UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

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Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, For Use of the Commission only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Rule 14a-12

 

GARTNER, INC.

(Name of Registrant as Specified In Its Charter)

 

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April 27, 2007

 

Dear Stockholder:

 

On behalf of the Board of Directors and Management of Gartner, Inc., I invite you to attend our 2007 Annual Meeting of Stockholders. The meeting will be held on Tuesday, June 5, 2007, at 10 a.m. local time, at our corporate headquarters at 56 Top Gallant Road, Stamford, Connecticut 06902.

 

Details of the business to be conducted at the meeting are given in the attached Notice of Annual Meeting of Stockholders and the attached Proxy Statement.

 

Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares, regardless of the number of shares you hold. After reading the enclosed Proxy Statement, please vote your proxy in accordance with the instructions provided. You may vote by Internet, by telephone, by completing, dating, signing and returning your proxy card in the enclosed prepaid envelope as promptly as possible so that your shares will be voted at the Annual Meeting, or by voting in person at the Annual Meeting.

 

If you have any questions about the meeting, please contact our Investor Relations Department at (203) 316-6537.

 

We look forward to seeing you at the meeting.

 

Sincerely,

 

Chief Executive Officer

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

By Order of the Board of Directors,

 

Lewis G. Schwartz

Corporate Secretary

 

Stamford, Connecticut

April 27, 2007

 

Table of Contents

 

GARTNER, INC.
56 Top Gallant Road
Stamford, CT 06902

 

 

PROXY STATEMENT

 

 

For the Annual Meeting of Stockholders

to be held on June 5, 2007

 

Our Board of Directors is soliciting proxies to be used at our Annual Meeting of Stockholders to be held on June 5, 2007. This Proxy Statement and form of proxy are being made available to our stockholders on or about April 27, 2007.

 

The specific proposals to be considered and acted upon at the Annual Meeting are summarized in the accompanying Notice of Annual Meeting and are described in more detail in this Proxy Statement.

 

Only stockholders of record at the close of business on April 12, 2007 may vote at the Annual Meeting. As of April 12, 2007, there were 104,037,869 shares of our common stock outstanding and eligible to be voted. Treasury shares are not voted.

 

You may vote using one of the following methods:

 

 

All shares that have been voted properly by an unrevoked proxy will be voted at the Annual Meeting in accordance with your instructions. If you sign and submit your proxy card, but do not give voting instructions, the shares represented by that proxy will be voted as our Board recommends.

 

If any other matters are brought properly before the Annual Meeting, the persons named as proxies in the enclosed proxy card will have the discretion to vote on those matters for you. As of the date of this Proxy Statement, we did not know of any other matter to be raised at the Annual Meeting.

 

 

If your broker holds your shares in “street name,” you should have received voting instructions with these materials from your broker or other nominee. We urge you to instruct your broker or other nominee how to vote your shares by following those instructions. The broker is required to vote those shares in accordance with your instructions. If you do not give instructions to the broker, the broker may vote your shares with respect to the election of directors (Proposal 1) and the ratification of the appointment of the Company’s independent auditors (Proposal 3), but the broker may not vote your shares with respect to the approval of the Executive Performance Bonus Plan (Proposal 2).

 

 

You can revoke your proxy or change your vote before your proxy is voted at the Annual Meeting by:

 

 

 

Each stockholder has one vote for each share of our common stock that he or she owned on the Record Date for all matters being voted on.

 

 

A quorum is constituted by the presence, in person or by proxy, of holders of our common stock representing a majority of the number of shares of common stock entitled to vote. Abstentions and broker non-votes will be considered present to determine the presence of a quorum.

 

 

Election of Directors. The eleven nominees for director receiving the highest vote totals will be elected. Abstentions and broker non-votes will have no effect on the election of directors. (See “Proposal One: Election of Directors” on page 3).

 

Approval of Executive Performance Bonus Plan and Ratification of Selection of Independent Auditors. To pass, these proposals will require the affirmative vote of the holders of a majority of the total number of shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the effect of a negative vote with respect to these proposals and broker non-votes will have the effect of votes not cast with respect to these proposals. (See “Proposal Two: Approval of Executive Performance Bonus Plan” on page 32 and “Proposal Three: Ratification of Selection of Independent Auditors” on page 39).

 

 

You have the option to receive future shareholder communications over the Internet exclusively. If you elect this option, the Company will not mail materials to you in the future, unless you request that we do so. This will cut down on bulky paper mailings, help the environment and reduce expenses paid by Gartner to mail materials. You may make this election by visiting http://www.amstock.com. Click on Shareholder Account Access to enroll. Please enter your account number (shown on your proxy card) and tax identification number to log in. Then select Receive Company Mailings via E-mail and provide your email address.

ELECTION OF DIRECTORS

 

Our Board currently has eleven directors who serve for annual terms.

 

All of the nominees listed below (with the exception of Mr. Fradin) are incumbent directors and have agreed to serve another term, and Mr. Fradin has also agreed to serve as director. Mr. Maynard G. Webb, Jr., currently a director, is not standing for re-election. If any nominee is unable or declines unexpectedly to stand for election as a director at the Annual Meeting, proxies will be voted for a nominee designated by the present Board to fill the vacancy. Each person elected as a director will continue to be a director until the 2008 Annual Meeting or until a successor has been elected.

 

Our Board recommends that you vote “FOR” the nominees listed below:

 

 

None of our directors or executive officers is related to another director or executive officer by blood, marriage or adoption. Mr. Hall’s employment agreement provides that we will include him on the slate of nominees to be elected to our Board during the term of his agreement. See “Executive Compensation — Employment Agreements with Executive Officers” on page 22. Messrs. Bingle and Joyce serve as directors pursuant to an agreement we entered into with Silver Lake Partners, L.P. and its affiliates (“Silver Lake Partners”) in April 2000. See “Transactions with Related Persons” on page 37. There are no other arrangements between any director or nominee and any other person pursuant to which the director or nominee was selected.

 

Michael J. Bingle, 35, has been a director since October 2004. Mr. Bingle is a Managing Director of Silver Lake, a private equity firm that he joined in January 2000. From 1996 to 2000, Mr. Bingle was a principal with Apollo Management, L.P., a private investment partnership. From 1994 to 1996, Mr. Bingle was an investment banker at Goldman, Sachs & Co., an investment banking firm. Mr. Bingle was nominated to the Board pursuant to our agreement with Silver Lake Partners. See “Transactions With Related Persons.”

 

Richard J. Bressler, 49, has been a director since February 2006. Mr. Bressler is a Managing Director of Thomas H. Lee Partners, L.P., a private equity firm that he joined in January 2006. From May 2001 through 2005, Mr. Bressler was Senior Executive Vice President and Chief Financial Officer of Viacom Inc. Prior to joining Viacom, Mr. Bressler was Executive Vice President of AOL Time Warner Inc. and Chief Executive Officer of AOL Time Warner Investments. Prior to that, Mr. Bressler served in various capacities with Time Warner Inc., including as Chairman and Chief Executive of Time Warner Digital Media. He also served as Executive Vice President and Chief Financial Officer of Time Warner Inc. from March 1995 to June 1999. Before joining Time Inc. in 1988, Mr. Bressler was a partner with the accounting firm of Ernst & Young. Mr. Bressler is a director of Warner Music Group Corp. and a director of American Media Operations, Inc.

 

Russell P. Fradin, 51 , is a new nominee to our Board. Since September 2006, he has been Chairman and Chief Executive Officer of Hewitt Associates, Inc., a provider of multi-service HR business process outsourcing and related consulting services. From February 2004 until joining Hewitt, he was President and Chief Executive Officer of Bisys Group, Inc., a provider of outsourcing solutions to investment firms, insurance companies and banks. From 1996 until 2003, Mr. Fradin held various senior positions at Automatic Data Processing, Inc., most recently as president of its Global Employer Services Group. Prior thereto, he spent 18 years at McKinsey & Company, serving most recently as Director.

 

Anne Sutherland Fuchs, 60, has been a director since July 1999. On January 1, 2003, Ms. Fuchs became a consultant to private equity firms. Prior to this, Ms. Fuchs was employed by LVMH Moët Hennessy Louis Vuitton, a global luxury products conglomerate, where she served as Executive Vice President of LVMH from March to December 2002 and as the global chief executive at Phillips de Pury & Luxembourg, LVMH’s auction house subsidiary, from July 2001 to February 2002. From 1994 to 2001, Ms. Fuchs worked for Hearst Magazines, where she was most recently the Senior Vice President and Group Publishing Director. Prior to joining Hearst, Ms. Fuchs held executive and publisher positions with a number of companies. Ms. Fuchs is a director of Pitney Bowes Inc. and Chair of the Commission on Women’s Issues for New York City.

 

William O. Grabe, 69, has been a director since April 1993. Mr. Grabe is a Managing Director of General Atlantic LLC, an investment firm, where he has worked since 1992. Prior to joining General Atlantic, Mr. Grabe retired from IBM Corporation as an IBM Vice President and Corporate Officer. Mr. Grabe is a director of Compuware Corporation, Digital China Holdings Limited, Lenovo Group Limited, LHS AG and Patni Computer Systems Ltd.

 

Eugene A. Hall, 50, has been our Chief Executive Officer and a director since August 2004. Prior to joining Gartner, Mr. Hall was a senior executive at Automatic Data Processing, Inc., a Fortune 500 global technology and service company, serving most recently as President, Employers Services Major Accounts Division, a provider of human resources and payroll services. Prior to joining ADP in 1998, Mr. Hall spent 16 years at McKinsey & Company, most recently as Director.

 

Max D. Hopper, 72, has been a director since January 1994. In 1995, he founded Max D. Hopper Associates, Inc., a consulting firm specializing in creating benefits from the strategic use of advanced information systems. He is the retired chairman of the SABRE Technology Group and served as Senior Vice President for American Airlines, both units of AMR Corporation. Mr. Hopper is a director of Perficient, Inc.

 

John R. Joyce, 53, has been a director since July 2005. Mr. Joyce is a Managing Director of Silver Lake, a private equity firm that he joined in July 2005. Prior to joining Silver Lake Partners, Mr. Joyce spent 30 years with IBM, serving most recently as Senior Vice President and Group Executive of the IBM Global Services (IGS) division, the world’s largest information technology services and consulting provider. From 1999 to 2004, Mr. Joyce was Chief Financial Officer of IBM. Prior to that, Mr. Joyce served in a variety of roles, including President, IBM Asia Pacific and vice president and controller for IBM’s global operations. Mr. Joyce is a member of the Bertelsmann AG Supervisory Board. Mr. Joyce was nominated to the Board pursuant to our agreement with Silver Lake Partners. See “Transactions With Related Persons.”

 

Stephen G. Pagliuca, 52, has been a director since July 1990. Mr. Pagliuca is a founding partner of Information Partners Capital Fund, L.P., a venture capital fund, and has served as its Managing Partner since 1989. He is also a Managing Director of Bain Capital, Inc., an investment firm with which Information Partners is associated. Prior to

1989, Mr. Pagliuca was a partner at Bain & Company, where he managed client relationships in the information services, software, credit services and health care industries. Mr. Pagliuca is a director of Burger King Holdings, Inc., ProSiebenSat.1 Media AG and Warner Chilcott Corporation. Mr. Pagliuca is also a certified public accountant.

 

James C. Smith, 66, has been a director since October 2002 and Chairman of the Board since August 2004. Until its sale in 2004, Mr. Smith was Chairman of the Board of First Health Group Corp., a national health benefits company. Prior to that, Mr. Smith was the Chief Executive Officer of First Health from January 1984 through January 2002 and President of First Health from January 1984 to January 2001. Mr. Smith is a director of Reliant Pharmaceuticals, Inc.

 

Jeffrey W. Ubben, 45, has been a director since June 2004. Mr. Ubben is a co-founder and Managing Partner of ValueAct Capital, an investment partnership. From 1995 to 2000, Mr. Ubben was a Managing Partner of BLUM Capital. Prior to that, he was a portfolio manager for Fidelity Investments from 1987 to 1995. Mr. Ubben is a director of Acxiom Corp., Catalina Marketing Corp. and Misys PLC. See “Transactions With Related Persons.”

 

Directors who are also employees, and directors who we appoint at the request of another entity because of the relationship between that entity and us (i.e., Silver Lake Partners), receive no fees for their services as directors. All other directors receive the following compensation for their services:

 

 

This table sets forth compensation (in dollars) earned or paid in cash, and the value of equity awards made, to our outside directors on account of services rendered as a director in 2006.

 

 

 

 

Our Board Principles and Practices are available at www.investor.gartner.com under the “Corporate Governance” link and are periodically reviewed and revised as necessary by our Board. They require that our Board be comprised of a majority of directors who meet the criteria for independence set forth by the New York Stock

Exchange (“NYSE”) in its corporate governance standards (Listing Manual, Section 303A.02), as well as the Securities and Exchange Commission (“SEC”) where applicable. Our committee charters likewise require that our standing Audit, Compensation and Governance/Nominating Committees be comprised only of independent directors. Additionally, the Audit Committee members must be independent under Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the Compensation Committee members must be independent under Rule 16b-3 promulgated under the 1934 Act and qualify as an outside director under regulations promulgated under 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Utilizing all of these criteria, the Board annually assesses the independence of all non-management directors and committee members by reviewing the commercial, financial, familial, employment and other relationships between each non-management director and the Company, its auditors and other companies that do business with Gartner. Any director who changes his or her primary employment must tender a resignation from the Board in order to enable the Governance Committee to determine whether the change in employment or other relationship creates an actual or potential conflict of interest, lack of independence or other issues that render the director’s continued service undesirable, thereby allowing the Board to avoid removing the director. In 2006, after analysis and recommendation by the Governance Committee, the Board determined that all of our non-management directors (i.e., Messrs. Michael Bingle, Richard Bressler, William Grabe, John Joyce, Max Hopper, Stephen Pagliuca, James Smith, Jeffrey Ubben and Maynard G. Webb, Jr. and Ms. Anne Sutherland Fuchs) are independent under the NYSE standards, that our Audit Committee members (Messrs. Bressler, Hopper and Smith) are also independent under Section 10A-3, and that our Compensation Committee members (Messrs. Webb, Joyce and Ubben and Ms. Fuchs) are independent under SEC Rule 16b-3 and qualify as outside directors under Code Section 162(m) regulations. Additionally, the Board has determined that Mr. Fradin, a new nominee for election to the Board at the 2007 Annual Meeting, is independent under the NYSE standards. Any material relationships considered by the Board are disclosed under “Transactions with Related Persons” below. Our sole management director, Mr. Hall, does not sit on any standing committees.

 

Our Board held six meetings during 2006. During 2006, all of our directors, with the exception of Messrs. Hopper, Pagliuca and Joyce, attended at least 75% of the aggregate of all Board and committee meetings held (during the periods in which such director served as a director and/or committee member.) At each Board meeting, the non-management directors met in executive session. James C. Smith, our non-executive Chairman of the Board, presided over these executive sessions. Directors are welcome, but not required, to attend the Annual Meeting of Stockholders, and we make all appropriate arrangements for directors that choose to attend. In 2006, only Mr. Hall attended the Annual Meeting of Stockholders.

 

As noted above, our Board has three standing committees: Audit, Compensation and Governance/Nominating and all committee members have been determined by our Board to be independent under applicable standards. Our Board of Directors has approved a written charter for each committee which is reviewed annually. A current copy of each charter is available at www.investor.gartner.com under the “Corporate Governance” link. See “Available Information” below.

 

Our Governance/Nominating Committee (the “Governance Committee”) presently consists of Ms. Fuchs and Messrs. Grabe (Chairperson) and Bingle and held three meetings during 2006. Our Governance Committee considers such matters as: the size, composition and organization of our Board, the independence of directors; our corporate governance policies, including periodically reviewing and updating our Board Principles and Practices; the criteria for membership as a director and the selection of individuals for election to the Board; evaluations of director independence; recommendations of assignments to Board committees; recommendations concerning the form and amount of director compensation; overseeing the performance evaluation of our Chief Executive Officer; overseeing management succession planning; and conducting an annual performance evaluation of our Board and

Board committees. The Governance Committee is responsible for recommending the form and amount of director compensation, and in doing so, must consider the impact of compensation on director independence.

 

Candidates for Board nomination are brought to the attention of the Governance Committee by current Board members, management, shareholders or other persons. At this time, we have retained Spencer Stuart & Associates to assist in identifying and/or evaluating candidates. Potential new candidates are evaluated at regular or special meetings of the Governance Committee, and then considered by the entire Board. The Governance Committee charter specifies that the Committee will consider and evaluate individuals who are nominated by shareholders for election to the Board. Shareholders wishing to recommend director candidates for consideration by the committee may do so by writing to the Chairman of the Governance/Nominating Committee, c/o Corporate Secretary, Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212, and indicating the recommended candidate’s name, biographical data, professional experience and any other qualifications. While the Governance Committee has not specified minimum qualifications for candidates it recommends, it will consider the qualifications, skills, expertise, qualities, diversity, age, availability and experience of all candidates that are presented to it for consideration, with the overriding objective being to select candidates best able to carry out the Board’s responsibilities and/or to complement the talent and experience represented on the Board in view of the current Board needs. Each nominee for election at the 2007 Annual Meeting of Stockholders was recommended for nomination by the Governance Committee, and nominated by the full Board for election. Additionally, each nominee (other than Mr. Fradin) is an incumbent director. Mr. Fradin was brought to the attention of the Governance Committee by both board members and Spencer Stuart. Mr. Maynard G. Webb, Jr., an incumbent director, is not standing for re-election. At the present time, pursuant to its agreement with the Company, Silver Lake Partners, the holder of 12.7% of our common stock, is entitled to designate two members of our Board — Messrs. Bingle and Joyce. In addition, Mr. Jeffrey Ubben, a director, is affiliated with ValueAct Capital Master Fund, L.P., ValueAct Capital Master Fund III, L.P., and affiliates (“ValueAct”), the holders in the aggregate of 19.8% of our common stock, although ValueAct does not have a contractual right to designate a director.

 

Gartner has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the 1934 Act. Our Audit Committee presently consists of Messrs. Bressler (Chairperson), Hopper and Smith. Our Board has determined that Mr. Bressler qualifies as an Audit Committee Financial Expert as defined by the rules of the SEC and has the requisite accounting or related financial management expertise required by the NYSE corporate governance listing standards, and that all members are financially literate as required by the NYSE corporate governance listing standards. During 2006, the Audit Committee held five meetings.

 

Our Audit Committee serves as an independent body to assist in Board oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors. Additionally, the Committee prepares the Audit Committee Report as required by the SEC and included in this Proxy Statement below, retains and terminates the Company’s independent auditors (subject to stockholder ratification), approves fees for audit and non-audit services, and provides an open avenue of communication among the independent accountants, the internal auditors, management and the Board.

 

The Audit Committee is directly responsible for the appointment, compensation and oversight of the independent auditors, approving the engagement letter describing the scope of the audit, and resolving disagreements between management and the auditors regarding financial reporting for the purpose of issuing an audit report in connection with our financial statements. The auditors report directly to the Audit Committee. By meeting with independent auditors and internal auditors, and operating and financial management personnel, the Audit Committee oversees matters relating to accounting standards, policies and practices, changes to these standards, polices and practices and the effects of any changes on our financial statements, financial reporting practices and the quality and adequacy of internal controls. Additionally our internal audit function reports directly to the Audit Committee. After each Audit Committee meeting, the Committee meets separately with the independent auditors and separately with the internal auditors, without management present.

The Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. A toll-free phone number that is managed by a third party is available for confidential and anonymous submission of concerns. All submissions are reported to the General Counsel and, in turn, to the Chairman of the Audit Committee. The Audit Committee has the power and funding to retain independent counsel and other advisors as it deems necessary to carry out its duties.

 

Our Compensation Committee presently consists of Messrs. Webb (Chairperson), Joyce and Ubben, and Ms. Fuchs. Our Board has determined that each member of the Compensation Committee qualifies as a non-employee director under Rule 16b-3 promulgated under the 1934 Act and as an outside director under regulations issued under Section 162(m) of the Code. During 2006, the Compensation Committee held six meetings. The Compensation Committee has responsibility for administering and approving all elements of compensation for the Chief Executive Officer and other executive officers. It also approves, by direct action or through delegation, all equity awards, grants, and related actions under the provisions of our 2003 Long-Term Incentive Plan (the “2003 LTIP”), and administers the 2003 LTIP. Consistent with the terms of the 2003 LTIP, the Committee has delegated to the CEO the authority to make awards to certain individuals not to exceed $100,000 in value or $1,000,000 in aggregate value in a calendar year. This delegation does not permit any award to an employee subject to Section 16 of the 1934 Act (i.e., all executive officers) or any award which would jeopardize the 2003 LTIP’s qualifications under Section 162(m) of the Code or Rule 16b-3 promulgated under the 1934 Act. The purpose of this delegation is to grant flexibility to the CEO in new hire, retention and promotion situations involving key personnel other than executive officers.

 

The Compensation Committee is responsible for evaluating CEO performance (with the oversight of the Governance Committee), establishing CEO compensation for approval by the full board, approving annual salary increases for other executive officers, approving the final terms of the annual equity awards for executive officers and other employees, approving the annual bonus program for executive officers and approving company-wide annual salary increases and bonus programs. In setting CEO compensation and compensation for other executive officers, the Committee will consider the results of performance evaluations, benchmarking, the advice of our outside compensation consultant, Frederic W. Cook, Inc. (“Cook”), published survey data and input from the CEO and human resources department. The CEO is responsible for reviewing the performance of all other executive officers, all of whom report directly to him, and recommending the annual salary increase, bonus program and equity award for these executive officers to the Committee for its approval. Please refer to the “Compensation Discussion and Analysis” on page 13 herein for a more detailed discussion. The Compensation Committee is also responsible for approving the form and amount of director compensation.

 

Cook is retained by the Company on an annual basis to provide guidance to the Compensation Committee and to management in connection with the Company’s compensation programs and equity plans. While Cook maintains a working relationship with management, it has direct reporting responsibility to the Chairman of the Compensation Committee.

 

The Committee reviews and approves management’s Compensation Discussion and Analysis contained on page 13 of this Proxy Statement, recommends its inclusion in this Proxy Statement (and Annual Report on Form 10-K for 2006) and issues the related report to stockholders as required by the SEC (see “Compensation Committee Report” on page 18 below).

 

Compensation Committee Interlocks and Insider Participation.  During 2006, no member of the Compensation Committee served as an officer or employee of the Company, was formerly an officer of the Company or had any relationship with the Company required to be disclosed under “Transactions With Related Persons,” except for Mr. John Joyce, in connection with his relationship to Silver Lake Partners, and Mr. Jeffrey Ubben, in connection with his relationship to ValueAct. See “Transactions with Related Persons — Relationships with Silver Lake Partners and ValueAct” below for a description of the Company’s transactions with Silver Lake Partners and ValueAct in 2006. Additionally, during 2006, no executive officer of the Company: (i) served as a member of the

compensation committee (or full board in the absence of such a committee) or as a director of another entity, one of whose executive officers served on our Compensation Committee; or (ii) served as a member of the compensation committee (or full board in the absence of such a committee) of another entity, one of whose executive officers served on our Board.

 

The Board believes directors should have a financial interest in the Company. Accordingly, each director is required to own at least 10,000 shares of our common stock. New directors also have three years from election or appointment to comply with the policy as follows: 25% within one year of election or appointment; 50% within two years of election or appointment; and 100% within three years of election or appointment.

 

Gartner has adopted a CEO & CFO Code of Ethics which applies to our Chief Executive Officer, Chief Financial Officer, controller and other financial managers, a Code of Business Conduct, which applies to all Gartner officers, directors and employees, and Principles of Ethical Conduct which applies to all employees. All of these codes are available at www.investor.gartner.com under “Corporate Governance.” At least annually, each director and each member of senior management must affirm his or her compliance with the Code of Business Conduct. See “Available Information” below.

 

The following individuals were serving as our executive officers on April 12, 2007:

 

 

Eugene A. Hall has been our Chief Executive Officer and a director since August 2004. Prior to joining Gartner, Mr. Hall was a senior executive at Automatic Data Processing, Inc., a Fortune 500 global technology and services company, serving most recently as President, Employers Services Major Accounts Division, a provider of human resources and payroll services. Prior to joining ADP in 1998, Mr. Hall spent 16 years at McKinsey & Company, most recently as Director.

 

Alister L. Christopher has been our Senior Vice President, Worldwide Events since June 2003. During his 11 years at Gartner, Mr. Christopher has served in a variety of roles, including Sales Executive; Director, Sales Operations in EMEA; Vice President of EMEA Inside Sales; Group Vice President, North American Inside Sales; and Group Vice President, EMEA Sales. Prior to joining Gartner in August 1996, Mr. Christopher spent 10 years in the IT industry.

 

Donna A. Collins has been our Senior Vice President, Client Services since August 2006. Prior to joining Gartner, Ms. Collins spent 20 years at Automatic Data Processing, Inc., serving most recently as Senior Vice President of service in ADP’s Small Business Services Division, prior thereto, as Division Vice President of business engineering solutions for ADP’s Major Accounts Division, and prior thereto as Vice President and General Manager of ADP’s Chesapeake office. Ms. Collins is a certified public accountant.

 

Kendall B. Davis has been our Senior Vice President, High Tech & Telecom Programs since August 2006. Prior to that, he served as Senior Vice President, Strategy, Marketing and Business Development. Prior to joining Gartner in September 2005, Mr. Davis spent ten years at McKinsey & Company, where he was a partner assisting clients in the IT industry.

 

Darko Hrelic has been our Senior Vice President and Chief Information Officer since January 2007. Prior to joining Gartner, he spent five years at Automatic Data Processing, Inc., most recently as Vice President and Chief Technology Officer in ADP’s Employers Services Division. Prior to joining ADP, Mr. Hrelic spent over 21 years at IBM, principally at the TJ Watson Research Center.

 

Robin B. Kranich has been our Senior Vice President, End User Programs since August 2006. From November 2004 until August 2006, she served as Senior Vice President, Research Operations and Business Development. During her more than 12 years at Gartner, Ms. Kranich has held various roles, including Senior Vice President and General Manager of Gartner EXP, Vice President and Chief of Staff to Gartner’s president and various sales and sales management roles. Prior to joining Gartner in September 1994, Ms. Kranich was part of the Technology Advancement Group at Marriott International.

 

Dale Kutnick has been our Senior Vice President, Executive Programs since February 2007. Prior to that, he served as Senior Vice President and Director of Research. Prior to joining Gartner in April 2005, Mr. Kutnick was the co-founder, Chairman of the Board and Research Director of Meta Group, Inc. Mr. Kutnick spent 14 years at Meta, from its inception in January 1989 to January 2003. Prior to co-founding Meta, Mr. Kutnick was Executive Vice President, Research at Gartner, and Executive Vice President of Gartner Securities.

 

Christopher J. Lafond has been our Executive Vice President, Chief Financial Officer since October 2003. From January 2002 to October 2003, Mr. Lafond served as Chief Financial Officer for North America and Latin America. From July 2000 to December 2001, Mr. Lafond was Group Vice President and North American Controller. Mr. Lafond joined us in March 1995 and has held several finance positions, including Director of Finance, Vice President of Finance and Assistant Controller. Prior to joining Gartner, Mr. Lafond was Senior Financial Planner at International Business Machines Corporation and an Analyst in fixed-income asset management at J.P. Morgan Investment Management.

 

Timothy T.M.F. Noble has been our Group Vice President, Worldwide Sales since January 2006. From August 2003 to January 2006, Mr. Noble was Group Vice President, EMEA Sales for Gartner UK. From October 2001 to August 2003, Mr. Noble was our Group Vice President, Inside Sales. From October 2000 when he joined Gartner, to October 2001, he was Regional Vice President, Sales for Gartner UK.

 

Robert C. Patton has been President, Gartner Consulting since he joined Gartner in April 2004. Prior thereto, Mr. Patton worked for 13 years at Cap Gemini Ernst & Young in numerous senior management roles, most recently as CEO, Government Solutions. Previously, he was managing director CGE&Y Americas sector. Mr. Patton is a certified public accountant.

 

Michele E. Riess has been our Senior Vice President, Human Resources, since February 2006. Prior to joining Gartner, Ms. Riess spent 11 years at Automatic Data Processing, Inc., most recently as Vice President — HR Shared Services. Prior to joining ADP, Ms. Riess held various HR roles at Home Insurance Company.

 

Lewis G. Schwartz has been our Senior Vice President, General Counsel and Corporate Secretary since January 2001. Prior to joining Gartner, Mr. Schwartz was a partner with the law firm of Shipman & Goodwin LLP, serving on the firm’s management committee. Before joining Shipman & Goodwin, Mr. Schwartz was a partner with Schatz & Schatz, Ribicoff & Kotkin, an associate in New York City at Skadden, Arps, Slate, Meagher & Flom, and an assistant district attorney in New York County (Manhattan).

 

Peter Sondergaard has been our Senior Vice President, Research since August 2004. During his 17 years at Gartner, Mr. Sondergaard has held various roles, including Head of Research for the Technology & Services Sector, Hardware & Systems Sector Vice President and General Manager for Gartner Research EMEA. Prior to joining Gartner, Mr. Sondergaard was research director at International Data Corporation in Europe.

 

Joseph T. Waters has been our Senior Vice President and Chief Marketing Officer since February 2007. From January 2005 until February 2007, he served as Senior Vice President, Executive Programs. Prior to rejoining Gartner in August 2002, Mr. Waters was the chief operating officer for ScreamingMedia, an Internet content syndication solutions provider based in New York City. From 1985 to 1999, Mr. Waters served Gartner in a variety of senior sales, marketing and product leadership roles, including head of Eastern Region sales for North America and head of worldwide marketing. Mr. Waters started his career with Xerox Corporation, where he spent four years in sales and product-marketing support.

 

Set forth below is a discussion of compensation awarded to, earned by, or paid to the Company’s executive officers, including all named executive officers, in 2006. This discussion explains all material elements of the Company’s compensation of these officers, including (i) the objectives of the Company’s compensation policies; (ii) what the compensation program is designed to reward; (iii) each element of compensation; (iv) why the Company chooses to pay each element; (v) how the Company determines the amount (and, where applicable, the formula) for each element to pay; and (vi) how each compensation element and the Company’s decisions regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements.

 

The Objectives of the Company’s Compensation Policies

 

The objectives of our compensation policies are two-fold:

 

 

What the Compensation Program is Designed to Reward

 

Our guiding philosophy is that executive compensation should be linked to corporate performance — the better Gartner performs, the higher the officer’s compensation should be. In addition, we believe that the design of the total compensation package must be competitive with the marketplace from which we hire our executive talent in order to achieve our objectives and retain individuals who are critical to our long-term success. Our compensation program for executive officers is designed to compensate individuals for the achievement of corporate performance objectives. We believe this type of compensation encourages outstanding team performance (not simply individual performance) which builds stockholder value.

 

Both our short-term and long-term incentive compensation is earned by executives, if at all, only upon the achievement by the Company of certain measurable performance objectives that are deemed by management and the Compensation Committee to be critical to the Company’s long-term success. For 2006, these objectives were set at a base level that was above the prior year’s measure, and the amount of compensation that could be earned

increased as Company performance increased. Finally, we believe that the proportion of an executive’s compensation attributable to corporate performance objectives should increase as the individual’s business responsibilities increase.

 

Each Element of Compensation and Why the Company Chooses to Pay Each Element

 

Compensation for our executive officers consists of three principal elements: base salary, short-term incentives (cash bonuses) and long-term incentives (equity awards under our 2003 Long-Term Incentive Plan). We pay competitive salaries to attract and retain the executive talent necessary to develop and implement our corporate strategy and business plan. We pay short-term and long-term incentive compensation to reward our executives for outstanding performance, to motivate our executives to continue to deliver outstanding performance and to make them stakeholders in the success of our Company by aligning their interests with those of the stockholders. In addition, we maintain a basic perquisites program to provide a fully competitive package. For a description of these benefits, see Other Compensation Table below.

 

How the Company Determines the Amount (and Where Applicable, the Formula) for Each Element to Pay

 

In General.  The salary, short-term and long-term incentive compensation elements for the CEO are established by the Compensation Committee after evaluation, together with other independent directors, of the CEO’s performance and after considering recommendations from the Company’s compensation consultant, Frederic W. Cook & Co., Inc. (“Cook”). The salary, short-term and long-term incentive compensation elements for the other executive officers are recommended by the CEO for approval by the Compensation Committee. In formulating his recommendation, the CEO undertakes a performance review of these executives, and considers input from compensation and human resources personnel at the Company, as well as the benchmarking data and other input from Cook. Ultimate approval of executive officer compensation, including in particular short-term incentive compensation in the form of bonuses and long-term incentive compensation in the form of equity awards, resides with the Compensation Committee.

 

Benchmarking.  Cook provides us with comparative data, updated on an annual basis, of salary, short-term incentive (bonus) and long-term incentive compensation paid to individuals occupying comparable positions at companies of similar industry and size, for use as one factor, among others, for determining the amount of each of these compensation elements to be paid to our CEO and other executive officers. This comparative data is based upon most recently available proxy statement data for a peer group of companies that is developed collaboratively by Cook and management, with the approval of the Compensation Committee, as well as certain published U.S. survey data.

 

For 2006, our peer group consisted of 15 U.S.-based public companies in the high tech industry with a particular focus on software and services that approximate Gartner in terms of revenues, net income, total assets, market capitalization and/or total employees, and that compete with Gartner for executive talent both from a hiring and a retention standpoint. (There are no direct peer companies or competitors of comparable size.) The composition of the peer group is reviewed and revised as necessary on an annual basis. These companies (the “Peer Group”) are:

 

 

From available Peer Group data, applying consistent valuation methodologies, Cook calculated median, 25^th percentile and 75^th percentile data for salary, bonus and long-term incentives by executive officer position for the top five reported officers (generally, CEO, CFO, general counsel, business unit heads, head of sales). Additionally, Cook provided data from four national surveys, two of which are leading high technology industry

surveys and two of which are general industry surveys. From these national surveys, additional data were obtained for other executive officer positions (such as business unit heads).

 

In 2006, our overall goal was to provide an aggregate compensation package to our executive officers that presented a “middle of the road” approach as compared to the aggregate compensation paid by our Peer Group. In determining the amount of each element, we gave greater weight to the long-term incentive compensation element, as compared to the cash elements, in order to drive corporate performance.

 

Base Salary.  We set base salaries by evaluating the responsibilities of the position, the experience of the individual, the achievement by the individual of personal performance goals and objectives, and the marketplace in which we compete for the executive talent we need. In addition, where possible, we review salary information for comparable positions for members of our Peer Group. Executive officers (other than Mr. Hall) receive a company-wide salary merit increase on an annual basis as a group. The merit increase for 2006 was 3% (determined based upon a methodology discussed below in “How each Compensation Element and the Company’s Decisions Regarding that Element Fit into the Company’s Overall Compensation Objectives and Affect Decisions Regarding Other Elements”) and was applied against each officer’s prior year’s base salary. The CEO may recommend material increases and decreases in salary of executive officers on an individual basis in the case of retentions, promotions or other significant job changes, subject to approval by the Compensation Committee. The Compensation Committee sets the CEO’s base salary on an annual basis.

 

Short-Term Incentives (Cash Bonuses).  We designed the annual cash bonus component of incentive compensation to align pay with our short-term (annual) performance. For 2006, the percentage of target bonus for Gartner employees was based on a sliding scale weighting of corporate versus individual performance goals based on the employee’s position in Gartner, with the bonus for more senior employees being more heavily weighted towards corporate performance. For executive officers, bonus targets (expressed as a percentage of salary) were based solely on achievement of company-wide financial performance objectives for 2006 (with no individual performance component) and varied from 40% to 100% of salary depending upon level of responsibility. With respect to our named executive officers, bonus targets were 100% for Mr. Hall, 80% for Mr. Patton and 60% for each of Messrs. Lafond, Sondergaard and Schwartz. The financial objectives and weightings used for 2006 for all executive officers were EBITDA (50%), Core Research Contract Value (30%) and Total Sales Bookings (20%). If financial objectives are not attained, no bonus is earned or payable. The target objective amounts (resulting in 100% payment of target bonus) were EBITDA ($135 million), Core Research Contract Value ($458 million) and Total Sales Bookings ($895 million). The EBITDA target objective represented growth of 29% over 2005. The Core Research Contract Value and Total Sales Bookings target objectives represented growth of 6% and 7%, respectively, over 2005 on a foreign exchange neutral basis. Bonuses were payable, in part, if at least an 80% attainment level of each of these objectives was achieved. A maximum of 170% of target bonus could be earned based upon an attainment level of at least 140% of the EBITDA target objective amount and at least 200% of each of the Core Research Contract Value and Total Sales Bookings target objectives amounts. In 2006, we exceeded our target financial objectives, and earned bonuses for executive officers were approximately 112.5% of target. Bonuses were paid according to the bonus plan approved by the Compensation Committee without any modification by the Committee.

 

Long-Term Incentives (Equity Awards).  We believe that ownership of our stock is a key element of our compensation program. It provides a retention incentive for our executive officers and aligns their personal objectives with long-term stock price appreciation, and, therefore, the interests of our stockholders. Additionally, we believe the combination of performance-based and time-based vesting criteria associated with our long-term incentive awards provide great motivation and retention value to our officers. We have evaluated different types of long-term incentives based on their motivational value, cost to the Company and appropriate share utilization under our 2003 Long-Term Incentive Plan (“2003 LTIP”). Presently, we have determined to make an annual award to executives of stock-settled stock appreciation rights (“SARs”) and performance-based restricted stock units (“PRSUs”), both of which vest over time based upon continued service, and to utilize time-based restricted stock units (“RSUs”) for certain other employees that will be earned for continued employment and exemplary performance. The executive award is balanced between SARs, which reward for stock price increases, and PRSUs, which reward financial performance. If performance objectives for PRSUs are not met, the PRSU award is forfeited. No part of the award earned is based upon individual performance. No performance objectives for any

PRSU intended to qualify under 162(m) of the Code (i.e., awards to executive officers) may be modified by the Committee. While the Committee does have discretion to modify other aspects of the awards (subject to the terms of the 2003 LTIP), no modifications were made in 2006. In addition, equity awards with a time-based vesting component were granted to executive new hires (other than the Named Executive Officers) in 2006 (after approval by the Compensation Committee) at the commencement of employment as an inducement to join the Company.

 

For 2006, the number of PRSUs awarded to executive officers and eligible to vest ranged from 0% to 200% of the original approved target award amount (100%) based upon the achievement of certain levels of a specified 2006 internal sales objective related to sales bookings of our research segment — a measurement of growth in our largest business segment. The 0% threshold was set at achievement of less than $580 million of this sales objective, which represented approximately 6.8% growth over 2005, and the 100% target threshold was set at achievement of at least $590 million of this sales objective, which represented approximately 8.7% growth over 2005, in each case on a foreign exchange neutral basis. This means that, had there been less than 6.8% growth in this sales objective, the entire PRSU award would have been forfeited. Seventy percent (70%) of the target number of PRSUs would be awarded with achievement of at least $580 million of this objective, and 200% of the target number of PRSUs would be awarded with achievement of at least $630 million of this objective. We established targets that scaled in a roughly linear manner between the 0% and 200% thresholds.

 

The aggregate value of the executive target awards was set at our Peer Group’s median value for this element of compensation, and individual executive target amounts varied with increasing levels of responsibility. The higher the level of objective achieved, the greater the award amount. On February 15, 2007, the Compensation Committee determined that 2006 PRSUs eligible to vest were 164.5% of the target number of units awarded based upon the level of achievement of the specified internal sales objective. Both the eligible PRSUs and the SARs awarded to executive officers in 2006 vest 25% per year commencing on May 15, 2007 and on each anniversary thereof subject to continued employment on the vesting date. The SARs, the amount of which was fixed on grant, are exercisable for seven years and two months following grant.

 

Chief Executive Officer.  Eugene Hall became our Chief Executive Officer in August 2004. In view of the performance of the Company during his tenure and since Mr. Hall’s employment agreement with the Company was due to expire in July 2007, in late 2006 the Compensation Committee resolved to enter into negotiations with Mr. Hall to procure a contract extension on mutually acceptable terms. This decision was driven in large part by the Company’s improved performance under Mr. Hall’s leadership based upon measurable performance metrics, including the increase in the Company’s contract value (from $509.2 million in 2004 to $640.3 million in 2006), total revenues (from $893 million in 2004 to $1,060 million in 2006), net income (from $16.9 million in 2004 to $58 million in 2006) and stock price (from $12.79 at December 31, 2004 to $19.79 at December 31, 2006). Consistent with the Company’s stated objective of rewarding performance, a new five-year employment agreement was entered into by the Company and Mr. Hall on February 15, 2007, effective January 1, 2007, which provides for an annual aggregate compensation package of $7,000,000 per year, comprised of salary, bonus and long-term incentive awards, representing an approximate 5% increase over his 2006 aggregate compensation package. See “Employment Agreements with Executive Officers” below for a detailed discussion of this agreement. A more detailed analysis of our financial performance for 2006 is contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2006 Annual Report on Form 10-K, as filed with the SEC.

 

How each Compensation Element and the Company’s Decisions Regarding that Element Fit into the Company’s Overall Compensation Objectives and Affect Decisions Regarding Other Elements.

 

As noted above, our two primary compensation objectives are to pay compensation that is competitive in the marketplace from which we draw executive talent, and to drive company performance and stockholder value through pay-for-performance compensation policies.

 

We establish salary and short-term incentive compensation at levels necessary to hire and retain the top executive talent we need to successfully manage Gartner and execute upon our corporate strategy. We provide annual salary increases on a company-wide basis that are based in large part upon published projected U.S. salary increase data (sources include BLR, Buck Consultants, Culpepper, Hewitt, Mercer and WorldatWork). These increases are also applied across the board to executive officers as a group (with the exception of Mr. Hall), with

material increases in compensation to executive officers made only for purposes of retentions, promotions or other circumstances involving significantly increased responsibilities. In 2006, our salaries and bonuses to executive officers were below the Peer Group median. This reflects our belief that long-term incentive compensation contributes to a greater degree to retention and to the delivery of top performance; accordingly, we allocate compensation more heavily to that element. Our 2006 long-term incentive award to executive officers was at 100% of the Peer Group median. Overall, our aggregate cash and long-term incentive compensation to executive officers for 2006 approximated the Peer Group median, which achieved our “middle of the road” approach.

 

The Company is presently considering the adoption of a policy regarding the adjustment or recovery of awards or payments to executive officers if the performance measures upon which these awards or payments are based are restated or otherwise adjusted in a manner that would reduce the size of the award. This situation has not presented itself to date. Since the personal interests of executive officers are aligned with stockholders through our long — term incentive awards (that vest over time), the Company does not have a stand-alone stock ownership requirement for executive officers. Finally, prior compensation to executive officers is the baseline from which the next year’s compensation is established in the manner discussed above (through application of management recommendations, Peer Group data and survey data regarding salary increases, etc). To date, gains from prior option or equity awards have not been taken into account when setting compensation elements.

 

Accounting and Tax Impact

 

In setting compensation, the Compensation Committee and management consider the potential impact of Section 162(m) of the Code adopted under the Federal Revenue Reconciliation Act of 1993. This section precludes a public corporation from deducting on its corporate income tax return individual compensation in excess of $1 million for its chief executive officer or any of its four other highest-paid officers. Section 162(m) also provides for certain exemptions to this limitation, specifically compensation that is performance-based within the meaning of Section 162(m) and that is issued under a stockholder-approved plan. The PSRU component of the 2006 long — term incentive awards is performance-based and issued under the 2003 LTIP, which has been approved by stockholders, and, therefore, is deductible under Section 162(m). Our 2006 short-term incentive awards were not made pursuant to a stockholder-approved plan, and, accordingly, may not be deductible in their entirety. In 2006, only a portion of Mr. Hall’s cash bonus was not deductible. Although the Compensation Committee endeavors to maximize deductibility of compensation under 162(m), it maintains the discretion to retain maximum flexibility in establishing compensation elements and to approve compensation that may not be deductible under this Section, if the Committee believes the compensation element to be necessary or appropriate under the circumstances. For example, the CEO’s initial award of 500,000 restricted shares made in 2004 was cancelled and replaced in 2005 with an identical award under our 2003 LTIP to ensure deductibility for corporate income tax purposes.

 

The second proposal to our shareholders at this year’s Annual Meeting seeks approval of a proposed Executive Performance Bonus Plan. Adoption of this Plan will allow the Company to fully deduct performance — based cash bonus compensation paid to Named Executive Officers. See Proposal Two — Approval of Executive Performance Bonus Plan on page 32.

 

Grant of Equity Awards

 

The Board of Directors has approved and adopted a formal policy with respect to the grant of equity awards under our 2003 LTIP which codified and formalized existing practices. Equity awards may include stock options, stock appreciation rights (SARs), awards of restricted stock (RSAs) and awards of restricted stock units (RSUs). In 2006, all awards to Named Executive Officers took the form of RSUs with performance elements (PRSUs) and SARs. Pursuant to the 2003 LTIP, the Committee may not delegate its authority with respect to Section 16 persons, or in any way which would jeopardize the 2003 LTIP’s qualification under Section 162(m) of the Code or Rule 16b-3 promulgated under the 1934 Act. Accordingly, our policy specifies that all awards to our Section 16 executive officers must be approved by the Compensation Committee prior to the award grant date, and that all such awards will be made and priced on the date of Compensation Committee approval.

 

Consistent with the 2003 LTIP, at least annually, the Compensation Committee approves a delegation of authority to the CEO to make equity awards under the 2003 LTIP to permitted Gartner employees on account of new

hires, retention or promotion without the approval of the Compensation Committee. The current delegation of authority specifies a maximum award “value” of $100,000 per individual, and a maximum aggregate award “value” of $1,000,000 for the calendar year. For purposes of this computation, in the case of RSAs and RSUs, “value” is calculated based upon the Fair Market Value (defined in the 2003 LTIP as the closing price on the New York Stock Exchange on the date of grant) of a share of Gartner common stock, multiplied by the number of RSAs or RSUs. In the case of options and SARs, the “value” of the award will be the Black-Scholes-Merton calculation of the value of the award utilizing assumptions appropriate on the award date. Any awards made under this delegated authority are reported to the Compensation Committee at the next regularly scheduled committee meeting.

 

As discussed above, the structure of annual long-term incentive awards comprising the long — term incentive compensation element of our compensation package to executive officers is established and approved by the Compensation Committee in the first quarter. The specific terms of the awards (number of PRSUs and SARs and performance criteria) are determined, and the awards are approved and made, on the same date after the release of the Company’s prior year’s financial results. The 2006 long-term incentive awards to executive officers were approved by the Compensation Committee and made on March 15, 2006, after release of our 2005 financial results. The final amount of PRSUs issuable on account of the 2006 award was determined by the Compensation Committee on February 15, 2007 upon final determination of the performance criteria. New hire, retention and promotion awards to executive officers are recommended by the CEO to the Compensation Committee for its approval.

 

It is the Company’s policy not to make equity awards to executive officers prior to the release of material non-public information. Generally speaking, executive new hire awards given as an inducement to joining the Company are made on the 15^th or 30^th day of the month first following the executive’s start date (and after approval of the Compensation Committee), and retention and promotion awards are made on the 15^th or 30^th day of the month first following the date of Compensation Committee approval, but the grant of these awards may be delayed pending the release of material non-public information.

 

The Compensation Committee of the Board of Directors of Gartner, Inc. has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement, as well as in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

 

Maynard G. Webb, Jr.

Anne Sutherland Fuchs

John R. Joyce

Jeffrey W. Ubben

 

This table describes compensation earned in 2006 (in dollars) by our CEO, CFO and three most highly compensated executive officers (other than the CEO and CFO) (the “Named Executive Officers”).

 

 

 

 

This table describes each component (in dollars) of the All Other Compensation column in the Summary Compensation Table.

 

 

 

 

 

This table provides information about awards made to our Named Executive Officers in 2006 pursuant to non-equity incentive plans (our short-term incentive cash bonus program) and equity incentive plans (our 2003 Long-Term Incentive Plan).

 

 

 

 

 

Mr. Hall — Employment Agreement in Effect during 2006.  Mr. Hall entered into an Employment Agreement with the Company effective August 4, 2004 (the “2004 Agreement”). Under the 2004 Agreement, Mr. Hall agreed to serve as our Chief Executive Officer through July 31, 2007, and thereafter for subsequent one-year periods unless either party provided ninety days written notice not to renew. During the term of the 2004 Agreement, we agreed to include Mr. Hall in our slate of nominees to be elected to our Board.

 

Under the 2004 Agreement, Mr. Hall’s initial base salary was $650,000, subject to annual adjustments by our Board or Compensation Committee. Mr. Hall’s annual target bonus was equal to 100% of his base salary and was based on the achievement of specified company and individual objectives. Mr. Hall’s bonus could be higher or lower than the target bonus amount based on over- or under-achievement of the objectives, but in no event could the bonus exceed 200% of his base salary. Mr. Hall’s bonus for the first twelve months of his employment was guaranteed at 100% of his target bonus. Additionally, we agreed to provide Mr. Hall with an automobile and a driver during his employment term.

 

Pursuant to the 2004 Agreement, Mr. Hall received a grant on August 16, 2004 of options to purchase 800,000 shares of our common stock at a price of $12.11 per share. These stock options vest in four equal annual installments on the anniversary of the date of grant. Mr. Hall also received a grant of 500,000 shares of restricted stock on October 15, 2004. The restrictions on these shares will lapse upon the earlier of (a) our common stock trading at or above specified average price targets for 60 consecutive trading days, or (b) a Change In Control (as defined below). The price targets are an average of the high and low selling price of at least $20 for the first 300,000 shares, $25 for the next 100,000 shares and $30 for the remaining 100,000 shares. In November 2005, Mr. Hall’s 2004 500,000 share restricted stock award was cancelled and replaced with a new award for the same amount of shares and on similar terms under our stockholder-approved 2003 Long-Term Incentive Plan (“2003 LTIP”). This action was undertaken to permit the Company to take a tax deduction when and if the restrictions lapse on the restricted stock award, which would not have been permissible in the award’s original form because the award had been made as an inducement grant, and not pursuant to a stockholder-approved plan. As of the date of this Proxy Statement, none of these restrictions had lapsed.

 

Termination and related payments.  The 2004 Agreement provided that Mr. Hall’s employment was at will and could be terminated by him or us upon sixty days’ notice. If we terminated Mr. Hall’s employment involuntarily and without Business Reasons (as defined in the 2004 Agreement) or a Constructive Termination (as defined in the 2004 Agreement) occurred, or if we did not renew the 2004 Agreement upon its expiration and Mr. Hall terminated his employment within ninety days following the expiration of the 2004 Agreement, Mr. Hall would be entitled to receive: (a) his base salary for twenty-four months, payable in accordance with our regular payroll schedule; (b) 200% of his target bonus for the year in which the termination occurs (plus any earned but unpaid bonus from the prior year); and (c) continued vesting for twenty-four months other than any award that vests pursuant to performance-based criteria.

 

If a Change in Control (defined below) occurred, Mr. Hall would be entitled to receive: (a) three times his base salary then in effect; (b) three times his target bonus for the fiscal year in which the Change in Control occurs (plus any unpaid bonus from the prior fiscal year); (c) acceleration in full of his option grant and the lapsing of all restrictions on his restricted stock grant; (d) at our cost, group health benefits pursuant to our standard programs for himself, his spouse and any children for three years after the Change in Control; and (e) an amount sufficient to fund the payment (“Gross-Up Payments”) for any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), on any payment received upon a Change In Control that would constitute a “parachute payment” within the meaning of Section 280G of the Code, together with any income, employment and excise taxes (including interest and penalties) imposed on the Gross Up Payment. Mr. Hall was entitled to these benefits whether or not his employment was terminated in connection with the Change In Control.

 

Under the 2004 Agreement, a “Change In Control” would occur when (i) any person becomes the beneficial owner of 50% of our voting securities, (ii) there is a merger or consolidation of Gartner with another company and our outstanding securities represent less than 50% of the voting securities of the combined entity, (iii) an agreement for sale of all or substantially all of our assets that is approved by our stockholders and is executed and (iv) there is a change in the composition of our Board occurring after stockholder approval, as a result of which fewer than a majority of the directors on the board prior to the stockholder vote remain.

 

Mr. Hall — New Employment Agreement dated February 15, 2007.  On February 15, 2007, Gartner entered into an Employment Agreement (the “2007 Agreement”) with Mr. Hall, with an effective date of January 1, 2007, pursuant to which Mr. Hall will serve as chief executive officer of the Company. The 2007 Agreement supersedes the 2004 Agreement described above.

 

The 2007 Agreement has an initial term of five years (expiring December 31, 2011), with automatic one year renewals commencing on the fifth anniversary, and continuing each year thereafter, unless either party provides the other with at least 60 days prior written notice of an intention not to extend the term. Under the 2007 Agreement, Mr. Hall’s annual base salary initially is $702,975, subject to adjustment on an annual basis by the Board or Compensation Committee. Additionally, Mr. Hall will be entitled to participate in the Company’s executive bonus program. His annual target bonus will be equal to 100% of his annual base salary, and his actual bonus may be higher or lower than the target bonus for over- or under-achievement of Company and individual objectives, provided, however, that the maximum actual bonus will not exceed 200% of Mr. Hall’s base salary. The 2007 Agreement also provides that the Company will include Mr. Hall in the Company’s slate of nominees for election to the board of directors. Additionally, we agreed to provide Mr. Hall with an automobile and a driver during his employment term.

 

The 2007 Agreement further provides that Mr. Hall will receive an annual long-term incentive award with an aggregate value (using the Black-Scholes-Merton valuation method for stock appreciation rights and the fair market value of the Company’s common stock for restricted stock, or such other appropriate valuation method as the Compensation Committee may use, to value equity-based incentive awards) equal to $7,000,000 minus the sum of base salary and target bonus for the year of grant. Each year’s incentive award will be divided between restricted stock units and stock appreciation rights, with the number of restricted stock units being subject to adjustment for over-or under-achievement of Company objectives. For 2007, the incentive award has an aggregate value of $5,594,050, and was divided such that 70% of the aggregate value will be in the form of restricted stock units, and 30% of the aggregate value will be in the form of stock appreciation rights. The 2007 incentive awards will vest over 4 years, assuming continued service, and vest in full upon a change in control.

 

Additionally, the 2007 Agreement provides that Mr. Hall is also entitled to receive all benefits provided to senior executives, executives and employees of the Company generally from time to time, including medical, dental, life insurance and long-term disability, in each case so long as and to the extent the same exist.

 

Termination and related payments.  The 2007 Agreement provides that Mr. Hall’s employment is at will and may be terminated by him or us upon 60 days’ notice. If we terminate Mr. Hall’s employment involuntarily and without Business Reasons (as defined in the 2007 Agreement) or a Constructive Termination (as defined in the 2007 Agreement) occurs, or if we do not renew the 2007 Agreement upon its expiration and Mr. Hall terminates his employment within 90 days following the expiration of the 2007 Agreement, then, subject to Mr. Hall signing and not revoking a general release of claims against the Company and its successors, Mr. Hall will be entitled to receive:

(a) accrued base salary and paid time off (“PTO”) plus base salary for a period of thirty-six (36) months following the termination date, with the first payment made six (6) months after the termination date (for amounts owing through that date) and thereafter, in accordance with the Company’s regular payroll schedule, (b) 300% of Mr. Hall’s target bonus for the fiscal year in which the termination date occurs, payable in a lump sum as soon as practicable following the six (6) month period commencing on the termination date, and any earned but unpaid bonus from the prior fiscal year which will be paid at the same time as bonuses for such fiscal year are paid to other Company executives, (c) 36 months’ continued vesting of all outstanding stock options, incentive awards and other equity arrangements subject to vesting and held by Mr. Hall (all such awards with an exercise feature will remain exercisable for 30 days following the last day of such 36 month continued vesting period, subject to the maximum term of the award), and (d) reimbursement for premiums incurred to continue group health benefits (or, at the Company’s election, to obtain substantially similar health benefits through a third party carrier) for thirty-six (36) months for Mr. Hall, his spouse and any children, provided that Mr. Hall makes the appropriate COBRA election. Additionally, any incentive awards that have accrued prior to the termination date will be granted to Mr. Hall on the day of the first open trading window for executives after the termination date. Payment of severance amounts is conditioned upon compliance with 36 month non-competition and non-solicitation covenants set forth in the 2007 Agreement.

 

In the event of a Change In Control (defined below), Mr. Hall will be entitled to receive the following: (i) accrued base salary and PTO plus three times base salary then in effect, and (ii) three times target bonus for the fiscal year in which the Change In Control occurs, in each case payable immediately upon a Change In Control. Additionally, Mr. Hall will be entitled to (a) earned but unpaid bonus from the prior fiscal year (payable at the same time bonuses for such fiscal year are paid to other Company executives, (b) continuation of group health benefits at the Company’s cost pursuant to the Company’s standard programs for three years following the Change In Control for Mr. Hall, his spouse and any children, (c) thereafter, to the extent COBRA is applicable, continuation of health benefits for such persons at Mr. Hall’s cost, for a period of 18 months or such longer period as may be applicable under the Company’s policies then in effect, provided that Mr. Hall makes the appropriate election and payments and (d) an amount sufficient to fund the payment (“Gross-Up Payments”) for any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), on any payment received upon a Change In Control that would constitute a “parachute payment” within the meaning of Section 280G of the Code, together with any income, employment and excise taxes (including interest and penalties) imposed on the Gross Up Payment. In addition, all outstanding equity awards will immediately vest, and all restrictions on restricted stock will immediately lapse. Mr. Hall is entitled to these benefits whether or not his employment is terminated in connection with the Change In Control. This benefit was negotiated in connection with the 2004 Agreement and retained in the negotiation of the 2007 Agreement. The 2007 Agreement was intended to enhance, not reduce, Mr. Hall’s employment terms as set forth in the 2004 Agreement in exchange for his agreement to serve as our Chief Executive Officer for an additional four years beyond the term of the 2004 Agreement. If Mr. Hall’s employment is terminated within 12 months following a Change In Control, he will not be entitled to any severance payments.

 

Under the 2007 Agreement, a “Change In Control” will occur when (i) any person becomes the beneficial owner of 50% of our voting securities, (ii) there is a merger or consolidation of Gartner with another company and our outstanding securities represent less than 50% of the voting securities of the combined entity, (iii) an agreement for sale of all or substantially all of our assets that is approved by our stockholders and is executed and (iv) there is a change in the composition of our Board occurring after stockholder approval, as a result of which fewer than a majority of the directors on the board prior to the stockholder vote remain.

 

Executive Officers.  Other than our CEO, we do not have long-term employment agreements with any of our Named Executive Officers. Each of our executive officers is covered by Gartner’s Executive Benefits Program (the “Program”) which provides for 35 days paid time off (PTO) annually, an annual physical examination and an annual lump sum payment of $15,000 per year from which the executive can choose to purchase the perquisites of his or her choice in lieu of any other perquisites to be provided by Gartner. The lump sum payment and certain other benefits are grossed up so as to be tax neutral to the executive. U.S.-based executive officers may also participate in an ERISA — excess program that allows them to contribute over the current 401(k) limits and a deferred compensation program (available to all U.S.-based Gartner employees with annual compensation in excess of $200,000) discussed below.

 

Termination and related payments.  The Program also provides that upon termination without cause, each of our executive officers will be entitled to receive: (a) base salary then in effect for 12 months plus any used PTO not to exceed 25 days (paid in accordance with Gartner’s regular payroll schedule); and (b) reimbursement for COBRA premiums to continue group health benefits pursuant to our standard programs for the executive, the executive’s spouse and any children for 12 months after the termination date. These severance benefits would be payable in the event of termination in connection with a Change In Control (as defined below) as well. Additionally, all vested equity awards held by the executive that have an exercise feature will remain exercisable for 90 days following the termination date (tolled during any blackout period). In the event of a Change In Control (defined below), if the executive is terminated without cause within 12 months after the Change In Control, all of the executive’s outstanding equity awards will immediately vest in full, and remain exercisable for 12 months following the termination date. For purposes of the Program, “Change In Control” occurs generally when (i) any person becomes the beneficial owner of 50% of our voting securities, (ii) there is a merger or consolidation of Gartner with another company where our outstanding securities represent less than 50% of the voting securities of the combined entity, (iii) an agreement for sale of all or substantially all of Gartner’s assets that is approved by our stockholders is executed and (iv) there is a change in the composition of our Board occurring after stockholder approval, as a result of which fewer than a majority of the directors on the board prior to the vote remain.

 

Under the 2003 LTIP, options that would have vested (assuming continued service) during the 12 months following retirement are deemed automatically vested on the retirement date. Additionally, in the event of death, disability or retirement, options remain exercisable for the earlier of the expiration date or one year from the date of termination; in the event of termination for any other reason, any unexercised options and other exercisable rights remain exercisable for the earlier of the expiration date or 90 days from the date of termination (excluding any period during which trading is prohibited under our insider trading policy). Retirement is defined in the 2003 LTIP as termination of employment if (i) on the date of termination, the employee is at least 55 years old and has at least 5 years continued service and (ii) the sum of the employee’s age and years of continued service equals at least 65. None of the Named Executive Officers qualified for a retirement benefit at December 31, 2006. Disability is defined in the 2003 LTIP as total and permanent disability. In the event of termination for cause, voluntary resignation, death, disability or retirement, no severance benefits are provided and vesting of equity awards ceases on the date of termination (except in the case of retirement as discussed above).

 

“Employment Agreements With Executive Officers” above contains a detailed discussion of the payments and other benefits to which our CEO and other Named Executive Officers are entitled in the event of an involuntary termination of employment, termination upon a Change In Control (as defined therein), or, in the case of Mr. Hall, upon a Change In Control only. In order to receive severance benefits, the executive officers who are terminated are required to execute and comply with a separation agreement and release of claims in which, among other things, the executive reaffirms his or her commitment to confidentiality and non-competition obligations (that bind all employees for one year following termination of employment) and releases the Company from various employment related claims. In addition, in the case of Named Executive Officers (other than Mr. Hall), severance will not be paid to any executive who refuses to accept an offer of comparable employment from Gartner or who does not cooperate or ceases to cooperate when being considered for a new position with Gartner, in each case as determined by the Company. Similarly, severance payments to Mr. Hall are contingent upon his execution of a general release of claims against the Company and compliance with confidentiality covenants, as well as non-competition and non-solicitation covenants contained in the 2004 Agreement that bind Mr. Hall for 24 months following termination of employment (which has been increased to 36 months under the 2007 Agreement).

 

The table set forth below quantifies amounts (in dollars) that would be payable by the Company, or otherwise be provided, to our Named Executive Officers (other than Mr. Hall) had their employment been terminated on December 29, 2006 (the last business day of 2006) as a result of (1) involuntary termination without cause and constructive termination and (2) a Change In Control. See Outstanding Equity Awards At Fiscal Year End Table below for a list of unvested equity awards at the end of 2006. Each Named Executive Officer would also be entitled to receive the balance in his deferred compensation plan account. See the Non-Qualified Deferred Compensation Table below.

 

 

 

 

 

The table set forth below quantifies amounts (in dollars) that would be payable by the Company, or otherwise be provided, to Mr. Hall had his employment been terminated on December 29, 2006 (the last business day of 2006) as a result of (1) involuntary termination without cause and constructive termination and (2) a Change In Control. These calculations are based upon the 2004 Agreement which was in effect on that date, and not the 2007 Agreement. Pursuant to the 2004 Agreement, acceleration of unvested options, SARS, RSUs and restricted stock awards will occur upon a Change In Control only; otherwise, in the event of involuntary termination other than in connection with a Change In Control, these securities will continue to vest over 24 months according to the applicable normal vesting schedule. See Outstanding Equity Awards At Fiscal Year End Table below for a list of unvested equity awards at the end of 2006. Mr. Hall would also be entitled to receive the balance in his deferred compensation plan account. See the Non-Qualified Deferred Compensation Table below.

 

 

 

 

Upon termination of employment due to death or disability, no additional benefits accrue to the Named Executive Officers (other than an extension of time to exercise options vested on the termination date). None of the Named Executive Officers were retirement eligible at December 29, 2006 and, therefore, none were entitled on that date to 12 months’ acceleration of vesting of options upon retirement provided by the 2003 LTIP. In any of these circumstances, however, the Compensation Committee has the power to modify any outstanding equity award held by an executive officer to accelerate vesting or to extend the period for exercise. In 2006, no such modifications were made.

 

 

Non-Equity Incentive Awards.  As discussed in greater detail in the Compensation Discussion and Analysis, 2006 bonus awards comprised our short-term incentive compensation component. 2006 bonus targets for executive officers were based solely upon the achievement of certain company-wide financial performance objectives. Executive bonus targets varied from 40% to 100% of base salary, with increasing levels of job responsibility. With respect to our Named Executive Officers, bonus targets were 100% for Mr. Hall, 80% for Mr. Patton, and 60% for each of Messrs. Lafond, Sondergaard and Schwartz. The financial objectives and weightings used for 2006 for all executive officers were EBITDA (50%), Core Research Contract Value (30%) and Total Sales Bookings (20%). The target objective amounts (resulting in 100% payment of target bonus) were EBITDA ($135 million), Core Research Contract Value ($458 million) and Total Sales Bookings ($895 million). The EBITDA target objective represented growth of 29% over 2005. The Core Research Contract Value and Total Sales Bookings target objectives represented growth of 6% and 7%, respectively, over 2005 on a foreign exchange neutral basis. Bonuses were payable in part if at least an 80% attainment level was achieved for each of these objectives. A maximum of 170% of target bonus could be earned based upon an attainment level of at least 140% of the EBITDA target objective amount and at least 200% of each of the Core Research Contract Value and Total Sales Bookings target objectives amounts. In 2006, we exceeded the target attainment levels, and earned bonuses for executive officers were approximately 112.5% of targeted amounts and were paid in full in February 2007. These amounts are reported under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

 

Equity Incentive Awards.  On March 15, 2006, the Compensation Committee approved, and there were awarded to executive officers, a combination of performance restricted stock units (PRSUs) and stock settled stock appreciation rights (SSARs) comprising our 2006 long-term incentive compensation award to executive officers under our 2003 LTIP. As discussed in greater detail in the Compensation Discussion and Analysis, for 2006, the number of PRSUs awarded to executive officers and eligible to vest ranged from 0% to 200% of the original approved target award amount (100%) based upon the achievement of certain levels of a specified 2006 internal sales objective related to sales bookings of our research segment — a measurement of growth in our largest business segment. The 0% threshold was set at achievement of less than $580 million of this sales objective, which represented approximately 6.8% growth over 2005, and the 100% target threshold was set at achievement of at least $590 million of this sales objective, which represented approximately 8.7% growth over 2005, in each case on a

foreign exchange neutral basis. This means that, had there been less than 6.8% growth in this sales objective, the entire PRSU award would have been forfeited. Seventy percent (70%) of the target number of PRSUs would be awarded with achievement of at least $580 million of this objective, and 200% of the target number of PRSUs would be awarded with achievement of at least $630 million of this objective. We established targets that scaled in a roughly linear manner between the 0% and 200% thresholds.

 

On February 15, 2007, the Compensation Committee determined that 2006 PRSUs eligible to vest were 164.5% of the target number of units awarded based upon the level of achievement of the specified 2006 internal sales objective. Additionally, both the PRSUs and SSARs vest based upon continued service to the Company at the rate of 25% per year for four years commencing May 15, 2007. Once vested, the SSARs are exercisable for seven years and two months from the date of grant, or until May 15, 2013. The SFAS 123(R) dollar amounts recognized for 2006 financial statement reporting purposes of the PRSUs and SSARs eligible to vest at December 31, 2006 are included in the amounts reported in the “Stock Awards” and “Option Awards” columns, respectively, of the Summary Compensation Table. The threshold, target and maximum number of PRSUs, and the number of SARs, awarded to the Named Executive Officers in 2006 are reported in the Grants of Plan — Based Awards Table. The actual number of PRSUs determined by the Committee to be eligible to vest are reported in footnote (2) to that table. The SFAS 123(R) full grant date fair value for each award (adjusted for the actual number of PRSUs awarded) is included in the “Grant Date Fair Value of Stock and Option Awards” column of the Grants of Plan-Based Awards Table.

 

This table provides information on the current option (including stock appreciation rights) and stock (including restricted stock and restricted stock unit) awards held by Named Executive Officers at December 31, 2006. Per SEC rules, each equity grant is shown separately for each Named Executive Officer. All performance criteria associated with these awards (except for Mr. Hall’s 500,000 share restricted stock award) have been fully satisfied, and the award is fixed. The market value of the stock awards is based on the closing price of our common stock on the New York Stock Exchange on December 29, 2006 (the last business day of the fiscal year), which was $19.79. Upon exercise of, or release of restrictions on, these awards, the number of shares ultimately issued to each executive may be reduced on account of shares withheld by Gartner for tax purposes.