As Directors, our focus is overseeing the Company's business strategies, risk management, talent development, and succession planning which aligns with SCI's vision of sustainable long-term growth. We take seriously the trust you place in us by your purchase of Service Corporation International shares, and we are honored to be stewards of your Company. Below are a few key highlights for 2018.
2018 Company Performance and Compensation Alignment
We strive to provide transparency to you as we govern with the goal of realizing sustainable growth that delivers long-term value to our shareholders. We are fully committed to helping SCI deliver excellent operating results and create attractive shareholder returns.
- The Company’s performance in 2018 resulted in increased adjusted earnings per share and adjusted operating cash flow compared to the prior year.
- During 2018, we grew our funeral and cemetery preneed sales 6.5% and 4.3%, respectively, to $1.8 billion which allowed our preneed backlog to grow to $11.1 billion.
- The quarterly dividend was increased 13% to $0.17 per share, and we completed nearly $280 million of share repurchases.
- Furthermore, we invested over $225 million in acquisitions and growth opportunities.
- During 2018, we achieved total shareholder return of 10%, while the S&P 500 index was down 4%. Over the medium to long term (3 to 10 years), we continue to significantly outperform the S&P 500.
The Compensation Committee understands the focus on aligning executive pay with performance and strongly believes the Company currently aligns pay and performance. At last year’s annual meeting, our advisory “say-on-pay” proposal received 89.4% of the votes cast.
Effective in 2018, we made changes to the performance unit plan to add return on equity as a modifier to the total shareholder return metric in response to shareholder feedback. Additionally, we changed the performance units to be denominated in SCI shares rather than units, which we believe will further link share performance of the Company with the payouts from the plan.
We believe these changes are responsive to your feedback and reinforce the link between our executive team and our shareholders. As we look ahead to 2019, our plan is to continue to guide management as it executes the Company's strategic plan and works toward our goal of continued growth of shareholder return.
Board Composition and Refreshment
Board recruitment and diversity are a high priority for us. The Nominating and Corporate Governance Committee strives to maintain an engaged, independent Board with broad and diverse experience that is committed to representing the long-term interests of our shareholders. The Nominating and Corporate Governance Committee is charged with reviewing the composition of the Board and refreshing the members as appropriate. With this in mind, the Committee continuously reviews potential candidates and recommends nominees to the Board for approval.
Service Corporation International believes in a strong corporate culture that invests in inclusion and diversity, creating one of the greatest competitive advantages a company can maintain. In no area of business is corporate leadership more essential to generating progress than in guiding our Company through the culture shift of embracing diversity and inspiring inclusiveness. We are creating a Board that is a direct reflection of our Company’s values. Women comprise approximately one-third of our current Board and are ethnically diverse. Additionally, SCI's CEO, and fellow board member, Thomas L. Ryan joined the CEO Action for Diversity & InclusionTM and has taken the pledge to act on supporting more inclusive workplaces.
In response to shareholders, last year we successfully declassified the Board, eventually allowing all Directors to be eligible for reelection each year. This ensures Directors are actively engaged and involved with meeting the Company's objectives as well as satisfying our shareholder's needs. Since 2012, we have added four new Directors. With the election of our two newest Directors, the average age and tenure of our Board has declined by approximately four and nine years, respectively, compared to 2018.
Also in response to shareholders, we eliminated or reduced certain supermajority voting requirements in our Articles of Incorporation and Bylaws. Independent Directors - meaning Directors who have no material relationship with SCI (either directly or as a partner, shareholder, or officer of an organization that has a material relationship with SCI) - comprise 80% of SCI’s Board of Directors. In addition, the Audit, Compensation, and Nominating and Corporate Governance Committees of SCI are composed entirely of Independent Directors.
Communicating Your Viewpoints with the Board
We value dialogue with our shareholders. We believe our ongoing shareholder outreach efforts have allowed us to better understand the viewpoints of our shareholders as well as providing an opportunity to communicate with transparency about what the Board is doing and why our decisions are aligned with the Company's business goals.
Shareholders and other interested parties may communicate with any of the independent Directors, including Committee Chairs and the Lead Independent Director, by using the following address:
Service Corporation International
Lead Independent Director
c/o Office of Corporate Secretary
1929 Allen Parkway
Houston, TX 77019
Thank you for the trust you place in us and for your continued investment in Service Corporation International.
Anthony L. Coelho
Lead Independent Director
Thomas L. Ryan
Chairman and CEO
Alan R. Buckwalter, III
Jakki L. Haussler
Victor L. Lund
John W. Mecom, Jr.
Clifton H. Morris, Jr.
Sara Martinez Tucker
W. Blair Waltrip
Marcus A. Watts
Remembering our colleague and friend
In 2018, we lost our fellow Director and friend, Dr. Edward E. Williams. He used his considerable financial and entrepreneurial skills for the benefit of SCI by serving as a Board member for twenty-seven years. Dr. Williams helped oversee SCI’s strategy through his service on a variety of committees and as the chairman of the Investment Committee from 2004 until 2018.
He was also a respected academician and widely published author in the field of economics, finance, and business with major experience in entrepreneurship and financial economics. In his career, he taught at Rice University (located in Houston, TX) and founded the entrepreneurship program at Rice, which was later recognized as the number two MBA program in 2017. He will be greatly missed.