CBIZ, INC.
6050 Oak Tree Boulevard South, Suite 500
Cleveland, OH 44131

 

April 8, 2011

 

Dear Stockholder:

 

We cordially invite you to attend the Annual Meeting of Stockholders of CBIZ, Inc., which will be held on Thursday, May 12, 2011, at 11:00 a.m. EDT, at Park Center Plaza II located at 6150 Oak Tree Boulevard South, Lower Level, Cleveland, Ohio 44131.

 

The matters to be considered at the meeting are described in the formal notice and proxy statement on the following pages.

 

We encourage your participation at this meeting. Whether or not you plan to attend in person, it is important that your shares be represented at the meeting. Please review the proxy statement and sign, date and return your proxy card in the enclosed envelope as soon as possible. Alternatively, you may vote via Internet or by telephone in accordance with the procedures set out on the proxy card.

 

If you attend the meeting and prefer to vote in person, your proxy card can be revoked at your request.

 

We appreciate your confidence in CBIZ, Inc. and look forward to the chance to visit with you at the meeting.

 

Very truly yours,

 

CBIZ, INC.

 

 

Steven L. Gerard, Chairman of the Board

 

CBIZ, INC.
6050 Oak Tree Boulevard South, Suite 500
Cleveland, Ohio 44131

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 2011

 

TO THE STOCKHOLDERS OF CBIZ, INC.:

 

The Annual Meeting of Stockholders of CBIZ, Inc. will be held on May 12, 2011, at 11:00 a.m. EDT, at Park Center Plaza II located at 6150 Oak Tree Boulevard South, Lower Level, Cleveland, Ohio 44131, for the following purposes:

 

1. To elect three of a class of three Directors, who are named in the Proxy Statement, to the Board of Directors of CBIZ, Inc. with terms expiring at the Annual Meeting in 2014;

 

2. To ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm;

 

3. To conduct an advisory vote on executive compensation;

 

4. To conduct an advisory vote on the frequency of future advisory votes on executive compensation;

 

5. To approve the amendment and restatement of the CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan;

 

6. To approve the amendment and restatement of the CBIZ, Inc. 2007 Amended and Restated Employee Stock Purchase Plan;

 

7. To amend the Company’s Amended and Restated Certificate of Incorporation to authorize up to 5,000,000 shares of preferred stock with a par value of $1.00 per share and make conforming changes thereto; and

 

8. To transact such other business as may properly come before the meeting or any adjournment thereof.

 

Only stockholders of record on March 25, 2011 will be entitled to vote at the meeting. This notice and proxy statement, a proxy and voting instruction card, and the 2010 Annual Report are being distributed on or about April 8, 2011.

 

You are cordially invited to attend the Annual Meeting. Your vote is important. Whether or not you expect to attend in person, you are urged to sign, date and mail the enclosed proxy card as soon as possible so that your shares may be represented and voted. The envelope enclosed requires no postage if mailed within the United States. If you attend the meeting and prefer to vote in person, your proxy card can be revoked at your request. Alternatively, you may vote via Internet or by telephone in accordance with the procedures set out on the proxy card.

 

By Order of the Board of Directors,

 

Michael W. Gleespen, Corporate Secretary

 

Cleveland, Ohio

April 8, 2011

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 12, 2011:

 

The proxy statement and annual report to security holders are available at www.envisionreports.com/cbiz.

 

PLEASE SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT IN THE ACCOMPANYING ENVELOPE,
OR VOTE BY INTERNET OR TELEPHONE AS SOON AS POSSIBLE

 

TABLE OF CONTENTS

 

CBIZ, INC.

 

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

 

This proxy statement is furnished in connection with the solicitation by the Board of Directors of CBIZ, Inc. (“CBIZ” or the “Company”) of proxies to be voted at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, May 12, 2011, and any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The mailing of this proxy statement and accompanying form of proxy to stockholders will commence on or about April 8, 2011.

 

 

Shares represented by properly executed proxies received on behalf of CBIZ will be voted at the Annual Meeting in the manner specified therein. If no instructions are specified in a proxy returned to CBIZ, the shares represented thereby will be voted in favor of the election of the directors listed in the enclosed proxy, in favor of ratification of KPMG LLP as CBIZ’s independent registered public accounting firm, in favor of the executive compensation practices of the Company as disclosed in this proxy statement, in favor of an annual advisory vote on executive compensation, in favor of the CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan, in favor of the CBIZ, Inc. 2007 Amended and Restated Employee Stock Purchase Plan, and in favor of the amendment of the Company’s Amended and Restated Certificate of Incorporation. Any proxy may be revoked by the person giving it at any time prior to being voted at the meeting, by submitting a subsequently signed and dated proxy in person, by mail, or otherwise voting via the Internet or by telephone.

 

Directors Rick L. Burdick and Benaree Pratt Wiley are designated as proxy holders in the proxy card. If no instructions are specified in a proxy returned to CBIZ, they will vote for the election as directors of Joseph S. DiMartino, Richard C. Rochon, and Donald V. Weir, who have been nominated by the Board of Directors. They also will vote for the ratification of KPMG LLP as CBIZ’s independent registered public accounting firm, in favor of the executive compensation practices of the Company as disclosed in this proxy statement, in favor of an annual advisory vote on executive compensation, in favor of the CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan, in favor of the CBIZ, Inc. 2007 Amended and Restated Employee Stock Purchase Plan, and in favor of amendment of the Company’s Amended and Restated Certificate of Incorporation. If any other matters are properly presented at the Annual Meeting for consideration, the proxy holders will have discretion to vote on such matters in accordance with their best judgment. The Board of Directors knows of no other matters to be presented at the meeting.

 

The Board of Directors established March 25, 2011 as the record date for determining stockholders entitled to notice of and to vote at the Annual Meeting. On the record date, CBIZ had 50,102,427 shares of voting common stock issued and outstanding. The common stock is the only class of capital stock CBIZ has outstanding. Only stockholders of record at the close of business on the record date will be entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote on each matter presented.

 

The holders of a majority of the total shares of common stock issued and outstanding, whether present in person or represented by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present for the transaction of business. Broker non-votes occur when a nominee holding shares of the Company’s common stock for a beneficial owner returns a properly executed proxy but has not received voting instructions from the beneficial owner and such nominee does not possess or chooses not to exercise discretionary authority with respect to such shares. Brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on proposals, such as the election of directors, proposals regarding the advisory vote on executive compensation, the advisory vote on the frequency of future advisory votes on executive compensation, the approval of the CBIZ 2002 Amended and Restated Stock Incentive Plan, the approval of the CBIZ 2007 Amended and Restated Employee Stock Purchase Plan, and the amendment to CBIZ’s Amended and Restated Certificate of Incorporation, although they may vote their clients’ shares on proposals such as the ratification of KPMG LLP as the Company’s independent registered public accounting firm.

The proposals regarding ratification of the selection of the Company’s independent registered accounting firm, the advisory vote on executive compensation, the approval of the CBIZ 2002 Amended and Restated Employee Stock Purchase Plan, the approval of the CBIZ 2007 Amended and Restated Employee Stock Purchase Plan and each of the director nominees require the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy at the Annual Meeting. In determining whether each proposal has received the requisite number of affirmative votes, abstentions will be counted and will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the vote for these matters.

 

The affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting is required to approve the advisory vote on the frequency of future advisory votes on executive compensation. Because stockholders are given the option to vote on a number of choices, it is possible that no single choice will receive a majority vote. If no single choice receives a majority vote, the frequency receiving the greatest number of votes (every one, two or three years) will be considered the frequency recommended by the stockholders. However, because this vote is non-binding, the Board of Directors may determine the frequency of future advisory votes on executive compensation in its discretion. The Board of Directors intends to carefully consider the voting results on this proposal in making its determination. Abstentions on this proposal have the same effect as not expressing a preference and broker non-votes will have no effect on the vote.

 

The proposal regarding the Amendment to CBIZ’s Amended and Restated Certificate of Incorporation requires an affirmative vote of a majority of the outstanding shares of common stock entitled to vote as of the record date. Abstentions and broker non-votes will have the same effect as a vote against this proposal.

 

CBIZ’s Certificate of Incorporation divides the Board of Directors into three classes of directors, with one class to be elected for a three-year term at each annual meeting of stockholders. The Board of Directors currently consists of eight members, with three members’ terms expiring at this Annual Meeting. If elected at the Annual Meeting, the nominees listed below will serve until the Annual Meeting of Stockholders in 2014, or until their successors are duly elected and qualified. All other directors will continue as such for the term to which they were elected. Although the Board of Directors does not contemplate that any of the nominees will be unable to serve, if such a situation arises prior to the Annual Meeting, the persons named in the enclosed proxy will vote for the election of another person as may be nominated by the Board of Directors.

 

The Board, upon nomination by the Nominating and Governance Committee, recommends a vote “FOR” approval of the Directors Standing for Election listed below.

 

Directors Standing for Election

 

 

Directors Whose Terms Continue

 

 

Director Qualifications and Experience

 

The Nominating and Governance Committee’s process for identifying and evaluating candidates to be nominated as directors consists of reviewing with the Board the desired experience, mix of skills and other qualities to assure appropriate Board composition; conducting candidate searches and inquiries; recommending to the Board qualified candidates for the Board who bring the background, knowledge, experience, skill sets, diversity and expertise that would strengthen the Board; and selecting appropriate candidates for nomination. A full description of the standards and processes used by the Nominating and Governance Committee in evaluating nominees and directors is set out below in the section entitled “Committees of the Board of Directors”, p. 24, and in the Charter of the Nominating and Governance Committee.

 

Set forth below is biographical information for the individuals nominated to serve as directors and each person whose term of office as a director will continue after the Annual Meeting. In addition, the biographical information for each Director nominee includes a summary of the specific experience, qualifications, attributes or skills that led the Board to conclude that the person should serve as a Director of the Company. It would not be possible to detail all experience, qualifications, attributes or skills possessed by each Director. Rather, the Company has attempted to set out those unique and important professional characteristics that each particular person brings to the Board.

 

Nominees For Directors

 

Joseph S. DiMartino has served as a Director of CBIZ since November 1997, when he was elected as an independent director. Mr. DiMartino has been Chairman of the Board of the Dreyfus Family of Funds since January

1995. Mr. DiMartino served as President, Chief Operating Officer and Director of The Dreyfus Corporation from October 1982 until December 1994 and also served as a director of Mellon Bank Corporation. Mr. DiMartino formerly served on the Boards of SunAir Services, Inc., LEVCOR International, Inc., The Newark Group and the Muscular Dystrophy Association within the last five years.

 

Mr. DiMartino’s service as a chairman, director and president of several significant public and NYSE-listed companies provides CBIZ with a wealth of strategic and operating experience. The Company regularly draws on his leadership skills and experience in his role as the Chairman of the Compensation Committee. His knowledge of the capital markets is extremely valuable in the structuring of the Company’s sources of credit.

 

Richard C. Rochon has served as a Director of CBIZ since October 1996, when he was elected as an independent director. Mr. Rochon is Chairman and Chief Executive Officer of Royal Palm Capital Management, a private investment and management firm that he founded in March 2002. From 1985 to February 2002, Mr. Rochon served in various capacities with Huizenga Holdings, Inc., a management and holding company owned by H. Wayne Huizenga, where he last served as President. Mr. Rochon has also served as a director of Devcon International, a provider of electronic security services, from July 2004 until September 2009. Additionally, Mr. Rochon has been a director of SunAir Services, Inc., a provider of pest-control and lawn care services from February 2005 until December 2009. Mr. Rochon was also a director of Bancshares of Florida, a full-service commercial bank from 2002 through February 2007. Mr. Rochon was Chairman and CEO of Coconut Palm Acquisition Corp. (“CPAC”) from September 2005 through June 2007, when CPAC merged with Equity Broadcasting Corporation to become Equity Media Holdings Corp (“EMHC”). EMHC filed a petition under the federal bankruptcy laws in December of 2008. Mr. Rochon was also employed as a certified public accountant by the public accounting firm of Coopers and Lybrand from 1979 to 1985. Mr. Rochon received his B.S. in accounting from Binghamton University in 1979 and Certified Public Accounting designation in 1981.

 

As the co-founder of a private investment and management firm, an officer in various management and holding companies having overseen investments in notable public companies, and with his qualification as a financial expert with a background in accountancy, Mr. Rochon provides critical insight into the proper conduct of the Company’s Audit and Compensation Committees. His broad experience in reporting and Sarbanes-Oxley requirements has helped the Company set its corporate governance priorities and reach its corporate governance related goals.

 

Donald V. Weir has served as a Director of CBIZ since September 2003, when he was elected as an independent director. Mr. Weir is Vice President of Private Equity for Sanders Morris Harris Group Inc. (“SMHG”) and has been with SMHG for the past eleven years. Prior to this Mr. Weir was CFO and director of publicly-held Deeptech International and two of its subsidiaries, Tatham Offshore and Leviathan Gas Pipeline Company, both of which were publicly-held companies. Prior to his employment with Deeptech, Mr. Weir worked for eight years with Sugar Bowl Gas Corporation, as Controller and Treasurer and later in a consulting capacity. Mr. Weir was associated with Price Waterhouse, an international accounting firm, from 1966 to 1979.

 

As a director, chief financial officer, treasurer and controller of various public and privately-held companies, Mr. Weir has the depth of knowledge and experience needed to serve as a director of a public company with such diverse holdings and operations of CBIZ, Inc. His financial and accounting expertise, as well as his strategic and operational experience, properly qualifies him to act as the Chairman of the Company’s Audit Committee.

 

Continuing Directors

 

Rick L. Burdick has served as a Director of CBIZ since October 1997, when he was elected as an independent director. On May 17, 2007, Mr. Burdick was elected by the Board to be its Lead Director, a non-officer position. Previously, in October 2002, he was elected by the Board as Vice Chairman, a non-officer position. Mr. Burdick has been a partner at the law firm of Akin Gump Strauss Hauer & Feld LLP since April 1988. Mr. Burdick serves on the Board of Directors of AutoNation, Inc.

 

In his firm management role at Akin Gump, Mr. Burdick has gained extensive knowledge regarding the strategic operation of a national professional services organization. He has broad transactional experience as both a director and legal representative of large public and multinational companies, and maintains a complex practice involving regulatory and financial reporting issues.

 

Michael H. DeGroote, son of CBIZ founder Michael G. DeGroote, was appointed a Director of CBIZ in November, 2006. Mr. DeGroote currently serves as President of Westbury International, a full-service real estate

development company, specializing in commercial/industrial land, residential development and property management. Prior to joining Westbury International, Mr. DeGroote was Vice President of MGD Holdings and previously held a management position with Cooper Corporation. Mr. DeGroote serves on the Board of Governors of McMaster University in Hamilton, Ontario.

 

As the President of a full-service real estate development company specializing in commercial/industrial land, residential development and property management, Mr. DeGroote reflects the entrepreneurial background of most of CBIZ’s acquisitions. His association with the largest single stockholder of Company stock fosters a consistent focus on attaining and improving stockholder value.

 

Steven L. Gerard was elected by the Board to serve as its Chairman in October, 2002. He was appointed Chief Executive Officer and Director in October, 2000. Mr. Gerard was Chairman and CEO of Great Point Capital, Inc., a provider of operational and advisory services from 1997 to October 2000. From 1991 to 1997, he was Chairman and CEO of Triangle Wire & Cable, Inc. and its successor Ocean View Capital, Inc. Mr. Gerard’s prior experience includes 16 years with Citibank, N.A. in various senior corporate finance and banking positions. Further, Mr. Gerard served seven years with the American Stock Exchange, where he last served as Vice President of the Securities Division. Mr. Gerard also serves on the Boards of Directors of Lennar Corporation and Joy Global, Inc.

 

Mr. Gerard has significant board-level experience with five other public companies, including three NYSE-listed entities, in addition to his current membership on the boards of Lennar Corporation and Joy Global, Inc. He has served on the audit and compensation committees of several of these public companies, and has been recognized as a “financial expert” by at least one. Mr. Gerard has broad experience in operations, finance, banking, risk assessment and regulation, and has served as the chief executive officer of several companies.

 

Todd J. Slotkin has served as a Director of CBIZ since September 2003, when he was elected as an independent director. In 2011, Mr. Slotkin became the lead independent director of Apollo Senior Floating Rate Fund, Inc. Between 2008 and 2010, Mr. Slotkin was a Senior Managing Director of Irving Place Capital. From 2006 to 2007, Mr. Slotkin served as a Managing Director of Natixis Capital Markets. From 1992 to 2006, Mr. Slotkin served as a SVP (1992-1998) and EVP and Chief Financial Officer (1998-2006) of MacAndrews & Forbes Holdings Inc. Additionally, he was the EVP and CFO of publicly owned M&F Worldwide (1998-2006). Prior to 1992, Mr. Slotkin spent 17 years with Citigroup, ultimately serving as Senior Managing Director and Senior Credit Officer. Mr. Slotkin serves on the Board of Martha Stewart Living Omnimedia. He is Chairman, Director and co-founder of the Food Allergy Initiative. Mr. Slotkin formerly served on the Board of Managers of AlliedBarton and the Board of Directors of TransTech Pharma within the last five years.

 

Mr. Slotkin’s considerable experience in both public and privately-held companies as a director, audit and compensation committee member, audit committee financial expert, and chief financial officer is an important asset that assists the Company in addressing a broad range of regulatory and operational issues. His history with public banks and public and private companies makes him uniquely qualified to render advice on the Company’s capital, strategic and transactional matters.

 

Benaree Pratt Wiley was appointed as an independent Director of CBIZ in May 2008. Ms. Wiley is a Principal of The Wiley Group, a firm specializing in personnel strategy, talent management, and leadership development primarily for global insurance and consulting firms. Ms. Wiley served as the President and Chief Executive Officer of The Partnership, Inc., a talent management organization for multicultural professionals in the greater Boston region for fifteen years before retiring in 2005. Ms. Wiley is currently a director on the boards of the Dreyfus Family of Funds and Blue Cross and Blue Shield of Massachusetts. Ms. Wiley also chairs the PepsiCo African American Advisory Board. Her civic activities include serving on the boards of The Boston Foundation, the Efficacy Institute and Howard University.

 

Ms. Wiley is a driving force in the advancement of leadership diversity. Under her leadership as president and chief executive officer, The Partnership, Inc. strengthened the capacity of greater Boston to attract, retain, and develop talented professionals of color and helped more than 1,300 African Americans integrate into the corporate community. This tenure is chronicled in a Harvard Business School case study on transformational non-profit leadership — Bennie Wiley and The Partnership, Inc. Ms. Wiley has served as both a member and chair of audit and nominating committees of the boards on which she has served.

 

The Audit Committee of the Board has selected KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011, and the Board has directed that management submit the selection of KPMG LLP as the Company’s independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. KPMG LLP has been the Company’s independent registered public accounting firm since fiscal 1997. Information on fees paid to KPMG LLP during the Company’s 2009 and 2010 fiscal years can be found after the Audit Committee Report below.

 

Representatives of KPMG LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

Neither the Company’s Bylaws nor any other governing documents or law require stockholder ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm. However, the Board is submitting the selection of KPMG LLP to the stockholders for ratification as a matter of what it believes to be good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain the firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.

 

The approval of this proposal requires the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions will be counted and will have the same effect as a vote against this proposal. Broker non-votes will have no effect on the vote for this proposal. If the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011 is not ratified, the Audit Committee will reconsider the appointment, as discussed above.

 

The Board recommends a vote “FOR” the ratification of the Audit Committee’s selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011.

 

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Pursuant to the Dodd-Frank Act and resulting Securities and Exchange Commission (“SEC”) rules, public companies are required to conduct a non-binding advisory vote on their executive compensation, as disclosed in applicable filings with the SEC. Accordingly, the Company is providing its shareholders with the opportunity to cast a non-binding advisory vote on the compensation of its named executive officers, as disclosed in this proxy statement.

 

CBIZ believes its executive compensation and compensation policies and practices are focused on pay-for-performance principles, are strongly aligned with the interests of the Company’s long-term shareholders, help incentivize the Company’s named executive officers, and are reasonable in comparison to the compensation practices of the Company’s competitors and other companies of similar size and complexity. The Company also believes that its executive compensation policies and practices help the Company maintain its ability to attract and retain superior employees in key positions and ensure that compensation provided to those employees remains competitive relative to the compensation paid to similarly situated executives at peer companies. CBIZ’s executive compensation policies are designed to ensure that total compensation reflects an individual’s performance and potential. The performance of the Company’s named executive officers is generally measured in accordance with an individual’s goals and objectives as well as their contribution to CBIZ’s corporate goals and initiatives. Such factors as teamwork, new service or product innovation, initiative, mentoring and personal development strongly influence a non-quantitative component of compensation awards at CBIZ. The Company believes that its compensation policies and programs and fiscal 2010 compensation decisions, as each is described in this proxy statement, appropriately reward the Company’s named executive officers for the Company’s performance and for their individual performance. You are strongly encouraged to read the full details of our compensation policies and programs under “Executive Compensation” below.

 

Accordingly, the Company recommends that its stockholders vote “For” the following resolution at the Annual Meeting:

 

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2011 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and the other narrative executive compensation disclosure contained in this proxy statement.”

 

Because this vote is advisory, it will not be binding on the Board of Directors or the Compensation Committee, nor will it overrule any prior decision or require the Board or Compensation Committee to take any action. However, the Board and the Compensation Committee will review the voting results and may consider the outcome of the vote when making future decisions about executive compensation programs.

 

The Board recommends a vote “FOR” the compensation of the Company’s named executive officers.

 

Pursuant to the Dodd-Frank Act and the resulting SEC rules, public companies are required to conduct a non-binding advisory vote every six years regarding whether a company should conduct a non-binding advisory vote on executive compensation every year, every two years, or every three years. Alternatively, a stockholder may abstain from voting on the proposal. Accordingly, the Company is providing its shareholders with the opportunity at the 2011 annual meeting to cast a non-binding advisory vote regarding the frequency of future non-binding advisory votes on the compensation of the Company’s named executive officers.

 

The Board of Directors, the Compensation Committee and the Nominating and Governance Committee believe that as a matter of good corporate governance it is appropriate to provide stockholders with an advisory vote on named executive officer compensation on an annual basis. The Board and Committee believe that an annual vote will maximize stockholders communication by providing stockholders with the opportunity to express their approval or disapproval of executive compensation in a timely manner.

 

Because this proposal is advisory, it will not be binding on the Company, and the Board of Directors and the Nominating and Governance Committee may decide to hold an advisory vote on executive compensation more or less frequently than the option selected by the Company’s stockholders. However, the Board of Directors values the Company’s stockholders’ opinions, and will consider the outcome of the vote when determining the frequency of future advisory votes on executive compensation. Please note that although the Board of Directors is making a recommendation with respect to this proposal, you are only being asked to vote on the choices specified above and not whether you agree or disagree with the Board’s recommendation.

 

The Board recommends a vote “FOR” an ANNUAL advisory vote on the compensation of the Company’s named executive officers.

 

The Company is asking our stockholders to approve the amendment and restatement of the CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan was originally approved by stockholders at the annual meeting in May 2002, with a total of 15,000,000 shares of CBIZ common stock authorized for issuance thereunder. The amendment and restatement of the Stock Incentive Plan will maintain the same number of shares of common stock authorized for issuance under the Stock Incentive Plan, and will merely extend the current life of the plan for an additional ten (10) years. As of March 25, 2011, the record date for the Annual Stockholders’ Meeting, there have been 2,956,538 shares of common stock issued and retained by participants under the Stock Incentive Plan. There are 5,878,332 remaining shares available to grant under the Stock Incentive Plan. Approval of this ballot issue merely provides the Company with an additional ten years in which it may grant the remaining number of equity awards previously authorized by the stockholders in 2002.

 

The amendment and restatement of the Stock Incentive Plan also expands the business criteria on which performance goals may be based for performance-based incentive awards. Approval of the material terms of the performance goals set forth in the amendment and restatement should allow certain awards made under the Stock Incentive Plan to qualify as tax-deductible performance-based compensation under section 162(m) of the Internal Revenue Code (the “Code”). Finally, the amendment and restatement makes additional changes to the Stock Incentive Plan to reflect recent changes to the Code and recent accounting pronouncements that could apply to awards under the Stock Incentive Plan.

 

In general, section 162(m) of the Code denies a publicly held corporation a deduction for federal income tax purposes for compensation exceeding $1 million per year per person to its principal executive officer, principal financial officer, and the three other officers (other than the principal executive officer and principal financial officer) whose compensation is disclosed in its proxy statement as a result of their total compensation, subject to certain exceptions. There is, however, an exception to this limit on deductibility for compensation that satisfies certain conditions for “qualified performance-based compensation” set forth under Code section 162(m). One of the conditions is that the stockholders must approve the material terms of the performance goals. For purposes of Code section 162(m), the material terms of the performance goals include (i) the employees eligible to receive compensation under the Stock Incentive Plan, (ii) a description of the business criteria on which the performance goal is based, and (iii) the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects of the Stock Incentive Plan is discussed below.

 

Summary of the Stock Incentive Plan as Amended and Restated

 

The material features of the Stock Incentive Plan, as amended and restated, are summarized below. This summary is qualified by reference to the full text of the Stock Incentive Plan (Amended and Restated as of May 12, 2011) attached as Appendix A to this proxy statement.

 

Available Shares

 

Subject to adjustments for stock splits, stock dividends, or other changes in corporate capitalization, the amendment and restatement of the Stock Incentive Plan will provide that the maximum number of shares of common stock that may be delivered to participants under the Stock Incentive Plan is 15,000,000. No participant under the Stock Incentive Plan may be granted stock options, stock appreciation rights, or other stock-based awards (other than dividend equivalents) covering in excess of 1,000,000 shares of common stock in a fiscal year. Shares subject to an award under the Stock Incentive Plan may be either authorized but unissued shares or treasury shares. If any award is forfeited, or terminates, expires or lapses without being exercised, or is cashed out, or if an award is exercised for, or is settled with, cash, any shares of common stock subject to such awards will again be available for distribution in connection with awards under the Stock Incentive Plan. No new shares are being requested as part of this ballot issue. If the Stock Incentive Plan is approved, no more than 3,200,000 of the remaining 5,878,332 available shares can be granted in the form of any award other than Stock Options and Stock Appreciation Rights.

 

The market value of the Company’s common stock as reported on the New York Stock Exchange as of March 1, 2011, was $7.01 per share.

Administration

 

The Stock Incentive Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee is currently comprised of Donald V. Weir, Richard C. Rochon, Todd J. Slotkin, and Benaree Pratt Wiley, each of whom is a “non-employee director” for purposes of Rule 16b-3 under section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an “outside director” for purposes of section 162(m) of the Code. The Stock Incentive Plan authorizes the Compensation Committee to approve the selection of participants, to determine the type of awards to be made to participants, the number of shares of CBIZ common stock subject to awards, and the terms and conditions of any awards, and to interpret the Stock Incentive Plan and establish rules and regulations relating to the Stock Incentive Plan. The Stock Incentive Plan authorizes the Compensation Committee to correct any defects, supply any omission or reconcile any inconsistency in the Stock Incentive Plan or in any award in the manner and to the extent the Compensation Committee deems desirable to carry it into effect.

 

Eligibility

 

Employees, officers, directors and consultants of, and individuals who have accepted an offer of employment with the Company or its subsidiaries or affiliates are eligible to receive grants of awards under the Stock Incentive Plan. Only employees of the Company or its subsidiaries may be granted incentive stock options.

 

Awards

 

Awards under the Stock Incentive Plan may consist of stock options, stock appreciation rights, stock or cash-based performance awards, or other stock-based awards.

 

Stock Options

 

Stock options, which may be “incentive stock options” (or “ISOs”) within the meaning of section 422 of the Code or nonqualified stock options, as designated by the Compensation Committee and specified in the option agreement setting forth the terms and provisions of the options, may be granted alone or in addition to other awards granted under the Stock Incentive Plan.

 

Exercise Price.  The exercise price per share of the Company’s common stock purchasable under a stock option will not be less than the greater of the par value or the fair market value of a share of common stock on the date of grant. The exercise price of an ISO granted to an employee owning stock possessing more than 10% of the total combined voting power of all classes of shares of the Company and its subsidiaries, or a “10% stockholder”, will not be less than 110% of the fair market value per share of CBIZ common stock on the date of grant.

 

Option Term.  The Compensation Committee will determine the term of each stock option, but no stock option of any kind may be exercisable more than six years after the date of grant. However, the term of any ISO granted to a 10% stockholder will not exceed five years from the date of grant.

 

Vesting.  An option will vest and become exercisable at a rate determined by the Compensation Committee on the date of grant. With respect to any stock option subject to delayed vesting, the Compensation Committee may at any time waive any installment exercise provisions or otherwise accelerate the exercisability of the stock option.

 

Method of Exercise.  The exercise price of a stock option may be paid in cash or, if approved by the Compensation Committee, with previously acquired shares of CBIZ common stock or a combination of cash and such stock. The Compensation Committee, in its discretion, may allow the cashless exercise of options through the use of a broker-dealer or for payment of the exercise price by withholding from the shares issuable upon exercise a number of shares having a fair market value on the date of exercise equal to the aggregate exercise price.

 

The Stock Incentive Plan provides that the Compensation Committee may elect to cash out all or part of the shares of common stock for which a stock option is being exercised by paying the optionee an amount, in cash or common stock, equal to the excess of the fair market value of such shares over their aggregate exercise price on the effective date of the cash-out.

 

Stock Appreciation Rights (SARs)

 

The Stock Incentive Plan permits the Compensation Committee to award SARs to an eligible participant either at the time of the grant of a stock option or thereafter by amendment to the option. A SAR is the right to receive the

increase between the grant price of the SAR and the fair market value of the Company’s common stock on the date of settlement, in shares of common stock or cash, or a combination of both.

 

Performance Awards

 

Under the Stock Incentive Plan, the Compensation Committee may grant performance awards alone or in addition to other awards under the Stock Incentive Plan. A performance award is the right to receive, upon attainment of specified goals, shares of CBIZ common stock, cash, or a combination of such shares and cash. Performance awards may be granted subject to the attainment of performance goals, the continued service of the participant, or both. The Compensation Committee also may grant “Qualified Performance-Based Awards”, which are performance awards designated as such by the Compensation Committee at the time of grant, and are intended to qualify for the exemption from the limitation on deductibility of compensation with respect to any covered employee imposed by section 162(m) of the Internal Revenue Code. The Stock Incentive Plan limits the sum of any cash paid, and the fair market value (as of the date of issuance) of any shares of common stock issued, to a participant pursuant to Qualified Performance Based Awards during any five fiscal years to 10% of the reported earnings before income tax, deductions and amortization (EBITDA) of the Company and its affiliates for such five-year period.

 

The amendment and restatement of the Stock Incentive Plan provides that the Compensation Committee may select as performance goals, or express performance goals in terms of, one or more of the following business criteria:

 

 

 

A performance goal may be measured over an “award cycle” on a periodic, annual, cumulative or average basis and may be established on a corporate-wide basis or with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. For purposes of the Stock Incentive Plan, an “award cycle” means the period or periods of time, as the Compensation Committee may select, during which performance will be measured in order to determine a participant’s entitlement to receive payment of a performance award. The Compensation Committee will establish the performance goals for each performance award, consisting of one or more business criteria permitted as performance goals under the Stock Incentive Plan, one or more levels of performance with respect to each such criterion, and the amount or amounts payable or other rights that the participant will be entitled to upon achievement of such levels of performance. The performance goals will be established by the Compensation Committee before or reasonably promptly following the inception of a Performance Period. To the extent required by section 162(m) of the Code, the Compensation Committee will establish the performance goals for Qualified Performance-Based Awards no later than 90 days after the commencement of the award cycle or the day prior to the date on which 25% of the award cycle has elapsed.

 

Subject to adjustment for certain corporate events, the maximum number of shares of common stock subject to any Qualified Performance-Based Award to any participant is 1,000,000 for any award cycle, and to the extent the award will be paid in cash, the maximum dollar amount of such award is the fair market value of such number of shares of common stock on the first or last day of the award cycle, as determined by the Compensation Committee. The amendment and restatement of the Stock Incentive Plan limits the maximum amount that can be paid in any calendar year to any participant pursuant to a cash bonus Qualified Performance-Based Award that is determined without reference to shares of common stock to $10,000,000.

 

Unless otherwise provided by the Compensation Committee in an award agreement, the amendment and restatement of the Stock Incentive Plan provides that in the event of a participant’s termination of continuous service before the end of the award for any reason, Qualified Performance-Based Awards will be payable only if the applicable performance goals are achieved, as determined by the Compensation Committee. The Compensation Committee may reduce or eliminate the amount of payment with respect to any performance award to a participant notwithstanding the achievement of specified performance goals.

 

No payments will be made with respect to any Qualified Performance-Based Award under amendment and restatement of the Stock Incentive Plan unless and until the Compensation Committee certifies in writing the achievement of the performance goals.

 

Other Stock-Based Awards

 

The Stock Incentive Plan permits the Compensation Committee to grant other awards of common stock, or that are valued by reference to or otherwise based on common stock, including restricted shares of common stock, dividend equivalents and convertible debentures, either alone or in conjunction with other awards.

 

The Compensation Committee, in its sole discretion, may prescribe the terms, conditions and other restrictions for the vesting or settlement of such other awards, including the attainment of performance goals and other restrictions designed to satisfy the Code section 162(m) exemption for performance-based compensation.

 

Director Equity Grants

 

Each non-employee director of CBIZ is automatically granted 50,000 nonqualified stock options on the first day after his or her first election as a director. The option exercise price for such options is the fair market value of a share of CBIZ common stock on the date of grant. Annually thereafter each non-employee director of CBIZ shall receive such equity grant as provided by the Company’s policy regarding the compensation of non-employee directors as approved by the Compensation Committee and the full Board.

Change in Control

 

The Compensation Committee may provide in the terms of an award that, in the event of a change in control (as defined in the Stock Incentive Plan), any option or stock appreciation right that is not then exercisable and vested will become fully exercisable and vested, and performance awards will be deemed earned and payable in full in cash.

 

Adjustments

 

The Stock Incentive Plan provides that in the event of certain corporate events or changes in the Company’s common stock, the Compensation Committee will adjust awards and the number of shares under the Stock Incentive Plan as the Compensation Committee determines to be appropriate to prevent dilution or enlargement of benefits or potential benefits under the Stock Incentive Plan or with respect to such awards. Any such adjustment made to an ISO will be made in accordance with section 424(a) of the Code unless otherwise determined by the Compensation Committee. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding options or SARs or cancel outstanding options or SARs in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs without stockholder approval.

 

Amendments and Termination

 

The Stock Incentive Plan as amended and restated will terminate on the day before the 2021 Annual Meeting. However, if the amendment and restatement of the Stock Incentive Plan is not approved by stockholders at the Annual Meeting, the Stock Incentive Plan will terminate on May 16, 2012. Our Board of Directors may terminate or amend the Stock Incentive Plan in any respect at any time, except that no amendment will be made without stockholder approval if such approval is required by law, regulation or stock exchange rules. Except as otherwise provided in the Stock Incentive Plan with respect to adjustments in connection with certain corporate events or changes in the Company’s common stock, no amendment may be made that would adversely affect the rights of a participant under any outstanding award without such participant’s written consent. However, if an award is granted to an individual who is employed outside the United States and who is not compensated from a payroll maintained in the United States, the Stock Incentive Plan permits the Compensation Committee to modify the Stock Incentive Plan’s provisions as they pertain to such individual to comply with applicable foreign law.

 

General Federal Tax Consequences

 

The following is a general summary of the material federal tax consequences of the grant and exercise of stock options under the Stock Incentive Plan. A participant may also be subject to state and local taxes, the consequences of which are not discussed herein, in the jurisdiction in which he or she works or resides. Moreover, the federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. This summary is for general information and is not tax advice.

 

Nonqualified Stock Options.  An individual granted a nonqualified stock option will generally not recognize taxable income at the time of grant. Upon exercise of a nonqualified stock option, a participant will generally recognize ordinary compensation income in an amount equal to the “spread,” meaning the excess, if any, in the fair market value of the shares underlying the stock option on the date of exercise over the exercise price paid at the time of exercise. In general, subject to the possible limitations on deductibility under sections 162(m) and 280G of the Code for compensation paid to certain individuals, the Company should be entitled to deduct the same amount from its taxable income at the time of such inclusion.

 

Incentive Stock Options.  An individual granted an ISO will generally not recognize taxable income at the time of grant or at the time of exercise. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the acquired shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will be long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, the Company will not be entitled to a deduction for federal income tax purposes in connection with the grant or exercise

of the ISO. If the shares acquired upon exercise of the ISO are disposed of within the later of two years from the date of grant or one year from the date of exercise (a “disqualifying disposition”), the participant will generally recognize ordinary compensation income in the year of disposition in an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price. In the event of such a disqualifying disposition, subject to the possible limitations on deductibility under sections 162(m) and 280G of the Code for compensation paid to certain individuals, the Company will generally be entitled to a tax deduction equal to the amount treated as taxable compensation to the participant.

 

A participant will not be subject to tax upon the grant of a performance award or other stock-based award in the form of common stock units. Rather, upon the delivery of unrestricted shares or cash pursuant to such award, the participant will have taxable compensation equal to the fair market value of the number of shares of CBIZ common stock (or the amount of cash) the participant actually receives with respect to the award. The Company will be able to deduct the amount of taxable compensation to the participant for federal income tax purposes, but the deduction may be limited under sections 162(m) and 280G of the Code for compensation paid to certain executives designated in those Code sections.

 

Section 162(m) Limitation.  In general, section 162(m) of the Code denies a publicly held corporation a deduction for federal income tax purposes for compensation exceeding $1 million per year per person to its principal executive and financial officers and the three other officers (other than the principal executive officer and principal financial officer) whose compensation is disclosed in its proxy statement as a result of their total compensation, subject to certain exceptions. The Stock Incentive Plan is intended to satisfy an exception with respect to grants of options and stock appreciation rights to such covered employees. In addition, the Stock Incentive Plan is designed to permit granting of restricted common stock, common stock units and cash bonuses as Qualified Performance-Based Awards intended to qualify under the “performance-based compensation” exception to section 162(m) of the Code. We have attempted to structure the Stock Incentive Plan in such a manner that the remuneration attributable to stock options and stock appreciation rights and to Qualified Performance-Based Awards will not be subject to the $1 million limitation. However, we have not requested a ruling from the Internal Revenue Service or an opinion of counsel regarding this issue.

 

Section 280G of the Code.  Under certain circumstances, the granting or enhancement of awards, the accelerated vesting or exercise of stock options or the accelerated lapse of restrictions with respect to other awards in connection with a Change in Control (as defined in the Stock Incentive Plan) might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of section 280G of the Code. To the extent it is so considered, the participant may be subject to a 20% excise tax and the Company may be denied a federal income tax deduction.

 

New Plan Benefits

 

Because future awards under the Stock Incentive Plan will be granted at the discretion of the Compensation Committee of the Company’s Board of Directors, the type, number, recipients, and other terms of such awards cannot be determined at this time.

 

Vote Required

 

The approval of this proposal requires the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions will be counted and will have the same effect as a vote against this proposal. Broker non-votes will have no effect on the vote for this proposal.

 

The Board of Directors unanimously recommends a vote FOR the adoption of the amendment and restatement of the CBIZ, Inc. 2002 Amended and Restated Stock Incentive Plan.

 

The Company is asking its stockholders to approve the amendment and restatement of the CBIZ, Inc. 2007 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan was originally approved by CBIZ’s stockholders at the May 17, 2007 Annual Meeting, with a total of 1,000,000 shares of CBIZ common stock authorized for issuance thereunder. The amendment and restatement of the Stock Purchase Plan will increase the number of shares of common stock authorized for issuance under the Stock Purchase Plan by 1,000,000 shares, to a total of 2,000,000 shares. The amendment and restatement of the Stock Purchase Plan will also extend the term of the Stock Purchase Plan from its original expiration date of June 30, 2012, to June 30, 2017.

 

In addition, the amendment and restatement of the Stock Purchase Plan will add provisions to limit the maximum number of shares that any participant may purchase during any purchase period, to permit the discretionary exclusion of certain highly compensated employees from any participation during one or more purchase periods, and to permit purchase periods to be successive or overlapping and clarify that purchase periods need not have identical terms.

 

Finally, the amendment and restatement of the Stock Purchase Plan will add specific guidance regarding the administration of the Stock Purchase Plan in certain situations, and will clarify the general terms of the Stock Purchase Plan.

 

Summary of the Stock Purchase Plan as Amended and Restated

 

The following is a summary of the principal features of the Stock Purchase Plan as amended and restated. This summary is qualified in all respects by reference to the full text of the Stock Purchase Plan (Amended and Restated as of May 12, 2011), attached as Appendix B to this proxy statement.

 

General Purpose

 

The general purpose of the Stock Purchase Plan is to provide employees of the Company and its participating subsidiaries with an opportunity to purchase shares of CBIZ common stock through accumulated payroll deductions.

 

Administration

 

The Stock Purchase Plan provides that it will be administered by the Board of Directors or by a committee appointed by the Board of Directors or the committee’s delegates. The Board of Directors has delegated authority to the Compensation Committee regarding the administration and interpretation of the Stock Purchase Plan. All costs and expenses incurred in the Stock Purchase Plan’s administration are paid by the Company.

 

Eligibility

 

The Stock Purchase Plan is open to any individual meeting the definition of “Employee” under the Plan on the day before the first day of a “purchase period” (defined below) by the Company or one of its participating subsidiaries. However, any employee who owns shares, including options to purchase shares, representing 5% or more of the total combined voting power or value of all classes of shares of the Company or any of its subsidiaries, or who, as a result of being granted the right to purchase shares under the Stock Purchase Plan with respect to such purchase period would own shares and options to purchase shares representing 5% or more of the total combined voting power or value of all classes of shares of the Company or any of its subsidiaries, is not permitted to participate in the Stock Purchase Plan. The administrator of the Stock Purchase Plan also may exclude from any purchase period certain “highly compensated employees” who have compensation above a certain level or who are officers subject to the disclosure requirements of section 16(a) of the Exchange Act.

 

Available Shares

 

Subject to adjustments for stock splits, stock dividends, or other changes in corporate capitalization, the amendment and restatement of the Stock Purchase Plan will provide that the maximum number of shares of common stock that may be purchased by employees under the Stock Incentive Plan is 2,000,000. The Company will not receive any fees, commissions or other payments pursuant to the sale of common stock to the Stock Purchase

Plan. No employee may purchase shares of common stock during any calendar year that have an aggregate fair market value in excess of $25,000. The amendment and restatement of the Stock Purchase Plan provides that no more than 5,000 shares of CBIZ common stock may be purchased by any one employee during any purchase period.

 

The market value of the Company’s common stock as reported on the New York Stock Exchange as of March 1, 2011, was $7.01 per share.

 

Purchase Periods

 

Shares of common stock are offered under the Stock Purchase Plan through a series of consecutive purchase periods, each with a maximum duration of twenty-seven months. Currently purchase periods begin on the sixteenth day of each month and end on the fifteenth day of the subsequent month. Purchases occur on the last day of each purchase period unless delayed by the close of the stock market. The purchase periods will continue until June 30, 2017, or there are no longer shares of common stock available for issuance under the Stock Purchase Plan. The Board of Directors may terminate or amend the Stock Purchase Plan in any respect at any time, except that no amendment will be made without stockholder approval if such approval is required by law, regulation or stock exchange rules.

 

Participation

 

Each eligible employee is offered the opportunity to purchase CBIZ’s common shares at a discount under the Stock Purchase Plan. Amounts accumulated for each participant, through participant elected payroll deductions of at least $25 per purchase period, will be credited toward the purchase of our common shares on the last trading day of each offering period.

 

Purchase Price

 

The Stock Purchase Plan administrator determines the price at which employees may purchase the common stock for each purchase period, which will not be less than 85% of the fair market value of our common stock on the last day of each purchase period.

 

Value

 

The value of the option to purchase shares of common stock under the Stock Purchase Plan depends on a number of factors, including the fair market value of CBIZ’s common stock on future dates. Consequently, it is not possible to determine the benefits that employees might receive by participating in the Stock Purchase Plan.

 

Holding Period for Purchased Shares of Common Stock

 

Once shares of common stock are purchased at the end of a purchase period, the Stock Purchase Plan requires that the participants hold the shares for a period of twelve months (or a shorter or longer period as may be established by the administrator). The shares of common stock may not be sold or otherwise disposed of during such restriction period unless waived by the Company. However, in the event of a change in control (as defined in the Stock Purchase Plan) or a tender offer initiated by the Company, the twelve-month holding period will no longer apply and the participant may sell the shares of common stock at any time.

 

Allocation of Shares and Refunds of Payroll Deductions

 

If the total number of shares of common stock to be issued at the end of a particular purchase period is greater than the maximum number of shares that may be issued under the Stock Purchase Plan, the administrator will allocate the available shares pro rata to participants in as near a uniform manner as practical, and promptly refund to participants any remaining accumulated payroll deductions not applied to the purchase of shares of common stock.

 

General Federal Tax Consequences

 

The following is a brief description of the federal income tax consequences of participation in the Stock Purchase Plan. State and local taxes, which may vary from locality to locality, are not discussed. The following discussion is for general information only and is based on U.S. federal income tax laws now in effect. This summary does not address specific state, local or foreign tax consequences.

A participant in the Stock Purchase Plan will not have recognizable taxable income either at the time that his or her participation begins or at the time that the participant purchases shares of common stock.

 

Generally, a participant in the Stock Purchase Plan will recognize income in the year in which he or she disposes of the shares of common stock or in which he or she dies. The participant’s federal tax liability will depend on whether the participant makes a qualifying or disqualifying disposition of the purchased shares of common stock. A qualifying disposition generally will occur if the sale or other disposition of those shares of common stock occurs after the participant has held the shares of common stock for more than two years after the first day of the purchase period and more than one year after the last day of the purchase period.

 

A participant who makes a qualifying disposition will recognize ordinary compensation income in the year of the qualifying disposition equal to the lesser of (1) the amount by which the fair market value of the shares on the first day of the purchase period in which the shares were purchased exceeds the purchase price paid for such shares (calculated as if the shares were purchased on the first day of the purchase period), and (2) the amount by which the amount realized for such shares on the date of the qualifying disposition exceeds the purchase price actually paid for such shares. Any additional gain recognized upon a qualifying disposition will be a long-term capital gain. If the fair market value of the shares of common stock being sold or otherwise transferred on the date of the qualifying disposition is less than the aggregate purchase price paid for such shares of common stock, there will be no ordinary income, and any loss recognized will be a long term capital loss. The Company will not be entitled to a deduction if the purchased shares of common stock are the subject of a qualifying disposition.

 

A participant who makes a disqualifying disposition will recognize ordinary income in the year of the disqualifying disposition equal to the amount by which the fair market value of the shares on the last day of the purchase period exceeds the purchase price. Any additional gain or loss recognized upon a disqualifying disposition will be capital gain, which will be long-term if the shares of common stock are held for more than twelve months. The Company may be entitled to a deduction if the purchased shares of common stock are the subject of a disqualifying disposition.

 

New Plan Benefits

 

Participation in the Stock Purchase Plan is entirely within the discretion of the eligible employees of the Company. As a result, the Company cannot forecast the extent of future participation. Therefore, the Company has omitted tabular disclosure of the benefits or amounts allocated under the Stock Purchase Plan.

 

Vote Required

 

The approval of this proposal requires the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions will be counted and will have the same effect as a vote against this proposal. Broker non-votes will have no effect on the vote for this proposal.

 

The Board of Directors unanimously recommends a vote FOR the adoption of the amendment and restatement of the CBIZ, Inc. 2007 Employee Stock Purchase Plan.

 

General

 

On several occasions during 2010, the Board reviewed potential means available for enhancing the Company’s financing and acquisition opportunities. As part of those discussions, the Board considered the possibility of expanding the Company’s range of opportunities through the authorization of preferred stock. However, the Board was advised by counsel that the Company’s current Certificate of Incorporation does not permit the issuance of preferred stock. On February 10, 2011, the Board of Directors, believing it to be in the best interests of the Company, adopted a resolution setting forth and declaring advisable an amendment to the Company’s Amended and Restated Certificate of Incorporation to authorize a class of preferred stock with a par value of $1.00, pursuant to which the Board of Directors would have the authority to issue up to 5,000,000 shares of preferred stock in separate series with such number of shares and such powers, designations, preferences and rights, and qualifications, limitations or restrictions thereof, as fixed and determined by the Board of Directors, and to make conforming changes thereto (the “Amendment”).

 

CBIZ’s Amended and Restated Certificate of Incorporation currently authorizes the issuance of up to 250,000,000 shares of common stock with a par value of $0.01 per share and no preferred stock is currently authorized. If CBIZ’s Amended and Restated Certificate of Incorporation is amended to authorize the issuance of preferred stock, CBIZ’s total authorized capital stock would increase to 255,000,000, and the Board of Directors would have discretion to establish series of preferred stock with such powers, designations, preferences and rights, and qualifications, limitations or restrictions thereof as fixed and determined by the Board of Directors, and the holders of CBIZ’s common stock would have no right to approve the terms of any such series unless a specific issuance requires stockholder approval under applicable law or under the listing requirements of any stock exchange on which CBIZ’s shares are then listed. If this proposal is approved by CBIZ’s stockholders, the Board of Directors does not intend to solicit further stockholder approval prior to the issuance of any shares of preferred stock, except as may be required by applicable law or rules.

 

Upon the effectiveness of the Amendment, in accordance with the Delaware General Corporation Law, the Board of Directors will have the express authority to execute and file a certificate of designation setting forth the series and the number of the shares of each series of preferred stock and the voting powers, designations, preferences and rights, and qualifications, limitations or restrictions thereof of each series of CBIZ’s preferred stock.

 

The proposed Amendment to CBIZ’s Amended and Restated Certificate of Incorporation is set forth in Appendix C to this proxy statement.

 

Reasons for the Authorization of a Class of Preferred Stock

 

The primary objective of the Board of Directors in establishing a class of preferred stock is to provide maximum flexibility with respect to future financing transactions. Preferred stock is commonly authorized by publicly traded companies and is frequently used as a preferred means of raising capital and making acquisitions. In particular, senior classes of securities may be issued to raise capital, with the terms of those securities being highly negotiated and tailored to meet the needs of both investors and the issuing companies. Such senior securities typically include liquidation and dividend preferences, voting rights, conversion privileges and other rights not found in common stock. CBIZ presently lacks the authority to issue preferred stock and, accordingly, is limited to issuing common stock or debt securities to raise capital. By authorizing a class of preferred stock, CBIZ would increase its flexibility in structuring transactions. In addition, CBIZ may issue preferred stock in connection with such activities as dividends payable in stock of the company, acquisitions of other companies or businesses, and otherwise. A secondary benefit in having preferred stock available for issuance is to give the Board of Directors flexibility in its response to an unsolicited takeover bid by the use of a “rights plan” or similar device, although the Board of Directors does not have a current plan to adopt a rights plan.

 

CBIZ has no plans, proposals or arrangements, written or otherwise, at this time to issue any of the shares of preferred stock if this proposal is approved.

Effects of the Authorization of a Class of Preferred Stock

 

If CBIZ issues preferred stock, such preferred stock will include certain powers, designations, preferences and rights, and qualifications, limitations or restrictions thereof, any of which may dilute the voting power and economic interest of the holders of its common stock. For example, in the absence of a proportionate increase in CBIZ’s earnings and book value, an increase in the aggregate number of outstanding shares caused by the issuance of CBIZ’s preferred stock would dilute the earnings per share and book value per share of all outstanding shares of CBIZ’s common stock. In addition, in a liquidation, the holders of CBIZ’s preferred stock may be entitled to receive a certain amount per share of its preferred stock before the holders of CBIZ’s common stock receive any distribution. In addition, the holders of CBIZ’s preferred stock may be entitled to vote and such votes may dilute the voting rights of the holders of its common stock when CBIZ seeks to take corporate action. A series of preferred stock also may be convertible into shares of CBIZ’s common stock. Furthermore, CBIZ’s preferred stock could be issued with certain preferences over the holders of its common stock with respect to dividends or the power to block the declaration of a dividend.

 

CBIZ could also issue shares of preferred stock that may, depending on the terms of such series, make it more difficult or discourage an attempt to obtain control of CBIZ by means of a merger, tender offer, proxy contest or other means. Such shares could also be privately placed with purchasers favorable to the Board of Directors in opposing such actions. In addition, the Board of Directors could authorize holders of a series of CBIZ’s preferred stock to vote either separately as a class or with the holders of its common stock, on the election of all or some of the members of the Board of Directors, and on any merger, sale or exchange of assets by CBIZ or any other extraordinary corporate transaction. The issuance of new shares also could be used to dilute the stock ownership of a person or entity seeking to obtain control of CBIZ should the Board of Directors consider the action of such entity or person not to be in the best interest of CBIZ’s stockholders and could be used to entrench current management or deter an attempt to replace the Board of Directors.

 

Effective Date of the Amendment

 

If the Amendment is approved by CBIZ’s stockholders, CBIZ is required to file a Certificate of Amendment with the Delaware Secretary of State in order for it to become effective. If CBIZ obtains stockholder approval of this proposal, CBIZ intends to file a Certificate of Amendment as soon as practicable.

 

The Board of Directors reserves the right, notwithstanding stockholder approval of the Amendment and without further action by CBIZ’s stockholders, not to proceed with the Amendment at any time before the effectiveness of the Certificate of Amendment.

 

Vote Required

 

The approval of this proposal requires the affirmative vote of a majority of the outstanding shares of common stock entitled to vote on the proposal. Abstentions and broker non-votes will be counted and will have the same effect as a vote against this proposal.

 

The Board of Directors recommends a vote “FOR” the approval of the Company’s amendment to its Amended and Restated Certificate of Incorporation to authorize up to 5,000,000 shares of preferred stock and to make conforming changes thereto.

 

The following table shows the beneficial ownership of CBIZ common stock as of March 25, 2011, by (1) each person known by CBIZ to own beneficially 5% or more of CBIZ’s common stock, (2) each director, (3) each executive officer named in the Summary Compensation Table (see “Executive Compensation”) and (4) all directors and executive officers of CBIZ as a group. The Company does not require directors or executive officers to hold a minimum number of shares in order to qualify for service as a director or executive officer.

 

 

 

 

 

The Board of Directors conducted four regular meetings and nine special meeting during fiscal 2010. In addition, there were two Actions in Writing in Lieu of a Meeting of the Board of Directors, dated March 30, and October 26, 2010. Each director attended in person at least 75% of the aggregate of all meetings of the Board and Committees of the Board on which he or she served in accordance with the Company’s expectations. The Company does not have a formal policy regarding directors’ attendance at annual stockholders meetings. Nevertheless, the Company strongly encourages and prefers that directors attend regular and special board meetings as well as the annual meeting of stockholders in person, although attendance by teleconference is considered adequate. The Company recognizes that attendance of the Board members at all meetings may not be possible, and excuses absences for good cause. All directors attended the Company’s 2010 Annual Meeting.

 

Independent Directors Meetings

 

In addition to the meetings of the committees of the Board of Directors summarized below, our Independent Directors met four times in executive session during fiscal 2010. The Company’s Lead Director and Vice Chairman, Mr. Burdick, chaired each executive session.

Communication with the Board of Directors

 

Security holders may communicate with the members of the Board by forwarding written communications to the CBIZ Corporate Secretary at the Company’s headquarters in Cleveland. The Corporate Secretary will present all communications, as received and without screening, to the Board at its next regularly scheduled meeting. This same method may be used by interested parties to contact Mr. Burdick, the Company’s Lead Director and Vice Chairman, in his capacity as presiding director over the meetings of the independent directors, as well as to contact the Non-Employee Directors.

 

Committees of the Board of Directors

 

The Board of Directors has appointed an Audit Committee, a Compensation Committee, a Nominating and Governance Committee, and an Executive Management Committee, all of which were active during 2010. The Board of Directors has determined that all members of the Audit Committee, Compensation Committee and Nominating and Governance Committee meet the definition of “Independent Director” set forth in Rule 303A of the NYSE Listed Company Manual. The following is a description of the committees of the Board of Directors:

 

The members of the Audit Committee are Directors Rochon, Slotkin and Weir (Chairman). CBIZ’s Board of Directors has determined that the Audit Committee members meet the independence standards set forth in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended. In addition, the Board has determined that all three members of the Audit Committee are “audit committee financial experts,” as that term is defined by the rules and regulations of the Securities and Exchange Commission (the “SEC”), and meet the financial sophistication requirements of the NYSE. The Audit Committee conducted four regular meetings and six special meetings during 2010. In addition, the Committee acted through two Actions in Writing in Lieu of a Meeting of the Audit Committee. The Audit Committee appoints the Company’s independent registered public accounting firm (“independent accountant” or “independent auditor”) and reviews issues raised by the independent accountants as to the scope of their audit and their audit reports, including questions and recommendations that arise relating to CBIZ’s internal accounting and auditing control procedures. The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is available on the Investor Relations page of the Company’s website, www.cbiz.com, or by writing to us at Attention: Investor Relations Department, 6050 Oak Tree Boulevard South, Suite 500, Cleveland, Ohio 44131.

 

The members of the Compensation Committee are Directors DiMartino (Chairman), Rochon, Slotkin, and Wiley. The Compensation Committee conducted three regular meeting and one special meeting during 2010. In addition, the Committee acted through two Actions in Writing in Lieu of a Meeting of the Compensation Committee. The Compensation Committee reviews and makes recommendations to the Board of Directors with respect to compensation of CBIZ’s executive officers, including salary, bonus and benefits. The Compensation Committee also administers CBIZ’s executive incentive-compensation plans and all equity-based plans. The Charter of the Compensation Committee is available on the Investor Relations page of the Company’s website, www.cbiz.com, or by writing to us at Attention: Investor Relations Department, 6050 Oak Tree Boulevard South, Suite 500, Cleveland, Ohio 44131.

 

The Compensation Committee was established to: (a) review and approve the Company’s stated compensation philosophy, strategy and structure and assist the Board in ensuring that a proper system of long-term and short-term compensation is in place to provide performance-oriented incentives to management, and that compensation plans are appropriate and competitive and properly reflect the objectives and performance of management and the Company without creating undue compensation risk to CBIZ; (b) discharge the Board’s responsibilities relating to compensation of the executive officers of the Company and its subsidiaries; (c) evaluate the Company’s Chief Executive Officer and set his or her remuneration package; (d) evaluate the other executive officers of the Company and its senior management and set their remuneration packages; (e) prepare an annual report on executive compensation for inclusion in the Company’s annual proxy statement; (f) make recommendations to the Board with respect to incentive compensation plans and equity-based plans; (g) oversee the risk assessment of the Company’s compensation arrangements; (h) advise the Board regarding stockholder advisory votes on executive compensation arrangements; (i) review and approve certain services to be performed by compensation consultants to the Company; and (j) perform such other functions as the Board may from time to time assign to the Committee. The Committee may delegate to its Chairman, any member of the Committee, any member of senior management or any external consultant of the Committee any task or duty the Committee deems necessary to assist it in

accomplishing its obligations under law and its Charter. Any final action taken to fulfill these obligations, however, is only permitted upon majority vote of the Committee members themselves. The Compensation Committee requests that the Chief Executive Officer make recommendations regarding the amount or form of executive and director compensation annually, other than his own, or more often as the CEO or the Committee deems necessary throughout each year. The Committee is free to hire any advisors or consultants, including compensation consultants, as it may deem necessary or advisable at any time. The Committee and Management jointly consulted with Hewitt Associates LLC to perform various director and executive compensation studies in 2002, 2004, 2006, 2007, 2008, 2009, and 2010.

 

Compensation Committee Interlocks and Insider Participation.  None of the members of the Compensation Committee during 2010 and continuing through 2011 is or has been an officer or employee of CBIZ. There are no compensation committee interlock relationships with respect to CBIZ.

 

The members of the Nominating and Governance Committee are Directors Burdick (Chairman), DiMartino, Rochon, Slotkin, Weir and Wiley. No candidates were recommended by beneficial owners of more than 5% of the Company’s voting common stock within the last year. The Committee conducted one regular meeting in 2010. In addition, the Committee acted through one Action in Writing in Lieu of a Meeting of the Nominating and Governance Committee. The Committee was formed to propose and recommend candidates for the Board, review the continued suitability of directors following changes in their employment situations, review Board committee responsibilities and composition, review the effectiveness of the Board and of Company management, and monitor the Company’s corporate governance policies and practices. The Committee’s Charter and its corporate governance guidelines are available on the Investor Relations page of the Company’s website, www.cbiz.com, or by writing to us at Attention: Investor Relations Department, 6050 Oak Tree Boulevard South, Suite 500, Cleveland, Ohio 44131.

 

The Nominating and Governance Committee’s process for identifying and evaluating candidates to be nominated as directors consists of reviewing with the Board the desired experience, mix of skills and other qualities to assure appropriate Board composition; conducting candidate searches and inquiries; recommending to the Board, qualified candidates for the Board who bring the background, knowledge, experience, skill sets, and expertise that would strengthen the Board; and selecting appropriate candidates for nomination. The Nominating and Governance Committee and the Board have determined that a director should have the following characteristics: (1) the ability to comprehend the strategic goals of the Company and to help guide the Company towards the accomplishment of those goals; (2) a history of conducting his/her personal and professional affairs with the utmost integrity and observing the highest standards of values, character and ethics; (3) the availability for in-person or telephonic participation in Board or Committee meetings, as well as the Annual Meeting of Stockholders; (4) the willingness to demand that the Company’s officers and employees insist upon honest and ethical conduct throughout the Company; (5) knowledge of, and experience with regard to at least some of: loans and securities, including any lending and financing activities related thereto, public company regulations imposed by the SEC and the NYSE, amongst others, portfolio and risk management, the major geographic locations within which the Company operates, sound business practices, accounting and financial reporting, and one or more of the principal lines of business in which the Company is engaged; and, (6) the ability to satisfy criteria for independence established by the Securities and Exchange Commission and the NYSE, as they may be amended from time to time.

 

In its recommendations of candidates for appointment, election and reelection to the Board, the Committee specifically follows the requirements of its Charter to “recommend to the Board qualified candidates for the Board who bring the background, knowledge, experience, skill sets and expertise that would strengthen and increase the diversity of the Board.” The Committee believes that the current Board members, as well as the candidates considered and nominated for election at the 2011 Annual Meeting, represent a group that includes differences of background, viewpoint, professional experience, education, skills and other qualities and attributes that contribute to heterogeneity.

 

The Nominating and Governance Committee will consider any candidate recommended by a stockholder, provided that the stockholder mails a recommendation to the Corporate Secretary at the Company’s headquarters, prior to the deadline for stockholder proposals, that contains the following: (1) the recommending stockholder’s name and contact information; (2) the candidate’s name and contact information; (3) a brief description of the candidate’s background and qualifications; (4) the reasons why the recommending stockholder believes the

candidate would be well suited for the Board; (5) a statement by the candidate that the candidate is willing and able to serve on the Board; (6) a statement by the recommending stockholder that the candidate meets the criteria established by the Board; and (7) a brief description of the recommending stockholder’s ownership of common stock of the Company and the term during which such shares have been held. In making its discretionary determination whether to nominate a candidate who has been recommended by a stockholder, the Nominating and Governance Committee will consider, among other things, (a) the appropriateness of adding another director to the Board, or of replacing a currently sitting director, (b) the candidate’s background and qualifications, and (c) other facts and circumstances identified in the Committee’s Charter.

 

The members of the Executive Management Committee are Messrs. Burdick, Gerard, and Grisko. The Executive Management Committee approved four Unanimous Written Consents in Lieu of Meeting of the Executive Management Committee of CBIZ, Inc. during 2010. Subject to applicable law, the Executive Management Committee is empowered with the same authority as the full Board of Directors to take any action including the authorization of any transaction in the amount of $10 million or less. With respect to acquisitions or divestitures, the Board of Directors has delegated to the Committee the power to cause the execution and delivery of documents in the name and on behalf of the Company, to cause the issuance of shares of Common Stock of the Company, and to take all actions necessary for the purpose of effecting acquisitions or divestments, so long as all members of the Committee approve the transaction and the total consideration to be paid to or by the Company in connection with the acquisition or divestiture does not exceed $10 million. The Committee does not have the power or authority of the Board of Directors to approve or adopt or recommend to the stockholders any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval; adopt, amend or repeal any Bylaw of the Company; fill or approve Board or Board committee vacancies; declare or authorize the payment of dividends; fix compensation for service on the Board or any committee thereof; or elect Company executive officers.

 

CBIZ has a Code of Professional Conduct and Ethics Guide that applies to every director, officer, and employee of the Company. The Code of Professional Conduct and Ethics Guide is available on the Investor Relations page of the Company’s website, www.cbiz.com, or by writing to us at Attention: Investor Relations Department, 6050 Oak Tree Boulevard South, Suite 500, Cleveland, Ohio 44131.

 

Risk is an integral part of Board and Committee deliberations throughout the year. Management, the full Board, and each Board Committee all review risk oversight and management issues pertaining to their respective areas of responsibility as established by the Company’s organizational documents and the charters of its committees. The Company has historically reviewed key risks with the Board of Directors and implemented a more formal enterprise risk management review program in 2010 as a Company-wide initiative to enhance our existing processes involving an integrated effort to identify, evaluate and manage risks that may affect our ability to execute our corporate strategy and fulfill our business objectives. The activities of the enterprise risk management program entail the identification, assessment, and prioritization of a broad range of risks — including, for example, strategic, operational, financial, legal, regulatory and reputational risks — and the review of plans to mitigate their possible effects. The Board and each of its committees were actively engaged in this program throughout 2010 and thereafter.

 

The NYSE Listed Company Manual provides that companies listed on the NYSE must have a majority of independent directors. A director is considered independent under NYSE rules if the board of directors determines that the director does not have any direct or indirect material relationship with CBIZ and if such director satisfies the other criteria specified by the NYSE Listed Company Manual. The Nominating and Governance Committee and the Board of Directors have determined that each of Rick L. Burdick, Joseph S. DiMartino, Richard C. Rochon, Todd J. Slotkin, Donald V. Weir and Benaree Pratt Wiley are independent directors.

In connection with these independence determinations, the Nominating and Governance Committee and the Board of Directors considered all of the relationships between each director and CBIZ, and in particular the following relationships:

 

 

The positions of Chairman of the Board of Directors and Chief Executive Officer are both held by Mr. Gerard. The Board believes the combination of these roles provides the Board with a more comprehensive understanding of ongoing operations and current issues. This structure also facilitates the identification of emerging issues, communication of essential information to the Board and preparation of agendas for the Board. Since our Chairman is an executive officer of the Company, the Board believes it is appropriate to have a lead independent director who, among other things, chairs all executive sessions of our independent directors and facilitates communication between the Board of Directors and the Company’s executive officers. Mr. Rick L. Burdick, our Lead Director, currently serves in this role. It is the Board’s belief that the current composition, committee system and the position of an independent Lead Director effectively maintains Board independence and independent oversight of management and Company performance. As in past years, in 2010 each member of the board and each committee member participated in performance self-assessments regarding their respective roles, their performance in each role, the activities of each body, and the performance and structure of leadership at the Board and management levels. The results of these assessments were reviewed by the full Board, each Committee, and by the independent directors as a group.

 

The Board of Directors maintains an Audit Committee comprised of three of the Company’s independent directors. The Board of Directors and the Audit Committee believe that the Audit Committee’s current member composition satisfies the current rules of the NYSE and the SEC that govern audit committee composition, including the requirement that audit committee members all be “independent directors” as that term is defined by Rule 303A of the NYSE Listed Company Manual and by all other applicable laws or rules.

 

The Audit Committee closely monitors developments in corporate governance, including those arising from the adoption of the Sarbanes-Oxley Act of 2002 (the “Act”) and rules related to the Act. The Audit Committee’s Charter and the Company’s Code of Professional Conduct and Ethics Guide reflect those portions of the Act and attendant rules promulgated by the SEC and the NYSE. The Audit Committee anticipates that changes to its Charter may be necessary from time to time if the SEC and the NYSE adopt additional rules bearing on the duties and

activities of the Committee. The Audit Committee Charter and Code of Professional Conduct and Ethics Guide have been posted on the Investor Relations portion of the Company’s website, at www.cbiz.com.

 

The membership of the Audit Committee did not change in 2010. Each of the Audit Committee members have been identified as audit committee financial experts, as defined by the rules and regulations of the SEC, in light of their training, experience, and expertise.

 

The Audit Committee oversees the Company’s financial process on behalf of the Board of Directors. Management has the primary responsibility for the consolidated financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements. Quarterly results similarly were reviewed and discussed.

 

The Audit Committee has relied, without independent verification, on management’s representation that the consolidated financial statements have been prepared with integrity and objectivity and in conformity with generally accepted U.S. accounting principles. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has in fact maintained appropriate accounting and financial reporting principles or policies. Furthermore, the Audit Committee’s considerations and discussions with management and the independent auditors do not ensure that the Company’s financial statements are presented in accordance with generally accepted U.S. accounting principles, that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or the standards of the Public Company Accounting Oversight Board (the “PCAOB”) or that the Company’s independent accountants are in fact independent.

 

The Audit Committee received, reviewed, and adopted management’s report assessing the Company’s internal control over financial reporting. The Committee continued to be very active in monitoring management’s efforts to document and assess the Company’s internal controls.

 

The Audit Committee discussed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with generally accepted U.S. accounting principles, the effectiveness of internal control over financial reporting, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards, including Statement of Auditing Standards No. 61, as amended, as adopted by the PCAOB (AICPA, Professional Standards, Vol. 1, AU section 380). In addition, the Audit Committee has discussed with the independent accountants the auditors’ independence from management and the Company including the matters in the written disclosures and the letter required by applicable requirements of PCAOB Rule 3526 regarding the independent accountants’ communications with the audit committee concerning independence.

 

The Audit Committee discussed with both the Company’s internal auditor and independent auditors the overall scope, plans and results of their audit activities. The Audit Committee met regularly throughout 2010 with the independent auditors, and the head of the Company’s Internal Audit staff, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

 

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the SEC.

 

Audit Committee of the Board of Directors

 

Donald V. Weir, Chairman

Richard C. Rochon

Todd J. Slotkin

 

Auditor Fees

 

The Company incurred the following fees for services performed by KPMG LLP in fiscal 2010 and 2009:

 

Audit Fees:  Fees for the fiscal year 2010 audit and the review of Forms 10-Q billed through December 31, 2010 were $958,420. Fees for the fiscal year 2009 audit and the review of Forms 10-Q billed through December 31, 2009 were $935,330. Audit fees include fees related to the integrated audit of consolidated financial statements as well as SAS 100 quarterly review fees, and comfort letter fees.

 

Audit-Related Fees:  Audit-related fees of $24,000 were billed for the year ended December 31, 2010. For 2010, audit-related fees were paid for services rendered in connection with the audit of the financial statements of the CBIZ Employee Retirement Savings Plan. Audit-related fees of $25,000 were billed for the year ended December 31, 2009. For 2009, audit-related fees were paid in connection with the audit of the financial statements of the CBIZ Employee Retirement Savings Plan.

 

Tax Fees:  There were no tax fees billed by KPMG LLP for the years ended December 31, 2010 or December 31, 2009.

 

All Other Fees:  There were no other fees billed for professional services by our independent auditors during fiscal years 2010 and 2009 that are not included in one of the above categories.

 

Pursuant to its Charter and the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee is responsible for pre-approving all services performed by the Company’s independent auditors, and certain services may not, under any circumstances, be performed for the Company by its independent auditors. KPMG LLP, the Company’s independent auditor, may not be engaged to perform for the Company, and is prohibited from performing for the Company, any prohibited service enumerated in the Act, or in any other law or regulation. In addition, the independent auditor is not permitted to perform services for the Company, whether associated with audit or non-audit functions, unless the services to be provided have been approved prior to their performance by this Committee, except as may otherwise be provided by law or regulation.

 

However, certain non-prohibited services may be pre-approved by the Audit Committee Chairman personally in advance of full Audit Committee consideration and approval, provided, that each engagement total no more than $20,000 in fees prior to the next regularly scheduled meeting of the Audit Committee, at which time the entire Audit Committee is required to consider and either approve or reject the engagement, provided the engagement otherwise does not appear reasonably likely to compromise KPMG LLP’s independence. The Audit Committee pre-approved all of the services described above.

 

The Compensation Committee of the Board (the “Committee”) is responsible for establishing, implementing and monitoring the application of its compensation philosophy to the senior management and directors of the Company. At CBIZ, the Senior Management Group (“SMG”) consists of the Company’s executive officers, Senior Vice Presidents, and certain other corporate officers. The Committee’s goal is to ensure that the total compensation paid to the SMG is fair, reasonable and competitive. Generally, the types of compensation and benefits provided to members of this group are similar to those provided to executive officers at other comparable companies. Throughout this proxy statement, the individuals who served as the Company’s Chief Executive Officer, President, and Chief Financial Officer during fiscal 2010, as well as the other individuals included in the Summary Compensation Table based on their compensation, are referred to as the “named executive officers”, all of whom are members of the SMG.

 

The Company believes the most effective executive compensation program rewards executives’ contribution in achieving and exceeding specific annual, long-term and strategic goals of the Company, and aligns executives’ interests with those of the stockholders. Moreover, the Company believes a successful compensation structure will help the Company maintain its ability to attract and retain superior employees in key positions and ensure that compensation provided to those employees remains competitive relative to the compensation paid to similarly situated executives at companies of comparable size and complexity. To that end, the Committee believes executive compensation packages provided by the Company to its executives, including the named executive officers should include both cash and equity compensation that reward performance that meets or exceeds established goals.

 

CBIZ also believes that total compensation should also reflect an individual’s performance and potential. Performance will generally be measured in accordance with an individual’s goals and objectives as well as their contribution to CBIZ’s corporate goals and initiatives. Such factors as teamwork, new service or product innovation, initiative, mentoring and personal development will strongly influence a non-quantitative component of compensation awards at CBIZ.

 

Ultimately, compensation paid to members of the SMG, including that paid to the named executive officers, will be determined based on the discretionary judgment of the Compensation Committee with input from the CEO, the President, and compensation consultants.

 

The Compensation Committee makes all compensation decisions for the SMG, including the named executive officers, and reviews recommendations and makes determinations regarding equity awards to all CBIZ employees. Decisions regarding the non-equity compensation of employees other than the SMG are made by the Chief Executive Officer and the President. The Chief Executive Officer and the President annually review the performance of each member of the SMG. The conclusions reached and recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are presented to the Committee. The Committee can exercise its discretion to modify any recommended adjustments or awards to executives.

 

In order to assist the Compensation Committee in applying its compensation philosophy and objectives, the Company, at the request of the Compensation Committee, engaged Hewitt Associates, an outside human resources consulting firm, to periodically conduct reviews of its compensation program for the SMG. The Company engaged Hewitt Associates to prepare reports regarding these matters in 2002, 2004, 2006 and 2008, and consults with the firm on an as-needed basis each year. In 2007 Hewitt Associates was asked by Management to assist the Committee in determining whether or not the triggering mechanism (incentive awards as a function of the range of earnings per share) in the executive incentive compensation plans for the SMG should be modified or updated. Following review of the report and discussion with management, the Committee determined that, commencing in 2008, compensation

under such plans would be triggered by a combination of earnings per share related to continuing operations and pre-tax margin improvement results.

 

In October 2010, Hewitt Associates again analyzed target compensation components and levels for the SMG, including the named executive officers. This most recent Hewitt Associates analysis compares each element of total compensation for the SMG against two groups, with some relevant compensation data common to both groups. The first is a custom peer group of 21 publicly traded, privately-held, and non-profit professional services, insurance, information technology, medical billing, and other companies reflecting some aspect of CBIZ’s product and service offerings (collectively, the “Compensation Peer Group”). The Compensation Peer Group is periodically reviewed and updated by Hewitt Associates as part of its studies, and the companies used for comparison in the 2010 Compensation Peer Group are somewhat different from the companies reflected in the Compensation Peer Group used in the 2008 Hewitt Associates study. Because of differences in the size and business focus among the companies comprising the Compensation Peer Group, regression analysis is used to adjust the compensation data for differences in revenues. This adjusted value estimates the market value of compensation and is used as the basis of comparison of compensation between CBIZ and the companies in the Compensation Peer Group. In order to reflect compensation as of January, 2011, the Compensation Peer Group data was aged where appropriate using a 2.9% annual rate based on projected salary increases from Hewitt’s Salary Increase Survey. The Compensation Peer Group from the 2010 study consists of the following companies:

 

 

The second comparison group consists of 25 companies, some of which are shared with the first group, included in the “Company Peer Group”, including four of the six companies reported in the 2010 Form 10-K report, for the purpose of comparing five year cumulative total returns. The companies included in this second group are:

 

 

Hewitt Associates’ database and statistical methods are helpful to the Compensation Committee because they create a broad basis on which to establish the 50th percentile market value compensation targets for the various members of the SMG, including the named executive officers. Because CBIZ is composed of units in widely different business lines, which are not mirrored in the aggregate by any other precisely comparable individual companies, the regression analysis offered by Hewitt Associates is particularly useful because it creates a possible basis for compensation comparison for our officers from a statistical amalgamation of many companies that otherwise would individually reflect only one facet of our business or which are either too small or too large to serve as fair one-to-one comparators. Taken together, their data provides CBIZ with a benchmark not available from each Compensation Peer Group member company individually.

 

The Committee generally targets aggregate compensation for the collective SMG at the 50th percentile of total compensation paid to similarly situated executives of the companies comprising the Compensation Peer Group and the Company Peer Group. Variations to this objective in general, and in evaluating compensation targets for individual members of the SMG, may occur as dictated by the experience level of the individual, his or her relative

importance or unique function within the organization, special meritorious conduct during the year or over a longer period, and market factors. Adjustments may also be made on the basis of ancillary compensation data that the Company has obtained from publicly available competitive intelligence, CBIZ acquisition efforts, and other sources of information pertaining to compensation for comparable positions.

 

A significant percentage of total compensation is allocated to incentives as a result of the Company’s philosophy to maintain a variable compensation model based on both Company and individual performance. There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation, other than consistency with the 50th percentile target for the aggregate of the various components of total compensation. The Committee reviews information provided by Hewitt Associates, as well as the other sources of information mentioned above, to determine the appropriate level and mix of incentive compensation. Income from such incentive compensation is realized as a result of the performance of the Company or the individual, depending on the type of award, compared to established goals.

 

Historically, and in fiscal 2010, the Committee granted a majority of total compensation to CBIZ executive officers in the form of cash, cash-incentive, and equity compensation. The Committee determined that the total compensation programs for most members of the SMG, including the named executive officers, were very close to the 50th percentile targets of the Compensation Peer Group and were consistent with the median targets within the Company Peer Group. The compensation of certain named executive officers exceeded the 50th percentile targets of the Compensation Peer Group, but was comparable to the 50th percentile targets based upon the compensation data of the Company Peer Group. In addition, the Committee believes that to the extent compensation was paid in excess of median Compensation Peer Group levels, such payments were appropriate because they are comparable to the median targets derived from the Company Peer Group, and because they serve as a retention mechanism and as recognition of the continued leadership contributions of the individuals concerned. The Committee and management believe that this approach is necessary in order to stay competitive and to retain key talent needed to ensure the long-term success of the Company.

 

For the fiscal year ended December 31, 2010, the principal components of compensation for named executive officers were:

 

 

Base Salary

 

The Company provides the named executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. As in past years, the Company continued to compare the compensation of the members of the SMG to the Compensation Peer Group and the Company Peer Group, and to target compensation at the 50th percentile, with salaries changing if called for by the Company’s ancillary compensation data.

 

During its review of base salaries for each member of the SMG, the Committee primarily considers:

 

 

Promotions or changes in job responsibility may also result in modifications to an executive’s salary level. Merit-based salary increases for the named executive officers (other than the Chief Executive Officer and the

President) are based on the evaluation and recommendation of the Chief Executive Officer and the President, and ultimately upon the Committee’s own assessment of an individual executive’s performance.

 

Performance-Based Incentive Compensation

 

The 2002 CBIZ, Inc. Stock Incentive Plan (the “2002 SIP”) was approved by the Company’s stockholders at the 2002 Annual Meeting of Stockholders. The 2002 SIP was amended and restated to clarify that the Plan did not permit issued options to be repriced, replaced, or regranted through cancellation or by lowering the option exercise price of a previously granted award. The Amended and Restated 2002 SIP gives the Committee the ability to design cash and stock-based incentive compensation programs to promote high performance and achievement of corporate goals by the named executive officers and other members of the SMG and other key employees throughout the Company. The Company believes that the 2002 SIP encourages the growth of stockholder value and allows key employees to promote and benefit from the long-term growth and profitability of CBIZ.

 

The 2002 SIP gives the Committee the sole authority to grant participants shares of CBIZ Common Stock, restricted stock, share units, stock options, stock appreciation rights, performance units and/or performance bonuses. In granting these awards, the Committee may establish any conditions or restrictions it deems appropriate. The Committee has awarded performance bonuses under the 2002 SIP through the adoption of Annual Executive Incentive Plans (“EIP”). The Committee also has awarded stock options and restricted stock as long-term equity incentive compensation. Members of the SMG are granted equity awards based on their performance during the prior year and in accordance with the Company’s Long-Term Equity Incentive program.

 

Members of the SMG, including the named executive officers, receive cash incentive compensation under the 2002 SIP and attendant EIP. As discussed in detail in the section titled CBIZ Annual Executive Incentive Plan below, in 2010, this cash incentive compensation component consisted of a Financially Based Award and an Individual Performance Award dependent on the Company’s financial performance results in terms of diluted earnings-per-share from continuing operations (“continuing EPS”) and as a function of the Company’s margin improvement. The Committee believes that this methodology directs the SMG’s focus toward ensuring the correct balance of revenue growth and margin improvement. The Committee’s adjustment of the EIP award mechanism was supported by the results of the 2007 Hewitt Associates study regarding typical incentive plan design characteristics, trends in current incentive plan designs, and alternatives that might better suit the Company’s focus on matters other than revenue growth as reflected in EPS improvement.

 

The named executive officers and other members of the SMG are also eligible to receive additional merit-based cash bonuses which are issued under the authority of the 2002 SIP based upon the evaluation and recommendation of the CEO and/or the President, and ultimately upon the Committee’s own assessment of an individual executive’s performance. Such compensation is discretionary and awards are made by the Committee.

 

Prior to 2006, stock options vested 20% on each of the five anniversaries following the grant date. Options expired six years after the date of grant. Beginning in 2006, options have been awarded to vest 25% on each of the four anniversaries following the grant date and to expire six years after the date of grant. Prior to 2006, restricted shares were granted with restrictions that lapsed 33% on each of the third, fourth, and fifth anniversaries following the date of grant. Since 2006, restrictions were set to lapse in 25% increments on each of the four anniversaries following the grant date. The Committee agreed with a management recommendation, formulated after considerable discussion with operating unit business unit leaders (“BULs”) and other high performers at the unit level, that to be a meaningful and tangible equity incentive to these individuals and to maintain a program that is more consistent with typical incentive plan practices, the vesting period of stock option awards and restricted periods of restricted stock awards needed to be slightly shortened. The Committee generally applies these vesting principles to its equity grants, although more rapid vesting of both options and restricted stock have been made from time to time for reasons such as an incentive to induce employment with the Company or as a reward for exemplary personal performance or commitment.

 

All stock options have an exercise price equal to the closing price of CBIZ stock on the date of grant. Annual awards of stock options to the SMG, and at times certain other corporate officials and practice group managers, are considered at the Committee’s regularly scheduled meeting in February, and then tabled until the Committee can consider all other performance grants to BULs and other high performers within the Company under its annual grant program. The Committee adopted this procedure to avoid inequities in option pricing that might occur if awards to

these respective groups were not granted simultaneously. After recommendations for operating unit-level grants are solicited and vetted by management, they are presented along with the underlying reasons supporting them to the Committee for review and action. Recommendations for all annual equity incentive grants are considered by the Committee at a special telephonic meeting typically held between March and May of each year.

 

The Committee has never granted options with an exercise price that is less than the closing price of the Company’s Common Stock on the grant date, nor has it granted options which are priced on a date other than the grant date.

 

Vesting rights, restriction lapses, rights to exercise, terms related to the events of death, disability or retirement, rules related to equity grant expiration and termination, and all other terms and conditions related to option and restricted stock awards are set out in the terms of the 2002 SIP and the option and restricted stock agreements which executives must sign in order to preserve their equity grants. All recipients of equity grants must agree to certain restrictive covenants that prevent the executive, upon leaving CBIZ, from soliciting clients and employees of CBIZ or its subsidiaries for a period of two years.

 

Management’s recommendations to the Committee regarding equity grants to newly hired or promoted executives are presented to the Committee at the next regularly scheduled Committee meeting following the promotion or the completion of an agreement to hire the executive. On occasion, the Committee will award grants through written action without a meeting.

 

CBIZ Annual Executive Incentive Plan

 

The EIP is an annual cash incentive program adopted by the Committee under the authority of the 2002 SIP. The EIP provides guidelines for the calculation of annual non-equity incentive-based compensation, subject to Committee oversight and modification. At its regular February meeting each year, the Committee considers whether an EIP should be continued and, if so, approves the members of the SMG eligible to participate in the EIP and sets incentive levels based on the participant’s position, management authority over and accountability for operations or corporate processes, and potential to impact revenue or expenses.

 

In 2010, the EIP calculated cash incentive awards as a function of the Company’s pre-tax margin improvement as well as its EPS growth. As in prior years, under the Financially Based Award component of the EIP in effect for 2010, Target Award (“TA”) opportunities are established as a percentage of each executive’s base salary, and are subject to a Target Multiplier (“TM”) that increases or reduces award opportunities based on the Company’s ability to exceed, meet, or fail to meet predetermined targets. In 2010, the predetermined targets consisted of a diluted continuing EPS target related to continuing operations (“EPS Target”) and a pre-tax margin related to continuing operations improvement target (“MA Target”). Certain adjustments may be made to these targets that would cause them to be characterized as non-GAAP financial measures. Seventy percent (70%) of an executive’s TA opportunity is dependent on the Company’s performance with respect to the EPS Target and thirty per cent (30%) of an executive’s TA opportunity is dependent on the Company’s performance with respect to the MA Target. The TA opportunities for members of the SMG, including the named executive officers, assuming the Company’s final EPS results related to continuing operations coincide with the EPS Target and margin improvement results coincide with the MA Target, range from 40% to 75% of base salary. The TM range for the EPS Target may reduce the awards to 0% or increase the awards to 200% of the EPS Target-related portion of an executive’s bonus opportunity. The TM range for the MA Target may reduce the awards to 0% or increase the awards to 200% of the MA Target-related portion of an executive’s bonus opportunity. For fiscal 2010, 100% of each named executive officer’s EIP award was based upon achievement of corporate financial objectives relating to adjusted EPS Targets and MA Targets.

 

The 2010 EIP also contained an additional Individual Performance Award component, under which each member of the SMG, including the named executive officers other than the CEO, could have earned up to an additional 25% of the executive’s base Target Award for extraordinary individual performance. Measurement of individual performance under this component was based upon the CEO’s assessment of an executive’s performance related to the individual’s personal contributions toward the achievement of the Company’s financial results. The CEO’s recommendations and underlying assessments were presented to the Committee, and the Committee had the opportunity to accept, reject, or modify the recommendations. In 2010, the Committee accepted the CEO’s recommendations.

Upon completion of the fiscal year, the Committee reviewed the EPS from continuing operations and margin improvement performance of the Company, determined the TMs applicable to the group’s respective TAs, determined the applicable Individual Performance Award percentage, calculated the EIP earned for each member of the participating group, and certified the appropriate EIP awards.

 

For 2010, the Committee set the EPS Target at $.54 per share from continuing operations, before adjustments for a $.02 per share charge for the write-off of a lease in connection with the acquisition of Goldstein Lewin and for a $.02 charge for the write-off of the deferred amortization expense resulting from the utilization of $60 million of the proceeds from the Company’s 2010 convertible note issuance to repurchase a like amount of the Company’s 2006 convertible notes. In light of these adjustments, this standard is considered to be a non-GAAP financial measure. For the covered executives, including the named executive officers, to earn any EIP Target-related bonus for 2010, the Company was required to post results that were approximately 92.6% of the EPS Target, or $.50 per share. In order to earn the maximum possible EIP bonus, the Company’s results would have had to exceed the EPS Target by approximately 11.1%, i.e. $.60 per share. The Committee believes these EPS Targets and MA Targets are consistent with the EIP’s purpose in encouraging the achievement of long-term performance improvements in the Company’s financial results and not penalizing the management team for difficult market conditions faced by each of the Company’s respective divisions.

 

For 2010, the Committee set the MA Target at 6.9% to 7.1%, before the adjustments for the charges noted in the preceding paragraph. In light of these adjustments, this standard is considered to be a non-GAAP financial measure. The Committee determined that this approximately static target was appropriate given the market challenges faced by each of the Company’s respective divisions. For the covered executives to earn any MA Target-related bonus for 2010, the Company was required to post results that were approximately 95.6% of the MA Target, or a 6.6% pre-tax margin result. In order to earn the maximum possible EIP bonus, the Company’s results would have had to exceed the MA Target by approximately 10.1%, or a pre-tax margin result of 7.6%.

 

The range of potential Target Multipliers applicable to 2010 is set out in the table below.

 

 

The impact of the charges for the lease write-off and the convertible notes deferred amortization write-off on EPS targets was $.04 per share and the impact on margin targets was 60 BP. Diluted EPS results related to continuing operations for 2010 were $.52 per share after these adjustments, and therefore the EPS Target Muliplier was set at 0.7. Pre-tax margin results related to continuing operations were 6.7% for 2010 after the adjustments and therefore the MA Target Multiplier was determined to be 0.7.

For each of the named executive officers, the Target Awards, applicable Target Multiplier, Individual Performance Adjustments, and EIP Bonuses for 2010 performance were:

 

 

With respect to the Individual Performance Award component of the EIP, the Compensation Committee determined that a predetermined percentage of the base pay of the SMG should be granted to them if they are determined to achieve financial and certain non-financial goals set jointly by the CEO and the Compensation Committee. The CEO is not personally eligible to obtain any bonus based upon the Individual Performance Award component of the EIP, as he personally assists the Committee in determining whether or not each member of the SMG is entitled to his or her proposed Individual Performance Award. The CEO does not recommend compensation levels for himself, and such determinations are solely within the control of the Compensation Committee.

 

In making the annual determination of the minimum, target and maximum levels for the EIP bonuses, the Committee considers any appropriate factor including but not limited to anticipated risks and rewards, performance metrics, internal revenue and margin estimates, as well as specific circumstances facing the Company during the coming year. The judgment of the Committee, as well as that of the CEO in his role of assisting the Committee, in determining whether or not the members of the SMG have met their goals and fulfilled their duties throughout the year, constitutes an exercise of both objective investigation as well as discretion. The goals set for these executives included achieving budgetary targets for the operations under their direction mitigated by any events or reasons outside their control that caused any failure to meet budget targets, meeting or exceeding cross-serving program goals for the operations under their control, generating acquisition opportunities, meeting the requirements of the “One CBIZ” client service model, working together as a coherent and mutually supportive senior management team, and meeting expectations related to leadership performance.

 

Awards made to named executive officers under the EIP for performance in 2010 are reflected in column (g) of the Summary Compensation Table on page 41.

 

In 2010 the Committee indicated that the President, CFO, and the heads of the Financial Services and the Employee Services divisions were eligible to receive their full Individual Performance Awards of up to 25% of their Base Target Awards. The Committee determined that these individuals set an excellent leadership standard in their respective areas of responsibility, drove performance in a year marked by difficult market conditions, diligently performed their goals and duties throughout the year, and worked together with the CEO as an effective senior management team.

 

Merit Bonuses

 

Promotions, changes in job responsibility, and extraordinary program achievements may also result in a merit-based bonus that is not awarded pursuant to the authority of the 2002 SIP. Merit-based bonuses are based, in the case of the CEO, on the evaluation of the Compensation Committee, and in the case of members of the SMG other than the CEO, on the recommendation of the CEO and the President, subject to the Committee’s approval.

 

Special merit bonuses, as set out in column (d) of the “Summary Compensation Table” on p. 41, were paid to the CEO, the President, and the CFO on the basis of their performances in 2010. These awards were granted by the Committee in recognition of their achievements in, and relative responsibility for, leading the Company through the prior eight consecutive years of growth in revenue, earnings, earnings per share, and cash earnings related to continuing operations, for delivering results roughly equivalent to the prior year’s performance in the face of difficult market forces challenging all Company operating divisions, for bringing the Company’s refinancing efforts to uniformly successful conclusions, and for organizing the orderly succession of interests attendant to the Westbury share repurchases. The Committee did not use a mathematical model for determining the amount of compensation

that should be awarded for these efforts and successes, but agreed that awards, amounting to approximately 18%, 14%, and 15.5% of the otherwise combined base and bonus compensation for the year, of the CEO, President, and CFO respectively, were reasonable awards for these otherwise uncompensated achievements. In the case of the CEO and President, the executives’ total bonus for 2010 was approximately 10% less than that received in 2009, in recognition of the failure of the Company to achieve internal growth targets. The CFO’s total bonus was approximately 15% greater than his awards in 2009, in recognition of his indispensible efforts in bringing the Company’s refinancing transactions to a successful close.

 

Long-Term Equity Incentive Compensation

 

Stock Option and Restricted Stock Programs

 

The Company believes that the Stock Option and Restricted Stock Programs enable the Company to:

 

 

Equity awards are determined based on market data and vary among participants based on their positions and functions within the Company. Option awards vest, restrictions on stock awards lapse, grants are awarded, conditions and terms apply, and pricing is set by the Compensation Committee according to the procedures described on pp. 33-34.

 

The Hewitt Associates 2010 study indicates that CBIZ’s long-term incentive compensation in the form of stock option or restricted stock grants to most of the members of the SMG, including the named executive officers, falls between the 25th and the targeted 50th percentile of long-term equity incentive compensation paid to similarly situated executives within the Compensation Peer Group, although the awards to the CEO were noted to be significantly less than those given in the comparative companies. Hewitt Associates noted that the long-term equity compensation values awarded by the Company to the SMG as a group overall generally fell at the 50th percentile awards of the Company Peer Group companies to their named executive officers, although once again the awards to the CEO were noted to be significantly less in comparison to those given in the Company Peer Group companies. The study also indicates that the Company’s use of stock options and restricted stock for the SMG is in line with market trends. The 2010 awards for the named executive officers are set out in the “Grants of Plan Based Awards” table on p. 44.

 

Deferred Compensation and Retirement Savings Plans

 

Retirement Savings Plan

 

The CBIZ Retirement Savings Plan (the “Savings Plan”) is a tax qualified retirement savings plan pursuant to which all U.S. based associates, including the named executive officers, are able to contribute the lesser of up to 80% of their annual salary or $15,000 (plus an additional $5,000 if the participant was at least 50 years old) to the Savings Plan on a before tax basis. The Company will match 50% of the first 6% of pay that is contributed to the Savings Plan. Employees are permitted to become participants in the Savings Plan after 60 days of employment. Employer matching payments commence after participants have been employed for one year. Employer contributions on behalf of participants are fully vested after a participant has been employed for three years. Participants deposit savings in one or more of 21 stock and bond investment funds. The 2010 at-market annual rates of return of the investment choices available to participants ranged from 4.54% to 28.03%, depending on each participant’s fund selections.

 

Non-qualified Deferred Compensation Plan

 

The named executive officers, as well as any other member of the SMG, any BUL and any other employee scheduled to earn more than $200,000 annually are entitled to participate in the CBIZ Employee Non-qualified Deferred Compensation Plan. Pursuant to this deferred compensation program, eligible employees can defer up to 100% of any bonus and commission payments, as well as up to 25% of their base compensation. There is no employer match in this program. The Company does not pay any gains that participants may obtain through investment in the plan. Gains and losses are strictly related to the investment returns of the mutual fund choices within the plan. For additional information about this plan, please refer to the discussion beginning on p. 46.

 

CBIZ 2007 Employee Stock Purchase Plan

 

At the 2007 Annual Meeting, stockholders approved the CBIZ 2007 Employee Stock Purchase Plan (“ESPP”), under which employees may purchase CBIZ stock at a 15% discount, and may contribute up to $21,250 toward purchases of stock by payroll deduction or otherwise, in accordance with the terms of the ESPP. The named executive officers and all other members of the SMG are entitled to participate in the ESPP, along with and upon the same terms as all other qualified employees of CBIZ subsidiaries. Proposal 6 of this Proxy Statement concerns the renewal of this plan.

 

Perquisites and Other Personal Benefits

 

The Company provides the named executive officers and other members of the SMG with perquisites and other personal benefits that the Company and the Committee believe are reasonable and consistent with the Company’s overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers. Certain of the named executive officers are provided with the use of Company automobiles, tax preparation assistance, participation in the plans and programs described above, long-term disability plans, life insurance, an excess liability umbrella insurance policy, an executive health program, the use of Company golf club memberships for personal use, and tax gross-up payments. Other perquisites are noted in the Other Compensation table on p. 42. The SMG, like all full-time employees of the Company, are provided with a death benefit program that provides for a payment of up to $50,000 in the event of death during employment. This program is provided to all full-time employees at no charge, and the enrollment of the named executive officers in this program has been determined by the Company to have no aggregate incremental cost. When the named executive officers use the Company’s golf club memberships for personal use, they reimburse CBIZ for any and all charges incurred in connection with their personal use. The occasional personal use of these memberships has been determined by the Company to have no aggregate incremental cost. In addition, the CEO is provided with certain hotel, airfare, car transportation, and other travel-related services, a portion of which, plus tax gross-up payments, are attributed to the CEO as income.

 

Attributed costs of the personal benefits described above for the named executive officers for the fiscal year ended December 31, 2010, are included in column (i) of the “Summary Compensation Table” on p. 41. The Company has entered into employment agreements or severance protection agreements with certain key employees, including several of the named executive officers. These agreements are designed to promote stability and continuity of key members of senior management. Information regarding applicable payments under such agreements for the named executive officers is provided under the headings “Employment or Other Agreements” on p. 42 and “Potential Payments upon Termination or Change in Control” on p. 47.

 

Comparison of Compensation to Targets

 

As previously stated, the Committee generally targets aggregate compensation for the collective SMG at the 50th percentile of total compensation paid to similarly situated executives of the companies comprising the Compensation Peer Group. Variations to this objective in general, and in evaluating compensation targets for individual members of the SMG, may occur as dictated by the experience level of the individual, his or her relative importance or unique function within the organization, special meritorious conduct during the year or over a longer period, continued leadership contributions, talent retention concerns, and other market factors.

 

The compensation levels of the named executive officers generally compare fairly to the Committee’s aggregate targets for their respective positions. When comparing the aggregate compensation of the named executive officers to the 50th percentile targets of the 2010 Hewitt Associates study, the Committee did not believe that the special merit bonuses should be included, since merit pay for such special achievements noted did not appear to be reflected in the study’s results.

 

The CEO’s total compensation in 2010, including the grant date fair value of long-term equity grants but excluding the special merit bonus in 2010 was $1,970,387, compared with the 2010 Hewitt study’s 50th percentile

total compensation targets, including long-term incentive equity grants, of $2,292,500 for the Compensation Peer Group and $2,144,311 for the Company Peer Group. If the special merit bonus for the year is included in these comparisons, the CEO’s total compensation of $2,156,012 remains consistent with these median target values. The Committee concluded that the CEO’s total compensation is consistent with the Committee’s stated goals and standards, but may be set at a rate lower than the median target level.

 

The President’s total compensation of $1,253,703, including the grant date fair value of equity grants but excluding the special merit bonus in 2010, compared fairly with the 2010 Hewitt study’s 50th percentile total compensation targets, including long-term incentive equity grants, of $1,122,800 for the Compensation Peer Group and $1,279,631 for the Company Peer Group. The Committee felt the difference in compensation over the Compensation Peer Group target was acceptable, given the President’s excellent performance. The Committee noted that even if the special merit bonus were included in the President’s total compensation of $1,365,853, the total would still approximate the median target level of the Company Peer Group given the Company’s interests in retaining talent and facilitating succession concerns. The Committee concluded the President to be appropriately compensated consistent with its standards.

 

The CFO’s total compensation of $928,988, including the grant date fair value of equity grants but excluding the special merit bonus in 2010, was higher in comparison to the 2010 Hewitt study’s 50th percentile total compensation targets, including long-term incentive equity grants, of $885,600 for the Compensation Peer Group and $812,048 for the Company Peer Group. The Committee indicated that the difference in compensation over the Compensation Peer Group target was acceptable in light of the CFO’s performance level and his ability to facilitate the financing requirements of the Company. The Committee noted that the CFO’s compensation was $1,018,788 if the special merit bonus were included for comparison purposes. However, the Committee concluded the CFO to be fairly compensated under its standards given his level of expertise and dedication and as a method of addressing retention concerns.

 

The Employee Services division President’s total compensation was $969,510 in 2010, including the grant date fair value of equity grants. The 2010 Hewitt study reflected 50th percentile total compensation of a division president, including long-term incentive equity grants, as $798,500 for the Compensation Peer Group and $789,379 for the Company Peer Group. The Committee noted that while this compensation package was higher than the median target level of the comparison groups, market data available to the Committee through the Company’s acquisition discussions and publicly available competitive intelligence indicate that compensation packages at the current and greater levels are commonly available to those holding similar positions at outside insurance and benefits brokerage organizations. For these reasons, the Committee concluded that the President of the Employee Services Division was compensated in a manner that was consistent with Committee targets.

 

The Financial Services division President’s total compensation in 2010, including the grant date fair value of equity grants, was $976,865. The 2010 Hewitt study indicated that the median total compensation, including long-term incentive equity grants, was $932,900 for the Compensation Peer Group and $789,379 for the Company Peer Group division presidents. The Committee noted that this compensation package was comparable to the median level of the Company Peer Group, but higher than the median of the Company Peer Group data. The Committee noted, however, that market data available to the Committee through the Company’s acquisition discussions and publicly available competitive intelligence indicate that compensation packages for presidents of comparably sized consulting and business services companies are consistent with, or greater, than the compensation of the Financial Services division President. For these reasons, the Committee concluded that the President of the Financial Services Division was compensated in a manner that was consistent with Committee targets.

 

The Compensation Committee has set 2011 base compensation to continue to remain at 2009 levels for the named executive officers, and has not raised any base compensation for any member of the SMG, including the named executive officers, for the past two years.

 

Deductibility of Executive Compensation

 

As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals. The Company believes that compensation paid under the qualified incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Committee may approve an executive’s total package consisting of a combination of the available compensation components that will not meet these requirements. The Committee may approve of such a package in order to ensure competitive levels of total compensation for its executive officers, or may consider other factors of greater importance than preserving deductibility for a particular form or amount of compensation. In this regard, for fiscal 2010, the amount of base salary and other payments not made in connection with a qualified incentive plan in excess of $1,000,000 for any named executive officer was not deductible for federal income tax purposes. The contracts of the CEO and the President contain provisions requiring the deferral of severance payouts that the Company would be unable to deduct under Section 162(m).

 

Accounting for Stock Based Compensation

 

Beginning on January 1, 2006, the Company began accounting for any stock-based awards or payments under its 2002 SIP and prior stock option plan in accordance with the requirements of FASB ASC Topic 718.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussion, recommended to the Board of Directors that it be included (or incorporated by reference as applicable) in the Company’s proxy statement.

 

Compensation Committee of the Board of Directors

 

Joseph S. DiMartino, Chairman
Richard C. Rochon
Todd Slotkin
Benaree Pratt Wiley

 

COMPENSATION RISK ASSESSMENT

 

In 2010, the Compensation Committee conducted a full review of the compensation policies and practices of the Company in order to determine if these factors are reasonably likely to have a material adverse effect on the Company. It was the Committee’s conclusion, after careful consideration of all the information presented, that CBIZ’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

 

 

 

 

Other Compensation

 

 

 

 

Employment or Other Agreements

 

Mr. Gerard’s original employment agreement was amended by the First Amended and Restated Employment Agreement, executed March 22, 2007. It extended the term of the original employment agreement to be ongoing and continued the terms of Mr. Gerard’s original October 11, 2000 contract by setting base salary at a minimum of $500,000 per year, with a minimum bonus of $150,000 that was required through 2003, in the absence of any approved performance-based incentive bonus plan such as the EIP. Other terms of the original contract were also continued, including an automobile allowance, participation in CBIZ welfare, incentive plans, maintenance of a $2,000,000 life insurance policy, and reimbursement for certain travel and housing expenses. Consistent with the original contract, if the agreement is terminated by CBIZ without cause or by Mr. Gerard for good reason based on a material alteration of his job duties, a reduction in his base compensation, or a material breach of his agreement, Mr. Gerard is entitled to (1) his base salary and vacation pay through the date of termination, (2) a cash payment equal to two times the sum of his then current base salary and average bonus paid in the three year period preceding the year of termination, (3) maintenance of health and life insurance coverage, and (4) other amounts due through

the date of termination. If the agreement is terminated by CBIZ or by Mr. Gerard for good reason related to a change in control of CBIZ, Mr. Gerard is entitled to (1) his base salary and vacation pay through the date of termination, (2) a cash payment equal to 2.99 times the sum of his then current base salary and average bonus paid in the three year period preceding the year of termination, (3) maintenance of health and life insurance coverage, and (4) other amounts due through the date of termination. If the agreement is terminated by CBIZ with cause or by Mr. Gerard without good reason, as defined by the contract, Mr. Gerard is entitled to (1) his base salary and vacation pay through the date of termination, and (2) other amounts due through the date of termination. The contract also contains provisions designed to address certain issues related to Code Sections 162(m) and 409A. The contract contains restrictive covenants that obligate Mr. Gerard to (1) maintain CBIZ’s confidential information, (2) return Company information or other personal and intellectual property, and (3) avoid disparagement of the Company.

 

Mr. Grisko’s Amended Severance Protection Agreement, executed December 31, 2008, maintains most of the same employment terms as the original Severance Protection Agreement, dated February 1, 2000, but contains amendments designed to address certain issues related to Code Sections 162(m) and 409A. The Amended Agreement continues to entitle him to receipt of an automobile allowance, and participation in CBIZ welfare, pension and incentive benefit plans. In addition, the contract provides for the payment of severance upon termination without cause (including termination resulting from a change of control), or upon a request by the Chairman of the Board that Mr. Grisko resign. Severance would include (1) a cash payment equal to two times the sum of his current year base pay plus the average of his bonus payments for the prior three years, (2) continued participation for two years in CBIZ health and welfare benefit plans, (3) immediate vesting of, and ability to exercise, any unvested but previously granted stock options, (4) receipt of title to any company vehicle then in use by Mr. Grisko, and (5) payment of club membership dues to a private club of his choosing. Mr. Grisko has voluntarily declined to accept club membership dues at this time. The contract contains restrictive covenants that obligate Mr. Grisko to (1) maintain CBIZ’s confidential information, (2) return Company information or other personal and intellectual property, (3) abide by a two-year employee, customer, and supplier nonsolicitation and noninterference term, and (4) avoid disparagement of the Company.

 

Mr. Grove’s employment agreement, executed December 12, 2000, and amended November 22, 2010, provides for payment of a base salary, continuing discretionary bonuses, an automobile allowance, and participation in CBIZ welfare, pension and incentive benefit plans. In addition, the contract provides for the payment of severance upon termination without cause, or upon voluntary termination due to a change of control. Severance would include (1) a cash payment equal to two times the sum of his current year base pay plus the average of his bonus payments for the prior three years, payable over a twenty-four month period, and (2) continued participation for two years in CBIZ health and welfare benefit plans, and (3) immediate vesting of, and ability to exercise, any unvested but previously granted stock options. The contract also contains provisions designed to address certain issues related to Code Sections 162(m) and 409A. The contract contains restrictive covenants that obligate Mr. Grove to (1) maintain CBIZ’s confidential information, (2) return Company information or other personal and intellectual property, (3) abide by a one-year non-compete, and one-year employee, customer, and supplier nonsolicitation and noninterference term, and (4) avoid disparagement of the Company.

 

Mr. O’Byrne was originally employed under an executive employment agreement attendant to the sale of his business to CBIZ. This agreement has expired, with the exception of certain restrictive covenants contained therein. Under the CBIZ Executive Severance Policy, Mr. O’Byrne is entitled to six months base pay if he is terminated other than for cause, or twelve months base pay if he is terminated in the event of a change in control. Mr. Sibits is entitled to participate in the compensation programs available to the SMG, and has committed to restrictive covenants comparable to those of Mr. O’Byrne. Under his Confidentiality, Non-solicitation and Non-competition Agreement, Mr. Sibits is entitled to twelve months base pay if he is terminated other than for cause, and he is entitled to twelve months base pay pursuant to the CBIZ Executive Severance Policy if he is terminated in the event of a change in control.