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 (Amendment No. )
 
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 Under Rule 14a-12
 
 
CDK Global Inc.
 
(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):
 
No fee required.
 
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
     
1) Title of each class of securities to which transaction applies:
     
2) Aggregate number of securities to which transaction applies:
     
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
     
4) Proposed maximum aggregate value of transaction:
     
5) Total fee paid:
 
Fee paid previously with preliminary materials:
 
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
     
1) Amount previously paid:
     
2) Form, Schedule or Registration Statement No.:
     
3) Filing Party:
     
4) Date Filed:




TABLE OF CONTENTS

 

   

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS




November 13, 2018
8:00 a.m. central time
www.virtualshareholdermeeting.com/ CDK2018

Notice is hereby given that the 2018 Annual Meeting of Stockholders of CDK Global, Inc. (the “Company,” “CDK Global,” “us,” “our” or “we”), will be held on November 13, 2018 at 8:00 a.m. central time at www.virtualshareholdermeeting.com/ CDK2018 (the “Annual Meeting”). This Annual Meeting will be a completely virtual, live, audio webcast meeting of stockholders.

The items of business are:

1. Election of nine nominees named in the proxy statement as directors, each for a term of one year;
2. An advisory vote to approve compensation of our named executive officers; and
3. Ratification of the appointment of our independent registered public accountants.

All stockholders of record of our common stock at the close of business on September 14, 2018, the record date, are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.

October 2, 2018
Hoffman Estates, Illinois


Lee J. Brunz
Executive Vice President, General Counsel and Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIAL FOR THE ANNUAL MEETING

SEC rules permit companies to furnish proxy materials to their stockholders over the internet. This expedites stockholders’ receipt of proxy materials, lowers annual meeting costs and conserves natural resources. We are therefore mailing stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of the proxy statement and our Annual Report on Form 10-K. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials online, vote and (if desired) obtain a paper copy of our proxy materials.

YOUR VOTE IS IMPORTANT

Your vote is important, and we urge you to vote as promptly as possible by using the internet, by telephone, or by signing, dating and returning the Proxy Card mailed to you if you received a paper copy of this proxy statement.

      3

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

PROXY SUMMARY

   

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the Company’s performance for the fiscal year ended June 30, 2018 (“fiscal 2018”), please review the Company’s Annual Report on Form 10-K for fiscal 2018.

VOTING MATTERS

Stockholders are being asked to vote on the following matters at the Annual Meeting:

Management Proposal:
For More Information
Board
Recommendation
Vote
Required for
Approval
Effect of
Abstentions
Effect of
Broker
Non-Votes
1. Election of nine nominees named in the proxy statement as directors, each for a term of one year
Page 13
✔ FOR each director nominee
Majority of votes cast
None
None
2. An advisory vote to approve compensation of named executive officers
Page 31
✔ FOR
Majority of shares present and entitled to vote
Against
None
3. Ratification of the appointment of our independent registered public accountants
Page 66
✔ FOR
Majority of shares present and entitled to vote
Against
None

You may cast your vote in any of the following ways:




Internet
Phone
Mail
Visit www.ProxyVote.com. You will need the 16-digit number included in your proxy card, voter instruction form or notice.
Call 1-800-690-6903 or the number on your voter instruction form. You will need the 16-digit number included in your proxy card, voter instruction form or notice.
Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.

      6

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

CORPORATE GOVERNANCE BEST PRACTICES

The CDK Global Board of Directors (the “Board”) is committed to sound corporate governance policies that we believe promote the long-term interests of the business and of our stockholders. This proxy statement sets forth a detailed description of our governance framework, which includes the following highlights:

Board Practices
8 of 9 director nominees are independent
Diverse Board in terms of gender, ethnicity, experience, skills and tenure (44% of directors are women or ethnically diverse)
Careful director nominee evaluation and selection process
Robust director orientation and ongoing director education programs
Annual election of directors with majority voting standard and director resignation policy for uncontested elections
Annual Board, committee and director evaluations
Independent non-executive Chairman of the Board with expansive duties
Limit on outside directorships
Fully independent audit, compensation, and nominating and governance committees
Regular executive sessions of independent directors
Comprehensive Board and committee oversight of the Company's strategy and risk management
Stock ownership requirements for directors
Stockholder Matters
Active stockholder engagement
One class of shares with each share entitled to one vote
Annual say-on-pay advisory vote
Proxy access right for stockholders (3% ownership threshold held continuously for 3 years / 2 director nominees or 20% of the Board / 20 shareholder aggregation limit)
Other Best Practices
Stock ownership guidelines for executive officers
Anti-hedging, anti-short sale and anti-pledging policies
Clawback policy for equity and cash incentive compensation applicable to all employees
Code of Business Conduct and Ethics applicable to all employees and directors with annual acknowledgment by employees and compliance certification for directors

      7

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

DIRECTOR NOMINEES

The Board and the nominating and governance committee believe that the following director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our management to ensure accountability to our stockholders:

Director
Age
Director
Since
Primary Occupation
Other
Public
Boards
Committee(s)
 
 
 
 
 
AC
CC
NGC
Leslie A. Brun, (Chairman)
66
2014
Chairman and Chief Executive Officer of SARR Group, LLC
3
 
 
 
Willie A. Deese
63
2014
Retired Executive Vice President of Merck & Co., Inc.
2
 
Chair
 
Amy J. Hillman
53
2014
Dean of the W. P. Carey School of Business at Arizona State University
 
 
 
Chair
Brian P. MacDonald
52
2015
President and Chief Executive Officer
1
 
 
 
Eileen J. Martinson
64
2016
Former Chief Executive Officer of Sparta Systems
 
 
Member
 
Stephen A. Miles
50
2014
Chief Executive Officer of The Miles Group
 
 
 
Member
Robert E. Radway
58
2014
Founder, Chairman and Chief Executive Officer of NXT Capital
 
Member
Member
 
Stephen F. Schuckenbrock
58
2016
Chief Executive Officer of CROSSMARK
 
Member
 
 
Frank S. Sowinski
62
2014
Former Chief Financial Officer of Dun & Bradstreet
1
Chair
 
Member

The Board and the nominating and governance committee have selected director nominees with a mix of skills, qualifications and attributes that strike the right balance between long-term understanding of our business and fresh external perspectives, as well as to ensure diversity within the boardroom.



      8

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

FISCAL 2018 PERFORMANCE HIGHLIGHTS

We encourage you to read the following Performance Highlights as background to this proxy statement.

Fiscal 2018 was a pivotal year for CDK Global. We exceeded our three-year business transformation plan adjusted EBITDA growth and margin expansion targets originally set at the end of our fiscal year ended June 30, 2015 (“fiscal 2015”) and met our commitment to return $750 million to $1 billion of capital to our stockholders during calendar year 2017. At the same time we grew diluted net earnings per share by 40% on a GAAP basis, and 27% on a non-GAAP adjusted basis. We also executed on our leadership succession plan and transitioned to a new CFO and a new President of our largest segment, Retail Sales North America.

We accomplished all of this while also implementing strategic actions to re-energize our transformed business for future growth. We enhanced our product portfolio through strategic acquisitions, including Dealer Dashboard Enterprises, a leader in reporting solutions for auto dealers, and Progressus Media, a specialty provider of mobile advertising solutions for dealerships, agencies, and automotive marketing companies. In addition, we announced innovative product initiatives, including Drive Flex DMSaaS, a cloud-based DMS product focused on smaller dealerships, and Fortellis Automotive Commerce Exchange, a technology platform focused on allowing developers, OEMs and dealers to leverage, build, innovate, and securely integrate solutions and workflows to transform their businesses.

In spite of these accomplishments, we were disappointed with our revenue growth for fiscal 2018. We entered our fiscal year ending June 30, 2019 (“fiscal 2019”) focused on growing our revenue, while also continuing the business transformation plan in support of our adjusted EBITDA and capital return targets.

FISCAL 2018 OPERATING RESULTS(1)


1 Financial results, including the GAAP to non-GAAP reconciliations, are reflected as reported in the Company's Annual Report on Form 10-K for fiscal 2018.

BUSINESS TRANSFORMATION PLAN RESULTS(1)


      9

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

1 Financial results, including the GAAP to non-GAAP reconciliations, are reflected as reported in the Company's Annual Report on Form 10-K for fiscal 2018.

RETURN TO STOCKHOLDERS

Return of Capital

In January 2017, the Board authorized us to repurchase up to $2.0 billion of our common stock as part of a return of capital plan through which we expect to return approximately $750.0 million to $1.0 billion per calendar year through calendar 2019 via a combination of dividends and share repurchases. Consistent with that goal, during calendar year 2017, we returned $755.0 million of capital to stockholders.

Total Stockholder Return

We have delivered significant long-term total stockholder return (“TSR”) as evidenced by the chart below, which shows how a $100 investment in CDK Global on October 1, 2014 (the date of our spin-off from ADP) would have grown to $216 on June 30, 2018, assuming all cash dividends were reinvested. The chart also compares the TSR on an investment in our common stock to the same investment in the: (i) Standard & Poor's (S&P) 500 Index, (ii) S&P MidCap 400 Index, and (iii) S&P 400 Information Technology Index over the same period.


The comparisons in the graph above are based upon historical data and are not indicative of, or intended to forecast, future performance of our common stock. The graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 (“Securities Act”) or the Securities Exchange Act of 1934 (the “Exchange Act”), each as amended, except to the extent that we specifically incorporate it by reference into such filing.

      10

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

FISCAL 2018 COMPENSATION HIGHLIGHTS

Cash Compensation

Base Salary

We provide competitive fixed, non-variable compensation for the expertise and knowledge that each executive brings to his or her role, thereby mitigating pressure to support high-risk business strategies.

Annual Incentive Cash Bonus

We provide an annual incentive cash bonus to align each senior executive's interests with our stockholders’ interests, and to reinforce key strategic initiatives and encourage superior individual performance. Annual incentive cash bonus payments are made to executive officers under the Company's 2014 Omnibus Award Plan (the “2014 Plan”), which was approved by stockholders at our 2015 Annual Meeting. For fiscal 2018, bonus achievement was based on the following performance measure targets and weights: (i) fiscal 2018 adjusted EBITDA margin of 35.5% (25%); (ii) fiscal 2018 adjusted EBITDA of $813 million (20%); (iii) fiscal 2018 global revenue growth of 4% (20%); (iv) fiscal 2018 global sales of $328 million (15%); and (v) individual strategic objectives (“MBOs”) (20%).

While the Company exceeded its three-year business transformation plan adjusted EBITDA margin target, actual overall achievement against the fiscal 2018 bonus plan objectives was mixed. The Company achieved its adjusted EBITDA margin and global sales targets, but did not meet the adjusted EBITDA or global revenue growth targets. This resulted in a 70.9% calculated payout versus the 80% target payout for all non-MBO financial measures. The compensation committee then applied negative discretion to yield an overall achievement of 60% on all non-MBO financial targets. The calculation of our fiscal 2018 annual incentive cash bonus payout is described in more detail below under “Compensation Review and Determination - Cash Compensation - Annual Incentive Cash Bonus.”

Long Term Equity Incentive Compensation

Performance Stock Units and Stock Options

The Company's fiscal 2018 long-term equity incentive compensation for its executives consisted of grants of performance stock units (“PSUs”) for 70% of total award value, which cliff vest at the end of a three-year performance period based on actual achievement of performance goals set at the time of the grant, and stock options for the remaining 30% of total award value, which have pro rata annual vesting over four years. For our fiscal year ended June 30, 2017 (“fiscal 2017”), the compensation committee approved grants of both fiscal 2017 and fiscal 2018 PSUs and stock options for all executives, including the Chief Executive Officer. The fiscal 2018 PSUs and stock options granted in fiscal 2017 are referred to as “pull forward” awards.

At the time of the grant, the “pull forward” PSU and stock option vesting schedules were set by the compensation committee as if the awards were made in fiscal 2018. As an additional condition to the grant, the compensation committee determined that recipients of fiscal 2018 “pull forward” awards would forgo receipt of any additional regular annual long-term equity incentive awards in fiscal 2018.

The compensation committee maintained its commitment to forgo additional regular annual awards in fiscal 2018. Accordingly, the only equity awards granted in fiscal 2018 were to Mr. Tautges in connection with his first year of service with the Company, and special one-time grants of: (i) restricted stock awarded to Mr. Brunz in recognition for his services as interim chief financial officer during fiscal 2017 and fiscal 2018, and interim chief human resources officer during fiscal 2017; and (ii) restricted stock and fiscal 2018 PSUs awarded to Mr. Flynn to encourage retention in recognition of his criticality to the success of the business transformation plan.

Settlement of Fiscal 2016 Performance Stock Units

Our executives, including the Named Executive Officers, with the exception of Mr. Tautges, Ms. Byrne, and Mr. Crutchfield, were awarded PSUs in fiscal 2016 (“fiscal 2016 PSUs”) which had a three-year performance period that ran from July 1, 2015, to June 30, 2018. Performance goals for the period were set by the compensation committee in September 2015. The primary performance goal was aligned with our three-year business transformation plan adjusted EBITDA margin goal of 35% for full-year fiscal 2018, such that achievement of the

      11

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

   

business transformation plan goal would result in a maximum number of PSUs earned at 200% of target. The number of PSUs earned was subject to further adjustment depending on the TSR of our common stock during the performance period compared against a performance peer group of companies in similar Global Industry Classification Standard (“GICS”) codes, as well as digital advertising and marketing companies. Lastly, if our compounded annual revenue growth over the performance period cycle was below 3%, awards would be capped at 100% of target.

The fiscal 2016 PSUs were settled at 162.5% of target. This is based on achievement at 200% of target for our fiscal 2018 adjusted EBITDA margin of 35.9%, multiplied by 81.25% for our three-year TSR ranking at the 31st percentile in the performance peer group. Finally, the payout was not subject to the cap because our compounded annual revenue growth of 3.7% exceeded the 3% floor. Our PSU awards are described in more detail below under “Compensation Review and Determination - Long-Term Equity Incentive Compensation - Performance-Based Stock Units.”

Total Direct Compensation

Set forth below is the fiscal 2018 direct compensation for each Named Executive Officer as determined under SEC rules. The amounts reported in this table differ substantially from the amounts reported in the Summary Compensation Table calculated based on SEC rules. This table supplements, but is not a substitute for the Summary Compensation Table. See the Summary Compensation Table and the accompanying notes to the table beginning on page 52 for more information.

Named Executive
Officer
Base
Salary
($)1
Annual
Bonus
($)
PSUs
($)2
Stock
Options
($)3
Restricted
Stock/
Units
($)4
Other
Bonuses5
Total
($)
MacDonald, Brian P.
 
925,000
 
 
1,116,000
 
 
 
 
 
 
 
 
 
 
2,041,000
 
Tautges, Joseph A.
 
595,833
 
 
418,735
 
 
972,914
 
 
389,998
 
 
749,943
 
 
400,000
 
 
3,527,423
 
Flynn, Daniel P.
 
425,000
 
 
237,600
 
 
534,539
 
 
 
 
499,962
 
 
 
 
1,697,101
 
Byrne, Amy W.
 
370,000
 
 
195,360
 
 
 
 
 
 
 
 
 
 
565,360
 
Crutchfield, Dean W.
 
351,666
 
 
174,660
 
 
 
 
 
 
 
 
 
 
526,326
 
Brunz, Lee J.
 
393,333
 
 
196,800
 
 
 
 
 
 
499,962
 
 
 
 
1,090,095
 
1. Mr. Tautges' displayed salary has been prorated based on his 11 months of fiscal 2018 employment.
2. In accordance with ASC 718, PSUs are deemed granted when the performance target is established. The PSU amounts include the grant date fair value of the fiscal 2018 PSU target awards, which vest on June 30, 2020. The PSU amounts are the same amounts included within Stock Awards in the “Summary Compensation Table for Fiscal 2018” on page 52 of this proxy statement. Mr. Tautges' grant is his annual fiscal 2018 grant included as part of his offer letter. Mr. Flynn's award is to retain him for his criticality and link his compensation to the success of CDK's transformational and operational efforts.
3. Stock option amounts represent the grant date fair value of the fiscal 2018 awards, which are the same amounts disclosed in the “Summary Compensation Table for Fiscal 2018” on page 52 of this proxy statement. Mr. Tautges' grant is his annual fiscal 2018 grant included as part of his offer letter.
4. Mr. Tautges received a sign-on restricted stock award as part of his compensation offer. Mr. Flynn received a restricted stock award to retain him for his criticality to the success of CDK's transformational and operational efforts. Mr. Brunz received a restricted stock award in recognition of his contributions and performance as interim Chief Human Resources Officer and interim Chief Financial Officer.
5. Sign-on bonus paid to Mr. Tautges.

      12

TABLE OF CONTENTS

 

   

PROPOSAL 1: ELECTION OF DIRECTORS

Upon the recommendation of the nominating and governance committee, the Board has nominated nine directors for election at the Annual Meeting. Each nominee is currently serving as one of our directors. If you re-elect them, they will hold office until our next annual meeting of stockholders or until their successors have been elected and qualified. If any of the nominees should for any reason be unable or unwilling to serve as of the Annual Meeting, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute nominee, the proxies will be voted for the election of such other person.

The nominating and governance committee and the Board look for current and potential directors collectively to have a mix of skills, experiences, qualifications, and character attributes that align with the needs of our long-term business strategy and that help achieve the goal of having a well-rounded, diverse Board that functions effectively as a unit. Recognizing that the selection of qualified directors is complex and crucial to our long-term success, the Board and the nominating and governance committee have established the Board composition and refreshment processes as described beginning on page 19 of this proxy statement.

All of our nominees are seasoned leaders, the majority of whom are or were chief executive officers or other senior executives and who bring to the Board skills, experience, and qualifications gained during their tenure at a wide array of public companies, private companies, non-profits, and other organizations. The following graphics summarize the notable skills, experience, and qualifications of each director nominee and highlight the balanced mix of skills, experience, and qualifications of the Board as a whole. This high-level summary is not intended to be an exhaustive list of each director nominee’s qualifications or contributions to the Board. On the following pages we have indicated for each nominee certain of the specific skills, experience, and qualifications that led the nominating and governance committee and the Board to conclude that the nominee should continue to serve as a director.

Skills, Experience, and
Qualifications
Leslie A.
Brun
Willie A.
Deese
Amy J.
Hillman
Brian P.
MacDonald
Eileen J.
Martinson
Stephen A.
Miles
Robert E.
Radway
Stephen F. Schuckenbrock
Frank S.
Sowinski

   

Automotive Retail
 
 
 
 
 
 
 
Capital Markets
 
 
 
 
 
CEO experience
 
 
Digital Marketing
 
 
 
 
 
 
Enterprise Risk Mgmt
 
 
Investor Relations
 
 
 
 
International Diversification
 
 
 
 
 
M&A/Divestiture
 
 
Operations/BPI/BPO
 
 
 
 
Strategy
CEO Succession
 
 
 
Technology/Technologist
 
 
 
 
 
 
 


      13

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

MAJORITY VOTING STANDARD

Our by-laws provide that directors are elected by a majority of votes cast unless the number of nominees exceeds the number of directors to be elected, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a director exceeds the number of votes cast “against” the director; abstentions are not counted either “for” or “against.” If an incumbent director in an uncontested election fails to receive a majority of votes cast for his or her election, the director is required to offer to tender his or her resignation to the Board for consideration by the nominating and governance committee. The nominating and governance committee will make a recommendation to the Board as to whether to accept or reject the resignation or to take other action. The Board is required to review and act on this recommendation within 90 days of the date of the certification of election results.

DIRECTOR NOMINEES

The Board recommends that you vote FOR the election of the following nominees:

   

   


Leslie A. Brun
Chairman and Chief Executive Officer of SARR Group, LLC
   
 
Age 66
Independent Chairman of the Board
  
  
 
Director Since
September 2014
   
 
Board Committees 
None
  
  
Other Public Boards

   


Broadridge Financial Solutions (Chair)
Corning
Merck & Co.
   
Director Qualification Highlights
CEO Experience
Capital Markets
Investor Relations
Enterprise Risk Management
BIOGRAPHY
   
Mr. Brun has been the Chairman and Chief Executive Officer of SARR Group, LLC, an investment holding company, since 2006. In addition, he was formerly Managing Director and head of investor relations at CCMP Capital Advisors, LLC, a global private equity firm. He is also the founder and Chairman Emeritus of Hamilton Lane Advisors, a provider of asset management services for which he served as Chief Executive Officer and Chairman from 1991 until 2005. From 1988 to 1991, he was Managing Director and co-founder of the investment banking group of Fidelity Bank in Philadelphia. Mr. Brun has served as a director of Broadridge Financial Solutions, Inc. (“Broadridge”), an investor communications and business process outsourcing provider, since 2007 and as Broadridge’s Chairman of the Board since 2011. He has served as a director of Merck & Co., Inc. (“Merck”), a health care company, since 2009 and lead director since 2016, and as a director of Corning, Inc., a materials and technology company, since July 2018. He served as a director of Hewlett Packard Enterprise Company, a technology solutions provider, from 2015 to 2018, and as a director of Automatic Data Processing, Inc. (“ADP”) from 2003 to 2015 and as ADP’s Chairman of the Board from 2007 to 2015. Mr. Brun’s investment banking and leadership experience provide him with extensive financial and management expertise, and his directorships at other public companies have given him broad experience with governance and other issues facing public companies.

      14

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   


Willie A. Deese
Retired Executive Vice President of Merck & Co., Inc.
   
 
Age 63
Independent Director
   
 
Director Since
September 2014
   
 
Board Committees 
Compensation (Chair)
  
  
Other Public Boards

   


Dentsply Sirona
Public Service Enterprise Group
   
Director Qualification Highlights
Operations / BPI / BPO
Strategy
Enterprise Risk Management
   
   
BIOGRAPHY
   
Mr. Deese has served as an independent director of Dentsply Sirona, a leading manufacturer and distributor of dental and other consumable healthcare products, since 2011 and Public Service Enterprise Group, a diversified energy company, since 2015. Mr. Deese served as an Executive Vice President of Merck from 2008 to 2016 and as President of the Merck Manufacturing Division from 2005 to 2016. Mr. Deese also served as Merck’s Senior Vice President of Global Procurement from 2004 to 2005. Prior to joining Merck, Mr. Deese served as Senior Vice President of Global Procurement and Logistics at GlaxoSmithKline and as Vice President of Purchasing, at Kaiser Permanente. In addition to his experience as a director of a publicly traded company, Mr. Deese brings to the Board substantial experience and expertise in both business transformation and strategic oversight and management of complex operations from his roles at Merck and GlaxoSmithKline.

   


Amy J. Hillman
Dean of the W. P. Carey School of Business at Arizona State University
   
 
Age 53
Independent Director
   
 
Director Since
September 2014
   
 
Board Committees 
Nominating and Governance (Chair)
   
 
 
Other Public Boards

   


None
   
   
Director Qualification Highlights
M&A / Divestiture
Investor Relations
Strategy
   
   
BIOGRAPHY
   
Since 2013, Ms. Hillman has served as the Dean of the W. P. Carey School of Business at Arizona State University, where she has taught as a Professor since 2006 and as an Associate Professor from 2001 to 2006. She holds a PhD in Strategic Management and is a fellow of the Academy of Management. In addition to her management skills gained as the leader of one of the largest U.S. business schools, Ms. Hillman brings to the Board expertise in the areas of business strategy and corporate governance, on which she has taught, consulted with major corporations, and conducted research.

      15

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   


Brian P. MacDonald
President and Chief Executive Officer
   
 
Age 52
Director
   
 
Director Since
June 2015
   
 
Board Committees
None
   
 
 
Other Public Boards

   



   
Suncor Energy
   
   
Director Qualification Highlights
CEO Experience
Capital Markets
Automotive Retail
Investor Relations
Operations / BPI / BPO
BIOGRAPHY
   
Mr. MacDonald has served as our President since January 1, 2016, as our Chief Executive Officer since March 8, 2016, and as a member of our Board of Directors since June 15, 2015. Mr. MacDonald has also served as a director of Suncor Energy, an integrated energy company, since July 2018. Prior to joining CDK Global, Mr. MacDonald served as President and Chief Executive Officer of Hertz Rental Equipment Corporation from June 2014 to May 2015, and as interim Chief Executive Officer of Hertz Corporation from September 2014 to November 2014. Prior to Hertz, Mr. MacDonald served as President and Chief Executive Officer of ETP Holdco Corp., an entity formed following Energy Transfer Partners' $5.3 billion acquisition of Sunoco, Inc. in 2012, where Mr. MacDonald had served as Chairman, President and Chief Executive Officer prior to ETP's acquisition of Sunoco. During his tenure at Sunoco, the company undertook a substantial restructuring to strengthen and transform the organization and better position it for growth. Sunoco exited unprofitable operations, significantly reduced costs, improved efficiencies, and refocused on established high-return businesses. Mr. MacDonald has also held executive management roles at Dell, General Motors Corporation, and Isuzu Motors Limited.
 
Mr. MacDonald previously served on the board of directors of Computer Sciences Corporation from August 2013 to April 2017, Sunoco and Sunoco Logistics from March 2012 to October 2012 and October 2009 to October 2012, respectively, and Ally Financial, Inc. from May 2013 to July 2014 following his appointment by the U.S. Department of the Treasury.
 
Mr. MacDonald brings to the Board substantial experience in the automotive sector and expertise in business transformation, business strategy, and investor relations from his roles at Hertz, Sunoco, and Ally Financial as well as his experience as a director of various publicly traded companies.

Eileen J. Martinson 
Former Chief Executive Officer of Sparta Systems
   
 
Age 64
Independent Director
   
 
Director Since
September 2016
   
 
Board Committees
Compensation
   
 
 
Other Public Boards

   


None
   
   
Director Qualification Highlights
Technology / Technologist
Strategy
CEO Experience
Enterprise Risk Management
   
BIOGRAPHY
   
Ms. Martinson served as Chief Executive Officer of Sparta Systems, a leading provider of enterprise-quality management software solutions, from 2011 to 2018. Prior to joining Sparta Systems, she served as the Chief Operating Officer at Allscripts. Before Allscripts, she served as Executive Vice President of global sales, services, and support at Misys and served in various management positions at Oracle, SAP, Siebel Systems, Gartner, Ariba and Accenture. She served as a director at AdvancedMD from 2016 to 2018, and has served as the Chair of the Board of Trustees at Philadelphia University since 2013. As a result of her executive experience with Sparta Systems, as well as her positions as a senior executive at other technology and consulting organizations, Ms. Martinson provides the Board with extensive and relevant executive leadership, software, sales and service, and technology industry experience.

      16

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   


Stephen A. Miles
Founder and Chief Executive Officer of The Miles Group
   
 
Age 50
Independent Director
   
 
Director Since
September 2014
   
 
Board Committees  
Nominating and Governance
   
 
 
Other Public Boards

   


None
   
   
Director Qualification Highlights
CEO Experience
Strategy
CEO Succession
   
   
BIOGRAPHY
   
Mr. Miles has served as the founder and Chief Executive Officer of The Miles Group, a provider of global CEO and board consulting and advisory services (focused on the topics of succession, board and organizational effectiveness, and talent management), since 2012. Previously, Mr. Miles served as Vice Chairman, Leadership Advisory at Heidrick & Struggles, a global executive search and executive leadership consulting firm from 2010 to 2012 and as Managing Partner and Head, Leadership Advisory for Heidrick & Struggles from 2005 to 2010, where he was responsible for managing its global Leadership Advisory Services business. Mr. Miles specializes in CEO succession and brings to the Board substantial expertise in leadership selection, succession planning and organizational effectiveness from his roles at Heidrick & Struggles and The Miles Group.

   


Robert E. Radway
Founder; Chairman and Chief Executive Officer of NXT Capital
   
 
Age 58
Independent Director
   
 
Director Since
September 2014
   
 
Board Committees 
Audit, Compensation
   
 
 
Other Public Boards

   



   
None
   
   
Director Qualification Highlights
CEO Experience
Capital Markets
Strategy
BIOGRAPHY
   
Mr. Radway has served as Founder, Chairman and Chief Executive Officer of NXT Capital, a privately held commercial finance company with approximately $6.5 billion in owned and managed assets, since 2010. From 2001 to 2008, Mr. Radway served as Managing Director and President of Merrill Lynch Capital, the commercial finance unit of Merrill Lynch Bank USA that, prior to its sale in 2008, had owned and managed assets in excess of $30 billion and approximately 550 employees. Prior to his service with Merrill Lynch Capital, Mr. Radway held senior positions with Heller Financial, Inc., including Executive Vice President of Corporate Strategy and Development responsible for the company’s strategic planning, business development, and M&A worldwide. Mr. Radway’s roles as the chief executive of NXT Capital and as president of Merrill Lynch Capital have provided him with extensive executive management, operational, and business strategy experience. He brings to the board the ability to analyze and oversee financial reporting and performance, as well as expertise in capital markets and financing initiatives, corporate strategy, and human resource development and retention.

      17

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   


Stephen F. Schuckenbrock
Chief Executive Officer of CROSSMARK Inc.
   
 
Age 58
Independent Director
   
 
Director Since
September 2016
   
 
Board Committees
Audit
   
 
 
Other Public Boards
   

   



   
None
   
   
Director Qualification Highlights
Digital Marketing
Technology / Technologist
Strategy
CEO Experience
BIOGRAPHY
   
Mr. Schuckenbrock has served as the Chief Executive Officer of CROSSMARK Inc., a leading provider of sales, marketing and merchandising services for manufacturers and retailers, since 2014. Prior to joining CROSSMARK, he was the CEO of Accretive Health, and prior to that held numerous leadership positions at Dell. His career also includes management positions at EDS, IBM, PepsiCo and Frito Lay. He served as a director of Micro Focus International from February 2016 to April 2017, and has served on a number of boards, including Compuware, Staples, and AT Kearney. Mr. Schuckenbrock also serves on the advisory boards of Texas Christian University and Enactus, an international non-profit that inspires students to improve the world through entrepreneurial action. As a result of his current executive position at CROSSMARK Inc., as well as his former positions as a senior executive at other technology organizations and his significant board experience, Mr. Schuckenbrock provides the Board with extensive and relevant board, executive leadership, sales and marketing, and technology industry experience.

   


Frank S. Sowinski
Former Chief Financial Officer of Dun & Bradstreet
   
 
Age 62
Independent Director
   
 
Director Since
September 2014
   
 
Board Committees  
Audit (Chair)
   
 
 
Other Public Boards

   



   
Buckeye GP LLC, general partner of Buckeye Partners, L.P.
   
   
Director Qualification Highlights
Digital Marketing
Technology / Technologist
Strategy
Enterprise Risk Management
BIOGRAPHY
   
Mr. Sowinski serves as the lead independent director, and as a member of the nominating and corporate governance and audit committees of Buckeye GP LLC, general partner of Buckeye Partners, L.P., a publicly-traded master limited partnership that provides mid-stream energy logistics services. Since 2006, Mr. Sowinski has served as an operating executive for MidOcean Partners, a private equity firm that identifies, invests in, and manages portfolio companies focusing on business, information, and marketing services. In his capacity as an operating executive for MidOcean Partners, Mr. Sowinski previously served as Vice Chairman of The Allant Group, Inc. a marketing services group, and also previously served as Vice Chairman of Pre-Paid Legal Services, Inc. dba LegalShield, a specialized legal service products company. In 2002, he served as Chief Financial Officer of PricewaterhouseCoopers Consulting, a global consulting firm. Previously, Mr. Sowinski spent 17 years with the Dun & Bradstreet Corporation, where he served in numerous positions including Chief Financial Officer of the Dun & Bradstreet Corporation, as well as Executive Vice President of Global Marketing and President of the D&B Operating Company. Mr. Sowinski’s numerous operating roles have provided him with broad managerial and operational expertise. In addition, his extensive experience in financial management, including his roles as Chief Financial Officer of the Dun & Bradstreet Corporation and PricewaterhouseCoopers Consulting, provide him with expertise in enterprise risk management, corporate financial management, and financial reporting.

      18

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

BOARD COMPOSITION AND REFRESHMENT

DIRECTOR SELECTION AND BOARD MEMBERSHIP CRITERIA

Recognizing that the selection of qualified directors is complex and crucial to our long-term success, the nominating and governance committee has established director qualification criteria for membership on the Board. When considering current directors for re-nomination to the Board, the nominating and governance committee assesses changes to any director’s qualifications, including their independence, and takes into account the performance of each director, which is part of the committee’s annual Board evaluation process. The nominating and governance committee then recommends actions for the Board to consider and adopt as it sees fit.

The nominating and governance committee has not established specific minimum age, education, experience, or skill requirements for potential members. Instead, the nominating and governance committee reviews the composition of the Board in light of the Company’s current challenges and needs and the current challenges and needs of the Board. Based on this review, the Board then determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, diversity, judgment, character, reputation, age, skills, education, training, background, and experience. All potential candidates should also possess the following personal characteristics: (i) business community respect for his or her integrity, ethics, principles, insights, and analytical ability; and (ii) ability and initiative to frame insightful questions, speak out, and challenge questionable assumptions and disagree without being disagreeable. The nominating and governance committee values diversity as a factor in selecting nominees to serve on the Board and considers the criteria noted above in selecting nominees for directors, including members from diverse backgrounds who combine a broad spectrum of experience and expertise. The nominating and governance committee believes that the Board, as currently constituted, is well-balanced and that it fully and effectively addresses our needs.

Nominations of candidates for the Board by our stockholders for consideration at our 2019 Annual Meeting of Stockholders are subject to the deadlines and other requirements described on page 69 of this proxy statement.

BOARD AND COMMITTEE SELF-ASSESSMENTS

The nominating and governance committee oversees an annual self-assessment process, whereby each director is surveyed to obtain his or her evaluation of the Board as a whole and the committees on which he or she serves. The surveys solicit ideas from the directors about, among other things, improving quality of Board and committee discussions on key matters, and identifying specific issues which should be discussed in the future. After these evaluations are complete, our general counsel summarizes the results, provides a preview for the Chairman of the Board and the Chair of each committee and then submits the summaries for discussion by the nominating and governance committee. If necessary, action plans are developed by the nominating and governance committee and recommended for discussion by the full Board.

In addition, as part of the annual self-assessment process, the nominating and governance committee facilitates structural sessions in which directors are encouraged to provide feedback on the performance of their peers. The Chairman of the Board and/or the Chair of the nominating and governance committee communicate relevant feedback to each director and take further action as they deem appropriate.

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

The nominating and governance committee oversees our orientation programs for new directors and continuing education programs for directors.

Each new director, after joining the Board, is provided with orientation regarding the Board and the Company’s operations. As part of this orientation, each new director has an opportunity to meet with members of our senior management team.

Directors are also provided with continuing education on various subjects that will assist them in discharging their duties. Such continuing education may include presentations by our management, the Board’s outside advisors or

      19

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

other third party experts on our business, information security and system disruption, compliance efforts, applicable legal, regulatory or other developments or other matters as the Board, or the nominating and governance committee in its oversight of the Board’s continuing education program, may deem appropriate.

BOARD AND COMMITTEE GOVERNANCE

We have robust policies and procedures for our directors and management and our commitment to good corporate governance is integral to our business. Our key governance practices are described below.

THE BOARD'S ROLE IN STRATEGY OVERSIGHT

A key component of the Board's role is to provide guidance on and oversight of the Company's strategy. In connection with these responsibilities, the Board has an obligation to keep informed about the Company’s business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independently the Board’s decision-making authority on matters of importance to the Company. Acting as a full Board and through the Board’s three standing committees the Board is directly involved in the Company’s strategic planning process.

Each year senior management convenes to review and refine the Company’s overall corporate strategy. Strategic areas of importance and specific operating priorities are identified, which, in turn inform the Company’s long-range planning. Some of the priorities will be short-term in focus; others will be based on longer time horizons. Senior management then reviews the conclusions reached with the Board at one or more meetings. These meetings involve both management presentations and input from the Board regarding the assumptions, priorities and strategies that form the basis for management’s operating plans.

At subsequent Board meetings, the Board continues to review the Company’s progress against its strategic plans and to exercise oversight and decision-making authority regarding strategic areas of importance and associated authorizations. For example, in the summer, the Board typically reviews the Company’s overall annual performance and considers the operating budget and capital plan for the coming fiscal year. In this time period, the Board also usually finalizes specific criteria against which the Company’s performance will be evaluated. In addition, Board meetings held throughout the year target areas of the business for extended, focused Board input and discussion. These time frames are flexible, however, and the Board adjusts its meeting agendas and plans to reflect business priorities and developments.

The oversight and input provided is integral to the development and review of the Company’s strategic plan. Through this rigorous and interactive process, the Board encourages the long-term success of the Company by exercising sound and independent business judgment on the strategic issues that are important to the Company’s business.

THE BOARD’S ROLE IN RISK OVERSIGHT

The Board provides oversight with respect to our enterprise risk assessment and risk management activities that are designed to identify, prioritize, assess, monitor, and mitigate the various risks we confront, including risks that are related to the execution of our business transformation plan, the achievement of other elements of our operational and financial strategy, and information security and system disruption. The Board performs this oversight function periodically as part of its meetings and also through its three committees, each of which examines various components of enterprise risk as part of its assigned responsibilities. The committees report on risk oversight matters directly to the Board on a regular basis. Management is responsible for establishing and supervising day-to-day risk management processes and reporting to the Board and its committees as necessary.

The compensation committee oversees risks related to compensation matters. The nominating and governance committee oversees risks associated with Board structure and other governance policies and practices. The audit committee focuses on financial risks, including reviewing with management, our internal auditors, and our Independent Auditor our major financial risk exposures, the adequacy and effectiveness of internal control over financial reporting, and the steps management has taken to monitor and control financial risk exposures. In

      20

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

addition, the audit committee reviews risks related to our financial reporting, and compliance with other applicable laws, regulations, and ethical standards. The audit committee regularly receives, reviews, and discusses with management presentations and analyses on various risks we confront.

BOARD LEADERSHIP STRUCTURE

Our corporate governance principles do not require the separation of the roles of Chairman of the Board and Chief Executive Officer because the Board believes that effective board leadership can depend on the skills and experience of, and personal interaction between, people in leadership roles. The Board is currently led by Mr. Brun, our independent non-executive Chairman of the Board. Mr. MacDonald, our President and Chief Executive Officer, serves as a member of the Board. The Board believes this leadership structure is in the best interests of our stockholders at this time. Separating these positions allows our Chief Executive Officer to focus on developing and implementing our business plans and supervising our day-to-day business operations, and allows our Chairman of the Board to lead the Board in its oversight, advisory, and risk management roles.

BOARD INDEPENDENCE

The Board is currently composed of eight non-employee directors and one employee director. The Board has established that nine directors will be the number that will constitute the full Board at the time of the Annual Meeting. Under our Corporate Governance Guidelines and the NASDAQ Stock Market (“NASDAQ”) listing standards, at least a majority of our Board must be independent. The Board’s standards of director independence are consistent with the NASDAQ listing standards. Directors meeting these standards are considered to be “independent.” The Board has affirmatively determined that all directors other than Mr. MacDonald meet these standards and are, therefore, considered to be independent directors. Mr. MacDonald does not meet these standards and is, therefore, not considered to be an independent director. Based on the these standards, all current members of the audit, compensation, and nominating and governance committees are independent.

CORPORATE GOVERNANCE GUIDELINES AND COMMITTEE CHARTERS

The Board has adopted Corporate Governance Guidelines. These guidelines address items such as the standards, qualifications, and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. The guidelines are subject to periodic review by the Board and to modification from time to time by the Board. The guidelines together with the charters of each of the Board’s audit, compensation, and nominating and governance committees are available under “Corporate Governance” in the “Investor Relations” section of our website at cdkglobal.com.

BOARD COMMITTEES

The Board has three standing committees: audit, compensation, and nominating and governance. The table below indicates the members of each Board committee. Mr. Tarkoff served as a member of the nominating and governance committee during fiscal 2018. Effective with Mr. Tarkoff's September 2018 resignation from the Board, Mr. Sowinski was appointed as a member of the nominating and governance committee.

 
Audit
Compensation
Nominating and Governance
Leslie A. Brun (Chairman)
 
 
 
Willie A. Deese
 
 
Amy J. Hillman
 
 
Brian P. MacDonald
 
 
 
Eileen J. Martinson
 
 
Stephen A. Miles
 
 
Robert E. Radway
E
 

      21

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

 
Audit
Compensation
Nominating and Governance
Stephen F. Schuckenbrock
 
 
Frank S. Sowinski
E
 

= Committee Chair

E = Financial Expert

AUDIT COMMITTEE
PRINCIPAL FUNCTIONS
   
 
 
Met 10 times in fiscal 2018
Current Committee Members
Frank S. Sowinski (Chair)
Robert E. Radway
Stephen F. Schuckenbrock
Oversee our accounting and financial reporting processes and related internal controls, the audit of our financial statements, and other matters as mandated under applicable laws, rules, and regulations;
Appoint, compensate, retain, and oversee the work of our Independent Auditor (including resolution of disagreements between management and our Independent Auditor regarding financial reporting), including for the purpose of preparing its audit report;
Review in advance and pre-approve all audit or non-audit services to be provided by our Independent Auditor, as permitted by Section 10A of the Exchange Act, and to approve all related fees and other terms of engagement;
Review disclosures required to be included in our periodic reports filed under the Exchange Act;
Review the performance of the internal auditors and our Independent Auditor, including the lead audit partner, on at least an annual basis;
Review and advise on the appointment, replacement, or dismissal of our Chief Audit Executive; and
Review, approve or ratify related persons transactions pursuant to our Related Persons Transaction Policy.
 
FINANCIAL EXPERTISE AND INDEPENDENCE
 
The Board has determined that all of the members of our audit committee satisfy the independence, financial sophistication, experience, and expertise requirements of our Corporate Governance Guidelines, Section 10A-3 of the Exchange Act, the applicable NASDAQ listing standards, and all other applicable regulatory requirements currently in effect.
 
The Board has also determined that Mr. Sowinski and Mr. Radway each qualify as an “audit committee financial expert” as such term is defined under the rules and regulations of the SEC.
 
REPORT
 
The audit committee report is set forth beginning on page 67 of this proxy statement.
   

      22

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

COMPENSATION COMMITTEE
PRINCIPAL FUNCTIONS
 
 
Met five times in fiscal 2018
Current Committee Members
Willie A. Deese (Chair)
Eileen J. Martinson
Robert E. Radway
Evaluate our Chief Executive Officer’s performance and set the Chief Executive Officer’s compensation based on such evaluation;
Evaluate our other executive officers’ performance and set their compensation based on such evaluations;
Review and approve the performance targets for the Company’s performance-based cash and equity incentive plans; and
Review and evaluate our compensation plans, policies, and programs for our executive officers.
INDEPENDENCE
The members of our compensation committee all satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards and all other applicable regulatory requirements currently in effect.
REPORT
The compensation committee report is set forth on page 65 of this proxy statement
   

COMPENSATION ADVISOR

The compensation committee has engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent external advisor. The compensation committee reviewed its relationship with FW Cook, considered FW Cook’s independence and the existence of potential conflicts of interest, and determined that the work of FW Cook did not raise any conflicts of interest in fiscal 2018. In making this assessment, the compensation committee considered various factors, including the independence factors enumerated in the compensation committee's charter, Rule 10C-1(b) under the Exchange Act, and applicable NASDAQ listing standards.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Willie Deese, Eileen Martinson, and Robert Radway served on the compensation committee for all of fiscal 2018. No member of the compensation committee is now, or was during fiscal 2018, an officer or employee of ours, and none of our executive officers serves, or served during fiscal 2018, as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee. No member of the compensation committee had any relationship with us or any of our subsidiaries during fiscal 2018 pursuant to which disclosure would be required under our Related Persons Transactions Policy or applicable SEC rules pertaining to the disclosure of transactions with related persons.

      23

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

NOMINATING AND GOVERNANCE COMMITTEE
PRINCIPAL FUNCTIONS
   
 
 
Met four times in fiscal 2018
Current Committee Members
Amy J. Hillman (Chair)
Stephen A. Miles
Frank S. Sowinski
Identify individuals qualified to become members of the Board;
Recommend to the Board director nominees;
Review director compensation and recommend director compensation level to the Board for approval;
Develop and recommend to the Board amendments to the Corporate Governance Guidelines;
Oversee the evaluation of the Board and its members; and
Develop and recommend to the Board succession plans for the Chief Executive Officer, interim Chief Executive Officer, and other executive officers.
INDEPENDENCE
The members of our nominating and governance committee all satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards, and all other applicable regulatory requirements currently in effect.
   

BOARD AND COMMITTEE MEETING ATTENDANCE

During fiscal 2018, the Board held 16 meetings, the audit committee held 10 meetings, the compensation committee held five meetings, and the nominating and governance committees held four meetings. Overall attendance at such meetings was approximately 92%. All of our directors attended at least 75%, in the aggregate, of the meetings of the Board and the committees of which they were members during the periods that they served on the Board during fiscal 2018. It is also our policy that our directors attend the Annual Meeting. Last year all directors attended the 2017 Annual Meeting.

EXECUTIVE SESSIONS

Executive sessions of the non-management directors are held during each Board meeting and the majority of committee meetings. Mr. Brun, our independent non-executive Chairman of the Board, presides at each executive session of the Board.

OUTSIDE ADVISORS

The Board and each of its principal committees may retain independent legal, financial, or other advisors of their choosing at our expense. The Board need not obtain management’s consent to retain outside advisors. In addition, the three principal committees need not obtain either the Board’s or management’s consent to retain outside advisors.

      24

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

STOCKHOLDER COMMUNICATIONS

Engagement and transparency with our stockholders provide us with useful feedback on a wide variety of topics, including governance, compensation, stockholder communication, Board composition, stockholder proposals, business performance, and operations. This information is shared regularly with our management and the Board and considered in the processes that set the governance practices and our strategic direction. We also use stockholder feedback to better tailor the public information we provide to address the interests and inquiries of our stockholders.

We interact and communicate with our stockholders through a number of forums, including quarterly earnings presentations, SEC filings, annual meetings, investor conferences, and web communications.

In addition, the Board has endorsed the Shareholder-Director Exchange (“SDX”) Protocol as a guide for effective, mutually beneficial engagement between our stockholders and directors. The Board believes that management should speak for the Company and that the Chairman of the Board should speak for the Board. During fiscal 2018, the Chairman of the Board met with stockholders to discuss a variety of topics, including our strategy and performance.

In order to provide our stockholders and other interested parties with a direct and open line of communication to the Board, we have adopted the following procedures for communications to directors. Stockholders and other interested persons may communicate with the Board by written communications addressed in care of Lee J. Brunz, our Secretary, at CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

All communications received in accordance with these procedures will be reviewed initially by our Secretary who will relay all such communications to the appropriate director or directors unless it is determined that the communication: (i) does not relate to our business or affairs or the functioning or constitution of the Board or any of its committees; (ii) relates to routine or insignificant matters that do not warrant the attention of the Board; (iii) is an advertisement or other commercial solicitation or communication; (iv) is frivolous or offensive; or (v) is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable laws and regulations relating to the disclosure of information.

The Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Board will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.

In addition, anyone who has a concern about the Company's conduct or about the Company's accounting, internal accounting controls or auditing matters may communicate those concerns directly to the audit committee. Such communications may be confidential or anonymous and may be submitted electronically, by phone or in writing to:

The Company’s Ethics Hotline at (800) 461-9330; CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169; or online via the Internet at www.convercent.com/report; or
The Legal Department at (847) 397-1700 (ask to speak to the general counsel or other attorney designated to handle ethics matters); or
The audit committee in writing to the attention of the Audit Committee of CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

CODE OF BUSINESS CONDUCT AND ETHICS

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to our executive officers, directors, and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions. The Code of Ethics may be viewed on our website at www.cdkglobal.com under “Corporate Governance” in the “Investor Relations” section. In the event we

      25

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

amend or waive any of the provisions of the Code of Ethics applicable to any of our directors, our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions that relates to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Exchange Act, we intend to disclose these actions on our website within four business days following the date of the amendment or waiver. No such waivers were made during fiscal 2018.

Our credibility and reputation depend upon the good judgment, ethical standards, and personal integrity of each director, executive officer, and employee and we expect them to conduct themselves with the highest degree of integrity, ethics, and honesty. In order to better protect us and our stockholders, we regularly review our Code of Ethics and related policies to ensure that they provide clear guidance to our directors, executive officers, and employees.

CORPORATE HOTLINE

We have established an independent CDK Global Ethics Hotline, utilizing a global internet and telephone information and reporting service, to allow any employee, director, or vendor to confidentially and anonymously: (i) ask questions about our Code of Ethics and other ethics and compliance issues; and (ii) submit a report or complaint about any potential accounting, internal control, auditing, Code of Ethics, or other violation or matter of concern (unless prohibited by local privacy laws in the jurisdiction of the reporting employee, in which case an alternate inquiry and reporting system has been implemented).

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS

We have adopted a written Related Persons Transactions Policy (the “policy”), which sets forth our policy with respect to the review, approval, ratification, and disclosure of all related person transactions by our audit committee. In accordance with the policy, our audit committee has overall responsibility for implementation of and compliance with the policy. A “related person” means a director, executive officer, or beneficial holder of more than 5% of our outstanding common stock, or any immediate family member of the foregoing, as well as any entity at which any such person is employed, is a partner or principal (or holds a similar position), or is a beneficial owner of a 10% or greater direct or indirect equity interest. Our directors and executive officers must inform our general counsel at the earliest practicable time of any plan to engage in a potential related persons transaction. For purposes of the policy, a “related persons transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are, or will be a participant and the amount involved exceeded, exceeds, or will exceed $120,000 and in which any related person (as defined in the policy) had, has, or will have a direct or indirect material interest. A “related persons transaction” does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by the Board, the compensation committee, or a group of independent directors performing a similar function. Further, we have determined that “related persons transactions” do not include transactions in which the related person’s interest derives solely from his or her service as a director of another entity that is a party to the transaction.

The policy requires that notice of a proposed related persons transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related persons transaction, the proposed transaction will be submitted to our audit committee for consideration at its next meeting or, in those instances in which the legal department, in consultation with the Chief Executive Officer or the Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the next audit committee meeting, to the Chair of the audit committee. Under the policy, our audit committee or the Chair of the audit committee, as applicable, may approve only those related persons transactions that: (i) are in our best interests; or (ii) are not inconsistent with our best interests. In the event that we become aware of a related persons transaction that has not been previously reviewed, approved, or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to the audit committee or Chair of the audit committee so that it may determine whether to ratify, rescind, or terminate the related persons transaction.

      26

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

The policy also provides that the audit committee will review certain previously approved or ratified related persons transactions that are ongoing to determine whether the related persons transaction remains in our best interests and the best interests of our stockholders.

Additionally, we make periodic inquiries of directors and executive officers with respect to any potential related persons transaction of which they, or any of their immediate family members, may be a party or of which they may be aware.

RELATED PERSONS TRANSACTIONS

Mr. Tarkoff served as a member of the Board from June 2016 through September 2018, and is the former President and Chief Executive Officer of Lithium Technologies. In June 2017, we entered into a three-year agreement with Lithium Technologies pursuant to which Lithium Technologies agreed to provide subscription and professional services to us in support of our automotive retail and adjacent industry solutions in exchange for an aggregate fee of up to $955,000. In fiscal 2018, we made payments of approximately $108,000 to Lithium Technologies. In June 2017, the agreement with Lithium Technologies was approved by the Board, including all of the members of the audit committee in accordance with the policy, and was subsequently reviewed and affirmed by the audit committee during fiscal 2018. Mr. Tarkoff resigned as President and Chief Executive Officer of Lithium Technologies in February 2018, and resigned as a director of the Company in September 2018.

Ron L. Frey has served as an executive officer of the Company since April 2017. On April 3, 2018, the Company acquired 100% of the membership interests of Progressus Media LLC (“Progressus”). Mr. Frey had an advisory relationship with Progressus that entitled him to a portion of the proceeds from a sale of Progressus under a unit appreciation rights agreement. The acquisition was made pursuant to a membership interest purchase agreement with customary representations, warranties, covenants, and indemnities by Progressus and the Company. The membership interest purchase agreement was approved by the Board, including all of the members of the audit committee in accordance with the policy. The acquisition date fair value of the total consideration transferred was $22.2 million which consists primarily of an initial cash price of $16.2 million, net of cash acquired, the fair value of the holdback provision of $0.3 million and the fair value of contingent consideration of $5.7 million, which is payable upon achievement of certain milestones and metrics over a three year period ending on March 31, 2021. At the time of the closing, $500,000 of the Company's initial cash price was paid to Mr. Frey to settle Progressus' obligation under the terms of the unit appreciation rights agreement.

COMPENSATION OF NON-EMPLOYEE DIRECTORS

The compensation program for non-employee directors is designed to: (i) fairly pay directors for the work required at a company of our size and scope; (ii) align directors’ interests with the long-term interests of our stockholders; and (iii) be simple, transparent, and easy for our stockholders to understand.

OVERVIEW

For the service year beginning immediately after the 2017 Annual Meeting, our non-employee directors received base annual compensation as shown in the table below. There are no additional meeting fees. The Chairman of the Board and the Chairperson of each Board committee receive additional compensation due to the workload and broad responsibilities of these positions.

All non-employee directors
$
280,000
 
Chairman of the Board*
$
150,000
 
Chair of the audit committee*
$
20,000
 
Chair of the compensation committee*
$
15,000
 
Chair of the nominating and governance committee*
$
10,000
 
* The Chairman's retainer and each committee Chair retainer are paid in addition to the regular retainer amount for all non-employee directors.

      27

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

FORM OF PAYMENT

Of the $280,000 retainer, $165,000 is paid in the form of restricted stock units (“RSUs”) and $115,000 may, at the election of each director, be paid in cash or in deferred stock units (“DSUs”). One-half of the additional $150,000 paid to the Chairman is paid in the form of mandatory DSUs and one-half may, at the election of the Chairman, be paid in cash or in DSUs. 100% of the committee Chair compensation is paid in cash or DSUs at the election of each committee Chair.

TIME OF PAYMENT

Equity awards, including mandatory and elective DSUs, are granted in full on or about the date of each annual meeting. Directors who elect to be paid in cash are paid the cash portion of their compensation quarterly in arrears beginning with the quarter following the effective date of appointment, and subsequently, beginning with the quarter following each annual meeting.

HOW NON-EMPLOYEE DIRECTOR RSUs WORK

The restricted period with respect to the RSUs lapses on the earlier of one year from the grant date and the date of our next annual meeting of stockholders. Upon the lapse of the restricted period, the RSUs either settle or convert to DSUs based on the prior election of each director. If converted to DSUs, when a dividend is paid on our common stock after the lapse of the restricted period, but prior to a director ceasing to serve on the Board, such director’s account is credited with a dividend equivalent in an amount equal to the cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of converted DSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their RSUs or the converted DSUs.

HOW NON-EMPLOYEE DIRECTOR DSUs WORK

DSUs are fully vested when credited to a director’s account. When a dividend is paid on our common stock, each director’s account is credited with a dividend equivalent in an amount equal to the cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of DSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their DSUs.

ONE-TIME RETAINER

During fiscal 2018, in support of the Board's oversight responsibilities for the Company's fiscal 2019 strategic plan, and at the request of the Chairman, Mr. Tarkoff provided supplemental strategic planning review and oversight duties for the Board. In recognition of the additional workload that he assumed, on August 7, 2018, the Board approved a $60,000 one-time supplemental cash retainer for Mr. Tarkoff.

CHANGES TO DIRECTOR COMPENSATION

The nominating and governance committee periodically reviews director compensation and recommends any changes to the Board for approval. Based on the recommendation of the nominating and governance committee, the Board last approved an adjustment to director compensation in connection with the 2017 review for the service year beginning immediately after the 2017 Annual Meeting. The approval superseded the prior adjustment made immediately after the 2015 Annual Meeting, and increased each non-employee director's base annual compensation by $35,000, of which $20,000 is in the form of RSUs and $15,000 is elective, and increased the audit committee Chair retainer by $5,000 to $20,000.

      28

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

STOCK OWNERSHIP REQUIREMENTS FOR NON-EMPLOYEE DIRECTORS

The stock ownership requirements set forth in the Corporate Governance Guidelines are intended to promote ownership in our stock by our non-employee directors and to align their financial interests more closely with those of our other stockholders. Each non-employee director is required to hold a minimum level of ownership of our common stock and/or DSUs while serving as a director, equal to five times the annual cash retainer payable to each director (excluding committee chair retainers, but including the Chairman's retainer and without regard to DSU elections). RSUs for which the restricted period has not lapsed do not count toward the ownership requirements. Directors will retain all shares of our common stock received pursuant to their service as a Board member until this minimum level is reached. Each director has five years from the date of his or her first election to the Board to attain this ownership threshold. In addition, non-employee directors are required to hold for at least one year the net shares obtained from exercising stock options after selling sufficient shares to cover the exercise price, taxes, and broker commissions. As of the end of fiscal 2018, the non-employee directors had satisfied, or progressed toward, the stock ownership guidelines as follows:


ANTI-HEDGING, ANTI-SHORT SALE, AND ANTI-PLEDGING POLICY

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

      29

TABLE OF CONTENTS

CORPORATE GOVERNANCE AT CDK GLOBAL

   

DIRECTOR COMPENSATION TABLE FOR FISCAL 2018

The following table presents compensation for our non-employee directors for fiscal 2018.

Name
Fees Earned or
Paid in Cash 1 ($)
Stock
Awards 2 ($)
Total ($)
Leslie A. Brun
 
183,750
 
 
237,500
 
 
421,250
 
Willie A. Deese
 
123,750
 
 
162,500
 
 
286,250
 
Amy J. Hillman
 
182,500
 
 
162,500
 
 
345,000
 
Eileen J. Martinson
 
110,500
 
 
162,500
 
 
273,000
 
Stephen A. Miles
 
108,750
 
 
162,500
 
 
271,250
 
Robert E. Radway
 
167,500
 
 
162,500
 
 
330,000
 
Stephen F. Schuckenbrock
 
113,125
 
 
162,500
 
 
275,625
 
Frank S. Sowinski
 
123,750
 
 
162,500
 
 
286,250
 
Robert M. Tarkoff
 
227,500
 
 
162,500
 
 
390,000
 

Footnotes:

1. The fees disclosed include all fees earned or paid in cash during fiscal 2018. For fiscal 2018, these fees were composed of: (i) the quarterly Board, committee Chair and incremental Chairman of the Board retainer payments made in July and October of 2017, which represented the final two quarterly payments for the service year that began immediately after the 2016 Annual Meeting; (ii) the quarterly Board and committee retainer payments made in January and March of 2018, which represented the first two quarterly payments for the service year that began immediately after the 2017 Annual Meeting; (iii) the elective DSUs granted in full in November 2017 to each of the non-employee directors for the service year that began immediately after the 2017 Annual Meeting; and (iv) the one-time supplemental cash retainer payment earned by Mr. Tarkoff. For the service year that began immediately after the 2017 Annual Meeting, all of the non-employee directors elected to receive 100% of the elective portion of their retainers in cash except as follows: Ms. Hillman (0% cash); Ms. Martinson (80% cash); Mr. Radway (0% cash); Mr. Schuckenbrock (50% cash); and Mr. Tarkoff (0% cash). Because, Ms. Hillman, Mr. Radway, and Mr. Tarkoff had previously elected to receive 100% of the elective portion of their retainers in cash for the service year that began immediately after the 2016 Annual Meeting and then elected to receive 100% in DSUs for the service year that began immediately after the 2017 Annual Meeting, they each have portions of compensation for two years reported in this table.
2. The stock awards disclosed include the following stock awards granted during fiscal 2018: (i) RSUs granted in November 2017 to each of the non-employee directors for the service year that began immediately after the 2017 Annual Meeting; and (ii) mandatory DSUs granted in November 2017 to the Chairman of the Board for the service year that began immediately after the 2017 Annual Meeting. Stock award compensation amounts reflect the aggregate grant date fair value of the stock awards without regard to forfeitures, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). This amount does not reflect the actual economic value realized by each non-employee director.

As of June 30, 2018, each non-employee director held 2,467 RSUs for which the restricted period had not lapsed.

As of June 30, 2018, each non-employee director held the following quantity of DSUs, exclusive of cash-settled dividend equivalents earned: Mr. Brun, 21,153; Mr. Deese, 13,674; Ms. Hillman, 20,809; Ms. Martinson, 3,770; Mr. Miles, 15,323; Mr. Radway, 14,452; Mr. Schuckenbrock, 4,842; Mr. Sowinski, 13,674; and Mr. Tarkoff, 5,425.

As of June 30, 2018, each non-employee director held the following quantity of outstanding stock options: Mr. Brun, 15,384; Mr. Deese, 15,384; Ms. Hillman, 15,384; Ms. Martinson, 0; Mr. Miles, 0; Mr. Radway, 15,384; Mr. Schuckenbrock, 0; Mr. Sowinski, 15,384; and Mr. Tarkoff, 0.

      30

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

COMPENSATION OF NAMED EXECUTIVE OFFICERS

PROPOSAL 2: AN ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

As discussed in the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement, the Board believes that our long-term success depends in large measure on the talents and efforts of our employees. Our compensation system plays a significant role in our ability to attract, retain, and motivate the highest quality workforce. The principal underpinnings of our compensation system are an acute focus on performance, stockholder alignment, sensitivity to the relevant marketplace, and a long-term orientation.

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote on an advisory basis, commonly referred to as “say on pay,” to approve the compensation paid to our Named Executive Officers (“NEOs”) as disclosed in the CD&A, the compensation tables and the related narrative disclosure contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this proxy statement.

This advisory proposal is not binding on the Board or us. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board, and accordingly, the Board and the compensation committee intend to consider the results of this vote when making determinations in the future regarding NEO compensation arrangements.

Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.

The Board recommends that you vote FOR the approval of the compensation of our NEOs because, as discussed in these disclosures, the Board believes that our compensation policies and decisions are effective in achieving our goals. Therefore, the Board recommends that our stockholders adopt the following resolution:
   
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby APPROVED.”

RESULTS OF 2017 STOCKHOLDER ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

The compensation committee considers the outcome of prior stockholder advisory votes to approve compensation of our named executive officers when making future decisions relating to the compensation of the executive officers identified in the CD&A and our executive compensation programs and policies.

At the 2017 Annual Meeting, stockholders expressed their support of our fiscal 2017 executive compensation programs with approximately 79% of the votes cast for approval of the “say on pay” proposal, which was a decrease from the average of 96% program support for 2015 and 2016.

We anticipated a modest reduction in “say on pay” support in response to the decision to grant long-term equity incentive compensation awards for both fiscal 2017 and fiscal 2018 during fiscal 2017. The compensation committee believes that the combined grants were well-timed and an important part of the fiscal 2017 compensation mix designed to closely align executive compensation with the Company's business transformation plan intended to build sustainable long-term stockholder value. The compensation committee also believes that such awards were carefully designed to be consistent with the Company's strategic-planning process and high ethical standards in that the “pull forward” equity awards will vest as if actually awarded in fiscal 2018, are predominantly performance-conditioned, and are based on financial measures with rigorous goals.

      31

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Nevertheless, we were disappointed with the results of the vote and wanted to hear from our stockholders what drove the decrease in support. Following the 2017 Annual Meeting, we engaged in direct dialogue with stockholders holding more than 25% of our outstanding common stock. We understand that stockholders were concerned about our grant of fiscal 2018 “pull forward” equity awards during fiscal 2017 and their impact on the amount of total equity awarded during fiscal 2017. In response, we have maintained our commitment not to make additional regular annual equity awards during fiscal 2018. We will continue to engage in direct dialogue with our stockholders regarding our executive compensation programs and policies to ensure that investors understand the manner in which our policies support our long-term strategic objectives.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes our compensation philosophy and summarizes the material components of our fiscal 2018 executive compensation program for our NEOs. Our NEOs for fiscal 2018 were:

Brian P. MacDonald, President, Chief Executive Officer and Director;
Joseph A. Tautges, Executive Vice President, Chief Financial Officer;
Daniel P. Flynn, President, CDK North America;
Amy W. Byrne, Executive Vice President, Chief Human Resources Officer;
Dean W. Crutchfield, Executive Vice President, Chief Information Officer; and
Lee J. Brunz, Executive Vice President, General Counsel and Secretary, and Interim Chief Financial Officer.

Mr. Brunz served as Interim Chief Financial Officer from June 1, 2017, to August 9, 2017, the date on which Joseph A. Tautges began service as Chief Financial Officer.

EXECUTIVE SUMMARY

Our executive compensation program is designed to create long-term stockholder value by aligning the interests of our executive officers with those of our stockholders. In order to accomplish this objective, we provide a competitive executive compensation program that enables us to attract and retain highly talented individuals, and we link their pay directly to the achievement of performance goals designed to foster the creation of sustainable long-term stockholder value.

Fiscal 2018 Performance Highlights

Fiscal 2018 was a pivotal year for CDK Global. We exceeded our three-year business transformation plan adjusted EBITDA growth and margin expansion targets originally set at the end of fiscal 2015 and met our commitment to return $750 million to $1 billion of capital to our stockholders during calendar year 2017. At the same time, we grew diluted net earnings per share by 40% on a GAAP basis, and 27% on a non-GAAP adjusted basis. We also executed on our leadership succession plan and transitioned to a new CFO and a new President of our largest segment, Retail Sales North America.

We accomplished all of this while also implementing strategic actions to re-energize our transformed business for future growth. We enhanced our product portfolio through strategic acquisitions, including Dealer Dashboard Enterprises, a leader in reporting solutions for auto dealers, and Progressus Media, a specialty provider of mobile advertising solutions for dealerships, agencies, and automotive marketing companies. In addition, we announced innovative product initiatives, including Drive Flex DMSaaS, a cloud-based DMS product focused on smaller dealerships, and Fortellis Automotive Commerce Exchange, a technology platform focused on allowing developers, OEMs and dealers to leverage, build, innovate, and securely integrate solutions and workflows to transform their businesses.

In spite of these accomplishments, we were disappointed with our revenue growth for fiscal 2018. We entered fiscal 2019 focused on growing our revenue, while also continuing the business transformation plan in support of our adjusted EBITDA and capital return targets.

      32

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Fiscal 2018 Operating Results1


1 Financial results, including the GAAP to non-GAAP reconciliations, are reflected as reported in the Company's Annual Report on Form 10-K for fiscal 2018.

Business Transformation Plan Results1


1 Financial results, including the GAAP to non-GAAP reconciliations, are reflected as reported to the Company’s Annual Report on Form 10-K for fiscal 2018.

Return to Stockholders

Return of Capital

In January 2017, the Board authorized us to repurchase up to $2.0 billion of our common stock as part of return of capital plan through which we expect to return approximately $750.0 million to $1.0 billion per calendar year through calendar 2019 via a combination of dividends and share repurchases. Consistent with that goal, during calendar year 2017, we returned $755.0 million of capital to stockholders.

      33

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Total Stockholder Return

We have delivered significant long-term TSR as evidenced by the chart below, which shows how a $100 investment in CDK Global on October 1, 2014 (the date of our spin-off from ADP) would have grown to $216 on June 30, 2018, assuming all cash dividends were reinvested. The chart also compares the TSR on an investment in our common stock to the same investment in the: (i) Standard & Poor's (S&P) 500 Index, (ii) S&P MidCap 400 Index, and (iii) S&P 400 Information Technology Index over the same period.


The comparisons in the graph above are based upon historical data and are not indicative of, or intended to forecast, future performance of our common stock. The graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

      34

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Fiscal 2018 Executive Compensation Highlights

Cash Compensation

Base Salary

We provide competitive fixed, non-variable compensation for the expertise and knowledge that each executive brings to his or her role, thereby mitigating pressure to support high-risk business strategies.

Annual Incentive Cash Bonus

We provide an annual incentive cash bonus to align each senior executive's interests with our stockholders’ interests, and to reinforce key strategic initiatives and encourage superior individual performance. Annual incentive cash bonus payments are made to executive officers under the 2014 Plan, which was approved by stockholders at our 2015 Annual Meeting. The payouts are limited to 200% of target. For fiscal 2018, bonus achievement was based on the following performance measure targets and weights: (i) fiscal 2018 adjusted EBITDA margin of 35.5% (25%); (ii) fiscal 2018 adjusted EBITDA of $813 million (20%); (iii) fiscal 2018 global revenue growth of 4% (20%); (iv) fiscal 2018 global sales of $328 million (15%); and (v) individual MBOs (20%).

While the Company exceeded its three-year business transformation plan adjusted EBITDA margin target, actual overall achievement against the fiscal 2018 bonus plan objectives was mixed. The Company achieved its adjusted EBITDA margin and global sales targets, but did not meet the adjusted EBITDA or global revenue growth targets. This resulted in a 70.9% calculated payout versus the 80% target payout for all non-MBO financial measures. The compensation committee then applied negative discretion to yield an overall achievement of 60% on all non-MBO financial targets. The calculation of our fiscal 2018 annual incentive cash bonus payout is described in more detail below under “Compensation Review and Determination - Cash Compensation - Annual Incentive Cash Bonus.”

Long Term Equity Incentive Compensation

Performance Stock Units and Stock Options

The Company's fiscal 2018 long-term equity incentive compensation for its executives consisted of grants of PSUs for 70% of total award value, which cliff vest at the end of a three-year performance period based on actual achievement of performance goals set at the time of the grant, and stock options for the remaining 30% of total award value, which have pro rata annual vesting over four years. In fiscal 2017, the compensation committee approved grants of both fiscal 2017 and fiscal 2018 PSUs and stock options for all executives, including the Chief Executive Officer. The fiscal 2018 PSUs and stock options granted in fiscal 2017 are referred to as “pull forward” awards.

At the time of the grant, the “pull forward” PSU and stock option vesting schedules were set by the compensation committee as if the awards were made in fiscal 2018. As an additional condition to the grant, the compensation committee determined that recipients of fiscal 2018 “pull forward” awards would forgo receipt of any additional regular annual long-term equity incentive awards in fiscal 2018.

The compensation committee maintained its commitment to forgo additional regular annual awards in fiscal 2018. Accordingly, the only equity awards granted in fiscal 2018 were to Mr. Tautges in connection with his first year of service with the Company, and special one-time grants of: (i) restricted stock awarded to Mr. Brunz in recognition for his services as interim chief financial officer during fiscal 2017 and fiscal 2018, and interim chief human resources officer during fiscal 2017; and (ii) restricted stock and fiscal 2018 PSUs awarded to Mr. Flynn to encourage retention in recognition of his criticality to the success of the business transformation plan.

Settlement of Fiscal 2016 Performance Stock Units

Our executives, including the NEOs, with the exception of Mr. Tautges, Ms. Byrne, and Mr. Crutchfield, were awarded fiscal 2016 PSUs which had a three-year performance period that ran from July 1, 2015, to June 30, 2018. Performance goals for the period were set by the compensation committee in September 2015. The primary performance goal was aligned with our three-year business transformation plan adjusted EBITDA margin goal of 35% for full-year fiscal 2018, such that achievement of the business transformation plan goal would result in a maximum number of PSUs earned at 200% of target. The number of PSUs earned was subject to further

      35

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

adjustment depending on the TSR of our common stock during the performance period compared against a performance peer group of companies in similar GICS codes, as well as digital advertising and marketing companies. Lastly, if our compounded annual revenue growth over the performance period cycle was below 3%, awards would be capped at 100% of target.

The fiscal 2016 PSUs were settled at 162.5% of target. This is based on achievement at 200% of target for our fiscal 2018 adjusted EBITDA margin of 35.9%, multiplied by 81.25% for our three-year TSR ranking at the 31st percentile. Finally, the payout was not subject to the cap because our compounded annual revenue growth of 3.7% exceeded the 3% floor. Our PSU awards are described in more detail below under “Compensation Review and Determination - Long-Term Equity Incentive Compensation - Performance-Based Stock Units.”

Total Direct Compensation

A summary of fiscal 2018 total direct compensation for our NEOs is set forth in the following table, and additional detail is presented in the subsequent discussion as well as the tables and narratives that follow this CD&A. The amounts reported in this table differ substantially from the amounts reported in the Summary Compensation Table calculated based on SEC rules. This table supplements, but is not a substitute for the Summary Compensation Table.

Fiscal 2018 Total Direct Compensation
Named Executive Officer
Base
Salary
($)1
Annual
Bonus
($)
PSUs
($)2
Stock
Options
($)3
Restricted
Stock/
Units
($)4
Other
Bonuses5
Total
($)
MacDonald, Brian P.
 
925,000
 
 
1,116,000
 
 
 
 
 
 
 
 
 
 
2,041,000
 
Tautges, Joseph A.
 
595,833
 
 
418,735
 
 
972,914
 
 
389,998
 
 
749,943
 
 
400,000
 
 
3,527,423
 
Flynn, Daniel P.
 
425,000
 
 
237,600
 
 
534,539
 
 
 
 
499,962
 
 
 
 
1,697,101
 
Byrne, Amy W.
 
370,000
 
 
195,360
 
 
 
 
 
 
 
 
 
 
565,360
 
Crutchfield, Dean W.
 
351,666
 
 
174,660
 
 
 
 
 
 
 
 
 
 
526,326
 
Brunz, Lee J.
 
393,333
 
 
196,800
 
 
 
 
 
 
499,962
 
 
 
 
1,090,095
 
1. Mr. Tautges' displayed salary has been prorated based on his 11 months of fiscal 2018 employment.
2. In accordance with ASC 718, PSUs are deemed granted when the performance target is established. The PSU amounts include the grant date fair value of the fiscal 2018 PSU target awards, which vest on June 30, 2020. The PSU amounts are the same amounts included within Stock Awards in the “Summary Compensation Table for Fiscal 2018” on page 52 of this proxy statement. Mr. Tautges' grant is his annual fiscal 2018 grant included as part of his offer letter. Mr. Flynn's award is to retain him for his criticality and link his compensation to the success of CDK's transformational and operational efforts.
3. Stock option amounts represent the grant date fair value of the fiscal 2018 awards, which are the same amounts disclosed in the “Summary Compensation Table for Fiscal 2018” on page 52 of this proxy statement. Mr. Tautges' grant is his annual fiscal 2018 grant included as part of his offer letter.
4. Mr. Tautges received a sign-on restricted stock award as part of his compensation offer. Mr. Flynn received a restricted stock award to retain him for his criticality to the success of CDK's transformational and operational efforts. Mr. Brunz received a restricted stock award in recognition of his contributions and performance as interim Chief Human Resources Officer and Chief Financial Officer.
5. Sign-on bonus paid to Mr. Tautges.

      36

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

In order to show the effect that the grant of fiscal 2018 “pull-forward” awards made during fiscal 2017 had on fiscal 2018 total direct compensation, we have included the following table that shows fiscal 2018 total direct compensation plus the fiscal 2018 “pull-forward” awards. The amounts reported in this table differ substantially from the amounts reported in the Summary Compensation Table calculated based on SEC rules. This table supplements, but is not a substitute for the Summary Compensation Table.

 
Fiscal 2018
Total Direct
Compensation
Fiscal 2018 Total Direct
Compensation Adjusted to Show the
Impact of “pull-forward” awards
granted in fiscal 2017
Named Executive Officer
Total
($)
Fiscal 2018
Pull-Forward
Stock Awards
($)
Fiscal 2018
Pull-Forward
Option Awards
($)
Total with
Fiscal 2018
Pull-Forward
Awards
($)
MacDonald, Brian P.
 
2,041,000
 
 
3,813,927
 
 
1,499,991
 
 
7,354,918
 
Tautges, Joseph A.
 
3,527,423
 
 
 
 
 
 
3,527,423
 
Flynn, Daniel P.
 
1,697,101
 
 
381,367
 
 
149,995
 
 
2,228,463
 
Byrne, Amy W.
 
565,360
 
 
279,956
 
 
119,990
 
 
965,306
 
Crutchfield, Dean W.
 
526,326
 
 
305,055
 
 
119,999
 
 
951,380
 
Brunz, Lee J.
 
1,090,095
 
 
305,055
 
 
119,999
 
 
1,515,149
 

COMPENSATION PRINCIPLES

We believe that compensation should be designed to create a direct link between performance and stockholder value. Five principles that guide our decisions involving executive compensation are that an executive’s compensation should be:

based on (i) our overall performance and (ii) the executive’s individual performance;
closely aligned with the short-term and long-term financial and strategic objectives that build sustainable long-term stockholder value;
competitive, in order to attract and retain executives critical to our long-term success;
consistent with high standards of corporate governance and best practices; and
designed so as not to encourage executives to take excessive risks or behave in ways that are inconsistent with our strategic-planning processes and high ethical standards.

Our compensation programs are designed so that target pay reflects the market for the executive’s skills and experience, and relative levels of responsibility among our key executives. In addition, the proportion of pay tied to operating performance and changes in stockholder value varies directly with executives’ levels of responsibility and accountability to stockholders. We assign all executives to pay grades by comparing their position-specific duties and responsibilities with market data and our internal management structure. Each pay grade has ranges for base salary, total annual cash compensation, and annual equity grants. Executives are positioned within these ranges based on a variety of factors, most notably their experience and skill set and their performance over time.

We design our performance-based compensation so that actual, realized compensation will vary relative to the target award opportunity based on performance. As such, actual compensation amounts may vary above or below targeted levels depending on our overall performance and the achievement of individual performance goals. We have adopted this compensation design to provide meaningful incentives for our key executives to achieve superior results. We also believe that it is important for our executive officers and other senior executives to have an ongoing long-term investment in us as outlined in this proxy statement under “Stock Ownership Guidelines.”

      37

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

GOOD GOVERNANCE AND BEST PRACTICES

We are committed to ensuring that our compensation programs reflect principles of good governance. The following practices are key aspects of our compensation program:

What We Do
What We Don’t Do
Structure a majority of pay as performance-based and not guaranteed
Permit employees to hedge, short-sell, or pledge our common stock
Mitigate undue risk in compensation programs
Reprice or buy out underwater stock options without shareholder approval
Include clawback provisions in our cash and equity incentive programs
Grant discounted stock options
Maintain stock ownership guidelines, including holding requirements to encourage share ownership by executives
Gross up employees for taxes under Internal Revenue Code (the “Code”) 280G or 409A
Include “double-trigger” treatment on change in control payments made under the Change in Control Plan
Pay current cash dividends on unearned PSUs or RSUs
Provide limited perquisites
 
Use an independent compensation consultant
 

      38

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

ELEMENTS OF COMPENSATION

The following table summarizes the major elements of our fiscal 2018 executive officer compensation programs:

Compensation Element
Objectives
Key Characteristics
Base Salary
To provide a fixed amount for performing the duties and responsibilities of the position
Determined based on overall performance, level of responsibility, pay grade, competitive compensation data, and comparison to our other executives
   
Annual Incentive Cash Bonus
To motivate executive officers to achieve Company-wide and individual performance goals
80% of bonus opportunity based on financial objectives, 20% based on individual strategic objectives
Financial objectives and targets aligned with business strategy to grow revenue and increase margins
Annual cash bonus payout range of 0-200%
   
PSU Awards
To motivate executive officers to achieve certain longer-term goals and create long-term alignment with stockholders
PSUs represent 70% of long-term incentive grant value
Granted annually (with the exception of the fiscal 2018 “pull-forward” awards granted in fiscal 2017) based on pay grades and individual performance
Based on a three-year performance period
Performance metrics are aligned with the business transformation plan; fiscal 2018 pull forward award performance is measured against (i) adjusted EBITDA margin during fiscal 2018 (weighted 13), and (ii) adjusted EBITDA growth during fiscal 2019 and fiscal 2020 (weighted 23)
For the three-year performance period, our TSR will be compared to a selected peer group of companies in similar GICS codes as CDK, which can adjust the PSU award (upward and downward) and thereby focus executives to drive long-term value to stockholders
If our compounded annual revenue growth is below 3% for the respective three-year performance period, final awards cannot exceed 100% of target
PSUs have a payout range of 0-250% of target, including the TSR modifier
   
Stock Options
To align the interests of executive officers with long-term stockholders’ interests and ensure that realized compensation occurs only when there is an increase in stockholder value
Stock options represent 30% of long-term incentive grant value
Granted annually (with the exception of the fiscal 2018 “pull-forward” awards granted in fiscal 2017) based on pay grades and individual performance
Grants vest in equal installments over four years (fiscal 2018 “pull-forward” stock option grant vests on the second, third, fourth and fifth anniversaries of the grant date)
   

      39

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Consistent with a pay-for-performance philosophy, compensation for Mr. MacDonald and the other NEOs is structured so that a significant portion of their total compensation is at-risk and paid based on meeting certain performance goals. The mix of target total direct compensation (base salary, cash bonus, and long-term incentive awards) for fiscal 2018 was designed to deliver the following approximate proportions of total compensation to Mr. MacDonald and the other NEOs (on average) if Company-wide and individual target levels of performance are achieved. Mr. MacDonald’s higher portion of at-risk compensation reflects his greater responsibility for overall Company performance.

CEO and NEO Total Direct Compensation Mix at Target


1. The total direct compensation mix includes: (i) the fiscal 2018 “pull-forward” equity awards granted in fiscal 2017; and (ii) PSU and stock option awards granted to Mr. Tautges in August 2017 and Ms. Byrne in June 2017 as part of their employment offers, and excludes special one-time: (a) restricted stock awards granted to Messrs. Tautges, Flynn, and Brunz; and (b) PSU awards granted to Mr. Flynn.

COMPENSATION REVIEW AND DETERMINATION

Role of the Compensation Committee

The compensation committee oversees and administers our executive compensation programs. Either before or near the beginning of the fiscal year the compensation committee reviews the executive compensation program and establishes base salaries, target annual cash bonus opportunities, and long-term incentive awards for executives and other eligible employees.

The compensation committee examines summary compensation sheets detailing the amounts and mix of base salary, cash bonus, and long-term equity incentives for each of the NEOs, which compare the amounts and mix to competitive compensation levels. We generally target base salary, annual cash bonus, and long-term equity incentives at the median of competitive compensation levels, but will set targets above or below the median when warranted in the judgment of the compensation committee. The degree to which target compensation ranges are above or below the median competitive rate is based on each executive’s skill set and experience relative to market peers. Executives who are new in their roles and therefore less experienced than market peers are typically positioned lower in the range, whereas executives with a long tenure in their role may be positioned higher in the range.

Role of the Compensation Adviser

Our compensation committee has engaged FW Cook as its independent external advisor to provide assistance with the design of our compensation programs regarding the amount and types of compensation that we provide our executives, and how these compare to peer company compensation practices. In June 2017, FW Cook examined the competitiveness of senior executive compensation levels and the Company’s aggregate share usage, dilution, and fair value cost of long-term incentives for all participants, which was used for setting fiscal 2018 target total compensation.

Representatives of FW Cook attend meetings of the compensation committee as requested and may also communicate with the Chair of the compensation committee outside of meetings. As part of its ongoing support to our compensation committee, FW Cook also reviews executive compensation disclosures, reviews and provides comments on changes to the committee’s charter, advises on emerging trends and the implications of regulatory and governance developments, and reviews and provides commentary on materials and proposals prepared by

      40

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

management that are presented at the committee’s meetings. FW Cook also advises our nominating and governance committee on director compensation and conducts biennial competitive reviews of director compensation.

Role of Competitive Market Data

Survey Market Data

With respect to the total cash and long-term incentive compensation for our Chief Executive Officer and other NEOs, the compensation committee reviews competitive compensation market data based on compensation surveys reflecting the pay practices of publicly traded companies and our compensation peer group, discussed below, as a second market reference. The surveys used were the Willis Towers Watson U.S. General Industry Executive Database, the Aon Hewitt U.S. Total Compensation Measurement Executive Survey, and the Radford Global Technology Survey. The general industry surveys are weighted 50% and the technology survey is weighted 50%. In benchmarking compensation levels against the survey data, the compensation committee considered only the aggregated survey data, and the identity of the companies included in the survey data is not disclosed to, or considered by, the compensation committee in its decision-making process. The companies included were based on a revenue range such that the median company revenue approximates the annual revenue for CDK Global or the executive’s business unit, as appropriate. The compensation committee also compared the aggregate level of each executive officer’s compensation and compared it against the executive’s previous year’s totals and against compensation of our other executive officers.

Peer Companies

For fiscal 2018, the compensation committee approved changing the compensation peer group to better align with our evolving business strategy and revenue mix. The new peer group was developed with assistance from FW Cook. Peer group selection focused on U.S. -based publicly traded companies in GICS sub-industry categories that were in our previous compensation peer group, in our Institutional Shareholder Services (“ISS”) peer group, and companies with similar customer profiles and/or business operations. We increased the proportion of companies in the Application/Systems Software, Automotive Retail, and Internet Software & Services industries, with an emphasis on companies with digital marketing operations, and decreased the proportion of companies in the Data Processing & Outsourced Services and IT/Research Consulting industries. Companies continued to be selected that are of a similar business model to CDK (including B-to-B operations, back-office services, and digital marketing services), that are similar size to CDK with revenues that are 33% to 300% of our annual revenue, and that are considered to be a peer by ISS and prevalent peer or peers. The following companies made up our peer group for fiscal 2018 compensation decisions:

Acxiom Corporation
Adobe Systems Incorporated
Alliance Data Systems Corporation
ANSYS, Inc.
Autodesk, Inc.
AutoNation, Inc.
CA, Inc.
Cadence Design Systems, Inc.
CoStar Group, Inc.
Gartner, Inc.
Group 1 Automotive, Inc.
Intuit Inc.
Open Text Corporation
Red Hat, Inc.
ServiceNow, Inc.
SS&C Technologies Holdings, Inc.
Synopsys, Inc.
Teradata Corporation
Total System Services, Inc.
Verint Systems Inc.
Zillow Group, Inc.
 

      41

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Role of Management

The Chief Executive Officer provides recommendations to the compensation committee with respect to each NEO’s overall performance and actual achievement against performance objectives, and in the determination of each NEO’s compensation, other than his own. The compensation committee takes the Chief Executive Officer’s general input into consideration when reviewing and approving compensation for NEOs other than the Chief Executive Officer.

The Chief Executive Officer and Chief Human Resources Officer participate in the development of the performance criteria measures and any plan design changes for our annual bonus and equity plans. The Chief Human Resources Officer presents the plan design changes to the compensation committee for their review and approval.

CASH COMPENSATION

Base Salary

Base salaries represent fixed amounts paid to each executive for performing their normal duties and responsibilities. For fiscal 2018, the compensation committee determined the amount based on the executive’s overall performance in prior years, level of responsibility, pay grade, competitive positioning, and comparison to our other executives. Based on these criteria, our NEOs received the following annual salary increases in fiscal 2018:

Named Executive Officer
Fiscal 2017 Salary ($)
Increase
Fiscal 2018 Salary ($)
MacDonald, Brian P.
 
900,000
 
 
3.3
%
 
930,000
 
Tautges, Joseph A.
 
 
 
%
 
650,000
 
Flynn, Daniel P.1
 
375,000
 
 
20.0
%
 
450,000
 
Byrne, Amy W.
 
370,000
 
 
%
 
370,000
 
Crutchfield, Dean W.
 
335,000
 
 
6.0
%
 
355,000
 
Brunz, Lee J.2
 
360,000
 
 
11.1
%
 
400,000
 
1. Mr. Flynn was promoted to the role of President, CDK North America on December 1, 2017. His fiscal 2018 base salary represents the full year salary for the new role.
2. Mr. Brunz's increase reflects an adjustment based on competitive positioning necessary to migrate his base salary toward the median range for his role and responsibilities.

Annual Incentive Cash Bonus Program

Program Design

The NEOs are eligible to earn an annual incentive cash bonus under the 2014 Plan as a way to align each NEO's interests with our stockholders’ interests, and to reinforce key strategic initiatives and encourage superior individual performance. Potential payouts are capped at 200% of target based on actual performance against financial metrics and MBOs. There is no minimum payment level, and the entire award opportunity is forfeited if threshold performance metric goals are not achieved. When making final payout determinations, the compensation committee may exercise negative discretion to award less than the maximum potential bonus based on actual performance metric goal achievement.

Each year the compensation committee approves bonus performance metrics aligned with the key components of our operational and strategic success and the degree to which the Chief Executive Officer and the other NEOs have responsibility for overall performance results. They also provide a set of common objectives that facilitate collaborative engagement.

For fiscal 2018, the compensation committee also established a threshold corporate performance “umbrella” target based on adjusted earnings per share. This metric must be met or exceeded before annual incentive bonus awards are made to our NEOs. Federal legislation passed on December 22, 2017, repealed the performance-based compensation exemption, for fiscal years beginning after December 31, 2017; therefore, this process allows the entire amount of the annual incentive bonus award to be considered performance-based and tax deductible under Section 162(m).

      42

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

For fiscal 2018, incentive bonus achievement was based on four core financial performance metrics and, as a fifth metric, individual MBOs. Each of the five metrics is capped at 200% of target. The specific metrics and the weighting that was placed on each, are as follows:

1. fiscal 2018 adjusted EBITDA margin percentage (25%);
2. fiscal 2018 adjusted EBITDA dollars (20%);
3. fiscal 2018 global revenue dollars growth (20%);
4. fiscal 2018 global sales dollars (15%); and
5. individual MBOs (20%).

Individual MBOs enhance focus on business objectives, such as operational objectives, strategic initiatives, succession planning, and talent development, which are important to the long-term success of the Company. The four financial performance metrics are defined and explained in greater detail as follows:

Financial Performance Metrics
Definition(1)
Rationale for Metric
Adjusted EBITDA Margin (%)
Non-GAAP adjusted EBITDA, as defined and reported in our Annual Report on Form 10-K for fiscal 2018 divided by Revenues as reported in our Annual Report on Form 10-K for fiscal 2018(2)
Incents achievement of our strategic goals by encouraging efficient operations and resource allocations, in order to maximize earnings relative to the revenue environment 
Adjusted EBITDA ($)
Non-GAAP adjusted EBITDA, as defined and reported in our Annual Report on Form 10-K for fiscal 2018(2)
Global Revenue Growth (%)
The percentage difference between Revenues as reported in our Annual Report on Form 10-K for fiscal 2018 and Revenues as reported in our Annual Report on Form 10-K for fiscal 2017
Reflects top line financial performance, which is a strong indicator of our long-term ability to drive stockholder value 
Global Sales ($)
An internal unit of measure that estimates the one-year value of sales transactions(3)
In-year indicator of revenue trajectory for future periods
1. While financial results are reported in accordance with GAAP, financial performance metric targets and results under incentive plans are sometimes based on non-GAAP financial measures. The financial results, whether GAAP or non-GAAP, may be further adjusted as permitted by those plans and approved by the compensation committee. The compensation committee reviewed GAAP to non-GAAP adjustments and any other adjustments to ensure performance took into account the way the goals were set and executive accountability for performance. These metrics and the related performance targets are relevant only to our executive compensation program and should not be used or applied in other contexts.
2. Fiscal 2018 adjusted EBITDA is GAAP net earnings attributable to CDK excluding the adjustments disclosed in our fiscal 2018 Annual Report on Form 10-K, and further adjusted for the impact of budgeted foreign currency exchange rates and the Company-wide impact on bonus funding based on discretion as permitted by the 2014 Plan and as approved by the compensation committee. Fiscal 2018 Global Revenue is GAAP revenue as disclosed in our Annual Report on Form 10-K adjusted for the impact of budgeted foreign currency exchange rates as permitted by the 2014 Plan and as approved by the compensation committee. An explanation of how management uses adjusted measures and the reasons why management views such measures as providing useful information for investors can be found in our fiscal 2018 Annual Report on Form 10-K. Our adjusted financial measures should be viewed in addition to, and not as an alternative to, financial results prepared in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from the Company’s results should be carefully evaluated.
3. The Company does not disclose its calculation of Global Sales because this information is not otherwise publicly disclosed by the Company, and the Company believes it would cause competitive harm to do so in this proxy statement. Consistent with the other financial targets, Global Sales targets were set at levels necessary to drive stockholder value.

      43

TABLE OF CONTENTS

PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

   

Design Changes for Fiscal 2018

The terms of the fiscal 2018 annual incentive cash bonus program remained largely consistent with those of the program from the prior year, but there were two changes made to better align executives' interests to the interests of our stockholders:

The weighting of Global Sales was increased from 10% to 15%; and
The weighting of adjusted EBITDA dollars growth was reduced from 25% to 20%.

Fiscal 2018 Financial Results

In August 2018, the compensation committee reviewed and determined performance against the four core financial performance metrics as follows:

Financial Performance Metric
Weight
Threshold
(50% of
Target)(1)
Target ($ in
millions)(1)
Maximum
(200% of
Target)(1)
Result ($ in
millions)(2)
Percentage of Target
Annual Incentive
Funded
Adjusted EBITDA Margin (%)
 
25
%
 
34.5
%
 
35.5
%
 
36.8
%
 
35.7
%
 
25.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA ($)
 
20
%
$
790.1
 
$
813.0
 
$
842.1
 
$
802.2
 
 
15.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Revenue Growth (%)
 
20
%
 
2.6
%
 
4.0
%
 
5.0
%
 
1.2
%
 
%