UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN THE PROXY STATEMENT

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Cinemark Holdings, Inc.

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LETTER FROM OUR CEO

 

Dear Fellow Stockholders:   We welcome you to join us at our 2021 annual meeting of stockholders (Annual Meeting) to be held virtually on May 20, 2021 at 9:00 a.m. CDT. The Notice of Annual Meeting and Proxy Statement, following this letter, provides more information regarding the virtual-only meeting and the business we will conduct at the Annual Meeting.   It is almost unfathomable that one year ago, we were reporting Cinemark’s fifth consecutive year of record results with the North American industry touting the second-highest grossing box office of all-time. At the beginning of 2020, we reflected an incredibly strong Company with areflected an incredibly strong Company with a history of discipline and consistency, operating in a stable and mature industry. It goes without saying that COVID-19 has
caused significant distress in multiple industries, including the movie exhibition industry, and tested the strength and resiliency of our Company over the course of the past year.

Cinemark is still a strong company operating with balance, discipline and consistency, while adapting to our current circumstances. This past year has only reinforced that Cinemark has tenacity and perseverance in addition to an ability and a willingness to think quickly and move nimbly as we evolve in this unpredictable, ever-changing environment.

Cinemark was one of the first theatre chains to reopen and has largely been able to remain open, government restrictions notwithstanding. At the end of the year, approximately 75% of our U.S. circuit was reopened, compared to 45% of the North American industry. Similarly, in Latin America, we had approximately 65% of our theatres operating by year-end. Our theatre teams have been proficient in executing our enhanced cleaning and safety protocols, named The Cinemark Standard. Since we began reopening in June, we have consistently received 96% guest satisfaction scores on Cinemark protecting their health and safety. Notably, we are continuing to more than cover our incremental variable costs associated with being open and are burning less cash with theatres open than we would if the theatres remained closed.

I am proud of the accomplishments the entire team has made over the past year. While we were well-positioned heading into the crisis, we have adapted the way we operate to become more efficient and navigate the current environment. We are working diligently to remain successful and further solidify our leadership position as theatrical moviegoing resurges, which will ultimately benefit long-term stockholder value.

Lastly, our Board’s active oversight has been integral to our success in helping management navigate the challenges and impacts associated with the COVID-19 pandemic with their diverse viewpoints, financial acumen and deep industry knowledge and expertise.

Thank you for your continued support, trust and investment in Cinemark. We look forward to your participation at our Annual Meeting.

YOUR VOTE IS VERY IMPORTANT TO US. Whether or not you plan to attend the Annual Meeting, I urge you to please cast your vote as soon as possible via the Internet, telephone or mail.

 

 

CINEMARK HOLDINGS, INC.

3900 Dallas Parkway

Plano, Texas 75093

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

April 2, 2021

Dear Stockholders:

Notice is hereby given that the Annual Meeting of the Company will be held on May 20, 2021 at 9:00 a.m. CDT, virtually, for the following purposes:

 

1.

To elect three Class II directors to serve for three years on our board of directors;

 

2.

To ratify the appointment of Deloitte and Touche, LLP as our independent registered public accounting firm for 2021;

 

3.

To hold the annual, non-binding, advisory vote on our executive compensation program; and

 

4.

To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

Only stockholders of record as of the close of business on March 25, 2021, set as the Record Date, will be entitled to notice of, and to vote at, the Annual Meeting.

For the second consecutive year, our Annual Meeting will be conducted exclusively online via live audio webcast. Conducting the meeting virtually will again ensure stockholder access in light of the expected ongoing uncertainty for large gatherings due to the COVID-19 pandemic. Stockholders will be afforded the same rights and opportunities to participate in a virtual-only Annual Meeting as they would at an in-person meeting.

To be admitted to the virtual-only Annual Meeting, stockholders as of the Record Date must use the following link: www.virtualshareholdermeeting.com/CNK2021 and enter the 16-digit control number found on the proxy card or the voting instruction form. By logging into the website, stockholders as of the Record Date will be able to vote shares electronically on all items to be considered at the Annual Meeting. If a stockholder as of the Record Date has any question pertaining to the business of the Annual Meeting, it must be submitted in advance of the Annual Meeting by visiting www.proxyvote.com. Questions may be submitted until 10:59 p.m. CDT, on Tuesday, May 18, 2021. Stockholders must have their proxy cards or voting instruction forms in hand when accessing the website and follow the instructions. To allow us to respond at the Annual Meeting to the maximum number of stockholders, each stockholder will be limited to one question.

Those without a 16-digit control number will be admitted to the virtual-only Annual Meeting as guests, but guests will not have the ability to vote or otherwise participate.

BY ORDER OF THE BOARD OF DIRECTORS,

 

Michael Cavalier

Executive Vice President-General Counsel & Secretary

YOUR VOTE IS IMPORTANT TO US. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. Therefore, we urge you to promptly vote and submit your proxy in advance of the Annual Meeting. You can vote your shares via the Internet, by telephone, or by signing, dating, and returning the proxy card or voting instruction form. To vote via the Internet or telephone, follow the instructions included in the proxy card or the voting instruction form. You can revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the proxy statement.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting.

The proxy statement and the 2020 Form 10-K are available at

http://materials.proxyvote.com/17243V

TABLE OF CONTENTS

 

LETTER FROM OUR CEO
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
PROXY STATEMENT SUMMARY			1
GENERAL INFORMATION			13
SOLICITATION OF PROXIES			13
SHARES OUTSTANDING AND VOTING RIGHTS			13
CORPORATE GOVERNANCE			13
BOARD COMPOSITION			13
ITEM ONE — ELECTION OF THREE CLASS II DIRECTORS			13
ANNUAL MEETING SLATE			13
NOMINATIONS FOR ELECTION TO THE BOARD			20
BOARD LEADERSHIP			20
BOARD INDEPENDENCE			21
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			22
BOARD DIVERSITY AND DIRECTOR QUALIFICATIONS			24
BOARD OVERSIGHT OF RISK			25
MEETING ATTENDANCE			26
EXECUTIVE SESSIONS			26
INVESTOR OUTREACH			26
STOCKHOLDER COMMUNICATIONS WITH THE BOARD			27
OUR ENVIRONMENTAL AND SOCIAL PRACTICES			27
CORPORATE GOVERNANCE POLICIES AND CHARTERS			28
CODE OF BUSINESS CONDUCT AND ETHICS			28
BOARD COMMITTEES			29
AUDIT COMMITTEE			29
COMPENSATION COMMITTEE			31
GOVERNANCE COMMITTEE			31
DIRECTOR COMPENSATION			32
ITEM TWO — RATIFICATION OF THE APPOINTMENT OF DELOITTE AND TOUCHE, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021			34
ITEM THREE — ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION			34
COMPENSATION DISCUSSION AND ANALYSIS			35
TABLE OF CONTENTS			35
OUR NEOS			35
2020 SAY-ON-PAY RESULT			36
EXECUTIVE SUMMARY			37
OVERVIEW OF 2020 EXECUTIVE COMPENSATION SET IN FEBRUARY 2020			38

EXECUTIVE COMPENSATION BEST PRACTICES			40
OUR COMPENSATION PHILOSOPHY			40
DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM			40
EXECUTIVE COMPENSATION COMPONENTS			41
2021 COMPENSATION CHANGES			50
EXECUTIVE COMPENSATION PROCESS: ROLES			50
EXECUTIVE COMPENSATION PROCESS: PEER GROUP REVIEW			51
COMPENSATION RISK ASSESSMENT			51
COMPENSATION COMMITTEE REPORT			52
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS			53
SUMMARY COMPENSATION TABLE FOR 2020			54
CEO PAY RATIO FOR 2020			56
GRANTS OF PLAN-BASED AWARDS IN 2020			57
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2020			59
STOCK OPTION EXERCISES AND STOCK VESTED IN 2020			60
DISCUSSION OF THE TERMS OF THE EMPLOYMENT AGREEMENTS WITH OUR NEOS			61
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			67
DELINQUENT SECTION 16(a) REPORTS			67
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			68
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING			70
DEADLINE FOR STOCKHOLDER PROPOSALS FOR THE 2022 ANNUAL MEETING			74
ADDITIONAL INFORMATION			75
STOCKHOLDERS SHARING A COMMON ADDRESS			75
INCORPORATION BY REFERENCE			75
OTHER MATTERS			75
AVAILABILITY OF REPORT ON FORM 10-K			75
QUESTIONS			75

GENERAL INFORMATION

 

 

SOLICITATION OF PROXIES

The Board is soliciting proxies in connection with the Annual Meeting (and any adjournment thereof) to be held virtually on May 20, 2021 at 9 a.m. CDT. The approximate date on which this proxy statement and the enclosed proxy are first being sent to stockholders is April 2, 2021.

SHARES OUTSTANDING AND VOTING RIGHTS

As of the Record Date, 119,539,989 shares of common stock, par value $0.001 per share (Common Stock) of the Company were outstanding. The Common Stock constitutes the only class of voting securities of the Company. Only stockholders of record as of the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting. Holders of Common Stock are entitled to one vote for each share so held.

 

 

CORPORATE GOVERNANCE

BOARD COMPOSITION

The majority of our Board is independent and is currently comprised of 10 members. The size of the Board may be fixed from time to time exclusively by our Board as provided in our Certificate of Incorporation. Our Certificate of Incorporation also provides that our Board consists of three classes of directors, designated as Class I, Class II and Class III. The members of each class are elected to serve a three-year term, with the terms of office of each class ending in successive years.

ITEM ONE — ELECTION OF THREE CLASS II DIRECTORS

ANNUAL MEETING SLATE

The terms of the current Class II directors, Mme. Antonellis and Messrs. Sepulveda and Zoradi expire at the Annual Meeting. All nominees have been recommended by the Nominating and Corporate Governance Committee (Governance Committee) and nominated by the Board for election at the Annual Meeting.

Each of Mme. Antonellis and Messrs. Sepulveda and Zoradi has consented to be nominated for re-election to the Board as a Class II director. If elected, they will serve on the Board for a three-year term expiring on the date of our 2024 annual meeting of stockholders. At this time, we have no reason to believe that any nominee will be unable or unwilling to serve if elected. However, should any of them become unavailable or unwilling to serve before the Annual Meeting, your proxy card authorizes us to vote for a replacement nominee if the Board names one.

 

 

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CLASS II DIRECTOR NOMINEES TERM EXPIRING 2024

 

Darcy Antonellis
Director Since: 2015   Nominee of: Board   Board Committees: Audit Committee; Strategic Long-Range Planning Committee   Age: 58   Other Public Company Boards: 1		Skills and Qualifications   •  Current CEO and previous executive experience •  Critical technology and cybersecurity experience •  Accounting and financial management expertise   Other Current Board Experience   •  Xperi   Previous Board Experience   •  Not Applicable		Professional Highlights   Since January 2014, Ms. Antonellis has been the CEO of Vubiquity, Inc., a subsidiary of Amdocs Inc. (NASDAQ: DOX), a leading software, services provider to communications and media companies. From June 1998 until December 2013, Ms. Antonellis held numerous positions at Warner Bros. Entertainment Inc., (a Time Warner company) including President of Technical Operations and Chief Technology Officer.
Carlos Sepulveda
Director Since: 2007   Nominee of: Mitchell Investors   Board Committees: Audit Committee; Compensation Committee; Strategic Long-Range Planning Committee   Lead Director   Age: 63   Other Public Company Boards: 1		Skills and Qualifications   •  Extensive public accounting experience; certified public accountant •  CEO and executive experience •  Strong accounting and financial oversight experience, strategic planning and management expertise   Other Current Board Experience   •  Triumph Bancorp, Inc.   Previous Board Experience   •  Matador Resources Company		Professional Highlights   Since May 2010, Mr. Sepulveda has been the Chairman of the board of directors of Triumph Bancorp, Inc. (Triumph Bancorp, NASDAQ: TBK), financial services company providing community banking, national lending and commercial finance. Prior to Triumph Bancorp, Mr. Sepulveda was the President and CEO of Interstate Battery System International, Inc. (Interstate Battery), a seller of automotive and commercial batteries, from March 2004 until April 2013 and its Executive Vice President from 1993 until March 2004. Prior to joining Interstate Battery, Mr. Sepulveda was an audit partner with the accounting firm of KPMG Peat Marwick in Austin, New York and San Francisco for 11 years.

 

 

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Mark Zoradi
Director Since: 2015   Nominee of: Board   Board Committees: None   Age: 67   Other Public Company Boards: 1		Skills and Qualifications   •  Veteran motion picture executive with a background in distribution •  Wealth of knowledge regarding strategic partnerships within the exhibition industry and exhibitor relationships with movie studios •  Management and oversight experience at large public companies within the industry   Other Current Board Experience   •  National CineMedia, Inc.   Previous Board Experience   •  Not Applicable		Professional Highlights   Since August 2015, Mr. Zoradi has served as our CEO. Mr. Zoradi spent 30 years at The Walt Disney Company, a major motion picture studio, including serving as the President of Walt Disney Studios Motion Picture Group. Prior to that, Mr. Zoradi served in a variety of positions of increasing responsibility with The Walt Disney company, including as the General Manager of Buena Vista Television and President of Buena Vista International with responsibility for the international theatrical and home entertainment marketing and distribution of Disney, Touchstone and Pixar films. Mr. Zoradi also served as the President and Chief Operating Officer (COO) of Dick Cook Studios from January 2011 until July 2014 and the COO of Dreamworks Animation SKG, Inc. from August 2014 until January 2015.

 

OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ELECTION OF EACH CLASS II NOMINEE

 

 

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		CLASS III DIRECTORS TERM EXPIRING 2022

 

Benjamin Chereskin
Director Since: 2004   Nominee of: Board   Board Committees: Compensation Committee; Strategic Long-Range Planning Committee (Chair)   Age: 62   Other Public Company Boards: 1		Skills and Qualifications   •  Strategic planning and finance growth opportunities •  Extensive knowledge and experience in corporate finance, mergers and acquisitions •  Executive compensation experience   Other Current Board Experience   •  CDW, Corporation   Previous Board Experience   •  Boulder Brands, Inc.		Professional Highlights   Mr. Chereskin is President of Profile Capital Management LLC (Profile Management), an investment management firm, which he founded in October 2009. Prior to founding Profile Management, Mr. Chereskin was a Managing Director and Member of Madison Dearborn Partners, LLC, a private equity firm, from 1993 until October 2009, having co-founded the firm in 1993.

 

Lee Roy Mitchell
Founder   Nominee of: Mitchell Investors   Board Committees: None   Age: 84   Other Public Company Boards: 0		Skills and Qualifications   •  Depth of experience in the motion picture industry •  Long-term historic industry perspective •  Leadership experience, including past memberships on public company boards   Other Current Board Experience   •  Not Applicable   Previous Board Experience   •  National CineMedia, Inc.		Professional Highlights   Mr. Mitchell is the founder of the Company. He has served as Chairman of the Board since March 1996 and as a director since our inception in 1987. Mr. Mitchell has been engaged in the motion picture exhibition business for over 50 years. His depth of experience in the motion picture industry has been invaluable to the Board. Additionally, Mr. Mitchell brings a long-term historic industry perspective and leadership experience to the Board.

 

 

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Ray Syufy
Director Since: 2006   Nominee of: Board   Board Committees: Strategic Long-Range Planning Committee   Age: 58   Other Public Company Boards: None		Skills and Qualifications   •  Deep knowledge of the motion picture industry •  Strategic planning expertise, particularly with respect to competition from other forms of entertainment •  Operational expertise   Other Current Board Experience   •  Not Applicable   Previous Board Experience   •  Not Applicable		Professional Highlights   Mr. Syufy began working for Century Theatres, Inc. (Century Theatres), a regional movie exhibitor, in 1977, and held positions in each of the major departments within Century Theatres. In 1994, Mr. Syufy was named President of Century Theatres and was later appointed CEO and Chairman of the board of directors of Century Theatres. Mr. Syufy resigned as an officer and director of Century Theatres upon the consummation of our acquisition of Century Theatres in 2006. Since then, Mr. Syufy has presided as CEO of Syufy Enterprises, Inc. (Syufy Enterprises) a retail and real estate holding company with operations in California, Nevada, Arizona, Colorado, and Texas.

 

 

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CLASS I DIRECTORS TERM EXPIRING 2023

 

Nancy Loewe
Director Since: 2017   Nominee of: Board   Board Committees: Audit Committee (Chair and Financial Expert); Governance Committee   Age: 53   Other Public Company Boards: 0		Skills and Qualifications   •  Accounting and financial management expertise •  Risk oversight experience •  Previous management and oversight experience at large public companies •  Management and executive experience   Other Current Board Experience   •  Not Applicable   Previous Board Experience   •  Not Applicable		Professional Highlights   Ms. Loewe has been the Chief Financial Officer (CFO) of Weyerhaueser Company, one of the world’s largest private owners of timberlands, since 2021. Prior to that, Ms. Loewe was a Senior Vice-President - Finance of Visa, Inc. (Visa), a multinational financial services corporation, since March 2019. Prior to Visa, Ms. Loewe served as the CFO for Kimberly-Clark International and prior to that she was the Chief Strategy Officer and Global Treasurer for Kimberly-Clark Corporation, a multinational personal care corporation. She has also served as Vice President and CFO of Frito Lay North America. Additionally, Ms. Loewe held numerous positions during her 20-year tenure at GE, inside and outside the U.S., including Vice President - Strategic Transactions & Cash, as well as CFO for varying business units, such as Plastics Asia, Healthcare, and Consumer & Industrial.

 

 

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Steven Rosenberg
Director Since: 2008   Nominee of: Board   Board Committees: Governance Committee (Chair)   Age: 62   Other Public Company Boards: 1		Skills and Qualifications   •  Risk management, board governance and general management expertise •  Accounting and financial management expertise •  Management experience   Other Current Board Experience   •  Texas Capital Bancshares, Inc.   Previous Board Experience   •  Not Applicable		Professional Highlights   Mr. Rosenberg is the Manager of SPR Ventures Inc., a private investment firm he founded in 1997. He was the President of SPR Packaging LLC, a manufacturer of flexible packaging, from 2006 to 2018.

 

Enrique Senior
Director Since: 2004   Nominee of: Board   Board Committees: Strategic Long-Range Planning Committee   Age: 77   Other Public Company Boards: 2		Skills and Qualifications   •  Extensive knowledge of film, media and entertainment, and beverage industries •  Strong strategic planning and management expertise •  Executive experience   Other Current Board Experience   •  Group Televisa S.A.B.; Coca-Cola FEMSA, S.A.   Previous Board Experience   •  Not Applicable		Professional Highlights   Mr. Senior is a Managing Director of Allen & Company LLC, a boutique investment bank, and has been employed by the firm since 1972. He has served as a financial advisor to several corporations including Coca-Cola Company, General Electric, CapCities/ABC, Columbia Pictures and QVC Networks.

 

 

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Nina Vaca
Director Since: 2014   Nominee of: Board   Board Committees: Governance Committee; Compensation Committee (Chair);   Age: 49   Other Public Company Boards: 1		Skills and Qualifications   •  Wealth of leadership and business experience particularly with regards to information technology and e-commerce •  Governance and executive compensation knowledge •  Management and executive experience   Other Current Board Experience   •  Comerica, Inc.   Previous Board Experience   •  Kohls, Corp.		Professional Highlights   Ms. Vaca is the founder, Chairman and CEO of the Pinnacle Group of companies, including Pinnacle Technical Resources, Inc. (together, Pinnacle) and Vaca Industries, Inc. Founded in 1996, Pinnacle is an information technology services and solutions provider.

NOMINATIONS FOR ELECTION TO THE BOARD

Our Governance Committee is responsible for identifying and recommending director candidates to our Board for nomination. This is an ongoing process through which the Board has added three new directors – Mmes. Antonellis and Loewe and Mr. Zoradi - since 2015. These directors have not only added to the Board’s portfolio of skills in finance, accounting, leadership experience and industry knowledge but have also particularly supplemented the experience in the information technology and cybersecurity areas.

Although the Board retains ultimate responsibility for approving candidates for election, the Governance Committee conducts the initial screening and evaluation. The Governance Committee has not established any minimum qualifications that must be met by a director candidate or identified any set of specific qualities or skills that it deems to be mandatory. Based on the director qualifications discussed under Board Diversity and Director Qualifications, the Governance Committee’s goal is to maintain a mix of different viewpoints such that the Company benefits from the fresh perspectives brought by new directors and the institutional knowledge and industry insights of directors having longer experience on our Board. The Governance Committee’s policy regarding consideration of potential director nominees acknowledges that choosing a director is dependent upon a number of subjective and objective criteria many of which are difficult to categorize. The Governance Committee considers candidates recommended by current directors, management, third party search firms engaged by the Governance Committee, and stockholders. Under the director nomination agreement which we entered into on April 9, 2007 with certain of our then current stockholders (Director Nomination Agreement), the Mitchell Investors (as defined in the Director Nomination Agreement) have a right to designate two nominees to the Board. Mr. Sepulveda is a nominee of the Mitchell Investors. All candidates, including candidates recommended by stockholders, are evaluated on the basis of the same criteria. Stockholders who wish to recommend a candidate to the Governance Committee or submit nominees for election at the 2022 annual meeting should follow the instructions on page 74.

BOARD LEADERSHIP

Lead Independent Director

Mr. Sepulveda serves as the Board’s Lead Independent Director (Lead Director). The Lead Director has the authority to preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the

 

 

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non-management directors and has the authority to call meetings of the non-management directors. The Lead Director serves as principal liaison between the non-management directors and Company management. In consultation with the Chairman and the CEO, the Lead Director approves meeting schedules and agendas and the information provided to the Board. If requested by stockholders and as appropriate, the Lead Director will also be available, as the Board’s liaison, for consultation and direct communication.

Separation of Chairman and CEO Roles

Although the Board does not have a formal policy on separation of the roles of the CEO and Chairman, we have kept these positions separate since 2007. Separating the Chairman and CEO roles allows us to develop and implement corporate strategy that is consistent with the Board’s oversight role, while facilitating strong day-to-day executive leadership. Mr. Mitchell provides leadership to the Board by chairing meetings, organizing directors and facilitating Board deliberations. His in-depth knowledge of the motion picture industry for more than five decades and his long-standing relationships within the industry provide the Board an invaluable resource and leadership particularly in the area of strategic initiatives, including evaluating new diversification and growth opportunities.

The Board believes that its leadership structure is appropriate for Cinemark. Through the role of the Lead Director, the independence of the Board’s standing committees, and the regular use of executive sessions of the non-management directors, the Board is able to maintain independent oversight of risks to our business, our long-term strategies, annual operating plan, and other corporate activities. These features, together with the role and responsibilities of the Lead Director described above, ensure a full and free discussion of issues that are important to Cinemark’s stockholders. At the same time, the Board is able to take advantage of the unique blend of leadership, experience and knowledge of our industry and business that Mr. Mitchell and Mr. Zoradi separately bring to the table.

BOARD INDEPENDENCE

The majority of our Board is independent with 7 out of 10 directors being independent. We comply with the independence requirements of the New York Stock Exchange (NYSE) listing standards. The test for independence under the NYSE listing standards is whether the director

1.            is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company;

2.            has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company (other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service);

3.            (a) is a current partner or employee that is the Company’s internal or external auditor; (b) has an immediate family member who is a current partner of such a firm; (c) has an immediate family member who is a current employee of such firm and personally works on the Company’s audit; or (d) is or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time;

4.            is, or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or has served on that company’s compensation committee; or

5.            is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.

 

 

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The Board in coordination with our Governance Committee, and assistance of the Company’s general counsel, followed the NYSE bright-line tests and considered the transactions reported under the Certain Relationships and Related Party Transactions to determine the independence of the Board members. On the basis of this review, the Board affirmatively determined, in its business judgment, that (a) the majority of the Board was, and continues to be, independent, (b) each of Mmes. Antonellis, Loewe and Vaca and Messrs. Chereskin, Rosenberg, Senior and Sepulveda are independent, (c) Messrs. Mitchell and Syufy are not independent due to their transactions with the Company exceeding $120,000 annually, (d) Messrs. Mitchell and Zoradi are not independent because they are employees of the Company, (e) each of Mmes. Antonellis and Loewe and Messrs. Rosenberg and Sepulveda meet all applicable requirements for membership in the Audit Committee, (f) Ms. Loewe and Mr. Sepulveda qualify as “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC and satisfy the NYSE’s financial experience requirements, and (g) each of Ms. Vaca and Messrs. Chereskin and Sepulveda meet all applicable requirements for membership in the Compensation Committee.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Board has adopted a written policy supplementing our Code of Business Conduct and Ethics relating to the review, approval and ratification of transactions between us and “related parties” as generally defined by applicable rules under the Securities Act of 1933, as amended. The policy covers any related party transaction in which the amount involved exceeds $120,000. Our Board has determined that the Audit Committee is best suited to review and approve related party transactions, although in certain circumstances the Board may determine that a particular related party transaction be reviewed and approved by a majority of disinterested directors. In reviewing and approving a related party transaction, the Audit Committee, after satisfying itself that it has received all material information regarding the related party transaction under review, shall approve based upon the determination whether the transaction is fair and in the best interest of the Company.

Management presents any proposed related party transaction at an Audit Committee meeting for review and approval. If management becomes aware of a proposed or existing related party transaction that has not been presented or pre-approved by the Audit Committee, management shall promptly notify the Chair of the Audit Committee who shall submit such related party transaction to the full Audit Committee for approval or ratification, if the Audit Committee determines that such transaction is fair to the Company. If management, in consultation with our CEO, CFO or General Counsel determines that it is not practicable to wait until the next Audit Committee meeting, the Chair of the Audit Committee has been delegated the authority to review, consider and approve any such transaction. In such event, the Chair of the Audit Committee shall report any related party transaction approved by him or her at the next Audit Committee meeting. The Audit Committee may establish guidelines it determines as necessary and appropriate for management to follow in dealings with related parties and related party transactions. The procedures followed in considering a related party transaction are evidenced in the resolutions and minutes of the meetings of the Audit Committee or Board, as applicable.

The Company has the following related party transactions with Mr. Mitchell and Mr. Syufy.

Laredo Theatre

We manage theatres for Laredo Theatre, Ltd., (Laredo). We are the sole general partner and own 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. (Lone Star) owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Under the agreement, management fees are paid by Laredo to us at a rate of 5% of annual theatre revenues up to $50 million and 3% of annual theatre revenues in excess of $50 million. We recorded approximately $0.15 million of management fee revenue from Laredo during 2020. As the sole general partner and the majority limited partner of Laredo, we control the affairs of the limited partnership and have the rights to dissolve the partnership or sell the theatres. We also have a license agreement with Laredo permitting Laredo to use the “Cinemark” service mark, name and corresponding logos and insignias in Laredo, Texas.

 

 

			22

Copper Beech LLC

Effective September 2, 2009, Cinemark USA, Inc. (CUSA), a wholly-owned subsidiary of the Company, entered into an Aircraft Time Sharing Agreement (Aircraft Agreement), with Copper Beech Capital, LLC, a Texas limited liability company (Operator), for the use of an aircraft and flight crew on a time sharing basis. Lee Roy Mitchell, our Chairman of the Board, and his wife, Tandy Mitchell own the membership interests of the Operator. Prior to the execution of the Aircraft Agreement, the Company had an informal agreement with the Operator to use, on occasion, a private aircraft owned by the Operator. The private aircraft is used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Aircraft Agreement specifies the maximum amount that the Operator can charge the Company under the applicable regulations of the Federal Aviation Administration for the use of the aircraft and flight crew. The Company pays the Operator the direct costs and expenses related to fuel, pilots, landing fees, storage fees, insurance obtained for the specific flight, flight planning, weather contract services and expenses such as in-flight food and beverage services and passenger ground transportation incurred during a trip. For 2020, the aggregate amounts paid to Copper Beech LLC for the use of the aircraft was approximately $10,000.

FE Concepts, LLC

The Company, through its wholly-owned indirect subsidiary CNMK Texas Properties, LLC, formed a joint venture, FE Concepts, LLC (FE Concepts), with AWSR Investments, LLC (AWSR), an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts operates a family entertainment center that offers bowling, gaming, movies and other amenities. The Company and AWSR each invested approximately $20.0 million and each have a 50% voting interest in FE Concepts. The Company has a theatre services agreement with FE Concepts under which the Company receives management fees for providing film booking and equipment monitoring services for the facility. The Company recorded $0.34 million of management service fees during the year ended December 31, 2020.

Family Relationships

Walter Hebert III, brother-in-law of Mr. Mitchell, is the Executive Vice President – Purchasing of the Company. Mr. Hebert received a total compensation of $519,860 for 2020. Such amount included base salary of $244,624, fair market value of annual restricted stock grant of $114,980, cash value of retention grant of $43,122, cash value of bonus equity of $86,240, and all other compensation of $30,894.

Tandy Mitchell, wife of Mr. Mitchell, participated in the voluntary workforce reduction program and is no longer an employee of the Company. Ms. Mitchell’s compensation for 2020 was $145,875.

Century Theatres

Our subsidiary, Century Theatres, currently leases 14 theatres and one parking facility from Syufy Enterprises or affiliates of Syufy Enterprises. Raymond Syufy, one of our directors, is an officer of the general partner of Syufy Enterprises. All of the leases except one have fixed minimum annual rent. The remaining lease has rent based upon a specified percentage of gross sales as defined in the lease with no minimum annual rent. For 2020, we paid approximately $24 million in rent for these leases. Since 2019, we began providing digital equipment support to drive-in theatres owned by Syufy Enterprises. We recorded $0 of management fees related to these services during 2020.

Director Nomination Agreement

Under the Director Nomination Agreement which we entered into on April 9, 2007 with certain of our then current stockholders, the Mitchell Investors (as defined in the Director Nomination Agreement) have a right to designate two nominees to the Board and Messrs. Mitchell (Class III) and Sepulveda (Class II) are its current nominees.

 

 

			23

BOARD DIVERSITY AND DIRECTOR QUALIFICATIONS

Our Corporate Governance Guidelines contain Board membership criteria which are set as broad tenets rather than as specific weighted criteria. To carry out its responsibilities and set the appropriate tone at the top, our Board is keenly focused on its leadership structure, and the character, integrity, and qualifications of its members. Our directors have a proven record of accomplishment and an ability to exercise sound and independent judgment in a collegial manner.

Our Board does not have a formal diversity policy. It broadly construes diversity to mean diversity of backgrounds, experience, qualifications, skills, age and expertise, among other factors, which when taken together best serve our Company and our stockholders. The following presentation highlights some of the diversity metrics of our Board.

 

In selecting board members, the Board takes into account, in addition to the core attributes, the range of talents, experience and expertise that are needed and would complement those that are currently represented on the Board. The Board seeks to achieve a mix of members whose experience and backgrounds are relevant to the Company’s strategic priorities and the scope and complexity of our business.

 

		Our directors complement each other in their mix of skills by bringing to the Board expertise and experience on the entertainment industry, capital markets, financial management, real estate, cybersecurity, technology, strategic planning and corporate governance. Additionally, in selecting Board members, our Governance Committee follows applicable regulations to ensure that our Board includes members who are independent, possess financial literacy and expertise, an understanding of risk management principles, policies, and practices, and can appropriately oversee and guide management.
Core Director Attributes
High personal and professional ethics and integrity
Strong business judgment
Experience beneficial to the Company
Proven leadership and management skills
Broad training and experience at the policy-making level
Dedicated—able to devote necessary time to oversight duties and represent stockholders’ interests
Commitment to serve for a period of several years to develop knowledge about the Company

 

 

			24

The following chart summarizes the core competencies of each director.

 

Skill/Experience Matrix

Experience

Director

Financial Literacy

✓

✓

✓

✓

✓

✓

✓

✓

Financial Management/Corporate Finance

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Accounting and Financial Oversight/Enterprise Risk Management

✓

✓

✓

✓

✓

Corporate Governance

✓

✓

✓

✓

✓

CEO Experience

✓

✓

✓

✓

✓

✓

Non-CEO Executive Experience

✓

✓

✓

✓

✓

Industry Knowledge

✓

✓

✓

✓

✓

Mergers and Acquisitions

✓

✓

✓

✓

Other Public Company Board Service

✓

✓

✓

✓

✓

✓

✓

✓

Leadership

✓

✓

✓

✓

✓

✓

✓

✓

Strategic Vision and Planning

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Information Technology and Cybersecurity

✓

✓

BOARD OVERSIGHT OF RISK

Throughout 2020, governance and risk management played a critical role in our response to the COVID-19 pandemic. As we confronted the challenges to our industry, we implemented operational teams to oversee daily decision-making to ensure our actions remained consistent with our priorities and in compliance with government mandates. The Board played a pivotal oversight role in our business continuity planning and execution in the face of the pandemic and oversaw the management by our executive team of risks related to continuing business operations, industry, financial controls, liquidity, employee retention, health and safety and IT operations.

Our Board believes that risk management is an important part of establishing, updating and executing Cinemark’s business strategy. The Board, as a whole and at the committee level, has oversight responsibility relating to risks that could affect the corporate strategy, business objectives, compliance, operations and the financial condition and performance of the Company. The Board focuses its oversight on the most significant risks facing the Company and on the processes that the Board has established to identify, prioritize, assess, manage and mitigate those risks.

Annually, and if needed more frequently, the Board reviews and considers Cinemark’s long-term strategic plan and its annual financial and operating plan. The Board and its committees also receive regular reports from members of senior management on areas of material risk to the Company, including strategic, operational, financial, legal and regulatory risks. While the Board has an oversight role, management is principally tasked with direct responsibility for managing and assessing the risks and implementing processes and controls to mitigate their effects on the Company.

 

 

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The Board’s leadership structure, with a Lead Director, separate Chairman and CEO, independent Board standing committees, the active participation of committees in the oversight of risk, and open communication with management support the risk oversight function of the Board. Each committee has risk oversight responsibilities and provides regular reports to the Board. Our risk governance structure is as follows:

 

		BOARD OF DIRECTORS   Oversight of overall risks. Oversight of the Company’s risk management and risk mitigation processes.
AUDIT COMMITTEE   Oversees risks related to financial controls and reporting, internal controls, IT and cybersecurity, ethics and compliance				COMPENSATION COMMITTEE   Oversees risks related to compensation policies, practices, incentive-related risks and succession planning		GOVERNANCE COMMITTEE   Manages risks associated with governance structures, policies and processes

STRATEGIC PLANNING COMMITTEE   Oversees and advises on risks related to alternative strategic options and external developments		MANAGEMENT   Responsible for identification, assessment and mitigation of risks

MEETING ATTENDANCE

During 2020, the Board held six (6) meetings and took action by written consent on four (4) occasions. All directors attended at least seventy-five percent (75%) of all meetings held by the Board and all meetings held by committees of the Board on which such director served.

All directors are strongly encouraged to attend the Annual Meeting, but we do not have a formal attendance requirement. Eight directors attended our virtual 2020 Annual Meeting.

EXECUTIVE SESSIONS

Pursuant to our Corporate Governance Guidelines and the rules of the NYSE, our non-management directors meet periodically in executive sessions with no Company personnel present. Our Corporate Governance Guidelines require separate sessions of the non-management directors at least twice a year.

The presiding director of the executive sessions is currently our Lead Director, Mr. Sepulveda. During 2020, our non-management directors met four times and our independent directors met once in executive sessions.

INVESTOR OUTREACH

We value the input and insights of our stockholders and are committed to continued engagement with our investors. As part of our proactive stockholder engagement program to ensure management and the Board understand and consider the issues that matter the most to our stockholders, we offered meetings to our top institutional investors, representing nearly 60% of our stockholder base. We held meetings with all that accepted our request, totaling more than 20% of the total shares outstanding. Key themes discussed included the impact of COVID-19 on our industry and the Company, succession planning for the Board, executive compensation and corporate social responsibility and sustainability. Our corporate governance profile reflects the input of stockholders from our outreach efforts.

 

 

			26

STOCKHOLDER COMMUNICATIONS WITH THE BOARD

As stated in our Corporate Governance Guidelines, any Company stockholder or other interested party who wishes to communicate with the non-management directors as a group may direct such communications by writing to the:

Company Secretary

Cinemark Holdings, Inc.

3900 Dallas Parkway

Plano, TX 75093

The communication must be clearly addressed to the Board or to a specific director. If a response is desired, the individual should also provide contact information such as name, address and telephone number. All such communications will be reviewed initially by the Company Secretary. The Company Secretary will forward to the appropriate director(s) all correspondence, except for items of the following nature:

 

•

advertising;

•

promotions of a product or service;

•

patently offensive material; and

•

matters completely unrelated to the Board’s functions, Company performance, Company policies or that could not reasonably be expected to affect the Company’s public perception.

The Company Secretary will prepare a periodic summary report of all such communications for the Board. Correspondence not forwarded to the Board will be retained by the Company and will be made available to any director upon request.

OUR ENVIRONMENTAL AND SOCIAL PRACTICES

Sustainability Initiatives:

We have an ongoing commitment to promote environmental sustainability in our communities, including reducing our carbon footprint through energy efficient measures and reducing waste through co-mingled recycling programs. We have been recognized and awarded for our sustainability efforts and are currently listed on the EPA Green Power Partner National Top 100 list. Since 2019, through Virtual Power Purchase Agreements and Renewable Energy Credits earned via contracts in deregulated markets, we have been able to offset some of our annual electricity usage through renewable options. We also recycle at all eligible locations and in 2019 diverted approximately 27% of our waste from landfills. Since 2012, we have recycled 60,000 tons of waste. In select locations, we also compost certain waste material. We have incorporated LED lighting in whole or in part in most theatres and parking lots. We also have energy management systems in place for automated lighting and HVAC controls to ensure energy efficiency. We also engineer our HVAC units to minimize energy waste and to reduce power consumption. As of December 31, 2020, we have three LEED certified theatres.

Our Passion for People:

Our employees form the core of our Cinemark Values. We seek to be an equitable, diverse and inclusive company. We are committed to diverse representation across all levels of our workforce to reflect the vibrant and thriving diversity of the communities in which we live and work. As part of our ongoing commitment to a diverse and inclusive workforce, we have organized conscious inclusion training sessions for our leadership teams, theatre general managers and our employees at the Service Centre. To facilitate discussions regarding diversity and inclusion, we have arranged for external speakers to speak at our town halls. We also support employee-driven support groups (ERGs) which help foster inclusion among all teammates, build awareness, recruit and retain a diverse workforce necessary for the Company to successfully operate in a global, multicultural, and evolving business environment. We support the continuous development of professional, technical and leadership skills of our employees by offering tuition assistance, skills development courses through partnerships with leading educational institutions, and leadership development and training both generally and as part of our diversity and inclusion initiatives.

 

 

			27

The Company understands that continuous engagement with its employees is vital to driving successful, meaningful outcomes. To foster a corporate culture of transparency and collaboration, senior management conducts regular “town-hall” style meetings with employees to share, among other matters, Company performance, business conditions and market challenges, and respond to employee concerns through question-and-answer sessions. These meetings were particularly important during 2020 to keep our employees informed of the impact of the pandemic on our Company and our business, status of the industry and that of the theatre reopenings. It also promoted motivation and boosted morale. We also conduct employee satisfaction surveys that provide actionable feedback from employees to management. The survey responses are anonymous, measure employee satisfaction, and solicit honest feedback. We also conduct annual performance reviews with bi-annual check-ins for all full-time employees, during which employees and managers address goals, developmental opportunities, strengths, and weaknesses. These reviews facilitate productive conversations across the organization and an open feedback culture.

In recognition and gratitude for our moviegoing communities, we strongly encourage team members to give back to the community. For the past several years, we have held annual service days for team members. We are a proud long-term corporate partner with charities such as Variety the Children’s Charity, Will Rogers Motion Pictures Pioneers Foundation and St. Jude Children’s Research Hospital and host an annual golf tournament to raise funds for selected charities.

CORPORATE GOVERNANCE POLICIES AND CHARTERS

The following documents make up our corporate governance framework:

 

•

Corporate Governance Guidelines;

•

Amended and Restated Charter of the Audit Committee (Audit Committee Charter);

•

Charter of the Governance Committee (Governance Committee Charter); and

•

First Amendment to Amended and Restated Compensation Committee Charter (Compensation Committee Charter).

Current copies of the above policies and guidelines are available publicly on our website at https://ir.cinemark.com/ under the “Governance” tab.

CODE OF BUSINESS CONDUCT AND ETHICS

The Company has also adopted a Code of Business Conduct and Ethics, which applies to directors, executive officers and employees. The Code of Business Conduct and Ethics sets forth the Company’s policies on critical issues such as conflicts of interest, insider trading, protection of our property, business opportunities and proprietary information. We will post on our website any amendment to, or a waiver from, a provision of the Code of Business Conduct and Ethics for executive officers and directors that have been approved by our Board or any Board committee. The Code of Business Conduct and Ethics is available on our website at https://ir.cinemark.com/ under the “Governance” tab.

 

 

			28

BOARD COMMITTEES

Our Board currently has three standing committees – Audit Committee, Compensation Committee and the Governance Committee. In addition, the Board has the Strategic Long-Range Planning Committee. The Board has temporarily disbanded its New Ventures Committee given its focus on strategic planning. The current composition of each of the committees is set forth below:

 

Name		Audit		Compensation		Governance		Strategic Planning
Darcy Antonellis		Member						Member
Benjamin Chereskin				Member				Chair
Nancy Loewe		Chair				Member
Lee Roy Mitchell		-		-		-		-
Steven Rosenberg		Member				Chair
Enrique Senior								Member
Carlos Sepulveda		Member		Member				Member
Raymond Syufy								Member
Nina Vaca				Chair		Member
Mark Zoradi		-		-		-		-
Number of Committee Meetings Held During 2020		4		6		1		3
Number of Decisions by Consent During 2020		1		2		0		0

AUDIT COMMITTEE

Effective February 11, 2021, the Governance Committee recommended, and the Board approved Nancy Loewe as the Chairman of the Audit Committee. Both Mr. Sepulveda, the past Chair, and Ms. Loewe qualify as “audit committee financial experts” within the meaning of Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. See Ms. Loewe and Mr. Sepulveda’s biographies on page 18 and page 14 respectively, for further information regarding their qualifications to be an “audit committee financial expert”. Each of the Audit Committee members satisfies the standards for independence of the NYSE and the SEC as they relate to audit committees.

The Audit Committee is governed by the Audit Committee Charter which sets forth the purpose and responsibilities of this committee.

Functions:

The functions of the Audit Committee include the following:

 

•

assisting the Board in its oversight responsibilities regarding (1) the integrity of our financial statements, (2) our risk management compliance with legal and regulatory requirements, (3) our systems of internal control and (4) our accounting, auditing and financial reporting processes generally, including the qualifications, independence and performance of the independent registered public accountants;

•

approving the report required by the SEC for inclusion in our annual proxy or information statement;

•

appointing, retaining, compensating, evaluating and replacing our independent registered public accountants;

•

approving audit and non-audit services to be performed by the independent registered public accountants;

•

establishing procedures for the receipt, retention and resolution of complaints regarding accounting, internal control or auditing matters submitted confidentially and anonymously by employees through the whistleblower hotline; and

•

performing such other functions as the Board may from time to time assign to the Audit Committee.

 

 

			29

The Audit Committee meets on a quarterly basis with Company management and Deloitte and Touche, to discuss, among other items, the earnings press release related to the quarter and the year (as applicable), the Company’s financial statements for the applicable period and any changes in significant accounting policies and its impact on the Company’s financial statements. The Audit Committee also meets, on a periodic basis, with Deloitte and Touche in executive sessions without the presence of members of management.

As part of the Board’s duty of risk oversight, the Board has delegated authority of cybersecurity oversight to the Audit Committee. The Audit Committee is updated by Company management twice a year to monitor and evaluate the cybersecurity threats and the effectiveness of the Company’s controls to address those risks. The Audit Committee also oversees and monitors the enterprise level risks related to ethics and compliance with the Company’s code of business conduct. Company management provides to the Audit Committee, at every quarterly meeting, the top claims (as determined by management) reported through the ethics hotline, and summary reports for various categories of claims, for both domestic and international, with a comparison to previous years.

The Board has also delegated its authority to approve related party transactions to the Audit Committee. The Company’s written policy regarding approval of related party transactions provides that management must present to the Audit Committee all potential related party transactions including the nature of the transaction, material terms and the maximum dollar value of the transaction. The Audit Committee approves based upon the determination of whether the transaction is fair and in the best interest of the Company. See Certain Relationships and Related Party Transactions on page 22 for further details on the approval of related party transactions.

Approval of Audit and Non-Audit Services:

The Audit Committee approves all audit and permissible non-audit services above a de-minimis threshold (including the fees and terms of the services) performed for the Company by Deloitte and Touche prior to the time that those services are commenced. The Audit Committee may, when it deems appropriate, form and delegate this authority to a sub-committee consisting of one or more Audit Committee members, including the authority to grant pre-approvals of audit and permitted non-audit services. The decision of such sub-committee is presented to the full Audit Committee at its next meeting. The Audit Committee pre-approved all fees for 2020 noted in the table below.

Fees Paid to Independent Registered Public Accounting Firm:

We paid the following fees (in thousands) to Deloitte and Touche and its affiliates for professional services rendered by them during 2020 and 2019, respectively:

 

Fees		2020				2019
Audit		$	2,158.5			$	2,056.9
Audit Related		$	179.7			$	154.0
Tax(1)		$	86.8			$	60.8
Other		$	-			$	-
Total		$	2,425.0			$	2,271.7
(1) Fees primarily include transfer pricing studies and tax compliance services.

Audit Committee Report

The Audit Committee has reviewed and discussed with management the Company’s audited financial statements for 2020. We have discussed with Deloitte and Touche the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. We have received the written disclosures and the letter from Deloitte and Touche as required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and have discussed with Deloitte and Touche its independence. Based on the above review and discussions, we recommended to the Board that the audited financial statements for the Company be included in the Company’s 2020 Form 10-K for filing with the SEC.

 

 

			30

Respectfully submitted,

Nancy Loewe (Chair)

Steven Rosenberg

Darcy Antonellis

Carlos Sepulveda (Past Chair)

COMPENSATION COMMITTEE

Each member of the Compensation Committee satisfies the standards for independence of the NYSE as they relate to compensation committees and qualify as “non-employee directors” within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act. The Compensation Committee is governed by the Compensation Committee Charter, which sets forth the purpose and responsibilities of this committee.

Functions

The functions of the Compensation Committee include the following:

 

•

making recommendations to the Board on the Company’s general compensation philosophy and objectives and on all matters of policy and procedures relating to executive compensation;

•

determining and approving the CEO’s compensation level;

•

determining and approving the compensation of the non-CEO NEOs and reviewing the compensation of certain other executive officers;

•

administering (to the extent such authority is delegated to the Compensation Committee by the Board) the incentive compensation and equity-based plans and recommending to the Board any modifications of such plans;

•

validating and approving the achievement of performance levels under the Company’s incentive compensation plans;

•

reviewing, recommending, and discussing with management the CD&A section included in the Company’s annual proxy statement; and

•

developing a succession planning program for the CEO and senior management.

GOVERNANCE COMMITTEE

The Governance Committee is composed solely of directors who satisfy all criteria for independence under the rules of the NYSE. The Governance Committee is governed by the Governance Committee Charter setting forth the purpose and responsibilities of this committee.

Functions

The functions of the Governance Committee include the following:

 

•

identifying individuals qualified to become Board members and evaluate candidates for Board membership, including those recommended by stockholders in compliance with the Company’s by-laws;

•

recommending to the Board the director nominees for election or to fill any vacancies and newly created directorships on the Board;

•

identifying and recommending to the Board members qualified to fill any vacancies on a committee of the Board;

•

developing and recommending to the Board a set of corporate governance guidelines and reviewing and reassessing the adequacy of such guidelines at least annually;

•

overseeing the Board’s annual self-evaluation process and the Board’s evaluation of management;

•

periodically reviewing the criteria for the selection of new directors to serve on the Board and recommending any proposed changes to the Board for approval;

 

 

			31

•

periodically reviewing and making recommendations regarding the composition and size of the Board;

•

periodically reviewing and making recommendations regarding the composition, size, purpose, structure, operations and charter of each of the Board’s committees, including the creation of additional committees or elimination of existing committees;

•

annually recommending to the Board the chairpersons and members of each of the Board’s committees; and

•

reviewing and reassessing the adequacy of the Governance Committee Charter on an annual basis and recommend any proposed changes to the Board for approval.

DIRECTOR COMPENSATION

Our director compensation program is designed to attract and to fairly compensate highly qualified, non-employee directors to represent our stockholders on the Board and to act in the stockholders’ best interests. The Company believes that compensation for non-management directors should be competitive and should encourage increased ownership of the Company’s Common Stock through the payment of a portion of director compensation in Company equity. In accordance with the Compensation Committee Charter, the Compensation Committee sets the compensation of our Board members. Pearl Meyer, the Compensation Committee’s independent compensation consultant annually reviews and reports to the Compensation Committee as to how the Company’s director compensation practices compare with those of other similarly situated companies. The Board makes changes in its director compensation practices only upon the recommendation of the Compensation Committee, and following discussion and unanimous concurrence by the full Board.

The compensation of our non-employee directors is subject to our Third Amended and Restated Non-Employee Director Compensation Policy (Director Compensation Policy). Under the Director Compensation Policy, a non-employee director is one who is not (i) an employee of the Company or any of our subsidiaries, or (ii) an employee of any of the Company’s stockholders which has contractual rights to nominate directors. Therefore, as Company employees, Messrs. Mitchell and Zoradi do not receive any compensation for their services on the Board or any of its committees.

The compensation of the directors per the Director Compensation Policy is as follows:

 

(a)

a base director retainer of $60,000;

(b)

additional retainer of $35,000 for the non-employee director who serves as the lead independent director;

(c)

additional cash retainer for services on the committees as follows:

 

Committee		Chairperson				Member
Audit		$	20,000			$	10,000
Compensation		$	15,000			$	10,000
Governance		$	10,000			$	7,500
Strategic Long-Range Planning		$	10,000			$	5,000

Annual cash retainers are paid in four equal quarterly installments at the end of each quarter for services rendered during the quarter. All directors are reimbursed for travel related expenses incurred for each Board meeting they attend.

In addition to the annual cash retainers, the non-employee directors receive an annual grant of restricted stock valued at $115,000. The number of shares of restricted stock is determined by dividing $115,000 by the closing price of Common Stock on the grant date, rounded down to the nearest whole share. The grant date is typically on or around June 15. The annual awards vest on the first anniversary of the grant date subject to continued service to the Company through the vest date. The directors are also subject to a stock ownership guideline and are required to retain Common Stock ownership five times the value of their base retainer. Our 2017 Omnibus Incentive Plan (the “2017 Plan”) imposes a $1,000,000 limit on the compensation that can be awarded to a non-employee director in any given fiscal year, including the sum of (i) cash compensation and (ii) the grant date fair value of equity compensation under the 2017 Plan.

 

 

			32

As discussed earlier in this proxy statement, during 2020, management implemented Company-wide pay reductions for approximately five months, from April through August. During this period, the Board members opted to forego their cash retainers for the second quarter. Full payment of the cash retainers was reinstated beginning the third quarter, at the same time that the full salaries for the employees was reinstated. The following table sets forth summary information regarding the compensation of our non-employee directors for 2020. See the compensation tables beginning on page 54 for the compensation paid to Messrs. Mitchell and Zoradi.

 

Name		Fees Projected to Be Paid in 2020				Fees Actually Earned or Paid in Cash				Stock Awards(1)				All Other Compensation(2)				Total Compensation Actually Received
Darcy Antonellis		$	70,000			$	35,000			$	114,990			$	1,085			$	151,075
Benjamin Chereskin		$	80,000			$	40,000			$	114,990			$	1,085			$	156,075
Nancy Loewe		$	77,500			$	38,750			$	114,990			$	1,085			$	154,825
Steven Rosenberg		$	80,000			$	40,000			$	114,990			$	1,085			$	156,075
Enrique Senior		$	70,000			$	35,000			$	114,990			$	1,085			$	151,075
Carlos Sepulveda		$	130,000			$	65,000			$	114,990			$	1,085			$	181,075
Raymond Syufy		$	70,000			$	35,000			$	114,990			$	1,085			$	151,075
Nina Vaca		$	82,500			$	41,250			$	114,990			$	1,085			$	157,325

 

(1)

The grant date fair values were calculated based upon the closing price of Common Stock on June 15, 2020 of $15.33 per share. This calculation is in accordance with FASB ASC Topic 718.

See Note 17 to the Company’s 2020 Form 10-K, for discussion of the assumptions used in determining the grant date fair values of these share based awards, including forfeiture assumptions and the period over which the Company will recognize compensation expense for such awards.

At December 31, 2020, each of the directors owned 7,501 shares of restricted stock. See Security Ownership of Certain Beneficial Owners and Management table on page 68 for total stock ownership of each of the directors.

 

(2)

The amounts reported are dividends paid during the first quarter of 2020 on the shares of unvested restricted stock granted in 2019. The Company suspended quarterly dividends beginning the second quarter of 2020 due to the impact of the COVID-19 pandemic.

 

 

			33

ITEM TWO — RATIFICATION OF THE APPOINTMENT OF DELOITTE AND TOUCHE, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021

The Audit Committee has appointed and the Board has ratified the appointment of Deloitte and Touche as the Company’s independent registered public accounting firm for 2021. As a matter of good corporate governance, we are seeking stockholder ratification of the appointment of Deloitte and Touche. If the stockholders do not ratify the appointment of Deloitte and Touche, the Audit Committee may review its future selection of auditors. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its stockholders.

One or more representatives of Deloitte and Touche are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to answer appropriate questions. Please refer to page 30 for the fees paid to Deloitte and Touche in 2020 and 2019.

Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment of Deloitte and Touche as the independent registered public accounting firm for 2021.

 

OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE AND TOUCHE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021

ITEM THREE — NON-BINDING, ANNUAL ADVISORY VOTE ON OUR EXECUTIVE COMPENSATION PROGRAM

As required by Section 14A of the Exchange Act, the Company is providing stockholders with an opportunity to cast an advisory vote on the compensation of our NEOs as disclosed in the CD&A, the compensation tables, narrative discussion, and related footnotes included in this proxy statement).

While the vote is advisory, and therefore non-binding on the Company, the Compensation Committee values the opinions of our stockholders and will take into account the outcome of the vote when considering future executive compensation decisions.

As discussed in more detail in the CD&A, our executive compensation program is designed to attract and retain a talented team of executives who can deliver on our commitment to build long-term stockholder value. The Compensation Committee believes our program is competitive in the marketplace and links pay to performance.

Accordingly, the Board recommends that you vote in favor of the following resolution:

“RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the CD&A, compensation tables and narrative discussion is hereby APPROVED.”

 

OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADVISORY VOTE ON OUR NAMED EXECUTIVE OFFICER COMPENSATION FOR 2020

 

 

			34

COMPENSATION DISCUSSION AND ANALYSIS

TABLE OF CONTENTS

To assist our stockholders in locating important information regarding our executive compensation program, the CD&A is organized as follows:

 

Section		Page Reference
Our NEOs		35
2020 Say-on-Pay Result		36
Executive Summary		37
Overview of 2020 Executive Compensation Set in February 2020		38
Executive Compensation Best Practices		40
Our Compensation Philosophy		40
Design of Our Executive Compensation Program		40
Executive Compensation Components		41
-     Base Salary		42
-     Cash Bonus		44
-      Long-term Incentive Compensation		49
2021 Compensation Changes		50
Executive Compensation Process: Roles		50
Executive Compensation Process: Peer Group Review		51
Compensation Risk Assessment		51
Compensation Committee Report		52

OUR NEOS

The CD&A provides a description of the material elements of our executive compensation program, as well as perspective and context for decisions made regarding the compensation of our CEO, CFO and our three other most highly compensated executive officers for the year ended December 31, 2020. These executive officers and their current positions are as follows:

 

Name		Age		Position
Lee Roy Mitchell		84		Executive Chairman of the Board
Mark Zoradi		67		Chief Executive Officer; Director
Sean Gamble		46		Chief Operating Officer; Chief Financial Officer
Michael Cavalier		54		Executive Vice President-General Counsel and Secretary
Valmir Fernandes		60		President-Cinemark International

Lee Roy Mitchell is the founder of the Company. He has served as our Chairman of the Board since March 1996 and as a director since our inception in 1987. Mr. Mitchell has been engaged in the motion picture exhibition business for over 50 years. Mr. Mitchell is the brother-in-law of Walter Hebert III, the Executive Vice President–Purchasing, of the Company. Mr. Mitchell served on the board of directors of National CineMedia, Inc. from 2007 until 2021.

Mark Zoradi has served as our director since June 2015 and our CEO since August 2015. Mr. Zoradi spent 30 years at The Walt Disney Company, including serving as the President of Walt Disney Studios Motion Picture Group. Prior to that, Mr. Zoradi served in a variety of positions of increasing responsibility with The Walt Disney Company, including as the General Manager of Buena Vista Television and President of Buena Vista International with responsibility for the international theatrical and home entertainment marketing and distribution of Disney, Touchstone and Pixar films. Mr. Zoradi also served as the President and COO of Dick Cook Studios from January 2011 until July 2014 and the COO of Dreamworks Animation SKG, Inc. from August 2014 until January 2015. Mr. Zoradi currently serves on the board of directors of National CineMedia, Inc.

 

 

			35

Sean Gamble has served as our COO and CFO since January 2018 and as our Executive Vice President and CFO since August 2014. Prior to joining Cinemark, from February 2009 until April 2014, Mr. Gamble worked for the Comcast Corporation as Executive Vice President and CFO of Universal pictures within NBCUniversal, one of the world’s leading media and entertainment companies. He joined Comcast after 15 years at the General Electric Company where he held multiple senior leadership positions, including CFO of GE Oil & Gas’ Equipment business based in Florence, Italy from May 2007 until January 2009.

Michael Cavalier has served as our Executive Vice President-General Counsel and Secretary since February 2014, our Senior Vice President-General Counsel and Secretary since January 2006 and our General Counsel since 1997. He has been with Cinemark for more than 25 years.

Valmir Fernandes has served as our President of Cinemark International, L.L.C. since March 2007 and has been with Cinemark for more than 20 years.

2020 SAY-ON-PAY RESULT

 

		We provide stockholders with the opportunity to cast an annual advisory vote on the compensation of our NEOs. At the 2020 Annual Meeting, approximately 96% of the stockholder votes cast on say-on-pay were voted in favor of the proposal. The Compensation Committee believes that this substantial majority of votes in favor affirms stockholders’ support for our approach to executive compensation.

 

 

			36

EXECUTIVE SUMMARY

 

 

 

			37

OVERVIEW OF 2020 EXECUTIVE COMPENSATION SET IN FEBRUARY 2020

 

Base Salaries				Long-term Incentive Award Values
No increase in base salary of the CEO; Increase in base salary of the other NEOs to reflect their and Cinemark’s consistent outperformance of the industry and its peers				Annual equity awards granted to the NEOs to motivate performance and ensure alignment with stockholder interests
Target Cash Bonus Incentive				Equity Award Structure
No change in target cash bonus opportunity for Messrs. Mitchell, Zoradi, Cavalier and Fernandes   Target cash bonus opportunity for Mr. Gamble increased to reflect his outstanding performance, increasing job responsibilities and to align with market and internal pay equity   No change in the cash bonus structure; Adjusted EBITDA target was set to reflect, as of February, the projected state of the industry during 2020   No ABO rating adjustment for Messrs. Mitchell and Zoradi; opportunity of +/-15% adjustment for other NEOs				Equity awards included time-based and performance-based awards; target value of equity awards determined as a percentage of base salary; target raised for CEO and CFO to better align with market, and to incentivize performance; 75% of the target value for the CEO, and 60% of the target value for the other NEOs, was allocated to at-risk, performance-based equity   Time-based restricted stock awards vest 50% every 2 years; performance-based restricted stock unit awards are certified after a two-year performance period, vesting after an additional two-year retention period   The hurdle rates for the IRR metric used to measure performance for purposes of the performance-based awards remained the same as 2019
				Time-based restricted stock awards vest 50% every 2 years; performance-based restricted stock unit awards are certified after a two-year performance period, vesting after an additional two-year retention period

A detailed discussion relating to each element of compensation and the decisions summarized above is included in Executive Compensation Components below.

 

of our CEO’s target total direct compensation was in the form of equity awards and 75% of the equity awards was Company performance-based		of our CEO’s target direct compensation was “at-risk” based on our performance against measurable objectives

 

 

			38

CEO

2020 Target Total Direct Compensation Mix

 

 

 

All Other NEOs

2020Target Total Direct Compensation Mix

 

 

 

 

 

			39

EXECUTIVE COMPENSATION BEST PRACTICES

The Compensation Committee monitors emerging best practices in executive compensation to incorporate them into our compensation program and enhance value for our stockholders. Through its commitment to strong governance, the Compensation Committee has implemented certain “best practices.” The chart below lists some of our compensation “best practices” and also provides the compensation practices we do not follow:

 

What We Do		What We Do Not Do
✓  Provide competitive, market-driven base salary		×   Reward imprudent risk-taking
✓  Utilize formula-driven, quantitative performance targets for a significant portion of total compensation		×   Provide “single trigger” provisions in our employment agreements for change in control
✓  Overlap performance periods and capped incentive opportunities		×   Provide excise tax gross ups for change in control payments
✓  Balance mix of pay components		×   Offer deferred compensation
✓  Align management and stockholder interests through stock ownership guidelines		×   Agree to golden parachutes
✓  Prohibit executives from engaging in hedging transactions or pledging Cinemark stock		×   Offer pension benefits
✓  Provide double trigger for change in control		×   Provide excessive perks

OUR COMPENSATION PHILOSOPHY

Our executive compensation program is structured to attract, motivate, reward, and retain high caliber talent who will lead the Company to increase our competitive advantage and deliver sustainable profitability. This includes building a solid foundation for long-term growth while consistently achieving near-term results. While formulating an effective pay strategy, the Compensation Committee takes a holistic view of pay and performance and ensures that there is appropriate alignment with Company performance, overall business strategy and culture. We hire high caliber individuals who can determine our strategy to execute our long-term vision while continuing to deliver our mission of making the movie-going experience memorable by engaging with our customers and providing world class facilities and services. To ensure that our key executives are incentivized appropriately to deliver our mission and vision, the Compensation Committee has designed an executive compensation program that strongly aligns with the interests of stockholders in creating sustainable long-term stockholder value by directly linking pay to Company and individual performance. Each of the measures in our performance-based plan is designed to align with, and support, our business strategy – create an extraordinary guest experience, deepen customer loyalty, and pursue growth opportunities.

DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program is designed to achieve the following key objectives:

 

•

Attract and retain top talent;

•

Pay-for-performance, and

•

Strike balance between performance and risk-taking

 

 

			40

To ensure that the compensation program serves the above objectives, the Compensation Committee takes into consideration the following:

 

•

Key drivers of sustainable performance

•

Viewing value creation over multiple overlapping timeframes

•

Considering total compensation as one package rather than viewing each component independently

•

Balancing stockholder expectations by discouraging undue risk-taking and motivating executives to drive the right behaviors

•

Industry comparables

The hallmarks of our executive compensation program are as follows:

 

Characteristics		Description
Competitive Base Salary		Base salary is market competitive to retain valued employees
Balanced Mix of Pay Components Over Short and Long Terms		Target compensation mix is weighted towards long-term equity-based incentives rather than short-term cash incentives
Balanced Approach to Performance-based Awards		Performance targets are tied to multiple financial metrics of the Company; performance periods for long-term equity incentive awards overlap and, therefore, reduce the motivation to maximize performance in any one period
Individual Performance Modifies Bonus Payout		Non-CEO NEO bonus payout can be modified up to +/-15% based on performance of individual goals set against Company strategic objectives for the year; CEO evaluated against Company performance and execution of strategic goals for the Company
Stock Ownership Guidelines		CEO required to own, directly or indirectly, Company equity five times base salary; other executive officers to own two times their base salary
Hedge or Pledge of Common Stock Prohibited; No Margin Account Allowed		Directors and executives (including NEOs) who are subject to the Supplemental Insider Trading Policy, are prohibited to trade in puts, calls or other derivative securities with respect to Company securities and short sales of Company securities. They may not hold Company securities in a margin account, and may not, without prior approval, pledge Company securities as collateral for any other loan

EXECUTIVE COMPENSATION COMPONENTS

The design of our executive compensation program is consistent with the compensation structure used in our industry:

 

•

base salary

•

cash bonus

•

long-term equity incentive awards

•

standard benefits

•

limited perks

 

 

			41

The Compensation Committee designs the executive compensation program to align pay with performance with the substantial majority of target compensation comprised of variable performance-based incentive awards. The principal components of our executive compensation program and the measurement metrics determining their amount, are provided below.

 

See discussion on each of the components for additional details and the section on 2020 Target Total Direct Compensation Mix for the CEO and other NEOs on page 39 for the distribution of target compensation between fixed and variable components as set in February 2020.

Base Salary

Base salary provides competitive annual compensation to retain high-performing, valued employees. In determining base salary, the Compensation Committee takes into consideration the scope and nature of job responsibilities of the NEO, market competitiveness relative to executives in similar positions at comparator group companies, merit increase recommendations of the CEO based on performance reviews (except in the case of his own compensation), and other judgmental factors deemed relevant by the Compensation Committee. The Compensation Committee has not adopted any formula with specific weightings assigned to any of the factors above.

In February 2020, as part of the annual compensation review process, the Compensation Committee increased the base salaries of each of Messrs. Mitchell, Gamble, Cavalier and Fernandes. The increases were based on factors such as market comparables, role of the executive in driving the Company’s growth, and retention. The Compensation Committee did not increase Mr. Zoradi’s base salary. It determined that the stockholder interests would be better served if Mr. Zoradi’s compensation is calibrated in favor of performance-centric long-term incentive awards versus an increase of base salary.

 

 

			42

Impact of COVID-19 on 2020 Base Salary:

As part of the Company’s strategy to aggressively preserve cash during the pandemic, management implemented Company-wide base salary reductions from April through August, with the NEOs volunteering for a deeper pay cut than was mandatory.

The percentages to which base salaries were decreased for the NEOs and the timeline to reinstatemtent is as follows, with a comparison to the reduced percentages that were applicable to all other domestic corporate employees:

 

Month		Mr. Mitchell		Mr. Zoradi		All Other NEOs		Other Corporate Employees
April		50%		50%		50%		65%
May-June		0%		0%		20%		50%
July-August		0%		50%		80%		80%
September		100% Salary Reinstated

The 2020 base salaries that were set in February including the variances from 2019, and the actual base salaries received by the NEOs during 2020 with the percentage loss due to the pay reductions were as follows:

 

Name		2020 Base Salary Approved				Change from 2019		Actual Base Salary Received Due to COVID-19				Percentage Loss of Base Salary Due to Base Salary Reductions
Lee Roy Mitchell		$	1,020,001			Up 2.0%		$	589,394			42.2%
Mark Zoradi		$	1,100,000			No change		$	740,632			32.7%
Sean Gamble		$	660,000			Up 5.6%		$	521,435			21.0%
Michael Cavalier		$	555,012			Up 2.8%		$	440,923			20.0%
Valmir Fernandes		$	555,012			Up 2.8%		$	441,633			20.4%

By August, the impact of the mandatory salary reductions over approximately five months resulted in significant loss in compensation which loss was further compounded by potential loss of cash bonus for the year for bonus-eligible employees, reduction in the value of our Common Stock due to depressed stock price and loss of dividend income. To address continuing concerns regarding the prolonged impact of COVID-19 on the industry and the Company, management increased its focus on talent retention and the Compensation Committee deemed it prudent to use the Retention Equity Grant as an effective retention tool without impacting the Company’s cash reserves. All corporate employees, including the NEOs, and theatre general managers received Retention Equity Grants in August and vest 100% in August 2022. The values of the Retention Equity Grants were calculated using base pay multipliers corresponding to the pay grades of the employees. Mr. Mitchell did not receive any Retention Equity Grant.

See Grants of Plan-Based Awards in 2020 table for the number of time-based restricted stock granted to each NEO under the Retention Equity Grant.

 

 

			43

Cash Bonus

Our cash bonus structure is designed to motivate and reward bonus eligible employees for the successful completion of our annual performance goals. Company performance is measured against pre-established performance metrics set for the year by the Compensation Committee. The cash bonus goals are established in writing by the Compensation Committee, with the expectation that attainment of these goals would require significant effort considering the business environment.

The participants in our cash bonus program are rewarded for achieving short-term financial and operational goals of the Company based on individual targets expressed as percentages of base salaries. For the NEOs, the target cash bonus opportunities are set by the Compensation Committee by taking into consideration a variety of factors including peer group data, CEO’s recommendation (except for his own) and the individual’s current and anticipated contributions to the strategic goals of the Company. Each participant to our cash bonus plan is entitled to receive a ratable portion of his/her target cash bonus based upon the Company’s level of achievement, within the range of threshold and maximum percentages, of the target performance metric set by the Compensation Committee. The actual amount of cash bonuses paid, if any, may result in a cash bonus that is greater or less than the stated individual target (and could be zero) depending on whether, and to what extent, the applicable Company performance metric and other conditions are satisfied.

What is the Company’s annual performance metric?

The Compensation Committee sets the Company’s cash bonus target for the year in terms of Adjusted EBITDA, regarded as a key performance and valuation metric in our industry. The Adjusted EBITDA target is set for domestic, international and worldwide, in the annual operating budget approved by the Board and may be adjusted, upward or downward, at the end of the year, to eliminate any variance between the actual North American industry box office for the fiscal year and the industry forecast used to set the Adjusted EBITDA target for the year.

To determine annual cash bonus payouts if any, the Compensation Committee adjusts the Adjusted EBITDA for certain agreed upon add-backs and adjustments such as cash bonus accruals, certain severance payments, if any, unusual expenses such as those related to accounting changes, a +/- 5% collar for foreign exchange fluctuation, and other adjustments the Compensation Committee deems appropriate including, but not limited to, factors such as extraordinary, unusual or non-recurring events that were not included in the operating budget for the year (Bonus Adjusted EBITDA).

The Bonus Adjusted EBITDA is compared to the target Adjusted EBITDA set at the beginning of the year (and as adjusted at the end of the year) to determine the cash bonus payout percentage, if any.

 

 

			44

The cash bonus payout for the NEOs, except for Mr. Fernandes, is based on the worldwide Adjusted EBITDA while that of all other domestic bonus eligible employees is based 100% on domestic EBITDA. Mr. Fernandes’s cash bonus payout is based 50% on worldwide and 50% on international Adjusted EBITDA. The worldwide Adjusted EBITDA targets for 2020 were as follows:

 

*The maximum goal for NEOs is 110% of target performance. The Adjusted EBITDA target for international was $104 million.

How is cash bonus adjusted for individual performance?

Individual cash bonus payouts, except for Messrs. Mitchell and Zoradi, may be adjusted to a maximum of +/-15% based on the individual’s Annual Business Objective (ABO) rating. The ABO rating indicates the achievement level for the goals the individual sets at the beginning of the year. These individual goals are defined through personal business objectives and are set to achieve the Company’s strategic objectives for the year.

As part of the year-end performance review process, the individual’s manager evaluates the individual’s performance against his/her ABO goals and assigns a composite score. The ratings range from ‘Significantly Below Expectations’ to ‘Exceeds Expectations’. Based on the composite rating, a discretion-based modifier of a maximum of +/-15% is applied to adjust the individual’s bonus payout calculation. We do not have a minimum level of guaranteed bonus, and maximum bonus payout (Adjusted EBITDA based + ABO modifier) cannot exceed 165% of the individual’s target bonus opportunity.

How is cash bonus adjusted for the CEO?

There is no ABO adjustment for the CEO’s cash bonus. The Compensation Committee evaluates the CEO’s performance against the Company’s goals and objectives, and the overall strategic plan, set for the year by the Board.

The annual cash bonus process is as follows:

 

 

 

			45

The Compensation Committee may, in its discretion, at any time, establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of the cash bonus (including, but not limited to, the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem appropriate in carrying out the purposes of the cash bonus program. The Compensation Committee may also take into account such other factors as it deems appropriate in administering any aspect of the bonus program, including reducing the amount of the bonus at any time prior to payout based on such criteria as it shall determine, including, but not limited to, individual merit and the attainment of specified levels of one or any combination of the performance factors. However, the Compensation Committee cannot adjust upwards the cash bonus payable to a NEO or waive the achievement of a performance target requirement for a NEO except in the case of the death or disability of the executive or a change in control of the Company.

Impact of COVID-19 on 2020 Cash Bonus:

The Company’s performance metrics set by the Compensation Committee in February 2020 were negated by the COVID-19 pandemic. Since the measurable Adjusted EBITDA metric for cash bonus payout for the year was not satisfied, the Compensation Committee did not approve any cash bonus payouts for 2020.

The cash bonus weightings, individual targets (as a percentage of base salary) for 2019 and 2020, expected target cash bonus for the year as set in February 2020, and the actual cash bonus earned for 2020, by for each of the NEOs were as follows:

 

Name		Target Cash Bonus (Percentage of Base Salary)								Expected Target Cash Bonus for 2020				Actual Cash Bonus Received
		2020				2019
Lee Roy Mitchell			100	%			100	%		$	1,020,001			$	0
Mark Zoradi			125	%			125	%		$	1,375,000			$	0
Sean Gamble			100	%			90	%		$	660,000			$	0
Michael Cavalier			90	%			90	%		$	499,511			$	0
Valmir Fernandes			90	%			90	%		$	499,511			$	0

While the measurable performance metric in terms of Adjusted EBITDA was unreachable due to extenuating business conditions beyond management’s control, the Compensation Committee acknowledged the incredible commitment, dedication and innovation demonstrated by the employees under the strategic leadership of the executive management team which enabled Cinemark to manage through the pandemic and strengthen its leadership position in the industry. As such, in line with our compensation philosophy of pay-for-performance and for purposes of motivation and retention for continued value creation, in December 2020 the Compensation Committee made discretion-based awards of Common Stock under the Bonus Equity Grant, to all bonus-eligible employees. The Bonus Equity Grant appropriately served the long-term interests of the stockholders while preserving the Company’s liquidity in a time of unpredictable business conditions. Under the Bonus Equity Grant program, all bonus-eligible employees received immediately vested shares of Common Stock, the value of which was based, depending on the employee’s performance, within a range of 75% to 90% of the individual’s target cash bonus. The shares awarded under the Bonus Equity Grant vested immediately for all grantees, except for the NEOs for whom the award was time-based restricted stock grants with a vest period of one year from the date of grant. The NEOs (including Mr. Mitchell) received a stock grant with a fair market value of 75% of each of their respective target cash bonus opportunity.

See Grants of Plan-Based Awards in 2020 table for the number of time-based restricted stock granted to each NEO under the Bonus Equity Grant.

Long-term Equity Incentive Compensation

Cinemark’s long-term equity incentive compensation program is intended to help (1) attract, motivate, and retain key talent, and (2) align our executives’ interests with stockholders’ interests to maximize long-term stockholder value.

The long-term equity incentive compensation is awarded as time-based and performance-based equity. Time-based equity enables us to attract and retain highly qualified executive officers as leaders to ensure our continued success. Performance-based equity encourages Company’s long-term growth and aligns the executive’s interests with the

 

 

			46

interests of our stockholders. The combination of the two, with an emphasis placed on performance-based equity, ensures both balance and alignment within our long-term incentive program. Although no longer necessary under Section 162(m) of the Internal Revenue Code, grants to all eligible employees, including the NEOs, are made in the first quarter of the year. The NEOs receive both time-based and performance-based equity.

How is the long-term incentive program structured?

The target value of long-term equity awards granted to a NEO is based on a percentage of the executive’s base salary. The target value and the split between time-based and performance-based grants is determined by the Compensation Committee by taking into account factors such as the individual’s leadership, NEO’s contribution to Company operations, projected state of the economy over the performance period, overall business environment and relative positioning versus peer group comparable.

The restricted stock grants typically vest 50% on each of the second and fourth anniversaries of the grant date, subject to continuous employment through the vest dates.

Recipients of restricted stock awards are permitted to:

 

(i)

receive dividends on the restricted stock (prior to vest) to the extent dividends are paid by the Company on shares of its Common Stock, and

 

(ii)

to vote such Common Stock during the restriction period.

Beginning May 2020, the Company has suspended its dividend payments to preserve its cash reserve as it navigates through the pandemic. The quarterly dividend rate as of the first quarter of 2020 was $0.36 per share.

Performance awards are granted in the form of restricted stock units. The goals for the performance awards are based on one or more pre-established objective criteria that specify the number of shares of Common Stock that will be issued upon attaining the performance goals. After certification of the attainment of the performance goal, the underlying Common Stock is subject to additional time-based vesting conditions. Any dividends that are attributable to the underlying Common Stock will be accrued and paid to the recipient, to the extent the performance award vests, at the end of the four years when the Common Stock is issued. The performance awards have a four-year vest schedule – performance period of two years followed by an additional two-year service requirement.

The measurement metric for the performance awards is an implied equity value concept that measures the IRR over a two-year performance period beginning on January 1 of the grant year and ending on December 31 of the following year. The implied equity value is based on a valuation model utilizing a multiple of Adjusted EBITDA (subject to certain specified adjustments) and other factors that produce a fundamental valuation of Cinemark equity. IRR represents the growth in this implied equity value during the performance period. The structure of the performance award program is similar to that of the bonus program. Each performance target underlying the performance awards has a threshold, target and maximum level and vest on a pro rata basis according to the IRR achieved during the performance period. The target IRR goal for the performance-based award is set by the Compensation Committee based on projected value creation with a substantial degree of difficulty of attaining the performance level. An adjustment of +/-7.5% for fluctuations in foreign currency translations is applied to certain inputs used in the calculation of the implied equity value to determine the IRR for the performance period. The targets for the grant year are established by the Compensation Committee in the first quarter of the year. The number of shares of Common Stock an executive may receive upon the attainment of a performance goal cannot be determined at the date of grant because the payment of such compensation is contingent upon attainment of the IRR. If, at the end of the performance period, the Compensation Committee certifies that the performance target has been met, the shares of Common Stock underlying the restricted stock units are subject to an additional time-based vesting restriction contingent upon the employee’s continued service until the vest date. Straight-line interpolation is used to determine payout between threshold, target, and maximum goals.

 

 

			47

The hurdle rates for the 2020 performance-based awards were unchanged from 2019 and were as follows:

 

Grant Year		Goals
		Threshold		Target		Maximum
2020		6.0%		8.0%		14.0%
Percentage of Individual Target Payout		25%		100%		175%

The Compensation Committee annually reviews each NEO’s compensation to determine the percentage of base salary to be awarded as target long-term equity awards and the appropriate mix of time-based and performance-based awards. This calibration is primarily for the purpose of driving performance and delivering results over the long-term. The target percentages are set to align with the market based on the executive’s role in setting the Company’s strategic plan and driving its execution, and incentivizing performance for an appropriate alignment with stockholder objective of long-term returns. Upon such review, in February 2020, the Compensation Committee made the following changes to Mr. Zoradi and Mr. Gamble’s equity compensation based on market comparables and their roles as the principal architects and drivers of the Company’s strategic growth:

 

a.

Raised the target percentage of Mr. Zoradi’s long-term incentive compensation from 275% to 400% of his 2020 base salary; and

 

b.

Raised the target percentage of Mr. Gamble’s long-term incentive compensation from 175% to 180% of his 2020 base salary;

The split between time-based and performance-based long-term incentive awards remained at 25%-75% for Mr. Zoradi and 40%-60% for Messrs. Gamble, Cavalier and Fernandes. Mr. Mitchell does not receive any annual equity incentive grant due to his substantial ownership in the Company.

The target percentages of the long-term incentive awards for 2020 as compared to 2019 were as follows for each of the NEOs:

 

Name		Target Percentage in 2020		Target Percentage in 2019
Lee Roy Mitchell		N/A		N/A
Mark Zoradi		400%		275%
Sean Gamble		180%		175%
Michael Cavalier		150%		150%
Valmir Fernandes		125%		125%

See Grants of Plan-Based Awards in 2020 table for the number of time-based restricted stock and the performance-based restricted stock units granted to each NEO in February 2020.

The restricted stock units will were subject to a two-year performance period, from January 1, 2020 until December 31, 2021 with an additional two-year retention period and vesting, to the extent certified, in February 2024. See the following discussion on Impact of COVID-19 on Long-term Incentive Compensation regarding certification of the performance-based awards granted in 2020.

 

 

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Impact of COVID-19 on Long-term Incentive Compensation:

During year-end review of compensation, the Compensation Committee evaluated the option of accelerating the vest of long-term incentive awards that were due to vest in February 2021. These accelerated vests were deemed to be in the best interest of the Company as they provided employees with an additional source of compensation at year-end which helped motivate and reward employees for their performance while conserving cash and allowing the Company to leverage certain compensation related relief provided by COVID related legislation. Therefore, the Compensation Committee approved the accelerated vests of the following grants:

 

A.

All time-based restricted shares that were due to vest in February 2021, were accelerated to vest in December 2020. This decision impacted all employees, included those who received the E20 Grants. For the NEOs, these restricted shares were (i) the remaining 50% of the restricted shares granted in February 2017 and (ii) 50% of the of the restricted shares granted in February 2019.

 

B.

Performance-based restricted stock units granted in 2017 (2017 RSU) to all NEOs and certain other key employees, were also accelerated to vest in December 2020. The 2017 RSUs were certified by the Compensation Committee in February 2019 to vest at 96% of target and were due to vest in February 2021 after the satisfaction of the additional two-year retention period.

See Stock Option Exercises and Stock Vested in 2020 table on page 60 for number of shares of Common Stock realized upon vesting of all long-term incentive compensation during 2020. See Beneficial Ownership Table on page 68 for the total ownership numbers as of December 31, 2020.

The COVID-19 pandemic has had significant impact on our performance metrics both for the short-term annual cash bonus as well as for the long-term performance-based incentive awards. One of the hallmarks of our equity compensation program is the overlapping of performance periods, which in other years ensures continuous performance over the long-term, as opposed to performance over discrete periods of time. However, the pandemic during 2020 had unforeseen negative consequences for the long-term performance awards. Not only was performance for the year impacted, but due to the overlap, the performance periods of two grant cycles are affected – that of the 2019 and the 2020 performance-based awards. The performance periods for the 2019 and 2020 awards were January 1, 2019 through December 31, 2020 and January 1, 2020 through December 31, 2021, respectively.

In February 2021, the Compensation Committee evaluated the impact of the pandemic on the IRR metric used to certify the number of shares issuable under the 2019 and 2020 performance-based awards. Upon evaluation, the Compensation Committee determined that the pandemic’s effect on the Company and the movie exhibition industry, and the projected continuation of the macro-economic conditions through 2021 and beyond, had a significant impact on the ability to effectively calculate the IRR metric for both the 2019 and the 2020 awards in a meaningful way. The Compensation Committee ultimately concluded that due to the continued uncertainty regarding the timing of the industry recovery (timeline for theater openings, public sentiment regarding in-theater viewing and the constant shifting of studio release dates due to the status of the pandemic and ensuing governmental restrictions and theatre closures) and how enormously different the business environment was for 2020 and is for 2021 versus each performance period’s baseline years (2018 and 2019), any adjustment to the metric would have resulted in an irrational vesting outcome. Such an adverse consequence is due to completely unforeseen, external circumstances beyond the control of management and would not be in parity with the exceptional performance of the executive management team during the pandemic given that the 2019 and the 2020 grant, under all scenarios, will result in a zero payout. Therefore, the Compensation Committee made the discretion based decision to certify the performance-based awards granted in February 2019 and February 2020 at the target level based on Company performance and leadership under very challenging business conditions. As a balance to Committee’s decision to payout at target, per the standard feature, these performance-based restricted stock units will fully vest in February 2023 and February 2024, respectively after satisfying the applicable service period requirements.

 

 

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2021 COMPENSATION CHANGES

In February 2021, the Compensation Committee set the compensation of the NEOs for 2021. It addressed the expected continuing impact of COVID-19 on the Company’s performance by making certain adjustments to the 2021 compensation program while aligning with our compensation objectives. The highlights of the 2021 NEO compensation are as follows:

 

•

Messrs. Mitchell and Zoradi have opted to forego an annual increase of base salary

•

Annual merit increase for all employees, including Messrs. Gamble, Cavalier and Fernandes, are in the form of time-based restricted stock grants with a one-year vest

•

The grants of performance-based shares have been suspended for 2021 and replaced with time-based restricted stock grants that vest 100% upon the fourth anniversary of the grant date. For all NEOs, 50% of their respective 2021 long-term equity incentive grant will consist of these 4-year cliff-vested shares. The remaining portion of the 2021 annual grant will be in the form of time-based restricted stock that vests 50% on the second and fourth anniversary of the grant date, respectively.

The Compensation Committee believes the above structure will ensure the retention of our executive team through these uncertain times and will revisit the long-term incentive program structure in 2022.

EXECUTIVE COMPENSATION PROCESS: ROLES

Role of the Compensation Committee and the Compensation Consultant: The Compensation Committee oversees and provides strategic direction to management regarding all aspects of our pay program for senior executives. It sets the compensation of the CEO, the non-CEO NEOs as well as the Board members. If deemed appropriate, the Compensation Committee advises the Board of its determination of the compensation of the CEO and certain other executive officers, prior to its implementation. But, while the Compensation Committee may consider input provided by the Board, the compensation decisions and determinations are made solely by the Compensation Committee.

To assist in carrying out its responsibilities, the Compensation Committee is authorized to retain the services of independent advisors. For purposes of advice and consultation with respect to the compensation of our executive officers and the Board during fiscal 2020, the Committee reengaged Pearl Meyer a national compensation consulting firm. Prior to engaging Pearl Meyer, the Committee considered and assessed Pearl Meyer’s independence. To ensure Pearl Meyer’s continued independence and to avoid any actual or apparent conflict of interest, the Compensation Committee does not permit Pearl Meyer to be engaged to perform any services for Cinemark beyond those services provided to the Compensation Committee which also has the sole authority to retain or terminate Pearl Meyer as its executive compensation consultant and to approve its fees and other terms of engagement. The Compensation Committee annually considers the independence of its compensation consultant and determines whether any related conflicts of interest require disclosure.

In establishing executive compensation, the Compensation Committee relies upon Pearl Meyer to:

 

•

assist in the selection of a group of peer companies;

•

provide information on compensation paid by such peer companies to their executive officers;

•

analyze compensation survey data to supplement publicly available information on compensation paid by peer companies;

•

advise on alternative structures or forms of compensation and allocation considerations; and

•

advise on appropriate levels of compensation for the NEOs and the other members of the executive team

During 2020, the Compensation Committee consulted with Pearl Meyer on all COVID-related compensation decisions made by the Compensation Committee. Throughout the year, Pearl Meyer apprised the Compensation Committee of trends in executive compensation due to the impact of the pandemic and actions or discretions being considered or adopted by the Company’s peers and the broader market. The Compensation Committee consulted with Pearl Meyer to develop the most appropriate compensation framework that would align with the Company’s compensation philosophy in the context of the pandemic and the Company’s resilient performance under an exceptionally difficult business environment.

 

 

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Role of Management and the CEO in Setting Executive Compensation: Each year, our CEO evaluates the performance of certain members of upper management including Messrs. Gamble, Cavalier and Fernandes (direct reports). Our CEO makes a recommendation for the compensation of his direct reports based upon his evaluation and their ABO rating, their roles and responsibilities, and market benchmarking data for similarly placed executives, as provided by Pearl Meyer. The Compensation Committee considers our CEO’s recommendation relative to our strategic plan, operating goals, and compensation philosophy. In consultation with Pearl Meyer, the Compensation Committee also considers general market conditions and industry trends to set non-CEO NEO executive compensation.

Process for Setting CEO Compensation: The Compensation Committee evaluates our CEO’s performance throughout the year considering our strategic plan, targets, operating goals, and key performance indicators. The Compensation Committee also considers general market conditions, specific industry trends and peer review data for each element of compensation, as provided by Pearl Meyer. The Compensation Committee also reviews the CEO’s employment agreement and assesses his target compensation. The CEO does not participate in discussions or decisions regarding his own compensation.

EXECUTIVE COMPENSATION PROCESS: PEER GROUP REVIEW

To help establish competitive ranges of base salary, incentive compensation opportunities, and target compensation, the Compensation Committee relies on competitive market data from surveys and reports prepared by Pearl Meyer. We consider market survey data from a group of size-appropriate comparators operating in the entertainment and retail industries (peer group) that are also traded publicly and with which we compete for executive talent.

Based on the criteria described above, the Compensation Committee used the peer group set forth below for purposes of setting executive compensation in February 2020 was as follows:

 

AMC Entertainment Holdings, Inc.		Lions Gate Entertainment Corp.		Discovery, Inc.
AMC Networks Inc.		Live Nation Entertainment, Inc.		IMAX Corporation
Brinker International, Inc.		The Madison Square Garden Company		Six Flags Entertainment Corporation
Cineplex, Inc.		Cineworld
Dave & Buster’s Entertainment, Inc.		E.W. Scripps Company

A blended market data using the most recent proxy data and size-appropriate survey information provided by Pearl Meyer was used by the Compensation Committee to determine 2019 compensation for each of the NEOs. The market data provides percentile compensation levels for various executive positions with comparable job responsibilities as our NEOs. The Compensation Committee also analyzes market data regarding compensation mix among base salary and annual and long-term incentives awards. The Committee does not endeavor to set executive compensation at or near any percentile, and it considers target compensation to be competitive if it is generally within a reasonable range of the market median. The Compensation Committee also considers other factors including level of responsibility, the individual’s performance, expectations regarding the individual’s future potential contributions, ability to drive the Company’s strategy, retention strategies, budget considerations, and the Company’s performance.

COMPENSATION RISK ASSESSMENT

The Compensation Committee monitors our compensation policies and practices to determine whether our risk management objectives are being met and to adjust those policies and practices to address any incentives that have the potential to encourage risks that are reasonably likely to have a material adverse effect on us and any changes in our risk profile. As part of these considerations and consistent with our compensation philosophy, our compensation

 

 

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program, particularly our annual and long-term incentive compensation plans, are designed to provide incentives for the executives to achieve performance objectives without encouraging excessive risk-taking. These considerations were particularly demonstrated during 2020 when the Compensation Committee made discretion-based equity grants to address and manage the risks of employee attrition and above-bar performance.

Below are the highlights of the Company’s compensation program which mitigate risks associated with compensation:

 

•

Appropriate mix of “short- vs. long-term” pay and “fixed vs. variable” pay” to reward overall performance;

•

Company performance measured against objective financial metrics;

•

Portion of individual cash bonus payout tied to the individual’s ABO ratings which measures the performance of the individual’s goals set against the Company’s strategic objectives for the year;

•

Employees’ commitment to our culture of accountability reinforced through a comprehensive performance management and compensation system;

•

Capped payout levels for incentive compensation;

•

Stock ownership requirements for directors, NEOs and executive vice-presidents – directors required to retain Common Stock ownership five times the value of their base retainer, the CEO five times his/her base salary and other executive officers two times their respective base salaries;

•

Vest of a significant portion of long-term equity incentive awards linked to performance over a period of time (with overlapping performance periods);

•

Validation of pay-for-performance on an annual basis by stockholders; and

•

Prohibiting, per our Supplemental Insider Trading Policy, covered employees from engaging in certain forms of hedging transactions, with respect to Company securities, which would block the employee from being exposed to the full risks of stock ownership as the Company’s other stockholders. Additionally, the covered employees may not hold Company securities in a margin account, and may not, without prior approval, pledge Company securities as collateral for any other loan except in the case of a non-margin loan where the covered employee demonstrates that the employee has the financial ability to repay the loan without resorting to the pledged securities. The Company has not, as of date, granted any exceptions to this policy. The Supplemental Insider Trading Policy covers all our directors and executive officers and any additional persons that the Company may from time to time designate as being subject to this policy because of their position with the Company and access to material nonpublic information.

Our Compensation Committee monitors and considers the risk mitigating factors when setting executive compensation. Based on such review, the Compensation Committee has concluded that our compensation programs do not create risks that are reasonably likely to have a materially adverse effect on the Company or put the Company at-risk.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference in the Company’s 2020 Form 10-K, and the Board has approved the recommendation.

Respectfully submitted,

Nina Vaca (Chair)

Benjamin Chereskin

Carlos Sepulveda

 

 

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

Plan Category		Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (1)		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
Equity compensation plans approved by security holders		890,680		N/A		5,821,224
Equity compensation plans not approved by security holders		N/A		N/A		N/A
Total		890,680				5,821,224

 

(1)

Represents unearned shares underlying restricted stock units, assuming the achievement of maximum performance goals.

 

 

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