8-KLeadership ChangesMaterial AgreementsCorporate Changes+1

AUTOMATIC DATA PROCESSING INC 8-K Report, Material Agreement (Aug 11, 2006)

Filed August 11, 2006For Securities:ADP

Summary

This Form 8-K filing from Automatic Data Processing, Inc. (ADP) on August 11, 2006, primarily details the Compensation Committee's actions regarding executive compensation for fiscal year 2007 and beyond. Key decisions include the approval of annual base salaries, performance criteria for cash bonuses, and the performance objectives for issuing Performance-Based Restricted Stock (PBRS) and implementing an Accelerated Revenue Program (ARP). These compensation elements are designed to incentivize key executives, including the CEO-elect and newly appointed CFO, towards achieving specific corporate goals related to earnings per share growth, revenue growth, return on equity, and operational objectives. Furthermore, the filing announces the retirement of a long-serving director, Mr. Harvey M. Krueger, effective August 10, 2006. It also reports on the adoption of amendments to the company's By-laws, specifically the dissolution of the Executive Committee of the Board of Directors. Investors should note that the effectiveness of the executive compensation programs is contingent upon stockholder re-approval of the 2001 Executive Incentive Compensation Plan at the upcoming 2006 annual meeting.

Key Highlights

  • 1ADP's Compensation Committee approved fiscal year 2007 base salaries for key executives, including the CEO-elect and the incoming CFO, with salaries ranging from $500,000 to $850,000.
  • 2Performance criteria for fiscal year 2007 cash bonuses have been established, focusing on metrics such as EPS growth, revenue growth, return on equity, net operating income, sales, and client retention.
  • 3The company has outlined performance objectives for issuing Performance-Based Restricted Stock (PBRS) tied to earnings per share growth over fiscal years 2007-2008.
  • 4An Accelerated Revenue Program (ARP) was approved, designed to incentivize executives over fiscal years 2007-2008 based on revenue growth targets, with awards paid in restricted stock.
  • 5Maximum potential cash bonuses for fiscal year 2007 range from $575,050 to $2,400,000 for the Named Executive Officers and Mr. Reidy.
  • 6Mr. Harvey M. Krueger, a director since 1967, retired from the Board of Directors on August 10, 2006.
  • 7ADP's Board of Directors adopted amendments to its By-laws, dissolving the Executive Committee, effective immediately.

Frequently Asked Questions

The filing details the approved annual base salaries for fiscal year 2007 for key executives, the performance criteria for cash bonuses in FY2007, and the performance objectives for Performance-Based Restricted Stock (PBRS) and an Accelerated Revenue Program (ARP) covering FY2007-2008. These are all tied to the company's 2001 Executive Incentive Compensation Plan.

Yes, the effectiveness of the cash bonus program, PBRS awards, and ARP awards is subject to and conditioned upon the stockholder re-approval of the 2001 Executive Incentive Compensation Plan at ADP's 2006 annual meeting.

The Compensation Committee will determine if the performance objectives were achieved after the end of fiscal year 2007. Any earned bonus payments will be made early in fiscal year 2008. The maximum potential bonuses range from $575,050 for Mr. Hogan and Mr. Daly to $2,400,000 for Mr. Butler.

The filing reports the retirement of Mr. Harvey M. Krueger from the Board of Directors, who had served as a director since 1967. Additionally, the Board of Directors dissolved the Executive Committee of the Board of Directors.