UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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Wright Express Corporation
(Name of Registrant as Specified in Its Charter)

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April 11, 2008

 

Dear Fellow Stockholders,

 

You are invited to attend our 2008 annual meeting of stockholders. The meeting will be held on Friday, May 16, 2008, at 8:00 a.m., Eastern Time, at the Wright Express Long Creek campus in South Portland, Maine.

 

At the meeting we will:

 

 

Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. As a stockholder of record, you can vote your shares by signing and dating the enclosed proxy card and returning it by mail in the enclosed envelope. If you decide to attend the annual meeting and vote in person, you may then revoke your proxy. If you hold your stock in “street name,” you should follow the instructions provided by your bank, broker or other nominee.

 

On behalf of the Board of Directors and the employees of Wright Express Corporation, we would like to express our appreciation for your continued interest in the Company.

 

Sincerely,

 

Rowland T. Moriarty

CHAIRMAN OF THE BOARD

 

Michael E. Dubyak

PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

 

 

April 11, 2008

 

The 2008 annual meeting of stockholders of Wright Express Corporation will be held on Friday, May 16, 2008, at 8:00 a.m., Eastern Time, at the Wright Express Corporation Long Creek Campus located at 225 Gorham Road, South Portland, Maine, 04106, to conduct the following items of business:

 

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 16, 2008. The proxy statement and annual report to stockholders are available at http://phx.corporate-ir.net/phoenix.zhtml?c=186699&p=irol-proxy.

 

Stockholders who owned shares of our common stock at the close of business on March 18, 2008 are entitled to attend and vote at the meeting and any adjournment or postponement of the meeting. A complete list of registered stockholders will be available at least 10 days prior to the meeting at our offices located at 225 Gorham Road, South Portland, Maine, 04106.

 

By Order of the Board of Directors,

 

 

Hilary A. Rapkin

SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND

CORPORATE SECRETARY

 

 

TABLE OF CONTENTS

 

 

 

This proxy statement describes the proposals on which you may vote as a stockholder of Wright Express Corporation. It contains important information to consider when voting.

 

The Company’s board of directors, or the Board, is sending these proxy materials to you in connection with the Board’s solicitation of proxies. Our annual report to stockholders and our proxy materials were first mailed on or about April 11, 2008.

 

Your vote is important. Please complete, execute and promptly mail your proxy card as soon as possible even if you plan to attend the annual meeting.

 

Stockholders who owned the Company’s common stock at the close of business on March 18, 2008, the record date, may attend and vote at the annual meeting. Each share is entitled to one vote. There were 39,957,926 shares of common stock outstanding on the record date.

 

How do I vote?

 

 

You do this by completing and signing your proxy card and mailing it in the enclosed prepaid and addressed envelope.

 

 

We will pass out ballots to any record holder who wants to vote at the meeting. However, if you hold your shares in street name, you must request a proxy from your stockbroker in order to vote at the meeting. Holding shares in “street name” means you hold them through a brokerage firm, bank or other nominee, and as a result, the shares are not held in your individual name but through someone else.

 

If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee, including any instructions provided regarding your ability to vote by telephone or through the Internet.

 

How do I vote my shares held in the Wright Express Corporation Employee Savings Plan?

 

If you participate in our Wright Express Corporation Employee Savings Plan, commonly referred to as the “401(k) Plan,” shares of our common stock equivalent to the value of the common stock interest credited to your account under the plan will be voted automatically by the trustee in accordance with your instruction, if it is received by May 13, 2008. Otherwise, the share equivalents credited to your account will be voted by the trustee in the same proportion that it votes share equivalents for which it receives timely instructions from all plan participants.

 

Please refer to the “Information about Voting Procedures” section.

 

 

Our nominees for director this year are:

 

 

Each nominee is presently a director of the Company and has consented to serve a new three-year term.

 

We recommend a vote FOR these nominees.

 

 

The Audit Committee of the Board has selected Deloitte & Touche LLP, or D&T, as the independent registered public accounting firm for the Company for fiscal year 2008. Stockholder ratification of the appointment is not required under the laws of the State of Delaware, but the Audit Committee has decided to request that the stockholders ratify the appointment. A representative of D&T will be present at the meeting to answer questions from stockholders and will have the opportunity to make a statement on behalf of the firm, if he or she so desires.

 

If this proposal is not approved by our stockholders at the 2008 annual meeting, the Audit Committee will reconsider its selection of D&T. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different registered public accounting firm at any point during the year if it determines that making a change would be in the best interests of the Company and our stockholders.

 

We recommend a vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm.

 

We know of no other business to be considered at the meeting and the deadline for stockholders to submit proposals or nominations has passed. However, if:

 

 

Our Board is led by our non-executive Chairman, Dr. Moriarty. The non-executive Chairman, who is not an officer or employee of Wright Express, leads all meetings of the Board at which he is present. The non-executive Chairman serves on appropriate committees as reasonably requested by the Board, sets meeting schedules and agendas and manages information flow to the Board to assure appropriate understanding and discussion regarding matters of interest or concern to the Board. The non-executive Chairman also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as may be prescribed.

 

 

Our certificate of incorporation provides that our Board shall consist of such number of directors as is fixed by our By-Laws. Our By-Laws provide that, by resolution of the Board, we shall have eight directors. Our directors serve staggered terms as follows:

 

 

The Board held eight meetings in 2007 and each director attended at least 75% of all Board and applicable committee meetings. Our non-management directors meet in executive session at each regularly scheduled in-person Board meeting and we have at least one meeting per year of our independent directors. Our Chairman of the Board leads the executive sessions of non-management directors. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. All directors who were serving at that time attended our 2007 annual meeting of stockholders.

Our Board has created the following committees:

 

 

You will find the following documents under the corporate governance tab of the investor relations page of our website at www.wrightexpress.com: our Corporate Governance Guidelines; Code of Business Conduct and Ethics for Directors; Employee Code of Business Conduct and Ethics; Code of Conduct for Senior Financial Officers; and the charters for the Audit Committee, Compensation Committee, and Corporate Governance Committee. You also may obtain a paper copy of these documents, without charge, by contacting our investor relations department:

 

Investor Relations

Wright Express Corporation

97 Darling Avenue

South Portland, ME 04106

Telephone: (866) 230-1633

Email: investors@wrightexpress.com

 

No member of our Compensation Committee (the members of which are listed in the table in the “Board and Committee Meetings” section) is or was one of our or our subsidiaries’ former officers or employees. During 2007, there were no Compensation Committee interlocks as defined under SEC rules.

 

In 2006, the compensation committee requested that Mercer (US) Inc. review our director compensation plan and provide the committee with recommendations on any changes to meet the following objectives of the compensation plan:

 

 

The committee reviewed Mercer’s analysis and approved the new Wright Express Corporation Non-Employee Director Compensation Plan which replaced the previous plan adopted when the Company went public. The director plan was effective as of January 1, 2007.

 

The plan splits the director retainer between cash and equity as shown below to meet our objectives of attracting and retaining directors while aligning director compensation with stockholder interests.

 

 

 

 

 

The total direct compensation of our outside directors at the time the 2007 plan was adopted represented the 75th percentile of our peer group which the Compensation Committee believes is the appropriate target given the experience our outside directors bring to Wright Express. We generally review director compensation every two years and intend to review it again in 2008.

 

  Non-employee directors deferred compensation plan

 

Under our Non-Employee Directors Deferred Compensation Plan (DDCP), our non-employee directors are eligible to receive their cash retainers and equity retainers in the form of deferred stock units, or DSUs. The DSUs issued pursuant to the DDCP are issued under the 2005 Equity and Incentive Plan. On the 200th day after the Director leaves the Board, a one-time distribution equivalent to the units deferred is payable to the Director in shares. Actual director compensation paid in 2007 is shown below.

 

Director Compensation

 

 

 

Grant Date Fair Values

 

 

 

 

The number of RSUs that were granted to each director on May 18, 2007 is as follows: Mr. Ghosh — 2,152; Mr. Maheu — 2,152; Mr. McTavish — 3,689; Dr. Moriarty — 3,920; Mr. Pond — 2,152; Ms. Sommer — 2,152; and Mr. VanWoerkom — 2,152. All of these RSUs were outstanding as of December 31, 2007.

 

On September 7, 2006, the Committee established and approved equity ownership guidelines for all non-executive directors. “Equity” for the purpose of these guidelines is defined to include shares of the Company’s common stock, vested restricted stock units and deferred stock units. Under the guidelines of the equity ownership program, all directors are expected to own equity equal in value to at least three times each director’s annual director cash retainer or non-executive chairman cash retainer. The Compensation Committee assesses progress against the guidelines each year on July 31. Directors have three years from July 31, 2007, or, if later, three years following their appointment to the Board, to achieve this level of ownership. All of our non-executive directors exceed the holdings in the guidelines.

 

This table shows common stock that is beneficially owned by our directors, our chief executive officer, our chief financial officer and our next three most highly compensated executive officers as of December 31, 2007, whom we refer to as our “named executive officers,” and all persons known to us to own 5% or more of the outstanding Company common stock, as of March 7, 2008.

 

 

 

 

 

 

 

We have considered the independence of each member of the Board. To assist us in our determination, we reviewed NYSE requirements and adopted general guidelines for independence.

 

To be considered independent: (1) a director must be independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) in the Board’s judgment, the director must not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

 

The Board has established guidelines to assist it in determining whether a director has a material relationship with the Company. Under these guidelines, a director will not be considered to have a material relationship with the Company if (1) he or she is independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) he or she: (i) serves as an executive officer of another company which is indebted to the Company, or to which the Company is indebted, provided that the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the company he or she serves as an executive officer; (ii) serves as an officer, director or trustee of a tax exempt organization, provided that the Company’s discretionary contributions to such organization are less than the greater of $1 million or 2% of that organization’s consolidated gross revenues (the Company’s automatic matching of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose); or (iii) serves as a director of another company with which the Company engages in a business transaction or transactions, provided that the director owns less than 5% of the equity interests of such other company and recuses himself or herself from deliberations of the Board with respect to such transactions. In addition, ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists shall be made by the other members of the Board of Directors who are independent as defined above.

Based on our guidelines and NYSE corporate governance standards, we have determined that the following directors are independent: Shikhar Ghosh, Ronald T. Maheu, George L. McTavish, Rowland T. Moriarty, Kirk P. Pond, Regina O. Sommer and Jack VanWoerkom.

 

When considering the independence of the directors listed above, the Board was aware that Mr. VanWoerkom was an executive officer of a company that does business with us in the ordinary course and that such relationship is deemed immaterial under the NYSE bright-line independence tests and our categorical standards. The amounts involved were substantially less than 1% of either party’s consolidated gross revenues for 2007.

 

The Corporate Governance Committee is composed entirely of independent directors as determined by the Board in accordance with its independence guidelines and the listing standards of the NYSE. Among the committee’s responsibilities is recommending candidates for nomination to the Board. In that capacity, the Corporate Governance Committee recommended Messrs. Dubyak and Maheu and Dr. Moriarty for election by our stockholders. Messrs. Dubyak and Maheu and Dr. Moriarty all have served as members of our Board since February 2005.

 

The Corporate Governance Committee will consider candidates nominated by stockholders for next year’s meeting in the same manner as candidates nominated by the Corporate Governance Committee. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then that nominee’s name will be included in the proxy card for the next annual meeting. Our stockholders also have the right under our By-Laws to directly nominate director candidates, without any action or recommendation on the part of the Corporate Governance Committee or Board by following the procedures in Article II, Section 5 of our By-Laws under the heading “Nomination of Directors.” Our By-Laws require, among other things, that a stockholder submitting a nominee for consideration include in the notice: (i) the name, age, business address and residence address of the person, (ii) the principal occupation and employment of the person, (iii) the class and series and number of shares of each class and series of capital stock which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other SEC filing. We refer you to the copy of our By-Laws that are posted on our website for a complete list of the requirements and procedures for directly nominating a candidate for director.

 

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received not earlier than January 16, 2009 nor later than February 16, 2009. However, in the event that the annual meeting is called for a date that is not within twenty-five days before or after May 16, 2009, notice by the stockholder must be received no later than the earlier of the close of business on the tenth day following the day on which notice of the date of the annual meeting is mailed or publicly disclosed.

 

Stockholder nominations must be addressed to:

 

Wright Express Corporation

Attention: Corporate Secretary

97 Darling Avenue

South Portland, ME 04106

 

Director Qualifications

 

The qualifications for directors are described in our Corporate Governance Guidelines and the guidelines for evaluating director nominees are in the Corporate Governance Committee’s charter, each of which is available on our website. In addition, the Corporate Governance Committee believes that a nominee for the position of director must meet the following specific, minimum qualifications:

 

 

 

Application of Criteria to Existing Directors

 

The re-nomination of existing directors is not viewed as automatic, but is based on continuing qualification under the criteria listed above. In addition, the Corporate Governance Committee considers the existing directors’ performance on the Board and any committee, which shall include consideration of the extent to which the directors undertook continuing director education.

 

The backgrounds and qualifications of the directors considered as a group are to provide a significant breadth of experience, knowledge and abilities in order to assist the Board in fulfilling its responsibilities.

 

The Board believes that the Chief Executive Officer and his designees speak for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies who are involved with the Company. It is, however, expected that Board members would do so with the knowledge of and, absent unusual circumstances or as contemplated by the committee charters, only at the request of the Company’s senior executives.

 

The Board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the committee charters, the Chairman of the Board shall, subject to advice and assistance from the General Counsel, (1) be primarily responsible for monitoring communications from stockholders and other interested parties, and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.

 

If you wish to communicate with the Board or the non-management members of the Board, you may send your communication in writing to:

 

Non-Management Director Communication

Wright Express Corporation

Attention: Corporate Secretary

97 Darling Avenue

South Portland, ME 04106

 

You should include your name and address in the written communication and indicate whether you are a stockholder.

 

The board of directors appointed us as an audit committee to monitor the integrity of Wright Express’ consolidated financial statements, its system of internal controls and the independence and performance of its internal auditor and independent registered public accounting firm. As an audit committee, we select the independent registered public accounting firm.

 

We are governed by a written charter adopted by the Audit Committee, which is available through the Investor Relations page of our website at www.wrightexpress.com.

 

Our committee consisted of three non-employee directors at the time that the actions of the committee described in this report were undertaken. Each member of the audit committee is “independent” within the meaning of the New York Stock Exchange rules and the Securities Exchange Act of 1934. Wright Express’ management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. Wright Express’ independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing. We have relied, without independent verification, on the information provided to us and on the representations made by Wright Express’ management and independent registered public accounting firm.

 

In fulfilling our oversight responsibilities, we discussed with representatives of Deloitte & Touche LLP, the independent registered public accounting firm for fiscal year 2007, the overall scope and plans for their audit of the consolidated financial statements for fiscal year 2007. We met with them, with and without Wright Express management present, to discuss the results of their examinations, their evaluations of the Company’s internal control over financial reporting and the overall quality of Wright Express’ financial reporting. We reviewed and discussed the audited consolidated financial statements for fiscal year 2007 with management and the independent auditors.

 

We also reviewed the report of management contained in the annual report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC, as well as the Report of Independent Registered Public Accounting Firm included in the Annual Report on Form 10-K related to Deloitte’s audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. We continue to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal 2008.

 

We discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended, as adopted by the Public Company Accounting Oversight Board, including a discussion of Wright Express’ accounting principles, the application of those principles, and the other matters required to be discussed with audit committees under generally accepted auditing standards.

 

In addition, we received from the independent registered public accounting firm a letter containing the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as adopted by the Public Company Accounting Oversight Board, and discussed the disclosures with them, as well as other matters relevant to their independence from management and Wright Express. In evaluating the independence of our independent registered public accountant, we considered whether the services they provided beyond their audit and review of the consolidated financial statements were compatible with maintaining their independence. We also considered the amount of fees they received for audit and non-audit services.

Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred to above and in the audit committee charter, we recommended to the board of directors that the audited consolidated financial statements for fiscal year 2007 be included in the annual report on Form 10-K.

 

THE AUDIT COMMITTEE

 

Ronald T. Maheu, Chair

Regina O. Sommer

George L. McTavish

 

Auditor Selection

 

The Audit Committee has selected D&T as the Company’s independent registered public accountant for the 2008 fiscal year. D&T has served as the Company’s independent registered public accountants since our initial public offering. We expect representatives of D&T to attend the annual meeting of stockholders. They will respond to appropriate questions from stockholders and will have the opportunity to make a statement.

 

Audit Fees

 

The following is a description of the fees billed to the Corporation by D&T for the years ended December 31, 2006 and 2007:

 

 

 

 

Pre-Approval Policies and Procedures

 

The Audit Committee has adopted a policy regarding pre-approval of audit and non-audit services performed by D&T. According to the policy, the Audit Committee shall pre-approve all audit services to be provided to the Company, whether provided by the principal independent registered public accountant or other firms, and all other permitted services (review, attest and non-audit) to be provided to the Company by the independent registered public accountant; provided, however, that de minimis permitted non-audit services may instead be approved in accordance with applicable SEC rules. The independent registered public accountant is not authorized to provide any prohibited non-audit services (as defined in Rule 2-01(c)(4) of Regulation S-X). The Chairman of the Audit Committee has the authority to pre-approve any permitted services on behalf of the Audit Committee and shall notify the full committee of such approval at its next meeting.

 

Since our initial public offering on February 16, 2005, the Audit Committee has pre-approved all of the services performed by D&T.

 

 

This Compensation Discussion and Analysis, or CD&A, describes our compensation objectives and programs for our executive officers. The CD&A also describes the specific decisions, and the process supporting those decisions, which were made with respect to 2007 for the executive officers named in the Summary Compensation Table.

 

The following discussion includes statements regarding performance targets in the limited context of our compensation programs. These targets should not be understood to be statements of management’s expectations of our future results or other guidance. Investors should not apply these targets in any other context.

 

Compensation Philosophy

 

Our compensation programs are designed and administered to balance the achievement of short-term operational results and long-term growth goals with the ultimate objective of increasing long-term stockholder value. We do this by structuring our compensation programs to:

 

 

We are a leading provider of fleet and corporate charge cards, providing payment processing and information management services to the US commercial and government vehicle fleet industry. We compete for both clients and employees with significantly larger companies. Our primary differentiator in this competitive market is our client-centered partnering approach. Our clients count on this when they outsource their branded business to us. The experience and performance of our associates, including the members of our executive team, is critical to sustaining this level of differentiation. Our CEO has been with the Company for over 20 years and has been instrumental in guiding this approach and in our resulting growth. The other members of our executive team bring significant industry and company experience which is critical to our continued success. Accordingly, in addition to being designed to support our goals of achieving strong year-over-year and long-term growth and stockholder value, our compensation programs reflect the competitive environment in which we operate and our focus on continued differentiation in the marketplace through continuity of leadership and culture.

Compensation Objectives

 

We recognize the role total compensation plays in achieving our objectives of attracting, retaining and motivating our high-performing associates, including our executives, to achieve these results. The chart below identifies the compensation elements and method of delivery used to support each of our compensation objectives listed above.

 

 

We believe the compensation of our executives should and does reflect the success of our Company. In setting compensation levels for each executive, we evaluate total direct compensation (base salary plus short-term incentive at target plus long-term equity incentive at target) against multiple factors including:

 

 

Annually, we reevaluate each compensation element with a focus on total direct compensation. We also evaluate equity ownership levels for each executive. The purpose of this review is to appropriately reward and motivate our executive team to increase stockholder value with a focus on providing compensation above target levels when Company performance is above target and compensation below target levels when we do not achieve our performance goals.

 

Annual Process of the Compensation Committee

 

The compensation committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. The committee meets at least once each quarter. Generally, the committee meets more than once in the first quarter each year. In addition to the three independent directors who serve on the compensation committee, typical attendance at these meetings includes the Senior Vice President, Human Resources, the Director of Compensation and Benefits and the Associate General Counsel and Assistant Corporate Secretary. Mr. Dubyak, our President and CEO, generally joins two meetings each year to discuss the mid-year and end-of-year appraisal of his performance with the committee. Otherwise, he generally does not attend committee meetings.

In the first quarter of each fiscal year, the committee reviews the Board’s assessment of the CEO’s performance with him and the Company results for the prior year. In addition, the committee approves the following as explained in the Annual Review of Executive Compensation section:

 

 

Agenda items for the second quarter vary each year but this meeting generally focuses on plan benchmarking and assessing the effectiveness of our executive compensation programs in meeting their objectives.

 

In the third quarter each year, Mercer (US) Inc., the compensation consultant retained by the committee, provides data to support the committee’s annual review of executive compensation. This data includes target ranges for:

 

 

In the final quarter of each fiscal year, management presents the committee with recommended executive compensation changes for each element of compensation. This includes:

 

 

In 2007, the committee engaged independent legal counsel in the second quarter to review committee governance practices around executive compensation. Based on this report, the committee concluded that it is following best practices in carrying out its duties. The committee also reviewed current equity compensation practices other companies are using with a focus on compliance with Section 162(m) of the Internal Revenue Code.

 

Role of the Compensation Consultant

 

In 2007, the committee selected Mercer, reporting directly to the committee, to provide advice regarding the Company’s executive compensation practices. The primary services provided by Mercer in 2007 were an evaluation of executive officers’ base salaries, short-term incentive targets and long-term incentive targets relative to identified peers and the broader market and a recommendation of compensation ranges for each executive officer. Mercer also provided advice on the design of the Company’s short-term and long-term incentive plans and evaluated the impact of the Company’s equity programs on the total pool of shares available for grant.

During 2007, Mercer also provided services to the Company’s management in the areas of health and welfare benefits, 401(k) and risk management. The table below shows the total amount Mercer received directly or indirectly as a result of its relationship with the Company.

 

 

Mercer’s existing relationships with Wright Express were discussed by the committee during the selection process. The committee selected Mercer over other compensation consultants reviewed due to its breadth and depth of experience and its familiarity with our business model and Company goals.

 

The committee has established procedures that it considers adequate to ensure that Mercer’s advice to the committee remains objective and is not influenced by the Company’s management. Mercer’s compensation consulting group operates with a direct reporting relationship to the committee. At least annually, the committee consults directly with Mercer without members of management present to evaluate the level to which Mercer is operating without management influence. Decisions regarding the amount and form of executive and director compensation are made by the committee alone. These decisions reflect considerations beyond the information and advice provided by Mercer.

 

Role of the Executive Officers

 

In approving 2007 executive compensation, the committee considered recommendations from Mr. Dubyak regarding total direct compensation for those executives reporting directly to him. Mr. Dubyak provided the committee with an assessment of each executive officer’s performance to support his recommendations. These assessments included the results of specific operational and strategic goals identified in STIP as well as progress in the area of succession planning. With the exception of Mr. Cornett, the Senior Vice President, Human Resources, who presents Mr. Dubyak’s recommendations to the committee, the other executives were not involved in the process of recommending specific executive compensation levels. Ms. Smith, in her role as CFO and Executive Vice President, Finance and Operations, recommends performance goals for the upcoming fiscal year but is not involved in decisions regarding individual executive compensation.

 

Peer Group

 

Mercer used the following compensation peer group in identifying the recommended 2007 compensation ranges for Wright Express executives. The peer group used by the Company was originally established, based on input from management and a review by the committee, when we became a public company in 2005. It is reviewed each year and modified as needed to reflect our growth and to account for changes due to market consolidations among peers.

The following companies were selected as our compensation peer group based on their comparability to Wright Express in terms of industry, annual revenue and/or market capitalization. The committee believes that understanding both peer group data and market survey data for these companies is important in determining the appropriate compensation level for each of our executives. The committee considers these factors because we compete with these companies for executive talent.

 

 

 

 

Annual Review of Executive Compensation

 

Each year, at the request of the committee, Mercer provides recommended ranges of compensation for base salary, total cash and total direct compensation for each executive. This is done after Mercer identifies any recommended changes to the peer group and provides analysis of our performance versus the peer group for the previous year. Mercer collects comparable position survey data on each executive from two sources:

 

 

This data is blended equally to produce the target ranges provided to the committee. We believe market survey data at the 50th percentile for companies of comparable revenues is the appropriate target in order to meet our objectives of attracting and retaining talent. Given the average revenue and market capitalization of our identified peer group, we believe the 40th percentile of the companies in our peer group is more appropriate than the 50th percentile in targeting compensation that will both attract and retain the members of our executive team. Mercer used the following surveys in establishing the 50th percentile market survey data for companies of our size for 2007 compensation:

 

 

Data from companies in our revenue category who participated in these surveys was aggregated and incorporated into the target compensation ranges provided to the committee by Mercer. The committee did not receive data for any individual company in these surveys. Mercer provides the committee and the human resources department with the current placement of each executive within the target range. Management uses the Mercer data to provide the committee with recommended base salary changes, short-term incentive targets and long-term equity targets for each of the executive officers. In addition, management provides the following information to the committee:

 

Pay for Performance

 

 

Retention/Leadership Continuity

 

 

Total compensation tally sheets for each executive officer are prepared by Mercer and reviewed by the committee each year. The purpose of this review is to assess whether the overall compensation package is consistent with individual and company performance. Annual review of the tally sheets also provide the committee with a view of the impact of historical changes to compensation over time and an opportunity to assess effectiveness in attracting and retaining our executives and driving high performance.

 

Compensation levels for 2007 are based on the committee’s review of tally sheets in November 2006. These tally sheets provided the target value of all components of the executive officers’ proposed 2007 compensation as well as the value of outstanding equity awards, deferred compensation, benefits, perquisites and exit pay in the event of various termination scenarios, including a change of control. In 2007, as in previous years, management modeled wealth accumulation for the committee using multiple share price scenarios. As a result of this review, the committee believes current wealth accumulation models reflect appropriate value to our executive officers for current and historical company performance.

 

2007 Executive Compensation Overview

 

Base Salary.  Base salary is provided at a competitive level in order to attract and retain key talent and is reviewed annually. For 2007, the committee established salary targets generally at a blended rate equally weighting the 40th percentile of our peer group and the 50th percentile of Mercer survey data for companies of our revenue size. These target amounts were then adjusted based on individual performance, experience, and the criticality of the individual to overall business strategy. Annual adjustments to base salary are made based on a review of both the individual performance assessed by the CEO and reported to the committee by management and the location of the executive officer’s current base salary in the target range provided by Mercer.

 

As a result of this analysis, each of the executive officers received a base salary increase between 4 and 5 percent in March 2007 with the exception of Ms. Smith and Ms. Rapkin who received additional market based increases. These market increases were proposed by management to move Ms. Smith and Ms. Rapkin to the appropriate position, given their experience and performance, within the target range identified by Mercer for their roles. In the case of Ms. Smith, the total increase, including annual increase and market adjustment, was 7.7% of her base salary and in the case of Ms. Rapkin, the total increase was 13.5% of base salary.

 

In November 2007, Ms. Smith and Mr. Maxsimic were promoted to Executive Vice Presidents in connection with a company reorganization. Their base salaries were increased to reflect their increased responsibilities, within target ranges for their new roles. As a result of their promotions, Ms. Smith received an additional increase of 14.3% and Mr. Maxsimic received an additional increase of 15.4% of their then current base salaries.

Short Term Incentive Compensation.  The purpose of the STIP is to attract and retain high-performing associates to drive the achievement of annual operational goals. Associates at all levels of the organization participate in the STIP and generally share the same key goals. This conscious choice creates alignment and focus on the achievement of strategic and operational goals. These goals and milestones, when consistently achieved, support our long-term goal of growth in stockholder value.

 

At the target level of performance, the STIP percentage of earnings represents the 40th percentile of our peers and the 50th percentile of market survey data for companies of our revenue size. At the maximum level of performance, which would represent performance that significantly exceeded target goals, STIP payout would be at or above the 75th percentile of the peer group. If we fail to meet the threshold level goals as defined by the committee, the executive officers receive no payout under the STIP. In establishing our targets for STIP we utilize the following principles generally based on historical achievement:

 

 

Management proposes performance level goals based on estimated achievability and current factors supporting or inhibiting achievement. Financial measures are predominantly used in establishing annual STIP goals. The goals for 2007 were approved by the committee in March 2007 and progress toward these goals was reported by the CEO to the Board of Directors throughout the year. STIP performance objectives and final payout factors used for each of the executive officers are shown below:

 

 

 

 

We have used adjusted net income and PPG adjusted revenue as performance measures in the STIP each year. They represent key areas of focus for continued growth and stockholder return. We chose revenue from strategic growth initiative, as a STIP measure in 2007 to incent participants for achievement of revenue, which while relatively small when compared to our corporate revenue goal, is important to the future growth of our Company. Operational efficiency was included in the STIP in 2007 to incent for operational changes and process improvements intended to provide for scalability as the Company grows.

 

Under the terms of the 2007 STIP, each eligible participant, including each of the executive officers, could receive from 0 percent to a maximum of 200 percent of their target STIP award if specified levels of performance were achieved by December 31 of the plan year. At the end of the annual performance period, the committee evaluates potential adjustments to performance as provided in the STIP and has discretion to include all or part of an item of loss or expense or to exclude all or part of an item of gain or income that the committee believes was not attributable to or does not accurately reflect the continuing performance of the Company. In 2007, the committee approved the exclusion of one item from adjusted net income. The approved exclusion related to the net impact of the change in the state of Maine tax law of approximately $1.6 million because it was not the result of the Company’s operational performance.

 

In February of 2008, the committee approved a recommendation from management to reduce the 2007 STIP payout to the executive and vice president levels of the Company and shift the dollars generated from this reduction to all other levels in the Company. The result of this change was to reduce the average executive payout from the 91.8 percent of target STIP reflected in the table above to 88.2 percent. This request was made by management to reward associates for their achievements in the area of operational efficiency which management felt were not reflected adequately as measured in the STIP. In 2007, the Company experienced a decrease in existing customer transactions, caused by an economic slowdown, which offset significant operational efficiency results achieved by associates during the year. If customer transactions had attained budgeted levels for 2007, the efficiencies produced by associates at the Company would have resulted in a payout above target for the Operational Efficiency goal. The management team requested the shift to reward associates without increasing the total expense to the Company of the 2007 STIP.

 

The bonus targets for the named executives employed on December 31, 2007 ranged from 45 percent to 100 percent of base salary and were not increased over the 2006 targets. Our executives’ STIP targets are set based primarily on the targets provided by Mercer. Their current STIP percentages represent what we believe is appropriate positioning within these targets based on their experience, performance and role in the Company. Mr. Dubyak’s STIP target of 100 percent is larger than those of our other executives due primarily to two factors:

 

 

In 2007, the Company was required to achieve threshold results for adjusted net income in order for any portion of the STIP to be paid to any employees, including the executive officers. Based on its overall assessment of performance against the 2007 STIP goals, and after approving the shift of earned payout under the plan described above, the committee approved the following STIP awards to each of the named executive officers as shown below:

 

 

 

 

As part of the 2007 STIP, Mr. Maxsimic had an additional sales incentive award which provided the potential to earn from $0 to $200,000 for the achievement of PPG adjusted revenue above the corporate target. The objective of Mr. Maxsimic’s sale incentive award is to incent him to increase PPG adjusted revenue beyond the Company’s annual target and as a motivating factor for rewarding Mr. Maxsimic given his responsibility for driving our revenue growth. If results exceeded a specified maximum identified in this special incentive, Mr. Dubyak could have recommended a higher payout for approval by the committee. This additional award was only to be paid if revenue achieved was above the corporate target. In 2007, PPG adjusted revenue was achieved at 95 percent of the corporate target; as a result, Mr. Maxsimic did not receive any payout under this additional incentive opportunity.

 

Long Term Incentive Compensation.  The Company provides long-term equity-based incentives through the Wright Express Corporation Long Term Incentive Program, or LTIP, to retain our executives and reward them for performance that meets stockholder expectations.

 

Grants under the LTIP are generally a mix of performance-based restricted stock units, or PSUs, and restricted stock units, or RSUs. Our PSUs convert to RSUs and the number of shares ultimately awarded is based on achievement of adjusted net income performance or PPG revenue targets whereas our RSUs vest over a four year period of employment. At the higher levels in the Company, equity is used to align our executives with stockholders and for this reason, grants are weighted more heavily toward PSUs than RSUs. At lower levels in the Company, equity is used primarily to retain key associates and grants to these individuals are weighted more heavily toward RSUs than PSUs.

 

The LTIP is governed under our 2005 Equity and Incentive Plan which allows us to grant employees and directors stock options, stock awards (including restricted stock), stock appreciation rights, performance-contingent awards and other awards. Eligible participants include executive officers and other selected employees in the Company. Each of the executive officers received a grant in 2007 through the LTIP.

 

The committee grants stock awards at fair market value and uses a grant price that represents the closing price of Wright Express Corporation stock on the last day the stock is traded prior to the grant award date. In determining the size of equity grants to executive officers, the committee considers similar awards to individuals holding comparable positions in our identified peer group. The committee also reviews potential equity ownership as a percentage of shares outstanding for each executive versus comparable positions within the peer group. Management does not grant awards without committee approval. With the exception of limited grants to newly hired associates, grants are generally awarded on March 30 each year.

2007 Annual Grant.  In 2007, executive LTIP award targets for the annual grant were set at a blended rate equally weighting the 50th percentile of market survey data and the 40th percentile of our peer group for each executive and their resulting grants, approved by the committee, fell within this range. Mr. Dubyak’s equity grant value is larger than the other named executive officers due to the scope of his role as President and CEO and our intent to provide more of Mr. Dubyak’s total direct compensation in the form of performance-based compensation. The committee considered the following additional data in approving 2007 executive grants:

 

 

Generally, for the 2007 annual LTIP grant, 50 percent of an executive officer’s target grant value was delivered in RSUs and 50 percent was delivered in PSUs. RSUs awards vest over four years with 25 percent of the grant vesting each year on the anniversary of the grant and PSU awards vest, as noted above, based on whether certain performance targets have been met. Mr. Dubyak’s 2007 annual grant, unlike the other executive officers, was entirely in the form of PSUs in order to further align his equity compensation with the interests of our stockholders.

 

For 2007, the performance metric identified for the annual grant was adjusted net income as defined in the STIP. Adjusted net income was chosen over revenue as the performance metric for the annual grant for PSUs given the focus our stockholders place on balanced achievement of revenue and strong fiscal management to produce consistent earnings growth. It serves as the most appropriate reward metric for our associates whether their focus is primarily to increase revenue or the achievement of key operational goals, all of which drive adjusted net income. To the extent that the final adjusted net income performance result differed from the target objective, the value of the PSU portion of the grant could have ranged from 0 percent to 200 percent of the target amount identified at the time of the grant. The chart below shows the 2007 performance goals.

 

In 2007, grants to the named executive officers at target totaled 75,553 units, including 21,282 units granted as RSUs and not subject to adjustment. The amount granted to named executive officers represented approximately 52 percent of the total grant. At the end of 2007, adjusted net income performance achievement was approved by the committee at 127.9 percent of target. The individual grants for each of the named executive officers are shown in the Grants of Plan Based Awards table. The chart below summarizes the difference between the initial grant at target and the actual number of units converted for vesting for each of the named executive officers.

 

2007 Annual Grant

 

 

 

 

Long Term Growth Grant.  On September 6, 2007, the committee approved a special performance-based, equity grant. The grant was requested by management and is targeted to support the Company’s strategic plan and aggressive long-term growth goals beyond our historical growth rates. The current probability of achieving these goals is low. We currently estimate the probability below the threshold for expensing the grant in our financial statements and reflect no expense for this grant. When and if it is determined the performance conditions of the grant are probable of being achieved, we will incur an expense representing the value of the award from date of grant. The long term growth grant is a performance-based grant, entirely PSU based, with an award to each executive officer as well as additional employees identified by management as critical to the achievement of our strategic initiatives. The approved grant of 112,821 PSUs at target provides for full vesting on March 30, 2011 based on the achievement of aggressive 2010 revenue and adjusted net income margin goals.

 

Grants to the named executive officers under the long term growth grant totaled 53,594 PSUs at target and represented approximately 48 percent of the total grant. Individual grant values were targeted to reflect the expected individual contribution of each executive officer toward the achievement of the long term growth grant goals.

 

 

 

 

Tax Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that Wright Express may deduct in any one year with respect to its CEO and the four other most highly paid executive officers. Wright Express receives no federal income tax deduction for any compensation that is (a) over $1 million and (b) is not performance-based as defined under Section 162(m). The STIP and the PSU component of our LTIP are both intended to provide fully tax-deductible compensation. The time-based RSU component of our LTIP is not considered performance-based under Section 162(m). The committee has the authority to adjust payments under the STIP and LTIP up or down at its discretion with the exception of any adjustments which may increase or accelerate payment to any participant who is impacted by Section 162(m). We review the impact of Section 162(m) annually. The results of this analysis are considered in the committee’s decisions each year regarding executive compensation. The committee may approve compensation that is not considered performance-based under Section 162(m) when it believes that such compensation is appropriate and consistent with our goal of building long-term stockholder value.

 

In September 2007, the committee requested that Mr. Dubyak defer receipt of a portion of his October 2005 special equity grant which vested in October 2007. This request from the committee was made to address potential tax liability under Section 162(m) unanticipated at the time the units were granted shortly after our initial public offering. The primary reasons for the potential liabilities were that:

 

 

Mr. Dubyak voluntarily deferred receipt of 42,688 shares of common stock of his October 2005 special equity grant to January 18, 2008. The deferral was executed in compliance with Internal Revenue Code section 409A. The vested units were delivered on January 18, 2008 and will be reflected in the Options Exercised and Stock Vested table in the Company’s 2008 proxy statement.

 

Executive Officer Equity Ownership Guidelines.  We believe executive ownership of Company securities demonstrates a commitment to continued success and aligns the efforts of our executives with stockholders. The committee established equity ownership guidelines for all executive officers in October of 2005. “Equity,” for the purposes of executive officer ownership guidelines, includes shares of our common stock and ownership interests in the Wright Express Common Stock Fund held in the Company’s 401(k) Plan. It does not include any granted RSUs or PSUs prior to their vesting and conversion to shares of stock.

 

Under these guidelines, the President and Chief Executive Officer is required to own securities equal in value to at least three times his annual base salary and all other executive officers are required to own securities equal in value to at least one times their annual base salaries. The committee monitors progress annually and executive officers have four years from October 2005, or their promotion to executive officer, to achieve the level of ownership described above. As of December 31, 2007, all named executive officers had exceeded the requirements of their ownership guidelines.

Benefits and perquisites.  We provide competitive benefits to attract and retain high performing associates at all levels. This includes a health and welfare benefits package and a generous 401(k) plan available to associates at all levels. We offer a modest perquisites package to executives representing the benefits we have identified as most critical in attracting and retaining executives to our Company.

 

Nonqualified Deferred Compensation.  The Company administers an Executive Deferred Compensation Plan, or EDCP, that provides each of the executive officers with the opportunity to defer up to 80 percent of base salary and/or up to 98 percent of annual short-term incentive compensation. The Company provides a match of up to six percent of the participant’s annual bonus deferred into the EDCP. Investment income on contributions and Company match is accrued for participants to reflect performance of investment funds identified by each participant during their annual election period. The investment funds and their performance used to calculate earnings in the EDCP generally mirror those used in the 401(k) Plan.

 

Each of the executive officers serving in their role at the time of election chose to defer a portion of their bonus into the EDCP in 2007. In addition, Mr. Maxsimic deferred a portion of his base salary into the EDCP during 2007. His base salary deferral is included in the Executive Contributions column of the Nonqualified Deferred Compensation Table.

 

Prior to our initial public offering, we offered the Wright Express Corporation Supplemental Investment & Savings Plan, or SERP, which allowed participants to defer compensation. The SERP was frozen to new contributions on December 31, 2004. Mr. Dubyak and Ms. Smith have balances in this plan, which continue to earn investment returns based on the funds they selected. These investment returns are market competitive for the type of funds offered; there is no preferential interest earned in either the EDCP or SERP accounts. SERP balances as of December 31, 2007 for Mr. Dubyak and Ms. Smith are shown below. None of the other executive officers participated in the SERP when it was an active plan.

 

 

Financial Planning.  The Company provided personal financial advisory services valued at $10,000 per person. This service includes tax preparation and estate planning services. We value this benefit based on the actual charge for the services which included travel and expense reimbursement for the financial advisor.

 

Company-sponsored Automobile.  A company-leased automobile was made available to all executive officers for personal and business use. For total compensation purposes in this proxy, the value of a Company automobile for executive officers was based on the cost of the annual lease and maintenance costs which are paid on behalf of the executive by the Company. For tax purposes, the cost of the automobiles was imputed as income and grossed up for all taxes.

 

Travel.  Directors and executive officers, when traveling on Wright Express business, are reimbursed for their travel costs. No personal travel for directors or executive officers was reimbursed in 2007.

 

Memberships.  The Company maintains a limited number of country club memberships for business use. In the event the facilities were used for personal reasons, the executive officers reimbursed Wright Express for the expenses incurred but not for any portion of the membership expense.

 

The aggregate value of all perquisites received by each of the executive officers exceeded $10,000 in 2007 and is detailed in the footnotes to the Summary Compensation Table.

 

The compensation committee is comprised entirely of independent directors as determined by the Board of Directors in accordance with its independence guidelines and the listing standards of the New York Stock Exchange.

 

The compensation committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. In connection with that responsibility, the compensation committee report to the Board on our activities at each meeting of the Board. The compensation committee charter, which describes in detail the purpose, structure, membership, authority, responsibilities, procedures and administration of the compensation committee is available on the Company’s website.

 

The compensation committee reviewed and discussed the Compensation Discussion and Analysis with members of senior management and, based on this review and discussion, the committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s annual report on Form 10-K and proxy statement on Schedule 14A filed with the Securities and Exchange Commission.

 

THE COMPENSATION COMMITTEE

 

Kirk P. Pond, Chair

Shikhar Ghosh

Regina O. Sommer

 

Total compensation for our named executive officers is shown in the Summary Compensation Table below. The Compensation Committee believes that the compensation provided to the named executive officers in 2007 is in alignment with the Company’s financial performance for 2007 and the individual performance of each of the named executive officers. The Compensation Committee also believes that the total compensation paid to the executive officers collectively in 2007 was an appropriate reward for their efforts in driving stockholder value during the period. Total compensation for the named executive officers is shown in the Summary Compensation Table below.

 

 

 

 

 

 

 

 

 

 

 

 

The following table represents all plan-based awards granted to the named executive officers in 2007.