UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Dear Shareholders:Shareholders,

Sleep Number’s 2022 financial performance reflects the sustained impact of external business model. In a yearand economic disruptions that began early in the year. Globally constrained microchips, Omicron, the war in Ukraine and high inflation drove record low consumer sentiment, significantly reduced demand, and pressured profits. Despite these challenges, we generated EBITDA of challengenearly $150 million dollars and change, we acceleratedcontinued to drive substantial advancements while executing on the digitization and innovation of our life-changing sleep experiences, reinforced our values of passion, integrity, innovation, courage and teamwork and delivered exceptional financial results.Company’s long-term strategic initiatives for sustainable stakeholder value creation.

The next gen smart beds were developed based on a robust combination of sleep science and Sleep Number’s 19 billion hours of longitudinal data gathered from more than one billion sleep sessions,data. Our proprietary platform connects the physical and digital worlds, creating an immersive, adaptive and effortless connected sleep health experience. The smart bed allows sleepers to understand metrics related to health and wellbeing during sleep and may ultimately enable Smart Sleepers to take preventative and proactive wellness actions.

Later this year we will also transition to the next evolution of our innovations continueSleep Number™ app, which will integrate all Sleep Number digital touchpoints to add meaningful valuesimplify our Smart Sleeper’s experience. It will also further advance our connected health strategy. With over 2.5 million Smart Sleepers engaging with our smart beds, our smart bed ecosystem offers an accurate, nonintrusive, real-world method to consumers’ lives. Through our strategic investments inconduct sleep science research that is improving lives and benefiting society. Meaningful collaborations with organizations like the National Football League and health and wellness institutions including the establishment of a renowned Scientific Advisory Board and collaborations with Mayo Clinic and Oxford PharmaGenesis, we are extendingAmerican Cancer Society – who named us their 2022 Corporate Partner of the Year – accelerate our sleep leadership into connected health with the potential to create significant value for customerspositive effect and shareholders for years to come.have vast societal impact.

As Chair, President and CEO, I am grateful to our highly engaged Sleep Number team and Board; collectively, their passion, dedication and commitment to our purpose leads to superior stakeholder value creation. This is a time which requires clarity, resilience and disciplined courage as we navigate the external challenges while pursuing our sleep innovations are transforming millions of lives through better sleep while creating substantial valueopportunities for all stakeholders.the future.

TO THE SHAREHOLDERS OF SLEEP NUMBER CORPORATION:

Shareholders of record at the close of business on March 17, 202114, 2023 will be entitled to vote at the meeting and any adjournments thereof. Your vote is important. Please be sure to vote your shares in favor of the Board of Directors’ recommendations in time for our May 12, 202111, 2023 meeting date. Your attention is directed to the Proxy Statement for a more complete statement of the matters to be considered at the meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ON MAY 12, 2021:11, 2023:

Minneapolis, Minnesota

March 30, 20212023

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Sleep Number Corporation for use at the 20212023 Annual Meeting of Shareholders.

When is the Annual Meeting and how can I attend?

What if I have technical difficulties during the meeting or trouble accessing the virtual Annual Meeting?

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual meeting platform log-in page.

Who is entitled to vote?

Shareholders of record at the close of business on March 17, 202114, 2023 (the Record Date) are entitled to vote at the meeting. As of the Record Date, there were 24,812,37522,032,590 shares of common stock outstanding. Each share is entitled to one vote on each matter to be voted on at the Annual Meeting. Shareholders do not have cumulative voting rights.

What is the difference between “Shareholders of Record” and “Beneficial Owners”?

If your shares are registered in your name in the records maintained by our stock transfer agent, you are a “Shareholder of Record.” If you are a Shareholder of Record, notice of the meeting was sent directly to you.

If your shares are held in the name of your bank, broker, nominee or other holder of record, your shares are held in “street name” and you are considered the “Beneficial Owner.” Notice of the meeting has been forwarded to you by your bank, broker, nominee or other holder of record, who is considered, with respect to those shares, the Shareholder of Record. As the Beneficial Owner, you have the right to direct your bank, broker, nominee or other holder of record how to vote your shares by using the voting instructions you received.

How can I receive proxy materials?

We are furnishing proxy materials to our shareholders primarily via the Internet. On or about March 30, 2021,2023, we will begin mailing to certain of our shareholders a Notice of Internet Availability of Proxy Materials (the Shareholder Notice), which includes instructions on (i)on: (a) how to access our Proxy Statement and Annual Report on the Internet, (ii)Internet; (b) how to

request that a printed copy of these proxy materials be forwarded to youyou; and (iii)(c) how to vote your shares. If you receive the Shareholder Notice, you will not receive a printed copy of the proxy materials unless you request a printed copy by following the instructions in the Shareholder Notice. All other shareholders will be sent the proxy materials by mail beginning on or about March 30, 2021.2023.

What does it mean if I receive more than one proxy card or Shareholder Notice?

If you receive more than one proxy card or Shareholder Notice, it generally means you hold shares registered in more than one account and you should vote once for each proxy card or Shareholder Notice that you receive. If you receive a paper copy of the Proxy Statement and you choose to vote by mail, sign and return each proxy card you receive. If you choose to vote by Internet or telephone, vote once for each proxy card and/or Shareholder Notice you receive.

What are shareholders being asked to vote on?

There are threefour items to be voted on at the meeting:

What are my voting choices?

For proposal 1 the(the election of Directors,Directors) you may:

For each of proposal 2 (the advisory vote to approve executive compensation) andyou may:

For proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation) you may:

For proposal 4 (the advisory vote to ratify the selection of independent auditors) you may:

How does the Board recommend that I vote?

Sleep Number’s Board unanimously recommends that you vote your shares:

How are votes counted?

Proxies marked “Withhold” on proposal 1 (election of Directors), or “Abstain” on proposal 2 (the advisory vote to approve executive compensation) or proposal 34 (the advisory vote to ratify the selection of independent auditors), will be counted in determining the total number of shares entitled to vote on such proposals and will have the effect of a vote “Against” a Director or such proposal. Proxies marked “Abstain” on proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation), will not have an effect on the outcome of the vote.

If you are a Beneficial Owner and hold your shares in “street name,” such as through a bank, broker, nominee or other holder of record, you generally cannot vote your shares directly and must instead instruct the broker how to vote your shares using the voting instruction form provided by the broker.

What is a Broker Non-Vote?

If a Beneficial Owner does not provide timely instructions, the broker will not have the authority to vote on any non-routine proposals at the Annual Meeting, which includes proposals 1, 2 and 2.3. Brokers will have discretionary authority to vote on proposal 34 because the ratification of the appointment of independent auditors is considered a routine matter. If the broker votes on proposal 34 (the advisory vote to ratify the selection of independent auditors) but does not vote on another proposal because the broker does not have discretionary voting authority and has not received instructions from the Beneficial Owner, this results in a “broker non-vote” with respect to such other proposal(s).

Broker non-votes on a matter may be counted as present for purposes of establishing a quorum for the meeting but are not considered entitled to vote on that particular matter. Consequently, broker non-votes generally will have no effect on the outcome of the matter. However, if and to the extent that broker non-votes are required to establish the presence of a quorum at the Annual Meeting, then any broker non-votes will have the same effect as a vote “Withheld” or “Abstained” on any matter that requires approval of a majority of the minimum number of shares required to constitute a quorum for the transaction of business at the Annual Meeting.

What is the vote required to approve each proposal?

Assuming that a quorum is present to vote on each of the proposals, proposals 1, 2 and 34 will require the affirmative vote of holders of a majority of the shares represented and entitled to vote in person or by proxy on such action.

point of view or preference on these proposals, but are not binding on the Company or its Board of Directors and do not require the Company or its Board of Directors to take any particular action in response to the shareholder vote. The Board intends to consider fully the votes of our shareholders in the context of any further action with respect to these proposals.

What constitutes a “quorum,” or how many shares are required to be present to conduct business at the Annual Meeting?

The presence, directly or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to vote (i.e., at least 12,406,18811,016,296 shares) will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares of common stock represented by a properly signed and returned proxy card or properly voted by telephone or via the Internet will be counted as shares represented and entitled to vote at the Annual Meeting for

How do I vote my shares?

The telephone and Internet voting procedures have been set up for your convenience. We encourage you to save corporate expense by submitting your vote by telephone or Internet. The procedures have been designed to authenticate your identity, to allow you to give voting instructions and to confirm that those instructions have been recorded properly.

Beneficial Owners should be aware that brokers are not permitted to vote shares on non-routine matters, including the election of Directors or matters related to executive compensation, without instructions from the Beneficial Owner. As a result, brokers are not permitted to vote shares on proposal 1 (election of Directors) or, proposal 2 (the advisory vote to approve executive compensation) or proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation) without instructions from the Beneficial Owner. Therefore, Beneficial Owners are advised that if they do not timely provide instructions to their bank, broker or other holder of record with respect to proposals 1, 2 or 2,3, their shares will not be voted in connection with any such proposal for which they do not provide instructions. Proposal 34 (the advisory vote to ratify the selection of independent auditors) is considered a routine matter and, as such, brokers will still be able to vote shares held in brokerage accounts with respect to proposal 3,4, even if they do not receive instructions from the Beneficial Owner.

Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote your shares in time for our May 12, 202111, 2023 meeting date.

May I revoke a proxy and change my vote?

Yes. Any shareholder giving a proxy may revoke it at any time prior to its use at the Annual Meeting by:

Can I receive future proxy materials electronically?

Yes. If you are a Shareholder of Record and you received a paper copy of the proxy materials, you may elect to receive future Proxy Statements and Annual Reports online as described in the next paragraph. If you elect this feature, you will receive an email message notifying you when the materials are available, along with a web address for viewing the materials. If you received this Proxy Statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future.

Whether you are a Shareholder of Record or a Beneficial Owner holding shares through a bank or broker, you can enroll for future electronic delivery of Proxy Statements and Annual Reports by following these steps:

What are the costs and benefits of electronic delivery of Annual Meeting materials?

There is no cost to you for electronic delivery of annual meeting materials. You may incur the usual expenses associated with Internet access as charged by your Internet service provider. Electronic delivery ensures quicker delivery, allows you to view or print the materials at your computer and makes it convenient to vote your shares online. Electronic delivery also conserves natural resources and saves the Company printing, postage and processing costs.

Who bears the proxy solicitation costs?

The proxies being solicited hereby are being solicited by the Board of Directors of the Company. The cost of preparing and mailing the notice of Annual Meeting, this Proxy Statement and the accompanying proxy and the cost of solicitation of proxies on behalf of the Board of Directors will be borne by the Company. The Company may solicit proxies by mail, Internet (including by email, Twitter,social media, the use of our Investor Relations website and other online channels of communication), telephone facsimile and other electronic channels of communication, town hall meetings, personal interviews, press releases and press interviews. Our Directors, officers and regular team members may, without compensation other than their regular compensation and the reimbursement of expenses, solicit proxies by telephone or personal conversation. In addition, we may reimburse brokerage firms and others for their reasonable and documented expenses incurred in connection with forwarding proxy materials to the Beneficial Owners of our common stock.

* Less than 1% of the outstanding shares.

Nomination

Article XIV of our Third Restated Articles of Incorporation, as amended, provides that the number of Directors must be at least one but not more than 12 and must be divided into three classes as nearly equal in number as possible. The exact number of Directors is determined from time-to-timetime to time by the Board of Directors. The term of each class is three years and the term of one class expires each year in rotation.

Vote Required

The election of each nominee for Director requires the affirmative vote of a majority of the shares represented and entitled to vote on the election of Directors at the Annual Meeting. Any broker non-votes on the election of each nominee for Director will be treated as shares not entitled to vote on that matter, and thus will not be counted in determining whether the Director has been elected.

Board Recommendation

If prior to the Annual Meeting, the Board should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for such nominee will be voted for such substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for such fewer number of nominees as results from the inability of any such nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.

Information about the Board’s Nominees and Other Directors

The following table provides information as of the date of this Proxy Statement about each individual serving as a Director of our Company and each individual nominated by the Board to serve as a Director. Each Director or Nominee has furnished the information included below that relates to his or hertheir respective age, principal occupation and business experience, as well as the names of other boards on which he or shethey currently servesserve as a Director or hashave served in the past. In addition, the table below highlights the relevant experience, qualifications, attributes and skills that led our Board to conclude that each Director or nominee is qualified to serve as a Director of our Company.

Nominees for election this year tofor three-year terms expiring in 20242026:

Directors not standing for election this year whose terms expire in 2022:2025:

Information about the Board of Directors and its Committees

The Board of Directors has determined that each of the following Directors who served as a member of our Board during any part of fiscal 20202022 is an “independent Director” as defined by applicable rules of the Nasdaq Stock Market and the rules and regulations of the Securities and Exchange Commission (SEC):

The Board has determined that each Director serving on a committee meets the independence and other requirements applicable to such committee prescribed by applicable rules and regulations of the Nasdaq Stock Market, the SEC and the Internal Revenue Service.

The Board of Directors has further determined that three current members of the Audit Committee, Stephen L. Gulis, Jr., Julie M. Howard and Barbara R. Matas, meet the definition of “audit committee financial expert” under rules and regulations of the SEC and meet the qualifications of “financial sophistication” under the Marketplace Rules of the Nasdaq Stock Market. These designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters are disclosure requirements of the SEC and the Nasdaq Stock Market and do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of our Audit Committee or of our Board of Directors.

The Board of Directors met in person or virtually five times during 2020.2022. The Audit Committee met in person or virtually eight times during 2022. The Management Development and Compensation Committee met in person or virtually five times during 2022. The Corporate Governance and Nominating Committee met in person or virtually sevenfive times during 2020.2022. Each of the members of our Board of Directors serving in 20202022 attended 75% or more of all meetings of the Board and committees on which they served during fiscal 2020.served.

Audit Committee

Management Development and Compensation Committee

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee (the CGNC) is comprised entirely of independent Directors, currently including Michael J. Harrison (Chair), Stephen L. Gulis, Jr. (Chair), Deborah L. Kilpatrick, Ph.D., Angel L. Mendez, and Kathleen L. Nedorostek.Jean-Michel Valette. The primary functions of the Corporate Governance and Nominating CommitteeCGNC are to develop and recommend to the Board corporate governance principles to govern the Board, its committees and our executive officers and team members in the conduct of the business and affairs of our Company; to identify and recommend to the Board individuals qualified to become members of the Board and its committees; and to develop and oversee the annual Board and committee evaluation process.

Board Leadership Structure

Our Board is currently comprised of nineten independent Directors, including an independent Lead Director, and one executive Director and Chair of the Board (Chair). The Board does not have a fixed policy regarding the separation of the offices of the Chair and the Chief Executive Officer and believes that it should maintain the flexibility to select the Chair and its leadership structure, from time to time, based on the criteria that it deems in the best interests of the Company and its shareholders. During any period in which the positions of the Chair and CEO are combined, the Board will appoint a Lead Director from among the independent members of the Board, who will have the significant Board leadership responsibilities specified in our Corporate Governance Principles and described below.

On March 14, 2022, we announced the Board’s unanimous decision to combine the roles of Chair and CEO and appoint an independent Lead Director. Since the conclusion of the 2022 Annual Meeting of Shareholders on May 12, 2022, Shelly R. Ibach, whoPresident and CEO, has served as our PresidentChair, and Chief Executive Officer since June 2012.  Since February 2008, the Board has determined to separate the positions of Chairman of the Board and Chief Executive Officer based on its review of the appropriate leadership structure at this time.  Jean-Michel Valette,Michael J. Harrison, an independent Director,director, has served as ChairmanLead Director. The Board believes that it is in the best interests of the Company and its stakeholders for Ms. Ibach to

serve as the Chair and CEO, providing innovative and proven leadership in a dynamic marketplace. Ms. Ibach’s leadership and vision reflects her deep understanding of the Company’s business, the consumer, and commitment to long-term stakeholder value creation. The Board reaffirmed its commitment to independent board leadership, appointing Mr. Harrison, an independent director since May 2010.2011, as Lead Director. Mr. Harrison has extensive board governance and consumer brand experience, previously chaired the Board’s Corporate Governance and Nominating Committee and served on its Audit Committee and Management Development and Compensation Committee. The Lead Director role is clearly defined with a robust set of responsibilities to ensure the Board’s effective oversight, governance and independent leadership, including:

The Lead Director provides a clear and independent voice on the Board that appropriately balances our leadership structure. This leadership is supplemented by the Board’s three standing committees, each of which is comprised of, and chaired by, independent directors. Consistent with the Company’s Corporate Governance Principles, the Board retains the right to review this determinationits leadership structure and to either continue to maintain these positions as separatedhave combined Chair and CEO positions or to combineseparate the positions, as the Board determines to be in the best interests of the Company at the time.  During any period in which the positions of Chairman of the Board and Chief Executive Officer are combined, the Board would appoint a Lead Director from among the independent members of the Board, who would have certain Board leadership responsibilities specified in our Corporate Governance Principles.

Board Role in Risk Oversight

Our Board is responsible for overseeing the Company’s policies and practices with respect to risk assessment and risk management and has delegated to the Audit Committee the responsibility of assisting the Board in fulfilling this role. Among its duties and processes, the Audit CommitteeCommittee: (a) reviews and discusses with management the Company’s policies and practices with respect to enterprise risk assessment and risk management, including with respect to financial risk exposures, internal controls over financial reporting and cybersecurity; (b) oversees the Company’s internal audit function and processes; (c) establishes and oversees procedures for receiving and addressing complaints regarding accounting, internal controls or auditing matters; (d) reviews legal compliance and other legal matters with the Company’s legal counsel; and (e) reports to the full Board with respect to matters within its area of responsibility.

The Audit Committee oversees the Company’s internal audit function, which function is responsible for undertaking an annual enterprise risk assessment process and reporting to the Audit Committee and the Board with respect to this assessment and related risk management and mitigation strategies. The Audit Committee reviews and approves, at least annually, the Company’s internal audit plan and receives quarterly reports with respect to the results of internal audits.function. The leader of the Company’s internal audit function reports directly to the Audit Committee with respect to internal audit matters, and the Audit Committee has authority to review and approve the appointment, replacement or dismissal of this leader. The Audit Committee reviews and approves, at least annually, the leaderCompany’s internal audit plan and receives quarterly reports with respect to the results of this function.internal audits. The leader of the internal audit function meets regularly with the chair of the Audit Committee or in executive

session with the Audit Committee, without any other membersas needed, outside the presence of the Company’s management team present.team. The Company’s risk assessment and risk management process is led by the Chief Legal and Risk Officer and the leader of the internal audit function, with guidance from outside advisors as needed. This process includes an annual enterprise risk assessment with quarterly reporting to the Audit Committee and Board regarding the assessment and related risk management and risk mitigation strategies.

In addition to the Audit Committee’s role, each of the other committees considers risks within its respective areas of responsibility. We believe our current Board leadership structure helps ensure proper risk oversight, based on the allocation of duties among committees and the role of our independent Directors in risk oversight.

Director Nominations Process

The Corporate Governance and Nominating Committee (the CGNC) administers the process for nominating candidates to serve on our Board of Directors. The CGNC recommends candidates for consideration by the Board as a whole, which is responsible for appointing candidates to fill any vacancy that may be created between meetings of the shareholders and for nominating candidates to be considered for election by shareholders at our Annual Meeting.

The Board has established selection criteria to be applied by the CGNC and by the full Board in evaluating candidates for election to the Board. These criteria, which are set forth in our Corporate Governance Principles, include general characteristics, areas of specific expertise and experience and considerations of diversity. The general characteristics include:

The specific areasbelow chart highlights certain key skills and experiences of expertise and experience sought by the CGNC and theour current Board from time to time will vary depending on the composition of the Board and the strategic direction of the Company, but will generally include CEO experience, executive level experience with analogous businesses and industries, financial and accounting expertise and functional expertise relevant to the strategic direction of the Company or the needs of the Board and its committees.members.

The CGNC reviews these selection criteria and the overall Director nomination process at least annually in connection with the nomination of Directors for election at the Company’s annual meeting for consistency with best practices in corporate governance and effectiveness in meeting the needs of the Board from time-to-time.Board.

The CGNC may use a variety of methods for identifying potential nominees for election to the Board, including consideration of candidates recommended by Directors, officers or shareholders of the Company. The CGNC also has the authority under its charter to engage professional search firms or other advisors to assist the CGNC in identifying candidates for election to the Board, or to otherwise assist the CGNC in fulfilling its responsibilities.

Shareholder nominations of candidates for membership on the Board, submitted in accordance with the terms of our Bylaws, will be reviewed and evaluated by the CGNC in the same manner as for any other nominations. Any shareholder who wishes the CGNC to consider a candidate should submit a written request and related information to our corporate Secretary. Under our Bylaws, if a shareholder intends to nominate a person for election to the Board of Directors at a shareholder meeting, the shareholder is required to give written notice of the proposed nomination to the corporate Secretary at least 120 days prior to the first anniversary of the date that the Company first released or mailed its proxy materials to shareholders in connection with the preceding year’s regular or annual meeting. The shareholder’s notice must include, for each nominee whom the shareholder proposes to nominate for election as a Director: (i)(a) the name, age, business address and residence address of the nominee, (ii)nominee; (b) the principal occupation or employment of the nominee, (iii)nominee; (c) the class and number of shares of capital stock of the Company that are beneficially owned by the nomineenominee; and (iv)(d) any other information concerning the nominee that would be required under the rules of the Securities and Exchange CommissionSEC in a proxy statement soliciting proxies for the election of such nominee. The shareholder’s notice must also include: (i)(a) the name and address of the nominating shareholder, as they appear on the Company’s booksbooks; and (ii)(b) the class and number of shares of the Company that are owned beneficially and of record by the shareholder. The shareholder’s notice must also be accompanied by the proposed nominee’s signed consent to serve as a Director of the Company.

Shareholder Engagement

Our Board of Directors and management team maintain a deep commitment to strong corporate governance. Engagement with, and accountability to, our shareholders are cornerstones of this commitment. Accordingly, we maintain an active shareholder engagement program that facilitates channels of communication and aims to foster relationships with our shareholders to drive sustainable, long-term growth and shareholder value. As part of our engagement program, members of our management team regularly meet with shareholders, in-person, virtually or by phone, occasionally joined by one or more members of our Board, to discuss strategy, governance, pay for performance orientation and other matters of shareholder interest. Our ongoing shareholder engagement and commitment to long-term value creation will continue to inform the Board of Director’sour Board’s deliberations in 20212023 and beyond.

Shareholders may communicate with the Board of Directors, its committees or any individual member of the Board of Directors by sending a written communication addressed to our corporate Secretary atby mail to Sleep Number Corporation, 1001 Third Avenue South, Minneapolis, MN 55404.55404 or by email to investorrelations@sleepnumber.com. The corporate Secretary will promptly forward any communication so received to the Board, any committee of the Board or any individual Board member specifically addressed in the communication. In addition, if any shareholder or other person has a concern regarding any accounting, internal control or auditing matter, the matter may be brought to the attention of the Audit Committee, confidentially and anonymously, by calling 1-800-835-5870. The Company reserves the right to revise or make exceptions to this policy in the event that the process is abused, becomes unworkable or otherwise does not efficiently serve the purposes of the policy.

Policy Regarding Director Attendance at Annual Meeting

Our policy is to require attendance by all of our Directors at our Annual Meeting of Shareholders, except for absences due to causes beyond the reasonable control of the Director. All of the Directors then serving on our Board were in attendance at our 20202022 Annual Meeting of Shareholders.

Corporate Governance Principles

Corporate Responsibility and Sustainability

At Sleep Number,Our commitment to corporate sustainability is deeply rooted in our purpose is to improve the health and wellbeing of society through higher quality sleep. ThisGuided by this purpose combined with our culture of individuality and wellbeing – andfirmly grounded in our values of passion, integrity, innovation, courage and teamwork, – are fundamental to our business strategy and community engagement. By investing strategically in sleep science-based innovation, digital technologies and our mission-driven team, we have builtSleep Number has become a beloved brand that has improved 13 million lives while delivering superior value for our stakeholders.

Sustainability considerations are included in the way we design and making a positive impact onmanufacture our innovations, the products and services we offer our customers, communities,the programs and opportunities we create to ensure the wellbeing of our team members, shareholdershow we support the communities where we operate, the way we engage with our suppliers and business partners and the worlddialogue we all share. have with – and returns we generate for – our shareholders. In short, our environmental stewardship, social priorities, and strong governance (ESG) are integrated into our strategy, culture and operations.

In 2020, Sleep Number became a signatory to the United Nations Global Compact (UNGC), demonstrating our support for the Ten Principles related to human rights, labor, environment and anti-corruption. We are dedicated to making the UNGC principles part of our strategy, culture, day-to-day operations and enterprise-wide approach to measure, advance and report on our environmental,ESG initiatives. Recognizing the critical importance of good governance in adopting and integrating social and environmental strategies, we start our corporate sustainability reporting with a description of our governance (ESG) initiatives.approach.

Code of Business Conduct

We are committed to the highest standards of ethical business practices throughout our Company. Our Company values, team member training, Company policies and culture underscore our expectations for integrity and provide clear guidelines for business decisions and behavior.

Team members are required to report any conduct that they believe in good faith violates our Code of Business Conduct. The Code of Business Conduct also sets forth procedures under which team members or others may report through our management team and, ultimately, directly to our Audit Committee (confidentially and anonymously, if so desired) any questions or concerns regarding accounting, internal accounting controls or auditing matters.

Related-Party Transactions Policy

COMPENSATION COMMITTEE REPORT

The Management Development and Compensation Committee of the Board of Directors (the Committee), consisting entirely of independent Directors, has reviewed and discussed the following Compensation Discussion and Analysis with management, and based on this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. 

Brenda J. Lauderback, Chair

Daniel I. Alegre

Table of Contents

Introduction

The Compensation Discussion and Analysis (CD&A) describes our executive compensation program, including the objectives and elements of compensation as well as determinations made by the Committee regarding our named executive officers (NEOs). 

For 2020,2022, the following five executive officers were determined to be NEOs as a result of their position during the year as chief executive officerChief Executive Officer (CEO), or chief financial officerChief Financial Officer (CFO), or their total compensation making them among the three other highest paid executives for the fiscal year.

Purpose Driven Company

20202022 Performance and Accomplishments

InSleep Number’s financial performance in 2022 reflected the sustained impact of external business and economic disruptions that began early in the year. Among the many challenges we faced were the global constraints on semiconductor chips and record low consumer sentiment, which reduced consumer demand and pressured profits. As a result, we fell short of our financial goals for the year, of challenge and change, we delivered exceptional resultsfollowing record financial performance in 2020 by leveraging2021. Our mission-driven team members navigated through this challenging environment to achieve significant strategic milestones which strengthen the power of vertical integration, digitization and a mission-driven, highly engaged team. The groundwork for our 2020 performance began years ago with an understanding that qualityCompany’s sleep is highly correlated with health and wellbeing. This strategic clarity, reinforced by disciplined investment to strengthen our competitive advantages and growth drivers, has resulted in sustainable, profitable growth, including a 5-year CAGR of 9% in net sales, 15% in adjusted EBITDA and 38% in EPS. This included performance in 2020 that meaningfully exceeded our plans and street consensus expectations. Consumer demandwellness technology leadership for our revolutionary 360 smart beds accelerated in the back half of 2020 and momentum continues. Sincefuture.

Note: For additional information on our non-GAAP financial measures, such as adjusted EBITDA and adjusted ROIC, and their reconciliation to operating income and net income, as applicable, see “Non-GAAP Data Reconciliations” on pages 2636 and 2737 of our Annual Report on Form 10-K filed on March 2, 2021.February 24, 2023.

Refer to our Annual Report on Form 10-K filed on March 2, 2021February 24, 2023 and our 2021 Corporate Responsibility and Sustainability Report, posted within the Investor Relations section of our companyCompany website, for additional information on these and other accomplishments in 2020.2022. The information contained in our Corporate Responsibility and Sustainability Report is not incorporated by reference into, or considered a part of, this Proxy Statement.

Pay and Performance Alignment

The letter to shareholders from our CEO in this Proxy Statement and the section “2020“2022 Performance and Accomplishments” provides highlights of our performance for the year. The following is a summary of our Company performance that determined the actual payouts earned for our 2020 AIP2022 Annual Incentive Plan (AIP) and 20182020 Performance Stock Units (PSUs). The performance and payouts for these incentive programs are described in more detail later in this CD&A.