UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549 

       

SCHEDULE 14A 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 

       

 

Filed by the registrant  ☒ Filed by a party other than the registrant     ☐

 

Check the appropriate box:
 
Preliminary Proxy Statement
   
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
   
Definitive Proxy Statement
   
Definitive Additional Materials
   
Soliciting Material Pursuant to Section 240.14a-12

 

Navient Corporation
(Name of Registrant as Specified in Its Charter)

 


(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

 

Payment of filing fee (check the appropriate box):
 
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  We are a leader in education loan management and business processing solutions for education, healthcare, and government clients at the federal, state, and local levels.  
         
  OUR VISION   OUR VALUES  
         
  We aspire to lead every market we serve, providing solutions that anticipate and solve our customers’ unique and complex needs.   Our values reflect who we are and where we’re going. By living them daily, we stay on course toward our goals for ourselves, our customers, our communities, and our shareholders.  
         
  OUR MISSION   We strive to be the best.  
         
  We enhance the financial success of our customers by delivering innovative solutions and insights with compassion and personalized service.   By relentlessly pursuing the right solutions, we deliver on our promises to each other and those we serve.  
         
      We’re stronger together.  
         
      We succeed because we’re inclusive and authentic, and we know good ideas can come from anywhere and anyone.  
         
      We earn the trust of our customers and colleagues.  
         
      We hold each other accountable and act with integrity.  
         
      We innovate always and everywhere.  
         
      We empower each other to think di!erently, develop ourselves, and grow our company.  

 

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123 Justison Street
Wilmington, Delaware 19801

 

April 9, 2021

 

Dear Fellow Shareholders:

 

As we write this letter to invite you to the 2021 Annual Meeting of Shareholders of Navient Corporation, the COVID-19 pandemic is still significantly impacting the world, the nation, virtually every aspect of the economy, our business and the lives of our employees and customers. We are pleased to share that our response to the pandemic at Navient continues to be rapid, impactful and solutions-driven.

 

We truly demonstrated our innovative approach, the agility of our systems, operations and people and the resilience of our organization during 2020. Perhaps the greatest example of that was how we worked with our business processing clients, including federal agencies, public sector entities and health care institutions, to offer relief where needed. We quickly redeployed our team and adapted our platform to help our state clients meet new challenges, including processing much-needed unemployment benefits and providing contact-tracing and vaccination administration services.

 

For the millions of student loan borrowers we serve, we swiftly implemented several unprecedented relief programs initiated by the White House and Congress for U.S. Department of Education borrowers, and we deployed options to support impacted FFELP and private credit borrowers we service. We also created a comprehensive webpage, https://Navient.com/covid-19, dedicated to providing information needed to access these programs during this crisis.

 

Additionally, in 2020, we responded to our nation’s rightful drive for social justice. We worked to strengthen Navient as an inclusive and equitable workplace and we also looked outside our own walls to find ways to create more opportunity for those in our communities who need it most. In early 2021, we launched a partnership with Boys & Girls Clubs of America— Navient’s largest-ever such partnership—with a specific emphasis on helping young people in underserved communities.

 

We delivered strong 2020 results, and we are committed to continuing to create value for our clients, customers, communities, colleagues, and our shareholders in 2021 and beyond.

 

Navient’s 2021 Annual Meeting of Shareholders will be held virtually on Thursday, May 20 at 8:00 a.m., Eastern Daylight Time to protect the safety and well-being of our shareholders and employees in light of the pandemic. Read on for instructions on how to participate in the meeting.

 

At our Annual Meeting, we will consider the matters described in this proxy statement. We are again making our proxy materials available to you electronically. We hope that this continues to offer you a convenient way to review the materials while allowing us to reduce our environmental footprint and expense.

 

The proxy statement contains important information and you should read it carefully. Your vote is important, and we strongly encourage you to vote your shares using one of the voting methods described in the proxy statement.

 

We wish you good health and safety.

 

(image) (image)
John (Jack) F. Remondi Linda A. Mills
President and Chief Executive Officer Chair of the Board of Directors

 

 

 

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AWARDS AND RECOGNITION
Navient is proud to receive recognition for excellence
in corporate governance and business practices.
   
Champion of Board Diversity
for commitment to women in leadership
Better Business Bureau Accredited
for Navient and its subsidiaries
   
(image) IMAGE OMITTED
   
   
“W” Company Award
for commitment to board diversity
2018 CPA-Zicklin Index “Trendsetter”
for political transparency
   
(image) IMAGE
   
Veteran Jobs Mission
for commitment to veteran hiring
Military Friendly Employer Award
for leading programs for veterans and
military spouses
   
(image) IMAGE
   
Training Top 100
for staff.learning and development programs
Best Place to Work
for a commitment to equality in the workplace
   
(image) IMAGE
   
To learn more about these and other awards as well as other ways  IMAGE
we participate in our communities, please visit about.navient.com/values-and-people
     

 

 

 

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123 Justison Street
Wilmington, Delaware 19801

 

April 9, 2021

 

     

 

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS OF
NAVIENT CORPORATION 

     

 

To Our Shareholders:

 

Navient Corporation (“Navient” or the “Company”) will hold its 2021 Annual Meeting of Shareholders (the “Annual Meeting”) as follows:

 

  Date: Thursday, May 20, 2021
     
  Time: 8:00 a.m., Eastern Daylight Time
     
  Access: Meeting Live via the Internet
    Please visit www.virtualshareholdermeeting.com/NAVI2021

 

Items of Business:

 

(1) Elect the 9 nominees named in the proxy statement to serve as directors for one-year terms or until their successors have been duly elected and qualified;

(2) Ratify the appointment of KPMG LLP as Navient’s independent registered public accounting firm for 2021;

(3) Approve, in a non-binding advisory vote, the compensation paid to Navient’s named executive officers;

(4) Act on such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.

 

Record Date:

 

You may vote if you were a shareholder of record as of the close of business on March 23, 2021.

 

In the interest of the health and well-being of our shareholders and our employees, we have determined that the 2021 Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. If you plan to participate in the virtual meeting, please refer to instructions on page 6 of this proxy statement.

 

 

 

Your participation in the Annual Meeting is important. You can vote by telephone, Internet or, if you request that proxy materials be mailed to you, by completing and signing the proxy card enclosed with those materials and returning it in the envelope provided. If you wish to attend and participate in the virtual meeting, you must provide evidence of your ownership as of March 23, 2021, or a valid proxy showing that you are representing a shareholder who owned shares as of that date.

 

Thank you for your interest in Navient.

 

    By Order of the Board of Directors,
     
     IMAGE
    Mark L. Heleen
    Secretary

 

 

 

 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 20, 2021.

 

This notice and proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) are available free of charge at and http://materials.proxyvote.com.

 

You may also obtain these materials at the Securities and Exchange Commission (“SEC”) website at www.sec.gov or by contacting the Office of the Corporate Secretary, 123 Justison Street, Wilmington, Delaware 19801. Navient will provide a copy of our Form 10-K without charge to any shareholder upon written request. 

  Except to the extent specifically referenced herein, information contained or referenced on our website is not incorporated by reference into and does not form a part of this proxy statement.  

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Our shareholder letter and this proxy statement contain forward-looking statements, within the meaning of the Federal securities laws, about our business and prospects. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “should,” “may,” “could,” “likely” or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Our future results may differ materially from our past results and from those projected in the forward-looking statements due to various uncertainties and risks, including, but not limited to, those described in Item 1A of Part I (Risk Factors) of our 2020 Form 10-K . We disclaim any obligation to update any forward-looking statements contained herein after the date of this proxy statement. 

 

 

 

 

Table of Contents

 

PROXY SUMMARY 1
   
Annual Meeting of Shareholders 1
Meeting Agenda Voting Matters 1
Board and Governance Practices 2
Board of Directors Composition 3
Director Nominees 4
   
GENERAL INFORMATION 5
   
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING 6
   
OVERVIEW OF PROPOSALS 11
   
PROPOSAL 1 — ELECTION OF DIRECTORS 12
   
CORPORATE GOVERNANCE 21
   
Role and Responsibilities of the Board of Directors 21
Board Governance Guidelines 21
Board Leadership Structure 22
Board Succession Planning 22
Management Succession Planning 22
Director Independence 23
Board of Directors Meetings and Attendance at Annual Meeting 23
Committee Membership 23
Compensation Consultant and Independence 26
Compensation Committee Interlocks and Insider Participation 26
The Board of Directors’ Role in Risk Oversight 27
Risk Assessment of Compensation Policies 29
Nominations Process 29
Proxy Access 30
Director Orientation and Continuing Education 30
Our Commitment to Environment, Social and Governance (“ESG”) Matters 31
Policy on Political Contributions, Disclosure and Oversight 32
Code of Business Conduct 32
Policy on Review and Approval of Transactions with Related Parties 32
   
DIRECTOR COMPENSATION 33
   
Director Compensation Elements 33
Share Ownership Guidelines 33
Anti-Hedging and Pledging Policy 34
Policy on Rule 10b5-1 Trading Plans 34
Other Compensation 34
Deferred Compensation Plan for Directors 34

 

9 

 

Director Compensation Table 35
   
PROPOSAL 2 — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 37
   
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 38
   
Fees Paid to Independent Registered Public Accounting Firms for 2020 and 2019 38
Pre-approval Policies and Procedures 38
   
REPORT OF THE AUDIT COMMITTEE 39
   
OWNERSHIP OF COMMON STOCK 40
   
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS 41
   
EXECUTIVE OFFICERS 43
   
PROPOSAL 3 — ADVISORY VOTE ON EXECUTIVE COMPENSATION 44
   
EXECUTIVE COMPENSATION 45
   
Compensation and Personnel Committee Report 45
Compensation Discussion and Analysis 46
Summary Compensation Table 64
Grants of Plan-Based Awards 66
Outstanding Equity Awards at Fiscal Year End 67
Option Exercises and Stock Vested 69
Pension Benefits 69
Non-Qualified Deferred Compensation 69
Arrangements with Named Executive Officers 70
Potential Payments upon Termination or Change in Control 71
Actual Payments Upon Termination 73
CEO Pay Ratio 73
   
OTHER MATTERS 74
   
Certain Relationships and Related Transactions 74
Other Matters for the 2021 Annual Meeting 74
Delinquent Section 16(a) Reports 74
Shareholder Proposals for the 2022 Annual Meeting 75
Proxy Access Procedures 75
Solicitation Costs 75
Householding 75

 

10 

 

Proxy Summary

 

This summary is intended as an overview of the information found elsewhere in this proxy statement. Because this is only a summary, you should read the entire proxy statement before voting.

 

Annual Meeting of Shareholders

 

     
DATE AND TIME: LOCATION: RECORD DATE:
May 20, 2021 Virtual Meeting Only March 23, 2021
8:00 a.m. local time Live via the Internet  
  Please Visit www.virtualshareholdermeeting.com/NAVI2021  
     

 

Meeting Agenda Voting Matters  

 

This year, there are three Company-sponsored proposals on the agenda.

 

Election of a director nominee pursuant to Proposal 1 will require the vote of a majority of the votes cast with respect to that director nominee’s election, meaning that the number of votes cast for such director nominee’s election must exceed the number of votes cast against that nominee’s election (with abstentions and broker non-votes not counted as votes cast either for or against the nominee’s election).

 

Approval of Proposals 2 and 3 at the Annual Meeting will require an affirmative vote of at least a majority of the votes present, represented and entitled to be voted on the matter, and voting affirmatively or negatively.

 

  Proposals Board Voting Recommendations Page
       
1. Election of each director nominee FOR EACH NOMINEE 12
       
2. Ratification of the appointment of KPMG as Navient’s independent registered public accounting firm for 2021 FOR 37
       
3. Non-binding advisory shareholder vote to approve the compensation paid to our named executive officers FOR 44

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC)  1

 

 

11 

 

Board and Governance Practices

 

Corporate Governance Highlights

 

We believe our corporate governance policies reflect best practices. In addition to executive compensation practices that strongly link pay and performance, Navient’s Code of Business Conduct and Board of Directors governance policies help to ensure that we meet high standards of ethical behavior, corporate governance and business conduct. The following chart highlights key Board information and governance practices in place on December 31, 2020.

 

Governance Oversight

   Independent Chair

 

    Eight Independent Directors (out of nine)

 

    All Board Committees (other than the Executive Committee) are comprised solely of Independent Directors

 

    Proxy Access

 

    Regular executive sessions of Independent Directors

 

    Majority voting for Directors (uncontested elections)

 

Board Effectiveness

    Strong commitment to Board diversity of perspective, gender, race and ethnicity

 

    Robust risk oversight framework to assess and oversee risks

 

    Annual Election for all Board members

 

    Annual Self-Evaluation of the Board and each Committee

 

    Active Board and Management Succession Planning

 

Executive Compensation Oversight

    Double-Trigger Change in Control

 

    Long-Term Incentive Metrics Designed to Promote Growth and Sustainable Profitability

 

    Pay-for-Performance Philosophy Emphasizes “At Risk” Pay and Equity-Based Incentives

  

    Enhanced Compensation Recovery/Clawback Policy

 

    No Excessive Perquisites

 

    Multi-year Vesting Periods for Equity Awards

 

    No Tax Gross-Ups Upon Change-in-Control

 

    Anti-Hedging and Pledging Policy

 

    No Executive Employment Agreements

 

    Executive Stock Ownership Guidelines

 

 

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12 

 

Board of Directors Composition

 

The composition of our Board reflects a breadth and variety of skills, business experiences and backgrounds.

 

The composition of our Board reflects the great wealth of experience and skills of our directors. The following table highlights each director’s specific skills, knowledge and experiences that he or she brings to the Board. A particular director may possess additional skills, knowledge or experience even though they are not indicated below.

 

  Frederick
Arnold
Anna
Escobedo
Cabral
Larry A.
Klane
Katherine A.
Lehman
Linda A.
Mills
John (Jack) F.
Remondi
Jane J.
Thompson
Laura S.
Unger
David L.
Yowan
Skills and Experience                  
Board of Directors Experience X X X X X X X X X
Industry Experience (1) X   X   X X X   X
Executive Leadership X X X X X X X X X
Business Operations X   X X X X X X X
Finance/Capital Allocation X X X X X X X   X
Financially Literate (2) X X X X X X X X X
Audit Committee Financial Expert (3) X   X X X X     X
Regulatory/Policy/Legal X X     X X X X X
Mergers/Acquisitions X   X X X X X X X
Higher Education   X     X X X    
Human Capital Management/Compensation X X X X X X X   X
Corporate Governance X X X X X X X X X
Technology/Systems         X X     X

 

(1) Directors with professional experience in the financial services, consumer lending or business processing services industries.

(2) Directors who are able to read and understand financial statements.

(3) Directors determined by the Board to be audit committee financial experts, as that term is defined under rules promulgated by the SEC.

 

Board Diversity Age of Director Nominees Tenure of Director Nominees
 

 

 

For more information about our governance programs and our Board of Directors, see Proposal 1 beginning on page 12.

 

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13 

 

Director Nominees

 

    Director     Standing
Committee Memberships(2)
Other
Public
Name Age(1) Since Occupation and Experience Independent EC AC CC NGC RC Boards
Frederick Arnold 67 2018 Financial Executive Yes   M     M 1
Anna Escobedo Cabral 61 2014 Partner, Cabral Group, LLC Yes   M   M   0
Larry A. Klane 60 2019 Co-Founding Principal, Pivot Investment Partners LLC Yes     M   M 1
Katherine A. Lehman 46 2014 Managing Partner, Hilltop Private Capital, Private Equity Investor Yes M   M   C 1
Linda A. Mills 71 2014 President, Cadore Group LLC Yes C         1
John (Jack) F. Remondi 58 2013 President and Chief Executive Officer, Navient No M         1
Jane J. Thompson 69 2014 CEO, Jane J. Thompson Financial Services Yes M   C M   0
Laura S. Unger 60 2014 President, Unger, Inc. Yes M M   C   2
David L Yowan 64 2017 EVP and Corporate Treasurer American Express Company Yes M C     M 0

 

(1) Ages are as of April 9, 2021.

(2) Membership as of December 31, 2020.

 

EC Executive Committee NGC Nominations and Governance Committee C Chair
AC Audit Committee RC Risk Committee M Member
CC Compensation and Personnel Committee        

 

Additional information about our director nominees, including summaries of their business and leadership experience, skills and qualifications, can be found in the director biographies that begin on page 13 of this proxy statement.

 

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14 

 

 

General Information

 

Navient Corporation (“Navient,” the “Company,” “we,” “our” or “us”) is furnishing this proxy statement to solicit proxies on behalf of the Board of Directors (the “Board of Directors” or “Board”) for use at our 2021 Annual Meeting of Shareholders (the “Annual Meeting”). In light of the continuing impact of COVID-19, this year’s Annual Meeting will be a virtual meeting conducted solely via live webcast. You will be able to attend the Annual Meeting, vote your shares electronically, and submit questions during the meeting by visiting a special website established for this purpose: www.virtualshareholdermeeting.com/NAVI2021. You will not be able to attend the Annual Meeting in person. A copy of the Notice of 2021 Annual Meeting of Shareholders accompanies this proxy statement. This proxy statement is being sent or made available, as applicable, to our shareholders beginning on or about April 9, 2021.

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 5

 

 

 

Questions and Answers about the Annual Meeting and Voting

 

Why is this year’s Annual Meeting being held as a virtual only meeting?

 

 

This year’s Annual Meeting will again be held as a virtual only meeting in light of the continuing impact of COVID-19. Holding the Annual Meeting as a virtual only meeting allows us to reach the broadest number of shareholders while maintaining our commitment to health and safety.

 

Who is entitled to attend and vote at the Annual Meeting?

 

 

Only shareholders who owned shares of Navient’s Common Stock, par value $0.01 per share (“Common Stock”), at the close of business on March 23, 2021, the record date for the Annual Meeting, are entitled to notice of, and to vote at, the Annual Meeting. Navient’s Common Stock is listed on the Nasdaq Stock Market (“Nasdaq”) under the symbol “NAVI.” On March 23, 2021, 180,458,782 shares of Common Stock were outstanding and eligible to be voted. Each share of Common Stock is entitled to one vote with respect to each matter on which holders of Common Stock are entitled to vote.

 

How do I attend the Annual Meeting?

 

 

This year’s Annual Meeting will once again be a virtual only meeting conducted solely via live webcast.

 

To participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/NAVI2021 and enter the sixteen-digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card. The live webcast will begin at 8:00 a.m. EDT on Thursday, May 20, 2021. We encourage you to access the virtual meeting platform at least 15 minutes prior to the start time. If you do not have a sixteen-digit control number, you will still be able to access the webcast as a guest, but will not be able to vote your shares or ask a question during the meeting.

 

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and mobile phones) running the most updated version of applicable software and plugins. Participants should ensure they have a strong WiFi connection wherever they intend to participate in the meeting. Further instructions on how to attend and participate in the Annual Meeting, including how to demonstrate proof of stock ownership, will be posted on the virtual meeting website.

 

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. Technical support will be available on the virtual meeting platform beginning at 7:00 a.m. EDT on the day of the meeting and will remain available until thirty minutes after the meeting has finished.

 

Why did I receive a “Notice Regarding the Availability of Proxy Materials”?

 

 

Navient furnishes proxy materials to its shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. By doing so, we save money and reduce our environmental impact. On or about April 9, 2021, Navient will mail a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to certain of the Company’s shareholders. The Notice of Internet Availability contains instructions on how to access Navient’s proxy materials and vote online or vote by telephone. The Notice of Internet Availability also contains a 16-digit control number that you will need to vote your shares. If you previously chose to receive Navient’s proxy materials electronically, you will continue to receive access to these materials via an e-mail that provides electronic links to these documents unless you elect otherwise.

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 6

 

 

 

How do I request paper copies of the proxy materials?

 

 

You may request paper copies of the proxy materials for the Annual Meeting by following the instructions included on your Notice of Internet Availability or listed at www.proxyvote.com, by telephoning 1-800-579-1639, or by sending an e-mail to sendmaterial@proxyvote.com.

 

What is the difference between holding shares as a beneficial owner in street name and as a shareholder of record?

 

 

If your shares are held in street name through a broker, bank, trustee or other nominee, you are considered the beneficial owner of those shares. As the beneficial owner, you have the right to direct your broker, bank, trustee or other nominee how to vote your shares. Without your voting instructions, your broker, bank, trustee or other nominee may only vote your shares on proposals considered to be routine matters. The only routine matter being considered at the Annual Meeting is Proposal 2 (relating to the ratification of the independent registered public accounting firm). Proposals 1 and 3 are considered non-routine matters. For non-routine matters, your shares will not be voted without your specific voting instructions. We encourage you to vote your shares.

 

If your shares are registered directly in your name with Navient’s transfer agent, Computershare, you are considered to be a shareholder of record with respect to those shares. As a shareholder of record, you have the right to grant your voting proxy directly to Navient’s Board of Directors or to a third party, or to vote at the Annual Meeting.

 

What if I hold my shares in street name and I do not provide my broker, bank, trustee or other nominee with instructions about how to vote my shares?

 

 

You may instruct your broker, bank, trustee or other nominee on how to vote your shares using any of the methods described above. If you do not provide them with instructions on how to vote your shares prior to the Annual Meeting, they will have discretionary authority to vote your shares only with respect to routine matters. Only Proposal 2 (relating to the ratification of the independent registered public accounting firm) is considered to be a routine matter, and your broker, bank, trustee or other nominee will not have discretion to vote your shares with respect to Proposals 1 or 3. If you do not give your instructions on how to vote your shares on Proposals 1 or 3, your shares will then be referred to as “broker non-votes” and will not be counted in determining whether Proposal 1 or 3 is approved. Please participate in the election of directors and vote on all the proposals by returning your voting instructions to your broker, bank, trustee or other nominee.

 

How do I vote shares of Common Stock held in my 401(k) Plan?

 

 

If you participate in the Navient 401(k) Savings Plan, you may vote the number of shares equivalent to your interest in the plan’s company stock fund, if any, as credited to your account on the record date. You will need to instruct the 401(k) Savings Plan trustee by telephone, internet or by mail on how to vote your shares. Voting instructions must be received no later than 5:00 p.m., Eastern Daylight Time, on May 15, 2021. If you own shares through the Navient 401(k) Savings Plan and do not provide voting instructions with respect to your plan shares, the trustee will vote your plan shares on each proposal in the same proportion as other plan shares are being voted.

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 7

 

 

 

How do I vote?

 

 

Navient encourages shareholders to vote in advance of the Annual Meeting, even if you plan to attend the Annual Meeting. You may vote in one of the following ways: 


         
VOTE BY INTERNET BEFORE THE MEETING Description: D:\Job Folder\Ashwin\2021\April\03\SUH_nc10022777x1 -- DEF 14A -- Navient Corp_V1\5.
              Final\nc10022777x1_img021.jpg Vote your shares at www.proxyvote.com. Votes submitted via the Internet must be received by 11:59 p.m., Eastern Daylight Time, on May 19, 2021. Please have your Notice of Internet Availability or proxy card available when you log on. Description: D:\Job Folder\Ashwin\2021\April\03\SUH_nc10022777x1 -- DEF 14A -- Navient Corp_V1\5.
              Final\nc10022777x1_img025.jpg If you hold shares directly in your name as a  shareholder of record, you may either vote or be represented by another person at the Annual Meeting by executing a legal proxy designating that person as your proxy to vote your shares. If you hold your shares in street name, you must obtain a legal proxy from your broker, bank, trustee or other nominee and present it to the inspector of elections with your ballot to be able to vote at the Annual Meeting. To request a legal proxy, please follow the instructions at www.proxyvote.com
         
VOTE BY PHONE Description: D:\Job Folder\Ashwin\2021\April\03\SUH_nc10022777x1 -- DEF 14A -- Navient Corp_V1\5.
              Final\nc10022777x1_img022.jpg Call the toll-free number (1-800-690-6903). You may call this toll-free telephone number, which is available 24-hours a day, and follow the pre-recorded instructions. Please have your Notice of Internet Availability or proxy card available when you call. If you hold your shares in street name, your broker, bank, trustee or other nominee may provide you additional instructions regarding voting your shares by telephone. Votes submitted telephonically must be received by 11:59 p.m., Eastern Daylight Time, on May 19, 2021.    
           
VOTE BY MAIL Description: D:\Job Folder\Ashwin\2021\April\03\SUH_nc10022777x1 -- DEF 14A -- Navient Corp_V1\5.
              Final\nc10022777x1_img023.jpg If you hold your shares in a street name through a broker, bank, trustee or other nominee and want to vote by mail, you must request paper copies of the proxy materials. Once you receive your paper copies, you will need to complete, sign and date the voting instruction form and return it in the prepaid return envelope provided. Your voting instruction form must be received no later than the close of business on May 19, 2021.      
           
VOTE BY INTERNET DURING THE MEETING Description: D:\Job Folder\Ashwin\2021\April\03\SUH_nc10022777x1 -- DEF 14A -- Navient Corp_V1\5.
              Final\nc10022777x1_img024.jpg

Go to www.virtualshareholdermeeting.com/NAVI2021.  

 

Vote must be submitted by the close of polls during the Annual Meeting. 

     
           

  

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How do proxies work?

 

 

Navient’s Board of Directors is requesting your proxy. Giving your proxy means that you authorize the persons named as proxies therein to vote your shares at the Annual Meeting in the manner you specify in your proxy (or to exercise their discretion as described herein). If you hold your shares as a record holder and sign and return a proxy card but do not specify how to vote on a proposal, the persons named as proxies will vote your shares in accordance with the Board of Directors’ recommendations. The Board of Directors has recommended that shareholders vote:

 

“FOR” the election of each of the director nominees named in Proposal 1;

 

“FOR” ratification of the appointment of Navient’s independent registered public accounting firm, as set forth in Proposal 2; and

 

“FOR” approval, on a non-binding advisory basis, of the compensation paid to our named executive officers as set forth in this proxy statement as Proposal 3.

 

Giving your proxy also means that you authorize the persons named as proxies to vote on any other matter properly presented at the Annual Meeting in the manner they determine is appropriate. Navient does not know of any other matters to be presented at the Annual Meeting as of the date of this proxy statement.

 

Can I change my vote?

 

 

Yes. If you hold your shares as a record holder, you may revoke your proxy or change your vote at any time prior to the final tallying of votes by:

 

Delivering a written notice of revocation to Navient’s Corporate Secretary at the Office of the Corporate Secretary, 123 Justison Street, Wilmington, Delaware 19801;

 

Submitting another timely vote via the Internet, by telephone or by mailing a new proxy (following the instructions listed under the “How do I vote?” section above); or

 

If you are eligible to vote during the Annual Meeting, you also can revoke your proxy or voting instructions and change your vote during the Annual Meeting by logging into the website at www.virtualshareholdermeeting.com/NAVI2021 and following the voting instructions.

 

If your shares are held in street name, you need to contact your broker, bank, trustee or nominee for instructions on how to revoke or change your voting instructions. Virtual attendance at the Annual Meeting constitutes presence in person for purposes of quorum at the Annual Meeting.

 

What constitutes a quorum?

 

 

A quorum of shareholders is necessary to transact business at the Annual Meeting. A quorum will exist when the holders of a majority of the shares of Common Stock entitled to vote are deemed present or represented by proxy, including proxies on which abstentions (withholding authority to vote) are indicated. Abstentions and broker non-votes will be counted in determining whether a quorum exists.

 

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What vote is necessary to approve each matter to be voted on at the Annual Meeting?

 

 

The following table provides a summary of the voting criteria for the Board’s voting recommendations for the matters on the agenda for the 2021 Annual Meeting:

 

Proposal Voting Options Vote Required for Abstentions Broker Broker Board's Voting
Approval Non-Votes Discretionary Recommendation
Vote
Permitted
1. Election of Directors "FOR" or Affirmative vote of the NOT NOT NO FOR
"AGAINST" holders of a majority COUNTED COUNTED the election of
of the votes cast. each of the
director
nominees
               
2. Ratify the appointment "FOR" or Affirmative vote of the COUNTED NOT YES FOR
of KPMG LLP as "AGAINST" or holders of a majority as votes COUNTED
Navient’s independent "ABSTAIN" of shares deemed Against
registered public from voting present or represented
accounting firm for by proxy and entitled
2021 to vote on the
proposal.
               
3.    Approve, in a non- "FOR" or Affirmative vote of the COUNTED NOT NO FOR
binding advisory vote, "AGAINST" or holders of a majority as votes COUNTED
the compensation paid "ABSTAIN" of shares deemed Against
to Navient’s named from voting present or represented
executive officers by proxy and entitled
to vote on the
proposal.
               

 

Who will count the vote?

 

 

Votes will be tabulated by an independent inspector of elections.

 

Who can attend the Annual Meeting?

 

 

Only shareholders as of the record date, March 23, 2021, or their duly appointed proxies, may attend. No guests will be allowed to attend the Annual Meeting.

 

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Overview of Proposals

 

This proxy statement contains three proposals requiring shareholder action, each of which is discussed in more detail below.

 

Proposal 1 requests the election of the director nominees named in this proxy statement to the Board of Directors.

 

Proposal 2 requests ratification of the appointment of KPMG LLP as Navient’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

 

Proposal 3 requests the approval, in a non-binding advisory vote, of the compensation paid to our named executive officers as set forth in this proxy statement.

 

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Proposal 1 — Election of Directors

 

Under the Navient Bylaws (the “Bylaws”), the Board of Directors has the authority to determine the size of the Board of Directors and to fill any vacancies that may arise prior to the next annual shareholder meeting. Although the Board has the authority to change its size at any time, currently the Board has set the size of our Board at 9.

 

On April 1, 2021, the Nominations and Governance Committee recommended and the Board of Directors nominated the following directors for election at the Annual Meeting:

 

Frederick Arnold

Anna Escobedo Cabral

Larry A. Klane

Katherine A. Lehman

Linda A. Mills

John (Jack) F. Remondi

Jane J. Thompson

Laura S. Unger

David L. Yowan

 

Biographical information and qualifications and experience for each nominee appear beginning on the next page.

 

In addition to fulfilling the general criteria for director nominees described in the section titled “Nominations Process,” each nominee possesses experience, skills, attributes and other qualifications that the Board of Directors has determined support its oversight of Navient’s business, operations and structure. These qualifications are discussed beginning on the next page along with biographical information regarding each member of the Board of Directors being nominated, including each individual’s age, principal occupation and business experience during the past five years. Information concerning each director is based in part on information received from him or her and in part from Navient’s records.

 

All nominees listed above have consented to being named in this proxy statement and to serve if elected. Should any nominee subsequently decline or be unable to accept such nomination to serve as a director, an event that the Board of Directors does not now expect, the Board of Directors may designate a substitute nominee or the persons voting the shares represented by proxies solicited hereby may vote those shares for a reduced number of nominees. If the Board of Directors designates a substitute nominee, persons named as proxies will vote “FOR” that substitute nominee.

 

Navient’s Bylaws generally provide that the election of a director nominee will be by a majority of the votes cast and voting affirmatively or negatively with respect to the nominee at a meeting for the election of directors at which a quorum is present. Accordingly, a director nominee will be elected to the Board of Directors if the number of shares voted “FOR” the nominee exceeds the number of votes cast “AGAINST” the nominee’s election, without regard to abstentions or broker non-votes. Shares that are not voted affirmatively or negatively in the election of directors, including abstentions and broker non-votes, have no direct effect in the election of directors. Those shares, however, are taken into account in determining whether a sufficient number of shares are present to establish a quorum.

 

If any director nominee fails to receive a majority of the votes cast “FOR” in an uncontested election, that nominee has agreed to automatically tender his or her resignation upon certification of the election results. If such an event were to occur, Navient’s Nominations and Governance Committee will make a recommendation to the Board of Directors on whether to accept or reject such nominee’s resignation. The Board of Directors will act on the recommendation of the Nominations and Governance Committee and publicly disclose its decision and the rationale behind it within 90 days from the date of certification of the election results.

 

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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

 

Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Jack Remondi, 58

  

Director since

May 2013

President and Chief Executive Officer

Navient Corporation

 

Directorships of Other Public Companies:

CubeSmart Real Estate Investment Trust (NYSE: CUBE) — 2009 to present

 

Former Directorships of Other Public Companies:

SLM Corporation

 

Other Professional and Leadership Experience:

Chairman, Reading is Fundamental

Trustee, Nellie Mae Education Foundation

 

Skills, Experience and Qualifications:

Mr. Remondi has been the Company’s President and Chief Executive Officer since April 2014. He was SLM Corporation’s President and Chief Executive Officer from May 2013 to April 2014, President and Chief Operating Officer from January 2011 to May 2013 and its Vice Chairman and Chief Financial Officer from January 2008 to January 2011.

 

Mr. Remondi has a nearly 30-year history in the student loan and business services industry with Navient and its predecessors, in a variety of leadership roles, including as chief executive officer, chief operating officer and chief financial officer. He has the in-depth knowledge of our industry, customers, investors and competitors, as well as the relationships, to lead our company. Mr. Remondi brings to our Board of Directors a unique historical perspective of Navient, its operations and the evolution of the student loan industry, and he provides valuable insights to our Board in the areas of finance, accounting, portfolio management, business operations and student/consumer lending.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

  

Linda Mills, 71

 

Chair of the Board since

June 2019

 

Director since

May 2014

President

Cadore Group LLC

 

Business Experience:

President, Cadore Group LLC, a management and IT consulting company — 2015 to present

Corporate Vice President, Operations, Northrop Grumman — 2013 to 2015

Corporate Vice President & President, Information Systems and Information Technology Sectors, Northrop Grumman — 2008 to 2012

 

Directorships of Other Public Companies:

American International Group, Inc. (NYSE: AIG) — 2015 to present

 

Other Professional and Leadership Experience:

Board Member Emeritus, Smithsonian National Air & Space Museum

Former Member, Board of Visitors, University of Illinois, College of Engineering

Former Senior Advisory Group and Board Member, Northern Virginia Technology Council

Former Board Member, Wolf Trap Foundation for the Performing Arts

 

Skills, Experience and Qualifications: 

Ms. Mills’ extensive experience in leading businesses and operations for large, complex multinational companies brings a valuable perspective to our Board of Directors in the areas of operations, financial management, strategic re-positioning, risk management, technology, federal, state and local government contracting, and cybersecurity risk. Through insights gained as a director on the board of another large, publicly traded corporation in a highly regulated industry, as well as her service on many nonprofit boards, Ms. Mills brings a unique and wide range of valuable strategic and operational perspectives to our Board.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Frederick Arnold, 67

 

Director since 

August 2018

Financial Executive

 

Business Experience:

Chief Financial Officer, Convergex Group, LLC — July 2015 to May 2017

Executive Vice President and Chief Financial Officer, Capmark Financial Group, Inc. — September 2009 to January 2011

Executive Vice President of Finance, Masonite Corporation — February 2006 to September 2007

Executive Vice President, Strategy and Development, Willis North America — 2001 to 2003

Chief Administrative Officer, Willis Group Holdings Ltd. — 2000 to 2001

Chief Financial and Administrative Officer, Willis North America — 2000

 

Directorships of Other Public Companies:

Valaris plc (OTC: VALPQ) — 2019 to Present

 

Former Directorships of Other Public Companies:

Syncora Holdings Ltd.

FS KKR Capital Corp.

Corporate Capital Trust

CIFC Corp.

 

Other Professional and Leadership Experience:

Current Chairman of the Board, Lehman Brothers Holdings Inc.

Former Director, The We Company

Former Director, Lehman Commercial Paper Inc.

 

Skills, Experience and Qualifications:

Mr. Arnold spent 20 years as an investment banker primarily at Lehman Brothers and Smith Barney, where he served as managing director and head of European corporate finance. His experience originating and executing mergers and acquisitions and equity financings across a wide variety of industries and geographies, as well as his other board experience, brings a valuable perspective to our Board of Directors. Subsequent to his employment at Lehman Brothers and Smith Barney, Mr. Arnold spent 15 years in various senior financial positions at a number of private equity-owned portfolio companies.



 

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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Anna Escobedo Cabral, 61

 

Director since 

December 2014

Partner

Cabral Group, LLC

 

Business Experience:

Partner, Cabral Group — 2018 to present

Senior Advisor, Inter-American Development Bank — 2009 to 2018

Treasurer of the United States, U.S. Department of the Treasury — 2004 to 2009 Director, Smithsonian Institution’s Center for Latino Initiatives — 2003 to 2004 CEO, Hispanic Association on Corporate Responsibility — 1999 to 2003

Deputy Staff Director & Chief Clerk, U.S. Senate Committee on the Judiciary — 1993 to 1999

Executive Staff Director, U.S. Senate Republican Conference Task Force on Hispanic Affairs — 1991 to 1999

 

Other Professional and Leadership Experience:

Vice Chair, Hispanic Diversity Advisory Committee, Comcast NBCU Trustee, Jessie Ball duPont Fund

Chair, BBVA Microfinance Foundation Board

Former Member, NatureBridge Regional Advisory Committee

Former Member, NatureBridge Board of Directors

Former Chair, Financial Services Roundtable Retirement Security Council

Former Member, Providence Hospital Foundation Board

Former Member, American Red Cross Board of Directors

Former Member, Sewall Belmont House Board of Directors

Former Member, Martha’s Table Board of Directors

 

Skills, Experience and Qualifications:

Through her extensive experience in public policy, government, public affairs, corporate social responsibility, international development, and financial literacy, as well as her experience as a chief operating officer in the nonprofit sector, Ms. Cabral provides our Board with insights and judgment regarding regulatory policy and the political and legislative process.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Larry A. Klane, 60

 

Director since

May 2019

Co-Founding Principal 

Pivot Investment Partners LLC

 

Business Experience:

Global Financial Institutions Leader, Cerberus Capital Management — 2012 to 2013 Chair, Korea Exchange Bank — 2010 to 2012

CEO, Korea Exchange Bank — 2009 to 2012

President of Global Financial Services, Capital One — 2000 to 2008 Managing Director, Bankers Trust/Deutsche Bank — 1994 to 2000

 

Directorships of Other Public Companies:

The Real Brokerage, Inc. (TSX-V: REAX; OTCQX: REAXF) — June 2020 to present

 

Former Directorships of Other Public Companies:

VeriFone Systems, Inc.

Korea Exchange Bank

Aozora Bank Ltd.

 

Other Professional and Leadership Experience:

Director, Goldman Sachs Bank USA

Former Director, Nexi Group S.p.A.

Former Director, Ethoca Limited

 

Skills, Experience and Qualifications:

Mr. Klane brings an important strategic and operational perspective to our Board given his extensive background in financial services and payment services, including his service in various leadership positions in the financial services industry.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Katherine A. Lehman, 46

 

Director since 

November 2014

Private Equity Investor

 

Business Experience:

Managing Partner, Hilltop Private Capital — 2016 to Present

Managing Director and Deal Team Leader, Lincolnshire Management — 2009 to 2016 Other Investment Roles, Lincolnshire Management — 2001 to 2009

 

Directorships of Other Public Companies:

Stella-Jones (TSX: SJ) — 2016 to present Chair of the Board

 

Other Professional and Leadership Experience:

Director, American Track Services

Director, Spiral Holding

Director, Bloom Engineering

Former Board Member, The Robert Toigo Foundation

Former Board Member, True Temper Sports

Former Board Member, Gruppo Fabbri

Former Board Member, PADI Holding Company

Former Board Member, Bankruptcy Management Solutions

 

Skills, Experience and Qualifications:

Ms. Lehman’s experience in private equity and financial services, along with her investment evaluation, portfolio oversight and board experience enable her to provide strategic and operational expertise in the areas of finance, review and analysis of investments, capital allocation, mergers and acquisitions, integration and operations, accounting and business, which assist our Board of Directors in evaluating our business and growth plans.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

  

 

Jane J. Thompson, 69

 

Director since

March 2014

Chief Executive Officer

Jane J. Thompson Financial Services LLC

 

Business Experience:

Chief Executive Officer, Jane J. Thompson Financial Services LLC, a management consulting firm — 2011 to present

President, Financial Services, Walmart Stores, Inc. — 2002 to 2011 

Executive  Vice  President,  Credit,  Home  Services,  Online  and  Corporate  Planning, Sears, Roebuck and Co. — 1988 to 1999 

Consultant/Partner, McKinsey & Company — 1978 to 1988

 

Former Directorships of Other Public Companies:

Mitek Systems, Inc.

OnDeck Capital, Inc.

Blackhawk Network Holdings, Inc.

VeriFone Systems, Inc.

The Fresh Market

 

Other Professional and Leadership Experience:

Former Chair, Pangea Universal Holdings, Inc.

Member, Commercial Club of Chicago

Former Member and Chair, The Chicago Network

Former Member and Board Member, The Economic Club of Chicago

Former Member, Center for Financial Services Innovation Board

Former Member, CFPB Consumer Advisory Board

Former Member and Chair, Boys & Girls Clubs of Chicago Board

Former Member, Lurie Children’s Hospital of Chicago Board of Trustees

Former Trustee, Bucknell University

Former Member, Corporate Advisory Board, Darden Graduate School of Business, University of Virginia

Former  Member,  Corporate  Advisory  Board,  Walton  Graduate  School  of  Business, University of Arkansas

 

Skills, Experience and Qualifications:

Ms. Thompson brings a unique depth and breadth of expertise to our Board of Directors in the areas of consumer behavior, financial services, consumer lending, finance and financial services regulation. She has extensive experience in consumer lending, as well as management experience with large, publicly traded businesses. Combined with other leadership roles in business—including service as a director of several public companies and as a member of various audit, compensation, risk management and governance committees—Ms. Thompson brings valuable insights to our Board in a variety of areas.



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Name and Age
Service as a Director Position, Principal Occupation, Business Experience and Directorships

 

 

Laura S. Unger, 60

  

Director since

November 2014

President

Unger, Inc.

 

Business Experience:

President, Unger, Inc., a financial services consulting firm — 2018 to present Special Advisor, Promontory Financial Group — 2010 to 2014

Independent Consultant to JPMorgan — 2003 to 2009

Commissioner, U.S. Securities and Exchange Commission — 1997 to 2002 (including six months as Acting Chairman)

Counsel, U.S. Senate Committee on Banking, Housing & Urban Affairs — 1990 to 1997

 

Directorships of Other Public Companies:

CIT Group (NYSE: CIT) — 2010 to present

Nomura Holdings, Inc. (NYSE: NMR) — 2018 to present

 

Former Directorships of Other Public Companies:

CA Technologies

Ambac Financial Group, Inc.

 

Other Professional and Leadership Experience:

Board Member, Children’s National Medical Center

Director, Nomura Holdings America

Director, Nomura Securities, Inc.

Director, Nomura Global Financial Products

 

Skills, Experience and Qualifications:

Ms. Unger has significant corporate governance expertise as a member or chair of boards and board committees of public companies and her service at the U.S. Securities and Exchange Commission. Her government, public policy and legal and regulatory experience, together with her extensive leadership experience at government agencies, provides our Board of Directors with perspectives into regulatory policy and the political and legislative process.



 

David L. Yowan, 64

 

Director since

March 2017

Consumer Financial Services Executive

American Express Company

 

Business Experience:

Executive Vice President and Treasurer, American Express Company — 2006 to present

Senior Treasury Management, American Express Company — 1999 to 2006 

Senior Vice President, North American Consumer Bank Treasury, Citigroup — 1987 to 1998

 

Skills, Experience and Qualifications:

Mr. Yowan’s extensive experience in consumer financial services including his long tenure with the world’s largest payment card issuer makes him a valuable addition to Navient’s Board of Directors. His insight and experience in risk management, balance sheet management, asset securitization and strategy make him ideally suited to assist our Board in overseeing financial, operational and credit risk management.



  

Board Recommendation

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.

 

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Corporate Governance

 

Role and Responsibilities of the Board of Directors

 

 

The Board of Directors believes strong corporate governance is critical to achieving Navient’s performance goals, enhancing shareholder value, and maintaining the trust and confidence of investors, employees, regulatory agencies and other stakeholders.

 

The primary responsibilities of the Board of Directors are to:

 

Review Navient’s long-term strategies and set long-term performance metrics;

 

Review and approve Navient’s annual business plan and multi-year strategic plan, regularly review performance against such plans and ensure alignment between the Company’s actions and its longer-term strategic objectives;

 

Review risks affecting Navient and its processes for managing those risks, and oversee management performance with regard to various aspects of risk management, compliance and governance;

 

Select, evaluate and compensate the Chief Executive Officer;

 

Plan for succession of the Chief Executive Officer and members of the executive management team;

 

Review and approve major transactions;

 

Through its Audit Committee, select and oversee Navient’s independent registered public accounting firm;

 

Oversee financial matters, including financial reporting, financial controls and capital allocation;

 

Recommend director candidates for election by shareholders and plan for the succession of directors; and

 

Evaluate the Board’s composition, succession, and effectiveness.

 

Board Governance Guidelines

 

 

The Board of Directors’ Governance Guidelines (the “Guidelines”) are reviewed, at least annually, by the Nominations and Governance Committee. The Guidelines can be found at www.navient.com under “Investors, Corporate Governance” and a written copy may be obtained by contacting the Corporate Secretary at corporatesecretary@navient.com. The Guidelines, along with Navient’s Bylaws, embody the following governance practices, among others:

 

A majority of the members of the Board of Directors must be independent directors and all members of the Audit, Compensation and Personnel, and Nominations and Governance Committees must be independent.

 

All directors stand for re-election each year and must be elected by a majority of the votes cast in uncontested elections.

 

No individual is eligible for nomination to the Board after the earlier of (i) their 75th birthday or (ii) after having served in the aggregate more than 20 years on the Board.

 

The Board of Directors has separated the roles of Chair of the Board and CEO, and an independent, non-executive director serves as Chair.

 

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Independent members of the Board of Directors and its committees meet in executive session, outside the presence of management or the CEO during each Board meeting as well as at the end of each Board and committee meeting. The Chair of the Board (or the applicable committee chair) presides over these sessions.

 

Navient maintains stock ownership and retention guidelines for directors and executive officers and has a policy prohibiting the hedging or pledging of its stock.

 

The Board of Directors and each committee conduct performance reviews annually through a combination of online questionnaires and individual director interviews.

 

The Board of Directors and its committees may engage their own advisors.

 

The Nominations and Governance Committee routinely conducts an assessment of director skillsets in light of the Company’s present and future businesses to ensure Board effectiveness. The Chair of the Board and the Chair of the Nominations and Governance Committee also meet with each director on an annual basis to assess Board effectiveness and engage in discussions regarding Board succession planning and director recruiting.

 

Board Leadership Structure

 

 

The Board of Directors has separated the roles of Chair of the Board of Directors and Chief Executive Officer, and the Board continues to believe that this structure properly balances the Board’s management and governance responsibilities. The Board of Directors also believes that its leadership structure has created an environment of open, transparent communication between the Board and management, enabling the Board to maintain an active, informed role in oversight by being able to monitor those matters that may present significant risks to Navient.

 

While it is the opinion of the Board of Directors that its leadership structure is appropriately balanced between promoting Navient’s strategic development with the Board’s management oversight function, in the future, when the Board contemplates either CEO succession or Board Chair succession, it may choose to change this governance structure at any time.

 

Board Succession Planning

 

 

Our Board Governance Guidelines provide that no individual is eligible for nomination to the Board after the earlier to occur of (i) their 75th birthday or, (ii) after they have served more than 20 years on the Board.1 The Board actively engages in succession planning and director recruiting to ensure that the size of the Board and the skills of the directors continue to align with our business strategy and the environment in which we operate. Each year the Chair of the Board and the Chair of the Nominations and Governance Committee meet with each director to engage in discussions regarding Board succession planning and director recruiting. In recruiting new directors, the Board seeks to achieve a diversity of gender, age, race, ethnicity, perspectives and experience.

 

Management Succession Planning

 

 

We have succession plans and talent management programs in place for our Chief Executive Officer and for our team of senior executives. Our senior management succession planning process is an organization-wide practice designed to proactively identify, develop and retain the leadership that is critical for future business success. We also look to promote diversity within our management team—in terms of gender, race, ethnicity, perspectives and other factors—as part of the management succession planning process.

 

 

1 Our Board Governance Guidelines state: “…individuals will not be nominated for election to the Board after the earlier to occur of (i) their 75th birthday or, (ii) after they have served more than 20 years on the Board.”

 

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The succession plan for our Chief Executive Officer is reviewed regularly by the Compensation and Personnel Committee and the other independent directors. The plan identifies a “readiness” level for each internal candidate and also incorporates the flexibility to define an external hire as a succession option. Formal succession planning for the rest of our senior leaders is also an ongoing process, which includes identifying a readiness level for each potential internal candidate and strategically planning for external hires for positions where gaps, if any, are identified.

 

Our emergency CEO succession plan is intended to respond to an immediate and unexpected position vacancy, including resulting from a major catastrophe. The plan allows the Company to continue safe and sound operation and minimizes potential disruption or loss of continuity to business and operations.

 

Director Independence

 

 

For a director to be considered independent, the Board of Directors must determine that the director does not have any direct or indirect material relationship with Navient that would interfere with the director’s exercise of independent judgment or that would render the director incapable of making a decision with only the best interests of the Company in mind. The Board of Directors has adopted the Guidelines, which include the standards for determining director independence. In addition to Delaware law requirements, the Guidelines conform to the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Nasdaq listing standards. The Guidelines can be found at www.navient.com under “Investors, Corporate Governance” and a written copy may be obtained by contacting the Corporate Secretary at corporatesecretary@navient.com.

 

At the end of 2020, the Board of Directors was comprised of 9 members, 8 of whom were affirmatively determined to be independent. The independent members of the Board of Directors at the end of fiscal 2020 were: Frederick Arnold; Anna Escobedo Cabral; Larry A. Klane; Katherine A. Lehman; Linda A. Mills; Jane J. Thompson; Laura S. Unger; and David L. Yowan. During 2020, and again in 2021, the Board of Directors determined that each of these individuals met the Nasdaq listing standards and Navient’s own director independence standards. In addition, the Board of Directors considered transactions and relationships between each director and any member of his or her immediate family on one hand, and Navient, on the other, to confirm that there were no transactions or relationships that would impair such director’s independence. Only Mr. Remondi was determined not to be independent.

 

Each member of the Board of Directors’ Audit, Compensation and Personnel, and Nominations and Governance Committees is independent within the meaning of the Nasdaq listing standards, Rule 10A-3 of the Exchange Act and Navient’s own director independence standards.

 

Board of Directors Meetings and Attendance at Annual Meeting

 

 

The full Board of Directors met 33 times in 2020. Each of our incumbent directors attended at least 91% of the total number of Board and committee meetings during his or her tenure on the Board and applicable committees, with the average attendance across all our incumbent directors being 98.4% in 2020. All directors attended the Company’s 2020 annual meeting of shareholders, other than Marjorie L. Bowen, who served on the Board in 2020 but did not stand for reelection at the 2020 Annual Meeting.

 

Committee Membership

 

 

The Board of Directors has established the following standing committees to assist in its oversight responsibilities: an Audit Committee, a Compensation and Personnel Committee, a Nominations and Governance Committee, a Risk Committee, and an Executive Committee. In 2020, the Board replaced an existing standing committee, the Finance and Operations Committee, with a new Risk Committee. The Risk Committee focuses primarily on oversight of the Company’s enterprise risk management infrastructure, including oversight of information security and cybersecurity matters. In connection with establishing the Risk Committee, the Nominations and Governance Committee reallocated the duties of the other standing committees to shift certain risk oversight responsibilities to this new committee, with other oversight responsibilities moving

 

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to the full Board. To better reflect the broad oversight responsibilities of the Compensation and Personnel Committee with respect to our workplace—including oversight of our strategy for promoting diversity, equity and inclusion in the workplace—the Board has committed to renaming this standing committee in 2021 the Compensation and Human Resources Committee.

 

Each standing committee is governed by a Board-approved written charter, which is evaluated annually, and which sets forth the respective committee’s functions and responsibilities. Membership of each of the committees is also changed as part of a regular rotation. Investors may find the current membership of the Board’s standing committees at https://www.navient.com/investors/corporate-governance/.

 

In 2020, as part of the Board’s regular governance practice, an 18-month work-plan was created from the charters of the Audit, Compensation and Personnel, Nominations and Governance, and Risk Committees so that the responsibilities of each committee would be addressed at appropriate times throughout the year. These work-plans will be reviewed and revised as a matter of course in 2021. Agendas for committee meetings are developed based on each committee’s work-plan together with other current matters the Board chair, the committee chair or management believes should be addressed at the meeting. The chair of each committee provides regular reports to the Board of Directors regarding the subject of the committee’s meetings and any committee actions.

 

The following table sets forth the membership and number of meetings held for each committee of the Board of Directors during 2020. This table reflects the membership of each committee as of December 31, 2020.2 It is the practice of the Board to hold its regular committee meetings in conjunction with the regular meetings of the Board. Given the Audit Committee’s responsibilities relating to our financial statements and financial reporting, it is expected that the Audit Committee will meet more often than the other committees.

 

Audit
Committee
Compensation
and
Personnel
Committee
Executive
Committee
Risk
Committee (1)
Nominations
and
Governance
Committee
Frederick Arnold X X
Anna Escobedo Cabral X X
Larry A. Klane X X
Katherine A. Lehman X X CHAIR
Linda A. Mills CHAIR
John F. Remondi X
Jane J. Thompson CHAIR X X
Laura S. Unger X X CHAIR
David L. Yowan (2) CHAIR X X
Number of Meetings in 2020 13 8 5 6 6

 

Chair = Committee Chair 

X = Committee Member

 

(1) In 2020, the Board replaced an existing standing committee, the Finance and Operations Committee, with a new Risk Committee.

(2) Mr. Yowan served on the Compensation and Personnel Committee until May 20, 2020, when he became a member of the Audit Committee. He was appointed Chair of the Audit Committee on July 2, 2020, succeeding Ms. Cabral.

 

Audit Committee

 

The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. During 2020, the Audit Committee, as set forth in its charter, assisted the Board of Directors in fulfilling its responsibilities by providing oversight relating to: (1) the integrity of Navient’s financial statements; (2) the Company’s system of internal controls; (3) the qualifications, performance and independence of Navient’s independent registered accounting firm; (4) the performance of the Company’s internal audit function; (5) risks related to Navient’s compliance, legal and regulatory matters; and (6) the review of related party transactions. In addition, the Audit Committee reviews the Company’s procedures for the receipt, retention and handling of confidential, anonymous complaints pertaining to accounting, internal accounting controls and auditing matters, including procedures for the periodic review of violations or waivers of compliance with the Company’s Code of Business Conduct, and prepares the report of the Audit Committee for Navient’s annual proxy statement, as

 

 

2 Marjorie L. Bowen served on the Board in 2020 but did not stand for reelection at the 2020 Annual Meeting. During her tenure on the Board, Ms. Bowen served on the Audit Committee and the Nominations and Governance Committee.

 

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required by the SEC. The Board of Directors has determined that two members of the Audit Committee, Mr. Yowan, the Committee Chair, and Mr. Arnold, qualify as audit committee financial experts, as that term is defined under the rules promulgated by the SEC. During 2020, no member of the Audit Committee served on the audit committee of more than three public companies.

 

Compensation and Personnel Committee

 

Pursuant to the provisions of its charter, which can be found on our website in full, the primary responsibilities of the Compensation and Personnel Committee (also referred to herein as the “Compensation Committee”) during 2020 were to: (1) approve or recommend, as appropriate, compensation, benefits and employment arrangements for Navient’s Chief Executive Officer and certain other executive officers who report to the CEO (collectively “Executive Management”), and independent members of the Board of Directors; (2) review and approve compensation plans, incentive plans and benefit plans applicable to Executive Management; (3) review, approve and administer all equity-based plans of the Company; (4) supervise the administration of employee benefit plans of Navient as required by law or the plan terms or as otherwise appropriate; (5) receive periodic reports regarding the Company’s compensation programs as they relate to all employees; (6) review Navient’s management development and recommend to the Board of Directors succession plans applicable to Executive Management; (7) review and consider current and developing compensation and personnel related topics as appropriate, including performance management, leadership development, turnover and retention, diversity, and employee engagement; (8) review Navient’s strategy for promoting diversity, equity and inclusion in the workplace; and (9) prepare the report of the Compensation Committee for inclusion in this proxy statement, as required. The Compensation Committee, in coordination with the Audit Committee, also reviews the report of management on the potential risks arising from Navient’s compensation policies and practices to determine whether such policies and practices are reasonably likely to have a material adverse effect on the Company.

 

The Compensation Committee considers executive officer and director compensation on an annual basis. In January or February of each year, after consultation with the independent chair and other independent directors, as well as its independent consultant, if one has been retained, the Compensation Committee approves the compensation of the Chief Executive Officer and Executive Management. At that time, the Compensation Committee also makes a recommendation to the Board of Directors regarding director compensation. The Compensation Committee reviews executive compensation as described in the “Compensation Discussion and Analysis” section of this proxy statement. In addition, throughout the year, the Compensation Committee considers executive compensation consistent with its responsibilities, as warranted by any personnel changes.

 

Risk Committee

 

During 2020, the Risk Committee assisted the Board of Directors, as required by its charter, by providing oversight with respect to: (1) the Company’s Enterprise Risk Management policy, standards and program; (2) material corporate finance matters, including investments, mergers and acquisitions, capital management, financing and funding strategy; (3) technology operations, information security and cybersecurity matters; (4) marketing and product development; (5) the Company’s lending programs; and (6) the Company’s information security program and cybersecurity. The Risk Committee also reviewed the financial risk profile of Navient, including capital market access, credit, interest rate, currency and programmatic/contractual risks and reviewed with management steps to manage those risks.

 

Nominations and Governance Committee

 

In accordance with its charter, the Nominations and Governance Committee assists the Board of Directors in establishing appropriate standards for the governance of Navient, the operations of the Board of Directors generally and the qualifications of directors. It recommends to the Board of Directors the director nominees for the annual meeting of shareholders; oversees the orientation of new directors and the ongoing education of the Board; recommends director assignments to the Board’s standing committees; oversees the Company’s reputational and political risks, including environment, social and governance (“ESG”) risks; supervises the Board’s self-evaluation and succession process; and reviews and recommends changes to the Board’s Governance Guidelines. Additionally, the Nominations and Governance Committee routinely benchmarks the Company’s governance practices against industry best practices and makes appropriate changes when necessary.

 

Each of the Committees’ charters is available at www.navient.com under “Investors, Corporate Governance.” Shareholders may obtain a written copy of a committee charter by contacting the Corporate Secretary at corporatesecretary@navient.com or Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801.

 

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Executive Committee

 

Since its creation, membership of the Executive Committee has included the committee chairs, the Chief Executive Officer and the Board chair. Under its charter, the Executive Committee has authority to act on behalf of the Board of Directors when the full Board of Directors is not available, and oversees the allocation of risk oversight responsibilities among Board committees. In conjunction with the Audit Committee, it also reviews with management the Company’s quarterly earnings and press releases.

 

Compensation Consultant and Independence

 

During 2020, the Compensation Committee retained Pearl Meyer as its independent compensation consultant (the “Compensation Consultant”).

 

The Compensation Consultant reported directly to the Compensation Committee, and the Compensation Committee retained authority to replace the Compensation Consultant or hire additional consultants at any time. A representative from the Compensation Consultant participated in meetings of the Compensation Committee and met with the committee without the presence of management, as requested, and directly communicated with the Chair of the Compensation Committee between meetings. However, the Compensation Committee made all decisions regarding the compensation paid to Navient’s named executive officers.

 

The Compensation Consultant provided various executive compensation services to the Compensation Committee pursuant to a written consulting agreement with the Compensation Committee. Generally, these services included advising the Compensation Committee on the principal aspects of Navient’s executive and director compensation programs, assisting in the selection of the compensation peer group, providing market information and analysis regarding the competitiveness of our compensation program design, reviewing Navient’s executive compensation disclosures, and informing the Committee about emerging compensation-related regulatory and industry issues.

 

During 2020, and again in 2021, the Compensation Committee considered the independence of the Compensation Consultant under SEC rules and Nasdaq listing standards. The Compensation Committee received a written statement of independence from the Compensation Consultant, which addressed the following factors: (1) other services provided to Navient by the Compensation Consultant; (2) fees paid by the Company as a percentage of the Compensation Consultant’s total revenues; (3) policies or procedures maintained by the Compensation Consultant that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and any member of the Compensation Committee; (5) any Navient Common Stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the Compensation Consultant or the individual consultants involved in the engagement. The Compensation Committee discussed these considerations and concluded that the work of the Compensation Consultant did not raise any conflicts of interest. For more information on the Compensation Committee and the Compensation Consultant, please see the “Compensation Discussion and Analysis” section in this proxy statement.

 

Compensation Committee Interlocks and Insider Participation

 

Ms. Thompson, Mr. Klane, Ms. Lehman, and Mr. Yowan were members of the Compensation Committee during fiscal year 2020.3 All members of the Compensation Committee were independent directors, and no member was an employee or former employee of Navient or its affiliates. During fiscal year 2020, none of Navient’s executive officers served on a compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the Compensation Committee.

 

 

3 Mr. Yowan served on the Compensation and Personnel Committee until May 20, 2020, when he became a member of the Audit Committee.

 

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The Board of Directors’ Role in Risk Oversight

 

 

Our Board of Directors has the ultimate responsibility for risk oversight under Navient’s Enterprise Risk Management (“ERM”) philosophy and framework. In carrying out this critical responsibility, the Board has designated the Risk Committee as having primary responsibility to assist the Board in the development, maintenance and governance of the company’s ERM policy, standards and program. Other standing committees of the Board are charged with overseeing specific enterprise risks, as described below. The Board and its standing committees are responsible for ensuring we adhere to established risk tolerances and parameters that form a cornerstone of the company’s ERM framework.

 

The Board has delegated day-to-day responsibility for risk oversight to our Chief Executive Officer and senior management team, who in turn have established the following management committees to implement this directive: Enterprise Risk and Compliance Committee, Credit and Loan Loss Committee, Asset and Liability Committee, and Incentive Compensation Plan Committee. These internal management committees, described in more detail below, provide regular reports to the Board and its standing committees—either directly or through one or more senior executives. The overall risk governance structure is illustrated below:

 

 

The Nominations and Governance Committee regularly reviews the composition and membership of each standing committee of the Board and makes recommendations to the Board. Outside of the SEC and Nasdaq requirements for eligibility to serve on certain committees, such as the Audit Committee and the Compensation and Personnel Committee, the Nominations and Governance Committee actively considers each committee’s responsibilities, as outlined in its charter, as well as individual director skillsets when deciding which directors will serve on specific standing committees.

 

Risk Appetite Framework

 

Navient employs a Risk Appetite Framework to identify the most significant risks that could impact our business and provides the process for evaluating and quantifying those risks. The Risk Appetite Framework defines the type and degree of risk Navient is able and willing to assume, given its business objectives, contractual and other legal requirements, and obligations to stakeholders. As noted below, our Risk Appetite Framework segments enterprise risk into nine enterprise risk domains.

 

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Enterprise Risk Domains

 

Our Risk Appetite Framework segments Navient’s enterprise risks across nine enterprise risk domains: (1) Credit; (2) Market; (3) Funding and Liquidity; (4) Compliance; (5) Legal; (6) Operational; (7) Reputational and Political; (8) Governance; and (9) Strategy. These risk domains are disclosed in our Form 10-K and proxy statements filed with the SEC. As noted above, our Board of Directors has the ultimate responsibility for risk oversight for Navient’s ERM framework.

 

The Board has assigned oversight responsibility for each risk domain to one or more of its standing committees. These risk oversight responsibilities are spelled out in each standing committee’s charter. Investors can find the charter of each committee on our website at https://www.navient.com/investors/corporate-governance/.

 

Each of the enterprise risk domains is described below, along with the standing committee(s) responsible for risk oversight.

 

Enterprise Risk Domain Board Committee Risk Description
Credit Risk Committee Risk resulting from an obligor's failure to meet the terms of any contract with the Company or otherwise fail to perform as agreed.
Market Risk Committee Risk resulting from changes in market conditions, such as interest rates, spreads, commodity prices or volatilities.
Funding and Liquidity Risk Committee Risk arising from the Company's inability to meet its obligations when they come due without incurring unacceptable losses.
Compliance Audit Committee Risk arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, internal policies, and procedures, or ethical standards.
Legal Audit Committee Risk manifested by claims made through the legal system, including litigation brought against the Company. Legal risk may arise from a product, a transaction, a business relationship, property (real, personal, or intellectual), employee conduct, or a change in law or regulation.
Operational Risk Committee Compensation and Personnel Committee Risk resulting from inadequate or failed internal processes, personnel and systems, inadequate product design and testing, or from external events, including cybersecurity risk.
Reputational and Political Nominations and Governance Committee Risk from stakeholder perceptions regarding actual or alleged violations of law, our internal code of conduct or other employee misconduct.
Governance Nominations and Governance Committee Risk of not establishing and maintaining a control environment that aligns with stakeholder and regulatory expectations, including tone at the top and board performance.
Strategic Executive Committee Risk from adverse business decisions or improper implementation of business strategies.

 

Cybersecurity Risk Oversight

 

The Board of Directors, through the Risk Committee, plays an important role in overseeing the Company’s cybersecurity risk management. The Risk Committee receives regular briefings from the Company’s Chief Information Security Officer relating to the most recent developments in cybersecurity prevention, detection, response and recovery as well as updates on breaches and exploitations, both successful and unsuccessful, at other companies.

 

Additional Risk Oversight Information

 

Additional information about how we actively manage risk for our stakeholders, including our customers, clients, employees, and shareholders, can be found on the Governance Documents & Reports section of our website at https://www.navient.com/investors/corporate-governance/ in a report titled “Meeting Our Commitment: A Report on How Navient Manages Risk.”

 

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Risk Assessment of Compensation Policies

 

 

Navient maintains an internal Incentive Compensation Plan Committee (the “ICP Committee”) that conducts an annual risk review and assessment of the various incentive compensation plans covering our employees—including plans that cover our named executive officers—to ensure that our employees are not incentivized to take inappropriate risks which could impact our financial position and controls, reputation and operations. Our Chief Risk and Compliance Officer, Chief Legal Officer, Chief Audit Officer and Chief Human Resources Officer serve on the ICP Committee, along with other senior business leaders. The ICP Committee presented its annual findings to the Compensation Committee and the Audit Committee in early 2021, and the Compensation Committee determined that the Company’s incentive compensation programs do not encourage or create unnecessary risk-taking, and that the risks arising from the programs are not reasonably likely to have a material adverse effect on the Company. The ICP Committee will continue to monitor our incentive compensation plans, as well as the plan governance structure put in place to mitigate risks associated with the plans, to ensure that our incentive compensation practices properly incentivize our employees and reflect industry best practices.

 

Nominations Process

 

 

As described earlier in this proxy statement, the Board actively engages in succession planning and director recruiting to ensure that the size of the Board and the skills of the directors continue to align with our business strategy and the environment in which we operate. The Nominations and Governance Committee considers director candidates recommended by shareholders and also receives suggestions for candidates from Board members or third parties. The Nominations and Governance Committee has, from time to time, engaged and may continue, in the future, to engage third-party search firms to assist in identifying director candidates.

 

Candidates are evaluated based on the needs of the Board of Directors and Navient at that time, given the then-current mix of Board members, their individual skills and experiences relative to the Company’s business strategy, and the Nominations and Governance Committee’s desire to bring additional skills or experiences to the Board. While Navient does not have a formal Board diversity policy, the Board of Directors actively seeks representation that reflects gender, race, ethnic, age and geographic diversity, as well as a diversity of perspectives and experience. The Nominations and Governance Committee, through its charter, is charged with reviewing the composition, skills and diversity of the Board of Directors, and as part of the process, the Nominations and Governance Committee incorporates into the Board of Directors’ annual evaluation process, the opportunity for each Board member to provide input regarding the current and desired composition of the Board of Directors and desired attributes of Board members. The minimum qualifications and attributes that the Nominations and Governance Committee believes a director nominee must possess include:

 

Knowledge of Navient’s business;

 

Proven record of accomplishment;

 

Willingness to commit the time necessary for Board of Director service;

 

Integrity and sound judgment;

 

Willingness to represent the best interests of all shareholders and effectively oversee management performance;

 

Ability to challenge and stimulate management; and

 

Independence.

 

In addition, the Nominations and Governance Committee believes the Board of Directors collectively should encompass a mix of skills and expertise in the following areas:

 

Finance, including capital allocation;

 

Accounting/audit;

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 29

 

 

 

Corporate governance;

 

Executive leadership;

 

Information security and cybersecurity;

 

Financial services, including financial technology and innovation;

 

Capital markets;

 

Business operations and operating efficiency;

 

Mergers and acquisitions;

 

Higher education;

 

Consumer credit;

 

Business processing solutions and outsourcing;

 

Consumer marketing and product development, including customer experience;

 

Government/Regulatory; and

 

Legal.

 

The Nominations and Governance Committee considers and evaluates candidates recommended by shareholders in the same manner that it considers and evaluates all other director candidates. To recommend a candidate, shareholders should send, in writing, the candidate’s name, credentials, contact information, and his or her consent to be considered as a candidate to the Chair of the Nominations and Governance Committee at corporatesecretary@navient.com or c/o Corporate Secretary, Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801. The shareholder should also include his or her contact information and a statement of his or her share ownership. A shareholder wishing to nominate a candidate must comply with the notice and other requirements described under “Shareholder Proposals for the 2022 Annual Meeting” in this proxy statement.

 

Proxy Access

 

 

The Company will include in its proxy statement and on its form of proxy card, the name of a director nominee submitted by an “Eligible Holder” who provides the information and satisfies the other provisions of the Company’s bylaws. To qualify as an “Eligible Holder,” a shareholder or a group of no more than 20 shareholders must have continuously owned at least three percent (3%) of the outstanding shares of the Company’s Common Stock entitled to vote in the election of directors for a period of at least three years and thereafter continue to own the shares through the Company’s annual meeting. There are no proxy access board nominees for the 2021 Annual Meeting. A complete version of the Company’s Second Amended and Restated Bylaws can be found on the Corporate Governance page of our website at the following location: https://www.navient.com/investors/corporate-governance/.

 

Director Orientation and Continuing Education

 

 

The Nominations and Governance Committee oversees the orientation of new directors and the ongoing education of the Board. As part of Navient’s director orientation program, new directors participate in one-on-one introductory meetings with Navient business and functional leaders and are given presentations by members of senior management on Navient’s strategic plans, financial statements and key issues, policies and practices. In addition, directors receive education on governance and director fiduciary duties and expectations. Directors may enroll in director continuing education programs on corporate governance and critical issues associated with a director’s service on a public company board. Navient makes an annual stipend available to each director towards the expenses of these programs. Our senior management meets regularly with the Board and meets annually to review with the Board the operating plan of the Company and each of our

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 30

 

 

 

strategic business groups. The Board also regularly participates in full Board educational programs and visits to Navient operation centers.

 

Our Commitment to Environment, Social and Governance (“ESG”) Matters

 

 

We recognize the importance of ESG matters to our investors. We have a long-standing commitment to the communities where we live and work, the environment, our employees, our customers and other stakeholders. Highlights of our commitment and approach to ESG matters are described below. Additional information appears on the About Us section of our website at https://about.navient.com and in our Corporate Social Responsibility Report found on our website.

 

Environment

 

In our facilities, we incorporate energy-efficient building support systems and corporate-sponsored recycling programs. Navient also is proactive in reducing travel-related emissions by providing video teleconferencing in its facilities, conference and training spaces. We make it easy for our millions of clients and customers to “go paperless” with us, reducing the natural resources needed to print and mail hardcopy communications.

 

Our Employees, Our Customers and Our Communities

 

We are committed to creating a workplace where employees are welcomed and respected for who they are as individuals. We believe that our employees and workplace thrive when we are authentically inclusive. We grow and innovate the best when we embrace a rich diversity that reflects the customers and communities we serve. We are committed to listen, learn, and take action against acts of inequity and injustice. Through our diversity, equity and inclusion strategy, our employees lead and participate in initiatives such as our Inclusion & Diversity Council, employee resource teams, and diversity, equity and inclusion education and awareness campaigns. We provide education finance solutions to help people pursue higher education and successfully manage their finances. We have aided millions of households on their path toward success. As a student loan servicer, we support people to successfully manage their student loan payments and build good credit. We also help federal student loan borrowers access federal benefits such as income-driven repayment, loan forgiveness and military benefits.

 

More than 400,000 student loan borrowers serviced by Navient pay off their student loans every year.

 

Navient-serviced federal student loan borrowers are 26% less likely to default than those serviced elsewhere.*

 

We have helped millions of borrowers enroll in income-driven repayment—including more than half of Navient-serviced student loan volume.

 

Since 2017, we also have refinanced more than $11 billion in student loans, helping borrowers save thousands through lower interest rates and accelerate their journey to successful repayment.

 

*Analysis of the FY 2017 Cohort Default Rate released by the U.S. Department of Education in 2020.

 

We support the communities where we live and work. Building on our focus to help people along the path to financial success, the Navient Community Fund supports organizations that address the root causes that limit financial success for all Americans. Our employees get involved in a variety of community activities such as distributing and reading books to kids, participating in blood drives, and collecting food and school supplies for families in need. We offer up to four hours of paid time off per month to empower employees to volunteer for a Navient-supported nonprofit organization in their community.

 

Governance

 

We are proud of our best-in-class governance practices—described in this proxy statement—and our commitment to diversity and inclusion. We’ve been recognized as a Champion of Board Diversity by the Forum of Executive Women and we’ve received a prestigious “W” award from the Women on Boards organization for the past four consecutive years.

 

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Policy on Political Contributions, Disclosure and Oversight

 

 

We did not make any political contributions using corporate funds in 2020, and we have no intention of making such political contributions in 2021. The Company's Government Relations personnel are responsible for the development and implementation of policies pertaining to the Company’s political activities. They report semi-annually to the Nominations and Governance Committee of the Board on major lobbying priorities and principles as well as the political risk environment in which the Company operates. Government Relations also provides the Committee with a report on any payments made to trade associations, political expenditures, contributions made to other tax-exempt political organizations, as well as contributions by the Company's Political Action Committee. Navient also maintains numerous compliance processes structured to ensure that the Company and its employees conduct all their activities in accordance with our Code of Business Conduct and with all relevant laws governing political contributions and lobbying activities.

 

Since 2016, we have published our Transparency in Policy Engagement and Political Participation Report. In 2018, the Company was recognized as a “Trendsetter” in the CPA-Zicklin Index for political transparency. The Report provides an overview of the Company’s legislative and political priorities and also provides details pertaining to Navient’s contributions to members of Congress, trade associations, 527 political organizations and other political organizations. The Nominations and Governance Committee has instructed the Company to update the report on a semi-annual basis. The current Report is available on the Company’s website at https://www.navient.com/about/who-we-are/transparency/.

 

Code of Business Conduct

 

 

The Company has a Code of Business Conduct that applies to Board members and all employees, including the chief executive officer, the chief financial officer and the principal accounting officer. The Code of Business Conduct is available on the Company’s corporate governance website at https://www.navient.com/investors/corporate-governance/ and a written copy is available from the Corporate Secretary. The Company intends to post amendments to or waivers of the Code of Business Conduct (to the extent applicable to the Company’s chief executive officer, chief financial officer or principal accounting officer or any director) at this location on its website. There were no waivers of the Code of Business Conduct during 2020.

 

Policy on Review and Approval of Transactions with Related Parties

 

 

The Company has adopted a Policy on Related Party Transactions to ensure that all Interested Transactions with Related Parties, as those terms are defined in the policy, will be at arm’s length and on terms generally available to an unaffiliated third-party under the same or similar circumstances. The policy states that, except for the limited exceptions specifically stated in the policy, Interested Transactions with Related Parties that will exceed $120,000 in any calendar year must be reviewed by the Audit Committee and receive approval of the Board of Directors prior to the Corporation entering into the Interested Transaction. A copy of the policy can be found on the Company’s Corporate Governance website at https://www.navient.com/investors/corporate-governance/. For additional information pertaining to Related Party Transactions, please refer to “Certain Relationships and Related Transactions” below.

 

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Director Compensation

 

Our director compensation program is designed to reasonably compensate our non-employee directors for work required for a company of our size, complexity and risk, and to align the interests of our directors with those of our shareholders. The Compensation Committee reviews the compensation of our non-employee directors on an annual basis and makes recommendations to the Board.

 

The Compensation Committee, with the assistance of the Compensation Consultant, determined that our existing director compensation program should remain unchanged for 2020, with the exception of changes to the form of annual equity awards described below. Our 2020 director compensation program is detailed below.

 

Director Compensation Elements

 

 

The following table highlights the material elements of our 2020 director compensation program:

 

2020 Compensation Elements Compensation Value
Annual Cash Retainer $100,000
Additional Cash Retainer for Independent Board Chair 50,000
Additional Cash Retainer for Audit Committee Chair 30,000
Additional Cash Retainer for Compensation and Personnel Committee Chair 25,000
Additional Cash Retainer for Other Committee Chairs 20,000
Annual Equity Award 130,000
Additional Equity Award for Independent Board Chair 65,000

 

Annual cash retainers are paid in quarterly installments as described below. Annual equity awards typically are granted in February each year in the form of restricted stock.

 

Restricted stock granted to our non-employee directors in prior years was structured to vest only upon the recipient’s election to the Board at the Company’s next following annual meeting of shareholders (or, if earlier, upon death, disability, or a change in control). Beginning in 2020, the Board modified the vesting provisions incorporated in these equity awards to address the potential for partial-year Board service. Restricted stock granted to our non-employee directors in February 2020 was structured to vest in quarterly increments beginning on the grant date, provided the director remains on the Board through each vesting date (with immediate vesting, if earlier, upon death, disability, or a change in control). The Board also modified the quarterly payment dates for cash retainers to coincide with the new equity vesting dates.

 

We also reimburse each non-employee director for any out-of-pocket expenses incurred in connection with their service as a director. As described below, our non-employee directors may elect to defer all or a portion of their annual compensation under the Navient Corporation Deferred Compensation Plan for Directors.

 

Share Ownership Guidelines

 

 

We maintain share ownership guidelines for our non-employee directors. Under these share ownership guidelines, each director is expected, within five years of his or her initial election to the Board of Directors, to own Navient Common Stock with a value equivalent to at least four times his or her annual cash retainer. Currently, that minimum ownership amount is $400,000. The following shares and share units count towards the ownership guidelines: shares held in brokerage accounts; notional shares credited to deferred compensation accounts; restricted stock and restricted stock units (“RSUs”) that vest solely upon the passage of time; and vested stock options, to the extent that they are “in-the-money.”

 

All non-employee directors are in compliance with the share ownership guidelines as of the date of this proxy statement due to their share ownership amount or because the five-year period from their initial election has not ended.

 

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Anti-Hedging and Pledging Policy

 

 

Navient’s Securities Trading Policy prohibits directors and officers (as defined by Rule 16a-1(f) of the Exchange Act and referred to as “Section 16 Officers”) from selling Navient stock short, holding Navient securities in a margin account, or pledging Navient securities as collateral for a loan or otherwise. Additionally, no director, Section 16 Officer or any other officer of the Company who is subject to the Company’s Stock Ownership Guidelines is permitted to enter into derivative or speculative transactions involving Navient securities (including prepaid variable forward contracts, equity swaps, collars, credit default swaps and exchange funds) that are designed to hedge or offset any decrease in the market value of Navient securities. All directors and named executive officers were in compliance with this policy throughout 2020 and remain in compliance as of the date of this proxy statement.

 

Policy on Rule 10b5-1 Trading Plans

 

 

The Company’s Securities Trading Policy governs the circumstances under which Navient directors and Section 16 Officers may enter into trading plans pursuant to SEC Rule 10b5-1. Rule 10b5-1 trading plans are pre-established trading plans for sales of our Common Stock. We believe our Rule 10b5-1 policy is effective in ensuring compliance with legal requirements. Under the policy:

 

All Rule 10b5-1 trading plans must be pre-cleared by the Company’s Securities Trading Compliance Officer.

 

A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of material non-public information.

 

Once adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade.

 

Other Compensation

 

 

We provide non-employee directors with company-paid group life insurance, accidental death and disability and business travel accident insurance. We also provide current non-employee directors the opportunity to participate in the Company’s medical and dental plans. If a director elects to participate in these plans, the director pays the full cost of medical and dental coverage (which for an employee is shared by the Company and the employee). After retirement from the Board, a former non-employee director may continue medical coverage for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act (COBRA) at his/her own expense.

 

Deferred Compensation Plan for Directors

 

 

Navient sponsors a deferred compensation plan for its non-employee directors. Under the Navient Corporation Deferred Compensation Plan for Directors (“Director Deferred Compensation Plan”), our non-employee directors may elect annually to defer receipt of all or a percentage of their annual cash retainer. In addition, directors may elect to receive a credit under the Director Deferred Compensation Plan in lieu of their annual equity retainer. Provided this election is made before the beginning of the year, the director’s plan account will be credited with a dollar amount equivalent to the annual equity retainer and automatically invested in a notional Company stock fund. Notional stock units remain subject to the same vesting schedule applicable to the annual equity retainer.

 

Deferrals are credited with earnings based on the performance of certain investment funds selected by the participant. The plan does not pay above-market or preferential earnings on amounts deferred. Deferrals invested in the notional Company stock fund are payable in shares of Navient Common Stock. All other deferrals are payable in cash (in a single lump sum or in installments at the election of the director) upon termination of the director’s service on the Board or after a minimum

 

(GRAPHIC) 2021 Proxy Statement (GRAPHIC) 34

 

 

 

number of years (except for hardship withdrawals in limited circumstances). As noted below, Ms. Bowen, Ms. Cabral, Mr. Klane, and Ms. Thompson each elected to defer all or a portion of his/her 2020 compensation under the Director Deferred Compensation Plan.

 

Director Compensation Table

 

The tables below present information regarding the compensation and stock awards that we have paid or granted to the non-employee directors for the year ended December 31, 2020.

 

Name Fees Earned
or Paid
in Cash(1)
($)
Stock
Awards(2)
($)
All Other
Compensation(3)
($)
Total
($)
Frederick Arnold 100,000 129,987 91 230,078
Marjorie L. Bowen(4) 49,750 130,000 45 179,795
Anna Escobedo Cabral(5) 115,000 130,000 91 245,091
Larry A. Klane(6) 100,000 130,000 91 230,091
Katherine A. Lehman 120,000 129,987 91 250,078
Linda A. Mills 150,000 194,988 91 345,079
Jane J. Thompson(7) 125,000 130,000 91 255,091
Laura S. Unger 120,000 129,987 91 250,078
David L. Yowan 115,000 129,987 91 245,078

 

(1) This table includes all fees earned or paid in fiscal year 2020. Unless timely deferred under the Director Deferred Compensation Plan, annual cash retainers are paid in quarterly installments on or around February 1st, May 1st, August 1st and November 1st.

 

(2) The grant date fair market value for each share of restricted stock granted in 2020 to directors is based on the closing market price of the Company’s Common Stock on the grant date. Additional details on accounting for stock-based compensation can be found in “Note 2–Significant Accounting Policies” to the audited consolidated financial statements included in the 2020 Annual Report on Form 10-K. Stock awards are rounded down to the nearest whole share to avoid the issuance of fractional shares. As noted in the footnotes below, certain directors timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of their 2020 annual equity retainer. Plan credits are automatically invested in a notional Company stock fund and are not subject to rounding for fractional shares. (3) All Other Compensation is detailed in a table on the following page.

 

(4) Ms. Bowen served on the Board in 2020 but did not stand for reelection at the 2020 Annual Meeting. Ms. Bowen’s compensation for 2020 reflects her partial tenure on the Board. Ms. Bowen timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 2020 annual equity retainer, with the credit being automatically invested in a notional Company stock fund. One-half of this credit was forfeited when she left the Board in May 2020.

 

(5) Ms. Cabral timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 2020 annual equity retainer, with the credit being automatically invested in a notional Company stock fund.

 

(6) Mr. Klane timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of his 2020 annual equity retainer, with the credit being automatically invested in a notional Company stock fund.

 

(7) Ms. Thompson timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 2020 annual equity retainer, with the credit being automatically invested in a notional Company stock fund.

 

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All Other Director Compensation:  
Name Life
Insurance
Premiums(A)
($)
Total
($)
Frederick Arnold 91 91
Marjorie L. Bowen 45 45
Anna Escobedo Cabral 91 91
Larry A. Klane 91 91
Katherine A. Lehman 91 91
Linda A. Mills 91 91
Jane J. Thompson 91 91
Laura S. Unger 91 91
David L. Yowan 91 91

 

(A) The amount reported is the annual premium paid by Navient to provide a life insurance benefit of up to $100,000.

 

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Proposal 2 — Ratification of the Appointment of the Independent Registered Public Accounting Firm

 

Navient’s independent registered public accounting firm, KPMG LLP (“KPMG”), is selected by the Audit Committee. On February 24, 2021, the Audit Committee engaged KPMG as Navient’s independent registered public accounting firm for the fiscal year ending December 31, 2021. Representatives of KPMG are expected to be present at the Annual Meeting and they will have the opportunity to respond to appropriate questions from shareholders and to make a statement if they desire to do so.

 

This proposal is put before the shareholders because the Board of Directors believes it is a good corporate governance practice to ask shareholders to ratify the selection of the independent registered public accounting firm.

 

For ratification, this proposal requires the affirmative vote of the holders of a majority of the Common Stock present, represented and entitled to vote, and voting affirmatively or negatively at the Annual Meeting. Accordingly, shares that are not voted affirmatively or negatively with respect to this proposal, including abstentions and broker non-votes, will not be relevant to the outcome. If the appointment of KPMG is not ratified, the Audit Committee will evaluate the basis for the shareholders’ vote when determining whether to continue the firm’s engagement. Even if the selection of Navient’s independent registered public accounting firm is ratified, the Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during 2021 if, in its discretion, it determines that such a change would be in the Company’s best interests.

 

Board Recommendation

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG AS NAVIENT’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021.

 

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Independent Registered Public Accounting Firm

 

Fees Paid to Independent Registered Public Accounting Firms for 2020 and 2019 

 

 

Aggregate fees billed for services performed for Navient by its independent accountant, KPMG, for the fiscal years ended December 31, 2020, and 2019, are set forth below.

 

    2020     2019  
Audit Fees   $4,482,366     $4,132,351  
Audit-Related Fees   $1,131,113     $1,021,909  
Tax Fees   $441,321     $378,881  
All Other Fees     -       -  
Total   $6,054,800     $5,533,141  

 

Audit Fees. Audit fees include fees for professional services rendered for the audits of the consolidated financial statements of Navient and statutory and subsidiary audits, issuance of comfort letters, consents, income tax provision procedures, and assistance with review of documents filed with the SEC. Audit-Related Fees. Audit-related fees include fees for assurance and other services related to service provider compliance reports, trust servicing and administration reports, internal control reviews, and attest services that are not required by statute or regulation. Tax Fees. Tax fees include fees for federal and state tax compliance, and tax consultation services.

 

Pre-approval Policies and Procedures  

 

  

The Audit Committee has a policy that addresses the approval of audit and non-audit services to be provided by the independent registered public accounting firm to the Company. The policy requires that all services to be provided by the Company’s independent registered public accounting firm be pre-approved by the Audit Committee or its Chair. Each approval of the Audit Committee or the Chair of the Audit Committee must describe the services provided and set a dollar limit for the services. The Audit Committee, or its Chair, pre-approved all audit and non-audit services provided by KPMG during 2020. Reporting is provided to the Audit Committee regarding services that the Chair of the Audit Committee pre-approved between committee meetings. The Audit Committee receives regular reports from management regarding the actual provision of all services by KPMG. No services provided by our independent registered public accounting firm were approved by the Audit Committee pursuant to the “de minimis” exception to the pre-approval requirement set forth in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

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Report of the Audit Committee

 

The following report shall not be deemed incorporated by reference in any filing under the federal securities laws by virtue of any general incorporation of this proxy statement by reference and shall not otherwise be treated as filed under the federal securities laws.

 

The Audit Committee is responsible for monitoring our financial reporting processes and system of internal controls, supervising our internal auditors and overseeing the independence and performance of the independent auditors. In carrying out these responsibilities, the Audit Committee meets, on a regular basis, with our internal auditors and our independent auditors to review the overall scope and plans for their respective audits of our financial statements. The Audit Committee also meets privately (and in separate meetings) with members of management, our independent auditors and our internal auditors as may otherwise be needed. The Audit Committee meets with management and with the independent auditors each quarter to review and discuss the Company’s quarterly reports on Form 10-Q prior to their being filed with the SEC and annually to review and discuss the Company’s Annual Report on Form 10-K. The Committee also meets with management and our independent auditors to review and discuss the Company’s quarterly earnings prior to review by the Executive Committee and public release.

 

The Audit Committee’s responsibility is to monitor and oversee the audit and financial reporting processes. However, the members of the Audit Committee are not practicing certified public accountants or professional auditors and rely, without independent verification, on the information provided to them and on the representations made by management, and the report issued by the independent registered public accounting firm. While the Audit Committee and the Board monitor the Company’s financial record-keeping and controls, management is ultimately responsible for the Company’s financial reporting process, including its system of internal controls, disclosure control procedures and the preparation of the financial statements. The independent auditors support the financial reporting process by performing an audit of the Company’s financial statements and issuing a report thereon.

 

The Audit Committee has reviewed and discussed with management and Navient’s independent registered accounting firm, KPMG LLP, the Company’s audited financial statements as of and for the year ended December 31, 2020. The Audit Committee also discussed with KPMG LLP the matters under Public Company Accounting Oversight Board (“PCAOB”) standards, including among other things, those relating to the audit of our financial statements.

 

The Audit Committee received, reviewed and discussed with KPMG LLP the written disclosures and letter (as required by applicable requirements of the PCAOB) regarding the independent accountant’s communications with the Audit Committee about the firm’s independence.

 

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the financial statements referred to above be included in the 2020 Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the Securities and Exchange Commission.

 

Audit Committee

 

David L. Yowan, Chair

Frederick Arnold

Anna Escobedo Cabral

Laura S. Unger

 

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Ownership of Common Stock

 

The following table provides information, as of March 1, 2021, about each shareholder known to Navient to beneficially own more than five percent of the outstanding shares of our Common Stock, based solely on the information filed by each such shareholder on Schedules 13D or 13G with the SEC on the dates indicated in the footnotes to this table (percentages are calculated assuming continuous beneficial ownership at March 23, 2021).

 

Name and Address of Beneficial Owner Shares Percent
BlackRock Inc. (1) 21,362,883 11.5%
40 East 52nd Street    
New York, NY 10022    
The Vanguard Group, Inc. (2) 20,057,126 10.77%
100 Vanguard Blvd.    
Malvern, PA 19355    
     
Dimensional Fund Advisors LP (3) 13,537,724 7.3%
Building One    
6300 Bee Cave Road    
Austin, TX 78746    

 

(1) This information is based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. on January 27, 2021. BlackRock, Inc. has sole power to vote or direct the voting of 20,959,107 shares of Common Stock and has sole power to dispose of or direct the disposition of 21,362,883 shares of Common Stock.

 

(2) This information is based on the Schedule 13G/A filed with the SEC by The Vanguard Group, Inc., on February 10, 2021. The Vanguard Group, Inc., directly and through its subsidiaries, has shared voting power of 193,275 shares, sole power to dispose of or direct the disposition of 19,681,279 shares of Common Stock, and shared power to dispose of or direct the disposition of 375,847 shares of Common Stock.

 

(3) This information is based on the Schedule 13G filed with the SEC by Dimensional Fund Advisors LP on February 16, 2021. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). The Funds directly have sole power to vote or direct the voting of 13,154,014 shares of Common Stock, and sole power to dispose of or direct the disposition of 13,537,724 shares of Common Stock.

 

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Ownership of Common Stock by Directors and Executive Officers

 

The following table sets forth information concerning the beneficial ownership of Navient’s Common Stock by: (i) our current directors and director nominees; (ii) the named executive officers listed in the Summary Compensation Table (other than Mr. Lown, who resigned from the Company in May 2020); and (iii) all of the Company’s current directors and executive officers as a group. Under SEC rules, beneficial ownership for purposes of this table takes into account stock as to which the individual has or shares voting and/or investment power as well as stock that may be acquired within 60 days (such as by exercising vested stock options). Information is provided as of March 3, 2021. The beneficial owners listed have sole voting and investment power with respect to stock beneficially owned, except as otherwise indicated. As of March 3, 2021, there were 181,836,082 shares of our Common Stock issued, outstanding and entitled to vote.

 

                Total        
                Beneficial     Percent of  
Director Nominees   Shares (1)     Vested Options (2)     Ownership (3)     Class  
Frederick Arnold     45,948       -       45,948       *  
Anna Escobedo Cabral(4)     81,217       -       81,217       *  
Larry A. Klane(5)     22,643       -       22,643       *  
Katherine A. Lehman     70,462       -       70,462       *  
Linda A. Mills     98,568       -       98,568       *  
Jane J. Thompson(6)     77,284       -       77,284       *  
Laura S. Unger(7)     69,078       -       69,078       *  
David L. Yowan(8)     51,849       -       51,849       *  

  

Named Executive Officers                                
Jack Remondi(9)     3,075,995       231,513       3,307,508       1.80 %
Joe Fisher(10)     84,374       -       84,374       *  
John Kane(11)     561,101       75,699       636,800       *  
Mark Heleen(12)     341,678       -       341,678       *  
Steve Hauber(13)     195,578       40,473       236,051       *  
Ted Morris(14)     109,108       25,533       134,641       *  
                                 
Directors and Current Officers as a Group (14 Persons)     4,884,883       373,218       5,258,101       2.85 %

 

* Less than one percent

 

(1) Shares of Common Stock and stock units held directly or indirectly, including vested deferred stock units and unvested deferred stock units that may vest within 60 days of March 3, 2021, credited to Company-sponsored retirement and deferred compensation plans. Totals for named executive officers include (i) restricted stock units (“RSUs”) that vest and are converted into shares only upon the passage of time, (ii) performance stock units (“PSUs”) that vest and are converted into shares upon the satisfaction of pre-established performance conditions, and (iii) associated dividend equivalent units (“DEUs”) issued on outstanding RSUs and PSUs. The individuals holding such RSUs, PSUs and DEUs have no voting or investment power over these units.

 

(2) Shares that may be acquired within 60 days of March 3, 2021, through the exercise of stock options. The stock options held by our officers are net-settled pursuant to their terms (i.e., shares are withheld upon exercise to cover the aggregate exercise price, and the net resulting shares are delivered to the option holder). Net-settled stock options therefore are shown on a “spread basis,” with out-of-the-money options shown as 0.

 

(3) Total of columns 1 and 2. Except as otherwise indicated and subject to community property laws, each owner has sole voting and sole investment power with respect to the shares listed.

 

(4) For Ms. Cabral, 32,056 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

(5) For Mr. Klane, 15,301 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

(6) For Ms. Thompson, 71,023 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

(7) For Ms. Unger, 24,852 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

(8) For Mr. Yowan, 11,477 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

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51 

 

(9) Mr. Remondi’s share ownership includes 250 shares held as custodian for his child. 1,108,346 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Remondi has no voting or dispositive control.

 

(10) 66,186 of the shares reported in this column are RSUs, PSUs, or DEUs over which Mr. Fisher has no voting or dispositive control.

 

(11) 213,552 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Kane has no voting or dispositive control. 1,358 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account.

 

(12) 158,823 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Heleen has no voting or dispositive control.

 

(13) 106,775 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Hauber has no voting or dispositive control.

 

(14) 75,952 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Morris has no voting or dispositive control.

 

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Executive Officers

 

Our executive officers are appointed annually by the Board of Directors. The following sets forth biographical information concerning Navient’s executive officers who are not directors. Biographical information for Mr. Remondi is included in Proposal 1 — Election of Directors.

 

Name and Age Position and Business Experience
   
Joe Fisher
41
● Chief Financial Officer and Principal Accounting Officer, Navient — October 2020 to present
  ● Vice President of Investor Relations and Corporate Development, Navient — April 2018 to October 2020
  ● Vice President of Investor Relations, Navient — May 2014 to April 2018
   
John Kane ● Group President, Business Processing Solutions, Navient — June 2015 to present
52 ● Chief Operating Officer, Navient — April 2014 to June 2015
  ● Senior Vice President — Enterprise Project Management, SLM Corporation — March 2013 to April 2014
  ● Senior Vice President — Credit, SLM Corporation — August 2011 to March 2013
  ● Senior Vice President — Collections, SLM Corporation — 2008 to 2011
  ● Senior Vice President — Consumer Credit Operations, MBNA/Bank of America — 1990 to 2008
   
Mark L. Heleen ● Chief Legal Officer and Secretary, Navient — February 2015 to present
58 ● Senior Vice President and Senior Deputy General Counsel, Navient — June 2014 to February 2015
  ● Senior Attorney, Cadwalader Wickersham & Taft LLP — August 2013 to June 2014
  ● Independent Consultant — January 2011 to August 2013
  ● Executive Vice President and General Counsel, SLM Corporation — February 2009 to December 2010
  ● Various roles in the Office of the General Counsel, SLM Corporation — July 1998 to February 2009
   
Steve Hauber ● Chief Risk and Compliance Officer, Navient — June 2017 to present
47 ● Chief Audit Officer, Navient — April 2014 to June 2017
  ● Chief Audit Officer, SLM Corporation — January 2011 to April 2014

 

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Proposal 3 — Advisory Vote on Executive Compensation

 

Navient is asking shareholders to approve an advisory resolution (commonly referred to as a “say-on-pay” resolution) on the Company’s executive compensation as reported in this proxy statement. Navient urges shareholders to read the “Compensation Discussion and Analysis” section of this proxy statement, which describes how the Company’s executive compensation policies and procedures operate and are designed, as well as the Summary Compensation Table and other related compensation tables and narrative, which provide detailed information on the compensation paid to our named executive officers (“NEOs”).

 

This proposal gives you, as a shareholder, the opportunity to express your views on our NEOs’ compensation. Your vote is not intended to address any specific item of our compensation program, but rather to address our overall approach to and objectives of the compensation paid to our NEOs as described in this proxy statement. In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Navient is asking shareholders to approve the following advisory resolution at the Annual Meeting:

 

“Resolved, that Navient’s shareholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis and the related compensation tables and narrative disclosure in this proxy statement.”

 

The Company conducts its advisory vote on executive compensation at each annual meeting of its shareholders. At each of our last five annual meetings, beginning in 2016, our shareholders have expressed their overwhelming support for our executive compensation programs:

 

image 

 

The Board of Directors believes that the Company’s 2020 executive compensation program strongly aligned pay to actual performance. Shareholders are encouraged to read the “Compensation Discussion and Analysis” section, which describes Navient’s executive compensation program in detail, including how it is designed to achieve the Company’s compensation objectives and how the Company’s performance in 2020 was reflected in the compensation of our NEOs.

 

This proposal to approve the resolution regarding the compensation paid to Navient’s NEOs requires the affirmative vote of the holders of a majority of the Common Stock present, represented and entitled to vote, and voting affirmatively or negatively at the Annual Meeting. Accordingly, shares that are not voted affirmatively or negatively with respect to this proposal, including abstentions and broker non-votes, will not be relevant to the outcome.

 

As an advisory vote, the “say-on-pay” resolution is not binding on Navient. The Board of Directors, however, values the opinions of our shareholders as expressed through their votes. Accordingly, the Board of Directors as well as the Compensation Committee will review and consider the results of the “say-on-pay” vote, the opinions of our shareholders, and other relevant factors in making future decisions regarding our executive compensation program.

 

Board Recommendation

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE RELATED COMPENSATION TABLES AND NARRATIVE DISCLOSURE IN THIS PROXY STATEMENT.

 

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Executive Compensation

 

Compensation and Personnel Committee Report

 

  

The following report shall not be deemed incorporated by reference in any filing under the federal securities laws by virtue of any general incorporation of this proxy statement by reference and shall not otherwise be treated as filed under the federal securities laws.

 

The Compensation and Personnel Committee of the Board of Directors has reviewed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and discussed it with the Company’s management, and based on its review and discussions with management, the Compensation and Personnel Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and this proxy statement.

 

Compensation and Personnel Committee

 

Jane J. Thompson, Chair

Larry A. Klane

Katherine A. Lehman

 

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Compensation Discussion and Analysis

 

 

Introduction

 

This Compensation Discussion and Analysis (“CD&A”) provides information regarding our executive compensation guiding principles, the elements of our executive compensation program, the factors that were considered in making compensation decisions for our “named executive officers” or “NEOs” in 2020, and how we have modified our programs to meet Navient’s needs in the future.

 

Navient’s Compensation and Personnel Committee (the “Compensation Committee” or simply the “Committee”) is responsible for establishing and overseeing our executive compensation program, including the program’s underlying philosophy, objectives and related policies. The Committee is composed of Ms. Thompson (Chair), Mr. Klane and Ms. Lehman.

 

This CD&A presents information for the following Navient NEOs:

 

Jack Remondi, President and Chief Executive Officer

 

Joe Fisher, Chief Financial Officer and Principal Accounting Officer*

 

John Kane, Group President, Business Processing Solutions

 

Mark Heleen, Chief Legal Officer and Secretary

 

Steve Hauber, Chief Risk and Compliance Officer

 

Ted Morris, Controller; Former Acting Chief Financial Officer and Principal Accounting Officer**

 

Chris Lown, Former Chief Financial Officer***

 

* Mr. Fisher was appointed as Executive Vice President, Chief Financial Officer, and Principal Accounting Officer effective October 7, 2020.

** Mr. Morris served as Acting Chief Financial Officer and Principal Accounting Officer from June 1, 2020 until October 6, 2020, and currently serves as Controller. 

*** Mr. Lown served as the Company’s Chief Financial Officer and Principal Accounting Officer until May 29, 2020.

 

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56 

 

Executive Summary

 

Navient’s executive compensation program emphasizes the link between pay and performance, aligning the compensation of our executives with the interests of our shareholders. Our executive compensation program balances annual and long-term performance measures, including a mix of financial, operational and strategic goals that promote effective management of our legacy loan portfolio, improvements and growth in our consumer lending business, profitable growth in our business services segment and expense control. Individual performance goals also are established for each of our NEOs. This section summarizes Navient’s performance in 2020 and the impact of that performance on the compensation paid to our NEOs.

 

Navient’s 2020 Performance

 

2020 was an extraordinarily challenging year in which Navient demonstrated resilience in the face of a global pandemic, ingenuity and determination to meet new needs, and commitment to our colleagues and customers. Our 2020 performance highlights include the following:

 

We Delivered Strong EPS Performance: Adjusted Diluted “Core Earnings” Per Share4 grew 29% from the prior year and our three-year Adjusted Diluted “Core Earnings” Per Share grew at a compound annual growth rate of 28%.

 

We Continued to Grow Our Consumer Lending Business: We originated $4.6 billion in private education refinance loans, despite the uncertain economic environment related to COVID-19, and continued to carefully manage the credit risk of our portfolio through rigorous underwriting, high-quality servicing and risk mitigation practices.

 

We Expanded Our Business Processing Offerings Into New Markets: In 2020 we supported states in providing unemployment benefits, COVID-19 contact tracing and vaccine coordination services, which led to strong growth in our business processing segment. We successfully redeployed existing employees and hired over 1,000 new employees to support these efforts.

 

We Implemented Innovative Financing Strategies to Reduce Our Interest Expense and Maintain Strong Levels of Liquidity: We retired all of our 2020 debt maturities and called $800 million of our future unsecured notes. In addition, we issued $700 million of unsecured debt at attractive spreads.

 

We Rapidly Deployed COVID-19 Related Student Loan Relief: We quickly implemented the student loan relief provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which apply only to loans owned by the U.S. Department of Education. We also extended relief options such as the use of forbearance to borrowers with FFELP and private education loans.

 

We Supported the Health, Well-being and Safety of Our Employees and Communities: We responded to the developing COVID-19 pandemic by rapidly moving nearly 90% of our employees to work-from-home arrangements—avoiding the widespread layoffs and furloughs experienced in some industries—and we implemented education, social distancing and safety regimens for those employees who continued to work on-site, all while sustaining customer service, productivity and quality levels.

 

We Promoted Diversity, Equity and Inclusion (DEI) in Our Workplace: We launched a multi-year DEI strategy in 2018 to strengthen leadership commitment, enhance the employee experience and mindfulness, institute sustainability measures such as employee focus groups, and measure key performance indicators. Our employees lead and participate in DEI initiatives such as our Inclusion & Diversity Council, employee resource teams, and DEI education and awareness campaigns. We also look to promote diversity within our management team—in terms of gender, race, ethnicity, perspective and other factors—as part of the management succession planning process and in recruitment, promotion and retention opportunities at all levels of the Company.

 

Navient’s 2020 Compensation Decisions

 

Based on the Committee’s review of Navient’s strong 2020 performance, and after considering the appropriate alignment with shareholders, employees and other stakeholders, the Committee did not make any changes to our incentive plan goals

 

 

4 Adjusted Diluted “Core Earnings” Per Share excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted Diluted “Core Earnings” Per Share is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020, or refer to the Investor Relations section of our website located at https://www.navient.com/investors/.

 

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or payouts to offset the impacts of the COVID-19 pandemic. Highlights of our 2020 compensation decisions are discussed below, with additional details in this CD&A.

 

2020 Base Salaries: Base salaries remained unchanged from 2019 for our CEO, Mr. Remondi, and Messrs. Kane, Heleen, Hauber and Lown. Base salaries for Messrs. Fisher and Morris were established at the time they assumed their new roles during 2020. Base salaries for each of our NEOs are described on page 54.

 

2020 Management Incentive Plan (“MIP”) Design: For the 2020 MIP, we eliminated the Consumer Lending New Loan Volume metric and re-weighted the remaining four metrics, with increased weight on Adjusted “Core Earnings” Operating Expenses. These changes align with Navient’s business strategy and are directly responsive to feedback from shareholders. Our 2020 MIP is described in greater detail on beginning on page 55.

 

2020 MIP Results: At or near maximum performance on Adjusted Diluted “Core Earnings” Per Share, Business Processing EBITDA, and Private Education Loan Gross Defaults contributed to an earned payout of 137%. Incentive award amounts for our NEOs under the 2020 MIP are described on page 57.

 

2018-20 Performance Share Units (“PSUs”): Above-target performance on Cumulative Net Student Loan Cash Flows and Strategic Objectives, offset by below threshold results for Cumulative Revenue from Growth Businesses, resulted in an earned payout of 83% against goals set in early 2018. Performance results for the 2018-20 PSUs are described on page 60.

 

2020-22 PSUs: The design of PSUs granted in 2020 and covering the performance period 2020-22 was unchanged from 2019, with 70% weight on Net Student Loan Cash Flows and 30% weight on “Core Earnings” Return on Equity (“ROE”). The design of 2020-22 PSUs granted to our NEOs is described in greater detail on page 58.

 

2021-23 PSU Design: A new performance “multiplier” based on the Company’s total shareholder return relative to other companies in the S&P 400 Financials Index (“rTSR”) has been introduced for the 2021-23 PSU design, which is otherwise the same as the design for the 2020-22 PSUs. The rTSR multiplier is intended to emphasize the Company’s keen focus on delivering superior overall returns to shareholders. This design of 2021-23 PSUs is described on page 63.

 

Linking Navient’s 2020 Performance to Executive Pay

 

The chart on the following page shows our key performance achievements in 2020 and the link between those achievements and our executive compensation program.

 

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Linking Navient’s 2020 Performance to Executive Pay

 

  Provide Consistent Return to
Shareholders
Successfully Manage Our
Liquidity Needs
Increase Business Processing
EBITDA
2020
Performance
Highlights

● Returned $523 million to our shareholders through dividends and share repurchases

 

● Adjusted Diluted “Core Earnings” Per Share5 of $3.40, beating the target in our 2020 annual incentive plan by nearly 13%

 

● Issued $1.5 billion in FFELP loan asset-backed securities (“ABS”) and $6.3 billion in private education loan ABS

 

● Retired $1.8 billion of senior unsecured debt, including all of our 2020 debt maturities

 

● Reduced the interest expense we otherwise would have incurred in 2020 by $140 million

 

● Increased Business Processing EBITDA6 by 16% from 2019, far exceeding the target in our 2020 annual incentive plan

 

● Increased Business Processing revenue by 18% from 2019

 

Annual
Incentive
Measures

● Adjusted Diluted “Core Earnings” Per Share

 

● Adjusted “Core Earnings” Operating Expenses7

 

● Adjusted Diluted “Core Earnings” Per Share

 

● Adjusted “Core Earnings” Operating Expenses

 

● Business Processing EBITDA

Long-term
Incentive
Measures

 

● Grow Intrinsic Value of Company

 

● Cumulative Net Student Loan Cash Flows8

 

● Grow Intrinsic Value of Company

 

● Cumulative Net Student Loan Cash Flows

 

● Cumulative Businesses Processing Revenue

 

● Improve Margins in Business Processing

 

 

 

 

 

Successfully Manage Our Federal
Education Loans Segment
Grow Our Consumer Lending
Business
Improve Performance of Our
Private Eduation Loan Portfolio
2020
Performance
Highlights

● Actively managed our loan portfolio, decreasing our delinquency rate from 11.7% to 9.2% year-over-year

 

● Reduced segment operating expenses by $72 million, or 20%, year-over-year

 

● Acquired $38 million of FFELP loans in 2020, which added to our consistent and predictable cash flows

 

● Originated $4.6 billion in private education refinance loans, despite the uncertain economic environment related to COVID-19

● Reduced private education loan delinquency rate 43% from 2019

 

● Due to improved loan performance, we were able to reduce our private education loan provision by $86 million from 2019

 

Annual
Incentive
Measures

● Adjusted Diluted “Core Earnings” Per Share

 

● Adjusted “Core Earnings” Operating Expenses

 

● Adjusted Diluted “Core Earnings” Per Share

● Private Education Loan Gross Defaults

 

● Adjusted Diluted “Core Earnings” Per Share

 

Long-term
Incentive
Measures

● Capture Operating Efficiencies in Legacy Student Loan Business

 

● Grow Intrinsic Value of Company

 

● Cumulative Net Student Loan Cash Flows

 

● Originate High Quality Student Loan Assets

 

● Grow Intrinsic Value of Company

 

● Cumulative Net Student Loan Cash Flows

 

● Grow Intrinsic Value of Company

 

● Cumulative Net Student Loan CashFlows

 

 

 

5 See footnote 4 above for more information on Adjusted Diluted “Core Earnings” Per Share.

 

6 Earnings Before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of EBITDA and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020, or refer to the Investor Relations section of our website located at http://www.navient.com/investors/.

 

7 Adjusted “Core Earnings” Operating Expenses excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted “Core Earnings” Operating Expenses is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted “Core Earnings” Operating Expenses and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to our Investor Presentation for Fourth Quarter and Full Year 2020 on the Investor Relations section of our website located at http://www.navient.com/investors/, or refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020..

 

8 “Cumulative Net Student Loan Cash Flows” is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of cumulative net student loan cash flows, please refer to the definition at footnote 17.

 

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CEO Realizable Pay

 

Our pay-for-performance approach over the past five years is highlighted in the chart below, which shows the alignment between the Company’s performance (as measured by cumulative total shareholder return (“TSR”)) and the annual Realizable Pay (as defined below) of our CEO over the past five fiscal years.

 

 

The Committee believes that analysis of Realizable Pay allows a more complete understanding of the pay-for-performance relationship than sole reliance on amounts shown in the Summary Compensation Table, which reflects the grant date value of various equity awards. The table below compares the components of Mr. Remondi’s Realizable Pay for 2020, 2019, 2018, 2017 and 2016.

 

    Year   Base Salary
($)
  Annual Incentive
Compensation
($)
  PSUs
($)
  RSUs
($)
  Stock Options
($)
  Total
($)
    2020   1,000,000   2,055,000   1,195,978   1,392,898   0   5,643,876
    2019   1,000,000   1,785,000   1,926,497   2,391,606   0   7,103,103
CEO Realizable Pay   2018   1,000,000   1,896,000   2,309,255   517,094   0   5,722,349
    2017   1,000,000   1,444,500   0   1,032,553   0   3,477,053
    2016   1,000,000   1,666,500   -   2,067,157   5,527,226   10,260,883

 

Realizable Pay for each of the applicable fiscal years is the sum of base salary paid, annual incentive award earned, the year-end value of RSUs and stock options granted under the Company’s long-term incentive program in that year, and the value of any PSUs with a performance period ending in that fiscal year. Stock awards are valued as of the end of each fiscal year and include the “in-the-money” value of stock options,9 RSUs and PSUs (excluding accrued dividend equivalent units on RSUs and PSUs).

 

Because the Company typically grants equity awards in February each year, the year-end value of these equity awards may be significantly greater or less than the grant-date value depending on whether the price of our common stock has increased or decreased by the end of the year. For example, the year-end value of stock options and RSUs granted in early

 

 

9 As of 2019, the Committee decided to discontinue the prior practice of granting stock options as part of the Company’s long-term incentive program.

 

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2016 was substantially greater than the value of these awards upon grant, as the price of our common stock increased between the February 2016 grant date and December 31, 2016, while the opposite was true for RSUs granted in early 2019 and 2020.

 

PSUs typically vest based on performance over three fiscal years. For example, PSUs granted in early 2015 were designed to vest at the end of 2017 based on cumulative performance over the 2015-17 fiscal years. Due to the Company’s performance during that three-year period, the value at the end of the fiscal 2017 was zero as none of the PSUs were earned. PSUs granted in early 2016 vested at 125% of the target number of units based on the Company’s performance over the applicable 2016-18 performance period, PSUs granted in early 2017 vested at 109% of the target number of units based on the Company’s performance over the applicable 2017-19 performance period, and PSUs granted in early 2018 vested 83% of the target number of units based on the Company’s performance over the applicable 2018-20 performance period.

 

Cumulative TSR assumes a base investment of $100 at December 31, 2015 and reinvestment of dividends through December 31, 2020.

 

Navient’s Compensation Philosophy and Objectives

 

We provide each of our NEOs with a compensation package that is tied to performance and aligned with the interests of our shareholders. The Compensation Committee utilizes the following guiding principles to design, implement, and monitor our executive compensation program:

 

Align Compensation with Shareholder Interests. For 2020, 87% of the Total Direct Compensation opportunity provided to our CEO was at-risk and aligned with shareholder value, including incentive awards that depend upon the attainment of specific performance objectives, the value of Navient’s Common Stock or both. This feature of our executive compensation program is highlighted in the charts below, which show the at-risk percentages of the 2020 total direct compensation of our NEOs and the percentage of their compensation that is at-risk, with Annual Incentives and PSUs shown at target levels of performance for the full year.

 

 

 

*Excludes Mr. Fisher and Mr. Morris, whose 2020 compensation was pro-rated to reflect their partial-year service as Chief Financial Officer and Acting Chief Financial Officer, respectively.

 

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Pay for Performance. As illustrated above, more than 75% of the full-year total compensation at target for our NEOs is delivered through annual incentives and PSUs that are earned based on achievement of enterprise-wide goals that impact shareholder value.

 

Reward Annual Performance. The annual incentive award component of our NEOs’ total compensation is designed to reward achievement of key annual goals that are aligned with the Company’s annual business plan, and conversely to be lower or zero in periods in which those key annual goals are only partially achieved or not achieved at all.

 

Reward Long-term Growth. The total compensation paid to our NEOs is weighted toward long-term equity-based incentives. These awards align pay with sustained performance and shareholder value creation.

 

Retention of Top Executives. Our NEOs have base salaries and benefits that are competitive and not excessive, therefore permitting Navient to attract, motivate and retain executives who can drive and lead our success.

 

The compensation packages we provide to our NEOs are designed to be competitive when compared to companies that compete with us for executive talent. In setting the compensation opportunity for our NEOs, we generally target the median total direct compensation provided to similarly situated executives by our peer group companies. We also believe that strong governance practices and policies are aligned with shareholder interests. Our policies prohibit hedging, pledging or short-sales of any Company stock held by our NEOs and provide for the clawback of compensation in certain situations. See “Other Arrangements, Policies and Practices Related to Our Executive Compensation Programs” below.

 

How Compensation Decisions Are Made

 

In establishing competitive total compensation packages for our NEOs, the Compensation Committee relies on an analysis of market data on the executive compensation packages offered by Navient’s peer group companies, which are described below. While the Committee generally targets the median total compensation opportunity provided by our peer group companies to similarly situated executives, market data is only one of several factors considered in establishing the compensation opportunity levels of our NEOs. Navient’s annual strategic business plan also factors heavily in determining certain elements of total compensation, such as our Annual Incentive and Long-term Incentive Programs, which are described in more detail below. Past pay practices and internal employee pay equity, as well as the skills and experience that each NEO brings to Navient, are all important factors considered by the Committee. The Committee also considers an assessment of each NEO’s success in achieving pre-determined business as well as individual objectives, an assessment that is prepared by the CEO and presented to the Committee at a minimum of once each year. Finally, the Committee meets with the other independent members of the Board in reviewing the CEO’s performance and consults with those members in setting the CEO’s compensation.

 

Role of the Compensation Consultant

 

The Compensation Committee is advised by its Compensation Consultant. See “Compensation Consultant and Independence” earlier in this proxy statement for more information on the Compensation Consultant’s role as an independent advisor to the Compensation Committee.

 

Use of Peer Groups

 

Navient seeks to provide its NEOs with competitive compensation relative to a peer group of companies. The Compensation Committee reviews the composition of the peer group annually with the assistance of the Compensation Consultant, making adjustments as needed to address changes in Navient’s business and/or changes in the peer group companies due to mergers or other transactions.

 

In August 2019, the Compensation Committee adopted a new peer group for 2020 to better reflect the Company’s current mix of businesses, including the continued growth and evolution of the Company’s business processing and consumer lending businesses. The Committee continues to believe that line of business and asset size are the most relevant parameters when identifying other companies of similar size and complexity, although it also took into account factors such as market capitalization when selecting the 2020 peer group. Our 2020 peer group, which the Committee used to set target pay levels at the start of 2020, consists of the following companies:

 

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2020 Navient Peer Group

 

Company Total
Assets(1)
Net
Income(2)
Market
Cap(1)
Alliance Data Systems Corporation $22,547   $214   $3,677
Ally Financial Inc. 182,165   1,085   13,332
Comerica Incorporated 88,129   474   7,769
Conduent Incorporated 4,256   (118)   1,005
Discover Financial Services, Inc. 112,889   1,141   27,747
Fifth Third Bancorp 204,680   1,427   19,641
KeyCorp 170,336   1,343   16,024
MAXIMUS, Inc. (3) 2,066   220   4,498
Paychex, Inc. (4) 8,615   1,059   33,604
Regions Financial Corporation 147,389   1,094   15,482
Santander Consumer USA Holdings, Inc. 48,887   911   6,740
SLM Corporation 30,770   881   4,649
Synchrony Financial 95,948   1,385   20,263
The Western Union Company 9,496   744   9,020
           
25th Percentile $12,759   $542   $5,172
Median 68,508   985   11,176
75th Percentile 138,764   1,129   18,737
           
Navient Corporation $87,412   $412   $1,829
Rank 8 of 15   12 of 15   14 of 15
Percentile 54       21       2     

 

(1) Total assets and market capitalization reflect each company’s most recent fiscal year end except for MAXIMUS, Inc. and Paychex Inc. Please see footnotes (3) and (4) for more information.

 

(2) Net income (in millions in accordance with GAAP) for each company’s most-recently-ended fiscal year, as reflected in each company’s Annual Report on Form 10-K filed with the SEC. Except as otherwise noted below, each company’s most recent fiscal year ended December 31, 2020.

 

(3) MAXIMUS' most recent fiscal year end is September 30, 2020. Total assets reflect the most-recent fiscal quarter end and net income reflects 12-month trailing as of December 31, 2020. Market capitalization reflects common shares outstanding at December 31, 2020, multiplied by the per share closing price of the company’s common stock on December 31, 2020, the last trading date of the year.

 

(4) Paychex's most recent fiscal year end is May 31, 2020. Total assets reflect the most-recent fiscal quarter end and net income reflects 12-month trailing as of November 30, 2020. Market capitalization reflects common shares outstanding at December 31, 2020, multiplied by the per share closing price of the company’s common stock on December 31, 2020, the last trading date of the year.

 

Consideration of Say-on-Pay Vote Results

 

At our most recent annual meeting of shareholders, held on May 20, 2020, the Company conducted an advisory vote to approve its executive compensation for the fiscal year ended December 31, 2019. As in prior years, shareholders expressed overwhelming support for the compensation of our NEOs, with approximately 97% of the votes present in person (or represented by proxy at the meeting) and entitled to vote on the matter cast to approve our 2019 executive compensation. The Committee took into account the results of this advisory vote when making compensation decisions for 2020.

 

In 2019, the Company conducted an advisory vote on the frequency of future advisory votes to approve its executive compensation, commonly known as “Say-on-Frequency.” Our shareholders indicated their preference for future advisory votes to be held annually. Consistent with the shareholders’ vote on this matter, the Board adopted a policy providing for annual advisory votes to approve the Company’s executive compensation.

 

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2020 Executive Compensation Program

 

Primary Elements of Compensation

 

The compensation program for our NEOs consists of three primary elements:

 

Compensation Element Objective Type of Compensation
Base Salary To provide a base level of cash compensation consistent with the executive’s level of responsibility. Fixed cash compensation. Reviewed annually and adjusted as appropriate.
     
Annual Incentives To encourage and reward our NEOs for achieving annual corporate and individual performance goals. Variable compensation. Performance-based. Payable in cash.
     
Long-term Incentives To motivate and retain senior executives by aligning their interests with those of shareholders through sustained performance and growth. Multi-year variable compensation. Generally payable in performance stock units (“PSUs”) and/or restricted stock units (“RSUs”). PSUs are year performance, with each award being settled in stock at the end of the performance period to the degree that goals are met. RSUs are subject to time-based vesting, with each award vesting in 1/3 increments over a three-year period. For 2020, total long-term incentive value was provided 60% in PSUs and 40% in RSUs for our CEO and split equally between PSUs and RSUs for our other NEOs other than Messrs. Fisher and Morris (see page 57 below).

 

The Compensation Committee makes decisions regarding each primary element of compensation described above.

 

In addition to the three primary compensation elements discussed above, our NEOs have an opportunity to participate in the Navient Deferred Compensation Plan. The Deferred Compensation Plan offers a variety of investment choices, none of which represents an “above-market return.” We also provide our NEOs with the same standard health, welfare and retirement benefits provided to our employees, as well as limited perquisites. Each of our NEOs also participates in severance plans for our senior executives.

 

Total Direct Compensation Mix

 

These primary compensation elements—Base Salary, Annual Incentives and Long-term Incentives—together form Total Direct Compensation for each of our NEOs. Consistent with Navient’s pay-for-performance culture, 87% of the 2020 Total Direct Compensation of our CEO was at-risk and dependent upon the attainment of specific performance objectives, as well as the value of Navient’s Common Stock. The charts on page 51 provide the at-risk percentages of the 2020 Total Direct Compensation of our NEOs and the percentage of their compensation that is at-risk, with Annual Incentives and PSUs shown at target levels of performance for the full year.

 

Base Salary

 

The Compensation Committee reviews base salary levels for the NEOs on an annual basis, but may make changes less frequently. Based on a market analysis of the 2020 Navient peer group, the Compensation Committee (in consultation with the other independent members of the Board) determined that Mr. Remondi’s 2020 base salary should remain unchanged at $1,000,000, consistent with peer group benchmarking.

 

The 2020 base salaries of the other NEOs were established by the Compensation Committee, taking into account recommendations made by Mr. Remondi, as well as a review of benchmarking data from the 2020 Navient peer group. The Committee concluded that the base salary for each of Messrs. Kane, Heleen, Hauber and Lown should remain unchanged for 2020. In the case of each NEO, including the CEO, the Committee reached its final determinations in consultation with the Compensation Consultant. The following chart lists the base salary for each of our NEOs as of December 31, 2020, December 31, 2019, and December 31, 2018 respectively.

 

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Navient NEOs     2020 Base
Salary
    2019 Base
Salary
    2018 Base
Salary
 
Mr. Remondi   $ 1,000,000   $ 1,000,000   $ 1,000,000  
Mr. Fisher*   $ 350,000   $ -   $ -  
Mr. Kane   $ 460,000   $ 460,000   $ 460,000  
Mr. Heleen   $ 385,000   $ 385,000   $ 385,000  
Mr. Hauber   $ 350,000   $ 350,000   $ 310,000  
Mr. Morris*   $ 285,000   $ -   $ -  
Mr. Lown   $ 400,000   $ 400,000   $ 400,000  

 

* Messrs. Fisher and Morris were not named executive officers of the Company prior to 2020. Mr. Fisher’s base salary, as reflected in the chart, became effective when he assumed the role of CFO on October 7, 2020. Mr. Morris’s 2020 annual compensation included a $30,000 supplemental bonus for each month or portion of a month in which he served as Acting CFO, which occurred from June to October 2020 for a total of $150,000 in supplemental bonus payments.

 

Annual Incentive Awards: The 2020 Management Incentive Plan

 

As part of Navient’s annual strategic planning process, management developed an operating plan for the Company’s 2020 fiscal year. The Compensation Committee and management then discussed specific corporate performance metrics and goals for Navient to be set forth in a 2020 annual incentive program—known as the Management Incentive Plan (“MIP”)—with the express purpose of focusing executives on achieving the operating plan. The following table details the specific performance metrics utilized in our 2020 MIP, as well as the weight assigned to each metric:

 

2020 MIP Performance Metric 2020
Weight
2019
Weight*
  Rationale
Adjusted Diluted “Core Earnings” Per Share10 50% 35% ●           Measures overall management effectiveness
      ●           Promotes shareholder value
      ●           Key financial metric for investors
         
Adjusted “Core Earnings” Operating Expenses11 20% 15% ●           Focuses management attention on expense reduction as our legacy loan portfolio amortizes
      ●           Key financial metric for investors, which is also critical to the achievement of our Core Earnings Per Share goal
         
Business Processing EBITDA12 15% 20% ●           Emphasizes profitable growth in certain businesses
    ●           EBITDA growth helps to offset company-wide expenses as our legacy loan portfolio amortizes
         
Private Education Loan Gross Defaults 15% 10% ●           Enhances the profitability of our private education loan portfolio
      ●           Aids our private education student loan customers
      ●           Key financial metric for investors to gauge the performance of our private education loan portfolio

 

*Remaining 20% of 2019 weight was for Consumer Lending New Loan Value metric, discontinued in 2020. 

 

10 Adjusted Diluted “Core Earnings” Per Share excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted Diluted “Core Earnings” Per Share is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020, or refer to the Investor Relations section of our website located at http://www.navient.com/investors/.

 

11 Adjusted “Core Earnings” Operating Expenses excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted “Core Earnings” Operating Expenses is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted “Core Earnings” Operating Expenses and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to our Investor Presentation for Fourth Quarter and Full Year 2020 on the Investor Relations section of our website located at http://www.navient.com/investors/, or refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020.

 

12 Earnings Before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of EBITDA and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020, or refer to the Investor Relations section of our website located at http://www.navient.com/investors/.

 

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For the 2020 MIP, the Committee continued its focus on Adjusted Diluted “Core Earnings” Per Share as the plan’s key financial metric. Three other financial metrics were carried forward from the 2019 plan—Business Processing EBITDA, Private Education Loan Gross Defaults, and Adjusted “Core Earnings” Operating Expenses. In response to investor feedback, and following the Committee’s review of Navient’s operating plan, the Consumer Lending New Loan Volume metric was removed for 2020. The weightings of the remaining performance measures were adjusted, with increased weightings for each of the performance metrics except Business Processing EBITDA, which was decreased to align with the weighting given to Private Education Loan Gross Defaults. The 2020 MIP remains well-aligned with the Company’s business plans, including our growth strategy for Consumer Lending, as performance in the Consumer Lending market continues to be included as part of the calculation for three 2020 MIP measures (Business Processing EBITDA does not include performance in this market as part of its calculation), with a total of 85% weight.

 

The Committee established a scale of “payout factors” to assess the Company’s performance relative to the target established for each of these performance metrics. These payout factors range from 50% based on a threshold level of performance, to 150% based on a maximum level of performance. Performance below threshold results in a payout factor of 0%. For each metric, the Committee also established a payout curve for performance between threshold-target and target-maximum.

 

The chart below sets forth the performance threshold, target, and maximum, and the payout factors for each performance metric:

 

2020 MIP Payout Factors
2020
Performance Metric
Below Performance
Threshold
(Payout Factor = 0%)
Performance
Threshold
(Payout Factor = 50%)
Performance
Target
(Payout Factor = 100%)
Performance
Maximum
(Payout Factor= 150%)
Adjusted Diluted “Core Earnings” Per Share <$2.62 $2.62 $3.02 >= $3.43
Adjusted “Core Earnings” Operating Expenses (millions) >$954 $954 $926 <=$902
Business Processing EBITDA (millions) <$41 $41 $48 >= $55
Private Education Loan Gross Defaults (millions) >$406 $406 $366 <= $326

 

Our performance in 2020 yielded an overall performance score of 137%, driven by notably strong performance against three of the four 2020 MIP goals. The chart below sets forth (i) each performance metric, (ii) the performance target approved by the Compensation Committee for each metric, (iii) the 2020 actual performance of the Company for each metric, (iv) the payout factor for each metric based on the Company’s level of achievement relative to target, (v) the relative weighting of each performance metric, and (vi) the performance score attributable to each metric, as well as the overall performance score.

 

2020 MIP Performance Results
2020 Performance Metric
(i)
    Performance
Target
(ii)
    2020 Actual
Performance
(iii)
    Payout
Factor
(iv)
    Weighting
(v)
    Performance
Score
(vi)
 
Adjusted Diluted “Core Earnings” Per Share13   $ 3.02   $ 3.40     147.5 %   50 %   73.8 %
Adjusted “Core Earnings” Operating Expenses14 (millions)   $ 926   $ 931     91.1 %   20 %   18.2 %
Business Processing EBITDA15 (millions)   $ 48   $ 57     150.0 %   15 %   22.5 %
Private Education Loan Gross Defaults (millions)   $ 366   $ 213     150.0 %   15 %   22.5 %
Overall Performance Score: 137.0%
 
13 See footnote 10 above for additional information regarding Adjusted Diluted “Core Earnings” Per Share.

 

14 See footnote 11 above for additional information regarding Adjusted “Core Earnings” Operating Expenses, which for 2020 excludes $33 million in net regulatory-related expenses and $9 million in restructuring expenses.

 

15 See footnote 12 above for additional information regarding EBITDA.

 

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These performance results were reviewed and certified by the Compensation Committee in January 2021. In determining the incentive award amounts to be paid to each of our NEOs under the 2020 MIP, the Committee also considered the individual performance of each NEO, as reflected in an annual performance assessment prepared by our CEO and presented to the Committee. The Committee also consulted with the other independent members of the Board in reviewing the CEO’s performance and setting his incentive payout.

 

Based on Navient’s strong 2020 financial results, which resulted in above-target performance under the 2020 MIP, the Committee did not make any changes to our incentive plan goals or payouts to offset the impacts of the COVID-19 pandemic. The incentive award amounts for our NEOs under the 2020 MIP, which were paid in cash in February 2021, are set forth in the following table.

 

2020 MIP Payouts  
Navient NEOs Target % of
Base Salary
2020 Target Incentive Award
at 100% Achievement
Amount ($)
2020 MIP Incentive Award
at 137% Achievement
Amount ($)
Mr. Remondi 150% 1,500,000    2,055,000  
Mr. Fisher* 150% 222,704   305,105  
Mr. Kane 150% 690,000   945,300  
Mr. Heleen 150% 577,500   791,175  
Mr. Hauber 150% 525,000   719,250  
Mr. Morris 125% 356,250   488,062  
Mr. Lown** 150% 600,000   0  

 

* Mr. Fisher’s annual incentive was pro-rated to reflect his appointment as Chief Financial Officer and Principal Accounting Officer at the beginning of the fourth quarter.

 

** Mr. Lown did not receive an annual incentive for 2020 due to his resignation in May 2020.

 

2020 Long-term Incentive Program

 

Our long-term incentive program is designed to drive long-term performance and shareholder value by delivering a significant portion of NEO compensation through a mix of restricted stock units (“RSUs”) and performance stock units (“PSUs”). Similar to the mix for 2019, Mr. Remondi’s 2020 long-term incentive award was delivered 60% in the form of PSUs and 40% in the form of RSUs (in terms of grant date value). Each of our other NEOs (excluding Messrs. Fisher and Morris) received long-term incentive awards split equally between RSUs and PSUs.

 

Mr. Fisher’s 2020 long-term incentive award was delivered 100% in the form of RSUs in accordance with the standard practice for employees at his level (Vice President) at the time he received his grant in February 2020. In addition, in connection with his promotion to CFO in October 2020, Mr. Fisher received an additional, one-time award of RSUs with a grant-date value of $150,000. Mr. Morris’s 2020 long-term incentive award was delivered 75% in the form of RSUs and 25% in the form of PSUs in accordance with the standard practice for employees at his level (Senior Vice President) at the time he received his grant in February 2020.

 

The chart below details the 2020 long-term incentive awards for our NEOs:

 

Navient NEOs Performance Stock Units(1)
(#)
Restricted Stock Units(2)
(#)
Total Award
Value(3)
($)
Mr. Remondi 212,765 141,843 5,000,000
Mr. Fisher - 23,030 240,000
Mr. Kane 35,460 35,460 1,000,000
Mr. Heleen 26,595 26,595 750,000
Mr. Hauber 17,730 17,730 500,000
Mr. Morris 4,432 13,297 250,000
Mr. Lown(4) 42,553 42,553 1,200,000

 

(1) This column represents the target PSUs granted to each of the NEOs on February 6, 2020, with the target number of PSUs equal to 50% (60% for Mr. Remondi, 25% for Mr. Morris and 0% for Mr. Fisher) of the approved 2020 long-term incentive award amount divided by the closing price of Navient Common Stock on the grant date. Each PSU is subject to performance-based vesting over a three-year performance period beginning on January 1, 2020 and ending on December 31, 2022. The vesting provisions of these PSUs are described below.

 

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(2) This column represents the RSUs granted to each of the NEOs on February 6, 2020, with the number of RSUs equal to 50% (40% for Mr. Remondi. 75% for Mr. Morris and 100% for Mr. Fisher) of the approved 2020 long-term incentive award amount divided by the closing price of Navient Common Stock on the grant date. These RSUs are scheduled to vest in one-third increments on each of the first, second and third anniversaries of the grant date, subject to certain terms and conditions. Mr. Fisher received two separate RSU awards; a regular grant in February 2020 with a grant-date value of $90,000 (representing 100% of his 2020 annual long-term incentive award) and a one-time promotional grant in October 2020 with a grant-date value of $150,000.

 

(3) Total award value differs slightly from the grant date fair value, as reflected in the “Summary Compensation Table” and “Grants of Plan-Based Awards” table, as the number of units is rounded down to the nearest whole unit to avoid the issuance of fractional units or shares.

 

(4) Mr. Lown’s 2020 long-term incentive awards were forfeited in connection with his resignation in May 2020

 

2020-22 Performance Stock Units

 

PSUs granted in 2020 as part of our 2020 long-term incentive program are designed to vest at the end of 2022, with a potential payout ranging from 0% to 150% of the target number of units, based on cumulative performance over the 2020-22 performance period.

 

The design of the 2020 PSUs was unchanged from 2019, with a 70% weight assigned to net student loan cash flows as a primary driver of the Company’s value, and a 30% weight assigned to return on equity (“ROE”), a standard financial metric that incents a disciplined approach to managing, allocating and investing capital to achieve the best return for shareholders. Given the impact of accounting rules on certain businesses, separate annual ROE targets will be established by the Committee for each year in the 2020-22 PSU performance cycle, with targets set at the beginning of each year. Each annual ROE target will have 10% weight and earned awards will not be paid until after the end of the 2020-22 performance period. The 2020 PSUs, like the 2019 PSUs, utilize “Core Earnings” ROE calculated using average stockholder’s equity on a “Core Earnings” basis, which eliminates volatility associated with derivative related mark-to-market adjustments that are out of management’s control.16

 

These performance metrics for the 2020-22 PSUs are summarized below:

 

2020-22 Performance Stock Units
2020-22 PSU Performance Metric Weight   Rationale
Cumulative Net Student Loan Cash Flows17 70% Promotes successful management of our loan portfolios
    Critical driver of shareholder value, supporting dividends, share repurchases and debt payments
    Supports growth of strategic businesses, including consumer lending
“Core Earnings” Return on Equity18 10% / 10% / 10% Requires focus on managing, allocating and investing capital to achieve the best return for shareholders
    Standard financial metric that permits comparability across peer groups and industry-wide benchmarks
 

16 For purposes of these PSUs, “Core Earnings” Return on Equity is calculated as a percentage equal to the Company’s “Core Earnings” net income for each of fiscal years 2020, 2021 and 2022 (as shown in the segment reporting footnote in the Company’s audited financial statements as published in the Company’s annual report on Form 10-K, excluding the impact of any regulatory and restructuring costs), divided by average stockholder’s equity for each such year (determined using the average balance of stockholder’s equity on a “Core Earnings” basis for each quarter in a given year).

 

17 Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows are the aggregate cash flows net of secured borrowings from all student loans (including private credit refinance loans) realized for the fiscal years 2020, 2021 and 2022, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2022 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales.

 

18 Annual “Core Earnings” Return on Equity targets and range are established by the Committee at the beginning of each respective year, with each year’s performance counting 1/3 towards the total 30% weight. “Core Earnings” Return on Equity is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of “Core Earnings” Return on Equity, see footnote 16 above. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 35-43 of our 2020 Annual Report filed on Form 10-K on February 26, 2020, as well as the section titled “Non-GAAP Financial Measures” in each of our quarterly reports filed on Forms 10-Q.

 

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The chart below shows the potential for vesting as a percentage of the target number of PSUs:

 

2020-22 Performance Stock Units
Performance Metric Weight Percentage of 2020-22 PSUs Vesting*
0% 50% 100% 150%

Cumulative Net Student Loan

Cash Flows

70%

Less than

$6.75 billion

$6.75 billion $7.8 billion $8.7 billion or greater

2020 “Core Earnings” Return

on Equity

10%

Less than

18.6%

18.6% 20.6% 22.6%

2021 “Core Earnings” Return

on Equity

10% Less than 16% 16% 18% 20%

2022 “Core Earnings” Return

on Equity19

10% - - - -

 

* For points between each performance level, the vesting percentages will be interpolated. That is, vesting will be interpolated between threshold performance (50% vesting) and target performance (100% vesting), as well as between target performance and maximum performance (150% vesting).

 

Regarding the performance targets established for each metric, the Compensation Committee believes that these targets are set at challenging but achievable levels in light of the uncertain regulatory, rating agency and financial environment the Company faces. The Committee considers these environmental factors, prevailing market-competitive return ratios, and the resulting degree of difficulty that management faces in achieving the Company’s long-term growth and performance goals when establishing appropriate levels for threshold, target and maximum performance levels and payout curves. The Committee established threshold, target and maximum levels of performance for 2021 “Core Earnings” Return on Equity at the beginning of calendar year 2021. These levels reflect our general market expectations for 2021, as well as our expectation that average stockholder’s equity for 2021 (determined using the average balance of stockholder’s equity on a “Core Earnings” basis for each quarter in 2021) will remain stable in 2021 while our legacy loan portfolio continues to amortize, resulting in a lower expected “Core Earnings” Return on Equity for 2021 relative to 2020.

 

The Company achieved a “Core Earnings” ROE of 23.2% for fiscal year 2020, which equates to maximum achievement (150%) of the 2020 goal for that performance metric.

 

2019-21 Performance Stock Units

 

The achievement of the 2020 ROE performance goal at the maximum level (150%) described above applies to the 2020 “Core Earnings” ROE performance metric for the 2019-21 PSU awards granted in early 2019 (weighted at 10% of the 2019-21 PSUs). The Company achieved a 2019 “Core Earnings” ROE of 17.4%, which equated to maximum achievement (150%) of the 2019 goal for that metric under the 2019-21 PSUs (also at weighted 10% of the 2019-21 PSUs). These results were driven by Navient’s strong earnings results in both 2019 and 2020.

 

2018-20 Performance Stock Units

 

Fiscal year 2020 also marked the final year of a three-year performance period associated with PSUs granted to our executive team in early 2018 as part of our long-term incentive program. These 2018-20 PSUs were designed to vest in early 2021 based on performance through the end of 2020, with a potential payout ranging from 0% to 150% of the target number of units, determined by cumulative performance over the 2018-20 performance period. The following performance metrics were selected in early 2018 to focus management on specific long-term business objectives:

 

 
19 The Committee will establish the “Core Earnings” Return on Equity target and range for 2022 at the beginning of calendar year 2022.

 

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2018-20 PSU Performance Metric Weight   Rationale
Cumulative Net Student Loan Cash Flows 50% Promotes successful management of our loan portfolios
    Critical driver of shareholder value, supporting dividends, share repurchases and debt payments
    Supports growth of strategic businesses, including consumer lending
Cumulative Revenue from Growth Businesses 30% Emphasizes strategic growth as our legacy loan portfolio amortizes
    Offsets Company-wide expenses as our legacy loan portfolio amortizes
Strategic Objectives 20% Focuses management on critical, long-term strategic goals

 

The following chart summarizes the Company’s cumulative performance over the 2018-20 performance period relative to the targets established for each of these metrics. Our performance during this three-year period resulted in the 2018-20 PSUs vesting at 83% of the target number of units.

 

2018-20 Performance Stock Units
2018-20 Performance Metric Performance
Target
  2018-20 Actual
Performance
  Payout
Factor
  Weight   Performance Score
Cumulative Net Student Loan Cash Flows20 (millions) $ 8,700   $ 8,982   123%   50%   62%
Cumulative Revenue from Growth Businesses21 (millions) $ 1,098   $ 854   0%   30%   0%
Strategic Objectives             105%   20%   21%
●    Originate High Quality Student Loan Assets                      
●    Capture Operating Efficiencies in Legacy Student Loan Business                      
●    Improve Margins in Business Processing                      
●    Build Strong Relationships with State and Federal Regulators                      
●    Grow Intrinsic Value of Company                      

 

Overall Performance Score: 83%

 

The Committee considered management’s key achievements during the 2018-20 performance period when assessing the Company’s performance relative to the strategic goals established at the beginning of that period. These key achievements are set forth in the table on the following page.

 

 

20 Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows include aggregate cash flows net of secured borrowings from student loans realized for the fiscal years 2018, 2019 and 2020, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2020 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales.

 

21 Cumulative Revenue from Growth Businesses includes that portion of the Company’s aggregate revenue for fiscal years 2018-20 from non-federal-loan-related businesses.

 

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2018-20 Performance Stock Units
2018-20 Strategic Objectives   Achievements
Originate High Quality Student Loan Assets Grew private education refinance loan originations from $2.8B in 2018, to $4.9B in 2019, and originated $4.6B in private education refinance loans in 2020 despite the uncertain economic environment related to COVID-19
  Credit loss rates for Earnest refinance loans have averaged 50% lower than the market index of similar student loan refinance portfolios
     
Capture Operating Efficiencies in Legacy Student Loan Business Reduced direct servicing unit cost between 2018-20 while improving customer satisfaction
  Continued to implement automation and system enhancements, as well as program and procedural improvements, that have driven down expenses and improved efficiency
  Moved core IT systems that support our servicing operations to a more variable cost structure through strategic agreement with First Data, now part of Fiserv
Improve Margins in Business Processing Business Processing EBITDA margins improved in 2018-19 and held steady in 2020 despite pandemic-related impacts to core business
  Implemented operational improvements, including robotic process automations and call optimization efforts, and reduced employee turnover
  Secured several large-scale healthcare revenue cycle management engagements and won new contracts in 2020 to support states in providing unemployment benefits and COVID-19 contract tracing services
Build Strong Relationships with State and Federal Regulators Established or reestablished dialogue with various regulatory bodies
  Received positive examinations from key federal and state regulators
  Continued to provide fact-based responses to ongoing litigation
Grow Intrinsic Value of Company Delivered increasing Adjusted Diluted “Core Earnings” Per Share results year-over-year
  Broadened information available to investors through periodic disclosures, guidance of future impacts, and investor conferences
  Value delivered to shareholders through dividends and share repurchases
     

These strategic goals were established at the beginning of the three-year period to be challenging but achievable. In evaluating management’s performance over the entire performance period, the Committee considered the business environment during the performance period and its impact on the difficulty of achieving the strategic goals. Based on its evaluation of the strategic goal achievements individually and overall, the Committee determined that management’s accompl