Management
Our CEO and the President and Chief Brand Officer on the expectations and achievements of each executive during the previous year, as well as their pay history and pay equity with other internal roles. The CPCC then references similar roles in peer companies to ensure they are within a competitive range of the peer group median. NEOs do not necessarily receive increases in base salary every year. When they do, the changes are effective on or about April 1st following their annual performance review, which includes a discussion about individual results against defined expectations.
COMPENSATION OF EXECUTIVE OFFICERS
Performance-Based Annual Cash Bonus
The opportunity for annual performance-based cash awards under our shareholder-approved Nordstrom, Inc. EMBP is designed to focus the NEOs on the alignment between annual operating performance and long-term business strategy.
In determining the target bonus opportunities, the CPCC takes into account the mix of pay elements, market pay information for similar roles within our peer group and the internal relationship between roles within the Company.
In support of our pay-for-performance philosophy, the maximum bonus payout, which is associated with superior performance, is 2.5 times an executive’s target bonus opportunity. This maximum is higher than is common among our retail peers because we believe it is important to continue encouraging and paying rewards when we achieve truly superior results. Under our approach, truly superior results are rarely achieved. In the past 10 years, we have not paid out bonuses in excess of 150% of target.
The following table shows the measures, weighting and opportunity for individual differentiation for the bonus opportunity for the CEO and President and Chief Brand Officer, and for the other NEOs for fiscal year 2021. The CPCC maintained the same financial performance measures of Incentive Adjusted EBIT, which emphasizes the importance of earnings and its role in driving shareholder value, and Incentive Adjusted ROIC, which ensures our overall performance aligns directly with shareholder returns over the long term.
In 2021, the bonus opportunity for the NEOs, excluding the CEO and President and Chief Brand Officer, was modified to place even greater emphasis on delivering profitable results by eliminating individual performance as a separate weighted metric. The CPCC retained the ability to differentiate payouts based on individual contributions and execution against goals. Any individual bonus differentiation is applied after the calculation of outcomes on the financial performance measures described below.
| | | | | | | | |
| Measure and Weighting | Opportunity for Individual Bonus Differentiation |
| |
CEO and President and Chief Brand Officer provide input | 100% Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold | No |
Other NEOs | 100% Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold | Yes |
The CPCC defines financial milestones for Incentive Adjusted ROIC (as a threshold) and Incentive Adjusted EBIT (as a range) that relate to varying percentages of bonus payout. The difficulty level in achieving the milestones reflects the CPCC’s belief that there should be a balance between executive pay opportunity, reinvestment in the Company and return to shareholders.
In accordance with our EMBP, Incentive Adjusted EBIT and Incentive Adjusted ROIC achievement used to determine bonus payout may differ from EBIT and ROIC, as reported in our 2021 Annual Report, due to the exclusion of certain one-time gains or losses. In fiscal year 2021, our Incentive Adjusted EBIT measure excluded certain performance-based compensation elements in order to be more reflective of business performance. Incentive Adjusted EBIT and Incentive Adjusted ROIC are not measures of financial performance under GAAP and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures.
2021 Bonus Measure Outcomes and Payouts
Our Incentive Adjusted EBIT achievement exceeded the threshold milestone of $612 million and Incentive Adjusted ROIC exceeded the threshold of 5.5%, resulting in a 128% payout. In fiscal year 2021, our Incentive Adjusted EBIT measure excluded certain performance-based compensation elements in order to be more reflective of business performance.
The bonus payouts for Anne Bramman, Kenneth Worzel and Edmond Mesrobian were not differentiated for individual performance. Each individual’s performance against strategic priorities was evaluated by the CEO and the President and Chief Brand Officer and the payout results were approved by the CPCC.
The performance-based annual cash bonus results are summarized in the following table.
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| | Milestones | |
Name | Bonus Measures | Threshold | Target | Superior | Actual |
All NEOs | Incentive Adjusted EBIT | $375 | M | $612 | M | $900 | M | $666M |
% of Payout | 25 | % | 100 | % | 250 | % | 128 | % |
Subject to Incentive Adjusted ROIC threshold | 5.5% | 7.0 | % |
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| 37 | 2022 Proxy Statement | NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
LTIs
Annual grants of LTI under our shareholder-approved EIP are intended to provide the NEOs with additional incentive to create shareholder value and receive financial rewards. In establishing the LTI annual grant value for each NEO, the CPCC considers the mix of pay elements, market pay information for similar roles within our peer group, our annual share usage and dilution, performance and internal equity of grant size by role. The CPCC typically approves LTI annual grants during the February CPCC meeting, which is scheduled at least a year in advance. The February meeting occurs after performance results for the prior year are known, which allows the CPCC to align compensation elements with our performance and business goals.
Due to the challenges of setting goals for PSUs in a highly variable environment, the CPCC approved changes in both the mix and vesting of LTI grants for the NEOs for fiscal year 2021.
•Erik Nordstrom and Peter Nordstrom’s target LTI mix changed from 40% stock options and 60% PSUs to 100% price-vested stock options. Stock option vesting changed from 25% each year over four years to 50% on March 10, 2024 and 50% on March 10, 2025, to account for the elimination of PSUs, which typically had a three-year cliff vest, and to emphasize the long-term nature of the award. Vesting is subject to the condition that the average daily closing price of our Common Stock meets or exceeds $45 per share for any twenty consecutive trading day period prior to March 10, 2025. For reference, our average closing price in fiscal year 2019 (pre-COVID) was $37.
•Anne Bramman, Kenneth Worzel and Edmond Mesrobian’s target LTI mix changed from 40% RSUs and 60% PSUs to 60% RSUs and 40% stock options. The CPCC made no change to RSU vesting, which vest 25% each year over four years. Stock option vesting changed from 25% each year over four years to 50% on March 10, 2024 and 50% on March 10, 2025, to account for the elimination of PSUs, which typically had a three-year cliff vest, and to emphasize the long-term nature of the award.
2019 PSUs Did Not Pay Out
Two-thirds of the PSUs granted in 2019 had a three-year performance period which ended January 29, 2022. At the end of the performance cycle, our Free Cash Flow Growth and EBIT Margin % did not meet the minimum thresholds, as shown below, required for payout. As a result, none of these PSUs vested. One-third of the PSUs granted in 2019 had a one-year performance period which ended February 1, 2020. As disclosed in our 2020 Proxy Statement, none of these PSUs vested as our Free Cash Flow Growth and EBIT Margin % did not meet the minimum thresholds required for payout.
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Performance Measures for Performance Period: February 3, 2019 – January 29, 2022 |
Free Cash Flow Growth | EBIT Margin % | Percentage of Units that will Vest |
≥31.4% | ≥7.1% | 200% |
28.9% | 6.8% | 100% |
26.3% | 6.5% | 50% |
<26.3% | <6.5% | 0% |
Stock Ownership Guidelines Align Executives and Shareholders
Ownership of Common Stock by our NEOs and other Executive Officers is encouraged by management and the Board, and our stock ownership guidelines were formally established in 2004. Ownership shares are made up of all forms of Common Stock, as well as vested PSUs that are deferred and unvested RSUs. Ownership shares do not include unvested or vested stock options, unvested PSUs or pledged shares.
The NEOs and other Executive Officers have an annual share target defined as base salary on each April 1st multiplied by their ownership multiple of base salary divided by a 52-week average closing stock price. The ownership multiples of base salary depend on the executive’s role in the Company and are as shown in the following table for the NEOs. The CPCC has assigned these particular multiples to match or exceed market practice, and to represent a significant portion of the overall compensation package to reinforce the alignment of management’s decision-making with shareholder interests. Executives will be deemed to be in compliance with the Stock Ownership Guidelines once their holdings of Common Stock meet or exceed the threshold, and will remain in compliance, notwithstanding any decline in the value of Common Stock, unless and until the executive sells shares. However, a new target will be determined at the time an executive receives a promotion that results in an increased multiple of base salary or in the case of a one-time base salary increase greater than 20%, at which point the executive will have five years to achieve the new target.
| | | | | |
Position | Multiple of Base Salary Used to Establish Ownership Target |
Chief Executive Officer | 10x |
Chief Financial Officer | 4x |
President and Chief Brand Officer | 10x |
Chief Customer Officer | 4x |
Chief Technology Officer | 3x |
COMPENSATION OF EXECUTIVE OFFICERS
Under our guidelines, NEOs and other Executive Officers are required to conduct any open market transactions in Common Stock only in accordance with an SEC Rule 10b5-1 trading plan. These plans predetermine the timing, number of shares and price at which an Executive Officer may buy or sell Company shares. The Executive Officers must also achieve and retain a minimum holding of 100% of their ownership targets before they may sell or otherwise dispose of Company shares.
The CPCC regularly reviews stock ownership status for the NEOs. All of the NEOs have exceeded their ownership targets.
Benefits
The Company offers the NEOs a comprehensive program of broad-based, leadership and retirement benefits. Their purpose varies by benefit, but in general they enhance total compensation with meaningful and competitive offerings that support healthy lifestyles and contribute to financial security. These benefits are regularly reviewed for consistency with our pay and benefits philosophy, organizational culture and market practices.
Additional information on 2021 benefits is provided in the table below.
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| | Benefit | | Where to Learn More |
Broad- Based | ● | Company contribution to medical, dental and vision coverage; short- and long-term disability; life insurance; adoption assistance; and employee referral assistance. Employee access to accident insurance; health savings account and flexible spending accounts; ESPP and merchandise discount. Paid time off (or Self-Managed Time Away for executives) | ● | For merchandise discount, see All Other Compensation in Fiscal Year 2021, footnote (a) on page 44. |
Leadership | ● | Long-term disability coverage; life insurance
| ● | For long-term disability and life insurance, see All Other Compensation in Fiscal Year 2021, footnote (c) on page 45. |
| ● | NDCP; including Company match for eligible participants | ● | See Nonqualified Deferred Compensation beginning on page 52. |
| ● | Executive Severance Plan | ● | See Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2021, footnote (e) on pages 57 and 58. |
Retirement | ●
| 401(k) match; Company matching contributions are made each pay period an employee contributes to the CPCC401(k) Plan, equal to a dollar for dollar match up to 1% of eligible pay then $0.50 per dollar on the levelnext 6% of eligible pay, up to a maximum of 4% of eligible pay and design of compensation elements for the NEOsIRC limits | ● | See All Other Compensation in Fiscal Year 2021, footnote (b) on page 45. |
● | Retiree health care (closed to new entrants in 2013; Erik Nordstrom, Peter Nordstrom and other Executive Officers, excluding themselves. Our Chief Human Resources Officer joins them in CPCC meetings to provide perspective and expertise relevantKenneth Worzel are participants as they were eligible prior to the agenda. Management supports the CPCC’s activity by providing analyses and recommendations developed internally,closure to new entrants) | ● | See Potential Payments Upon Termination or occasionally, with the assistance of external consulting firms other than the CPCC’s independent consultant.Market Data Provides a Reference PointChange in Control at Fiscal Year-End 2021, footnote (d) on page 57.
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● | SERP (annual benefit capped for CompensationThe CPCC believes that knowledge of market practices, particularly those of our peers listed below, is helpfulcurrent participants; closed to new entrants in assessing the design and targeted level of our executive compensation package. In reviewing peer group information, the CPCC uses survey data provided by external consultants, monitors general market movement for executive pay and references proxy statements for specific roles.
While the CPCC considers the 50th percentile (median) of our peer group as a reference, there is no specific percentage of target total direct compensation targeted by the CPCC other than to remain generally competitive with similarly situated peer companies. Target opportunities for individual pay elements vary by executive role based on scope of responsibilities and expected contributions.
Target total direct compensation for 2020 for2012; Erik Nordstrom, and Peter Nordstrom was below our peer group median, as it has been in previous years. Based on the CPCC’s review of relevant market data and internal pay equity, the CPCC believes the target total direct compensation for Anne
Bramman, Kenneth Worzel and Edmond Mesrobian was within a competitive range ofare participants as they were eligible prior to the peer group median. Actual pay for the NEOs can exceed our established targets or peer group actual pay through the variable compensation elements when pre-determined performance milestones are achieved. Actual or realizable pay for the past few years has been below target, as shownclosure to new entrants)
| ● | See Pension Benefits beginning on page 31.Peer Group Companies Represent Our Business
Each year, the CPCC reviews the appropriateness of our peer group for comparison on pay and related practices. Collectively, the peer group companies represent our primary business areas, including our Nordstrom, Nordstrom Rack, in-store, and online business and private label products. The peer group companies generally meet the following selection criteria:
•51.
|
fall within the Consumer Discretionary and Staples sectors;
•fall within a reasonable range of our size, defined as one-fourth to four times our revenue and one-fifth to five times our market capitalization;
•share similar talent, operational and/or business characteristics, including a retail-focused business model;
•have a similar or related product focus and place a high value on customer experience;
•are part of our industry group as defined by institutional shareholders and shareholder service organizations; and
•are a public company subject to similar market pressures.
Our peer group used for evaluating compensation for fiscal year 2020 was comprised of the following retail companies:
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| 39 | 2022 Proxy Statement | NORDSTROM, INC. | |
Bed Bath & Beyond, Inc. | J. C. Penney Company, Inc. | Tapestry, Inc. |
Capri Holdings Limited | Kohl’s Corporation | Tiffany & Co. |
Dillard’s, Inc. | L Brands, Inc. | The TJX Companies, Inc. |
The Estée Lauder Companies Inc. | Macy’s, Inc. | Urban Outfitters, Inc. |
Foot Locker, Inc. | Ralph Lauren Corporation | VF Corporation |
Gap, Inc. | Ross Stores, Inc. | Williams-Sonoma, Inc. |
During 2020, as part of its annual review of peer companies to be used for compensation comparison purposes, the CPCC determined that Hudson’s Bay Company and Neiman Marcus Group should be removed due to the unavailability of publicly disclosed pay data going forward.
33 NORDSTROM, INC. - 2021 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
Each Element of Compensation Has Its Own Purpose
Our compensation program for NEOs is made up of four primary elements outlined below. Each element has its own purpose based on our fundamental premise of pay for performance and our pay and benefits philosophy,
described on page 30. Additional information is provided below and on the following pages in the “About Our Compensation Elements: What We Paid in 2020 and Why” section.
| | | | | | | | |
Compensation Element | | Purpose |
Base Salary
(Pages 34 through 35)
| | Reflect scope of the role and individual performance through base-line cash compensation. |
Performance-Based Annual
Cash Bonus
(Pages 35 through 36)
| | Motivate and reward contributions to annual operating performance and long-term business strategy with cash that varies based on results. |
LTIs
(Pages 36 through 37)
| | Promote alignment of executive decisions with Company goals and shareholder interests through stock options, PSUs and RSUs where value varies with Company stock performance. |
Benefits
(Page 38)
| | Provide meaningful and competitive broad-based, leadership and retirement benefits that support healthy lifestyles and contribute to financial security. |
Pay Changes for 2020
On an annual basis, the CPCC reviews base salary, performance-based bonus target opportunity and LTI target grant value for each of the NEOs in consideration of the upcoming fiscal year.
The CPCC did not approve any changes to base salary, target bonus opportunity or target equity grant value for any of the NEOs in 2020. The CPCC believes these elements and the overall compensation program are meeting the expectations for our pay-for-performance and pay and benefits philosophies.
Base Salary in the table below reflects base salaries prior to temporary pay reductions implemented from March 29, 2020 to October 3, 2020, as discussed below.
LTI annual grant in the table below reflects target grant value as a percent of base salary. The CPCC retains discretion to approve grants above and below targets in any given year to reflect an individual’s contributions to delivering shareholder value. In 2020, the CPCC used its discretion to increase the LTI annual grant to 250% for Anne Bramman, 300% for Kenneth Worzel and 200% for Edmond Mesrobian, as discussed on page 36.
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Name | | Base Salary ($) | | Performance-Based Annual Cash Bonus (Target Opportunity as a % of Base Salary) | | LTI Annual Grant (Target Grant Value as a % of Base Salary)* |
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Erik B. Nordstrom | | 758,500 | | | | | 200 | | | | | 350 | | | |
Anne L. Bramman | | 800,000 | | | | | 100 | | | | | 200 | | | |
Peter E. Nordstrom | | 758,500 | | | | | 200 | | | | | 350 | | | |
Kenneth J. Worzel | | 875,000 | | | | | 125 | | | | | 250 | | | |
Edmond Mesrobian | | 775,000 | | | | | 80 | | | | | 150 | | | |
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About Our Compensation Elements: What We Paid in 2020 and Why |
Impact of COVID-19 on Compensation
The COVID-19 pandemic has had a profound effect on the Company and its employees on many levels, including compensation. When the Company temporarily closed all store locations to protect the health of our employees and customers, on March 17, 2020, the decision was made to continue to pay store employees through April 5, 2020, and to continue to provide benefits to enrolled employees. The belief at that time was that the store closure would be quite short, but in the weeks that followed, it became clear it would be necessary for our stores to be closed to the public for a longer period.
On March 25, 2020, the CPCC took immediate action to support cash preservation goals by reducing the base salaries of the NEOs from March 29, 2020 to October 3, 2020, as follows: Erik Nordstrom and Peter Nordstrom received no base salary, while Anne Bramman, Kenneth Worzel and Edmond Mesrobian received a 25% base salary reduction. Similarly, the salaries of all other executives at the Company were reduced by 10% to 25%, depending on role, and our Board elected to reduce their 2020 cash retainers by fifty percent (50%) and defer payment of their remaining cash retainers for the six months immediately following the 2020 Annual Meeting. Subsequently, in April 2020, a portion of our corporate employees were furloughed for six weeks, during which time the Company continued to make available benefits to enrolled employees.
NORDSTROM, INC. - 2021 Proxy Statement 34
Changes for 2022
Each year, the CPCC reviews the design of our total compensation elements and makes changes as needed to improve alignment with our pay and benefits philosophy. At the February 2022 meeting, the CPCC approved the following changes for fiscal year 2022:
Base Salary
Anne Bramman’s base salary was increased by 4% effective March 27, 2022, to maintain her relative market competitiveness. The base salaries of all other NEOs remained unchanged.
Performance-Based Annual Cash Bonus
The CPCC determined that the target bonus opportunity as a percent of base salary for the NEOs will remain unchanged for 2022.
LTIs
•Performance-based equity was reintroduced into the LTI annual grant mix. The 2022 target annual grant mix for all NEOs was changed to 60% PSUs and 40% stock options. The PSUs will pay out based on the cumulative sales and EBIT margin % over a three-year performance period. Goals for the PSUs are aligned with the Company’s forward-looking strategy communicated at the February 2021 Investor Event. The CPCC believes that these measures reflect the Company’s key areas of strategic focus over the next three years. The minimum percentage of PSUs that can be earned at the end of the three-year performance cycle is 75% and the maximum is 150%. To emphasize the long-term nature of the award, the stock options will continue to vest 50% at the end of year 3 and 50% at the end of year 4.
•Anne Bramman’s target LTI grant value as a percent of base salary increased from 200% to 250% to maintain her relative market competitiveness for the Chief Financial Officer role. The target LTI grant as a percent of base salary of all other NEOs remained unchanged. The CPCC did not use its discretion to modify any NEO target LTI grants for 2022.
Our Roles in Determining Compensation Are Well-Defined
Compensation, People and Culture Committee
Our CPCC oversees the development and delivery of our pay and benefits philosophy and compensation plans for the NEOs and other executives as described in the CPCC charter on our Investor Relations Website.
As part of that oversight, the CPCC ensures the NEOs’ aggregate compensation aligns with shareholder interests by reviewing analyses that include:
•Cash alignment to evaluate the short-term incentive payouts relative to our financial performance.
•Relative pay and performance to compare the percentile rankings of our total direct compensation (base salary + performance-based bonus + LTIs) with financial performance metrics of our peer group.
Base Salary
The CPCC begins its annual review of base salary for the NEOs through discussion with the CEO and the President and Chief Brand Officer on the expectations and achievements of each executive during the previous year, as well as their pay history and pay equity with other internal roles. The CPCC then references similar roles in peer companies to ensure they are within a competitive range of the peer group median. NEOs do not necessarily receive increases in base salary every year. When they do, the changes are effective on or about April 1st
following their annual performance review, which includes a discussion about individual results against defined expectations.
As discussed on the previous page, Erik Nordstrom and Peter Nordstrom received no base salary from March 29, 2020 to October 3, 2020, and the base salaries of the other NEOs were reduced by 25% during this period.
Performance-Based Annual Cash Bonus
The opportunity for annual performance-based cash awards under our shareholder-approved Nordstrom, Inc. EMBP is designed to focus the NEOs on the alignment between annual operating performance and long-term business strategy.
NEOs received no bonus under our program for 2020 as discussed below.
The CPCC establishes the following criteria in developing the annual bonus arrangements:
•Target bonus opportunity: In determining the target percentage of base salary, the CPCC takes into account the mix of pay elements, market pay information for similar roles within our peer group and the internal relationship between roles within the Company.
In support of our pay-for-performance philosophy, the maximum bonus payout, which is associated with superior performance, is 2.5 times an executive’s target bonus opportunity. This maximum is higher than is common among our retail peers because we believe it is important to continue encouraging and paying rewards when we achieve truly superior results. Under our approach, truly superior results are rarely achieved. In the past 10 years, we have not paid out bonuses in excess of 150% of target.
•Performance measures: The CPCC establishes the performance measures to focus executives on the most important annual and long-term strategic goals. For fiscal year 2020, the NEOs had the following measures:
–Incentive Adjusted ROIC to ensure our overall performance aligns directly with shareholder returns over the long term. The measure is expressed as a threshold that must be met before any payout can be made on Incentive Adjusted EBIT results to ensure our executives are rewarded only after earnings generate meaningful returns for our shareholders.
–Incentive Adjusted EBIT to emphasize the importance of earnings and its role in driving shareholder value. Erik Nordstrom and Peter Nordstrom each had this performance measure weighed at 100%, subject to the achievement of the Incentive Adjusted ROIC threshold. Anne Bramman, Kenneth Worzel and Edmond Mesrobian each had this performance measure weighed at 67%, again subject to the achievement of the Incentive Adjusted ROIC threshold.
–Individual Measure to enable differentiation in bonus payout opportunity based on individual contributions and execution against goals for Anne Bramman, Kenneth Worzel and Edmond Mesrobian. The individual bonus measure accounted for 33% of the total bonus opportunity for these NEOs.
The following table shows the mix of financial and individual components of the bonus opportunity for the CEO and the President and Chief Brand Officer and for the other NEOs for fiscal year 2020.
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CEO and President and Chief Brand Officer | 100%
Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold
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Other NEOs | 67%
Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold
| 33%
Individual Measure
|
•Performance measure milestones: The CPCC defines financial milestones for Incentive Adjusted ROIC (as a threshold) and Incentive Adjusted EBIT (as a range) that relate to varying percentages of bonus payout. The difficulty level in achieving the milestones reflects the CPCC’s belief that there should be a balance between executive pay opportunity, reinvestment in the Company and return to shareholders. Quantitative and qualitative goals were established for the individual bonus measures.
In accordance with our EMBP, Incentive Adjusted EBIT and Incentive Adjusted ROIC achievement used to determine bonus payout may differ from EBIT and ROIC, as reported in our 2020 Annual Report, due to the exclusion of certain one-time gains or losses. In fiscal year 2020, Incentive Adjusted EBIT and Incentive Adjusted ROIC are the same as EBIT and ROIC as reported in our 2020 Annual Report. Incentive Adjusted EBIT and Incentive Adjusted ROIC are not measures of financial performance under GAAP and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures.
2020 Bonus Measures, Incentive Adjusted EBIT Milestones, Individual Measure Achievement and Total Bonus Payout
Our Incentive Adjusted EBIT achievement fell below our threshold milestone of $645 million, resulting in a zero payout.
While significant progress was made against the qualitative and quantitative goals associated with the individual measure, the CPCC approved a zero payout on this portion of the bonus opportunity for Anne Bramman, Kenneth Worzel and Edmond Mesrobian, given overall business results. Performance against the quantitative and qualitative goals, which were established at the beginning of the year, was evaluated by the CEO and the President and Chief Brand Officer and the payout results were approved by the CPCC.
35 NORDSTROM, INC. - 2021 Proxy Statement
The performance-based annual cash bonus results are summarized in the following table.
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| | | Milestones | | Total Bonus Payout (as a % of Target) |
NEO | Bonus Measures | Weight | Threshold (25%) | Target (100%) | Superior (250%) | Result / Payout % |
Erik B. Nordstrom and Peter E. Nordstrom | Incentive Adjusted EBIT | 100 | % | $645 | M | $840 | M | ≥$1,036M | ($1,047M) / 0% | 0 | % |
Subject to Incentive Adjusted ROIC threshold | | 8.6 | % | | | (8.5 | %) |
Anne L. Bramman | Incentive Adjusted EBIT | 67 | % | $645 | M | $840 | M | ≥$1,036M | ($1,047M) / 0% | 0 | % |
Subject to Incentive Adjusted ROIC threshold | | 8.6 | % | | | (8.5 | %) |
Individual Measure | 33 | % | | | | 0 | % |
Kenneth J. Worzel | Incentive Adjusted EBIT | 67 | % | $645 | M | $840 | M | ≥$1,036M | ($1,047M) / 0% | 0 | % |
Subject to Incentive Adjusted ROIC threshold | | 8.6 | % | | | (8.5 | %) |
Individual Measure | 33 | % | | | | 0 | % |
Edmond Mesrobian | Incentive Adjusted EBIT | 67 | % | $645 | M | $840 | M | ≥$1,036M | ($1,047M) / 0% | 0 | % |
Subject to Incentive Adjusted ROIC threshold | | 8.6 | % | | | (8.5 | %) |
Individual Measure | 33 | % | | | | 0 | % |
LTIs
Annual grants of equity under our shareholder-approved EIP are intended to provide the NEOs with additional incentive to create shareholder value and receive financial rewards. The LTI annual grant value to NEOs is expressed as a percentage of base salary as shown on page 34. In establishing the LTI annual grant value for each NEO, the CPCC considers the mix of pay elements, market pay information for similar roles within our peer group, our annual share usage and dilution, performance and internal equity of grant size by role. The CPCC typically approves LTI annual grants during the February CPCC meeting, which is scheduled at least a year in advance. The February meeting occurs after performance results for the prior year are known, which allows the CPCC to align compensation elements with our performance and business goals.
The CPCC used its discretion to increase the LTI annual grant value as a percentage of base salary for Anne Bramman, Kenneth Worzel and Edmond Mesrobian to recognize their increased responsibilities and/or to acknowledge their strong leadership in their functional areas.
•Anne Bramman’s LTI annual grant was 250% of base salary to recognize her role in delivering expense savings well in excess of our expense target.
•Kenneth Worzel’s LTI annual grant was 300% of base salary to recognize his increased responsibility in our newly established Chief Operating Officer role and his leadership as we have progressed our growing local market strategy.
•Edmond Mesrobian’s LTI annual grant was 200% of base salary to recognize his progress in building a strong team delivering leading-edge systems capabilities.
For fiscal year 2020, the target LTI mix was composed of PSUs (60% of the grant value) and stock options (40% of the grant value) for the CEO and the President and Chief Brand Officer and PSUs (60% of the grant value) and RSUs (40% of the grant value) for the other NEOs. This mix provides a balance of the key retention and performance objectives of the LTI plan.
•PSUs granted as part of the annual equity grant had a three-year performance cycle, from February 2, 2020 through January 28, 2023, and would have resulted in a payout if certain criteria were met. The core measures for the PSUs in this performance cycle, equally weighted, were free cash flow and EBIT margin percentage, with the Company’s market share serving as a payout modifier for the award. Shortly after the PSU grant was made on March 9, 2020, the Company temporarily closed stores in response to the growing COVID-19 pandemic, which meaningfully disrupted sales and operations. There was also significant uncertainty and disruption to our inventory flow, merchandising, and supply chain. Accordingly, the CPCC determined that the financial and market share goals established in February of 2020 for the PSU grant were no longer relevant or functional, and determined not to revise the goals for the 2020 PSUs. Accordingly, each of the NEOs agreed to the cancellation of their PSU award on August 18, 2020, as disclosed in the Form 8-K filed August 20, 2020. As required, the grant date fair values of the PSU grants are included in the Summary Compensation Table, on page 42. On August 18, 2020, the CPCC determined to award stock option grants in light of continued economic uncertainty, along with a desire to incentivize executives towards optimal shareholder outcomes and recognize the executives’ critical roles in supporting the Company’s key strategies and long-term success to each of the NEOs, effective August 27, 2020, the first open trading window date after CPCC approval. Stock options reward executives for the creation of long-term shareholder value, thereby aligning the executives’ interests with those of our Company’s shareholders. Erik Nordstrom and Peter Nordstrom each received an option to purchase 245,829 shares, and Anne Bramman, Kenneth Worzel and Edmond Mesrobian received an option to purchase 281,657, 366,540 and 212,207 shares, respectively. The stock options granted on August 27, 2020 have a grant price of $14.79, the closing stock price on August 27, 2020 and vest in full on September 10, 2022.
NORDSTROM, INC. - 2021 Proxy Statement 36
•RSUs granted as part of the annual equity grant to the NEOs, excluding the CEO and the President and Chief Brand Officer, vest in four equal installments and complement our objectives for balancing award value through both absolute and relative stock performance.
•Stock options granted as part of the annual grant to the CEO and the President and Chief Brand Officer vest and become exercisable in four equal annual installments and have a 10-year term. Our equity plan does not permit repricing, grant prices below 100% of the fair market value of Common Stock on the date of grant or cash dividend payments on options.
Two-Thirds of the 2019 PSUs are Still in Process
One-third of the PSUs granted in 2019 has a one-year performance period and two-thirds of the grant has a three-year performance period. The core measures for both performance periods are free cash flow growth and EBIT margin percent. At the end of the three-year performance period, market share results could adjust the number of shares that vest and are paid out up or down by up to 20%. At the end of the one-year performance period ended February 1, 2020, the thresholds for the core measures of free cash flow growth and EBIT margin percent were not achieved, so one-third of the PSU grant did not pay out, while two-thirds of the grant has time remaining in the performance period. The vest schedule for the remaining two-thirds of the 2019 PSU grant is shown below.
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Performance Measures for Performance Period: February 3, 2019 – January 29, 2022 |
Free Cash Flow Growth |
EBIT Margin % | Percentage of Units that will Vest |
≥31.4% | ≥7.1% | 200% |
28.9% | 6.8% | 100% |
26.3% | 6.5% | 50% |
<26.3% | <6.5% | 0% |
Stock Ownership Guidelines Align Executives and Shareholders
Ownership of Common Stock by our NEOs and other Executive Officers is encouraged by management and the Board, and our stock ownership guidelines were formally established in 2004. Ownership shares are made up of all forms of Common Stock, as well as vested PSUs that are deferred and unvested RSUs. Ownership shares do not include unvested or vested stock options, unvested PSUs or pledged shares.
The NEOs and other Executive Officers have an annual share target defined as base salary on each April 1st multiplied by their ownership multiple of base salary divided by a 52-week average closing stock price. The ownership multiples of base salary depend on the executive’s role in the Company and are as shown in the following table for the NEOs. The CPCC has assigned these particular multiples to match or exceed market practice, and to represent a significant portion of the overall compensation package to reinforce the alignment of management’s decision-making with shareholder interests. Executives will be deemed to be in compliance with the Stock Ownership Guidelines once their holdings of Common Stock meet or exceed the threshold, and will remain in compliance, notwithstanding any decline in the value of Common Stock, unless and until the executive sells shares. However, a new target will be determined at the time an executive receives a promotion that results in an increased multiple of base salary or in the case of a one-time base salary increase greater than 20%. Executives would have five years to achieve the new target.
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Position | Multiple of Base Salary Used to Establish Ownership Target |
Chief Executive Officer | 10x |
Chief Financial Officer | 4x |
President and Chief Brand Officer | 10x |
Chief Operating Officer | 4x |
Chief Technology Officer | 3x |
Under our guidelines, NEOs and other Executive Officers are required to conduct any open market transactions in Common Stock only in accordance with an SEC Rule 10b5-1 trading plan. These plans predetermine the timing, number of shares and price at which an Executive Officer may buy or sell Company shares. The Executive Officers must also achieve and retain a minimum holding of 100% of their ownership targets before they may sell or otherwise dispose of Company shares.
The CPCC regularly reviews stock ownership status for the NEOs. All of the NEOs have exceeded their ownership targets.
37 NORDSTROM, INC. - 2021 Proxy Statement
Benefits
The Company offers the NEOs a comprehensive program of broad-based, leadership and retirement benefits. Their purpose varies by benefit, but in general they enhance total compensation with meaningful and competitive offerings that support healthy lifestyles and contribute to financial security. These benefits are regularly reviewed for consistency with our pay and benefits philosophy, organizational culture and market practices.
Due to the economic impact of the COVID-19 pandemic, the Board made the decision to suspend the discretionary company match (equal to dollar for dollar, up to 4% of eligible pay) and the profit-based match (equal to up to an additional $0.50 per $1 up to a maximum of 2% of eligible pay, based on Company performance) under the 401(k) Plan for the 2020 plan year. As a result, neither the NEOs, nor any other
Company employees, received a Company matching contribution for the 2020 Plan Year.
Company matching contributions began again for the 2021 plan year for NEOs and all other Company employees under a new Qualified Automatic Contribution Arrangement (QACA) plan design. Beginning January 1, 2021, the NEOs and all other Company employees can contribute up to 50% of eligible pay, subject to IRC limits. Company matching contributions are made each pay period an employee contributes to the 401(k) Plan, equal to a dollar for dollar match up to 1% of eligible pay then $0.50 per dollar on the next 6% of eligible pay, up to a maximum of 4% of eligible pay and IRC limits.
Additional information on 2020 benefits is provided as noted below.
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| | Benefit | | Where to Learn More |
Broad-Based | ● | Company contribution to medical, dental and vision coverage; short- and long-term disability; life insurance; adoption assistance; and employee referral assistance. Employee access to accident insurance; health savings account and flexible spending accounts; ESPP and merchandise discount. Paid time off (or Self-Managed Time Away for executives) | ● | For merchandise discount, see All Other Compensation in Fiscal Year 2020, footnote (a) on page 44. |
Leadership | ● | Long-term disability coverage; life insurance
| ● | For long-term disability and life insurance, see All Other Compensation in Fiscal Year 2020, footnote (c) on page 44. |
| ● | NDCP; Company match and discretionary profit-based match for eligible participants | ● | See Nonqualified Deferred Compensation beginning on page 51. |
| ● | Executive Severance Plan | ● | See Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2020, footnote (e) on page 57. |
Retirement | ●
| Discretionary 401(k) match and profit-based match (suspended for the 2020 plan year and modified for the 2021 plan year as discussed above) | ● | See All Other Compensation in Fiscal Year 2020, footnote (b) on page 44. |
● | Retiree health care (closed to new entrants in 2013; Erik Nordstrom, Peter Nordstrom and Kenneth Worzel are participants as they were eligible prior to the closure to new entrants) | ● | See Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2020, footnote (d) on page 57. |
● | SERP (annual benefit capped for current participants; closed to new entrants in 2012; Erik Nordstrom, Peter Nordstrom and Kenneth Worzel are participants as they were eligible prior to the closure to new entrants) | ● | See Pension Benefits beginning on page 50. |
Changes for 2021
Each year, the CPCC reviews the design of our total compensation elements and makes changes as needed to improve alignment with our pay and benefits philosophy. At the February 2021 meeting, after consideration of recommendations made by the CPCC’s compensation consultant, the CPCC approved the following changesfor fiscal year 2021:
Base Salary
•Anne Bramman, Kenneth Worzel(Page 36)
| Reflect scope of the role and Edmond Mesrobian received increases of 2%, 2% and 3%, effective March 28, 2021, to maintain their relative market competitiveness.•Erik Nordstrom and Peter Nordstrom’s base salaries remained unchanged.
individual performance through base-line cash compensation. | Performance-Based Annual Cash Bonus The CPCC determined(Page 37)
| | Motivate and reward contributions to annual operating performance and long-term business strategy with cash that the target bonus opportunity as a percentvaries based on results. |
LTIs (Pages 38-39) | | Promote alignment of executive decisions with Company goals and shareholder interests where value varies with Company stock performance. |
Benefits (Page 39) | | Provide meaningful and competitive broad-based, leadership and retirement benefits that support healthy lifestyles and contribute to financial security. |
Pay Changes for 2021
On an annual basis, the CPCC reviews base salary, performance-based bonus target opportunity and LTI target grant value for each of the NEOs in consideration of the upcoming fiscal year. Committee decisions for fiscal year 2021 are summarized below and shown as a year over year comparison.
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| | Base Salary ($) | | Performance-Based Annual Cash Bonus (Target Opportunity as a % of Base Salary) | | LTI Annual Grant (Target Grant Value as a % of Base Salary) |
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Name | | FYE 2020 | | FYE 2021 | | FYE 2020 | | FYE 2021 | | FYE 2020 | | FYE 2021 |
Erik B. Nordstrom | | 758,500 | | | 758,500 | | | 200 | | | 200 | | | 350 | | | 350 | |
Anne L. Bramman | | 800,000 | | | 815,000 | | | 100 | | | 100 | | | 200 | | | 200 | |
Peter E. Nordstrom | | 758,500 | | | 758,500 | | | 200 | | | 200 | | | 350 | | | 350 | |
Kenneth J. Worzel | | 875,000 | | | 895,000 | | | 125 | | | 125 | | | 250 | | | 250 | |
Edmond Mesrobian | | 775,000 | | | 800,000 | | | 80 | | | 80 | | | 150 | | | 150 | |
In 2021, the CPCC approved modest increases to base salary for Anne Bramman, Kenneth Worzel and Edmond Mesrobian, as shown above, to maintain their relative market competitiveness. These increases were effective March 28, 2021. Erik Nordstrom and Peter Nordstrom’s base salaries remained unchanged.
In addition, the CPCC made no changes to target bonus opportunities or to target LTI grant values for any of the NEOs.
LTI annual grant in the table above reflects target grant value as a percent of base salary. The CPCC retains discretion to approve grants above and below targets in any given year to reflect an individual’s contributions to delivering shareholder value. In 2021, the CPCC used its discretion to increase the LTI annual grant for the NEOs to recognize the criticality of their roles in continuing to deliver on strategic objectives that position the company for future growth.
•Erik Nordstrom’s LTI annual grant was 488% of base salary to recognize his critical role in delivering results to shareholders over the next few years. The increase in Erik Nordstrom’s LTI grant value continues to result in competitive pay positioning below median of CEO roles within our peer group.
•Peter Nordstrom’s LTI annual grant was 488% of base salary, to recognize the importance of his role in transforming our merchandising capabilities, optimizing inventory flow and expanding our supplier partnership models.
•Anne Bramman’s LTI annual grant was 275% of base salary to recognize her role in ensuring the long-term sustainability of the organization and leading critical initiatives to maintain our financial disciplines.
•Kenneth Worzel’s LTI annual grant was 275% of base salary to recognize his leadership on our growing local market strategy and on the ongoing integration of customer touchpoints that will deliver key customer outcomes and capture market share.
•Edmond Mesrobian’s LTI annual grant was 300% of base salary to recognize his role in delivering significant technology innovation that will be critical to the achievement of our business strategy in years to come.
Base Salary
The CPCC begins its annual review of base salary for the NEOs through discussion with the CEO and the President and Chief Brand Officer on the expectations and achievements of each executive during the previous year, as well as their pay history and pay equity with other internal roles. The CPCC then references similar roles in peer companies to ensure they are within a competitive range of the peer group median. NEOs do not necessarily receive increases in base salary every year. When they do, the changes are effective on or about April 1st following their annual performance review, which includes a discussion about individual results against defined expectations.
COMPENSATION OF EXECUTIVE OFFICERS
Performance-Based Annual Cash Bonus
The opportunity for annual performance-based cash awards under our shareholder-approved Nordstrom, Inc. EMBP is designed to focus the NEOs on the alignment between annual operating performance and long-term business strategy.
In determining the target bonus opportunities, the CPCC takes into account the mix of pay elements, market pay information for similar roles within our peer group and the internal relationship between roles within the Company.
In support of our pay-for-performance philosophy, the maximum bonus payout, which is associated with superior performance, is 2.5 times an executive’s target bonus opportunity. This maximum is higher than is common among our retail peers because we believe it is important to continue encouraging and paying rewards when we achieve truly superior results. Under our approach, truly superior results are rarely achieved. In the past 10 years, we have not paid out bonuses in excess of 150% of target.
The following table shows the measures, weighting and opportunity for individual differentiation for the bonus opportunity for the CEO and President and Chief Brand Officer, and for the other NEOs for fiscal year 2021. The CPCC maintained the same financial performance measures of Incentive Adjusted EBIT, which emphasizes the importance of earnings and its role in driving shareholder value, and Incentive Adjusted ROIC, which ensures our overall performance aligns directly with shareholder returns over the long term.
In 2021, the bonus opportunity for the NEOs, excluding the CEO and President and Chief Brand Officer, was modified to place even greater emphasis on delivering profitable results by eliminating individual performance as a separate weighted metric. The CPCC retained the ability to differentiate payouts based on individual contributions and execution against goals. Any individual bonus differentiation is applied after the calculation of outcomes on the financial performance measures described below.
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| Measure and Weighting | Opportunity for the NEOs will remain unchanged for 2021.Individual Bonus Differentiation |
| |
CEO and President and Chief Brand Officer | •100%The 2021 bonus opportunity for Anne Bramman, Kenneth Worzel and Edmond Mesrobian was modified to increase the emphasis on delivering profitable results. 100% of the bonus opportunity will be based on Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold. The CPCC retains the ability to differentiate payouts based on individual contributions and execution against goals.threshold
| No |
Other NEOs | •100%The 2021 bonus opportunity for Erik Nordstrom and Peter Nordstrom remains based 100% on Incentive Adjusted EBIT subject to achievement of the Incentive Adjusted ROIC threshold.threshold
| Yes |
The CPCC defines financial milestones for Incentive Adjusted ROIC (as a threshold) and Incentive Adjusted EBIT (as a range) that relate to varying percentages of bonus payout. The difficulty level in achieving the milestones reflects the CPCC’s belief that there should be a balance between executive pay opportunity, reinvestment in the Company and return to shareholders.
In accordance with our EMBP, Incentive Adjusted EBIT and Incentive Adjusted ROIC achievement used to determine bonus payout may differ from EBIT and ROIC, as reported in our 2021 Annual Report, due to the exclusion of certain one-time gains or losses. In fiscal year 2021, our Incentive Adjusted EBIT measure excluded certain performance-based compensation elements in order to be more reflective of business performance. Incentive Adjusted EBIT and Incentive Adjusted ROIC are not measures of financial performance under GAAP and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures.
2021 Bonus Measure Outcomes and Payouts
Our Incentive Adjusted EBIT achievement exceeded the threshold milestone of $612 million and Incentive Adjusted ROIC exceeded the threshold of 5.5%, resulting in a 128% payout. In fiscal year 2021, our Incentive Adjusted EBIT measure excluded certain performance-based compensation elements in order to be more reflective of business performance.
The bonus payouts for Anne Bramman, Kenneth Worzel and Edmond Mesrobian were not differentiated for individual performance. Each individual’s performance against strategic priorities was evaluated by the CEO and the President and Chief Brand Officer and the payout results were approved by the CPCC.
The performance-based annual cash bonus results are summarized in the following table.
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| | Milestones | |
Name | Bonus Measures | Threshold | Target | Superior | Actual |
All NEOs | Incentive Adjusted EBIT | $375 | M | $612 | M | $900 | M | $666M |
% of Payout | 25 | % | 100 | % | 250 | % | 128 | % |
Subject to Incentive Adjusted ROIC threshold | 5.5% | 7.0 | % |
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- 2021 Proxy Statement 38
Long-Term Incentives
The CPCC used its discretion to increase the LTI grant value, as a percentage of base salary, above the target LTI grant values (which remained unchanged from fiscal year 2020) for the NEOs to recognize the criticality of their roles in continuing to deliver on strategic objectives that position the company for future growth.
•Erik Nordstrom’s LTI annual grant was 488% of base salary to recognize his critical role in delivering results to shareholders over the next few years. The increase in Erik Nordstrom’s LTI grant value continues to result in competitive pay positioning below median of CEO roles within our peer group.
•Peter Nordstrom’s LTI annual grant was 488% of base salary, to recognize the importance of his role in transforming our merchandising capabilities, optimizing inventory flow and expanding our supplier partnership models.
•Anne Bramman’s LTI annual grant was 275% of base salary to recognize her role in ensuring the long-term sustainability of the organization and leading critical initiatives to maintain our financial disciplines.
•Kenneth Worzel’s LTI annual grant was 275% of base salary to recognize his leadership on our growing local market strategy and on the ongoing integration of customer touchpoints that will deliver key customer outcomes and capture market share.
•Edmond Mesrobian’s LTI annual grant was 300% of base salary to recognize his role in delivering significant technology innovation that will be critical to the achievement of our business strategy in years to come.
Due to the challenges of setting goals for PSUs in a highly variable environment, the CPCC approved changes in both the mix and vesting of LTI grants for the NEOs in fiscal year 2021.
•Erik Nordstrom and Peter Nordstrom’s target LTI mix changed from 40% stock options and 60% PSUs to 100% price-vested stock options. Stock option vesting changed
from 25% each year over four years to 50% on March 10, 2024 and 50% on March 10, 2025, to account for the elimination of PSUs, which typically had a three-year cliff vest, and to emphasize the long-term nature of the award. Vesting is subject to the condition that the average daily closing price of the Company’s Common Stock meets or exceeds $45 per share for any twenty consecutive trading day period prior to March 10, 2025. For reference, our average closing price in fiscal year 2019 (pre-COVID) was $37.
•Anne Bramman, Kenneth Worzel and Edmond Mesrobian’s LTI mix changed from 40% RSUs and 60% PSUs to 60% RSUs and 40% stock options. The CPCC made no change to RSU vesting, which will continue to vest 25% each year over four years. Stock options will vest 50% on March 10, 2024 and 50% on March 10, 2025.
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| 37 | 2022 Proxy Statement | NORDSTROM, INC. | |
Additional Information |
COMPENSATION OF EXECUTIVE OFFICERS
LTIs
Annual grants of LTI under our shareholder-approved EIP are intended to provide the NEOs with additional incentive to create shareholder value and receive financial rewards. In establishing the LTI annual grant value for each NEO, the CPCC considers the mix of pay elements, market pay information for similar roles within our peer group, our annual share usage and dilution, performance and internal equity of grant size by role. The CPCC typically approves LTI annual grants during the February CPCC meeting, which is scheduled at least a year in advance. The February meeting occurs after performance results for the prior year are known, which allows the CPCC to align compensation elements with our performance and business goals.
Due to the challenges of setting goals for PSUs in a highly variable environment, the CPCC approved changes in both the mix and vesting of LTI grants for the NEOs for fiscal year 2021.
•Erik Nordstrom and Peter Nordstrom’s target LTI mix changed from 40% stock options and 60% PSUs to 100% price-vested stock options. Stock option vesting changed from 25% each year over four years to 50% on March 10, 2024 and 50% on March 10, 2025, to account for the elimination of PSUs, which typically had a three-year cliff vest, and to emphasize the long-term nature of the award. Vesting is subject to the condition that the average daily closing price of our Common Stock meets or exceeds $45 per share for any twenty consecutive trading day period prior to March 10, 2025. For reference, our average closing price in fiscal year 2019 (pre-COVID) was $37.
•Anne Bramman, Kenneth Worzel and Edmond Mesrobian’s target LTI mix changed from 40% RSUs and 60% PSUs to 60% RSUs and 40% stock options. The CPCC made no change to RSU vesting, which vest 25% each year over four years. Stock option vesting changed from 25% each year over four years to 50% on March 10, 2024 and 50% on March 10, 2025, to account for the elimination of PSUs, which typically had a three-year cliff vest, and to emphasize the long-term nature of the award.
2019 PSUs Did Not Pay Out
Two-thirds of the PSUs granted in 2019 had a three-year performance period which ended January 29, 2022. At the end of the performance cycle, our Free Cash Flow Growth and EBIT Margin % did not meet the minimum thresholds, as shown below, required for payout. As a result, none of these PSUs vested. One-third of the PSUs granted in 2019 had a one-year performance period which ended February 1, 2020. As disclosed in our 2020 Proxy Statement, none of these PSUs vested as our Free Cash Flow Growth and EBIT Margin % did not meet the minimum thresholds required for payout.
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Performance Measures for Performance Period: February 3, 2019 – January 29, 2022 |
Free Cash Flow Growth | EBIT Margin % | Percentage of Units that will Vest |
≥31.4% | ≥7.1% | 200% |
28.9% | 6.8% | 100% |
26.3% | 6.5% | 50% |
<26.3% | <6.5% | 0% |
Stock Ownership Guidelines Align Executives and Shareholders
Ownership of Common Stock by our NEOs and other Executive Officers is encouraged by management and the Board, and our stock ownership guidelines were formally established in 2004. Ownership shares are made up of all forms of Common Stock, as well as vested PSUs that are deferred and unvested RSUs. Ownership shares do not include unvested or vested stock options, unvested PSUs or pledged shares.
The NEOs and other Executive Officers have an annual share target defined as base salary on each April 1st multiplied by their ownership multiple of base salary divided by a 52-week average closing stock price. The ownership multiples of base salary depend on the executive’s role in the Company and are as shown in the following table for the NEOs. The CPCC has assigned these particular multiples to match or exceed market practice, and to represent a significant portion of the overall compensation package to reinforce the alignment of management’s decision-making with shareholder interests. Executives will be deemed to be in compliance with the Stock Ownership Guidelines once their holdings of Common Stock meet or exceed the threshold, and will remain in compliance, notwithstanding any decline in the value of Common Stock, unless and until the executive sells shares. However, a new target will be determined at the time an executive receives a promotion that results in an increased multiple of base salary or in the case of a one-time base salary increase greater than 20%, at which point the executive will have five years to achieve the new target.
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Position | Multiple of Base Salary Used to Establish Ownership Target |
Chief Executive Officer | 10x |
Chief Financial Officer | 4x |
President and Chief Brand Officer | 10x |
Chief Customer Officer | 4x |
Chief Technology Officer | 3x |
Compensation Risk Assessment Supports Integrity of the Pay Program
COMPENSATION OF EXECUTIVE OFFICERS
Under our guidelines, NEOs and other Executive Officers are required to conduct any open market transactions in Common Stock only in accordance with an SEC Rule 10b5-1 trading plan. These plans predetermine the timing, number of shares and price at which an Executive Officer may buy or sell Company shares. The Executive Officers must also achieve and retain a minimum holding of 100% of their ownership targets before they may sell or otherwise dispose of Company shares.
The CPCC regularly reviews stock ownership status for the NEOs. All of the NEOs have exceeded their ownership targets.
Benefits
The Company offers the NEOs a comprehensive program of broad-based, leadership and retirement benefits. Their purpose varies by benefit, but in general they enhance total compensation with meaningful and competitive offerings that support healthy lifestyles and contribute to financial security. These benefits are regularly reviewed for consistency with our pay and benefits philosophy, organizational culture and market practices.
Additional information on 2021 benefits is provided in the table below.
The CPCC oversees an extensive review of the Company’s pay-for-performance philosophy, the composition | | | | | | | | | | | | | | |
| | Benefit | | Where to Learn More |
Broad- Based | ● | Company contribution to medical, dental and balance of elements in the compensation package and the alignment of plans with shareholder interests to ensure these practices do not pose a material adverse risk to the organization. The review is conducted every other year as underlying programs and practices are generally consistent over time. The last review, for fiscal year 2020, concluded with the following perspectives:•The goals of the Company’s compensation programs are to attract and retain the best talent and to motivate and reward our people in ways that are aligned with the long-term interests of our shareholders. This has been a long-standing
objective of our pay-for-performance philosophy. We believe that the strong alignment of our employee compensation plans with performance has well-served our stakeholders, and our shareholders in particular. The strength of this alignment is regularly reviewed and monitored by the CPCC.
•We have systems in place to identify, monitor and control risks, making it difficult for a single individual or a group of individuals to expose the Company to material compensation risk.
•Our compensation program rewards bothvision coverage; short- and long-term performance. Performance measuresdisability; life insurance; adoption assistance; and employee referral assistance. Employee access to accident insurance; health savings account and flexible spending accounts; ESPP and merchandise discount. Paid time off (or Self-Managed Time Away for executives)
| ● | For merchandise discount, see All Other Compensation in Fiscal Year 2021, footnote (a) on page 44. |
Leadership | ● | Long-term disability coverage; life insurance
| ● | For long-term disability and life insurance, see All Other Compensation in Fiscal Year 2021, footnote (c) on page 45. |
| ● | NDCP; including Company leaders are predominantly team-oriented rather than individually focused and tied to measurable factors that are both transparent to shareholders and drivers of their shareholder return.39 NORDSTROM, INC. - 2021 Proxy Statement
•The compensation program balances the importance of achieving critical short-term objectives with a focusmatch for eligible participants
| ● | See Nonqualified Deferred Compensation beginning on realizing strategic long-term priorities. Strong stock ownership guidelines are in place for Company leaders, and mechanisms, such as an executive clawback policy, exist to address inappropriate rewards.•The CPCC is actively engaged in establishing compensation plans, monitoring these plans during the year and using discretion in making rewards, as necessary.
•The Company has active and engaged oversight systems in place. The AFC and the full Board closely monitor and certify the performance that drives employee rewards through detailed and transparent financial reporting, which is in place to provide strong, timely insight into the performance of the Company.
Based on this review, the CPCC believes that the Company’s compensation plans do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company.
Executive Compensation Clawback Policy Applies to Performance-Based Pay
In February 2008, the Board adopted a formal executive compensation clawback policy that applies to any performance-based bonus, equity, equity equivalent or other incentive compensation awarded to an Executive Officer, beginning in that fiscal year. Under that policy, in the event of a material restatement of the Company’s financial results, the Board will review the circumstances that caused the restatement and consider accountability to determine whether an Executive Officer was negligent or engaged in misconduct. If so, and if the amount or vesting of an award would have been less had the financial statements been correct, the Board will seek to recover compensation from the Executive Officer as it deems appropriate. This policy is in addition to any requirements which might be imposed pursuant to applicable law.
Termination and Change in Control Provisions are CPCC-Directed
Under our Nordstrom, Inc. page 52.
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| ● | Executive Severance Plan eligible Executive Officers, including certain NEOs, are entitled to receive severance benefits upon involuntary termination of employment by the Company to assist in the transition from active employment. To be eligible to participate in the Plan upon involuntary termination, the NEO must have signed a non-competition and non-solicitation agreement. Erik Nordstrom and Peter Nordstrom are not currently eligible for separation benefits under the Plan, and Anne Bramman has elected not to participate in the Plan. Separation benefits are described in the | ● | See Potential Payments Upon Termination or Change in Control section beginningat Fiscal Year-End 2021, footnote (e) on page 52.
As described in the same section, the NEOs are generally not entitled to any payment or accelerated benefit in connection with a change in control of the Company. However, the NEOs are entitled to accelerated vesting of equity if they experience a qualifying termination (termination by the Company without cause or termination by the executive for good reason) within 12 months following a change in control, unless the Companypages 57 and the CPCC does not act to to cause the NEOs to receive, on account of the equity award, cash or other property being paid to shareholders in the change in control transaction.
Tax and Accounting Considerations Underlie the Compensation Elements
The CPCC recognizes the tax and regulatory factors that can influence the structure of executive compensation programs, including:
•Section 162(m) of the IRC, which generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their NEOs. Prior to the enactment of the Tax Act, the IRC generally excluded from the calculation of the $1 million limit compensation that was based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The exclusion for performance-based compensation was repealed by the Tax Act, effective for taxable years beginning after December 31, 2017, such that compensation paid to our NEOs in excess of $1 million is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Tax Act also expanded the category of covered officers for purposes of the limitations of Section 162(m). Following passage of the Tax Act, the CPCC anticipates that compensation paid to the Company’s NEOs in excess of $1 million will not be deductible by the Company.
•FASB ASC 718, where stock options, PSUs and RSUs are accounted for based on their grant date fair value (see the notes to the financial statements contained within the Company’s 2020 Annual Report). The CPCC regularly considers the accounting implications of our equity-based awards.
•Section 409A of the IRC, the limitations of which primarily relate to the deferral and payment of benefits under the NDCP and SERP. The CPCC continues to consider the impact of Section 409A and in general, the evolving tax and regulatory landscape in which its compensation decisions are made.
NORDSTROM, INC. - 2021 Proxy Statement 40
| | | | | | | | | | | | | | | | | | | | | | | | Compensation, People and Culture Committee Report
The CPCC has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. The CPCC believes the Compensation Discussion and Analysis represents the intent and actions of the CPCC with regard to executive compensation and has recommended to the Board that it be included in this Proxy Statement for filing with the SEC.
| | | Compensation, People and Culture Committee | | | | | | | | | Tanya L. Domier, Chair | Glenda G. McNeal | Brad D. Smith | Mark J. Tritton | | | | | | | 58. |
41 NORDSTROM, INC. - 2021 Proxy Statement
Summary Compensation Table
The following table summarizes the total compensation paid or accrued by the Company for services provided by the NEOs for fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Fiscal Year | Salary ($)(a) | Bonus ($)(b) | Stock Awards ($)(c) | Option Awards ($)(d) | Non-Equity Incentive Plan Compensation ($)(e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(f) | All Other Compensation ($)(g) | Total ($) | Erik B. Nordstrom | 2020 | 367,419 | | — | | 1,592,846 | | 2,654,740 | | — | | 1,010,681 | | 21,984 | | 5,647,670 | | Chief Executive Officer | 2019 | 756,393 | | — | | 1,592,836 | | 1,061,897 | | 708,591 | | 2,700,516 | | 52,070 | | 6,872,303 | | | 2018 | 756,393 | | — | | 2,654,705 | | — | | 963,144 | | — | | 77,504 | | 4,451,746 | | Anne L. Bramman | 2020 | 699,231 | | — | | 1,999,988 | | 1,824,997 | | — | | — | | 14,411 | | 4,538,627 | | Chief Financial Officer | 2019 | 793,750 | | — | | 1,549,974 | | 1,859,994 | | 564,500 | | — | | 39,912 | | 4,808,130 | | 2018 | 768,889 | | 150,000 | | 3,562,483 | | — | | 645,066 | | — | | 38,716 | | 5,165,154 | | Peter E. Nordstrom | 2020 | 367,419 | | — | | 1,592,846 | | 2,654,740 | | — | | 1,055,774 | | 24,849 | | 5,695,628 | | President and Chief Brand Officer | 2019 | 756,393 | | — | | 1,592,836 | | 1,061,897 | | 708,591 | | 2,782,378 | | 77,355 | | 6,979,450 | | 2018 | 756,393 | | — | | 2,654,705 | | — | | 963,144 | | — | | 59,386 | | 4,433,628 | | Kenneth J. Worzel | 2020 | 764,597 | | — | | 2,624,977 | | 2,374,996 | | — | | 864,312 | | 18,367 | | 6,647,249 | | Chief Operating Officer | 2019 | 826,111 | | — | | 1,999,970 | | 2,400,000 | | 645,433 | | 1,589,618 | | 37,080 | | 7,498,212 | | 2018 | 786,875 | | — | | 3,562,483 | | — | | 835,167 | | 754,441 | | 45,813 | | 5,984,779 | | Edmond Mesrobian | 2020 | 677,214 | | — | | 1,549,973 | | 1,374,995 | | — | | — | | 7,917 | | 3,610,099 | | Chief Technology Officer | 2019 | 743,542 | | — | | 2,087,450 | | 1,304,995 | | 420,971 | | — | | 10,225 | | 4,567,183 | | 2018 | — | | — | | — | | — | | — | | — | | — | | — | |
(a)Salary
The amounts shown represent base salary earned during the fiscal year. The numbers shown for all fiscal years vary somewhat from annual base salaries due to the fact that our fiscal year ends on the Saturday nearest to January 31st and salary increases are effective on or about April 1st of each year. The 2020 base salaries were $758,500 each for Erik Nordstrom and Peter Nordstrom, $800,000 for Anne Bramman, $875,000 for Kenneth Worzel and $775,000 for Edmond Mesrobian. Edmond Mesrobian was not an NEO in fiscal year 2018, so no amounts are shown for this year.
On March 25, 2020, the CPCC took immediate action to support cash preservation goals by reducing the base salaries of the NEOs from March 29, 2020 to October 3, 2020, as follows: Erik Nordstrom and Peter Nordstrom received no base salary, while Anne Bramman, Kenneth Worzel and Edmond Mesrobian received a 25% base salary reduction.
Anne Bramman elected to defer 8% of her base salary earned during each of the calendar years 2020 and 2021 and 10% of her annual performance-based cash award paid in calendar year 2020 into the NDCP. Kenneth Worzel elected to defer $50,000 of his base salary earned during each of the calendar years 2020 and 2021 into the NDCP. Edmond Mesrobian elected to defer $41,000 of his base salary earned in each of the calendar years 2020 and 2021 into the NDCP. Due to the timing of our fiscal year ends, $108,183, $49,826 and $39,217 were attributed to fiscal year 2020 deferrals for Anne Bramman, Kenneth Worzel and Edmond Mesrobian, respectively, as reported in the Fiscal Year 2020 Nonqualified Deferred Compensation Table on page 52.
Each of the NEOs contributed a portion of their base salary earned during fiscal year 2020 to the Retirement | ●
| 401(k) Plan.(b) Bonus
The amount reported for fiscal year 2018 reflects a discretionary one-time cash payment, approved by the CPCC in March 2018, to Anne Bramman in recognition of her service since joining the Company in June 2017 as Chief Financial Officer.
NORDSTROM, INC. - 2021 Proxy Statement 42
(c) Stock Awards
The amounts reported reflect the grant date fair value of RSUs and PSUs granted during the fiscal year under the 2010 and 2019 EIPs. The amounts reported are not the value actually received.
Shortly after the PSU grant was made on March 9, 2020, the Company temporarily closed stores in response to the growing COVID-19 pandemic. Sales and operations were meaningfully disrupted. Accordingly, the CPCC determined that the goals established with the PSU grant were no longer relevant or functional. On August 18, 2020, each of the NEOs agreed to the cancellation of their PSU award. The PSU grants to Erik Nordstrom and Peter Nordstrom each had a grant date fair value of $1,592,846. The PSU grants to Anne Bramman, Kenneth Worzel and Edmond Mesrobian had a grant date fair value of $1,199,989, $1,574,982 and $929,983, respectively. The amounts reported were calculated in accordance with ASC 718. See column (c) of the Grants of Plan-Based Awards in Fiscal Year 2020 table on page 45 for the number of PSUs granted in fiscal year 2020. No amounts are reported for fiscal year 2018 as the Company did not award PSUs during that fiscal year.
The value the NEOs may receive from their RSUs will depend on whether the time-based vesting requirement is met and the market price of Common Stock on the vesting date. The amounts reported were calculated in accordance with ASC 718. See column (d) of the Grants of Plan-Based Awards in Fiscal Year 2020 table on page 45 for the number of RSUs granted in fiscal year 2020.
(d) Option Awards
The amounts reported reflect the grant date fair value of stock options granted during the fiscal year under the 2010 and 2019 EIPs. This is not the value received. The NEOs will only realize value from stock options if the market price of Common Stock is higher than the exercise price of the options at the time of exercise. The amounts reported were calculated in accordance with ASC 718. See column (e) of the Grants of Plan-Based Awards in Fiscal Year 2020 table on page 45 for the number of stock options granted in fiscal year 2020. No amounts are reported for fiscal year 2018 as the Company did not grant stock options during that fiscal year.
Assumptions used in the calculation of these amounts are included in the notes to the financial statements contained within the Company’s 2020 Annual Report.
(e) Non-Equity Incentive Plan Compensation
The amounts reported reflect the annual performance-based cash awards under the EMBP, as described on page 35.
(f) Change in Pension Value and Nonqualified Deferred Compensation Earnings
The amounts reported are the changes in actuarial present value from fiscal year-end 2019 to fiscal year-end 2020 for each of the eligible NEO’s benefit under the SERP. The present value of the benefit is affected by current earnings, credited years of service, the executive’s age and time until normal retirement eligibility, the age of the executive’s spouse or life partner as the potential beneficiary and economic assumptions (discount rate and mortality table used to determine the present value of the benefit).
The present value of Erik Nordstrom’s and Peter Nordstrom’s benefits increased from last year by $1,010,681 and $1,055,774, respectively. The increases were primarily the result of a decrease in the discount rate used to determine the present value of the benefit. The interest rate used is the same as the discount rate used for financial reporting purposes for the SERP which changed from 2.97% to 2.62%. The present value of Kenneth Worzel’s benefit increased by $864,312, primarily due to the change in discount rate mentioned above along with an increase to service. Amounts are not reported for Anne Bramman and Edmond Mesrobian because the SERP was closed to new entrants prior to when they joined the Company. See the Pension Benefits section beginning on page 50 for more information about the SERP.
The amounts were calculated using the same discount rate assumptions as those used in the Company’s financial statements to calculate the Company’s obligations under the SERP. Assumptions used in the calculation of these amounts are included in the notes to the financial statements contained within the Company’s 2020 Annual Report.
Anne Bramman, Kenneth Worzel and Edmond Mesrobian had account balances in the NDCP in fiscal year 2020, as shown on page 52.They did not receive above-market-rate or preferential earnings on their deferred compensation, so no amounts for these types of earnings are included in the table.
(g) All Other Compensation
Each component of all other compensation paid to the NEOs is shown in the table on the following page.
43 NORDSTROM, INC. - 2021 Proxy Statement
| | | | All Other Compensation in Fiscal Year 2020 |
The table below shows each component of “All Other Compensation” for fiscal year 2020, reported in column (g) of the Summary Compensation Table on page 42, calculated at the aggregate incremental cost to the Company.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Merchandise Discount ($)(a) | | 401(k) Plan Company Match ($)(b) | | Premium on Insurance ($)(c) | | | | | Total ($) | Erik B. Nordstrom | 17,602 | | | 2,334 | | | 2,048 | | | | | | 21,984 | | Anne L. Bramman | 10,405 | | | 1,846 | | | 2,160 | | | | | | 14,411 | | Peter E. Nordstrom | 21,168 | | | 1,633 | | | 2,048 | | | | | | 24,849 | | Kenneth J. Worzel | 13,670 | | | 2,334 | | | 2,363 | | | | | | 18,367 | | Edmond Mesrobian | 3,439 | | | 2,385 | | | 2,093 | | | | | | 7,917 | |
(a)Merchandise Discount
The Company provides a broad-based merchandise discount for its employees. The NEOs were provided a discount of 33% for purchases at Nordstrom stores and Nordstrom.com and 20% for purchases at Nordstrom Rack stores, NordstromRack.com, HauteLook.com and our restaurants. A 40% discount is available at certain times of the year on specific merchandise. The merchandise discount provided to the NEOs is the same as for all other eligible management and high-performing non-management employees of the Company. The amounts reported are the total discount the NEOs received on their Nordstrom purchases during the fiscal year. The Company provides the same merchandise discount program for its Board, as described on page 16.
(b)401(k) Plan Company Match
The Company offers a matching contribution on employee 401(k) contributions under the 401(k) Plan to all eligible employees, including the NEOs. The NEOs may defer up to 16% of their eligible pay (i.e., base salary, performance-based bonus and other taxable wages) into the Plan, subject to IRC limits.
Due to the economic impact of the COVID-19 pandemic, the Board made the decision to suspend the discretionary company match (equal to dollar for dollar, up to 4% of eligible pay) and the profit-based match (equal to up to an additional $0.50 per $1 up to a maximum of 2% of eligible pay, based on Company performance) under the 401(k) Plan for the 2020 plan year. As a result, neither the NEOs, nor any other Company employees, received a Company matching contribution for the 2020 Plan Year.
Company matching contributions began again for the 2021 plan year for NEOs and all other Company employees under a new Qualified Automatic Contribution Arrangement (QACA) plan design. Beginning January 1, 2021, the NEOs and all other Company employees can contribute up to 50% of eligible pay, subject to IRC limits.match; Company matching contributions are made each pay period an employee contributes to the 401(k) Plan, equal to a dollar for dollar match up to 1% of eligible pay then $0.50 per dollar on the next 6% of eligible pay, up to a maximum of 4% of eligible pay and IRC limits. The total Company matching contribution each of the NEOs received, as shown above, reflects this matching formula and was credited between January 1, 2021, the start of the plan year, and January 30, 2021, the end of the Company’s fiscal year.
Contributions under the 401(k) Plan may be directed to custom target retirement date funds or to any of nine individual investment alternatives, including Common Stock. The Plan also offers a self-directed brokerage option.
(c)Premium on Insurance
The Company provides life insurance to the NEOs in an amount equal to approximately 1.25 times their base salary and additional disability insurance. The amounts reported are the annual Company-paid premiums.
NORDSTROM, INC. - 2021 Proxy Statement 44
Grants of Plan-Based Awardslimits
| ● | See All Other Compensation in Fiscal Year 2020The following table discloses the potential range of payouts for:
•non-equity incentive plan awards granted in fiscal year 2020. These awards are performance-based cash bonuses granted under the EMBP, as described2021, footnote (b) on page 35;45.
| ● | Retiree health care (closed to new entrants in 2013; Erik Nordstrom, Peter Nordstrom and •EIP awards granted in fiscal year 2020. These awards Kenneth Worzel are PSUs granted under the 2019 EIP,participants as described on pages 36 and 37.
The table also discloses:
•the grant date fair value of PSUs granted under the 2019 EIP in fiscal year 2020, as described on pages 36 and 37;
•the number, price and grant date fair value of stock options granted under the 2019 EIP in fiscal year 2020, as described on pages 36 and 37; and
•the number and grant date fair value of RSUs granted under the 2019 EIP in fiscal year 2020, as described on pages 36 and 37.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (b) | | Estimated Future Payouts Under Equity Incentive Plan Awards (c) | All Other Stock Awards: Number of Shares of Stock or Units (#)(d) | All Other Option Awards: Number of Securities Underlying Options (#)(e) | Exercise or Base Price of Option Awards ($/Sh)(f) | Grant Date Fair Value of Stock and Option Awards ($)(g) | Name and Award | Grant Date (a) | Approval Date | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | Erik B. Nordstrom | | | | | | | | | | | | | | EMBP | | | 379,250 | | 1,517,001 | | 3,792,502 | | | | | | | | | | PSU | 3/09/2020 | 2/26/2020 | | | | | 33,393 | 66,786 | 160,286 | | | | 1,592,846 | Stock Option Award | 3/09/2020 | 2/26/2020 | | | | | | | | | 147,407 | 26.79 | 1,061,891 | Stock Option Award | 8/27/2020 | 8/18/2020 | | | | | | | | | 245,829 | 14.79 | 1,592,849 | Anne L. Bramman | | | | | | | | | | | | | | EMBP | | | 200,000 | | 800,000 | | 2,000,000 | | | | | | | | | | PSU | 3/09/2020 | 2/26/2020 | | | | | 25,157 | 50,314 | 120,753 | | | | 1,199,989 | RSU | 3/09/2020 | 2/26/2020 | | | | | | | | 34,647 | | | 799,999 | Stock Option Award | 8/27/2020 | 8/18/2020 | | | | | | | | | 281,657 | 14.79 | 1,824,997 | Peter E. Nordstrom | | | | | | | | | | | | | | EMBP | | | 379,250 | | 1,517,001 | | 3,792,502 | | | | | | | | | | PSU | 3/09/2020 | 2/26/2020 | | | | | 33,393 | 66,786 | 160,286 | | | | 1,592,846 | Stock Option Award | 3/09/2020 | 2/26/2020 | | | | | | | | | 147,407 | 26.79 | 1,061,891 | Stock Option Award | 8/27/2020 | 8/18/2020 | | | | | | | | | 245,829 | 14.79 | 1,592,849 | Kenneth J. Worzel | | | | | | | | | | | | | | EMBP | | | 273,437 | | 1,093,750 | | 2,734,375 | | | | | | | | | | PSU | 3/09/2020 | 2/26/2020 | | | | | 33,018 | 66,037 | 158,488 | | | | 1,574,982 | RSU | 3/09/2020 | 2/26/2020 | | | | | | | | 45,474 | | | 1,049,995 | Stock Option Award | 8/27/2020 | 8/18/2020 | | | | | | | | | 366,540 | 14.79 | 2,374,996 | Edmond Mesrobian | | | | | | | | | | | | | | EMBP | | | 155,000 | | 620,000 | | 1,550,000 | | | | | | | | | | PSU | 3/09/2020 | 2/26/2020 | | | | | 19,496 | 38,993 | 93,583 | | | | 929,983 | RSU | 3/09/2020 | 2/26/2020 | | | | | | | | 26,851 | | | 619,990 | Stock Option Award | 8/27/2020 | 8/18/2020 | | | | | | | | | 212,207 | 14.79 | 1,374,995 |
45 NORDSTROM, INC. - 2021 Proxy Statement
(a) Grant Date
The grant date is the first business day of the open trading window that falls on or after the CPCC approval of the grant.
(b) Estimated Future Payouts Under Non-EIP Awards
The amounts shown report the range of possible cash payouts for fiscal year 2020 associated with established levels of performance or achievement under the EMBP. The amounts shown in the “Threshold,” “Target” and “Maximum” columns reflect the payout opportunity associated with established levels of performance or achievement, as discussed on page 35. For there to be any payout, minimum performance milestones or achievement must be met.
Although the column heading refers to future payouts, fiscal year 2020 performance-based bonuses resulted in zero payoutthey were eligible prior to the NEOsclosure to new entrants)
| ● | See Potential Payments Upon Termination or Change in March 2021, as reported in the Summary Compensation Table on page 42, in column (e), “Non-Equity Incentive Plan Compensation.”(c) Estimated Future Payouts Under EIP Awards
The numbers shown report the range of potential PSU payout for the 2020 grant. Shortly after the PSU grant was made on March 9, 2020, the Company temporarily closed stores in response to the growing COVID-19 pandemic. Sales and operations were meaningfully disrupted. Accordingly, the CPCC determined that the goals established with the PSU grant were no longer relevant or functional. On August 18, 2020, each of the NEOs agreed to the cancellation of their PSU award. Payouts are shown in units of 50%, 100% and 240% of the number of PSUs granted. No payout will be earned, as the PSUs were cancelled.
(d) All Other Stock Awards: Number of Shares of Stock or Units
The numbers shown report the number of RSUs granted to the NEOs in fiscal year 2020 under the 2019 EIP. RSUs were granted on March 9, 2020 to Anne Bramman, Kenneth Worzel and Edmond Mesrobian and will vest equally over four years, beginning on March 10, 2021.
(e) All Other Option Awards: Number of Securities Underlying Options
The numbers shown report the number of stock options granted to the NEOs in fiscal year 2020 under the 2019 EIP. The stock option grants to Erik Nordstrom and Peter Nordstrom made on March 9, 2020 as part of the annual grant vest and become exercisable in four equal annual installments, beginning on March 10, 2021. The one-time stock option grants to the NEOs made on August 27, 2020 vest and become exercisable on September 10, 2022. This one-time stock option award is discussed in the Compensation Discussion and Analysis on page 36.
(f) Exercise or Base Price of Options Awards
The exercise price of the stock options granted on March 9, 2020 of $26.79 and August 27, 2020 of $14.79 was the closing price of Common Stock on the respective grant dates.
(g) Grant Date Fair Value of Stock and Option Awards
The grant date fair value of the PSUs, RSUs and stock options was calculated in accordance with ASC 718.
The reported value for PSUs was calculated by multiplying the number of PSUs granted by the fair value of a PSU on the date of grant, which was $23.85 on March 9, 2020. No payout will be earned, as the PSUs were cancelled as described under footnote (c), Estimated Future Payouts Under EIP Awards,
The reported value for RSUs was calculated by multiplying the number of RSUs awarded by the fair value of a RSU on the date of grant, which was $23.09 on March 9, 2020. The actual value the NEOs may receive will depend on whether the time-based vesting requirement is met and the market price of Common Stock at the time of any vesting.
The reported value of stock options was calculated by multiplying the number of options awarded by the fair value of an option on the date of grant. The fair value for the grant on March 9, 2020 to Erik Nordstrom and Peter Nordstrom was $7.20. The fair value for the grant on August 27, 2020 to the NEOs was $6.48. The actual value received by the NEOs will be the number of options exercised multiplied by the difference between the stock price at the future exercise date and the grant price. The grant price on March 9, 2020 was $26.79 and the grant price on August 27, 2020 was $14.79.
NORDSTROM, INC. - 2021 Proxy Statement 46
Outstanding Equity AwardsControl at Fiscal Year-End 20202021, footnote (d) on page 57.
| ● | SERP (annual benefit capped for current participants; closed to new entrants in 2012; Erik Nordstrom, Peter Nordstrom and Kenneth Worzel are participants as they were eligible prior to the closure to new entrants) | ● | See Pension Benefits beginning on page 51. | |
| | | | | | | | | | | | | | |
| 39 | 2022 Proxy Statement | NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
Changes for 2022
Each year, the CPCC reviews the design of our total compensation elements and makes changes as needed to improve alignment with our pay and benefits philosophy. At the February 2022 meeting, the CPCC approved the following changes for fiscal year 2022:
Base Salary
Anne Bramman’s base salary was increased by 4% effective March 27, 2022, to maintain her relative market competitiveness. The base salaries of all other NEOs remained unchanged.
Performance-Based Annual Cash Bonus
The CPCC determined that the target bonus opportunity as a percent of base salary for the NEOs will remain unchanged for 2022.
LTIs
•Performance-based equity was reintroduced into the LTI annual grant mix. The 2022 target annual grant mix for all NEOs was changed to 60% PSUs and 40% stock options. The PSUs will pay out based on the cumulative sales and EBIT margin % over a three-year performance period. Goals for the PSUs are aligned with the Company’s forward-looking strategy communicated at the February 2021 Investor Event. The CPCC believes that these measures reflect the Company’s key areas of strategic focus over the next three years. The minimum percentage of PSUs that can be earned at the end of the three-year performance cycle is 75% and the maximum is 150%. To emphasize the long-term nature of the award, the stock options will continue to vest 50% at the end of year 3 and 50% at the end of year 4.
•Anne Bramman’s target LTI grant value as a percent of base salary increased from 200% to 250% to maintain her relative market competitiveness for the Chief Financial Officer role. The target LTI grant as a percent of base salary of all other NEOs remained unchanged. The CPCC did not use its discretion to modify any NEO target LTI grants for 2022.
Our Roles in Determining Compensation Are Well-Defined
Compensation, People and Culture Committee
Our CPCC oversees the development and delivery of our pay and benefits philosophy and compensation plans for the NEOs and other executives as described in the CPCC charter on our Investor Relations Website.
As part of that oversight, the CPCC ensures the NEOs’ aggregate compensation aligns with shareholder interests by reviewing analyses that include:
•Cash alignment to evaluate the short-term incentive payouts relative to our financial performance.
•Relative pay and performance to compare the percentile rankings of our total direct compensation (base salary + performance-based bonus + LTIs) with financial performance metrics of our peer group.
CPCC Consultant
The CPCC has retained Semler Brossy. A consultant from the firm attends CPCC meetings and in support of the CPCC’s role, provides independent expertise on market practices, compensation program design and related subjects as described on page 14. Semler Brossy provides services only as directed by the CPCC. During fiscal year 2021, Semler Brossy’s services included a review of executive and Director pay programs, a review of the compensation peer group, and other pay-related matters specific to the CPCC’s charter. With respect to Director pay, Semler Brossy provides its services to the CGNC.
Management
Our CEO and the President and Chief Brand Officer provide input to the CPCC on the level and design of compensation elements for the NEOs and other Executive Officers, excluding themselves. Our Chief Human Resources Officer attends CPCC meetings to provide perspective and expertise relevant to the agenda. Management supports the CPCC’s activity by providing analyses and recommendations developed internally, or occasionally, with the assistance of external consulting firms other than the CPCC’s independent consultant.
Market Data Provides a Reference Point for Compensation
The CPCC believes that knowledge of market practices, particularly those of our peers listed on the following page, is helpful in assessing the design and targeted level of our executive compensation package. In reviewing peer group information, the CPCC uses survey data provided by external consultants, monitors general market movement for executive pay and references proxy statements for specific roles.
While the CPCC considers the 50th percentile (median) of our peer group as a reference, there is no specific percentage of target total direct compensation targeted by the CPCC other than to remain generally competitive with similarly situated peer companies. Target opportunities for individual pay elements vary by executive role based on scope of responsibilities and expected contributions.
COMPENSATION OF EXECUTIVE OFFICERS
Target total direct compensation for 2021 for Erik Nordstrom and Peter Nordstrom was below our peer group median, as it has been in previous years. Based on the CPCC’s review of relevant market data and internal pay equity, the CPCC believes the target total direct compensation for Anne Bramman, Kenneth Worzel and Edmond Mesrobian was within a competitive range of the peer group median. Actual pay for the NEOs can exceed our established targets or peer group actual pay through the variable compensation elements when pre-determined performance milestones established by the CPCC are achieved.
Peer Group Companies Represent Our Business
Each year, the CPCC reviews the appropriateness of our peer group for comparison on pay and related practices. Collectively, the peer group companies represent our primary business areas, including our Nordstrom, Nordstrom Rack, in-store and online businesses and private label products. The peer group companies generally meet the following selection criteria:
•fall within the Consumer Discretionary and Staples sectors;
•fall within a reasonable range of our size, defined as one-fourth to four times our revenue and one-fifth to five times our market capitalization;
•share similar talent, operational and/or business characteristics, including a retail-focused business model;
•have a similar or related product focus and place a high value on customer experience;
•are part of our industry group as defined by institutional shareholders and shareholder service organizations; and
•are a public company subject to similar market pressures.
Our peer group used for evaluating compensation for fiscal year 2021 was comprised of the following retail companies:
| | | | | | | | |
Bed Bath & Beyond Inc. | Kohl’s Corporation | Tapestry, Inc. |
Capri Holdings Limited | Bath & Body Works, Inc.* | The following table provides information on the current holdings of stock options and stock awards by the NEOs as of the fiscal year ended January 30, 2021. TJX Companies, Inc. |
Dillard’s, Inc. | Macy’s, Inc. | Urban Outfitters, Inc. |
The table includes vested but unexercised stock options, unvested stock options, unvested RSUs and PSUs with time remaining in the three-Estée Lauder Companies Inc. | Ralph Lauren Corporation | V.F. Corporation |
Foot Locker, Inc. | Ross Stores, Inc. | Williams-Sonoma, Inc. |
The Gap, Inc. | | |
*In July 2021, L Brands announced separation of the Victoria’s Secret business into an independent, publicly traded company and made a name change from L Brands, Inc. to Bath & Body Works, Inc.
During 2021, as part of its annual review of peer companies to be used for compensation comparison purposes, the CPCC determined that J.C. Penney Company, Inc. and Tiffany & Co. should be removed due to the unavailability of publicly disclosed pay data going forward.
Compensation Risk Assessment Supports Integrity of Our Pay Practices
The CPCC oversees an extensive review of the Company’s pay-for-performance philosophy, the composition and balance of elements in the compensation package and the alignment of plans with shareholder interests to ensure these practices do not pose a material adverse risk to the organization. The review is conducted every other year as underlying programs and practices are generally consistent over time. The last review, for fiscal year 2020, concluded with the following perspectives:
•The goals of the Company’s compensation programs are to attract and retain the best talent and to motivate and reward our people in ways that are aligned with the long-term interests of our shareholders. This has been a long-standing objective of our pay-for-performance philosophy. We believe that the strong alignment of our employee compensation plans with performance has well-served our stakeholders, and our shareholders in particular. The strength of this alignment is regularly reviewed and monitored by the CPCC.
•We have systems in place to identify, monitor and control risks, making it difficult for a single individual or a group of individuals to expose the Company to material compensation risk.
•Our compensation program rewards both short- and long-term performance. Performance measures for Company leaders are predominantly team-oriented rather than individually focused and tied to measurable factors that are both transparent to shareholders and drivers of their shareholder return.
•The compensation program balances the importance of achieving critical short-term objectives with a focus on realizing strategic long-term priorities. Strong stock ownership guidelines are in place for Company leaders, and mechanisms, such as an executive clawback policy, exist to address inappropriate rewards.
•The CPCC is actively engaged in establishing compensation plans, monitoring these plans during the year and using discretion in making rewards, as necessary.
•The Company has active and engaged oversight systems in place. The AFC and the full Board closely monitor and certify the performance that drives employee rewards through detailed and transparent financial reporting, which is in place to provide strong, timely insight into the performance of the Company.
year performance cycle. The vesting schedules for outstanding stock options and RSUs are provided on pages 48 and 49. Information about the amount of Common Stock beneficially owned by the NEOs is provided in the Beneficial Ownership Table on page 61.
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| Option Awards | | Stock Awards |
| | | | EIP Awards: Number of Securities Underlying Unexer- cised Unearned Options (#) | | | | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($) | EIP Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | EIP Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) |
| | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | |
Name | Grant Date | Exer- cisable | Unexer- cisable (a) | |
Erik B. Nordstrom | 2/25/2011 | 69,637 | — | | 42.48 | 2/25/2021 | | | | | |
2/22/2012 | 68,244 | — | | 49.15 | 2/22/2022 | | | | | |
| 3/4/2013 | 99,563 | — | | 50.26 | 3/4/2023 | | | | | |
| 3/3/2014 | 60,747 | — | | 57.16 | 3/3/2024 | | | | | |
| 2/24/2015 | 45,996 | — | | 75.23 | 2/24/2025 | | | | | |
| 2/29/2016 | 82,141 | — | | 51.32 | 2/28/2026 | | | | | |
| 6/7/2016 | 10,838 | — | | 40.50 | 6/7/2026 | | | | | |
| 2/28/2017 | 28,989 | 9,664 | | 46.66 | 2/28/2027 | | | | | |
| 2/28/2017 | | | | | | | 6,908 | 244,889 | | |
| 3/6/2018 | | | | | | | 26,106 | 925,458 | | |
| 3/5/2019 | 18,267 | 54,802 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | | | 12,543 | 444,649 |
| 3/9/2020 | — | 147,407 | | 26.79 | 3/9/2030 | | | | | |
| 8/27/2020 | — | 245,829 | | 14.79 | 8/27/2030 | | | | | |
Anne L. Bramman | 3/6/2018 | | | | | | | 13,407 | 475,278 | | |
3/6/2018 | | | | | | | 22,983 | 814,747 | | |
| 3/5/2019 | — | 123,554 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | | | 7,323 | 259,600 |
| 3/5/2019 | | | | | | | 11,221 | 397,784 | | |
| 3/9/2020 | | | | | | | 34,647 | 1,228,236 | | |
| 8/27/2020 | — | 281,657 | | 14.79 | 8/27/2030 | | | | | |
Peter E. Nordstrom | 2/25/2011 | 69,637 | — | | 42.48 | 2/25/2021 | | | | | |
2/22/2012 | 68,244 | — | | 49.15 | 2/22/2022 | | | | | |
| 3/4/2013 | 99,563 | — | | 50.26 | 3/4/2023 | | | | | |
| 3/3/2014 | 60,747 | — | | 57.16 | 3/3/2024 | | | | | |
| 2/24/2015 | 45,996 | — | | 75.23 | 2/24/2025 | | | | | |
| 2/29/2016 | 82,141 | — | | 51.32 | 2/28/2026 | | | | | |
| 6/7/2016 | 10,838 | — | | 40.50 | 6/7/2026 | | | | | |
| 2/28/2017 | 28,989 | 9,664 | | 46.66 | 2/28/2027 | | | | | |
| 2/28/2017 | | | | | | | 6,897 | 244,499 | | |
| 3/6/2018 | | | | | | | 26,106 | 925,458 | | |
| 3/5/2019 | 18,267 | 54,802 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | | | 12,543 | 444,649 |
| 3/9/2020 | — | 147,407 | | 26.79 | 3/9/2030 | | | | | |
| 8/27/2020 | — | 245,829 | | 14.79 | 8/27/2030 | | | | | |
47 | | | | | | | | | | | | | | |
| 41 | 2022 Proxy Statement | NORDSTROM, INC. - 2021 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | | | | EIP Awards: Number of Securities Underlying Unexer- cised Unearned Options (#) | | | | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($) | EIP Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | EIP Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | | | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | | Name | Grant Date | Exer- cisable | Unexer- cisable (a) | | Kenneth J. Worzel | 3/4/2013 | 40,536 | — | | 50.26 | 3/4/2023 | | | | | | 3/3/2014 | 26,141 | — | | 57.16 | 3/3/2024 | | | | | | | 2/24/2015 | 20,585 | — | | 75.23 | 2/24/2025 | | | | | | | 2/29/2016 | 38,057 | — | | 51.32 | 2/28/2026 | | | | | | | 6/7/2016 | 23,433 | — | | 40.50 | 6/7/2026 | | | | | | | 2/28/2017 | 12,348 | 4,116 | | 46.66 | 2/28/2027 | | | | | | | 2/28/2017 | | | | | | | 2,942 | 104,294 | | | | 3/6/2018 | | | | | | | 12,906 | 457,518 | | | | 3/6/2018 | | | | | | | 22,983 | 814,747 | | | | 3/5/2019 | — | 159,425 | | 45.33 | 3/5/2029 | | | | | | | 3/5/2019 | | | | | | | | | 9,449 | 334,967 | | 3/5/2019 | | | | | | | 13,938 | 494,102 | | | | 3/9/2020 | | | | | | | 43,777 | 1,551,895 | | | | 8/27/2020 | — | 366,540 | | 14.79 | 8/27/2030 | | | | | | Edmond Mesrobian | 8/27/2018 | | | | | | | 19,052 | 675,393 | | | 3/5/2019 | — | 86,687 | | 45.33 | 3/5/2029 | | | | | | | 3/5/2019 | | | | | | | | | 5,138 | 182,142 | | 3/5/2019 | | | | | | | 7,873 | 279,098 | | | | 8/26/2019 | | | | | | | 25,680 | 910,356 | | | | 3/9/2020 | | | | | | | 26,851 | 951,868 | | | | 8/27/2020 | — | 212,207 | | 14.79 | 8/27/2030 | | | | | |
(a)Number of Securities Underlying Unexercised Options: Unexercisable
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COMPENSATION OF EXECUTIVE OFFICERS
Based on this review, the CPCC believes the Company’s compensation plans do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company.
Executive Compensation Clawback Policy Applies to Performance-Based Pay
In February 2008, the Board adopted a formal executive compensation clawback policy that applies to any performance-based bonus, equity, equity equivalent or other incentive compensation awarded to an Executive Officer, beginning in that fiscal year. Under that policy, in the event of a material restatement of the Company’s financial results, the Board will review the circumstances that caused the restatement and consider accountability to determine whether an Executive Officer was negligent or engaged in misconduct. If so, and if the amount or vesting of an award would have been less had the financial statements been correct, the Board will seek to recover compensation from the Executive Officer as it deems appropriate. This policy is in addition to any requirements which might be imposed pursuant to applicable law.
LTI Grants Are Effective On the First Day of the Open Trading Window
The CPCC approves annual equity-based awards at its annual February meeting, which is typically held approximately three weeks after fiscal year end. Annual grants are customarily effective on the first day of the Company’s next open trading window following CPCC approval. The CPCC may approve one-time equity-based grants to executives on other dates for reasons such as newly hired executives or for retention purposes. Such grants are generally effective on the first day of the Company’s next open trading window following approval by the CPCC.
Termination and Change in Control Provisions are CPCC-Directed
Under our Nordstrom, Inc. Executive Severance Plan, eligible Executive Officers, including certain NEOs, are entitled to receive severance benefits upon involuntary termination of employment by the Company to assist in the transition from active employment. To be eligible to participate in the Plan upon involuntary termination, the NEO must have signed a non-competition and non-solicitation agreement. Erik Nordstrom and Peter Nordstrom are not eligible for separation benefits under the Plan, and Anne Bramman has elected not to participate in the Plan. Separation benefits are described in the Potential Payments Upon Termination or Change in Control section beginning on page 53.
As described in the same section, the NEOs are generally not entitled to any payment or accelerated benefit in connection with a change in control of the Company. However, the NEOs are entitled to accelerated vesting of equity if they experience a qualifying termination (termination by the Company without cause or termination by the executive for good reason) within 12 months following a change in control, unless the Company and the CPCC does not act to cause the NEOs to receive, on account of the equity award, cash or other property being paid to shareholders in the change in control transaction.
Tax and Accounting Considerations Underlie the Compensation Elements
The CPCC recognizes the tax and regulatory factors that can influence the structure of executive compensation programs, including:
•Section 162(m) of the IRC, which disallows a tax deduction to public companies for annual compensation over $1 million paid to “covered employees” which generally includes NEOs. Certain performance-based compensation under arrangements in place as of November 2, 2017 are not subject to the limitation. Therefore, compensation in excess of $1 million paid to our NEOs is generally expected to be nondeductible by the Company.
•FASB ASC 718, where stock options, PSUs and RSUs are accounted for based on their grant date fair value (see the notes to the financial statements contained within the Company’s 2021 Annual Report). The CPCC regularly considers the accounting implications of our equity-based awards.
•Section 409A of the IRC, the limitations of which primarily relate to the deferral and payment of benefits under the NDCP and SERP. The CPCC continues to consider the impact of Section 409A and in general, the evolving tax and regulatory landscape in which its compensation decisions are made.
The following table shows the grant date, vesting schedule and expiration date for all unvested stock options as of the fiscal year ended January 30, 2021. On March 5, 2019, Erik Nordstrom and Peter Nordstrom received a stock option grant with a four-year vesting schedule of 25% per year.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes the total compensation paid or accrued by the Company for services provided by the NEOs for fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020.
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Name and Principal Position | Fiscal Year | Salary ($)(a) | Bonus ($)(b) | Stock Awards ($)(c) | Option Awards ($)(d) | Non-Equity Incentive Plan Compensation ($)(e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(f) | All Other Compensation ($)(g) | Total ($) |
Erik B. Nordstrom | 2021 | | 758,700 | | — | | — | | 3,699,999 | | 1,941,761 | | (692,013) | | 44,686 | | 5,753,133 | |
Chief Executive Officer | 2020 | | 367,419 | | — | | 1,592,846 | | 2,654,740 | | — | | 1,010,681 | | 21,984 | | 5,647,670 | |
| 2019 | | 756,393 | | — | | 1,592,836 | | 1,061,897 | | 708,591 | | 2,700,516 | | 52,070 | | 6,872,303 | |
Anne L. Bramman | 2021 | | 812,892 | | — | | 1,319,977 | | 879,995 | | 1,040,246 | | — | | 24,679 | | 4,077,789 | |
Chief Financial Officer | 2020 | | 699,231 | | — | | 1,999,988 | | 1,824,997 | | — | | — | | 14,411 | | 4,538,627 | |
| 2019 | | 793,750 | | — | | 1,549,974 | | 1,859,994 | | 564,500 | | — | | 39,912 | | 4,808,130 | |
Peter E. Nordstrom | 2021 | | 758,700 | | — | | — | | 3,699,999 | | 1,941,761 | | (1,364,580) | | 56,475 | | 5,092,355 | |
President and Chief Brand Officer | 2020 | | 367,419 | | — | | 1,592,846 | | 2,654,740 | | — | | 1,055,774 | | 24,849 | | 5,695,628 | |
2019 | | 756,393 | | — | | 1,592,836 | | 1,061,897 | | 708,591 | | 2,782,378 | | 77,355 | | 6,979,450 | |
Kenneth J. Worzel | 2021 | | 892,123 | | — | | 1,443,737 | | 962,494 | | 1,427,077 | | 1,389,900 | | 32,195 | | 6,147,526 | |
Chief Customer Officer | 2020 | | 764,597 | | — | | 2,624,977 | | 2,374,996 | | — | | 864,312 | | 18,367 | | 6,647,249 | |
2019 | | 826,111 | | — | | 1,999,970 | | 2,400,000 | | 645,433 | | 1,589,618 | | 37,080 | | 7,498,212 | |
Edmond Mesrobian | 2021 | | 827,123 | | — | | 1,394,971 | | 929,995 | | 815,262 | | — | | 12,158 | | 3,979,509 | |
Chief Technology Officer | 2020 | | 677,214 | | — | | 1,549,973 | | 1,374,995 | | — | | — | | 7,917 | | 3,610,099 | |
2019 | | 743,542 | | — | | 2,087,450 | | 1,304,995 | | 420,971 | | — | | 10,225 | | 4,567,183 | |
(a)Salary
The amounts shown represent base salary earned during the fiscal year. The numbers shown for all fiscal years vary somewhat from annual base salaries due to the fact that our fiscal year ends on the Saturday nearest to January 31st and salary increases are effective on or about April 1st of each year. The 2021 base salaries were $758,500 each for Erik Nordstrom and Peter Nordstrom, $815,000 for Anne Bramman, $895,000 for Kenneth Worzel and $800,000 for Edmond Mesrobian.
Anne Bramman elected to defer 10% of her base salary earned during calendar year 2022 into the NDCP. Kenneth Worzel elected to defer $50,000 of his base salary earned during calendar year 2021 and 10% of his base earned during calendar year 2022 into the NDCP. Due to the timing of our fiscal year ends, $3,135 and $51,442 were attributed to fiscal year 2021 deferrals for Anne Bramman and Kenneth Worzel, respectively, as reported in the Fiscal Year 2021 Nonqualified Deferred Compensation Table on page 53.
Each of the NEOs contributed a portion of their base salary earned during fiscal year 2021 to the 401(k) Plan.
The amounts reported for fiscal year 2020 reflect the reduced base salaries of the NEOs, as part of the Company’s response to business impacts from the COVID-19 pandemic. Base salaries were reduced from March 29, 2020 to October 3, 2020, as follows: Erik Nordstrom and Peter Nordstrom received no base salary, while Anne Bramman, Kenneth Worzel and Edmond Mesrobian received a 25% base salary reduction.
(b) Bonus
This column refers to one-time payments not made under the EMBP. No amounts were paid to NEOs.
(c) Stock Awards
The amounts reported reflect the grant date fair value of RSUs and PSUs granted during the fiscal year under the 2010 and 2019 EIPs. The amounts reported are not the value actually received.
The value the NEOs may receive from their RSUs will depend on whether the time-based vesting requirement is met and the market price of Common Stock on the vesting date. The amounts reported were calculated in accordance with ASC 718. See column (c) of the Grants of Plan-Based Awards in Fiscal Year 2021 table on page 46 for the number of RSUs granted in fiscal year 2021.
No PSU amounts are reported for fiscal year 2021 as the Company did not award PSUs during the fiscal year. The PSU amounts reported in fiscal year 2020 reflects grants of PSUs that were subsequently cancelled 6 months later as part of the Company’s response to COVID. The cancelled PSU grants to Erik Nordstrom and Peter Nordstrom each had a grant date fair value of $1,592,846. The cancelled PSU grants to Anne Bramman, Kenneth Worzel and Edmond Mesrobian had a grant date fair value of $1,199,989, $1,574,982 and $929,983, respectively. As discussed on page 38, the 2019 PSUs did not meet the performance thresholds required for payout. As a result, none of the 2019 PSUs vested. The amounts reported were calculated in accordance with ASC 718.
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| 43 | 2022 Proxy Statement | NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
(d) Option Awards
The amounts reported reflect the grant date fair value of stock options granted during the fiscal year under the 2010 and 2019 EIPs. This is not the value received. The NEOs will only realize value from stock options if the market price of Common Stock is higher than the exercise price of the options at the time of exercise. The amounts reported were calculated in accordance with ASC 718. See column (d) of the Grants of Plan-Based Awards in Fiscal Year 2021 table on page 46 for the number of stock options granted in fiscal year 2021.
Assumptions used in the calculation of these amounts are included in the notes to the financial statements contained within the Company’s 2021 Annual Report.
(e) Non-Equity Incentive Plan Compensation
The amounts reported reflect the annual performance-based cash awards under the EMBP, as described on page 37.
(f) Change in Pension Value and Nonqualified Deferred Compensation Earnings
The amounts reported are the changes in actuarial present value from 2020 fiscal year-end to 2021 fiscal year-end for each of the eligible NEO’s benefit under the SERP. The present value of the benefit is affected by current earnings, credited years of service, the executive’s age and time until normal retirement eligibility, the age of the executive’s spouse or life partner as the potential beneficiary and economic assumptions (discount rate and mortality table used to determine the present value of the benefit).
The present value of Erik Nordstrom’s and Peter Nordstrom’s benefits decreased from 2020 fiscal year-end by $692,013 and $1,364,580, respectively. The decreases were primarily the result of an increase in the discount rate used to determine the present value of the benefits. The interest rate used is the same as the discount rate used for financial reporting purposes for the SERP which changed from 2.62% to 3.19%. The present value of Kenneth Worzel’s benefit increased by $1,389,900, primarily due to an increase to service and pay, which more than offset any decrease due to the change in the discount rate, as mentioned above. Amounts are not reported for Anne Bramman and Edmond Mesrobian because the SERP was closed to new entrants prior to when they joined the Company. See the Pension Benefits section beginning on page 51 for more information about the SERP.
The amounts were calculated using the same discount rate assumptions as those used in the Company’s financial statements to calculate the Company’s obligations under the SERP. Assumptions used in the calculation of these amounts are included in the notes to the financial statements contained within the Company’s 2021 Annual Report.
Anne Bramman, Kenneth Worzel and Edmond Mesrobian had account balances in the NDCP in fiscal year 2021, as shown on page 53. They did not receive above-market-rate or preferential earnings on their deferred compensation, so no amounts for these types of earnings are included in the table.
(g) All Other Compensation
Each component of all other compensation paid to the NEOs is shown in the table below.
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All Other Compensation in Fiscal Year 2021 |
The table below shows each component of “All Other Compensation” for fiscal year 2021, reported in column (g) of the Summary Compensation Table on page 43, calculated at the aggregate incremental cost to the Company.
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Name | Merchandise Discount ($)(a) | | 401(k) Plan Company Match ($)(b) | | Premium on Insurance ($)(c) | | Personal Use of Company Aircraft ($)(d) | | | | Total ($) |
Erik B. Nordstrom | 36,826 | | | 5,812 | | | 2,048 | | | — | | | | | 44,686 | |
Anne L. Bramman | 10,659 | | | 11,833 | | | 2,187 | | | — | | | | | 24,679 | |
Peter E. Nordstrom | 34,977 | | | 8,145 | | | 2,048 | | | 11,305 | | | | | 56,475 | |
Kenneth J. Worzel | 17,214 | | | 12,583 | | | 2,398 | | | — | | | | | 32,195 | |
Edmond Mesrobian | 1,835 | | | 8,187 | | | 2,136 | | | — | | | | | 12,158 | |
(a)Merchandise Discount
The Company provides a broad-based merchandise discount for its employees. The NEOs, their spouses and eligible children, were provided a discount of 33% for purchases at Nordstrom stores, Nordstrom.com, Trunk Club and TrunkClub.com and 20% for purchases at Nordstrom Rack stores, NordstromRack.com, and our restaurants. A 40% discount is available at certain times of the year on specific merchandise. The merchandise discount provided to the NEOs is the same as for all other eligible management and high-performing non-management employees of the Company, and its Board, as described on page 17. The amounts reported are the total discount the NEOs received on their Nordstrom purchases during fiscal year 2021.
On March 5, 2019, Anne Bramman, Kenneth Worzel and Edmond Mesrobian received a stock option grant with a four-year vesting schedule of 50% after years three and four.
COMPENSATION OF EXECUTIVE OFFICERS
(b)401(k) Plan Company Match
The Company offers a matching contribution on employee 401(k) contributions under the 401(k) Plan to all eligible employees, including the NEOs. The NEOs and all other Company employees, may defer up to 50% of their eligible pay (i.e., base salary, performance-based bonus and other taxable wages) into the 401(k) Plan, subject to IRC limits.
Company matching contributions are made each pay period an employee contributes to the 401(k) Plan, equal to a dollar for dollar match up to 1% of eligible pay then $0.50 per dollar on the next 6% of eligible pay, up to a maximum of 4% of eligible pay and IRC limits. The total Company matching contribution each of the NEOs received, as shown on the previous page, reflects this matching formula for fiscal year 2021.
Contributions under the 401(k) Plan may be directed to custom target retirement date funds or to any of 9 individual investment alternatives, including Common Stock. The Plan also offers a self-directed brokerage option.
(c)Premium on Insurance
The Company provides life insurance to the NEOs in an amount equal to approximately 1.25 times their base salary and additional disability insurance. The amounts reported are the annual Company-paid premiums.
(d) Personal Use of Company Aircraft
The Company has a fractional ownership interest in an aircraft which it charters for business purposes. On rare occasions, a NEO may have a guest accompany them on a business trip as an additional passenger. Only the direct variable costs (i.e., costs the Company incurs solely as a result of the passenger being on the aircraft) are included in determining the aggregate incremental cost to the Company. When travel does not meet the IRS standard for business travel, the cost of the travel is imputed as income to the executive, which is the Company’s practice to fully disclose. The Company does not reimburse the NEOs for taxes incurred as a result of the imputed income.
In fiscal year 2021, Peter Nordstrom was accompanied by a family member on one business trip. The costs reported are the total direct variable costs associated with the family member’s travel, which include the tax deduction the Company was not able to take as a result of the nondeductible portion of the aircraft operating costs.
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| 45 | 2022 Proxy Statement | NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
Grants of Plan-Based Awards in Fiscal Year 2021
The following table discloses the potential range of payouts for:
•non-equity incentive plan awards granted in fiscal year 2021. These awards are performance-based cash bonuses granted under the EMBP, as described on page 37;
•the number, price and grant date fair value of stock options granted under the 2019 EIP in fiscal year 2021, as described on page 38; and
•the number and grant date fair value of RSUs granted under the 2019 EIP in fiscal year 2021, as described on page 38.
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| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (b) | | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(c) | All Other Option Awards: Number of Securities Underlying Options (#)(d) | Exercise or Base Price of Option Awards ($/Sh)(e) | Grant Date Fair Value of Stock and Option Awards ($)(f) |
Name and Award | Grant Date (a) | Approval Date | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) |
Erik B. Nordstrom | | | | | | | | | | | | | |
EMBP | | | 379,250 | | 1,517,001 | | 3,792,502 | | | | | | | | | |
Stock Option | 3/4/2021 | 2/23/2021 | | | | | | | | | 297,619 | | 35.52 | | 3,699,999 | |
Anne L. Bramman | | | | | | | | | | | | | |
EMBP | | | 203,173 | | 812,692 | | 2,031,730 | | | | | | | | | |
RSU | 3/4/2021 | 2/23/2021 | | | | | | | | 40,060 | | | 1,319,977 | |
Stock Option | 3/4/2021 | 2/23/2021 | | | | | | | | | 63,008 | | 35.52 | | 879,995 | |
Peter E. Nordstrom | | | | | | | | | | | | | |
EMBP | | | 379,250 | | 1,517,001 | | 3,792,502 | | | | | | | | | |
Stock Option | 3/4/2021 | 2/23/2021 | | | | | | | | | 297,619 | | 35.52 | | 3,699,999 | |
Kenneth J. Worzel | | | | | | | | | | | | | |
EMBP | | | 278,726 | | 1,114,904 | | 2,787,260 | | | | | | | | | |
RSU | 3/4/2021 | 2/23/2021 | | | | | | | | 43,816 | | | 1,443,737 | |
Stock Option | 3/4/2021 | 2/23/2021 | | | | | | | | | 68,915 | | 35.52 | | 962,494 | |
Edmond Mesrobian | | | | | | | | | | | | | |
EMBP | | | 159,231 | | 636,923 | | 1,592,307 | | | | | | | | | |
RSU | 3/4/2021 | 2/23/2021 | | | | | | | | 42,336 | | | 1,394,971 | |
Stock Option | 3/4/2021 | 2/23/2021 | | | | | | | | | 66,588 | | 35.52 | | 929,995 | |
(a) Grant Date
The grant date is the first business day of the open trading window that falls on or after the CPCC approval of the grant.
(b) Estimated Future Payouts Under Non-Equity Incentive Plan Awards
The amounts shown report the range of possible cash payouts for fiscal year 2021 associated with established levels of performance or achievement under the EMBP. The amounts shown in the “Threshold,” “Target” and “Maximum” columns reflect the payout opportunity associated with established levels of performance or achievement, as discussed on page 37. For there to be any payout, minimum performance milestones or achievement must be met.
Although the column heading refers to future payouts, fiscal year 2021 performance-based bonuses have already been earned and were paid to the NEOs in March 2022, as reported in the Summary Compensation Table on page 43, in column (e), “Non-Equity Incentive Plan Compensation.”
(c) All Other Stock Awards: Number of Shares of Stock or Units
The numbers shown report the number of RSUs granted to the NEOs in fiscal year 2021 under the 2019 EIP. RSUs were granted on March 4, 2021 to Anne Bramman, Kenneth Worzel and Edmond Mesrobian and will vest equally over four years, beginning on March 10, 2022.
COMPENSATION OF EXECUTIVE OFFICERS
(d) All Other Option Awards: Number of Securities Underlying Options
The numbers shown report the number of stock options granted to the NEOs in fiscal year 2021 under the 2019 EIP. Stock options were granted on March 4, 2021 and become exercisable on March 10, 2024 and March 10, 2025.
(e) Exercise or Base Price of Options Awards
The exercise price of the stock options granted on March 4, 2021 of $35.52 was the closing price of Common Stock on the grant date.
(f) Grant Date Fair Value of Stock and Option Awards
The grant date fair value of RSUs and stock options was calculated in accordance with ASC 718.
The reported value for RSUs was calculated by multiplying the number of RSUs awarded by the fair value of a RSU on the date of grant, which was $32.95 on March 4, 2021. The actual value the NEOs may receive will depend on whether the time-based vesting requirement is met and the market price of Common Stock at the time of any vesting.
The reported value of stock options was calculated by multiplying the number of options awarded by the fair value of an option on the date of grant. After taking into account the vesting price hurdle relevant to their awards, the fair value for the stock option grant on March 4, 2021 to Erik Nordstrom and Peter Nordstrom was $12.43. The fair value for the stock option grants on March 4, 2021 to Anne Bramman, Kenneth Worzel and Edmond Mesrobian was $13.96. The actual value received by the NEOs will be the number of options exercised multiplied by the difference between the stock price at the future exercise date and the grant price. The grant price on March 4, 2021 was $35.52.
| | | | | | | | | | | | | | |
| 47 | 2022 Proxy Statement | NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
Outstanding Equity Awards at Fiscal Year-End 2021
The following table provides information on the current holdings of stock options and stock awards by the NEOs as of the fiscal year ended January 29, 2022. The table includes vested but unexercised stock options, unvested stock options, and unvested RSUs. The vesting schedules for outstanding stock options and RSUs are provided on pages 49 and 50, respectively. Information about the amount of Common Stock beneficially owned by the NEOs is provided in the Beneficial Ownership Table on page 61.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
| | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexer- cised Unearned Options (#) | | | | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) |
| | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | |
Name | Grant Date | Exer- cisable | Unexer- cisable (a) | |
Erik B. Nordstrom | 2/22/2012 | 68,244 | | — | | | 49.15 | | 2/22/2022 | | | | | |
3/4/2013 | 99,563 | | — | | | 50.26 | | 3/4/2023 | | | | | |
| 3/3/2014 | 60,747 | | — | | | 57.16 | | 3/3/2024 | | | | | |
| 2/24/2015 | 45,996 | | — | | | 75.23 | | 2/24/2025 | | | | | |
| 2/29/2016 | 82,141 | | — | | | 51.32 | | 2/28/2026 | | | | | |
| 6/7/2016 | 10,838 | | — | | | 40.50 | | 6/7/2026 | | | | | |
| 2/28/2017 | 38,653 | | — | | | 46.66 | | 2/28/2027 | | | | | |
| 3/6/2018 | | | | | | | 13,053 | | 285,208 | | | |
| 3/5/2019 | 36,534 | | 36,535 | | | 45.33 | | 3/5/2029 | | | | | |
| 3/9/2020 | 36,851 | | 110,556 | | | 26.79 | | 3/9/2030 | | | | | |
| 8/27/2020 | — | | 245,829 | | | 14.79 | | 8/27/2030 | | | | | |
| 3/4/2021 | — | | 297,619 | | | 35.52 | | 3/4/2031 | | | | | |
Anne L. Bramman | 3/6/2018 | | | | | | | 11,492 | 251,100 | | |
3/6/2018 | | | | | | | 6,704 | 146,482 | | |
| 3/5/2019 | — | 123,554 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | 7,481 | 163,460 | | |
| 3/9/2020 | | | | | | | 25,986 | 567,794 | | |
| 8/27/2020 | — | 281,657 | | 14.79 | 8/27/2030 | | | | | |
| 3/4/2021 | — | 63,008 | | 35.52 | 3/4/2031 | | | | | |
| 3/4/2021 | | | | | | | 40,060 | 875,311 | | |
Peter E. Nordstrom | 2/22/2012 | 68,244 | — | | 49.15 | 2/22/2022 | | | | | |
3/4/2013 | 99,563 | — | | 50.26 | 3/4/2023 | | | | | |
| 3/3/2014 | 60,747 | — | | 57.16 | 3/3/2024 | | | | | |
| 2/24/2015 | 45,996 | — | | 75.23 | 2/24/2025 | | | | | |
| 2/29/2016 | 82,141 | — | | 51.32 | 2/28/2026 | | | | | |
| 6/7/2016 | 10,838 | — | | 40.50 | 6/7/2026 | | | | | |
| 2/28/2017 | 38,653 | — | | 46.66 | 2/28/2027 | | | | | |
| 3/6/2018 | | | | | | | 13,053 | 285,208 | | |
| 3/5/2019 | 36,534 | 36,535 | | 45.33 | 3/5/2029 | | | | | |
| 3/9/2020 | 36,851 | 110,556 | | 26.79 | 3/9/2030 | | | | | |
| 8/27/2020 | — | 245,829 | | 14.79 | 8/27/2030 | | | | | |
| 3/4/2021 | — | 297,619 | | 35.52 | 3/4/2031 | | | | | |
Kenneth J. Worzel | 3/4/2013 | 40,536 | — | | 50.26 | 3/4/2023 | | | | | |
3/3/2014 | 26,141 | — | | 57.16 | 3/3/2024 | | | | | |
| 2/24/2015 | 20,585 | — | | 75.23 | 2/24/2025 | | | | | |
COMPENSATION OF EXECUTIVE OFFICERS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
| | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexer- cised Unearned Options (#) | | | | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) |
| | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | |
Name | Grant Date | Exer- cisable | Unexer- cisable (a) | |
| 2/29/2016 | 38,057 | — | | 51.32 | 2/28/2026 | | | | | |
| 6/7/2016 | 23,433 | — | | 40.50 | 6/7/2026 | | | | | |
| 2/28/2017 | 16,464 | — | | 46.66 | 2/28/2027 | | | | | |
| 3/6/2018 | | | | | | | 6,453 | 140,998 | | |
| 3/6/2018 | | | | | | | 11,492 | 251,100 | | |
| 3/5/2019 | — | 159,425 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | 9,292 | 203,030 | | |
| 3/9/2020 | | | | | | | 32,833 | 717,401 | | |
| 8/27/2020 | — | 366,540 | | 14.79 | 8/27/2030 | | | | | |
| 3/4/2021 | — | 68,915 | | 35.52 | 3/4/2031 | | | | | |
| 3/4/2021 | | | | | | | 42,181 | 921,655 | | |
Edmond Mesrobian | 8/27/2018 | | | | | | | 9,526 | 208,143 | | |
3/5/2019 | — | 86,687 | | 45.33 | 3/5/2029 | | | | | |
| 3/5/2019 | | | | | | | 5,249 | 114,691 | | |
| 8/26/2019 | | | | | | | 12,840 | 280,554 | | |
| 3/9/2020 | | | | | | | 20,139 | 440,037 | | |
| 8/27/2020 | — | 212,207 | | 14.79 | 8/27/2030 | | | | | |
| 3/4/2021 | — | 66,588 | | 35.52 | 3/4/2031 | | | | | |
| 3/4/2021 | | | | | | | 42,336 | 925,042 | | |
(a)Number of Securities Underlying Unexercised Options: Unexercisable
The following table shows the grant date, vesting schedule and expiration date for all unvested stock options as of the fiscal year ended January 29, 2022. On March 5, 2019, Erik Nordstrom and Peter Nordstrom received a stock option grant with a four-year vesting schedule of 25% per year. On March 5, 2019, Anne Bramman, Kenneth Worzel and Edmond Mesrobian received a stock option grant with a four-year vesting schedule of 50% on March 10, 2022 and 50% March 10, 2023. On March 4, 2021, Erik Nordstrom and Peter Nordstrom received a stock option grant that vests 50% on March 10, 2024 and 50% March 10, 2025 subject to the condition that the average daily closing price of our Common Stock meets or exceeds $45 per share for any twenty consecutive trading day period prior to March 10, 2025. On March 4, 2021, Anne Bramman, Kenneth Worzel and Edmond Mesrobian also received a stock option grant that vests 50% on March 10, 2024 and 50% March 10, 2025, and is not subject to a price condition for vesting.
| | | | | | | | |
Grant Date | Vesting Schedule | Expiration Date |
2/28/2017 | 25% per year with remaining vesting date of 3/10/2021 | 2/28/2027 |
3/5/2019 | 25% per year with remaining vesting dates of 3/10/2022 and 3/10/2023 | 3/5/2029 |
3/5/2019 | 50% on 3/10/2022 and 50% on 3/10/2023 | 3/5/2029 |
3/9/2020 | 25% per year with remaining vesting dates of 3/10/2021, 3/10/2022 and 3/10/2023 | 3/5/2029 |
3/5/2019 | 50% on 3/10/2022 and 50% on 3/10/2023 | 3/5/2029 |
3/9/2020 | 25% per year with vesting dates of 3/10/2021, 3/10/2022, 3/10/2023 and 3/10/2024 | 3/9/2030 |
8/27/2020 | 100% vest on 9/10/2022 | 8/27/2030 |
3/4/2021 | 50% on 3/10/2024 and 50% on 3/10/2025 | 3/4/2031 |
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| 49 | 2022 Proxy Statement | NORDSTROM, INC. - 2021 Proxy Statement 48
(b)Number of Shares or Units of Stock That Have Not Vested
The following table shows the grant date and vesting schedule for all unvested RSUs as of the fiscal year ended January 30, 2021.
| |
COMPENSATION OF EXECUTIVE OFFICERS
(b) Number of Shares or Units of Stock That Have Not Vested
The following table shows the grant date and vesting schedule for all unvested RSUs as of the fiscal year ended January 29, 2022.
| | | | | |
Grant Date | Vesting Schedule |
2/28/2017 | 25% per year with remaining vesting date of 3/10/2021 |
3/6/2018 | 25% per year with a remaining vesting date of 3/10/2022 |
8/27/2018 | 25% per year with a remaining vesting date of 9/10/2022 |
3/5/2019 | 25% per year with remaining vesting dates of 3/10/2022 and 3/10/2023 |
8/26/2019 | 33% in years one and two and 34% in the final year with a remaining vesting date of 9/10/2022 |
3/9/2020 | 25% per year with remaining vesting dates of 3/10/2021 and 3/10/2022 |
8/27/2018 | 25% per year with remaining vesting dates of 9/10/2021 and 9/10/2022 |
3/5/2019 | 25% per year with remaining vesting dates of 3/10/2021, 3/10/2022, and 3/10/2023 |
8/26/2019 | 33% in years one and two and 34% in the final year with remaining vesting dates of 9/10/2021 and 9/10/2022 |
3/9/2020 | 25% per year with vesting dates of 3/10/2021, 3/10/2022, 3/10/2023 and 3/10/2024 |
3/4/2021 | 25% per year with vesting dates of 3/10/2022, 3/10/2023, 3/10/2024 and 3/10/2025 |
(c) Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested
The PSUs granted on March 9, 2020 were cancelled on August 18, 2020, as discussed on page 43, and are not reflected in the table beginning on page 48.
(d) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
The PSUs granted on March 9, 2020 were cancelled on August 18, 2020, as discussed on page 43, and are not reflected in the table beginning on page 48.
(c) EIP Awards: Number of Unearned Shares, Units, or Other Rights That Have Not
COMPENSATION OF EXECUTIVE OFFICERS
Option Exercises and Stock Vested in Fiscal Year 2021
The following table provides information for the NEOs on the number of shares of Common Stock acquired and value realized from RSUs that vested with respect to fiscal year 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#)(a) | | Value Realized on Vesting ($)(b) |
| | | | | | | | |
Erik B. Nordstrom | | — | | | — | | | 19,961 | | | 752,729 | |
Anne L. Bramman | | — | | | — | | | 30,595 | | | 1,153,737 | |
Peter E. Nordstrom | | — | | | — | | | 19,950 | | | 752,315 | |
Kenneth J. Worzel | | — | | | — | | | 38,111 | | | 1,410,499 | |
Edmond Mesrobian | | — | | | — | | | 31,702 | | | 945,207 | |
(a) Number of Shares Acquired on Vesting
The numbers reported are the RSUs that vested during the fiscal year.
(b) Value Realized on Vesting
The amounts reported are the value realized for the RSUs that vested during the fiscal year.
Pension Benefits
The Company’s original SERP was introduced in the 1980s. Over the years, the plan design changed to better meet the purpose of encouraging designated executives to stay with Nordstrom throughout their careers and rewarding their significant and sustained contribution to the Company’s success by adding to their financial security upon retirement. Beginning in 2012, the SERP was closed to new entrants.
The NEOs, except Anne Bramman and Edmond Mesrobian, who both joined the Company after the SERP had been closed to new entrants, are eligible for the SERP. The eligible NEOs are entitled to receive their full retirement benefit at age 58. Their full benefit is equal to 1.6% multiplied by final average pay, as described in the following paragraph, and their years of credited service, up to a maximum of 25 years. They may retire early and could receive a reduced benefit if they are between the ages of 53 and 57, inclusive, with at least 10 years of credited service and the Board approves the early retirement. The early retirement benefit is reduced 10% for each year that their retirement age is less than 58. If they retire after age 58, they are entitled to their full retirement benefit, increased with interest of 5% per year, compounded annually, for each full year worked beyond age 58, for a maximum of 10 years. The annual SERP benefit is capped at $700,000 after any early retirement reductions are applied.
Final average pay is the average base salary and annual performance-based cash bonus of the highest 36 months over the longer of:
•the most recent five years of service; or
•the entire period of service after the executive’s 53rd birthday.
The annual SERP benefit is paid upon retirement for the remaining life of the executive with a 50% annuity paid to a surviving spouse or life partner after the executive’s death. A surviving spouse or life partner also receives a 50% survivor benefit if the executive dies before retiring. The amount of this survivor benefit depends on the executive’s age and years of credited service at the time of death.
The SERP provides that no benefit will be paid to an executive whose employment is terminated for cause, which includes competitive behavior against the Company, as determined by the CPCC in the exercise of its discretion in accordance with the Plan. The CPCC also has discretion to discontinue payment of benefits under the SERP if the retired executive is found to have engaged in misconduct or in competitive behavior against the Company.
Information about payment of the SERP benefit related to change in control is provided on pages 56 and 57 in footnote (b) to the Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2021 table.
Because the SERP is a nonqualified deferred compensation plan, the Company is not obligated to fund it. If the Company were to become insolvent, participants would be unsecured general creditors, and there is no guarantee that funds would be available to pay all creditors in full. See the notes to the financial statements contained within the Company’s 2021 Annual Report for a discussion of the benefit obligation.
The PSUs granted on March 9, 2020 were cancelled on August 18, 2020, as discussed on page 36, and are not reflected in the above table. The numbers reported are the outstanding PSUs granted in fiscal year 2019. One-third of the PSUs are earned on the last day of the one-year performance cycle, February 1, 2020, if performance criteria have been met, and two-thirds of the units are earned on the last day of the three-year performance cycle, January 29, | | | | | | | | | | | | | | |
| 51 | 2022 if performance criteria have been met. The 2019 PSUs vest when the results have been certified by the CPCC at the end of the three-year performance cycle, January 29, 2022. For the performance cycle that ended on February 1, 2020, the performance payout threshold was not achieved, so one-third of the grant will not pay out. The remaining two-thirds of this grant has time remaining in its three-year performance cycle. If the performance cycle for the remaining two-thirds of the grant had ended as of the close of fiscal year 2020, the performance payout threshold would not have been achieved and 0% of the number of PSUs outstanding would have been earned.As required to be disclosed by SEC rules, the number of estimated shares reported for the remaining two-thirds of this grant is based on achieving the next higher performance measure, which pays out at 50% of the number of units outstanding, as shown in the PSU vesting schedule on page 37.Proxy Statement
| NORDSTROM, INC. | |
COMPENSATION OF EXECUTIVE OFFICERS
Fiscal Year 2021 Pension Benefits Table
The following table shows the present value of the accumulated SERP benefit payable to each of the NEOs, based on the number of years of service credited under the Plan to each NEO and actuarial assumptions consistent with those used in the Company’s 2021 Annual Report to calculate the Company’s obligations under the Plan. See Note 8: Supplemental Executive Retirement Plan to the financial statements contained within the Company’s 2021 Annual Report for a discussion of the benefit obligation and assumptions used.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Present Value of Accumulated Benefit | | |
Name | | Plan Name | | Age (a) | | Number of Years Credited Service (#)(b) | | Full Retirement Benefit ($)(c) | | Early Retirement Benefit ($)(d) | | Payments During Last Fiscal Year ($) |
Erik B. Nordstrom | | SERP | | 58 | | | 25 | | | 13,595,960 | | | — | | | — | |
Anne L. Bramman | | — | | | — | | | — | | | — | | | — | | | — | |
Peter E. Nordstrom | | SERP | | 59 | | | 25 | | | 13,706,490 | | | — | | | — | |
Kenneth J. Worzel | | SERP | | 57 | | | 12 | | | 6,780,714 | | | 6,395,816 | | | — | |
Edmond Mesrobian | | — | | | — | | | — | | | — | | | — | | | — | |
Age is as of January 29, 2022, the last day of the fiscal year.
(b) Number of Years Credited Service
Although Erik Nordstrom and Peter Nordstrom each have more than 25 years of service, the number of years of credited service under the SERP is capped at 25.
(c) Present Value of Accumulated Benefit: Full Retirement Benefit
The amounts shown are based on the full retirement age of 58. Erik Nordstrom and Peter Nordstrom have met the minimum full retirement age with at least 10 years of credited service and would be eligible to receive the SERP benefit having the present values as shown in the table above. Kenneth Worzel will be eligible for full retirement on his 58th birthday, and his present value for full retirement is shown in the table above.
(d) Present Value of Accumulated Benefit: Early Retirement Benefit
Kenneth Worzel has met the minimum early retirement age with at least 10 years of credited service and would be eligible for early retirement with prior approval from the Board. The present value of his early retirement benefit is shown in the table above. Early retirement benefits are not applicable for Erik Nordstrom and Peter Nordstrom, as they have both met the minimum full retirement age of 58.
(d) EIP Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
The PSUs granted on March 9, 2020 were cancelled on August 18, 2020, as discussed on page 36, and are not reflected in the above table. The amounts reported relate to the outstanding PSUs granted in fiscal year 2019. One-third of the PSUs are earned on the last day of the one-year performance cycle, February 1, 2020, if performance criteria have been met, and two-thirds of the units are earned on the last day of the three-year performance cycle, January 29, 2022, if performance criteria have been met. The 2019 PSUs vest when the results have been certified by the CPCC at the end of the three-year performance cycle, January 29, 2022. For the performance cycle that ended on February 1, 2020, the performance payout threshold was not achieved, so one-third of the grant will not pay out. The remaining two-thirds of this grant has time remaining in its three-year performance cycle.
If the performance cycle for the remaining two-thirds of the grant had ended as of the close of fiscal year 2020, the performance payout threshold would not have been achieved and 0% of the number of PSUs outstanding would have been earned.
As required to be disclosed by SEC rules, the payout values for the remaining two-thirds of this grant are reported and are based on achieving the next higher performance measure, which pays out at 50% of the number of units outstanding. The value of estimated payouts has been calculated using the closing price of Common Stock on January 29, 2021, the last market trading day of the fiscal year, of $35.45. The payout does not include estimated dividend amounts as the Company does not pay dividends on unvested PSUs.
49 NORDSTROM, INC. - 2021 Proxy Statement
Option Exercises and Stock Vested in Fiscal Year 2020
The following table provides information for the NEOs on the number of shares of Common Stock acquired and value realized from PSUs and RSUs that vested with respect to fiscal year 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#)(a) | | Value Realized on Vesting ($)(b) |
| | | | | | | | |
Erik B. Nordstrom | | — | | | — | | | 23,134 | | | 627,163 | |
Anne L. Bramman | | — | | | — | | | 28,051 | | | 686,080 | |
Peter E. Nordstrom | | — | | | — | | | 23,118 | | | 626,729 | |
Kenneth J. Worzel | | — | | | — | | | 30,458 | | | 830,397 | |
Edmond Mesrobian | | — | | | — | | | 24,990 | | | 405,508 | |
(a) Number of Shares Acquired on Vesting
The numbers reported are the RSUs that vested during the fiscal year.
(b) Value Realized on Vesting
The amounts reported are the value realized for the RSUs that vested during the fiscal year.
Pension Benefits
The Company’s original SERP was introduced in the 1980s. Over the years, the plan design changed to better meet the purpose of encouraging designated executives to stay with Nordstrom throughout their careers and rewarding their significant and sustained contribution to the Company’s success by adding to their financial security upon retirement. Beginning in 2012, the SERP was closed to new entrants.
The NEOs, except Anne Bramman and Edmond Mesrobian, who both joined the Company after the SERP had been closed to new entrants, are eligible for the SERP. The eligible NEOs are entitled to receive their full retirement benefit at age 58. Their full benefit is equal to 1.6% multiplied by final average pay, as described in the following paragraph, and their years of credited service, up to a maximum of 25 years. They may retire early and could receive a reduced benefit if they are between the ages of 53 and 57, inclusive, with at least 10 years of credited service and the Board approves the early retirement. The early retirement benefit is reduced 10% for each year that their retirement age is less than 58. If they retire after age 58, they are entitled to their full retirement benefit, increased with interest of 5% per year, compounded annually, for each full year worked beyond age 58, for a maximum of 10 years. The annual SERP benefit is capped at $700,000 after any early retirement reductions are applied.
Final average pay is the average base salary and annual performance-based cash bonus of the highest 36 months over the longer of:
•the most recent five years of service; or
•the entire period of service after the executive’s 53rd birthday.
The annual SERP benefit is paid upon retirement for the remaining life of the executive with a 50% annuity paid to a surviving spouse or life partner after the executive’s death. A surviving spouse or life partner also receives a 50% survivor benefit if the executive dies before retiring. The amount of this survivor benefit depends on the executive’s age and years of credited service at the time of death.
The SERP provides that no benefit will be paid to an executive whose employment is terminated for cause, which includes competitive behavior against the Company, as determined by the CPCC in the exercise of its discretion in accordance with the Plan. The CPCC also has discretion to discontinue payment of benefits under the SERP if the retired executive is found to have engaged in misconduct or in competitive behavior against the Company.
Information about payment of the SERP benefit related to change in control is provided on page 56 in footnote (b) to the Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2020 table.
Because the SERP is a nonqualified deferred compensation plan, the Company is not obligated to fund it. However, the Company does set aside funds to assist in the payment of future benefit obligations. If the Company were to become insolvent, participants would be unsecured general creditors, and there is no guarantee that funds would be available to pay all creditors in full. See the notes to the financial statements contained within the Company’s 2020 Annual Report for a discussion of the benefit obligation.
NORDSTROM, INC. - 2021 Proxy Statement 50
Fiscal Year 2020 Pension Benefits Table
The following table shows the present value of the accumulated SERP benefit payable to each of the NEOs, based on the number of years of service credited under the Plan to each NEO and actuarial assumptions consistent with those used in the Company’s 2020 Annual Report to calculate the Company’s obligations under the Plan. See Note 7: Postretirement Benefits to the financial statements contained within the Company’s 2020 Annual Report for a discussion of the benefit obligation and assumptions used.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Present Value of Accumulated Benefit | | |
Name | | Plan Name | | Age (a) | | Number of Years Credited Service (#)(b) | | Full Retirement Benefit ($)(c) | | Early Retirement Benefit ($)(d) | | Payments During Last Fiscal Year ($) |
Erik B. Nordstrom | | SERP | | 57 | | | 25 | | | 14,288,063 | | | 14,933,660 | | | — | |
Anne L. Bramman | | — | | | — | | | — | | | — | | | — | | | — | |
Peter E. Nordstrom | | SERP | | 58 | | | 25 | | | 15,071,070 | | | — | | | — | |
Kenneth J. Worzel | | SERP | | 56 | | | 11 | | | 5,390,814 | | | 4,697,771 | | | — | |
Edmond Mesrobian | | — | | | — | | | — | | | — | | | — | | | — | |
(a) Age
Age is as of January 30, 2021, the last day of the fiscal year.
(b) Number of Years Credited Service
Although Erik Nordstrom and Peter Nordstrom each have more than 25 years of service, the number of years of credited service under the SERP is capped at 25.
(c) Present Value of Accumulated Benefit: Full Retirement Benefit
The amounts shown are based on the full retirement age of 58. Peter Nordstrom is the only eligible NEO that has met the minimum full retirement age with at least 10 years of credited service and would be eligible to receive the SERP benefit having the present value as shown in the table above.
(d) Present Value of Accumulated Benefit: Early Retirement Benefit
Erik Nordstrom and Kenneth Worzel have met the minimum early retirement age and would be eligible for early retirement with prior approval from the Board. The early retirement present value benefit for Erik Nordstrom is an increase from his full retirement present value benefit because both benefits are limited by the $700,000 annual SERP benefit cap, which results in the same annual SERP benefit for his early retirement as for his full retirement.
Nonqualified Deferred Compensation
The Company offers participation in the NDCP to employees, including the NEOs, who meet a minimum compensation threshold. Under this Plan, a participant may defer up to 80% of base salary, up to 100% of an annual performance-based bonus earned under the Company’s bonus plan and up to 100% of any vested PSUs, less applicable payroll taxes. Deferral elections are irrevocable and are made in compliance with Section 409A of the IRC. If a participant’s NDCP deferrals cause a reduction in the Company’s 401(k) match contribution, the Company may deposit a make-up contribution into the participant’s NDCP account. The Company may also provide adollar for dollar matching contribution, up to 4% of eligible pay over the 401(k) calendar year compensation limit, on deferrals into the NDCP by eligible participants and a discretionary profit-based match up to an additional 2% of eligible pay over the 401(k) calendar year compensation limit.participants. Participants in the Company’s SERP are not eligible for this matching contribution. The discretionary 401(k) match was suspended for the 2020 plan year as discussed on page 38.
Plan participants may direct their cash deferrals to deemed investment alternatives, priced and valued similar to retail mutual funds. As of the end of the fiscal year, the Company offered 189 deemed investment alternatives. In addition, Plan participants are offered a fixed rate option, which was 4.31% for calendar years 2020year 2021 and 2021,4.36% for calendar year 2022, which is not subsidized by the Company but rather is a rate based on guaranteed contractual returns from a third-party insurance company provider. With the exception of the fixed rate fund, participants may change their investment allocations among these investment alternatives daily. Gains and losses for cash deferrals are credited to participant accounts daily, based on their investment elections. The deemed investment alternatives for cash do not include Common Stock. Vested PSUs that are deferred into the NDCP remain as stock units until distribution.
51 NORDSTROM, INC. - 2021 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
Fiscal Year 20202021 Nonqualified Deferred Compensation Table
The following table discloses information on nonqualified deferred compensation for the NEOs under the Company’s NDCP for the fiscal year ended January 30, 2021.29, 2022. The Company’s SERP is also a nonqualified plan. Information regarding benefits payable to NEOs under the SERP is provided on pages 5051 and 51.52.
| Name | Name | | Executive Contributions in Last Fiscal Year ($)(a) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings in Last Fiscal Year ($)(b) | | Aggregate Withdrawals/Distributions ($) | | Aggregate Balance at Last Fiscal Year-End ($)(c) | Name | | Executive Contributions in Last Fiscal Year ($)(a) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings in Last Fiscal Year ($)(b) | | Aggregate Withdrawals/Distributions ($) | | Aggregate Balance at Last Fiscal Year-End ($)(c) |
Erik B. Nordstrom | Erik B. Nordstrom | | — | | | — | | | — | | | — | | | — | | Erik B. Nordstrom | | — | | | — | | | — | | | — | | | — | |
Anne L. Bramman | Anne L. Bramman | | 108,183 | | | — | | | 7,813 | | | — | | | 238,673 | | Anne L. Bramman | | 3,135 | | | — | | | 10,273 | | | — | | | 252,080 | |
Peter E. Nordstrom | Peter E. Nordstrom | | — | | | — | | | — | | | — | | | — | | Peter E. Nordstrom | | — | | | — | | | — | | | — | | | — | |
Kenneth J. Worzel | Kenneth J. Worzel | | 49,826 | | | — | | | 46,588 | | | — | | | 853,403 | | Kenneth J. Worzel | | 51,442 | | | — | | | (16,408) | | | — | | | 888,438 | |
Edmond Mesrobian | Edmond Mesrobian | | 39,217 | | | — | | | 53,564 | | | — | | | 189,152 | | Edmond Mesrobian | | — | | | — | | | 11,381 | | | — | | | 200,533 | |
The Company does not have employment agreements with any Nordstrom employees, including the NEOs. The Company maintains an executive severance plan to provide certain NEOs an appropriate level of severance benefits in the event of involuntary separation of service, not for cause. Except as described on the following pages, there are no agreements, arrangements or plans that entitle the NEOs to enhanced benefits upon termination of their employment.
The following table shows various termination scenarios and payments that would be triggered under the Company’s compensation plans.