90%

     

David Thomson

 

David Thomson is Chairman of Thomson Reuters. He is also a Chairman of Woodbridge, the Thomson family investment company, and Chairman of The Globe and Mail Inc., a Canadian media company. Mr. Thomson is an active private investor with a focus on real estate and serves on the boards of several private companies. Mr. Thomson has a MA from Cambridge University.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    15 of 15    100%          
    Total    15 of 15    100%                  
    Securities held (number and value)2                 

Total shares

and DSUs

 

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

  

RSUs

  

DSUs

83,085

  

Options

  83,085         
      

   $4,904,508          $4,904,508   
     

1 David Thomson and Peter Thomson, both of whom are nominees, are brothers.

2 David Thomson and Peter Thomson are substantial shareholders of our company as members of the family that owns the equity of Woodbridge, our principal shareholder. For additional information, please see the “Principal Shareholder and Share Capital” section of this circular.

 

 

LOGO

 

James C. Smith

 

Age: 59

 

Toronto, Ontario, Canada

 

Director since 2012

 

Non-independent

 

Primary areas of expertise: operations, international business and media/publishing

 

2018 votes for: 99.24%

     

 

James C. Smith

 

James C. Smith has been President & Chief Executive Officer since January 2012. Mr. Smith was Chief Operating Officer of Thomson Reuters from September 2011 to December 2011 and Chief Executive Officer of Thomson Reuters Professional division from April 2008 to September 2011. Prior to the acquisition of Reuters Group PLC (Reuters) by The Thomson Corporation (Thomson) in April 2008, he served as Chief Operating Officer of Thomson and as President and Chief Executive Officer of Thomson Learning’s Academic and Reference Group. Mr. Smith joined the Thomson Newspaper Group in 1987. He held several staff and operating positions, culminating in his role as head of operations for Thomson Newspapers in the U.S. With the sale of the Thomson Newspaper Group in 2000, he joined Thomson in 2001 as Executive Vice President. He began his career as a journalist and held several editorial and general management positions prior to joining Thomson. Mr. Smith received a BA from Marshall University.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
      Board1    9 of 15   60%    Pfizer Inc.             
    Total    9 of 15   60%                  
      Securities held
(number and value)
                  

Total shares

and DSUs

 

Total market

value2

  

Ownership multiple

of base salary3

   

Common shares

487,750

  

RSUs

346,469

 

DSUs

204,155

  

Options

4,883,042

  691,905         
    $28,791,883      $11,976,656          $40,843,152    25.5x
     

1  Mr. Smith missed several board meetings due to an illness in the first half of 2018. Only one of those meetings was regularly scheduled and four of the meetings that Mr. Smith missed were held in February for directors to be updated on his health. Other than meetings that Mr. Smith missed due to illness, his attendance at our board meetings in 2018 was 100%. Mr. Smith had 100% attendance at 42 board meetings from his initial appointment in 2012 through the end of 2017.

 

2  154,490 of Mr. Smith’s 346,469 RSUs are time based restricted share units (TRSUs). As of April 11, 2019, the value of Mr. Smith’s TRSUs was $9,119,545 and the total market value of his common shares, DSUs and TRSUs was $49,888,083.

 

3 Reflects Mr. Smith’s ratio under his executive ownership guidelines, which is based on a multiple of his salary.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 15

 



Table of Contents

 


 

LOGO

 

Sheila C. Bair

 

Age: 65

 

Kennedyville, Maryland, United States

 

Director since 2014

 

Independent

 

Primary areas of expertise: international business, finance, operations, legal

 

2018 votes for: 99.82%

   

 

 

Sheila C. Bair

 

Sheila C. Bair is a corporate director. Ms. Bair was President of Washington College from August 2015 to June 2017. Prior to that, she was Senior Advisor to The Pew Charitable Trusts for four years. Ms. Bair was also Senior Advisor to DLA Piper, an international law firm. Ms. Bair was the Chair of the Federal Deposit Insurance Corporation from June 2006 to July 2011. From 2002 to 2006, she was the Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst. She also served as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury from 2001 to 2002, Senior Vice President for Government Relations of the New York Stock Exchange from 1995 to 2000, Commissioner of the Commodity Futures Trading Commission from 1991 to 1995, and as counsel to Kansas Republican Senate Majority Leader Bob Dole from 1981 to 1988. Ms. Bair has a bachelor’s degree and law degree from the University of Kansas.

 

     

Board/committee

membership

   2018 attendance   

Other public company board memberships

    Board    15 of 15    100%   

Host Hotels & Resorts Inc.

Industrial and Commercial Bank of China Ltd.

    Audit Committee    8 of 8    100%            
    Risk Committee    1 of 1    100%            
    Special Committee    3 of 3    100%                    
    Total    27 of 27    100%                    
      Securities held
(number and value)
                     Total shares
and DSUs
   Total market
value
   Ownership multiple
of annual retainer
   

Common shares

  

RSUs

  

DSUs

16,444

  

Options

  

16,444

         
            $970,689            $970,689    4.9x

 

 

LOGO

 

David W. Binet

 

Age: 61

 

Toronto, Ontario, Canada

 

Director since 2013

 

Non-independent

 

Primary areas of expertise: legal, media/publishing, investment management

 

2018 votes for: 95.40%

     

David W. Binet

 

David W. Binet is Deputy Chairman of Thomson Reuters. He is also President and Chief Executive Officer and a director of Woodbridge, the Thomson family investment company. Prior to January 1, 2013, he held a number of senior positions at Woodbridge between 1999 and 2012, including Chief Operating Officer. Mr. Binet is a director of The Globe and Mail Inc., a Canadian media company and of a number of other companies in which Woodbridge is invested. Mr. Binet is also Chairman of the Thomson Reuters Foundation. Prior to joining Woodbridge in 1999, he was a partner at a major law firm. Mr. Binet has a law degree from McGill University, a BA from Queen’s University and a graduate degree in journalism from Northwestern University.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    15 of 15   100%      
    Corp. Governance Committee    5 of 5   100%      
    HR Committee    8 of 8   100%            
    Risk Committee    1 of 1   100%            
    Total    29 of 29   100%                    
      Securities held
(number and value)
                   

Total shares

and DSUs

  

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

261,176

  

RSUs

  DSUs 27,208   

Options

   288,384          
      $15,417,219      $1,606,088            $17,023,308    85.1x

 

 

 

Page 16    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

 

LOGO

 

W. Edmund Clark, C.M.

 

Age: 71

 

Toronto, Ontario, Canada

 

Director since 2015

 

Non-independent

 

Primary areas of expertise: executive leadership, finance, human resources, strategy

 

2018 votes for: 93.05%

     

 

W. Edmund Clark, C.M.

 

W. Edmund Clark is a corporate director. Mr. Clark served as Group President and Chief Executive Officer of TD Bank Group from 2002 until his retirement in November 2014. Mr. Clark was inducted as a Companion of the Canadian Order of the Business Hall of Fame in 2016. In 2014, Mr. Clark was elected to the Board of Trustees of the Brookings Institute. He is also Chair of the Vector Institute for Artificial Intelligence. Mr. Clark has a BA from the University of Toronto, and an MA and Doctorate in Economics from Harvard University. He has also received honorary degrees from Mount Allison University, Queen’s University, Western University and the University of Toronto. In 2010, he was made an Officer of the Order of Canada, one of the country’s highest distinctions.

 

     

Board/committee

membership

  2018 attendance   Other public company board memberships
    Board   15 of 15   100%    
    Corp. Governance Committee   5 of 5   100%        
    HR Committee   8 of 8   100%                
    Total   28 of 28   100%                
      Securities held
(number and value)
                 Total shares
and DSUs
 

Total market

value

  Ownership multiple
of annual retainer
   

Common shares

36,316

 

RSUs

 

DSUs

20,608

 

Options

  56,924        
      $2,143,733  

  $1,216,490  

      $3,360,224   16.8x

 

 

LOGO

 

Michael E. Daniels

 

Age: 64

 

Hilton Head Island, South Carolina, United States

 

Director since 2014

 

Independent

 

Primary areas of expertise: international business, finance, operations, technology

 

2018 votes for: 98.45%

     

 

Michael E. Daniels

 

Michael E. Daniels is a corporate director. In March 2013, Mr. Daniels retired as Senior Vice President and Group Executive IBM Services after 36 years with the company where he directed IBM’s consulting, systems integration, application management, cloud computing and outsourcing services around the globe. Mr. Daniels also held a number of senior leadership positions in his career at IBM, including General Manager of Sales and Distribution Operations of the Americas as well as leading Global Services in the Asia Pacific region. Mr. Daniels has a bachelor’s degree in political science from Holy Cross College.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    14 of 15    93%    SS&C Technologies Holdings, Inc.   
    Audit Committee    5 of 6    83%    Johnson Controls International plc   
    Corp. Governance Committee    5 of 5    100%      
    HR Committee    7 of 8    88%      
    Risk Committee    1 of 1    100%      
    Special Committee    3 of 3    100%                    
    Total    35 of 38    92%                    
      Securities held
(number and value)
                     Total shares
and DSUs
  

Total market

value

   Ownership multiple
of annual retainer
   

Common shares

2,924

  

RSUs

  

DSUs

20,892

  

Options

   23,816          
      $172,604   

   $1,233,255   

        $1,405,858    7.0x

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 17

 



Table of Contents

 


 

LOGO

 

Vance K. Opperman

 

Age: 76

 

Minneapolis, Minnesota, United States

 

Director since 1996

 

Independent

 

Primary areas of expertise: legal, operations, finance, media/publishing, investment management

 

2018 votes for: 96.96%

     

 

Vance K. Opperman

 

Vance Opperman is Lead Independent Director of Thomson Reuters. He is also President and Chief Executive Officer of Key Investment, Inc., a private investment company involved in publishing and other activities. Previously, Mr. Opperman was President of West Publishing Company, an information provider of legal and business research which is now owned by Thomson Reuters. He serves as Lead Independent Director of TCF Financial Corporation. He also serves on the board of several educational and not-for-profit organizations. He has a law degree from the University of Minnesota and practiced law for many years.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    15 of 15    100%    TCF Financial Corporation   
    Audit Committee    8 of 8    100%      
    Corp. Governance Committee    5 of 5    100%      
    HR Committee    8 of 8    100%      
    Risk Committee    1 of 1    100%      
    Special Committee    3 of 3    100%                    
    Total    40 of 40    100%                    
      Securities held
(number and value)
                    

Total shares

and DSUs

  

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

50,000

  

RSUs

  

DSUs

128,358

  

Options

   178,358          
      $2,951,500   

   $7,576,973   

        $10,528,473    52.6x

 

 

LOGO

 

Kristin C. Peck

 

Age: 47

 

Greenwich, Connecticut, United States

 

Director since 2016

 

Independent

 

Primary areas of expertise: commercial operations, business development, strategy, customer experience

 

2018 votes for: 98.56%

     

 

Kristin C. Peck

 

Kristin Peck is Executive Vice President and Group President, U.S. Operations, Business Development and Strategy at Zoetis, a NYSE-listed global leader in the discovery, development, manufacture and commercialization of animal health medicines and vaccines that was spun off by Pfizer in 2013. From October 2012 through April 2015, she served as Executive Vice President and Group President of Zoetis. Ms. Peck joined Pfizer in 2004 and held various positions, including Executive Vice President, Worldwide Business Development and Innovation; Senior Vice President, Worldwide Business Development, Strategy and Innovation; Vice President, Strategic Planning; Chief of Staff to the Vice Chairman; and Senior Director, Strategic Planning. She also served as a member of Pfizer’s Executive Leadership Team. Prior to joining Pfizer, Ms. Peck was a Principal at Boston Consulting Group. She holds a Bachelor’s degree from Georgetown University and a Master of Business Administration from Columbia Business School.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    15 of 15    100%      
    Corp. Governance Committee    2 of 2    100%      
    HR Committee    8 of 8    100%      
    Special Committee    3 of 3    100%                    
    Total    28 of 28    100%                    
      Securities held
(number and value)
                    

Total shares

and DSUs

  

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

  

RSUs

  

DSUs

11,709

  

Options

   11,709          
            $691,182            $691,182    3.5x

 

 

 

Page 18    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

 

LOGO

 

Barry Salzberg

 

Age: 65

 

New York, New York, United States

 

Director since 2015

 

Independent

 

Primary areas of expertise: accounting/audit, operations, international business

 

2018 votes for: 99.60%

     

 

Barry Salzberg

 

Barry Salzberg is a corporate director. Mr. Salzberg served as the Global Chief Executive Officer of Deloitte Touche Tohmatsu Limited from 2011 until his retirement in May 2015. He joined Deloitte in 1977 and his roles included Chief Executive Officer and Managing Partner of the firm’s U.S. operations. Mr. Salzberg is Chairman of the Board of Directors of 10EQS and has previously served as a board member of New Profit, Inc. and previously served as Chairman of the United Way Worldwide, Chairman of the Board of College Summit and Chairman of the Board of the YMCA of Greater New York. From July 2015 until June 2018, he was a Professor at Columbia Business School. He has a BS in Accounting from Brooklyn College, a JD from Brooklyn Law School, and an LLM in Taxation from the New York University School of Law.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    15 of 15    100%      
    Audit Committee    8 of 8    100%      
    Corp. Governance Committee    5 of 5    100%      
    Risk Committee    1 of 1    100%      
    Special Committee    3 of 3    100%      
                                   
    Total    32 of 32    100%                    
      Securities held
(number and value)
                    

Total shares

and DSUs

  

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

  

RSUs

  

DSUs

18,709

  

Options

   18,709          
     

  

   $1,104,392   

        $1,104,392    5.5x

 

 

LOGO

 

Peter J. Thomson1

 

Age: 53

 

Toronto, Ontario, Canada

 

Director since 1995

 

Non-independent

 

Primary areas of expertise: investment management, science, technology

 

2018 votes for: 98.97%

     

 

Peter J. Thomson

 

Peter J. Thomson is a Chairman of Woodbridge, the Thomson family investment company. Mr. Thomson is an active private equity investor and serves on the boards of several private companies. He has a BA from the University of Western Ontario.

 

 

Board/committee

membership

   2018 attendance    Other public company board memberships
  Board    15 of 15    100%      
  HR Committee    2 of 2    100%          
  Total    17 of 17    100%                    
  Securities held
(number and value)2
                     Total shares
and DSUs
  

Total market

value

   Ownership multiple
of annual retainer
 

Common shares

  

RSUs

  

DSUs

10,397

  

Options

   10,397          
   

  

   $613,735   

        $613,735   
   

 

 

1  David Thomson and Peter Thomson, both of whom are nominees, are brothers.

2  David Thomson and Peter Thomson are substantial shareholders of our company as members of the family that owns the equity of Woodbridge, our principal shareholder. For additional information, please see the “Principal Shareholder and Share Capital” section of this circular.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 19

 



Table of Contents

 


 

LOGO

 

Wulf von Schimmelmann

 

Age: 72

 

Munich, Germany

 

Director since 2011

 

Independent

 

Primary areas of expertise: finance, operations, international business

 

2018 votes for: 99.81%

     

 

Wulf Von Schimmelmann

 

Wulf von Schimmelmann is a corporate director. Mr. von Schimmelmann was Chief Executive Officer of Deutsche Postbank AG from 1999 to 2007, where he transformed the organization from a check processing division of Deutsche Post to one of Germany’s leading retail banks. He also serves as a member of the Supervisory Board of Maxingvest AG. Prior to his lengthy career in banking, he was a partner at McKinsey & Co., working in Switzerland, the U.S. and Germany. Mr. von Schimmelmann was also previously Chairman of the Supervisory Board of Deutsche Post DHL AG, a member of the Supervisory Board of Deutsche Teleknow and Allianz Deutschland AG, a director of Western Union Company, Accenture plc and Deutsche Post DHL AG, and Chair of BAWAG P.S.K. Mr. von Schimmelmann received a degree in economic sciences and his Ph.D. in economics from the University of Zurich.

 

     

Board/committee

membership

   2018 attendance    Other public company board memberships
    Board    13 of 15    87%    Accenture plc   
    Audit Committee    8 of 8    100%      
    HR Committee    2 of 2    100%      
    Special Committee    2 of 3    67%                    
    Total    25 of 28    89%                    
      Securities held
(number and value)
                     Total shares
and DSUs
  

Total market

value

  

Ownership multiple

of annual retainer

   

Common shares

  

RSUs

  

DSUs

34,608

  

Options

   34,608          
     

  

   $2,042,910   

        $2,042,910    10.2x

 

 

 

Page 20    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Director Compensation and Share Ownership

Approach and Philosophy

Our approach and philosophy for director compensation is to:

 

·   

align the interests of our directors with those of our shareholders; and

 

·   

provide competitive compensation.

The compensation program for our directors takes into account:

 

·   

the size, scope and complexity of our organization;

 

·   

the time commitment, contributions and effort required of directors to serve on the board and one or more board committees, as applicable (including board/committee meetings and travel to and from board/committee meetings and site visits);

 

·   

the experience and skills of our directors;

 

·   

compensation levels for boards of directors of other large comparable U.S. and Canada-based multinational public companies in order for amounts paid to our directors to be competitive to attract new candidates and to retain existing directors;

 

·   

an increasing trend in U.S. and Canadian public company director compensation programs to require a combination of mandatory and optional equity components to further align directors’ interests with shareholders; and

 

·   

our desire to have a flat fee structure.

Our Corporate Governance Committee is responsible for periodically reviewing the adequacy and form of directors’ compensation. In 2018, the Corporate Governance Committee reviewed our director compensation program and decided to provide the chairs of the Corporate Governance Committee and the newly formed Risk Committee with a retainer equivalent to the chairs of the Audit Committee and HR Committee. The Lead Independent Director was chair of the Corporate Governance Committee until June 2018 and did not receive any additional committee fees while serving in both capacities. Due to the F&R transaction, the Corporate Governance Committee decided not to make any other changes to the form or amount of director compensation in 2018.

In periodically benchmarking director compensation, the Corporate Governance Committee evaluates publicly available data related to director compensation paid by large U.S. and Canadian public companies, as our company’s board is primarily comprised of directors from the U.S. and Canada. U.S. board compensation is generally higher than Canadian companies.

We do not grant stock options, restricted share units (RSUs) or bonuses to our non-management directors. In addition, we do not provide our non-management directors with retirement/pension benefits, healthcare coverage or perquisites.

 

 

As discussed later in this section, we require our directors to hold a minimum value of common shares and/or deferred share units (DSUs) and our director compensation program encourages directors to invest in our company beyond their minimum ownership requirements.

 

 

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 21

 



Table of Contents

 


 

Our directors have a mandatory equity component for their compensation. Approximately 89% of director compensation was paid in equity (DSUs or common shares) in 2018.

 

 

Components of Director Compensation

The table below sets forth the annual retainers that were payable to our non-management directors in 2018. Directors do not receive separate attendance or meeting fees. Chairs of the board’s standing committees receive additional fees given their increased responsibilities and workloads. No fees were paid in 2018 to members of the Special Committee that was formed in connection with the F&R transaction (as discussed later in this circular). Additional information regarding the different components of our director compensation structure is provided following this table.

 

 
     2018 ($)

Non-management  directors1

   200,000 (50,000 of which is required to be paid in deferred share units, or DSUs)

Chairman of the Board

   600,000

Additional retainers

    

Deputy Chairman of the Board

   150,000 (payable in DSUs)

Lead Independent Director

   150,000 (payable in DSUs)

Committee chairs – Audit, Corporate Governance, HR and Risk

   50,000 (payable in DSUs)

 

1

Directors other than the Chairman.

Retainers / Mandatory Equity Component

We require a minimum of $50,000 of each director’s $200,000 annual retainer to be paid in equity in the form of DSUs (payable quarterly). Our non-management directors then elect to receive the remaining $150,000 of their $200,000 annual retainer in the form of DSUs, common shares or cash (or a mix thereof – payable quarterly).

DSUs

Each DSU has the same value as one common share, though DSUs do not have voting rights. DSUs are not performance-based units. If a director elects to receive DSUs, units representing the value of common shares are credited to the director’s account. DSUs accumulate additional units based on notional equivalents of dividends paid on our common shares. DSUs are fully vested upon grant, but they are only settled (in the form of common shares or cash, at the election of the director) following termination of the director’s board service. Any common shares delivered to a director in connection with the settlement of DSUs are purchased in the open market.

Common Shares

If a director elects to receive common shares, the cash amount (net of withholding taxes) is provided to our broker who uses such amount to buy shares in the open market.

Committee Fees

Committee chair fees, which are payable entirely in DSUs, are reflected in the table above.

Chairman and Deputy Chairman Retainer

The Chairman’s annual retainer is $600,000. The Deputy Chairman’s annual retainer is $150,000, which is payable entirely in DSUs. The Deputy Chairman also receives the same annual $200,000 retainer paid to other non-management directors. Additional information about the Chairman and the Deputy Chairman is provided later in the “Corporate Governance Practices” section of this circular.

 

 

 

Page 22    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Lead Independent Director Retainer

The Lead Independent Director’s annual retainer is $150,000, which is payable entirely in DSUs and was previously inclusive of the fee for chairing one committee. The Lead Independent Director was chair of the Corporate Governance Committee until June 2018 and did not receive any additional committee fees while serving in both capacities. The Lead Independent Director also receives the same annual $200,000 retainer paid to other non-management directors. Additional information about the Lead Independent Director is provided later in the “Corporate Governance Practices” section of this circular.

2019 Director Compensation

No changes are currently contemplated at this time to the amount or form of director compensation for 2019.

Total Director Compensation

The table below reflects compensation earned by our directors in 2018. Approximately 89% of 2018 director compensation was paid in DSUs. Committee chair fees were pro-rated for directors who served in that capacity for part of 2018.

As President and CEO of Thomson Reuters, Mr. Smith does not receive compensation for his service as a director. Information regarding Mr. Smith’s 2018 compensation is set forth in the “Executive Compensation” section of this circular.

 

     Fees Earned ($)  
         

Director

   Cash      DSUs      Common Shares    All Other
Compensation ($)
     Total ($)  

David Thomson

          600,000              600,000  

Sheila C. Bair1

        228,493              228,493  

David W. Binet

   150,000      200,000              350,000  

W. Edmund Clark, C.M.2

        250,000              250,000  

Michael E. Daniels3

        228,493              228,493  

Sir Kenneth Olisa, OBE4

   12,329      4,110              16,439  

Vance K. Opperman5

        350,000              350,000  

Kristin C. Peck

        200,000              200,000  

Barry Salzberg6

        250,000              250,000  

Peter J. Thomson

   150,000      50,000              200,000  

Wulf von Schimmelmann

        200,000              200,000  

Total

   312,329      2,561,096              2,873,425  

 

1   Includes fees for serving as Chair of the Risk Committee during part of 2018.
2   Includes fees for serving as Chair of the HR Committee during 2018.
3   Includes fees for serving as Chair of the Corporate Governance Committee during part of 2018.
4   Sir Kenneth resigned from the board in January 2018. This table reflects pro-rated compensation for his service as a director during that month.
5   Includes fees for serving as the Lead Independent Director during 2018 and Chair of the Corporate Governance Committee during part of 2018.
6   Includes fees for serving as Chair of the Audit Committee during 2018.

Stock Option and RSU Grants

Our non-management directors are not eligible to receive stock option grants and no non-management director currently holds any options. None of our non-management directors currently hold RSUs. Options and RSUs held by Mr. Smith are described later in the circular.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 23

 



Table of Contents

 


Share Ownership Guidelines

Directors are required to hold common shares and/or DSUs with a value of $600,000, which is equal to three times their annual retainer. Directors are required to meet their ownership requirement within five years of the date of their initial appointment to the Thomson Reuters board. Share prices of all public companies are subject to market volatility. As a result, director share ownership guidelines reflect a “once met, always met” standard. This means that if a director has met his or her applicable ownership guideline multiple and a subsequent decline in the Thomson Reuters share price causes the value of his or her ownership to fall below the applicable threshold, the director will be considered to be in compliance with the guidelines so long as he or she continues to hold the number of shares that were owned at the time when he or she achieved the guidelines.

Ownership of common shares and DSUs by our director nominees can be found in each nominee’s biography in this circular. David Thomson and Peter Thomson are substantial shareholders of our company as members of the family that owns the equity of Woodbridge. As of April 11, 2019, Woodbridge beneficially owned approximately 66% of our common shares. For more information, see the “Principal Shareholder and Share Capital” section of this circular. The following table shows each non-management director’s progress towards his or her share ownership guidelines. All ownership multiples and each director’s ownership are as of April 11, 2019.

 

 

All of our directors currently exceed their share ownership guideline level.

 

 

 

   

Name

   Ownership multiple of
annual retainer
   Progress towards guidelines

David Thomson

      , through Woodbridge’s ownership

Sheila C. Bair

   4.9x   

David W. Binet

   85.1x   

W. Edmund Clark, C.M.

   16.8x   

Michael E. Daniels

   7.0x   

Vance K. Opperman

   52.6x   

Kristin C. Peck

   3.5x   

Barry Salzberg

   5.5x   

Peter J. Thomson

      , through Woodbridge’s ownership

Wulf von Schimmelmann

   10.2x   

Mr. Smith is subject to separate ownership guidelines in his capacity as CEO of our company and his ownership as of April 11, 2019 was 25.5x his base salary, which significantly exceeded his guideline level of 6x his base salary. For more information, see the “Compensation Discussion and Analysis” section of this circular.

Pensions

Non-management directors do not receive any pension benefits from our company. Mr. Smith’s pension and retirement benefits are described in the “Executive Compensation – Pension and Other Retirement Benefits” section of this circular.

Service Contracts

We have not entered into service contracts with our non-management directors. Our agreement with Mr. Smith regarding termination benefits is described in the “Executive Compensation – Termination Benefits” section of this circular.

Liability Insurance

We provide our directors with liability insurance in connection with their service on the board.

Director Expenses

We reimburse directors for reasonable travel and out-of-pocket expenses incurred in connection with their Thomson Reuters duties.

 

 

 

Page 24    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Corporate Governance Practices

Our board is committed to high standards of corporate governance and believes that sound corporate governance practices are essential to the well-being of our company and for the promotion and protection of our shareholders’ interests. We believe that sustainable value creation for all shareholders is fostered through a board that is informed and engaged and that functions independently of management.

As a public company with shares listed in Canada on the Toronto Stock Exchange and in the United States on the New York Stock Exchange, our corporate governance practices are generally consistent with the best practice guidelines of the Canadian securities regulatory authorities and the SEC. In addition, our corporate governance practices comply with most of the corporate governance listing standards of the NYSE, notwithstanding that we are exempt from most of those standards as a “foreign private issuer”.

Board Composition and Responsibilities

Governance Structure

The board oversees our corporate governance structure, in part, through the work of the Corporate Governance Committee. Board practices are set out in corporate governance guidelines, which the Corporate Governance Committee reviews annually. The corporate governance guidelines deal with issues such as the board’s duties and responsibilities, share ownership guidelines and conflicts of interest. In addition, each of the board’s four standing committees (Audit, Corporate Governance, HR and Risk) has a charter. The charters are reviewed annually by the relevant committee and the Corporate Governance Committee.

 

 

The board’s principal responsibilities include strategic planning, risk management, financial reporting, disclosure and corporate governance.

 

 

Our Code of Business Conduct and Ethics (Code), which was updated in February 2018, applies to our employees, directors and officers, including our CEO, CFO and Controller. Our updated Code reflects changes in style and appearance. While the content of the updated Code and its provisions are fundamentally the same, it also reflects certain content updates to make the Code consistent with policies and regulations that have changed in the last few years. Our employees, directors and officers are required to submit an acknowledgment that they have received and read a copy of the Code and understand their obligations to comply with the principles and policies outlined in it. The Corporate Governance Committee receives an annual report regarding the Code from the General Counsel.

Board Size

The board currently consists of 11 individuals and functions independently of management. The board is currently comprised of 10 non-management directors and the CEO. Individual directors are proposed for election annually. We have proposed that 11 directors be nominated for election at the meeting, all of whom are currently directors.

 

LOGO

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 25

 



Table of Contents

 


Key Responsibilities of the Board

The fundamental responsibility of the board is to supervise the management of the business and affairs of Thomson Reuters. The table below highlights primary activities and topics from the board’s 2018 work plan.

 

Meeting

   2018 Primary Activities/Topics

January

  

· Annual operating plan

· Dividend policy

· F&R transaction

February

  

· CEO health

March

  

· Annual disclosure and corporate governance documents (annual report, management proxy circular, financial statements)

· Executive compensation

· F&R transaction

· Capital strategy update

· New Thomson Reuters update

June

  

· F&R transaction

· Investor Relations update

· Capital strategy update

· Tax update

· New Thomson Reuters update

August

  

· F&R transaction return of proceeds (substantial issuer bid)

September

  

· Corporate strategy

· Legal Professionals business strategy

· Tax Professionals strategy

· Corporates business strategy

· Capital strategy update and dividend policy

October

  

· F&R transaction return of proceeds (return of capital transaction)

November

  

· Thomson Reuters business update

Periodically

  

· Strategic and management discussions related to individual businesses or sectors

· Reports from the Chairs of the Audit, Corporate Governance, HR and Risk Committees

· Enterprise risk management (ERM)

· Proposed significant acquisitions and dispositions

· Product updates

· Proposed capital markets transactions

·  In-camera meetings with the CEO only (typically at the start and end of each in-person meeting)

·  In-camera meetings of non-management directors only

·  In-camera meetings of independent directors only

· Competitive analysis

 

Strategic Planning

The board plays an important role in strategic planning and direction throughout the year.

In January, the board meets with management to review, discuss and approve the final version of our annual operating plan, which is prepared by our CEO, CFO and other senior executives. The plan typically addresses:

 

·   

Opportunities

 

·   

Risks

 

·   

Competitive position

 

·   

Business outlook

 

·   

Preliminary full-year financial results

 

·   

Financial projections for a three-year period

 

·   

Other key performance indicators

 

·   

Annual dividend and share repurchase program recommendations

 

 

 

Page 26    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Throughout the year, the board and management discuss our progress against the plan. The board focused its in-person meeting in September on corporate strategy. As part of this meeting, directors had an in-depth discussion about our company’s strategic plans with our CEO and CFO and other senior executives. Strategy discussions typically cover topics such as technology, the current condition of our business segments, future growth potential of our businesses and the key market segments that we serve, and how we are seeking to increase shareholder value.

While the January and September meetings focus on strategic planning, the board also discusses various strategic issues with management at other meetings during the year. For example, the board discussed our capital strategy with the CFO and the Treasurer in March and June. In addition, various presidents of our business segments provide updates to the board at meetings during the year and those discussions typically address the segment’s current operations and strategic objectives.

Risk Oversight

The board is responsible for confirming that a system is in place to identify the principal risks facing Thomson Reuters and that appropriate procedures and systems are in place to monitor, mitigate and manage those risks.

The ERM process at our company includes:

 

·   

identifying the most significant operational, strategic, reputational, financial and other risks in each of our business segments as well as for our corporate center, considering both the external environment as well as internal changes related to structure, strategy and processes;

 

·   

assessing which of these risks individually or together with other identified risks could have a significant impact on Thomson Reuters as an enterprise if they were to materialize; and

 

·   

developing and implementing action plans for the enterprise risks and reviewing them periodically at a corporate and board level.

 

 

Our enterprise risk management (ERM) process is designed to enhance the identification and mitigation of risk throughout Thomson Reuters and assist the board and its committees with oversight responsibility for risk management.

 

 

We have a management risk committee that tracks and monitors enterprise risks. This committee assesses the status of identified risks and reviews the adequacy of applicable mitigation plans. The management risk committee also provides direction, prioritization, executive support and communication to others at the company involved in the ERM process. Executives responsible for specific risk mitigation periodically report to the board’s Risk Committee, the full board of directors or other board committees, as appropriate, during the year. The management risk committee is comprised of various Thomson Reuters senior leaders from Corporate functional departments and each business segment. An ERM owner who works with the management risk committee to plan the annual process is also responsible for collecting and consolidating Corporate and business segment-identified risks.

For our business segments and functional departments, ERM is an ongoing process under continuous management review. We involve our Corporate Compliance and Audit department in the review of certain identified risks, as appropriate or upon request. Mr. Smith’s operating committee undertakes a formal risk review at least annually.

As discussed later in the circular, the Risk Committee (created in 2018) is now primarily responsible for overseeing management’s ERM process. General oversight of risk management was previously a responsibility of the Audit Committee. The Audit Committee now oversees overall risk assessment and management, and focuses primarily on financial risks.

The HR Committee’s responsibilities include establishing, implementing and overseeing our compensation policies and programs. We have designed our compensation programs to provide an appropriate balance of risk and reward in relation to the company’s overall business strategy. Please see the “Compensation Discussion and Analysis” section of this circular for additional information regarding why we believe that our compensation programs do not incentivize our executives to take unnecessary or excessive risks.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 27

 



Table of Contents

 


Separate Chairman and CEO

The roles and responsibilities of the Chairman and the CEO of our company are separate to allow for more effective oversight and to hold management more accountable.

 

·   

As Chairman, David Thomson seeks to ensure that the board operates independently of senior management. The Chairman is responsible for chairing board meetings, ensuring that the board and its committees have the necessary resources to support their work (in particular, accurate, timely and relevant information), and maintaining an effective relationship between the board and senior management.

 

·   

As CEO, Jim Smith is principally responsible for the management of the business and affairs of Thomson Reuters in accordance with the strategic plan and objectives approved by the board.

Deputy Chairman

David Binet is the board’s Deputy Chairman. The Deputy Chairman works collaboratively with the Chairman and assists the Chairman in fulfilling his responsibilities. The Deputy Chairman also engages in regular dialogue with the Chairman, the CEO and the Lead Independent Director to reinforce our culture of good governance; serves as an ambassador for Thomson Reuters; and performs additional duties as may be delegated to him by the Chairman or the board from time to time.

Lead Independent Director

Vance Opperman is the board’s Lead Independent Director. Among other things, responsibilities of our Lead Independent Director include chairing meetings of the independent directors; in consultation with the Chairman, Deputy Chairman and CEO, approving meeting agendas for the board; as requested, advising the CEO on the quality, quantity, appropriateness and timeliness of information sent by management to the board; and being available for consultation with the other independent directors as required.

Position Descriptions

Position descriptions for the Chairman, the chair of each committee and the Lead Independent Director have been approved by the board and help ensure the independent operations of the board and its committees.

Meetings with and without the CEO/Management

Our board begins each in-person meeting with an “in-camera” session with the CEO, but no other members of management. This is intended to give the CEO an opportunity to discuss his objectives for the day’s meeting, and for directors to express preliminary observations based on their prior review of meeting materials. This permits a more effective use of time in the board meeting. A similar session is typically held with the CEO at the end of the meeting, followed by a meeting of the board without the CEO or other members of management present. Board committees also utilize “in-camera” meetings for discussions without the CEO or members of management present.

Meetings of Independent Directors

As part of each board meeting, our independent directors meet as a group without the CEO and without the directors affiliated with Woodbridge. These meetings are chaired by the Lead Independent Director. The Lead Independent Director develops the agenda for these meetings, although discussion has not been limited to it. The agenda generally addresses any issues that might be specific to a public corporation with a controlling shareholder. The Lead Independent Director reports to the Chairman, Deputy Chairman and the CEO on the substance of these meetings to the extent that action is appropriate or required. Three meetings of the independent directors took place in 2018 which were presided over by Mr. Opperman.

Secretary

Deirdre Stanley, Executive Vice President and General Counsel, is also Secretary to the board. Directors have access to the advice and services of the Secretary.

Access to Management and Professional Advisors

The board has access to members of management and professional advisors. The board and its committees may invite any member of senior management, employee, outside advisor or other person to attend or report at any of their meetings. The board and any of its committees are able to retain an outside independent professional advisor at any time at the expense of our company and have the authority to determine the advisor’s fees and other retention terms. Individual directors are able to retain an outside independent professional advisor at the expense of our company subject to notifying the Corporate Governance Committee in advance.

The HR Committee retains an independent consulting firm to advise it on compensation matters relating to senior management. The independent consulting firm also reviews executive compensation programs and provides guidance and analysis on plan design and market trends and practices.

 

 

 

Page 28    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

The HR Committee also utilizes and relies upon market survey data provided by a consulting firm regarding executive compensation for organizations of comparable size and scope with which Thomson Reuters is most likely to compete for executive talent. Additional information is provided in the “Compensation Discussion and Analysis” section of this circular.

Delegation of Authority

To clarify the division of responsibility between the board and management, the board has adopted a delegation of authority policy. This policy delegates certain decision-making and operating authority to senior management and has been adopted by the board in order to enhance our internal controls and allow management appropriate flexibility to deal with certain matters without obtaining specific board approval. The board also delegates certain responsibilities to the Audit Committee, Corporate Governance Committee, HR Committee and Risk Committee, and oversees the committees’ fulfillment of their responsibilities. The responsibilities of each committee are described in more detail below.

Director Attendance

The board meets regularly in order to discharge its duties effectively. Directors are expected to attend all meetings of the board including committee meetings, if applicable, and annual meetings of shareholders. An extraordinarily high number of meetings were held in 2018, primarily in connection with the company’s F&R transaction that signed in January and closed in October. The following table provides information about the number of board and committee meetings in 2018.

 

     Number of Meetings

Board

   15

Regularly scheduled – 5

    

Special – 10

    

Audit Committee

   8

Corporate Governance Committee

   5

HR Committee

   8

Risk Committee

   1

Special Committee

   3

Five of the board’s 15 meetings in 2018 were held in person. 10 special meetings of the board were held telephonically during the year, five of which related to our company’s F&R transaction (including the company’s substantial issuer bid and return of capital transaction that utilized proceeds of the transaction). As discussed in the “Board Committees” subsection below, in July 2018, the board formed a Special Committee comprised of independent directors to consider different ways to return F&R transaction proceeds to shareholders and to provide a recommendation to the board.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 29

 



Table of Contents

 


The following table sets forth the attendance of our directors at board and committee meetings in 2018. In 2018, average attendance for these individuals at all board and committee meetings was approximately 95% and approximately 98%, respectively. The Risk Committee was formed in June 2018.

 

    Meetings Attended
                   

Director

    Board     % Board
Attendance
  Audit
Committee
  Corp.

Governance
Committee

  HR
Committee
  Risk

Committee

  Special

Committee

  Committee
Total
  Total
Meetings
  Total%

David Thomson

    15 of 15     100%               15 of 15   100%

James C. Smith1

    9 of 15     60%               9 of 15   60%

Sheila C. Bair

    15 of 15     100%   8 of 8       1 of 1   3 of 3   12 of 12   27 of 27   100%

David W. Binet

    15 of 15     100%     5 of 5   8 of 8   1 of 1     14 of 14   29 of 29   100%

W. Edmund Clark, C.M.

    15 of 15     100%     5 of 5   8 of 8       13 of 13   28 of 28   100%

Michael E. Daniels2

    14 of 15     93%   5 of 6   5 of 5   7 of 8   1 of 1   3 of 3   21 of 23   35 of 38   92%

Vance K. Opperman

    15 of 15     100%   8 of 8   5 of 5   8 of 8   1 of 1   3 of 3   25 of 25   40 of 40   100%

Kristin C. Peck3

    15 of 15     100%     2 of 2   8 of 8     3 of 3   13 of 13   28 of 28   100%

Barry Salzberg4

    15 of 15     100%   8 of 8   5 of 5     1 of 1   3 of 3   17 of 17   32 of 32   100%

Peter J. Thomson

    15 of 15     100%       2 of 2       2 of 2   17 of 17   100%

Wulf von Schimmelmann4

    13 of 15     87%   8 of 8     2 of 2     2 of 3   12 of 13   25 of 28   89%

 

1

Mr. Smith missed several board meetings due to an illness in the first half of 2018. Only one of those meetings was regularly scheduled and four of the meetings that Mr. Smith missed were held in February for directors to be updated on his health. Other than meetings that Mr. Smith missed due to illness, his attendance at our board meetings in 2018 was 100%. Mr. Smith had 100% attendance at 42 board meetings from his initial appointment in 2012 through the end of 2017.

2

Mr. Daniels was appointed to the Audit Committee in April 2018.

3

Ms. Peck was appointed to the Corporate Governance Committee in June 2018.

4

Messrs. P. Thomson and von Schimmelmann were appointed to the HR Committee in June 2018.

Sir Kenneth Olisa served on the board between January 1, 2018 and January 30, 2018. In 2018, Sir Kenneth attended two of three board meetings held that month.

Controlled Company

Our company is a “controlled company” as a result of Woodbridge’s ownership.

The NYSE corporate governance listing standards require a listed company to have, among other things, solely independent directors on its compensation committee and nominating/corporate governance committee. A “controlled company” (as defined by the NYSE) is a company of which more than 50% of the voting power is held by an individual, group or another company and is exempt from these requirements.

Supplemental guidelines issued by the Canadian Coalition for Good Governance (CCGG) address controlled companies. A “controlled company” (as defined by CCGG) includes corporations with a controlling shareholder who controls a sufficient number of shares to be able to elect the board of directors or to direct the management or policies of the corporation.

While a majority of members of each of the Corporate Governance Committee and the HR Committee of our company are independent, the board believes it is appropriate for Messrs. Binet, Clark and P. Thomson, who are not considered to be independent under applicable rules because of their affiliation with Woodbridge, to serve on these committees and has approved our reliance on the NYSE’s controlled company exemption to do so. CCGG has stated that it believes it is appropriate for directors who are related to the controlling shareholder to sit on these committees to bring the knowledge and perspective of the controlling shareholder to executive compensation, appointments and board nominations.

A majority of members of the Risk Committee are independent. No directors affiliated with Woodbridge serve on our Audit Committee, which is required to have solely independent directors.

 

 

 

Page 30    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Board Committees

This section provides information about the board’s four committees (Audit, Corporate Governance, HR and Risk), including each committee’s responsibilities, members and activities in 2018. Additional information about each committee is provided below. The following table sets forth the current membership of our four board committees.

 

Committee Membership     
       

Name of Director

   Audit    Corporate Governance    HR    Risk

Sheila C. Bair

                (Chair)

David W. Binet

             

W. Edmund Clark, C.M.

           (Chair)     

Michael E. Daniels

      (Chair)      

Vance K. Opperman

           

Kristin C. Peck

               

Barry Salzberg

   (Chair)           

Peter Thomson

                 

Wulf von Schimmelmann

               

Total

   5    6    7    5

Each of the board’s committees has a charter. The charters are reviewed annually by the relevant committee and the Corporate Governance Committee. These charters and a committee chair position description are publicly available at www.thomsonreuters.com.

Audit Committee

Responsibilities

The Audit Committee is responsible for assisting the board in fulfilling its oversight responsibilities in relation to:

 

·   

the integrity of financial statements and other financial information relating to our company;

 

·   

the qualifications, independence and performance of the independent auditor (PricewaterhouseCoopers LLP);

 

·   

the adequacy and effectiveness of our internal control over financial reporting and disclosure controls and procedures;

 

·   

the effectiveness of the internal audit function;

 

·   

the overall assessment and management of risk; and

 

·   

any additional matters delegated to the Audit Committee by the board.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 31

 



Table of Contents

 


In the course of fulfilling its mandate, the Audit Committee focused on several topics in 2018, which are reflected in the work plan below.

 

2018 Primary Audit Committee Activities

· Review and discuss the company’s annual and quarterly consolidated financial statements and related MD&A;

· Review our earnings press releases;

· Receive periodic updates from our Corporate Compliance and Audit Department on the internal audit plan and process, internal control over financial reporting and fraud-related matters;

· Receive periodic updates from senior management on financial risk topics such as tax, treasury and accounting;

· Review and discuss the company’s ERM process with the General Counsel and other members of senior management, including the steps and processes taken to identify, assess, monitor and mitigate risks that are viewed as more significant and receive periodic updates from senior management on cybersecurity and other information security matters;*

· Review the scope and plans for the audit of our company’s financial statements;

  

· Review and approve fees to be paid to PricewaterhouseCoopers LLP for its services;

· Discuss with PricewaterhouseCoopers LLP:

· its independence from Thomson Reuters (and receiving disclosures from PricewaterhouseCoopers LLP in this regard);

· all critical accounting policies and practices used or to be used by Thomson Reuters;

· all alternative treatments of financial information within IFRS that have been discussed with management, ramifications of the use of such alternative treatments and the treatment preferred by the auditor; and

· all other matters required to be communicated under IFRS.

 

 

*

As discussed below, these responsibilities were assigned to the Risk Committee when it was created in the second half of 2018. However, the Audit Committee remains responsible for the overall assessment and management of risk.

Financial Literacy

All members of the Audit Committee are financially literate in accordance with applicable Canadian and U.S. securities rules. Mr. Salzberg qualifies as an “audit committee financial expert” (within the meaning of applicable SEC rules) and meets applicable tests for accounting or related financial management expertise within the meaning of NYSE listing standards.

Audit Committee Members’ Education and Experience

The following is a brief summary of the education and experience of each member of the Audit Committee that is relevant to the performance of his or her responsibilities. Mr. Daniels was appointed to the Audit Committee in April 2018.

 

 

Audit Committee Member

   Education/Experience

Barry Salzberg (Chair)

  

· Former Global Chief Executive Officer of Deloitte Touche Tohmatsu Limited

· Former Professor at Columbia Business School

· Degree in accounting from Brooklyn College, JD from Brooklyn Law School and LLM in Tax from New York University

Sheila C. Bair

  

· Former Chair of the Federal Deposit Insurance Corporation (FDIC)

· Former Dean’s Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst

· Former Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury

· Former Senior Vice President for Government Relations of the New York Stock Exchange

· Former Commissioner of the Commodity Futures Trading Commission

Michael E. Daniels

  

· Over 25 years of executive experience at IBM

· Former member of the Tyco International Ltd. audit committee

· Member of SS&C Technologies Holdings, Inc. and Johnson Controls International plc boards of directors

Vance K. Opperman

  

· Former President and COO of West Publishing Company

· President and CEO of Key Investment, Inc.

· Former Chair of Audit Committee of Thomson Reuters for over 15 years

· Member of TCF Financial Corporation audit committee

· Represented financial institutions in securities and financial regulations matters as a practicing attorney

Wulf von Schimmelmann

  

· Former CEO of Deutsche Postbank AG

· Degree in Economic Sciences and Ph.D in Economics from the University of Zurich

· Member of Maxingvest AG audit committee

 

 

 

Page 32    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Financial Reporting

The Audit Committee meets to discuss and review our:

 

·   

annual and quarterly earnings releases; and

 

·   

annual and quarterly management’s discussion and analysis (MD&A) and related financial statements.

As is customary for a number of global multinational companies, the board of directors has delegated review and approval authority to the Audit Committee for our quarterly earnings releases, MD&A and financial statements. Following the Audit Committee’s recommendation, the full board reviews and approves our annual MD&A and annual audited financial statements, as required by applicable law.

Prior to an Audit Committee meeting at which draft financial reporting documents will be discussed, a draft is distributed to the members of the Audit Committee for review and comment. The CFO and the Chief Accounting Officer and a representative from the independent auditor meet with the Chair of the Audit Committee to preview the audit-related issues which will be discussed at the Audit Committee meeting. At the Audit Committee meeting, the Chief Accounting Officer discusses the financial statements and disclosure matters and the Audit Committee members are given an opportunity to raise any questions or comments. The independent auditor also participates in the meeting. All of our directors are also provided with a draft and an opportunity to comment before or during the Audit Committee meeting. When the Audit Committee is satisfied with the disclosure, it provides its approval and the material is released.

For the annual report, a draft is distributed to the members of the board in advance of a board meeting for their review and approval. At the board meeting, directors are given an opportunity to raise any questions or comments.

Based upon the reports and discussions described in this circular, and subject to the limitations on the role and responsibilities of the Audit Committee in its charter, the Audit Committee recommended that our board approve the filing of the audited consolidated financial statements and related MD&A and their inclusion in our annual report for the year ended December 31, 2018.

Independent Auditor

The Audit Committee is responsible for selecting, evaluating and recommending for nomination the independent auditor to be proposed for appointment or re-appointment. The Audit Committee recommended that PricewaterhouseCoopers LLP be re-appointed as our independent auditor to serve until our next meeting of shareholders in 2020 and that our board submit this appointment to shareholders for approval at the 2019 annual meeting of shareholders. In connection with recommending PricewaterhouseCoopers LLP, the Audit Committee considered the firm’s provision of services to Thomson Reuters over the last year, including the performance of the lead audit engagement partner and the audit team. The Audit Committee also reviewed the appropriateness of PricewaterhouseCoopers LLP’s fees in relation to the size of Thomson Reuters and its global footprint. The Audit Committee continues to be satisfied with PricewaterhouseCoopers LLP’s performance and believes that its continued retention as independent auditor is in the best interests of Thomson Reuters and its shareholders.

Throughout the year, the Audit Committee evaluates and is directly responsible for our company’s relationship with PricewaterhouseCoopers LLP. The Audit Committee appoints PricewaterhouseCoopers LLP as our independent auditor after reviewing and approving its engagement letter. The Audit Committee also determines PricewaterhouseCoopers LLP’s fees.

The Audit Committee and representatives from PricewaterhouseCoopers LLP meet several times during the year. In 2018, representatives from PricewaterhouseCoopers LLP attended each Audit Committee meeting and met with the Audit Committee in separate sessions.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 33

 



Table of Contents

 


 

PricewaterhouseCoopers LLP is accountable to the Audit Committee and reports directly to the Audit Committee.

 

 

On an annual basis, before PricewaterhouseCoopers LLP issues its report on our company’s annual financial statements, the Audit Committee:

 

·   

Confirms that PricewaterhouseCoopers LLP has submitted a written statement describing all of its relationships with Thomson Reuters that, in PricewaterhouseCoopers LLP’s professional judgment, may reasonably be thought to bear on its independence;

 

·   

Discusses any disclosed relationships or services, including any non-audit services, that PricewaterhouseCoopers LLP has provided to Thomson Reuters that may affect its independence;

 

·   

Obtains written confirmation from PricewaterhouseCoopers LLP that it is independent with respect to Thomson Reuters within the meaning of the Rules of Professional Conduct adopted by the Ontario Institute of Chartered Accountants and the standards established by the Public Company Accounting Oversight Board; and

 

·   

Confirms that PricewaterhouseCoopers LLP has complied with applicable law with respect to the rotation of certain members of the audit engagement team for Thomson Reuters.

The Audit Committee has also adopted a policy regarding its pre-approval of all audit and permissible non-audit services provided to our company by PricewaterhouseCoopers LLP.

 

·   

The policy gives detailed guidance to management as to the specific types of services that have been pre-approved by the Audit Committee.

 

·   

The policy requires the Audit Committee’s specific pre-approval of all other permitted types of services that have not already been pre-approved.

The Audit Committee’s charter allows the Audit Committee to delegate to one or more members the authority to evaluate and approve engagements in the event that the need arises for approval between Audit Committee meetings. Pursuant to this charter provision, the Audit Committee has delegated this authority to its Chair. If the Chair approves any such engagements, he must report his approval decisions to the full Audit Committee at its next meeting. For the year ended December 31, 2018, none of the audit-related, tax or all other fees of Thomson Reuters described above made use of the de minimis exception to pre-approval provisions contained in Rule 2-01(c)(7)(i)(c) of SEC Regulation S-X and Section 2.4 of the Canadian Securities Administrators’ Multilateral Instrument 52-110 (Audit Committees).

Internal Audit and Internal Control Over Financial Reporting

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with international financial reporting standards. Our company has adopted the Committee of Sponsoring Organizations of the Treadway Commission guidance for implementing our internal control framework as part of compliance with the Sarbanes-Oxley Act and applicable Canadian securities law.

The Corporate Compliance and Audit department of our company, which performs an internal audit function, prepares and oversees the overall plan for our internal control over financial reporting.

Each year, Corporate Compliance and Audit identifies certain processes, entities and/or significant accounts to be within the scope of its internal control focus areas and testing for the year. In determining the proposed scope of its annual internal audit plan, the Corporate Compliance and Audit department identifies, assesses and prioritizes risk to Thomson Reuters and considers both quantitative and qualitative factors.

In the first quarter of 2018, Corporate Compliance and Audit presented an annual internal audit plan to the Audit Committee for its review and approval. The Corporate Compliance and Audit department then provided updates to the Audit Committee at meetings throughout the year. During the second half of 2018, the Corporate Compliance and Audit department tested applicable controls in order to achieve compliance with the required year-end evaluation of the effectiveness of the internal control system.

 

 

 

Page 34    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018. In March 2019, the Audit Committee reviewed and discussed with management its assessment and report on the effectiveness of our internal control over financial reporting as of December 31, 2018. The Audit Committee also reviewed and discussed with PricewaterhouseCoopers LLP its review and report on the effectiveness of our internal control over financial reporting.

 

 

The head of the Corporate Compliance and Audit department reports directly to the Audit Committee (with a dotted line reporting relationship to our CFO).

 

 

Disclosure and Communications Controls and Procedures

We have adopted disclosure controls and procedures to ensure that all information required to be disclosed by us in reports and filings with Canadian and U.S. securities regulatory authorities and stock exchanges and other written and oral information that we publicly disclose is recorded, processed, summarized and reported accurately and within the time periods specified by rules and regulations of the securities regulatory authorities. These disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to management (including the CEO and CFO), as appropriate, to allow timely decisions regarding required disclosure. The Audit Committee receives an annual update from management regarding the adequacy and effectiveness of our disclosure controls and procedures, including the role and responsibilities of management’s disclosure committee.

As required by applicable Canadian and U.S. securities laws, our CEO and CFO provide certifications that they have reviewed our annual and quarterly reports, that the reports contain no untrue statements or omissions of material facts and that the reports fairly present our financial condition, results of operations and cash flows. In addition, the CEO and CFO make certifications regarding our disclosure controls and procedures and internal control over financial reporting. Our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2018.

On a day-to-day basis, inquiries or other communications from shareholders, analysts and the media to management are answered by our investor relations and media relations departments or referred to another appropriate person in our company.

Senior executives meet regularly with financial analysts and institutional investors, and our earnings conference calls are broadcast live via webcast and are accessible to interested shareholders, the media and members of the public. Presentations given by senior executives at investor conferences are promptly made public in the “Investor Relations” section of our website. Some of our non-management directors have attended our Investor Day meetings with analysts and major shareholders.

Risk Assessment and Management

In 2018, the Audit Committee met with senior management to review the company’s controls and policies regarding risk assessment and risk management, including the steps and process taken to monitor and control risks. As part of this review, senior management presented an overview of its 2018 ERM process to the Audit Committee. The overview reflected key risks identified by management and a proposed calendar of future meetings for “deep dive” reviews and discussions about specific risks (at the board or committee level).

As discussed below, the Risk Committee (which was formed in the second half of 2018) is now primarily responsible for overseeing ERM and various non-financial risks. As part of its financial risk management oversight responsibilities, the Audit Committee met with management in 2018 to discuss treasury risk management and the external tax environment.

The Audit Committee continues to discuss Thomson Reuters’ guidelines and policies that govern the overall process by which risk assessment and risk management is undertaken at the company. As part of this oversight role, the Audit Committee periodically reviews reports from or meets with the Risk Committee regarding the company’s processes for assessing and managing risk. Risk topics not otherwise assigned to the Audit Committee or the Human Resources Committee are now overseen by the Risk Committee, and the Corporate Governance Committee oversees the division of responsibilities between the Board and its committees. As part of this division of responsibilities, the Audit Committee discusses the company’s major financial risk exposures and the steps that management has taken to monitor and control such exposures.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 35

 



Table of Contents

 


Whistleblower Policy

The Audit Committee has adopted procedures for the receipt, retention and treatment of complaints received by our company regarding accounting, internal accounting controls, auditing matters, and disclosure controls and procedures, as well as procedures for the confidential, anonymous submission of concerns by our employees regarding questionable accounting, internal accounting controls, auditing matters or disclosure controls and procedures. These procedures are set forth in the Thomson Reuters Code of Business Conduct and Ethics, which is described earlier in this circular.

Corporate Governance Committee

The Corporate Governance Committee is responsible for assisting the board in fulfilling its oversight responsibilities in relation to:

 

·   

our company’s overall approach to corporate governance;

 

·   

the size, composition and structure of the Thomson Reuters board and its committees, including the nomination of directors;

 

·   

orientation and continuing education for directors;

 

·   

related party transactions and other matters involving actual or potential conflicts of interest; and

 

·   

any additional matters delegated to the Corporate Governance Committee by the board.

The following table sets forth the Corporate Governance Committee’s work plan for 2018.

 

2018 Primary Corporate Governance Committee Activities

· Review size, composition and structure of the board and its committees for effective decision-making, including the addition of new committee members, the formation of the new Risk Committee and the division of responsibilities between the Risk Committee and the board’s other standing committees

· Assess director independence, financial literacy and audit committee financial expert status

· Report on the results of board, committee and director review processes

· Nominate directors for the annual meeting

· Review director compensation

· Review corporate governance disclosure for draft proxy circular

· Review corporate governance guidelines and committee charters

· Review committee composition and chairs

· Board succession planning

· Review external analysis of proxy circular and other shareholder group assessments

· Plan board, committee and director assessments

· Review compliance with Thomson Reuters Trust Principles

  

· Report on effectiveness of Thomson Reuters Code of Business Conduct and Ethics

 

Periodically

· Review orientation and continuing education initiatives for directors

· Review position descriptions for Board

· Review related party transactions and conflicts of interest

· Monitor developments in corporate governance and recommend appropriate initiatives as part of overall approach to governance

· Consider agendas for meetings of independent directors

· Review Board and CEO expenses

· Review delegation of authority

· Review share ownership expectations and compliance

· Approve any waivers of Code of Business Conduct and Ethics

· Monitor relationships between senior management and the Board

· Be available as a forum for addressing the concerns of individual directors

· Review D&O insurance

 

 

 

 

 

 

Page 36    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

 

Skills and Experiences of Director Nominees

We believe that our board reflects an appropriate mix of directors with different skills and experiences. The following table, or skills matrix, summarizes the skills and areas of experience indicated by each director nominee. Our board believes that these skills and experiences are necessary for it to carry out its mandate. The Corporate Governance Committee takes our skills matrix into consideration when identifying potential new director candidates. The skills matrix is reviewed and updated annually.

 

    LOGO   LOGO   LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO    

 

 

LOGO  

Accounting/Audit

          X               X       X       X

Board experience (with other companies)

  X   X   X   X   X   X   X       X   X   X

Corporate governance

  X   X   X   X   X   X   X       X   X   X

Corporate social responsibility (CSR)

  X   X   X   X   X   X   X   X   X       X

Executive leadership

  X   X   X   X   X   X   X   X   X       X

Finance

      X   X   X   X   X   X   X   X       X

Government relations/public sector

          X       X   X   X   X   X   X    

Human Resources

  X   X       X   X   X   X   X   X       X

Industries in which Thomson Reuters Business Segments operate

  X   X   X   X   X   X   X   X   X   X   X

International business

  X   X   X   X   X   X   X   X   X   X   X

Investment management

  X           X   X       X           X    

Legal

          X   X           X       X        

M&A

      X       X   X   X   X   X   X   X    

Media/Publishing

  X   X   X   X           X           X    

Operations

  X   X   X       X   X   X   X   X       X

Risk management

  X       X       X   X   X       X       X

Sales & Marketing

  X   X               X   X   X            

Strategy

  X   X       X   X   X   X   X   X       X

Tax

                  X       X       X        

Technology

      X               X   X       X   X   X

Director Qualifications, Recruitment, Board Size and Appointments

The Corporate Governance Committee is responsible for assessing the skills and competencies of current directors, their anticipated tenure and the need for new directors. The Corporate Governance Committee retains a professional search firm to assist it in identifying and evaluating potential director candidates. Through its search firm, the Corporate Governance Committee maintains an evergreen list of potential director candidates.

The Corporate Governance Committee recommends candidates for initial board membership and board members for re-nomination. Recommendations are based on character, integrity, judgment, skills and competencies, business experience, record of achievement and any other attributes that would enhance the board and overall management of the business and affairs of our company. Diversity is among these other attributes as the Corporate Governance Committee believes that having a diverse board enhances board operations. While the Corporate Governance Committee focuses on finding the best qualified candidates for the board, a nominee’s diversity may be considered favorably in his or her assessment. The Corporate Governance Committee does not specifically define diversity, but values diversity of thought, style, experience, culture, race, color, gender, geographic background, national origin, religion, gender identity and expression, sexual orientation, disability and age.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 37

 



Table of Contents

 


In identifying candidates for election or re-election, the board and the Corporate Governance Committee consider the level of representation of women on the board. Two of the 11 director nominees proposed for election (approximately 18%) at this year’s meeting are women. When the Corporate Governance Committee engages a professional search firm to help identify and evaluate director candidates, the search firm is advised that identifying women candidates is one of the board’s priorities (along with directors who have technology background and experience).

The Corporate Governance Committee looks at the totality of factors that would enhance the board and overall management of the business and affairs of our company. Therefore, it has not adopted a formal written policy to identify or nominate women directors or targets for the percentage of women directors as the board does not focus on fixed numbers or percentages for any selection criteria.

Director Orientation and Continuing Education

All new directors are provided with an orientation upon election or appointment to the board, which includes:

 

·   

Induction materials describing our business, our corporate governance structure and related policies and information; and

 

·   

Meetings with the Chairman, Lead Independent Director, CEO, CFO and other executives.

The board’s secure website, management reports and other means of communication provide directors with information to ensure their knowledge and understanding of our business remain current.

Largely in connection with board and committee meetings, members of senior management prepare memoranda and presentations on strategic and operating matters which are distributed to the directors. These board papers are often prepared in connection with matters that require director approval under our policies or applicable law and are also used to inform the directors about developments that senior management believe should be brought to the directors’ attention. The board also periodically receives reports on other non-operational matters, including corporate governance, taxation, pension and treasury matters.

In 2018, as part of our continuing education programs for directors, we made arrangements for members of the Audit Committee to receive access to Thomson Reuters’ Checkpoint Learning business, which offers a series of self-directed, online courses and instructor-led webinars and seminars. Courses cover topics such as accounting, auditing, ethics, finance, tax and technology.

To facilitate ongoing education, the directors are also entitled to attend external continuing education opportunities at the expense of Thomson Reuters. The Corporate Governance Committee is responsible for confirming that procedures are in place and resources are made available to provide directors with appropriate continuing education opportunities. As part of our most recent board effectiveness review process, directors indicated they were pleased to continue on this basis.

Site Visits

In 2018, the Corporate Governance Committee continued its director continuing education/orientation program by facilitating visits by directors to a Thomson Reuters site. The board coordinates the timing of these site visits to coincide with regularly scheduled board meetings. This allows substantially all of the directors to participate in the site visits at the same time and then attend a board meeting as part of one trip. The visits are designed to:

 

·   

Enable directors to update themselves first hand on our key businesses, products and services;

 

·   

Provide an opportunity for directors to interact with key executives, high potential talent and customers; and

 

·   

Give a broader selection of current and future executives the opportunity to meet directors.

In November 2018, the board held a meeting and had a site visit in the Thomson Reuters offices in the Minneapolis/St. Paul, Minnesota area. Directors also had an opportunity to meet with staff of the Thomson Reuters Legal Professionals, Tax Professionals and Corporates segments.

Feedback on this program from directors and location hosts has been positive and it is expected to continue in 2019.

 

 

 

Page 38    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Conflicts of Interest and Transactions Involving Directors or Officers

In the case of any potential or actual conflict of interest, each director is required to inform the board and executive officers are required to inform the CEO. We also ask our directors and executive officers about potential or actual conflicts of interest in annual questionnaires. Our policies on conflicts of interest are reflected in our Code of Business Conduct and Ethics, our Corporate Governance Guidelines and in supplemental guidance approved by the board.

Unless otherwise expressly determined by the board or relevant committee of the board, a director who has a conflict of interest in a matter before the board or such committee must not receive or review any written materials related to the conflict subject area, nor may the director attend any part of a meeting during which the matter is discussed or participate in any vote on the matter, except where the board or the applicable committee has expressly determined that it is appropriate for him or her to do so.

Significant related party transactions are considered by the Corporate Governance Committee or, where appropriate, a special committee of independent directors or the full board. If a director has a significant, ongoing and irreconcilable conflict, voluntary resignation from the board or the conflicting interest may be appropriate or required.

In July 2018, the board created a Special Committee comprised entirely of independent directors to consider different ways to provide returns to shareholders (including Woodbridge, our principal shareholder) from the F&R transaction and to subsequently make a recommendation to the board. Stikeman Elliott LLP was engaged as legal counsel to the Special Committee. The board’s Lead Independent Director and Woodbridge indicated their support for the Special Committee. Under the mandate of the Special Committee, the board would not approve any transaction unless it had been recommended by the Special Committee. The Special Committee met three times. In August 2018, the Special Committee made a unanimous recommendation to the board regarding a substantial issuer bid to purchase up to $9 billion of our company’s shares. The Special Committee’s recommendation was subsequently approved by the board. Additional information about the role of the Special Committee is provided in our company’s offer to purchase and issuer bid circular dated as of August 28, 2018, a copy of which was filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission.

For more information about related party transactions in the last two years, please see the management’s discussion and analysis (MD&A) section of our 2018 annual report.

Board Effectiveness Review

The Corporate Governance Committee oversees an annual review of the effectiveness of the board, its committees and individual directors. The Lead Independent Director meets individually with each director during the year. The Lead Independent Director subsequently provides an update to the Corporate Governance Committee regarding his discussions with individual directors.

From time to time, director questionnaires or surveys are sent to members of the board to seek feedback and input on the board’s and committees’ supervision of senior management, strategic planning, risk management, financial reporting, disclosure, governance as well as on the conduct and effectiveness of board and committee meetings. Results from questionnaires/surveys are initially discussed with the Corporate Governance Committee and an update is provided to the board.

Annually, the board reviews its responsibilities by assessing our corporate governance guidelines and each committee of the board performs an annual review of its charter. The Corporate Governance Committee also reviews various position descriptions on an annual basis.

The Corporate Governance Committee believes that each director continues to be effective and that each director has demonstrated a commitment to his or her role on the board and its committees. Based on the Corporate Governance Committee’s recommendations, the board recommends that all of the director nominees be elected at the meeting to be held on June 5, 2019, as each of them is expected to bring valuable skills and experience to the board and its committees.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 39

 



Table of Contents

 


HR Committee

The HR Committee is responsible for assisting the board in fulfilling its oversight responsibilities in relation to:

 

·   

the compensation of the CEO and senior management and assessment of compensation risk;

 

·   

the selection and retention of senior management;

 

·   

planning for the succession of senior management;

 

·   

professional development for senior management;

 

·   

diversity initiatives;

 

·   

the management of pension and significant benefit plans for employees; and

 

·   

any additional matters delegated to the HR Committee by the board.

The following table provides an overview of the HR Committee’s work plan for 2018.

 

2018 Primary HR Committee Activities

· Compensation review for the CEO and other executive officers

· Annual individual performance evaluation of the CEO and review of evaluations of other executive officers

· Approve 2017 annual and long-term incentive award payouts

· Approve 2018 annual and long-term incentive award design and targets

· Approve compensation disclosure in the annual management proxy circular

· Talent reviews

· Succession planning reviews

  

· Compensation and talent aspects of the F&R partnership transaction

· Compensation program risk assessment

· Compensation trends review

· Compensation peer group review and approval

· Equity share plan reserve analysis

· “Say on pay” modeling

· Retirement plans review

· Review CEO position description

· Review senior management’s share ownership guidelines

· Periodic consideration of certain new senior executive hirings and terminations

The following is a brief summary of the experience of each member of the HR Committee that is relevant to the performance of his or her responsibilities.

 

 

HR Committee Member

   Experience

W. Edmund Clark, C.M. (Chair)

  

· Former Group President and Chief Executive Officer of TD Bank Group

· Familiarity with global compensation standards

David W. Binet

  

· Former member of the Compensation Committee of CTV Globemedia

· Secretary to the Thomson Reuters HR Committee for 12 years

Michael E. Daniels

  

· Over 25 years of executive experience at IBM

· Familiarity with global compensation standards

· Chair of Johnson Controls International plc compensation committee

Vance K. Opperman

  

· Former President and COO of West Publishing Company

· President and CEO of Key Investment, Inc.

· Chair of TCF Financial Corporation compensation committee

Kristin C. Peck

  

· President of U.S. operations at Zoetis and member of leadership team

· Former member of Pfizer executive leadership team and HR leadership team

Peter J. Thomson

  

· Chair of Woodbridge and familiar with compensation programs at many companies

· Familiarity with global compensation standards

Wulf von Schimmelmann

  

· Former CEO of Deutsche Postbank AG and chair of the HR Committee

· Former member of Deutsche Post DHL AG HR Committee

 

 

 

Page 40    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Human Capital Management

Our human capital practices and initiatives are designed to attract, motivate and retain high quality and talented employees across all of our businesses who feel valued, are provided with opportunities to grow, and are driven to succeed. The HR Committee and our board regularly engage with management on a variety of human capital topics that apply to our current workforce of approximately 25,000 employees, such as compensation and benefits, culture and employee engagement, talent acquisition/development, and diversity and inclusion. The board and management engage in detailed succession planning discussions for all senior roles, and the principles employed at the senior-most levels of the organization are embraced by management throughout the entire organization. A more detailed discussion of some of these topics is provided later in this section.

Over the last year and a half, oversight of human capital management has been a greater focus area for the HR Committee and the board in light of the F&R transaction, which effectively split our global workforce in half between Thomson Reuters and the newly created Refinitiv partnership. The F&R transaction resulted in significant organizational changes and our ability to successfully evolve our human capital is essential to our strategy and future success. As part of these ongoing discussions, management has been periodically reporting metrics and data to the HR Committee and board on various human capital topics, which has informed our directors in providing management with feedback and input. While we voluntarily publish numerous human capital-related metrics and data in our securities filings and on our website, some metrics and data are not publicly disclosed due to competitive considerations.

We expect that human capital management will continue to be an important focus area in the future for the board and its committees because it ensures solid stewardship of our organization, supports important societal objectives, and is key to ensuring strategic advantage in the marketplace.

Compensation Planning

The HR Committee’s responsibilities include establishing, implementing and overseeing our compensation policies and programs. A detailed discussion of the HR Committee’s responsibilities in this area is provided in the “Compensation Discussion and Analysis” section of this circular.

CEO Performance Evaluation and Objectives Setting

The HR Committee assists the board in setting objectives each year for the CEO. The HR Committee evaluates the performance of the CEO against these objectives at year end. The HR Committee reports to the full board on the objectives for the forthcoming year and the performance against objectives in the preceding year. The HR Committee also maintains a written position description for the CEO.

Talent Management and Succession Planning

A robust framework directly aligned with our business priorities is in place to enable an integrated approach to talent management and succession planning. We commit to developing a strong leadership pipeline by providing our current and future leaders with opportunities to learn and transform themselves, to drive business performance and add customer value. The CEO and Chief People Officer are stewards of enterprise talent agenda and sponsor key development programs that build a robust and diverse leadership bench.

We integrate our talent and succession planning process with the primary objective of having high performing individuals in critical roles across the organization. Last year, we implemented our “Talent to Value” approach through which we identified roles that drive outsized value for Thomson Reuters. Our intent is to differentiate development of talent in these roles, and manage talent similar to how we manage capital, investing in them to prepare for broader and more complex roles that have disproportionate impact on the value agenda.

Stepping up advancement of women and other diverse talent into key leadership roles continues to be a top priority and is reinforced by our commitment to develop a robust pipeline of diverse leaders. This, coupled with our philosophy to develop and promote from within, strengthens our culture, retains our key talent and provides more options for succession. We also complement this with selective external hiring to procure critical skills, close any talent gaps and foster diverse thinking.

The HR Committee plays a key role in overseeing talent management and succession planning strategies, with strong support from our CEO and Chief People Officer. Annually, the HR Committee partners with the CEO and the Chief People Officer in reviewing succession and developmental plans for executive management, critical talent and succession risk metrics, progress made over the year and plans for the upcoming year.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 41

 



Table of Contents

 


Diversity and Inclusion

Diversity. Inclusion. They are more than just words for us. They are an integral part of our values, guiding us in everything we do. As an organization with diverse businesses competing in the global marketplace, we understand that one of the most effective ways of meeting and exceeding the needs of our diverse customers and shareholders is to have a workforce that reflects diversity.

We also acknowledge that creative ideas and innovative solutions only happen when we foster an environment that helps people bring their uniqueness to work. We believe that a culture where every employee is treated with respect, feels valued and has a sense of belonging will help employees unleash their true potential. Our objective is to seek out and hire talented, dedicated individuals from all walks of life and give them an opportunity to learn, develop and succeed within Thomson Reuters.

Women in Leadership

A key component of our diversity and inclusion approach is identification, development and advancement of women globally for leadership positions. In 2018, the overall representation of women in senior leadership positions at Thomson Reuters and our subsidiaries was 36%, just below our goal of 40% by 2020. This goal is strongly embedded into our talent practices and we are committed to drive continued efforts in this area. In addition, in 2018, 44 of our 125 global senior executives were women and 5 of 17 members of the CEO’s Operating Committee were women, including the President of the Tax Professionals segment (Charlotte Rushton), our General Counsel (Deirdre Stanley) and our Chief People Officer (Mary Alice Vuicic).

We are focused on accelerating the development of women to strengthen our succession bench through various strategic initiatives, including our Women’s Advisory Task Force chaired by our CEO, and the Women’s Leadership Program focused on developing women early in their careers, helping them realize their full potential and accelerating their growth and readiness.

Risk Committee

In the second half of 2018, a new Risk Committee was formed and subsequently met once. The Risk Committee is responsible for assisting the board in fulfilling its oversight responsibilities in relation to:

 

·   

Thomson Reuters’ identification, assessment and management of enterprise risks, other than financial risks (which are overseen by the Audit Committee) or risks related to talent/employee matters (which are overseen by the HR Committee); and

 

·   

any additional matters delegated to the Risk Committee by the board.

While the Risk Committee now oversees and manages our company’s framework policies and procedures with respect to risk identification, assessment and management, it is the responsibility of our CEO and senior management to identify, assess and manage our company’s risks through the design, implementation and maintenance of our ERM program. The Risk Committee’s responsibilities include reviewing and approving the ERM framework on an annual basis.

The Risk Committee’s responsibilities also extend to overseeing our company’s efforts to identify, evaluate and mitigate major risks related to:

 

·   

Cybersecurity, data protection controls, business continuity/disaster recovery systems and other information security matters;

 

·   

Regulatory compliance risks that are not overseen by the Audit Committee;

 

·   

Reputational risks, other than those related to compliance with the Thomson Reuters Trust Principles, which are overseen by the Corporate Governance Committee; and

 

·   

Strategic risks, particularly those related to emerging technologies.

At its initial meeting in November 2018, the Risk Committee reviewed a calendar/work plan for 2019 and agreed that the committee’s meetings would generally follow the Audit Committee meetings to maintain alignment and coordination between the two committees. The Risk Committee also reviewed and approved a proposed ERM process for 2019 and also received a cybersecurity update from the company’s Chief Information Security Officer and an outside advisor.

 

 

 

Page 42    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

About Our Independent Auditor

 

 

HIGHLIGHTS

 

· 

We are proposing to re-appoint PricewaterhouseCoopers LLP (U.S.) as our independent auditor for another year until the 2020 annual meeting of shareholders.

 

 

The board unanimously recommends that PricewaterhouseCoopers LLP (U.S.) be appointed as the auditor of our company, to hold office until the next annual meeting of shareholders. It is also recommended that the board be authorized to fix the remuneration of PricewaterhouseCoopers LLP (U.S.).

The following table sets forth fees related to services rendered by PricewaterhouseCoopers LLP and its affiliates in 2018 and 2017.

 

(in millions of U.S. dollars)

     2018        2017  

Audit fees

   $   18.5      $   19.7  

Audit-related fees

     12.9        4.8  

Tax fees

     3.8        3.2  

All other fees

     0.1        0.2  

Total

   $   35.3      $   27.9  

The following are descriptions of fees for services rendered by PricewaterhouseCoopers LLP in 2018 and 2017.

Audit Fees

These audit fees were for professional services rendered for the audits of consolidated financial statements, reviews of interim financial statements included in periodic reports, audits related to internal control over financial reporting, statutory audits and services that generally only the independent auditor can reasonably provide, such as comfort letters and consents. These services included French translations of our financial statements, MD&A and financial information included in our interim and annual filings and prospectuses and other offering documents.

Audit-related Fees

These audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported under the “audit fees” category above. These services included subsidiary carve-out audits (including for the sale of a majority stake in our F&R business), transaction due diligence, internal control attestation engagements, licensing of technical research material, audits of various employee benefit plans and agreed-upon procedures principally related to executive compensation reporting in the management proxy circular.

Tax Fees

Tax fees were for tax compliance, tax advice and tax planning. These services included the preparation and review of corporate and expatriate tax returns, assistance with tax audits and transfer pricing matters, advisory services relating to federal, state, provincial and international tax compliance, and restructurings, mergers and acquisitions.

All Other Fees

Fees disclosed in the tables above under the item “all other fees” were for services other than the audit fees, audit-related fees and tax fees described above. These services include independent IT process reviews.

Pre-approval Policies and Procedures

Information regarding our policy regarding pre-approval of all audit and permissible non-audit services is set forth in the corporate governance disclosure included earlier in this circular.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 43

 



Table of Contents

 


Advisory Resolution on Executive Compensation (Say On Pay)

 

 

HIGHLIGHTS

 

· 

We are proposing a non-binding advisory “say on pay” resolution related to executive compensation.

 

· 

This is a recommended best practice of the Canadian Coalition for Good Governance (CCGG).

 

· 

We plan to continue holding this advisory vote on an annual basis.

 

 

Our overall philosophy regarding executive compensation is to pay for performance. We believe this drives our management team to achieve higher levels of results for the benefit of Thomson Reuters and our shareholders. In the “Compensation Discussion and Analysis” section of this circular, we explain our compensation principles, how we design our compensation program and why we pay each component of compensation.

As part of our dialogue with shareholders about our executive compensation programs, we are once again proposing a “say on pay” advisory resolution for this year’s meeting (as we have done since 2008). An identical resolution was approved by approximately 97% of the votes cast at last year’s annual meeting of shareholders.

As this is an advisory resolution, the results will not be binding upon the board. However, the board will take voting results into account, as appropriate, when considering future compensation policies, procedures and decisions and in determining whether there is a need to significantly increase its engagement with shareholders on compensation-related matters.

We will disclose the results of the shareholder advisory resolution as part of our report on voting results for the meeting.

Our “named executive officers” for purposes of the “Compensation Discussion and Analysis” section of this circular are our CEO (Jim Smith), CFO (Stephane Bello) and the three other most highly compensated executive officers as of December 31, 2018 (Brian Peccarelli – Executive Vice President and Chief Operating Officer, Customer Markets; Neil Masterson – Executive Vice President and Chief Operating Officer, Operations & Enablement; and Michael Friedenberg – President, Reuters News).

Shareholders with questions about our compensation programs are encouraged to contact our Investor Relations department by e-mail at investor.relations@thomsonreuters.com or by phone at 1.203.539.8452.

The board unanimously recommends that you vote FOR the following resolution:

“RESOLVED, on an advisory basis, and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approach to executive compensation as described in the 2019 management proxy circular.”

 

 

 

Page 44    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Compensation Discussion and Analysis

 

 

Executive Summary

“Pay for performance” is the foundation of our compensation philosophy for our named executive officers. Their compensation is primarily variable and performance-based, utilizing multiple and complementary financial measures that are aligned with our strategy to drive shareholder value. This section explains our compensation principles, how we design our compensation program, why we pay each component of compensation and how we performed and what we paid to our named executive officers in 2018.

2018 was truly a watershed year for our company. One year ago, the task ahead of us seemed daunting. We entered the year with a 1% growth business, a highly complex F&R transaction to execute, significant stranded costs to resolve and a major repositioning of the go-forward Thomson Reuters business on the horizon.

In 2018 (and for the seventh consecutive year), our full-year financial performance achieved or exceeded our guidance for each performance metric. We grew revenues approximately 3% organically overall, and grew 4% organically in our core Legal Professionals, Tax Professionals and Corporates segments (which represent 80% of our revenue base).

 

 

LOGO

The table below compares our actual performance in 2018 to the outlook that we provided last year as external guidance:

 

Non-IFRS Financial Measures1

   2018 Outlook2   

2018 Actual Performance

(in constant currency)2

Revenues

   Low single digit growth (excludes fourth quarter 2018 revenues within Reuters News from Refinitiv following the closing of the F&R transaction)    2.5%   

Adjusted EBITDA

   Approximately $1.3 billion including the Corporate costs referred to below    $1.3 billion   

Total Corporate costs

   Between $500 million and $600 million (including stranded costs and investments to reposition our company following the closing of the F&R transaction)    $499 million 3   

Depreciation and amortization of computer software

   Between $500 million and $525 million    $510 million   

Capital expenditures, as a percentage of revenues

   Approximately 10% of revenues    Approximately 10%   

Effective tax rate on adjusted earnings

   Between 17% and 19%    15%   

1 Please refer to Appendix A of the management’s discussion and analysis section of our 2018 annual report for additional information on non-IFRS financial measures.

2 Our 2018 Outlook and 2018 actual performance were measured at constant currency rates relative to 2017. Please refer to Appendix B of the management’s discussion and analysis section of our 2018 annual report for reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures.

3 Corporate costs at actual rates include expenses of $466 million that are part of adjusted EBITDA and $33 million of capital spending, which is not part of adjusted EBITDA.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 45

 



Table of Contents

 


In 2018, we successfully executed against our three key objectives:

 

We closed the F&R transaction, solidified our capital structure and separated F&R from the remaining Thomson Reuters business – In October 2018, we sold a 55% interest in our former F&R business to private equity funds managed by Blackstone for approximately $17 billion and retained a 45% interest in the new company, which is now known as Refinitiv. We returned $10 billion of the proceeds to our shareholders through a series of transactions and repaid approximately $4 billion of debt. We intend to use approximately $2 billion of the proceeds to fund strategic, targeted acquisitions to bolster our positions in key growth segments of our remaining businesses or to repurchase shares. The Refinitiv strategic partnership highlights our efforts and the success that we have had investing to stabilize and grow our financial services business over the last several years. We believe that our 45% equity stake in a well-positioned financial business with a strong strategic partner will also allow us to participate in the future upside for the business. As part of the transaction, Reuters News and Refinitiv entered into a 30-year agreement pursuant to which Reuters News will supply news and editorial content to Refinitiv for a minimum of $325 million per year.

 

We restructured the remaining Thomson Reuters business into new customer-focused segments – Our new structure moves decision making closer to the customer and allows us to serve our customers better with our full suite of offerings. Our customers are faced with a rapidly evolving global regulatory framework, fast-paced technological change and new business models that demand efficiency. We believe that our subject matter expertise, positioning, brand and scale are strengths that will drive customers to partner with our company for solutions that are tailored to their workflows and designed to help make their operations more efficient. In connection with restructuring our business, we appointed several new leaders in 2018. Our current leadership team exhibits commercial acumen and customer-centricity that we are modeling across the organization. We are building a flatter organization with fewer management layers, ensuring less distance between leadership and our customers.

 

We repositioned the company for future growth – Our new customer segments are aligned around the customer, allowing us to concentrate on the customer experience and offer full value propositions to address the needs of each customer. We believe that this model will allow us to sell more to existing customers, while also attracting and acquiring new customers that are looking for comprehensive solutions. Our growth strategy also includes providing more software and solutions to our customers.

We believe that our compensation program is strongly connected to our ability to achieve success for Thomson Reuters.

 

2018 compensation decisions were aligned with our strategic objectives – During 2018, the HR Committee was actively engaged in reviewing and discussing the design and approach to our compensation, talent and culture programs to fit the Thomson Reuters of the future.

 

     

In 2018, a significant portion of executive pay was at risk and linked to both operational performance and stock price. 88% of our CEO’s 2018 target compensation was variable and approximately 74% of the other named executive officers’ 2018 target compensation was variable. In 2018, we did not increase base salaries or the value of target annual and long-term incentive awards for Messrs. Smith and Bello. As part of restructuring Thomson Reuters into a new customer-focused organization, Messrs. Peccarelli and Masterson each received increases to their base salary and long-term incentive awards and special equity awards in connection with their promotions to co-Chief Operating Officers and to increase retention. Mr. Friedenberg joined our company in December 2018 and received a sign-on equity award and cash bonus.

 

     

Our incentive plan goals reflected our published business outlook, operating plan and long-term strategy. Annual incentive awards focused on growth objectives for the year with metrics based on total revenues, book of business and cash operating income (adjusted EBITDA less capital expenditures). 2018 was the first year that we brought most annual incentive plan participants under a single plan rather than having different plans for different business segments. Our financial performance ended up far exceeding our targets, which resulted in one of the highest annual incentive plan payouts in more than a decade. 2018 annual incentive awards for our CEO, CFO and one of our Chief Operating Officers (Mr. Masterson), which were based 80% on our company’s results (excluding our former F&R business) and 20% based on the performance of the F&R business, had a payout of approximately 129% of target based on financial performance. Our other two named executive officers – Mr. Peccarelli and Mr. Friedenberg – received 2018 annual incentive awards that were based 100% on our company’s results (excluding F&R) and those awards had a payout of approximately 134% of target. As discussed in this compensation discussion and analysis, payouts for Messrs. Bello, Peccarelli and Masterson were increased based on 2018 individual performance against strategic objectives.

 

     

Performance restricted share units (PRSUs) granted as long-term incentive awards for the three-year period ended December 31, 2018 were earned at 100% of target, reflecting actual performance for 2016 and 2017 (the first two years of the cycle) and a deemed 100% performance for 2018 (the last year of the cycle) due to complexities associated with

 

 

 

Page 46    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents
 

measuring 2018 performance in light of the F&R transaction. 2016-2018 PRSU awards were designed to measure performance for payout purposes based on the three-year average for each award metric. The impact of effectively splitting our company in half in 2018 made the initial performance goals no longer measurable on a comparable basis. As a result of the significant changes related to the F&R transaction and to increase retention, we modified the structure of long-term incentive awards granted to our named executive officers for the 2018-2020 period to reflect 50% time based restricted share units (TRSUs) and 50% stock options to ensure an equity-based focus during a year in which setting multi-year performance goals with precision was not possible due to the transformative nature of the F&R transaction. As discussed in this compensation discussion and analysis, PRSUs (weighed 50%) were added back as a performance component of long-term incentive awards granted in 2019.

 

Our compensation program is strongly aligned with shareholder return and value – In this compensation discussion and analysis section, we provide graphs that show our executive officer compensation over the last five years has been strongly aligned with total shareholder return. We also require our executive officers to maintain meaningful levels of share ownership that are multiples of their respective base salaries, creating a strong link to our shareholders and the long-term success of our company.

 

We benchmark executive compensation and performance against global peer companies that we compete with for customers and talent – In 2018, the HR Committee approved a new global peer group for executive compensation purposes to reflect our company’s smaller size once the F&R transaction closed. Several companies in our previous peer group that operated in the financial services industry were removed. When constructing our new global peer group, the HR Committee did not include other Canadian companies with a common Global Industry Classification System (GICS) code. While we acknowledge that proxy advisors tend to focus on these companies, we believe that they do not provide a meaningful or relevant comparison of our competitive market for talent given the particular executive talent pool from which we recruit and the significant differences in industries, businesses and operational strategy between our companies and other Canadian companies with a common GICS code. The HR Committee did, however, also approve a new Canadian peer group in 2018 given our company’s increasing presence in Toronto. This Canadian peer group is also referenced by the HR Committee as part of executive compensation benchmarking.

 

Our compensation program is aligned with good governance practices and has received strong shareholder support in recent years – Our plans and programs reflect strong governance principles. The HR Committee has an independent advisor (FW Cook) for executive compensation matters. We also engage with our shareholders on compensation matters during the year and we provide a “say on pay” resolution each year at our annual meeting of shareholders. Over the last five years, approximately 98% of votes have been cast “for” our “say on pay” advisory resolutions.

 

We do not believe that we have any problematic pay practices and risk is taken into account in our compensation programs The HR Committee’s independent advisor is of the view that our compensation program appears unlikely to create incentives for excessive risk taking and includes meaningful safeguards to mitigate compensation program risk.

Looking Forward: Key 2019 Compensation Decisions

In March 2019, the HR Committee decided not to increase any of our named executive officers’ base salaries after an evaluation of current market positioning of their compensation. Our named executive officers were also granted 2019 annual and long-term incentive awards with target payouts reflected at the same percentages of base salary as their 2018 targets.

2019 annual incentive awards for our named executive officers were weighted 1/3 each on organic revenue, book of business and adjusted EBITDA less capital expenditures performance. All metrics are based on Thomson Reuters consolidated performance, which the HR Committee believes promotes teamwork and enables more enterprise collaboration.

2019 long-term incentive awards for our named executive officers were split between 50% PRSUs, 25% TRSUs and 25% stock options. PRSUs granted for the 2019-2021 performance period are weighted 50% each on average organic revenue growth and average free cash flow per share performance. The HR Committee believes that organic revenue growth over a multi-year period complements the same metric as reflected in 2019 annual incentive awards and aligns to the company’s strategic priorities. The HR Committee also believes that including a component of TRSUs in long-term awards balances the award mix and supports retention, while still promoting a performance culture in the organization.

The HR Committee believes that the 2019 compensation program continues to align executive pay with the company’s annual and long-term strategic and financial performance objectives.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 47

 



Table of Contents

 


Our 2018 Compensation Program

The HR Committee of the board structured our 2018 compensation program in a way that was consistent with our strategic objectives, A named executive officer’s total compensation typically comprises the following components. We describe each of these components in more detail later in this section.

 

       

Component

 

Description

  Type  

2018 Measures

   Form   Purpose

Base salary

  Payments made throughout
the year at an established rate.
  Fixed   Individual performance, role, responsibilities and experience.    Cash   Provides predictable amount of fixed income as short-term compensation.

Annual incentive award

  Variable payment made in March after results for the previous year are available, and dependent on company performance against objective financial targets established at the beginning of the year and subject to adjustment based on individual performance.   Performance-
based
 

Revenues (1/3).

 

Adjusted EBITDA less capital expenditures (1/3).

 

“Book of business” based or annualized contract value (ACV) (1/3).

 

Individual performance factor (+/- 15%) based on performance against key individual strategic objectives (applicable for named executive officers other than the CEO).

   Cash   Focuses executives on our financial goals and objectives for the year.

Long-term incentive award

 

Our long-term incentive awards have included PRSUs since 2006. However, in light of the significant changes related to the F&R transaction and to increase retention, the HR Committee decided not to include PRSUs in 2018-2020 long-term incentive awards, as further discussed in this compensation discussion and analysis.

 

These awards also include stock options with an exercise price equal to the fair market value of our shares on the grant date and TRSUs.

  Time-
based
 

Value tied to share price performance.

 

2018 long-term incentive awards for Messrs. Smith, Bello, Peccarelli and Masterson consisted of grants of TRSUs (50%) and stock options (50%).

   Equity  

Strongly links their pay to our share price, and supports retention objectives.

 

Helps retain critical talent and recognize superior performance.

 

Aligns their interests to shareholder interests.

 

 

 

Page 48    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents
         

Component

 

Description

  Type  

2018 Measures

   Form   Purpose

Retirement and health and

welfare-related benefits

  Savings and deferred compensation plans, life and disability insurance, group medical and dental.            Various   Most of these programs are broad-based employee programs, consistent with customary market practice and competitive factors. Messrs. Smith and Bello also have individual supplemental
executive retirement plans (SERPs).

Perquisites and other personal

benefits

  Limited and includes executive physicals and tax and financial planning assistance. Limited personal use of corporate aircraft.            Various   Encourages maintenance of health and sound finances in a cost effective manner for our company, and minimizes distractions for executives.

Periodic/special long-term

equity awards

  Grants of additional TRSUs or additional PRSUs with vesting over a specified period of years.   Time-
vested or
performance-
based
 

Value tied to share price performance for TRSU grants.

 

Messrs. Peccarelli, Masterson and Friedenberg received special TRSU grants in 2018.

 

No additional PRSU grants were made to our named executive officers in 2018.

   Equity  

Reward exceptional performance and for retention.

 

Assist with attracting executive talent.

Our named executive officers are also subject to share ownership guidelines. Additional information is provided later in this compensation discussion and analysis.

Our Process for Designing and Determining Executive Compensation

HR Committee

The HR Committee’s responsibilities include establishing, implementing and overseeing our compensation policies and programs, executive talent review and succession planning processes. One of the HR Committee’s key responsibilities is approving compensation arrangements for the CEO and other executive officers. The board recognizes the importance of appointing knowledgeable and experienced individuals to the HR Committee who have the necessary background in executive compensation to fulfill the HR Committee’s obligations to the board and our shareholders. Each member of the HR Committee has direct experience as a senior leader that is relevant to his or her responsibilities in executive compensation. Additional information about the HR Committee is included earlier in this circular in our discussion of the board and corporate governance.

Management

Our Chief People Officer and other members of the Human Resources department are responsible for overseeing the day-to-day design, implementation, administration and management of our various compensation and benefits policies and plans, including base salaries, annual and long-term incentives, retirement savings, health and welfare. The CEO, Chief People Officer and other senior executives in the Human Resources, Finance and Legal departments regularly attend HR Committee meetings. Throughout the year, management provides recommendations to the HR Committee on a wide range of compensation matters.

Our Principal Shareholder

We recognize that executive compensation is a key area of interest for shareholders. Woodbridge, our principal shareholder, actively monitors this aspect of our governance given its importance to the achievement of our financial performance goals and long-term success. With its substantial equity investment in Thomson Reuters, Woodbridge considers that its interests as a shareholder are aligned with those of all other shareholders. A majority of the HR Committee’s members are independent

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 49

 



Table of Contents

 


directors and Messrs. Binet, Clark and P. Thomson serve as non-independent directors. David Thomson, Chairman of the Board, regularly attends meetings of the HR Committee as an observer.

Independent Advisors

The HR Committee has retained an outside consulting firm, Frederic W. Cook & Co., Inc. (FW Cook), to serve as an independent advisor on matters relating to executive compensation since 1998. Representatives of FW Cook generally attend HR Committee meetings, including meeting privately, or “in-camera”, with the committee (when no members of management are present) and have discussions with the Chair and other members of the HR Committee from time to time outside of regularly scheduled meetings.

As part of its ongoing services to the HR Committee, FW Cook assists in evaluating the competitive positioning of senior executive compensation levels and provides guidance and analysis on plan design and market trends and practices to ensure that our program provides executives with competitive compensation opportunities, links compensation to performance and shareholder value creation, is efficient from accounting, tax and cash flow perspectives, and is supportive of emerging best practice corporate governance principles.

FW Cook does not provide any services to Thomson Reuters other than those provided directly to the HR Committee. Any use of FW Cook by Thomson Reuters management would require the HR Committee’s prior approval. In 2018 and 2017, we paid FW Cook the following fees:

 

   
       2018        2017        Percentage of total fees  

Executive compensation-related fees

   $ 123,318      $ 144,968        100%  

All other fees

   $ –            $ –               

Total annual fees

   $ 123,318      $ 144,968        100%  

The HR Committee believes that it is important to receive objective recommendations and input from its outside compensation advisor. SEC and NYSE rules require the compensation committee of U.S. public companies to consider six independence-related factors when selecting their compensation advisor and determining whether certain conflicts of interest disclosures must be made. Although foreign private issuers such as Thomson Reuters are exempt from these rules, the HR Committee once again considered them in March 2019 in relation to FW Cook. The six factors considered by the HR Committee were:

 

1.

The provision of other services to Thomson Reuters by the firm;

 

2.

The amount of fees received from Thomson Reuters by the firm as a percentage of the total revenue of the firm;

 

3.

The policies and procedures of the firm that are designed to prevent conflicts of interest;

 

4.

Any business or personal relationship of the advisor with a member of the HR Committee;

 

5.

Any stock of Thomson Reuters owned by the advisor; and

 

6.

Any business or personal relationship of the advisor or firm with an executive officer of Thomson Reuters.

Based on disclosures provided to the HR Committee by FW Cook and in questionnaires provided by our directors and executive officers, the HR Committee views FW Cook as independent.

In 2018, management also continued to engage its own consultant to provide it with executive compensation consulting services, including competitive compensation analyses and advice on various other matters.

 

 

 

Page 50    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

Our Key Compensation Principles

 

·   

Pay for performance is the foundation of our executive compensation program

 

·   

Incentive performance goals are linked to key measures of our company’s performance and strategy

 

·   

Our executives should accumulate and retain equity in our company to align their interests with our shareholders

 

·   

We provide competitive compensation opportunities

 

·   

Our compensation programs take risk into account and do not encourage unnecessary or excessive risk taking

Below, we describe how each of these key compensation principles drives our executive management team to achieve higher levels of results for the benefit of Thomson Reuters and our shareholders.

“PAY FOR PERFORMANCE” IS THE FOUNDATION OF OUR EXECUTIVE COMPENSATION

We believe that tying a significant component of pay to our company’s achievement of specific financial performance goals and changes in our share price motivates our executives to achieve exceptional performance and focus on the goals and objectives that are of the most value to Thomson Reuters.

As shown below, approximately 88% of Mr. Smith’s 2018 target compensation was variable, which included approximately 65% awarded as long-term incentive grants in the form of TRSUs and stock options. On average, approximately 74% of the other named executive officers’ 2018 target compensation was variable, which included approximately 42% awarded as long-term incentive grants in the form of TRSUs and stock options. Target annual compensation for our named executive officers excludes special TRSU awards granted to Messrs. Peccarelli, Masterson and Friedenberg.

 

 

LOGO

As part of its review of executive compensation, the HR Committee reviews targeted values for each component of compensation for each named executive officer. In determining the mix and relative weighting of cash (base salary and annual incentive awards) versus equity-based incentives, the HR Committee considers the appropriate proportion of compensation that should be variable based on the executive’s ability to affect and influence our annual and long-term results and advance the interests of shareholders as well as the compensation mix for similar positions at comparable companies. In general, the proportion of total pay delivered through variable short-term and long-term performance-based compensation increases directly with an executive’s level of operational/financial responsibility. The HR Committee believes this mix and weighting aligns the interests of executives with those of shareholders, provides significant performance incentives and assists in keeping us competitive in the market for high-quality executives.

INCENTIVE PERFORMANCE GOALS ARE LINKED TO KEY MEASURES OF OUR COMPANY’S PERFORMANCE AND STRATEGY

Annual incentive awards

The HR Committee sets performance goals for our annual incentive awards that focus on superior performance, taking into account current market conditions. The financial performance goals set by the HR Committee reflect our published business outlook, operating plan and long-term strategy. Annual incentive awards are designed to incentivize individual performance and drive accountability for results. An executive’s annual incentive award opportunity is expressed as a percentage of base salary.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 51

 



Table of Contents

 


The following table sets forth annual incentive award payouts to our CEO, CFO and various other Corporate-level executives as a percentage of target for the years indicated. Payouts to Mr. Bello and Mr. Masterson were increased based on 2018 individual performance against strategic objectives. Mr. Peccarelli’s annual incentive award had different performance metrics and his payout was also increased based on 2018 individual performance against strategic objectives. Additional information about 2018 annual incentive award targets and performance is provided later in this compensation discussion and analysis.

 

   

Performance Year

                 Payout Year        Payout as a percentage of target  

2018

                 2019        129%  

2017

                 2018        94%  

2016

                 2017        83%  

2015

                 2016        105%  

2014

                 2015        92%  

5-year average

                 –          101%  

Long-term incentive awards

An executive’s long-term incentive award opportunity is also expressed as a percentage of base salary, and an executive’s percentage may be modified up or down for a particular year based on future potential and past performance. In addition, our long-term incentive awards are designed to optimally balance alignment with key drivers of total shareholder return, accountability for longer-term results and overall executive retention. Financial performance measures reflected in PRSUs granted as long-term incentive awards complement measures in annual incentive awards. As discussed in this compensation discussion and analysis, 2018 long-term incentive awards did not include PRSUs due to the F&R transaction, but PRSUs were reintroduced as a component of long-term incentive awards granted in 2019.

The following table sets forth payouts for our PRSU awards as a percentage of target for the years indicated. Additional information about PRSUs for the 2016-2018 performance period is provided later in this compensation discussion and analysis.

 

   

Performance Period

     Payout Year        Payout as a percentage of target  

2016-2018

     2019        100%  

2015-2017

     2018        145%  

2014-2016

     2017        170%  

2013-2015

     2016        57%  

2012-2014

     2015        66%  

5-year average

     –          108%  

Discretionary adjustment authority

For both annual incentive awards and PRSUs granted as part of long-term incentive awards, the HR Committee is authorized to make discretionary adjustments (outside of the design principles discussed above, which operate mechanically without discretion) to deal with extraordinary, non-recurring or unanticipated business conditions that materially affected our results (positively and negatively), the fairness of the performance targets, or the impact of external changes which have unduly influenced our ability to meet the targets. Due to complexities associated with determining consolidated company performance for PRSUs granted for the 2016-2018 and 2017-2019 performance periods as a result of the F&R transaction, the HR Committee decided to determine payouts for these awards based on performance as of December 31, 2017 and a deemed 100% performance for remaining periods (with payouts to occur as originally scheduled in 2019 and 2020, respectively). No discretionary adjustments of this type were made in determining payouts for 2018 annual incentive awards paid to our named executive officers.

Non-IFRS financial measures

Most of the financial metrics that we use in our annual and long-term incentive awards described in this circular are non-IFRS financial measures. Later in this section, we discuss our annual and long-term incentive awards in more detail, and we explain why we use these metrics as part of our performance goals. Please also see the “Additional Information – Non-IFRS Financial Measures” section of this circular for more information about our non-IFRS financial measures.

 

 

 

Page 52    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

OUR EXECUTIVES SHOULD ACCUMULATE AND RETAIN EQUITY IN OUR COMPANY TO ALIGN THEIR INTERESTS WITH OUR SHAREHOLDERS

Our long-term incentive awards are all equity-based and, together with our share ownership guidelines, align the interests of our executives with those of our shareholders and enable our executives to share in our long-term growth and success. Executives are aligned with shareholders because this part of their compensation is tied directly to the long-term performance of the price of our shares.

PRSUs, TRSUs and stock options are designed to reward executives for increases in shareholder value and thereby foster strong alignment between management and shareholders. They also support important management retention objectives as a result of the vesting requirements, which are over a period of years. From time to time, we also grant off-cycle TRSUs or PRSUs on a highly selective basis to high-performing executives in connection with promotions and for retention and recognition of high potential, superior performance and contributions to the company.

Through our share ownership guidelines, Mr. Smith and other executive officers are encouraged to acquire and maintain an equity interest in Thomson Reuters with a value equal to a multiple of their base salary. Until the guideline is met, executive officers must retain a specified percentage of the shares that they acquire (after applicable tax withholdings) through option exercises and the vesting of PRSUs and TRSUs. Unvested PRSUs and TRSUs and vested/unvested stock options do not count toward the guidelines. Share prices of all public companies are subject to market volatility. As a result, executive share ownership guidelines reflect a “once met, always met” standard. This means that if an executive has met his or her applicable ownership guideline multiple and a subsequent decline in the Thomson Reuters share price causes the value of his or her ownership to fall below the applicable threshold, the executive will be considered to be in compliance with the guidelines so long as he or she continues to hold the number of shares that were owned at the time when he or she achieved the guidelines.

The following table shows the share ownership guidelines for our named executive officers as well as their actual share ownership, based on the closing price of our shares on the NYSE on April 11, 2019. All share values and the named executive officers’ ownership are as of April 11, 2019. Mr. Friedenberg became subject to share ownership guidelines in December 2018 when he joined our company as our new President of Reuters News.

 

     Minimum Share Ownership      Actual Share Ownership  
       
Name    (base salary multiple)    ($)      (base salary multiple)      ($)  

James C. Smith

   6x      9,600,000        25.5x        40,843,152  

Stephane Bello

   4x      4,000,000        13.6x        13,570,997  

Brian Peccarelli

   3x      2,250,000        6.0x        4,489,704  

Neil Masterson

   3x      2,250,000        4.0x        2,973,459  

Michael Friedenberg

   3x      2,250,000                

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 53

 



Table of Contents

 


WE PAY COMPETITIVE COMPENSATION

The HR Committee utilizes independent market surveys and peer group data to evaluate the competitiveness of our compensation programs. The HR Committee refers to these benchmarks, either wholly or in part, when establishing individual components and overall compensation of our executives to assess the differences between our compensation program and those of the market and the peer group.

On an annual basis, the HR Committee evaluates each named executive officer’s compensation and compares each element (e.g., base salary, annual incentive and long term incentive) and their total direct compensation (TDC), which consists of target base salary, target annual incentive award value, target long term incentive award value and the annualized value of any special grants that are outstanding. This TDC is compared for each named executive officer against compensation peer group data, as discussed below, to both understand the competitive level of an individual’s pay as well to make decisions on each person’s future competitive compensation position. While the HR Committee does not target a specific competitive level of pay, the HR Committee does consider the overall competitive market as well as the experience, skills, contribution, historical and expected performance of each executive in its decision making.

Target compensation for our CEO and CFO had been established based on market data for companies of similar size and complexity prior to the closing of the F&R transaction. In 2018, the HR Committee did not increase base salaries or the value of target annual and long-term incentive awards for Messrs. Smith and Bello. As part of restructuring Thomson Reuters into a new customer-focused organization, Messrs. Peccarelli and Masterson each received increases to their base salary and long-term incentive awards in connection with their promotions to co-Chief Operating Officers.

In June 2018, the HR Committee approved a new global peer group for executive compensation purposes to reflect our company’s smaller size once the F&R transaction closed. Several companies in our previous peer group that operated in the financial services industry were also removed. The global peer group is a primary reference point as a result of the global nature of our business and the global market for executive talent.

The companies in our current global peer group are publicly traded and have similar business models or strategies which are focused on information development and electronic delivery. Although we believe our company is somewhat unique in terms of its business operations serving the legal, tax, corporate and news industries, a number of these companies are considered by analysts and shareholders to be our closest public company comparables. Similar to Thomson Reuters, many of these other companies also have significant global operations. Our company’s revenues (excluding the F&R business) were about the 25th percentile of the companies in the new global peer group (based on information available at that time). The 17 companies in our current global peer group consist of:

 

Automatic Data Processing Inc.

CGI Group Inc.

Cognizant Technology Solutions Corp.

eBay Inc.

Gartner Inc.

IAC/InterActive Corp.

  

The Interpublic Group of Companies, Inc.

Intuit Inc.

Moody’s Corp.

News Corporation

Nielsen Holdings plc

Omnicom Group Inc.

  

Pearson plc

RELX PLC

S&P Global Inc.

Sage Group Inc.

Wolters Kluwer NV

The HR Committee also approved a new Canadian peer group given our company’s increasing presence in Toronto. The Canadian peer group is viewed secondarily as a means to evaluate compensation compared to local practices and levels. Our company’s revenues approximated the peer group median of the 23 companies in the Canadian peer group (based on information available at the time). These companies include Bank of Montreal, The Bank of Nova Scotia, BCE Inc., Canadian Imperial Bank of Commence, CGI Group Inc., Cineplex Inc., Cogeco Communications Inc., Constellation Software Inc., Corus Entertainment Inc., Fairfax Financial Holdings Limited, Industrial Alliance Insurance and Financial Services Inc., Intact Financial Corporation, National Bank of Canada, Open Text Corporation, Quebecor Inc., Rogers Communications Inc., Shaw Communications Inc., SNC-Lavalin Group Inc., Stantec Inc., Sun Life Financial Inc., TELUS Communications Inc., Transcontinental Inc. and Waste Connections Inc.

FW Cook reviewed the proposed peer groups identified by management and its compensation consultant prior to presentation to the HR Committee. When the HR Committee met to discuss and approve the new peer groups, it received input from FW Cook and management’s compensation consultant.

 

 

 

Page 54    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

OUR COMPENSATION PROGRAMS TAKE RISK INTO ACCOUNT AND DO NOT ENCOURAGE UNNECESSARY OR EXCESSIVE RISK TAKING

We have designed our compensation programs to provide an appropriate balance of risk and reward in relation to our company’s overall business strategy. In February 2019, FW Cook provided the HR Committee with a risk assessment of the Thomson Reuters compensation program for executive officers. As part of its assessment, FW Cook reviewed our compensation structure and key attributes of our compensation program for executive officers for the purpose of identifying potential sources of risk. Based on its review, FW Cook was of the view that our compensation program appears unlikely to create incentives for excessive risk taking and includes meaningful safeguards to mitigate compensation program risk.

The HR Committee and management believe that our senior executive compensation programs do not incentivize our executives to take unnecessary or excessive risks because:

 

·   

Most of an executive’s compensation is comprised of longer-term performance opportunities with less emphasis on shorter-term performance opportunities;

 

·   

The base salary component of each executive’s compensation is fixed and therefore does not encourage risk taking;

 

·   

Our HR Committee annually reviews and determines award design and there are principles and processes with management for approving design changes and performance goals;

 

·   

The HR Committee reviews performance criteria for financial metrics used in our incentive awards, including threshold, target and maximum amounts, to ensure that they are challenging, but achievable;

 

·   

Our incentive awards utilize a number of different financial performance measures and do not rely on a single metric. Each metric has a threshold, target and maximum performance target with pre-defined payout amounts;

 

·   

Our annual incentive awards and PRSUs issued as part of long-term incentive awards have caps for the maximum potential payouts;

 

·   

Our HR Committee has discretionary authority to make fairness-related and other adjustments to performance award opportunities that it may deem appropriate;

 

·   

We have robust share ownership guidelines for our executive officers which further ties their interests to those of our shareholders over the long-term;

 

·   

We have a recoupment (or “clawback”) policy that permits us to seek reimbursement from the CEO and all of the other executive officers in certain circumstances. Our clawback policy provides that the board, at the recommendation of the HR Committee, has the right to seek reimbursement of part of the annual or long-term incentive compensation awarded to an executive officer if in the board’s view, the amount of the compensation was calculated based on the achievement or performance of financial results that were subject to a material restatement (other than a restatement due to, or to comply with, changes in applicable accounting principles or related to an acquisition or disposition). Reimbursement could be sought for any excess amount of compensation that relates to such a material restatement that occurred within 24 months of payment of the compensation, and the executive officer from whom reimbursement is sought would need to have engaged in fraud that caused the material restatement; and

 

·   

Executive officers are prohibited from hedging or pledging company shares (as further discussed later in this compensation discussion and analysis section).

The HR Committee assesses compensation risk on an annual basis as part of its oversight of executive compensation.

For more information about risks that we believe are material to our company, please see the “Risk Factors” section of our 2018 annual report, which is available on our website at www.thomsonreuters.com, as well as on www.sedar.com and www.sec.gov.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 55

 



Table of Contents

 


2018 Compensation

In 2018, the HR Committee reviewed and approved compensation arrangements for our CEO and other named executive officers.

 

·   

Our Chief People Officer initially made recommendations to the HR Committee regarding the proposed 2018 compensation arrangements for our executive officers (other than the CEO). The CEO’s input was reflected in these recommendations. The CEO and Chief People Officer considered each individual’s actual performance during the prior year, the competitiveness of each individual’s compensation, and external compensation trends and developments. Management also provided the HR Committee with its recommendations for structuring 2018 annual and long-term incentive awards. In making recommendations to the HR Committee, the CEO and Chief People Officer proposed a compensation program that supports our pay for performance philosophy without encouraging unnecessary or excessive risk taking by management.

 

·   

As part of its analysis and decision-making process, the HR Committee received a summary of performance assessments for the CEO and other executive officers. The HR Committee also received executive pay comparisons to assess proposed arrangements between individual executives and against applicable market position. This information included base salary, annual incentive award (target as a percentage of salary), long-term incentive award (target as a percentage of salary), target total direct compensation for each individual, plus target total direct compensation that included the annualized value of any special equity awards outstanding, exclusive of new hire awards.

 

·   

Following its review of the information mentioned above and using its own judgment, the HR Committee approved 2018 compensation arrangements for each executive officer (other than the CEO) and provided a compensation recommendation for Mr. Smith to the board, which made the final decision for the CEO’s arrangement. The HR Committee also approved 2018 annual incentive awards and long-term incentive awards during the year.

Additional information about each named executive officer’s individual 2018 compensation arrangement and individual performance during the year is provided later in this section.

Base Salary

Base salary is typically determined annually by reference to an executive’s individual performance and experience and our company’s financial performance, as well as competitive considerations, such as salaries prevailing in the relevant market. Base salaries are also evaluated in connection with promotions and other changes in job responsibilities.

The HR Committee establishes Mr. Smith’s base salary and also considers any increases to the base salaries of our other named executive officers based on Mr. Smith’s recommendations for each individual. In addition to the considerations described above, the HR Committee also takes into account any applicable merit increase guidelines established for our employees.

In 2018, our company’s standard merit increase in the United States for employee base salaries was 2.7% (effective on April 1 of the year). In light of various changes made to their compensation packages in previous years and an evaluation of current market positioning of their compensation, our CEO and CFO did not receive a base salary increase in 2018. As part of restructuring Thomson Reuters into a new customer-focused organization, Messrs. Peccarelli and Masterson each received increases to their base salary.

Base salaries for each of our named executive officers are described later in this section of the circular.

Annual Incentive Awards

We provide an annual, cash-based incentive award opportunity to each of our named executive officers which is based on our company’s actual financial performance compared to our annual operating plan for the year and an assessment of performance against key strategic objectives.

Each named executive officer’s annual incentive award has a target that is expressed as a percentage of base salary. In setting target percentages, the HR Committee considers factors such as an executive’s position and responsibilities as well as competitive considerations identified through compensation benchmarking.

In the fourth quarter of 2017, senior executives from our businesses met with our CEO, CFO and other Corporate executives to discuss the 2018 operating plan, including specific objectives and targets for the plan. In developing our operating plan, management considered various factors related to our operations, products/services, competition, and economic and market conditions in the countries where we operate. Our board of directors then met with senior management in the first quarter of 2018 to review, discuss and approve the final version of the plan.

 

 

 

Page 56    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

After meeting with management in March 2018, the HR Committee decided that 2018 annual incentive awards for Mr. Smith and several other executive officers would be weighted 80% on Thomson Reuters’ consolidated results (excluding the results of our F&R business) and 20% on F&R’s results. The HR Committee felt that a plan for Mr. Smith and others that was based on the blended results would incentivize various members of the Thomson Reuters senior executive team to continue to support the F&R business during the transaction process. Blended annual incentive awards were also granted to Messrs. Bello and Masterson. As Mr. Peccarelli’s responsibilities at the time were not expected to impact F&R’s 2018 results, he received an annual incentive award based 100% on Thomson Reuters’ consolidated results (excluding F&R). Mr. Friedenberg joined our company in December 2018 after the closing of the F&R transaction and he received a similar award based 100% on Thomson Reuters results (excluding F&R) that was pro rated for the numbers of days in the year that he worked at our company.

To place greater emphasis on 2018 and future year growth, the HR Committee also decided to change the weighting of the financial metrics used for 2018 annual incentive awards to enhance focus on growth as measured by book of business. The HR Committee decided that 2018 awards would be weighted as follows:

 

   

Financial metric

   Annual incentive

percentage

weighting (2018)

   Rationale for financial metric

Revenues

   1/3    We use revenues because they are commonly used to measure growth of our business

Adjusted EBITDA less capital expenditures
(cash OI)

   1/3    We use adjusted EBITDA less capital expenditures (referred to internally as “cash OI”) because it provides a basis for evaluating the operating profitability and capital intensity of our business in a single measure. This measure captures investments regardless of whether they are expensed or capitalized

“Book of business” or ACV

   1/3    We use book of business because it is focused on recurring or subscription-based revenue that customers have contractually agreed to for a period of time, generally 12 consecutive months

2017 annual incentive awards had been weighted 40% on revenues, 40% on adjusted EBITDA less capital expenditures and 20% on book of business.

The HR Committee believes that these shorter term financial metrics complement metrics reflected in long-term incentive awards and that the addition of an individual performance adjustment tied to strategic objectives provides the appropriate balance between delivering financial results and focusing on key business and functional priorities that position the organization for long-term success.

Potential payouts for 2018 annual incentive awards ranged from 0% to 200% of the target award depending on financial performance against the goals set by the HR Committee at the beginning of the year.

As part of the HR Committee’s design principles for 2018 annual incentive awards, targets and actual results are evaluated on a constant currency basis. In addition, in determining performance, guiding principles approved by the HR Committee for annual incentive awards contemplate adjustments for:

 

     

Acquisitions and disposals not in our company’s 2018 operating plan;

 

     

One-time charges (above a specified financial threshold) that were not foreseen in the 2018 operating plan and where the related savings are outside of the plan period;

 

     

Extraordinary events which are outside of management’s control to the extent that the actual impact differs from original plan assumptions (i.e., the regulatory/tax environment and significant one-time transactions); and

 

     

Changes in accounting practices to make figures comparable to the original 2018 operating plan.

The following table sets forth information regarding our 2018 minimum, target, maximum and actual performance for the three financial metrics reflected in annual incentive awards granted to Messrs. Smith, Bello and Masterson, which had a payout of approximately 129% of target. 2018 targets for revenues, adjusted EBITDA less capital expenditures and book of business were higher than full-year 2017 actual results, in support of our growth initiatives. The actual performance results indicated below are not directly comparable to similar financial measures that we disclose in our 2018 annual report because they are based on our

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 57

 



Table of Contents

 


internal operating plan. As discussed later in this section, payouts to Mr. Bello and Mr. Masterson were increased based on 2018 individual performance against strategic objectives.

 

         

Performance metric (in billions of dollars)

    
Minimum
performance

 
    

Target

performance

 

 

    
Maximum
performance

 
    

Actual

performance

 

 

    

Payout

percentage

 

 

Thomson Reuters performance (excluding F&R)

                                            

Revenues

     $5.22        $5.41        $5.52        $5.45        133%  

Adjusted EBITDA less capital expenditures

     $0.99        $1.12        $1.21        $1.16        140%  

“Book of business” or ACV

     $3.99        $4.17        $4.23        $4.18        130%  

Total Thomson Reuters performance (80%)

                                 134%  

F&R performance

                                            

Revenues

     $5.99        $6.21        $6.33        $6.27        150%  

Adjusted EBITDA less capital expenditures

     $1.59        $1.81        $1.95        $1.84        128%  

“Book of business” or ACV

     $4.33        $4.48        $4.54        $4.40        49%  

Total F&R performance (20%)

                                 109%  

Combined performance (100%)

                                 129%  

As noted above, annual incentive awards granted to Messrs. Peccarelli and Friedenberg were based 100% on Thomson Reuters results (excluding F&R) and their awards had a payout of approximately 134% of target. As discussed later in this section, Mr. Peccarelli’s payout was increased based on 2018 individual performance against strategic objectives.

Strategic Objectives – Individual Performance Factor

The HR Committee also decided that 2018 annual incentive awards could be further adjusted up or down by 15% based on each executive’s performance against key individual strategic objectives (referred to as an individual performance factor, or IPF). Performance is assessed by the CEO who recommends an IPF to the HR Committee for approval. The IPF can modify the award up or down by 15% and no positive adjustment can be applied if revenue for the business segment or company, as appropriate, is not equal to prior-year results. The CEO’s annual incentive award is not subject to an IPF adjustment because the HR Committee believes that the CEO’s performance is best evaluated based on our company’s overall results.

In February 2019, the HR Committee determined the extent to which our 2018 annual performance targets were met by comparing our financial results to our performance goals. 2018 actual results were evaluated using foreign currency exchange rates that were used to prepare our 2018 annual operating plan. This has been a long standing policy that has been consistently applied to our annual incentive awards.

 

  Annual Base   Salary     x   Target % of Annual Base Salary   x  

 

Actual Company Performance

%

  x  

 

Individual Performance Factor %

  =   Payout Amount  

Additional information about each named executive officer’s IPF and the related modifications to each of their 2018 annual incentive awards is provided later in this compensation discussion and analysis.

Long-term Incentive Awards

Each named executive officer’s long-term incentive award has a target that is expressed as a percentage of base salary. In setting target percentages, the HR Committee considers factors such as an executive’s position and responsibilities as well as competitive considerations. The HR Committee may decide to increase or decrease an executive officer’s target from year to year based on an assessment of the executive’s prior-year performance and expected contribution to future financial and strategic results.

Our long-term incentive awards have included PRSUs since 2006. In 2018, due to significant changes related to the F&R transaction and to increase retention, we divided long-term incentive award values for Mr. Smith and our other named executive officers (other than Mr. Friedenberg) between 50% TRSUs and 50% stock options. This blend was intended to create balance in our long-term incentive awards by ensuring that the program is aligned to shareholder interests, financially efficient and strongly drives executive outcomes with the company’s strategic and business objectives. The value of TRSUs and stock options is dependent on our company’s share price.

 

 

 

Page 58    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

In determining the size of TRSU and stock option grants, the HR Committee initially established a total target compensation award opportunity for each named executive officer, along with the percentage of this amount to be reflected through long-term incentive awards. The HR Committee then determined the number of TRSUs and stock options to be granted to each named executive officer. In determining long-term incentive grants, the HR Committee generally takes into account the amount of previous allocations. However, the HR Committee does not increase or decrease the size of an executive’s new award based on payouts of previous awards because we believe long-term incentive awards are intended to be an incentive for future performance.

Stock options

All options granted in 2018 vest 25% per year over four years. The exercise prices for options granted were based on the fair market value of our common shares on the NYSE on the grant date. Fair market value is considered to be the closing price of the common shares on the day before the grant. The expiration date for options granted in 2018 is 10 years from the grant date. Options expire at the later of the expiration date or, if that date occurs during a blackout period or other period during which an insider is prohibited from trading in our securities by our insider trading policy, 10 business days after the period ends, subject to certain exceptions. Other than their alignment to our company’s share price, options do not contain additional performance goals.

In determining the number of stock options to be granted to each named executive officer, the HR Committee initially determines a target economic value for the total award. For options granted in 2018, the HR Committee calculated the grant date fair values using common share prices and a Black-Scholes valuation (as described in more detail in the Summary Compensation Table contained in this circular). The HR Committee uses a Black-Scholes value in order to maintain year-to-year consistency in determining the number of stock options to be granted.

TRSUs

As mentioned above, 2018 long-term incentive awards included a component of TRSUs due to the significant changes related to the F&R transaction and to increase retention. These TRSUs are scheduled to vest in 2021, subject to award terms and conditions. While TRSUs are not subject to performance conditions, we believe they are effective attraction and retention tools as their value is often seen as more tangible by recipients and they require longer-time service to be earned. The value of TRSUs is directly aligned with our share price and is consistent with our philosophy of paying competitive compensation.

TRSUs historically have not been part of our company’s ongoing compensation program for named executive officers, and have been used selectively by the HR Committee for promotions and to recognize and retain executives who are viewed as critical to the future success of the company. TRSUs granted as special awards usually vest in full over a three or five-year period and thereby provide both a long-term performance and retention focus. In 2018, as part of restructuring Thomson Reuters into a new customer-focused organization, we granted a special award of TRSUs to Messrs. Peccarelli and Masterson in connection with their promotions to co-Chief Operating Officers and to increase retention. Mr. Friedenberg was also received a special sign-on TRSU grant in connection with joining our company.

Some of our special/retention awards have historically been provided in the form of additional PRSUs. During 2018, we did not grant any additional PRSUs.

PRSUs

Our PRSUs reinforce our pay for performance philosophy and align with the interests of our shareholders. Because the payout for PRSUs is tied to operational results over a long-term period, these awards create a strong “line of sight” between controllable performance and realizable compensation, reinforce the importance of achieving specific multi-year financial results and mitigate the impact of stock price volatility on the retention power of the overall program. Costs associated with PRSUs are variable and are incurred only to the extent that the underlying performance goals are achieved. PRSUs thereby ensure a financially efficient outcome to our company by tying expense recognition to the achievement of specific financial goals.

When long-term incentive awards include PRSUs, the HR Committee sets targets that align with realistic expected growth rates over the three-year performance period in our operating plan. Similar to annual incentive awards, in general, the HR Committee sets targets so that the relative difficulty of achieving them is consistent from year to year. The HR Committee also reviews past performance against similar targets to assess the effectiveness of targets. Target levels are intended to be challenging, yet realistic and achievable.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 59

 



Table of Contents

 


The two financial metrics used for PRSU awards granted in 2016 to our named executive officers for the performance period ended December 31, 2018 were adjusted EPS and free cash flow per share.

 

·   

Adjusted EPS – Adjusted EPS is a primary driver of our long-term financial performance by measuring growth in profitability on a per share basis. It is also a measure commonly used by shareholders to measure our success. Adjusted EPS reflects earnings attributable to common shareholders on a per share basis excluding the post-tax impacts of fair value adjustments, amortization of other identifiable intangible assets, other operating gains and losses, certain impairment charges, other net finance costs or income, our share of post-tax earnings or losses in equity method investments, discontinued operations and other items affecting comparability. We also deduct dividends declared on preference shares.

 

·   

Free cash flow per share – Free cash flow per share is a measure of our operating performance because it represents cash available to repay debt, pay common share dividends and fund share repurchases and new acquisitions. We define free cash flow as net cash provided by operating activities, proceeds from disposals of property and equipment and other investing activities, less capital expenditures, dividends paid on our preference shares and dividends paid to non-controlling interests from discontinued operations.

Both measures are calculated using diluted weighted average shares and exclude the impact of share buybacks not included in the operating plan.

The financial performance goals for PRSUs granted in 2016 were weighted 50% each as they were equally important to our long-term objectives:

 

 

Financial metric

     PRSU percentage weighting  

Adjusted EPS performance

     50%  

Free cash flow per share performance

     50%  

The number of PRSUs granted to each executive was based on our closing share price on the NYSE on the business day before the grant. PRSUs had a vesting range of 0% to 200% after the end of the performance period, depending on the achievement of the performance goals.

PRSUs also accumulate additional units based on notional equivalents of dividends paid on our common shares. The accumulated dividends are subject to the same performance adjustment as the underlying award when the underlying shares are distributed.

2016-2018 targets for adjusted EPS and free cash flow per share were based on three year averages for each metric and contemplated increases each year for both metrics during the performance period.

PRSUs granted for the 2016-2018 period were earned at 100% of target, reflecting actual performance for 2016 and 2017 (the first two years of the cycle) and a deemed 100% performance for 2018 (the last year of the cycle) due to complexities associated with measuring 2018 performance in light of the F&R transaction, which closed during 2018. The impact of effectively splitting our company in half during 2018 made the initial performance goals set in 2016 no longer measurable on a comparable basis.

As part of the HR Committee’s design principles for PRSU awards, targets and actual results are evaluated on a constant currency basis. In addition, in determining performance, guiding principles for long-term incentive awards contemplate adjustments for:

 

     

Acquisitions and disposals not in our company’s operating plan and resulting in adjustments greater than a specified amount;

 

     

One-time charges that were not foreseen in the operating plan and where the related savings are outside of the plan period;

 

     

The impact of any share repurchases that are in excess of buyback amounts reflected in the original operating plan;

 

     

Extraordinary events which are outside of management’s control to the extent that the actual impact differs from original plan assumptions (i.e., the regulatory/tax environment and significant one-time transactions);

 

     

Changes in accounting practices to make figures comparable to the original operating plan; and

 

     

Tax expense on adjusted earnings and cash tax differences in excess of 5% of targets (positive or negative).

In addition, as PRSU terms do not expressly account for abnormally high currency volatility, the HR Committee uses a constant currency methodology for all PRSU grants. Using this methodology, performance is measured at actual foreign currency rates

 

 

 

Page 60    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

within a specified performance range to hold management accountable for managing volatility. Constant currency rates are utilized outside of this range when high volatility is outside of management control. We believe this methodology best drives management performance.

As a result of the significant changes related to the F&R transaction and to increase retention, PRSUs were not included in long-term incentive awards granted in 2018. As discussed in this compensation discussion and analysis, PRSUs (weighed 50%) were added back as a performance component of long-term incentive awards granted in 2019.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 61

 



Table of Contents

 


2018 Named Executive Officer Compensation and Key Accomplishments

The following section provides information about each individual named executive officer’s 2018 performance and compensation. The tables in this section help show how we pay for performance. In the tables below, long-term incentive award performance is reflected at target since these awards will vest in the future.

 

 

 

LOGO

 

James C. Smith

President and Chief Executive Officer

 

Jim Smith has been President & Chief Executive Officer since January 2012. Mr. Smith was Chief Operating Officer of Thomson Reuters from September 2011 to December 2011 and Chief Executive Officer of Thomson Reuters Professional division from April 2008 to September 2011. Prior to the acquisition of Reuters Group PLC (Reuters) by The Thomson Corporation (Thomson) in April 2008, he served as Chief Operating Officer of Thomson and as President and Chief Executive Officer of Thomson Learning’s Academic and Reference Group. Mr. Smith joined the Thomson Newspaper Group in 1987. He held several staff and operating positions, culminating in his role as head of operations for Thomson Newspapers in the U.S. With the sale of the Thomson Newspaper Group in 2000, he joined Thomson in 2001 as Executive Vice President. He began his career as a journalist and held several editorial and general management positions prior to joining Thomson.

2018 performance

2018 was an immensely challenging and invigorating year for Thomson Reuters under Mr. Smith’s leadership. Mr. Smith was on medical leave for part of the year and returned to the office after making a full recovery.

In 2018, Thomson Reuters successfully closed the F&R transaction and launched the new Refinitiv partnership smoothly. We built a new customer-centric model and started to execute on a new growth strategy which reframes our opportunity around evolving customer needs and their growing shift from content to software.

Under Mr. Smith’s leadership, we met the financial guidance that we provided to shareholders and other stakeholders, achieving approximately 3% organic revenue growth – our company’s best growth since 2008. Our Legal Professionals, Corporates and Tax Professionals segments, which collectively represented 80% of total 2018 revenues, grew 4% organically for the full year. Reuters News also grew its full-year revenues driven by its new commercial relationship with Refinitiv.

Near the end of the year, Mr. Smith and his executive leadership team successfully relaunched the new Thomson Reuters at our Investor Day in Toronto.

With a solid close to an eventful year, Thomson Reuters entered 2019 well positioned to build on its 2018 performance.

2018 compensation

 

       
     Target Total Direct Compensation (2017)      Target Total Direct Compensation (2018)      Fixed      Variable  
      $     % of base salary      $     % of base salary                  

Base salary

     $1,600,000              $1,600,000              12       

Annual incentive award

     $3,200,000       200      $3,200,000       200             23

Long-term incentive awards

     $8,800,000       550      $8,800,000       550             65

Total

     $13,600,000              $13,600,000              12      88

Base salary: Mr. Smith’s base salary was unchanged in 2018.

Annual incentive award: Mr. Smith was granted a 2018 annual incentive award based 80% on our company’s performance (excluding the F&R business) and 20% based on F&R business performance. This award had a payout of approximately 129% of target based on financial performance. Mr. Smith’s award was not eligible for an individual performance factor adjustment.

Long-term incentive awards: Mr. Smith’s 2018 award grant (based on 2017 performance) had a grant date value of $8,800,000, split between 50% TRSUs and 50% stock options. TRSUs granted in 2018 will fully vest in March 2021, and stock options granted in 2018 will vest 25% each year over a four-year period. Mr. Smith’s 2019 award grant (based on 2018 performance) also had a grant date value of $8,800,000, split between 50% PRSUs, 25% TRSUs and 25% stock options. PRSUs and TRSUs granted in 2019 will fully vest in March 2022, and stock options granted in 2019 will vest 25% each year over a four-year period.

 

 

 

Page 62    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

LOGO

 

Stephane Bello

Executive Vice President and Chief Financial Officer

 

Mr. Bello has been Executive Vice President & Chief Financial Officer since January 2012. Mr. Bello was Chief Financial Officer of Thomson Reuters Professional division from April 2008 to December 2011. Mr. Bello joined Thomson in 2001 and was Senior Vice President and Treasurer until April 2008. Prior to joining Thomson, Mr. Bello held several positions at General Motors.

2018 performance

Under Mr. Bello’s leadership, 2018 was the seventh consecutive year that our company met or exceeded each of the performance metrics in our external financial outlook.

Mr. Bello oversaw the return of $10 billion of F&R transaction proceeds to shareholders through a $6.5 billion substantial issuer bid, a $2.3 billion return of capital transaction and $1.2 billion of share repurchases. An additional $900 million was returned to shareholders through dividends.

Mr. Bello also guided the repayment of $4 billion of outstanding debt using F&R transaction proceeds, strengthening our company’s capital structure. Following this repayment, the maturity dates for our term debt are well balanced with no significant concentration in any one year. As of year-end 2018, our company remained well below our target leverage ratio of net debt to adjusted EBITDA of 2.5:1.

During Mr. Smith’s medical leave early in 2018, Mr. Bello oversaw Mr. Smith’s responsibilities alongside his own.

2018 compensation

 

       
     Target Total Direct Compensation (2017)      Target Total Direct Compensation (2018)      Fixed      Variable  
      $     % of base salary      $     % of base salary                  

Base salary

     $1,000,000              $1,000,000              24       

Annual incentive award

     $1,250,000       125      $1,250,000       125             29

Long-term incentive awards

     $2,000,000       200      $2,000,000       200             47

Total

     $4,250,000              $4,250,000              24      76

Base salary: Mr. Bello’s base salary was unchanged in 2018.

Annual incentive award: Mr. Bello was granted a 2018 annual incentive award based 80% on our company’s performance (excluding the F&R business) and 20% based on F&R business performance. This award had a payout of approximately 129% of target based on financial performance. Based on his 2018 individual performance against strategic objectives, the HR Committee increased Mr. Bello’s payout by 5% to approximately 136% of target.

Long-term incentive awards: Mr. Bello’s 2018 award grant (based on 2017 performance) had a grant date value of $2,000,000, split between 50% TRSUs and 50% stock options. TRSUs granted in 2018 will fully vest in March 2021, and stock options granted in 2018 will vest 25% each year over a four-year period. Mr. Bello’s 2019 award grant (based on 2018 performance) also had a grant date value of $2,000,000, split between 50% PRSUs, 25% TRSUs and 25% stock options. PRSUs and TRSUs granted in 2019 will fully vest in March 2022, and stock options granted in 2019 will vest 25% each year over a four-year period.

 

 

 

Management Proxy Circular and Notice of Annual Meeting of Shareholders    Page 63

 



Table of Contents

 


LOGO

 

Brian Peccarelli

Executive Vice President and Chief Operating Officer, Customer Markets

 

Mr. Peccarelli has been Chief Operating Officer, Customer Markets and also has led the Legal Professionals segment since June 2018. Prior to June 2018, Mr. Peccarelli was President of the Tax & Accounting business for seven years. Prior to February 2011, Mr. Peccarelli was President of Workflow & Service Solutions within the Tax & Accounting business for seven years. Mr. Peccarelli joined Thomson in 1984 and has held a number of other key leadership positions within the organization, including Vice President of the Corporate Services Market and General Manager for RIA Compliance. He is also a certified public accountant and a lawyer.

2018 performance

Mr. Peccarelli’s primary focus since his appointment as Chief Operating Officer, Customer Markets, has been on accelerating growth for Thomson Reuters – primarily organically, but also through acquisitions. Mr. Peccarelli was instrumental in the creation of our new customer-focused organizational structure, which is intended to drive growth and allow us to better serve our company’s 460,000+ customers (compared to our previous product-centric structure). Through Mr. Peccarelli’s leadership, our new customer segments are now better aligned around the customer, allowing us to concentrate more on customer experience and offer full value propositions to address the needs of each customer. Mr. Peccarelli is driving initiatives for our company to cross sell more to existing customers, while also attracting and acquiring new customers that are looking for comprehensive solutions. Mr. Peccarelli is also overseeing initiatives for our businesses to provide more software and solutions to our customers.

Mr. Peccarelli also has led our largest customer segment (Legal Professionals) since mid-2018. In 2018, Legal Professionals delivered 4% revenue growth and improved adjusted EBITDA as a result of revenue growth.

2018 compensation

Mr. Peccarelli’s target total direct compensation in the table below reflects annualized values based on his compensation following his promotion to co-Chief Operating Officer during 2018.

 

       
     Target Total Direct Compensation (2017)      Target Total Direct Compensation (2018)      Fixed      Variable  
      $     % of base salary      $     % of base salary                  

Base salary

     $630,000              $750,000              27       

Annual incentive award

     $787,500       125      $937,500       125             33

Long-term incentive awards

     $630,000       100      $1,125,000       150             40

Total

     $2,047,500              $2,812,500              27      73

Base salary: Mr. Peccarelli’s base salary was increased in 2018 in connection with his promotion to co-Chief Operating Officer.

Annual incentive award: Mr. Peccarelli was granted a 2018 annual incentive award based 100% on our company’s performance (excluding the F&R business). This award had a payout of approximately 134% of target based on financial performance. Based on his 2018 individual performance against strategic objectives, the HR Committee increased Mr. Peccarelli’s payout by 5% to approximately 141% of target.

Long-term incentive awards: Mr. Peccarelli’s target long-term incentive award was increased from 100% to 150% of his base salary in connection with his promotion. Mr. Peccarelli’s 2018 award grant (based on 2017 performance) had a grant date value of $1,125,000, split between 50% TRSUs and 50% stock options. TRSUs granted in 2018 will fully vest in March 2021, and stock options granted in 2018 will vest 25% each year over a four-year period. Mr. Peccarelli’s 2019 award grant (based on 2018 performance) also had a grant date value of $1,125,000, split between 50% PRSUs, 25% TRSUs and 25% stock options. PRSUs and TRSUs granted in 2019 will fully vest in March 2022, and stock options granted in 2019 will vest 25% each year over a four-year period.

Special award: In 2018, we granted Mr. Peccarelli 100,000 TRSUs in connection with his promotion. As these TRSUs are not part of Mr. Peccarelli’s regular annual compensation, they are not reflected in the table above. Mr. Peccarelli’s special award of TRSUs vests on the fifth anniversary of the grant date in June 2023.

 

 

 

Page 64    Management Proxy Circular and Notice of Annual Meeting of Shareholders


Table of Contents

 

LOGO

 

Neil Masterson

Executive Vice President and Chief Operating Officer, Operations & Enablement

 

Mr. Masterson has been Chief Operating Officer, Operations & Enablement since June 2018. Prior to June 2018, Mr. Masterson was Executive Vice President & Chief Transformation Officer for five years and also led the former Enterprise Technology & Operations organization for two years. Mr. Masterson joined Thomson in 2002 and has held a number of key leadership positions within the organization, including Managing Director of the Investor segment of F&R and Vice President, Treasury and Corporate Planning for Thomson Reuters. Prior to joining Thomson, Mr. Masterson spent two years at Reuters as Senior Vice President of Business Development.

2018 performance

In 2018, Mr. Masterson led our Operations & Enablement group, which unified more than 10 core functions (such as our technology functions, operations centers, content, security, sales effectiveness, real estate and sourcing) into a single enterprise team. Operations & Enablement comprises approximately 1/3 of Thomson Reuters’ employees and operating expenses and 100% of its capital investment.

Under Mr. Masterson’s leadership, Operations & Enablement helped complete the F&R transaction, supported the remaining Thomson Reuters business in connection with its restructuring into new customer-focused segments, and executed the company’s growth strategy. As part of the F&R transaction, Mr. Masterson’s group helped divide technology, real estate and supplier relationships between Thomson Reuters and Refinitiv and the team negotiated, and now manages, a series of post-closing transition services agreements between the two organizations. Mr. Masterson’s team helped support the launch of new and innovative products such as Westlaw Edge. Operations & Enablement also continued to drive our company’s efforts to invest in our digital platforms and propositions to provide a more robust and seamless end-to-end digital customer experience.

2018 compensation

Mr. Masterson’s target total direct compensation in the table below reflects annualized values based on his compensation following his promotion to co-Chief Operating Officer during 2018.