SEC Company Response from CBRE GROUP, INC. (CBRE) (CIK 0001138118) (CBRE) — Oct 5, 2007
CBRE GROUP, INC. (CBRE) (CIK 0001138118)
Date: Oct. 5, 2007 · CIK: 0001138118 · Accession: 0001193125-07-214264
AI Filing Summary & Sentiment
Reasoning
Referenced dates: August 21, 2007
Letter
VIA EDGAR TRANSMISSION Securities and Exchange Commission Division of Corporate Finance Attention: Pam Howell Re: CB Richard Ellis Group, Inc. Definitive 14A Filed April 24, 2007 File No. 1-32205
Dear Ms. Howell:
Reference is made to the comments of the Staff of the Securities and Exchange Commission (the “SEC” or the “Staff”) with respect to the above referenced definitive 14A proxy statement filed on April 24, 2007 (the “Proxy Statement”) of CB Richard Ellis Group, Inc. (the “Company”) in the letter dated August 21, 2007, addressed to Brett White, President and Chief Executive Officer of the Company. Set forth below are the Staff’s comments and the Company’s responses.
Compensation Committee Interlocks and Insider Participation, page 15
1. Provide the disclosure required by Item 407(e)(4)(i)(C) of Regulation S-K, rather than simply cross-referencing to the Related Party Transactions Section. This disclosure is required to accompany the identification of the directors in this section.
Company Response
We included this disclosure beginning at page 47 of the Proxy Statement and we intend to include this disclosure in next year’s proxy statement under the heading “Compensation Committee Interlocks and Insider Participation”, as well, pursuant to the comment. Had we
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included the disclosure under this section this year, there would have been no additional disclosures beyond the information provided by cross reference.
Director Independence, page 17
2. Provide the disclosure required by Item 407(a)(3) of Regulation S-K. For each director and nominee for director that is identified as independent, describe, by specific category or type, any transactions, relationships or arrangements not disclosed pursuant to Item 404(a) that were considered by the board of directors under the applicable independence definitions in determining that the director is independent. The current disclosure simply indicates that the named directors are independent under the standards set forth, but does not address whether any of these transactions, relationships or arrangements were considered in making this determination.
Company Response
We identify the Company’s independent directors on page 11 of the Proxy Statement. They are: Richard Blum, Patrice Marie Daniels, Senator Thomas Daschle, Curtis Feeny, Bradford Freeman, Michael Kantor, Frederic Malek, Jane Su and Gary Wilson. In 2005, the Board of Directors (the “Board”) adopted standards for pre-determining categories of transactions that would not require an independence determination by the Board. These standards are on page 17-18 of the Proxy Statement. In 2006, no specific transactions or relationships fell outside of these categorical standards requiring a separate Board evaluation. In the “Director Independence” section of the 2008 proxy statement, we intend to affirmatively identify whether any transactions or relationships required separate Board evaluation for purposes of an independence determination, and if so the nature of those transactions.
Compensation Discussion and Analysis, page 25
3. When discussing the compensation program objectives, clarify the policies for allocating between long term and currently paid out compensation and for allocating between cash and non-cash compensation. See Item 402(b)(2)(i) and (ii) of Regulation S-K.
Company Response
We respectfully submit that the disclosures on pages 25-26 of the Proxy Statement sufficiently describe the Company’s existing process for allocating between long term and currently paid out compensation and for allocating between cash and non-cash compensation. The Compensation Committee considers compensation levels among the companies identified
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as peer group companies (“Peer Group Companies”) in the Proxy Statement and our relative performance as compared to those companies when setting the individual components of compensation for our executive officers. (See page 26 of the Proxy Statement)
As discussed in the Proxy Statement, compensation for our CEO, CFO and other named executive officers (“NEOs”) consists of annual base pay, an annual cash performance award and an annual equity award consisting of stock options and restricted stock.
•
Base salaries are generally set at the market median of the Peer Group Companies. We believe the median represents the competitive baseline that must be paid in order to attract and retain the skills and experience necessary for these complex roles.
•
Cash performance awards are intended to incentivize achievement of short and long-term goals.
•
Equity awards are intended to incentivize achievement of long-term goals, align the executive’s interests and incentives with our stockholders’ interests and serve as a retention tool.
The Compensation Committee believes that a significant portion of executive compensation should be in the latter two categories when compared to base salary, which is generally similar to the approach taken by the Peer Group Companies. The Compensation Committee determines the targets for cash performance awards under the Company’s Executive Bonus Plan (the “EBP”) and the amount of specific equity awards based on advice from its outside consultant regarding market parameters within the Peer Group Companies and other subjective factors, including an assessment of business unit financial performance, individual past performance, potential future performance and retention risk. Actual payouts under the EBP will differ from targets based on financial and subjective factors as described below, in the following question and on page 27 of the Proxy Statement. In 2007, achievement of the cash performance award for all executive officers will be based 80% on the satisfaction of financial goals, which are EBITDA-based, and 20% on the achievement of strategic measures. (See pages 26-28 and 30-31 of the Proxy Statement) We intend to include in the 2008 proxy statement disclosure substantially similar to that above.
The Compensation Committee approves financial goals and strategic measures under the EBP for each executive officer in the first quarter of each year. As discussed below in the Company’s response to Question 7, we do not disclose the specific EBITDA targets for the financial goals given their competitively sensitive nature and our concern that disclosure of these goals may provide competitors with insight into our plans.
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Compensation Discussion and Analysis, page 25
4. You state on page 26 that your “pay practices are highly differentiated based on individual performance, leadership and potential.” Please disclose how the specific forms of compensation are structured and implemented to reflect each named executive officer’s individual performance and/or individual contribution to these items of the registrant’s performance, describing the elements of individual performance and/or contribution that are taken into account. See Item 402(b)(2)(vii) of Regulation S-K.
Company Response
Please see our response in the immediately preceding question and the disclosures on pages 26-28 and 30-31 of the Proxy Statement. In addition, we intend to provide in the 2008 proxy statement expanded disclosure of the strategic measures component of the EBP, e.g., depending on the executive officer, historically these have been based on succession planning, development of multi-year business plans, leadership in ethics and diversity efforts, mergers & acquisitions, EBITDA margin, successful recruitment and retention efforts, integration efforts related to acquisitions, management of an efficient budgeting process, and management of planned capital expenditure costs.
Compensation Discussion and Analysis, page 25
5. We refer you to Release 33-8732A, Section II.B.1. As noted therein, the Compensation Discussion and Analysis should be sufficiently precise to identify material differences in compensation policies with respect to individual executive officers. Please explain the reasons for the differences in the amounts of compensation awarded to the named executive officers. For example, Mr. White received the highest base salary of $650,000, which was approximately $150,000 above that of the next highest base salary paid, and approximately $2 million in non-equity incentive plan compensation, which was over $1 million more than the next highest paid award under the plan. We direct your attention to Item 402(b)(2)(vii) of Regulation S-K.
Company Response
Please see our response in the immediately preceding question. We use the same policy for determining compensation for all NEOs. As discussed above, base salaries are generally set at the market median of the Peer Group Companies. The Compensation Committee sets the size of incentive compensation opportunities (targets) based on advice from
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its outside consultant regarding market parameters within the Peer Group Companies and for the specific position in question. The reason Mr. White’s base salary and annual incentive award were significantly above that of the next highest paid executive is partly a function of the competitive market data, which indicates that CEOs are paid significantly higher than other executives. In addition to market data, the Compensation Committee also considers a number of factors relating to each executive officer, including individual performance, job responsibilities, experience level and ability when setting the compensation of executive officers. The higher compensation of Mr. White as our CEO reflects the Compensation Committee’s view that as CEO, he bears ultimate responsibility for global results and the overall success of the Company. The Compensation Committee believes in a pay-for-performance model, and given the Company’s strong financial performance and resulting benefit to stockholders, that compensation levels were appropriately set.
Compensation Discussion and Analysis, page 25
6. Disclose in greater detail the role of the CEO in the compensation process. See Item 402(b)(2)(xv) of Regulation S-K.
Company Response
Mr. White meets with the Compensation Committee’s consultant to provide information about the Company and industry helpful in conducting an accurate Peer Group Company benchmarking survey. In addition, Mr. White is given an opportunity to review the consultant’s report to the Compensation Committee and provide the committee with commentary on certain portions of the report. He also attends, at the invitation of the Compensation Committee, portions of its meetings when the performance of the executive officers who report directly to him and other Section 16 officers is discussed. During these meetings, he provides an assessment of their performance and recommends a payout of some or all of the compensation recommended by the compensation consultant. The Compensation Committee makes all ultimate compensation decisions, incorporating both the feedback from the compensation consultant and Mr. White. He does not attend discussions where his performance is evaluated or make recommendations on his own compensation. However, as described on page 27 of the Proxy Statement, he did request that the Compensation Committee re-allocate to certain other executive officers the over-performance portion of his performance award related to his 2006 strategic measures. We intend to expand the disclosure in the 2008 proxy statement to further clarify Mr. White’s role in the compensation process.
Short-term or annual incentive bonuses, page 27
7. You have not provided quantitative disclosure of the terms of the necessary targets to be achieved for your executive officers to earn their short-term or
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annual incentive compensation. Please disclose the specific target EBITDA used to determine incentive amounts or provide a supplemental analysis as to why such disclosure may be omitted pursuant to Instruction 4 to Item 402(b) of Regulation S-K. In addition, you state that 20% of this compensation is based upon strategic measures, which “includes EBITDA margin plus other qualitative measures.” Please note that qualitative goals generally need to be presented to conform to the requirements of Item 402(b)(2)(v) of Regulation S-K. Lastly, we note the statement that your target financial performance, in your opinion, “represents aggressive goal setting.” To the extent that it is appropriate to omit specific targets, please provide disclosure pursuant to Instruction 4 to Item 402(b) of Regulation S-K. General statements regarding the level of difficulty, or ease, associated with achieving performance goals either corporately or individually are not sufficient. In discussing how likely it will be for the company to achieve the target levels or other factors, provide as much detail as necessary without providing information that poses a reasonable risk of competitive harm. Provide similar disclosure or analysis relating to the financial and strategic measures established for 2007, as referenced on page 31.
Company Response
With respect to financial goal-based performance awards, we believe our specific EBITDA targets are proprietary, competitive information that should not be disclosed publicly. We do, however, provide the breakdown between quantitative and qualitative factors and the quantitative formulae for determining financial goal-based performance awards in the EBP, which is publicly filed with the SEC, and on page 27 of the Proxy Statement. The EBITDA targets used for cash performance awards are approved by the Board as part of the Company’s budget after rigorous review; these targets do not differ from the Board-approved budgets for the Company. The Board believes in good faith that it sets aggressive targets that align the interests of our executive officers with Company goals and provide substantial value to our stockholders upon achievement.
Our strategic measure-based performance awards have, depending on the executive officer, been based on succession planning, development of multi-year business plans, leadership in ethics and diversity efforts, mergers & acquisitions, EBITDA margin, successful recruitment and retention efforts, integration efforts related to acquisitions, management of an efficient budgeting process, and management of planned capital expenditure costs. We intend to clarify this disclosure in the 2008 proxy statement.
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Long term incentives, page 28
8. It is unclear how the company determines the amount (or formula) for the long-term incentive stock options and restricted stock. The disclosure currently indicates that long-term incentives are targeted at the market median for your peer group. Please clarify and explain whether there are specific objective performance-related factors that are used to determine the incentive awards. These awards are being made pursuant to the 2004 Stock Incentive Plan, which is designed to qualify as “performance based compensation.”
Company Response
As described on page 28 of the Proxy Statement, executive officer grant guidelines are determined by the Compensation Committee. The Compensation Committee’s independent consultant utilizes a benchmarking study to recommend an overall equity target dollar value for each of the execu
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CORRESP 1 filename1.htm SEC Response Letter Laurence H. Midler 11150 Santa Monica Boulevard Executive Vice President Suite 1600 General Counsel Los Angeles, CA 90025 CB Richard Ellis Group, Inc. 310 405 8910 Tel 310 405 8925 Fax larry.midler@cbre.com www.cbre.com October 5, 2007 VIA EDGAR TRANSMISSION Securities and Exchange Commission Division of Corporate Finance 100 F Street, N.E. Washington, D.C. 20549 Attention: Pam Howell Re: CB Richard Ellis Group, Inc. Definitive 14A Filed April 24, 2007 File No. 1-32205 Dear Ms. Howell: Reference is made to the comments of the Staff of the Securities and Exchange Commission (the “SEC” or the “Staff”) with respect to the above referenced definitive 14A proxy statement filed on April 24, 2007 (the “Proxy Statement”) of CB Richard Ellis Group, Inc. (the “Company”) in the letter dated August 21, 2007, addressed to Brett White, President and Chief Executive Officer of the Company. Set forth below are the Staff’s comments and the Company’s responses. Compensation Committee Interlocks and Insider Participation, page 15 1. Provide the disclosure required by Item 407(e)(4)(i)(C) of Regulation S-K, rather than simply cross-referencing to the Related Party Transactions Section. This disclosure is required to accompany the identification of the directors in this section. Company Response We included this disclosure beginning at page 47 of the Proxy Statement and we intend to include this disclosure in next year’s proxy statement under the heading “Compensation Committee Interlocks and Insider Participation”, as well, pursuant to the comment. Had we Securities and Exchange Commission October 5, 2007 Page 2 included the disclosure under this section this year, there would have been no additional disclosures beyond the information provided by cross reference. Director Independence, page 17 2. Provide the disclosure required by Item 407(a)(3) of Regulation S-K. For each director and nominee for director that is identified as independent, describe, by specific category or type, any transactions, relationships or arrangements not disclosed pursuant to Item 404(a) that were considered by the board of directors under the applicable independence definitions in determining that the director is independent. The current disclosure simply indicates that the named directors are independent under the standards set forth, but does not address whether any of these transactions, relationships or arrangements were considered in making this determination. Company Response We identify the Company’s independent directors on page 11 of the Proxy Statement. They are: Richard Blum, Patrice Marie Daniels, Senator Thomas Daschle, Curtis Feeny, Bradford Freeman, Michael Kantor, Frederic Malek, Jane Su and Gary Wilson. In 2005, the Board of Directors (the “Board”) adopted standards for pre-determining categories of transactions that would not require an independence determination by the Board. These standards are on page 17-18 of the Proxy Statement. In 2006, no specific transactions or relationships fell outside of these categorical standards requiring a separate Board evaluation. In the “Director Independence” section of the 2008 proxy statement, we intend to affirmatively identify whether any transactions or relationships required separate Board evaluation for purposes of an independence determination, and if so the nature of those transactions. Compensation Discussion and Analysis, page 25 3. When discussing the compensation program objectives, clarify the policies for allocating between long term and currently paid out compensation and for allocating between cash and non-cash compensation. See Item 402(b)(2)(i) and (ii) of Regulation S-K. Company Response We respectfully submit that the disclosures on pages 25-26 of the Proxy Statement sufficiently describe the Company’s existing process for allocating between long term and currently paid out compensation and for allocating between cash and non-cash compensation. The Compensation Committee considers compensation levels among the companies identified Securities and Exchange Commission October 5, 2007 Page 3 as peer group companies (“Peer Group Companies”) in the Proxy Statement and our relative performance as compared to those companies when setting the individual components of compensation for our executive officers. (See page 26 of the Proxy Statement) As discussed in the Proxy Statement, compensation for our CEO, CFO and other named executive officers (“NEOs”) consists of annual base pay, an annual cash performance award and an annual equity award consisting of stock options and restricted stock. • Base salaries are generally set at the market median of the Peer Group Companies. We believe the median represents the competitive baseline that must be paid in order to attract and retain the skills and experience necessary for these complex roles. • Cash performance awards are intended to incentivize achievement of short and long-term goals. • Equity awards are intended to incentivize achievement of long-term goals, align the executive’s interests and incentives with our stockholders’ interests and serve as a retention tool. The Compensation Committee believes that a significant portion of executive compensation should be in the latter two categories when compared to base salary, which is generally similar to the approach taken by the Peer Group Companies. The Compensation Committee determines the targets for cash performance awards under the Company’s Executive Bonus Plan (the “EBP”) and the amount of specific equity awards based on advice from its outside consultant regarding market parameters within the Peer Group Companies and other subjective factors, including an assessment of business unit financial performance, individual past performance, potential future performance and retention risk. Actual payouts under the EBP will differ from targets based on financial and subjective factors as described below, in the following question and on page 27 of the Proxy Statement. In 2007, achievement of the cash performance award for all executive officers will be based 80% on the satisfaction of financial goals, which are EBITDA-based, and 20% on the achievement of strategic measures. (See pages 26-28 and 30-31 of the Proxy Statement) We intend to include in the 2008 proxy statement disclosure substantially similar to that above. The Compensation Committee approves financial goals and strategic measures under the EBP for each executive officer in the first quarter of each year. As discussed below in the Company’s response to Question 7, we do not disclose the specific EBITDA targets for the financial goals given their competitively sensitive nature and our concern that disclosure of these goals may provide competitors with insight into our plans. Securities and Exchange Commission October 5, 2007 Page 4 Compensation Discussion and Analysis, page 25 4. You state on page 26 that your “pay practices are highly differentiated based on individual performance, leadership and potential.” Please disclose how the specific forms of compensation are structured and implemented to reflect each named executive officer’s individual performance and/or individual contribution to these items of the registrant’s performance, describing the elements of individual performance and/or contribution that are taken into account. See Item 402(b)(2)(vii) of Regulation S-K. Company Response Please see our response in the immediately preceding question and the disclosures on pages 26-28 and 30-31 of the Proxy Statement. In addition, we intend to provide in the 2008 proxy statement expanded disclosure of the strategic measures component of the EBP, e.g., depending on the executive officer, historically these have been based on succession planning, development of multi-year business plans, leadership in ethics and diversity efforts, mergers & acquisitions, EBITDA margin, successful recruitment and retention efforts, integration efforts related to acquisitions, management of an efficient budgeting process, and management of planned capital expenditure costs. Compensation Discussion and Analysis, page 25 5. We refer you to Release 33-8732A, Section II.B.1. As noted therein, the Compensation Discussion and Analysis should be sufficiently precise to identify material differences in compensation policies with respect to individual executive officers. Please explain the reasons for the differences in the amounts of compensation awarded to the named executive officers. For example, Mr. White received the highest base salary of $650,000, which was approximately $150,000 above that of the next highest base salary paid, and approximately $2 million in non-equity incentive plan compensation, which was over $1 million more than the next highest paid award under the plan. We direct your attention to Item 402(b)(2)(vii) of Regulation S-K. Company Response Please see our response in the immediately preceding question. We use the same policy for determining compensation for all NEOs. As discussed above, base salaries are generally set at the market median of the Peer Group Companies. The Compensation Committee sets the size of incentive compensation opportunities (targets) based on advice from Securities and Exchange Commission October 5, 2007 Page 5 its outside consultant regarding market parameters within the Peer Group Companies and for the specific position in question. The reason Mr. White’s base salary and annual incentive award were significantly above that of the next highest paid executive is partly a function of the competitive market data, which indicates that CEOs are paid significantly higher than other executives. In addition to market data, the Compensation Committee also considers a number of factors relating to each executive officer, including individual performance, job responsibilities, experience level and ability when setting the compensation of executive officers. The higher compensation of Mr. White as our CEO reflects the Compensation Committee’s view that as CEO, he bears ultimate responsibility for global results and the overall success of the Company. The Compensation Committee believes in a pay-for-performance model, and given the Company’s strong financial performance and resulting benefit to stockholders, that compensation levels were appropriately set. Compensation Discussion and Analysis, page 25 6. Disclose in greater detail the role of the CEO in the compensation process. See Item 402(b)(2)(xv) of Regulation S-K. Company Response Mr. White meets with the Compensation Committee’s consultant to provide information about the Company and industry helpful in conducting an accurate Peer Group Company benchmarking survey. In addition, Mr. White is given an opportunity to review the consultant’s report to the Compensation Committee and provide the committee with commentary on certain portions of the report. He also attends, at the invitation of the Compensation Committee, portions of its meetings when the performance of the executive officers who report directly to him and other Section 16 officers is discussed. During these meetings, he provides an assessment of their performance and recommends a payout of some or all of the compensation recommended by the compensation consultant. The Compensation Committee makes all ultimate compensation decisions, incorporating both the feedback from the compensation consultant and Mr. White. He does not attend discussions where his performance is evaluated or make recommendations on his own compensation. However, as described on page 27 of the Proxy Statement, he did request that the Compensation Committee re-allocate to certain other executive officers the over-performance portion of his performance award related to his 2006 strategic measures. We intend to expand the disclosure in the 2008 proxy statement to further clarify Mr. White’s role in the compensation process. Short-term or annual incentive bonuses, page 27 7. You have not provided quantitative disclosure of the terms of the necessary targets to be achieved for your executive officers to earn their short-term or Securities and Exchange Commission October 5, 2007 Page 6 annual incentive compensation. Please disclose the specific target EBITDA used to determine incentive amounts or provide a supplemental analysis as to why such disclosure may be omitted pursuant to Instruction 4 to Item 402(b) of Regulation S-K. In addition, you state that 20% of this compensation is based upon strategic measures, which “includes EBITDA margin plus other qualitative measures.” Please note that qualitative goals generally need to be presented to conform to the requirements of Item 402(b)(2)(v) of Regulation S-K. Lastly, we note the statement that your target financial performance, in your opinion, “represents aggressive goal setting.” To the extent that it is appropriate to omit specific targets, please provide disclosure pursuant to Instruction 4 to Item 402(b) of Regulation S-K. General statements regarding the level of difficulty, or ease, associated with achieving performance goals either corporately or individually are not sufficient. In discussing how likely it will be for the company to achieve the target levels or other factors, provide as much detail as necessary without providing information that poses a reasonable risk of competitive harm. Provide similar disclosure or analysis relating to the financial and strategic measures established for 2007, as referenced on page 31. Company Response With respect to financial goal-based performance awards, we believe our specific EBITDA targets are proprietary, competitive information that should not be disclosed publicly. We do, however, provide the breakdown between quantitative and qualitative factors and the quantitative formulae for determining financial goal-based performance awards in the EBP, which is publicly filed with the SEC, and on page 27 of the Proxy Statement. The EBITDA targets used for cash performance awards are approved by the Board as part of the Company’s budget after rigorous review; these targets do not differ from the Board-approved budgets for the Company. The Board believes in good faith that it sets aggressive targets that align the interests of our executive officers with Company goals and provide substantial value to our stockholders upon achievement. Our strategic measure-based performance awards have, depending on the executive officer, been based on succession planning, development of multi-year business plans, leadership in ethics and diversity efforts, mergers & acquisitions, EBITDA margin, successful recruitment and retention efforts, integration efforts related to acquisitions, management of an efficient budgeting process, and management of planned capital expenditure costs. We intend to clarify this disclosure in the 2008 proxy statement. Securities and Exchange Commission October 5, 2007 Page 7 Long term incentives, page 28 8. It is unclear how the company determines the amount (or formula) for the long-term incentive stock options and restricted stock. The disclosure currently indicates that long-term incentives are targeted at the market median for your peer group. Please clarify and explain whether there are specific objective performance-related factors that are used to determine the incentive awards. These awards are being made pursuant to the 2004 Stock Incentive Plan, which is designed to qualify as “performance based compensation.” Company Response As described on page 28 of the Proxy Statement, executive officer grant guidelines are determined by the Compensation Committee. The Compensation Committee’s independent consultant utilizes a benchmarking study to recommend an overall equity target dollar value for each of the execu