| ☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
| ☒ | No fee required. |
Fee paid previously with preliminary materials. | ||||||
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and | ||||||
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2024 NOTICE AND PROXY STATEMENT AVERY DENNISON
NOTICE OF ANNUAL
Notice of 2018 Annual Meeting of Stockholders
To Our Stockholders:MEETING OF STOCKHOLDERS
We cordially invite you to attend our 2018 Annual Meeting of Stockholders at the Embassy Suites, 800 North Central Avenue, Glendale, California 91203 on Thursday, April 26, 2018, at 1:30 p.m. Pacific Time. At the meeting, we will conduct the following items of business:
 RECORD DATE | February 26, 2024 | |||
MEETING DATE | April 25, 2024 | |||
MEETING TIME | 2:30 p.m. Eastern Time | |||
MEETING FORMAT | Virtual at www.virtualshareholdermeeting.com/AVY2024 | |||
ITEMS OF BUSINESS FOR STOCKHOLDER VOTE | |||
| 1 | Election of the | ||
| 2 | Approval, on an advisory basis, of our executive | ||
| 3 | Approval of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to provide that stockholders holding 25% of our outstanding common stock have the right to request that we call special meetings of stockholders | ||
| 4 | Ratification of the appointment of | ||
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Our Board recommends that you voteFOR each of theour 10 director nominees in Item 1 andFOR Items 2, 3 and 3. After Dean Scarborough, our Chairman, conducts these items of business at the meeting, Mitch Butier, our President and Chief Executive Officer, will discuss our 2017 performance and answer your questions.4.
Stockholders of record as of February 26, 20182024 are entitled to notice of, and to vote at,in connection with, the meeting and any adjournment or postponement thereof. This notice and our definitive proxy statement are being first mailed or made available to stockholders on or about March 11, 2024.
We want your shares to be represented and voted. We encourage you to vote promptly as this will save us the time and expense of additional proxy solicitation. As shown below, you can vote online, by telephone, by mail or, in certain circumstances, during the meeting.
On behalf of our Board of Directors, management and team members worldwide, thank you for investing in us and our company. We look forward to engaging with you during the virtual Annual Meeting.
Vikas Arora
Vice President, Associate General Counsel and
Corporate Secretary
March 11, 2024
| ONLINE | | BY TELEPHONE | | BY MAIL | | DURING MEETING | |||||||||
| You can vote online using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | In the U.S. and Canada, you can vote by telephone using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | You can vote by mail by completing, dating and signing your proxy card or voting instruction form and returning it in the accompanying postage-paid envelope. | Registered holders can vote during the meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting. Shares held through our Employee Savings Plan may not be voted during the meeting. | ||||||||||||
TABLE OF CONTENTS
Avery Dennison Corporation | 2024 Proxy Statement | Table of Contents |
PROXY SUMMARY
This proxy summary includes key messages related to this proxy statement and does not contain all the information you should consider before voting. We strongly encourage you to read the entire proxy statement before voting.
INFORMATION REGARDING ANNUAL MEETING
Distribution of Proxy Materials
We will bebegin mailing our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials on the Internet,online and vote your shares, on or beforeabout March 15, 2018.11, 2024. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will mail you a proxy card and our 2018 proxy statement; 2017 annual2023 integrated financial and sustainability report (our “2023 Integrated Report”), which includes a letter to stockholders from our ChairmanPresident/Chief Executive Officer (CEO); a description of our businesses, stakeholders and President/CEO;values; highlights of our strategies, financial performance and a proxy cardsustainability progress; our Annual Report on or about March 16, 2018.
We want your shares to be representedForm 10-K for the fiscal year ended December 30, 2023 (our “2023 Annual Report”); and voted. You can vote as shown in the chart below.
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On behalf of the Board of Directors, management and employees of Avery Dennison, thank you for your continued support.
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Avery Dennison Corporation| 2018 Proxy Statement |Table of Contents
This section summarizes information described in greater detail in other parts of this proxy statement for our 2024 Annual Meeting of Stockholders (the “Annual Meeting”).
Time, Date and does not contain all the information you should consider before voting. We encourage you to read the entire proxy statement before voting.Format of Annual Meeting
TIME AND LOCATION OF ANNUAL MEETING
The Annual Meeting will take place at 1:2:30 p.m. PacificEastern Time on April 26, 2018 25, 2024. To allow stockholders to attend without the time and expense of doing so in person, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2024 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form.
Online access to the live audio webcast of the Annual Meeting will open at 2:15 p.m. Eastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the Embassy Suites, 800 North Central Avenue, Glendale, California 91203.meeting in advance of its start time as we plan to begin the meeting promptly. For additional instructions on how to attend the virtual Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
ITEMS BEING VOTED ON AT ANNUAL MEETING
Items Being Voted on During Annual Meeting
You are being asked to vote on the items of business shown below atduring the Annual Meeting. Our Board of Directors (our "Board"“Board”) recommends that you vote FOR all 11for each of our 10 director nominees and FORfor Items 2, 3 and 4.
ITEM OF BUSINESS | BOARD RECOMMENDATION | VOTE REQUIRED | DISCRETIONARY BROKER VOTING | PAGE | ||||||||
| 1 | Election of directors |  | FOR | Majority of votes cast |
No |
39 | ||||||
2 | Advisory vote to approve executive compensation | | FOR
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Majority of shares represented and entitled to vote |
No |
50 | ||||||
| 3 | Approval of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to provide that stockholders holding 25% of outstanding common stock have the right to request that we call special meetings of stockholders | | FOR | Majority of shares outstanding | No | 94 | ||||||
| 4 | Ratification of appointment of PwC as our independent registered public accounting firm for FY 2024 | | FOR | Majority of shares represented and entitled to vote | Yes | 96 | ||||||
Voting Prior to or During Annual Meeting
You may vote your shares by submitting a proxy in advance of the twoAnnual Meeting online, by telephone or by mail; only in certain circumstances may you vote during the meeting. If you are a registered stockholder who has not previously voted or wants to change your vote, you may vote during the Annual Meeting. Beneficial holders may only vote during the meeting if they properly request and receive a legal proxy in their name from the broker, bank or other nominee that holds their shares. Shares held through our Employee Savings Plan may not be voted during the meeting. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy promptly by following the instructions on your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form.
Avery Dennison Corporation | 2024 Proxy Statement | 1 |
Asking Questions During Annual Meeting
We have designed the virtual Annual Meeting to ensure that you have the same rights and opportunities to participate as you would at an in-person meeting, with an easy-to-use online platform that allows you to attend, vote and ask questions. After we have finished acting upon the Annual Meeting items beingof business and the meeting is adjourned, our Executive Chairman will lead a Q&A session during which we intend to answer all questions submitted timely that are pertinent to our company or the items brought before the stockholder vote. Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. For information on how to submit questions during the Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
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We are a global materials science and digital identification solutions company that provides a wide range of branding and information solutions that optimize labor and supply chain efficiency, reduce waste, advance sustainability, circularity and transparency, and better connect brands and consumers. Our products and solutions include labeling and functional materials, radio frequency identification (RFID) inlays and tags, software applications that connect the physical and digital, and a variety of products and solutions that enhance branded packaging and carry or display information that improves the customer experience. We serve an array of industries worldwide, including home and personal care, apparel, general retail, e-commerce, logistics, food and grocery, pharmaceuticals and automotive.
Our company is composed of two reportable segments, Materials Group and Solutions Group. Materials Group is a leading provider to pressure-sensitive label and graphics industries worldwide. Our innovative products include label materials, graphics and reflective materials and functional bonding materials, such as tapes. Our label materials enhance shelf appeal for brands, inform shoppers, advance circularity, increase transparency, help reduce waste and improve operational supply chain efficiency. Our graphics portfolio offers highly engineered materials that range from vehicle wraps to architectural films. Materials Group plays a key role in advancing our fast-growing Intelligent Labels business, providing the materials science capabilities and process engineering expertise essential to developing and manufacturing intelligent labels at scale.
Solutions Group is a leading global provider of information and branding products and solutions that cover a breadth of customer needs from digital identification and data management, branding and embellishment, as well as productivity, pricing and retail media. We empower customers across multiple retail and industry segments to connect the physical and digital, leveraging our industry-leading RFID solutions. Our technology addresses complex customer challenges, provides transparency and visibility across supply chains, improves labor and waste efficiency, and enables better consumer experiences at the point of purchase and beyond. Market segments served include the global apparel, logistics, food and grocery, and general retail industries. As a large ultra-high frequency RFID solutions provider, we leverage our innovation and data management capabilities, global footprint and market access in the ongoing advancement of our Intelligent Labels business.
STRATEGY OVERVIEW
We striveare committed to create superiorensuring the long-term sustainable value forsuccess of all our stakeholders – our customers, investors, employees and investors and improvecommunities. Over the communities in whichpast five years, we operate. To realize the business aspects of this vision, we arehave focused on executing the following key strategies:delivering to our potential by managing through macro volatility while evolving our aspirations. In 2023, we evolved our long-term strategies as shown below, adding a vital new one that reflects our growing Materials and Solutions connected capabilities and combining two of our former strategies into one.
•DrivingDrive outsized growth in
high valuehigh-value product categorieswith higher growth and margin potential (e.g., specialty labels, graphics, industrial tapes and radio-frequency identification (RFID));•Growingthrough market-driven innovationGrow profitably in our base
business through tailored go-to-market strategiesbusinessesLead at the intersection of the physical and
disciplined execution;•Maintaining our relentlessdigitalEffectively allocate capital and relentlessly focus on productivity
Lead in an environmentally and socially responsible manner
Our customers are increasingly looking for help solving some of the most complex industry challenges, including labor efficiency and supply chain effectiveness; waste reduction, circularity and transparency; and better connection between brands and consumers. We believe that physical items will need a digital identity to solve these challenges, and that we are well-positioned to help the industries we serve overcome them. Our vision is to leverage the strengths of our Materials and Solutions businesses to lead at the intersection of the physical and digital.
2
2024 Proxy Statement | Avery Dennison Corporation
We plan to realize this vision through continued operational excellencesegment leadership, market-driven innovation, and enterprise lean sigma;advancement of integrated digital solutions, leveraging our Intelligent Labels business. Our areas of focus address key megatrends that present both risks and
Our strategies prioritize using our market insights, driving long-term innovation and enhancing the digital capability of our teams, while continuing to execute well in the core businesses that have been key to our success. Our five strategic pillars and 2023 achievements are shown below.
STRATEGIC PILLARS
1 | ||||
Drive outsized growth in high-value categories through market-driven innovation
We aim to increase, both organically and through acquisitions, the proportion of our portfolio in high-value categories that serve markets that are growing faster than gross domestic product (GDP), represent large pools of potential profit and leverage our core capabilities. These products and solutions include our Intelligent Labels that use RFID tags and inlays, specialty and durable label materials, graphics and reflective solutions, industrial tapes, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions.
| • | In 2023, we continued to increase the proportion of our portfolio in high-value product categories, with significant organic growth in Intelligent Labels, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions, and the acquisition of three companies that expand the external embellishment capabilities in our Solutions Group. Over the past five years, we more than doubled the size of our Intelligent Labels business, with net sales of ~$850 million in 2023. |
2 | ||||
Grow profitably in our base businesses
| • | We strive to grow profitably in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies. |
| • | In 2023, we protected margins in our base businesses through product reengineering and productivity actions to mitigate the impact of lower volume as the industries we serve experienced significant inventory destocking. |
3 | ||||
Lead at the intersection of the physical and digital
We connect the physical and digital, leveraging the core capabilities of our Materials and Solutions businesses to help our customers optimize labor efficiency and supply chain effectiveness, reduce waste, advance circularity and transparency, and better connect brands with consumers.
4 | ||||
Effectively allocate capital effectively by balancing investmentsand relentlessly focus on productivity
We balance our capital investment in organic growth, productivity, and acquisitions and venture investments, while returningcontinuing to return cash to stockholders.stockholders through dividends and share repurchases and ensure that we maintain a strong balance sheet with ample capacity to invest. In addition, we take actions to restructure our operations from time to time and use product reengineering and enterprise lean sigma principles to expand our margins, enhance our competitiveness and provide a funding source for reinvestment.
FINANCIAL PERFORMANCE HIGHLIGHTS
| • | In 2023, we invested $285.1 million in fixed and information technology (IT) capital expenditures to support organic growth; completed three acquisitions and made one venture investment for a total of $224.9 million; increased our quarterly dividend rate by ~8%; and repurchased $137.5 million in shares of our common stock. We also delivered ~$69 million in pre-tax savings from restructuring actions, net of transition costs. |
Avery Dennison Corporation | 2024 Proxy Statement | 3 |
5 | ||||
Lead in an environmentally and socially responsible manner
Strong Financial Performance
We aim to advance the environmental sustainability of our company and Executionvalue chain by delivering innovations that advance the circular economy, reducing the environmental impact of Strategic Priorities. Fiscal year 2017 marked our sixth consecutive year of strong top-lineoperations, and offering value-creation opportunities for our customers. We also seek to make a positive social sustainability impact by building a more diverse workforce and inclusive and equitable culture, maintaining operations that promote health and safety, and supporting our communities.
| • | In 2023, we made further progress toward our 2025 and 2030 sustainability goals, reducing the environmental impact of our operations and continuing to invest in our sustainability strategic innovation platform focused, among other things, on material circularity and waste reduction/elimination; driving sustainable change in diversity, equity and inclusion (DEI); and providing $5.5 million in support for our communities, primarily through the Avery Dennison Foundation (ADF). |
With these strategies in mind, our near-term priorities are to deliver on our high-value growth margin expansion and double-digit adjusted earnings per share (EPS) growth. We exceededinitiatives; achieve our financial goalsobjectives for the first half of the year; deepen our ecosystem engagement and expand our M&A pipeline; accelerate sustainability-related and digital innovation; and expand organizational capability in both Materials and Solutions.
PERFORMANCE HIGHLIGHTS
2023 Performance
Although a lower demand environment driven primarily by significant inventory destocking downstream from our company led to a challenging 2023, we delivered sequential improvement each quarter during the year and continued advancement in key growth areas such as Intelligent Labels. Market conditions were significantly worse than we initially anticipated, which resulted in our not realizing our annual performance expectations. Demonstrating strength and resiliency, we navigated the challenging environment, protecting margins; improving service for our customers; deepening our insights into the drivers of demand and inventory throughout our value chain; continuing to shift our product portfolio toward high-value categories, particularly Intelligent Labels; and generating strong cash flow. By leveraging our core strengths of productivity, cost management and capital stewardship and expanding our potential in intelligent label solutions, we mitigated the impact of the lower volume environment on our bottom line.
Key financial results for the year with the accomplishmentsare shown below and on the following page.below.
•Achieved net sales of approximately $6.6 billion, an increase of 8.7% over the prior year, through a balance of organic growth and acquisitions.•• Net sales of $8.4 billion, down 7.5% from $9.0 billion in 2022, reflecting lower volume primarily as a result of inventory destocking
Excluding the impact of currency, sales
grew by 8.2%; on an organic basis, sales grew by 4.2%, driven by growth in high value product categories and businesses serving emerging markets.declined 6.9%Avery Dennison Corporation|2018 Proxy Statement|i• Reported earnings per share (EPS) decreased from $9.21 in 2022 to $6.20 in 2023
•Although reportedAdjusted EPS decreased 13.7% from
$3.54 in 2016$9.15 to$3.13 in 2017 due to a substantial increase in our provision for income taxes to reflect$7.90, primarily reflecting lower volume, partially offset by productivity and restructuring actions
• With net cash provided by operating activities of $826.0 million, delivered adjusted free cash flow of $591.9 million; adjusted free cash flow conversion, meaning the proportion of net income we were able to convert to cash, was more than 100%
• On net income of $503.0 million, achieved return on total capital (ROTC) of 12.4%
4
2024 Proxy Statement | Avery Dennison Corporation
Sales change excluding the provisional estimated impact of the Tax Cuts and Jobs Act (TCJA)currency (sales change ex. currency), adjusted EPS, increased from $4.02 to $5.00, significantly exceeding the high end of the $4.30-$4.50 guidance range we gave in February 2017.
Organic sales growth, adjusted EPS, free cash flow, ROTCamortization (EBITDA) and adjusted ROTCEBITDA margin, which are used later in this proxy statement – are supplemental non-GAAP financial measures that we use internally and provide to investors to assist theminvestors in assessing our performance, and operating trends and defineliquidity. These measures are defined, qualified and reconciled from generally accepted accounting principles in theCompensation Discussion and Analysis section United States of America (GAAP) in Appendix A of this proxy statement. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to the comparable financial measures under generally accepted accounting principles in the United States of America (GAAP) and are reconciled to GAAP inAppendix A of this proxy statement.GAAP.
On Track to Deliver Financial Targets. Our 2014-2018 financial goals included an organic sales growth target of 4% to 5%, reflecting confidence in the trajectoryThe fundamentals of our two largest businesses. business shown below continue to provide us with significant competitive advantage.
We also targeted double-digit adjusted EPS growth. Forare exposed to diverse and growing end markets, with catalysts for long-term growth
We are industry leaders in our primary businesses, with strength in scale and innovation
We have a clear set of strategies that have been key to our success over the first time,long term across a wide range of business cycles
We are uniquely positioned to connect the physical and digital to help address some of the most complex problems facing the industries we externally communicated a target for ROTC, which has long been a key internalserve
Progress Toward 2025 Financial Targets
In March 2021, we announced financial metric fortargets through 2025. Given the challenges we experienced in 2023, our company. progress toward these long-term targets slowed during the year; however, we expect significant progress in 2024 as label and apparel markets rebound and growth in our Intelligent Labels business accelerates. We believe that the combinationour strategies, together with our team’s ability to execute in various environments, will allow us to continue generating long-term value creation through a balance of ourGDP+ growth and ROTC targets capturesstrong returns, as we unlock significant growth opportunities and our value creation objectives, which together arecore businesses rebound.
In 2021-2023, on a proxy for economic value added (EVA)three-year compound annual basis (with 2020 as the base period), one of the performance objectives usedGAAP reported net sales increased by 6.3%, while GAAP operating income, net income and EPS decreased by 1.1%, 3.3% and 2.1%, respectively. GAAP reported operating margin in our long-term incentive (LTI) compensation program. As shown below, based on our results for the first four years of this five-year period, we are on track to achieve or exceed our 2018 commitments to investors.2023 was 9.4%.
|
| 2021-2025 Targets | 2021-2023 Results(1) | ||
Sales Change Ex. Currency(2) | 5%+ | 7.7% | ||
Adjusted EBITDA Growth(2)(3) | 6.5% | 5.7% | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.1% in 2023 | ||
Adjusted EPS Growth(2) | 10% | 3.6% | ||
ROTC | 18%+ | 12.4% in 2023 | ||
(1) | Results for non-GAAP measures are reconciled from GAAP in Appendix A of this proxy statement. | ||||||
Percentages for | |||||||
Avery Dennison Corporation| 2018 Proxy Statement |ii
In March 2017, we announced our 2017-2021 goals, targeting continued solid organic sales growth and double-digit growth in adjusted EPS on a compound annual basis. While we are only one year into this five-year period, we are on pace to deliver these targets, as shown below.
Percentages for | ||||||||
| (3) | Although adjusted EBITDA growth was not one of |
Reported results for these periods are disclosed in theCompensation Discussion and Analysis section of this proxy statement.Effective Capital Allocation
Disciplined Capital Allocation. Effectively deploying capital is one of our key strategies, and we have been consistently disciplined in our execution by investing in organic growth and productivity and acquiring targeted companies, while continuing to return cash to stockholders through dividends and share repurchases.
We have paid quarterly dividends for decades and raised our quarterly dividend rate by 125% since 2010. As shown in the graph below, over the last five years, we have allocated nearly $2 billion to dividends and share repurchases. Given our increased use of available capital for acquisitions and equity investments, we repurchased fewer shares in 2017 compared to prior years.
We have also allocated capital to investinginvested in our businesses to support organic growth and pursuing targeted acquisitionsacquired companies that supportexpand our strategycapabilities in high-value product categories, increase our pace of increasinginnovation and advance our exposuresustainability priorities. Our fixed and IT capital spending in 2023 of $285.1 million was comparable to high value product categories. 2022, reflecting our continued investment in high-value categories, particularly our Intelligent Labels business. During 2017,the year, we successfully completedacquired Thermopatch, Inc. (“Thermopatch”), a New York-based manufacturer specializing in labeling, embellishments and integratedtransfers for the acquisitions of (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitivesports, industrial laundry, workwear and hospitality industries; LG Group, Inc. (“Lion Brothers”), a Maryland-based designer and manufacturer of specialty filmsapparel brand embellishments; and laminates; (ii) Yongle Tape Ltd.Silver Crystal Group (“Silver Crystal”), a China-based manufacturerCanada-based provider of specialty tapessports apparel customizations and related products usedapplication solutions across in-venue,direct-to-business and e-commerce platforms; together, these acquisitions expand the external embellishments portfolio in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare products used in the management of wound care and skin conditions.our Solutions Group. We also made equity investmentsone venture investment in two other companies.a company developing technological solutions that we believe have the potential to advance our strategies.
Capital Allocated to Dividends,Share RepurchasesIn 2023, we paid $256.7 million in dividends of $3.18 per share and Acquisitions*
* Amounts for acquisitions include equity investments in other companies.
Avery Dennison Corporation | 2024 Proxy Statement | 5 |
Avery Dennison Corporation| 2018 Proxy Statement |iii
Three- and Five-Year Cumulative TSR Outperformance.As shown below, with total stockholder returnover the last five years, we have deployed over $2 billion to acquisitions (including venture investments) and returned over $2 billion to stockholders in dividends and share repurchases.
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Longer-Term Total Stockholder Return (TSR) of over 66%Outperformance
Our TSR in 2017, we delivered cumulative2023 was modestly below the TSR for the 2015-2017 three-year period and the 2013-2017 five-year period that significantly outperformed the S&P 500® and the median of the S&P 500 Index and the S&P 500 Industrials Index and Materials subsets (wemodestly above the Dow Jones U.S. Container & Packaging Index, three comparator groups we use to assess our relative performance. In 2023, we disaggregated our market basket comparator group used in previous years into the S&P 500 Industrials Index and the Dow Jones U.S. Container & Packaging Index, of which we are a member of the Materials subset, but also share many characteristics with members of the Industrials subset; investors have informed us that they look at both subsets in evaluatingmember. We believe this presentation provides greater clarity on our relative performance, as we do internally).reflecting it in a manner more consistent with the methodology used by peer companies.
We believe that our longer-term TSR measures the return we have providedis a more meaningful measure than our one-year TSR, which can be impacted by short-term market volatility unrelated to our stockholders,performance. Our five-year cumulative TSR significantly outperformed all three of these comparator groups.
5-YEAR CUMULATIVE TSR |
1-, 3- AND 5-YEAR TSR |
| AVY | S&P 500 Index | S&P 500 Industrials Index | Dow Jones U.S. Container & | |||||
2019 | 49% | 31% | 29% | 29% | ||||
2020 | 21% | 18% | 11% | 21% | ||||
2021 | 41% | 29% | 21% | 11% | ||||
2022 | (15)% | (18)% | (5)% | (18)% | ||||
2023 | 14% | 26% | 18% | 8% | ||||
3-Year TSR | 37% | 33% | 35% | (2)% | ||||
5-Year TSR | 145% | 107% | 94% | 53% | ||||
LEADERSHIP TRANSITION
| EXECUTIVE CHAIRMAN | PRESIDENT/CEO | |||
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Mitch Butier | Deon Stander |
In May 2023, Mitch Butier announced his decision to step down as our CEO. Our Board elected Mr. Butier as Executive Chairman effective September 1, 2023 to ensure a smooth transition by providing counsel and guidance to our new CEO, noting that, during his tenure as CEO, our company delivered superior performance while creating even greater future potential, accelerated growth and expanded margins, and advanced our sustainability priorities.
6 | 2024 Proxy Statement | Avery Dennison Corporation |
Our Board has a well-established CEO succession planning process that is part of its broader ongoing leadership succession planning. Reflecting a thoughtful succession process, in May 2023 our Board elected Deon Stander as President/CEO, effective September 1, 2023. Mr. Stander had been our President/Chief Operating Officer (COO) since March 2022, after having served as Vice President/General Manager of our business now known as Solutions Group since June 2015. Having evaluated his attributes, experiences and strengths as a leader during multiple discussions over the preceding 18-24 months, our Board determined that Mr. Stander, who has served in a number of leadership roles across the globe with increasing responsibility and impact during his 20-year career with our company, was the right individual to lead our company into the future. Mr. Stander has a proven track record, including stock price appreciationleading the transformation of our Solutions business and dividends paid (assuming reinvestment thereof).helping accelerate growth in Intelligent Labels.
1-, 3- and 5-YEAR TSR | ||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 3-Year TSR | 5-Year TSR | ||||||||
| | | | | | | | | | | | | | | |
AVY | 47.5% | 6.2% | 23.8% | 14.6% | 66.7% | 136.4% | 270.3% | |||||||
| | | | | | | | | | | | | | | |
S&P 500 | 32.4% | 13.7% | 1.4% | 12.0% | 21.8% | 38.3% | 108.1% | |||||||
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S&P 500 Indus. & Mats.* (median) | 41.0% | 11.7% | (4.7)% | 19.0% | 27.5% | 49.2% | 134.8% | |||||||
*Based on companies in subsets asIn connection with their transitions to these respective roles, giving consideration to the advice ofDecember 31, 2017.
Avery Dennison Corporation| 2018 Proxy Statement |iv
Tableits independent compensation consultant, WTW, our Board’s Talent and Compensation Committee (the “Compensation Committee”) made the decisions described below related to the compensation of ContentsMessrs. Stander and Butier.
We continued our longstanding practiceFor Mr. Stander, increased his annual base salary from $700,000 to $1.1 million and his target Annual Incentive Plan (AIP) opportunity from 75% to 135% of ongoing engagement and open dialoguebase salary, in each case effective September 1, 2023. The Compensation Committee preliminarily aligned to increase his target long-term incentive (LTI) opportunity from 300% to 550% of base salary, effective with stockholders in 2017. Our engagement program takes place throughout the year, generally as shown below.
ENGAGEMENT PROCESS
annual LTI award on March 1, 2024, subject to its review of market pay for similar roles at that time. In advanceaddition, the Compensation Committee approved a special promotion award of stock options on September 1, 2023 with a grant date fair value of approximately $3 million, 50% of which vests on each of the 2017 Annual Meeting, we contactedthird and fourth anniversaries of the grant date, in each case subject to his continued service.
For Mr. Butier, reduced his annual base salary from $1.3 million to $1 million and his target AIP opportunity from 160% to 120% of base salary, in each case effective September 1, 2023. He received no special LTI award in connection with his role change.
2024 DIRECTOR NOMINEES (ITEM 1)
As previously disclosed, in February 2024, Julia Stewart notified our 25 largest institutional stockholders, representing almost 50%Board of our then-outstanding shares. Board members, including our Lead Independent Director, and management were made availableher intention not to answer questions and address concerns regarding our executive compensation and governance programs and the items being brought to stockholder votestand for reelection at the Annual Meeting. While we received responses from stockholders representing 25%As a result, her membership on our Board will end on the date of the Annual Meeting.
Board Performance Highlights
Our Board provides strong oversight of our then-outstanding shares, nonemanagement team and company, with highlights of them feltits accomplishments in recent years described below.
Supported management in navigating our response to the pandemic, including related labor, freight and inflationary challenges, in 2020 and 2021; pandemic-related challenges in China, the Russia-Ukraine war, supply chain disruptions, sizable currency movements and inflationary pressures in 2022; and lower demand driven primarily by downstream inventory destocking in 2023
Oversaw management’s consistent execution of our strategies, delivering performance that there wasexceeded our 2021 financial targets and progressed us toward achieving our 2025 financial targets, as well as 2019-2023 TSR of 145%, significantly outperforming the S&P 500 Index, S&P 500 Industrials Index and Dow Jones U.S. Container & Packaging Index
Supported management in evaluating synergistic acquisition targets, resulting in 15 companies becoming part of our portfolio, adding new capabilities, expanding our position in high-value product categories and enhancing our opportunities in the marketplace
Implemented thoughtful Board refreshment and director succession planning to ensure we maintain a needhigh-caliber Board; mitigate the potential impact of concentrated mandatory retirements given the closeness in age of many of our directors; and further enhance overall Board diversity, leading to substantively engage during that busy time.the appointment of three new independent directors in the last 18 months, two of whom increased the gender and/or ethnic diversity on our Board
Conducted regular executive succession planning, resulting in experienced leaders promoted to more senior positions, including our new CEO and Solutions Group President, each appointed in 2023
Sharpened focus on advancing our sustainability agenda, with continuous progress toward achieving our 2025 sustainability goals and more ambitious 2030 goals, as well as enhanced sustainability reporting
Avery Dennison Corporation | 2024 Proxy Statement | 7 |
Matrix of Director Nominee Skills, Qualifications and Demographic Backgrounds
Our director nominees bring a balance of skills, qualifications and demographic backgrounds to their roles in providing oversight of our company, as shown by individual in the matrix below. This matrix, which has been revised and expanded from previous years to, among other things, specify key areas of industry and functional experience or expertise, reflects additional information we solicited from directors in our year-end 2023 questionnaire.
In
As part of its ongoing director succession planning process, the fall, without the time pressures associated with proxy season, we reached outGovernance Committee regularly discussed and reported to our 30 largest institutional stockholders, representing nearly 55%Board during 2023 on the skills, qualifications and demographic backgrounds desirable for our Board to best serve the needs of our then-outstanding shares. Proposed topicscompany. As part of this process, the Governance Committee initiated a search for these meetings includednew directors with retail/consumer packaged goods (CPG) or finance expertise, which led to the appointment of Maria Fernanda Mejia to our business strategyBoard in February 2024. The search for an independent director with finance expertise continues and financial performance, executive compensation matters, is expected to conclude in the coming months.
8 | 2024 Proxy Statement | Avery Dennison Corporation |
DIRECTOR NOMINEE MATRIX
|
| Initial Criteria | ||||||||||||||||||||
Independent(1) | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ||||||||||
Public Company Leadership Exp.(2) | ✓ |
| ✓ |
| ✓ |
| ✓ | ✓ |
| ✓ | ||||||||||
Public Company Board Exp.(3) |
| ✓ |
|
| ✓ | ✓ |
|
| ✓ | ✓ | ||||||||||
| Industry Experience(4) | ||||||||||||||||||||
Digital/Technology |
|
| ● |
| ● |
| ● | ● |
| ● | ||||||||||
Retail |
| ● | ● |
| ● | ● |
| ● | ● |
| ||||||||||
Consumer Goods |
| ● |
|
| ● | ● |
|
| ● | ● | ||||||||||
Packaging | ● | ● | ● | ● | ● | ● |
| ● | ● |
| ||||||||||
Materials Science | ● |
| ● | ● |
|
| ● | ● | ● |
| ||||||||||
Industrial Goods | ● |
| ● | ● |
|
| ● | ● | ● |
| ||||||||||
| Functional Experience(4) | ||||||||||||||||||||
Finance | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
Marketing | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
M&A | ● | ● | ● |
| ● | ● | ● | ● | ● | ● | ||||||||||
Environmental Sustainability | ● |
| ● | ● | ● | ● | ● | ● | ● |
| ||||||||||
Cybersecurity | ● |
| ● |
| ● |
| ● | ● | ● | ● | ||||||||||
Science/Engineering/R&D | ● | ● | ● | ● |
| ● | ● | ● | ● | ● | ||||||||||
| Demographic Background(5) | ||||||||||||||||||||
Tenure (years as of YE 2023) | 63⁄4 | 133⁄4 | <1 | 3⁄4 | 161⁄2 | – | 103⁄4 | 73⁄4 | 183⁄4 | 11⁄4 | ||||||||||
Gender |
|
|
|
|
|
|
|
|
|
| ||||||||||
Woman |
|
|
| ✓ |
| ✓ | ✓ |
|
|
| ||||||||||
Man | ✓ | ✓ | ✓ |
| ✓ |
|
| ✓ | ✓ | ✓ | ||||||||||
Non-Binary |
|
|
|
|
|
|
|
|
|
| ||||||||||
Age | 61 | 67 | 55 | 52 | 71 | 60 | 67 | 52 | 68 | 57 | ||||||||||
Mandatory Retirement Year | 2035 | 2029 | 2041 | 2044 | 2025 | 2036 | 2029 | 2044 | 2028 | 2039 | ||||||||||
Race/Ethnicity |
|
|
|
|
|
|
|
|
|
| ||||||||||
Black or African American |
|
|
|
|
|
|
|
|
|
| ||||||||||
Hispanic or Latino | ✓ |
|
|
|
| ✓ |
|
|
|
| ||||||||||
White | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Asian (including South Asian) |
|
|
|
|
|
|
|
|
|
| ||||||||||
Native Hawaiian or Pacific Islander |
|
|
|
|
|
|
|
|
|
| ||||||||||
Native American or Alaska Native |
|
|
|
| ✓ |
|
|
|
|
| ||||||||||
LGBTQ+ | ||||||||||||||||||||
Veteran |
|
|
|
| ✓ |
|
|
|
|
| ||||||||||
Works/Worked Outside U.S. | ✓ | ✓ | ✓ | ✓ |
| ✓ |
| ✓ | ✓ |
| ||||||||||
| (1) | Determined by our Board as independent under NYSE listing standards. |
| (2) | Service as U.S. public company CEO, COO and/or CFO. |
| (3) | Prior or concurrent service on another U.S. public company board excluding companies at which individual served or serves as CEO, COO and/or CFO. |
| (4) | Key for industry and functional experience: |
| • | Technical expertise – Direct management experience or subject matter expertise during professional career. |
| • | Supervisory experience – Supervisory management experience during professional career. |
| • | Substantial knowledge – Knowledge from serving on board of another U.S. public company and/or gained from investment banking or private equity experience. |
| (5) | Classifications for gender, race/ethnicity, LGBTQ+, veteran and works/worked outside the U.S. based on directors’ responses to questionnaire. |
Avery Dennison Corporation | 2024 Proxy Statement | 9 |
Board composition andGovernance Highlights
Highlights of our governance program are shown below.
Stockholder Rights | ✓ Market-standard proxy access ✓ If Item 3 is approved at Annual Meeting, stockholders will have the right to request that we call special meetings of stockholders at 25% ownership threshold ✓ No supermajority voting requirements ✓ No poison pill ✓ No exclusive forum or fee-shifting bylaws | |
Board Governance | ✓ Annual election of directors ✓ Majority voting in director elections ✓ Single class of outstanding voting stock ✓ Director nominees 80% independent ✓ Robust Lead Independent Director role ✓ Regular director succession planning and paced Board refreshment, including four new directors appointed within last 18 months ✓ Continuous executive succession planning and leadership development ✓ Annual Board/Committee evaluations and individual director feedback process ✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted ✓ Best practice Governance Guidelines ✓ Strong Board and Committee governance ✓ Direct access to management and experts |
SUSTAINABILITY
We have been consistently focused on advancing our sustainability agenda by establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustainability progress reflects the leadership of our management team and the engagement and oversight of our Board, as well as the commitment and passion of our team members worldwide.
Sustainability Governance
We believe that strong sustainability governance ensures consistency and accuracy of information we use to provide transparency to our stakeholders. Our governance structure is shown below.
| SUSTAINABILITY GOVERNANCE STRUCTURE |
10 | 2024 Proxy Statement | Avery Dennison Corporation |
Sustainability Data and Reporting
We continue to refine and expand the sustainability data we disclose, which has provided our stakeholders with regular insight into our progress. Our sustainability data is indexed to the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) frameworks to facilitate comparability of our results with those of other companies. We partnered with a third-party expert to assess our disclosures against the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) regarding the information that companies should disclose to allow their stakeholders to assess and price their climate-related risks and have developed a plan to align with TCFD requirements.We also report to Carbon Disclosure Project (CDP) Climate, Water and Forests and support the growing adoption of International Sustainability Standards Board (ISSB) standards. We plan to assess our reporting against ISSB standards, and other disclosures that incorporate those standards, as part of our ongoing sustainability reporting transparency efforts.
Our sustainability teams assess our reporting in accordance with external frameworks; engage with environmental, social and governance (ESG) rating agencies; manage our data collection and reporting processes; establish and monitor assurance guidance and controls; and approve reports, data and information. In addition, we engage an independent third party to validate our energy and greenhouse gas (GHG) emissions data. Having aligned with the Audit Committee to ensure Board oversight of sustainability governance, our reporting processes ensure data owner sign-off, Sustainability Disclosure Committee review and senior management approval prior to publication.
Our March 2024 ESG Download, being made available on our website at esg.averydennison.com on or before the filing of our definitive proxy statement, reflects our focus and progress towards achievingon sustainability and governance matters. It includes ~140 metrics covering our policies, goals, strategies, risks, outcomes and certifications. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Sustainability Progress
Sustainability is one of our core values and has long been integral to our way of doing business. To create value for all our stakeholders, we are advancing our sustainability goals. We received responses from stockholders representing over 30% ofstrategic innovation platform focused, among other things, on material circularity and waste reduction/elimination; building a more diverse workforce and inclusive and equitable culture; maintaining operations that promote health and safety; and supporting our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
Avery Dennison Corporation| 2018 Proxy Statement |v
The graphics below show the results of our 2017 engagement.
STOCKHOLDER FEEDBACK DURING 2017 ENGAGEMENT
Governance Matters
With respect to matters related to governance, we discussed several topics related to our Board's processes, including succession planning and refreshment, diversity, and evaluations. We also discussed the integration ofcommunities. Integrating sustainability into our business strategies and our Board's oversight of our cybersecurity preparedness. Our stockholders expressed interest in the anticipated completion of our CEO transition and our Board's views on proxy access; both of these matters were subsequently addressed with our December 2017 announcement of Dean Scarborough's retirement as our Executive Chairman at the end of that year and our adoption of proxy access.
Executive Compensation Matters
With respect to matters related to executive compensation, our stockholders expressed support for our program generally and appreciated the more graphical disclosure in our 2017 proxy statement. In addition, we discussed our approach to human capital management, in particular our diversity and inclusion efforts, as well as the linkage between our executive incentive compensation and business strategies. We also provided additional clarification on the market-leveraged stock units (MSUs) included in our LTI program.
Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of investors' evolving expectations on compensation and governance matters. We look forward to maintaining our longstanding practice of connecting with stockholders to ensure our programs continue to align with best practices.
Avery Dennison Corporation| 2018 Proxy Statement |vi
Sustainability is one of our values and has long been part of our approach to doing business. Our aim is to improve the sustainability of our products and processes while helping to create shared value for all of our stakeholders. Key to our progress has been integrating sustainability into our underlying business strategies and engaginghelped us engage employees at all levels.levels to deliver sustained progress.
We report
Avery Dennison Corporation | 2024 Proxy Statement | 11 |
In the first eight years of the 10-year horizon for our 2025 sustainability goals, we have made substantial progress, including exceeding our goal for cumulative GHG emissions reduction, as shown in the scorecard below. You can find additional information on our sustainability progress every two years. In September 2017, we issuedin our 2014-2016 Sustainability2023 Integrated Report summarizingbeing furnished to the Securities and Exchange Commission (SEC) prior to the distribution of our key achievements during the period and progress towards reaching the 2025 sustainability goals we setproxy materials, as well as in 2015. We encourage you to review the report on our website atwww.averydennison.com/sustainability. Our sustainability goals are shown below and our progress is described underSustainability in theGovernance, Sustainability and Social Responsibility section of this proxy statement.March 2024 ESG Download.
| 2023 SCORECARD OF PROGRESS TOWARD 2025 SUSTAINABILITY GOALS | |||||||||||
 | Goal(s) | Baseline Year | Highlights of Progress | ||||||||
Greenhouse Gas Emissions
| Achieve at least 3% absolute reduction | 2015 | Reduced GHG emissions by additional ~7% in 12 months through Q3 2023, our most recently available data, compared to same period in prior year and by ~63% cumulatively through Q3 2023 compared to baseline year | ||||||||
 Paper
| Source 100% certified paper, of which at least 70% | 2015 | Of total volume of paper procured in 2023, ~96% was certified, with ~79% of face stock Forest Stewardship Council®-certified | ||||||||
 Films
| 70% of | N/A | ~97% of 2023 film volume conformed to Materials Group’s Restricted Substance List (RSL) | ||||||||
 Chemicals
| 70% of | N/A | ~96% of 2023 chemical volume conformed to Materials Group’s RSL | ||||||||
 | Products and Solutions
| Derive 70% of revenues from sustainability-driven products (as defined by our Sustainable ADvantage criteria) | 2015 | ~67% of Materials Group (based only on Label and
| |||||||
 Waste
| Be 95% landfill-free, with at least 75% of our waste reused, repurposed or |
2015 | Diverted ~93% of | ||||||||
 People
| Continue to cultivate diverse (40%+ female at level of manager and above), engaged, safe (recordable incident rate (RIR) of <0.25), productive and healthy workforce Maintain world-class safety and employee engagement scores | 2015 | Increased female representation at level of manager and above by ~4% from baseline year, reaching ~36% at YE 2023 Continued world-class safety record, with RIR of 0.22 in 2023, substantially better than manufacturing industry average of 3.2 in 2022 (most recently available data) Employee engagement of ~80%* in 2023 | ||||||||
Transparency
| Commit to goals publicly and be transparent in reporting progress | N/A | Continued enhancing sustainability transparency with more comprehensive reporting, including in our | ||||||||
| * | Data reflects change in engagement survey platform and methodology. |
12 | 2024 Proxy Statement | Avery Dennison Corporation |
After completing our biannual materiality assessment in 2020 to prioritize the most significant environmental and social sustainability challenges then facing our company and our stakeholders, we established an additional set of sustainability goals that we are aiming to achieve by 2030. Within these goals, we have specific targets. In 2022, we completed an enhanced materiality assessment, which included an updated mapping of our sustainability priorities throughout our value chain. This process included interviews with internal and external stakeholders such as members of management, customers and non-governmental organizations (NGOs), as well as industry analysis. The topics that ranked highest in the assessment also offer substantial value-creation opportunities for our company and customers. The most material topics identified in our 2022 materiality assessment – transition to a circular economy, advanced technologies and innovation, climate change, GHG emissions and reduction, supply chain, fair and inclusive marketplace, materials management and operational waste – are all reflected in our 2030 sustainability goals and targets. Our progress toward our 2030 goals through 2023 is shown below.
 | ||||||
Goal | Targets | Baseline Year | Highlights of Progress | |||
Deliver innovations that advance the circular economy | Satisfy the | |||||
Solutions Group: 100% of |
N/A | ~75% (based only on Apparel Solutions) | ||||
Materials Group: 100% of our standard label products will contain recycled or renewable content; all of our regions will have labels that enable circularity of plastics | N/A | ~61% (based only on Label and Graphic Materials) | ||||
Reduce the environmental impact in our operations and supply chain | Reduce our Scope 1 and 2 GHG emissions by 70% from our 2015 baseline. Work with our supply chain to reduce our 2018 baseline Scope 3 GHG emissions by 30%, with an ambition of net zero by 2050 | N/A | Scope 1 and 2: ~63%; as of Q3 2023, our most recently available data Scope 3: Prior-year calculations publicly available in our most recent CDP Climate response* | |||
Source 100% of paper fiber from certified sources focused on a deforestation-free future | 2015 | ~96% certified | ||||
Divert 95% of our waste away from landfills, with a minimum of 80% of our waste recycled and the remainder either reused, composted or sent to energy recovery | 2015 | ~89% landfill-free ~64% recycled | ||||
Deliver a 15% increase in water efficiency at our sites that are located in high- or extremely high-risk countries as identified in the World Resources Institute Aqueduct Tool | N/A | ~9% as of Q3 2023 | ||||
Make a positive social impact by enhancing the livelihood of our people and communities | Foster an engaged team and an inclusive workplace • Inclusion Index: 85% • Employee Engagement: 82% • Females in manager level or above positions: 40% • Safety: RIR of 0.20 | 2015 | ~76%** (N/A in 2015) ~80%** (from 80%) ~36% (from 32%) 0.22 (from 0.31) | |||
Support the participation of our employees in ADF grants and foster the well-being of the communities in which we • 85% of countries in which we operate receive ADF grants • 50% of all ADF grants incorporate volunteerism | N/A | Made ADF grants in ~72% of countries in which we operate 95% of grants incorporated employee volunteerism | ||||
| * | Our Scope 3 GHG emissions reporting is currently spend-based and fluctuates with market trends and inflation. |
| ** | Data reflects change in engagement survey platform and methodology. |
Avery Dennison Corporation | 2024 Proxy Statement | 13 |
Avery Dennison Corporation| 2018 Proxy Statement |vii
Table of ContentsPEOPLE AND CULTURE
2018 DIRECTOR NOMINEES (ITEM 1)
Our Board has overseenemployee experience depends on our strong recent performance, includingculture, technology and work environment, whether in an office, remote or hybrid. To enhance this experience, we have advanced our professional-level onboarding and expanded digital access for our manufacturing and remote employees; enabled the following:
•Successful executioncontinuous growth of ourBoard-aligned business strategies,employee resource groups (ERGs), whichhas drivenare open to all employees; further enhanced flexible work arrangements; provided more targeted talent development programming; and matured ourstrong TSR performance over the most recent three-enterprise leader development program.We have continued annually evaluating pay equity, making adjustments where appropriate. In 2023, we reviewed pay equity (considering total base and
five-year periods of over 136% and 270%, respectively, in each case substantially outperforming the S&P 500;•The closing and integration of five acquisitions and the completion of equity investments in three other companies in the last two years, demonstrating our disciplined approachannual incentive compensation) with respect toacquisitions through which we target companies that can enhance our existing capabilities and increase our exposure to high value product categories; and•Seamless execution of our Board's executive succession planning with the 2016 election of Mitch Butier as our Chief Executive Officer (CEO), after serving as Chief Operating Officer under our previous CEO, Dean Scarborough (who then became our Executive Chairman),gender for all non-manufacturing employees globally, as well as all manufacturing employees in the2017 electionU.S. and certain other countries, and with respect to race/ethnicity for all U.S. employees. Our teams engaged with company leadership on our pay equity/transparency priorities and implemented several advancements, such as including employees from recently integrated acquisitions in our population data, expanding our analysis to include long-term incentives for director-level and above employees, and fine-tuning our analytic model in certain regions to reflect their unique circumstances. We also enhanced pay transparency to comply with evolving laws and regulations.Diversity is one of
Greg Lovinsour core values, reflecting our commitment to ensuring an inclusive and equitable environment for people of all backgrounds. It is our belief that we gain strength from diverse ideas and teams. Our DEI efforts are intended to foster an environment where our employees can grow and be increasingly productive and innovative, enhancing our reputation as a great place to work and allowing us to attract and retain talent for the benefit of our stakeholders. We hold ourselves accountable for our DEI progress in our 2030 sustainability goals. Over the past several years, we have significantly advanced our DEI journey, as shown below. Our 2023 EEO-1 statistics, which reflect the voluntary self-identification by our U.S. employees, can be found in our March 2024 ESG Download.HIGHLIGHTS OF DEI JOURNEY
2015
• Established goal of 40%+ female at manager level and above
• Employees established first ERG
2016-2020
• Added Diversity as one of our company values
• Established Regional DEI Councils
• Launched and expanded gender pay equity review and began evaluating U.S. racial/ethnic pay equity, in each case making adjustments where appropriate
• Began requiring gender-diverse hiring slates globally
• Conducted unconscious bias training for managers globally
• Added inclusion index to annual employee engagement survey
• Expanded flexible work arrangements
• Initiated Women.Empowered development program
• Joined CEO Action for Diversity & Inclusion
• Employees established several new ERGs, including for women and Black/African American, LGBTQ+ and Latinx employees
2021
• Formalized DEI strategy with four global pillars and supporting regional focus areas
• Established DEI infrastructure with global leader and dedicated regional resources
• Further enhanced pay equity review with third-party analysis of U.S. racial/ethnic data
• Began annually publishing EEO-1 statistics
• Reached milestone of 20+ ERGs, which are open to all our employees
• Implemented more equitable benefits for LGBTQ+ employees and their families
2022-2023
• Made additional progress in female manager+ representation; on track to reach 40% by 2026
• Improved global female employee engagement and maintained rate of female departures in manager+ positions despite competitive talent market
• Grew ERG membership globally by 30%+
• Launched AD Advocate, pairing executives to sponsor and mentor top diverse talent
• Implemented new employee engagement survey, providing expanded set of questions more reflective of market best practices, enhanced comparability with peers, improved analytics and pulse survey capability
• Completed foundational work focused on DEI strategic pillars of women leaders, fairness manufacturing, inclusion and underrepresented groups (from hiring to development and career growth)
In 2024, we plan to maintain our focus on fair and transparent talent practices and standards, equitable access to opportunities for career growth and development, and manufacturing team communication and camaraderie.
14
2024 Proxy Statement | Avery Dennison Corporation
STOCKHOLDER ENGAGEMENT
In addition to our ongoing investor relations program through which our CEO, Chief Financial Officer (CFO)., business leaders and Investor Relations team engage with our investors throughout the year, for over a decade, we have semiannually engaged with stockholders to solicit feedback on our strategies, executive compensation and sustainability progress, offering to include directors as participants in scheduled meetings. The objectives of this program are to maintain regular and thoughtful engagement to directly obtain investor feedback; continue to strengthen our relationships with key investors; and gather perspectives on our sustainability and governance profile to identify potential improvement opportunities. Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of evolving investor expectations and helps ensure we continue to reflect best practices.
APPOINTMENT OF NEW DIRECTOR2023 Engagement Results
Upon
2023 ENGAGEMENT RESULTS* | ||||||
| Outreach | Conversations | |||||
In 2023, we contacted our top 35 investors in proxy season and the off-season. Board members, in particular our Lead Independent Director (LID), and management were made available to answer questions and discuss matters of investor interest. We engaged with every stockholder who requested a meeting or accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements. | |  | |  | ||
| * | Based on percentage of shares outstanding. |
We discussed the recommendation ofresults and feedback from our 2023 engagement regarding executive compensation and social sustainability with the Compensation Committee and regarding governance and environmental sustainability with our Board’s Governance and Social Responsibility Committee,Committee. We also shared highlights with our Board appointed Andres Lopez as an independent director onto supplement the reports from those Committee Chairs.
In February 2024, giving consideration to the feedback we received from investors during our 2023 engagements, our Board effective February 1, 2017. Mr. Lopez brings deep packaging industry expertise as President and CEO of Owens-Illinois, Inc., after having served in leadership roles of increasing responsibility at the glass container manufacturing company (as described in greater detail in his biography on page 28 of this proxy statement). Mr. Lopez was subsequently electedapproved, subject to our Board by our stockholders at the 2017 Annual Meeting.
RETIREMENT OF EXECUTIVE CHAIRMAN
In December 2017, Mr. Scarborough, then Executive Chairman, notified the Board that he would be retiring from our company at the end of the year. He was our employee through December 31, 2017 and continues to serve as non-executive Chairman.
DIRECTOR NOMINEES
Our director nominees have demonstrated their commitment to diligently executing their fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect each of the nominees shown in the chart belowstockholder approval at the Annual Meeting.Meeting, a Certificate of Amendment to our Amended and Restated Articles of Incorporation to provide that stockholders holding 25% of our outstanding common stock have the right to request that we call special meetings of stockholders.
| NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bradley A. Alford | 61 | 2010 | Retired Chairman & CEO, Nestlé USA |  | M | M | ||||||||
| Anthony K. Anderson | 62 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | | M | M | ||||||||
| Peter K. Barker | 69 | 2003 | Retired Chairman of California, JPMorgan Chase & Co. | | M | | C | |||||||
| Mitchell R. Butier | 46 | 2016 | President & CEO, Avery Dennison Corporation |  | ||||||||||
| Ken C. Hicks | 65 | 2007 | Retired Chairman, Foot Locker, Inc. | | M | M | | |||||||
| Andres A. Lopez | 55 | 2017 | President & CEO, Owens-Illinois, Inc. | | M | |||||||||
| David E. I. Pyott (LID) | 64 | 1999 | Retired Chairman & CEO, Allergan, Inc. | | M | M | ||||||||
| Dean A. Scarborough | 62 | 2000 | Retired Executive Chairman, Avery Dennison Corporation | | ||||||||||
| Patrick T. Siewert | 62 | 2005 | Managing Director & Partner, The Carlyle Group | | C | | | |||||||
| Julia A. Stewart | 62 | 2003 | Former Chairman & CEO, DineEquity, Inc. | | C | M | ||||||||
| Martha N. Sullivan | 61 | 2013 | President & CEO, Sensata Technologies Holding N.V. | | M | M | |
AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chair LID = Lead Independent Director
Avery Dennison Corporation| 2018 Proxy Statement |viii
Table of Contents2023 Engagement Feedback
Our director nominees bring a balance of skills, qualificationsWe discussed our leadership transition in all off-season engagements, with investors interested to learn about our Board’s executive succession planning process, engagement with the CEO successor in and demographic backgrounds in overseeingoutside the boardroom, and strategic rationale for determining Mr. Stander to be the right individual to guide our company as highlighted below and shown in greater detail in the Board Matrix included inItem 1 — Electionnext phase of Directors of this proxy statement.
Our governance program reflects our valuesits journey. Stockholders also sought to understand the role, responsibilities and facilitates our Board's independent oversightanticipated tenure of our company. Executive Chairman.
Governance Feedback
Our 2023 engagements provided feedback on the governance matters described below.
| • | Board composition, including the appropriateness of the balance of skills, qualifications, demographic backgrounds and tenure distribution on our Board given our evolving strategies |
| • | Board refreshment and diversity, including our director succession planning process to ensure a robust pipeline of potential new directors, the rationale for recent director appointments and our Governance Committee’s search for new directors with retail/CPG or finance expertise |
| • | Board leadership structure, including our rationale for maintaining a non-independent Chairman complemented by a proactive and engaged Lead Independent Director |
| • | Our stockholder rights profile, particularly the inability of our stockholders to request that we call special meetings of stockholders |
Avery Dennison Corporation | 2024 Proxy Statement | 15 |
Environmental Sustainability Feedback
Environmental sustainability was a significant area of focus for the stockholders with which we engaged. Investors uniformly commended our sustainability transparency in the disclosures contained in our Integrated Reports, proxy statements and ESG Downloads. During our conversations, we primarily discussed the matters described below.
| • | Our progress against our 2025 and 2030 sustainability goals, including our substantial achievement of the former set of goals and whether adjustments would be made to the original goals or would be reflected in our next set of sustainability goals |
| • | Our current focus areas, including goal attainment, actions to address increasing regulatory requirements, improved transparency and ESG ratings agency engagement, and approach to materiality |
| • | Our efforts to reduce Scope 3 GHG emissions, including our investment in internal infrastructure with dedicated procurement resources in each of our business segments; partnership with CDP Supply Chain to optimize engagement with our customers; and measurement methodology, including our potential transition from spend-based to materials-based measurement of these emissions |
| • | Our 2025 goal related to 70% sustainability-driven products, including our criteria for designation as sustainability-driven and our shift from our goals for 2025 focused on our products to our goals for 2030 focused on what our products enable for our customers and end users |
| • | Our efforts toward aligning with TCFD requirements, including our assessment with a third-party expert to understand our physical and transactional risks and our plans to incorporate TCFD into our enterprise risk management (ERM) and long-term strategic planning processes |
| • | Our net zero ambition, including internal strategy development, the impact of our progress reducing Scope 1 and Scope 2 GHG emissions, and our dependence on other parties to reduce Scope 3 GHG emissions |
Executive Compensation and Social Sustainability Feedback
The highlightsprimary focus areas during our 2023 engagements were our leadership transition, Board refreshment and governance profile; executive compensation and social sustainability were not significant topics of discussion. Stockholders did express interest in the impacts of our program are shown below.
✓82% Independent✓Robust Lead Independent Director Role✓Ongoing Director Succession Planning and Board Refreshment✓Executive Succession Planning and Leadership Development✓Annual Board Evaluations✓Mandatory Director Retirement Policy✓Governance Guidelines✓Strong Committee Governance✓Direct Board Access to Management and Experts
ADOPTION OF PROXY ACCESS
In December 2017, responding to feedback from our largest stockholders, our Board amended our bylaws to permit a stockholder, or a group of no more than 20 stockholders, owning at least 3%leadership transition on executive compensation, including the compensation of our company's stock continuously for at least three yearsnew CEO and our Executive Chairman, as well as any additional incentives provided to submit director nominees (upsenior leaders in connection with the transition. Investors continued to 20% ofwant to learn more about the ways in which we incent our Board) for inclusion inleaders to progress toward achieving our proxy materials, subject to the terms and conditions described in our bylaws.sustainability goals.
16 | 2024 Proxy Statement | Avery Dennison Corporation |
APPROVAL OF EXECUTIVE COMPENSATION (ITEM 2)
COMPENSATION DESIGN
Our Board'sThe Compensation and Executive Personnel Committee (the "Compensation Committee") designsoversees our executive compensation program, which is designed to motivate our executives to execute our business strategies and deliver long-term stockholder value. The program delivers pay for performance, with realized compensation dependent on our company achievingachievement of challenging annual financial targets and long-term financial performance andlonger-term value creation objectives that advance the interests of our stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |ixExecutive Compensation Program
TableThe substantial majority of Contents
PERFORMANCE-BASED COMPENSATION
TargetNamed Executive Officer (NEO) target total direct compensation (TDC) tois performance based, meaning that our executives is comprisedultimately may not realize the value of at-risk components if we fail to achieve the following three components:
•Base salary;•Performance-based cash incentive under our Annual Incentive Plan (AIP); and•Long-term incentives delivered in performance-based equity awards, consisting 50% ofdesignated performanceunits (PUs) and 50% of MSUs.
objectives. The Compensation Committee establishesapproves the target TDC of our Named Executive Officers (NEOs)NEOs to incent economicstrong operational and financial performance and stockholder value creation, giving consideration to the market median, role responsibilities, individual performance, tenure, retentioncreation. The mix and succession. The majorityelements of this compensation is performance-based, meaning that our executives may ultimately not realize some or all of these components of compensation if we fail to achieve our financial objectives. In 2017, approximately 84% and 67% of theNEO target TDC of our CEO and average of our other current NEOs, respectively, was performance-based.are shown below.
2017 Target Total Direct Compensation Mix
 | ANNUALIZED TARGET TDC MIX | 2023 TARGET TDC MIX | ||||||||
| CEO* |
|  | Avg. of Other NEOs** |
| |||||
| * | Mr. |
| ** | Mr. Butier is excluded because his target 2023 TDC primarily reflected his compensation as CEO given the timing of our leadership transition. Francisco Melo’s target TDC mix included in the average reflects his target TDC as President, Solutions Group. |
| ELEMENTS OF NEO TARGET TDC | ||||||
| LTI Compensation | |||||
| Performance Units (PUs) | Corporate NEOs | Solutions NEO | ||||
• 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Company EVA(1) (50%) - Company Relative TSR(2) (50%) | • 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Solutions Group EVA (75%) - Company Relative TSR (25%) | |||||
• Relative TSR payout capped at 100% if absolute TSR is negative | ||||||
Market-leveraged Stock Units (MSUs) | • 50% of LTI with payout = 0% to 200% of target award • 100% Absolute TSR(3) • 1-, 2-, 3- and 4-year performance periods | |||||
| Annual Incentive Compensation | ||||||
| AIP Award(4) |
|
| ||||
• Drives performance consistent with annual company or business financial goals • Individual performance modifier based on achievement against predetermined strategic and sustainability objectives (generally capped at 100% for NEOs) | ||||||
| Base Salary | • Annual fixed-cash compensation generally set around market median | |||||
| (1) | Economic Value Added (EVA) is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit. |
| (2) | Relative TSR compares our TSR to the TSR of companies in a peer group satisfying certain objective criteria described in the Compensation Discussion and Analysis section of this proxy statement. |
| (3) | Absolute TSR measures the return that we provided our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). |
| (4) | AIP award |
Avery Dennison Corporation | 2024 Proxy Statement | 17 |
PAY-FOR-PERFORMANCE
Pay for Performance
Over the past five years, our cumulative TSR has increased over 270% while the total compensation of our CEO has increased by only 13%. In the graph below, CEO compensation for 2019 through 2022 reflects Mr. Butier’s compensation as reported in our Summary Compensation Tables for those years and, for 2023, Mr. Stander’s compensation as reported in our 2023 Summary Compensation Table. Our CEO pay reflects the compensation ofhas generally reflected our former CEO,cumulative TSR except that Mr. Scarborough, from 2013 to 2015 and the compensation of our current CEO,Stander’s pay in 2023 was substantially lower than prior-year amounts for Mr. Butier because it primarily reflected his compensation as COO, which was significantly lower than Mr. Butier’s as CEO, as well as his special award of stock options with a grant date fair value of approximately $3 million granted in connection with his promotion to CEO. See the Compensation Discussion and Analysis section of this proxy statement for 2016 and 2017.more information.
Five-Year CEO Pay and Cumulative TSR
Avery Dennison Corporation| 2018 Proxy Statement |x
COMPENSATION BEST PRACTICES
Executive Compensation Best Practices
As summarized below and described in further detail in theCompensation Discussion and Analysissection of this proxy statement, our executive compensation program aligns with our financial goals and business strategies and reflects best practices.
Pay for Performance | ✓ 87% of CEO’s annualized target TDC tied to company performance ✓ Rigorous stock ownership policy requires CEO and Executive Chairman each to own 6x respective base salary, 50%+ of which must be vested shares; does not count unvested PUs or stock options and only counts 50% of unvested MSUs at target | |
Compensation Best Practices | ✓ Double-trigger equity vesting requires termination of employment after change of control ✓ YE 2023 three-year average burn rate of 0.50%, in line with 50th percentile of S&P 500 companies ✓ Compensation clawback policy for executive officers in event of accounting restatement; additional clawback policy applies to all AIP and LTI recipients ✓ Independent compensation consultant serves at direction of Compensation Committee ✓ Annual Compensation Committee evaluation and charter review ✓ Periodic strategic review of compensation program and assessment of compensation program features that mitigate excessive risk-taking ✓ Releases from liability and restrictive covenants for departing executives ✓ Compensation Committee review of NEO tally sheets reflecting all compensation components | |
✓ No NEO employment contracts unless required by laws of home country ✓ No guaranteed AIP awards; 2023 NEO AIP awards based solely on financial performance ✓ No excise tax gross-ups on change of control severance benefits ✓ No tax gross-ups on perquisites ✓ No above-market interest rates for deferred compensation ✓ No re-pricing of stock options without stockholder approval ✓ No payout of MSU dividend equivalents unless and until awards vest ✓ No stock options awarded below fair market value ✓ No supplemental retirement benefits |
18 | 2024 Proxy Statement | Avery Dennison Corporation |
What We Do
APPROVAL OF CERTIFICATE OF AMENDMENT TO
✓Pay for performance — 84%AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (ITEM 3)
In February 2024, after giving consideration to the feedback we received from investors during our 2023 engagements and its review of market practices, upon the recommendation of the Governance Committee, our Board approved, subject to stockholder approval at the Annual Meeting, a Certificate of Amendment to our Amended and Restated Certificate of Incorporation (our “Charter”) to provide that stockholders holding 25% of our
CEO's 2017 target TDC was tiedoutstanding common stock have the right tocompany performance✓Emphasize long-term performance — 66%request that we call special meetings of stockholders. The amendment also removes out-of-date references to the declassification of ourCEO's 2017 target TDC was equity-based and tied to delivering long-term stockholder value✓Use double-trigger change of control vesting provisions — vesting requires qualifying termination of employment within 24 months✓Manage share usage conservatively — our three-year average burn rate at the end of fiscal year 2017 of 0.8% was at the 50thpercentile of companies in the S&P 500✓Maintain rigorous stock ownership guidelines — 6x base salaryBoard that had been fully implemented by April 2014, providing that directors shall be elected annually forour CEO (an increase for 2017 from the previous 5x) and 3x base salary for our other NEOs; require holding 50% of ownership level in vested shares✓Able to clawback compensation✓Use an independent compensation consultant retained directly by, and serving at the direction of, the Compensation Committee✓Annually evaluate the Compensation Committee and review its charter✓Periodically assess risks related to our compensation policies and practices✓Following termination, obtain releases from liability from and impose restrictive covenants on our departing executives✓Review tally sheets reflecting all compensation components for our NEOs
What We Don't Do
✗No employment contractsone-year terms, consistent with ourNEOs✗No guaranteed AIP awards✗No excise tax gross-ups on change of control severance benefits✗No hedging or pledging of company stock by directorsexisting Charter andofficers✗No tax gross-ups on perquisites✗No above-market interest rates in our only deferred compensation plan currently open for deferrals✗No re-pricing of stock options without stockholder approval✗No payout of accrued dividends before performance conditions are met and underlying equity awards vest✗No granting of stock options below fair market value✗No NEOs with supplemental retirement benefits
RATIFICATION OF APPOINTMENT OF PwC (ITEM 3)
4)
Our Board'sThe Audit and Finance Committee has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 2018,2024 and our Board is seeking stockholder ratification of the appointment. PwC is very well qualifiedwell-qualified to actcontinue serving as our independent registered public accounting firm, and has a deep understanding of our operations and accounting practices. practices, and maintains rigorous procedures to ensure independence from our management and company, which are overseen by the Audit Committee.
The Audit and Finance Committee considered the qualifications, performance and independence of PwC, the quality of its discussions with PwC, and the fees charged by PwC for the levelscope and quality of services provided during 2017,– as well as the firm’s tenure as our independent auditor – and determined that the reappointmentappointment of PwC for 2024 is in the best interest of our company and stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |xi
| 19 |
GOVERNANCE
We produce pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. Some pressure-sensitive materials are sold to printers and converters that convert the materials into labels and other products through embossing, printing, stamping and die-cutting. We sell materials in converted form as tapes and reflective sheeting. We also manufacture and sell a variety of other converted products and items not involving pressure-sensitive components, such as fasteners, tickets, tags, radio-frequency identification inlays and tags, and imprinting equipment and related services, which we market to retailers, apparel manufacturers, and brand owners.
Under the oversight of our Board of Directors (our "Board"), we have designed our governance program to comply with applicable laws and regulations — including the rules of the Securities and Exchange Commission (SEC) and the listing standards of the New York Stock Exchange (NYSE) — and reflect best practices as informed by the practices of other large public companies, recommendations from our outside advisors, the voting guidelines of our stockholders and the policies of proxy advisory firms. The key features of our governance program and the related benefits to our stockholders are describedshown in theBoard Governance Highlights section of our Proxy Summary.
the proxy summary. We encourage you to visit the Corporate Governanceinvestors section of our website atwww.averydennison.com/corporategovernance,under Corporate Governance, where you can reviewview and download current versions of the following documents:
•Amended and Restated Certificate of Incorporation;•Amended and Restated Bylaws ("Bylaws");•Corporate Governance Guidelines (our "Governance Guidelines");•Charters for our Board's Audit and Finance Committee (the "Audit Committee"), Compensation and Executive Personnel Committee (the "Compensation Committee"), and Governance and Social Responsibility Committee (the "Governance Committee");•Code of Conduct;•Code of Ethics for the Chief Executive Officer (CEO) and Senior Financial Officers; and•Audit Committee Complaint Procedures for Accounting and Auditing Matters.
You can access these documents on our website using the links contained in this proxy statement, but should note that informationshown below. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Charter
Amended and Restated Bylaws (our “Bylaws”)
Corporate Governance Guidelines (our “Governance Guidelines”)
Charters for our Board’s Audit Committee, Compensation Committee, Governance Committee and Finance Committee
Code of Conduct
Code of Ethics for the CEO and Senior Financial Officers
Audit Committee Complaint Procedures for Accounting and Auditing Matters
You can also receiverequest copies of these documents, without charge, by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Avery Dennison Corporation| 2018 Proxy Statement |1VALUES AND ETHICS
TableCode of ContentsConduct, Talkabout Toolkits and Supplier Standards
CODE OF ETHICSOur Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. It includes messages from our CEO and Chief Compliance Officer; detailed information regarding higher risk areas such as anti-corruption/bribery, antitrust, conflicts of interest, insider trading, anti-harassment, and compliance with laws and regulations; and case studies to provide practical guidance on situations that raise complex ethical questions. The Code is available in 33 languages and our leaders affirm their commitment to complying with it when they first join our company and regularly thereafter as part of our compliance certification process described in the Related Person Transactions section of this proxy statement. We plan to update our Code of Conduct in 2024 to refresh its current content and include new topics.
We regularly train employees on the Code of Conduct topics in instructor-led sessions held in person or virtually; in 2023, we held ~230 of these sessions globally. We also deploy mandatory online training for our computer-based employees; in 2023 we launched one enterprise-wide and five regional courses using a targeted risk-based approach, with an average completion rate of ~97%. Our three “Talkabout” Toolkits (also available in 33 languages) that we develop each year empower managers to engage in meaningful discussions with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, which are supplemented by internal social media campaigns that allow our team members to engage with their colleagues across the globe around our values and ethics.
Our global supplier standards extend our commitment to our third-party service providers, establishing our expectation that they do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may currently be reached by (i) calling 800.461.9330 toll-free in the U.S., toll-free outside of the U.S. using the country-specific numbers found in our Code of Conduct, or +1.720.514.4400 direct with applicable charges from any location or (ii) visiting www.averydennison.com/guidelinereport. The GuideLine is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with Board oversight primarily by the Governance Committee and, for certain finance-related matters, also by the Audit Committee. We have adopted aprohibit retaliation for good-faith reporting.
20 | 2024 Proxy Statement | Avery Dennison Corporation |
Code of Ethics
Our Code of Ethics requires that requires our CEO, Chief Financial Officer (CFO)CFO and Chief Accounting Officer (CAO) toController act professionally and ethically in fulfilling their responsibilities.
•Our CEO, CFO and CAO mustavoid actual or apparent conflicts of interestand disclose any material transaction or relationship that could reasonably be expected to raise a conflict of interest to the Governance Committee.•In addition, they must:•Ensure that our SEC filings are complete and accurateand contain understandable information;•Respect the confidentiality of informationacquired in the course of the performance of their responsibilities;•Employ corporate assets responsibly; and•Report violationsof our Code of Ethics to the Chair of eitherOnly the Audit Committee or the GovernanceCommittee.
SupportingCommittee can amend or waive the principles reflected inprovisions of our Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014 and have made no exemptions or granted any waivers since its inception.
CODE OF ETHICS RESPONSIBILITIES |
• Avoidactual or apparent conflicts of interest • Ensure complete and accurate SEC filings • Respect confidentiality of financial and other information • Employ corporate assets responsibly • Report Code of Ethics violations to Chair of Audit or Governance Committees |
Supporting fulfillment of these responsibilities, our controllership and internal audit functions ensure that we maintain a robust internal control environment, with the leaders of these functions regularly reporting to, and periodically meeting in executive session with, the Audit Committee.
Our Code of Ethics is available on our website atwww.averydennison.com/codeofethics. Only the Audit Committee or Governance Committee can amend or waive the provisions of the Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014.
CODE OF CONDUCT
Our Code of Conduct applies to all of our directors, officers and employees. It has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and annually thereafter. We train employees on the Code of Conduct at least bi-annually, in addition to our online training program consisting of four courses per year covering specific risk areas from the Code of Conduct that designated computer-based employees are required to complete. To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees globally, we also develop and launch three "Talkabout" toolkits (also in over 30 languages) each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, a leader discussion guide and an introductory subtitled video, which includes messages from company leadership.
Recent Code Updates
In 2017, we refreshed our Code of Conduct, which is available on our website atwww.averydennison.com/codeofconduct, with updated leadership messages, additional guidance on certain higher risk areas, and case studies to provide additional guidance on more complex ethical situations. We introduced the updated Code of Conduct with manager and employee communications and created a pocket version for distribution to all employees.
In 2018, we are further updating our Code of Conduct to reflect our recently updated values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. In an effort to reinforce our strengths and bring focus to areas in which we have opportunities to further develop, we streamlined and consolidated our previous values and leadership principles into a single set of eight simplified, more memorable values. Moving forward, these values will help shape our culture and guide our behavior as we continue to grow. Later this year, our "Values in Action" campaign will give our employees around the world an opportunity to demonstrate how they are living these values and helping maintain our collective values-based culture.
Avery Dennison Corporation| 2018 Proxy Statement |2
Ethics-Based Policies
The ethics-based policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to many of these principles to our third party service providers, establishing our expectation that they also do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine is a hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct, anonymously if they so choose.
The GuideLine may be reached by (i) calling 888.567.4387 toll-free in the United States; 704.731.0166 collect from outside the United States; 10.800.711.0729 toll-free in North China; or 10.800.110.0672 toll-free in South China or (ii) visitingwww.integrity-helpline.com/AveryDennison.jsp (www.financial-integrity.com/AveryDennison.jsp in Europe).
Avery Dennison Corporation| 2018 Proxy Statement |3
The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. All reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.
COMPLAINT PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
The Audit Committee has adopted procedures for the confidential, anonymous submission of complaints related to accounting, accounting standards, internal accounting controls and audit practices.
These procedures relate to complaintsreports of (i) fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements or other financial reports; (ii) fraud or deliberate error in the recording or maintenance of our financial records; (iii) deficiencies in, or noncompliance with, our internal accounting controls; (iv) misrepresentation or false statement to or by a senior officer or accountant regarding any matter contained in our financial records, statements or other reports; or (v) deviation from full and fair reporting of our financial condition. Any person, including third parties, may submit a good faithgood-faith complaint regarding accounting and auditing matters and employees may do so without fear of dismissal or other retaliation. The Audit Committee oversees these procedures, which are available on our website atwww.averydennison.com/auditprocedures. Investigations arewith investigations conducted under the direction of our internal audit department in consultation with our Corporate Secretary, Chief ComplianceLegal Officer law department(CLO) and other members of senior management to the extent appropriate under the circumstances.
Stockholders and other interested parties interested in communicating regarding these matters may make a confidential, anonymous report by contacting the Business Conduct GuideLine as described on the previous page or writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
STOCK OWNERSHIP GUIDELINESPOLICY
2017 Changes to Guidelines
In the fourth quarter of 2016, the Compensation Committee evaluated the effectiveness and market consistency of our executiveOur stock ownership guidelines to ensurepolicy requires that they effectively encourage our Named Executive Officers (NEOs) and other leaders to maintain meaningful ownership of our common stock.
At the Compensation Committee's request, Willis Towers Watson reviewed market practices for stock ownership guidelines at companies with $3 billion to $10 billion in annual revenue. Based on this data, Willis Towers Watson recommended the following changes to our guidelines to make them more stringent and better reflect market practices. Upon the advice of its independent compensation consultant, the Compensation Committee approved the changes shown below to our stock ownership guidelines for NEOs and other executives, effective January 1, 2017.
•Eliminated the share guidelines, maintaining only the salary-multiple guidelines, which effectivelyincreased the minimum number of shares required to achieve compliance.•Increased our CEO's minimum ownership level from 5x to 6xhis annual base salary.•Discontinued counting unexercised stock option gains and began counting only 50% of unvested value of market-leveraged stock units (MSUs)(rather than 100%) for purposes of measuring compliance.•Required holding 50% of the ownership level in vested shares.
In February 2017, upon the advice of Willis Towers Watson, the Compensation Committee also approved the following changes to our(i) non-employee director stock ownership guidelines, effective as of the 2017 Annual Meeting: (i) eliminated the share guideline, maintaining only the dollar guideline, and (ii) discontinued counting unexercised stock option gains towards measuring compliance, counting only shares owned, deferred stock units (DSUs) and unvested restricted stock units (RSUs), consistent with our revised executive stock ownership guidelines. Non-employee directors are also required to hold 50% of their ownership level in vested shares, which includes DSUs.
Avery Dennison Corporation| 2018 Proxy Statement |4
2017 Guidelines
Our revised stock ownership guidelines require that non-employee directors acquire and maintain a minimum equity interestownership in our company equal toof $500,000, (ii) Executive Chairman and our CEO and other NEOs acquire and maintain a minimum equity interest in our company equal toownership of 6x and 3x their annual base salary respectively.
If a director or NEO fails to achieve or make reasonable progress towards achieving his or herand (iii) Level 2 and Level 3 executives acquire and maintain minimum ownership level, he or she is required to retain shares acquired, net of taxes, from3x and 2x their base salary, respectively. At least 50% of the exerciseapplicable requirement must be held in vested shares.
The values of stock options or vesting of stock awards until such level is met. Executives are not allowed to transact in company stock until they certify their compliance with our ownership guidelines after giving effect to the transaction they plan to effectuate.
The following shares/units and their related values are considered in measuring compliance with our stock ownership guidelines:policy: (i) shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federalU.S. securities laws; (ii) for officers, shares or units held in qualified and non-qualified employee benefit plans; (iii) unvested RSUs subject only to time-based vesting;plans and (iv) 50% of the value of unvested MSUs at the target payout level. Neitherlevel; (iii) for non-employee directors, deferred stock units (DSUs); and (iv) for officers and non-employee directors, unvested PUs norrestricted stock units (RSUs) subject to time-based vesting. Unvested stock options and PUs are not considered in measuring compliance. DSUs, which represent annual cash retainers deferred at a director’s election, are included as owned under the policy because they are earned upon receipt and would be paid out to a participating director upon his or her separation from our Board.
Avery Dennison Corporation | 2024 Proxy Statement | 21 |
Until a non-employee director or officer achieves their minimum ownership requirement, they are required to retain any shares acquired, net of taxes, from the vesting of stock awards or exercise of stock options. Officers may not transact in company stock until they certify that they will remain in compliance with our stock ownership policy after giving effect to the transaction they plan to effectuate.
The Compensation Committee and the Governance Committee reviewed the stock ownership of our non-employee directors in December 2023 and February 2018, noting2024, respectively. Both committees noted that all– excluding the individuals appointed in 2022 and 2023 – our then-serving non-employee directors had average ownership of them had exceeded12x the minimum ownership level required by the guidelines, except for Mr. Lopez who became a director in February 2017 and has five years to reach the minimum ownership level. The Committee noted that because Mr. Lopez had made reasonable progress towards meeting the applicable level, he was also in compliance. On average, the ownership level of our non-employee directors was approximately 7x the minimum ownership level, requirement, aligning their interests with those of our stockholders and further incenting their focus on creating long-term stockholder value.value creation. All current non-employee directors have exceeded the minimum ownership required by our policy, except for Mr. Wagner and Mses. Mejia and Reverberi, who have five years from the date of their respective Board appointments to reach that level.
The Compensation Committee reviewed NEOexecutive stock ownership in October 2017December 2023 and determined that, allwith the exception of our Currentmost recently appointed executive officer who has five years from the date of her appointment to reach her level, our executive officers, including all NEOs, were inhad achieved their minimum ownership requirement. The compliance of our non-employee directors and NEOs with our stock ownership guidelines, except for Mr. Gravanis.policy at year-end 2023 is shown below.
| STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||||||||
|
| Minimum Requirement(1) | Ownership(2) as of YE 2023(#) | Requirement Achieved | Minimum Requirement Achieved | ||||||||||||||||
Non-Employee Directors(3) | $ | 500,000 | ||||||||||||||||||
Bradley Alford |
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| 47,454 | 17x | ✓ | ||||||||||||||
Ken Hicks |
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| 46,233 | 17x | ✓ | ||||||||||||||
Andres Lopez |
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| 4,865 | 1x | ✓ | ||||||||||||||
Francesca Reverberi(4) | 1,126 | – | – | |||||||||||||||||
Patrick Siewert |
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| 18,226 | 6x | ✓ | ||||||||||||||
Julia Stewart |
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| 54,603 | 20x | ✓ | ||||||||||||||
Martha Sullivan |
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| 32,425 | 12x | ✓ | ||||||||||||||
William Wagner(4) |
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| 1,481 | – | – | ||||||||||||||
Executive Chairman |
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Mitchell Butier | $ | 6,000,000 | 336,085 | 62x | ✓ | |||||||||||||||
CEO |
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Deon Stander | $ | 6,600,000 | 61,861 | 10x | ✓ | |||||||||||||||
Level 2 NEOs |
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Gregory Lovins | $ | 2,250,000 | 78,598 | 19x | ✓ | |||||||||||||||
Francisco Melo(5) | $ | 1,554,657 | 19,106 | 6x | ✓ | |||||||||||||||
Level 3 NEOs |
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Deena Baker-Nel | $ | 980,000 | 13,259 | 5x | ✓ | |||||||||||||||
Nicholas Colisto | $ | 913,540 | 10,779 | 4x | ✓ | |||||||||||||||
| (1) | Minimum requirements for Executive Chairman and CEO, Level 2 NEOs and Level 3 NEOs reflect 6x, 3x and 2x, respectively, of year-end 2023 base salary. |
| (2) | Reflects shares/units considered in measuring compliance with our stock ownership policy based on the average closing price of our common stock from October 1 to December 31, 2023. All then-serving non-employee directors, other than Ms. Reverberi and Mr. Wagner, and NEOs were also in compliance with our 50% vested shares requirement at year-end 2023. |
| (3) | Excludes Ms. Mejia who was appointed to our Board in February 2024. |
| (4) | Ms. Reverberi and Mr. Wagner were appointed to our Board in February 2023 and October 2022, respectively, and have five years from their respective date of appointment to achieve the minimum ownership requirement. |
| (5) | Amount for Mr. Melo was converted from euros using the average monthly exchange rate for December 2023. |
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| COMPLIANCE WITH STOCK OWNERSHIP GUIDELINES | ||||||||||||
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| | SHARES AS OF 2017 FYE (#) | GUIDELINE | % OF GUIDELINE | COMPLIANCE | ||||||||
NON-EMPLOYEE DIRECTORS | | | $500,000 | | | | | |||||
Bradley Alford | 32,159 | 695% |  | |||||||||
Anthony Anderson | 13,021 | 281% | | |||||||||
Peter Barker | 55,635 | 1203% | | |||||||||
Ken Hicks | 36,522 | 790% | | |||||||||
Andres Lopez | 2,408 | 52% | | |||||||||
David Pyott | 63,576 | 1374% | | |||||||||
Dean Scarborough | 51,095 | 1105% | | |||||||||
Patrick Siewert | 14,226 | 308% | | |||||||||
Julia Stewart | 52,125 | 1127% | | |||||||||
Martha Sullivan | 19,635 | 425% | | |||||||||
PRESIDENT & CEO | | | 6x Base Salary | | | | | |||||
Mitchell Butier | 149,394 | $6,798,000 | 238% | | ||||||||
OTHER CURRENT NEOs | | | 3x Base Salary | | | | | |||||
Gregory Lovins | 19,818 | $1,650,000 | 130% | | ||||||||
Georges Gravanis | 15,943 | $1,885,785 | 91% |  | ||||||||
Anne Hill | 48,110 | $1,596,135 | 326% | | ||||||||
Susan Miller | 22,078 | $1,643,082 | 145% | | ||||||||
Avery Dennison Corporation| 2018 Proxy Statement |5
INSIDER TRADING POLICY
Our insider trading policy prohibits our directors, officers and employees from (i) engaging in transactions in our company's stock while in the possessionany type of material non-public information; (ii) engaging in transactions in the stock of other companiessecurity while in possession of material non-publicnonpublic information relating to the security or the issuer of the security in breach of a duty of trust or confidence, whether the issuer is our company or another company. In addition, (i) if they are in possession of material nonpublic information regarding any other publicly-traded company, including that of our suppliers, customers, competitors or potential acquisition targets, they become awaremay not trade in its securities until the information becomes public or is no longer material; (ii) they may not purchase or sell any security of any other company while in performingpossession of material nonpublic information obtained in the course of their duties;employment or service with our company; and (iii) disclosingthey may not directly or indirectly communicate material non-publicnonpublic information to unauthorized personsanyone outside or within our company other than on a need-to-know basis.
Officer/Director 10b5-1 Plans
Our insider trading policy contains specific requirements regarding contracts, plans or instructions to trade in our company’s securities entered into in accordance with SEC Rule 10b5-1, including with respect to multiple plans and modifications or terminations of existing plans. We reserve the right to suspend, discontinue or otherwise prohibit transactions under a 10b5-1 trading plan if we determine that doing so is in the best interest of our company.
Limited Trading Windows
In addition, ourOur insider trading policy restricts trading for directorsin company stock by Board members, officers and officers (including all NEOs)director-level employees, or any other person designated by our Corporate Secretary, during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the releaseissuance of our earnings release for the quarter. Additional blackout periods may be imposed with or without notice, as the circumstances require. All transactions in company stock must be precleared by our Corporate Secretary. Except for transactions under a previously established Rule 10b5-1 trading plan, if precleared individuals become aware of material nonpublic information or become subject to a blackout period before their transaction is effectuated, they may not complete the transaction even if they previously received preclearance.
ProhibitionProhibitions on Hedging and PledgingCertain Transactions
Our insider trading policy expressly prohibits our directors, officers and executive officersemployees from (i)short-selling company stock; transacting in puts, calls or other derivative securities involving company stock; or purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of company stock. In addition, directors and officers are expressly prohibited from – and our non-officer employees are strongly discouraged from – pledging shares of our common stock they hold, directlyas collateral for a loan, purchasing company securities on margin or indirectly, or (ii) pledging any of their shares of common stock to secure personal loans or other obligations, including by holding such sharesplacing company securities in a margin account.
To our knowledge based on our review of their written representations in our annual director and officer questionnaire, all of our directorsBoard members and executive officers complied with our insider trading policy during 2017.2023 and none of them engaged in any transaction prohibited thereby.
Avery Dennison Corporation | 2024 Proxy Statement | 23 |
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability is oneand Diversity are two of our core values, and has long been part of our approach to doing business, driving us to work collaborativelywithin our company and across our entire value chain to address the environmental and social impacts of our products. Ourproducts and practices.
We aim is to continually improve the environmental sustainability of our products, build a more diverse, equitable and processesinclusive workforce, maintain operations that promote health and safety, and provide meaningful support for our communities.
BOARD OVERSIGHT AND MANAGEMENT RESPONSIBILITY
Board oversight of environmental sustainability and community investment is primarily conducted by the Governance Committee, which receives a report from management on each of these topics at least annually. In addition, our full Board engages with business leaders on their sustainability initiatives during its regular discussion of their business strategies. In October 2023, our Board engaged with senior management on our sustainability progress, having discussed with them throughout the year our innovation efforts to create shared valueaddress the increasing demand for allmore sustainable products, sustainability strategic innovation platform, and business and enterprise sustainability priorities. In early 2024, our Board reviewed our 2023 Integrated Report, which includes our progress against our 2025 and 2030 sustainability goals.
Board oversight of social sustainability is primarily conducted by the Compensation Committee, which discussed DEI, including pay equity and transparency, at multiple meetings in 2023 and regularly reviews other matters related to talent management, including the impact of executive promotions, role changes and exits on U.S. racial/ethnic diversity and global gender and generational representation. In December 2023, our Board engaged with, and challenged management on, our employee experience, including reviewing the results of our stakeholders. In 2017, management led the executionemployee engagement survey obtained through a more advanced platform using updated questions, as well as our progress in each of our four DEI strategic pillars. They also discussed our 2024 plans to activate enterprise-wide standards to more consistently select, promote, develop and reward talent; globally implement a mobile application to better enable our manufacturing employees to access company information; and develop a talent solution connecting everything our team members need for learning, skills advancement and career mobility.
With strategic guidance and direction provided by our CEO, management is responsible for ensuring that we continue to make progress toward achieving our sustainability strategygoals through our Sustainability Council, chairedwhich is led by Mitch Butier, our President/enterprise sustainability leader reporting in this capacity to our CEO, who is accountable for our progress. The council, which is composed of a cross-divisional and comprisedcross-functional group of other corporate and business leaders, with Board oversight through the Governance Committee.
Avery Dennison Corporation| 2018 Proxy Statement |6
ENGAGING OUR STAKEHOLDERS
We seekmanagement, met regularly during 2023 to ensure thatwe progress toward our 2025 sustainability efforts are consistent with stakeholder expectations. We regularly communicate with individualsgoals, advance our roadmaps to achieve our 2030 sustainability goals and organizations interestedtargets, and accurately report to our stakeholders. Our enterprise sustainability leader participated in how we do business generally andsubstantially all our sustainability efforts in particular, and also conduct stakeholder interviews as part of our regular sustainability assessments. These activities allow us2023 off-season stockholder engagements to focus on the areas in which we can have the most impact.
SUSTAINABILITY STRATEGY
The foundation of our sustainability strategy is a science-based sustainability framework developed by The Natural Step, an international NGO. The Natural Step framework serves as the basis of our environmental and social guiding principles, listed below.
•Create shared value for our customers, their value chains and the communities we serve.•Do not pollute with manufactured materials.•Discover and capture lost value at every stage of the value chain.•Do not pollute with extracted materials.•Empower our people to innovate and create value.•Do not impede people's wellness, influence, competence, equity and meaning.•Do not over-harvest or over-encroach on living systems.•Embrace the collaboration that is inherent to sustainability.
ADVANCEMENTS TOWARDS 2025 SUSTAINABILITY GOALS
We report on our sustainability progress every two years. In September 2017,and answer questions from investors.
ENGAGEMENT OF OUR STAKEHOLDERS
We align our sustainability priorities with the expectations of our stakeholders. We regularly communicate with them regarding our sustainability progress and also interview members of management responsible for key sustainability initiatives and third parties as part of our biennial materiality assessments. Our material topics and the feedback we issuedreceived engaging with investors on sustainability matters during 2023 can be found in the proxy summary.
PROGRESS TOWARD ACHIEVING OUR 2025 AND 2030 GOALS
We present our 2014-2016 Sustainability Report, summarizing2023 scorecards showing progress against our achievements towards reaching the 2025 and 2030 sustainability goals we set in 2015. In the first two yearsproxy summary. You can find additional information in our 2023 Integrated Report being furnished to the SEC prior to the distribution of the 10-year goal horizon, weour proxy materials and our March 2024 ESG Download being made significant progress, the key to which has been integrating sustainability into our underlying business strategies and engaging employees at all levels. We encourage you to review the report, which contains more information on our progress summarized on the following page,available on our website atwww.averydennison.com/sustainability.
Avery Dennison Corporation| 2018 Proxy Statement |7
Table esg.averydennison.com on or before the filing of Contentsour definitive proxy statement. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
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Avery Dennison Corporation| 2018 Proxy Statement |8
TableWe disclose our sustainability metrics in accordance with the SASB and GRI frameworks and annually report to CDP Climate, Water and Forests. We are a member of Contentsthe United Nations Global Compact and have made commitments to the United Nations Sustainable Development Goals and the Science Based Targets initiative (SBTi), with our Scope 1, 2 and 3 GHG emissions reduction targets having been approved by SBTi as consistent with reductions required to keep warming to no more than 1.5ºC.
DIVERSITY, EQUITY AND INCLUSION
AVERY DENNISON FOUNDATIONHighlights of our DEI journey are shown in the proxy summary. Our DEI strategy is grounded in the four global pillars shown below.
Increasing the number of women who hold leadership positions
Enhancing the experience of our manufacturing employees
Increasing representation and inclusion for underrepresented groups, with priority populations and actions established regionally
Making merit and transparency even more foundational to our employee experience
Members of our senior leadership formally sponsor or actively engage in progressing these DEI pillars. To ensure we achieve our goals, we employ a Global DEI Director and additional resources in each of our regions to advise and support our Regional DEI Councils and ERGs. We regularly report to, and engage with, our stakeholders so they can assess our DEI progress and help us advance our journey.
OTHER TALENT MANAGEMENT MATTERS
Succession Planning
Leading up to its decision in May 2023 to appoint Deon Stander as our new CEO, our Board discussed leadership succession in multiple meetings during the preceding 18-24 months, helping ensure a smooth transition. In addition, in July 2023, the Compensation Committee reviewed leadership team changes, assessed key areas of leadership development and succession focus, and discussed potential successors to the members of our Company Leadership Team, which includes the leaders of our businesses and corporate functions. In October and December 2023, the Compensation Committee again reviewed leadership changes and the key areas of focus in our Materials and Solutions businesses, as well as enterprise-wide, with a view to ensuring we have talent that is ready to fill senior executive positions in the event of a vacancy. Our Compensation Committee Chair reported on these reviews to our Board. Recognizing that we have had several recent leadership changes, including the recent appointments of our new CEO and Solutions Group President, our Board conducted leadership succession planning at all of its meetings during the first half of 2023.
The Compensation Committee regularly receives reports on executive new hires, promotions and role changes, departures and open positions – as well as the impact of these developments on U.S. racial/ethnic and global gender and generational representation – to assist with succession planning.
Leadership Development
The Compensation Committee oversees our talent management program to assist with identifying and developing our future leaders. We maintain a robust performance review process and progress leadership development plans for our top talent, while also providing development opportunities to our employees more broadly. Senior management reports to the Compensation Committee on our leadership at executive levels by identifying high-potential talent, cultivating the skills and capabilities to enable identified individuals to become our future leaders, and ensuring that they have appropriate development plans in place to progress them toward roles with greater responsibility. Our Board has the opportunity to actively engage with our business and functional leaders in and outside the boardroom. In addition, Board members periodically visit our facilities to meet with local management and have the freedom to directly contact any of our employees.
Avery Dennison Corporation | 2024 Proxy Statement | 25 |
COMMUNITY INVESTMENT
With Board oversight fromby the Governance Committee, our social responsibilitycommunity investment efforts promote our spirit of community and help strengthen the placescommunities around the world in which we do business.operate. We make most of our community investments through the Avery Dennison Foundation (the "Foundation"),ADF, which annually investsdistributes at least 5% of its assets from the prior year to advance women's empowerment, education and sustainability in the communities where our employees live and work and encourages employee engagement with a spirit of invention and innovation. The Foundation invests in communities by making grants to community-based organizations, promoting employee volunteerism and engagement, and awarding scholarships.
GLOBAL GRANTMAKING
The Foundation's globalyear. ADF’s grantmaking initiative is its primary means of giving. Grantmaking is also aided by our employees worldwide, who help identify qualified nongovernmentalnonprofit organizations (NGOs). Grant decisionsserving their local communities that can advance their mission and impact with additional financial support.
In 2023, after undertaking a formal strategic review process, ADF updated and refined its vision, mission and grantmaking focus areas. ADF’s updated grantmaking strategy focuses funding on charitable organizations working to increase education access, advance environmental sustainability and support secure livelihoods. Alongside its grantmaking focus areas, ADF continues supporting disaster response, DEI and nonprofit organizations identified by our employees around the world addressing challenges in their local communities.
ADF and our company collectively made $5.5 million in grants and other financial contributions during 2023.
Enhanced Focus on Grantmaking
In support of its enhanced vision and mission, ADF prioritizes grants to communities and geographies facing the greatest need, as well as organizations that demonstrate inclusivity and equity in their work. The total amount of grants in each pillar, as well as select grant recipients, made in 2023, 95% of which incorporated employee volunteerism, are guidedshown below:
| 2023 ADF GRANT HIGHLIGHTS | ||||
| ~$980K TO INCREASE EDUCATION ACCESS | ~$650K TO ADVANCE ENVIRONMENTAL SUSTAINABILITY | ~$1.3M TO SUPPORT SECURE LIVELIHOODS | ||
• Ascendance SDB BHD to support youth empowerment programs in Malaysia • Fundacion Leer in support of literacy programming in Argentina • Institute of International Education to provide scholarships to children of company employees in countries with significant employee presence | • Asheville GreenWorks to support urban heat mapping and tree canopy restoration in North Carolina • Gift of the Givers to improve clean water access in rural Africa | • Universal Access Project of the UN Foundation to support the Resilience Fund for Women in Global Value Chains • Connecting Dreams Foundation to support India’s first LGBTQI Center of Excellence in Delhi • Islamic Relief USA to improve economic access for people in Pakistan and Kenya | ||
Supporting Employees in Times of Crisis
In 2020, ADF launched an Employee Assistance Fund to support company employees who had been significantly impacted by the following priorities:
EMPLOYEE ENGAGEMENT
Aspandemic; from 2020 to 2022, the hands and heart of our company, our employees are critical to advancing the Foundation's efforts. Because they often have the best understanding of the needs of their communities, more than 110 employee-organized Community Investment Teams coordinate volunteerism locally at our global locations. Nearly 50% of the Foundation's grants are enhanced with volunteer time from our employees.
The Foundation also engages employees through the Granting Wishes program, which allows employees in the U.S., Europe and Latin America to recommend one-time grants to local NGOs. Employees often have a connection to the organizations they nominate through volunteerism or service on the organization's board. In the seven years since the Foundation launched Granting Wishes, more than 700 of our employees have taken part, enabling grants of over $1.1fund distributed ~$4.6 million to more than 2004,000 individuals in 27 countries. With the global impact of the pandemic having substantially diminished but the potential opportunity for further impact remaining, ADF converted the fund to an Employee Crisis Fund to provide financial assistance to our employees impacted by natural disasters and other humanitarian crises. In 2023, this fund provided support to 475 company employees in northern China impacted by severe flooding.
Supporting Disaster Relief Efforts
ADF partners with an independent nonprofit, GlobalGiving, to promote and supplement employee giving to disaster relief efforts around the globe. Employees are able to give to organizations including Doctors Without Borders, UNICEF,supporting impacted communities. In 2023, 300+ employees made donations totaling ~$25,000 to organizations responding to earthquakes in Turkey and Syria and emergency and long-term support to people in need in Gaza, Israel and Ukraine. These donations were matched by ADF. In addition, ADF made a grant of $250,000 to a member organization of the AmericanInternational Committee of the Red Cross to support relief efforts in Israel, where we have a significant employee presence.
Promoting DEI
ADF supported organizations promoting DEI globally, with grants totaling $395,000. ADF continued to work with our company’s Regional DEI Councils and HabitatERGs to ensure that it supported organizations making a difference in the communities in which our team members live and work. In addition to certain of the grants shown in the chart above, grants in 2023 included support for Humanity.
SCHOLARSHIPSLGBTQ+ youth in Singapore, veterans in the U.S. and people with disabilities in Mexico.
The Foundation
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Engaging Employees
Our employees advance our community investment efforts at the local level through their personal monetary contributions as well as volunteerism. Through ADF’s signature Granting Wishes program, employees nominate local NGOs to receive grants and organize volunteer events. In 2023, ADF made ~$1 million in grants in 37 countries through Granting Wishes.
Providing College Scholarships
Partnering with independent third parties to advance education access, ADF provides college scholarships to the children of our employeescompany employees. The U.S. Scholars program, administered in partnership with Scholarship America, annually awards scholarships in the U.S., China and India. Since 1977,Canada. In 2023, ADF partnered with the Institute of International Education to provide scholarships in Bangladesh, Honduras, India, Mexico, Sri Lanka and Vietnam, with plans to expand the program to additional countries in which we have a significant employee presence in future years.
While 2022 marked the end of ADF’s Spirit of Invention (InvEnt) Scholarship Program, alumni from recent years gathered in person in 2023 having been unable to meet during their participation due to pandemic-related restrictions, giving them the opportunity to meet with regional leaders of our company and expand their professional network. Over 10 years, the InvEnt program provided tuition assistance and professional development opportunities to more than 600 scholarships totaling over $2.2 million have been awarded to students entering their first year of college.
In China and India, the Foundation's InvEnt Scholarships have for more than a decade supported the next generation of innovators in100 talented science, technology, engineering and mathematics. By providing undergraduates with tuition assistance, an invention competition and professional development opportunities, the Foundation inspires the spirit of innovation in tomorrow's engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year. Scholarships are awarded to students who demonstrate outstanding innovative spirit and excellent practical competence.
Avery Dennison Corporation| 2018 Proxy Statement |9
mathematics scholars.
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OUR BOARD OF DIRECTORS
OVERVIEW
Our Board oversees, counsels and ensures management is serving the best interests of our company, and stockholders, with the goal ofa view toward maximizing the performance of our businesses to createand delivering long-term value.
Our Board's primary responsibilities include the following:
•Establishing astrong governanceprogram, with a Board and Committee structure that ensures independent oversight;•Overseeing ourbusinesses, strategies and risks;•Maintaining theintegrity of our financial statements;•Evaluating the performance of our senior leaders and determiningexecutive compensation;•Conductingsuccession planningvalue for ourCEO and other senior executives, including ensuring we have ahuman capital managementprogram that is developing our future leaders; and•Approving ourannual operating planand significant strategic and operational actions, includingsignificant capital expenditures and acquisitions.
BOARD COMPOSITIONinvestors.
PRIMARY BOARD RESPONSIBILITIES |
• Establish Board/Committee composition, structure and responsibilities to ensure strong independent oversight • Conduct director succession planning to maintain engaged and diverse Board with balance of skills, qualifications and demographic backgrounds • Oversee businesses, strategy execution, risk mitigation, sustainability progress and governance profile • Approve annual operating plan and strategic decisions, including significant fixed and IT capital expenditures and acquisitions • Maintain integrity of financial statements • Evaluate performance of senior leaders and determine executive compensation • Conduct CEO and other executive succession planning and help us develop leaders that advance our future growth and ensure high-performing teams, diverse talent and equitable and inclusive culture |
2024 Director Nominees
Our BylawsGovernance Guidelines provide our Board’s view that our Board be comprised ofa size between eight8 and 12 directors withallows for effective Board functioning, although it may periodically comprise a larger or smaller number of directors. Under our Bylaws, the exact number of directors is fixed from time to time by Board resolution. As previously disclosed, in February 2024, Julia Stewart notified our Board of her intention not to stand for reelection at the Annual Meeting; she is continuing to serve as Compensation Committee Chair through April 2024. Our Board currently has fixedplans to fix the number of directors at 11. The10 following Ms. Stewart’s departure from our Board.
Our 2024 director nominees for election at the Annual Meeting — and the year of their initial appointment or election, current or most recent principal occupation, independence status, and committee memberships — are shown in the chart below. As shown by individual in the Director Nominee Matrix in the proxy summary, they collectively bring a balance of industry and functional experiences and demographic backgrounds in overseeing management in advancing our strategies and achieving our financial and sustainability goals.
| NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | FC | ||||||||||
1 | Bradley A. Alford | 67 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
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2 | Mitchell R. Butier | 52 | 2016 | Executive Chairman, Avery Dennison Corporation | – |
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3 | Ken C. Hicks | 71 | 2007 | Executive Chairman, Academy Sports + Outdoors, Inc. | ✓ |
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4 | Andres A. Lopez | 61 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ● | ● |
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5 | Maria Fernanda Mejia^ | 60 | 2024 | Retired CEO, International, Newell Brands Inc. | ✓ | ● |
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6 | Francesca Reverberi | 52 | 2023 | SVP, Engineered Materials & CSO, Trinseo PLC | ✓ |
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7 | Patrick T. Siewert | 68 | 2005 | Retired Managing Director & Partner, The Carlyle Group | ✓ | ● |
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8 | Deon M. Stander | 55 | 2023 | President & CEO, Avery Dennison Corporation | – |
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9 | Martha N. Sullivan | 67 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ● |
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10 | William R. Wagner | 57 | 2022 | Retired President & CEO, GoTo Group, Inc. | ✓ | ● |
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AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM FC = Member C = Chair LIDFinance Committee
= Lead Independent Director● = Chair ● = Member ^= New Director
The ages of our director nominees range from 4652 to 69,71, with an average age of 61. Their lengths of service range from less than one to 1819 years, with an average tenure on our Board of ten8 years. None of our directors serves on more than two other boards of SEC-reporting companies, except for Messrs. Anderson
Board Meetings and Pyott, who are both retired and serve on three such other boards.
Avery Dennison Corporation| 2018 Proxy Statement |10
Table of ContentsAttendance
APPOINTMENT OF NEW INDEPENDENT DIRECTOR
During the second half of 2016, the Governance Committee oversaw our Board's search for a new independent director. The Committee engaged Korn Ferry, an executive search firm, to assist with the search. Korn Ferry identified a number of potential candidates (including Andres Lopez) who were initially evaluated by the Governance Committee and our Chairman, with input from other Board members and senior management. The Governance Committee and other members of our Board interviewed Mr. Lopez, unanimously supporting his candidacy based on his extensive packaging industry expertise and the end customer insights he could bring to our Board. Upon the recommendation of the Governance Committee, our Board appointed Mr. Lopez to our Board effective February 1, 2017, recognizing his packaging industry experience, public company board experience and global exposure. Also upon the recommendation of the Governance Committee, our Board subsequently appointed Mr. Lopez to the Audit Committee, effective immediately after the 2017 Annual Meeting, at which he was first elected to our Board by our stockholders.
RETIREMENT OF EXECUTIVE CHAIRMAN
In December 2017, Mr. Scarborough, then Executive Chairman, notified the Board that he would be retiring from our company at the end of the year. He was our employee through December 31, 2017 and continues to serve as non-executive Chairman.
BOARD MEETINGS AND ATTENDANCE
Our Board met fiveseven times and acted three times by unanimous written consent during 2017.2023. There were 1624 Board Committee meetings during the year. All of ourincumbent directors attended theat least 75% of their respective Board and Committee meetings held during 2017meetings; average attendance was 100%. In addition, our directors regularly discussed strategic, business and financial matters with each of which he or she was a member.our Executive Chairman and our CEO outside of meetings. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines and all then-serving directors attended the 2023 Annual Meeting.
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Additional Board Engagement
Bringing their industry and functional expertise, some of our directors attended– in certain cases, together with third-party experts – are providing supplemental guidance outside the 2017 Annual Meeting.
Boardboardroom to management in its execution of our strategic initiatives related to digital solutions, environmental sustainability and Committee meeting2017 attendance = 100%
Avery Dennison Corporation| 2018 Proxy Statement |11
Tablefood, as well as our focus on cybersecurity risk management. At this time, Mr. Wagner is a member of Contentsour Digital Advisory Council and our Cybersecurity Advisory Council; Mses. Mejia and Reverberi are members of our Circularity and Future of Packaging Advisory Council; and Mr. Alford is a member of our Food Advisory Council. Messrs. Butier and/or Stander serve on each of these Advisory Councils. Directors serving on Advisory Councils are not currently provided any additional compensation for doing so, but that could change for independent directors as the time commitments of their service continue to be assessed.
Our Governance Guidelines provide the governance framework for our company and reflect the values of our Board, as highlighted below. They are reviewed at least annually and amended from time to time to reflect changes in regulatory requirements, evolving market practices, recommendations from our advisors and feedback from our stockholders.investors. Our Governance Guidelines were most recentlylast amended in February 2017.December 2021.
BOARD GOVERNANCE HIGHLIGHTS | ||
Board Composition | ✓ Board of 10 director nominees reflects increased refreshment in recent years ✓ Mandatory retirement after age 72 with no exemptions or waivers allowed or granted ✓ On average, director nominee age of 61 years and tenure of 8 years ✓ 50% of director nominees are women and/or from other underrepresented communities | |
Director Independence | ✓ Director nominees 80% independent ✓ Executive sessions of independent directors held at 6 Board meetings in 2023 | |
Board Leadership Structure | ✓ Annual review of Board leadership structure ✓ Robust Lead Independent Director role and independent Audit, Compensation and Governance Chairs | |
Board Committees | ✓ Annual composition review and periodic structural review and Chair/member rotation (including in July 2023 and February 2024) ✓ Act under annually reviewed charters reflecting best practices and stakeholder expectations ✓ Directors required to attend Board/Committee and stockholder meetings | |
Board Duties | ✓ Regular leadership succession planning ✓ Ongoing review of long-term strategic plans, including key risks and mitigating strategies ✓ Directors entitled to rely on independent legal, financial or other advisors at our expense | |
Continuous Board Improvement | ✓ New directors receive orientation materials and engage with senior management to familiarize themselves with our Board and company, and also participate in additional orientation sessions after joining Board committees to better understand responsibilities and processes ✓ Continuing education through meetings with management, visits to our facilities and participation in director education programs ✓ Annual evaluation process ensures Board, Committees, Chairman, Lead Independent Director and Committee Chairs are functioning effectively ✓ Individual director feedback process advances continuous director development and assists with Board succession planning | |
Director Qualifications | ✓ Regular review of Board composition (including industry and functional experience, demographic backgrounds, tenure, and mandatory retirement date) and ongoing director succession planning | |
Avery Dennison Corporation | 2024 Proxy Statement | 29 |
Governance Guidelines Highlights
Board Composition
✓Reasonable Board size of 11 directors✓No over-boarded directors✓Mandatory retirement after age 72, with no term limits
Director Independence
✓82% independent✓Executive sessions of independent directors at every 2017 Board meeting
Board Leadership Structure
✓Annual review of Board leadership structure by the Governance Committee✓Robust Lead Independent Director role and independent Committee Chairs
Board Committees
✓100% independent✓Act under charters delineating Committee responsibilities✓Directors required to attend Board and Committee meetings
Board Duties
✓Directors entitled to rely on independent legal, financial or other advisors at our expense✓Regular review of long-term strategic plans, including major risks and mitigating strategies✓Regular succession planning for our CEO and other executive officers through the Compensation Committee
Continuous Board Improvement
✓All new directors participate in an initial orientation to familiarize themselves with our company and after joining a Committee to understand its responsibilities✓Directors continue their education through meetings with management, visits to our facilities and attendance at accredited director education programs✓The Governance Committee oversees an annual evaluation process to ensure our Board, Committees, Chairman and Lead Independent Director are functioning effectively
Director Qualifications
✓The Governance Committee reviews the skills and characteristics of our Board members and recommends director nominees
Avery Dennison Corporation| 2018 Proxy Statement |12
Our Governance Guidelines require that our Board be comprised ofcomprise a majority of directors who satisfy the criteria for independence under NYSE listing standards. These standards also requireand that our audit, compensationAudit, Compensation and nominating committeesGovernance Committees be comprisedcomposed entirely of independent directors. An independent director is one who meets the independence requirements of the NYSE and who our Board affirmatively determines has no material relationship with our company, directly or indirectly as a partner, stockholder or officer of an entity with which we have a business relationship.
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annualour Board’s independence determination, including all relevantany relationships they have with our company, directly or indirectly through our company'scompany’s sale or purchase of products or services to or from theany companies or firms by which they are employed. The Governance Committee reviewsdiscusses any relevant disclosures made in the questionnaires relevant to its independence assessment with our General Counsel/Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2018, the Governance Committee reviewed the2024, after review of their respective relationships, impacting the independence of our director nominees referenced below.
•Mr. Butier.Mr. Butier serves as our President and CEO.•Mr. Scarborough.Mr. Scarborough formerly served as our Executive Chairman and was an employee of our company through December 31, 2017.•Mr. Lopez.Although there were no sales in 2016 or 2017, in 2015 we sold products to Owens-Illinois, Inc., for which Mr. Lopez serves as President and CEO. The payments we received from the company were on competitive terms, in the ordinary course of business, and less than $1 million, the lower of the two applicable thresholds set forth in the NYSE's independence standards.
After review and discussion of the relevant facts and circumstances, the Governance Committee concluded that only Messrs. Butier and ScarboroughStander had relationships that were disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon the recommendation of the Governance Committee, our Board affirmatively determined the nine director nominees9 directors named below serving for all or part of 2023, as well as our newest director appointed in February 2024, to be independent, representing 82% of our nominees.independent.
| 2023 INDEPENDENT DIRECTORS | DIRECTOR NOMINEE INDEPENDENCE* | ||||
 Bradley Alford Anthony Anderson Ken Hicks Andres Lopez Francesca Reverberi Patrick Siewert Julia Stewart Martha Sullivan William Wagner | 
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| * | Director nominee independence excludes Mr. Anderson, who departed from our Board in November 2023, and Ms. Stewart, who will leave our Board in April 2024. It includes Ms. Mejia, who was appointed to our Board in February 2024. |
For a discussion of the potential impact of tenure on director independence, see theBoard Refreshment and Director Succession Planning section of this proxy statement.
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Our Board currently has a Chairman, who as a recent former employee is not independent, a separate CEO and a Lead Independent Director.
| EXECUTIVE CHAIRMAN | PRIMARY RESPONSIBILITIES | |
Mitch Butier Elected annually by our Board | In addition to customary duties of Chairman: • Provide Board’s collective input on company strategies to CEO • Engage with CEO on value-enhancing strategic opportunities, as well as other key relationships and strategic alliances • Support CEO and Company Leadership Team in expanding and deepening relationships with key stakeholders • Participate in certain Advisory Councils • Mentor CEO, acting as principal liaison between him and Board members | |
| LEAD INDEPENDENT DIRECTOR | PRIMARY RESPONSIBILITIES | |
Patrick Siewert Elected annually by independent directors | • Preside over executive sessions of independent directors and Board meetings where Executive Chairman is not present • Approve Board meeting agendas, schedules and other information sent to our Board • Call meetings of independent directors • Consult and meet with stockholders | |
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Our Governance Guidelines give our Board — acting through its independent directors — the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time; totime. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following yeargiving consideration to, our independent directors. Our independent directors do not view any particular Board leadership structure as necessarily preferable, rather they make an informed annual determination taking into account, among other things, our financial position, business strategies and sustainability and governance priorities, as well as any feedback received from our stockholders.investors and other stakeholders.
OurDuring the first two-thirds of the year, we had a combined Chairman/CEO and a Lead Independent Director balancesDirector. In connection with our non-independentCEO transition, our other directors in July elected Mr. Butier as Executive Chairman effective September 2023 for the remainder of the term ending at the Annual Meeting based on their belief that his leadership would optimize the execution of our strategic priorities as he mentors Mr. Stander in his new role as CEO. At that time, the Chairman and CEO roles were separated, each filled by long-serving leaders of our company who have developed and executed our strategies effectively to deliver long-term value for our employees, customers, investors and communities. Because Mr. Butier remains our employee, Mr. Siewert was elected by our independent directors through the Annual Meeting to continue ensuring independent oversight of our Board.
Robust Lead Independent Director Role
Our robust Lead Independent Director role balances our Executive Chairman role, exercising critical duties to ensure independent decision-making in the boardroomboardroom. Mr. Siewert began serving as our Lead Independent Director in April 2020 and was most recently reelected by our independent directors in February 2024 for a one-year term beginning after the Annual Meeting, subject to ensure effective and independent Board decision-making.his reelection. Our Governance Guidelines clearly delineate thesedefine his primary responsibilities, which are shown below.in the chart above. Mr. Pyott currently serves as our Lead Independent Director.
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In addition to these responsibilities, Mr. PyottSiewert also performed the following activities described below as Lead Independent Director in 2017:2023.
•Regularly consulted with each of the Chairman and CEO to help guide management's ongoing engagement with the Board on our strategic direction, including reviewing our business strategies and assessing acquisition opportunities;•Provided feedback to our Chairman and our CEO after executive sessions of independent directors;•Consulted on an ad hoc basis with other independent directors; and•Met with members of senior management other than our CEO.
| • | Oversaw our new director search process, including meeting regularly with senior management and the external firm selected by the Governance Committee to lead the search; interviewing and assessing high-potential candidates; and leading director succession planning discussions with the Governance Committee he chairs, as well as with our Executive Chairman, our CEO and other Board members |
| • | Directed our Board/Committee evaluation process, meeting individually with each other director to obtain verbal feedback to supplement their written evaluations |
| • | Led the majority of our off-seasonstockholder engagements |
| • | Oversaw our individual director feedback process through which each director was able to provide anonymous written feedback on their peers, giving consideration to their preparation, participation and engagement in and outside the boardroom with a view to enhancing their overall performance and assisting with director succession planning |
| • | Consulted frequently with our independent directors and provided feedback to our Executive Chairman and our CEO based on these discussions, including our Board’s evaluation of their 2023 performance with the Compensation Committee Chair |
| • | Met regularly with our Executive Chairman and our CEO, as well as periodically with other members of management and representatives of our independent registered public accounting firm |
Supplementing our Lead Independent Director in providing independent Board leadership are our CommitteeAudit, Compensation and Governance Chairs, all of whom are independent. The Governance Committee evaluated
Board Leadership Assessment and Evaluation
During our Board evaluation process conducted during the performancefourth quarters of our2022 and 2023,Messrs. Butier and Siewert received uniformly positive feedback in their respective roles as Chairman and Lead Independent Director during theDirector.
In May and July 2023, having delayed its planned discussion of these matters from April 2023 as a result of its leadership and Board evaluation process conducted in the fourth quarter of 2017. Based on these evaluations, we believe our current Board leadership structure is providing effective independent oversight of our company. During our ongoing engagement with our stockholders on governance matters, none of them has expressed concerns with our current Board leadership structure, which we believe reflects support for our robust and clearly delineated Lead Independent Director role.
In February 2018,succession planning work, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr. ScarboroughButier continue serving asin the role of Chairman, noting that his mentorship duringhe remained best positioned to lead our CEO transition has continued to assist managementBoard in executingoverseeing our Board-aligned strategies to drive long-term stockholder value creation and that he received positive feedback on his performance from our independent directors during the 2017 Board evaluation process.strategies. Upon the recommendation of the Governance Committee, our Board elected Mr. ScarboroughButier (with him abstaining)not present for the discussion or vote) as Executive Chairman effective September 1, 2023 through the Annual Meeting. In February 2024, giving consideration to the valuable mentorship he has provided our new CEO and his successful transition to the role of Executive Chairman, upon the recommendation of the Governance Committee, our Board (with him not present for the discussion or vote) elected Mr. Butier to continue serving as ourExecutive Chairman effective immediately afterfor a one-year term ending at the 2025 Annual Meeting, subject to his re-election. Thereelection.
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In July 2023, the Governance Committee also recommended that Mr. PyottSiewert (with him abstaining)not present for the discussion or vote) continue serving as Lead Independent Director.Director through the Annual Meeting. Having a long-serving director with finance expertise and extensive experience working outside the U.S. serve as Lead Independent Director has provided Messrs. Butier and Stander valuable counsel and guidance while ensuring independent Board oversight of management. The committee also recognized Mr. Pyott has significantly contributed toSiewert’s support and substantial effort with our executive compensationstockholder engagement program. The Governance Committee determined that, in light of his demonstrated commitment, engagement and governance programs through his strong leadership, Mr. Siewert should continue ensuring independent and strategic leadershipstewardship of our Board.Board in its oversight responsibilities. The committee’s decision took into account his significant contributions as a member and former Chair of the Audit Committee and as the current Chair of the Governance Committee, as well as his more than 25 years working in Asia Pacific, a region from which ~30% of our 2023 sales originated and ~56% of our employees were located at year-end 2023. Upon the recommendation of the Governance Committee, ourthe independent directors selectedon our Board elected Mr. PyottSiewert (with him abstaining)not present for the discussion or vote) as Lead Independent Director through the Annual Meeting. In February 2024, upon the recommendation of the Governance Committee, the independent directors on our Board elected Mr. Siewert (with him not present for the discussion or vote) to continue serving as our Lead Independent Director effective immediately afterfor the term ending at the 2025 Annual Meeting, subject to his re-election.
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Table of Contentsreelection.
During our 2023 stockholder engagements, while certain investors expressed a preference for an independent chairman, they appreciated the rationale for our current Board leadership structure given our recent CEO transition and other senior leadership changes.
BOARD COMMITTEES
Each of our Board committeesCommittees has a written charter that describes its purposes,purpose, membership and meeting structure, and responsibilities. These charters which may be found on the investors section of our website atwww.averydennison.com/corporategovernance,under Corporate Governance and are reviewed by the respective committee at least annually, with any recommended changes adopted upon approval by our Board. Amended charters are promptly posted on our website. The Charters forcharters of the Audit Committee, Compensation Committee and Governance CommitteesCommittee were lastmost recently amended in February 2017, December 20152023, December 2023 and December 2016, respectively.
EachOctober 2021, respectively; the charter of the Finance Committee was first adopted by our Board committees hasin December 2023.
Our Board Committees have the ability to form and delegate authority to subcommittees and may obtain advice and assistance from internal or external consultants, legal counsel or other advisors at our expense. In addition, each committee annually evaluates its performance. The primary responsibilities, membership and 2023 meeting and attendance information for the three independent committees of our Board are summarized belowbelow. In July 2023 and onFebruary 2024, upon the following page.recommendation of the Governance Committee, our Board modestly adjusted the membership of its committees; the current Chairs and members are reflected in this proxy statement.
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 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Martha Sullivan (Chair) Andres Lopez Maria Fernanda Mejia Patrick Siewert
Audit committee financial expert: Siewert All members satisfy
MEETINGS 2023 meetings: 8 Avg. attendance: 90% | • Oversee financial statement and disclosure matters, including • Appoint and oversee • Oversee • Perform compliance oversight responsibilities, •
Approve | |||
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 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Julia Stewart (Chair) Bradley Alford Andres Lopez Ken Hicks
All members satisfy
MEETINGS 2023 meetings: 5 Avg. attendance: 100% | • Review and approve • Review andapprove senior executive compensation, including base salaries and incentive compensation •Conduct leadership succession and development planning and regularly review executive new hires, promotions and role changes, departures and open positions, as well as executive diversity trends
•Review and provide oversight of talent management policies and strategies, including DEI and pay equity and transparency; leadership compensation plans, benefits, recruiting and retention strategies, and development programs; and employee engagement • Review stockholder engagement process, results and feedback related to executive compensation, talent management and social sustainability • Approve • Oversee stockholder approval of executive compensation matters, including • Assess compensation
• Recommend non-employee director compensation •Administer clawback policies providing for recoupment of incentive compensation determined to have been erroneously received by executive officers or other AIP or LTI recipients
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 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Patrick Siewert (Chair) Bradley Alford Julia Stewart
All members satisfy NYSE independence standards MEETINGS 2023 meetings: 10 Avg. attendance: 95% |
•
• Recommend Board and Committee structure, • Recommend • Review andapprove related person transactions • Oversee • Review •
•Review stockholder engagement process, results and feedback related to governance, environmental sustainability and community investment • Review stockholder proposals • Oversee | |||
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Avery Dennison Corporation| 2018 Proxy Statement |16
TableIn addition to the above committees required by SEC rules and NYSE listing standards, upon the recommendation of Contentsthe Governance Committee, our Board formed a standalone non-independent Finance Committee in July 2023, the responsibilities of which were previously performed by the Audit Committee.
 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Mitch Butier (Chair) Patrick Siewert Deon Stander MEETINGS 2023 meetings: 1 Avg. attendance: 100% | Conduct finance oversight responsibilities, includingreviewing and making recommendations to our Board regarding: • Capital structure in light of our financial plans, current operations and long-term strategies • Capital allocation strategy, including stockholder dividends, stock repurchase program and financial capacity for significant transactions such as strategic investments, acquisitions and divestitures • Financing plans including equity, debt or other securities offerings and private placements that may materially impact our financial position • Pension plan financing status • Other financial matters that management or our Board desires to have reviewed by the committee | |||
EXECUTIVE SESSIONS
Our Board believes it is important to have separate executive sessions with Mr. Butier, with Mr. Stander, with both of them and without our CEO, non-independent Chairman or other memberseither of management present,them, each of which werewas generally held at every regular2023 Board meeting during 2017.meetings. Our independent directors have robust and candid discussions at thesethe executive sessions that exclude our Executive Chairman and/or our CEO during which they critically evaluate the performance of them, management as a whole and our company, Chairman, CEO and management. company. As Lead Independent Director, Mr. PyottSiewert presided over the fivesix executive sessions of independent directors held during 2017.2023.
In addition,
Our Board generally began its 2023 meetings with one of two executive sessions were scheduled for each regular meeting of the Audit, Compensation and Governance Committees held. These executive sessions generally excluded Mr. Scarborough, Mr.with Messrs. Butier and otherStander to discuss key focus areas and frame meeting discussions; the second such session at the end of these meetings provided time for the Board to reflect and align on key priorities, after which our independent directors generally met in executive session.
Executive sessions were also generally held for regular 2023 Board Committee meetings. These sessions excluded members of management unless the Committeecommittee requested the presenceone or more of a member of management for a portion of the sessionthem to attend to provide additional information or perspective.perspective, in which case the committee generally met independently thereafter.
Management is responsible for managing the day-to-day risks confronting our businesses, butand our Board has responsibility for overseeing enterprise riskoversees ERM. In performing its oversight role, our Board ensures that the ERM processes designed and implemented by management (ERM).are functioning effectively and promoting risk-adjusted decision-making. The teams leading our businesses have incorporated ERMERM-rooted thinking into developingtheir strategic development and executing strategy,execution, assessing the risks and mitigating strategies impacting their businesses and implementing and adjusting mitigating actions on an ongoing basis. In addition, in consultation with our Chief Compliance Officerrisk management team and senior management, these teamsthey semiannually prepare a risk profileprofiles consisting of a heat map and a summary of their key risks and mitigating strategies, which are used to prepare a company risk profile based on identified business-specificbusiness risks as well as enterprise-wideenterprise risks. Among other things, these risks include the macroeconomic environment; climate change, environmental regulation and sustainability trends; cybersecurity; operational and supply chain disruptions; and M&A.
In 2023, we further enhanced our ERM program by assigning accountability for key risks and mitigating strategies to identified business or functional leaders and began prioritizing mitigation strategies based on discussions with business leaders led by risk champions from our law department. Our compliance and IT functions also continued their annual ERM reviews. These advancements have allowed our ERM Steering Committee to benefit from the critical thinking of a broader cross-section of company leaders.We alsoaim to continue advancing our ERM program, with oversight by our Board.
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We have robust global processes that support a strong internal control environment toand promote the early identification and continued managementongoing mitigation of risks by our company's leadership.risks. Our legal and compliance functions, including our Chief Compliance Officer, report intoto our General CounselCLO to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit leader reports to the Audit Committee in the conduct of his operational responsibilities, ensuring hishelping ensure he maintains independence from management.
In performing its oversight role, our Board is responsible for ensuring that the risk management processes designed and implemented by management are functioning effectively, and that our culture fosters risk-adjusted decision-making.
Our Board as a whole oversees risks related to our company and business strategies and operations,five-year strategic plan horizon, exercising this responsibility by considering the risks related to its decisions. Each year, ourmanagement’s strategies and execution plans. Our Board annually receives reports on the ERM process and the resulting company risk profile, engaging throughout the year with management on their strategic plans and risks facing each of our businesses and our company as a whole. These risks may include financial risks, political risks, legal and regulatory risks, supply chain risks, competitive risks, information technology risks, and other risks related to the way in which we do business. key risks. Employees who lead various risk areas —– such as law, information technology; environmental, healthtechnology, tax, compliance, sustainability, DEI and safety; tax; sustainability; and social responsibility —community investment – report periodically to Board Committees and occasionally to our full Board.
OurAs shown below, our Board has delegated to its Committees elements of its risk oversight functionresponsibility to betterits Committees to more efficiently coordinate with management to serve the long-term interests of our company and stockholders.in risk mitigation. Our Board receives reports from the Committee Chairs regarding topics discussed at every Committee meeting, which includescommittee meetings, including the areas of risk overseenthey primarily byoversee, and engages on risk mitigation during its Committees.
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RISK OVERSIGHT | ||||||
Board of Directors | ||||
• Business strategies • Annual operating plan and significant fixed and IT capital expenditures • Corporate governance • Acquisitions, divestitures and other significant transactions • Enterprise risk management | ||||
| Audit Committee | | Compensation Committee | | Governance Committee | | Finance Committee | |||||||||||||
• Financial reporting processes and statements, and internal controls • Information technology and cybersecurity • Certain legal, compliance and regulatory matters | • Executive compensation and succession planning • Annual and long-term incentive plans • Compensation clawback policies • Non-employee director compensation • Social sustainability, including leadership compensation, benefits, and recruiting and retention; DEI; and employee engagement | • Board and Committee structure and composition • Director succession planning • Governance, environmental sustainability and community investment • Values and Ethics/Code of Conduct • Conflicts of interest and related person transactions • Certain legal, compliance and regulatory matters | • Capital structure and allocation strategy, including stockholder dividends, stock repurchases and financial capacity for strategic transactions • Financing plans, including debt, liquidity and other securities offerings • Pension plan funding status | |||||||||||||||||
The Audit Committee oversees our internal control environment and evaluates the effectiveness of our internal controls at least annually. Supplementing these processes, the Audit Committee periodically meets regularly in executive session with each of our CEO, CFO, CAO, General Counsel, Vice President ofController, Internal Audit leader, and representatives of our independent registered public accounting firm.firm, and as needed with other members of senior management such as our CEO and CLO. The Governance Committee also meets semiannually with our Chief Compliance Officer to discuss, among other things, discusssignificant internal investigations.
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During 2023, our investigation of allegations reported to our Business Conduct GuideLine.
During 2017,Board was particularly focused on overseeing the following risk areas were of particular Boarddescribed below.
2023 RISK FOCUS AREAS | ||||
| • | Navigating challenging near-term business environment – Addressing lower demand driven primarily by downstream inventory destocking, as well as preparing for potential recessionary environment through rigorous scenario planning and identified potential productivity and restructuring actions |
| • | Further accelerating Intelligent Labels adoption – Executing key apparel and logistics programs, accelerating new segment and use case adoption, and expanding manufacturing capacity to ensure we can deliver for customers in this fast-growing business |
| • | Advancing sustainable innovation initiatives – Accelerating our sustainable innovation efforts through governmental engagement and investment in new technologies to turn sustainability-related headwinds into opportunities for competitive differentiation |
| • | Advancing digital journey – Accelerating our digital strategies and evolving our Digital Advisory Council to advance our market insights, digital capabilities and innovation to lead at intersection of physical and digital |
| • | Optimizing portfolio of businesses – Integrating previously separated businesses into Materials Group, executing and integrating acquisitions, and expanding our M&A pipeline and deal conversion |
| • | Advancing cybersecurity preparedness – Addressing more volatile cybersecurity landscape with increasing threats on manufacturers, incorporating learnings from of our maturity assessments and publicly reported incidents at other companies |
Risks Associated with Compensation Policies and Committee focus:
•The global economic environment;•Changes in tax laws and regulations, in particular in the U.S.;•Our U.S. pension plan liabilities;•Cybersecurity and information technology, including the implementation of an enterprise resource planning system in our Label and Graphic Materials North America business; and•Risks associated with our restructuring actions, acquisitions and integration activities.
RISKS ASSOCIATED WITH COMPENSATION POLICIES AND PRACTICESPractices
As described in theCompensation Discussion and Analysis section of this proxy statement, we maintain best practices in compensation that collectively encourage ongoing risk assessment and mitigation. The Compensation Committee annually discusses with management and its independent compensation consultant, WTW, whether our executive compensation program is meeting the committee’s objectives. In addition, the Compensation Committee periodically reviews our compensation programsengages WTW to undertake a more formal assessment to ensure that they doour program does not provide incentives that encourage our employees to take excessive risksrisk-taking in managingthe management of their respective businesses or functional areas andareas. The committee most recently conducted its most recent reviewthis evaluation in February 2018.2024.
Based on the advice of its independent compensation consultant, Willis Towers Watson, theThe Compensation Committee noted the key risk-mitigating features of our compensation policies and practices shown on the following page.
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Governance and Oversight
•The Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants based on individual performance, including as a result of excessive risk-taking.•Our clawback policy serves as a deterrent to fraud or other misconduct in connection with our financial statements.•The Compensation Committee annually evaluates the performance of our CEO and other executives in the context of our company and business goals and their individual contributions.•Our stock ownership guidelines are rigorous and consistent with best practices, with a minimum ownership level of 6x base salary for our CEO and a requirement that 50% of the ownership level be held in vested shares.•We prohibit our officers from hedging or pledging company stock and require them to engage in stock transactions only during limited trading windows.
Pay Philosophy and Structure
•Our programs prioritize incenting stockholder value creation, balanced by retention and other considerations.•The substantial majority ofexecutive compensationisprogram described below.RISK-MITIGATING FEATURES
Governance and
Oversight
✓ Compensation Committee has discretion to decrease AIP and LTI awards to penalize potentially risky actions
✓ Clawback policy requires recoupment of certain incentive-based compensation to executive officers if we are required to prepare accounting restatement to correct material noncompliance with any financial reporting requirement; in addition, all AIP and LTI recipients are subject to compensation clawback in connection with financial restatement indicating fraud or misconduct
✓ Incentive compensation plan structure and targets reviewed within context of market practices, tied to annual business plans and company goals, and approved by Compensation Committee
✓ Compensation Committee annually evaluates CEO/senior executive performance against strategic, financial and sustainability goals
✓ Officers prohibited from hedging or pledging company stock and required to engage in stock transactions only during limited trading windows
Pay Philosophy
and Structure
✓ Focus on incenting stockholder value creation, balanced by retention and other considerations
✓ Incentive compensation designed to incent strong annual financial performance and long-term economic and stockholder value creation, balance growth and efficient capital deployment, and consider sustainability progress and individual contributions thereto
✓ Substantial majority of leadership compensation delivered in long-term equity or cash-based awards to motivate pursuit of superior performance and sustainable growth
✓ Rigorous stock ownership policy, with minimum ownership requirement of 6x for CEO; requires net shares acquired to be retained until compliance is achieved and pre-transaction certifications of continued compliance
✓ Executive severance plans consistent with market practices, with double-trigger change of control severance benefits only for most senior NEOs
Incentive
Program Design
✓ AIP and LTI awards incent achievement of annual financial goals and long-term economic and stockholder value creation, using multiple performance objectives covering different time periods
✓ AIP awards not guaranteed, with below-threshold performance resulting in zero payout, payments subject to overall cap of 200% and NEO individual modifiers generally capped at 100%
✓ Equity awards fully performance-based, using multiple performance objectives, vesting over multiple time horizons and subject to threshold and maximum payout opportunities
• PUs cliff vest at end of three years with payout for relative TSR component capped at 100% of target if absolute TSR is negative
• MSUs vest over 1-, 2-, 3- and 4-year performance periods (average performance period of 2.5 years), with threshold performance at absolute TSR of (15)% and target performance at absolute TSR of 10%
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Given its assessed low risk in equity to motivate the pursuiteach of strong long-term performance and sustainable growth.
Incentive Program Design
•Our AIP and LTI awards incent annual profitable growth balanced with long-term financial value creation, using multiple performance objectives and providing realized compensation based primarily on our company's performance.•AIP awards are not guaranteed, with below-threshold performance potentially resulting in zero payout and payments subject to an overall cap of 200%.•Our equity award vehicles are performance-based, use multiple performance objectives, are subject to threshold and maximum payout opportunities, and have the following additional features that limit potential risk-taking:•Our performance units (PUs) cliff vest at the end of three years with the payout for the relative total stockholder return (TSR) components capped at 100% of target for any three-year performance period in which absolute TSR is negative to prevent management from being unduly enriched when stockholders experience loss, while still incenting executives to deliver relatively strong performance during challenging economic periods; and•Our market-leveraged stock units (MSUs) vest over one-, two-, three- and four-year performance periods (with an average performance period of 2.5 years), with challenging performance objectives, including a threshold performance level of absolute TSR of -15% and a target performance level of absolute TSR of 10%.
Based on these categories and other factors, Willis Towers Watson determinedWTW advised the Compensation Committee that our compensationexecutive pay program strikes an appropriate pay-risk balance. balance and does not present risk-related concerns.
The Compensation Committee has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company.
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Table of ContentsDIRECTOR EDUCATION
HUMAN CAPITAL MANAGEMENT
Initial Orientation
LEADERSHIP DEVELOPMENT
Our Board is actively involved in human capitaldirector orientation materials and discussions with management to identifygenerally cover our (i) stakeholders, values, strategies, and develop our future leaders. We maintain a robust performance review processfinancial and leadership development program for our employees. Management develops leadership at lower levels of our organization by identifying high potential talentsustainability goals; (ii) business and critical experts, cultivating the skillscompany strategies, risks and capabilities to allow identified individuals to become our future leadersmitigating actions; (iii) sustainability priorities and providing them with developmental opportunities. Through regular reports from management, ourprogress; (iv) Board has the opportunity to meet business leaders and functional leaders in law, finance, information technology, compliance, and human resources. In addition, Board members have freedom of access to all employees, and are encouraged to visit our facilities to meet local management and attend company events.
SUCCESSION PLANNING
The Compensation Committee and/or our Board conducts executive succession planning semiannually, developingobjectives; (v) information regarding company leadership and refining succession plans forrecent Board/committee meetings; (vi) Board, governance and company policies, including our CEOGovernance Guidelines, Committee charters, conflict of interest policy, non-employee director compensation program, insider trading policy and key executive officers. Consistent with this practice, in April and October 2017, the Compensation Committee discussed talent that is currently ready — or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready — to fill executive officer positions in the eventCode of a vacancy. Those discussions were then summarized and reported to our Board. In addition, the Compensation Committee reviews executive new hires, promotions and departures at its regularly-scheduled meetings.
INITIAL ORIENTATION
Our initial director orientation generally covers (i) our strategies, performance and leadership; (ii)Conduct; (vii) investor messaging; (iii) the strategies and risks of our businesses; (iv) finance matters, including our financial reporting policies(viii) SEC filings and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure; (v) legal matters, including our governance policies and procedures, values and ethics, compliance, and ERM; (vi) human resources matters, including executive compensation, succession planning, and non-employee director compensation; and (vii) information technology and cybersecurity.sustainably reporting.
In connection with his initialher appointment to our Board in early 2017,February 2024, we provided Mr. LopezMs. Mejia with information regarding our businesses, strategic plans and risk-mitigating actions, competitors, non-employee director compensation policiesthese matters. Our Executive Chairman, CEO and other matters. Our CEO thenmembers of management met with Mr. LopezMs. Mejia to discuss these matters. We conducted further orientation for Mr. Lopezthem to ensure a smooth initial onboarding. Ms. Mejia also joined as an observer in the spring of 2017 in connection with his appointmentselect Board Committee meetings to the Audit Committee.better understand their respective responsibilities and was assigned two independent directors on our Board to help guide her continued onboarding process.
Continuing Education
CONTINUING EDUCATION
Our continuingongoing director education program consists of regular interactions with and presentations from members of management regarding our businesses, strategies, financial performance and sustainability progress, as well as periodic visits to our facilities. In the spring of 2023, our Board visited our headquarters in Mentor, Ohio, which also serves as our Materials Group’s North American headquarters, and met informally with members of that business’ leadership. Visits to that facility, as well as to our Solutions Group innovation center in Miamisburg, Ohio and certain international facilities and management presentations regarding our business operations, strategies, risks and values and ethics. in Asia, are planned for 2024.
We provide updates on relevant topics of interest to our Board at and between meetings throughout the year, and providedirectors with access to a boardroom news resource platform for them to keep informed of emerging best practices. We alsoregulatory developments and market practices, and reimburse directors who attend accreditedcontinuing director education programs for program fees and related expenses.
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BOARD AND COMMITTEE EVALUATIONS
The Governance Committee oversees and conducts an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees,committees, including the Committee Chairs. Our Board views the evaluation process as integral to assesingassessing its effectiveness and identifying opportunities for continued improvement. Through this process, we have continually improved Board functioning.
As part of this process, our directors historically had the opportunity to provide our Lead Independent Director candid feedback on other directors. In 2023, the Governance Committee implemented a more formal process for directors to provide anonymized individual feedback on their peers to advance continuous improvement opportunities inand assist with Board succession planning. The summary below focuses on the pursuit of continued excellence. Many of the improvements in our governance practices and Board processes were identified and implemented as a result of the annualbroader Board/Committee evaluation process.
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In responseBOARD AND COMMITTEE EVALUATIONS
1 | ||||
Process
Written evaluations of Board/Committee
Composition, including balance and diversity of skills, qualifications and demographic backgrounds
Meeting materials
Meeting mechanics and structure
Fulfillment of responsibilities
Meeting content and conduct
Overall performance
Effectiveness of Chairman, Lead Independent Director and Committee Chairs
| • | One-on-one discussions with Governance Committee Chair to provide additional perspective on written evaluations |
2 | ||||
2023 Review of Results
Discussion of anonymized evaluation results and feedback received
Executive Chairman, Lead Independent Director/Governance Committee Chair and Corporate Secretary
Governance Committee
Board in recent years during the evaluation process, our Board made the following enhancements to its processes:executive session with Executive Chairman and CEO, discussing potential improvement opportunities
•Identified the need for anindependent director
Committees in the packaging industry, culminating in the appointment of Mr. Lopez to our Board;
Avery Dennison Corporation| 2018 Proxy Statement |21
3 | ||||
Table of Contents Recent Improvement Actions
| • | Sharpened focus on executive succession planning and leadership development, appointing new CEO after having evaluated his attributes, experiences and strengths and determined that he was best positioned to lead our company into the future in which we believe every product will have a digital identity |
| • | Enhanced director succession planning with view toward more regular refreshment, launching new director search in 2023 focused on candidates with retail/CPG or finance expertise that could also increase gender or racial/ethnic diversity on our Board, with Ms. Mejia being appointed to our Board in February 2024 |
| • | Advanced strategic oversight, expanding mentorships between individual directors and key business leaders and increasing Board engagement with members of management below senior leadership level |
| • | Heightened focus on strategic priorities of digital solutions and sustainability-driven innovation, as well as cybersecurity risk management |
| • | Continuous discussion of M&A pipeline and potential targets, as well as performance of acquired companies and integration learnings |
| • | Refined Board schedule and meeting process, implementing additional executive sessions with our Executive Chairman and our CEO, as well as ones with each of them, and conducting certain Committee meetings virtually to expand time for in-person full Board meetings |
| • | Continued regular Executive Chairman and CEO engagement with directors between meetings and increased time dedicated to executive sessions that exclude other members of management to provide greater time for Board-only discussion, after which independent directors generally meet in executive session |
STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS
We value stockholder feedback on our governance program and we actively solicit input through stockholder engagement to ensure that our program reflectspractices reflect not only our evolving business strategies but also the changing business environment and stockholder expectations.
STOCKHOLDER ENGAGEMENT ON GOVERNANCE MATTERS IN 2017
We continued our longstanding practice of open dialogue with stockholders in 2017. In advance of the 2017 Annual Meeting, we contacted our 25 largest institutional stockholders, representing almost 50%expectations of our then-outstanding shares. Board members, including our Lead Independent Director, and management were made available to answer questions and address concerns regarding our executive compensation and governance programsstakeholders. This supplemental engagement program and the items being brought to stockholder vote at the Annual Meeting. Whilefeedback we received responseson governance matters are described in the proxy summary.
CONTACTING OUR BOARD
Our Board welcomes feedback from our stakeholders. We review all correspondence received from stockholders, representing 25% of our then-outstanding shares, none of them felt that there was a need to substantively engage during that busy time.
In the fall, we reached out to our 30 largest institutional stockholders, representing nearly 55% of our then outstanding shares, to learn what issues are important to them without the time pressures associated with proxy season. As a result of these efforts, we received responses from stockholders representing over 30% of our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
During our 2017 engagement program, with respect to matters related to governance, we discussed several topics related to our Board's processes, including succession planning and refreshment, diversity, and evaluations. We also discussed the integration of sustainability into our business strategies, and our Board's oversight of our cybersecurity preparedness. Our stockholders expressed interest in the anticipated completion of our CEO transition and our Board's views on proxy access; both of these matters were subsequently addressed with our December 2017 announcement of Mr. Scarborough's retirement as our Executive Chairman at the end of that year and our adoption of proxy access.
CONTACTING OUR BOARD
We welcome ongoing feedback from all our stockholders. We review correspondence submitted by stockholders, discussing the feedback received with senior management and/or our Board as appropriate.
Stockholders and other interested parties may contact our Board, Executive Chairman, Lead Independent Director, any Committee or Committee Chair or any other individual director concerning business matters by writing to:to Board of Directors (or a particular Board subgroup or individual director), c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.
Avery Dennison Corporation| 2018 Proxy Statement |22
8080 Norton Parkway, Mentor, Ohio 44060.
| 2024 Proxy Statement | Avery Dennison Corporation |
ITEM 1 – ELECTION OF DIRECTORS
Our Bylaws provide for athat the number of directors will be fixed from time to time by resolution duly approved by our Board. As previously disclosed, in February 2024, Julia Stewart notified our Board of between eight and 12 directors, withher intention not to stand for reelection at the exact number fixed by a resolution of our Board. Effective February 1, 2017, in conjunction with Mr. Lopez's appointment and upon the recommendation of the Governance Committee, ourAnnual Meeting. Our Board fixedplans to fix the number of directors at 11. All nominees are standing for election at the Annual Meeting for a one-year term.10 following Ms. Stewart’s departure from our Board in April 2024.
Each of the 11our nominees is presently serving on our Board and has consented to being named in this proxy statement and serving if elected by our stockholders. All nominees are standing for election for a one-year term ending at the 2025 Annual Meeting.
MAJORITY VOTING STANDARD; UNELECTED DIRECTOR RESIGNATION REQUIREMENTMajority Voting Standard; Unelected Director Resignation Requirement
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting. Our Bylaws provide for the approval by a majority of votes cast for the election of directors in uncontested elections like this one and require that an incumbent director who is not re-electedreelected tender his or her resignation from our Board. Our Board, excluding the tendering director, iswould be required to determine whether to accept the resignation —– taking into account the recommendation of the Governance Committee and any other factors it considers appropriate —– and publicly disclose its decision regarding the tendered resignation, including itsand rationale for the decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for election of directors.
Board Recommendation
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting.
Our Board recommends that you vote FOR each of our 10 director nominees. |
RECOMMENDATION OF BOARD OF DIRECTORS
Our Board of Directors recommends that you vote FOR each of the director nominees.The persons named as proxies will vote for thetheir election, of each of the 11 nominees, unless you specify otherwise. If any director nominee were to become unavailable prior to the Annual Meeting, your proxy would be voted for a substitute nominee designated by our Board or we would decrease the size of our Board.
SELECTION OF DIRECTOR NOMINEES
Director nomineesDirectors are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nomineesNew directors may also be recommended by the Governance Committee for appointment to our Board, with their election by stockholders taking place at the next Annual Meeting. Our Board believes thatAs shown in the Director Nominee Matrix in the proxy summary, our directors reflectdirector nominees bring a balance of skills, qualificationsindustry and demographics that allowsfunctional experiences and reflect diverse demographic backgrounds, allowing them to effectively discharge their oversight responsibilities.
•Ability to qualify as independent, to ensure that a majority of our Board remains independent;•Business and leadership experience, considering factors such as size, industry, scope, complexity and global operations;•Experience as a board member of another public company;•Experience in finance, accounting and/or executive compensation;•Time commitments, including other boards on which the nominee serves;•Potential conflicts of interest;•Ability to contribute to the oversight and governance of our company; and•Ability to represent the balanced interests of stockholders as a whole, rather than those of any special interest group.
In consideringevaluating whether to recommend a candidate as anew or incumbent director nominee, the Governance Committee uses the following criteria set forth in our Governance Guidelines:
Avery Dennison Corporation| 2018 Proxy Statement |23
For incumbent directors, the Governance Committee also evaluates contributions to our Board and Committees, attendance at Board and Committee meetings, compliance with our stock ownership guidelines, and mandatory retirement date to assist with director succession planning. The Governance Committee does not assign specific weights toprimarily considers the criteria and no particular criterion is necessarily applicable to all nominees.described below.
| • | Independence, to ensure substantial majority of our Board is independent |
| • | U.S. public company leadership and/or Board experience and working or having worked outside the U.S., as well as industry and functional experience, in each case considering factors such as size, scope and complexity |
| • | Board service at other U.S. public companies |
| • | Experience in finance, accounting and/or executive compensation |
| • | For incumbent directors, Board/Committee engagement and effectiveness, meeting attendance, compliance with our stock ownership policy, and mandatory retirement date |
| • | Time commitments, including service on other boards; directors who are public company executive officers may not serve on more than one other U.S. public company board |
| • | Potential conflicts of interest |
| • | Demographic background; when evaluating nominees, the committee only considers (and requires any search firm engaged to provide) candidate slates that include highly qualified women and individuals from other underrepresented communities |
| • | Ability to contribute to our company’s governance and sustainability priorities and progress |
Avery Dennison Corporation | 2024 Proxy Statement | 39 |
The Governance Committee reviews the skills, qualifications and demographic background of any candidate with those of our current directors in assessing howto ensure our Board can most effectively fulfill its oversight responsibilities.has a broad diversity of experiences and viewpoints. Sources for identifying potential nominees include current Board members, senior management, executive search firms and investors.
The Governance Committee regularly reviewed the skills, qualifications, demographic backgrounds, ages, tenures and scheduled mandatory retirement dates of our stockholders.
STOCKHOLDER SUBMISSION OF DIRECTOR NOMINEES
Advance Notice Nominees
Stockholders may recommenddirectors and conducted Board succession planning to ensure that it continues to meet the needs of our businesses, effectively oversee management in executing our strategies and advance the interests of our stakeholders. Its search for new directors with retail/CPG or finance expertise led to Ms. Mejia’s appointment to our Board in February 2024; the search for an additional director candidates by submitting the candidate's name, together with his or her biographical information, professional experience and written consent to nomination, to Governance and Social Responsibility Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203. To be considered at the 2019 Annual Meeting, advance notice stockholder nominations must comply with the requirements referenced in the last section of this proxy statement underfinance expertise continues.
Stockholder Submission of Stockholder Items for 2019 Annual Meeting. Director Nominees
The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
Proxy AccessAdvance Notice Nominees
Our Board recently amendedStockholders may recommend director candidates by submitting the candidate’s name, together with his or her biographical information, professional experience, written consent to nomination and the other information required by our Bylaws, to permit aGovernance Committee Chair, c/o Corporate Secretary, 8080 Norton Parkway, Mentor, Ohio 44060. To be considered at the 2025 Annual Meeting, advance notice stockholder nominations must comply with the deadlines and other requirements described in the Voting and Meeting Q&A section of this proxy statement.
Proxy Access Nominees
A stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company'scompany’s stock continuously for at least three years is permitted to submit director nominees (up to 20% of the Board) for inclusion in our proxy materials, subject to the deadlines and other requirements specifieddescribed in our Bylaws. For further information on submitting proxy access nominees pleasefor the 2025 Annual Meeting, refer toSubmission the Voting and Meeting Q&A section of Stockholder Items for 2019 Annual Meeting.
Avery Dennison Corporation| 2018 Proxy Statement |24
Table of Contentsthis proxy statement.
Our directors bring abalance of skills, qualifications and demographic backgrounds in overseeing our company, as shown in the matrix below. The Governance Committee regularly evaluates the skills and qualifications desirable for our Board to best meet the changing needs of our business.
BOARD REFRESHMENT AND DIRECTOR SUCCESSION PLANNING
Our Board'sBoard’s ongoing director succession planning is designed to ensure an independent, well-qualified Board, with diversity in experience and background to effectively provide strong oversight.
NO TERM LIMITSBoard.
Our Governance Committee’s long-term objective is to position our Board for regular refreshment, ensure access to a broad new director candidate pool and achieve a more balanced tenure distribution with approximately one-third comprised each of newer directors, medium-tenure directors and longer-term directors.
Tenure
Our Governance Guidelines reflect our Board's beliefcurrently provide that directors shouldare not be subject to termtenure limits. While termtenure limits could facilitate fresh ideas and viewpoints being brought tohelp ensure regular Board refreshment, they could also result in the Board, our Board believes they are counter-balanced by the disadvantage of causing thepremature loss of a director who over a longer period of time has become well-versed in our strategies, operations and risksgained valuable experience and is providing valuable contributionscontinuing to Board deliberations. We believe that our Board's decision not to establish term limits is consistent with the prevailing practice among companies in the S&P 500.
We recognize that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity; however, we believe that arbitrarily removing knowledgeable directors and losing the oversight consistency they bring — particularly during periods of executive management change similarsignificantly contribute to our recent CEOBoard and CFO transitions — weighs against implementing term limits. Ultimately, it is our Board's responsibility to establish appropriate boardcompany.
Our Board determines its refreshment policies usingin light of our evolving strategies and financial position, exercising its discretion in the best interest of our company and stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |25
POLICIES SUPPORTING BOARD REFRESHMENTour stakeholders have suggested that longer-tenured directors may have decreased independence and objectivity. However, we believe that the removal of knowledgeable directors and loss of oversight consistency they bring – particularly during periods of senior leadership change, such as our recent CEO and Solutions Group President appointments – are important counterbalancing considerations.
40 | 2024 Proxy Statement | Avery Dennison Corporation |
Policies Supporting Regular Board Refreshment
Our Board has adopted the policies described below to facilitate regular refreshment, of our Board and ensure that it continues to independently challenge our management with refreshed points of view.the described events having occurred since last year’s Annual Meeting.
POLICY | DESCRIPTION | EVENTS OCCURRING AT/SINCE 2023 ANNUAL MEETING | ||
Mandatory Resignation Policy | Incumbent directors | All incumbent directors then standing for election were elected at the | ||
Mandatory Retirement Policy | Directors must retire on | No directors | ||
Resignation Tendered Principal Employment | Directors who change | The following independent directors changed their principal employment in 2023: Ms. Reverberi assumed additional responsibilities as leader of | ||
Prior Notice Requirement | Directors must give prior notice before accepting another U.S. public company directorship so that | Mr. | ||
Over the past eight years, five directors retired from our Board as a result of our mandatory retirement policy and two directors resigned from our Board (not due to any disagreement with our company). Upon the recommendation of the Governance Committee, Mr. Lopez wasWagner and Mses. Mejia and Reverberi were appointed as independent directors to our Board as an independent director in October 2022, February 2017. In connection with our CEO transition,2024 and February 2023, respectively. Mr. ButierStander joined our Board as a non-independent directorwhen he became CEO in May 2016.September 2023. Mr. Anderson departed from our Board in November 2023 and Ms. Stewart will leave our Board in April 2024. We believe that this recent experience — coming after fourdemonstrates regular Board refreshment.
Both the Governance Committee and our full Board discussed director succession planning at multiple meetings held in 2023 to oversee a search for new independent directors were appointedfocused on candidates with retail/CPG or finance expertise to complement and advance the collective experience on our Board between 2009 and 2013 — demonstratesalso further enhance Board diversity.
Avery Dennison Corporation | 2024 Proxy Statement | 41 |
BOARD COMPOSITION
Our Board supports and reflects our Board's commitment to ongoing refreshment.
AGE AND TENURE
The average agevalues, recognizing the benefits of our director nominees is 61, which we believe is comparable to the average board agediversity in the S&P 500boardroom, including the healthy debate that results from different viewpoints that may stem from diverse backgrounds.
Age and within the 60-63 year band in which the plurality of these companies fall. Tenure
The average tenure of our director nominees is ten years, which we believe is comparable to the average tenure for companies in the S&P 500 and within the six-to-ten year band in which the majority of these companies fall. The charts on the following page show the age and tenure of our director nominees which we believe is balanced between new61 and 8 years, respectively. Our director nominees include newer directors who bring newbringing fresh ideas and insights into the boardroom and longer-serving directors with deep institutional knowledge of our Board and company.
Avery Dennison Corporation| 2018 Proxy Statement |26
Table of ContentsGender and Racial/Ethnic Diversity
Although our Board does not have a formal policy regarding the consideration of diversity in selecting director nominees,Our Governance Guidelines reflect that the Governance Committee seeks to recommend individuals with a broad diversity of experience, profession, skill,skills, geographic representation and background, which may include consideration of an individual's demographic background, including characteristics such as race, gender and national origin. background. While diversity is a consideration nominees are not chosen or excluded solely or primarily on that basis; rather,and an area of Board refreshment focus, the Governance Committee focuses on skills, experience and background that cana candidate’s overall profile to complement our existing Board in lightthose of the diverse and global natureexisting members of our businessesBoard. When evaluating director candidates, the Governance Committee only considers (and requires any search firm engaged to provide) candidate slates that include highly qualified women and operations.
Our Board recognizes the benefits of racial, ethnic and gender diversity in the boardroom, including better reflecting our global customer base and the healthy debate that resultsindividuals from different viewpoints that may stem from diverse backgrounds. The racial, ethnic and gender diversityother underrepresented communities; two of our 2018 director nominees is shown inthree most recently appointed independent directors increased the chart below.gender and/or ethnic diversity on our Board.
2024 DIRECTOR NOMINEES
The following pages provide information on the directors nominated for election at the Annual Meeting,our 2024 director nominees, including his or hertheir age, board leadershiplength of service, independence, current Board roles and business experience during at least the past five years. We also indicate the name of any other U.S. public company board on which each nominee currently serves or has served during the past five years; for these purposes, "public company" means one that is required to file reports with the SEC.years.
In addition to the information presented regardingFor each nominee's experiencenominee, we present select skills and qualifications, that led our Board to conclude that he or she should serve as a director — which includes seniorU.S. public company leadership experience, industry experience, global exposure, financial sophistication, andU.S. public company board experience, — we believeareas of industry and functional experience, and experience working or having worked outside the U.S. The balance of skills, qualifications and demographic backgrounds on our Board is shown in the Director Nominee Matrix in the proxy summary; consistent with that each of them has integritydisclosure, Select Skills and adheres to our high ethical standards. Each nominee also hasQualifications excludes board service at U.S. public companies at which the individual served or serves as CEO, COO or CFO. All director nominees have demonstrated the ability to exercise sound judgmentfulfill the time commitments necessary to serve on our Board and is committed to servingadvance the long-term interests of our stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |27
stockholders, as well as those of our other stakeholders.
| 2024 Proxy Statement | Avery Dennison Corporation |
| ANDRES A. LOPEZ | |||
Age 61 Director since February 2017 Independent | RECENT BUSINESS EXPERIENCE
• President & •
• President, O-I Americas, from July 2014 to • President, O-I Latin America, from April 2009 to July 2014
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Compensation Committee Member
Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS
• Oversees Industry and functional experience •
• Given impact of waste and recycling in glass value chain, technical expertise in environmental sustainability, as well as supervisory experience in finance, marketing, M&A, cybersecurity and R&D as CEO
Works/Has Worked Outside the U.S. • Work assignments in Latin America
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•
Concurrent service on one other public board
BOARD LEADERSHIP ROLES
Audit Committee Member
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Age 67 Director since April 2010 Independent |
Nestlé USA, a nutrition, health and wellness company • Chairman & Nestlé Brands Company, an operating unit of Nestlé USA • President & | ||
BOARD ROLES
Governance Committee Member
Current:
Perrigo Company Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS
• Concurrent service on one other board and prior service on other boards
Industry experience •
Functional experience •
• Work assignments in Oceania |
Avery Dennison Corporation| 2018 Proxy Statement |28
| DEON M. STANDER | ||
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Director since Not Independent
|
Avery Dennison Corporation •
•
•
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•
• VP/GM, Global Commercial, RBIS, from October 2010 to December 2012
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Current: None Past Five Years:
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Avery Dennison Corporation| 2018 Proxy Statement |29
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None |
SELECT SKILLS AND QUALIFICATIONS
•
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Industry experience • Led our Solutions Group business and oversaw our Materials Group as COO, with packaging industry expertise and extensive experience in digital, materials science and industrial goods Functional experience • Technical environmental sustainability expertise having led our enterprise Sustainability Council, with supervisory experience in finance, marketing, M&A, cybersecurity and R&D as CEO Works/Has Worked Outside the U.S. • Work assignments in Europe and Asia Pacific |
Avery Dennison Corporation | 2024 Proxy Statement | 43 |
| FRANCESCA REVERBERI | ||||
 Age 52 Director since February 2023 Independent | RECENT BUSINESS EXPERIENCE Trinseo PLC, a specialty materials solutions provider • SVP, Engineered Materials & Chief Sustainability Officer since August 2023 • SVP, Sustainable Plastics & Chief Sustainability Officer from July 2021 to July 2023 • SVP, Engineered Materials & Synthetic Rubber, from March 2020 to December 2021 • General Manager, Engineered Materials, from October 2019 to May 2021 • Global Senior Business Director, Performance Plastics, from December 2017 to October 2019 BOARD ROLES Compensation Committee Member OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None | SELECT SKILLS AND QUALIFICATIONS Industry experience • Technical materials science expertise focused on applied science in plastics, as well as extensive experience in industrial goods, in each case complementing our Materials Group Functional experience • Serves as global sustainability leader, with technical expertise in environmental sustainability • Advanced educational and professional engineering expertise, with supervisory experience in marketing as divisional leader Works/Has Worked Outside the U.S. • Works in Europe, region leading sustainability-related requirements |
| KEN C. HICKS | ||||
Age 71 Director since July 2007 Independent | RECENT BUSINESS EXPERIENCE Academy Sports + Outdoors, a sports and recreation retailer • Executive Chairman since June 2023 • Chairman, President & CEO from May 2018 to May 2023 Foot Locker, Inc., a specialty athletic retailer • Executive Chairman from December 2014 to May 2015 • Chairman, President & CEO from February 2010 to November 2014 • President & CEO from August 2009 to February 2010 BOARD ROLES Compensation Committee Member OTHER PUBLIC COMPANY BOARDS Current: Academy Sports + Outdoors Past Five Years: None | SELECT SKILLS AND QUALIFICATIONS U.S. public company leadership experience • Led company then with $6.4 billion in annual revenues and ~22K employees U.S. public company board experience • Prior service on other boards Industry experience • 35+ years of retail industry expertise into which our Solutions Group sells, as well as extensive experience in consumer goods and packaging industries Functional experience • 35+ years of technical marketing expertise, including roles as merchandising leader at two retail companies, and supervisory experience in finance, M&A, environmental sustainability and cybersecurity as CEO |
| MARIA FERNANDA MEJIA | ||||
 Age 60 Director since February 2024 Independent | RECENT BUSINESS EXPERIENCE Newell Brands Inc. • CEO, International, from February 2022 to February 2023 Kellogg Company • SVP and President, Latin America, from November 2011 to February 2020 BOARD ROLES Audit Committee Member OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: Grocery Outlet | SELECT SKILLS AND QUALIFICATIONS U.S. public company board experience • Prior service on other boards Industry experience • 35+ years of consumer goods industry expertise into which our Solutions Group sells, as well as extensive experience in packaging, focused primarily on consumer goods Functional experience • Technical expertise in marketing, as well as supervisory experience in environmental sustainability and R&D as regional CEO Works/Has Worked Outside the U.S. • Work assignments in Latin America, Europe and Asia Pacific |
44 | 2024 Proxy Statement | Avery Dennison Corporation |
| MARTHA N. SULLIVAN | ||||
Age 67 Director since February 2013 Independent | RECENT BUSINESS EXPERIENCE Sensata Technologies Holding PLC, a supplier of sensors and controls • President & CEO from January 2013 to March 2020 • President & COO from April 2010 to December 2012 • COO from May 2006 to April 2010 Texas Instruments, Inc., Sensata’s predecessor entity • VP, Sensor Products, from 1997 to 2006 BOARD ROLES Audit Committee Chair OTHER PUBLIC COMPANY BOARDS Current: Sensata Technologies Holding PLC Past Five Years: Goldman Sachs Acquisition Holding Company Corp II | SELECT SKILLS AND QUALIFICATIONS U.S. public company leadership experience • Led company then with $3.5 billion in annual revenues and ~21K employees Industry experience • Industrial goods industry expertise and extensive materials science experience, in each case complementing our Materials Group, as well as extensive experience in technology from overseeing RFID business, complementing our Solutions Group Functional experience • Higher education in engineering and technical expertise in R&D, as well as supervisory experience in finance, marketing, M&A and environmental sustainability as CEO |
| MITCHELL R. BUTIER | ||||
Age 52 Director since April 2016 Not Independent | RECENT BUSINESS EXPERIENCE Avery Dennison Corporation • Executive Chairman since September 2023 • Chairman & CEO from March 2022 to August 2023 • Chairman, President & CEO from April 2019 to February 2022 • President & CEO from May 2016 to April 2019 • President & COO from November 2014 to April 2016 • SVP & CFO from June 2010 to October 2014; continued serving as CFO until March 2015 • VP, Global Finance, & CAO from March 2007 to May 2010 BOARD ROLES Executive Chairman Finance Committee Chair OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None | SELECT SKILLS AND QUALIFICATIONS U.S. public company leadership experience • Held roles of increasing responsibility at our company, including CFO, COO and Industry experience • Served in Functional experience • Technical finance expertise having served as CAO and CFO and environmental sustainability expertise from advancing our sustainability goals value-creation opportunities • Supervisory experience in marketing, M&A, cybersecurity and R&D as CEO Works/Has Worked Outside the U.S. • Work assignments in Europe
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Avery Dennison Corporation| 2018 Proxy Statement |30
| 45 |
| PATRICK T. SIEWERT | |||
Age 68 Director since April 2005 Independent | RECENT BUSINESS EXPERIENCE The Carlyle Group, a • Retired Managing Director and Partner The Coca-Cola Company, a beverage company •
Executive Committee member and Group President, Asia, from August 2001 to
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Governance Committee Chair
Finance Committee Member
Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS U.S. public company board experience • Concurrent service on one other board Industry experience •
Functional experience •
Works/Has Worked Outside the U.S. • 25+ years working in Asia Pacific
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BOARD LEADERSHIP ROLES
Audit Committee Chair
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SELECT BUSINESS EXPERIENCE
JPMorgan Chase & Co., a global financial services firm
•
Chairman of California and Executive Committee Member from September 2009 to January 2013
Goldman Sachs & Co., an investment banking, securities and investment management firm
•
Partner/Managing Director from 1982 to 1998
Age Director since Independent |
RECENT BUSINESS EXPERIENCE GoTo Group, Inc. (formerly LogMeIn, Inc.), a provider of software as a service and cloud-based remote work tools • President & CEO from December 2015 to January 2022 • President & COO from January 2015 to December 2015 • COO from May 2013 to December 2014 BOARD ROLES Audit Committee Member Governance Committee Member OTHER PUBLIC COMPANY BOARDS Current:
Semrush Holdings, Inc. Past Five Years:
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SELECT SKILLS AND QUALIFICATIONS
• Led
U.S. public company board experience •
Concurrent service on three other boards Industry experience • 25+ years of digital/technology industry expertise, as well as extensive experience in technology-based consumer goods, in each case complementing our Solutions Group and our strategy to lead at the intersection of the physical and digital Functional experience • Technical cybersecurity expertise, as well as marketing expertise as functional leader at two
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Governance Committee Chair
Audit Committee Member
46 | 2024 Proxy Statement | Avery Dennison Corporation |
Avery Dennison Corporation| 2018 Proxy Statement |31
In recommending non-employee director compensation to our Board, the Compensation Committee seeks to target compensation ataround the median of similar-sizecompanies similar in size, global scope and complexity with which we compete for director talent. The majority of compensation is delivered in equity to align director interests with those of our stockholders. Because he retired from
Annual Target Compensation
The components of our company at the end of 2017, Mr. Scarborough will be compensated pursuant to our 2023 non-employee director compensation program beginningare shown in 2018.
MEDIAN TOTAL REMUNERATIONthe charts below.
After having been unchanged for three years,
| 2023 NON-EMPLOYEE DIRECTOR COMPENSATION | ||||||
Target Grant Date Fair Value of RSUs | $ | 170K |
| |||
Board Retainer | $ | 100K | ||||
Match of Charitable/Educational Contributions | $ | 10K | ||||
Additional Retainers* | ||||||
Lead Independent Director | $ | 30K | ||||
Audit Committee Chair | $ | 25K | ||||
Compensation Committee Chair | $ | 20K | ||||
Governance Committee Chair | $ | 20K | ||||
| * | There is currently no additional Finance Committee Chair retainer because our Executive Chairman is serving in that capacity. |
Our 2017 Incentive Award Plan limits the sum of the grant date fair value of equity awards and the cash compensation provided to non-employee directors during any calendar year to $600,000.
Compensation Setting
Non-employee director compensation was increasedis reviewed by the Compensation Committee every three years. In February 2024, the Compensation Committee’s independent compensation consultant analyzed trends in 2016 based uponnon-employee director compensation and assessed our program’s market competitiveness.
Using benchmark data from public filings of companies in the Fortune 350-500, WTW recommended the following adjustments to non-employee director compensation: the target grant date fair value of the annual RSU award increase by $15,000; the Board retainer increase by $15,000; the additional retainer for our Lead Independent Director increase by $15,000; and the additional retainers for our Audit, Compensation and Governance Committee Chairs increase by $10,000, $5,000 and $5,000, respectively. These modest increases would bring total direct compensation for regular Board service to $300,000 (or $310,000 with the charitable match), the projected median of Fortune 350-500 companies in 2027, the next time the Compensation Committee plans to review the program. Giving consideration to the advice of Willis Towers WatsonWTW, the Compensation Committee recommended to our Board that the target grant date fair value of the annual award of RSUs be increased to $185,000; the Board retainer be increased to $115,000; the additional retainer of our previous overall compensation was belowLead Independent Director be increased to $45,000; and the market median. To maintain the program's market-competitivenessadditional retainers for our Audit, Compensation and attractGovernance Committee Chairs be increased to $35,000, $25,000 and retain qualified directors, upon$25,000, respectively.
Upon the recommendation of the Compensation Committee, our Board approved changes to target total non-employee director remuneration at the market median through 2017. The primary components of our revised non-employee director compensation program, are summarized ineffective as of the charts below and described thereafter.
 |  |
Based ondate of the advice of Willis Towers Watson, the Compensation Committee recommended to our Board that the supplemental Lead Independent Director retainer be further increased from $25,000 to $30,000 to more closely align with market practices. Our Board approved the increase effective May 1, 2017.Annual Meeting.
STOCK OWNERSHIP GUIDELINESStock Ownership Policy
Our stock ownership guidelines require policy requires non-employee directors to own at least $500,000 inof our company stock, 50% of which must be held in vested shares. In February 2017, upon the advice of Willis Towers Watson, the Compensation Committee discontinued considering stock option gains towards measuring guideline compliance, counting onlyOnly shares owned directly or in a trust, deferred stock units (DSUs)DSUs and RSUs. These changes, which made the guidelines more stringent, were consistent with the changes madeunvested RSUs subject to our executive stock ownership guidelines effective 2017.time-based vesting are measured to determine policy compliance.
Directors are prohibited from hedging or pledging
All of our common stock.
Except for our newest director who has five years to reach hisnon-employee directors have achieved the minimum ownership level, all of our directors satisfy the holding requirements ofrequired by our stock ownership guidelines. Nonepolicy other than Mr. Wagner and Mses. Reverberi and Mejia who have five years from the date of our directors has hedged or pledged our common stock.
Avery Dennison Corporation| 2018 Proxy Statement |32
Tabletheir respective Board appointment to achieve that level. The average ownership of Contents
EQUITY COMPENSATION
The 2017 equity grant to all other then-serving non-employee directors was made in12x the formminimum ownership requirement at year-end 2023.
Avery Dennison Corporation | 2024 Proxy Statement | 47 |
Equity Compensation
The annual equity award to non-employee directors consists of RSUs that vest in one year,on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected; however, unvestedelected. Unvested RSUs (i) fully vest upon a director'sdirector’s death, disability, retirement from our Board after reaching age 72 or termination of service within 24 months after a change of control. Unvested RSUscontrol and (ii) are generally cancelled in the event a director voluntarily resigns, is not re-electedreelected by stockholders or isleaves our Board before vesting, unless otherwise asked to leave our Board.determined by the Compensation Committee. On May 1, 2017,2023, each of our then-serving non-employeedirectors was granted 1,678awarded 971 RSUs with a grant date fair value of approximately $140,000 based on the fair market value of our common stock on that date.$166,978.
On February 1, 2017, the date of his23, 2023, in connection with her appointment to our Board, Mr. LopezMs. Reverberi received a prorated equity grant for the remainderan award of the term expiring at the 2017 Annual Meeting consisting of 445155 RSUs with a grant date fair value of approximately $35,000 based$27,817, reflecting the annual equity award of $170,000 prorated for the remaining two months of the term ending at the 2023 Annual Meeting.
Following his departure from our Board in November 2023 and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to accelerate the vesting of the RSUs granted to Mr. Anderson on the fair market valueMay 1, 2023 in recognition of his decade-plus service on our common stock on that date.Board.
DEFERRABLE CASH COMPENSATIONDeferrable Cash Compensation
CashAnnual retainers are paid semiannually and prorated for any director'sdirector’s partial service during the year. Directors are also reimbursed for travel expenses incurred to attend Board meetings and continuing education events.
Non-employeeOur non-employee directors may chooseelect to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Plan,Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by an insurance company;a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation PlanProgram (DDECP); or (iii) a combination of cash and DSUs. NoneIn 2023, none of our current then-serving non-employee directors participatesparticipated in the DVDCP and eightfour of our non-employee directors participatethem participated in the DDECP. Dividend equivalents, representing the value of dividends paid on shares of our common stock calculated based on the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs.
When a director participatingparticipant in the DDECP retires or otherwise ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director'sdirector’s service, with the resulting number of shares of our common stock, less fractional shares, issued to the director. Dividend equivalents, representing the value of dividends per share paid onIn connection with his departure from our Board effective November 30, 2023, Mr. Anderson was issued 13,102 shares of our common stock calculated with reference to the number of DSUs held as of a dividend record date, are reinvestedreflecting his DDECP account balance on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP.that date.
MATCHING GIFT PROGRAMCharitable Match
We match up to $10,000 per year of a each non-employee director's director’s documented contributions to charitable organizations or educational institutions.
Avery Dennison Corporation| 2018 Proxy Statement |33
48 | 2024 Proxy Statement | Avery Dennison Corporation |
| NAME | | FEES EARNED OR PAID IN CASH(1) | | STOCK AWARDS(2) | | CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS(3) | | ALL OTHER COMPENSATION(4) | | TOTAL | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||||||||||
Bradley A. Alford | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | $ | 7,000 | | | $ | 243,973 | | |||
Anthony A. Anderson | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | | | — | | | $ | 236,973 | | ||
Peter K. Barker | | | $ | 115,000 | | | | $ | 136,973 | | | | — | | $ | 10,000 | | | $ | 261,973 | | |||
Ken C. Hicks | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | | | $ | 10,000 | | | $ | 246,973 | | |
Andres A. Lopez | | | $ | 91,667 | | | | $ | 170,721 | | | | — | | — | $ | 262,388 | | ||||||
David E.I. Pyott | | | $ | 128,333 | | | | $ | 136,973 | | | | $ | 8,336 | | | | $ | 10,000 | | | $ | 283,642 | |
Patrick T. Siewert | | | $ | 120,000 | | | | $ | 136,973 | | | | — | | — | $ | 256,973 | | ||||||
Julia A. Stewart | | | $ | 115,000 | | | | $ | 136,973 | | | | — | | | | $ | 10,000 | | | $ | 261,973 | | |
Martha N. Sullivan | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | $ | — | $ | 236,973 | | |||||
(1)Messrs. Butier and Scarborough do not appear in the table because they were employed by our company in 2017 and did not receive any additional compensation to serve as directors. Amounts represent retainers earned as shown in the table below. At their election, the following directors deferred their cash compensation through the DDECP, with the following balances of DSUs in their accounts as of December 30, 2017, the last day of our 2017 fiscal year: Alford — 16,154; Anderson — 8,070; Barker — 27,225; Hicks — 12,512; Lopez — 285; Pyott — 47,642; Stewart — 35,475; and Sullivan — 7,967.
| DIRECTOR | | BOARD LEADERSHIP ROLES | | BOARD RETAINER | | COMMITTEE CHAIR RETAINER | | LEAD DIRECTOR RETAINER | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |||||||||
| Alford | | | | | $ | 100,000 | | | | — | | — | | | ||||
| Anderson | | | | $ | 100,000 | | | | — | | | | — | | | |||
| Barker | | Governance Committee Chair | | | $ | 100,000 | | | | $ | 15,000 | | | | — | | | |
| Hicks | | | | $ | 100,000 | | | | — | | | | — | | | |||
| Lopez | | | | | $ | 91,667 | | | | — | | — | | | ||||
| Pyott | | Lead Independent Director | | | $ | 100,000 | | | | — | | | | $ | 28,333 | | | |
| Siewert | | Audit Committee Chair | | | $ | 100,000 | | | | $ | 20,000 | | | | — | | | |
| Stewart | | Compensation Committee Chair | | | $ | 100,000 | | | | $ | 15,000 | | | | — | | | |
| Sullivan | | | | | $ | 100,000 | | | | — | | — | | | ||||
(2)Amounts reflect the grant date fair value, without adjustment for forfeitures, of 1,678 RSUs granted on May 1, 2017. Amount for Mr. Lopez also reflects the grant date fair value, without adjustment for forfeitures, of 445 RSUs granted on February 1, 2017 in connection with his appointment to our Board. The fair value of RSUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends. Each non-employee director serving as of December 30, 2017 held 3,707 unvested RSUs, except for Mr. Lopez, who held 2,123 unvested RSUs.(3)We do not currently have a retirement benefit program for non-employee directors. Amount for Mr. Pyott reflects the change in present value of his accumulated benefits under a director retirement plan the accrual of benefits under which was frozen in 2002, based on an interest rate of 3.03% as of December 30, 2017.(4)Amounts reflect our matching gifts for contributions made to charitable organizations or educational institutions.
Avery Dennison Corporation| 2018 Proxy Statement |34
| Name(1) | Fees Earned or Paid in Cash(2) | Stock Awards(3) | All Other Compensation(4) | Total | ||||||||||||||||
Bradley A. Alford | $100,000 | $166,978 | $ 2,000 | $268,978 | ||||||||||||||||
Anthony A. Anderson(2) | $ 50,000 | $166,978 | — | $216,978 | ||||||||||||||||
Ken C. Hicks | $100,000 | $166,978 | $10,000 | $276,978 | ||||||||||||||||
Andres A. Lopez | $100,000 | $166,978 | — | $266,978 | ||||||||||||||||
Francesca Reverberi | $100,000 | $194,795 | — | $294,795 | ||||||||||||||||
Patrick T. Siewert | $150,000 | $166,978 | $10,000 | $326,978 | ||||||||||||||||
Julia A. Stewart | $120,000 | $166,978 | $10,000 | $296,978 | ||||||||||||||||
Martha N. Sullivan | $125,000 | $166,978 | $10,000 | $301,978 | ||||||||||||||||
William R. Wagner | $100,000 | $166,978 | $10,000 | $276,978 | ||||||||||||||||
| (1) |
|
| (2) | Amounts represent retainers earned as shown in the table below. At their election, the following directors had, for one or more years during their service, deferred compensation through the DDECP, with the following number of DSUs in their accounts as of December 30, 2023, the last day of our 2023 fiscal year: Mr. Alford – 22,398; Mr. Hicks – 15,330; Mr. Lopez – 1,649; Ms. Stewart – 43,303; and Ms. Sullivan – 13,864. Following his departure from our Board in November 2023, Mr. Anderson was issued 13,102 shares of our common stock reflecting his DDECP account balance, less fractional shares, on his separation date. |
| Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | |||||||||||||
Alford |
| $ | 100,000 | — | — | ||||||||||||
Anderson |
| $ | 50,000 | — | — | ||||||||||||
Hicks |
| $ | 100,000 | — | — | ||||||||||||
Lopez |
| $ | 100,000 | — | — | ||||||||||||
Reverberi |
| $ | 100,000 | — | — | ||||||||||||
Siewert | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 20,000 | $ | 30,000 | ||||||||||
Stewart | Compensation Committee Chair | $ | 100,000 | $ | 20,000 | — | |||||||||||
Sullivan | Audit Committee Chair | $ | 100,000 | $ | 25,000 | — | |||||||||||
Wagner |
| $ | 100,000 | — | — | ||||||||||||
| (3) | Amounts reflect the grant date fair values of RSUs in accordance with Accounting Standards Codification Topic 718, Compensation, Stock Compensation (ASC 718). Fair values were determined based on the fair market value of our common stock on the respective grant date, adjusted for foregone dividends. Each non-employee director serving at year-end 2023 held 971 unvested RSUs, except that Ms. Reverberi held 1,126 unvested RSUs. |
| (4) | Amounts reflect our match of documented contributions made to charitable organizations or educational institutions. |
Avery Dennison Corporation | 2024 Proxy Statement | 49 |
ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
After considering the preliminary voting results of the advisory vote on the frequency of our say-on-pay vote votes at our 2017the 2023 Annual Meeting, our Board determined to hold continue holding say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (expected to occur at our 2023 Annual Meeting).
In this Item 2, our stockholders are being asked to vote on the following resolution:
RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's Named Executive Officers (NEOs), as described in theCompensation Discussion and Analysis andExecutive Compensation Tables sections of the Company's 2018 proxy statement.
RECOMMENDATION OF BOARD OF DIRECTORS
We remain committed to ongoing engagement with our stockholders to solicit their viewpoints and discuss why we believe our executive compensation program properly aligns with our strategies by encouraging our leaders to deliver strong financial performance and create superior long-term, sustainable value for our customers, employees, investors and communities.Our Board of Directors recommends that you vote FOR approval, on an advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.
annually. The advisory vote is a vote to approve the compensation of our NEOs, as described in theCompensation Discussion and Analysis (CD&A) andExecutive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the compensation of our non-employee directors, our CEO pay ratio or pay vs. performance disclosures, or the features of our compensation program designed to preventthat mitigate excessive risk-taking as described inRisks Associated with Compensation Policies and Practices.risk-taking.
The results of the advisory vote are not binding on our Board. However, in accordanceconsistent with SEC regulations,its historical practice, the Compensation Committee will disclose the extent to which it takes into account the resultsits consideration of the vote results in the CD&A of our 2019 proxy statement.
Avery Dennison Corporation| 2018 Proxy Statement |35
|
The Compensation and Executive Personnel Committee (referred to in this report as the "Committee") of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) section of Regulation S-Kour 2025 proxy statement.
Board Recommendation
We are committed to maintaining ongoing engagement with management and, based on its review and those discussions, has recommendedour investors to our Boarddiscuss the alignment of Directors that the CD&A be included in our 2018 proxy statement and incorporated by reference into our 2017 Annual Report on Form 10-K.
The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicateprogram with our strategies and the Committee by writingincentives it provides our leaders to the Compensationdeliver strong financial performance and Executive Personnel Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.continuous sustainability progress, creating superior long-term, sustainable value for our customers, investors, employees and communities.
Julia A. Stewart, ChairBradley A. AlfordKen C. HicksDavid E. I. PyottMartha N. Sullivan
Avery Dennison Corporation| 2018 Proxy Statement |36
Our Board recommends that you vote FOR approval, on an advisory basis, of our executive compensation. |
Properly dated and signed proxies will be so voted unless you specify otherwise.
50 | 2024 Proxy Statement | Avery Dennison Corporation |
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This Compensation Discussion and Analysis (CD&A)CD&A* describes the principles and practices underlying our executive compensation program and the decisions made byof the Compensation and Executive Personnel Committee (referred to in this CD&A as the "Committee"“Committee”) related to 2017regarding 2023 executive compensation. This CD&A containsIt includes the sections shown below.
•Executive Summary–Business Strategy Overview–On Track to Deliver Financial Targets–2017 Financial Performance–Disciplined Capital Allocation–Three-51 51 52 52 53 2023 Say-on-Pay Vote and Feedback During Stockholder Engagement
53 54 54 Overview of Pay Philosophy and Executive Compensation Components
55 57 58 59 61 61 61 67 70 72 72 73 74 75 77 EXECUTIVE SUMMARY
Our strategic pillars and
Five-Year Cumulative TSR Outperformance–2017 Say-on-Pay Vote and Stockholder Feedback During 2017 Engagement–2017 NEOs–Overview of Pay Philosophy and Executive Compensation Components–Continuous Evolution of Compensation Program–Strong Compensation Governance Practices
•Summary of Compensation Decisions for 2017•Discussion of Compensation Components and Decisions Impacting 2017 Compensation–Base Salary–2017 AIP Awards–2017 Grants of LTI Awards–2017 Vesting of Previously Granted LTI Awards–Perquisites–Relocation and Other Temporary Benefits–General Benefits–Severance Benefits
•Compensation-Setting Tools•Independent Oversight and Expertise•Other Considerations
BUSINESS STRATEGY OVERVIEW
Overrelated 2023 achievements are described in the last several years, weproxy summary. We have been successfully executingconsistently executed our business strategies, which are designed to createdelivering long-term, sustainable value for our customers, employees, and investors and improve the communities in which we operate. From our stockholders' perspective,investors. We believe that this value is best measured by our total stockholder return (TSR)TSR and economic value added (EVA),cumulative EVA, both of which are performance objectives used in our LTI program and inform how we set our goals for sales growth, operating margin improvement, asset efficiency, ROTC and capital allocation.
We communicatedHighlights of our financial performance are shown below. Our overriding focus remains on ensuring the long-term goals in 2014 for the organic sales growth, adjusted earnings per share (EPS) growthsuccess of our stakeholders, and, return on total capital (ROTC) we planned to achieve by 2018, raising the bar over the five-year goals we established in 2012 and substantially achieved through 2015. With only one year remainingas described in the 2014-2018 period,proxy summary, we are on trackhave a clear set of strategies to achieve or exceed our targets.deliver for them.
In late 2016, we changed our operating structure to align with our overall business strategy. As a result, our results are now based on the following segments: Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS), and Industrial and Healthcare Materials (IHM). Progress Toward 2025 Financial Targets
In March 2017,2021, we announced newfinancial targets through 2025. Given the challenges we experienced in 2023, our progress toward these long-term goals for 2021 for these new segments,targets slowed during the year; however, we expect significant progress in 2024 as well as for our company as a whole, targeting continued solid organic sales growthlabel and double-digit growth in adjusted EPS on a compound annual basis.
*This CD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risksapparel markets rebound anduncertainties, which could cause actual results to differ materially from the results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a. "Risk Factors" and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2017 Annual Report on Form 10-K, filed on February 21, 2018 with the SEC (our "2017 Annual Report"). Stockholders should note that statements contained in this CD&A regarding our company and business performance targets and goals should not be interpreted as management's expectations, estimates of results or other guidance.
Avery Dennison Corporation| 2018 Proxy Statement |37
To achieve our targets, we have been consistently executing four key strategies. First, we are focused on driving outsized growth in high value product categories (organically and through acquisitions) to improve our portfolio mix over time. Product categories are defined as high value when they serve markets that are growing faster than gross domestic product (GDP), represent large pools of potential profit and leverage our core capabilities. Examples include specialty and durable label materials, graphic and reflective materials, industrial tapes, and radio-frequency identification (RFID) inlays and tags. In 2017, we delivered above-average growth in these categories, while also increasing our exposure to them through acquisitions.
Second, we are focused on delivering solid growth in our baseIntelligent Labels business by carefully balancing volume, price and mix; reducing complexity; and tailoring our go-to-market strategies.accelerates.
Third, we remain highly focused
| * | This CD&A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the expected results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2023 Annual Report. Statements contained in this CD&A regarding our company and business performance targets and goals should not be interpreted as management’s expectations, estimates of future results or other guidance. |
Avery Dennison Corporation | 2024 Proxy Statement | 51 |
In 2021-2023, on continuously improving productivity to expand margins, enhance our competitiveness and provide a funding source for reinvestment. Product reengineering and lean operating principles are among the levers we use in executing this strategy.
Our final key strategy is to be a highly disciplined allocator of capital. This applies to our acquisition criteria and how we deploy capital for organic growth and productivity, as well as our approach to stockholder distributions.
ON TRACK TO DELIVER FINANCIAL TARGETS
Our 2014-2018 financial goals included an organic sales growth target of 4% to 5%, reflecting confidence in the trajectory of our two largest businesses. We also targeted double-digit adjusted EPS growth. For the first time, we externally communicated a target for return on total capital (ROTC), which has long been a key internal financial metric for our company. We believe that the combination of our growth and ROTC targets effectively communicates our value creation objectives, which together are a proxy for EVA, one of the performance objectives used in our LTI program. As shown on the following page, based on our results for the first four years of this five-year period, we are on track to achieve or exceed our 2018 commitments to investors. For the 2014-2017 period, on athree-year compound annual basis reported sales grew by 2%(with 2020 as the base period), reported EPS grew by 10% andGAAP reported net sales increased by 6.3%, while GAAP operating income, grewnet income and EPS decreased by 7%1.1%, 3.3% and 2.1%, respectively. GAAP reported operating margin in 2023 was 9.4%.
Organic sales growth, adjusted EPS, ROTC and adjusted ROTC — as well as free cash flow, which is described on page 40 — are non-GAAP financial measures that we provide to investors to assist them in assessing our performance and operating trends. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable financial measures under generally accepted accounting principles in the United States of America (GAAP) and are reconciled to GAAP inAppendix A of this proxy statement.
|
| 2021-2025 Targets | 2021-2023 Results(1) | ||
Sales Change Ex. Currency(2) | 5%+ | 7.7% | ||
Adjusted EBITDA Growth(2)(3) | 6.5% | 5.7% | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.1% in 2023 | ||
Adjusted EPS Growth(2) | 10% | 3.6% | ||
ROTC | 18%+ | 12.4% in 2023 | ||
Avery Dennison Corporation| 2018 Proxy Statement |38
| (1) | Results for non-GAAP measures are reconciled from GAAP in Appendix A of this proxy statement. | |||
| Percentages | ||
|
|
| (3) | Although adjusted EBITDA growth was not one of our original financial targets, it was implied by our sales change ex. currency and adjusted EBITDA margin targets. The foreign currency translation impact to EBITDA was a benefit of approximately $38 million in 2021 and a headwind of approximately $81 million and $20 million in 2022 and 2023, respectively. |
2023 Financial Performance
Although a lower demand environment driven primarily by inventory destocking downstream from our company resulted in a challenging year in which we did not realize our annual performance expectations, we delivered sequential improvement each quarter and continued advancement in key growth areas such as Intelligent Labels. Key financial results for the year are shown below.
2023 FINANCIAL RESULTS | ||||||
| Net Sales | Reported EPS | Cash From Operating Activities | Net Income | |||
| $8.4B | $6.20 | $826.0M | $503.0M | |||
|
| |||||
|
| |||||
In March 2017, we announced 2017-2021 goals, targeting continued solid organic sales growth and double-digit growth in adjusted EPS on a compound annual basis. While we are only one year into this five-year period, we are on pace to deliver these targets, as shown below. Compared to 2016, in 2017, reported sales grew by 9% and — driven by the provisional estimated impact of the Tax Cuts and Job Act (TCJA) — reported EPS and reported net income each declined by 12%.
| Delivered ROTC of |
Avery Dennison Corporation| 2018 Proxy Statement |39
Table of ContentsEffective Capital Allocation
2017 FINANCIAL PERFORMANCE†
Fiscal year 2017 marked our sixth consecutive year of strong top-line growth, margin expansion and double-digit adjusted EPS growth. We exceeded our financial goals for the year, with the accomplishments shown below.
•Achieved net sales of approximately $6.6 billion, an increase of 8.7% over the prior year, through a balance of organic growth and acquisitions.•Excluding the impact of currency, sales grew by 8.2%; on an organic basis, sales grew by 4.2%, driven by growth in high value product categories and businesses serving emerging markets.•Although reported EPS decreased from $3.54 in 2016 to $3.13 in 2017 due to a substantial increase in our provision for income taxes to reflect the provisional estimated impact of the TCJA, adjusted EPS increased from $4.02 to $5.00, significantly exceeding the high end of the $4.30-$4.50 guidance range we gave in February 2017.•With net cash provided by operating activities of $650.1 million, delivered free cash flow of $421.7 million. Free cash flow refers to cash flow from operations, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from sales (purchases) of investments.•On reported net income of $281.8 million, achieved return on total capital (ROTC) of 12.9%; adjusted to exclude the net impact of the TCJA, ROTC increased to 18.8%.•Continued our disciplined approach to capital allocation by investing $226.1 million in capital expenditures to support organic growth and $319.3 million in acquisitions and equity investments, while allocating $155.5 million to dividends and $129.7 million to share repurchases.
DISCIPLINED CAPITAL ALLOCATION
We achieved these results while maintaining a healthy balance sheet and continuing the disciplined execution of our capital allocation strategy. Over the last five years, we have allocated nearly $2 billion to dividends and repurchases. In 2017, we deployed approximately $285 million to (i) repurchase 1.5 million shares at an aggregate cost of nearly $130 million and (ii) pay an annual dividend of $1.76 per share for an aggregate amount of over $155 million. We have paid quarterly dividends for decades and raised our quarterly dividend rate by 125% since 2010; most recently, we raised the quarterly dividend rate by 10% in April 2017. Given our increased use of available capital for acquisitions and equity investments, we repurchased fewer shares in 2017 compared to prior years.
†For complete information regarding our 2017 performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" — in particular the information contained under the heading "Non-GAAP Financial Measures" — and our audited consolidated financial statements and notes thereto contained in our 2017 Annual Report.
Avery Dennison Corporation| 2018 Proxy Statement |40
We have also allocated capital to investinginvested in our businesses to support organic growth and pursuing targeted acquisitionsacquired companies that support our strategy of increasing our exposure to high value product categories. In 2017, we increased our spending on capital expenditures by approximately 9% over the prior year to grow our business and continued to take actions to improve our profitability and expand our margins. In addition,capabilities in high-value product categories, increase our pace of innovation and advance our sustainability priorities. Our fixed and IT capital spending in 2023 of $285.1 million was comparable to 2022, reflecting our continued investment in high-value categories, particularly our Intelligent Labels business. During the year, we successfully completedacquired Thermopatch, Lion Brothers and integratedSilver Crystal; together, these acquisitions expand the acquisitions of (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturer of specialty films and laminates; (ii) Yongle Tape Ltd., a China-based manufacturer of specialty tapes and related products usedexternal embellishments portfolio in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare products used in the management of wound care and skin conditions.our Solutions Group. We also made equity investmentsone venture investment in two other companies.a company developing technological solutions that we believe have the potential to advance our strategies.
THREE- AND FIVE-YEAR CUMULATIVE TSR OUTPERFORMANCEIn 2023, we paid $256.7 million in dividends of $3.18 per share and repurchased 0.8 million shares of our common stock. We raised our quarterly dividend rate by ~8% in April 2023.
52 | 2024 Proxy Statement | Avery Dennison Corporation |
As shown below, withover the last five years, we have deployed over $2 billion to acquisitions (including venture investments) and returned over $2 billion to stockholders in dividends and share repurchases.
CAPITAL ALLOCATION HIGHLIGHTS |
|
Longer-Term TSR of nearly 67%Outperformance
Although our TSR in 2017, we delivered cumulative2023 was modestly below the TSR for the 2015-2017 three-year period and the 2013-2017 five-year period that significantly outperformed the S&P 500® and the median of the S&P 500 Index and the S&P 500 Industrials Index and Materials subsets (we are a membermodestly above the Dow Jones U.S. Container & Packaging Index, our five-year cumulative TSR significantly outperformed all three of these comparator groups.
5-YEAR CUMULATIVE TSR |
1-, 3- AND 5-YEAR TSR |
| AVY | S&P 500 Index | S&P 500 Industrials Index | Dow Jones U.S. Container & | |||||
2019 | 49% | 31% | 29% | 29% | ||||
2020 | 21% | 18% | 11% | 21% | ||||
2021 | 41% | 29% | 21% | 11% | ||||
2022 | (15)% | (18)% | (5)% | (18)% | ||||
2023 | 14% | 26% | 18% | 8% | ||||
3-Year TSR | 37% | 33% | 35% | (2)% | ||||
5-Year TSR | 145% | 107% | 94% | 53% | ||||
2023 Say-on-Pay Vote and Feedback During Stockholder Engagement
At the Materials subset, but also share many characteristics with members of the Industrials subset; investors have informed us that they look at both subsets in evaluating our relative performance, as we do internally). TSR measures the return we have provided to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment thereof).
1-, 3- and 5-YEAR TSR | ||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 3-Year TSR | 5-Year TSR | ||||||||
| | | | | | | | | | | | | | | |
AVY | 47.5% | 6.2% | 23.8% | 14.6% | 66.7% | 136.4% | 270.3% | |||||||
| | | | | | | | | | | | | | | |
S&P 500 | 32.4% | 13.7% | 1.4% | 12.0% | 21.8% | 38.3% | 108.1% | |||||||
| | | | | | | | | | | | | | | |
S&P 500 Indus. & Mats.* (median) | 41.0% | 11.7% | (4.7)% | 19.0% | 27.5% | 49.2% | 134.8% | |||||||
*Based on companies in subsets as of December 31, 2017.
Avery Dennison Corporation| 2018 Proxy Statement |41
2017 SAY-ON-PAY VOTE AND STOCKHOLDER FEEDBACK DURING 2017 ENGAGEMENT
We continued our practice of maintaining ongoing dialogue with stockholders in 2017. The Committee made significant changes to our executive compensation program in recent years to address direct feedback from our stockholders and more closely align our LTI program with our financial profile and business strategies, demonstrating the Committee's commitment to paying for performance and being responsive to stockholder feedback. SeeContinuous Evolution of Compensation Program later in this CD&A. In 2017, during our ongoing stockholder engagement program, we discussed our executive compensation program with some2023 Annual Meeting, ~93% of our stockholders who expressed support for its current structure.
Results and Analysis of 2017 Vote
At the 2017 Annual Meeting, approximately 94% of our stockholders approved on an advisory basis, our executive compensation. The level of support we received was relatively consistent with the high approval rates for the last twowe received in recent years. The Committee believes that our consistently high approval rate, along with the positive feedback we received during our engagement with stockholders, reflects strong support of the changes to our compensation program made in recent years, as well as our consistently improving CD&A disclosure.
Stockholder Engagement Process
We value stockholder feedback on our executive compensation policies and practices, and we actively solicit input through our stockholder engagement program. Our ongoing engagement program takes place throughout the year, generally as shown in the graphic below.
Feedback During 2017 Engagement
We continued our longstanding practice of open dialogue with stockholders in 2017. In advance of the 2017 Annual Meeting, we contacted our 25 largest institutional stockholders, representing almost 50% of our then-outstanding shares. Board members, including our Lead Independent Director, and management were made available to answer questions and address concerns regarding our executive compensation and governance programs and the items being brought to stockholdersay-on-pay vote at the Annual Meeting. While we received responses from stockholders representing 25% of our then-outstanding shares, none of them felt that there was a need to substantively engage during that busy time.
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In the fall, we reached out to our 30 largest institutional stockholders, representing nearly 55% of our then-outstanding shares, to learn what issues are important to them without the time pressures associated with proxy season. As a result of these efforts, we received responses from stockholders representing over 30% of our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
During our 2017 engagement, with respect to matters related to executive compensation, our stockholders expressed support for our program generally and appreciated the increased graphical disclosure in our 2017 proxy statement. In addition, we discussed our approach to human capital management, in particular our diversity and inclusion efforts,results, as well as the linkage betweenfeedback related to our executive incentive compensation program we have received during our engagements with investors, demonstrate overall support of our program.
The Committee makes changes to our executive compensation program as appropriate to ensure it aligns with our evolving financial profile, business strategies and business strategies.sustainability priorities or address feedback from our investors. We also provided additional clarification onbelieve that this ongoing review and the market-leveraged stock units (MSUs) included in our LTI program.actions taken over time demonstrate the Committee’s commitment to paying for performance and being responsive to investor feedback.
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2017 NAMED EXECUTIVE OFFICERS (NEOs)
2023 NEOs
In this CD&A and theExecutive Compensation Tables section of this proxy statement, we provide compensation information for our 20172023 NEOs who are identifiedshown below.
| 2023 NEOs | ||||||||||||||||||||
| Name | Title at YE | NEO Type | Executive Level | U.S./Non-U.S. | ||||||||||||||||
1 |
| Deon M. Stander | President & CEO | Corporate | 1 | U.S. | ||||||||||||||
| 2 |  | Mitchell R. Butier | Executive Chairman (former CEO) | Corporate | 1 | U.S. | ||||||||||||||
| 3 |  | Gregory S. Lovins | SVP & CFO | Corporate | 2 | U.S. | ||||||||||||||
| 4 |  | Francisco Melo | President, Solutions Group | Solutions | 2 | Non-U.S. | ||||||||||||||
| 5 |  | Deena Baker-Nel | SVP & CHRO | Corporate | 3 | U.S. | ||||||||||||||
| 6 | 
| Nicholas R. Colisto | SVP & CIO | Corporate | 3 | U.S. | ||||||||||||||
Leadership Transition
As discussed in the chart below.proxy summary, our Board executed a well-developed CEO succession planning process in May 2023, appointing Mr. Stander as President/CEO and Mr. Butier as Executive Chairman, in each case effective September 1, 2023.
In connection with their transition to these roles, giving consideration to the advice of its independent compensation consultant, WTW, the Committee made the decisions described below related to their compensation. Given the timing of the CEO transition, the compensation of Messrs. Stander and Butier for 2023 largely reflected their compensation as President/COO and CEO, respectively.
For Mr. Stander, increased his annual base salary from $700,000 to $1.1 million and his target AIP opportunity from 75% to 135% of base salary, in each case effective September 1, 2023 (with his 2023 AIP award to be prorated based on the portion of the year in which he served as COO and the portion of the year in which he served as CEO). The Compensation Committee preliminarily aligned to increase his target LTI opportunity from 300% to 550% of base salary, effective with the annual LTI award on March 1, 2024, subject to its review of market pay for similar roles at that time. In addition, the Committee approved a special promotion award to Mr. Stander on September 1, 2023 of stock options with a grant date fair value of approximately $3 million, 50% of which vests on each of the third and fourth anniversaries of the grant date, subject to his continued service. Mr. Stander’s annualized target TDC of $8.6 million (excluding the special promotion award) was set less than the market median; the Committee believed that positioning his compensation at the market 40th percentile compensated him within a reasonable CEO market range but reflected that he was new to the CEO role. | ||
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The NEOs who
For Mr. Butier, reduced his annual base salary from $1.3 million to $1 million and his target AIP opportunity from 160% to 120% of base salary, in each case effective September 1, 2023 (with his 2023 AIP award to be prorated based on the portion of the year in which he served atas CEO and the endportion of our 2017 fiscalthe year (which excludes Ms. Bramman) are collectively referred to in this CD&Awhich he served as our "Current NEOs."
OVERVIEW OF PAY PHILOSOPHY AND EXECUTIVE COMPENSATION COMPONENTS
Executive Chairman). He received no special LTI award in connection with his role change. The Committee has designed ourset Mr. Butier’s annualized target TDC consistent with the market median for an executive chairman role, reflecting the mentorship and guidance he would be providing to help ensure a smooth CEO transition.
Overview of Pay Philosophy and Executive Compensation Components
Our executive compensation program to reflect itsreflects the Committee’s philosophy that a substantial majority of compensation should be tied to our success in meetingachieving our performancefinancial objectives and creating stockholder value, providing higher realized compensation when we deliver superior, sustained performance. The objectiveobjectives of this strategy isare to motivate our executives to achieve our annual and long-term financial goals and recognize their contributions to delivering strong performance.goals.
The Committee implements its pay-for-performance philosophy primarily throughas follows:
| • | Establishing target TDC to incent strong operational and financial performance and stockholder value creation, giving consideration to median pay at similar-size companies, role responsibilities, individual performance, tenure, retention and succession |
| • | Aligning annual incentives for executives with our financial goals for the year |
| • | Rewarding long-term performance using absolute and relative TSR, as well as cumulative EVA, to focus our executives on delivering sustainable stockholder value creation |
The substantial majority of target TDC is performance-based, meaning that our NEOs ultimately may not realize the following:
•Establishing total direct compensation (TDC)value of at-risk components if we fail toincent economic and stockholder value creation,giving consideration toachieve themarket median of companies similar in size, scope and complexity with which we compete for executive talent, role responsibilities, individualdesignated performancetenure, retention, and succession;•Aligning our annual incentives with our annual operating planand key financial and strategic goals; and•Rewarding long-term performance using absolute and relative TSR, as well as cumulative EVA, to focus our executives on consistent and sustainable stockholder value creation.
objectives. Incentive compensation for the year consistedconsists of a target award opportunityopportunities under our Annual Incentive Plan (AIP)AIP and long-term incentive (LTI) programs,our LTI compensation program, with payouts determined based on our performance against goalsthe threshold, target and maximum levels established by the Committee in February 2017.Committee. The Committee structures annual incentive compensation to reward NEOs primarily based on corporatecompany or business performance to motivate them and align their compensation with stockholder interests, giving consideration to their individual contributions in achieving our financial results. Our LTI awards provide upside opportunity for exceeding performance targetsinterests. The mix and downside risk, up to and including cancellation, for failing to achieve threshold performance, with EVA targets generally consistent with our externally communicated long-term financial goals for earnings growth and ROTC. AIP targets are generally established at or above the midpointelements of our annual guidance and consistent with our long-term financial goals.
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Elements of Total Direct Compensation for Corporate NEOs
As shown in the graph below, the substantial majority of our Current NEOs' 2017NEO target TDC was performance-based.are shown below.
2017 Target Total Direct Compensation
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 | ANNUALIZED TARGET TDC MIX | 2023 TARGET TDC MIX | ||||||||
| CEO* |
| | Avg. of Other NEOs** |
| |||||
| * | Mr. Stander’s annualized target TDC reflects his compensation package as CEO, excluding his special promotion award of stock options with a grant date fair value of approximately $3 million. |
| ** | Mr. Butier is excluded because his target 2023 TDC primarily reflected his compensation as CEO given the timing of our leadership transition. Mr. Melo’s target TDC mix included in the average reflects his target TDC as President, Solutions Group. |
| ELEMENTS OF NEO TARGET TDC | ||||||
| LTI Compensation | |||||
| PUs | Corporate NEOs | Solutions NEO | ||||
• 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Company EVA (50%) - Company Relative TSR (50%) | • 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Solutions Group EVA (75%) - Company Relative TSR (25%) | |||||
• Relative TSR payout capped at 100% if absolute TSR is negative | ||||||
| MSUs | • 50% of LTI with payout = 0% to 200% of target award • 100% Absolute TSR(3) • 1-, 2-, 3- and 4-year performance periods | |||||
| Annual Incentive Compensation | ||||||
| AIP Award* |
|
| ||||
• Drives performance consistent with annual company or business financial goals • Individual performance modifier based on achievement against predetermined strategic and sustainability objectives (generally capped at 100% for NEOs) | ||||||
• Annual fixed-cash compensation generally set around market median | ||||||
| * | AIP award |
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Over the past five years, our cumulative TSR has increased over 270% while the total compensation of our CEO has increased by only 13%. In the graph below, CEO compensation for 2019 through 2022 reflects Mr. Butier’s compensation as reported in our Summary Compensation Tables for those years and, for 2023, Mr. Stander’s compensation as reported in our 2023 Summary Compensation Table. Our CEO pay reflects the compensation ofhas generally reflected our former CEO,cumulative TSR except that Mr. Scarborough, from 2013 to 2015 and the compensation of our current CEO,Stander’s pay in 2023 was substantially lower than prior-year amounts for Mr. Butier for 2016 and 2017.
Five-Yearbecause it primarily reflected his compensation as COO, which was significantly lower than Mr. Butier’s as CEO, Pay and Cumulative TSR
CONTINUOUS EVOLUTION OF COMPENSATION PROGRAM
Over the past several years, the Committee has discussed the views expressed by our stockholders and proxy advisory firms with management and Willis Towers Watson, the Committee's independent compensation consultant, and has taken several actions in light of this feedback. Highlights of these changes are shown on the timeline on the following page; together they demonstrate the Committee's ongoing evaluation of our executive compensation program and efforts undertaken to continuously evolve the program to reflect market practices and changes in our financial profile and strategic focus, as well as address feedback from our stockholders.
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Tablehis special award of Contents
Executive Compensation Changes Madestock options with a grant date fair value of approximately $3 million granted in Recent Years
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STRONG COMPENSATION GOVERNANCE PRACTICESconnection with his promotion to CEO.
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|
Strong Compensation Governance Practices
Our executive compensation program incorporates the best practices shown below, which the Committee believes ensure that it serves the long-term interests of our stockholders.
| PAY FOR PERFORMANCE | ||||
Compensation Primarily Performance-Based | ✓ 87% of | |||
| Capped Annual Incentive Set and Long-Term Targets | ✓AIP award | |||
| Majority Long-Term Equity Incentive Compensation | ✓ LTI awards | |||
| Strategic Targeting | ✓ Target TDC (base salary + | |||
| COMPENSATION BEST PRACTICES | ||||
| No | ✓ NEOs employed without contract unless required by applicable laws in their | |||
Rigorous Stock Ownership | ✓ CEO | |||
| No Hedging or Pledging | ✓ Insider trading policy prohibits | |||
| Limited Trading Windows | ✓ NEOs may only transact | |||
| Median Burn Rate | ✓ Three-year average burn rate of 0.50% at | |||
| Compensation Clawbacks | ✓ Incentive compensation | |||
| No Excise Tax Gross Ups | ✓ No gross-up payments | |||
Double Trigger Equity Vesting | ✓Equity awards | |||
| Limited Perquisites | ✓Other than | |||
| Reasonable Severance Benefits | ✓Severance CEO: 2x (annual salary + | |||
All other NEOs (excl. Mr. Butier): 1x (annual salary + | ||||
Limited Change of Control Benefits | ✓ Enhanced severance for qualifying termination within 24 months following a change of control: CEO: 3x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium) + prorated target AIP award for year of termination Level 2 NEOs only: 2x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium) + prorated target AIP award for year of termination | |||
| STRONG GOVERNANCE | ||||
| Independent Oversight | ✓ Committee | |||
Expert Consultant | ✓ WTW provides | |||
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Avery Dennison Corporation| 2018 Proxy Statement |47
Integration of Sustainability Progress Tied to Strategy
In recent years, the Committee has engaged in discussions with its compensation consultant, WTW, and management and reviewed market practices regarding the integration of our sustainability progress into our executive compensation program. The Committee noted that one of our strategic pillars is leading in an environmentally and socially responsible manner, and its aim is to approve executive compensation that reflects our strategies and incents achievement of company goals.
The Committee has determined that our executive compensation program holds our leaders accountable and rewards their delivery of sustainability-related results. The Committee has noted, among other things, the factors described below.
| • | Approximatelyone-quarter of the measures on our 2023 business group scorecards related to sustainability, incenting our leaders to achieve these objectives and providing visibility and accountability to ensure continuous advancement. These scorecards help surface underperforming progress and offer an assessment tool in year-end performance discussions. |
| • | Our senior leadership, including our NEOs and Vice Presidents, is accountable for driving our sustainability progress. In making their compensation decisions, managers consider not only financial or business achievements, but also an individual’s success in advancing our sustainability goals, consistent with our company’s values and strategies. |
| • | Although the AIP financial modifier does not include quantitative sustainability-related measures, our financial performance in part reflects the success of our sustainability-driven products and solutions. In addition, a component in determining an AIP award is the individual modifier, which reflects a qualitative assessment of overall performance, including sustainability-related achievements, and can increase or decrease an executive’s AIP award. |
| • | Diversity and Sustainability are two of our company’s values. Our annual Leadership Excellence Awards are granted to individuals and teams globally in each of these categories, with recipients generally receiving at least a 120% individual modifier on their AIP award. In 2023, 38 employees received awards for either diversity or sustainability, with 17 additional individuals recognized for their work in their communities. |
The Committee recognizes that our sustainability progress has helped us deliver financial success in recent years. We have consistently innovated more sustainable solutions, which have provided significant competitive advantage, helping drive our success in the marketplace and deliver for our stakeholders.
The Committee has committed to regularly reviewing evolving stakeholder expectations and market practices, and reevaluating the continued appropriateness of its approach to the integration of sustainability progress in executive compensation. Reviewing benchmark data on market practices with management and WTW, the Committee observed that the majority of S&P 500 companies report considering sustainability performance in their executive compensation programs, with most doing so similarly to the way we do. In 2023, during its discussion of the feedback from our 2023 stockholder engagements, the Committee aligned to maintain its approach to the consideration of sustainability matters in setting and approving executive compensation, noting that certain investors had advised caution in incorporating quantitative sustainability targets, which can be difficult to objectively measure.
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SUMMARY OF 2023 COMPENSATION DECISIONS FOR 2017
The Committee designsapproves executive compensation to pay for performance, with the target TDC of NEOs established to incent economicstrong financial performance and stockholder value creation, giving consideration to the market median of companies similar in size, scope and complexity with which we compete for executive talent, role responsibilities, individualcreation. Compensation is predominantly performance tenure, retention and succession. The majority of this compensation is performance-based,based, meaning that our executives may not ultimately not realize some or all of thesethe at-risk components of compensation if we fail to achieve our financial objectives. In 2017, approximately 84% and 67% of the TDC of our CEO and average of our other Current NEOs, respectively, was performance-based.
In determining 20172023 NEO compensation, the Committee considered the following:factors described below.
•Company/Business Performance— Our company's overall financial performance, including our 2017 adjusted sales growth, adjusted EPS, and free cash flow for our corporate NEOs, and, for our business NEO, the performance of our LGM business;•Stockholder Returns— Our TSR on an absolute basis, as well as relative to a designated group of peer group companies;•Annual Individual Performance— Our CEO's performance against the predetermined and objectively measurable strategic objectives established for him at the beginning of the year and the individual contributions of our other Current NEOs;•Competitiveness— Market pay practices and company performance relative to peers; and•Responsiveness to Investors— The results of our 2017 say-on-pay vote and feedback on our executive compensation received during our ongoing stockholder engagement program.
| • | Annual Company Performance – For Corporate NEOs, our company’s 2023 adjusted sales growth, adjusted EPS and adjusted free cash flow; for our Solutions NEO, primarily the adjusted net income and adjusted free cash flow of his business and secondarily adjusted EPS |
| • | Stockholder Returns – Our TSR on an absolute basis, as well as relative to a designated group of peer companies |
| • | Individual Performance – Our CEO’s performance against the predetermined strategic objectives established for him at the beginning of the year and the individual contributions of our other NEOs |
| • | Market Competitiveness – Pay practices and company performance relative to the market |
| • | Investor Feedback – The results of our 2023 say-on-pay vote and the feedback on executive compensation received during our stockholder engagement program |
The key elements of 20172023 NEO target TDC are showndescribed in the following table. table shown below. While we provide consistent, market-competitive target TDC opportunities for our NEOs, the actual compensation they realize each year varies year-to-year based primarily on company and business performance; for 2017, the incentive compensation realized by our NEOs was based solely onfinancial performance.
2023 EXECUTIVE COMPENSATION SUMMARY | |||||||
Component | Decisions Impacting 2023 Compensation | ||||||
BASE SALARY 13% of annualized CEO TDC; Avg. 31% of 2023 TDC for Other NEOs (excl. Butier) | |||||||
| |||||||
17% of
Other |
| The
Company and/or
| |||||
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|
| 59 | ||
2023 EXECUTIVE COMPENSATION SUMMARY | |||||
| Component | Decisions Impacting 2023 Compensation | ||||
TARGET LTI AWARD (50% PUs, 50% MSUs) 70% of CEO annualized TDC; Avg. 50% of 2023 TDC for Other NEOs (excl. Butier) | Annual LTI Awards Granted in 2023 •
• 50% in PUs that cliff-vest at the end of | ||||
|
• 50% in MSUs that vest based on | ||||
|
Special LTI Awards Granted in 2023 • In 2023, the Committee approved | ||||
|
• Annual Award of 2021-2023 PUs: Our • Special Award of 2021-2023 PUs: For retention purposes and to further incent him to contribute to the results for our total company – including by continuing to transform our Solutions business and driving our sustainability progress as then-leader of our | ||||
60 |
|
2023 EXECUTIVE COMPENSATION SUMMARY | ||||
| Component | Decisions Impacting 2023 Compensation | |||
• MSUs | ||||
• 4th Tranche | ||||
Payout of 180% of target | ||||
• 3rd Tranche | ||||
Payout of 134% of target | ||||
• 2nd Tranche | ||||
Payout of 94% of target | ||||
• 1st Tranche | ||||
Payout of 98% of target | ||||
In addition to these primary elements of our executive compensation program, weWe also provide our NEOs with limited perquisites and benefits that the Committee believes are comparable to those offered by other multinational public companies.
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DISCUSSION OF 2023 COMPENSATION COMPONENTS AND
DECISIONS IMPACTING 2017 COMPENSATION
The Committee aims to have base salaries at the marketor around median pay at similar-size companies, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Committee's pay-for-performance philosophy, drivingthat delivers higher realized compensation when our financial performance is stronger and lower realized compensation when our financial performance is weaker. In addition, it provides
Base Salary
Changes to NEO base salaries approved by the Committee withare described in the flexibility to respond to changing business conditions, manage compensation to reflect career progression, and adjust compensation to reflect differences in executive experience and performance.
BASE SALARY
2023 Executive Compensation Summary. Increases in base salary for NEOs are generally driven by the average percentage merit increase given to our U.S. employees, subject to marginal increase or decrease based on the NEO's performance and the market mediancomparisons for positions with similar scope and responsibility. In February 2017, the Committee approved base salary increases of 3% for our then-serving NEOs consistent with the average increase for U.S. employees, except for Mr. Gravanis, whose base salary increased by 5% to reflect the size and scope of his role.
2017 AIP AWARDS
| NEO BASE SALARIES | ||||||||
| NEO | Executive Level | 2023 YE Base Salary | ||||||
Stander | 1 | $ | 1,100,000 | |||||
Butier | 1 | $ | 1,000,000 | |||||
Lovins | 2 | $ | 750,000 | |||||
Melo(1) | 2 | $ | 518,219 | |||||
Baker-Nel | 3 | $ | 490,000 | |||||
Colisto | 3 | $ | 456,770 | |||||
| (1) | Amount for Mr. Melo was converted from euros using the average monthly exchange rate for December 2023. |
2023 AIP Awards
The 20172023 AIP was designed to incent management to create long-term stockholder value.achieve our financial goals for the year. NEOs are not eligible for guaranteed AIP awards. AIP awards are determined for each fiscal year using the formula below. Individual modifiers for NEOs are generally capped at 100% although the Committee retains the discretion to determine higher individual modifiers to reward exceptional performance, up to 150%.
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Target AIP Opportunities
As a percentage of 2017 year-end base salary, theChanges to NEO target AIP opportunities for 2017 were 125% for Mr. Butier; 75% for Ms. Bramman and Mr. Gravanis; 60% for Mses. Hill and Miller; and 50% for Mr. Lovins. Mr. Lovins' 2017 AIP award was prorated to reflect his target AIP opportunity of 40% of base salary forapproved by the first six months ofCommittee are described in the year and his target AIP opportunity of 60% of base salary for the second six months of the year.2023 Executive Compensation Summary.
| NEO TARGET AIP OPPORTUNITIES | ||||||||
| NEO | Executive Level | 2023 Opportunity (% of Base Salary) | ||||||
Stander | 1 | 95 | %* | |||||
Butier | 1 | ~147 | %* | |||||
Lovins | 2 | 75 | % | |||||
Melo | 2 | ~58 | %* | |||||
Baker-Nel | 3 | 50 | % | |||||
Colisto | 3 | 50 | % | |||||
* Target AIP opportunities for Messrs. Stander, Butier and Melo were prorated based on their previous opportunities of 75%, 160% and 50% of base salary, respectively, and their year-end opportunities of 135%, 120% and 60% of base salary, respectively. |
| |||||||
AIP Performance Objectives and Weightings;Objectives; Target-Setting Principles
The following performance objectives and weightings for the 20172023 AIP for Corporate NEOs, which were consistent with the prior year, were established and weighted by the Committee in consultation with Willis Towers Watson. Our CEO, Chief Human Resources Officerto continue incenting them to grow sales, improve profitability and then-serving CFO participated during portions of the meetings during which the Committee reviewed and recommended performance objectives for our AIP and analyzed our performance against these objectives.generate strong cash flow.
For our business participants (including Mr. Gravanis), the
2023 AIP PERFORMANCE OBJECTIVES FOR CORPORATE NEOs | ||
Objective | Description | |
Adjusted Sales Growth (20%) | Focuses management on top-line growth, a key contributor to sustained long-term value creation | |
Adjusted EPS (60%) | Primary driver of stockholder value creation and measure we use to provide annual guidance to investors; focuses management on profitable growth and expense control | |
Adjusted Free Cash Flow (20%) | Cash available after investment in our business, which we can deploy for acquisitions, venture investments, dividends and share repurchases; focuses management on improving capital efficiency, including working capital | |
The Committee determined to link 75% of the AIP financial modifier for our Solutions NEO primarily to their respective business'his business’ results, based 45% on adjusted net income and 25%40% on adjusted free cash flow; the remaining 15% was linked to corporate results. Business performanceadjusted EPS. The Solutions objectives were designed to be achievable only if the relevant business substantially improved upon its 20162022 performance and delivered results consistent with its 2023 goals.
The threshold payout level for the achievement ofadjusted EPS performance objective for all NEOs was set at 0%. The threshold payout level for the other two performance objectives for Corporate NEOs was set at 50%. For our 2014-2018 financial targets.
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2017 AIP TARGETS
Solutions NEO, the threshold payout level for the adjusted net income performance objective was set at 0% and the threshold payout level for the adjusted free cash flow performance objective was set at 50%. For all performance objectives for all NEOs, the target payout level was 100% and the maximum payout level was 200%. In setting the2023 AIP targets for these objectives,Corporate NEOs, the Committee aimed to ensure consistency with our long-term2021-2025 financial targets, and require adjusted sales growth and adjusted EPS improvement fromgiving consideration to the results achieved in the prior year. These were the same objectives and weightings used for purposes of the 2016 AIP to continue incenting our NEOs to increase sales on an organic basis, improve profitability, and generate strong free cash flow.factors described below.
Target adjusted sales growth, reflecting sales growth ex. currency excluding the impact of acquisitions completed after the targets were set, of 3.5% ($9,285M) was set at the low endless than both our 2021-2025 sales growth ex. currency target of 5%+ and our long-term target, reflecting top-line challenges in the retail apparel market served2022 sales growth ex. currency result of 13.1% because 2022 results were largely driven by our RBIS business; however,customers building up inventory when supply chains were constrained and the target required improvementpricing actions we took to address significant inflation. For 2023, we expected that we would pass some of the benefit from the prior year. anticipated easing of inflation to our customers.
Target adjusted EPS of $9.50 was establishedset above the midpoint and near the high end of the annual guidance we announcedprovided to investors in February 20172023. Due to anticipated inventory destocking, target was set lower than our 2021-2025 compound annual growth target of 10% and represented a 11% increase (a 16% increase on a currency neutral basis) from4% higher than our 2016 results for this measure. 2022 result of $9.15.
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Although we did not externally communicate a 2021-2025 adjusted free cash flow target, as part of our 2018 goals, we continueplan for 2023 was to expect our businesses to generate strongdeliver adjusted free cash flow an important metric used internallyof $740 million with solid net income growth and working capital productivity, partially offset by our investors in evaluating our performance. Although lower than our 2016 result, our 2017 targethigher planned capital expenditures and restructuring actions. Target for adjusted free cash flow reflected increased capital expenditures planned for 2017 to support future growth and achieve our 2017-2021 financial targets.was 11% above the adjusted free cash flow we achieved in 2022.
| CORPORATE 2017 AIP TARGETS VS. 2014-2018 TARGETS AND 2016 RESULTS | ||||||
| 2014-2018 Target | 2016 Results | 2017 AIP Target | ||||
| Adjusted Sales Growth | 4%-5% | 3.9% | 4.0% | |||
| Adjusted EPS | 12%-15%+ Growth | $4.02 | $4.45 (up 11% from 2016*) | |||
| Free Cash Flow | N/A | $387M | $355M | |||
2023 AIP TARGETS VS. LONG-TERM TARGETS AND 2022 RESULTS
| ||||||
2021-2025 Long-Term Target | 2022 Results | 2023 AIP Target | ||||
Sales Growth Ex. Currency |
5%+ |
13.1% |
3.5% ($9,285M)* | |||
Adjusted EPS Growth | 10% | $9.15 | $9.50 (4% over 2022 results) | |||
Adjusted Free Cash Flow | N/A | $667M | $740M (11% over 2022 results) | |||
* Represents AIP target for adjusted sales growth | ||||||
Financial Modifiers
FinancialAIP financial modifiers are capped at 200%. Consistent with prior years, in evaluating our achievement of these performance objectives, In determining financial modifiers, the Committee has the discretion to exclude the impact, positive or negative, of extraordinary items such as acquisitions and divestitures; restructuring and integration actions not included in our annual net income plan; currency translation fluctuations; changes in accounting principles, tax codes or related regulations and rulings; extraordinary events such as natural disasters, outbreaks of epidemiological disease, terrorism and war; costs related to the early extinguishment of debt;debt and pension plan terminations; costs of litigation outside the normal course of business; and non-cash charges associated with the impairment of long-lived assets.
Avery Dennison Corporation| 2018 Proxy Statement |51
Table of Contentsassets such as goodwill.
The table below shows the calculation of 2023 AIP financial modifiers for our NEOs for 2017.modifiers. As shown, we exceeded the targetthreshold level establishedof performance was not achieved for allany of the performance objectives established for Corporate NEOs or our corporate NEOs and two of the performance objectives established for our business NEO. Our corporate and business performance resultedSolutions NEO, resulting in anweighted average AIP financial modifiermodifiers of 170%0% for our corporate Currentall NEOs and 127% for our business NEO. Because she was not employed at the end of 2017, Ms. Bramman was not eligible for a 2017 AIP award..
| 2023 AIP FINANCIAL MODIFIERS | ||||||||||||||||
Performance Objective
| Weighting
| Threshold(1)
| Target
| Maximum (200%)
| 2023 Actual
| Modifier
| Weighted Average | |||||||||
Mr. Stander Mr. Butier Mr. Lovins Ms. Baker-Nel Mr. Colisto | Adjusted Sales Growth(3) | 20% | $9,059M | $9,285M | $9,550M | $8,285M | 0% | 0% | ||||||||
| Adjusted EPS(4) | 60% | $9.00 | $9.50 | $10.00 | $7.86 | 0% | 0% | |||||||||
| Adjusted Free Cash Flow(5) | 20% | $670M | $740M | $800M | $588M | 0% | 0% | |||||||||
Corporate NEO Financial Modifier | 0% | |||||||||||||||
Mr. Melo(2) |
Adjusted EPS(4) |
15% |
$9.00 |
$9.50 |
$10.00 |
$7.86 |
0% |
0% | ||||||||
Solutions Adjusted Net Income(6)(7) |
45% |
$232.0M |
$244.2M |
$268.6M |
$155.5M |
0% |
0% | |||||||||
Solutions Adjusted Free Cash Flow(7) |
40% |
$123M |
$153M |
$183M |
$40M |
0% |
0% | |||||||||
Solutions NEO Financial Modifier | 0% | |||||||||||||||
| (1) | Adjusted EPS and adjusted net income thresholds set at 0%; thresholds for all other performance objectives set at 50%. |
| (2) | Performance objectives and weightings for Mr. Melo reflect those tied to his service as Solutions President for the last nine months of the year. His performance objectives for the first three months of the year when he served as SVP/GM, Avery Dennison Smartrac, were adjusted EPS (weighted 15%), enterprise Intelligent Labels sales (weighted 40%), enterprise Intelligent Labels EBIT (weighted 25%); enterprise Intelligent Labels adjusted free cash flow (weighted 10%); and Solutions adjusted free cash flow (weighted 10%). Sales, EBIT and adjusted free cash flow targets and results at the business unit level are not disclosed due to their competitively sensitive nature. Additionally, the Committee determined that the financial modifier for all NEOs should be zero given 2023 performance. |
| (3) | Reflects reported net sales of $8,364.3 million, removing the $5.1 million impact of foreign currency translation since the target was set and the $74.4 million impact of new acquisitions. |
| (4) | Reflects reported net income per common share, assuming dilution, of $6.20, adjusted for restructuring charges and other items of $1.70 and removing the ($0.04) impact of acquisitions completed after the targets were set. |
| (5) | Reflects net cash provided by operating activities of $826.0 million, minus purchases of property, plant and equipment of $265.3 million and software and other deferred charges of $19.8 million, plus proceeds from sales of property, plant and equipment of $1.0 million, plus proceeds from insurance and sales (purchases) of investments, net, of $1.9 million, plus proceeds from company-owned life insurance policies of $48.1 million, plus payments for certain acquisition-related costs of $5.3 million, less cash flow from new acquisitions of $9.3 million. |
| (6) | Adjusted net income refers to income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges and other items. Adjusted tax rate is the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as effects of certain discrete tax planning actions, impacts related to enactments of comprehensive tax law changes, and other items. |
| (7) | Adjusted net income and adjusted free cash flow measures at the segment level are internal metrics that exclude or make simplifying assumptions for items that cannot be allocated precisely by segment, such as interest and income tax expenses, and related balance sheet accounts, such as deferred tax assets and liabilities, income tax payables and receivables, and short- and long-term debt. Certain balance sheet accounts such as pension and other postretirement benefits and insurance that are generally managed at the corporate level, as well as the impact of foreign currency translation, are also excluded from the calculation of these measures for the segments. In certain limited circumstances, one-time items may be excluded from segment adjusted net income. The impact of intercompany sales is included in segment measures. |
Avery Dennison Corporation | 2024 Proxy Statement | 63 |
| 2017 AIP FINANCIAL MODIFIERS | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | |
| | NEO | PERFORMANCE OBJECTIVE | WEIGHTING | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (200%) | 2017 ACTUAL | MODIFIER | WEIGHTED AVERAGE MODIFIER | | ||||||||||||
| Butier Lovins | Total Company Adjusted Sales Growth(1) | 20% | 1.9% | 4.0% | 8.1% | 4.2% | | 105 | % | | 21 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Hill Miller | Total Company Adjusted EPS(2) | 60% | $4.20 | $4.45 | $4.95 | $4.96 | | 200 | % | | 120 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Total Company Free Cash Flow(3) | 20% | $280M | $355M | $505M | $423M | | 143 | % | | 29 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Corporate NEO Financial Modifier | 170 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Gravanis | Total Company Adjusted EPS(2) | 25% | $4.20 | $4.45 | $4.95 | $4.96 | | 200 | % | | 50 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Label and Graphic Materials (LGM) | LGM Adjusted Sales Growth(4) | 20% | 2.9% | 5.0% | 8.4% | 4.2% | | 78 | % | | 16 | % | ||||||||||
| | | | | | ||||||||||||||||||
| LGM Adjusted Net Income(4)(5) | 35% | $366M | $385M | $424M | $384M | | 96 | % | | 33 | % | |||||||||||
| | | | | | ||||||||||||||||||
| LGM Free Cash Flow(4) | 20% | $251M | $291M | $371M | $322M | | 140 | % | | 28 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Business NEO Financial Modifier | 127 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
(1)Total Company Adjusted Sales Growth refers to reported sales growth of 8.7%, adjusted for the impact of currency translation of (0.5)% and the net impact of acquisitions and product line divestitures of (3.9)%. Total does not sum due to rounding.(2)Total Company Adjusted EPS refers to reported net income per common share, assuming dilution, of $3.13, adjusted for tax-effected restructuring costs, impact of the TCJA and other items of $1.87 and excluding the $.04 positive impact of the three acquisitions completed in 2017.(3)Total Company Free Cash Flow refers to cash flow from operations of $650.1 million,minuspurchases of property, plant and equipment of $190.5 million and software and other deferred charges of $35.6 million,plusproceeds from sales of property, plant and equipment of $6.0 million,minuspurchases of investments of $(8.3) million,pluscash flow of $1.3 million from the negative impact of the three acquisitions in 2017. Free cash flow is measured quarterly to ensure consistent management of working capital throughout the year, subject to adjustment if the full-year target is not achieved. While total company free cash flow was 119% of target, our average quarterly performance resulted in a modifier of 143% for that objective.(4)Adjusted sales growth, adjusted net income and free cash flow measures at the segment level are internal metrics. These metrics either exclude or make simplifying assumptions for items that cannot be allocated precisely by segment, such as interest and income tax expenses, and related balance sheet accounts, such as deferred tax assets and liabilities, income tax payables and receivables, and short- and long-term debt. Certain balance sheet accounts such as pension and other postretirement benefits and insurance that are generally managed at the corporate level, as well as the impact of foreign currency translation, are also excluded from the calculation of these metrics for the segments. In certain limited circumstances, one-time items may be excluded from segment adjusted net income. The impact of intercompany sales is included in segment metrics. While LGM's free cash flow was 111% of target, its average quarterly performance resulted in a modifier of 140% for that objective.(5)Adjusted net income refers to reported net income adjusted for tax-effected restructuring costs, the impact of the TCJA and other items.
Avery Dennison Corporation| 2018 Proxy Statement |52
NEO Performance Evaluations &and Individual Modifiers
Our NEOs are evaluated on their individual performance for the year, withyear. The Committee approved the Committee approvingstrategic objectives of our CEO's goals for the yearthen-CEO and then-COO,our CEO approvingthen-COO approved the goals of our Solutions NEO and our then-CEO approved the goals of the other NEOs. The NEOs' performance is assessedNEOs, in each case in February of2023. In February 2024, the following year. ForCommittee evaluated the NEOs other thanperformance of our CEO against his predetermined strategic objectives; for our other NEOs, this assessment considersconsidered the totality of their performance rather than assigning weightings to their performance goals. performance.
Individual modifiers for all participants are capped at 150%, subject to the total cap on AIP awards of 200%.
In February 2017, our CEO recommended and Although it retains the discretion to determine individual modifiers of up to 150%, the Committee agreedhas determined that the individual modifiers for 2017 his individual modifier and that of theour NEOs reporting to himshould generally be capped at 100%. All of the 2017 NEO individual modifiers were capped at 100%.
The Committee reviewed and evaluated the 2023 performance of our CEO's 2017CEO, giving consideration to his leadership navigating the lower demand environment driven primarily by downstream inventory destocking; our financial results for the year in which we did not deliver our annual operating plan or achieve the threshold levels of performance taking into accountestablished for the 2023 AIP; his performance against the predetermined and objectively measurablehis strategic objectives established in February 2017, his self-assessment of2023; and his performance and market reference and other data provided by Willis Towers Watson. Our CEO is not involved in the decisions regarding his compensation, which are determined byself-assessment discussed with the Committee meeting in executive session with Willis Towers Watson.February 2024. The Committee determined the individual modifier for our CEO based on its assessment of his performance, withinperformance.
In addition to navigating the contextdynamic and challenging environment, our CEO had the strategic objectives for 2023 shown below with the Committee’s evaluation of his performance. These strategic objectives did not have assigned weightings, reflecting the cap described above.Committee’s expectation that he deliver on all fronts.
For 2017,
2023 CEO PERFORMANCE EVALUATION | ||
| Strategic Objective | Evaluation | |
CEO readiness– Continue progressing Board-aligned readiness plan; engage in quarterly earnings process; and lead strategic planning process | Progressed readiness plan consistent with Board expectations; engaged in quarterly earnings process beginning in 4Q22, leading process starting in 2Q23; and led 2023 strategic planning process across business segments and enterprise-wide, including related discussions with Board | |
Drive outsized growth in high-value categories– Deliver above-average organic growth rate in Materials’ graphics and specialty labels businesses; achieve targeted percentage of growth in Solutions’ external embellishments business; deliver successful Solutions’ shelf edge label productivity pilot with large retailer; and reach $1 billion in enterprise-wide Intelligent Labels sales | In challenging lower volume environment driven primarily by inventory destocking, delivered modest organic growth in Materials’ graphics and decline in Materials’ specialty labels businesses, in each case in line with overall market performance; grew Solutions’ external embellishments but below targeted percentage given declining apparel import environment; progressed Solutions’ shelf edge label productivity pilot consistent with expectations; and, although its enterprise-wide sales target was not reached, delivered low-double digit growth in Intelligent Labels | |
Grow profitably in our base businesses – Enhance share position in Materials’ North America and Europe, Middle East and North Africa (EMENA) regions and maintain share position in other Materials regions and base Solutions categories (adjusted for Intelligent Labels) | Enhanced share position in Materials’ North America and EMENA regions and base Solutions categories (adjusted for Intelligent Labels), while also maintaining share position in other Materials regions | |
Focus relentlessly on productivity – Deliver targeted amount of savings from restructuring actions and achieve productivity targets in both Materials and Solutions | Exceeded targeted amount of savings from restructuring actions by ~50%, having accelerated certain actions given weaker-than- anticipated demand; and achieved productivity targets in both Materials and Solutions | |
64 | 2024 Proxy Statement | Avery Dennison Corporation |
2023 CEO PERFORMANCE EVALUATION | ||
| Strategic Objective | Evaluation | |
Allocate capital effectively –Invest within targeted range of capital expenditures; continue driving operating working capital productivity; invest targeted amount in accelerated growth platforms of Intelligent Labels, innovation and digital infrastructure; invest targeted amount in Intelligent Labels capital expenditures, including achieve milestones related to key strategic project; and continue building M&A pipeline and integrating acquisitions | Given lower demand driven primarily by downstream inventory destocking, appropriately reduced capital spending below low end of targeted range, while still investing at level consistent with prior year to support organic growth; improved working capital productivity; appropriately reduced spending on growth investments, while continuing to strategically invest in accelerated growth platforms of Intelligent Labels, innovation and digital infrastructure; appropriately delayed strategic Intelligent Labels project, achieving milestones consistent with adjusted timeline; and completed acquisitions of Thermopatch, Lion Brothers and Silver Crystal, expanding Solutions’ external embellishments portfolio | |
Lead in an environmentally and socially responsible manner – Progress innovation strategy and deployment program with emphasis on environmental sustainability and digital solutions; continue reducing Scope 1 and 2 GHG emissions and begin executing Scope 3 emissions reduction plan; deploy accelerated roadmap to enable greater recyclability of plastics in Materials ecosystem; and further enhance leadership diversity | Progressed innovation strategy and deployment program, including with respect to environmental sustainability and digital solutions; significantly reduced Scope 1 and 2 GHG emissions and began executing plan to achieve 2030 Scope 3 GHG emissions reduction target; completed gap assessment and developed accelerated roadmap to enable greater recyclability of plastics in Materials ecosystem; and, while manager+ gender diversity percentage of 36% was unchanged from prior year, increased representation of women at VP+ level | |
Refine/Execute leadership succession/development – Refine/Execute development plans for leadership, with particular focus on Materials and Solutions leaders, and enhance digital leadership | Executed leadership succession transitions in Materials and Solutions; advanced succession and development plans of other members of Company Leadership Team; and began strengthening digital leadership | |
Individual Modifier Based on Evaluation | 100% | |
The strategic objectives of our former CEO were in many respects similar to those shown above for our current CEO. In reviewing his annual performance, the Committee evaluatedfocused on the performance of our CEO, determining that he substantially achieved or exceeded eachunique aspects of his strategic objectives established in February 2023, which included progressing the Board-aligned CEO succession strategy with the goal of ready-now successors over multiple time horizons; providing targeted development support for our then-COO; refining and executing leadership development plans with a focus on newly appointed leaders in our Materials and Solutions businesses; progressing our cybersecurity strategy and deployment program; and integrating the year,TCFD framework into our ERM program. In addition, the Committee evaluated his performance as shown inExecutive Chairman.
The Committee Chair, together with our Lead Independent Director, separately discussed with our CEO and our Executive Chairman the chart below.
BASED ON PERFORMANCE AGAINST PREDETERMINED AND MEASURABLE STRATEGIC OBJECTIVES
Avery Dennison Corporation| 2018 Proxy Statement |53
Tablefeedback from discussions of Contentsthe Committee and our full Board regarding their 2023 performance.
Our CEO recommended to the Committee the individual modifiers for our other Current NEOs based on his assessment of their 20172023 performance. The Committee considered our CEO'sCEO’s recommendations, and challenged his assessments as needed, while retaining the discretion to approve individual modifiers for our other Current NEOs lowerthem different than what theour CEO had recommended. Other than discussing with our CEO their performance against their individual performance, plans, our other Current NEOs played no role in their compensation determinations.
In determining the individual modifiers for our other Current NEOs, and recognizing that the cap of 100% eliminated the potential upside from the individual modifier on their AIP awards, the Committee highlightednoted the following regarding the 2017highlights of their 2023 performance of the other Current NEOs:shown below.
•Avery Dennison Corporation | 2024 Proxy Statement
65
Mr. Lovins — Transitioned from Treasurer to Chief Financial Officer; led our finance function, delivering results that exceeded our 2017 goals for organic sales growth, adjusted EPS and free cash flow; and continued disciplined execution
| • | Led enterprise finance function, including overseeing controllership, tax, treasury, financial planning and operational finance teams |
| • | Critical support to CEO transition on financial planning and reporting, investor relations and other key finance areas |
| • | Drove significant productivity benefits to mitigate impact of lower demand driven primarily by inventory destocking |
| • | Delivered strong adjusted free cash flow and adjusted free cash flow conversion greater than 100% through improved working capital |
| • | Enhanced macro environment analytics and increased forecasting rigor |
| • | Continued driving strong global controllership |
| • | Advanced finance system standardization through enterprise resource planning rollouts across business units |
| • | Continued driving ongoing scenario planning to ensure achievement of long-term financial targets |
| • | Oversaw continued expansion of sustainability reporting |
| • | Maintained strong balance sheet, investing organically and acquiring three companies, while also returning cash to stockholders through share repurchases and a growing dividend |
| • | Ensured effective capital allocation to deliver strong returns and EVA growth over long term |
Served as member of capital allocation.
Mr. Gravanis — Led our LGM business, delivering strong performance on key financial metrics; improved productivity, service and quality; integrated two acquisitions while expanding organizational capability to better serve high value product categories.•
| • | Successfully transitioned to Solutions President role, improving cross-business collaboration and advancing customer-centricity |
| • | Delivered low-double-digit growth in Intelligent Labels, expanding into new segments with significant wins in Logistics and Food and executing world’s largest single-wave RFID deployment |
| • | Navigated challenging low volume year, executing cost-reduction initiatives to improve profitability and optimize cost-to-serve |
| • | Expanded high-value external embellishments capabilities with three strategic acquisitions, enabling significant growth in team sports |
| • | Evolved and led Digital Advisory Council, informing continued expansion of digital capabilities and building on atma.io connected product cloud platform |
| • | Expanded Solutions’ portfolio to include more products meeting Sustainable ADvantage Standard and improved recycling of waste |
Ms. Hill — Led our human resource and communications functions with particular focus on executive succession planning; diversity and inclusion initiatives; employee engagement; and the development and communicationBaker-Nel
| • | Led enterprise human resources, communications and community investment functions |
| • | Guided CEO and segment leader transitions and advanced Company Leadership Team succession plans |
| • | Renewed focus on senior leadership effectiveness and complementarity, driving greater clarity on accountability |
| • | Facilitated Board refreshment planning and Governance Committee’s new director search process |
| • | Deployed digitally-enabled employee listening tool, enhancing insights and analytics and establishing new baselines for employee engagement and inclusion |
| • | Finalized enterprise competency model to serve as consistent global standard against which we hire, develop, promote and reward talent |
| • | Published inaugural DEI Synopsis report to enhance social sustainability transparency and progressed pay equity and transparency |
Served as member of our evolved values to support our business strategies.
Mr. Colisto
| • | Led enterprise IT function, including management of IT infrastructure, cybersecurity, data analytics and business software initiatives |
| • | Delivered strong performance in challenging environment, managing increasing cybersecurity threats and accelerating IT modernization to drive innovation and growth |
| • | Enhanced digitizing business processes, delivering enterprise resource planning systems and enabling improved efficiency and data-driven decision-making |
| • | Advanced digital customer engagement platforms, improving customer experience and business resilience |
| • | Developed technology investment allocation strategy to maximize returns and support future growth |
| • | Educated global teams on artificial intelligence, identifying most promising use cases and unlocking potential avenues for process innovation and efficiency |
| • | Served as executive sponsor of women in leadership, advancing DEI by empowering female leaders |
Based on the abovethese assessments and after giving consideration to the recommendations of our CEO (other than with respect to himself), the Committee approved individual modifiers of 100% for all Current NEOs.NEOs, which had no impact on their AIP payouts given the 0% financial modifiers.
66 | 2024 Proxy Statement | Avery Dennison Corporation |
AIP Awards
OurAs shown below, our NEOs received theno AIP awards shown in the table below for 2017, based on their respective base salary, AIP opportunity, financial modifier and individual modifier.
2017 AIP AWARDS | ||||||||||||
| | | | | | | | | | | | | |
| 2017 YE BASE SALARY | AIP OPPORTUNITY | TARGET AIP AWARD | FINANCIAL MODIFIER | INDIVIDUAL MODIFIER | AIP AWARD | ||||||
Butier | $1,133,000 | 125% | $1,416,250 | 170% | 100% | $2,407,625 | ||||||
Lovins* | $550,000 | 50% | $275,000 | 170% | 100% | $467,500 | ||||||
Gravanis* | $628,595 | 75% | $471,446 | 127% | 100% | $598,737 | ||||||
Hill | $532,045 | 60% | $319,227 | 170% | 100% | $542,686 | ||||||
Miller | $547,694 | 60% | $328,616 | 170% | 100% | $558,647 | ||||||
Bramman** | $575,025 | 75% | $431,269 | — | — | — | ||||||
*Mr. Lovins' AIP award was prorated based on his AIP opportunity of 40% of base salary for the first half of the year and his AIP opportunity of 60% of base salary for the second half of the year. Amounts for Mr. Gravanis were converted from euros using the exchange rate as of our fiscal year-end.**Ms. Bramman did not receive an AIP award since she was not employed at the end of 2017.
Avery Dennison Corporation| 2018 Proxy Statement |54
2023.
2023 AIP AWARDS | ||||||||||||||||||||||||||||||
|
| 2023 YE Base Salary | Target AIP Opportunity | Target AIP Award | Financial Modifier | Individual Modifier | AIP Award | ||||||||||||||||||||||||
Stander(1) | $ | 1,100,000 |
| 95 | % | $ | 1,045,000 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
Butier(2) | $ | 1,000,000 |
| ~147 | % | $ | 1,466,667 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
Lovins | $ | 750,000 |
| 75 | % | $ | 562,500 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
Melo(3)(4) | $ | 518,219 |
| ~58 | % | $ | 297,976 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
Baker-Nel | $ | 490,000 |
| 50 | % | $ | 245,000 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
Colisto | $ | 456,770 |
| 50 | % | $ | 228,385 |
| 0% |
|
| 100% |
| $ | 0 | |||||||||||||||
| (1) | Mr. Stander’s target AIP opportunity was prorated based on his opportunity as COO of 75% of base salary for the first eight months of the year and his opportunity as CEO of 135% of base salary for the last four months of the year. |
| (2) | Mr. Butier’s target AIP opportunity was prorated based on his opportunity as CEO of 160% of base salary for the first eight months of the year and his opportunity as Executive Chairman of 120% of base salary for the last four months of the year. |
| (3) | Amounts for Mr. Melo were converted from euros using the average monthly exchange rate for December 2023. |
| (4) | Mr. Melo’s target AIP opportunity was prorated based on his opportunity as SVP/GM, Avery Dennison Smartrac, of 50% of base salary for the first three months of the year and his opportunity as Solutions President, of 60% of base salary for the last nine months of the year. |
20172023 GRANTS OF LTI AWARDS
Our LTI program provides variable incentive compensation to enhance alignment of executive interests with stockholder interests and drive long-term value creation. The annual LTI awards granted to NEOs in 20172023 were fully performance-basedperformance based and delivered through the following equity vehicles:vehicles described below.
•50% in PUs that cliff-vest at the end of a three-year period subject to
ourthe achievement of the respective cumulative EVA and relative TSR performance objectives established for theaward; and•50% in MSUs that vest at the end of the one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years, based solely on our absolute TSR.• 50% in MSUs that vest at the end of the 1-, 2-, 3- and 4-year performance periods, with an average performance period of 2.5 years, based on our absolute TSR
Annual LTI awards were granted on
February 23, 2017,March 1, 2023. Actual amounts, if any, realized by our NEOs from thedayvesting of these awards will be based on ourBoard held its regularly-scheduled meeting.performance, as well as our stock price at the time of vesting.The Committee does not offset the loss or gain of prior year grants in determining current year grants, as doing so would compromise the intended risk/reward nature of these incentives.
Actual amounts realized from the vesting of these awards will be based on our performance, as well as our stock price, at the time of vesting.Although we have suspended the regular grant of stock options and time-vesting RSUs to our executives, specialSpecial LTI awards may be granted by the Committee for hiring, promotion, retentionand/orand other incentive purposes, with the awards granted on the first day of the last month of thecalendarquarter following the event or decision to makesucha grant.In connection with his promotion to CFO, Mr. Lovins was grantedThe four special LTI awards approved by the Committee in 2023 are described in the 2023 Executive Compensation Summary and shown in aspecial one-time award of RSUs with a grant date fair value of approximately $550,000 on September 1, 2017, which vestchart later inequal installments on the first, second, third and fourth anniversaries of the grant date, subject to his continued service.this section.Avery Dennison Corporation | 2024 Proxy Statement
67
Target LTI Opportunity
As a percentage of base salary, theChanges to NEO target LTI opportunities for our NEOs were 425% for Mr. Butier; 120% for Mr. Lovins; 180% for Mr. Gravanis and Mses. Hill and Miller; and 200% for Ms. Bramman. In 2017, (i) Mr. Butier's target LTI opportunity increased from 400% to 425% of base salary to bring his LTI opportunity closer to the market median and (ii) Mr. Lovins' target LTI opportunity increased from 120% to 180% of base salary in connection with his promotion to CFO; however, his 2017 annual LTI awards were granted based on his previous target LTI opportunity. Target LTI award opportunities represented approximately 66% and 47%, respectively, of our CEO's, and other Current NEOs' average, total incentive compensation.approved by the Committee are described in the 2023 Executive Compensation Summary.
NEO 2023 TARGET LTI OPPORTUNITIES
| ||||||||||
| NEO | Executive Level | LTI Opportunity | ||||||||
Stander(1) | 1 | 300% | ||||||||
Butier(2) | 1 | 700% | ||||||||
Lovins | 2 | 250% | ||||||||
Melo(3) | 2 | 180% | ||||||||
Baker-Nel | 3 | 120% | ||||||||
Colisto | 3 | 120% | ||||||||
(1) Mr. Stander’s target LTI opportunity reflects opportunity as COO since his role change occurred after the March 1, 2023 grant date. The Committee preliminarily aligned in May 2023 to increase Mr. Stander’s target LTI opportunity to 550% effective March 1, 2024, subject to its review of market pay for similar roles at that time. (2) When he was serving as CEO, Mr. Butier’s target LTI opportunity was increased from 585% of base salary to 700% of base salary effective March 1, 2023 to be more consistent with market data for companies with revenues of $10 billion and to acknowledge his delivery of top-quartile TSR during his tenure. At the time of his role change, the Committee had not determined his target LTI opportunity as Executive Chairman. (3) Mr. Melo’s target LTI opportunity reflects opportunity as Solutions President, since his role change effective April 1, 2023 had been determined before the March 1, 2023 grant date. |
Performance Units (PUs)
Awarded under our 2017-2019 Mid-Term Incentive Plan (MTIP), PUs cliff-vest in shares of our common stock after the end of a three-year period at threshold (50% payout), target (100% payout) and maximum (200% payout) levels based on our achievement of the performance objectives established for the award. PUs do not accrue dividend equivalents and are not counted towards measuring compliance withfor purposes of our stock ownership guidelines.policy.
Consistent with the 2016-2018 MTIP, theThe Committee selectedestablished the following performance objectives for the 2017-2019 MTIP.2023-2025 PUs. The Committee believes that these objectives continue to appropriately align executive compensation with the long-term interests of our stockholders because delivering cumulative EVA and strong TSR relative to peer companies directly impacts both the number of shares executives may receive at vesting andreflects the value creation we provide to our stockholders.
•Cumulative EVA, weighted 50%create for ourcorporate NEOs (based on our total company EVA) and 75% for our business NEO (based on LGM's cumulative EVA). EVA is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from our after-tax operating profit. The Committee established corporate EVA goals consistent with our 2014-2018 targets and our key financial objective of delivering superior TSR, with the target payout at the low end of these targets and the maximum payout at the high end of these targets. Targets for our businesses focused on EVA change compared to the prior three-year period, with the target payout for executives linked to our LGM business (including Mr. Gravanis) requiring positive EVA and significant change in EVA, with the cost of capital being fixed over the performance period, but reassessed annually for new cycles. Average invested capital is targeted to increase at a rate substantially below our targeted rate of organic sales growth. Unlike under the AIP, cash restructuring charges — which include severance and related costs and exclude asset impairment charges and lease and other contract cancellation costs — are included in EVA calculations as it is expected that these investments will generate a return over the MTIP's longer performance period (in contrast to the AIP). Whether linked to corporate or business results, the 2017-2019 EVA targets require continued improvement in our performance.
Avery Dennison Corporation| 2018 Proxy Statement |55
•Relative TSR compared to an objectively determined peer group of companies, weighted 50% for our corporate NEOs and 25% for our business NEO. TSR measures the return that we have provided our stockholders, including stock price appreciation and dividends paid (assuming reinvestment thereof), expressed as a percentage. Consistent with its pay-for-performance philosophy, the Committee designed the TSR objective to provide realized compensation only if our stockholder value creation compares favorably relative to the designated peer group. The Committee set the threshold payout level at TSR at the 40thpercentile, the target payout level at TSR at the 50thpercentile and maximum payout level at TSR at the 80thpercentile, which were the same levels used for the 2016-2018 MTIP. Reflecting previously received stockholder feedback, payouts for the relative TSR component of these PUs is capped at 100% of target if our absolute TSR is negative for the 2017-2019 performance period. In assessing the rigor of the TSR objectives, the Committee noted that our stock price and TSR had substantially increased in the last few years; as a result, performing at the median relative to our peers over the 2017-2019 performance period would represent solid performance, particularly in light of our relatively high exposure to foreign currency translation risk and the end market challenges in the apparel industry served by our RBIS business.
Consistent with the 2016-2018 MTIP and upon the recommendation of Willis Towers Watson, to benchmark TSR, the Committee continued utilizing a peer group(‡) comprised of U.S. companies (i) in similar industries based on their classification in one of five GICS groups (diversified chemicals, specialty chemicals, metal and glass containers, paper packaging, and paper products) and (ii) with revenues during the last twelve months of $1 billion to $20 billion. Based on the formulaic application of the same objective criteria, the peer group changed from the prior year as follows: (i) GCP Applied Technologies was added because it became a public company and met the other criteria; (ii) Domtar Corp. was added because its GICS code was reclassified; (iii) Olin Corp. was deleted because its GICS code was reclassified; (iv) AEP Industries Inc. was deleted because it was acquired; and (v) Innospec Inc. was deleted because its last twelve months' revenues fell below $1 billion.
Cumulative EVA, weighted 50% for Corporate NEOs (based on company EVA) and 75% for our Solutions NEO (based on segment EVA). EVA is calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit, with the cost of capital fixed over the performance period. The Committee established EVA targets for Corporate NEOs consistent with our 2021-2025 financial goals for earnings growth and ROTC and our primary objective of delivering superior TSR, with the target payout set at or a near the high end of these goals and the maximum payout exceeding the high end of these goals. EVA targets for our Solutions NEO focused on the business’ EVA change compared to the prior three-year period, with the cost of capital fixed over the performance period. Whether linked to company or business results, achievement of 2023-2025 cumulative EVA targets requires significant improvement in our financial performance. | ||||
| • | Relative TSR compared to an objectively determined peer group of companies, weighted 50% for Corporate NEOs and 25% for our Solutions NEO. The Committee designed the TSR objective to provide realized compensation only if our stockholder value creation compares favorably relative to the designated peer group, the names of which are listed under Peer Groups later in this CD&A. The Committee set the threshold payout at TSR at the 40th percentile, target payout at TSR at the 50th percentile and maximum payout at TSR at the 80th percentile, which were the same levels used for the 2022-2024 PUs. Payouts for the relative TSR component of PUs are capped at 100% of target if our absolute TSR is negative. In assessing the rigor of the TSR objectives, the Committee noted that performing at the median relative to peers over the 2023-2025 period would represent solid performance in light of anticipated headwinds from foreign currency fluctuations, inflationary pressures and supply chain challenges. |
68 | 2024 Proxy Statement | Avery Dennison Corporation |
2023-2025 PUs | ||||||
| NEOs | Weighting | |||||
 | Stander Butier Lovins Baker-Nel Colisto | Cumulative EVA Relative TSR | 50% 50% | |||
| Melo | Solutions Cumulative EVA Relative TSR | 75% 25% | |||
Market-leveraged Stock Units (MSUs)
In 2013, based on the expert advice and recommendation of Willis Towers Watson, the Committee began granting our NEOs MSUs which are performance-based LTI awards that:
•Are fully performance-based because they aretied to our absoluteTSR performance, which represents appreciation in our stock price and dividends paid; and•Have one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years.
(‡)The following companies comprise the peer group for purposes of the 2017-2019 MTIP: A. Schulman, Inc.; Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings; Axalta Coating Systems Ltd.; Ball Corporation; Bemis Company, Inc.; Berry Plastics Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Domtar Corporation; Eastman Chemical Company; Ecolab Inc.; Ferro Corporation; GCP Applied Technologies Inc., Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; International Flavors & Fragrances Inc.; KapStone Paper and Packaging Corporation; Kraton Corporation; Minerals Technologies Inc.; NewMarket Corporation; Owens-Illinois Inc.; Packaging Corporation of America; P.H. Glatfelter Company; Platform Specialty Products Corporation; PolyOne Corporation; PPG Industries Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Chemours Company; The Sherwin-Williams Company; Valhi Inc.; W.R. Grace & Co.; and WestRock Company.
Avery Dennison Corporation| 2018 Proxy Statement |56
The Committee wanted to use an equity vehicle that has one-, two-, three- and four-year performance periods becauseTSR. MSUs replaced stock options and RSUs, both of which vested ratably over four years. The transition to granting MSUs was made to address burn rate concerns raised by our stockholders and increase the performance linkage of our LTI program. MSUs wereare designed to achieve the Committee’s combined objectives of our previous equity vehicles, including retention (similar to RSUs) and the provision of meaningful upside opportunity tied tohigher incentive compensation driven by stock price appreciation (similar to stock options, but more limited due to fewer shares earned for target performance and a cap on the number of shares that can be earned above target), while making the LTI program fully performance-based. The Committee continues to believe that retention is an important objective of our executive compensation program.
appreciation. MSUs vest based on ourthe performance asperiods shown on the graph below, with the number of shares paid out at vesting based solely on our absolute TSR and the value realized reflecting both the number of shares paid out as well as our stock price at the time of vesting. Although dividend equivalents accrue on MSUs during the performance period, they are earned and paid only at vesting; as such, if the threshold level of performance wereis not achieved, any dividend equivalents accrued during the performance period would be cancelled.are cancelled with the tranche of awards subject to vesting.
The number of shares paid out at vesting for the MSUs granted in 2014 reflected the performance criteria for MSUs are shown on the left below, resulting in every 1% increase in TSR increasing the payout by 1%. The Committee significantly changed the MSU program beginning in 2015, making the threshold and target performance criteria more challenging to reflect stockholder feedback and our improved financial profile, as shown on the right below. To help mitigate the effect on participants of more challenging threshold and target hurdles, the Committee also proportionally increased the number of shares paid out for achieving threshold performance from 70% to 85% and decreased the TSR required for a maximum payout from 100% to 75%. As a result, every 1% increase in TSR above 10% increases the payout by 1.54%. The Committee determined to maintain the same MSU programperformance objectives for 2017 to continue observing payout experience to ensure that the program's revised structure is2023 because they are achieving the Committee's goals.
2013/2014 MSUs | 2015/2016/2017 MSUs | |||||||||
| | | | | | | | | | | |
| ABSOLUTE TSR | UNIT PAYOUT | ABSOLUTE TSR | UNIT PAYOUT | |||||||
Cancelled | <-30% | 0% | Cancelled | <-15% | 0% | |||||
Threshold | -30% | 70% | Threshold | -15% | 85% | |||||
Target | 0% | 100% | Target | 10% | 100% | |||||
Above Target | >0% | >100% | Above Target | >10% | >100% | |||||
Maximum | 100% | 200% | Maximum | 75% | 200% | |||||
Avery Dennison Corporation| 2018 Proxy Statement |57
TableCommittee’s goal of Contentsincenting strong performance and value creation.
| MSU PERFORMANCE CRITERIA | |||||||
Absolute TSR | Unit Payout | |||||||
Cancelled | <(15)% | 0% | ||||||
Threshold | (15)% | 85% | ||||||
Target | 10% | 100% | ||||||
Above Target | >10% | >100% | ||||||
Maximum | 75% | 200% | ||||||
Annual LTI Awards
Our NEOs were granted the annual LTI awards shown in the table below in February 2017.March 2023. The number of awards granted was based on the NEO's (i)respective NEO’s base salary at year-end 2016 2022 and (ii)target 2023 target LTI opportunity, with theopportunity. The number of PUs granted for the EVA component was based on a grant date fair value equal to the average closing price for shares of our common stock during the first ten10 trading days of February 20172023; the numbers of PUs granted for the relative TSR component and the number of MSUs granted were based on a grant date fair value determined by ausing the Monte-Carlo simulation usingmethod described in footnote (2) of the trading days of January 2017. As a result of these methodologies used to determine grant date fair value, awarded2023 Summary Compensation Table.
2023 ANNUAL LTI AWARDS
| |||||||||||||||||||||||||||||||||||
|
| 2022 YE Base Salary | Target LTI Opportunity | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI Value | ||||||||||||||||||||||||||||
Stander | $ | 700,000 |
| 300% |
|
| 5,623 | $ | 1,021,274 |
| 5,454 | $ | 1,050,095 | $ | 2,071,369 | ||||||||||||||||||||
Butier | $ | 1,200,000 |
| 700% |
|
| 22,493 | $ | 4,085,287 |
| 21,816 | $ | 4,200,125 | $ | 8,285,412 | ||||||||||||||||||||
Lovins | $ | 700,000 |
| 250% |
|
| 4,686 | $ | 851,096 |
| 4,545 | $ | 875,058 | $ | 1,726,154 | ||||||||||||||||||||
Melo(1) | $ | 416,465 |
| 180% |
|
| 2,401 | $ | 426,661 |
| 2,311 | $ | 445,020 | $ | 871,681 | ||||||||||||||||||||
Baker-Nel | $ | 457,600 |
| 120% |
|
| 1,471 | $ | 267,167 |
| 1,426 | $ | 274,604 | $ | 541,771 | ||||||||||||||||||||
Colisto | $ | 441,324 |
| 120% |
|
| 1,418 | $ | 257,543 |
| 1,375 | $ | 264,816 | $ | 522,359 | ||||||||||||||||||||
| (1) | Mr. Melo’s base salary was converted from euros using the average monthly exchange rate for December 2022. |
Avery Dennison Corporation | 2024 Proxy Statement | 69 |
SPECIAL LTI values slightly exceeded target LTI values.AWARDS
2017 ANNUAL LTI AWARDS | ||||||||||||||
| | | | | | | | | | | | | | | |
| 2016 YE BASE SALARY | TARGET LTI OPPORTUNITY | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI VALUE | |||||||
Butier | $1,100,000 | 425% | 29,452 | $2,526,940 | 25,574 | $2,337,476 | $4,864,416 | |||||||
Lovins(1) | $412,000 | 120% | 3,114 | $267,177 | 2,705 | $247,243 | $514,420 | |||||||
Gravanis(2) | $542,034 | 180% | 6,147 | $496,547 | 5,337 | $487,807 | $984,354 | |||||||
Hill | $516,548 | 180% | 5,858 | $502,608 | 5,086 | $464,872 | $967,480 | |||||||
Miller | $531,742 | 180% | 6,030 | $517,366 | 5,236 | $478,570 | $995,936 | |||||||
Bramman(3) | $575,025 | 200% | 7,246 | $621,697 | 6,291 | $575,015 | $1,196,712 | |||||||
(1)Mr. Lovins' target LTI opportunity reflects his previous opportunity since his promotion to CFO occurred after the February 2017 grant date.(2)Mr. Gravanis' base salary was converted from euros using the exchange rate as of our fiscal year end.(3)TheMs. Baker Nel and Messrs. Stander, Lovins and Colisto were granted special one-time LTI awards
grantedin 2023 as shown in the table below. The Committee’s rationale for the awards to Ms.Bramman were cancelled uponBaker-Nel and Messrs. Lovins and Colisto is described in thetermination of her employment before our fiscal year-end.
2017
2023 SPECIAL LTI AWARDS | ||||||||||||||||||||
|
| Stock Options (#) | Exercise Price ($) | RSUs (#) | LTI Value | ||||||||||||||||
Stander(1) | 62,955 | $190.54 | – | $ | 3,000,025 | |||||||||||||||
Lovins(2) | – | – | 8,230 | $ | 1,430,732 | |||||||||||||||
Baker-Nel(2) | – | – | 3,292 | $ | 578,870 | |||||||||||||||
Colisto(2) | – | – | 1,097 | $ | 192,898 | |||||||||||||||
(1) Stock options awarded to Mr. Stander in connection with his promotion to CEO vest 50% on each of the third and fourth anniversaries of the grant date, subject to his continued service. (2) RSUs awarded to Mr. Lovins cliff-vest on the third anniversary of the grant date and RSUs awarded to Ms. Baker-Nel and Mr. Colisto cliff-vest on April 1, 2025, in each case subject to their continued service. | ||||||||||||||||||||
2023 VESTING OF PREVIOUSLY GRANTED ANNUAL LTI AWARDS
2015-2017 MTIPAnnual Award of 2021-2023 PUs Eligible For Vesting
The annual award of PUs granted to our NEOs in February 20152021 for the three-year period ending in 2023 were eligible for vesting at the end of 2017to vest based (i) for our corporate NEOs (excluding Mr. Lovins, who was an LGM employee in February 2015other than Messrs. Stander and received PUs with the same performance criteria as our business NEO),Melo, 50% on our total company'scompany cumulative three-year EVA and 50% on our three-year relative TSR compared to a peer group§ of companies, determined using the same objective criteria used for the 2017-2019 MTIPnames of which are listed under Peer Groups later in this CD&A; and (ii) for Mr. LovinsMessrs. Stander and our business NEO,Melo, 75% on LGM'sthe cumulative three-year EVA of what is now our Solutions Group and 25% on our three-year relative TSR. The key goal-setting principle in setting company cumulative EVA targets was consistency with our 2021-2025 financial targets for earnings growth and ROTC, which the Committee believes translates into delivering above-average TSR.
The company cumulative EVA target of $1,150 million for the annual award of PUs to beour NEOs other than Messrs. Melo and Stander was consistent with our long-term financial goals for growth and ROTC, which the Committee believes translate into delivering above-average TSR.
The target for corporate EVA — cumulative EVA of $446 million — was consistent with our 2014-2018 targets for organic sales growth and operating margin expansion and recognized that increasing sales and operating margin, together with balance sheet efficiency, are key drivers of EVA improvement. TheOur company cumulative EVA target was nearly three times~26% higher than ourthe cumulative EVA forwe delivered in the three-year period ending in 2014.2020. The company cumulative EVA of $1,250 million required for maximum payout — cumulative EVA of $497 million — was consistent with the high end of our long-term growth and operating margin targets. As shown on the following page, below, we delivered total company cumulative EVA of over $601$1,216.3 million duringfor the 2015-20172021-2023 performance period, resulting in a payout of 200%166% for that component for our NEOsother than Messrs. Stander and Melo.
2021-2023 PUs: COMPANY CUMULATIVE EVA | ||||||||||||||||||||
($M) | 2021 | 2022 | 2023 | Cumulative EVA | ||||||||||||||||
Adjusted EBIT(1) | $ | 1,044.3 | $ | 1,008.0 | $ | 824.1 | ||||||||||||||
Taxes(2) |
| (261.1 | ) |
| (249.0 | ) |
| (212.6 | ) | |||||||||||
Equity method investment net losses |
| (3.9 | ) |
| – |
| – | |||||||||||||
|
|
|
|
|
| |||||||||||||||
| 779.3 |
| 759.0 |
| 611.5 | |||||||||||||||
Capital charge(3) |
| (306.9 | ) |
| (307.9 | ) |
| (318.7 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||||
EVA | $ | 472.4 | $ | 451.1 | $ | 292.8 |
| $1,216.3 | ||||||||||||
| (1) | Adjusted EBIT is a non-GAAP financial measure defined and reconciled from GAAP in Appendix A of this proxy statement. |
| (2) | GAAP tax rates for 2021, 2022 and 2023 were 25.0%, 24.2% and 27.6%, respectively. Taxes are shown based on adjusted tax rates of 25.0%, 24.7% and 25.8% for 2021, 2021 and 2023, respectively. The adjusted tax rate represents the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as the effects of certain discrete tax planning actions, impacts related to enactments of comprehensive tax law changes, and other items. |
| (3) | 8.5% of average invested capital of $3.61 billion in 2021, $3.62 billion in 2022 and $3.75 billion in 2023, in each case using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity, adjusted to exclude the impact of acquisitions completed since the target was set. |
70 | 2024 Proxy Statement | Avery Dennison Corporation |
Solutions cumulative EVA for the EVA componentannual award of PUs for our corporate NEOs (excluding Mr. Lovins).
§The following companies comprisedthepeer group at vesting for purposes2021-2023 performance period was 96% of the2015-2017 MTIP: A. Schulman, Inc.; Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holding; Axalta Coating Systems Ltd.; Ball Corporation; Bemis Company, Inc.; Berry Plastics Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Eastman Chemical Company; Ecolab Inc.; Ferro Corporation; FMC Corp; Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; International Flavors & Fragrances Inc.; KapStone Papertarget level of performance, resulting in a payout of 97% on that performance objective for Messrs. Stander andPackaging Corporation; Kraton Performance Polymers Inc.; Minerals Technologies Inc.; NewMarket Corporation; Olin Corp.; Owens-Illinois Inc.; Packaging Corporation of America; P.H. Glatfelter Company; PolyOne Corporation; PPG Industries Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Sherwin-Williams Company; Valhi Inc.; Verso Paper Corporation; and W.R. Grace & Co.
Avery Dennison Corporation| 2018 Proxy Statement |58
| 2015-2017 MTIP: CORPORATE CUMULATIVE EVA | |||||||||||||
| | | | | | | | | | | | | | |
| (In millions) | 2015 | 2016 | 2017 | CUMULATIVE | |||||||||
| Adjusted EBIT(1) | $ | 483.6 | $ | 586.4 | $ | 656.6 | | | |||||
| Taxes(2) | $ | (159.1 | ) | $ | (192.3 | ) | $ | (183.8 | ) | ||||
| | | | | | | | | | | | | | |
| | $ | 324.5 | $ | 394.1 | $ | 472.8 | | | |||||
| Capital charge(3) | $ | (182.8 | ) | $ | (185.3 | ) | $ | (221.9 | ) | ||||
| | | | | | | | | | | | | | |
| EVA | $ | 141.7 | $ | 208.8 | $ | 250.9 | $ | 601.4 | |||||
(1)Adjusted EBIT refers to earnings before interest expense and taxes, excluding non-cash restructuring costs and other items. Adjusted EBIT is a non-GAAP financial measure and is reconciled to GAAP inAppendix Aof this proxy statement.(2)Based on an effective tax rate of 32.9%, 32.8% and 28.0% for fiscal years 2015, 2016 and 2017, respectively. The effective tax rate for 2017 represents the full-year GAAP rate, adjusted to include the impact of previously planned repatriation of foreign earnings for the fourth quarter of 2017 and exclude the impact of the TCJA.(3)8.5% of average invested capital of $2.15 billion, $2.18 billion and $2.61 billion for fiscal years 2015, 2016 and 2017, respectively, using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity.
The cumulative EVA generated by our LGM business also exceeded the target established by the Committee. The payout for the EVA component for Mr. Lovins and our business NEO was 200%. Due to the competitively sensitive nature of information on business-levelMelo. EVA targets and actual results at the segment level are not disclosed. Information regarding the goal-setting process and rigor of the EVA performance objectives has been included in the discussion of the 2017-2019 MTIP on the previous page.disclosed due to their competitively sensitive nature.
Relative TSR for the 2021-2023 performance period was at the 9790th percentile of the designated peer group, resulting in a 200% payout for thisthat component for all Current NEOs.
Avery Dennison Corporation| 2018 Proxy Statement |59
TablePUs for the 2021-2023 performance period paid out based on weighted averages of Contents123% for Messrs. Stander and Melo and 183% for all other NEOs.
Special Award of 2021-2023 PUs
For retention purposes and to further incent him to contribute to the results for our total company – including by continuing to transform our Solutions business and driving our sustainability progress as then-leader of our enterprise-wide Sustainability Council – Mr. Stander was granted a one-time award of PUs in February 2021 with a grant date fair value of approximately $500,000 with the same performance objectives and weightings as the annual award of 2021-2023 PUs for Corporate NEOs. Consistent with the above, these PUs paid out based on a weighted average of 183%.
MSUs Eligible for Vesting at YE 2023
Four tranches of MSUs were eligible for vesting at the end of 20172023 based on our absolute TSR for the four-, three-, two-, and one-year performance periods shown below, with the number of shares paid out at vesting determined in accordance with the following formula:formula shown below.
Stock price at settlement (avg. closing price for trading days of January 2024) + reinvested dividends during period | ||||||||||||||||
Stock price at grant (avg. closing price for trading days of January of year of grant) | Payout at vesting | |||||||||||||||
| ÷ | = | |||||||||||||||
4TH TRANCHE OF MSUs GRANTED IN 2020 | 3RD TRANCHE OF MSUs GRANTED IN 2021 | |||
Performance period of 4 years | Performance period of 3 years | |||
2020-2023 Absolute TSR of 62% | 2021-2023 Absolute TSR of 32% | |||
Paid out at | Paid out at | |||
2ND TRANCHE | ||||
1ST TRANCHE OF MSUs GRANTED IN 2023 | ||||
Performance period of 2 years | Performance period of 1 year | |||
2022-2023 Absolute TSR of (1)% | 2023 Absolute TSR of 7% | |||
Paid out at | Paid out at | |||
Avery Dennison Corporation | 2024 Proxy Statement | 71 |
PERQUISITES
Perquisites
Consistent with market practices, our corporateOur NEOs receive the perquisites shown in the chart below. We do not reimburse our NEOs for the tax consequences of their receipt of these perquisites.
LIMITED PERQUISITES | ||||
Executive Benefit Allowance | ||||
$70,000 for CEO, | Flat allowance reduces expense of administering | |||
Financial Planning | Annual reimbursement of up to $25,000 for | Allows most senior executives to focus on job duties | ||
Annual Physical Examination | Paid directly to | Helps ensure leaders maintain good overall health | ||
Mr. Gravanis receives an automobile allowance consistent with customary executive benefit programs in the Netherlands. He also receives taxable dependent tuition assistance. For more information, see footnote (5) of the2017 Summary Compensation Table.General Benefits
RELOCATION AND OTHER TEMPORARY BENEFITS
We provide relocation assistance to some of our senior level employees, which may include our NEOs. Mr. Lovins received a one-time taxable lump-sum payment of $100,000 as compensation for the expenses associated with traveling from his home to our headquarters; provided, however, that if Mr. Lovins leaves within 12 or 24 months of his appointment date, he is required to repay 100% or 50%, respectively, of this lump-sum payment. If Mr. Lovins in the future utilizes our relocation assistance services on terms and conditions substantially similar to our other relocating executives, this lump-sum amount will be deducted from any benefits provided at that time. In addition, Mr. Lovins received an interim monthly cash stipend and temporary housing assistance during his service as our Interim CFO. For more information, see footnote (5) of the2017 Summary Compensation Table.
Avery Dennison Corporation| 2018 Proxy Statement |60
GENERAL BENEFITS
Nonqualified Deferred Compensation Benefits
Our U.S. NEOs are eligible to participate in our nonqualified deferred compensation plan, which allows eligible U.S. employees to defer up to 75% of their base salary and up to 90% of their AIP award. Although we previously allowed deferral of LTI awards, we suspended this plan feature in 2015. The plan provides these NEOs and other eligible U.S. employees with a long-term capital accumulation opportunity because deferred amounts accumulate on a pre-tax basis. Participating executivesParticipants may select from a number of investment options.options, with deferrals 100% vested. Our only deferred compensation plan currently open for deferrals does not offer above-market interest rates. Deferrals are 100% vested.
WeOur company made an annuala contribution in early 2017effective as of the first business day of 2023 to the deferred compensation accounts of our NEOs of up to 6% ofeligible participants for (i) 401(k) eligible earnings and deferred compensationpay in 2022 in excess of the Internal Revenue Code of 1986, as amended (the "Code"“Code”) compensation limit.limit, and (ii) their respective deferred compensation deferrals. This benefit wasannual contribution, which is designed to supplement 401(k) contributions that are limited under the Code.Code, provides an automatic contribution of 3% of deferred and eligible pay and a matching contribution of up to 50% of the first 7% of deferrable and eligible pay above the Code compensation limit.
For additional information regarding our deferred compensation plan and accrued NEO benefits thereunder, see 20172023 Nonqualified Deferred Compensation inExecutive Compensation Tables.
RetirementPension Benefits
Our U.S.Messrs. Butier and Lovins are our only NEOs are eligible, for retirement benefits under our U.S. pension plan and our benefit restoration plan, a nonqualified excess benefit plan, in each case subject to the same terms and conditions as our other eligible U.S. employees.employees, for pension benefits under our benefit restoration plan, a nonqualified excess benefit plan. Because we froze the accrual of benefits under these plansthe benefit restoration plan was frozen as of December 31,year-end 2010, noneneither of our eligible NEOs accrued additional retirementpension benefits during 2017.2023. For additional information regarding these plansthe benefit restoration plan and accrued NEO benefits thereunder, see20172023 Pension Benefits inExecutive Compensation Tables. Mr. Gravanis has legally mandated retirement benefits in his previous work location of France and his current work location of the Netherlands.
Defined Contribution Benefits
Our U.S. NEOs are eligible to participate in our employee savings plan, a qualified 401(k) plan that permitsallows U.S. employees to defer up to 100% of their eligible earnings less payroll deductions to the plan on a pre-tax basis and 25% of their eligible earnings on an after-tax basis, subject to the annual limit prescribed by the Internal Revenue Service (IRS) for the aggregate of company contributions and employee pre- and post-tax contributions. Employee deferrals are immediately vested upon contribution and in 2017contribution. In 2023, we contributed up to 6%6.5% of an employee'semployee’s eligible compensation, 3% of which was an automatic contribution and up to 3%3.5% of which was a matching contribution of 50% of the employee'semployee’s contributions up to 6%,7% of pay, subject to the Code limits. For 2018, we increased our matching contribution to 50% of the employee's contributions up to 7%, subject to Code limits.compensation limit. Participants vest in companyour contributions to their savings plan account after two years of service.
Employees are immediately eligible to participateAll U.S. NEOs participated in the savings plan and all our Current NEOs participated in the plan during fiscal year 2017, except for Mr. Gravanis who is not a U.S. employee and was therefore ineligible. Our U.S. NEOs participate in these plans2023, subject to the same eligibility and benefit terms and conditions as our other U.S. employees.employees, and are fully vested.
Executive Life Insurance Benefits
In addition to the $50,000 in life insurance benefits we provide to all U.S. employees, our U.S. NEOsexecutives are provided with supplemental life insurance benefits equal to three times the NEO'stheir base salary less $50,000, up to a maximum coverage amount of $1 million.
Personal
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Executive Long-Term Disability Insurance Benefits
If they elect to enroll in executive long-term disability coverage, our U.S. NEOs’ long-term disability benefit is equal to 65% of their eligible pre-disability monthly earnings up to a maximum of $25,000 per month. Coverage is available only for the individual; dependents are not covered.
Executive Excess Liability Insurance Benefits
We provide $3 million of personal excess liability insurance coverage to our U.S. NEOs.executives. Personal excess liability coverage provides an additional layer of liability coverage that supplements the coverage provided by the individual'sindividual’s personal liability insurance. To receive any benefit from this insurance the NEO mustprovided that they maintain certain minimum coverage requirements under his or her personal liability policy.
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Table of Contentsrequirements.
SEVERANCE BENEFITSCharitable Match Benefits
NoneWe match up to $10,000 of our NEOs has an employment contract. The absenceCEO’s and our Executive Chairman’s and $5,000 of employment contracts reflects our pay-for-performance philosophy; if an NEO is no longer performing at the expected level, heother NEOs’ annual documented contributions to charitable organizations or she can be terminated immediately without receiving a contractually-guaranteed payment. However,educational institutions.
Severance Benefits
Consistent with market practices, the Committee believes that providing our executives with severance benefits helps ensure that they act in the best interests of our company and stockholders, even if doing so may be contrary to their personal interests, such as where it could lead to the termination of their employment or a change of control of our company.
The Committee believes the amount of these benefits and the terms and conditions upon which they are provided are consistent with market practices. Unvested equity awards outstanding on the date of termination are generally cancelled, except for employees who qualify as retirement eligible under the terms of our equity incentive plans, whose awards are accelerated upon termination of service. Mr. Gravanis and Mses. Hill and Miller qualified as retirement eligible as of the end of fiscal year 2017. SeeEquity Incentive Plans following thePayments Upon Termination as of December 30, 2017 table for further information.
The rightscompensation of our NEOs in the event of termination not for cause areis governed by our Amended and Restated Executive Severance Plan (the "Severance Plan"“Severance Plan”) and, as applicable, our Amended and Restated Key Employee Change of Control Severance Plan (the "COC“COC Severance Plan"Plan”). We use these plans rather than individually negotiated agreements to provideallow us with the flexibility to change the severance benefits for which ourapplicable NEOs are eligible to reflect market practices without the need to obtain their individual consent. In addition, this plan-based approach eliminates the time and expense it would requireneed to individually negotiate separation paymentsseverance arrangements and ensures that oureligible NEOs are eligible forreceive benefits on the same terms and conditions as employees with similar levels of responsibility. Receipt of benefits under these plans is conditioned on the executive signing a waiver and general release of most claims against our company, as well as agreeing to non-competition, non-solicitation, and non-disclosurecertain restrictive covenants in favor of our company. Any violation of these covenants could result in our company seeking to recover some or all severance benefits previously paid or pursuing any other claims that may be appropriate under the circumstances.
Unvested equity awards outstanding on the date of termination are generally cancelled, except for employees who qualify as retirement eligible under the terms of our equity incentive plan, whose awards are accelerated upon termination of service. Mr. Gravanis' severance benefits would also be subject to applicable Dutch labor laws and regulations in effectStander was the only NEO who qualified as retirement eligible at the time of his separation, and he would receive the greater of the amount provided under our plans and the amount required by those laws and regulations.year-end 2023.
For additional information regarding potential NEO benefits under these plans, including the treatment of equity awards under various termination scenarios, seePayments Upon Termination as of December 30, 20172023 inExecutive Compensation Tables.
Severance Following Involuntary Termination Not for Cause
Our NEOs (excluding Mr. Butier) are eligible to receive severance benefits upon involuntary termination not for "cause,"“cause,” in accordance with the terms and conditions of the Severance Plan. In the event of a qualifying termination, our CEO would be eligible to receive two times the sum of his annual salary, his highesttarget AIP award received infor the preceding three yearsyear of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our other eligible NEOs would be eligible to receive one times his or hertheir respective sum of these amounts. All NEOs They would also be eligible to receive up to $25,000 in outplacement services for up to one year following termination of employment. Any payments made under the Severance Plan would be offset by any payments received by the NEO under any statutory, legislative and regulatory requirement or, if applicable, the COC Severance Plan.
In connection with her separation from our company and in accordance with the terms and conditions of the Severance Plan, Ms. Bramman received severance benefits of $1,223,313 in 2017, which included (i) $575,025, her annual base salary as of her termination date; (ii) $633,965, her highest AIP award in the last three years; and (iii) $14,323, the cash value of twelve months of premiums for qualified medical and dental plans in which she participated as of her termination date. In consideration of her receipt of these benefits, Ms. Bramman agreed to a waiver and release of any claims against our company and to non-competition, non-solicitation and non-disclosure covenants in favor of our company. All unvested equity awards held by Ms. Bramman on the date of her termination of employment were cancelled.
Severance Following Change of Control
OurMessrs. Stander, Lovins and Melo are our only NEOs are eligible for enhanced severance payments upon termination not for "cause"cause or by the executive for "good reason"good reason within 24 months of a "changechange of control"control of our company, in accordance with the terms and conditions of the
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COC Severance Plan. In the event of a qualifying termination following a change of control, our CEO would be eligible to receive three times the sum of his annual salary, highesttarget AIP award received infor the preceding three yearsyear of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our otherLevel 2 NEOs would be eligible to receive two times his or hertheir respective sum of these amounts. Our These NEOs would also be eligible to receive a pro-rata
Avery Dennison Corporation | 2024 Proxy Statement | 73 |
prorated AIP award for the year of termination and up to $25,000 in outplacement services for up to one year following termination of employment. Any payments under the COC Severance Plan would be offset by any payments received by the NEO under the Severance Plan and any other statutory, legislative and regulatory requirement.
Under In the event of termination following a change of control, our equity incentive plans, unvested equity awards granted to ourLevel 3 NEOs would generally vest only ifbe entitled to receive benefits under the NEO is terminated without "cause" or resigns for "good reason" within 24 months after the change of control.Severance Plan described above.
OurParticipating NEOs are not eligible to receive any excise tax gross-up on amounts payable under the COC Severance Plan. However, if anIf the NEO would otherwise incur excise taxes under Section 4999 of the Code, payments under the COC Severance Plan maywould be reduced at the participating NEO's election so that no excise taxes would be due.due if the reduction results in a greater after-tax benefit to the NEO.
Under our equity incentive plans, unvested equity awards would generally vest only if our NEOs are terminated without cause or resign for good reason within 24 months after the change of control. Outstanding PUs and MSUs vest based on actual performance, if determinable, and otherwise based on target performance.
COMPENSATION-SETTING TOOLS
MARKET SURVEY DATAMarket Survey Data
The Committee annually considers market survey data to target TDC, looking at a cross sectionconsidering companies of U.S. companiessimilar size based on annual revenues across all industries to reflect the broad talent market across which we seek our executives. The Committee reviews results from surveys prepared by third partiesa third-party survey to understand market compensation practices and assess our competitiveness, narrowing the scope of the results to account for variations caused by company size.
In February 2017,2023, the Committee was presented with industry-wide data from the following published compensation surveys, with executive matches based on job and functional responsibility: (i) the most recent Willis Towers Watson U.S. CompensationWTW General Industry Database, comprised of data, includingExecutive Compensation Survey. Primary market rates referenced were companies with annual revenues from 360 participants and (ii)of $10 billion, as predicted either by regression analysis or estimated as the most recent Hewitt Total Compensation Measurement Survey, which was narrowed in scope to focus on the dataaverage of the 63 participantscompanies with $5annual revenues of (i) $6 billion to $10 billion and (ii) $10 billion to $20 billion. Recognizing our company’s growth trajectory and top quartile performance in recent years, the Committee determined it was appropriate to assess market competitiveness for our CEO and Executive Chairman at the $10 billion level rather than the $6 billion to $10 billion range it used previously; the Committee primarily used the previous range for assessing the market competitiveness for our other NEOs, while also referencing data for companies with annual revenues. revenues of $10 billion. The Committee reviewed the data from each survey on an aggregated basis, with no consideration of either survey's respectivethe survey’s component companies, which were not determined or known by the Committee.
The Committee uses the survey data as a reference point to target TDC and the components thereof, at the market median, giving consideration to responsibilities, individual performance, tenure, retention and succession.
PEER GROUPSTally Sheets
For determining our relative TSR for purposes of vesting PUs granted under the 2015-2017 MTIP and 2017-2019 MTIP, the Committee used a peer group comprised of U.S. companies satisfying objective criteria for industry classification and revenue size, the names of which have been disclosed in this CD&A. The Committee does not utilize a peer group for any other purpose.
TALLY SHEETS
The Committee annually reviews tally sheets that reflect the components of each NEO'sNEO’s compensation. The tally sheets reviewed in 2017February 2024 included the following information shown below for 2015, 2016 and 2017:each of the most recent three fiscal years.
•Compensation history, including annual cashCash compensation (base salary and AIP awards), LTI awards, value of vested LTI awards, and annualized cost of benefits and
perquisites;•The expected valueperquisitesValue of annual compensation,
for the year,including base salary, AIP award andthegrant date fair value of LTIawards;•- awards
Accumulated value of compensation, including
total accumulated value ofoutstanding LTI awards and accumulated benefit values underour retirementpension and deferred compensationplans;•- plans
Potential payments under various termination
scenarios; and•- scenarios
Compliance with our stock ownership
guidelines.policyAvery Dennison Corporation|2018 Proxy Statement|63The Committee believes that reviewing tally sheets is useful in determining executive compensation because they provide a historical perspective on NEO compensation and include information that will be contained in our proxy statement.
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Peer Groups
Beginning in 2023, for determining relative TSR, the Committee used the following objective criteria for purposes of identifying the peer group: public companies primarily listed on a U.S. stock exchange (previous criterion was headquartered in the U.S.) (i) in similar industries based on their classification in one of five GICS groups (diversified chemicals, specialty chemicals, metal and glass containers, paper packaging, and paper products) and (ii) with market capitalization of at least $1.5 billion and revenues during the last 12 months of $3 billion to $30 billion (previous criterion was only revenues during the last 12 months of $1 billion to $20 billion).
| PEER GROUP FOR DETERMINING RELATIVE TSR FOR PUs | ||||||
| 2023-2025 PUs AT FYE 2023 (31 companies) | 2021-2023 PUs AT TIME OF PAYOUT (39 companies) | |||||
Albermarle Corporation Amcor plc AptarGroup, Inc. Ardagh Metal Packaging S.A. Avient Corporation Axalta Coating Systems Ltd. Ball Corporation Berry Global Group, Inc. Celanese Corporation Crown Holdings, Inc. Dupont de Nemours, Inc. Eastman Chemical Company Ecolab Inc. Graphic Packaging International, LLC Greif, Inc. H.B. Fuller Company | Huntsman Corporation International Flavors & Fragrances Inc. International Paper Company O-I Glass, Inc. Packaging Corporation of America Pactiv Evergreen Inc. PPG Industries, Inc. RPM International Inc. Sealed Air Corporation Silgan Holdings Inc. Sonoco Products Company Sylvamo Corporation The Chemours Company The Sherwin-Williams Company Westrock Company | Albermarle Corporation AptarGroup, Inc. Ashland Global Holdings Inc. Axalta Coating Systems Ltd. Avient Corporation Ball Corporation Berry Global Group, Inc. Celanese Corporation Clearwater Paper Corporation Crown Holdings, Inc. Eastman Chemical Company Ecolab Inc. Ecovyst Inc. Element Solutions Inc. Graphic Packaging International, LLC Greif, Inc. H.B. Fuller Company Huntsman Corporation Ingevity Corporation Innospec Inc. | International Flavors & Fragrances Inc. Minerals Technologies Inc. NewMarket Corporation O-I Glass, Inc. Packaging Corporation of America Pactiv Evergreen Inc. PPG Industries, Inc. Quaker Chemical Corporation Rayonier Inc. RPM International Inc. Sealed Air Corporation Sensient Technologies Corporation Silgan Holdings Inc. Sonoco Products Company Stepan Company The Chemours Company The Sherwin-Williams Company Valhi, Inc. WestRock Company | |||
INDEPENDENT OVERSIGHT AND EXPERTISE
Our Board believes that hiring and retaining effectiveour executives and providing them with market-competitive compensation are essential to the success of our company and advanceadvancing the interests of our stockholders. The Committee, which is comprisedcomposed solely of independent directors, is responsible for overseeing ourapproving executive compensation program.compensation. The Committee may delegate authority to subcommittees or, in certain limited circumstances not relatedunrelated to the compensation of our executive officers, to our CEO.
Under its charter, the Committee has the authority, in its sole discretion and at our expense, to obtain advice and assistance from external advisors. The Committee may retain and terminate any compensation consultant or other external advisor at our expense and has sole authority to approve the advisor'sadvisor’s fees and other terms and conditions of the retention. In retainingThe Committee annually considers the independence of its advisors, theadvisors.
The Committee must consider each advisor's independence from management, as required by NYSE listing standards.
During 2017, the Committeehas retained Willis Towers WatsonWTW as its independent compensation consultant, andwith the firm performedperforming the following services described below for or at the Committee:request of the Committee in 2023.
2023 WTW SERVICES | ||
• Advised on CEO succession and other leadership transitions | ||
• Benchmarked CEO and Executive Chairman compensation | ||
• Provided strategic review of executive compensation program | ||
• Provided incentive compensation | ||
• Conducted analyses of | ||
• Commented on our 2023 CD&A and certain other proxy statement disclosures | ||
• Analyzed a proxy advisory firm’s projected pay-for-performance analysis | ||
• Advised on executive compensation trends and regulatory updates | ||
• Prepared for, attended and reviewed documentation for Committee meetings | ||
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In 2017, Willis Towers Watson2023, WTW received $139,873$344,972 in compensation from our company for professional services directly performed for or at the request of the Committee. We also reimbursed the firm for its reasonable out-of-pocketexpenses.
The Committee conducted its annual assessment of Willis Towers Watson'sWTW’s performance in December 2017,2023, which included a reviewan evaluation of the servicesfirm’s service delivery provided during the year, as well as the fees paid therefor and the following additional evaluation criteria:criteria described below.
•Experience— The firm's depth and breadth of executive compensation knowledge and experience; quality of staff, data, and other resources; and understanding of our business strategy and issues, industry, performance drivers and human capital considerations;•Independence —The firm's objectivity in giving advice and making recommendations, and its willingness to provide candid feedback regarding management and Committee proposals, questions and concerns;•Preparation— The quality and timeliness of the firm's reports and its review and feedback on management proposals, and the firm's preparation with the Committee Chair and our management, as appropriate; and•Committee Relationship —The accessibility and availability of members of the engagement team; the firm's relationship with the Committee Chair and our human resources staff; and the effectiveness of its communication.
| • | Experience – The firm’s depth and breadth of executive compensation and board advisory knowledge and experience; qualifications as a board-level consultant; quality of resources available, including staff and data; and understanding of our business strategy, challenges, industry, performance drivers and talent considerations |
| • | Independence –The firm’s objectivity in giving advice and making recommendations, and its willingness to provide candid feedback regarding management and Committee proposals, questions and concerns |
| • | Preparation – The quality and timeliness of the firm’s reports, including accuracy, type and amount of information, clear communication and responsiveness to issues; its review and feedback on management proposals; and the firm’s preparation with the Committee Chair and management, as appropriate |
| • | Committee Relationship – The accessibility and availability and communication effectiveness of members of the engagement team and the firm’s reporting relationship with the Committee Chair and working relationship with management |
Based on this assessment,evaluation, the Committee determined that itexpressed its continued to be satisfiedsatisfaction with the performance of Willis Towers WatsonWTW and the individual members of the engagement team servingadvising the Committee.
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Table The Committee Chair discussed with the lead members of Contentsthe engagement team the Committee’s feedback on their performance, including potential improvement opportunities.
ADVISOR INDEPENDENCEAdvisor Independence
Willis Towers WatsonWTW and the Committee have had the following protocols in place since the engagement commenced to ensure the firm'sfirm’s independence from management: the Committee has the sole authority to select, retain and terminate Willis Towers Watson, as well asWTW and, acting through its Chair, authorize the firm'sfirm’s fees, and determine the other terms and conditions that govern the engagement; the Committee directs Willis Towers Watsonengagement and direct WTW on the process for delivery and communication of its work product, including its analyses, findings, conclusions and recommendations; product; in the performance and evaluation of its duties, Willis Towers WatsonWTW is accountable, and reports directly, to the Committee;Committee; and members of the Committee may consult with Willis Towers WatsonWTW at any time, with or without members of management present, at the Committee'sin their sole discretion.
As required by SEC regulations and NYSE listing standards, theThe Committee considered the independence of its advisors in December 2017.2023. The Committee reviewed information provided by Willis Towers Watson, membershas noted the factors described below in assessing the independence of the Committee and our executive officers related to the following factors:WTW.
•Other services provided to our company —During fiscal year 2017, Willis Towers WatsonWTW performed
no servicesonly two discrete projects for our companyother thanin 2023 outside of the executive compensationconsulting services;•Fees paid by our company as a percentageservices it performed for or at the request of thefirm's total revenue —CommitteeFees from our company reflected approximately
0.002%0.004% ofWillis Towers Watson'sWTW’s revenue for its fiscal year ended December 31,2017;•Policies2023WTW has policies and procedures
maintainedtoprevent or mitigate conflicts of interest —Willis Towers Watson has multiple such policiesensure its advice is objective andprocedures,independent, including a comprehensive code of conduct and ethics and quality policies that mandate rigorous work reviews and periodic compliance reviews, which the firm has represented to the Committee are highlyeffective;•Business or personal relationships with members of the Committee —effectiveBased on disclosures from
Willis Towers WatsonWTW and members of the Committee,wethere areaware ofnosuchbusiness or personalrelationships;•Company stock owned by Willis Towers Watson firm representatives —relationships between themNo members of the
Willis Towers WatsonWTW team serving the Committee ownanystock in our company, other thanperhapspotentially through investments in mutual or other funds managed without themember's input; and•Business or personal relationships with any executive officer of our company—member’s inputBased on disclosures from the firm and our executive officers,
wethere areaware ofno business or personal relationshipswith Willis Towers Watsonbetween WTW or the members of the engagement team advising theCommittee.Committee with any executive officer of our company76
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COMPENSATION CLAWBACK POLICIES
In October 2023, our Board adopted a Policy for Recovery of Erroneously Awarded Compensation (“Section 16 Clawback”) to implement rules issued by the SEC. The Section 16 Clawback applies to our current and former executive officers, including all NEOs, and subjects their incentive-based compensation received on or after October 2, 2023 to clawback in the event our company is required to prepare an accounting restatement to correct material noncompliance with any financial reporting requirement under U.S. securities laws, including restatements that correct an error in previously issued financial statements that (i) is material to the previously issued financial statements or (ii) would result in a material misstatement if the error were corrected or left uncorrected in the current period. In these circumstances, the Section 16 Clawback requires our company to recover, reasonably promptly, the portion of incentive-based compensation that is deemed to have been erroneously awarded, unless the Committee affirmatively(which administers the policy) has determined Willis Towers Watson tothat recovery would be independentimpracticable and both the firm and the membersthat one or more of the engagement team advisingallowable impracticability conditions under SEC rules has been met. Recovery is required whether or not the applicable officer engaged in misconduct or otherwise caused or contributed to the requirement for the restatement. Each of our executive officers, including all NEOs, has agreed to the terms of the Section 16 Clawback and acknowledged that their compensation may be subject to reduction, cancellation, forfeiture and/or recoupment as required thereby.
At the time it recommended to our Board the adoption of the Section 16 Clawback, the Committee recommended that our existing clawback policy remain in effect. This clawback policy applicable to be free of any conflicts of interest.
CLAWBACK POLICY
Inall AIP and LTI recipients requires that, in the event of fraud or other intentional misconduct on the part of an NEOawardee that necessitates a restatement of our financial results (including, without limitation, any accounting restatement due to material noncompliance with any financial reporting requirement), the NEO would be required toCommittee may require that the awardee reimburse our company for any AIP or LTI awards paid or granted in excess of the amount that would have been paid or granted based on the restated financial results. These remedies would be in addition to, not instead of, any other actions taken by our company (through the imposition of any discipline up to and including termination), law enforcement agencies, regulators or other authorities. This more widely applicable clawback policy has been contractually acknowledged by our NEOs upon the execution of their LTI award agreements since 2010.
The Committee approved our clawback policy in 2009 to subject incentive compensation to forfeiture if our financial results are not achieved consistent with our high ethical standards. This policy is expressly incorporated into our AIPannual and long-term incentive plans and is contractually agreed to by LTI plans. The Committee anticipates that it will revise the policy if and as necessary to comply with final rules issued by the SEC.
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TAX IMPLICATIONS OF EXECUTIVE COMPENSATION
The Committee aims to compensate ourrecipients, including all NEOs, in a manner that is tax effective for our company. However, the Committee may adopt or implement compensation programs and/or practices that are not fully tax deductible to the extent it believes doing so is in the best interests of our company and stockholders.
Section 162(m) of the Codetheir annual award agreements.
Under Section 162(m) of the Code ("Section 162(m)") as in effect for fiscal year 2017, our federal income tax deductions for executive compensation in fiscal year 2017 were limited to the extent total compensation for certain executive officers exceeded $1 million in any one year, unless it qualified as "performance-based." To qualify as performance-based under Section 162(m) as in effect for fiscal year 2017, compensation must, among other things, be based solely upon the achievement of objective performance goals and made under a plan that is administered by a compensation committee comprised solely of "outside directors." In addition, the material terms of the plan must be disclosed to and approved by our stockholders and the Committee must certify that the performance goals were achieved before payments can be made.
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TALENT AND COMPENSATION
The The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with
EXECUTIVE COMPENSATION TABLES
2023 SUMMARY COMPENSATION TABLE
The table below provides information regarding the number of shares acquired and the value realized by our NEOs upon the
The present
Compensation covered by the
Benefits under the
The table below provides information regarding
Executive Variable Deferred Retirement Plan Under the Eligible employees are able to defer All deferred compensation accounts are unfunded obligations of our company and subject to the same risks as any of our general debts and obligations. As a result, these accounts help mitigate risk-seeking behavior by management that could be detrimental to the long-term health of our company.
Contributions to deferred compensation accounts are required to be distributed following an eligible
PAYMENTS UPON TERMINATION AS OF DECEMBER 30, The table below shows the potential benefits that would have been payable to our
In
Benefits Not Subject to Trigger for Benefits. Involuntary termination, whichexcludes termination for Definition of Cause. Cause is defined as (i) commission of a crime or other act that could materially damage the reputation of our company or its subsidiaries; (ii) theft, misappropriation, or embezzlement of company or subsidiary property; (iii) falsification of company or subsidiary records;
Benefits Not Subject to Gross-up.Benefits are subject to withholding for all applicable taxes and not grossed-up for excise or other taxes. However, if the payment would trigger an excise tax,
Definition of Change of Control. Change of control is defined as (i) replacement of a majority of our Board during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of our Board; or (ii) acquisition by any person, group or corporation that has entered into a merger, acquisition, consolidation, purchase, stock acquisition, asset acquisition or similar business transaction with our company, of (A) together with any of our Definition of Definition of
Under
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 30,
PAY VS. PERFORMANCE DISCLOSURE The table below reflects information regarding the
Relationship Between Financial Performance Measures The graphs below compare the Compensation Actually Paid to our CEO(s) and the average of the Compensation Actually Paid to our non-CEO NEOs with our (i) TSR, Peer Group TSR and Former Peer Group TSR, (ii) net income and (iii) adjusted EPS, in each case for our 2020, 2021, 2022 and 2023 fiscal years. TSR amounts assume $100 invested on December 31, 2020 and reinvestment of dividends.Reflecting the Compensation Committee’s philosophy of paying for performance and incenting our executives using long-term equity awards primarily tied to our stock price and TSR, the Compensation Actually Paid to our NEOs was generally aligned with our TSR performance. non-CEO NEOs also increased. In 2022, when our TSR decreased, the Compensation Actually Paid also decreased. While our TSR modestly increased in 2023 and the Compensation Actually Paid to Mr. Butier increased as well, the average Compensation Actually Paid to ournon-CEO NEOs substantially decreased due to the impact of the adjustments shown in footnote (2) above. We believe that the inclusion of both absolute and relative TSR as performance objectives in our annual The growth in our net income from 2020 through 2022 did not directly align with Compensation Actually Paid. In each of those three years, our net income grew; however, our Compensation Actually Paid varied over the period. Net income declined in 2023, while Compensation Actually Paid to Mr. Butier increased and Compensation Actually Paid to our non-CEO NEOs substantially decreased due to the impact of the adjustments shown in footnote (2) above. Compensation Actually Paid is less sensitive to net income because our executive compensation program prioritizes longer-term equity compensation primarily tied to our stock price and TSR and secondarily to cumulative EVA, each of which we expect will continue to have a much greater impact than net income on Compensation Actually Paid.Outside of our TSR performance, we believe that adjusted EPS is the most important financial measure that ties the compensation of NEOs to our 
  Pay vs. Performance Financial Performance Measures We believe the financial performance measures shown below, all of which are performance objectives used in our executive compensation program, were the most important in linking Compensation Actually Paid to non-GAAP financial measures from GAAP, see theCompensation and Discussion Analysis Absolute TSR and Relative TSR Adjusted EPS Cumulative EVA Adjusted Sales Growth Adjusted Free Cash Flow
CEO PAY RATIO With ~69% of our 2023 revenues The charts below show the demographics of our global workforce by region and function. At year-end 2023, ~20,000 of our employees were in Asia Pacific, serving our customers in the region. In addition, ~22,500 employees at that time worked in the operations of our manufacturing facilities or in positions directly supporting them from other locations.
We offer market-based, competitive wages and benefits in
global population in the To determine our medianable group, we used a statistical sampling approach known as stratified sampling to concentrate on medianable employees, which were those within a narrow range of the estimated median annual salary of
Our median employee was a full-time, salaried employee working at a manufacturing facility in China, with annual base compensation of
In determining the annual total compensation of
ITEM 3 – APPROVAL OF CERTIFICATE OF AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
After careful consideration and upon the recommendation of the Governance Committee, our Board has determined it to be advisable and has approved, and recommends that our stockholders approve at the Annual Meeting, a Certificate of Amendment (the “Charter Amendment”) to our Amended and Restated Certificate of Incorporation (“Charter”) to provide stockholders of record holding, in the aggregate, at least 25% of the voting power of our outstanding common stock the right to request that our Corporate Secretary call special meetings of stockholders. If stockholders approve the Charter Amendment, which is described below and included in its entirety in Appendix B of this proxy statement, our Board will amend our Bylaws to specify the notice, information and other requirements for stockholders to request that our Corporate Secretary call a special meeting of stockholders that will become effective upon the effectiveness of the Charter Amendment. Pursuant to our Charter, stockholders currently do not have the right to request that we call special meetings of stockholders. Based on its ongoing review of our governance program and the feedback received during our 2023 engagements with investors, the Governance Committee and our Board have recognized that providing stockholders with the ability to request that special meetings be called is considered by various stakeholders to be an important element of a strong governance program. Our Board considers special meetings to be extraordinary events that should be held only when significant strategic concerns or other similar considerations require that the matters to be addressed not be delayed until our next Annual Meeting. Our investor relations and stockholder engagement programs provide forums in which stockholders may communicate directly with our Board and members of management throughout the year on topics of interest to them. Because special meetings would be expensive and time-consuming for our company and potentially disrupt our normal business operations, our Board believes that a small percentage of stockholders should not be entitled to request that special meetings be called for their own interests, which may not be shared by the majority of our stockholders. To better inform our Board’s recommendation, we considered feedback from our investors, and while they expressed a variety of preferences and thresholds either during engagement or in their published policies, we found broad support for a 25% minimum ownership threshold for stockholders to be able to request that special meetings be called. Our Board believes that this threshold is appropriate as it would provide stockholders with a meaningful right to request that a special meeting be called while mitigating the risk that company resources are expended to serve the narrow self-interests of a few minority stockholders. The Charter Amendment makes only one additional change, which is to remove out-of-date references to the declassification of our Board that had been fully implemented by April 2014, providing that directors shall be elected annually for one-year terms, consistent with existing Charter provisions and best practices. In light of these considerations, our Board believes that the adoption of a right for stockholders to request that a special meeting be called as set forth in the Charter Amendment establishes the appropriate balance between enhancing stockholder rights and protecting stockholder interests. Board Recommendation Our Board recommends that you vote FOR a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to provide that stockholders holding at least 25% of our common stock have the right to request that we call special meetings of stockholders. Properly dated and signed proxies will be so voted unless you specify otherwise.
Complete Text of Proposed Charter Amendment The foregoing description is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the proposed Charter Amendment attached to this proxy statement as Appendix B. Conforming Changes to the Bylaws If the Charter Amendment is approved by stockholders at the Annual Meeting, our Board will amend our Bylaws to specify the procedural and related requirements for stockholder-requested special meetings. These procedural amendments are intended to ensure that our company and stockholders receive appropriate information about the special meeting and that the special meeting is not duplicative of matters that were, or in the near term could be, covered at an Annual Meeting. A summary of the planned amendments to our Bylaws is set forth below.
The amendments to our Bylaws will specify that the business to be transacted at a stockholder-requested special meeting will be limited to the business stated in a valid special meeting request and any additional business that our Board determines to include in the notice for the special meeting.
ITEM 4 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee Stockholder ratification is not required by our Bylaws or applicable laws and regulations. However, our Board annually submits
In determining whether to reappoint PwC, the Audit Committee considered the firm’s qualifications, performance, independence and
The Audit Committee
Our Board recommends that you vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for fiscal year Properly dated and signed proxies will be so voted unless you specify otherwise.
AUDIT MATTERS AUDITOR TENURE PwC has been our independent registered public accounting firm since 1998 and served in that capacity during fiscal year
In conducting its
The Audit Committee recognized PwC’s use of digital tools to improve efficiencies in the areas of business performance analytics and auditing of the consolidation process, as well as the expanded use of its tool for gathering and managing audit requests. In addition, PwC has continued to improve utilization of its global deliverable model to manage service delivery cost, drive standardization and execute a quality audit. PwC continuously provides the Audit Committee and management with accounting/financial reporting insights and best practices relevant to our business, as well as advance notice of legislative and regulatory developments that could have a significant impact on our company. The Audit Committee has several controls in place to mitigate any potential independence risk related to auditor tenure, including
AUDITOR INDEPENDENCE PwC has advised us that neither the firm nor any member thereof has any financial interest, direct or indirect, in
In COMMITTEE APPROVAL OF SERVICES AND FEES The Audit Committee has adopted procedures for the pre-approval of all audit and non-audit services and fees provided by the independent registered public accounting firm. In the fourth quarter of 2022, the Audit Committee approved the (i) audit, audit-related and other services PwC could perform in 2023 and (ii) permissible tax services the firm
AUDIT FEES
AUDIT COMMITTEE REPORT COMPOSITION AND QUALIFICATIONS The Audit The Committee has a written charter During fiscal year
Based on the OVERSIGHT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The PwC provided to the Committee the written disclosures and independence letter required by the PCAOB. The Committee discussed with PwC its independence from our company and management and concluded that PwC was independent during fiscal year Under its charter, the Committee is required to The Committee has determined that the appointment of PwC as our independent registered public accounting firm for fiscal year The
The Committee regularly meets separately in executive session without management present with each of
STOCKHOLDER FEEDBACK The Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints regarding our accounting, internal controls and auditing matters. SeeComplaint Procedures for Accounting and Auditing Matters in theGovernance
served on the Audit Committee through July 2023 and new director Maria Fernanda Mejia was appointed to the Audit Committee in February 2024. Neither Mr. Anderson nor Ms. Mejia participated in the review, discussions and recommendations reflected in this Audit Committee Report.
SECURITY OWNERSHIP INFORMATION SECURITY OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS The table below shows the number of shares of our common stock beneficially owned by our (i) current directors; (ii) NEOs; (iii) current directors and executive officers as a group; and (iv) greater-than-five-percent, or
In addition, each of our directors and executive officers annually completes a questionnaire designed to solicit information about any potential related person transactions. Transactions involving directors are reviewed with the Governance Committee by We review internal financial records to identify transactions with security holders known by us from information contained in Schedules 13D or 13G filed with the SEC to be beneficial owners of more than During fiscal year
VOTING AND MEETING Q&A ANNUAL REPORT AND PROXY MATERIALS
HOW DO I ACCESS THE We have elected to provide access to our proxy materials on the On or about March Stockholders of record may obtain a copy of this proxy statement without charge by writing to our Corporate Secretary WHAT IS HOUSEHOLDING? We For holders who share If you HOW CAN I ACCESS THE ANNUAL REPORT AND PROXY MATERIALS ELECTRONICALLY? Instead of receiving paper copies of You may enroll to access proxy materials and annual reports electronically for future Annual Meetings by registering online at the following website:https://enroll.icsdelivery.com/
Our Board is soliciting your vote in connection with the Annual Meeting. WHO IS ENTITLED TO VOTE? Stockholders of record as of the close of business on February 26, HOW DO I VOTE? You may vote by submitting a proxy or voting The method of voting by proxy differs depending on whether you are viewing this proxy statement
If your shares are held in street name, you may only change your vote by submitting new voting instructions to your nominee. You must contact your nominee to find out how
IS MY VOTE CONFIDENTIAL? Except in contested proxy solicitations, when required by law or as HOW WILL VOTES BE COUNTED? Votes cast by proxy or The vote required to approve each of the Annual Meeting business items, as well as the impact of abstentions and broker non-votes, is shown in the chart below.
WHAT IF THERE IS ADDITIONAL BUSINESS TO BE VOTED ON? As of the date of this proxy statement, we know of no other business to be presented for consideration HOW DO I FIND VOTE RESULTS? We expect to announce preliminary voting results
ANNUAL MEETING WHAT IS THE TIME, DATE AND The Annual Meeting will take place at
HOW CAN I ATTEND THE VIRTUAL MEETING?
After the business portion of the Annual Meeting concludes and the meeting is adjourned, we will hold a Q&A session during which we intend to answer all questions submitted timely that are pertinent to our company and the items being brought before stockholder vote, as time permits and in accordance with our Ground Rules for Conduct of Meeting. Questions and answers will be grouped by topic and substantially similar questions will be answered only once. To ensure all questions are able to be addressed, we will respond to no more than three questions from any single stockholder. Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. As a result of time constraints and other considerations, we cannot assure you that every stockholder wishing to address the meeting will have the opportunity to do so. However,
Beginning 15 minutes prior to, and during, the Annual Meeting, we will have support available to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulty accessing, or during, the virtual meeting, please call the support team at 1.844.986.0822 (toll-free in the U.S. and Canada) or +1.303.562.9302 (for all other attendees). HOW ARE PROXIES BEING SOLICITED? We have retained
MATTERS RELATED TO 2025 ANNUAL MEETING HOW DO I SUBMIT ITEMS FOR POTENTIAL CONSIDERATION AT THE To propose business
Your notice must include, among other things, the
We intend to file a proxy statement and a white proxy card with the SEC in connection with our solicitation of proxies for the 2025 Annual Meeting. HOW DO I NOMINATE DIRECTORS FOR INCLUSION IN THE Our
APPENDIX A – RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FROM GAAP
We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of our financial results Our non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it more difficult to assess our underlying performance in a single period. By excluding the accounting effects, We use the following non-GAAP financial measures in this proxy
SALES CHANGE EX. CURRENCY AND ORGANIC SALES CHANGE
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
ADJUSTED
ADJUSTED FREE CASH FLOW
RETURN ON TOTAL CAPITAL (ROTC)
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
APPENDIX B – TEXT OF CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF AVERY DENNISON CORPORATION (Pursuant to Section 242 of the General Corporation Law of the State of Delaware) Avery Dennison Corporation, a Delaware corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that: 1. Article VII of the Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) is hereby amended in its entirety to read as follows:
2. Article X of the Charter is hereby amended in its entirety to read as follows:
3. The foregoing amendments to the Charter were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer on this day of 2024.
AVERY DENNISON CORPORATION C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC. P.O. BOX 1342 BRENTWOOD, NY 11717
VOTE BY INTERNET Before The Meeting-Go towww.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on April 24, 2024 for shares held directly and by 11:59 p.m. Eastern Time on April 22, 2024 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting-Go towww.virtualshareholdermeeting.com/AVY2024 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on April 24, 2024 for shares held directly and by 11:59 p.m. Eastern Time on April 22, 2024 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
— — — — — — — — — — — — — — — — —— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at
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