Paul J. Sarvadi
INSPERITYAbout Paul J. Sarvadi
Co-founder of Insperity (1986) and its Chairman and Chief Executive Officer since 1989; age 68; attended Rice University and the University of Houston before starting and operating several small companies; former president and board member of NAPEO; recognized as E&Y National Entrepreneur of the Year (2001), Conn Family Distinguished New Venture Leader (2004), and inducted into the Texas Business Hall of Fame (2007) . 2024 performance context: Adjusted EBITDA was $270 million (non-GAAP), with net income of $91 million; cumulative TSR value stood at 101.83 using a $100 base (2019) as required in pay-versus-performance disclosures; CEO “compensation actually paid” (SEC CAP) was $81,500 reflecting equity mark-to-market and below-trend operating results . Governance uses a combined CEO/Chair model with a strong Lead Independent Director and majority independent board .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Insperity | Chairman & CEO | 1989–Present | Co-founder; long-term strategy, client focus in PEO; sustained leadership through growth cycles . |
| Insperity | President | 1989–Aug 2003 | Scaled operations and commercial execution during formative growth . |
| Various small companies | Founder/Operator | Pre-1986 | Sales/customer acumen foundational to Insperity’s SMB focus . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| National Association of Professional Employer Organizations (NAPEO) | President; Board Member | n/a (prior) | Industry advocacy; standards and visibility for PEO model . |
| Awards/Recognition | E&Y National Entrepreneur of the Year (Service) | 2001 | National recognition of entrepreneurial leadership . |
| Texas Business Hall of Fame | Inductee | 2007 | State-level recognition for business impact . |
Fixed Compensation
| Component | 2023 | 2024 | Notes |
|---|---|---|---|
| Base Salary ($) | $1,125,000 | $1,160,000 | 3.1% increase; market-based adjustment . |
| Target Bonus (% of Salary) | 150% | 150% | Short-Term Incentive Program . |
| Actual Cash Bonus ($) | $312,947 | $1,541,411 | 2024 payout improved to 89% of target vs. 18.5% in 2023 . |
Performance Compensation
2024 Short-Term Incentive (STI) Design and Results
| Metric | Weight | Threshold | Target | Max | Actual | Payout Modifier |
|---|---|---|---|---|---|---|
| Adjusted EBITDAIC (in $mm) | 30% | 285.3 | 338.6 | 371.5 | 345.5 | 119% . |
| PWEE Growth (Avg WSEEs) | 30% | 0.0% | 2.5% | 3.0% | 1.4% | 43% . |
| WX Employee Growth | 10% | 14% | 21% | 28% | 14.6% | 29% . |
| Workday Partnership Strategy (points) | 30% | 16 | 24 | 36 | 27 | 125% . |
| CEO Bonus Payout (% Target) | — | — | — | — | — | 89.0% . |
Definition notes: Adjusted EBITDAIC excludes stock-based and incentive comp, pre-paid SaaS implementation expense, and certain pre-identified Workday implementation costs for 2024 STI measurement .
2024 Long-Term Incentive (LTI) Structure and Grant
| LTI Component | Weight | Shares Granted (2/28/2024) | Grant Date Fair Value ($) |
|---|---|---|---|
| RSUs (3-yr ratable vest) | 35% | 23,555 | $2,362,331 . |
| Performance Shares (LTIP, 2024–2026) | 65% | 43,750 (target) | $4,274,370 . |
| 2024 LTIP Metrics | 75% Adjusted EBITDA (1-yr tranches over 3 yrs), 25% RTSR vs peer group | — | — . |
2024 LTIP first-year Adjusted EBITDA objectives and outcome:
| Performance Level | 2024 Adj. EBITDA Objective ($mm) | Payout % |
|---|---|---|
| Threshold | 241 | 50% |
| Target | 263 | 100% |
| Maximum | 285 | 200% |
| Actual (2024) | 270 | 130% (for 1/3 tranche) . |
Notes: RSUs accrue dividend equivalents and vest over three years; all executive equity awards include double-trigger CIC vesting; Qualified Retirement Policy allows continued vesting under specified age/tenure and non-compete conditions .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 1,335,704 shares; 3.55% of outstanding (as of 4/4/2025) . |
| Composition | Includes 862,912 shares via Our Ship Limited Partnership, Ltd. and 33,691 jointly with spouse . |
| Unvested RSUs (counted in beneficial ownership table) | 51,463 . |
| Options | None outstanding/exercisable . |
| Pledging | 120,000 shares pledged (~9.0% of his beneficial ownership); Board approved as not significant per policy . |
| Hedging | Prohibited for employees/directors . |
| Ownership Guidelines | CEO required 5x base salary; Company states compliance or within timeframe . |
| Realized Vesting (2024) | 69,992 shares vested; $6,955,982 value . |
Upcoming/Programmed Vesting (potential tax-selling pressure windows)
| Date | CEO RSUs Scheduled to Vest (incl. dividend equivalents) |
|---|---|
| Feb 28, 2025 | 22,526 |
| Feb 28, 2026 | 14,215 |
| Feb 28, 2027 | 8,060 . |
Employment Terms
| Topic | Terms |
|---|---|
| Employment Agreement | None; at-will . |
| Severance Plan (No CIC) | CEO: 24 months base salary in installments upon involuntary termination without cause; pro-rated STI at target; continued medical/dental/vision for severance period; restrictive covenants apply . |
| Severance (CIC within 18 months, double-trigger) | CEO: Lump sum 30 months base salary + target annual bonus; equity uses “change in control value” with completed periods at actual and incomplete at greater of target or actual if measurable; continued benefits for severance period . |
| Non-Compete/Non-Solicit | CEO non-compete 24 months; non-solicit customers/employees 24 months; others: 18-month non-compete, 24-month non-solicits . |
| Equity Vesting | Double-trigger CIC for acceleration; death/disability and Qualified Retirement Policy provide specified continued/pro-rata vesting; no single-trigger vesting . |
| Clawback | NYSE-compliant clawback for executives; broad recoupment policy for other employees . |
| Tax Gross-Ups | None for CIC . |
Board Governance
- Service/Role: Director since 1986; Chairman & CEO since 1989; not independent; no board committee service; board size 11 .
- Independence: All directors independent except Sarvadi (CEO) and Rawson (former management) .
- Lead Independent Director: Timothy T. Clifford; stated responsibilities include agendas, executive sessions, liaison to CEO .
- Meetings/Attendance: Board met six times in 2024; all directors attended ≥75% of meetings .
- Combined CEO/Chair Rationale: Board cites efficiency, accountability, and founder knowledge, with LID as counterbalance .
Director Compensation (as it applies to CEO as a director)
- Employee directors receive no additional compensation for board service (i.e., Sarvadi receives no director pay) .
Compensation Structure Analysis
- Cash vs Equity Mix: ~88% of CEO’s target direct compensation is incentive-based; LTI mix 65% performance shares in 2024 (performance emphasis) .
- Shift in Metrics/Targets: 2024 STI added strategic Workday partnership execution (30% weight), alongside Adj. EBITDAIC (30%), PWEE growth (30%) and WX employee growth (10%); payout 89% of target vs 2023’s 18.5% .
- Option Usage: No stock options or SARs granted; program relies on RSUs and PSUs; minimum one-year vesting on equity awards .
- Peer Positioning: 2024 LTI target increased 8% for CEO to keep TDC near market median; committee does not target a specific percentile; uses updated peer group for robustness .
Say-on-Pay & Shareholder Feedback
| Year | Say-on-Pay Approval |
|---|---|
| 2024 | >98% in favor . |
| 2023 | >89% in favor . |
Management reports outreach to large holders and ongoing alignment with shareholder interests .
Compensation Peer Group (2024/2025 Updates)
| Category | Peers |
|---|---|
| PEOs | ADP; Paychex; TriNet . |
| IT/Services/Consulting | Broadridge; CACI; FTI; Genpact; ICF; KBR; Maximus; SAIC . |
| HR/Staffing/Professional Services | Alight; ASGN; Kelly Services; Kforce; Korn Ferry; ManpowerGroup; Robert Half . |
| Changes vs prior | Removed Gartner, TrueBlue; added Alight, KBR, ManpowerGroup, Maximus, SAIC . |
Related Party Transactions (Governance Red Flags/Context)
- Book Licensing: Company bought 1,350 copies of Sarvadi’s co-authored book at cost ($6.52 each) for internal training ($8.8k) .
- Aircraft Charter: Company chartered flights via third-party operating Sarvadi-owned aircraft; paid $910,116 total in 2024; Sarvadi’s interest equaled 85% of hourly rate or $603,573 .
- Pledging: 120,000 pledged shares approved as not significant under board policy (less than 1% of shares outstanding), but remains a monitoring item for downside risk amplification .
Performance & Track Record
| Measure | 2024 | 2023 | Notes |
|---|---|---|---|
| Net Income ($mm) | 91 | 171 | SEC Pay-vs-Performance table . |
| Adjusted EBITDA ($mm) | 270 | 354 | Non-GAAP; basis for incentives/CSM . |
| TSR (Value from $100 at 12/31/2019) | 101.83 | 150.11 | Company TSR metric per PVP . |
| CEO “Compensation Actually Paid” ($) | 81,500 | 5,857,449 | CAP is equity mark-to-market measure under SEC rules . |
Strategic initiative: Partnership planning with Workday (2024 STI 30% weight) achieved 27/36 points; notable execution in integrations, branding, co-selling strategy, and onboarding playbooks .
Equity Ownership & Alignment — Detail Table
| Item | Amount | As-of Date |
|---|---|---|
| Beneficial Ownership (shares) | 1,335,704 | Apr 4, 2025 . |
| Ownership % | 3.55% | Apr 4, 2025 . |
| Unvested RSUs (beneficial ownership table) | 51,463 | Apr 4, 2025 . |
| Pledged Shares | 120,000 | Apr 4, 2025 . |
| RSUs Not Yet Vested (award schedule) | 44,801 (market value $3,472,526 at $77.51) | Dec 31, 2024 . |
| Unearned PSU/RSU Units | 93,570 (market value $7,252,611 at $77.51) | Dec 31, 2024 . |
Employment Terms — Economics (Illustrative at 12/31/2024)
| Scenario | Cash Severance | Equity | STI | Benefits | Total |
|---|---|---|---|---|---|
| Retirement | — | RSUs continue per policy; LTIP per actual/pro-rata | $1,541,411 | — | $9,050,399 total (includes LTIP/RSU values) . |
| Termination Not for Cause | $2,320,000 | Forfeit unvested RSUs/LTIP | $1,740,000 (pro rata at target) | $41,189 | $4,101,189 total . |
| Death/Disability | — | RSUs vest; LTIP pro-rata actual | — | — | $7,383,559 total . |
| CIC + Qualifying Termination | $7,250,000 (30 mo base + target bonus) | RSUs vest; LTIP “CIC value” | — | $51,486 | $18,026,596 total . |
Note: Values use 12/31/2024 stock price and plan formulas; timing and Section 409A may impact payment schedule .
Board Service History, Committees, Independence Considerations
- Director since 1986; Chairman & CEO since 1989; not independent; no committee seats .
- Lead Independent Director: Timothy T. Clifford; committee structure entirely independent; LID duties include executive sessions and agenda-setting .
- Attendance and structure consistent with NYSE independence rules; all directors independent except Sarvadi and Rawson .
Investment Implications
- Pay-for-performance alignment strengthened in 2024: despite base salary up 3.1%, STI payout at 89% reflected mixed growth (PWEE + WX below target) but solid profitability and strategic execution on Workday partnership; LTI remains majority performance-based with rigorous EBITDA targets and RTSR caps, supporting medium-term shareholder alignment .
- Retention risks appear mitigated by at-will status plus robust severance protections and double-trigger CIC equity; however, 120,000 pledged shares and related-party aircraft charter are governance watch items for downside scenarios; no CIC tax gross-ups and a NYSE-compliant clawback are positives .
- Ownership alignment is strong: 3.55% stake, compliance with 5x-salary ownership guideline, and significant scheduled vesting through 2027; expect periodic sale activity around vesting dates for tax-liquidity, potentially creating short-window supply .
- Governance: Combined Chair/CEO balanced by an active LID and majority-independent board; say-on-pay support >98% (2024) indicates shareholder confidence in the program; peer group refreshed to better match scale and talent markets .
- Execution risk: 2024 adjusted EBITDA of $270 million below prior year underscores sensitivity to SMB hiring; 2024 CAP for CEO effectively near zero illustrates alignment but also the volatility of equity-driven pay underperformance; sustained improvement in WSEE growth and Workday initiative monetization are critical near-term levers .