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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ý☒
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Check the appropriate box:o Preliminary Proxy StatementoConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))ý Definitive Proxy Statemento Definitive Additional Materialso Soliciting Material Pursuant to § 240.14a-12
☐ | 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 |
AVERY DENNISON CORPORATION
(Name of Registrant as Specified Inin Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
☒ | ||||||
No fee required. |
Fee paid previously with preliminary materials. |
Fee computed on table in exhibit required by Item 25(b) per Exchange Act | ||||||
Section III 2022 Notice and Proxy Statement Avery Dennison Corporation | 2022 Proxy Statement SECTION III
Table of ContentsNOTICE OF ANNUAL
Table of ContentsMEETING OF STOCKHOLDERS
Notice of 2019 Annual Meeting of Stockholders
To Our Stockholders:
We cordially invite you to attend our 2019 Annual Meeting of Stockholders at 207 Goode Avenue, Glendale, California 91203 on Thursday, April 25, 2019 at 1:30 p.m. Pacific Time. At the meeting, we will conduct the following items of business:
RECORD DATE | February 28, 2022 | ||
MEETING DATE | April 28, 2022 | ||
MEETING TIME | 1:30 p.m. Eastern Time | ||
MEETING FORMAT | Virtual, at www.virtualshareholdermeeting.com/AVY2022 |
MEETING AGENDA
![]() | Elect the | |
![]() | Approve, on an advisory basis, our executive | |
![]() | Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year | |
![]() | Transact any other business properly brought before the meeting or any adjournment or postponement |
Our Board recommends that you voteFOR each of theour 8 director nominees in Item 1 andFOR Items 2 and 3.
Stockholders of record as of February 25, 201928, 2022 are entitled to notice of, and to vote at,in connection with, the meeting and any adjournment or postponement thereof. This notice and our proxy materials are being mailed or made available to stockholders on or about March 15, 2022.
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 on the right, 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 your investment 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 10, 2022
Online
You can vote online at www.proxyvote.com by 11:59 p.m. Eastern Time on April 27, 2022. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Telephone
In the U.S. and Canada, you can vote by calling 1.800.690.6903 by 11:59 p.m. Eastern Time on April 27, 2022. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Mail
You can vote by mail by completing, dating and signing your proxy card and returning it in the postage-paid envelope or otherwise to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.
During Meeting
Unless your shares are held through our Employee Savings Plan, you can vote during the Annual Meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting.
Avery Dennison Corporation | 2022 Proxy Statement | Table of Contents |
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.
DISTRIBUTION OF PROXY MATERIALS
We will mail our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials on the Internet,online, on or beforeabout March 11, 2019.15, 2022. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will mail you our 2019 proxy statement; 2018 annual2021 integrated report, which includes lettersa letter to stockholders from our Chairman and our Chairman-Elect, President and Chief Executive Officer;Officer (CEO); our 2021 annual report; our notice and proxy statement for the 2022 Annual Meeting of Stockholders (the “Annual Meeting”); information regarding our businesses, financial performance and strategic achievements, including our continued progress as it relates to environmental, social and governance (ESG) matters; and a proxy card on or about March 11, 2019.
We want your shares to be represented 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| 2019 Proxy Statement |Table of Contents
This section summarizes information described in greater detail in other parts of this proxy statement and does not contain all the information you should consider before voting. We encourage you to read the entire proxy statement before voting.
TIME, DATE AND LOCATIONFORMAT OF ANNUAL MEETING
The Annual Meeting will take place at 1:30 p.m. PacificEastern Time on April 25, 2019 at 207 Goode Avenue, Glendale, California 91203. Parking28, 2022. Due to continued public health concerns about large, indoor in-person gatherings given the coronavirus/COVID-19 pandemic (“COVID-19”), the meeting will be available next door at 127 Burchett Street, Glendale, California 91203. Attendantsheld virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will be availableneed to provide assistance with directions and parking tickets will be validated atlog in to www.virtualshareholdermeeting.com/AVY2022 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials or proxy card.
Online access to the live audio webcast of the Annual Meeting.Meeting will open at 1:15 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 meeting in advance of its designated start time as we plan to begin conducting 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 ATDURING 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 each of the 11our 8 director nominees and FOR the other two2 items being brought before the stockholder vote.
Item | Board Recommendation | Vote Required | Discretionary Broker Voting | Page Reference | ||||||||
1 | Election of directors | ![]() | FOR each nominee | Majority of votes cast | No | 39 | ||||||
2 | Advisory vote to approve executive compensation | ![]() | FOR | Majority of shares represented and entitled to vote | No | 49 | ||||||
3 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for FY 2022 | ![]() | FOR | Majority of shares represented and entitled to vote | Yes | 89 |
VOTING PRIOR TO OR DURING ANNUAL MEETING
You may vote your shares by submitting a proxy in advance of the Annual Meeting or, in certain circumstances, voting during the meeting. You may not vote during the meeting if your shares are held through our Employee Savings Plan. 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. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by following the instructions contained in the Voting and Meeting Q&A section of this proxy statement.
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, using easy-to-use online tools that allow you to attend, vote andask questions. After the business portion of the Annual Meeting concludes and the meeting is adjourned, our Chairman/CEO will lead a Q&A session during which we intend to answer all questions submitted on the day of or during
Avery Dennison Corporation | 2022 Proxy Statement | 1 |
the meeting that are pertinent to our company and the items being brought before 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.
OUR COMPANY
We are a global materials science company specializing in the design and manufacture of a wide variety of labeling and functional materials. Our products and solutions, which are used in nearly every major industry, include pressure-sensitive materials for labels and graphic applications; tapes and other bonding solutions for industrial, medical and retail applications; tags, labels and embellishments for apparel; and radio-frequency identification (RFID) solutions serving apparel and other markets. We have approximately 36,000 employees in more than 50 countries.
Our company is comprised of the following businesses: Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS) and Industrial and Healthcare Materials (IHM).
STRATEGY OVERVIEW
We are committed to ensuring the continuing success of all our stakeholders – our employees, customers, investors and communities. In 2021, we continued to invest in the long-term success of our company and advance our ESG priorities. To mitigate the challenges presented by the continued impact of COVID-19, we focused on ensuring the safety and well-being of our employees; managing a dynamic supply/demand environment and supply chain pressures to deliver for our customers; minimizing the impact of pandemic-related effects for our stockholders; and supporting our communities. Our key strategies and 2021 achievements are shown below and on the following page. Our overriding focus remains the long-term success of all of our stakeholders, and we have a clear set of objectives and strategies to deliver for them.
1 | ||||
Drive outsized growth in high-value categories
We seek to increase the proportion of our portfolio in high-value products and solutions, both organically and through acquisitions; high-value categories serve markets that are growing faster than GDP, represent large pools of potential profit and leverage our core capabilities. These products and solutions include our specialty and durable label materials, graphics and reflective solutions, industrial tapes, Intelligent Labels that use RFID tags and inlays, external embellishments, and, with our recent acquisition of CB Velocity Holdings, LLC (“Vestcom”), shelf-edge pricing, productivity and consumer engagement solutions.
In 2021, we achieved organic sales change in high-value product categories that outpaced that of our base businesses by a high-single digit rate driven by growth in specialty labels, external embellishments and Intelligent Labels; added to our capabilities and expanded our position in high-value product categories through our acquisition of Vestcom; and more than tripled the size of our Intelligent Labels platform over the last five years, reaching net sales of $0.7 billion in 2021
2 | ||||
Grow profitability in our base businesses
We strive to grow profitability in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies
In 2021, we heightened our focus on material reengineering to drive productivity and mitigate the impact of rising input costs
3 | ||||
Focus relentlessly on productivity
We employ product reengineering and enterprise lean sigma to expand our margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment
In 2021, we continued expanding operating margins, with approximately $65 million in savings from restructuring, net of transition costs
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BUSINESS STRATEGY OVERVIEW
Allocate capital effectively
We strive to create superior long-term, sustainable value forbalance our customers, employees and investors and improve the communities in which we operate. To realize the business aspects of this vision, we are focused on executing the following key strategies:
In 2021, leveraging our strong balance sheet, we invested $272.1 million in fixed and information technology (IT) capital expenditures to support organic growth; completed three acquisitions and made three venture investments for a total of $1.48 billion; increased our quarterly dividend rate by ~10%; and repurchased $180.9 million in shares of our common stock
5 | ||||
Lead in an environmentally and socially responsible manner
We aim to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive and equitable culture; maintain operations that promote health and safety; and support our communities through contributions from the Avery Dennison Foundation (ADF), supplemented by contributions from our company
In 2021, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in strategic innovation platforms focused on material circularity and waste reduction/elimination; driving sustainable change in diversity, equity and inclusion (DE+I), with a sharpened focus on increasing workforce racial/ethnic diversity, as well as representation from other underrepresented communities such as LGBTQ+, veteran or disabled individuals; and using the $10 million we contributed to ADF in 2020 to significantly increase grant-making in our communities, resulting in over $6 million of charitable contributions from ADF and our company in 2021. We also announced more ambitious 2030 sustainability goals.
FINANCIAL PERFORMANCE HIGHLIGHTS
COVID-19 Response
Our top priority in 2021 as the COVID-19 pandemic continued to evolve and impact our global teams was to safeguard the safety and well-being of our employees by continually adapting our world-class safety protocols. We also were highly focused on delivering for our customers, leveraging our global scale to manage elevated lead times caused by constrained raw material, freight and labor availability and persistent inflation. To minimize the effects of the pandemic on our investors, we maintained a strong balance sheet to ensure financial flexibility. We also more than doubled our financial support for communities in 2021 compared to the prior year.
Strong 20182021 Performance and Execution of Strategic Priorities. Fiscal year 2018 marked
In 2021, by consistently executing our seventhstrategies, we delivered our tenth consecutive year of strong top-linetop- and bottom-line growth, expanded operating margin expansion,margins and double-digit adjusted earnings per share (EPS) growth.achieved record free cash flow, despite the continued impact of COVID-19 and related supply chain, labor, freight and inflationary challenges. These results reflected the extraordinary efforts undertaken by our leaders and teams globally to respond to the difficult macroeconomic environment and mitigate its impacts on our company. Our performance reflects our rigorous scenario planning, which has enabled us to be prepared for a wide range of financial situations. We exceededadvanced our key strategies and delivered strong performance, while continuing to deliver for all of our stakeholders.
Our fiscal year 2021 performance reflects the strength of our markets, our industry-leading positions, the strategic foundations we have laid and our talented team. Our key financial goalsachievements for the year with the accomplishments shownare described below and on the following page.
Reported net sales of approximately $7.2$8.41 billion an increase, up ~21%, reflecting volume growth across our businesses and recovery from the prior-year impact of 8.2% over prior yearCOVID-19.
Excluding the impact of currency, sales grew by 6.9%. Onincreased ~19%; sales on an organic basis sales grewincreased by 5.5%,~16% driven by continued strong demand for consumer packaged goods and the accelerated shift to e-commerce in LGM, as well as significant organic growth in high value product categories and salesIntelligent Labels
Reported earnings per share (EPS) increased ~34% from $6.61 in emerging markets.
Avery Dennison Corporation| 2019 Proxy Statement |i
Avery Dennison Corporation | 2022 Proxy Statement | 3 |
Adjusted EPS increased ~25% from $5.00$7.10 to $6.06 due to$8.91, driven by strong growth and operating margin expansion; adjusted EPS for the combined effect of volume and mix, as well as benefits from productivity initiatives, partially offset byyear was substantially higher employee-related costs, growth investments, andthan the net impact of pricing and raw material inflation. Adjusted EPS exceeded the hightop end of the $5.70$7.65 to $5.95$8.05 annual guidance range we gaveprovided to our stockholdersinvestors in January 2018.
Withreportednet cash provided by operating activities of $457.9$1,046.8 million, delivered record free cash flow of $429.2 million.
Onreported net income of $467.4$740.1 million, achieved return on total capital (ROTC) including acquisition amortization of 18.6%.~18% and ROTC excluding acquisition amortization of ~19%
Sales change excluding the impact of currency (sales change ex. currency,currency), organic sales change, adjusted EPS, free cash flow and ROTC both including and excluding acquisition amortization – as well as adjusted EBITDA margin, which is used later in this proxy summary – are supplementalnon-GAAP financial measures that we provide to assist investors in assessing our performance and operating trends. TheyThese measures are defined, in theCompensation Discussion and Analysis section of this proxy statementqualified and reconciled from generally accepted accounting principles in the United States of America (GAAP) inAppendix A the last section 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 GAAP.
Delivering Financial Targets. Our five-year financial goals through 2018 included an organic sales growth target of 4% to 5% and a GAAP operating margin target of 9% to 10% in 2018. We also targeted double-digit adjusted EPS growth and ROTC of at least 16% in 2018. The combination of our growth and ROTC targets is a proxy for growth in economic value added (EVA), one of the performance objectives used in our long-term incentive (LTI) compensation program. As shown below, we achieved or exceeded our five-year commitments through 2018.
For the 2014-2018 period, on a five-year compound annual basis (with 2013 as the base period), GAAP reported net sales, reported EPS and reported net income grew by 3.1%, 19.9% and 17.0%, respectively.
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Avery Dennison Corporation| 2019 Proxy Statement |ii
Table of ContentsDelivering Financial Targets
Our objective is to deliver GDP+ growth and top-quartile returns on capital to create superior value over the long term. In March 2017, we announced five-year goalsfinancial targets through 2021, targeting continued solid organic sales growth, GAAP operating margin of at least 11% in 2021, double-digit adjusted EPS growth on a compound annual basis, and ROTC of at least 17% in 2021. As shown below, based onwe exceeded each of these commitments we made to our results forinvestors.
This is the first two yearsthird set of this five-year period,long-term financial targets we have delivered. Our consistently strong performance reflects the strength of our industry-leading market positions, the strategic foundations we have laid, and our agile and talented workforce. Given the diversity of our end markets, strong competitive advantages and resilience as an organization, we are on trackconfident in our ability to deliver these targets.continue delivering for you through a wide range of business cycles.
For the 2017-20182017-2021 period, on a two-yearfive-year compound annual basis (with 2016 as the base period), GAAP reported net sales, reported EPS and reported net income and EPS increased by 8.5%6.7%, 22.1%18.2% and 20.7%20.1%, respectively.
2017-2021 Targets | 2017-2021 Results(1) | ||||||||||
Sales Growth(2) | 5%+ ex. currency(3) 4%+ organic | 4.6% organic | |||||||||
GAAP Operating Margin | 11%+ in 2021 | ||||||||||
Adjusted EPS Growth(2) | 10%+ | ||||||||||
ROTC incl. Acquisition Amortization | 17%+ in 2021 | ||||||||||
(1) | Results for non-GAAP measures are reconciled from GAAP in | ||||||||||
(2) | Percentages for targets and results reflect five-year compound annual growth rates, with 2016 as the base period. | ||||||||||
(3) | Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 2017 of approximately |
4 | 2022 Proxy Statement | Avery Dennison Corporation |
In March 2021, we announced five-year financial targets through 2025. As shown below, based on the first year of this five-year period, we are on track to achieve these commitments.
In 2021 (with 2020 as the base period), GAAP reported net sales, net income and EPS increased by 20.6%, 33.1% and 33.6%, respectively.
| 2021-2025 Targets | 2021 Results(1) | ||
Sales Growth(2) | 5%+ ex. currency(3) | 18.6% ex. currency
15.6% organic | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.6% in 2021 | ||
Adjusted EPS Growth(2) | 10% | 25% | ||
ROTC excl. Acquisition Amortization | 18%+ in 2025 | 19.1% in 2021 | ||
ON TRACK TO ACHIEVE 2021-2025 FINANCIAL TARGETS | ||||
(1) Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. (2) Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect one-year annual growth rates, with 2020 as the base period. (3) Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 10, 2021, which represents (0.2)%. |
DisciplinedEffective Capital Allocation.Allocation
We have been consistently executeddisciplined in executing our disciplined approach to capital allocation strategy, balancing our investments in organic growth, productivity, and acquisitions whileand venture investments with continuing to return cash to stockholders through dividends and share repurchases.In 2018,2021, we delivered ROTC of nearly 19% and invested $256.6$272.1 million in fixed and IT capital expenditures to support future growth and further productivity improvement made $3.8 million in equity investments,and allocated $1.48 billion to acquisitions and venture investments; we also paid $175.0$220.6 million in dividends and repurchased $392.9$180.9 million in shares of our common stock.stock.
We have invested in our businesses to support organic growth and pursued targeted acquisitions that supportcomplementary and synergistic acquisitions. Our fixed and IT capital spending in 2021 was nearly 25% higher than in 2020, reflecting our strategy of increasingcontinued investment in high-value categories, including our exposure to high value product categories.We increased our spending onfast-growing Intelligent Labels platform, and lower-than-planned capital expenditures in 2018 by over 13% compared2020 to priormitigate the impact of COVID-19. During the year, to enable the future growthwe acquired Vestcom, an Arkansas-based provider of our businesses, improve our profitabilityshelf-edge pricing, productivity and expand our operating margins. In addition, during 2018, we continued integrating the following acquisitions we made in 2017: (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturer of specialty filmsconsumer engagement solutions for retailers and laminates; (ii) Yongle Tape Ltd.consumer packaged goods companies, for $1.47 billion, as well as ZippyYum, LLC (“ZippyYum”), a China-based manufacturerCalifornia-based developer of specialty tapes and related products used in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcaresoftware products used in the managementfood service and food preparation industries, and JDC Solutions, Inc. (“JDC”), a Tennessee-based manufacturer of wound care and skin conditions. Wepressure-sensitive specialty tapes, collectively for approximately $43 million. During 2021, we also made equitythree venture investments in two start-up companies developing innovative technological solutions and negotiated a further investment in a small company in whichthat we first invested in 2016, for which payment was made in early 2019.believe have the potential to advance our businesses.
In 2018,2021, we deployed approximately $568$401.5 million to (i)pay dividends of $2.66 per share and repurchase nearly four0.9 million shares at an aggregate cost of nearly $393 million and (ii) pay an annual dividend of $2.01 per share for an aggregate amount of $175 million.our common stock. We have paid quarterly dividends for decades and most recentlyraised our quarterly dividend rate by 16%approximately 10% in April 20182021. Given the lower price of our common stock in the second half of the year, as well as our substantially decreased use of capital for acquisitions and equity investments, we repurchased a significantly greater dollar amount in shares in 2018 compared to prior years.
As shown in the graph on the following page,below, over the last five years, we have allocated over $2 billion to acquisitions and venture investments and nearly $2 billion to dividends and share repurchases.
Avery Dennison Corporation | 2022 Proxy Statement | 5 |
Avery Dennison Corporation| 2019 Proxy Statement |iii
Table of ContentsTotal Stockholder Return (TSR) Outperformance
By generating substantial economic value added (EVA), we drove strong TSR in 2021 despite the continued uncertain macroeconomic environment as a result of
COVID-19Capital Allocated to Dividends,Share Repurchases and Acquisitions*
* Amounts for acquisitions include investments in unconsolidated businesses.
Three-related supply chain, labor, freight and Five-Year Cumulativeinflationary challenges. Our TSR Outperformance. As shown below,despite negative total stockholder return (TSR) in 2018, we delivered cumulative TSR for the 2016-2018 three-year period and the 2014-2018 five-year period that significantlyof over 40% outperformed the S&P 500®500 and the median of the S&P 500 Industrials and Materials subsets, (we are a member of the Materials subset, but share many characteristics with members of the Industrials subset; investors have informed us that they look at both subsets in evaluating two comparator groups we use to assess 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 of dividends).
performance. We believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our underlying performance. For example, althoughBoth our three-year and five-year TSR substantially outperformed these two comparator groups. We focus on TSR because it measures the value we delivered strong performance in 2018 — exceedingcreate for our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). We compare ourselves to the high end of our adjusted EPS guidance for the year — our 2018 TSR was negative.
1-, 3- and 5-YEAR TSR | ||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 3-Year TSR | 5-Year TSR | ||||||||
| | | | | | | | | | | | | | |
AVY | 6.2% | 23.8% | 14.6% | 66.7% | (20.3)% | 52.3% | 100.2% | |||||||
| | | | | | | | | | | | | | |
S&P 500 | 13.7% | 1.4% | 12.0% | 21.8% | (4.4)% | 30.4% | 50.3% | |||||||
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S&P 500 Indus. & Mats.* (median) | 11.8% | (4.5)% | 20.0% | 26.9% | (15.5)% | 35.2% | 48.9% |
Avery Dennison Corporation| 2019 Proxy Statement |iv
We continued our longstanding practice of ongoing engagement and open dialogue with stockholders in 2018. Our engagement program takes place throughout the year and — with respect to governance, sustainability and executive compensation matters — generally as shown in the graphic below.
ENGAGEMENT PROCESS
In advancemedian of the 2018 Annual Meeting,S&P 500 Industrials and Materials subsets because we contacted our 35 largest institutional stockholders, representing over 55%are a member of our then-outstanding shares. Board members, including our Lead Independent Director,the Materials subset, and management were made available to answer questions and address concerns regarding the items being brought before the Annual Meeting. While we received responses from stockholders representing over 28% of our then-outstanding shares, none of them desired to substantively engage at that time.
In the summer and fall, without the time pressures associated with proxy season, we contacted our 41 largest institutional stockholders, representing nearly 60% of our then-outstanding shares, to request a meetingalso share many characteristics with members of the Industrials subset; investors have indicated that they also look at both subsets in evaluating our Board and/or management. Proposed topics for these meetings included our business strategy and financial performance executive compensation matters, Board composition and succession planning, and progress towards achieving our sustainability goals. We received responses from stockholders representing nearly 30%relative to that of our then-outstanding sharespeers.
5-Year Cumulative TSR
1-, 3- and spoke with stockholders representing over 25%5-YEAR TSR
AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2017 | 67% | 22% | 28% | |||
2018 | (20)% | (4)% | (14)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
2021 | 41% | 29% | 24% | |||
3-Year TSR | 154% | 100% | 94% | |||
5-Year TSR | 237% | 133% | 122% |
* | Based on median of companies in both subsets as of December 31, 2021 |
ESG GOVERNANCE
We have been consistently focused on advancing our ESG profile, establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustained progress reflects the commitment and passion of our then-outstanding shares. We substantively engaged with every stockholder who requested to do somanagement and included our Lead Independent Director in engagements upon stockholder request.
Avery Dennison Corporation| 2019 Proxy Statement |v
The graphics below show the results of our 2018 stockholder engagement on governance, sustainability and executive compensation matters.
STOCKHOLDER FEEDBACK DURING 2018 ENGAGEMENT
Governance and Sustainability Matters
With respect to matters related to governance, we discussed several topics related to our Board composition, skills and succession planning and refreshment processes. We also discussed our business strategies and related risks, diversity and inclusion initiatives, and sustainability priorities.
Executive Compensation Matters
With respect to executive compensation, we discussed our approach to human capital management, including our leadership development and succession planning processes,employees, as well as the linkage betweenrobust engagement and oversight of our incentive compensationBoard. Our ESG governance structure is shown on the following page.
6 | 2022 Proxy Statement | Avery Dennison Corporation |
ESG GOVERNANCE STRUCTURE
We believe that strong data governance ensures consistency and accuracy of information in support of our ESG priorities and enhances transparency to our stakeholders. Our ESG data is organized and indexed to the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks to facilitate stakeholder usage and comparability with other companies. We have also responded to Carbon Disclosure Project (CDP) Climate, Water and Forests since 2010, 2015 and 2016, respectively. The volume of ESG information we disclose has significantly increased in recent years and our scores from ESG rating agencies have continued to improve.
During 2021, we evolved our ESG data governance program by establishing an ESG Program Management Office to assess our reporting in accordance with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD); engage with targeted ESG rating agencies; manage our data collection and reporting processes; create assurance guidance and controls, and provide reports, data and information for publication. In addition, we engaged an independent third party to review our energy and GHG emissions data; requested our Internal Audit team to perform walkthroughs of key metrics and provide ongoing advisory engagement; and formalized our processes for data owner sign-off, ESG Disclosure Committee review and senior management approval.
Our March 2022 ESG Download, published concurrently with this proxy statement on our ESG website at esg.averydennison.com, reflects the organizational focus we have on these matters. It includes 120 categories covering our policies, goals, strategies, risks, outcomes/metrics and certifications. This information comes from multiple data owners and sources, including our enterprise-wide Sustainability Council, the sustainability teams in our businesses, and representatives from corporate and business strategies. We also reviewed the robust oversight providedfunctions such as EHS, Operations/Supply Chain, Procurement, HR and Law. The ESG Download and other information on our website are not and should not be considered part of, nor are they incorporated by our Board's Compensation and Executive Personnel Committee (the "Compensation Committee").reference into, this proxy statement.
Our Board and management believe that regular stockholder engagement fosters a deeper understanding of investors' evolving expectations on governance, sustainability and executive compensation matters. We look forward to continuing our longstanding practice of engaging in dialogue with our stockholders to ensure our programs continue to align with best practices.
Avery Dennison Corporation | 2022 Proxy Statement 7Avery Dennison Corporation| 2019|vi
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability is one of our core values and has long been partintegral to our way of our approach to doing business. Our aim is to improve the sustainability of our products and processes while helping toTo create shared value for all of our stakeholders. Keystakeholders, we aim to advance our progress has been integratingstrategic innovation platforms on material circularity and waste reduction/elimination, build a more diverse workforce and inclusive and equitable culture, maintain operations that promote health and safety, and support our communities. Integrating sustainability into our underlying business strategies has helped us deliver sustained strong financial performance and engagingengage employees at all levels.
We publicly report on our sustainability progress every two years. In September 2017, we issuedthe first six years of the 10-year horizon for our 2014-2016 Sustainability Report, summarizing our achievements against our 2015 sustainability goals and providing details on the 2025 sustainability goals, we set in 2015, which are shown on the following page. In the first three years of the 10-year horizon for our new goals, we have made meaningful progress. We expect to issue our 2016-2018 Sustainability Reportsubstantial progress, as shown in the fall of 2019, describing our continued progress towards achieving our 2025 sustainability goals. We encourage you to review these reports, which contain greaterscorecard below. You can find additional information on the highlights summarizedour ESG progress in theSustainability section of this proxy statement,our 2021 integrated sustainability and annual report, as well as on our ESG website at esg.averydennison.com. The 2021 integrated sustainability and annual report and other information on our website atwww.averydennison.com/sustainability.are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
2021 SCORECARD OF PROGRESS TOWARD 2025 SUSTAINABILITY GOALS | |||||||||||
![]() | Focus Area | Goal(s) | Baseline Year | Highlights of Progress | |||||||
Greenhouse Gas Emissions | Achieve at least 3% absolute reduction year-over-year and at least | 2015 | Reduced absolute GHG emissions by ~7% in 12 months through Q3 2021 compared to | ||||||||
![]() | Paper | Source 100% certified paper, of which at least 70% | 2015 | Of total volume of paper procured in 2021, ~91% was certified, with ~81% of face stock Forest Stewardship Council®-certified | |||||||
![]() | Films | Ensure that 70% of | N/A | ~97% of 2021 film volume conformed to LGM’s restricted substance list (RSL) | |||||||
![]() | Chemicals | Ensure that 70% of | N/A | ~96% of 2021 chemical volume conformed to LGM’s RSL | |||||||
![]() | Products and Solutions | Through innovation, deliver above-average growth in sales from sustainability-driven products and Ensure that 70% of our products and solutions conform to, or enable end products to conform to, our environmental and social guiding | 2015 | ~55% and ~50% of RBIS Apparel and LGM sales, respectively, in 2021 came from sustainability-driven products that are responsibly sourced, enable recyclability, contain recycled content or use less material, without compromising performance | |||||||
![]() | Waste | Be 95% landfill-free, with at least 75% of our waste reused, repurposed or Eliminate 70% of the matrix and liner waste from our value | 2015 | Diverted ~94% of solid waste from landfills and recycled ~67% of waste as of Q3 2021, our most recently available data | |||||||
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![]() | People | Continue to cultivate Continue to invest in our employees and the communities in which they live and | 2015 | Increased female representation at level of manager and above by ~3% from baseline year, reaching 35% at YE 2021 Continued world-class safety record, with 2021 RIR of 0.21, substantially better than manufacturing industry average of 3.1 in 2020 (most recently available data) | |||||||
Transparency | Commit to goals publicly and be transparent in reporting progress | N/A | Continued to enhance transparency by providing more frequent and comprehensive ESG disclosures, including by launching ESG website and making new commitments to external standards (e.g., Science Based Targets initiative) in 2021 |
8 | 2022 Proxy Statement | Avery Dennison Corporation |
After updating our materiality assessment in 2020 to better understand the environmental and social sustainability challenges facing our company and our stakeholders, we reframed our eight 2025 goals into three broader goals that we are aiming to achieve by 2030. Within each of these goals, we have specific targets related to environmental and social sustainability. We show our progress against the targets shown below in our 2021 integrated annual and sustainability report.
Avery Dennison Corporation| 2019 Proxy Statement |vii
Table of Contents2030 SUSTAINABILITY GOALS AND TARGETS
GOALS | TARGETS | |
Deliver innovations that advance the circular economy | Satisfy the recycling, composting or reuse requirements of all single-use consumer packaging and apparel with our products and solutions RBIS: 100% within our core product categories (printed fabric labels, woven labels, paper, interior heat-transfer labels, packaging and RFID) will meet our third-party verified Sustainable ADvantage Standard LGM: 100% of our standard label products will contain recycled or renewable content; all of our regions will have labels that enable circularity of plastics | |
Reduce the environmental impact in our operations and supply chain | Reduced 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 | |
Source 100% of paper fiber from certified sources focused on a deforestation-free future | ||
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 | ||
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 | ||
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: 0.2 RIR | |
Support the participation of employees in Avery Dennison Foundation grants and foster the well-being of the communities in which we and our supply chain operate. |
DIVERSITY, EQUITY AND INCLUSION (DE+I)
Diversity is one of our core values, reflecting our commitment to ensuring an inclusive and equitable environment for people of all backgrounds and orientations and our belief that we gain strength from diverse ideas and teams. We are holding ourselves accountable for DE+I progress, with quantitative targets for employee engagement, inclusion and workforce gender diversity in our 2030 sustainability goals. Over the past several years, we have made consistent progress in our DE+I journey, as shown on the following page. Our 2021 EEO-1 statistics, which we collect as required by the U.S. Equal Opportunity Commission and reflect the voluntary self-identification by our U.S. employees, can be found in our March 2022 ESG Download.
Avery Dennison Corporation | 2022 Proxy Statement | 9 |
HIGHLIGHTS OF DE+I JOURNEY | ||
2015 | • Established 2025 goal of 40%+ female at manager level and above • Employees established Northeast Ohio Chinese Employee Resource Group (ERG) | |
2016 | • Launched unconscious bias training for managers globally • Released DE+I Talkabout Toolkit • Initiated Women.Empowered development program • Expanded flexible work arrangements • Added inclusion index to employee engagement survey | |
2017 | • Employees established Elevate, women’s ERG • Began requiring gender diverse hiring slate goals globally • Joined CEO Action for Diversity & Inclusion • Formally added Diversity as one of our company values | |
2018 | • Established Regional DE+I Councils • Employees established BERG, our Black ERG • Launched Men as Allies program • Reviewed director+ level gender pay equity, making adjustments where appropriate | |
2019 | • Employees established Veterans ERG and UNITE, our LGBTQ+ ERG • Launched North America iBelong employee engagement campaign • Expanded gender pay equity review, making adjustments where appropriate | |
2020 | • Employees established Voz Latina ERG • Launched regional DE+I town halls • Began enhancing DE+I transparency with increased ESG reporting • Started to recruit for enterprise-wide DE+I leader • Continued expanding gender pay equity review and began evaluating U.S. racial/ethnic pay equity, making adjustments where appropriate | |
2021 | • Engaged third party expert to assess our baseline and help us establish our global DE+I priorities • Established DE+I infrastructure with global leader and dedicated regional resources • Developed global DE+I strategy with four pillars and supporting regional focus areas • Increased DE+I transparency, including by publishing EEO-1 data and committing to do so annually • Further enhanced pay equity review by engaging third party expert to analyze racial/ethnic equity • Invested to further develop ERG leaders • Employees established ERGs focused on mental awareness, single parenting and young employees • Sponsored 50+ diverse leaders in externally-facilitated leadership academies • Ensured more equitable benefits for LGBTQ+ employees and their families, resulting in 100% score on Human Rights Campaign Foundation’s 2022 Corporate Equality Index |
10 | 2022 Proxy Statement | Avery Dennison Corporation |
STOCKHOLDER ENGAGEMENT
In addition to our extensive investor relations program through which our CEO, Chief Financial Officer (CFO), business leaders and Investor Relations team engage with our investors throughout the year, we have a longstanding practice of semiannual engagement with stockholders to further discuss and solicit their feedback on our strategies, performance, executive compensation and ESG matters.
Summary of 2021 Engagement Feedback
Our Board and management believe that regular stockholder engagement fosters a deeper understanding of our investors’ evolving expectations on ESG matters and helps us ensure our programs continue to align with best practices. The objectives of our stockholder engagement program are to maintain thoughtful dialogue and further strengthen our relationships with our top investors; gather feedback on the prior proxy season and identify potential improvement opportunities based on evolving expectations; and discuss our company strategies, Board matters, executive compensation, and ESG progress.
In 2021, we contacted our top 30 investors in the spring and the fall. Board members, in particular our Lead Independent Director, and management were made available to answer questions and address concerns. We engaged with every stockholder who accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements.
We discussed the process, results and feedback from our 2021 engagement with the Talent and Compensation Committee (the “Compensation Committee”) and the Governance Committee of our Board, and also shared highlights with the full Board to supplement the reports from those Committee Chairs.
A summary of the results from our 2021 stockholder engagement is shown on the following page.
Avery Dennison Corporation | 2022 Proxy Statement | 11 |
2021 ENGAGEMENT RESULTS | ||||
![]() | ![]() | ![]() |
Governance Feedback
With respect to governance, our 2021 engagements focused primarily on the matters described below.
Board oversight of ESG matters, including the allocation of responsibilities among Board Committees and our full Board
Board composition, with investors noting that the diversity of skills, qualifications and demographic backgrounds on our Board was appropriate given our company’s strategies and ESG priorities
Board refreshment, including actions underway to mitigate the risk from upcoming concentrated director retirements and the skills and backgrounds we would seek in any new director to complement those of our existing directors
Board leadership structure, including our rationale for maintaining a combined Chairman/CEO with a robust Lead Independent Director role
Director commitments, given the lower level of stockholder support at the 2021 Annual Meeting received by one of our current directors whose board memberships do not comply with certain of our investors’ voting policies
Our shareholder rights profile
Environmental Sustainability Feedback
Investors uniformly commended our significantly expanded ESG transparency with the disclosures contained in our integrated annual and sustainability reports, proxy statements and ESG Downloads and on our ESG website at esg.averydennison.com. Environmental sustainability was a key area of focus for many of our investors in 2021. During our conversations, we primarily discussed the matters described below.
The 2019strong linkage between ESG and our company strategies, as well as the ways in which our environmental and social sustainability creates market opportunity and provides competitive advantage
Our reframed sustainability framework, progress toward our 2025 goals and our new 2030 goals, reviewing the step-change advancement between these sets of goals, including our more objective and ambitious 2030 targets, including those related to Scope 1, 2 and 3 GHG emissions reduction and water to address evolved stakeholder expectations
Our launch of strategic innovation platforms focused on waste reduction/elimination and material circularity
The approval by the Science Based Targets initiative of our 2030 Scope 1 and 2 GHG emissions reduction targets as consistent with reductions required to keep warming to no more than 1.5 degrees Celsius, and our ambition to achieve net zero GHG emissions by 2050
Executive Compensation Feedback
The stockholders with whom we spoke sought information regarding the consideration of ESG matters in our executive compensation program, seeking to ensure that the Compensation Committee is discussing evolving expectations regarding ESG-executive compensation linkage. We discussed our current approach of establishing performance objectives for our annual incentive program based on quantitative financial metrics, supplemented by a qualitative individual assessment of executives that includes consideration of their ESG-related goals. We also explained our Board’s view that our financial success in recent years has been inextricably linked to our ESG focus and progress and that we have made substantial ESG progress as part of our commitment to deliver for all our stakeholders. Investors noted the need to be thoughtful and objective if we were to add ESG performance objectives, cautioning against setting targets without sufficient time and data to assess their appropriateness. To provide additional perspective on the Compensation Committee’s views on the linkage between ESG and executive compensation, we have included additional disclosure in the Compensation Discussion and Analysis section of this proxy statement.
12 | 2022 Proxy Statement | Avery Dennison Corporation |
Social Sustainability and Talent Management Feedback
Social sustainability and talent management continued to be significant areas of investor focus in 2021. In addition to the general feedback on our ESG program noted above, discussions related to these topics included the following:
Training and development opportunities we provide our employees with a view to ensuring an informed and ethical workforce
Our efforts to attract team members from underrepresented communities and ensure diverse hiring slates
The programs we offer to make our company an attractive place to work
Employeeretention and attrition
DE+I continued to be a key topic of engagement. The matters described below were areas of DE+I focus.
The ways in which DE+I aligns with our business strategies, allowing us to recruit and retain an engaged workforce committed to advancing their success and ours
Given our focus on building a more diverse workforce and inclusive and equitable culture, sharing our quantitative achievements, as well as information related to our qualitative efforts to continuously improve
The Compensation Committee’s discussion of our DE+I initiatives and progress at each of its regular meetings in 2021, with supplemental engagement on these matters by our full Board with our CEO, Chief Human Resources Officer (CHRO), business leaders and DE+I leaders
Ourdisclosure of EEO-1 data for the first time in 2021, with investors expressing their interest in learning more about the demographics of our workforce, what drives employee engagement and how our company plans to ensure the continued success of this key stakeholder group
We also candidly discussed our projected inability to achieve our goal of 40%+ women at the manager level and above by 2025, including the challenges we experienced, our key learnings and the organizational enhancements we have made in recent years to ensure we can deliver this renewed goal by 2030.
2022 DIRECTOR NOMINEES (ITEM 1)
Our Board has provided our management and company with strong oversight, with the following notable accomplishments in recent years:
BOARD REFRESHMENT AND SUCCESSION
Appointment of New Independent DirectorDirector’s Decision Not to Stand for Reelection
As part of its efforts to ensure regular Board refreshment, our Board's Governance and Social Responsibility Committee (the "Governance Committee") oversaw our Board's search for a new independent director during 2018. The Committee engaged Spencer Stuart, an executive search firm, to assist it in identifying and evaluating potential candidates. Spencer Stuart identified a number of potential candidates (including Mark Barrenechea) 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. Barrenechea, uniformly supporting his candidacy based on the deep technology industry expertise he could bring to our Board as we continue refining our go-to market strategies in our high value product category of Intelligent Labels. Upon the recommendation of the Governance Committee, our Board unanimously appointed Mr. Barrenechea to our Board effective September 10, 2018, recognizing his senior leadership experience, technology industry experience, global exposure and public company board experience.
Departure of Current Chairman; Post-Annual Meeting Board Leadership Structure
In February 2019, our Chairman, Dean Scarborough,2022, Director Mark Barrenechea notified our Board of Directors of his intentiondecision not to stand for reelection at the 20192022 Annual Meeting so that he maycan focus on other endeavors. Mr. Scarborough's membership on,
Matrix of Director Nominee Skills, Qualifications and chairmanship of, our Board will end on the date of the Annual Meeting.
In light of Mr. Scarborough's upcoming departure, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mitch Butier, our President and CEO, be elected as Chairman, noting that he has successfully led our company for the last three years and, with Mr. Scarborough's departure, is best positioned to lead our Board in overseeing our strategies to drive long-term value creation for our key stakeholders. The committee further noted that Mr. Butier has articulated and worked to realize the long-term vision for our company and that we could best continue our progress towards achieving our 2021 financial and 2025 sustainability goals with combined leadership in the boardroom at this time. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr. Butier (with him and Mr. Scarborough abstaining) to serve as our Chairman, effective immediately after the Annual Meeting subject to his reelection.
Avery Dennison Corporation| 2019 Proxy Statement |viii
Table of ContentsDemographic Backgrounds
The Governance Committee also recommended that Mr. Pyott (with him abstaining) continue serving as Lead Independent Director. Retaining Mr. Pyott as Lead Independent Director will provide Mr. Butier valuable mentorship, independent guidance and leadership continuity as he transitions into the Chairman role. In addition, Mr. Pyott has significantly contributed to our executive compensation and governance programs through his strong, independent leadership of our Board. Upon the recommendation of the Governance Committee, our independent directors unanimously selected Mr. Pyott (with him abstaining) to continue serving as our Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.
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 below at the Annual Meeting.
NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | |||||||
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Bradley A. Alford | 62 | 2010 | Retired Chairman & CEO, Nestlé USA | ![]() | M | M | ||||||||
Anthony K. Anderson | 63 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ![]() | M | M | ||||||||
Peter K. Barker | 70 | 2003 | Retired Chairman of California, JPMorgan Chase & Co. | ![]() | M | | C | |||||||
Mark J. Barrenechea | 54 | 2018 | Vice Chair, CEO & CTO, OpenText Corporation | ![]() | ||||||||||
Mitchell R. Butier | 47 | 2016 | Chairman-Elect, President & CEO, Avery Dennison Corporation | ![]() | | | | |||||||
Ken C. Hicks | 66 | 2007 | Chairman & CEO, Academy Sports + Outdoors | ![]() | M | M | ||||||||
Andres A. Lopez | 56 | 2017 | President & CEO, Owens-Illinois, Inc. | ![]() | M | | | |||||||
David E. I. Pyott (LID) | 65 | 1999 | Retired Chairman & CEO, Allergan, Inc. | ![]() | M | M | ||||||||
Patrick T. Siewert | 63 | 2005 | Managing Director & Partner, The Carlyle Group | ![]() | C | | | |||||||
Julia A. Stewart | 63 | 2003 | Former Chairman & CEO, Dine Brands Global, Inc. | ![]() | C | M | ||||||||
Martha N. Sullivan | 62 | 2013 | President & CEO, Sensata Technologies Holding PLC | ![]() | M | M | |
AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chair LID = Lead Independent Director
Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeingto their roles of providing oversight of our company, as highlighted below and shown in greater detailby individual in the matrix on the following page, which we have modified slightly from prior year to conform with the areas of industry expertise by which we now classify directors given our evolved strategic profile. This matrix reflects information received from each of our directors in their responses to our annual director questionnaire. At least annually, the Governance Committee evaluates and reports to our Board Matrix includedon the skills, qualifications and demographic backgrounds desirable for our Board to best advance our business strategies and serve the interests of all our stakeholders.
Avery Dennison Corporation | 2022 Proxy Statement | 13 |
BOARD MATRIX
Governance Guidelines Criteria | ||||||||||||||||
Independent | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ||||||||
Senior Leadership Experience(1) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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Industry Experience(2) | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||
Global Exposure(3) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||
Board Experience(4) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ||||||||
Financial Expertise(5) |
| ✓ |
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Industry Expertise | ||||||||||||||||
Software/Digital/Cybersecurity(6) |
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Retail/Dining |
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Packaging | ✓ |
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Consumer Goods |
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Industrial Goods |
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Materials Science |
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Demographic Background | ||||||||||||||||
Tenure (years) | 5 | 9 | 12 | 19 | 14 | 9 | 5 | 16 | ||||||||
Gender |
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Female |
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Male | ✓ | ✓ | ✓ |
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Non-Binary Gender |
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Age | 59 | 66 | 65 | 66 | 69 | 65 | 50 | 66 | ||||||||
Mandatory Retirement Year | 2035 | 2028 | 2029 | 2028 | 2025 | 2029 | 2044 | 2028 | ||||||||
Race/Ethnicity |
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Black or African American |
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Hispanic or Latino | ✓ |
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White | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||
Asian (including South Asian) |
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Native Hawaiian or Pacific Islander |
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Native American or Alaska Native |
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LGBTQ+ | ||||||||||||||||
Veteran |
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Lives/Has Lived Abroad | ✓ |
| ✓ |
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| ✓ | ✓ |
(1) | Service as president, chief executive officer or in similar senior executive positions. |
(2) | Experience in the software/digital/cybersecurity, retail/dining, packaging, consumer goods, industrial goods or materials science industries. |
(3) | Seniority in a global enterprise or significant experience in international markets. |
(4) | Prior or concurrent service on other U.S. public company boards. |
(5) | Expertise in accounting, auditing, tax, banking, insurance or investments. |
(6) | Departing director Mark Barrenechea had this expertise, which is among the skills the Governance Committee and our Board will seek in new directors. |
14 | 2022 Proxy Statement | Avery Dennison Corporation |
Board Performance Highlights
Our Board provides strong oversight of our management team and company, with highlights of its notable accomplishments in recent years described below.
Supported management in navigating our evolving response to COVID-19, including related labor, freight and inflationary challenges in 2021 by ensuring we protected employee safety and well-being, delivered for our customers, mitigated supply chain risk, maintained a strong balance sheet to provide financial flexibility and supported our communities, while continuing to invest in our company’s future growth and further productivity
Oversaw consistent execution of our business strategies, which delivered significant operating margin expansion and double-digit compound adjusted EPS growth and exceeded our 2017-2021 financial targets, as well as 2017-2021 TSR of 237%, substantially outperforming the S&P 500 and the median of the S&P 500 Materials and Industrials subsets
Acquired 10 companies through year-end 2021 that added new capabilities and expanded our position in high-value product categories that serve markets that are growing faster than GDP, represent large pools of potential profit and leverage our core capabilities
Advanced Board and management focus on advancing ESG priorities, with consistent progress toward achieving our 2025 sustainability goals, more ambitious 2030 goals and increased transparency with more frequent and comprehensive disclosures, resulting in improved scores with key ESG rating agencies
Implemented thoughtful Board refreshment and succession planning, adding 3 new directors in theItem 1 — Election last 6 years, transitioning Patrick Siewert into Lead Independent Director role and appointing new Chairs for the Audit and Governance Committees, and proactively working to mitigate the impact of Directors sectionupcoming concentrated retirements under our mandatory retirement policy and further enhance Board diversity
Conducted regular executive leadership development and succession planning, resulting in several experienced leaders promoted to senior executive positions, including our new President and Chief Operating Officer (COO), new leaders of this proxy statement.our RBIS Apparel Solutions and IHM businesses, and our CHRO and Chief Legal Officer (CLO) in 2020 who effectively transitioned into their roles during 2021
Board Governance Highlights
Avery Dennison Corporation| 2019 Proxy Statement |ix
Our governance program reflects our company values and facilitates our Board'sensures independent Board oversight of our company. The highlightsHighlights of our program, which we believe is generallyconsistent and aligned with the Investor Stewardship Group'sGroup’s Corporate Governance Principles for U.S. Listed Companies, are shown below.
Stockholder Rights | ✓ Market-standard proxy access ✓ 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 ✓ Current directors 89% independent; director nominees 88% independent ✓ Robust Lead Independent Director role ✓ Regular director succession planning and Board refreshment ✓ Continuous executive succession planning and leadership development ✓ Annual Board evaluations ✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted ✓ Governance Guidelines ✓ Strong Committee governance ✓ Direct access to management and experts |
APPROVAL OF EXECUTIVE COMPENSATION (ITEM 2)
COMPENSATION DESIGN
The Compensation Committee designsoversees our executive compensation program, to motivate our executives to execute our business strategies and deliver long-term stockholder value. The programwhich delivers pay for performance, with realized compensation dependent on our company achieving challenging annual and long-term financial performancetargets and value creation objectives that advance the interests of our stockholders.
PERFORMANCE-BASED COMPENSATION
Avery Dennison Corporation | 2022 Proxy Statement
| 15 |
Election of President and COO
In late 2021 and early 2022, during Board meetings and executive sessions with our Chairman/CEO, but no other members of management present, and further one-on-one conversations between our Chairman/CEO and each director, our Board conducted leadership planning, among other things, discussing the potential election of Deon M. Stander, the Vice President and General Manager of our RBIS business, as President and COO. As a result of this thorough planning and these robust discussions, in February 2022, Mr. Stander was elected by our Board as our President and COO, effective March 1, 2022. Mr. Butier served as our President through the end of February 2022 and now serves only in the roles of Chairman and CEO.
Performance-Based Compensation
Target total direct compensation (TDC) for our executivescorporate Named Executive Officers (NEOs) is comprised of the following three components:elements shown below.
Base salary;ELEMENTS OF TARGET TDC FOR CORPORATE NEOs
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 creation. As shown below, the market median, role responsibilities, individual performance, tenure, retention and succession. Thesubstantial majority of this compensation is performance-based, meaning that our executives ultimately may not realize somethe value of thesethe at-risk components of TDC if we fail to achieve our strategic, financial and ESG objectives. Our business NEO’s 2021 AIP award and PUs had different performance objectives than those of our corporate NEOs.
16 | 2022 Proxy Statement | Avery Dennison Corporation |
Avery Dennison Corporation| 2019 Proxy Statement |x
Table of ContentsPay for Performance
As shown in the charts showngraph below, in 2018, approximately 86% and 70% of the TDC ofrecent years, our CEO and average of our other NEOs, respectively, was performance-based.
2018 Target Total Direct Compensation Mix
PAY-FOR-PERFORMANCE
Over the past five years,CEO’s compensation increased commensurate with our cumulative TSR, increasedwith his 2021 pay reflecting the longer-term approach to CEO compensation approved by 100% while the total compensationCompensation Committee in 2021. See the Compensation Discussion andAnalysis section of our CEO decreased by approximately 28%. In the graph below, CEO pay reflects the compensation of our former CEO, Mr. Scarborough,this proxy statement for 2014 and 2015, and the compensation of our current CEO, Mr. Butier, from 2016 to 2018.more information.
Five-Year CEO Pay and Cumulative TSR
Executive Compensation Best Practices
Avery Dennison Corporation| 2019 Proxy Statement |xi
COMPENSATION BEST PRACTICES
As summarized below and described in further detail in theCompensation Discussion andAnalysissection of this proxy statement, our executive compensation program aligns with our financial goals and business strategies and reflects best practices.
Pay-for-Performance | ✓ 88% of CEO 2021 target TDC tied to company performance ✓ 71% of CEO 2021 target TDC equity-based to incent delivery of long-term stockholder value ✓ Rigorous stock ownership policy; requires CEO to own ~6x base salary, 50%+ of which must be vested shares; does not count unvested PUs and only counts 50% of unvested MSUs | |
Compensation Best Practices | ✓ Double-trigger equity vesting requires termination of employment after change of control ✓ YE 2021 three-year average burn rate of 0.58%, in line with 50th percentile of S&P 500 companies ✓ Compensation clawback in event of accounting restatement ✓ Independent compensation consultant retained and serving at direction of Compensation Committee ✓ Annual Compensation Committee evaluation and charter review ✓ Periodic formal risk assessment of compensation policies and practices ✓ Releases from liability and restrictive covenants for departing executives ✓ Compensation Committee review of NEO tally sheets reflecting all compensation components | |
✓ No NEO employment contracts ✓ No guaranteed AIP awards; NEO AIP awards based on company, business and ESG 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 until vesting ✓ No grant of stock options below fair market value ✓ No supplemental retirement benefits |
Avery Dennison Corporation | 2022 Proxy Statement | 17 |
What We Do
What We Don't Do
RATIFICATION OF APPOINTMENT OF PwC (ITEM 3)
Our Board'sBoard’s Audit and Finance Committee has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 2019,2022 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 auditor independence. The Audit and Finance Committeecommittee considered the qualifications, performance and independence of PwC, the quality of its discussions with PwC, and the fees charged by PwC for the level and quality of services provided by the firm during 2018,2021 – as well as considerations regarding PwC’s tenure as our independent auditor – and determined that the reappointment of PwC iswas in the best interest of our company and stockholders.
18 | 2022 Proxy Statement | Avery Dennison Corporation |
Avery Dennison Corporation| 2019 Proxy Statement |xii
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We produce pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. We sell most of our pressure-sensitive materials to label printers and converters that convert the materials into labels and other products through embossing, printing, stamping and die-cutting. We sell other pressure-sensitive 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 (RFID) inlays and tags, and imprinting equipment and related solutions, which serve the apparel and other end markets.
Under theWith oversight offrom 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 to 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 program are noteddescribed in theBoard Governance Highlights section of the Proxy Summary; together they form a program that we believe is consistent and aligned with the Investor Stewardship Group's Corporate Governance Principles for U.S. Listed Companies.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 the following documents:current versions of the documents shown below and referenced in this proxy statement.
Amended and Restated Certificate of Incorporation;
Amended and Restated Bylaws (our "Bylaws"“Bylaws”);
Corporate Governance Guidelines (our "Governance Guidelines"“Governance Guidelines”);
Charters for our Board'sBoard’s Audit and Finance Committee (the "Audit Committee"“Audit Committee”), CompensationTalent and Executive PersonnelCompensation Committee (the "Compensation Committee"“Compensation Committee”), and Governance and Social Responsibility Committee (the "Governance Committee");
Code of Conduct;
Code of Ethics for the Chief Executive Officer (CEO)CEO and Senior Financial Officers; and
Audit Committee Complaint Procedures for Accounting and Auditing Matters.Matters
You can access these documents on our website using the links contained in this proxy statement, but should note that informationInformation on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement. You can also receive 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| 2019 Proxy Statement |1
Table of ContentsVALUES AND ETHICS
CODE OF ETHICS
We have adopted a Code of Ethics that requires our CEO, Chief Financial Officer (CFO) and Chief Accounting Officer (CAO) to act professionally and ethically in fulfilling their responsibilities.
Supporting the principles reflected in our Code of Ethics, 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 the 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.employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. The Code includes leadership messages, detailed information regarding higher risk areas, and case studies to provide guidance on situations that raise complex ethical questions. 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.thereafter as part of our compliance certification process. We regularly train employees on the Code of Conduct at least biannually,topics in instructor-led sessions held in person or virtually, in addition to our online training program generally consisting of four courses per year covering specific risk areas from the Code of Conduct that designatedour computer-based employees are required to complete.
To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees, we develop and launch three "Talkabout" toolkits“Talkabout” Toolkits (also in over 30 languages) globally 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 our Chief Compliance Officer and other company leadership.leaders.
Recent Code Updates
Avery Dennison Corporation | 2022 Proxy Statement | 19 |
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 further updated our Code of Conduct to reflect our updated values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. These values will shape our culture and guide our behavior as we continue to grow. Our "Values in Action" campaign during the year provided our employees around the world the opportunity to demonstrate how they are living our values and helping maintain our values-based culture.
Avery Dennison Corporation| 2019 Proxy Statement |2
Ethics-Based Corporate Culture and Policies
Reflecting the culture of our company, since its inception, the ethics-based corporate 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 (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 be reached by (i) calling 800.461.9330 toll-free in the United States, 720.514.4400U.S., +1.720.514.4400 direct with applicable charges from any location, or toll-free outside of the United StatesU.S. using the country-specific toll-free numbers found in our Code of Conduct or (ii) visitingaverydennison.com/ www.averydennison.com/guidelinereport(averydennison.com/www.averydennison.com/guidelinereport-eu in Europe). 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 reportsReports 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.
Avery Dennison Corporation| 2019 Proxy Statement |3
TableFinancial Code of ContentsEthics
We have adopted a Code of Ethics that requires our CEO, CFO and Controller/Chief Accounting Officer (CAO) to act professionally and ethically in fulfilling their responsibilities. Only the Audit Committee or the Governance Committee can amend or waive the provisions 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 we 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.
20 | 2022 Proxy Statement | Avery Dennison Corporation |
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 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 and 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.
Our stock ownership policy requires that non-employee directors acquire and maintain a minimum ownership interest in our company equal toof $500,000 and our CEO, Level 2 executives and other NEOsLevel 3 executives acquire and maintain a minimum ownership interest in our company equal to 6x, 3x and 3x2x their annual base salary, respectively.respectively, at least 50% of which must be held in vested shares.
The values of the following shares/units are considered in measuring compliance with our stock ownership policy: (i) shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federal securities laws; (ii)for officers, shares or units held in qualified and non-qualified employee benefit plans; (iii)plans, unvested RSUsrestricted stock units (RSUs) subject only to time-based vesting;vesting, and (iv) 50% of the value of unvested MSUs at the target payout level.level; and, for non-employee directors, deferred stock units (DSUs). Neither stock options nor unvested PUs nor stock options are considered in measuring compliance.
If
Until a director or officer fails to achieve or make reasonable progress towards achievingachieves his or her respective ownership level,requirement, he or she is required to retain shares acquired, net of taxes, from the exercise of stock options or vesting of stock awards until such levelthe requirement is met. ExecutivesThese individuals are not allowed to 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 2018November 2021 and February 2019,2022, respectively. Both Committees noteddetermined thatall of our non-employee directors have exceeded the minimum ownership level required by the policy, except for Messrs. Barrenechea and Lopez who became directors in September 2018 and February 2017, respectively, and have five years to reach the minimum ownership level. The Committee noted that, because they had made reasonable progress towards meeting the applicable level, Messrs. Barrenechea and Lopez were also in compliance with the policy. Onpolicy, with average ownership of 12x the ownership of our non-employee directors was approximately 6x the minimum ownership level, aligningrequirement, helping ensure their interests remain aligned with those of our stockholders and further incenting their focus on long-term stockholder value creation. The relatively high average ownership level by our non-employee directors is largely due to the inclusion of DSUs for purposes of our stock ownership policy; DSUs represent annual cash retainers deferred at a director’s election. DSUs are included as owned under the policy because they are earned upon receipt and would be paid out to a director upon his or her separation from our Board.
The Compensation Committee reviewed officerexecutive stock ownership in December 2018November 2021 and determined that all of our executive officers, including all NEOs, were in compliance with our stock ownership policy.policy. The compliance of our directors and NEOs with our stock ownership policy as of year-end 2021 is shown on the following page.
Avery Dennison Corporation | 2022 Proxy Statement | 21 |
STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||||
| Minimum Requirement(1) | Shares(2) as of 2021 FYE (#) | Requirement Achieved | Policy Compliance | ||||||||||||
Non-Employee Directors | $ | 500,000 |
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Bradley Alford |
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| 42,930 | 18x | ✓ | ||||||||||
Anthony Anderson |
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| 16,069 | 6x | ✓ | ||||||||||
Mark Barrenechea |
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| 6,892 | 2x | ✓ | ||||||||||
Ken Hicks |
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| 43,810 | 18x | ✓ | ||||||||||
Andres Lopez |
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| 8,390 | 3x | ✓ | ||||||||||
Patrick Siewert |
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| 16,842 | 7x | ✓ | ||||||||||
Julia Stewart |
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| 63,471 | 27x | ✓ | ||||||||||
Martha Sullivan |
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| 28,727 | 12x | ✓ | ||||||||||
Chairman & CEO |
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Mitchell Butier | $ | 7,200,000 | 269,668 | 8x | ✓ | |||||||||||
Level 2 NEOs |
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Gregory Lovins | $ | 1,983,780 | 46,051 | 5x | ✓ | |||||||||||
Deon Stander | $ | 1,707,021 | 35,663 | 4x | ✓ | |||||||||||
Level 3 NEOs(3) |
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Deena Baker-Nel | $ | 832,000 | 4,005 | 1x | ✓ | |||||||||||
Ignacio Walker | $ | 850,750 | 6,948 | 1x | ✓ |
(1) | Minimum requirements for CEO, Level 2 NEOs and Level 3 NEOs reflect 6x, 3x and 2x, respectively, of their respective base salary as of year-end 2021. |
(2) | Reflects shares/units considered in measuring compliance with our stock ownership policy rather than vested shares, based on the average closing price of our common stock from October 1 to December 31, 2021. |
(3) | Minimum requirements for Ms. Baker-Nel and Mr. Walker increased from 1x to 2x their respective base salaries in connection with their promotions in September 2020. |
Avery Dennison Corporation| 2019 Proxy Statement |4
COMPLIANCE WITH STOCK OWNERSHIP POLICY | ||||||||||||
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| SHARES AS OF 2018 FYE (#) | MINIMUM GUIDELINE | % OF GUIDELINE | COMPLIANCE | ||||||||
NON-EMPLOYEE DIRECTORS | | | $ 500,000 | | | | | |||||
Bradley Alford | 35,020 | 625% | ![]() | |||||||||
Anthony Anderson | 14,246 | 254% | ![]() | |||||||||
Peter Barker | 58,666 | 1047% | ![]() | |||||||||
Mark Barrenechea | 880 | 16% | ![]() | |||||||||
Ken Hicks | 38,609 | 689% | ![]() | |||||||||
Andres Lopez | 4,050 | 72% | ![]() | |||||||||
David Pyott | 67,165 | 1199% | ![]() | |||||||||
Dean Scarborough | 47,177 | 842% | ![]() | |||||||||
Patrick Siewert | 14,640 | 261% | ![]() | |||||||||
Julia Stewart | 55,321 | 988% | ![]() | |||||||||
Martha Sullivan | 13,933 | 249% | ![]() | |||||||||
PRESIDENT & CEO | | | 6x Base Salary | | | | | |||||
Mitchell Butier | 189,312 | $6,798,000 | 249% | ![]() | ||||||||
OTHER NEOs | | | 3x Base Salary* | | | | | |||||
Gregory Lovins | 25,239 | $1,800,000 | 125% | ![]() | ||||||||
Georges Gravanis | 21,746 | $1,883,907 | 103% | ![]() | ||||||||
Susan Miller | 37,467 | $1,692,374 | 198% | ![]() | ||||||||
Deon Stander | 20,175 | $1,077,920 | 167% | ![]() |
INSIDER TRADING POLICY
Our insider trading policy prohibits our directors,Board members, officers and employees from (i) engaging in transactions in our company'scompany’s stock while in the possession of material non-public information; (ii) engaging in transactions in the stock of other companies while in possession of material non-public information that they become aware of in performing their duties; and (iii) disclosing material non-public information to unauthorized persons outside our company.
Limited Trading Windows
Our insider trading policy restricts trading for directors andby Board members, officers (including allour NEOs) and director-level employees during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the release of earnings for the quarter. Additional blackout periods may be imposed with or without notice, as the circumstances require.
ProhibitionProhibitions on Hedging and Pledging
Our insider trading policy expressly prohibits our directors, officers (including our NEOs) and employees from 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 shares of our common stock they hold, directly or indirectly. In addition, directors and officers are expressly prohibited from —– and our non-officer employees are strongly discouraged from —– pledging anyshares of their shares ofour common stock to secure personal loans or other obligations, including by holding such shares 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 2018,2021, and none of them has hedged or pledged shares of our common stock.
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Avery Dennison Corporation| 2019 Proxy Statement |5
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability is oneand Diversity are two of our core values and hashave 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 and processes, to create shared valuebuild a more diverse, equitable and inclusive workforce, and provide meaningful support for all of our stakeholders.communities.
In 2018, leadership over ensuring meaningful progress towards achieving our 2025 sustainability goals transitioned fromWith strategic guidance and direction provided by Mitch Butier, our Chairman/CEO, responsibility over ensuring that we continue to make progress toward achieving our sustainability goals resides with Deon Stander, now our President and CEO, to Deon Stander, Vice President and General Manager of our Retail Branding and Information Solutions (RBIS) business.COO. Our enterprise-wide Sustainability Council, now led by Mr. Stander and comprised of an expandeda cross-divisional and cross-functional group of functional and business leaders to help drive broad accountability and continually accelerate our progress, meets bimonthlymet regularly during 2021 to develop our 2030 sustainability goals and updatestargets, as well as formulate our executive leadership team quarterly. The Council has the following four work streams to help focus its efforts, each of which is led by an internal leader from one of our businesses: operations; technology and innovation; products and solutions; and social impact and transparency. go-forward ESG strategy.
Board oversight over 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 once a year. In addition, our full Board hears from ourengages with business leaders on ourtheir sustainability initiatives during its regular review of ourtheir business strategies. In July and October 2021, our full Board held strategy sessions focused on environmental sustainability, our innovation efforts to address the increasing need and demand for more sustainable products, our strategic innovation platforms focused on waste reduction/elimination and material circularity, and our overall ESG strategy, priorities and progress.
Board oversight over social sustainability is conducted primarily through the Compensation Committee, which reviewed our DE+I progress at each of its meetings in 2021 and regularly discusses other matters related to talent management. In December 2021, our full Board engaged with, and challenged, management on our DE+I progress,including by reviewing the four pillars of our enterprise DE+I strategy, as well as its supporting regional focus areas.
We seek to ensure that our sustainability efforts are consistent with the expectations of our stakeholders, as shown below.stakeholders. We regularly communicate with individuals and organizations interested in how we do business generally and our sustainability efforts in particular, and also conduct stakeholder interviews as part of our regular sustainabilitybiennial materiality assessments. These assessments help set our sustainability agenda, allowingfocusing us to focus on the areas in which we can have the most impact.
In 2020, we partnered with Environmental Resources Management to refresh our materiality assessment and reprioritize the sustainability topics most significant to our stakeholders.
Avery Dennison Corporation| 2019 Proxy Statement |6
TableThe resulting materiality map showing the importance of Contents
ADVANCEMENTS TOWARDS 2025 SUSTAINABILITY GOALS
various ESG topics to our company and external stakeholders may be found in our March 2022 ESG Download. We publicly reporthave begun working on our sustainability progress every two years. In September 2017,next biennial materiality assessment, which we issuedplan to share with our 2014-2016 Sustainability Report, summarizing our achievements against our 2015 sustainability goals and providing details on the 2025 sustainability goals we setstakeholders in 2015. In the first three years of the 10-year horizon for our new goals, we have made meaningful progress, the key to which has been integrating sustainability into our underlying business strategies and engaging employees at all levels. We expect to issue our 2016-2018 Sustainability Report in the fall of 2019, describing our continued progress towards achieving our 2025 sustainability goals. We encourage you to review these reports, which contain greater information on the highlights summarized on the following page, on our website at www.averydennison.com/sustainability.March 2023.
Avery Dennison Corporation | 2022 Proxy Statement | 23 |
SUSTAINABILITY STAKEHOLDERS
Avery Dennison Corporation| 2019 Proxy Statement |7
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Industry
Trade Associations Cross-Industry Working Groups Conferences
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Customers and Brand Owners
Product Collaborations Surveys Site Audits Working Groups
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Employees
Engagement Survey Works Councils Employee Resource Groups Intranet/Town Halls
Code of Conduct Training Business Conduct GuideLine
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Investors
Annual Meetings Quarterly Earnings Calls Investor Meetings Stockholder Engagement Program
Non-Governmental Organizations
Consultations on Issues of Concern Specific Initiatives (e.g., responsibly sourcing paper, reducing GHG emissions)
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Policymakers and Regulators
Permitting Audits Certifications
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Communities
Foundation Grant-making Employee Volunteerism Civic Collaboration
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Suppliers
Supplier Standards Compliance Training Supplier Audits Joint Projects
PROGRESS TOWARD ACHIEVING OUR 2025 AND 2030 GOALS
We present our scorecard showing progress against our 2025 sustainability goals through 2021 in the proxy summary. We present our progress against our 2030 goals in our 2021 integrated annual and sustainability report. You can find additional information in our ESG Downloads available in the investors section of our website at investors.averydennison.com and on our ESG website at esg.averydennison.com. Our 2021 integrated sustainability and annual report, ESG Downloads and other information on our website are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
24 | 2022 Proxy Statement |
We disclose our ESG metrics using the frameworks of the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and CDP Worldwide. We are a member of the United Nations Global Compact and have made commitments to the UN Sustainable Development Goals and the Science Based Targets initiative (SBTi), with our Scope 1 and 2 GHG emissions reduction targets having been approved by SBTias consistent with levels required to meet the goals of the Paris Agreement.
Avery Dennison Corporation| 2019 Proxy Statement |8
Table of ContentsDIVERSITY, EQUITY AND INCLUSION (DE+I)
Diversity is one of our core values, reflecting our desire to ensure an equitable and inclusive environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams.The importance of DE+I to our company is evidenced by the engagement, inclusion and gender diversity-related targets included in our 2030 sustainability goals. Highlights of our DE+I journey are shown in the proxy summary.
Beginning in 2020, we redoubled our efforts on DE+I, engaging with our employees across the globe to gather information on areas where we most needed to focus. After listening and learning from our employees, our leaders regularly met to discuss areas of focus, and each of our business’ strategies include quantitative DE+I goals, with their leaders evaluated on the progress they make.
In 2021, we engaged a third party expert to help us perform DE+I baselining, which included an enterprise-wide inclusion assessment and pipeline analysis, provide external benchmarking and obtain independent anonymous and focus group feedback from our team members worldwide. With this information, we identified our DE+I priorities and developed our go-forward DE+I strategy,which includes the following four pillars: increasing the number of women who hold leadership positions; enhancing the experience of our shop floor employees; increasing DE+I for underrepresented groups; and making merit and transparency even more foundational to our employee experience. These pillars, as well as the supporting regional focus areas, have been communicated to our employees worldwide.
Each of our strategic pillars is sponsored by members of our Company Leadership Team. To ensure we achieve our goals, we have advanced our internal DE+I capability and leadership, with a Global DE+I Director and additional resources in each of our regions, together forming a global infrastructure of fully-dedicated resources. To keep ourselves accountable, we are committed to continuing to enhance external transparency into our DE+I journey through regular reporting and engagement with our stakeholders so they may critically assess our progress and provide feedback to help us achieve our goals.
SOCIAL RESPONSIBILITY
OTHER TALENT MANAGEMENT MATTERS
AVERY DENNISON FOUNDATIONSuccession Planning
The Compensation Committee and our full Board conduct executive succession planning at least semiannually, reviewing succession plans for our CEO and other senior executives. Consistent with this practice, in April 2021, the Compensation Committee discussed potential successors to the members of our Company Leadership Team, and aligned on a process and timeline to enhance focus on CEO succession planning as a matter of strong corporate governance. In October 2021, the Compensation Committee again reviewed talent that is ready – or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready – to fill senior executive positions in the event of a vacancy. These assessments were further discussed with our full Board. In addition, in July and December 2021, our full Board conducted CEO succession planning to ensure ready-now successors over multiple time horizons. The Compensation Committee also reviews executive new hires, promotions, transfers and departures in connection with each of its meetings to assist with executive succession planning and leadership development.
Leadership Development
The Compensation Committee oversees our company’s talent management programs to assist with identifying and developing our future leaders. We maintain a robust performance review process and provide leadership development opportunities for our employees. Senior management reports to the Compensation Committee or our full Board on leadership at executive levels of our organization by identifying high-potential talent and critical experts, cultivating the skills and capabilities to allow identified individuals to become our future leaders, and ensuring that they have appropriate development plans in place to progress them toward greater responsibility.Through regular reports from management, our Board has the opportunity to meet our business leaders and functional leaders in law, finance, information technology and human resources. In addition, Board members have freedom of access to all our employees, and are encouraged to visit our facilities to meet with local management and attend company events.
Avery Dennison Corporation | 2022 Proxy Statement | 25 |
With Board oversight from the Governance Committee, our social responsibilitycommunity investment efforts reflect 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, 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 global grantmaking initiative is itsyear. ADF’s grant-making, our primary means of giving. Grantmakinggiving, is also aided by our employees worldwide who help identify qualified NGOs. Grant decisions are guided by the priorities shown below, which are targeted to thedeserving nonprofit organizations serving communities in whichwhere our employees live and work.Historically, ADF has given to organizations advancing education, women’s empowerment and sustainability. In 2021, ADF continued to address these funding areas, while also responding to the COVID-19 pandemic, natural disasters and the call for greater DE+I worldwide.
In 2021, ADF and our company collectively made $6.3 million in grants and other financial contributions, more than double that of the prior year. In the discussion that follows, we provide an overview of this giving.
COVID-19 and Disaster Response
Beginning in 2020, ADF shifted its resources to support the response to EMPLOYEE ENGAGEMENTCOVID-19 in communities where our company has a presence. We continued that support in 2021. In a joint effort with the company, ADF provided grants to help fund COVID-19 relief efforts by nonprofit organizations in our global communities, including those described below.
India: A grant of $230,000 to support the American India Foundation in helping meet the acute shortage of portable hospital beds in the city of Gurgaon, where our company has facilities; a second grant of $235,000 to the American India Foundation helped source vaccines, supply diagnostic and medical emergency equipment, raise vaccination awareness and mitigate nutrition gaps in the city of Bangalore, where our company also has operations
Brazil: A grant of $100,000 supported Doctors Without Borders/Médecins Sans Frontières’ with vaccine coordination and the purchase and distribution of medical supplies
Sri Lanka: A grant of $50,000 helped the Rotary Club in the city of Kandy provide ICU beds at a rural hospital and purchase ventilators and other needed medical equipment
Vietnam: Two grants totaling $70,000 helped support the Red Cross Vietnam’s COVID-19 response in Long An and Bac Ninh
In 2021, ADF also continued to support the Employee Assistance Fund it launched in 2020, which provides financial assistance to our employees who have been significantly adversely impacted by COVID-19. The fund was designed to help provide for basic needs such as housing and utilities, medical care, dependent care and other pandemic-related expenses. The fund also provides support to families of employees who have died from COVID-19. Employee donations have significantly supplemented ADF funds for this effort. In all, more than $3.4 million was distributed in 2021 to more than 4,200 individuals in 27 countries. The fund is administered by Global Impact, an independent third party.
ADF also partnered with third-party nonprofit GlobalGiving to facilitate donations from our employees to disaster relief efforts, ensuring that their donations support legitimate and vetted nonprofit organizations in affected communities. All donations made through GlobalGiving are matched by ADF, and employees receive regular reports from the organizations they support describing accomplishments with the funding received. In 2021, our employees supported 43 charitable organizations through GlobalGiving, with donations totaling $60,000.
DE+I Support
Prompted in part by events in the U.S. in 2020, and in recognition of the role it can play in accelerating society’s journey toward greater equity, ADF made grants to organizations promoting DE+I globally. ADF worked with our regional DE+I councils and ERGs around the world to identify organizations most relevant to underrepresented communities in each region. A selection of these grants is described below.
Education: Included grants of $200,000 to World Vision Honduras to teach life skills to at-risk women; $132,000 to Associação Beneficente ABID to enhance foster care services in São Paulo, Brazil; $17,000 to Fundacion Leer to support literacy programs in Buenos Aires, Argentina; and $5,000 to Boys and Girls Club of Pasadena, California
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Sustainability: Included grants of $200,000 to Waste and Resource Action Program to support public-private partnerships aimed at reducing food waste in Indonesia and $50,000 to Lake-Geauga Habitat for Humanity to provide housing for low-income families in Painesville, Ohio
Women’s Empowerment: Included grants of $250,000 to UN Foundation Resilience Fund to support women in South and Southeast Asia; $124,000 to The Smile Foundation to support women’s empowerment in Delhi, India; $100,000 to Right to Play to provide educational opportunities for girls in refugee camps and underserved communities in Pakistan and Burundi; and $88,000 to Gesanghua Education Foundation to provide hygiene care packages for girls in Qinghai, China
DE+I: Included grants of $200,000 to HOLA Ohio to support a new Hispanic community center in Painesville; $50,000 to Youth Opportunities Unlimited to provide job readiness and training to African American youth in Cleveland, Ohio; $25,000 to the LGBT Community Center of Greater Cleveland to support LGBTQ+ awareness and programming in Northeastern Ohio; $25,000 to the Wounded Warrior Project to support veteran mental health; and $10,000 to Stichting – Women in Higher Technical Education to support gender diversity in STEM programs in the Netherlands
Employee Engagement
As the handsheart and hearthands of our company, our employees are critical to advancing the Foundation's efforts. Because they often have the best understanding of the needs ofour community investment efforts through both their communities, moregiving and volunteerism. More than 150 employee teams coordinate volunteerism locally at our global locations. Nearly 50%Examples of the Foundation's grantsemployee engagement in 2021 are enhanced with volunteer time from our employees.described below.
Employees in India supported The Smile Foundation’s “Health Cannot Wait” campaign to boost distribution of oxygen concentrators and ventilators to government health institutions
Team members in Ireland honored International Women’s Day by donating to Longford Women’s Link, an organization providing education and training opportunities for women
Our RBIS employees produced limited-edition, iron-on patches designed to celebrate healthcare and frontline workers and promote health and safety, with net proceeds benefiting Doctors Without Borders/Médecins Sans Frontières
Business partnerships with local organizations promoting DE+I, as well as our company hiring interns from community partners such as Esperanza, the National Society of Black Engineers and Black Professionals Charitable Foundation
ADF also engages employees through theits Granting Wishes program, which allows employees globally to recommend one-time grants to their local NGOs. Employees often have a connectionnon-governmental organizations (NGOs). Given increased need in 2021, employees were more engaged than ever in nominating charitable organizations for funding and volunteering to thesupport those organizations, they nominate through volunteerism or service on the organization's board.resulting in grants of $10,000 each to 80 NGOs in 33 countries. In the eight10 years since the FoundationADF launched Granting Wishes, more than 1,0002,000 of our employees have taken part, enablingsubmitted funding recommendations, resulting in grants to more than 280350 organizations.
SCHOLARSHIPSScholarship Programs
The Foundation providesADF continues to provide scholarships to the children of our U.S. employees in the U.S. More than 620To date, over 660 scholarships have been awardedawarded. This program is administered by Scholarship America, an independent third party.
ADF has also partnered with our company to develop a Children of Employees Scholarship Program outside the U.S. college students.Initial countries proposed for the program include Bangladesh, Mexico, Sri Lanka and Vietnam. This program, which is expected to launch in 2022, will be administered by the Institute for Internal Education, an independent third party.
In China and India, the Foundation'sADF’s InvEnt Scholarships have for more than a decade supported the next generation of innovators in science, technology, engineering and mathematics. By providingScholarships have provided undergraduates in China and India with tuition assistance, the opportunity to participate in an invention competition and professional development opportunities, the Foundation inspires the spirit of innovation in future engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year. Over 186opportunities. To date, scholarships have been awarded to Chineseover 100 students in China and Indiannearly 100 students in India who have demonstrated outstanding innovative spirit and strong practical competence.
Avery Dennison Corporation | 2022 Proxy Statement | 27 |
Avery Dennison Corporation| 2019 Proxy Statement |9
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Our Board oversees, counsels and ensures management is serving the best interests of our company and stockholders, with the goal of maximizing the performance of our businesses to deliverand delivering long-term value.value for all our stakeholders.
PRIMARY BOARD RESPONSIBILITIES
Our Board's primary responsibilities include the following:
Review Board composition andconduct director succession planning to ensure we maintain an engaged and diverse Board with thebalance of skills, qualifications and demographic backgrounds to effectively oversee our company;
Oversee businesses, strategy execution, ESG priorities and progress, and risk mitigation
Approve annual operating plan and strategic decisions, including significant strategicfixed and operational actions, includingsignificant IT capital expenditures and acquisitions;
Maintain integrity of our financial statements;•Evaluating the
Evaluate performance of our senior leaders and determiningdetermine executive compensation; and
Conduct executive succession planningand ensure effective talent management
Our Board’s top priority in 2021 given the continuing public health crisis of COVID-19 was supporting management in protecting the health, safety and well-being of our employees, delivering for our CEOcustomers, minimizing the impact of the pandemic on our investors and other senior executives, and ensuring we have ahuman capital management program that is effectively developingsupporting our leaders.
2019 DIRECTOR NOMINEES2022 Director Nominees
Our Bylaws provide that our Board be comprised of between eight8 and 12 directors, with the exact number fixed from time to time by Board resolution. Our Board has fixed the current number of directors at 12, but plans9. In February 2022, director Mark Barrenechea notified our Board of his decision not to reducestand for reelection at the 2022 Annual Meeting so he can focus on other endeavors; as a result, our Board expects that it will fix the number of directors to 11 when Mr. Scarborough leaves the Boardat 8 in April 2019. The2022 assuming that all 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 reelected.
Our 2022 director nominees are shown in the chart below.
NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | |||||||
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Bradley A. Alford | 62 | 2010 | Retired Chairman & CEO, Nestlé USA | ![]() | M | M | ||||||||
Anthony K. Anderson | 63 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ![]() | M | M | ||||||||
Peter K. Barker | 70 | 2003 | Retired Chairman of California, JPMorgan Chase & Co. | ![]() | M | | C | |||||||
Mark J. Barrenechea | 54 | 2018 | Vice Chair, CEO & CTO, OpenText Corporation | ![]() | ||||||||||
Mitchell R. Butier | 47 | 2016 | Chairman-Elect, President & CEO, Avery Dennison Corporation | ![]() | | | | |||||||
Ken C. Hicks | 66 | 2007 | Chairman & CEO, Academy Sports + Outdoors | ![]() | M | M | ||||||||
Andres A. Lopez | 56 | 2017 | President & CEO, Owens-Illinois, Inc. | ![]() | M | | | |||||||
David E. I. Pyott (LID) | 65 | 1999 | Retired Chairman & CEO, Allergan, Inc. | ![]() | M | M | ||||||||
Patrick T. Siewert | 63 | 2005 | Managing Director & Partner, The Carlyle Group | ![]() | C | | | |||||||
Julia A. Stewart | 63 | 2003 | Former Chairman & CEO, Dine Brands Global, Inc. | ![]() | C | M | ||||||||
Martha N. Sullivan | 62 | 2013 | President & CEO, Sensata Technologies Holding PLC | ![]() | M | M | |
Name | Age | Director Since | Principal Occupation | Independent | AC | CC | GC | |||||||||||||||||
Bradley A. Alford | 65 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
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Anthony K. Anderson | 66 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ✓ | ● |
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Mitchell R. Butier | 50 | 2016 | Chairman & CEO, Avery Dennison Corporation |
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Ken C. Hicks | 69 | 2007 | Chairman, President & CEO, Academy Sports + Outdoors | ✓ |
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Andres A. Lopez | 59 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ● |
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Patrick T. Siewert | 66 | 2005 | Managing Director & Partner, The Carlyle Group | ✓ | ● |
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Julia A. Stewart | 66 | 2003 | Chair & CEO, Alurx, Inc. | ✓ |
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Martha N. Sullivan | 65 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ● |
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AC = Audit &and Finance Committee CC = Talent and Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chair LID
= Lead Independent Director● = Chair ● = Member
The ages of our director nominees range from 4750 to 70,69, with an average age of 61.approximately 63. Their lengths of service range from less than one5 to 19 years, with an average tenure on our Board – after Mr. Barrenechea’s scheduled departure in April 2022 – of approximately nine111/2 years. None
Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeing our directors serves on more than two other boards of SEC-reporting companies, except for Messrs. Andersoncompany, as shown by individual in the Board matrix included in the proxy summary.
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Board Meetings and Pyott, who are both retired and serve on three such other boards.
Avery Dennison Corporation| 2019 Proxy Statement |10
Table of ContentsAttendance
APPOINTMENT OF NEW INDEPENDENT DIRECTOR
As part of its efforts to ensure regular Board refreshment, the Governance Committee oversaw our Board's search for a new independent director during 2018. The Committee engaged Spencer Stuart, an executive search firm, to assist it in identifying and evaluating potential candidates. Spencer Stuart identified a number of potential candidates (including Mark Barrenechea) 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. Barrenechea, uniformly supporting his candidacy based on the deep technology industry expertise he could bring to our Board as we continue refining our go-to market strategies in our high value product category of Intelligent Labels. Upon the recommendation of the Governance Committee, our Board unanimously appointed Mr. Barrenechea to our Board effective September 10, 2018, recognizing his senior leadership experience, technology experience, global exposure and public company board experience.
DEPARTURE OF CURRENT CHAIRMAN
In February 2019, our Chairman, Dean Scarborough, notified our Board of his intention not to stand for reelection at the Annual Meeting so that he may focus on other endeavors. Mr. Scarborough's membership on, and chairmanship of, our Board will end on the date of the Annual Meeting. For information on our Board's leadership structure following Mr. Scarborough's departure, see theBoard Leadership Structure section of this proxy statement.
BOARD MEETINGS AND ATTENDANCE
Our Board met five times and acted twiceonce by unanimous written consent during 2018.2021. There were 2114 Board Committee meetings and one Committee action by unanimous written consent during the year.All of our directors attended at least 82%75% of the aggregate number oftheir respective Board and Committee meetings, of which he or she was a member during 2018; thewith average attendance of all 99%. In addition, our directors was 97%.regularly discussed matters of critical importance with our Chairman/CEO throughout the year outside of meetings, particularly with regard to our COVID-19 response; related supply chain, labor, freight and inflationary challenges; potential acquisitions; and ESG priorities and progress. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines andall of our directors attended the 2018virtual 2021 Annual Meeting.
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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. Our Governance Guidelines were most recently amended in December 2018.2021.
BOARD GOVERNANCE HIGHLIGHTS | ||
Board Composition | ✓ Reasonable Board size of 9 directors; after Annual Meeting, 8 directors ✓ Mandatory retirement after age 72 with no exemptions or waivers allowed or granted; no term limits ✓ On average, director nominee age of 63 years and tenure of 111/2 years ✓ 63% of director nominees are female or from underrepresented communities | |
Director Independence | ✓ Current directors and director nominees 89% and 88% independent, respectively ✓ Executive sessions of independent directors held at all five 2021 Board meetings | |
Board Leadership Structure | ✓ Annual review of Board leadership structure ✓ Robust Lead Independent Director role and independent Committee Chairs | |
Board Committees | ✓ 100% independent ✓ Annual composition review and periodic Chair/members rotation ✓ Act under annually reviewed charters reflecting best practices and stakeholder expectations ✓ Directors required to attend Board/Committee and stockholder meetings | |
Board Duties | ✓ Regular CEO/senior executive 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 participate in initial orientation to familiarize themselves with our company and after joining Board committees to understand their responsibilities ✓ 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; includes peer evaluation | |
Director Qualifications | ✓ Regular review of Board composition (skills, qualifications, demographic backgrounds including with respect to gender, race and ethnicity, and board commitments) and director succession planning | |
Our Governance Guidelines Highlightsrequire that our Board be comprised of a majority of directors who satisfy the criteria for independence under NYSE listing standards and that our audit, compensation and nominating committees be comprised 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 relationship.
Board Composition
Avery Dennison Corporation | 2022 Proxy Statement | 29 |
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on our Board’s independence determination, including all relationships they have with our company, directly or indirectly through our company’s sale or purchase of 12 directorsproducts or services to or from the companies or firms by which they are employed. The Governance Committee reviews any relevant disclosures made in 2018
Director Independence
Independent Directors Bradley Alford Anthony Anderson Mark Barrenechea Ken Hicks Andres Lopez Patrick Siewert Julia Stewart Martha Sullivan | Director Nominee Independence |
For a discussion of the potential impact of tenure on director independence, see the Board Refreshment and Director Succession Planning section of this proxy statement.
Our Governance Guidelines give our Board – acting through its independent directors only
Robust Lead Independent Director Role
Our robust Lead Independent Director role balances our combined Chairman/CEO role by exercising critical duties to ensure independent decision-making in the boardroom. Mr. Siewert began serving as our Lead Independent Director in April 2020 and was reelected by our independent directors for another one-year term in April 2021. Our Governance Guidelines clearly define his primary responsibilities, which are shown below.
LEAD INDEPENDENT DIRECTOR | PRIMARY RESPONSIBILITIES | |
Designee: Patrick Siewert | • Preside over executive sessions of independent directors and Board meetings where Chairman/CEO is not present • Serve as liaison between Chairman/CEO and independent directors | |
Selected annually by independent directors | • Approve Board meeting agendas and schedules • Call meetings of independent directors • Consult and meet with stockholders |
Mr. Siewert also performed the activities described below and on the following page as Lead Independent Director in 2021.
Led majority of our off-season stockholder engagement discussions
Frequently engaged with Chairman/CEO to help guide strategic direction, including COVID-19 response and related supply chain, labor, freight and inflationary challenges, review of business strategies, mitigation of related risks, assessment of potential acquisitions and ESG progress
Consulted frequently with other independent directors and interviewed each of them as part of annual Board/Committee evaluation process
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Provided feedback to Chairman/CEO based on discussions with independent directors
Met with members of senior management other than Chairman/CEO
Supplementing our Lead Independent Director in providing independent Board leadership are our Committee Chairs, all of whom are independent.
Board Leadership Structure
Board Committees
Board Duties
Continuous Board Improvement
Director Qualifications
Avery Dennison Corporation| 2019 Proxy Statement |12
Our Governance Guidelines require that our Board be comprised of a majority of directors who satisfy the criteria for independence under NYSE listing standards. These standards also require that our audit, compensation and nominating committees be comprised 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 relationship.
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annual independence determination, including all relevant relationships they have with our company, directly or indirectly through our company's sale or purchase of products or services to or from the companies or firms by which they are employed. The Governance Committee reviews any relevant disclosures made in the questionnaires with our General Counsel/Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2019, the Governance Committee reviewed two relationships impacting the independence of our directors, namely Mr. Butier's service as our President and CEO and Mr. Scarborough's former service as our President and CEO.
After review and discussion of the relevant facts and circumstances, the Governance Committee concluded that only Messrs. Butier and Scarborough had relationships that were disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon recommendation of the Governance Committee, our Board affirmatively determined the ten directors named below to be independent, representing 83% of our current directors and 91% of our director nominees.
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For a discussion of the potential impact of tenure on director independence, see theBoard Refreshment and Director Succession Planning of this proxy statement.
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. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following one-year term 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 any feedback received from our stockholders.
Avery Dennison Corporation| 2019 Proxy Statement |13
ROBUST LEAD INDEPENDENT DIRECTOR ROLE
Our Lead Independent Director balanced our non-independent Chairman and CEO roles in 2018, exercising critical duties in the boardroom to ensure effective and independent Board decision-making. Our Governance Guidelines clearly delineate these responsibilities, which are shown below. Mr. Pyott currently serves as our Lead Independent Director.
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In addition to these responsibilities, Mr. Pyott performed the following activities as Lead Independent Director in 2018:
Supplementing our Lead Independent Director in providing independent Board leadership are our Committee Chairs, all of whom are independent.
PRE-ANNUAL MEETING LEADERSHIP STRUCTURE
Our Board currently has a Chairman, who as a recent former employee is not independent, a separate CEO, and a Lead Independent Director. The Governance Committee oversaw the evaluation of the performance of our Chairman and Lead Independent Director during the Board evaluation process conducted induring the fourth quarter of 2018, noting that2021, Messrs. ScarboroughButier and PyottSiewert each received uniformly positive feedback from our independent directors in their respective roles. Based on these evaluations, we believeroles as Chairman/CEO and Lead Independent Director, indicating that our pre-Annual Meetingcurrent Board leadership structure has providedis enabling effective independent oversight of our company. During our ongoing2021 engagement with stockholders, only one investor expressed a preference that the positions of Chairman and CEO be separated at our stockholders on governance matters, none of them expressed concerns with our pre-Annual Meeting Board leadership structure,company, which we believe reflects support for our robust and clearly delineated Lead Independent Director role.role and Mr. Siewert’s participation and strong engagement in the majority of our off-season meetings.
POST-ANNUAL MEETING LEADERSHIP STRUCTURE
In February 2019, in light of Mr. Scarborough's upcoming departure from our Board,2022, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr. Butier be elected to continue serving as Chairman, noting that he has successfully led our company as CEO for the last threesix years and with Mr. Scarborough's departure, isremains best positioned to lead our Board in overseeing our strategies to drivedeliver long-term value creation for our key stakeholders.employees, customers, investors and communities. The committee further noted that Mr. Butier has articulated and worked to realize thea long-term vision for our company that has delivered top quartile TSR performance and exceeded our 2017-2021 financial targetsand that we couldcan best continue to advance our strategies and ESG progress towardstoward achieving our 2021 financial and 2025 sustainability goals – as well as our 2021-2025 financial targets and more ambitious 2030 sustainability goals – continuing with combined leadership in the boardroom at this time. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr. Butier (with him and Mr. Scarborough abstaining) to serve as our Chairman, effective immediately after the Annual Meeting subject to his reelection.
Avery Dennison Corporation| 2019 Proxy Statement |14
TheAt that time, the Governance Committee also recommended that Mr. PyottSiewert (with him abstaining)not participating in the discussion) continue serving as Lead Independent Director. Retaining Mr. PyottHaving a long-serving director with financial expertise and substantial international experience serve as Lead Independent Director will providehas provided Mr. Butier valuable mentorship and guidance while ensuring robust independent guidanceBoard oversight of management. The committee also recognized Mr. Siewert’s valuable support and substantial effort with our stockholder engagement program. The Governance Committee determined that, in light of his demonstrated commitment, engagement and leadership continuity asin the second year in which he transitions intoserved in this capacity, Mr. Siewert should continue in the Chairman role. In addition, Mr. Pyott has significantly contributed to our executive compensation and governance programs through his strong,role of ensuring independent leadershipstewardship of our Board.Board in its oversight of our strategies to deliver long-term value for all our stakeholders. The committee’s decision took into account his significant contribution to the Board’s responsibilities as a member of the Audit Committee since joining our Board and as its Chair for five years, as the current Chair of the Governance Committee, and his extensive international experience in Asia, a region from which approximately 35% of our sales originated and approximately 58% of our employees were located in 2021. Upon the recommendation of the Governance Committee, our independent directors unanimously selected Mr. PyottSiewert (with him abstaining)abstaining from the vote) to continue servingserve as our Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.
Each of our Board committeesCommittees has a written charter that describes its purposes, 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 forof the Audit, Compensation and Governance Committees were lastmost recently amended in December 2018, December 2018, and December 2016, respectively.February 2021.
Each of our Board committeesCommittees has 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, current membership and 2021 meeting and attendance information for the three standing committees of our Board are summarized below and on the following page.pages.
Avery Dennison Corporation | 2022 Proxy Statement | 31 |
AUDIT FINANCE COMMITTEE | ||
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Current Members: Martha Sullivan (Chair) Anthony Anderson Andres Lopez Patrick Siewert 2021 meetings: 8 2021 average attendance: 100% Audit committee financial experts: Anderson and Siewert All members satisfy NYSE enhanced independence standards | • Oversee financial statement and disclosure matters, including
• Appoint and oversee
• Oversee
• Perform compliance oversight responsibilities, including overseeing
• Conduct finance oversight responsibilities, including reviewing
• Approve |
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Current Members: Julia Stewart (Chair) Bradley Alford Mark Barrenechea Ken Hicks 2021 meetings: 4 2021 average attendance: 100% All members satisfy NYSE enhanced independence standards and qualify as “non-employee directors” under Exchange Act Rule 16b-3 | • Review and approve corporate goals and
• Review andapprove senior executive compensation, including base salaries and incentive compensation • Oversee CEO succession planning and conduct succession and development planning for other senior executives; regularly review executive new hires, promotions and role changes, departures and open positions
• Review
• Review stockholder engagement process, results and feedback related to executive compensation and talent management • Approve
• Oversee stockholder approval of executive compensation matters, including
• Ensure no encouragement of excessive risk-taking in compensation policies/programs • Recommend non-employee director compensation |
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Current Members: Patrick Siewert (Chair) Bradley Alford Anthony Anderson Julia Stewart 2021 meetings: 2 2021 average attendance: 100% All members satisfy NYSE independence standards | • Identify potential or incumbent Board members and recommend director nominees
• 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 |
Avery Dennison Corporation| 2019 Proxy Statement |16
Our Board believes it is important to have executive sessions withoutwith our Chairman/CEO, orwithout other members of management present, and without him, both of which wereare held at every regulareach Board meeting during 2018.meeting. Our non-managementindependent directors have robust and candid discussions at thesethe executive sessions that exclude Mr. Butier during which they critically evaluate the performance of our company, Chairman/CEO and management. As Chairman, Mr. Scarborough presided over five executive sessions of non-management directors during 2018. As required by NYSE rules, our Board also conducts at least one executive session per year without our non-independent Chairman and our CEO. As Lead Independent Director, Mr. Pyott Siewert presided over the onefive executive sessionsessions of independent directors held during 2018.2021.
In 2021, implementing feedback from our annual Board evaluation process, our Board began starting each of its meetings with one of two executive sessions with our Chairman/CEO, but no other members of management, to discuss key focus areas and frame meeting discussions; the second such session at the end of the meeting provides time for the Board to reflect and align on key priorities, after which our independent directors meet in executive session without our Chairman/CEO.
Executive sessions wereare also generally scheduled for each regular meetingmeetings of the Audit, Compensation and Governance Committees held.Committees. These executive sessions generally excluded Mr. Scarborough, Mr. Butierexclude our Chairman/CEO and other members of management, unless the Committee requested Mr. Scarborough orrequests one or more members of managementthem to attend a portion of the session to provide additional information or perspective.
RISK OVERSIGHT
Management is responsible for managing the day-to-day risks confronting our businesses, butand our Board has responsibility for overseeing enterprise risk management (ERM).In performing its oversight role, our Board is responsible for ensuring that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making. The teams leading our businesses have incorporated ERM into developing and executing their strategies, assessing the risks impacting their businesses, and identifying and implementing appropriate mitigating actions on an ongoing basis. In addition, in consultation with our headleader of risk managementRisk Management and senior management, these teams semiannually prepare a risk profile 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-specific risks as well as enterprise-wide risks.risks, including risks related to ESG matters such as climate change, GHG emissions and energy use; materials management; advancing the circular economy; DE+I; waste; and employee health and safety.
Avery Dennison Corporation | 2022 Proxy Statement | 33 |
We also have robust global processes that support aour strong internal control environment toand promote the early identification and continued managementmitigation of risks by our company'scompany’s leadership. Our legal and compliance functions report into our General CounselCLO to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit reports to the Audit Committee in the conduct of his operational responsibilities, ensuring his independence from management.
In performing its2021, we enhanced our already robust ERM program by meeting to prepare risk profiles with an expanded group of functional leaders for our RBIS and IHM businesses and each of the regions of our LGM business, in addition to the global risk profiles we have routinely prepared for each of our reportable segments and our company as a whole. We also prepared standalone compliance and information technology risk profiles to enable greater focus on these critical risk areas, and designated risk champions from our Law Department to partner with our Risk Management team in facilitating future ERM discussions with our business leadership teams. These advancements have embedded ERM deeper into our organization, allowing us to benefit from the engagement and critical thinking of a broader cross-section of corporate and business leaders. We plan to continue advancing our ERM program, with leadership from our ERM Steering Committee comprised of members of senior management and oversight role,by our Board is responsible for ensuring that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making.Board.
Our Board as a whole oversees risks related to our company and business strategies and operations, exercising this responsibility by considering the risks related to its decisions. Each year, our Board receives reports on the ERM process and the strategic plans and risks facing our businesses and company as a whole. Thesewhole; these risks include financial risks, politicalgeopolitical risks, legal and regulatory risks, supply chain risks, competitive risks, compliance risks, ESG risks, information technology risks and other risks related to the wayways in which we do business.business. Employees who lead various risk areas —– such as law, information technology; environmental, healthtechnology, tax, compliance, sustainability, DE+I and safety; tax; sustainability; and corporate social responsibility —community investment – report periodically to Board Committees and occasionally to our full Board.
Our Board has delegated elements of its risk oversight functionresponsibility to its Committees to better coordinate with management to serve the long-term interests of all our company and stockholders.stakeholders. Our Board receives reports from itsthe Committee Chairs regarding topics discussed at Committeecommittee meetings, which includeincluding the areas of risk overseenthey primarily by the Committees.
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Tableoversee, and engages with our leaders on these risk areas during its regular review of Contentsour business strategies.
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 |
| |
| ||
• Financial reporting processes and statements, and internal controls • Capital structure • Financing, including debt, liquidity, capital allocation and pension plan funding • Stockholder distributions (dividends and stock repurchases) • Information technology and cybersecurity • Certain legal, compliance and regulatory matters | • Executive compensation and CEO/senior executive succession planning • Annual and long-term incentive plans • Compensation plans and benefit programs • Non-employee director compensation • Social sustainability and talent management, including DE+I; leadership compensation plans, benefit programs, recruiting and retention strategies and development progress; and employee engagement | • Board and Committee structure and composition • Director succession planning • Values and Ethics/Code of Conduct • Conflicts of interest and related person transactions • Governance, environmental sustainability and community investment • Certain legal, compliance and regulatory matters |
Management • Day-to-day management of risks facing our businesses |
34 | 2022 Proxy Statement | Avery Dennison Corporation |
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 periodicallyregularly meets in executive session with each of our CEO, CFO, Controller/CAO, General Counsel, Vice President of Internal Audit and representatives of our independent registered public accounting firm.firm and meets as needed in executive session with other members of management such as our CEO and CLO. The Governance Committee also meets semiannually with our Chief Compliance Officer to discuss, among other things, the investigation of allegations reported to the GuideLine.
During 2021, our Business Conduct GuideLine.
During 2018,Board was particularly focused on the following risk areas weredescribed below.
2021 Risk Focus Areas | ||||
Impact of particular BoardCOVID-19– Prioritizing safety and Committee focus:
Delivering for customers – Managing constrained raw material, freight and labor availability and elevated lead times to continue providing high-quality service to customers
Inflation management – Offsetting impact of inflation through productivity and pricing
Intelligent Labels – Further accelerating primary long-term profitable growth driver, including the implementation of an enterprise resource planning system in our Label and Graphic Materials North America business;
Innovation – Advancing innovation through strategic innovation platforms on material circularity and
M&A – Being bolder to expand robust pipeline of acquisition opportunities, including evaluating risks related to our environmental, socialacquisitions and governance responsibilities, particularlyintegrations of Zippy Yum and JDC, as well as our venture investments, while maintaining our disciplined approach to capital allocation
ESG – Heightening focus on ESG matters, resulting in more frequent and comprehensive disclosures contained in our integrated sustainability and annual reports, proxy statements and ESG Downloads
Sustainability – Increasing focus on more sustainable packaging, including strategies and risks related to the areas of data privacy, sustainability, Valuesstrategic innovation platforms described above
DE+I – Raising the bar to drive sustainable change with new 2030 goals and Ethics,more robust global infrastructure
Risks Associated with Compensation Policies and diversity and inclusion.
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Table of ContentsPractices
RISKS ASSOCIATED WITH COMPENSATION POLICIES AND PRACTICES
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 programs are meeting the committee’s objectives. In addition, the Compensation Committee periodically reviewsengages WTW to undertake a more formal assessment of our compensation programs to ensure that they do not provide incentives that encourage our employees to take excessive risks in managing their respective businesses or functional areas andareas. The committee most recently conducted its most recent reviewthis evaluation in February 2018.2022.
Based on the advice of its independent compensation consultant, Willis Towers Watson, theThe Compensation Committee noted the risk-mitigating features of our compensation policies and practicesprogram described below and on the following page, which are substantially the same as what they were at thepage.
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Risk-Mitigating Compensation Features | ||||
Governance and Oversight | ✓ Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants to penalize potentially risky actions ✓ Clawback policy deters fraud or other misconduct that results in financial restatement, providing means to recoup inappropriately received AIP and LTI awards ✓ Incentive compensation plan structure and targets are reviewed within context of market practices, tied to operating business plans and corporate goals, and approved by Compensation Committee ✓ Compensation Committee annually evaluates CEO/senior executive performance against challenging strategic, financial and ESG goals ✓ Rigorous stock ownership policy is consistent with best practices, with minimum ownership level of 6x for CEO; requires net shares acquired to be retained until compliance is achieved ✓ 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 ✓ Substantial majority of leadership compensation delivered in long-term equity or cash-based awards to motivate pursuit of superior performance and sustainable growth ✓ Executive severance plans consistent with market practices, with double-trigger change of control benefits and only for most senior NEOs ✓ Incentive compensation designed to incent strong annual financial performance and long-term economic and stockholder value creation, and balance growth and efficient capital deployment | |
Incentive Program Design | ✓ AIP and LTI awards incent annual profitable growth and long-term financial value creation, using multiple performance objectives ✓ 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 use multiple performance objectives, vest over multiple time horizons and are subject to threshold and maximum payout opportunities • Performance units (PUs) cliff vest at end of three years with payout for relative total stockholder return (TSR) component capped at 100% of target if absolute TSR is negative • Market-leveraged stock units (MSUs) vest over one-, two-, three- and four-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% |
Given low risk in each of the most recent review.
Governance and Oversight
Pay Philosophy and Structure
Incentive Program Design
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Based on these categories and other factors, Willis Towers Watson determinedWTW advised the Compensation Committee that our compensation program strikes an appropriate pay-risk balance. balance and presents no 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.
HUMAN CAPITAL MANAGEMENT
DIRECTOR EDUCATION
SUCCESSION PLANNINGInitial Orientation
The Compensation Committee and our full Board conduct executive succession planning semiannually, developing and refining succession plans for our CEO and senior executives. Consistent with this practice, in April and October 2018, the Compensation Committee reviewed talent that is ready — or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready — to fill senior executive positions in the event of a vacancy. Those reviews were then further discussed with our full Board. In addition, the Compensation Committee reviews executive new hires, promotions, transfers and departures at its regularly-scheduled meetings.
LEADERSHIP DEVELOPMENT
Our Board is actively involved in human capital management to identify and develop our future leaders. We maintain a robust performance review process and leadership development program for our employees. Senior management develops leadership at lower levels of our organization by identifying high potential talent and critical experts, cultivating the skills and capabilities to allow identified individuals to become our future leaders, and providing them with developmental opportunities. Through regular reports from management, our 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.
DIVERSITY AND INCLUSION
Diversity is one of our core values, reflecting our efforts to create an inclusive and respectful environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams. The importance of diversity and inclusion to our company is evidenced by the inclusion of diversity-related targets in our 2025 sustainability goals. Diversity and inclusion at our company are championed primarily by our cross-functional and cross-divisional Diversity and Inclusion Council, currently co-chaired by Anne Hill, our Senior Vice President and Chief Human Resources Officer, and Deon Stander, the Vice President and General Manager of our RBIS business. Board oversight is conducted primarily through the Compensation Committee.
In recent years, among other initiatives, we have focused on training our managers globally on unconscious bias, increasing the number of sites offering flexible work arrangements, and expanding our Women Empowered program that features interactive discussions among nominated participants to facilitate and enhance their development. We also evaluated our gender pay equity with positive results, developing plans to make identified adjustments to compensation for 2019. This year, we are formally launching employee resource groups, which are voluntary employee-led groups made up of individuals who join together based on common interests, backgrounds or demographic characteristics such as race, ethnicity or sexual orientation. In addition, we are establishing regional diversity and inclusion councils to provide leadership of initiatives that more strongly resonate with employees in their respective regions.
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INITIAL ORIENTATION
Our initial director orientation generally covers (i) our strategies, performance and leadership; (ii) investor messaging; (iii) the strategies, risks and risksmitigating strategies, and ESG priorities of our businesses; (iv) finance matters, including our financial reporting policies and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure;allocation; (v) legal and compliance matters, including our Board composition, governance policies and procedures, valuesValues and ethicsEthics program, and ERM; (vi) human capitalexecutive compensation and talent management matters, including executive compensation, succession planning, leadership development, DE+I and diversity and inclusion;community investment; and (vii) information technology and cybersecurity.
In connection with his initial appointment to our Board in 2018, we provided incoming independent director Mark Barrenechea with information regarding our businesses, strategic plans and risk-mitigating actions, competitors, non-employee director compensation policies and other matters. Our CEO then met with Mr. Barrenechea to discuss these matters to ensure a smooth onboarding process. In October and December 2018, Mr. Barrenechea joined as an observer in our Board's Audit, Compensation and Governance Committee meetings to better understand their respective responsibilities.
36 2022 Proxy Statement | Avery Dennison Corporation CONTINUING EDUCATION
Continuing Education
Our continuing director education program consists of periodic visits to our facilities and regular management presentations regarding our business operations, performance, strategies risks and values and ethics.risk mitigation activities. We provide updates on relevantthese topics of interest to our Board atduring and between meetings throughout the year, and provide access to a boardroom news resource platform for them to keep informed of emerging best practices. We also reimburse directors who attend continuing director education programs for fees and related expenses.
BOARD AND COMMITTEE EVALUATIONS
The Governance Committee oversees and conducts an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees, including the Committee Chairs. As part of this process, our directors evaluate the performance of their peers serving on the Board, providing candid feedback to enable continuous boardroom improvement and assist with director succession planning. Our Board views the evaluation process as integral to assessing its effectiveness and identifying improvement opportunities in the pursuit of continued excellence. Many of the improvements inWe have continually improved our governance practices and Board processes were identified and implemented as a result of thethis annual evaluation process.
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In response to evaluation feedback received in recent years, our Board madeprocess, as shown below and on the following enhancementspage.
BOARD AND COMMITTEE EVALUATIONS
1 | ||||
Process
Written evaluations on Board/Committee
Composition, including 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 interviews with Governance Committee Chair to its membershipprovide additional perspectives and processes:discuss feedback
Verbal peer reviews to identify potential improvement opportunities for individual directors
2 | ||||
Identified the need for2021 Review of Resultsindependent directors
Discussion of evaluation results and feedback
Chairman/CEO, Lead Independent Director/Governance Committee Chair, Corporate Secretary, and CLO
Joint Governance Committee and Board discussion in executive session with packaging and technology expertiseChairman/CEO, aligning on improvement opportunities for implementation
3 | ||||
Recent Improvement Actions, culminating in the appointments of Messrs. Lopez and Barrenechea to our Board;
Sharpened focus on acquisitions, enhancedstrategic and risk oversight, highlighting one business group during each Board meeting, establishing mentorships between individual directors and key business leaders, and ensuring meeting discussions prioritize discussion of challenges and opportunities rather than presentation of information
Heightened focus on financial scenario planning, cybersecurity preparedness, ESG priorities and progress, and compliance matters
Enhanced discussion of M&A pipeline and potential targets actively under consideration,, as well as the integration and performance of acquired companies;companies and integration learnings
Expanded review of potential CEO successors and their development plans to ensure ready-now
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Increased engagement on these matters both with the Compensation Committee investor relations,stockholder engagement and our full Board and provided regular updates on executive new hires, promotions, transfers and departurescompetitive landscape to the Compensation Committee;
Conducted annualpost-investment reviews of the returnreturns on significant fixed capital expenditures, acquisitions and information technology investments.IT investments
Sharpened focus on director succession planning, selecting new Lead Independent Director, appointing new Chairs for Audit and Governance Committees and refreshing Committee memberships; proactively aligning on steps to mitigate impact of upcoming concentrated retirements; and focusing on software/digital/cybersecurity and materials science industry expertise and increased Board diversity for future directors
Increased Chairman/CEO engagement with directors between meetings, with frequent updates and one-on-one discussions between him and each director, which were important in 2021 as we continued responding to COVID-19, mitigated related supply chain, labor, freight and inflationary challenges, advanced ESG focus and transparency, and redoubled efforts to advance DE+I
Refined Board schedule and meeting process to maintain robust dialogue despite move to primarily virtual meetings given COVID-19, including establishing annual strategic discussion calendars, beginning each meeting in executive session with Chairman/CEO, but no other members of management, to discuss key focus areas and frame meeting discussions; holding another such executive session to reflect on the meeting and align on key priorities, after which our independent directors meet in executive session without our Chairman/CEO; and planning to hold certain Committee meetings off-cycle (not coincident with Board meetings) and future Board meetings as a mix of virtual and in-person meetings given equally high level of engagement and discussion in both formats
STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS
We value stockholder feedback on our governance sustainability and executive compensation programs,program and we actively solicit input through stockholder engagement on these matters to ensure that we reflect not only our programs reflectevolving business strategies but also the changing business environment and stockholder expectations.
STOCKHOLDER ENGAGEMENT ON GOVERNANCE AND SUSTAINABILITY MATTERS IN 2018
We continued our longstanding practice of open dialogue with stockholders in 2018. In advance of the 2018 Annual Meeting, we contacted our 35 largest institutional stockholders, representing over 55%expectations of our then-outstanding shares. Boardstakeholders. In addition to our extensive investor relations program through which members includingof management engage with our Lead Independent Director,investors throughout the year, this supplemental engagement program is depicted – and management were made available to answer questions and address concerns regarding the items being brought before the Annual Meeting. Whilefeedback we received responses from stockholders representing over 28% of our then-outstanding shares, none of them desired to substantively engage at that time.on governance matters is described – in the proxy summary.
In the summer and fall, without the time pressures associated with proxy season, we contacted our 41 largest institutional stockholders, representing nearly 60% of our then-outstanding shares, to request a meeting with members of our Board and/or management. Proposed topics for these meetings included our business strategy and financial performance, executive compensation matters, Board composition and succession planning, and progress towards achieving our sustainability goals. We received responses from stockholders representing nearly 30% of our then-outstanding shares and spoke with stockholders representing over 25% of our then-outstanding shares. We substantively engaged with every stockholder who requested to do so and included our Lead Independent Director in engagements upon stockholder request.
With respect to matters related to governance, we discussed several topics related to our Board composition, skills and succession planning and refreshment processes. We also discussed our business strategies and related risks, diversity and inclusion initiatives, and sustainability priorities.
Our Board welcomes feedback from all our stockholders. We review correspondence submitted by stockholders, discussing any substantive feedback received with senior management and/or our Board as appropriate.
Stockholders and other interested parties may contact our Board, 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| 2019 Proxy Statement |22
8080 Norton Parkway, Mentor, Ohio 44060.
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ITEM 1 – ELECTION OF DIRECTORS
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Our Bylaws provide for a Board of between eight8 and 12 directors, with the exact number fixed by a resolution of our Board. In September 2018, in conjunction with Mr. Barrenechea's appointment and uponOur Board has fixed the recommendation of the Governance Committee, our Board fixed thecurrent number of directors at 12.9. In April 2019,February 2022, director Mark Barrenechea notified our Board of his decision not to stand for reelection at the 2022 Annual Meeting so he can focus on other endeavors; as a result, our Board expects tothat it will fix the number of directors at 11 to reflect Mr. Scarborough's departure from the Board at the end of his current term.8 in April 2022 assuming that all nominees are reelected. All nominees are standing for election for a one-year term expiring at the 20202023 Annual Meeting.
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting. 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.
MAJORITY VOTING STANDARD; UNELECTED DIRECTOR RESIGNATION REQUIREMENTMajority Voting Standard; Unelected Director Resignation Requirement
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, is 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 itsthe rationale for theits decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for the election of directors.
In voting for the electionRecommendation of directors, each share has one vote for each position to be filled and there is no cumulative voting.
RECOMMENDATION OF BOARD OF DIRECTORSBoard of Directors
Our Board of Directors recommends that you vote FOR each of theour 8 director nominees.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 nominees are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nominees 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 that our directorsdirector nominees reflect a balance and diversity of skills, qualifications and demographicsdemographic backgrounds, as shown in the Board matrix contained in the proxy summary, that allows them to effectively discharge their oversight responsibilities.
In consideringevaluating whether to recommend a candidate as anew or incumbent director nominee, the Governance Committee primarily uses the following criteria set forth in our Governance Guidelines:
• | Independence, to ensure substantial majority of Board remains independent |
• | Business and leadership experience, including industry experience and global exposure and considering factors such as size, scope and complexity |
• | Board service at other U.S. publicly-traded companies |
• | Experience in finance, accounting and/or executive compensation |
• | For incumbent directors, attendance and compliance with our stock ownership policy |
• | Time commitments, including service on other boards; any new directors joining our Board who are executive officers of a public company may not serve on more than one other public company Board |
• | Potential conflicts of interest |
• | Demographic characteristics (including, without limitation, gender, race and ethnicity); when evaluating new nominees, the committee will seek to consider (and ask any search firm engaged to provide) candidates that include highly qualified women and individuals from underrepresented communities |
• | Ability to contribute to oversight, governance and sustainability of our company |
• | Ability to represent balanced interests of all stockholders, as well as the interests of our other stakeholders, rather than those of any special interest group |
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For incumbent directors, the Governance Committee also evaluatesconsiders their contributions to our Board and Committees, attendance at Board and Committee meetings, compliance with our stock ownership policy, and mandatory retirement dates to assist with director succession planning.planning, and feedback received during our annual Board evaluation process. The Governance Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all nominees.
The Governance Committee reviews the skills, qualifications and demographic background of any candidate with those of our current directors in assessingto assess how our Board can most effectively fulfill its oversight responsibilities. Sources for identifying potential nominees include current Board members, senior management, executive search firms and our stockholders.investors.
STOCKHOLDER SUBMISSION OF DIRECTOR NOMINEESStockholder Submission of Director Nominees
Advance Notice Nominees
Stockholders may recommend director candidates by submitting the candidate'scandidate’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 91203.8080 Norton Parkway, Mentor, Ohio 44060. To be considered at the 20202023 Annual Meeting, advance notice stockholder nominations must comply with the requirements described in the lastVoting and Meeting Q&A section of this proxy statement. The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
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 requirements specifieddescribed in our Bylaws. For further information on submitting proxy access nominees for the 2023 Annual Meeting, please refer to the lastVoting and Meeting Q&A section of this proxy statement.
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Our director nominees 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 experienceskills, qualifications and background to effectively provide strong oversight.demographic backgrounds that enables effective independent oversight and aligns with our business strategies and ESG priorities.
NO TERM LIMITSNo Term Limits
Our Governance Guidelines reflect our Board'sBoard’s belief that directors should not be subject to term limits. While term limits could help facilitate fresh ideas andnew viewpoints being brought to the Board,boardroom, our Board believes they could also result in the premature loss of a director who over a period of time has become well-versed in our strategies, operations and risksgained valuable experience and is continuing to provide valuable contributionssignificantly contribute to Board deliberations.deliberations assessing our strategies, operations, risks and mitigating strategies, and ESG priorities and progress. We believe that our Board'sBoard’s decision not to establish term limits at this time is consistent with the prevailing practice among companies in the S&P 500. 500.
Our Board recognizes that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity; however,objectivity. However, our Board believes that, except as required by our mandatory retirement policy arbitrarily removing knowledgeable directors and losing the oversight consistency they bring, — particularly during periods of either executive management change, such as our recent CEOnew President and CFO transitions, or Board change, such as Mr. Scarborough's April 2019 departure
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fromCOO, the new leaders for our Board after having served as Chairman for the past nine years —RBIS Apparel Solutions and IHM businesses, and our CHRO and CLO elected in 2020 weighs against implementing term limits at this time. Ultimately, our Board believes that it is its responsibility to establishresponsible for establishing appropriate board refreshment policies in light of our strategies, leadership teamfinancial position and financial positionESG priorities at any particular time, exercising its discretion in the best interest of our company and stockholders. To assist in discharging this responsibility, in November 2021 and February 2022, the Governance Committee reviewed the skills, qualifications and demographic backgrounds of our Board members and conducted director succession planning to ensure that our Board continues to meet the needs of our businesses, align with our strategies and advance the interests of all our stakeholders.
POLICIES AND RECENT ACTIONS SUPPORTING REGULAR BOARD REFRESHMENT
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Policies and Events 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 oversee and challenge our management.management team.
Policy | Description | Events Occurring at or Since 2021 Annual Meeting | |||||||
Mandatory Resignation Policy | Incumbent directors | All incumbent directors standing for election were elected at the | |||||||
Mandatory Retirement Policy | Directors must retire on | ||||||||
Resignation Tendered Upon Change in Principal Employment | Directors who change | ||||||||
Prior Notice Requirement to Prevent | Directors must give prior notice before accepting another U.S. public company directorship so that |
Upon the recommendation of the Governance Committee, Messrs. Barrenechea and Lopez were appointed to our Board as independent directors in September 2018 and February 2017, respectively. In connection with his becoming our CEO, transition, Mr. Butier joined our Board as a non-independent director in May 2016. Mr. Scarborough's service asBarker retired from our Chairman and director will end upon the expiration of his current termBoard in April 2019.2021 and Mr. Barrenechea will leave our Board in April 2022. We believe that this recent experience with both joining and departing directors demonstrates our Board'sBoard’s commitment to regular refreshment.
Both the Governance Committee and our full Board plan to regularly discuss director succession planning in 2022 to mitigate the impact of upcoming concentrated retirements, develop a candidate profile for one or more new directors that would both complement and advance the skills and qualifications currently represented on our Board, and further enhance Board diversity.
AGE AND TENUREDIRECTOR DIVERSITY
Our Board supports and reflects our values, recognizing the benefits of diversity in the boardroom, including the healthy debate that results from different viewpoints that may stem from diverse backgrounds.
Age and Tenure
The average age of our director nominees is 61,63, which we believe is comparable toconsistent with the average boarddirector age in the S&P 500 and within the 60-63 year60 to 63-year band in which the plurality of these companies fall. The average tenure of our director nominees is approximately nine111⁄2 years; were it not for our most recently appointed director’s decision not to stand for reelection, our average tenure of 101⁄2 years which we believe iswould have been comparable to the average tenure for companies in the S&P 500, and within the 6-10 year band in which the majority of these companies fall. The charts below show the age andwhich have average tenure of oursix to ten years. Our director nominees which we believe reflectsreflect a balance between newer directors who bring fresh ideas and insights and longer-serving directors with deep institutional knowledge of our Board and company.
Director Nominee Age and Tenure | ||||
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Demographic Background
Our Governance Guidelines reflect that the Governance Committee'sCommittee’s assessment of the qualifications of director candidates includes consideration of their demographic characteristics such asbackgrounds, including, without limitation, race, gender and ethnicity. Although neither the Governance Committee nor our Board has awe have no formal policy regarding the consideration of diversity in selecting director nominees, the Governance Committee seeks to recommend individuals with a broad diversity of experience, profession, skill, geographic representation and demographic background, including characteristics such as race, gender and ethnicity.background. While diversity is a consideration and area of focus in recommending future nominees, area given nominee would not be chosen or excluded solely or primarily on that basis; rather, the Governance Committee focuseswould focus on skills, experience and backgroundan overall candidate profile that canwould complement our existing Board in light of the diverse and global nature of our businesses and operations.
Our Board recognizesWhen evaluating new nominees, the benefitsGovernance Committee will seek to consider (and ask any search firm engaged to provide) candidates that include highly qualified women and individuals from underrepresented communities; 2 of our 4 most recently appointed independent directors increased the racial, ethnic andor gender diversity in the boardroom, including better reflectingon our global customer base and the healthy debate that results from different viewpoints that may stem from diverse backgrounds. The racial, ethnic and gender diversity of our 2019 director nominees is shown in the chart below.Board.
Director Nominee Diversity | ||||
The following pages provide information on the directors nominated for election, at the Annual Meeting, including his or her age, board leadershipcurrent 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 regardingWe also present each nominee'snominee’s experience and qualifications that led our Board to conclude that he or she should serve as a director, — which includes senior leadership experience, industry experience,expertise, global exposure, financial sophistication, andU.S. public company board experience, — we believe that each of them has integrity and adheres to our high ethical standards. and/or financial expertise as defined in the Board matrix shown in the proxy summary. Each nominee also has demonstrated the ability to exercise sound judgment, fulfill the time commitments necessary to serve on our Board and is committed to servingadvance the long-term interests of our stockholders.
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ANDRES A. LOPEZ | ||||
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Age 59 Director since February 2017 Independent | RECENT BUSINESS EXPERIENCE
• President & •
• President, O-I Americas, from July 2014 to January 2015 • President, O-I Latin America, from April 2009 to July 2014
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Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Oversees Industry • Leads • Led Latin America and Americas divisions, after having worked in positions of increasing responsibility throughout the region
U.S. public company board experience • Concurrent service on one other
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Age 66 Director since December 2012 Independent |
Ernst & Young LLP, an assurance, tax, transaction and advisory services firm • Vice Chair, Managing Partner and Member of
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Governance Committee Member
Current: AAR Corporation Exelon Corporation Marsh & McLennan Companies, Inc. Past Five Years: First American Financial Corporation |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Served on Financial •
• Substantial experience advising audit committees of large multinational corporations • Certified public accountant (now inactive)
U.S. public company board experience • Concurrent service on three other
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Governance Committee Member
![]() Age 65 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:
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SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led Industry •
• Knowledge of • Substantial M&A and integration experience
U.S. public company board experience • Concurrent service on one other
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Avery Dennison Corporation| 2019 Proxy Statement |28
Avery Dennison Corporation | 2022 Proxy Statement |
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![]() Age 66 Director since January 2003 Independent |
Alurx, Inc., a health and wellness company • Founder, Chair & CEO since January 2020 Dine Brands Global, Inc. (formerly DineEquity, Inc.), owner, operator and franchisor of IHOP and • Chairman &
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Current:
Past Five Years: Dine Brands Global, Inc. |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led
Industry expertise and global exposure • Substantial operational and marketing experience in • Expertise in brand positioning, risk assessment, financial reporting and governance
U.S. public company board experience •
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Governance Committee Member
![]() Age 69 Director since July 2007 Independent |
Academy Sports + Outdoors, a sports and recreation retailer • Chairman, President & Foot Locker, Inc., a specialty athletic retailer • Executive Chairman from December 2014 to May 2015 • Chairman, President & • President | |||
Compensation Committee Member
Current:
Past Five Years:
Whole Foods Corporation |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Leads Industry •
U.S. public company board experience •
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Avery Dennison Corporation| 2019 Proxy Statement |29
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![]() Age 65 Director since February 2013 Independent |
Sensata Technologies Holding PLC, a supplier of sensors and controls • President & • President & COO from September 2010 to December 2012 •
Texas Instruments, Inc., • Vice President of Sensor Products from 1997 to 2006 | |||
BOARD ROLES
Current: Sensata Technologies Holding PLC Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry •
• Strong technology background, including experience overseeing
U.S. public company board experience • Concurrent service on one other
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Compensation Committee Member
44 | 2022 Proxy Statement | Avery Dennison Corporation |
MITCHELL R. BUTIER | ||||
![]() Age 50 Director since April 2016 Not Independent |
Avery Dennison Corporation • Chairman & CEO since March 2022 • Chairman, President & • President & CEO from May 2016 to April 2019 • President & • Senior Vice President & • Vice President, Global Finance
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Current: None Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry • Served in Financial • Served as
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Avery Dennison Corporation| 2019 Proxy Statement |30
![]() Age 66 Director since April 2005 Independent |
RECENT BUSINESS EXPERIENCE The Carlyle Group, a global alternative investment firm • Managing Director and Partner since April 2007 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
Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Industry • Led • Work experience, citizenship and residency in Asia, Financial • Advises on investments in consumer goods businesses globally, particularly in Asia
U.S. public company board experience • Concurrent service on one other
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Avery Dennison Corporation| 2019 Proxy Statement |31
In recommending non-employee director compensation to our Board based onwith the independent expert advice of Willis Towers Watson,WTW, the Compensation Committee seeks totarget compensation at the median of similarly sized companies similar in size, global scope and complexity with which we compete for director talent. Compensation is reviewed periodically (approximately(generally every three years) to ensure market competitiveness and consistency. Themajority of compensation is delivered in equity to align director interests with those of our stockholders.
MEDIAN TARGET 2018 COMPENSATIONMedian Target Compensation
The components of our non-employee director compensation program for 2018 are summarized in the charts below and described thereafter.
![]() | ![]() |
NON-EMPLOYEE DIRECTOR COMPENSATION | ![]() | |||||
Target Grant Date Fair Value of Restricted Stock Units (RSUs) | $ | 170,000 |
| |||
Cash Retainer | $ | 100,000 |
| |||
Match of Charitable/Educational Contributions | $ | 10,000 |
| |||
Additional Cash Retainer for Lead Independent Director | $ | 30,000 |
| |||
Additional Cash Retainer for Audit Committee Chair | $ | 25,000 |
| |||
Additional Cash Retainer for Compensation Committee Chair | $ | 20,000 |
| |||
Additional Cash Retainer for Governance Committee Chair | $ | 20,000 |
|
Our 2017 Incentive Award Plan, under which was approved byRSUs are granted to our stockholders in April 2017,non-employee directors, limits the sum of the grant date fair value of equity awards and the amount of any cash compensation in each case granted to any non-employee director during any calendar year to $600,000.
POST-ANNUAL MEETING COMPENSATION
In February 2019, the Compensation Committee considered our 2021, all non-employee director compensation program, which had not changed the level of compensation received by our non-employee directors other thanexcept for our Lead Independent Director since May 2016. AtDirector/Governance Committee Chair and our Audit Committee Chair received less than half of this maximum compensation amount.
Compensation Setting
In February 2021, at the Compensation Committee'sCommittee’s request, Willis Towers Watson reviewedits independent compensation consultant analyzed trends innon-employee director compensation and assessed the competitiveness of allthe components of our program, including total cash compensation (Board and Committee Chair retainers), annual equity grants,grant, charitable match, total direct compensation (annual cash plus equity), total remuneration, our stock ownership policy and the additional retainer for theour Lead Independent Director.
Using benchmarkingbenchmark data from public filings of companies ranked in the Fortune 375-500, Willis Towers Watson350-500, WTW recommended that the additional cash retainers for our Audit, Compensation and Governance Committee Chairs each increase by $5,000 and the target grant date fair value of our annual equity grant to non-employee directors increase by $15,000. Modestly increasing the annual equity grant be increased by $15,000 to increase the proportion of compensation delivered in equity to 60%. This change would bring total non-employee directordirect compensation for regular Board service to $255,000,$270,000 (or $280,000 with the charitable match), the projected median non-employee director compensation of our Fortune 375-500 peers350-500 companies in 2021,2024, the next time the Compensation Committee currently plans to review non-employee director compensation. Giving consideration to, among other things, the program. Based on Willis Towers Watson's recommendation,advice of WTW, the Compensation Committee recommended to our Board that the amountadditional cash retainers for our Audit, Compensation and Governance Committee Chairs be increased to $25,000, $20,000 and $20,000, respectively, and the target grant date fair value of annual equity compensationRSUs granted annually to our non-employee directors be increased to $155,000, with grants continuing to be in the form of RSUs that vest in one year.$170,000.
After consideration of the advice from the independent compensation consultant,Based on the recommendation of the Compensation Committee and further discussion, our Board approved the revised non-employee director compensation program, effective as of the date of the 2021 Annual Meeting.
46 | 2022 Proxy Statement |Avery Dennison Corporation
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Stock Ownership Policy
Our stock ownership policy requires non-employee directors to own $500,000 of our company stock, 50% of which must be held in vested shares. Stock option gains are not considered towards measuring policy compliance; onlyOnly shares owned directly or in a trust, deferred stock units (DSUs) and unvested RSUs, which are subject only to time-based vesting, count for these purposes.
Directors Our non-employee directors are prohibited from hedging or pledging our common stock.
Except for our two newest directors, who have five years to reach the minimum ownership level, allAll of ournon-employee directors have achieved the minimum ownership level required by our stock ownership policy.policy; average non-employee director ownership was ~12x the required level at year-end 2021. Based on our review of their written representations in our annual2021 director questionnaire, none of ournon-employee directors has hedged or pledged our common stock.
EQUITY COMPENSATIONEquity Compensation
The 20182021 equity grant to non-employee directors was made in the formconsisted of RSUs that vest on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected. 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 and (ii) are generally cancelled in the event a director voluntarily resigns, is not re-electedreelected by stockholders or is otherwise asked to leave our Board.Board, unless otherwise determined by the Compensation Committee. On May 1, 2018,2021, each of our then-serving non-employeedirectors was granted 1,336792 RSUs with a grant date fair value of approximately $140,000 based$167,809.
In connection with his mandatory retirement from our Board on the fair market value of our common stock on that date.
On September 10, 2018, the date of his appointmentthe 2021 Annual Meeting and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to our Board, Mr. Barrenechea received a prorated equity grant foraccelerate the remaindervesting of the RSUs granted to Peter Barker in May 2020 that were scheduled to vest a few days after his separation from our Board. In making its determination, the Compensation Committee noted that Mr. Barker had served nearly the entire one-yearterm expiring at the 2019 Annual Meeting consisting of 880 RSUs with a grant date value of approximately $93,333 based on the fair market value offor which he had been elected by our common stock on that date.stockholders.
DEFERRABLE CASH COMPENSATIONDeferrable Cash Compensation
Cash 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 director education events.
Our non-employee directors may choose to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation Program (DDECP); or (iii) a combination of cash and DSUs. None of our current non-employee directors currently participates in the DVDCP and nine7 of them currently participate in the DDECP. When a director participating 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's service, with the resulting number of shares of our common stock issued to the director. Dividend equivalents, representing the value of dividends per share paid on shares of our common stock calculated with reference to the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP. When a director participating in the DDECP 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’s service, with the resulting number of shares of our common stock issued to the director.
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 | 2022 Proxy Statement | 47 |
Avery Dennison Corporation| 2019 Proxy Statement |33
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 | | | | $ | 137,256 | | | | — | | $ | 2,250 | | | $ | 239,506 | | |||
Anthony A. Anderson | | | $ | 100,000 | | | | $ | 137,256 | | | | — | | | | — | | | $ | 237,256 | | ||
Peter K. Barker | | | $ | 115,000 | | | | $ | 137,256 | | | | — | | $ | 10,000 | | | $ | 262,256 | | |||
Mark J. Barrenechea | | | $ | 66,667 | | | | $ | 91,534 | | | | — | | | | — | | | $ | 158,201 | | ||
Ken C. Hicks | | | $ | 100,000 | | | | $ | 137,256 | | | | — | | $ | 10,000 | | | $ | 247,256 | | |||
Andres A. Lopez | | | $ | 100,000 | | | | $ | 137,256 | | | | — | | | | — | | | $ | 237,256 | | ||
David E.I. Pyott | | | $ | 130,000 | | | | $ | 137,256 | | | | $ | 0 | | | | $ | 10,000 | | | $ | 277,256 | |
Dean A. Scarborough | | | $ | 133,333 | | | | $ | 137,256 | | | | — | | | | $ | 10,000 | | | $ | 280,589 | | |
Patrick T. Siewert | | | $ | 120,000 | | | | $ | 137,256 | | | | — | | — | $ | 257,256 | | ||||||
Julia A. Stewart | | | $ | 115,000 | | | | $ | 137,256 | | | | — | | | | $ | 10,000 | | | $ | 262,256 | | |
Martha N. Sullivan | | | $ | 100,000 | | | | $ | 137,256 | | | | — | | $ | 10,000 | | | $ | 247,256 | |
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 | | | | — | |||
Barrenechea | | | | $ | 66,667 | | | | — | | | | — | | | |||
Hicks | | | | | $ | 100,000 | | | | — | | — | ||||||
Lopez | | | | $ | 100,000 | | | | — | | | | — | | | |||
Pyott | | Lead Independent Director | | | $ | 100,000 | | | | — | | $ | 30,000 | | | |||
Scarborough | | | | $ | 100,000 | | | | — | | | | — | | | |||
Siewert | | Audit Committee Chair | | | $ | 100,000 | | | | $ | 20,000 | | | | — | |||
Stewart | | Compensation Committee Chair | | | $ | 100,000 | | | | $ | 15,000 | | | | — | | | |
Sullivan | | | | | $ | 100,000 | | | | — | | — |
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||||||||||
Bradley A. Alford | $ | 100,000 | $ | 167,809 | $ | 10,000 | $ | 277,809 | ||||||||||||
Anthony A. Anderson | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | |||||||||||||
Peter K. Barker(4) | — | — | — | — | ||||||||||||||||
Mark J. Barrenechea | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | |||||||||||||
Ken C. Hicks | $ | 100,000 | $ | 167,809 | $ | 10,000 | $ | 277,809 | ||||||||||||
Andres A. Lopez | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | |||||||||||||
Patrick T. Siewert | $ | 150,000 | $ | 167,809 | $ | 10,000 | $ | 327,809 | ||||||||||||
Julia A. Stewart | $ | 120,000 | $ | 167,809 | $ | 10,000 | $ | 297,808 | ||||||||||||
Martha N. Sullivan | $ | 125,000 | $ | 167,809 | $ | 10,000 | $ | 302,809 |
(1) | Mr. Butier does not appear in the table because he serves as CEO of our company and does not receive any additional compensation to serve as director or Chairman. Amounts represent retainers earned as shown in the table below. At their election, the following currently-serving directors deferred their cash compensation through the DDECP, with the indicated following number of DSUs in their accounts as of January 1, 2022, the last day of our 2021 fiscal year: Mr. Alford – 20,575; Mr. Anderson – 11,895; Mr. Barrenechea – 2,356; Mr. Hicks – 14,808; Mr. Lopez – 1,275; Ms. Stewart – 41,829; and Ms. Sullivan – 12,067. Mr. Barker’s DDECP account was paid out to him in shares of our common stock after he left our Board in April 2021 in accordance with program terms. |
Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | |||||||||||||
Alford |
| $ | 100,000 | — | — | ||||||||||||
Anderson |
| $ | 100,000 | — | — | ||||||||||||
Barker |
| — | — | — | |||||||||||||
Barrenechea |
| $ | 100,000 | — | — | ||||||||||||
Hicks |
| $ | 100,000 | — | — | ||||||||||||
Lopez |
| $ | 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 | — |
(2) | Amounts reflect the grant date fair value of 792 RSUs granted on May 1, 2021 in accordance with Accounting Standards Codification Topic 718, Compensation, Stock Compensation) (ASC 718). Fair value was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends, of $211.88. Each non-employee |
(3) | Amounts reflect our match of documented director contributions made to charitable organizations or educational institutions. |
(4) | Mr. Barker retired from the Board on the date of our 2021 Annual Meeting. Although he served as a non-employee director for four months of the year, he received no cash fees during this time since fees for the second half of a non-employee director’s term are paid in December of the previous year. In addition, he received no stock awards during the year, which are granted only to elected directors after the date of the Annual Meeting. However, in connection with his mandatory retirement from our Board on the date of the 2021 Annual Meeting and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to accelerate Mr. Barker’s RSUs granted in May 2020 that were scheduled to vest a few days after his separation from our Board. In accelerating the vesting, the Compensation Committee noted that he had served nearly the entire one-year term for which he had been elected by stockholders. |
48 | 2022 Proxy Statement |Avery Dennison Corporation |
ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
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After considering the preliminary voting results of the advisory vote on the frequency of our say-on-pay vote at ourthe 2017 Annual Meeting, our Board determined to hold say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (expected to occur(which will take place at ourthe 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 2019 proxy statement.
RECOMMENDATION OF BOARD OF DIRECTORS
We remain committed to ongoing engagement with our stockholders to seek their feedback and discuss why we believe our executive compensation program properly aligns with our strategies by incenting 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.
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 isnot 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 the features of our compensation program designed to prevent excessive risk-taking as described in the Risks Associated with Compensation Policies and Practices section of this proxy statement.
.Recommendation of Board of Directors
We are committed to maintaining ongoing engagement with our stockholders to seek their feedback and discuss why we believe our executive compensation program aligns with our strategies and incents our leaders to deliver strong financial performance and consistent ESG progress, creating superior long-term, sustainable value for our customers, employees, investors and communities. 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.
Meaning of Advisory Vote
The results of the advisory vote are not binding on our Board. However, in accordance with SEC regulations, the Compensation Committee will disclose the extent to which it takes into accountits consideration of the results of the vote in the CD&ACompensation Discussion and Analysis section of our 20202023 proxy statement.
Avery Dennison Corporation| 2019
Avery Dennison Corporation | 2022 Proxy Statement | 49 |
TALENT AND COMPENSATION COMMITTEE REPORT
|
The CompensationTalent and Executive PersonnelCompensation Committee (referred to in this report as the "Committee"“Committee”) of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) of Regulation S-K with management and, based on its review and those discussions, has recommended to our Board of Directors that the CD&A be included in our 20192022 proxy statement and thereby be incorporated by reference into our 20182021 Annual Report on Form 10-K.
The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with the Committee by writing to the CompensationTalent and Executive PersonnelCompensation Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Julia A. Stewart, Chair
Bradley A. Alford
Mark J. Barrenechea
Ken C. HicksDavid E. I. PyottMartha N. Sullivan
Avery Dennison Corporation| 2019 Proxy Statement |36
50 | 2022 Proxy Statement | Avery Dennison Corporation |
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
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This Compensation Discussion and Analysis (CD&A)CD&A* describes the principles and practices underlying our executive compensation program and the decisions made by the Compensation and Executive Personnel Committee of our Board of DirectorsBoard’s Talent and Compensation Committee (referred to in this CD&A as the "Committee"“Committee”) related to 2018on 2021 executive compensation. This CD&A containsIt includes the sections shown below.
Executive SummaryEXECUTIVE SUMMARY
BUSINESS STRATEGY OVERVIEW
Over the last several years, weWe have successfullyconsistently executed our business strategies, which are designed to createdelivering long-term, sustainable value for our employees, customers employees and stockholdersinvestors and improveimproving the communities in which we operate.operate. From our stockholders'investors’ perspective, we believe that this value is best measured by our total stockholder return (TSR) and cumulative economic value added (EVA), both of which are performance objectives used in our long-term incentive (LTI) compensation program and inform how we set our goals for sales growth, operating margin improvement, asset efficiency, return on total capital (ROTC) and capital allocation.
We communicatedOur key strategies and 2021 achievements are shown on the following page. Our overriding focus remains on ensuring the long-term goals in 2014 for, among other things, the organic sales growth, GAAP operating margin, double-digit adjusted earnings per share (EPS) growth and ROTC we planned to achieve by 2018, raising the bar from the five-year goals we established in 2012 and substantially achieved through 2015. We met or exceeded eachsuccess of all of our 2018 targets.
In March 2017, we announced new long-term goals for 2021 for our three reporting segments — Labelstakeholders, and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS), and Industrial and Healthcare Materials (IHM) — and our company as a whole, targeting continued solid organic sales growth, GAAP operating margin expansion, double-digit adjusted EPS growth on a compound annual basis, and ROTC we planned to achieve by 2021.
Avery Dennison Corporation| 2019 Proxy Statement |37
To achieve our goals, we have been consistently executing four key strategies. First, we are focused on drivinga clear set of strategies to deliver for them.
* | 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 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 2021 Annual Report on Form 10-K, filed on February 23, 2022 with the SEC (our “2021 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 | 2022 Proxy Statement | 51 |
1 | ||||
Drive outsized growth in high value producthigh-value categories (organically
We seek to increase the proportion of our portfolio in high-value products and solutions, both organically and through acquisitions) to improve our portfolio mix over time. Productacquisitions; high-value categories are defined as high value when they serve markets that are growing faster than gross domestic product (GDP),GDP, represent large pools of potential profit and leverage our core capabilities. ExamplesThese products and solutions include our specialty and durable label materials, graphicgraphics and reflective solutions, industrial tapes, Intelligent Labels that use RFID tags and radio-frequency identification (RFID) inlays, external embellishments, and, tags. with our recent acquisition of Vestcom, shelf-edge pricing, productivity and consumer engagement solutions.
In 2018,2021, we delivered above-averageachieved organic sales change in high-value product categories that outpaced that of our base businesses by a high-single digit rate driven by growth in thesespecialty labels, external embellishments and Intelligent Labels; added to our capabilities and expanded our position in high-value product categories while also enhancingthrough our exposureacquisition of Vestcom; and more than tripled the size of our Intelligent Labels platform over the last five years, reaching net sales of $0.7 billion in 2021
2 | ||||
Grow profitability in our base businesses
We strive to them through continuing to integrate the acquisitions we made in 2017.
Second, we are focused on delivering solid growthgrow profitability in our base businesses by carefully balancing volume, price and mix;mix, reducing complexity;complexity and tailoring our go-to-market strategies. strategies
In 2021, we heightened our focus on material reengineering to drive productivity and mitigate the impact of rising input costs
3 | ||||
Focus relentlessly on productivity
Third, we remain highly focused on continuously improving productivity
We employ product reengineering and enterprise lean sigma to expand our margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment. Product reengineering and enterprise lean sigma are the primary leversreinvestment
In 2021, we usecontinued expanding operating margins, with approximately $65 million in executing this strategy.savings from restructuring, net of transition costs
4 | ||||
Allocate capital effectively
Our fourth key strategy is to be a highly disciplined allocator of capital. This is reflected
We balance our investments in how we deploy capital for organic growth, and productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases
In 2021, leveraging our acquisition criteria,strong balance sheet, we invested $272.1 million in fixed and IT capital expenditures to support organic growth; completed three acquisitions and made three venture investments for a total of $1.48 billion; increased our quarterly dividend rate by ~10%; and repurchased $180.9 million in shares of our common stock
5 | ||||
Lead in an environmentally and socially responsible manner
We aim to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive and equitable culture; maintain operations that promote health and safety; and support our communities through contributions from the Avery Dennison Foundation (ADF), supplemented by contributions from our company
In 2021, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in strategic innovation platforms focused on material circularity and waste reduction/elimination; continuing to drive sustainable change in diversity, equity and inclusion (DE+I), with a sharpened focus on increasing workforce racial/ethnic diversity, as well as representation from other underrepresented communities such as LGBTQ+, veteran or disabled individuals; and using the $10 million we contributed to ADF in 2020 to significantly increase grant-making in our approach to stockholder distributions (dividendscommunities, resulting in over $6 million of charitable contributions from ADF and share repurchases).our company in 2021. We also announced more ambitious 2030 sustainability goals.
52 | 2022 Proxy Statement | Avery Dennison Corporation |
DELIVERING FINANCIAL TARGETSDelivering Financial Targets
Our objective is to deliver GDP+ growth and top-quartile returns on capital to create superior value over the long term. In March 2017, we announced five-year financial goalstargets through 2018, three of which are not in accordance with generally accepted accounting principles in the United States of America (GAAP), included an organic sales growth target of 4% to 5% and a GAAP operating margin target of 9% to 10% in 2018. We also targeted double-digit adjusted EPS growth and ROTC of at least 16% in 2018. The combination of our growth and ROTC targets is a proxy for growth in EVA, one of the performance objectives used in our LTI compensation program.2021. As shown on the following page,below, we achieved or exceeded each of these commitments we made to our five-year commitments through 2018.investors.
OrganicSales change ex. currency, organic sales change, adjusted EPS and ROTC, —including and excluding acquisition amortization – as well as sales change ex. currency and free cash flow and adjusted EBITDA margin, which are usedreferenced later in this CD&A —– are non-GAAP financial measures that we provide 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 progress toward the comparable financial measures under GAAP and are defined, in the following pages of this CD&A,qualified and are reconciled from GAAP inAppendix A the last section of this proxy statement.
Avery Dennison Corporation| 2019 Proxy Statement |38
For the 2014-20182017-2021 period, on a five-year compound annual basis (with 2013 as the base period), GAAP reported net sales, reported EPS and reported net income grew by 3.1%, 19.9% and 17.0%, respectively.
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In March 2017, we announced our five-year financial goals through 2021, targeting continued solid organic sales growth, GAAP operating margin of at least 11% in 2021, double-digit adjusted EPS growth on a compound annual basis, and ROTC of at least 17% in 2021. As shown below, based on our results of the first two years of this five-year period, we are on track to deliver these targets.
For the 2017-2018 period, on a two-year compound annual basis (with 2016 as the base period), GAAP reported net sales, reported EPS and reported net income and EPS increased by 8.5%6.7%, 22.1%18.2% and 20.7%20.1%, respectively.
2017-2021 Results(1) | ||||
Sales Growth(2) | 5%+ ex. currency(3) 4%+ organic | 6.6% ex. currency 4.6% organic | ||
GAAP Operating Margin | 11%+ in 2021 | 12.6% in 2021 | ||
Adjusted EPS Growth(2) | 10%+ | 17.3% | ||
ROTC incl. Acquisition Amortization | 17%+ in 2021 | 18.4% in 2021 | ||
EXCEEDED 2017-2021 FINANCIAL TARGETS | ||||
(1)Results for non-GAAP measures are reconciled from GAAP in | ||||
(2) | Percentages for targets and results reflect five-year compound annual growth rates, with 2016 as the base period. | |||
(3) | Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 2017 of approximately |
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TableIn March 2021, we announced five-year financial targets through 2025. As shown below, based on the first year of Contentsthis five-year period, we are on track to achieve these commitments.
In 2021 (with 2020 as the base period), GAAP reported net sales, net income and EPS increased by 20.6%, 33.1% and 33.6%, respectively.
| 2021-2025 Targets | 2021 Results(1) | ||
Sales Growth(2) | 5%+ ex. currency(3) | 18.6% ex. currency
15.6% organic | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.6% in 2021 | ||
Adjusted EPS Growth(2) | 10% | 25% | ||
ROTC excl. Acquisition Amortization | 18%+ in 2025 | 19.1% in 2021 | ||
ON TRACK TO ACHIEVE 2021-2025 FINANCIAL TARGETS | ||||
(1) Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. (2) Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect one-year annual growth rates, with 2020 as the base period. (3) Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 10, 2021, which represents (0.2)%. |
2018 FINANCIAL PERFORMANCE†2021 Financial Performance
FiscalIn fiscal year 2018 marked our seventh consecutive2021, we delivered another year of strong top-linetop- and bottom-line growth, expanded operating margin expansionmargins and double-digit adjusted EPS growth.record free cash flow. We substantially exceeded our financial goals for the year, withachieving the accomplishmentsfinancial results shown below. The non-GAAP financial measures used below are reconciled from GAAP inAppendix A of this proxy statement.
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NET SALES $8.41B Reported sales increased by ~21%, reflecting volume growth across our businesses and prior-year impact of COVID-19; sales ex. currency increased by ~19% and organic sales increased by ~16% driven by strong demand for consumer packaged goods and accelerated shift to e-commerce in LGM and significant organic sales growth in Intelligent Labels | REPORTED EPS $8.83 Reported EPS substantially increased by ~34%, in part due to prior-year impact of COVID-19; adjusted EPS increased by ~25% to $8.91 driven by strong growth and operating margin expansion; adjusted EPS substantially exceeded top end of February 2021 guidance range | |||||||||||
CASH FROM OPERATING ACTIVITIES $1,046.8M Free cash flow of $797.7 million was used to fund three acquisitions and three venture investments, pay dividends of $220+ million and repurchase 0.9 million shares of our common stock | NET INCOME $740.1M Achieved ROTC including acquisition amortization of ~18% and ROTC excluding acquisition amortization of ~19% |
DISCIPLINED CAPITAL ALLOCATION
We have been consistently executedeffective in executing our disciplined approach to capital allocation strategy, balancing our investments in organic growth, productivity, and acquisitions of targeted companies, whileand venture investments with continuing to return cash to stockholders through dividends and share repurchases.In 2018,2021, we delivered ROTC of nearly 19% and invested $256.6$272.1 million in fixed and IT capital expenditures to support future growth and further productivity improvement made $3.8 million in equity investments,and allocated $1.48 billion to acquisitions and venture investments; we also paid $175.0$220.6 million in dividends and repurchased $392.9$180.9 million toin shares of our common stock.stock.
We have invested in our businesses to support organic growth and pursued targeted acquisitions that supportcomplementary and synergistic acquisitions. Our fixed and IT capital spending in 2021 was nearly 25% higher than in 2020, reflecting our strategy of increasingcontinued investment in high-value categories, including our exposure to high value product categories.We increased our spending onfast-growing Intelligent Labels platform, and lower-than-planned capital expenditures in 2018 by over 13% compared2020 to prior year to enable future growthmitigate the impact of our businesses, improve our profitabilityCOVID-19. During 2021, we acquired Vestcom, an Arkansas-based provider of shelf-edge pricing, productivity and expand our margins. In addition, we continued integrating the following acquisitions we made in 2017: (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturerconsumer engagement solutions for retailers and consumer packaged goods companies, for $1.47 billion, as well as ZippyYum, a California-based developer of
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specialty films and laminates; (ii) Yongle Tape Ltd., a China-based manufacturer of specialty tapes and related products used in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare software products used in the managementfood service and food preparation industries, and JDC, a Tennessee-based manufacturer of wound care and skin conditions. Wepressure-sensitive specialty tapes, collectively for approximately $43 million. During 2021, we also made equitythree venture investments in two start-up companies developing innovative technological solutions that we believe have the potential to advance our businesses.
In 2021, we deployed $401.5 million to pay dividends of $2.66 per share and negotiated a further equity investmentrepurchase 0.9 million shares of our common stock. We raised our quarterly dividend rate by approximately 10% in a small company in which we first invested in 2016, for which payment was made in early 2019.
OverApril 2021. As shown on the following page, over the last five years, we have allocated over $2 billion to acquisitions and venture investments and nearly $2 billion to dividends and share repurchases.repurchases.
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* Includes venture investments |
By generating substantial EVA, we deployed approximately $568 million to (i) repurchase nearly four million shares at an aggregate cost of nearly $393 million and (ii) pay an annual dividend of $2.01 per share for an aggregate amount of $175 million. We have paid quarterly dividends for decades and most recentlyraised our quarterly dividend rate by 16%drove strong TSR in April 2018. Given2021 despite the lower price of our common stockuncertain macroeconomic environment during the second halfyear due to the continued impact of the year, as well as our substantially decreased useCOVID-19 and related supply chain, labor, freight and inflationary challenges. Our TSR of capital for acquisitions and equity investments, we repurchased a significantly greater dollar amount in shares in 2018 compared to prior years.
THREE- AND FIVE-YEAR CUMULATIVE TSR OUTPERFORMANCE
As shown below, despite negative TSR in 2018, we delivered cumulative TSR for the 2016-2018 three-year period and the 2014-2018 five-year period that significantlyover 40% outperformed the S&P 500®500 and the median of the S&P 500 Industrials and Materials subsets (we are a member of the Materials subset, but share many characteristics with members of the Industrials subset; investors have informed us that they look atsubsets. More important, both subsets in evaluating our relative performance, as we do internally).three-year and five-year TSR measures the return we have provided to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends).substantially outperformed these two comparator groups.
5-Year Cumulative TSR
We believe that our longer-term
1-, 3- and 5-Year TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our underlying performance. For example, although we delivered strong performance in 2018 — exceeding the high end of our adjusted EPS guidance for the year — our 2018 TSR was negative.
AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2017 | 67% | 22% | 28% | |||
2018 | (20)% | (4)% | (14)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
2021 | 41% | 29% | 24% | |||
3-Year TSR | 154% | 100% | 94% | |||
5-Year TSR | 237% | 133% | 122% |
* | Based on median of companies in both subsets as of December 31, 2021 |
2021 Say-on-Pay Vote and Feedback During Stockholder Engagement
1-, 3- and 5-YEAR TSR | ||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 3-Year TSR | 5-Year TSR | ||||||||
AVY | 6.2% | 23.8% | 14.6% | 66.7% | (20.3)% | 52.3% | 100.2% | |||||||
S&P 500 | 13.7% | 1.4% | 12.0% | 21.8% | (4.4)% | 30.4% | 50.3% | |||||||
S&P 500 Indus. & Mats.* (median) | 11.8% | (4.5)% | 20.0% | 26.9% | (15.5)% | 35.2% | 48.9% |
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2018 SAY-ON-PAY VOTE AND STOCKHOLDER FEEDBACK DURING 2018 ENGAGEMENT
We continued our practice of maintainingIn 2021, we maintained proactive ongoing dialogueengagement with stockholders in 2018.regarding executive compensation and talent management. The Committee made significant changes toregularly reviews our executive compensation program, in recent years — including replacing regular grants of stock options and time-vesting restricted stock units (RSUs) with performance-based market-leveraged stock units (MSUs), capping Annual Incentive Plan (AIP) awards at 200% of target, and establishing additional guardrails on PU and MSU performance criteria —making changes as needed to address direct feedback from our stockholders andor more closely align our executive compensationthe program with our financial profile, and business strategies demonstratingand ESG priorities. We believe this process and the Committee'sspecific actions taken over time demonstrate the Committee’s commitment to paying for performance and being responsive to stockholderinvestor feedback. In 2018,2021, during our ongoing stockholder engagement program, we discussed elements of our executive compensation program with some of our stockholders, who generally expressed support for its current structure.structure.
Results and Analysis of 20182021 Vote
At the 20182021 Annual Meeting, approximately 93%nearly 96% of our stockholders approved, on an advisory basis, our executive compensation.compensation. The level of strong support we received was consistent with the high approval rates we have received in the last threerecent years. The Committee believes that our high approval rates in recent years, along withthese strong say-on-pay vote results, as well as the generally positive feedback we have received during our ongoing engagement with stockholders, reflects strong support of the changes to our executive compensation program made in recent years, as well asand our consistently improving CD&A disclosure.
Stockholder Engagement Process
We actively solicit feedback through stockholder engagement to ensure that we reflect not only our evolving business strategies but also the expectations of our investors. In addition to our extensive investor relations program through which members of management engage with our investors throughout the year, this supplemental engagement program
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is depicted – and the feedback we received on executive compensation, social sustainability and talent management are described – in the proxy summary.
Strong ESG-Executive Compensation Linkage
We value stockholder feedbackInformation on our ESG progress may be found in the proxy summary and the Environmental and Social Sustainability section of this proxy statement. Additional information may be found in our 2021 integrated sustainability and annual report and our March 2022 ESG Download being published concurrently with this proxy statement, as well as on our ESG website at esg.averydennison.com. The 2021 integrated sustainability and annual report, March 2022 ESG Download and other information on our website are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
The stockholders with whom we spoke during 2021 asked about the Committee’s consideration of ESG matters in our executive compensation policiesprogram. In recent years, the Committee has engaged in frequent discussions with its compensation consultant, WTW, and management regarding ESG–executive compensation linkage, in part due to increasing investor interest in the topic, and reviewed market practices to explore the potential to further incorporate ESG into our program. The Committee noted that our key company strategies include leading in an environmentally and socially responsible manner, and that the committee seeks to approve executive compensation that reflects company strategy and incents achievement of company goals.
The Committee has determined that our existing compensation practices and we actively seek it throughtalent management priorities reflect our stockholder engagement program. ESG strategies, hold our leaders accountable and reward results. The Committee noted, among other things, the items described below.
Nearly half of the measures on our annual business group scorecards using the objectives, goals, strategies and measures (OGSM) framework are ESG-related, aligning our leaders with these objectives and providing visibility and accountability to enable continuous improvement. With their concise format and use of color-coding to indicate progress, these OGSMs surface ESG underperformance relative to our goals and offer an assessment tool in year-end discussions with our business leaders on their annual performance.
Our ongoing engagement program regarding these matters takes placesenior leadership, including our NEOs and Vice Presidents, have accountability for driving our ESG progress, with responsibility for executing toward our goals and targets cascaded throughout our organization. People managers are expected to discuss the year, generallyprogress their team members make toward their annual goals as shownpart of our performance evaluation process. In approving base salary increases, AIP award individual modifiers, structural pay increases and promotions, our managers consider not only financial or business achievements, but also a leader’s success in advancing our ESG priorities, consistent with our company’s strategies and values.
Although the financial modifier in the graphic below.AIP does not include ESG metrics, our financial performance in part reflects our ESG progress and a key component in determining an AIP award is the individual modifier, which relies on a qualitative assessment of annual performance. For our leaders, this process includes consideration of their ESG-related contributions. In determining their 2021 AIP awards, the Committee discussed the ESG achievements of our CEO and other NEOs in assessing their performance and determining their individual modifiers.
Diversity and Sustainability are two of our company’s values, reflecting the priority with which we hold ESG matters. Our annual Leadership Excellence Awards are granted to teams globally in each of these categories, with winners receiving at least a 120% individual modifier on their AIP award, subject to the overall AIP award cap of 200%. In 2021, over 70 employees globally received awards for diversity and sustainability, a substantial increase from the 10 awards granted in 2018; over 20 additional individuals received awards related to their leadership in the community.
As described in this proxy statement, we have made substantial ESG progress in recent years, and our Board and the Committee are committed to delivering for all our stakeholders. The Committee shares our Board’s view that our financial success in recent years has been inextricably linked to our ESGprogress. We have consistently delivered more sustainable solutions, which have provided significant competitive advantage, fueling our success in the marketplace and strong financial performance. While our compensation programs have played an important part in advancing our ESG initiatives, ESG has become embedded into our workplace culture. We are working diligently to advance our journey because we believe that our company can have a long-term positive impact on people and our planet.
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After reviewing benchmark data on current market practices, the Committee noted that, consistent with our existing practice, the majority of S&P 500 companies consider ESG performance in their executive compensation programs, with most doing so in ways similar to the way in which we do. The Committee is committed to regularly reviewing stakeholder expectations and market practices, and pressure testing the continued appropriateness of its current approach, in consultation with management and WTW. If or when the Committee determines to include additional ESG metrics as performance objectives in any of our incentive programs, it would establish targets that are as rigorous and objectively measurable as our financial performance objectives.
2021 Named Executive Officers (NEOs)
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Feedback During 2018 Engagement
We continued our longstanding practice of ongoing dialogue with stockholders in 2018. In advance of the 2018 Annual Meeting, we contacted our 35 largest institutional stockholders, representing over 55% of our then-outstanding shares. Board members, including our Lead Independent Director, and members of management were made available to answer questions and address concerns regarding the items being brought before the Annual Meeting. While we received responses from stockholders representing over 28% of our then-outstanding shares, none of them desired to substantively engage at that time.
In the summer and fall, we contacted our 41 largest institutional stockholders, representing nearly 60% of our then-outstanding shares, to request a meeting with members of our Board and/or management. As a result of these efforts, we received responses from stockholders representing nearly 30% of our then-outstanding shares and spoke with stockholders representing over 25% of our then-outstanding shares. We substantively engaged with every stockholder who requested to do so and included our Lead Independent Director (who is also a member of the Committee, as well as the Governance Committee) in engagements upon stockholder request.
With respect to matters related to executive compensation during our 2018 stockholder engagement, we discussed our approach to human capital management, in particular our leadership development and succession planning processes, as well as the linkage between our executive compensation and business strategies. We also commented on the robust oversight provided by the Committee.
2018 NAMED EXECUTIVE OFFICERS (NEOs)
In this CD&A and theExecutive Compensation Tables section of this proxy statement, we provide compensation information for our 20182021 NEOs, who are identified in the chart below.Subsequent to year-end 2021, Mr. Stander waselected by our Board to serve as President and Chief Operating Officer effective March 1, 2022; in connection with this election, Mr. Butier ceased serving in the capacity of President. References in this proxy statement to Level 2 NEOs are to Messrs. Lovins and Stander and references to Level 3 NEOs are to Ms. Baker-Nel and Mr. Walker.
Name | Title in 2021 | ||||
Mitchell R. Butier | Chairman, President & Chief Executive Officer | ||||
Gregory S. Lovins | Senior Vice President & Chief Financial Officer | ||||
Deena Baker-Nel | Vice President | ||||
Deon M. Stander | Vice President & General Manager, | ||||
Ignacio J. Walker | Vice President & Chief Legal Officer |
OVERVIEW OF PAY PHILOSOPHY AND EXECUTIVE COMPENSATION COMPONENTSOverview of Pay Philosophy and Executive Compensation Components
Our executive compensation program reflects the Committee'sCommittee’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 recognizegiving consideration to their contributions to delivering strong performance.In support of our increased focus on ESG matters and greater transparency with all our stakeholders, the Committee considers our ESG progress in evaluating the individual performance of our CEO and other NEOs.
The Committee implements its pay-for-performance philosophy primarily through the following:
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Table of Contentsfollows:
• | Establishing target total direct compensation (TDC) to incent strong operational and financial performance and stockholder value creation, giving consideration to median pay at similarly sized companies, role responsibilities, individual performance, tenure, retention, and succession |
• | Aligning our annual incentives for executives with our company’s annual operating plan and 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 consistent and sustainable stockholder value creation |
Incentive compensation for the year consistedconsists of target award opportunities under our AIP and our LTI compensation program, with payouts determined based on our performance against goalsobjectives established by the Committee in February 2018.Committee. The Committee structures annual incentive compensation to reward NEOs based on corporate and/or business performance to motivate them and align their compensation with stockholder interests, giving consideration to their individual contributions into our performance. AIP targets are established at or above the midpoint of the guidance we give to our stockholders on our anticipated performance for the year and consistent with achieving our long-term financial results.goals. Our LTI awards provide upside opportunityhigher realized compensation for exceeding performance targets and downside risk (up to and including cancellation) for failing to achieve threshold performance, with EVA targets that are consistent with our externally communicated long-term financial goals for earnings growth and ROTC. AIP targets are established at or above the midpoint of the guidance we give to our stockholders on our anticipated annual performance and consistent with the achievement of our long-term financial goals.
Elements of Total Direct Compensation for Corporate NEOs
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ELEMENTS OF TARGET TDC FOR CORPORATE NEOs
As shown in the graph below, the substantial majority of each of our NEOs' 2018NEOs’ 2021 target TDC was performance-based.
performance-based, meaning that they may not ultimately realize the value of the
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Tablecomponents of ContentsTDC if we fail to achieve the designated performance objectives. As a business NEO in 2021, Mr. Stander’s AIP award and PUs had different performance objectives than those of our corporate NEOs.
Over
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As shown in the past fivegraph below, in recent years, our CEO’s compensation increased commensurate with our cumulative TSR, increased by 100% whilewith his 2021 pay reflecting the totallonger-term approach to CEO compensation described below.
Change in Approach to CEO Compensation
In the few years prior to 2021, the Committee discussed how best to ensure that it was compensating our CEO optimally and in alignment with the long-term interests of our stockholders. The Committee’s objectives were to:
Recognize our company’s performance and delivery of value to our customers, employees, investors and communities during his tenure as our CEO
Enhance his incentive to continue creating value for these stakeholders, including by driving superior TSR
Encourage his retention for the long term
The Committee sought to maintain market-competitive target TDC for our CEO decreasedwell-aligned with our company’s performance and ensure that his target TDC did not fall substantially below the median of similarly sized companies, without relying on the traditional approach of annual review and periodic increase to the components of his TDC – base salary, target AIP opportunity and target LTI opportunity – to maintain consistency with continually rising market CEO pay.
With expert advice and guidance from its independent compensation consultant, WTW, and giving consideration to the feedback received in 2020 and 2021 during engagement with our investors, the Committee determined to shift from considering annual increases to our CEO’s base salary and target AIP and LTI opportunities to a longer-term approach that generally holds his target TDC constant for a three-year period. At the end of the period, the Committee will evaluate both his and our company’s performance, as well as market conditions, before determining the appropriate level of his go-forward compensation, continuing to give consideration to factors such as tenure, retention and succession. The Committee intends for this approach to CEO compensation to be more consistent with the long-term approach we take to planning our strategies, setting our financial targets and sustainability goals, and creating value for all our stakeholders.
To ensure our CEO’s compensation remained competitive and mitigate the potential for his target TDC to substantially fall behind his peers over the next three years, the Committee set our CEO’s compensation roughly halfway between the 50th and 75th percentiles of companies with annual revenues between $6 billion and $10 billion, reflecting his strong performance during his tenure in the role, during which our company consistently delivered top quartile performance. The Committee’s expectation is that – at the end of the three-year period during which our CEO’s compensation is expected not to increase – his TDC would be at or around the median pay at similarly sized companies.
Reviewing 2020 benchmark data and projected 2021 pay rates, the Committee targeted our CEO’s TDC for the year at $9.9 million by approximately 28%. Inincreasing (i) his base salary by 6% to $1.2 million; (ii) his target AIP opportunity from 125% of base salary to 140% of base salary; and (iii) his target LTI opportunity from 475% of base salary to 585% of base salary. The Committee noted that our CEO had delivered strong value creation for all our stakeholders by leading the graph below, CEO pay reflects the compensationdevelopment and execution of our former CEO, Mr. Scarborough,strategies during his tenure in the role and successfully navigated the impact ofCOVID-19 in 2020. Nearly 90% of his target TDC consists of at-risk, performance-based compensation; his realized compensation depends on our company continuing to deliver strong TSR performance, achieving our 2021 and 2025 financial targets and our 2025 and 2030 sustainability goals, and continuing to engage our employees, serve our customers, deliver for 2014our investors and 2015, andsupport the compensation of our current CEO, Mr. Butier, from 2016 to 2018.communities in which we operate.
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Five-Year CEO Pay and Cumulative TSR
Strong Compensation Governance Practices
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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.
Policy or Best Practice | Description and Stockholder Benefit | ||||
PAY FOR PERFORMANCE | |||||
Compensation Primarily Performance-Based | ✓ 88% of | ||||
Capped Annual Incentive Set At or Above Midpoint of Guidance | ✓AIP award | ||||
Majority Long-Term Equity Incentive Compensation | ✓ LTI awards | ||||
Strategic Targeting | ✓TDC (base salary + | ||||
No Annual Stock Options | ✓ Last made | ||||
COMPENSATION BEST PRACTICES | |||||
No Employment Contracts | |||||
✓ NEOs employed at-will | |||||
Rigorous Stock Ownership Policy | ✓ CEO | ||||
No Hedging or Pledging | ✓ Insider trading policy prohibits | ||||
Limited Trading Windows | ✓ NEOs may only transact in our common stock during approved trading windows after | ||||
Median Burn Rate | ✓ Three-year average burn rate of | ||||
Clawback Policy | ✓Cash and equity incentive compensation | ||||
No Excise Tax Gross Ups | ✓ No gross-up payments | ||||
Double Trigger Equity Vesting | ✓Equity awards | ||||
No Repricing/Exchange of Underwater Stock Options | ✓ No repricing or exchange of underwater options without stockholder | ||||
Limited Perquisites | ✓Other than | ||||
Reasonable Severance Benefits | ✓Severance formula CEO: 2x (annual salary +
| ||||
Reasonable Change of Control Benefits | ✓Severance formula CEO: 3x (annual salary + Level 2 NEOs: 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 Compensation Consultant |
|
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SUMMARY OF COMPENSATION DECISIONS FOR 2018
2021
The Committee designsapproves executive compensation to pay for performance, with the target TDC of NEOs established to incent strong financial performance and stockholder value creation, giving consideration to the market median of companies similar in size, global scope and complexity with which we compete for executive talent, role responsibilities, individual performance, tenure, retention and succession. This compensationcreation. Compensation is primarily performance-based, meaning that our executives may not ultimately not realize some or all of thesethe at-risk components of compensationTDC if we fail to achieve our financial objectives. In 2018,2021, approximately 86%88% and 70% of the target TDC of our CEO and the average of our other NEOs, respectively, was performance-based.performance-based.
In determining 20182021 NEO compensation – in addition to the continued impact of COVID-19, and related supply chain, labor, freight and inflationary challenges, on our businesses and our leaders’ continuous efforts during the year to address and mitigate these matters – the Committee considered the following:factors described below.
Company/Business Performance — – Our company's overallcompany’s financial performance, including our 20182021 adjusted sales growth, adjusted EPS and free cash flow for our corporate NEOs, and, for our business NEOs,NEO, the performance of their respective business;
Stockholder Returns — – Our TSR on an absolute basis, as well as relative to a predetermineddesignated group of peer companies;
Individual Performance — – Our CEO'sCEO’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 NEOs;
Competitiveness — Market pay – Pay practices and company performance relative to peers; and
Investor Feedback – The results of our 2018 2021 say-on-pay vote and feedback on our executive compensation received during our ongoing stockholder engagement program.program
The key elements of 20182021 NEO target TDC are described in the table shown below. below and on the following page. While we provide consistent, market-competitive target TDC opportunities for our NEOs, the actual compensation they realize varies year-to-year based primarily on company and business performance; for 2018, the incentive compensation realized by our NEOs was based solely on such performance.performance.
In determining Mr. Butier's 2018 compensation, the Committee focused on his target LTI compensation rather than incremental cash increases to his base salary or target AIP award to bring his TDC closer to the market median. This approach reflects the Committee's pay-for-performance philosophy by using performance-based equity to further incent our CEO to deliver top quartile long-term stockholder value creation.
Component | Rationale | Decisions Impacting 2021 Compensation | |||||||
FIXED Base Salary
12% of TDC for CEO; Avg. 30% of TDC for Other NEOs | Provides fixed, market competitive monthly income for performing | As part of the longer-term compensation approach implemented for our CEO, his base salary increased by 6%. The base salaries of our other NEOs | |||||||
PERFORMANCE-BASED SHORT-TERM CASH Target AIP Award 17% of TDC for CEO; Avg. 18% of TDC for Other NEOs Capped at 200% of
| Provides variable, cash-based incentive to motivate Target AIP opportunity based on market survey data; financial modifier based on | As part of longer-term compensation approach implemented for our CEO, his target AIP opportunity increased from 125% of base salary to 140% of base salary. There were no other changes to NEO target AIP
Company performance resulted in financial
Individual modifiers |
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Component | Rationale | Decisions Impacting 2021 Compensation | |||||||
PERFORMANCE-BASED LONG-TERM EQUITY Target LTI
71% of TDC for CEO; Avg. Other NEOs | Provides variable, equity-based incentive compensation to align NEO interests with stockholder interests and drive long-term value creation Target LTI opportunity based on market survey data; award vehicles, performance criteria and weightings | LTI Awards Granted in 2021 •
• 50% in PUs that cliff-vest at the end of | |||||||
|
• 50% in MSUs that vest based on | ||||||||
|
| ||||||||
| • MSUs Vesting at YE 2021 • 4th Tranche of MSUs granted in | ||||||||
2018-2021 Absolute TSR | |||||||||
of 87% Paid out at 200% of target | |||||||||
• 3rdTranche of MSUs granted in | |||||||||
2019-2021 Absolute TSR | |||||||||
of 131% Paid out at | |||||||||
• 2nd Tranche of MSUs granted in | |||||||||
2020-2021 Absolute TSR | |||||||||
of 64% Paid out at | |||||||||
• 1st Tranche of MSUs granted in | |||||||||
2021 Absolute TSR | |||||||||
Paid out at 135% of target |
In addition to the primary elements of our executive compensation program described above, we also provide our NEOs with limited perquisites and benefits that the Committee believes are comparable to those offered by other multinational public companies.
62 | 2022 Proxy Statement | Avery Dennison Corporation |
Avery Dennison Corporation| 2019 Proxy Statement |48
DISCUSSION OF COMPENSATION COMPONENTS AND
DECISIONS IMPACTING 20182021 EXECUTIVE COMPENSATION
The Committee aims to have base salaries at or around the market median pay at similarly sized companies, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Committee's Committee’s pay-for-performance philosophy, driving higher realized compensation when our financial and ESG performance is stronger and lower realized compensation when our financial and ESG performance is weaker. In addition, prioritizing pay-for-performance provides the Committee with 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.
Increases in base salary for NEOs are generally based on the average percentage merit increase given to our U.S. employees, subject to increase or decrease based on the NEO'sNEO’s performance and the market mediancomparisons for positions with similar scope and responsibility. In February 2018,As part of the longer-term compensation approach implemented for our CEO, his base salary increased by 6% in 2021. The Committee approved base salary increases of approximately 3%2.5% for our other NEOs, consistent with the average merit increase for our U.S. employees, except for (i)that Mr. Lovins’ base salary increased by 7% to be more consistent with the market.
NEO base salaries at year-end 2021 were as follows: Mr. Butier whose base salary was not increased for the reasons described above, and (ii)– $1,200,000; Mr. Lovins whose base salary was increased by 9% to move his salary closer to the market median after he completed a year of service as our CFO.– $661,260; Ms. Baker-Nel – $416,000; Mr. Stander – $569,007; and Mr. Walker – $425,375.
The 20182021 AIP was designed to incent management to create long-term stockholder value. NEOs are not eligible for guaranteed AIP awards. AIP awards are determined for each fiscal year using the formula below.In contrast to the general AIP formula shown, individual Individual modifiers for NEOs are generally capped at 100% (although although the Committee retains the discretion to determine higher individual modifiers to reward individual performance, including for their ESG-related achievements, up to 150%).
Target AIP Opportunities
As a percentage of 2018 year-end base salary, the2021 target AIP opportunities for 2018 were 125%140% for Mr. Butier;Butier, 75% for Messrs. Gravanis and Lovins;Mr. Lovins, 60% for Ms. Miller;Mr. Stander and 50% for Ms. Baker-Nel and Mr. Stander. In February 2018, Mr. Lovins'Walker. As part of the longer-term compensation approach implemented for our CEO, his target AIP opportunity was increased from 60% to 75%125% of base salarysalary. There were no other changes to move his annual incentive closer to the market median after he completed a year of service as our CFO.
Avery Dennison Corporation| 2019 Proxy Statement |49
NEO target AIP opportunities.
AIP Performance Objectives and Weightings; Target-Setting Principles
The following performance objectives and weightings for the 20182021 AIP were established and weighted by the Committee, in consultation with Willis Towers Watson.which were the same ones used for the 2020 AIP to continue incenting our NEOs to increase sales on an organic basis, improve adjusted EPS and generate strong free cash flow. Our CEO, Chief Human Resources OfficerCFO and CFOCHRO participated during portions of the meetings during which the Committee reviewed and recommended performance objectives for ourthe AIP and analyzed our performance against these objectives.
Avery Dennison Corporation | 2022 Proxy Statement | 63 |
For our business NEOs (Messrs. Gravanis and Stander),NEO, the Committee determined to link 75% of thehis AIP financial modifier to their respective business'RBIS’ results and 25% to corporate results. BusinessRBIS’ performance objectives were designed to be achievableprovide realized compensation only if the respective business improved upon its 20172020 performance and delivered results consistent with the achievement ofdelivering its 20212017-2021 financial targets.
2018
2021 AIP TARGETS
| ||||
Objective | Description | Linkage | ||
Adjusted Sales Growth (20%) | Focuses management on top-line organic growth, a key contributor to sustained long-term value creation | • Tied to total company for corporate NEOs (Butier, Lovins, Baker-Nel and Walker) • Tied to RBIS for business NEO (Stander) | ||
Profitability (60%) | Primary driver of stockholder value creation and measure used to provide annual guidance to investors; focuses management on profitable growth and expense control | • For corporate NEOs, based on our total company adjusted EPS • For business NEO (as a proportion of profitability objective) based: • 42% on total company adjusted EPS • 58% on RBIS’ adjusted net income | ||
Free Cash Flow (20%) | Cash available after investment in our business, which can be deployed for acquisitions, dividends and share repurchases; focuses management on improving capital efficiency, including working capital | • Tied to total company for corporate NEOs • Tied to RBIS for business NEO |
In setting the2021 AIP targets, for these objectives, the Committee aimed to ensure consistency with our 20212017-2021 financial targets and require adjusted sales growth and adjusted EPS improvement from the results achieved inover the prior year. Theseyear, considering the factors described below. Results in 2020 were significantly impacted by COVID-19, resulting in targets and results that were significantly higher than prior years. Beginning in 2021, the same objectives and weightings usedCommittee reduced the threshold payout level for the 2017 AIPAIP’s profitability performance objective(s) from 50% to continue incenting our NEOs0% to increase salesheighten management’s focus on an organic basis, improveimproving profitability and generate strong free cash flow.more closely align with market practices.
Target adjusted sales growth of 5.5% was set consistent withabove our 2017-2021 target of at least 4%+ and slightly lower than what we achieved in 2017, reflecting uncertainty both in the retail apparel market served by our RBIS business and in the early success2020 results of our transformation plan to improve the financial performance and trajectory of this business. (3.4)%.
Target adjusted EPS of $7.90 was establishedset above the midpoint of the annual guidance we gaveprovided to investors in January 2018February 2021 and representedconsistent with our 2017-2021 target of over 10%, representing an 18%11% increase from our 2017 results for this measure. 2020 results.
Although we did not externally communicate a free cash flow target as part of our 2017-2021 financial goals, our outlook at the beginning of 2021 goals, we expect our businesseswas to generate strongdeliver free cash flow an important metric used internally and by our investors in evaluating our performance.of at least $600 million. Our 20182021 target for corporate free cash flow was 9%11% higher than the record free cash flow we generated in 2017,2020, despite ahigher planned increase infixed and IT capital expendituresinvestments to support our future growth.growth and profitability.
CORPORATE 2018 AIP TARGETS VS. LONG-TERM TARGETS AND 2017 RESULTS | ||||||
2017-2021 Long-Term Target | 2017 Results | 2018 AIP Target | ||||
Adjusted Sales Growth | 4%+ | 4.2% | 4.1% | |||
Adjusted EPS Growth | 10%+ | $5.00 | $5.88 (18% over 2017) | |||
Free Cash Flow | N/A | $422M | $460M |
Avery Dennison Corporation| 2019 Proxy Statement |50
CORPORATE 2021 AIP TARGETS VS. LONG-TERM TARGETS AND 2020 RESULTS
| ||||||
2017-2021 Long-Term Target | 2020 Results | 2021 AIP Target | ||||
Adjusted Sales Growth | 4%+ | (3.4)% | 5.5% | |||
Adjusted EPS Growth | 10%+ | $7.10 | $7.90 (11% over 2020 results) | |||
Free Cash Flow | N/A | $548M | $610M (11% over 2020 results) |
Financial Modifiers
FinancialAIP financial modifiers are capped at 200%. Consistent with prior years, in In evaluating our achievement of these performance objectives, the Committee hadhas 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.
64 | 2022 Proxy Statement | Avery Dennison Corporation |
The table below shows the 20182021 AIP financial modifiers for our NEOs. As shown, the targetmaximum level was exceeded for two of theall three performance objectives established for our corporate NEOs;NEOs and three of the four performance objectives established for our LGM business NEO; and all fourthe fourth performance objective for our business NEO was in excess of the performance objectives established for our RBIS business NEO. Our corporate and business performance resulted in AIP financial modifiers of 123% for our corporate NEOs, 116% for our LGM business NEO, and 144% for our RBIS business NEO.
2018 AIP FINANCIAL MODIFIERS | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | |
| NEO(s) | PERFORMANCE OBJECTIVE | WEIGHTING | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (200%) | 2018 ACTUAL | MODIFIER | WEIGHTED AVERAGE MODIFIER | | ||||||||||||
Butier Lovins | Total Company Adjusted Sales Growth(1) | 20% | 2.0% | 4.1% | 8.3% | 5.5% | | 132 | % | | 27 | % | ||||||||||
| | | | | ||||||||||||||||||
Miller | Total Company Adjusted EPS(2) | 60% | $5.64 | $5.88 | $6.48 | $6.06 | | 130 | % | | 78 | % | ||||||||||
| | | | | ||||||||||||||||||
Total Company Free Cash Flow(3) | 20% | $388M | $460M | $604M | $429M | | 91 | % | | 18 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Corporate NEO Financial Modifier | 123 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Gravanis | Total Company Adjusted EPS(2) | 25% | $5.64 | $5.88 | $6.48 | $6.06 | | 130 | % | | 32 | % | ||||||||||
| | | | | ||||||||||||||||||
LGM Adjusted Sales Growth(4) | 20% | 2.1% | 4.2% | 8.3% | 6.1% | | 143 | % | | 29 | % | |||||||||||
| | | | | ||||||||||||||||||
LGM Adjusted Net Income(4)(5) | 35% | $416M | $430M | $474M | $428M | | 92 | % | | 32 | % | |||||||||||
| | | | | ||||||||||||||||||
LGM Free Cash Flow(4) | 20% | $260M | $320M | $440M | $338M | | 115 | % | | 23 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
LGM Business NEO Financial Modifier | 116 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Stander | Total Company Adjusted EPS(2) | 25% | $5.64 | $5.88 | $6.48 | $6.06 | | 130 | % | | 32 | % | ||||||||||
| | | | | ||||||||||||||||||
RBIS Adjusted Sales Growth(4) | 20% | 1.4% | 3.5% | 8.6% | 7.2% | | 169 | % | | 34 | % | |||||||||||
| | | | | ||||||||||||||||||
RBIS Adjusted Net Income(4)(5) | 35% | $103M | $110M | $125M | $118M | | 155 | % | | 54 | % | |||||||||||
| | | | | ||||||||||||||||||
RBIS Free Cash Flow(4) | 20% | $77M | $96M | $134M | $104M | | 120 | % | | 24 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
RBIS Business NEO Financial Modifier | 144 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Avery Dennison Corporation| 2019 Proxy Statement |51
2021 AIP FINANCIAL MODIFIERS | ||||||||||||||||
NEO(s) | Performance Objective | Weighting | Threshold (50%) | Target (100%) | Maximum (200%) | 2021 Actual | Modifier | Weighted Average Modifier | ||||||||
Butier Lovins Baker-Nel Walker | Total Company Adjusted Sales Growth(1)
| 20% | 3.0% | 5.5% | 9.0% | 15.6% | 200% | 40% | ||||||||
Total Company Adjusted EPS(2) | 60% | $7.60 | $7.90 | $8.60 | $8.78 | 200% | 120% | |||||||||
Total Company Free Cash Flow(3) | 20% | $550M | $610M | $730M | $754M | 200% | 40% | |||||||||
Corporate NEO Financial Modifier | 200% | |||||||||||||||
Stander | Total Company Adjusted EPS(2) | 25% | $7.60 | $7.90 | $8.60 | $8.78 | 200% | 50% | ||||||||
RBIS Adjusted Sales Growth(4) | 20% | 6.0% | 11.0% | 15.0% | 25.2% | 200% | 40% | |||||||||
RBIS Adjusted Net Income(4) (5) | 35% | $135.3M | $147.6M | $162.3M | $177.6M | 200% | 70% | |||||||||
RBIS Free Cash Flow(4) (6) | 20% | $133M | $159M | $212M | $175M | 130% | 26% | |||||||||
Business NEO Financial Modifier | 186% |
(1) | Total Company Adjusted Sales Growth refers to reported sales growth of 20.6%, adjusted for the impact of currency translation of (3.4%), acquisitions and product line divestitures of (3.1%) and impact of 53rd week in 2020 of 1.4%. Total does not sum due to rounding. |
(2) | Total Company Adjusted EPS refers to reported net income per common share, assuming dilution, of $8.83, adjusted for restructuring charges and other items of $0.08 and removing the impact of acquisitions completed since the target was set of ($0.13). |
(3) | Total Company Free Cash Flow refers to net cash provided by operations of $1,046.8 million, minus purchases of property, plant and equipment of $255.0 million and software and other deferred charges of $17.1 million, plus proceeds from sales of property, plant and equipment of $1.1 million, plus proceeds from insurance and sales (purchases) of investments, net, of $3.1 million, minus the impact of free cash flow from acquisitions, net of acquisition costs, completed since the targets were set of $25.1 million. |
(4) | Adjusted sales growth, adjusted net income and free cash flow measures at the segment level are internal metrics. These metrics exclude or make simplifying assumptions for items that cannot be allocated precisely by segment, such as interest and income tax expense, 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 at the segment level. 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. |
(5) | 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, as well as the impact of acquisitions completed since the targets were set. Adjusted tax rate is the full-year GAAP tax rate, excluding certain unusual or infrequent events that are expected to significantly impact the GAAP tax rate, such as effects of discrete tax structuring and planning actions. |
(6) | RBIS free cash flow payout reflects impact of corporate capital specifically allocated to support future RBIS growth. |
NEO Performance Evaluations &and Individual Modifiers
Our NEOs are evaluated on their individual performance for the year, with theyear. The Committee approvingapproves our CEO's goals for the yearCEO’s strategic objectives and our CEO approvingapproves the goals of our other NEOs. TheNEOs, in each case in February, with the performance of ourall NEOs is assessedevaluated in February of the following year. ForThe Committee evaluates our CEO’s performance against his predetermined strategic objectives; for our NEOs other than the CEO, this assessment considers the totality of their performance rather than assigning weightingsperformance.
While the goal-setting process in 2021 was consistent with prior years, ensuring the safety and well-being ofour employees and navigating the uncertain macroeconomic environment caused by COVID-19 and related supply chain, labor, freight and inflationary challenges to their performance goals. deliver for our customers were the primary objectives for all our leaders who continually adjusted our COVID-19 response in the face of continuously evolving health information, governmental regulations and economic conditions.
Avery Dennison Corporation | 2022 Proxy Statement | 65 |
Individual modifiers for all participants are capped at 150%, subject to the total cap on AIP awards of 200%.
Although it retains the discretion to determine higher individual modifiers (upof up to 150%), the Committee has determined that the individual modifiers for our CEO and other NEOs should generally be capped at 100%. All of the 2018 NEOThe individual modifiers for all NEOs for 2021 were capped at 100%, as they were for 2017 and 2016..
The Committee reviewed and evaluated our CEO's 2018CEO’s annual performance, taking into accountgiving consideration to his success in navigating the impact of COVID-19 on our employees and customers, constrained raw material, freight and labor availability, and persistent inflation during the year; his performance against thehis predetermined and objectively measurable strategic objectives established in February of that year, his2021; and the self-assessment of 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 bydiscussed with the Committee meeting in executive session with Willis Towers Watson.February 2022. The Committee determined the individual modifier for our CEO based on its assessment of his performance, withinperformance. The Committee Chair, together with our Lead Independent Director, discussed with our CEO the context offeedback from discussions by the caps described above.
Avery Dennison Corporation|Committee and our full Board regarding his 2021 performance 2019 Proxy Statement |52
For 2018,2021, the Committee evaluated the performance of our CEO against his strategic objectives for the year, determining that he substantially achieved or exceeded each of his strategic objectives for the year,them, as shown in the chart below. In contrast to prior years, our CEO’s strategic objectives for 2021 had no assigned weightings, reflecting the Committee’s expectation that Mr. Butier delver on all fronts given the uncertain economic environment as a result of COVID-19.
Strategic Objective | Evaluation | |
Drive outsized growth in high-value categories – Deliver above-average organic growth rate in LGM’s graphics and specialty product categories; achieve targeted percentages of growth in external embellishments in RBIS and in Intelligent Labels; and manage IHM through challenging macroeconomic environment | Significantly grew graphics and specialty product categories in LGM; substantially exceeded growth targets in RBIS’ external embellishments and in Intelligent Labels; and managed IHM through challenging macroeconomic environment, with significant improvement in Industrial and Automotive market segments compared to prior year | |
Grow profitably in our base businesses – Manage market segment share position in LGM’s regional businesses; protect share position in RBIS’ base product categories (adjusted for RFID); and accelerate near-term productivity in IHM | Managed LGM regional share positions well given constrained raw material availability and inflationary environment; expanded share in RBIS’ base business with sales substantially increasing over prior year; and, although its margins expanded in recent years, IHM did not achieve targeted 2021 operating margin | |
Focus relentlessly on productivity – Achieve targeted restructuring savings in LGM and RBIS and execute designated significant projects in each reportable segment | Significantly exceeded targeted restructuring savings and successfully executed designated significant projects, realizing savings in excess of target | |
Allocate capital effectively – Invest in capital expenditures within targeted range to enable future growth; continue to build M&A pipeline and integrate acquisitions; invest targeted amount in accelerated growth platforms; and repurchase shares as appropriate | Invested $270+ million in fixed and IT capital expenditures to enable future growth; improved operating working capital; completed 3 acquisitions, made 3 venture investments and continued to ensure robust M&A pipeline; exceeded target for investment in accelerated growth platforms; and repurchased $180+ million in shares | |
Lead in an environmentally and socially responsible manner – Progress innovation strategy and deployment program; continue to reduce GHG emissions; develop accelerated roadmap to enable greater recyclability of consumer packaged goods in LGM; further increase leadership diversity; and expand ESG reporting and transparency, improving ESG rating agency scores | Developed scorecard and defined innovation pipeline to continue progressing innovation strategy; set bolder 2030 targets for GHG emissions reduction, including new Scope 3 target and net zero ambition by 2050; advanced two strategic innovation platforms focused on material circularity and waste reduction/elimination; increased representation of women in manager-level and above roles to 35% and continued to advance DE+I for members of other underrepresented communities; and published second integrated report and 2021 ESG Downloads, with improved scores from key ESG rating agencies | |
Refine/Execute leadership succession plan – Progress CEO succession to ensure ready-now successors over multiple time horizons, and refine/execute executive leadership development plans | Progressed CEO succession strategy, ensuring ready-now successors over multiple time horizons, and refined and executed development plans for leadership, resulting in seasoned executives being promoted to serve as President/COO and leaders of RBIS Apparel Solutions and IHM businesses | |
CEO Individual Modifier Based on Evaluation | 100% |
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| | | | | ||||
---|---|---|---|---|---|---|---|---|
2018 CEO PERFORMANCE EVALUATION | ||||||||
| | | | | | | | |
STRATEGIC OBJECTIVE | WEIGHTING | EVALUATION | ||||||
| Accelerate penetration in high value product categories — Achieve growth objectives for LGM's graphics and specialty, RBIS' RFID and IHM's industrial product categories; integrate acquisitions and continue building M&A pipeline; and accelerate Intelligent Labels integration across LGM and RBIS | 25% | Exceeded targeted levels of organic growth in LGM's graphics and specialty categories and RBIS' RFID business, accelerated integration of Intelligent Labels platform across LGM and RBIS, and achieved many but not all acquisition and integration objectives, but did not achieve targeted level of organic growth in IHM's industrial categories | | ||||
Drive profitable growth in base business — Maintain share in LGM's base product categories; grow volumes in RBIS' base business (adjusted for RFID); and accelerate near-term productivity in IHM | 25% | Maintained share position in LGM's base product categories and grew volumes in RBIS base categories, but did not accelerate IHM productivity to targeted level of EBITDA expansion | ||||||
| Continue relentless focus on productivity —Achieve targeted RBIS restructuring savings and adjusted EBITDA goal; accelerate integration of Finesse acquisition into existing Vancive Medical Technologies business | 15% | Exceeded targeted amount of RBIS restructuring savings and achieved targeted adjusted EBITDA goal; planned and began implementation of Board-aligned project to accelerate integration of Finesse into our Vancive business | | ||||
Deploy capital effectively —Invest in capital expenditures at targeted amount to enable future growth; invest targeted amount in accelerated growth platforms; repurchase shares; and satisfy commitments to investment community, in each case consistent with our Board-aligned capital allocation objectives | 15% | Invested targeted amounts in capital expenditures and accelerated growth platforms; cost-effectively repurchase shares; and continued to execute long-term capital deployment commitments made to investment community | ||||||
| Succession planning —Refine/execute executive leadership development plans; execute senior leadership transitions; and develop CEO succession strategy to ensure availability of ready-now successors by targeted deadline | 15% | Completed leadership development plans; oversaw departures, promotions and new hires in several executive positions; and made meaningful progress advancing CEO succession strategy with Board oversight | | ||||
Sustainability/Diversity — Make progress toward 2025 sustainability goals, including reduce greenhouse gas (GHG) emissions by 3%; ensure at least 90% of sites are landfill free; and evaluate gender pay equity and begin to adjust compensation as appropriate | 5% | Exceeded 3% GHG reduction target by nearly 3%; achieved over 95% of sites as landfill-free; and evaluated our gender pay equity with positive results, developing plans to make identified adjustments to compensation for 2019 | ||||||
| | | | | | | | |
Individual Modifier Based on Committee Evaluation | 100% | 100% | ||||||
| | | | | | | | |
PERFORMANCE ASSESSED AGAINST PREDETERMINED AND MEASURABLE STRATEGIC OBJECTIVES
Our CEO recommended to the Committee the individual modifiers for our other NEOs based on his assessment of their 20182021 performance. The Committee considered our CEO's recommendationCEO’s assessments and challenged his assessments of our other NEOs' performance as appropriate,recommendations, retaining the discretion to approve individual modifiers for them lowerdifferent than the 100%what our CEO had recommended. Other than discussing with our CEO their performance against their individual performance plans, our other NEOs played no role in their compensation determinations.
In determining the individual modifiers for our other NEOs, and recognizing that the cap of 100% eliminated the potential upside from the individual modifier on their AIP awards, the Committee noted the following highlights of the 2018their 2021 performance of other NEOs:described below.
Mr. Lovins —Lovins – Led our global finance function, deliveringincluding overseeing our strong controllership environment and our tax, treasury and operational finance teams; ensuring we delivered 2021 results that exceeded our 2018annual goals for organic sales growth and adjusted EPS growth and executingfree cash flow while continuing to make progress toward our capital allocation strategieslong-term financial targets and sustainability goals, despite the challenging macroeconomic environment caused by persistent inflation and supply chain disruptions; and ensuring our balance sheet remained strong as we continued to supportinvest in our future growth, pursue acquisition opportunitiesbusinesses, both organically and returnthrough acquisitions, while also returning cash to shareholders through dividends and share repurchases. Also servedstockholders. In addition, Mr. Lovins continued to serve as Interim General Managerthe interim leader of our IHM business afterthrough the previous leaderend of that business ceased serving in that capacity.2021, achieving strong top-line
and operating income growth, and oversaw the continued expansion of our ESG disclosures. Mr. Lovins also served as a member of the Board of Trustees of the Avery Dennison CorporationFoundation (ADF).
| 2019 Proxy Statement Ms.| Baker-Nel 53
Mr. — Stander – Led our global RBIS business through another challenging year, ensuring continued elevation of global service and flexibility for customers while delivering record growth and margin expansion; investing in and continuing to grow the high-value categories of Intelligent Labels and external embellishments; and ensuring the safety of an engaged and diverse global team. In addition, Mr. Stander led our successful acquisition of Vestcom, further accelerating our position in high-value categories, and continued leading our enterprise-wide Sustainability Council, overseeing our progress toward our 2025 sustainability goals, developing and beginning to track progress toward our 2030 sustainability goals, and implementing enhanced ESG reporting protocols. Mr. Stander also served as a member of the Board of Trustees of ADF.
Mr. Walker – Led our global legal function, with particular focusadvising our Board and management on integrating our 2017 acquisitions and supporting our robust pipeline of potential acquisitions and venture investments; supporting ourinvestments, litigation, intellectual property and footprint optimization projects; overseeing our Values & Ethics and risk management functions, securities and governance work, and government relations efforts; implementing a new functional operational model to accelerate productivity, standardize processes and deploy best practices; developing strategic priorities for his department that align with our company’s values and strategies; designing and executing projects including capital investments to support our future growthprogress the department’s strategic priorities of business risk optimization, people and restructuring actions to improve our profitability;culture, operational efficiency, and sustainability; and leading our Valuestraining and Ethics program.
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 NEOs .NEOs.
AIP Awards
Avery Dennison Corporation | 2022 Proxy Statement
| 67 |
AIP Awards
Our NEOs received the AIP awards shown in the table below for 2018,2021, based on their respective year-end base salary, AIP opportunity, financial modifier and individual modifier.
2018 AIP AWARDS | ||||||||||||
| | | | | | | | | | | | |
| 2018 YE BASE SALARY | AIP OPPORTUNITY | TARGET AIP AWARD | FINANCIAL MODIFIER | INDIVIDUAL MODIFIER | AIP AWARD | ||||||
Butier | $1,133,000 | 125% | $1,416,250 | 123% | 100% | $1,741,988 | ||||||
Lovins(1) | $600,000 | 75% | $450,000 | 123% | 100% | $553,500 | ||||||
Gravanis(2) | $627,969 | 75% | $470,977 | 116% | 100% | $546,333 | ||||||
Miller | $564,125 | 60% | $338,475 | 123% | 100% | $416,324 | ||||||
Stander | $538,960 | 50% | $269,480 | 144% | 100% | $388,051 |
2021 AIP AWARDS | ||||||||||||||||||||||||||||||
NEO | 2021 YE Base Salary | AIP Opportunity | Target AIP Award | Financial Modifier | Individual Modifier | AIP Award | ||||||||||||||||||||||||
Butier | $ | 1,200,000 |
| 140 | % | $ | 1,680,000 |
| 200 | % |
| 100 | % | $ | 3,360,000 | |||||||||||||||
Lovins | $ | 661,260 |
| 75 | % | $ | 495,945 |
| 200 | % |
| 100 | % | $ | 991,890 | |||||||||||||||
Baker-Nel | $ | 416,000 |
| 50 | % | $ | 208,000 |
| 200 | % |
| 100 | % | $ | 416,000 | |||||||||||||||
Stander | $ | 569,007 |
| 60 | % | $ | 341,404 |
| 186 | % |
| 100 | % | $ | 635,011 | |||||||||||||||
Walker | $ | 425,375 |
| 50 | % | $ | 212,687 |
| 200 | % |
| 100 | % | $ | 425,374 |
Our LTI program provides variable incentive compensation to enhance alignment of executive interests with stockholder interests and drive long-term value creation. The annual and special LTI awards granted to NEOs in 20182021 were fully performance-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 the achievement of the respective cumulative EVA and relative TSR performance objectives established for the award; 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.TSR
Annual LTI awards were granted on February 22, 2018,March 1, 2021. Actual amounts, if any, realized by our NEOs from the dayvesting of these awards will be based on our Board 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.
Avery Dennison Corporation| 2019 Proxy Statement |54
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, retention and/or other incentive purposes, with the awards granted on the first day of the last month of the calendar quarter following the event or decision to make such a grant. No such awards wereFor retention purposes and to further incent Mr. Stander to contribute to our total company – including by driving our ESG progress as leader of our enterprise-wide Sustainability Council and continuing to transform our RBIS business – Mr. Stander was granted a special one-time award of PUs with a grant date fair value of approximately $500,000 based 50% on our relative TSR and 50% of total company EVA, the same performance objectives, weightings and targets, and over the same performance period, as the 2021-2023 PUs granted to our NEOs in 2018.corporate NEOs.
Target LTI Opportunity
As a percentage of base salary, the 2021 target LTI opportunities for our NEOs were 475%585% for Mr. Butier; 200%250% for Mr. Lovins; 180% for Mr. GravanisStander; and 120% for Ms. Miller;Baker-Nel and 140% for Mr. Stander. In 2018, (i) Mr. Butier's target LTI opportunity was increased from 425% to 475% of base salary to move his TDC closer to the market median for the reasons described above and (ii) Mr. Lovins' target LTI opportunity was increased from 180% to 200% of base salary to move his LTI closer to the market median after he completed a year of service as our CFO. Walker. Target LTI award opportunities represented approximately 68%71% and 50%52%, respectively, of our CEO'sCEO’s and other NEOs'NEOs’ average totalperformance-based incentive compensation.As part of the longer-term compensation approach implemented for our CEO in 2021, Mr. Butier’s target LTI opportunity increased from 475% of base salary.
68 | 2022 Proxy Statement | Avery Dennison Corporation |
Performance Units (PUs)
PUs cliff-vest in shares of our common stock after the end of thea three-year 2018-2020 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 policy.
The Committee established the following performance objectives for the 2018-20202021-2023 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 reflects the value creation we provide tocreate for our stockholders.investors.
Cumulative EVA, weighted 50% for our corporate NEOs (based on our total company EVA);company) and 75% for our LGM business NEO (based on LGM'sRBIS’ cumulative EVA); and 100% for our RBIS business NEO (based on RBIS' 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.profit, with the cost of capital fixed over the performance period. The Committee established cumulative EVA targets for our corporate NEOs consistent with our 2017-2021 targetsfinancial goals for earnings growth and ROTC and our primary objective of delivering superior TSR, with the target payout at or slightly above the midpoint of these targets and the maximum payout atexceeding the high end of these targets. CumulativeThe cumulative EVA targetstarget for our business NEOsNEO focused on their respective business'RBIS’ EVA change compared to the prior three-year period, with the target payout at the midpointtop end of their respective business'its 2017-2021 targets and the cost of capital fixed over the performance period. The RBIS business NEO's PUs were weighted 100% on that business' cumulative EVAtargets. In contrast to incent his singular focus on delivering the transformation plan to improve the financial performance and trajectory of this business. 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 the Committee expects that these investments willto generate a return over the three-year performance period (in contrast to the AIP, which has a one-yearmeasures performance period)over one year). Whether linked to corporate or business results, the 2018-20202021-2023 cumulative EVA targets requiredrequire continued improvement in financial performance.
Avery Dennison Corporation| 2019 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 provide to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). 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 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 2020-2022 PUs. Payouts for the relative TSR component of PUs are capped at 100% of target if our absolute TSR is negative for the 2021-2023 performance period. In assessing the rigor of the TSR objectives, the Committee noted that our stock price and TSR had significantly increased in the second half of 2020; as a result, performing at the median relative to our peers over the 2021-2023 period would represent solid performance, particularly in light of continued uncertainty regarding the impact of COVID-19, as well as our relatively high exposure to the impact of foreign currency translation and the geopolitical and trade-related uncertainty at that time. |
Consistent with the 2017-20192020-2022 PUs and uponwith the recommendationadvice of Willis Towers Watson,WTW, to benchmark TSR, the Committee continued utilizingutilized a peer group(‡)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 twelve12 months of $1 billion to $20 billion. Based on the formulaic application of theApplying this same objective criteria, the peer group changed from the prior year as follows: (i) PQ Group Holdings(A) Pactiv Evergreen Inc. and Venator Materials PLC werewas added because they had become public companies and met the other criteria; (ii) Innospec Inc.following a merger; (B) Quaker Chemical Corporation was added because its last twelve months' revenues had exceeded $1 billion;GICS classification changed; and (iii) Chemtura(C) Ferro Corporation Multi Packaging Solutions International Limited and Valspar CorporationGCP Applied Technologies were deleted because they had been acquired.each of their last 12 months’ revenues was less than $1 billion.
† | The following companies comprised the peer group for the 2021-2023 PUs at the end of fiscal year 2021: Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings Inc.; Axalta Coating Systems Ltd.; Avient Corporation (formerly known as PolyOne Corporation); Ball Corporation; Berry Global Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings, Inc.; Eastman Chemical Company; Ecolab Inc.; Ecovyst Inc. (formerly PQ Group Holdings Inc.); Element Solutions Inc.; Graphic Packaging Holding Company; Greif, Inc.; H.B. Fuller Company; Huntsman Corporation; Ingevity Corporation; Innospec Inc.; International Flavors & Fragrances Inc.; Kraton Corporation; Minerals Technologies Inc.; NewMarket Corporation; O-I Glass Inc.; Packaging Corporation of America; Pactive Evergreen; PPG Industries, Inc.; Quaker Chemical Corporation; Rayonier Advanced Materials Inc.; RPM International Inc.; Schweitzer-Maudit 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.; Verso Corporation; and WestRock Company. |
Avery Dennison Corporation | 2022 Proxy Statement | 69 |
Market-leveraged Stock Units (MSUs)
MSUs are performance-based LTI awards that:
The Committee selected an equity vehicle that has one-, two-, three- and four-year performance periods because paid. MSUs replaced stock options and RSUs, both of which had vested ratably over four years.MSUs wereare designed to achieve the Committee’s combined objectives of previously granted 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 compensation program fully performance-based. The Committee continues to believe that retention is an important objective of our executive compensation program..
MSUs vest based on our performance over periods as shown in the graph on the left on the following page,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 out only at vesting; as such, if the threshold level of performance wereis not achieved, any dividend equivalents accrued during the performance period would beare cancelled.
Avery Dennison Corporation| 2019 Proxy Statement |56
The performance criteria for MSUs which reflect previously received stockholder feedback seeking to make the criteria more challenging, are shown in the chart on the right below. Every 1% increase in TSR above 10% increases the payout by 1.54%. The Committee determined to maintain the same MSU performance objectives for 2018 and continue observing payouts to ensure2021 given that the revised MSU structureprogram is achievingaccomplishing the Committee'sCommittee’s goal of incenting strong long-term 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 2018. The2021. Except as noted, the number of awards granted was based on the respective NEO's (i)NEO’s base salary at year-end 2017 2020 and (ii) target LTI opportunity,opportunity. Consistent with our historical practice, the number of PUs granted 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 20182021 and the number of MSUs granted was based on a grant date fair value determined using the Monte-Carlo simulation method. As a resultmethod described in footnote (2) of the methodology used to determine grant date fair value, awarded LTI values slightly exceeded target LTI values.2021 Summary Compensation Table.
2021 ANNUAL LTI AWARDS | |||||||||||||||||||||||||||||||||||
NEO | 2020 YE Base Salary | Target LTI Opportunity | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI Value | ||||||||||||||||||||||||||||
Butier(1) | $ | 1,200,000 |
| 585 | % |
| 17,886 | $ | 3,537,766 |
| 16,245 | $ | 3,509,903 | $ | 7,047,669 | ||||||||||||||||||||
Lovins | $ | 618,000 |
| 250 | % |
| 3,936 | $ | 778,523 |
| 3,575 | $ | 772,438 | $ | 1,550,961 | ||||||||||||||||||||
Baker-Nel | $ | 400,000 |
| 120 | % |
| 1,223 | $ | 241,884 |
| 1,111 | $ | 240,066 | $ | 481,950 | ||||||||||||||||||||
Stander(2) | $ | 555,129 |
| 180 | % |
| 2,750 | $ | 505,487 |
| 2,312 | $ | 499,531 | $ | 1,005,018 | ||||||||||||||||||||
Walker | $ | 415,000 |
| 120 | % |
| 1,269 | $ | 251,026 |
| 1,152 | $ | 248,901 | $ | 499,927 |
(1) | For Mr. Butier, the Committee determined to use his increased base salary approved in February 2021 to give effect to the longer-term compensation approach it approved for him at that time. |
(2) | On March 1, 2021, in addition to his annual award of PUs tied primarily to RBIS’ performance, Mr. Stander received a one-time special award of 2,547 PUs with a fair market value $503,784 based on the same performance objectives, weightings and targets as the annual award of PUs granted to our corporate NEOs (50% relative TSR and 50% total company EVA). |
70 | 2022 Proxy Statement | Avery Dennison Corporation |
2018 ANNUAL LTI AWARDS | ||||||||||||||
| | | | | | | | | | | | | | |
| 2017 YE BASE SALARY | TARGET LTI OPPORTUNITY | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI VALUE | |||||||
Butier(1) | $1,133,000 | 475% | 23,324 | $2,889,828 | 22,852 | $2,690,823 | $5,580,651 | |||||||
Lovins(2) | $550,000 | 200% | 4,768 | $590,752 | 4,671 | $550,010 | $1,140,762 | |||||||
Gravanis(3) | $628,595 | 180% | 4,904 | $579,918 | 4,805 | $565,789 | $1,145,707 | |||||||
Miller | $547,694 | 180% | 4,272 | $529,298 | 4,186 | $492,902 | $1,022,200 | |||||||
Stander | $524,280 | 140% | 3,817 | $429,827 | 3,740 | $440,385 | $870,212 |
20182021 VESTING OF PREVIOUSLY GRANTED LTI AWARDS
2016-20182019-2021 PUs Eligible for Vesting
The PUs granted to our NEOs in February 20162019 were eligible for vestingto vest at the end of 20182021 based (i) for our corporate NEOs, (excluding Mr. Lovins, who was an LGM employee in February 2016 and received PUs with the same performance criteria as our LGM business NEO), 50% on our company'scompany’s 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 2018-2020 PUs2021-2023 PUs; and (ii) for Mr. Lovins and our business NEOs,NEO, 75% on their respective business'RBIS’ cumulative three-year EVA and 25% on our three-year relative TSR. The key goal-setting principle in setting cumulative EVA targets was consistency with our 2014-20182017-2021 financial goalstargets for earnings growth and ROTC, which the Committee believes translates into delivering above-average TSR.
Avery Dennison Corporation| 2019 Proxy Statement |57
The cumulative EVA target of $537$1,081 million for our corporate NEOs was consistent with our 2014-2018 targets2017-2021 financial goals 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.The cumulative EVA target was approximately two-and-a-half times43% higher than ourthe cumulative EVA we achieved for the three-year period ending in 20152018. EVA required for maximum payout – cumulative EVA of $612$1,148 million —– was consistent with the high end of our long-term growth and operating margin targets. As shown below, we delivered cumulative EVA of over $755$1,132 million for the 2016-20182019-2021 performance period, resulting in a payout of 200%176% for the EVA component for our corporate NEOs.
2016-2018 PUs: CORPORATE CUMULATIVE EVA | |||||||||||||
| | | | | | | | | | | | | |
(In millions) | 2016 | 2017 | 2018 | CUMULATIVE EVA | |||||||||
Adjusted EBIT(1) | $ | 586.4 | $ | 656.6 | $ | 713.1 | | | |||||
Taxes(2) | $ | (192.3 | ) | $ | (183.8 | ) | $ | (178.3 | ) | ||||
| | | | | | | | | | | | | |
Equity method investment net losses | | — | | — | $ | (2.0 | ) | | | ||||
| | | | | | | | | | | | | |
$ | 394.1 | $ | 472.8 | $ | 532.8 | ||||||||
Capital charge(3) | $ | (185.3 | ) | $ | (221.9 | ) | $ | (237.4 | ) | | | ||
| | | | | | | | | | | | | |
EVA | $ | 208.8 | $ | 250.9 | $ | 295.4 | $ | 755.1 |
The cumulative EVA generated by our LGM business also exceeded the maximum level of performance established by the Committee; as such, the payout for the EVA component for Mr. Lovins and our LGM business NEO was 200%. The cumulative EVA generated by our RBIS business also exceeded the maximum level of performance established by the Committee; as such, the payout for the EVA component for our RBIS business NEO was 200%. Due to the competitively sensitive nature of information regarding business-level EVA, targets and actual results are not disclosed. Information regarding the goal-setting process and rigor of the EVA performance objectives is included in the previous discussion of the 2018-2020 PUs.
2019-2021 PUS: CORPORATE CUMULATIVE EVA | ||||||||||||||||
(In millions) | 2019 | 2020 | 2021 | Cumulative EVA | ||||||||||||
Adjusted EBIT(1) | $ | 777.0 |
| $ | 810.8 |
| $ | 1,012.1 |
| |||||||
Taxes(2) |
| (191.1 | ) |
| (195.4 | ) |
| (253.0 | ) | |||||||
Equity method investment net losses |
| (2.6 | ) |
| (3.7 | ) |
| (3.9 | ) | |||||||
|
|
|
|
|
| |||||||||||
| 583.3 |
|
| 611.7 |
|
| 755.2 |
| ||||||||
Capital charge(3) |
| (260.9 | ) |
| (281.7 | ) |
| (275.6 | ) | |||||||
|
|
|
|
|
| |||||||||||
EVA | $ | 322.4 |
| $ | 330.0 |
| $ | 479.6 |
|
| $1,132.0 |
| ||||
(1) Adjusted EBIT is a non-GAAP financial measure defined and reconciled from GAAP in the last section of this proxy statement.
(2) The GAAP tax rates for 2019, 2020, and 2021 were (22.7)%, 24.1% and 25.0%, respectively. Taxes shown in the table are based on adjusted tax rates of 24.6%, 24.1% and 25.0% for 2019, 2020 and 2021, respectively. The adjusted tax rate represents the full-year GAAP rate, excluding certain unusual or infrequent events that are expected to significantly impact the GAAP tax rate, such as impacts related to the termination of our U.S. pension plan and the effects of discrete tax structuring and planning transactions.
(3) 8.5% of average invested capital of $3.07 billion, $3.31 billion and $3.24 billion for 2019, 2020 and 2021, 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, adjusted to exclude the impact of acquisitions completed since the target was set. |
|
§ | The following companies comprised the peer group for the 2019-2021 PUs at the time of payout: Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings Inc.; Axalta Coating Systems Ltd.; Avient Corporation (formerly known as PolyOne Corporation); Ball Corporation; Berry Global Corp., Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Eastman Chemical Company; Ecolab Inc.; Ecovyst Inc. (formerly PQ Group Holdings Inc.); Element Solutions Inc.; Ferro Corporation; GCP Applied Technologies Inc.; Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; Ingevity Corporation; Innospec Inc.; International Flavors & Fragrances Inc.; Kraton Corporation; Minerals Technologies Inc.; Neenah, Inc.; NewMarket Corporation; O-I Glass, Inc.; Packaging Corporation of America; PH Glatfelter Company; PPG Industries Inc.; Rayonier Advanced Materials Inc.; RPM International Inc.; Schweitzer- Mauduit 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.; and WestRock Company. |
Avery Dennison Corporation | 2022 Proxy Statement | 71 |
Relative TSR for the 2016-20182019-2021 performance period was at the 8293ndrd percentile of the designated peer group, resulting in a 200% payout for this component for all NEOs.
![]() | ![]() |
Avery Dennison Corporation| 2019 Proxy Statement |58
PUs for 2019-2021 performance period paid out at 188% for our corporate NEOs and 115% for our business NEO.
MSUs Eligible for Vesting at YE 2021
Four tranches of MSUs were eligible for vesting at the end of 20182021 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 2022) + 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 | 3RD TRANCHE OF | ||||
Performance period | |||||
Performance period of 3 years | |||||
2018-2021 Absolute TSR | 2019-2021 Absolute TSR of 131% | ||||
Paid out at 200% of target | Paid out at | ||||
2ND TRANCHE OF | 1ST TRANCHE OF | ||||
Performance period | Performance period | ||||
2020-2021 Absolute TSR | 2021 Absolute TSR of 33% | ||||
Paid out at | Paid out at 135% of |
Consistent with market practices, our U.S.Our 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 a variety of separate perquisites | ||
Financial Planning | Annual reimbursement of up to $25,000 for our CEO and $15,000 for our | Allows senior executives to focus on job duties | ||
Annual Physical Examination | Paid directly to the service provider only to the extent | Helps ensure company leaders maintain good overall health |
72 | 2022 Proxy Statement | Avery Dennison Corporation |
In 2018, Mr. Gravanis received an automobile allowance consistent with customary executive benefits in the Netherlands. For more information, see footnote (6) of the2018 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. None of our NEOs received such benefits in 2018.
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 those NEOs and other eligible employees in the U.S. with a long-term capital accumulation opportunity because deferred amounts accumulate on a pre-tax basis. Participating executives may select from a number of investment options.options. Our only deferred compensation plan currently open for deferrals does not offer above-market interest rates. Deferrals are 100% vested.
Avery Dennison Corporation| 2019 Proxy Statement |59
We made an annual contribution as of January 1, 20182021 to the deferred compensation accounts of our U.S. NEOs for 401(k) eligible earnings and deferred compensation in 20172020 in excess of the Internal Revenue Code of 1986, as amended (the "Code"“Code”) compensation limit. This annual contribution provided an automatic contribution of 3% of pay and a matching contribution of up to the first 6%50% of pay above the Code compensation limit. In 2019, for 401(k) eligible earnings and deferred compensation in 2018 in excess of the Code compensation limit, the matching contribution will increase to the first 7% of pay above the Code compensation limit. This benefit is designed to supplement 401(k) contributions that are limited under the Code.
For additional information regarding our deferred compensation plan and accrued NEO benefits thereunder, see20182021 Nonqualified Deferred Compensation inExecutive Compensation Tables.
Retirement Benefits
Our U.S.Of our NEOs, may beonly Messrs. Butier and Lovins were eligible for retirement benefits under our U.S. pension plan and are eligible for retirement benefits under 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. Because we frozeWe terminated our U.S. pension plan in September 2018 and, because the accrual of benefits under these plansthe benefit restoration plan was frozen as of December 31,year-end 2010, none of our eligible NEOs accrued additional retirement benefits during 2018. In addition, we terminated our U.S. pension plan as of September 28, 2018.2021. For additional information regarding these plansthe benefit restoration plan and accrued NEO benefits thereunder, see20182021 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 permits 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. In 2018,2021, we contributed up to 6.5% (a 0.5% increase from 2017) of an employee'semployee’s eligible compensation, 3% of which was an automatic contribution and up to 3.5% of which was a matching contribution of 50% of the employee'semployee’s contributions up to 7% of pay, subject to the Codefederal compensation limit. Participants vest in company contributions to their savings plan account after two years of service.
Employees are immediately eligible to participate in the savings plan and all our NEOs participated in the plan during fiscal year 2018, except for Mr. Gravanis who is not a U.S. employee and was therefore ineligible.2021. Our U.S. NEOs participate in these plansthe plan subject toon the same eligibility and benefit terms and conditions as our other U.S. employees.
Life Insurance Benefits
In addition to the $50,000 in life insurance benefits we provide to all U.S. employees, our U.S. NEOs are provided with supplemental life insurance benefits equal to three times the NEO'sNEO’s base salary less $50,000, up to a maximum coverage amount of $1 million.
Executive Long-Term Disability Insurance Benefits
If our NEOs elect to enroll in executive long-term disability coverage, their 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 NEO; their dependents are not covered.
Personal Excess Liability Insurance Benefits
We provide $3 million of personal excess liability insurance coverage to our U.S. NEOs. 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 excess liability insurance, the NEO must maintain certain minimum coverage requirements under his or her personal liability policy.
SEVERANCE BENEFITS
Avery Dennison Corporation | 2022 Proxy Statement
| 73 |
Charitable Match Benefits
We match up to $10,000 of our CEO’s and $5,000 of our other NEOs’ annual documented contributions to charitable organizations or educational institutions.
None of our NEOs has an employment contract. The absence of employment contractscontract, and each is employed at-will, which reflects our pay-for-performance philosophy; if an NEO is no longer performing at the expected level, he or she can be terminated immediately without receiving a contractually-guaranteedcontractually guaranteed payment. However, 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 these benefits are consistent with market practices.
Avery Dennison Corporation| 2019 Proxy Statement |60
The compensation 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 provide 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 require to individually negotiate separation payments 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-disclosure 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 plans, whose awards are accelerated upon termination of service. Mr. Gravanis and Ms. Miller qualified as retirement eligible as of the end of fiscal year 2018. As a result, their outstanding PUs and MSUs would vest at the end of the performance period on a prorated basis based on our actual performance.
Mr. Gravanis' severance benefits would also be subject to applicable Dutch labor laws and regulations in effect 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.
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 29, 2018January 1, 2022 inExecutive Compensation Tables.
Severance Following Involuntary Termination Not for Cause
Our NEOs 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 NEOs would be eligible to receive one times his or hertheir respective sum of these amounts. Allamounts. NEOs 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.
Severance Following Change of Control
Our NEOsMessrs. Butier, Lovins, and Stander are eligible for severance payments upon termination not for "cause"“cause” or by the executive for "good reason"“good reason” within 24 months of a "change“change of control"control” of our company, in accordance with the terms and conditions of the COC Severance Plan. As Level 3 NEOs, Ms. Baker-Nel and Mr. Walker are not eligible for benefits under this 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. Ouramounts. These NEOs would also be eligible to receive a pro-rataprorated 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 our equity incentive plans, unvested equity awards granted to our NEOs would generally vest only if the NEO is terminated without "cause"“cause” or resigns for "good reason"“good reason” within 24 months after the change of control. Outstanding PUs and MSUs granted beginning in 2018 would vest based on actual performance, if determinable, and otherwise based on target performance.
Our
74 | 2022 Proxy Statement | Avery Dennison Corporation |
Participating 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.
Avery Dennison Corporationafter-tax | 2019 Proxy Statement |61
benefit to the NEO.
MARKET SURVEY DATAMarket Survey Data
The Committee annually considers market survey data to target TDC, looking at a cross sectioncompanies of companiessimilar size based on annual revenues that span 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 2018,2021, 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 WatsonWTW U.S. Compensation General Industry Database, which was narrowed in scope to focus on data of the 5268 participants with $6 billion to $10 billion in annual revenues, and (ii) the most recent Hewitt Total Compensation Measurement Survey, which was narrowed in scope to focus on the data of the 55 participants with $5 billion to $10 billion in annual revenues.revenue. The Committee reviewed the data from each surveywith executive matches based on job and functional responsibility 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 median pay at similarly sized companies, responsibilities, individual performance, tenure, retention and succession.
PEER GROUPSPeer Groups
For determining our relative TSR for purposes of the vesting 2016-2018of the 2019-2021 PUs and granted 2018-2020the grant of the 2021-2023 PUs, the Committee used a peer group comprised of U.S. companies satisfying objective criteria for industry classification and revenue size, the names of which are disclosed earlier in this CD&A. The Committee does not utilize a peer group for any other purpose.
TALLY SHEETSTally Sheets
The Committee annually reviews tally sheets that reflect the components of each NEO'sNEO’s compensation. The tally sheets reviewed in 2018February 2022 included the following information shown below for each of our lastthe most recent three fiscal years:years.
Compensation history, including annual cash compensation (base salary and AIP awards), LTI awards, value of vested LTI awards, and annualized cost of benefits and perquisites;
Expected value of annual compensation, for the year, including base salary, AIP award and the grant date fair value of LTI awards;
Accumulated value of compensation, including total accumulated value of LTI awards and accumulated benefit values under our retirement and deferred compensation plans;
Potential payments under various termination scenarios; and
Compliance with our stock ownership policy.policy
The 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.
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 comprised 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 related to the compensation of our executive officers, to our CEO.
Avery Dennison Corporation| 2019 Proxy Statement |62
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 and has sole authority to approve the advisor'sadvisor’s fees and other terms and conditions of the retention. In retaining its advisors, the Committee must considerconsiders each advisor'sadvisor’s independence from management, as required by NYSE listing standards.
Avery Dennison Corporation | 2022 Proxy Statement | 75 |
During 2018,2021, the Committee retained Willis Towers WatsonWTW as its independent compensation consultant, andwith the firm performedperforming the following services described below for the Committee:Committee.
• Assisted with setting | ||
• Evaluated a proxy advisory | ||
• Commented on our | ||
• Provided incentive compensation advice (including recommending relative TSR peer group for the | ||
• Conducted analyses of | ||
• Advised on compensation for our non-employee directors | ||
• Advised on incentive compensation related to our Vestcom acquisition | ||
• Prepared for, attended and reviewed documentation for Committee meetings | ||
In 2018, Willis Towers Watson2021, WTW received $210,639$127,927 in compensation from our company for professional services performed for or at the request of the Committee. We also reimbursed the firm for its reasonable expenses.
The Committee conducted its annual assessment of Willis Towers Watson'sWTW’s performance in December 2018,October 2021, which included a reviewan evaluation of theits services provided during the year, theand fees paid thereforyear-to-date, and the following additional evaluation criteria:criteria described below.
• | Experience – The firm’s depth and breadth of executive compensation knowledge and experience; qualification as a board-level consultant; quality of resources available; and understanding of our business strategy, 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, including accuracy, type and amount of information, and responsiveness to issues); its review and feedback on management proposals; and the firm’s preparation with the Committee Chair and our management |
• | Committee Relationship – The accessibility and availability of members of the engagement team; the firm’s reporting relationship with the Committee Chair and its working relationship with our human resources team; and the effectiveness of its communication |
Based on this assessment,evaluation, the Committee determined that it wasremained satisfied with the performance of Willis Towers WatsonWTW and the individual members of the engagement team serving the Committee.
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, authorize the firm'sfirm’s fees and determine the other terms and conditions that govern the engagement;engagement; the Committee directs Willis Towers WatsonWTW on the process for delivery and communication of its work product, including its analyses, findings, conclusions and recommendations; inthe 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'stheir sole discretion.
Avery Dennison Corporation| 2019 Proxy Statement |63
As required by SEC regulations and NYSE listing standards, the Committee considered the independence of its advisors – including WTW and the law firms providing executive compensation counsel to the Committee and/or our company – in December 2018.October 2021. The Committee reviewed the information provided by Willis Towers Watson, members of the Committee and our executive officers related to the following factors:WTW described below.
WTW performed no services for our company in 2021 other than executive compensation services performed at the request of the Committee;
Fees from our company reflected approximately 0.002%0.001% of Willis Towers Watson'sWTW’s revenue for its fiscal year ended December 31, 2017;
76 | 2022 Proxy Statement | Avery Dennison Corporation |
WTW has several policies and procedures to mitigate conflicts of interest,ensure its advice is objective and 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 highly effective;
Based on disclosures from Willis Towers WatsonWTW and members of the Committee, wethere are aware of no such business or personal relationships;
No members of the Willis Towers WatsonWTW team serving the Committee own any stock in our company, other than perhapspotentially through investments in mutual or other funds managed without the member's input; and
Based on disclosures from the firm and our executive officers, wethere are aware of no business or personal relationships with Willis Towers Watsonbetween WTW or the members of the engagement team advising the Committee.
The Committee affirmatively determined Willis Towers Watson to be independent and both the firm and the memberswith any executive officer of the engagement team advising the Committee to be free of any conflicts of interest.our company
CLAWBACK POLICYClawback Policy
In the event of fraud or other intentional misconduct on the part of an NEO 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 to 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 clawback policy has beenis contractually acknowledged by our NEOs upon the execution of their LTI award agreements since 2010.agreements.
The Committee approved ourOur clawback policy in 2009is designed 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 AIP and LTI plans. The Committee anticipates that it will revise the policy if and as necessary to comply with final rules issued by the SEC.SEC, which are currently expected to be issued in 2022.
TAX IMPLICATIONS OF EXECUTIVE COMPENSATIONTax Implications of Executive Compensation
The Committee aims to compensate our NEOs in a manner that is tax effective for our company. However, the Committee may, in its discretion, adopt or implement compensation programs and/or practices that are not fully tax deductible to the extentif it believes that doing so is in the best interests of our company and stockholders.
Avery Dennison Corporation| 2019 Proxy Statement |64
Section 162(m) of the Code
Prior toFollowing the enactment of the TCJA, Section 162(m) of the Code ("Section 162(m)") generally limited our federal income tax deductionsTax Cuts and Jobs Act (TCJA), for executivetaxable years beginning on or after January 1, 2018, compensation in any fiscal year to the extent total compensation for certain executive officers exceededexcess of $1 million in such year, unless it qualified as "performance-based." The TCJA amended Section 162(m) by, among other things, expanding the scope ofpaid to executive officers covered by Section 162(m) and eliminatingof the exception for "performance-based" compensation. As a result, under Code (“Section 162(m) as in effect for fiscal year 2018, our federal income tax deductions for executive compensation in fiscal year 2018 were”) generally limited to the extent total compensation for certain executive officers exceeded $1 million,is not deductible, unless it qualifiedqualifies for limited transition relief under the TCJA. To qualify for transition relief, compensation must, among other things, behave been payable pursuant to a written binding contract that was in effect on November 2, 2017 and not subsequently modified in any material respect.
While in the past we have structured certain of our incentive compensation in a manner intended to be tax-deductible for purposes of Section 162(m), due to the TCJA and the uncertainties in the application of Section 162(m), as amended by the TCJA, and the regulations thereunder, there is no guarantee that any deductions claimed under Section 162(m) will not be challenged or disallowed by the IRS and our ability to deduct compensation under Section 162(m) may be restricted. Furthermore, although the Committee believes that the deductibility of executive compensation is an importanta relevant consideration and may continue to consider the effects of the TCJASection 162(m) on our future pay practices, it reserves the right to approve and pay executiveincentive compensation arrangements that areis not fully tax deductible, and/or modify executive compensation programs and practices without regard forto tax deductibility, if it believes that doing so is in the best interests of our company and stockholders.
Section 409A of the Code
Nonqualified deferred compensation must be deferred and paid under plans or arrangements that satisfy the requirements of Section 409A of the Code with respect to the timing of deferral elections and payments and certain other matters. Failure to satisfy these requirements could expose individuals to accelerated income tax liabilities, penalty taxes and interest on their compensation deferred under these plans. As a general matter, we design and administer our compensation and benefit plans and arrangements in a manner intended to cause these plans and arrangementsthem to be either exempt from, or satisfy the requirements of, Section 409A of the Code.
Avery Dennison Corporation | 2022 Proxy Statement | 77 |
Avery Dennison Corporation| 2019 Proxy Statement |65
|
20182021 SUMMARY COMPENSATION TABLE
TheThis table below shows the compensation earned by or awarded toof our NEOs during fiscal years 2018, 2017 and 2016 in accordance with SEC regulations. Compensation as shown in the table does not reflect the compensation actually realized by our NEOs for these years. For example, the amounts under "Stock Awards" do not represent amounts realized by our NEOs; rather, they represent the aggregate grant date fair value for financial reporting purposes of PUs (which are subject to the achievement of cumulative EVA and relative TSR performance objectives measured at the end of a three-year period and may result in no such compensation ultimately being realized by our NEOs) and MSUs (which are subject to cancellation in the event our absolute TSR declines more than 15% over one-, two-, three- or four-year performance periods).
Name and Principal Position | Year | Salary(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change In Pension Value and NQDC Earnings | All Other Compensation(4) | Total | ||||||||||||||||||||||||||||
Mitchell R. Butier | |||||||||||||||||||||||||||||||||||
Chairman, President & |
| 2021 | $ | 1,183,250 | $ | 7,047,669 | $ | 3,360,000 | $ | 662,480 | $ | 180,322 | $ | 12,433,721 | |||||||||||||||||||||
Chief Executive Officer |
| 2020 | $ | 1,133,000 | $ | 5,598,133 | $ | 1,331,275 | $ | 464,100 | $ | 182,840 | $ | 8,709,348 | |||||||||||||||||||||
| 2019 | $ | 1,133,000 | $ | 5,358,043 | $ | 1,288,788 | $ | 508,024 | $ | 207,177 | $ | 8,495,032 | ||||||||||||||||||||||
Gregory S. Lovins | |||||||||||||||||||||||||||||||||||
Senior Vice President & |
| 2021 | $ | 650,445 | $ | 1,550,961 | $ | 991,890 | $ | 133,115 | $ | 126,497 | $ | 3,452,908 | |||||||||||||||||||||
Chief Financial Officer |
| 2020 | $ | 618,000 | $ | 1,232,041 | $ | 653,535 | $ | 76,327 | $ | 125,223 | $ | 2,705,126 | |||||||||||||||||||||
| 2019 | $ | 613,500 | $ | 1,493,462 | $ | 421,785 | $ | 81,676 | $ | 126,425 | $ | 2,736,848 | ||||||||||||||||||||||
Deena Baker-Nel(5) |
| 2021 | $ | 412,000 | $ | 481,950 | $ | 416,000 | $ | 87,340 | $ | 104,164 | $ | 1,501,454 | |||||||||||||||||||||
Vice President & Chief HR Officer | |||||||||||||||||||||||||||||||||||
Deon M. Stander | |||||||||||||||||||||||||||||||||||
Vice President & |
| 2021 | $ | 565,537 | $ | 1,508,802 | $ | 635,012 | $ | 142,139 | $ | 124,331 | $ | 2,975,821 | |||||||||||||||||||||
General Manager, RBIS |
| 2020 | $ | 555,129 | $ | 791,699 | $ | 379,708 | $ | 120,727 | $ | 122,642 | $ | 1,969,906 | |||||||||||||||||||||
| 2019 | $ | 551,086 | $ | 963,728 | $ | 363,887 | $ | 105,550 | $ | 143,172 | $ | 2,127,423 | ||||||||||||||||||||||
Ignacio J. Walker(5) |
| 2021 | $ | 422,781 | $ | 499,927 | $ | 425,375 | $ | 320 | $ | 91,282 | $ | 1,439,685 | |||||||||||||||||||||
Vice President & Chief Legal Officer |
(1) | Amounts include any portions of salary contributed to our employee savings plan or deferred under our deferred compensation plan. Changes in base salary, if any, become effective in April. |
(2) | Amounts in 2021 include the grant date fair value of PUs, which are paid out in shares of our common stock at the end of a three-year period provided that the designated performance objectives are achieved as of the end of the period. The number of shares paid out at vesting can range from 0% to 200% of the target units at the time of grant. The performance objectives that determine the number of shares that may be earned for the PUs granted in 2021 are (i) cumulative EVA (weighted 50% based on our total company for our corporate NEOs and 75% based on our RBIS business for our business NEO), which is a performance condition under Accounting Standards Codification Topic 718, Compensation-Stock Compensation (ASC 718), and (ii) relative TSR (weighted 50% for our corporate NEOs and 25% for our business NEO), compared to a peer group of companies determined based on GICS code and revenue size, which is a market condition under ASC 718, in each case computed over the 2021-2023 performance period. The performance condition component of the fair value of PUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends during the performance period. The maximum grant date fair values of the performance condition component of PUs were $3,565,710, $784,659, $761,308 and $252,853 for Messrs. Butier, Lovins, Stander and Walker respectively, and $243,921 for Ms. Baker-Nel. The market condition component of the fair value of PUs was determined as of the date of grant using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objectives established for the award, including the expected volatility of our stock price relative to the group of peer companies listed on page 69 of this proxy statement at the end of the three-year performance period and a risk-free interest rate of 0.23% derived from linear interpolation of the term structure of Treasury Constant Maturities yield rates for the period; as such, their maximum grant date fair values were the same as their target grant date fair values shown in the table. Based on the Monte-Carlo simulation method, the grant date fair value of the market condition component of the PUs was 131.65% of our average stock price on the grant date. The grant date fair values of the market condition component of the PUs were $1,754,911, $386,188, $374,733 and $124,599 for Messrs. Butier, Lovins, Stander and Walker, respectively, and $119,924 for Ms. Baker-Nel. |
Amounts in 2021 also include the grant date fair value of MSUs, which are paid out in shares of our common stock over one-, two-, three- and four-year performance periods provided that the designated performance objective is achieved as of the end of each period. The number of shares paid out at each vesting date can range from 0% to 200% of one-quarter of the target units on the grant date. The single performance objective that determines the number of units that may be paid out for MSUs is our absolute TSR, which is a market condition under ASC 718; as such, their maximum grant date fair values were the same as their target grant date fair values shown in the table. The grant date fair value was 121.68% of our average stock price on the grant date and determined using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objective established for the award, including the expected volatility of our stock price and risk-free interest rates of 0.08%, 0.12%, 0.23% and 0.42% for the first, second, third and fourth MSU tranches, respectively, derived from linear interpolation of the term structure of Treasury Constant Maturities yield rates for the respective performance periods. The grant date fair values of MSUs were $3,509,903, $772,438, $499,531 and $248,901 for Messrs. Butier, Lovins, Stander and Walker, respectively, and $240,066 for Ms. Baker-Nel. |
Amount for Mr. Stander also includes grant date for value of additional PUs granted in 2021. The performance objectives, weightings and targets for this special one-time award were the same as the 2021-2023 PUs granted to our corporate NEOs described above. The maximum grant date fair value of the performance condition component of these 2021-2023 PUs was $507,767 and the grant date fair value of the market condition component of these PUs was $249,900. |
(3) | Amounts reflect cash AIP awards for the applicable year, which are determined in February and paid in March of the following year. |
(4) | The table shown on the following page shows the components of these amounts for 2021. |
78 | 2022 Proxy Statement | Avery Dennison Corporation |
NAME AND PRINCIPAL POSITION | | YEAR | | SALARY(1) | | BONUS(2) | | STOCK AWARDS(3) | | OPTION AWARDS | | NON-EQUITY INCENTIVE PLAN COMPENSATION(4) | | CHANGE IN PENSION VALUE AND NQDC EARNINGS(5) | | ALL OTHER COMPENSATION(6) | | TOTAL | | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||
Mitchell R. Butier | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
President & | | | 2018 | | | $ | 1,133,000 | | — | | $ | 5,580,651 | | — | | | $ | 1,741,988 | | | | $ | 0 | | | | $ | 254,058 | | | $ | 8,709,697 | | |||
Chief Executive Officer | | | 2017 | | | $ | 1,124,750 | | — | | $ | 4,864,416 | | — | | | $ | 2,407,625 | | | | $ | 344,240 | | | | $ | 218,437 | | | $ | 8,959,468 | | |||
| | 2016 | | | $ | 988,333 | | — | | $ | 4,694,582 | | $ | 2,000,008 | | | $ | 1,832,620 | | | | $ | 170,266 | | | | $ | 152,978 | | | $ | 9,838,787 | | |||
Gregory S. Lovins(7) | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Senior Vice President & | | | 2018 | | | $ | 587,500 | | — | | $ | 1,140,762 | | — | | | $ | 553,500 | | | | $ | 0 | | | | $ | 123,963 | | | $ | 2,405,725 | | |||
Chief Financial Officer | | | 2017 | | | $ | 480,949 | | $ | 100,000 | | $ | 1,038,782 | | — | | | $ | 467,500 | | | | $ | 89,626 | | | | $ | 283,905 | | | $ | 2,460,762 | | ||
Georges Gravanis(8) | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
President, LGM | | | 2018 | | | $ | 651,785 | | — | | $ | 1,145,707 | | — | | | $ | 546,333 | | | | — | | | | $ | 26,640 | | | $ | 2,370,465 | | ||||
| | 2017 | | | $ | 618,551 | | — | | $ | 984,354 | | — | | | $ | 598,737 | | | | — | | | | $ | 50,267 | | | $ | 2,251,909 | | |||||
| | 2016 | | | $ | 523,775 | | — | | $ | 925,850 | | — | | | $ | 682,964 | | | | — | | | | $ | 403,353 | | | $ | 2,535,942 | | |||||
Susan C. Miller | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Senior Vice President, | | | 2018 | | | $ | 560,017 | | — | | $ | 1,022,200 | | — | | | $ | 416,324 | | | | $ | 0 | | | | $ | 147,356 | | | $ | 2,145,897 | | |||
General Counsel & | | | 2017 | | | $ | 543,706 | | — | | $ | 995,936 | | — | | | $ | 558,647 | | | | $ | 1,307,825 | | | | $ | 141,896 | | | $ | 3,548,010 | | |||
Secretary | | | 2016 | | | $ | 527,870 | | — | | $ | 991,532 | | — | | | $ | 468,996 | | | | $ | 331,781 | | | | $ | 126,461 | | | $ | 2,446,640 | | |||
Deon M. Stander(7) | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Vice President & | | | 2018 | | | $ | 535,290 | | $ | 750,000 | | $ | 870,212 | | — | | | $ | 388,051 | | | | $ | 0 | | | | $ | 98,242 | | | $ | 2,641,795 | | ||
General Manager, RBIS | | | | | | | | | | | | | | | | | | |
Perquisites | Benefits | |||||||||||||||||||||||||||||||||||||||||||||||||
Name | Executive Benefit Allowance | Financial Planning | Executive Physical | Other | Company Contribution/ Match, Savings Plan | Company Contributions, Deferred Comp. Plan | Company Match Charitable Contribution | Excess Life Insurance | Executive Long-Term Disability Insurance | Executive Group Term Life Insurance | Excess Executive Liability Insurance | Total | ||||||||||||||||||||||||||||||||||||||
Butier | $ | 70,000 |
|
| – |
|
| – |
| – | $ | 18,850 |
| $ | 73,387 |
| $ | 10,000 |
| $ | 1,944 |
| $ | 2,619 |
| $ | 2,622 |
| $ | 900 |
| $ | 180,322 |
| ||||||||||||||||
Lovins | $ | 65,000 |
|
| – |
|
| – |
| – | $ | 18,850 |
| $ | 31,927 |
| $ | 3,547 |
| $ | 1,944 |
| $ | 2,619 |
| $ | 1,710 |
| $ | 900 |
| $ | 126,497 |
| ||||||||||||||||
Baker-Nel | $ | 50,000 |
|
| – |
|
| – |
| $3,795* | $ | 18,850 |
| $ | 18,783 |
| $ | 5,000 |
| $ | 1,944 |
| $ | 2,270 |
| $ | 2,622 |
| $ | 900 |
| $ | 104,164 |
| ||||||||||||||||
Stander | $ | 65,000 |
|
| – |
|
| – |
| – | $ | 18,462 |
| $ | 32,784 |
|
| – |
| $ | 1,944 |
| $ | 2,619 |
| $ | 2,622 |
| $ | 900 |
| $ | 124,331 |
| ||||||||||||||||
Walker | $ | 50,000 |
|
| – |
| $ | 3,125 |
| – | $ | 18,850 |
| $ | 14,446 |
|
| – |
| $ | 1,944 |
| $ | 307 |
| $ | 1,710 |
| $ | 900 |
| $ | 91,282 |
|
* | Other for Ms. Baker-Nel reflects miscellaneous carryover living expenses related to her previous international assignment in the Netherlands, which includes $1,025 tax equalization gross-up. |
(5) | Ms. Baker-Nel and Mr. Walker became NEOs in 2021. As permitted by SEC rules, the table shows their compensation beginning in the year in which they became NEOs. |
Amounts in 2018 include the grant date fair value of PUs, which are paid out in shares of our common stock at the end of a three-year period provided that the designated performance objectives are achieved at the end of the period. The number of shares paid out at vesting can range from 0% to 200% of the target shares at the time of grant. The performance objectives that determine the number of shares that may be earned for the PUs granted in 2018 were (i) cumulative EVA (weighted 50% based on our total company for our corporate NEOs, 75% based on the LGM business for our LGM business NEO, and 100% based on the RBIS business for our RBIS business NEO), which is a performance condition under Accounting Standards Codification Topic 718,Compensation-Stock Compensation (ASC 718), and (ii) relative TSR (weighted 50% for our corporate NEOs, 25% for our LGM business NEO, and 0% for our RBIS business NEO), compared to the TSR of a peer group of companies objectively determined based on GICS code and revenue size, which is a market condition under ASC 718, in each case computed over the three-year (2018-2020) performance period. The performance condition component of the fair value of PUs was determined based on the fair market value of our common stock on the grant date. The maximum grant date fair values of the performance condition component of PUs were $2,626,485, $536,918, $828,350, and $859,655 for Messrs. Butier, Lovins, Gravanis, and Stander, respectively, and $481,064 for Ms. Miller. The market condition component of the fair value of PUs was determined as of the date of grant using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objectives established for the award, including the expected volatility of our stock price and other assumptions appropriate for determining fair value; as such, their maximum grant date fair values are the same as their target grant date fair values included in the table. The grant date fair values of the market condition component of the PUs were $1,576,586, $322,293 and $165,743 for Messrs. Butier, Lovins and Gravanis, respectively, and $288,766 for Ms. Miller. The PUs granted to Mr. Stander in 2018 did not have a market condition component.
Amounts in 2018 also include the grant date fair value of MSUs, which are paid out in shares of our common stock over one-, two-, three- and four-year performance periods provided that the respective designated performance objectives are achieved as of the end of each period. The number of shares paid out at vesting can range from 0% to 200% of the target shares on the grant date. The single performance objective that determines the number of units that may be paid out for MSUs is our absolute TSR, which is a market condition under ASC 718; as such, their maximum grant date fair values were the same as their target grant date fair values shown in the table. The grant date fair value of MSUs of $117.75 in 2018 for all NEOs was determined using the Monte-Carlo simulation method described above.
Avery Dennison Corporation| 2019 Proxy Statement |66
| | | PERQUISITES | | BENEFITS | | | | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NAME | | Executive Benefit Allowance | | Financial Planning | | Other* | | Company Contribution and Match, Employee Savings Plan | | Company Contributions, Deferred Comp. Plan | | Excess Life Insurance | | Executive Long-Term Disability Insurance | | Executive Liability Insurance | | TOTAL | | |||||||||||||||||||||||||
| Butier | | | $ | 70,000 | | | | — | | — | | $ | 17,875 | | | | $ | 161,302 | | | | $ | 1,944 | | | | $ | 2,700 | | | | $ | 237 | | | $ | 254,058 | | ||||||
| Lovins | | | $ | 65,000 | | | | — | | | | — | | | | $ | 17,875 | | | | $ | 36,207 | | | | $ | 1,944 | | | | $ | 2,700 | | | | $ | 237 | | | $ | 123,963 | | ||
| Gravanis | | | — | | $ | 3,164 | | | | $ | 23,476 | | | | — | | — | | — | | — | | — | $ | 26,640 | | ||||||||||||||||||
| Miller | | | $ | 65,000 | | | | $ | 15,000 | | | | — | | | | $ | 17,875 | | | | $ | 44,600 | | | | $ | 1,944 | | | | $ | 2,700 | | | | $ | 237 | | | $ | 147,356 | | |
| Stander | | | $ | 50,000 | | | | — | | — | | $ | 17,875 | | | | $ | 25,486 | | | | $ | 1,944 | | | | $ | 2,700 | | | | $ | 237 | | | $ | 98,242 | |
Avery Dennison Corporation| 2019 Proxy Statement |67
20182021 GRANTS OF PLAN-BASED AWARDS
The table below provides information regarding grants of plan-based incentive awards made to our NEOs during 2018.
| | | | | | | | | | | | | | | | | | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK UNITS(#) | | | | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS ($)(1) | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS (#)(2) | | | | |||||||||||||||||||||||||||||||
| | | | | | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($)(3) | | |||||||||||||||||||||||||||||||||||
NAME | | AWARD TYPE | | GRANT DATE | | THRESHOLD | | TARGET | | MAXIMUM | | THRESHOLD | | TARGET | | MAXIMUM | | |||||||||||||||||||||||||
Mitchell R. Butier | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| MSUs | | 02/22/18 | | | — | | | — | | — | | | 19,424 | | | | 22,852 | | | | 45,704 | | | | — | | | | $ | 2,690,823 | | | |||||||||
| PUs | | 02/22/18 | | | — | | | — | | — | | | 11,662 | | | | 23,324 | | | | 46,648 | | | | — | | | | $ | 2,889,828 | | | |||||||||
| AIP Award | | — | | | $ | 708,125 | | | $ | 1,416,250 | | $ | 2,832,500 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Gregory S. Lovins | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| MSUs | | 02/22/18 | | | — | | | — | | — | | | 3,970 | | | | 4,671 | | | | 9,342 | | | | — | | | | $ | 550,010 | | | |||||||||
| PUs | | 02/22/18 | | | — | | | — | | — | | | 2,384 | | | | 4,768 | | | | 9,536 | | | | — | | | | $ | 590,752 | | | |||||||||
| AIP Award | | — | | | $ | 137,500 | | | $ | 450,000 | | $ | 550,000 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Georges Gravanis | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| MSUs | | 02/22/18 | | | — | | | — | | — | | | 4,084 | | | | 4,805 | | | | 9,610 | | | | — | | | | $ | 565,789 | | | |||||||||
| PUs | | 02/22/18 | | | — | | | — | | — | | | 2,452 | | | | 4,904 | | | | 9,808 | | | | — | | | | $ | 579,918 | | | |||||||||
| AIP Award | | — | | | $ | 235,488 | | | $ | 470,976 | | $ | 941,952 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Susan C. Miller | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| MSUs | | 02/22/18 | | | — | | | — | | — | | | 3,558 | | | | 4,186 | | | | 8,372 | | | | — | | | | $ | 492,902 | | | |||||||||
| PUs | | 02/22/18 | | | — | | | — | | — | | | 2,136 | | | | 4,272 | | | | 8,544 | | | | — | | | | $ | 529,298 | | | |||||||||
| AIP Award | | — | | | $ | 169,238 | | | $ | 338,475 | | $ | 676,950 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Deon M. Stander | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| MSUs | | 02/22/18 | | | — | | | — | | — | | | 3,179 | | | | 3,740 | | | | 7,480 | | | | — | | | | $ | 440,385 | | | |||||||||
| PUs | | 02/22/18 | | | — | | | — | | — | | | 1,909 | | | | 3,817 | | | | 7,634 | | | | — | | | | $ | 429,827 | | | |||||||||
| AIP Award | | — | | | $ | 134,740 | | | $ | 269,480 | | $ | 538,960 | | | — | | | | — | | | | — | | | | — | | | | — | | |
Amounts for PUs represent threshold, target and maximum opportunities for the 2018-2020 PUs, which are paid out in shares of our common stock at the end of a three-year performance period provided that the cumulative EVA and relative TSR performance objectives, as applicable, are achieved at the end of the period. The actual number of shares paid out can range from 0% to 200% of the target number of shares at the time of grant, with a threshold payout opportunity of 50% if threshold performance is achieved with respect to each of the performance objectives.
The grant date fair value for the performance condition component of PUs was determined based on the fair market value of our common stock on the grant date. The grant date fair value for the market condition component of PUs was determined as of the grant date using the Monte-Carlo simulation method described above.
2021.
For information regarding the assumptions we use for our stock-based compensation, see Note 12, "Long-Term Incentive Compensation," to the consolidated financial statements contained in our 2018 Annual Report.
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock | Grant Date and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 03/01/21 | – | – | – | 13,808 | 16,245 | 32,490 | – | $ | 3,509,903 | |||||||||||||||||||||||||||||||||||||||||||||
PUs | 03/01/21 | – | – | – | 8,943 | 17,886 | 35,772 | – | $ | 3,537,766 | |||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 336,000 | $ | 1,680,000 | $ | 3,360,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 03/01/21 | – | – | – | 3,039 | 3,575 | 7,150 | – | $ | 772,438 | |||||||||||||||||||||||||||||||||||||||||||||
PUs | 03/01/21 | – | – | – | 1,968 | 3,936 | 7,872 | – | $ | 778,523 | |||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 99,189 | $ | 495,945 | $ | 991,890 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 03/01/21 | – | – | – | 944 | 1,111 | 2,222 | – | $ | 240,066 | |||||||||||||||||||||||||||||||||||||||||||||
PUs | 03/01/21 | – | – | – | 611 | 1,223 | 2,446 | – | $ | 241,884 | |||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 41,600 | $ | 208,000 | $ | 416,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 03/01/21 | – | – | – | 1,965 | 2,312 | 4,624 | – | $ | 499,531 | |||||||||||||||||||||||||||||||||||||||||||||
PUs | 03/01/21 | – | – | – | 1,375 | 2,750 | 5,500 | – | $ | 505,487 | |||||||||||||||||||||||||||||||||||||||||||||
Special PUs | 03/01/21 | – | – | – | 1,273 | 2,547 | 5,094 | $ | 503,784 | ||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 42,538 | $ | 341,404 | $ | 682,808 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 03/01/21 | – | – | – | 979 | 1,152 | 2,304 | – | $ | 248,901 | |||||||||||||||||||||||||||||||||||||||||||||
PUs | 03/01/21 | – | – | – | 634 | 1,269 | 2,538 | – | $ | 251,026 | |||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 68,281 | $ | 212,688 | $ | 425,376 | – | – | – | – | – |
(1) | Amounts represent threshold, target and maximum opportunities under the 2021 AIP. Target AIP awards are established by multiplying each NEO’s base salary at the end of 2021 by the following target opportunities: 140% for Mr. Butier; 75% for Mr. Lovins; 60% for Mr. Stander; and 50% for Ms. Baker-Nel and Mr. Walker. Payout levels range from zero for below-threshold performance; 20% for threshold performance based on a threshold of 0% for profitability performance objective(s) and a threshold of 50% for other performance objectives; 100% for target performance with respect to each of the performance objectives; and 200% for maximum performance with respect to each of the performance objectives. |
(2) | Amounts for MSUs represent threshold, target and maximum opportunities, which are paid out in shares of our common stock over one-, two-, three- and four-year performance periods provided that the absolute TSR performance objective is achieved as of the end of each period. The actual number of shares paid out at each vesting date can range from 0% to 200% of one-fourth of the target number of units on the grant date, with a threshold payout of 85%. MSUs accrue dividend equivalents during the performance period, which are earned and paid only at vesting. |
Amounts for PUs represent threshold, target and maximum opportunities for the 2021-2023 PUs, which are paid out in shares of our common stock at the end of the three-year performance period provided that the respective cumulative EVA and relative TSR performance objectives are achieved at the end of the period. The actual number of shares paid out can range from 0% to 200% of the target number of units on the grant date, with a payout of 50% if threshold performance is achieved with respect to each of the performance objectives. |
(3) | The grant date fair value of MSUs was determined using the Monte-Carlo simulation method, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award. |
The grant date fair value for the performance condition component of PUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends during the performance period. The grant date fair value for the market condition component of PUs was determined as of the grant date using the Monte-Carlo simulation method described above. |
For information on the inputs to the Monte-Carlo simulation method, see footnote (2) of the 2021 Summary Compensation Table. For additional information regarding the assumptions we use for our stock-based compensation, see Note 12, “Long-Term Incentive Compensation,” to the consolidated financial statements contained in our 2021 Annual Report. |
(4) | On March 1, 2021, in addition to his annual grant of PUs tied primarily to RBIS’ performance, Mr. Stander was granted a special one-time award of 2021-2023 PUs with a fair market value of $503,784 based 50% on our relative TSR and 50% on our total company EVA, the same performance objectives, weightings and targets as the 2021-2023 PUs granted to our corporate NEOs. |
Avery Dennison Corporation | 2022 Proxy Statement | 79 |
Avery Dennison Corporation| 2019 Proxy Statement |68
20182021 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below shows NEO equity awards outstanding as of December 29, 2018,January 1, 2022, the end of our 20182021 fiscal year.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options – Exercisable (#) | Number of Securities Underlying Unexercised Options – Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 06/01/16 |
| 141,108 |
| – | $ | 73.96 |
| 06/01/26 |
| – |
| – |
| – |
| – | |||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 11,848 | (2) | $ | 2,565,921 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 45,071 | (3) | $ | 9,761,027 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 20,333 | (2) | $ | 4,403,518 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 38,182 | (3) | $ | 8,269,076 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 32,406 | (2) | $ | 7,018,167 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 35,772 | (3) | $ | 7,747,142 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 30,061 | (2) | $ | 6,510,311 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
| 141,108 | – | – | – |
|
|
| – | – |
| 213,673 | $ | 46,275,162 | |||||||||||||||||||||||||||||||||||
Gregory S. Lovins | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 2,424 | (2) | $ | 524,966 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 12,562 | (3) | $ | 2,720,552 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 5,668 | (2) | $ | 1,227,519 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 10,960 | (3) | $ | 2,373,607 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 9,312 | (2) | $ | 2,016,700 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 7,872 | (3) | $ | 1,704,839 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 6,616 | (2) | $ | 1,432,827 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| – |
| – |
| – |
| – |
| – |
| – |
| 55,414 | $ | 12,001,010 | |||||||||||||||||||||||||||||||||||
Deena Baker-Nel | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 631 | (2) | $ | 136,656 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,340 | (3) | $ | 723,344 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 1,358 | (2) | $ | 294,102 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,864 | (3) | $ | 620,256 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,432 | (2) | $ | 526,698 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,446 | (2) | $ | 529,730 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,056 | (3) | $ | 445,268 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| – |
| – |
|
|
|
|
|
|
|
|
|
| – |
| – |
| 15,127 | $ | 3,276,054 | |||||||||||||||||||||||||||
Deon M. Stander | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 1,939 | (2) | $ | 419,929 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 8,176 | (3) | $ | 1,770,676 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,667 | (2) | $ | 794,162 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 7,174 | (3) | $ | 1,553,673 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 6,022 | (2) | $ | 1,304,185 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,500 | (3) | $ | 1,191,135 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,094 | (3) | $ | 1,103,208 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 4,278 | (2) | $ | 926,486 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| – |
| – |
| – |
| – |
|
|
|
| – |
| – |
| 41,850 | $ | 9,063,454 | |||||||||||||||||||||||||||||
Ignacio J. Walker | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 791 | (2) | $ | 171,307 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,092 | (3) | $ | 669,634 | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 1,397 | (2) | $ | 302,548 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,698 | (3) | $ | 584,306 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,293 | (2) | $ | 496,595 | |||||||||||||||||||||||||||||||||
| 09/01/20 |
| – |
| – |
| – |
| – |
| 1,734 |
| $375,532 |
| – |
| – | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,538 | (3) | $ | 549,655 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,132 | (2) | $ | 461,727 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| – |
| – |
| – |
| – |
|
|
|
| 1,734 |
| $375,532 |
| 14,941 | $ | 3,235,772 |
(1) | Market value calculated based on the closing price of our common stock of $216.57 on December 31, 2021, the last trading day of our 2021 fiscal year. |
(2) | MSUs are eligible for vesting over one-, two-, three- and four-year performance periods, subject to achievement of the absolute TSR performance objective established for the award. Amounts are shown at (i) 200%, 200%, 183% and 135% of target for the vesting tranches of the MSUs granted in 2018, 2019, 2020 and 2021, respectively, the payouts for all NEOs based on our actual performance for the respective performance periods as determined by the Compensation Committee in February 2022 and (ii) the maximum level of performance for the remaining tranches of the MSUs granted in 2019, 2020 and 2021 as actual performance through January 1, 2022 would result in above-target payouts. |
(3) | PUs are eligible for vesting at the end of a three-year performance period, subject to achievement of the respective performance objectives established for the award. Amounts are shown at (i) 188% of target for the 2019-2021 PUs for corporate NEOs, and 115% of target for the 2019-2021 PUs for our business NEO, which were the payouts based on our actual performance for the period as determined by the Compensation Committee in February 2022 and (ii) the maximum level of performance for (A) the 2020-2022 PUs and 2021-2023 PUs for all NEOs and (B) the special one-time award of PUs granted to Mr. Stander in 2021, as actual performance through January 1, 2022 would result in above-target payouts. |
80 | 2022 Proxy Statement | Avery Dennison Corporation |
NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS — EXERCISABLE (#) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS — UNEXERCISABLE (#) | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(1) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED ($)(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | |
Mitchell R. Butier | | ||||||||||||||||||
02/26/15 | — | — | — | — | — | — | 13,126(5) | $1,165,983 | |||||||||||
02/25/16 | — | — | — | — | — | — | 70,320(4) | $6,246,526 | |||||||||||
02/25/16 | — | — | — | — | — | — | 30,196(5) | $2,682,311 | |||||||||||
06/01/16 | — | 141,108(2) | $73.96 | 06/01/26 | — | — | — | — | |||||||||||
02/23/17 | — | — | — | — | — | — | 58,904(4) | $5,232,442 | |||||||||||
02/23/17 | — | — | — | — | — | — | 35,080(5) | $3,116,156 | |||||||||||
02/22/18 | — | — | — | — | — | — | 46,648(4) | $4,143,742 | |||||||||||
02/22/18 | — | — | — | — | — | — | 17,591(5) | $1,562,609 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | — | 141,108 | — | — | 271,865 | $24,149,769 | |||||||||||||
Gregory S. Lovins | | ||||||||||||||||||
02/26/15 | — | — | — | — | — | — | 2,827(5) | $251,122 | |||||||||||
02/25/16 | — | — | — | — | — | — | 7,672(4) | $681,504 | |||||||||||
02/25/16 | — | — | — | — | — | — | 3,295(5) | $292,695 | |||||||||||
02/23/17 | — | — | — | — | — | — | 6,228(4) | $553,234 | |||||||||||
02/23/17 | — | — | — | — | — | — | 3,711(5) | $329,648 | |||||||||||
09/01/17 | — | — | — | — | 4,359(3) | $387,210 | — | — | |||||||||||
02/22/18 | — | — | — | — | — | — | 9,536(4) | $847,082 | |||||||||||
02/22/18 | — | — | — | — | — | — | 3,596(5) | $319,433 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | — | — | 4,359 | $387,210 | 36,865 | $3,274,718 | |||||||||||||
Georges Gravanis | | ||||||||||||||||||
02/26/15 | — | — | — | — | — | — | 3,634(5) | $322,808 | |||||||||||
06/01/15 | — | — | — | — | 3,043(3) | $270,310 | — | — | |||||||||||
02/25/16 | — | — | — | — | — | — | 14,390(4) | $1,278,263 | |||||||||||
02/25/16 | — | — | — | — | — | — | 6,179(5) | $548,881 | |||||||||||
02/23/17 | — | — | — | — | — | — | 12,294(4) | $1,092,076 | |||||||||||
02/23/17 | — | — | — | — | — | — | 7,321(5) | $650,324 | |||||||||||
02/22/18 | — | — | — | — | — | — | 9,808(4) | $871,244 | |||||||||||
02/22/18 | — | — | — | — | — | — | 3,699(5) | $328,582 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | — | — | 3,043 | $270,310 | 57,325 | $5,092,178 | |||||||||||||
Susan C. Miller | | ||||||||||||||||||
02/26/15 | — | — | — | — | — | — | 5,365(5) | $476,573 | |||||||||||
02/25/16 | — | — | — | — | — | — | 14,852(4) | $1,319,304 | |||||||||||
02/25/16 | — | — | — | — | — | — | 6,378(5) | $566,558 | |||||||||||
02/23/17 | — | — | — | — | — | — | 12,060(4) | $1,071,290 | |||||||||||
02/23/17 | — | — | — | — | — | — | 7,182(5) | $637,977 | |||||||||||
02/22/18 | — | — | — | — | — | — | 8,544(4) | $758,964 | |||||||||||
02/22/18 | — | — | — | — | — | — | 3,222(5) | $286,210 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | — | — | — | — | 57,603 | $5,116,876 | |||||||||||||
Deon M. Stander | | ||||||||||||||||||
02/26/15 | — | — | — | — | — | — | 2,808(5) | $249,435 | |||||||||||
02/25/16 | — | — | — | — | — | — | 20,138(4) | $1,788,858 | |||||||||||
02/25/16 | — | — | — | — | — | — | 2,883(5) | $256,097 | |||||||||||
02/23/17 | — | — | — | — | — | — | 16,192(4) | $1,438,335 | |||||||||||
02/23/17 | — | — | — | — | — | — | 3,215(5) | $285,588 | |||||||||||
02/22/18 | — | — | — | — | — | — | 7,634(4) | $678,128 | |||||||||||
02/22/18 | — | — | — | — | — | — | 2,879(5) | $255,742 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
55,749 | $4,952,183 |
Avery Dennison Corporation| 2019 Proxy Statement |69
Avery Dennison Corporation| 2019 Proxy Statement |70
20182021 OPTION EXERCISES AND STOCK VESTED
The table below provides information regarding the number of shares acquired and the value realized by our NEOs upon the vesting of stock awards during 2018. Amounts reflect the vesting of (i) the PUs granted in 2015 for the 2015-2017 performance period, which paid out at 200% of target based on our relative TSR for all NEOs and at 200% of target based on our cumulative EVA for our corporate NEOs (excluding Mr. Lovins), 200% of target based on LGM's cumulative EVA for Messrs. Lovins and Gravanis, and 61% of target based on RBIS' cumulative EVA for Mr. Stander; (ii) the fourth tranche of MSUs granted in 2014 that paid out at 200% of target based on our 2014-2017 absolute TSR; (iii) the third tranche of MSUs granted in 2015 that paid out at 200% of target based on our 2015-2017 absolute TSR; (iv) the second tranche of MSUs granted in 2016 that paid out at 200% of target based on our 2016-2017 absolute TSR; (v) the first tranche of MSUs granted in 2017 that paid out at 188% of target based on our 2017 absolute TSR; and (vi) RSUs granted in 2015 and 2017 that vested in 2018. MSU amounts include accrued dividend equivalents paid out at vesting.2021.
| OPTION AWARDS | STOCK AWARDS | ||||||
---|---|---|---|---|---|---|---|---|
NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($) | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($)(1) | ||||
Mitchell R. Butier | — | — | 100,035 | $11,777,116 | ||||
Gregory S. Lovins | — | — | 19,501 | $2,279,893 | ||||
Georges Gravanis | — | — | 28,780 | $3,355,193 | ||||
Susan C. Miller | — | — | 35,174 | $4,144,904 | ||||
Dean M. Stander | — | — | 15,767 | $1,824,341 |
Option Awards | Stock Awards | ||||||||||||||||||||||||
Name | Number of Shares on Exercise (#) | Value Realized on Exercise ($) |
| Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||
Mitchell R. Butier | – | – | 73,772 | $ | 13,090,841 | ||||||||||||||||||||
Gregory S. Lovins | – | – | 16,477 | $ | 2,993,224 | ||||||||||||||||||||
Deena Baker-Nel | – | – | 4,523 | $ | 802,606 | ||||||||||||||||||||
Deon M. Stander | – | – | 10,591 | $ | 1,879,373 | ||||||||||||||||||||
Ignacio J. Walker | – | – | 5,932 | $ | 1,093,985 |
(1) | |||||||||||||||
Amounts reflect the number of shares |
Name | Award Type | Grant Date | Number of Units Subject to Vesting (#) | Performance Modifier (%) | Number of Shares Acquired on Vesting (#) | Fair Market Value on Vesting Date ($) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||
Butier |
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| ||||||||||||||
| MSUs | 02/23/17 | 6,394 | 200 | % | 13,812 | $ | 177.45 | $ | 2,450,939 | |||||||||||||||||||||||||
| MSUs | 02/22/18 | 5,713 | 146 | % | 8,842 | $ | 177.45 | $ | 1,569,013 | |||||||||||||||||||||||||
| MSUs | 02/28/19 | 4,952 | 197 | % | 10,139 | $ | 177.45 | $ | 1,799,166 | |||||||||||||||||||||||||
| MSUs | 02/27/20 | 5,462 | 120 | % | 6,693 | $ | 177.45 | $ | 1,187,673 | |||||||||||||||||||||||||
| PUs | 02/22/18 | 23,324 | 147 | % | 34,286 | $ | 177.45 | $ | 6,084,051 | |||||||||||||||||||||||||
Lovins |
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| ||||||||||||||
| RSUs | 09/01/17 | 1,453 | – | 1,453 | $ | 225.20 | $ | 327,215 | ||||||||||||||||||||||||||
| MSUs | 02/23/17 | 676 | 200 | % | 1,462 | $ | 177.45 | $ | 259,432 | |||||||||||||||||||||||||
| MSUs | 02/22/18 | 1,168 | 146 | % | 1,806 | $ | 177.45 | $ | 320,475 | |||||||||||||||||||||||||
| MSUs | 02/28/19 | 1,380 | 197 | % | 2,826 | $ | 177.45 | $ | 501,474 | |||||||||||||||||||||||||
| MSUs | 02/27/20 | 1,571 | 120 | % | 1,921 | $ | 177.45 | $ | 340,881 | |||||||||||||||||||||||||
| PUs | 02/22/18 | 4,768 | 147 | % | 7,009 | $ | 177.45 | $ | 1,243,747 | |||||||||||||||||||||||||
Baker-Nel |
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| ||||||||||||||
| MSUs | 02/23/17 | 190 | 200 | % | 413 | $ | 177.45 | $ | 73,287 | |||||||||||||||||||||||||
| MSUs | 02/22/18 | 304 | 146 | % | 469 | $ | 177.45 | $ | 83,224 | |||||||||||||||||||||||||
| MSUs | 02/28/19 | 331 | 197 | % | 676 | $ | 177.45 | $ | 119,956 | |||||||||||||||||||||||||
| MSUs | 02/27/20 | 410 | 120 | % | 502 | $ | 177.45 | $ | 89,080 | |||||||||||||||||||||||||
| PUs | 02/22/18 | 1,239 | 199 | % | 2,463 | $ | 177.45 | $ | 437,059 | |||||||||||||||||||||||||
Stander |
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| ||||||||||||||
| MSUs | 02/23/17 | 586 | 200 | % | 1,266 | $ | 177.45 | $ | 224,652 | |||||||||||||||||||||||||
| MSUs | 02/22/18 | 935 | 146 | % | 1,447 | $ | 177.45 | $ | 256,770 | |||||||||||||||||||||||||
| MSUs | 02/28/19 | 893 | 197 | % | 1,827 | $ | 177.45 | $ | 324,201 | |||||||||||||||||||||||||
| MSUs | 02/27/20 | 1,016 | 120 | % | 1,242 | $ | 177.45 | $ | 220,393 | |||||||||||||||||||||||||
| PUs | 02/22/18 | 3,817 | 126 | % | 4,809 | $ | 177.45 | $ | 853,357 | |||||||||||||||||||||||||
Walker |
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| RSUs | 09/01/20 | 866 | – | 866 | $ | 225.20 | $ | 195,023 | ||||||||||||||||||||||||||
| MSUs | 02/23/17 | 476 | 200 | % | 1,028 | $ | 177.45 | $ | 182,419 | |||||||||||||||||||||||||
| MSUs | 02/22/18 | 381 | 146 | % | 588 | $ | 177.45 | $ | 104,341 | |||||||||||||||||||||||||
| MSUs | 02/28/19 | 340 | 197 | % | 694 | $ | 177.45 | $ | 123,150 | |||||||||||||||||||||||||
| MSUs | 02/27/20 | 387 | 120 | % | 472 | $ | 177.45 | $ | 83,756 | |||||||||||||||||||||||||
| PUs | 02/22/18 | 1,554 | 147 | % | 2,284 | $ | 177.45 | $ | 405,296 |
Avery Dennison Corporation | 2022 Proxy Statement | 81 |
NAME | AWARD TYPE | GRANT DATE | NUMBER OF UNITS SUBJECT TO VESTING (#) | PERFORMANCE MODIFIER (%) | NUMBER OF SHARES ACQUIRED ON VESTING (#)* | FAIR MARKET VALUE ON VESTING DATE ($) | VALUE REALIZED ON VESTING ($) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | |
Butier |
| |
|
|
|
|
| ||||||||
RSUs | 03/02/15 | 3,809 | — | 3,809 | $114.95 | $437,845 | |||||||||
MSUs | 02/27/14 | 4,083 | 200% | 8,166 | $117.84 | $962,281 | |||||||||
MSUs | 02/26/15 | 6,708 | 200% | 13,415 | $117.84 | $1,580,823 | |||||||||
MSUs | 02/25/16 | 7,853 | 200% | 15,705 | $117.84 | $1,850,677 | |||||||||
MSUs | 02/23/17 | 6,513 | 188% | 12,244 | $117.84 | $1,442,833 | |||||||||
PUs | 02/26/15 | 23,348 | 200% | 46,696 | $117.84 | $5,502,657 | |||||||||
Lovins | | ||||||||||||||
RSUs | 09/01/17 | 1,453 | — | 1,453 | $105.38 | $153,117 | |||||||||
MSUs | 02/27/14 | 1,050 | 200% | 2,100 | $117.84 | $247,464 | |||||||||
MSUs | 02/26/15 | 1,444 | 200% | 2,887 | $117.84 | $340,204 | |||||||||
MSUs | 02/25/16 | 856 | 200% | 1,712 | $117.84 | $201,742 | |||||||||
MSUs | 02/23/17 | 689 | 188% | 1,295 | $117.84 | $152,603 | |||||||||
PUs | 02/26/15 | 5,027 | 200% | 10,054 | $117.84 | $1,184,763 | |||||||||
Gravanis | | ||||||||||||||
RSUs | 06/01/15 | 3,043 | — | 3,043 | $105.93 | $322,345 | |||||||||
MSUs | 02/27/14 | 1,668 | 200% | 3,336 | $117.84 | $393,114 | |||||||||
MSUs | 02/26/15 | 1,856 | 200% | 3,711 | $117.84 | $437,304 | |||||||||
MSUs | 02/25/16 | 1,607 | 200% | 3,213 | $117.84 | $378,620 | |||||||||
MSUs | 02/23/17 | 1,359 | 188% | 2,555 | $117.84 | $301,081 | |||||||||
PUs | 02/26/15 | 6,461 | 200% | 12,922 | $117.84 | $1,522,729 | |||||||||
Miller | | ||||||||||||||
MSUs | 02/27/14 | 2,395 | 200% | 4,790 | $117.84 | $564,454 | |||||||||
MSUs | 02/26/15 | 2,740 | 200% | 5,480 | $117.84 | $645,763 | |||||||||
MSUs | 02/25/16 | 1,659 | 200% | 3,317 | $117.84 | $390,875 | |||||||||
MSUs | 02/23/17 | 1,334 | 188% | 2,507 | $117.84 | $295,425 | |||||||||
PUs | 02/26/15 | 9,540 | 200% | 19,080 | $117.84 | $2,248,387 | |||||||||
Stander | | ||||||||||||||
RSUs | 09/01/15 | 2,700 | — | 2,700 | $105.38 | $284,526 | |||||||||
MSUs | 02/27/14 | 1,401 | 200% | 2,801 | $117.84 | $330,070 | |||||||||
MSUs | 02/26/15 | 1,433 | 200% | 2,866 | $117.84 | $337,729 | |||||||||
MSUs | 02/25/16 | 750 | 200% | 1,499 | $117.84 | $176,642 | |||||||||
MSUs | 02/23/17 | 597 | 188% | 1,122 | $117.84 | $132,217 | |||||||||
PUs | 02/26/15 | 4,991 | 96% | 4,779 | $117.84 | $563,157 |
Avery Dennison Corporation| 2019 Proxy Statement |71
The present valuesvalue of accumulated pension benefits shown in the table below havehas been calculated based on the assumptions we used to calculate our pension benefit obligations in the consolidated financial statements contained in our 20182021 Annual Report. Since the accrual of additional amounts under these plans has been frozen since December 31, 2010, the fluctuation in present values from year to year is based primarily on changes in the assumptions we use to determine the present value of participants' accumulated benefits for purposes of our year-end audited financial statementsMs. Baker-Nel and secondarily on the passage of time. Messrs. GravanisStander and Stander haveWalker are not been included in the table because they have no accrued benefits under these plans. No payments from these plans were made to any of our NEOs in 2018.accumulated pension benefits.
NAME | | PLAN NAME | NUMBER OF YEARS OF CREDITED SERVICE (#) | PRESENT VALUE OF ACCUMULATED BENEFIT(1) ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |
Mitchell R. Butier |
|
| | | |||||||
Pension Plan | 9.33 | $ | 310,097 | ||||||||
Benefit Restoration Plan | 9.33 | $ | 225,701 | ||||||||
| | | | | | | | | | | |
Total | $ | 535,798 | |||||||||
Gregory S. Lovins | | | |||||||||
Pension Plan | 15.58 | $ | 310,414 | ||||||||
Benefit Restoration Plan | 15.58 | $ | 30,049 | ||||||||
| | | | | | | | | | | |
Total | $ | 340,463 | |||||||||
Susan C. Miller | | | |||||||||
Pension Plan | 21.00 | $ | 921,263 | ||||||||
Benefit Restoration Plan | 21.00 | $ | 424,692 | ||||||||
| | | | | | | | | | | |
Total | $ | 1,345,955 |
Amounts shown reflect the lump-sum present value of the applicable pension benefit accruedbenefits accumulated as of December 29, 2018. WhileJanuary 1, 2022, the last day of our fiscal year.
Name | Plan Name | Number of Years of Credited Service(#) | Present Value of Accumulated | Payments During Last Fiscal | ||||||||||||||||
Mitchell R. Butier | Benefit Restoration Plan | 9.33 | $ | 362,434 | – | |||||||||||||||
Gregory S. Lovins | Benefit Restoration Plan | 15.58 | $ | 48,937 | – |
(1) | The Benefit Restoration Plan allows for lump-sum payment. For information regarding the assumptions we use to determine the present value of accumulated benefits for our pension plans, see Note 6, “Pension and Other Postretirement Benefits,” to the consolidated financial statements contained in our 2021 Annual Report. |
Benefit Restoration Plan
Our Benefit Restoration Plan allows(BRP) is a nonqualified excess benefit plan that provides for lump-sumthe payment the Pension Plan requires that distributions take the form of a monthly annuity, exceptsupplemental retirement benefits to eligible participants in special circumstances. For information regarding the assumptions we use to determine the present value of accumulated benefits for our pension plans, see Note 6, "Pension and Other Postretirement Benefits,"an amount equal to the consolidated financial statements contained inamount by which their benefits payable under our 2018 Annual Report.
PENSION PLAN
We provide qualified retirement benefits for eligiblenow terminated U.S. employeespension plan would have been reduced under the Avery Dennison Pension Plan (the "Pension Plan"). All ofCode. Messrs. Butier and Lovins are our only NEOs — except for Messrs. Gravanis and Stander — are eligible to receive benefits under the Pension Plan, including reduced benefits in the event of early retirement. The accrual of additional benefits under the Pension Plan was frozen as of December 31, 2010; as a result, no additionalBRP. No accruals were made during 2018.2021.
Compensation covered by the Pension PlanBRP includes base salary and AIP awards, up to the applicable statutory limitations each plan year. Employees vestvested in the Pension PlanBRP after five years of service, or at age 55 upon termination of employment. The annual pension benefit payable in 2018 was limited to $220,000 under the Code.
Benefits under the Pension PlanBRP are based on pensionable earnings, length of service, when benefits commence and how they are paid. Benefits are calculated separately for each year of applicable service using a formula equal to 1.25% times compensation up to the breakpoint (which for each year prior to our freezing the accrual of additional benefits was the average of the Social Security wage bases for the preceding 35 years) plus 1.75% times compensation in excess of the breakpoint. The results of the calculation for each year of service are added together to determine the annual single life annuity benefit under the Pension PlanBRP for an employee at normal retirement (generally age 65), which is not subject to reduction for Social Security payments.
Eligible participants may elect to receive their benefits in one of several payment forms payable in monthly installments. Benefits Payments are generally paid in annuity form over the lifetime of the participant and/or a beneficiary. By default, single participants are eligible for a single life annuity, and they can choose from alternate payment forms that may include benefits payable to a beneficiary. By default, married participants are eligible for a joint and survivor annuity that is payable over the participant's lifetime, and, if survived by a spouse, over the spouse's lifetime. Married participants can choose alternate payment forms, with the consent of the spouse. The monthly benefit each eligible participant may receive is adjusted based on the plan's definition of actuarial equivalence.
Avery Dennison Corporation| 2019 Proxy Statement |72
Benefits are generally payable without reduction after participants reach age 65; however, certain participants — including our participating NEOs — may be eligible to receive an unreduced benefit at age 62. Prior to age 62, a participant's benefits are reduced by 15% for commencement of benefits at age 61 and an additional 5% for each additional year the participant elects to receive benefits early, provided that no benefit may commence before a participant reaches age 55.
We terminated our U.S. pension plan as of September 28, 2018. We expect to fully fund the plan prior to transferring its liability to one or more insurance companies in the first half of 2019. Termination of the plan is expected to settle our U.S. pension liability through a combination of (i) lump-sum payments we made in 2018 to eligible participants who timely elected to receive them; (ii) the purchase of a group annuity contract(s) with one or more insurance companies; and (iii) the transfer to the Pension Benefit Guaranty Corporation of the benefits of those participants that qualify under applicable guidelines.
BENEFIT RESTORATION PLAN
Our Benefit Restoration Plan (BRP) is a nonqualified excess benefit plan that provides for the payment of supplemental retirement benefits to eligible participants in an amount equal to the amount by which their benefits otherwise payable under the Pension Plan would be reduced under the Code. All NEOs — except for Messrs. Gravanis and Stander — are eligible to receive benefits under the BRP. The accrual of additional benefits under the BRP was frozen as of December 31, 2010; as a result, no additional accruals were made during 2018.
Because the BRP is designed to mirror the Pension Plan, the information concerning the compensation covered, benefit formula, early retirement provisions, and payment forms is the same as that of the Pension Plan except that (i) the BRP provides for payment in the form of a lump-sum distribution, unless a timely election is made for monthly payments over the lifetime of the participant and, if applicable, a designated beneficiary, and (ii) BRP benefits are generally payable upon the later of separation from service and age 55.
82 | 2022 Proxy Statement | Avery Dennison Corporation |
20182021 NONQUALIFIED DEFERRED COMPENSATION
The table below provides information regarding NEO and company contributions to nonqualified deferred compensation plans(1) in fiscal year 2018. Mr. Gravanis has not been included in the table because, as a non-U.S. employee, he is not eligible to participate in the only plan currently open for deferrals.
NAME | EXECUTIVE CONTRIBUTIONS IN LAST FY ($) | REGISTRANT CONTRIBUTIONS IN LAST FY ($)(2) | AGGREGATE EARNINGS IN LAST FY ($)(3) | AGGREGATE WITHDRAWALS/ DISTRIBUTIONS ($) | AGGREGATE BALANCE AT LAST FYE ($) | |||||
---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |
Mitchell R. Butier | — | $161,302 | $(113,709) | — | $1,542,455 | |||||
Gregory S. Lovins | — | $36,207 | $(12,709) | — | $216,703 | |||||
Susan C. Miller | — | $44,600 | $(472,527) | — | $4,975,516 | |||||
Deon M. Stander | $112,624 | $25,486 | $(25,681) | — | $295,730 |
Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance At Last FYE ($) | ||||||||||||||||||||
Mitchell R. Butier | – | $ | 73,387 | $ | 662,480 | – | $ | 3,373,198 | |||||||||||||||||
Gregory S. Lovins | – | $ | 31,927 | $ | 133,115 | – | $ | 596,615 | |||||||||||||||||
Deena Baker-Nel | $ | 40,388 | $ | 18,783 | $ | 87,340 | – | $ | 760,929 | ||||||||||||||||
Deon M. Stander | $ | 132,495 | $ | 32,784 | $ | 142,088 | – | $ | 1,178,921 | ||||||||||||||||
Ignacio J. Walker | – | $ | 14,446 | $ | 320 | – | $ | 89,077 |
(1) | Company contributions to the EVDRP are included in the “All Other Compensation” column of the 2021 Summary Compensation Table. |
(2) | Amounts reflect EVDRP vested account balances as of January 1, 2022, the last day of our 2021 fiscal year. Because the amounts do not represent above-market earnings, they are not reported in the 2021 Summary Compensation Table. The amounts shown below were reported under the “All Other Compensation” column of the |
Name | Aggregate Company Contributions Previously Reported ($) | ||||
Butier | $ | 756,247 | |||
Lovins | $ | 147,788 | |||
Baker-Nel | – | ||||
Stander | $ | 111,777 | |||
Walker | – |
Executive Variable Deferred Retirement Plan
The EVDRP is the only active deferred compensation plan available to our eligible U.S. employees. Earnings are based on a fixed rate and/or the performance of variable bond and equity funds selected by the participant from available options. The EVDRP does not offer investment options that provide above-market interest rates.
Eligible employees are able to defer U.S. taxes until their investment is withdrawn, providing an opportunity for them to accumulate savings on a pre-tax basis. We also benefit from this arrangement because we can use this cash for other corporate purposes until a deferred compensation account is paid to a participant based on his or her election to receive in-service withdrawals or after termination of employment.
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.
Employee Contributions
Under the EVDRP, eligible employees can defer up to 75% of their salary and 90% of their AIP award. Deferrals are immediately vested.
Company Contribution
As of January 1, 2021, we made a contribution to the deferred compensation accounts of eligible employees based on 401(k) eligible earnings in excess of the federal compensation limit and deferred compensation in 2020. This annual contribution provided an automatic contribution of 3% of pay plus a matching contribution of 50% on the first 7% of pay not covered by company contributions to our 401(k) Plan. This contribution was added to the deferred compensation accounts of eligible employees employed at year-end 2020, which included all our NEOs. This benefit is designed to supplement 401(k) contributions that are limited under federal law.
Withdrawals/Distributions
Contributions to deferred compensation accounts are required to be distributed following an eligible employee’s separation from service. Subject to Section 409A of the Code, eligible employees may elect to receive separation from
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Avery Dennison Corporation| 20192022 Proxy Statement|73
EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN
Our Executive Variable Deferred Retirement Plan (EVDRP) is the only active deferred compensation plan available to our eligible U.S. employees. Earnings are based on a fixed rate and/or the performance of variable bond and equity funds selected by the participant from available options. The EVDRP does not offer investment options that provide above-market interest rates.
Eligible employees are able to defer U.S. taxes until their investment is withdrawn, providing an opportunity for them to accumulate savings on a pre-tax basis. We also benefit from this arrangement because we do not have to expend cash to pay amounts individuals have elected to defer. As a result, we can use this cash for other corporate purposes until a deferred compensation account is paid to a participant at the time the participant elected to receive in-service withdrawals or after termination of employment.
83
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.
service withdrawals in the form of a lump-sum payment or monthly installments over two to 20 years. Eligible employees may change the method in which payments are distributed provided that they do so at least 12 months before the date of distribution; however, any change results in the distribution occurring or beginning five years later than it would have otherwise. All NEOs are “specified employees” under Section 409A. Distributions to specified employees cannot be made until at least the seventh month after separation from service, except in the event of death.
PAYMENTS UPON TERMINATION AS OF JANUARY 1, 2022
The table below shows potential benefits that would have been payable to our NEOs in the event of termination on January 1, 2022, the last day of our 2021 fiscal year. Amounts paid or distributed upon actual termination may differ from amounts shown due to timing and any future changes to our benefit plans.
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| Termination Scenarios as of End of Fiscal Year 2021 | |||||||||||||||||||||||||||||
Name |
| Benefit | Death | Qualifying Disability | Qualifying Retirement | Involuntary Termination Not for Cause | Termination within 24 Mos. of Change of Control | |||||||||||||||||||||||||
Mitchell R. Butier |
| |||||||||||||||||||||||||||||||
Severance Payment | – | – | – | $ | 5,808,720 | $ | 8,713,079 | |||||||||||||||||||||||||
Unvested PUs(1) | $ | 4,047,549 | $ | 4,047,549 | – | – | $ | 8,008,109 | ||||||||||||||||||||||||
Unvested MSUs(1) | $ | 3,240,074 | $ | 3,240,074 | – | – | $ | 6,249,951 | ||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||
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|
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|
| |||||||||||||||||||||||
Total | $ | 7,287,623 | $ | 7,287,623 | – | $ | 5,833,720 | $ | 22,996,139 | |||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||
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| Value of Forfeited Equity(1) | $ | (6,970,437 | ) | $ | (6,970,437 | ) | $ | (14,258,060 | ) | $ | (14,258,060 | ) | – | |||||||||||||||||
Gregory S. Lovins |
| |||||||||||||||||||||||||||||||
Severance Payment | – | – | – | $ | 1,181,565 | $ | 2,363,130 | |||||||||||||||||||||||||
Unvested PUs(1) | $ | 1,075,342 | $ | 1,075,342 | – | – | $ | 2,039,223 | ||||||||||||||||||||||||
Unvested MSUs(1) | $ | 858,595 | $ | 858,595 | – | – | $ | 1,606,267 | ||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total | $ | 1,933,937 | $ | 1,933,937 | – | $ | 1,206,565 | $ | 6,033,620 | |||||||||||||||||||||||
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| |||||||||||||||||||||||
|
| Value of Forfeited Equity(1) | $ | (1,711,553 | ) | $ | (1,711,553 | ) | $ | (3,645,490 | ) | $ | (3,645,490 | ) | – | |||||||||||||||||
Deena Baker-Nel |
| |||||||||||||||||||||||||||||||
Severance Payment | – | – | – | $ | 648,360 | $ | 648,360 | |||||||||||||||||||||||||
Unvested PUs(1) | $ | 295,041 | $ | 295,041 | – | – | $ | 574,993 | ||||||||||||||||||||||||
Unvested MSUs(1) | $ | 229,875 | $ | 229,875 | – | – | $ | 442,299 | ||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||
Total | $ | 524,916 | $ | 524,916 | – | $ | 673,360 | $ | 1,690,652 | |||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||
Value of Forfeited Equity(1) | $ | (492,376 | ) | $ | (492,376 | ) | $ | (1,017,292 | ) | $ | (1,017,292 | ) | – | |||||||||||||||||||
Deon M. Stander |
| |||||||||||||||||||||||||||||||
Severance Payment | – | – | – | $ | 934,771 | $ | 1,869,542 | |||||||||||||||||||||||||
Unvested PUs(1) | $ | 900,281 | $ | 900,281 | – | – | $ | 1,924,008 | ||||||||||||||||||||||||
Unvested MSUs(1) | $ | 555,627 | $ | 555,627 | – | – | $ | 1,039,203 | ||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total | $ | 1,455,908 | $ | 1,455,908 | – | $ | 959,771 | $ | 4,857,753 | |||||||||||||||||||||||
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| |||||||||||||||||||||||
|
| Value of Forfeited Equity(1) | $ | (1,507,303 | ) | $ | (1,507,303 | ) | $ | (2,963,211 | ) | $ | (2,963,211 | ) | – | |||||||||||||||||
Ignacio J. Walker |
| |||||||||||||||||||||||||||||||
Severance Payment | – | – | – | 662,423 | $ | 662,423 | ||||||||||||||||||||||||||
Unvested RSUs(1) | $ | 375,532 | $ | 375,532 | – | – | $ | 375,532 | ||||||||||||||||||||||||
Unvested PUs(1) | $ | 286,378 | $ | 286,378 | – | – | $ | 566,980 | ||||||||||||||||||||||||
Unvested MSUs(1) | $ | 227,997 | $ | 227,997 | – | – | $ | 440,873 | ||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||
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Total | $ | 889,907 | $ | 889,907 | – | $ | 687,423 | $ | 2,070,808 | |||||||||||||||||||||||
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| |||||||||||||||||||||||
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| Value of Forfeited Equity(1) | $ | (493,479 | ) | $ | (493,479 | ) | $ | (1,383,386 | ) | $ | (1,383,386 | ) | – |
84 | 2022 Proxy Statement | Avery Dennison Corporation |
In the event of termination, our NEOs would be entitled to receive their accrued balance under the EVDRP. These amounts would be determined and paid in accordance with the terms and conditions of the plan, and are not included in the table. See 2021 Nonqualified Deferred Compensation for more information.
None of our NEOs has an employment contract, and all of them are employed at-will; if an NEO were no longer performing at the expected level, he or she could be terminated for cause immediately without receiving a contractually guaranteed payment. The other potential payments upon termination or a change of control are described below.
Executive Severance Plan
Our NEOs are eligible participants under the Severance Plan. Upon involuntary termination not for cause, our NEOs would be entitled to the benefits shown below.
Lump-sum payment equal to annual base salary medical and dental insurance premiums | 2For our CEO | Outplacement services of | ||||||||||||||
× | + | |||||||||||||||
1For all other NEOs |
Benefits Not Subject to Gross-up. Benefits are subject to withholding for all applicable taxes and not grossed-up for taxes.
Trigger for Benefits. Involuntary termination, which excludes termination for cause or due to disability, death, voluntary resignation, or an executive declining simultaneous or continuing employment in a comparable position.
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; (iv) substantial failure to comply with written policies and procedures; (v) misconduct; or (vi) substantial failure to perform material job duties not cured within 30 days after written notice.
Key Executive Change of Control Severance Plan
The COC Severance Plan is designed to retain certain key executives during a period in which a change of control transaction is being negotiated or a hostile takeover is being attempted. Messrs. Butier, Lovins and Stander are the only eligible participants under the COC Severance Plan. These NEOs are entitled to benefits only if they are terminated not for “cause” or terminate employment for “good reason” within 24 months of the change of control (a “double trigger”). In these circumstances, these NEOs would be entitled to the benefits shown below.
Lump-sum payment equal to annual | × | 3For our CEO | + | Prorated target AIP award for year in which termination occurs | + | Outplacement services of | ||||||||||||||||||
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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 for a participating NEO, the NEO can elect to receive (i) his full benefits, with him responsible for paying any applicable excise taxes, or (ii) reduced benefits to an amount sufficient to eliminate any excise tax liability. In the termination payments table, we assume that these NEOs would elect to reduce their respective benefits.
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 company’s stock previously held, more than 50% of the total fair market value or the total voting power of our company’s stock; (B) 30% or more of the total voting power of our company’s stock during any 12-month period; or (C) assets of our company having a total gross fair market value of 40% or more of the total gross fair market value of all of our company’s assets during any 12-month period.
Avery Dennison Corporation|
| 85 |
Definition of Cause. Cause is defined as it is under the Severance Plan.
Definition of Good Reason. Good reason is defined as (i) material diminution in base compensation; (ii) material diminution in authority, duties, or responsibilities or supervisor’s authority, duties, or responsibilities; (iii) material change in geographic job location; or (iv) any other action or inaction that constitutes a material breach by our company.
Equity Incentive Plans
Under our 2017 Incentive Award Plan approved by stockholders in April 2017, unvested equity awards held by our NEOs on the date of termination would vest as shown in the table below.
VESTING OF EQUITY AWARDS ON TERMINATION EVENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | MSUs | RSUs | Stock Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Resignation/Involuntary Termination, Whether or Not for Cause | Cancelled | Cancelled | Cancelled | Cancelled | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Death | Vest at time of event on | Vest at time of event on prorated basis based on target performance | Vest | Cancelled | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Qualifying Disability | Same as death | Same as death | Vest | Cancelled | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Qualifying Retirement | Vest after end of performance period on prorated basis based on actual performance | Vest after end of performance period on prorated basis based on actual performance | Vest | Vest and exercisable for term of option | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change of Control | Vest based on actual, if determinable, and otherwise target performance only in
| Vest based on actual, if determinable, and otherwise target performance only in event of
| Vest only in
| Vest only in event of |
EQUITY COMPENSATION PLAN INFORMATION AS OF JANUARY 1, 2022
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | ||||||||||||
Equity compensation plans approved by security holders |
| ||||||||||||||
Amended and Restated Stock | 141,932 | $ | 73.76 | – | |||||||||||
2017 Incentive Award Plan(2) | 1,146,041 | – | 3,759,493 | ||||||||||||
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Total |
| 1,287,973 | $ | 73.76 |
| 3,759,493 |
(1) |
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(2) | Our 2017 Incentive Award Plan was approved by our stockholders in April 2017. We began issuing awards under this plan in May 2017. Under this plan, shares issuable under outstanding equity awards include (i) RSUs and DSUs for non-employee directors and (ii) restricted stock |
86 | 2022 Proxy Statement |Avery Dennison Corporation
This disclosure compares the median annual total compensation of our employees to the annual total compensation of our CEO. With approximately 75% of our 2021 revenues originating outside the U.S. and approximately half of our revenues having originated in emerging markets (Asia, Latin America, Eastern Europe and Middle East/Northern Africa), our employees are located in over 50 countries to best serve our customers. Approximately 84% of our employees at year-end 2021 were located outside the U.S. and approximately 68% were located in emerging markets, where median compensation is substantially lower than it is in the U.S. The charts shown below show the demographics of our global employee population by region and function. Approximately 21,055 of our approximately 36,000 employees at year-end 2021, representing approximately 58% of our global workforce, were in Asia, serving our customers in that region. In addition, approximately 67% of our global workforce at that time worked in the operations of our manufacturing facilities or in positions directly supporting them from other locations.
Our compensation philosophy is to offer market-based, competitive wages and benefits in all the markets where we compete for talent. All of our employees were paid at least the applicable legal minimum wage, and 96% of our employees were paid above the applicable legal minimum wage at year-end 2021. Our CEO’s compensation is substantially driven by pay-for-performance incentive compensation, consistent with U.S. market practices. 2021 PAY RATIO The annual total compensation of our median employee (among all employees except for our CEO) was $15,256.
Our
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Based on this information, a reasonable estimate of the 2021 ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was approximately 815 to 1.
We calculated this ratio based on the rules and guidance provided by the SEC. SEC rules allow for varying methodologies for companies to use in identifying their median employee; other companies may have different workforce demographics and employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their CEO pay ratios. As a result, the CEO pay ratios reported by other companies may not be meaningful comparisons to our CEO pay ratio.
IDENTIFICATION OF MEDIAN EMPLOYEE
Given that there were no changes in the compensation arrangements of our global workforce from 2017 to 2018 that would cause a significant change in our CEO pay ratio, as allowed by SEC rules, we considered using the same median employee in 2018 as we did in 2017. However, given that the role of the median employee identified for 2017 changed in 2018, we identified another employee as the median employee for 2018 from the same group from which we identified the 2017 median employee, as described more fully on the following page. The employee identified for 2018 had comparable pay to the median employee in 2017 but best represented the compensation of the employees in this group given the 2017 median employee's role change.
Avery Dennison Corporation| 2019 Proxy Statement |80
For purposes of identifyingTo identify our median employee, in 2017, we considered annual base compensation, which is the most common pay element for all our employees, as reflected in our global human resources information system. We selected this compensation element because it represents the principal broad-based compensation element for the vast majority of our employees globally. We measured compensation for purposes of determining the median employee using the 12-month period endingended December 31, 2017. No 2021, making no cost-of-living adjustments were made. adjustments.
Avery Dennison Corporation | 2022 Proxy Statement | 87 |
We selected NovemberJanuary 1, 20172022 as the date on which to determine our median employee. As of that date, we had 30,25635,971 employees, 26,23130,320 of which were located outside of the United StatesU.S. and approximately 21,00024,571 of which were located in emerging markets. We utilized the de minimis exemption to eliminate those countries representing no more than 5% of our global population in the aggregate. The countries excluded were Mauritius (19 employees), the Dominican Republic (120 employees), Pakistan (353 employees), Indonesia Pakistan(527 employees) and Sri Lanka with 542, 202 and 646 employees, respectively, in the aggregate(669 employees), representing approximately 4.6%0.1%, 0.3%, 1.0%, 1.5% and 1.9%, respectively, of our global workforce.
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 salary of $9,524,$10,645, because these employees were all reasonably likely to be our median employee. As a result of this statistical sampling process, we identified 647819 employees with a salary within $500 of this amount. Employees from China represented 51%approximately 58% of the medianable group; as a result, we narrowed the medianable group to those 329478 employees. Finally, we identified the nine5 employees who were potentially our median employee by analyzing additional qualitative and quantitative characteristics, including pay volatility.
MEDIAN EMPLOYEE COMPENSATION
Using the methodology described above, we determined that ourOur median employee for 2018 was a full-time, salaried employee working at a manufacturing facility in China.China, with annual base compensation of $10,198. For purposes of this disclosure, we converted the employee'semployee’s base compensation from Chinese Yuan to U.S. dollars using the average monthly exchange rate asduring 2021 of December 1, 2018 of 0.14408184.0.1548281792.
InAs required by SEC rules, in determining the annual total compensation of approximately $12,523$15,256 for our median employee, as required by SEC rules, we calculated the employee'semployee’s compensation in accordance with Item 402(c)(2)(x) of Regulation S-K, consistent with how we determinedetermined our CEO'sCEO’s total compensation for the20182021 Summary Compensation Table.
88 | 2022 Proxy Statement |Avery Dennison Corporation |
ITEM 3 – RATIFICATION OF APPOINTMENT OF
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The Audit Committee —– which is directly responsible for the appointment, compensation (including approval of audit and non-audit fees) and evaluation of the independent registered public accounting firm that audits our financial statements and internal control over financial reporting —– has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 2019,2022 and our Board is seeking stockholder ratification of the appointment. Stockholder ratification is not required by our Bylaws or applicable laws and regulations. However, our Board annually submits thisthe appointment for stockholder ratification as an element of our strong governance program. If stockholders were not to ratify the appointment, the Audit Committee would reconsider whether or not to retain PwC, but could determine to do so in the committee'scommittee’s discretion. In addition, even if the appointment is ratified, the Audit Committee could subsequently appoint a different independent registered public accounting firm without stockholder approval if the committee were to determine that doing so would bewas in the best interests of our company and stockholders.
Although no formal statement from PwC is planned, representatives of the firm will be present atavailable during the Annual Meeting to answer questions from stockholders.
In determining whether to reappoint PwC, the Audit Committee considered theits qualifications, performance and independence, as well as those of the firm and the audit engagement team,team; the quality of its discussions with PwC,PwC; and the fees charged by PwC for the quality and breadthscope of services provided. In connection with the 20192022 appointment, the Audit Committee considered, among other things, the following:factors described below.
Audit Quality — – The quality of PwC'sPwC’s audit and non-audit work based on its oversight of the firm'sfirm’s work product, considering the firm’s (i) compliance with accounting, auditing and regulatory requirements; (ii) deep and broad understanding of our businesses and the financial environments in which we operate; (iii) use of its experience to identify and resolve issues in a timely manner; and (iv) exercise of integrity, objectivity and professional skepticism when performing our audits, as well as itsthe committee’s discussions with management in executive session without PwC present and its discussions with PwC in executive session without management present;
Performance — PwC's reports on its quality controls and its – PwC’s performance during our 20182021 and prior-year audits;audits, noting the firm’s agility and continued satisfactory performance in 2021 despite the impact of COVID-19
Qualitative Review — – The results of our global survey of members of management and the Audit Committee evaluating PwC'sPwC’s (i) expertise and resources,resources; (ii) quality and timeliness of audit planning,planning; (iii) communication and interaction,interaction; (iv) independence, objectivity and professional skepticismskepticism; and (v) value for fees;
Self-Assessment — PwC's – PwC’s self-assessment of its accomplishmentsperformance in connection with the 20182021 audit, its satisfaction of the service needs and expectations of the Audit Committee and management, and areas of continued focusstrength and improvement opportunities;
Regulatory Reviews — – External data on the firm'sfirm’s audit quality and performance, including the most recent Public Company Accounting Oversight Board (PCAOB) reportsreport on PwC and its peer firms;
Fees – The reasonableness of Fees — The appropriateness of PwC'sPwC’s fees for audit and non-audit services, both on an absolute basis and relative to comparable firms;
Independence — Written – PwC’s processes to ensure it maintains independence, written disclosures from the firm and the independence letter required by the PCAOB; and
Tenure — PwC's – PwC’s tenure as our independent auditor, including related feedback from certain of our investors and the benefits of having a long-tenuredlonger-tenured auditor, andas well as the controls we and theyPwC have in place to mitigate any potential independence risk.
The Audit Committee has determined that the appointment of PwC is in the best interest of our company and stockholders. The Audit Committee has appointed subject to stockholder ratification, PwC as our independent registered public accounting firm for fiscal year 20192022 and recommends that stockholders ratify the appointment at the Annual Meeting.appointment.
RECOMMENDATION OF BOARD OF DIRECTORS
Our Board recommends that you vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for fiscal year 2019.2022. Properly dated and signed proxies will be so voted unless you specify otherwise.
Avery Dennison Corporation| 2019
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AUDIT MATTERS |
AUDITOR TENURE
PwC has been our independent registered public accounting firm since 1998 and served in that capacity during fiscal year 2018.2021. Through its predecessor entities, the firm has served as our independent auditor since at least 1960, which was the first year our financial statements were first subject to SEC reporting requirements. We have been unable to determine the exact year PwC began serving as the independent auditor for our company. 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 auditor independence. Some governance stakeholders, including certain of our investors, have suggested that, longbecause longer tenure poses a risk to auditor independence. Theindependence, the Audit Committee believes, however,should consider rotating firms. After giving these views due consideration, the Audit Committee determined to reappoint PwC because it continues to believe that PwC'sPwC’s years of experience auditing our company confers significant benefits, including the following:those described below.
Audit Quality — – PwC has deep institutional knowledge regarding our operations, businesses, and accounting policies and practices;
Scale — – PwC has a global presence with resources in virtually all of the countries in which we do business, enabling the firm to cost-effectively perform statutory audit work on our subsidiary accounts;accounts
Capability – PwC’s capability and
Efficiency – PwC brings customized knowledge incorporating independent judgment tailored to our audits, allowing for significant time savings
Cost – PwC is able to effectively perform itsaudit, audit-related, tax compliance, tax planning and other services and ensure audit quality more cost-competitively than other firms.
In conducting its periodicregular review of whether to appoint a new independent registered public accounting firm, among other things, the Audit Committee considers the fact that onboarding a new firm would require a significant time commitment on the part of management, potentially distracting from the paramount focus on financial reporting and internal controls, without necessarily increasing audit quality.
The Audit Committee has noted that PwC’s advanced technological tools have substantially improved the efficiency and effectiveness of its assurance procedures, enhancing the quality of its audit and making it less burdensome for our team members. These digital advancements were particularly valuable during 2021 when the firm continued to leverage technology to plan and complete many of its audit procedures remotely as a result of the continued impact of COVID-19.
In addition, PwC has continuously provided management and the Audit Committee with accounting/financial reporting insights and best practices relevant to our business, as well as advance notice of legislative and regulatory developments that have the potential to significantly impact our company.
The Audit Committee has several controls in place to mitigate any potential independence risk related to auditor tenure, including those described below and on the following:following page.
Annual Review of Performance and Independence – In addition to its ongoing assessment and real-time feedback provided to PwC, the Audit Committee formally evaluates both the performance and independence of PwC in determining whether or not to appoint the firm for the following year
Limits on Non-Audit Services — – The Audit Committee assesses the impact providing non-audit services may have on PwC'sPwC’s independence each time it approves the firm'sfirm’s provision of these services, as well as during its annual assessment of the firm'sfirm’s independence;
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Regular Consideration of Auditor Rotation — – The Audit Committee periodicallyregularly considers whether to change the independent registered public accounting firm based on its assessment of PwC'sPwC’s audit quality, performance, compensation and independence, having most recently done so in 2015 and determined to retain PwC, reconfirming its decision in 2018;
Executive Sessions — – The Audit Committee meets regularly both with PwC without management present and with management without PwC present; and
Lead Engagement Partner Selection — The Audit Committee selects any new lead engagement partner, in consultation with members of senior managementRotation and representatives of PwC.
In order toSelection – To regularly bring a fresh perspective to the audit, a new lead engagement partner is designated at least every five years. Ayears; a new lead engagement partner has beenwas most recently designated forin advance of the 2019 audit, having shadowed the 2018 partner to ensure service continuity and knowledge transfer.audit. The Audit Committee interviewed the partner prior to his designation, and the Audit Committee was directly responsible for making the selection, in consultation with members of senior management and representatives from PwC. The Audit Committee anticipates that it will begin discussions with the firm regarding the next lead engagement partner in late 2022.
Oversight by Lead Relationship Partner – PwC designates a separate lead relationship partner to provide additional assurance and objective oversight; this partner meets at least annually with the Audit Committee and is available as needed to resolve any issues that may arise.
PwC has advised us that neither the firm nor any member thereof has any financial interest, direct or indirect, in any capacity in our company or our subsidiaries. As a result, PwC has confirmedsubsidiaries, confirming to the Audit Committee that it is in compliance with the rules, standards and policies of the PCAOB and the regulations of the SEC governing auditor independence.
The Audit Committee considers the impact providing non-audit services may have on PwC's independence each time it approves the firm's provision of such services, as well as during its annual assessment of the firm's
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independence. In February 2019,2022, the Audit Committee reviewed the non-audit services approved by the Committeecommittee and provided by PwC during 2018,2021, including the related fees, and determined that the firm'sfirm’s provision of these services did not impair PwC'sPwC’s independence.
The Audit Committee discussed with PwC its independence from our company, Board and management and concluded that PwC was independent during 2021.
In negotiatingapproving PwC’s services and approving PwC's fees, and services, the Audit Committee considers whether PwC is best positioned to provide the services effectively and efficiently due to its familiarity with our operations, businesses, accounting policies and practices, internal controls, and financial and information technology systems, as well as whether the services enhance our ability to manage or control risks and maintain audit quality. The Audit Committee monitorsregularly receives updates on the services renderedprovided by, and fees paid to, PwC to ensure that they are within the parameters approved by the Audit Committee.
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 2020, the Audit Committee approved the (i) audit, audit-related and other services PwC would perform in the 2021 audit and (ii) permissible tax services the firm andcould provide during the fees paid to PwC in 2018 were pre-approved.year. The Audit Committee pre-approved the estimated PwC’s budgeted fees for audit, feesaudit-related, tax compliance, tax planning and other services in February 2018,2021, received a mid-year updateupdates on year-to-date fees incurred in July and October of that year, and assessed the final fees in connection with its review of the results of the audit in February 2019.2022. These procedures include reviewing and approving a plan for audit and permitted non-audit services, which includes a description of, and estimated fees for, each category of audit services and non-audit services. Additional Audit Committee approval is required for non-audit services not included in the initial plan or substantially in excess of the budgeted amount for the particular category of services. The Audit Committee has delegated interim pre-approval authority to its Chair for services not included in the audit plan; these services are reviewed withpresented for approval to the entire Audit Committee at a subsequent meeting.
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AUDIT FEES
ForIn fiscal years 20182021 and 2017,2020, PwC provided the services shown below for our company —– all of which were approved by the Audit Committee usingunder the procedures described above —– for which we paid the firm the fees indicated.
| | 2018 | | 2017 | | ||||
---|---|---|---|---|---|---|---|---|---|
| | | | | | ||||
Audit Fees(1) | | | $ | 7,946,000 | | | $ | 8,025,000 | |
Audit-Related Fees(2) | | | 503,000 | | | 448,000 | | ||
Tax Fees: | | | | | | ||||
Tax Compliance(3) | | | 2,312,000 | | | 1,949,000 | | ||
Tax Planning(4) | | | 1,792,000 | | | 1,369,000 | | ||
All Other Fees(5) | | | 40,000 | | | 55,000 | | ||
| | | | | | ||||
Total Fees | | | $ | 12,593,000 | | | $ | 11,846,000 | |
| | | | | | ||||
| | | | | | | | ||
| | | | | |
2021 | 2020 | |||||||
Audit Fees(1) | $ | 8,690,000 | $ | 8,455,000 | ||||
Audit-Related Fees(2) | 236,000 | 173,000 | ||||||
Tax Fees: | ||||||||
Tax Compliance(3) | 2,610,000 | 2,190,000 | ||||||
Tax Planning(4) | 1,647,000 | 1,984,000 | ||||||
All Other Fees(5) | 16,000 | 15,000 | ||||||
|
|
|
| |||||
Total | $ | 13,199,000 | $ | 12,817,000 | ||||
(1) Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to comfort letters, consents and review of our SEC filings.
(2) Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures and the audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans, as well as the audit or review of information technology systems and internal controls unrelated to the audit of the financial statements.
(3) Includes fees associated with tax compliance such as preparation of tax returns in foreign jurisdictions, tax audits and transfer pricing documentation.
(4) Includes fees for domestic and international tax planning, and tax planning related to restructuring actions, acquisitions and divestitures.
(5) Includes fees for any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources and other permissible services. |
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AUDIT AND FINANCE COMMITTEE REPORT
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COMPOSITION AND QUALIFICATIONS
The Audit and Finance Committee (referred to in this report as the "Committee"“Committee”) of our Board of Directors (our “Board”) is comprised of the directors named below,at the end of this report, each of whom meets the enhanced independence and experience standards for audit committee members set forth inrequired by Securities and Exchange Commission (SEC) rules and New York Stock Exchange (NYSE) listing standards. Our Board of Directors has determined all members to be financially literate and designated each of Messrs.Anthony Anderson Barker and Patrick Siewert as an "audit“audit committee financial expert"expert” under applicable SEC regulations. Members of the Committee are prohibited from sitting on the audit committee of more than two other public companies, and all members are in compliance with this restriction.
�� The Committee has a written charter adopted by our Board, of Directors, which is available onunder Corporate Governance in the investors section of our website atwww.averydennison.com/auditcharter.website. The Committee annually reviews the charter and recommends changes to the Board for approval. The charter was last amended in December 2018.February 2021.
During fiscal year 2018,2021, the Committee primarily performed the following activities described below on behalf of our Board of Directors:Board.
Reviewed and discussed with management and the independent registered public accounting firm our quarterly and annual financial results, earnings release documentation and the related reports filedwe file with the SEC;
Reviewed and discussed with management, theour Vice President of Internal Audit and the independent registered public accounting firm our internal controls report and the independent registered public accounting firm'sfirm’s attestation thereof;
Evaluated the qualifications, performance and independence of the independent registered public accounting firm and met with representatives of the firm to discuss the scope, budget, staffing and progress of the firm's audit;
Supervised theour Vice President of Internal Audit with respect to the scope, budget, staffing and progress of the internal audit and evaluated his personal performance, as well as the performance of the internal audit function; and
Discussed significant financial risk exposures, including our cybersecurity risk management program and risks related to our company’s information technology controls and security, and the steps taken by management to monitor and control these exposures.exposures
OVERSIGHT OF CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for our consolidated financial statements, accounting and financial reporting policies, internal control over financial reporting, and disclosure controls and procedures. The Committee appointed the independent registered public accounting firm of PricewaterhouseCoopers LLP (PwC) to provide audit, audit-related and tax compliance services, with limited tax planning and other non-audit services to the extent approved by the Committee. PwC was responsible for performingperformed an independent audit of our 2021 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and issuingissued an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America (GAAP). The Committee'sCommittee’s responsibility is to monitor and oversee our accounting and financial reporting processes and the auditaudits of our consolidated financial statements and our internal control over financial reporting. The members of the Committee are not professionally engaged in the practice of auditing or accounting and rely without independent verification on the information provided to them and the representations made by management and PwC.
The Committee reviewed and discussed our consolidated financial statements and related footnotes for the fiscal year ended December 29, 2018 —January 1, 2022 – including our company'scompany’s critical accounting policies and management'smanagement’s significant estimates and judgments —– with management and PwC, as well as PwC'sPwC’s report and unqualified opinion on the audit. Management represented to the Committee and PwC that our consolidated financial statements were prepared in
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accordance with GAAP. PwC presented the matters required to be discussed by Auditing Standard No. 1301,Communications with Audit Committees as adopted by the PCAOB and currently in effect.. The Committee received these written disclosures and the letters from PwC required by the applicable requirements of the PCAOB regarding communications concerning independence —– including Rule 3524,Audit Committee Pre-approval of Certain Tax Services;Services Rule 3525,Audit Committee Pre-approval of Non-Audit Services Related to Internal Control Over Financial Reporting;, and Rule 3526,Communication with Audit Committees Concerning Independence, — – and discussed with PwC its independence from our company, Board and management.
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Based on the Committee'sCommittee’s review and discussions with management and PwC described above, as well as the Committee'sCommittee’s review of the representations of management and the audit report and unqualified opinion of PwC, the Committee recommended that our Board of Directors approve the inclusion of the audited consolidated financial statements for theour fiscal year ended December 29, 2018January 1, 2022 in our Annual Report on Form 10-K filed with the SEC.
OVERSIGHT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Committee's responsibilityCommittee is to appointresponsible for appointing the independent registered public accounting firm, and monitormonitoring and overseeoverseeing the firm'sfirm’s qualifications, compensation, performance and independence. In this capacity, the Committee reviewed with PwC the overall scope of services and fees for its audit, and monitored the progress of PwC'sPwC’s audit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the firm'sfirm’s findings and required resources.
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 2018.2021. The Committee has a policy requiring pre-approval of fees for audit, audit-related, tax compliance, tax planning and other services and has concluded for 2018 that PwC'sPwC’s provision of limited non-audit services to our company in 20182021 was compatible with maintaining its independence.
Under its charter, the Committee is required to periodicallyregularly consider whether it is appropriate to change the independent registered public accounting firm, and the Committeehaving most recently formally evaluated with management and PwC whether it may be appropriate to do so in 2015, withFebruary 2020. With a view to ensuring that audit quality would continue to be paramount. Theparamount and recognizing that PwC was continuing to independently and appropriately challenge management, the Committee determined at that time to retain PwC, noting the firm’s strong performance and the Committee reconfirmed its decision in 2018.consistently improving service delivery.
The Committee has determined that the appointment of PwC as our independent registered public accounting firm for fiscal year 20192022 is in the best interest of our company and stockholders. The Committee has appointed PwC in suchthis capacity and recommends that stockholders ratify the appointment at the Annual Meeting.appointment.
The Committee'sCommittee’s responsibility is to monitor and oversee our internal audit function, reviewing the significant audit results reported to management and management'smanagement’s responses thereto. In this capacity, the Committee reviews with theour Vice President of Internal Audit the overall scope and budget for the internal audit, and regularly monitors the progress of the internal audit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the Vice President of Internal Audit's key findings and required resources. The Committee directly supervises theour Vice President of Internal Audit in the conduct of his operational responsibilities and evaluates his individual performance as well as that of the entire internal audit function.
The Committee regularly meets separately in executive session without management present with each of theour Vice President of Internal Audit and PwC to review and discuss their evaluations of the overall quality of our accounting and financial reporting and internal control. The Committee also periodicallyregularly meets, without PwC or theour Vice President of Internal Audit present, with management, our CFO and our Controller/CAO, and meets as wellneeded with other members of management such as occasionally with only our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer,CEO and General Counselour CLO, to discuss, among other things, significant risk exposures impacting our financial statements and accounting policies.
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Table of ContentsSTOCKHOLDER 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 Sustainability and Social Responsibilitysection of this proxy statement. The Committee welcomes feedback regarding its oversight of our audit and finance programs. Stockholders may communicate with the Committee by 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.
Martha N. Sullivan, Chair
Anthony K. Anderson
Andres A. Lopez
Patrick T. Siewert ChairAnthony K. AndersonPeter K. BarkerKen C. HicksAndres A. LopezMartha N. Sullivan
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Table of ContentsSECURITY OWNERSHIP INFORMATION
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SECURITY OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS
The table below shows the number of shares of our common stock beneficially owned by our (i) directors; (ii) NEOs; (iii) current directors and executive officers as a group; and (iv) greater-than-five-percent, or "significant,"“significant,” stockholders, in each case as of the February 25, 201928, 2022 record date for the Annual Meeting. "Beneficial ownership"Beneficial ownership means that the individual, group or entity, directly or indirectly, has or shares with others the power to vote (or direct the voting of) or the power to dispose of (or direct the disposition of) the shares; the individual, group or entity may or may not have any economic interest in the shares. The reportinginclusion of information in the table does not constitute an admission that the individual, group or entity is, for the purposepurposes of Section 13 or 16 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), the beneficial owner of the shares shown.
Name of Beneficial Owner | Common Stock(1) | Number of Rights Exercisable and Vesting within 60 Days(2) | Number of Shares Beneficially Owned | Percent of Class(3) | ||||||||||||||||
Directors | ||||||||||||||||||||
Bradley A. Alford | 21,563 | 20,575 | 42,138 | * | ||||||||||||||||
Anthony K. Anderson | 3,382 | 11,895 | 15,277 | * | ||||||||||||||||
Mark J. Barrenechea | 3,744 | 2,356 | 6,100 | * | ||||||||||||||||
Mitchell R. Butier | 243,041 | 226,442 | 469,483 | * | ||||||||||||||||
Ken C. Hicks | 28,210 | 14,808 | 43,018 | * | ||||||||||||||||
Andres A. Lopez | 6,323 | 1,275 | 7,598 | * | ||||||||||||||||
Patrick T. Siewert | 16,050 | – | 16,050 | * | ||||||||||||||||
Julia A. Stewart | 20,850 | 41,829 | 62,679 | * | ||||||||||||||||
Martha N. Sullivan | 15,868 | 12,891 | 28,759 | * | ||||||||||||||||
Non-director NEOs | ||||||||||||||||||||
Gregory S. Lovins | 38,948 | 22,169 | 62,117 | * | ||||||||||||||||
Deena Baker-Nel | 2,363 | 5,844 | 8,207 | * | ||||||||||||||||
Deon M. Stander | 31,623 | 11,650 | 43,273 | * | ||||||||||||||||
Ignacio J. Walker | 3,529 | 5,749 | 9,278 | * | ||||||||||||||||
All current directors and executive officers as a group (15 persons) | 465,131 | 390,794 | 855,925 | 1.0 | % | |||||||||||||||
Significant stockholders | ||||||||||||||||||||
The Vanguard Group(4) | 9,649,647 | – | 9,649,647 | 11.7 | % | |||||||||||||||
BlackRock, Inc.(5) | 6,726,210 | – | 6,726,210 | 8.2 | % | |||||||||||||||
T. Rowe Price Associates, Inc.(6) | 5,486,584 | – | 5,486,584 | 6.7 | % |
(1) | Except as otherwise noted herein, each director, NEO and current executive officer has sole voting and investment power with respect to the shares indicated and no shares have been pledged as security by any such person. Includes for the following beneficial owners the following amounts of shares held in our employee savings plan as of February 28, 2022: Butier – 4,010, Lovins – 2,086, Baker-Nel – 1,213, Walker – 545, and all current directors and executive officers as a group – 10,189. |
(2) | Numbers reported in this column are not entitled to vote during the Annual Meeting. Includes the following number of DSUs deferred through the DDECP by the following directors as of February 28, 2022, as to which they have no voting or investment power: Alford – 20,575; Anderson – 11,895; Barrenechea – 2,356; Hicks – 14,808; Lopez – 1,275; Stewart – 41,829; and Sullivan – 12,067. DSUs are included as beneficially owned because, if the director were to resign or retire from our Board, his or her DDECP account would be valued as of the date of separation and the equivalent number of shares of our common stock would be issued to the separating director. |
(3) | Percent of class based on 82,355,333 shares of our common stock outstanding as of February 28, 2022. Individuals with an (*) beneficially own less than 1% of our outstanding common stock. |
(4) | Number of shares beneficially owned based on information as of December 31, 2021 contained in Amendment No. 11 to Schedule 13G filed with the SEC on February 9, 2022. The Vanguard Group has sole voting power with respect to no shares; shared voting power with respect to 136,002 shares; sole dispositive power with respect to 9,310,583 shares; and shared dispositive power with respect to 339,064 shares. The Vanguard Group is an investment adviser, in accordance with Rule 13d-1(b)(1)(ii)(E) of the Exchange Act, with a business address of 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. |
(5) | Number of shares beneficially owned based on information as of December 31, 2021 contained in Amendment No. 13 to Schedule 13G filed with the SEC on February 1, 2022. BlackRock, Inc. has sole voting power with respect to 5,702,277 shares and sole dispositive power with respect to all 6,726,210 shares. BlackRock, Inc. is a parent holding company or control person, in accordance with Rule 13d-1(b)(1)(ii)(G) of the Exchange Act, with a business address of 55 East 52nd Street, New York, New York 10055. |
(6) | Number of shares beneficially owned based on information as of December 31, 2021 contained in Amendment No. 3 to Schedule 130 filed with the SEC on February 14, 2022. T. Rowe Price Associates, Inc. has sole voting power with respect to 1,842,064 shares and sole dispositive power with respect to all 5,486,584 shares. T. Rowe Price Associates, Inc. is an investment adviser, in accordance with Rule 13d-1(b)(1)(ii)(E) of the Exchange Act, with a business address of 100 East Pratt Street, Baltimore, Maryland 21202. |
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NAME OF BENEFICIAL OWNER | | COMMON STOCK(1) | | NUMBER OF SHARES SUBJECT TO DSUS, OPTIONS EXERCISABLE, AND RSUS, PUs and MSUs VESTING WITHIN 60 DAYS(2) | | NUMBER OF SHARES BENEFICIALLY OWNED | | PERCENT OF CLASS(3) | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||||
Directors | | | | | | | | | |||||||
Dean A. Scarborough | | 48,668 | | | 278,930 | | | | 327,598 | | | * | |||
Bradley A. Alford | | 15,564 | | | 33,488 | | | | 49,052 | | | * | |||
Anthony K. Anderson | | 3,035 | | | 9,234 | | | | 12,269 | | | * | |||
Peter K. Barker | | 27,769 | | | 44,929 | | | | 72,698 | | | * | |||
Mark J. Barrenechea | | — | | | 173 | | | | 173 | | | * | |||
Mitchell R. Butier | | 157,604 | | | 107,211 | | | | 264,815 | | | * | |||
Ken C. Hicks | | 23,369 | | | 29,272 | | | | 52,641 | | | * | |||
Andres A. Lopez | | 1,974 | | | 591 | | | | 2,565 | | | * | |||
David E. I. Pyott | | 15,293 | | | 65,904 | | | | 81,197 | | | * | |||
Patrick T. Siewert | | 12,663 | | | — | | | | 12,663 | | | * | |||
Julia A. Stewart | | 16,009 | | | 48,317 | | | | 64,326 | | | * | |||
Martha N. Sullivan | | 11,027 | | | 9,953 | | | | 20,980 | | | * | |||
Non-Director NEOs | | | | | | | | | |||||||
Gregory S. Lovins | | 16,027 | | | 13,070 | | | | 29,097 | | | * | |||
Georges Gravanis | | 11,886 | | | 22,923 | | | | 34,809 | | | * | |||
Susan C. Miller | | 30,534 | | | 25,175 | | | | 55,709 | | | * | |||
Deon M. Stander | | 16,034 | | | 25,189 | | | | 41,223 | | | * | |||
All current directors and executive officers as a group (18 persons) | | 407,456 | | | 714,359 | | | | 1,121,815 | | | 1.3% | |||
Significant stockholders | | | | | | | | | |||||||
The Vanguard Group(4) | | 9,847,087 | | | — | | | | 9,847,087 | | | 11.7% | |||
BlackRock, Inc.(5) | | 6,272,094 | | | — | | | | 6,272,094 | | | 7.5% |
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers, and owners of greater than 10% our equity securities (collectively, our "Insiders") to timely file initial reports of ownership and reports of changes in ownership with the SEC. Due to the complexity of SEC reporting rules, we undertake to file these reports on behalf of our directors and executive officers and have instituted procedures to assist them with complying with their reporting obligations. We reviewed our records, the Section 16 filings related our company stock and written representations from our directors and executive officers that no other reports were required to have been filed.
All of our Insiders complied with the Section 16(a) filing requirements on a timely basis during 2018.
Both our Code of Conduct and our Conflict of Interest Policy (our "COI Policy"(“COI Policy”) provide that conflicts of interest should be avoided. Under our Governance Guidelines, directorsBoard members are expected to comply with theour Code of Conduct and avoid any action, position or interest that conflicts with the intereststhose of our company, or gives the appearance of a conflict. Our COI Policy proscribes any of our officers (including our executive officers) or employees —– or any of their immediate family members —– from directly or indirectly doing business, seeking to do business or owning an interest in an entity that does business or seeks to do business with our company without approval in writing from the Governance Committee. Under our COI Policy, any officer or employee who has a question as to the interpretation of the policy or its application to a specific activity, transaction or situation may submit the question in writing to our General Counsel/SecretaryChief Compliance Officer or Chief Legal Officer for any further necessary review by the Governance Committee.
OnGenerally on an annual basis, all of our employees at the level of manager and above and all non-supervisory professionals are required to complete a compliance certification in which they must (i) disclose, among other things, whether they or any of their immediate family members have a job, contract or other position with an entity that has commercial dealings with our company and (ii) certify their compliancethat they have complied with our COI Policy and Code of Conduct. Non-supervisory professionals in our sales, marketing, customer serviceConduct and purchasing functions complete this certification in even years, and non-supervisory professionals in our technology, finance, supply chain, technical services, environmental, health and safety, legal and risk functions do so in odd years.company policies. All disclosures are reviewed by our compliance departmentand law departments in consultation with our law department and senior management to determine whether the activity has the potential to significantly influence our business. The Governance Committee receives a report from our Chief Compliance Officer on the disclosures elicited in the annual compliance certification and, in the event that aan unresolved disclosure potentially gives rise to a significant conflict of interest, determines whether a conflict of interest exists or whether there is a reasonable likelihood that the activity, transaction or situation would influence the individual'sindividual’s judgment or actions in performing his or her duties for our company. In 2021, we temporarily suspended the compliance certification process to allow our Corporate Compliance team to implement improvement opportunities aligned upon with an independent third party expert we engaged to benchmark our compliance program. We plan on launching the improved certification process in 2022.
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 the General Counsel/our Corporate Secretary in connection with the annual assessment of director independence and review of related person transactions.independence. Responses from executive officers are reviewed by the Office of the General Counselour Corporate Secretary with oversight by the Governance Committee in the event any transactions are identified.
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 five percent of our common stock to determine whether we have any relationships with the security holders that might constitute related person transactions under Item 404(a) of Regulation S-K. In the event of any findings, our General Counsel/ Our Corporate Secretary discusses themany such findings with the Governance Committee.
During fiscal year 2018,2021, there were no related person transactions requiring disclosure under Item 404 of Regulation S-K.SEC rules and regulations. To our knowledge, all related person transactions were subject to reviewreviewed under our policies and procedures.
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ANNUAL REPORT AND PROXY MATERIALS
WHEN WILL I RECEIVE THE 20182021 ANNUAL REPORT?
We expect to mail or make available our 20182021 Annual Report to Stockholders to all stockholders of record on or about March 11, 2019.15, 2022.
HOW DO I ACCESS THE 20192022 PROXY MATERIALS?
We have elected to provide access to our proxy materials on the Internet.internet. Accordingly, we are sending the Notice of Internet Availability of Proxy Materials (the "Notice"“Notice”) to our stockholders of record. Brokers, banks and other nominees (collectively, "nominees"“nominees”) who hold shares on behalf of beneficial owners (also called "street name"“street name” holders) will send a similar notice. You will have the ability to access our proxy materials on the website referred to in the Notice. Instructions on how to request printed proxy materials by mail, including an option to receive paper copies in the future, may be found in the Notice and on the website referred to in the Notice.
On or about March 11, 2019,15, 2022, we intend to make this proxy statement available on the Internetonline and mail the Notice to all stockholders entitled to vote. WeOn or about the same date, we intend to mail this proxy statement, together with a proxy card, to stockholders entitled to vote atduring the Annual Meeting who have previously requested paper copies on or about March 11, 2019.copies. In addition, if you request paper copies of these materials for the first time, they will be mailed within three business days of your request. If you hold your shares in street name, you may request paper copies of the proxy statement and proxy card from your nominee by following the instructions on the notice your nominee provides to you.
Stockholders of record may obtain a copy of this proxy statement without charge by writing to our Corporate Secretary Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.at 8080 Norton Parkway, Mentor, Ohio 44060.
WHAT IS HOUSEHOLDING?
We have adopted a procedure approved by the SEC called householding. Under this procedure, wewill deliver a single copy of our proxy statement2021 integrated sustainability and annual report, which includes our 2022 notice and proxy statement, to stockholders sharing the same address. Householding allows us to reduce our printing and postage costs, and prevents duplicative information from being received at your household. Our use of householding affectshousehold and impacts only the delivery of proxy materials; it does not impact the delivery of dividend checks.
For holders who share a single address, we are sending only one annualintegrated report and proxy statement to that address unless we have received instructions to the contrary from any stockholder at that address. If you wish to receive an additional copy of our annualintegrated report, or proxy statement, or if you receive multiple copies of our annualintegrated report or proxy statement and wish to receive a single copy in the future, you may make your request by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
If you are a street name holder and wish to revoke your consent to householding and receive separate copies of our proxy statement and annual report in future years, you may call Broadridge Investor Communications Services toll-free at 866.540.7095 in the U.S. and Canada or write to them c/o Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
HOW CAN I ACCESS THE ANNUAL REPORT AND PROXY MATERIALS ELECTRONICALLY?
Instead of receiving paper copies of proxy statements and annual reports by mail in the future, you can elect to receive an email that will provide a link to these documents on the Internet.internet. By electing to access proxy materials on the Internet,online, you will be able tocan access them more quickly, save us the cost of printing and mailing them to you, reduce the amount of mail you receive from us, and help us preserve environmental resources.
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/avy.avy. If you are voting on the Internet,online, you can follow the links on the voting website to get toreach the electronic enrollment website.
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WHO IS ENTITLED TO VOTE?
Stockholders of record as of the close of business on February 25, 201928, 2022 are entitled to notice of, and to vote at, the Annual Meeting. Our common stock is the only class of shares outstanding, and there were 83,972,86782,355,333 shares of common stock outstanding on February 25, 2019.28, 2022. The list of stockholders entitled to vote will be available for inspection atduring the virtual Annual Meeting, as well as starting 10 days before the Annual Meeting during regular business hours at our company headquarters.headquarters in Mentor, Ohio. You are entitled to one vote for each share of common stock you held on the record date.
HOW DO I VOTE?
You may vote by submitting a proxy or voting in person atduring the Annual Meeting.Meeting at www.virtualshareholdermeeting.com/AVY2022. If you hold your shares in street name, you may only vote in person atduring the meeting if you properly request and receive a legal proxy in your name from the nominee that holds your shares.
The method of voting by proxy differs depending on whether you are viewing this proxy statement on the Internetonline or reviewing a paper copy, as follows:copy.
If you are viewing this proxy statement on the Internet,online, you may vote your shares by (i) submitting a proxy on the Internetby telephone or online by following the instructions on the website or (ii) requesting a paper copy of the proxy materials and following one of the methods described below; and
If you are reviewing a paper copy of this proxy statement, you may vote your shares by (i) submitting a proxy by telephone or on the Internetonline by following the instructions on the proxy card or (ii) completing, dating and signing the proxy card included with the proxy statement and returning it in the preaddressed, postage paidpostage-paid envelope provided.
Whether or not you plan to attend the Annual Meeting, we urge you to vote promptly using one of the methods described in the proxy materials. We encourage you to vote by proxy by telephone or on the Internetonline since these methods immediately record your vote and allow you to confirm that your votes have been properly recorded. Telephone and Internet voting facilities close atonline votes must be received by 11:59 p.m. Eastern Time on April 24, 2019.27, 2022.
WHAT IF MY SHARES WERE ACQUIRED THROUGH THE DIRECT SHARE PURCHASE AND SALE PROGRAM?
Shares acquired through our Direct Share Purchase and Sale Program may be voted by following the procedures described above.
WHAT IF MY SHARES ARE HELD IN THE EMPLOYEE SAVINGS PLAN?
If you hold shares as a participant in our Employee Savings (401(k)) Plan, your vote serves as a voting instruction to Fidelity Management Trust Company, the trustee of the plan, on how to vote the shares you hold through the plan.your shares. Your voting instruction must be received by the trustee by 11:59 p.m. Eastern Time on April 22, 2019.25, 2022.
If the trustee does not receive your instruction in a timely manner, your shares will be voted in the same proportion as the shares voted by participants in the plan who timely furnish instructions. Shares of our common stock that have not been allocated to participant accounts will also be voted by the trustee in the same proportion as the shares voted by participants in the plan who timely furnish instructions.
HOW DO I REVOKE MY PROXY OR CHANGE MY VOTE AFTER I HAVE VOTED?
If you give a proxy pursuant to this solicitation, you may revoke it at any time before it is acted upon atduring the Annual Meeting by (i) submitting another proxy by telephone or on the Internetonline (only your last voting instructions will be counted); (ii) sending a later dated paper proxy; (iii) delivering to our Corporate Secretary a written notice of revocation prior to the voting of the proxy atduring the Annual Meeting; or (iv) if you are entitled to do so, voting in person atduring the Annual Meeting. Simply attending the Annual Meeting will not revoke your proxy.
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 you canto change your vote. Shares held in our Employee Savings Plan cannot be changed or revoked after 11:59 p.m. Eastern Time on April 22, 2019,25, 2022, nor can they be voted in person atduring the Annual Meeting.
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IS MY VOTE CONFIDENTIAL?
Except in contested proxy solicitations, when required by law or as expressly authorized by you (such as by making a written comment on your proxy card, in which case the comment, but not your vote, willmay be shared with our company), your vote or voting instruction is confidential and will not be disclosed other than to the broker, trustee, agent or other entity tabulating your vote. Our directors, officers or employees will not learn how you voted.
HOW WILL VOTES BE COUNTED?
Votes cast by proxy or in person atduring the Annual Meeting will be tabulated by a representative from Broadridge Financial Solutions, Inc., the independent inspector of election appointed by our Board. The inspector of election will also determine whether a quorum is present. AtDuring the Annual Meeting, shares represented by proxies that reflect abstentions or "broker non-votes"broker non-votes (which are shares held by a nominee that are represented atduring the meeting, but with respect to which the nominee neither has discretionary authority to vote nor has been given actual authority to vote on a particular item) will be counted as shares that are present and entitled to vote atduring the Annual Meeting for purposes of determining the presence of a quorum. Items 1 and 2 are "non-routine"non-routine under the rules of the NYSE, and Item 3 is routine. Nominees are prohibited from voting on non-routine items in the absence of instructions from the beneficial owners of the shares; as a result, if you hold your shares in street name and do not submit voting instructions to your nominee, your shares willnot be voted on Item 1, election of directors, or Item 2, approval, on an advisory basis, of our executive compensation. We urge you to promptly provide voting instructions to your nominee so that your vote is counted.
The vote required to approve each of the Annual Meeting items, as well as the impact of abstentions and broker non-votes, is shown in the chart below.
![]() Item | Vote Required | Impact of Abstentions | Impact of Broker Non-Votes | |||||
1 | Election of directors | Majority of votes cast | Not counted as votes cast; no impact on outcome | Not counted as votes cast; no impact on outcome | ||||
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2 | Advisory vote to approve executive compensation | Majority of shares represented and entitled to vote | Negative impact on outcome | Not counted as represented and entitled to vote; no impact on outcome | ||||
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3 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year | Majority of shares represented and entitled to vote | Negative impact on outcome | Not applicable |
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 atduring the meeting. However, ifIf any other business properly comes before the meeting, your vote will be cast on any such other business in accordance with the best judgment of the individuals acting pursuant to your proxy.
HOW DO I FIND VOTE RESULTS?
We expect to announce preliminary voting results atduring the Annual Meeting and report final voting results in a Current Report on Form 8-K filed with the SEC on or before May 1, 2019.4, 2022.
WHAT IS THE TIME, DATE AND LOCATIONFORMAT OF THE ANNUAL MEETING?
TheDue to continued public health concerns about large, indoor in-person gatherings given the COVID-19 pandemic, the Annual Meeting will take place at 1:30 p.m. PacificEastern Time on April 25, 2019 at 207 Goode Avenue, Glendale, California 91203. Parking will be available next door at 127 Burchett Street, Glendale, California 91203. Attendants will be available to provide assistance28, 2022 virtually, with directions and parking tickets will be validated atattendance via the Annual Meeting.
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Table of Contentsinternet.
HOW CAN I ATTEND THE VIRTUAL MEETING?
IfTo attend the virtual Annual Meeting, you would likewill need to attendlog in to www.virtualshareholdermeeting.com/AVY2022 using the 16-digit control number on the Notice or proxy card mailed or made available to you on or about March 15, 2022.
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Online access to the live audio webcast of the Annual Meeting please bring photo identification. Ifwill open at 1:15 p.m. Eastern Time to allow time for you are a stockholder of record,to log in and test your device’s audio system. We encourage you may bringto access the top half of your proxy card or your Notice to serve as your admission ticket. If you hold your shares in street name, you may be required to present proof of ownership to be admitted into the meeting. Acceptable documentation includes your Notice, a recent brokerage statement or a letter from your nominee evidencing your beneficial ownership of shares of our common stock as of February 25, 2019. If you would like to secure admissionmeeting in advance you may send a written request with proof of ownershipits designated start time as we plan to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.
Stockholders will be admitted intobegin conducting the Annual Meeting beginning at 1:00 p.m. Pacific Time and seating will be on a first-come basis. For safety and security reasons, cameras, recording equipment, computers, or large bags or other packages will not be permitted into the meeting.meeting promptly.
MAYHOW DO I ASK QUESTIONS ATDURING THE MEETING?
Our Chairman will conductWe have designed the virtual Annual Meeting into ensure that you have the same rights and opportunities to participate as you would at an orderlyin-person meeting, using easy-to-use online tools that allow you to attend, vote and timely manner in accordance with our Bylaws and Delaware law. To assist him in fulfilling his responsibilities, we have established rules for stockholders wishing to address the meeting, which will be available at the meeting.ask questions. Only stockholders as of the record date or their properly-appointedproperly appointed proxies may ask questions atduring the meeting, and they may do so only after recognized by our Chairman who may limit the length of discussion on any particular matter. On the day of, and during, the Annual Meeting, you can view our Ground Rules for Conduct of Meeting and submit questions on www.virtualshareholdermeeting.com/AVY2022.
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 before or during the meeting that are pertinent to our company and the items being brought before stockholder vote during the Annual Meeting, 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 promote fairness and ensure all stockholder 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, all stockholders are invited to direct inquiries or comments regarding business matters to our Investor Relations department by email toinvestorcom@averydennison.com or by mail to Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060. In addition, stockholders wishing to address matters to our Board or any of its members may do so as described underContacting Our Board in theOur Board of Directors section of this proxy statement.
WHAT DO I DO IF I AM HAVING TECHNICAL ISSUES ACCESSING OR PARTICIPATING IN THE MEETING?
OTHER MATTERS
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 international participants).
HOW ARE PROXIES BEING SOLICITED?
We have retained D. F.D.F. King & Co., Inc. to assist in soliciting proxies for a fee of $12,000, plus reimbursement of out-of-pocket expenses incident to preparing and mailing our proxy materials. Some of our employees may solicit proxies in person, by telephone or email; these employees will not receive any additional compensation for their proxy solicitation efforts. We will bear all costs related to this solicitation of proxies and we will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses they incur in forwarding our proxy materials to beneficial stockholders. You can help reduce these costs by electing to accessaccessing our proxy materials electronically.
MATTERS RELATED TO 2023 ANNUAL MEETING
HOW DO I SUBMIT ITEMS FOR POTENTIAL CONSIDERATION AT THE 20202023 ANNUAL MEETING?
To propose business otherwise satisfying the eligibility requirements of SEC Rule 14a-8 to be considered for inclusion in our proxy statement for the 20202023 Annual Meeting, you must mailprovide notice of proposed items so they are received at our principal executive offices on or before November 12, 2019.15, 2022. If you wish to nominate persons for election to our Board or bring any other business before an annual meeting under the advanced notice provisions or our Bylaws, you must notify our Corporate Secretary at our principal executive offices in writing 90 to 120 days prior to the first anniversary of the preceding year'syear’s annual meeting (with respect to the 20202023 Annual Meeting, no earlier than December 27, 201929, 2022 and no later than January 26, 2020)28, 2023).
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Your notice must include, among other things, the following information:information described below.
As to each person who you propose to nominate for election or reelection as a director:
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•
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As to any other item of business you propose to bring before the meeting, a brief description of the business, the reasons for conducting the business atduring the meeting and any material interest you have in the business being proposed; and
Your name and address, and class and number of shares you own beneficially and as of record, as well as information relating to your security ownership in our company, as described in greater detail in Article II, Section 14 of our Bylaws, which are available onunder Corporate Governance in the investors section of our website atwww.averydennison.com/bylaws.
Stockholder items of business that do not fully comply with the advance notice requirements contained in our Bylaws will not be permitted to be brought before the 20202023 Annual Meeting. In addition to satisfying the foregoing requirements under our Bylaws, to comply with the SEC’s universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than our company’s nominees must provide written notice to our Corporate Secretary at our principal executive offices that includes the information required by Rule 14a-19 under the Exchange Act no later than February 22, 2023.
We intend to file a proxy statement and a WHITE proxy card with the SEC in connection with our solicitation of proxies for the 2023 Annual Meeting.
HOW DO I NOMINATE DIRECTORS FOR INCLUSION IN THE 20202023 PROXY STATEMENT?
Our Bylaws to permit a stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company'scompany’s outstanding shares of common stock continuously for at least three years to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two nominees or 20% of our Board, subject to the requirements specifiedcontained in Article II, Section 17 of our Bylaws, which are available onunder Corporate Governance in the investors section of our website atwww.averydennison.com/bylaws.website. Notice of proxy access director nominees for the 20202023 Annual Meeting must be delivered to our Corporate Secretary at our principal executive offices no earlier than October 13, 201916, 2022 and no later than November 12, 201915, 2022 and must otherwise comply with our Bylaws.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FROM GAAP
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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 that are prepared in accordance with GAAP. Based uponon feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are useful to their assessment of our performance and operating trends, as well as liquidity.
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 difficult to assess our underlying performance in a single period. By excluding the accounting effects, both positive or negative, of certain items (e.g.,(such as restructuring charges, outcomes of certain legal settlements,proceedings, certain effects of strategic transactions and related costs, losses from debt extinguishments, gains or losses from curtailment or settlement of pension obligations, gains or losses on sales of certain assets, gains or losses on venture investments, and other items), we believe that we are providing meaningful supplemental information that facilitates an understanding of our core operating results and liquidity measures. These non-GAAP financial measures are used internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for a single period. While some of the items we exclude from GAAP financial measures recur, they tend to be disparate in amount, frequency or timing.
We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for quarters and year-to-date periods, as applicable.
We use the following non-GAAP financial measures described below in this proxy statement:statement.
We believe that sales change ex. currency and organic sales change assist investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period.
• | Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation, and, where applicable, an extra week in our fiscal year and the calendar shift resulting from the extra week in the prior fiscal year and currency adjustment for transitional reporting of highly inflationary economies. The estimated impact of foreign currency translation is calculated on a constant currency basis, with prior period results translated at current period average exchange rates to exclude the effect of currency fluctuations. |
• | Organic sales change refers to sales change ex. currency, excluding the estimated impact of acquisitions and product line divestitures. |
We believe that sales change ex. currency and organic sales change assists investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period. |
• | Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net sales. Adjusted EBITDA is adjusted operating income before depreciation and amortization. Adjusted operating income is income before taxes; interest expense; other |
• | Adjusted net income per common share, assuming dilution (adjusted EPS), refers to adjusted net income divided by weighted average number of common shares outstanding, assuming dilution. Adjusted net income is 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 the enactment of the U.S. Tax Cuts and Jobs Act (TCJA), where applicable, and other items. We believe that adjusted EPS assists investors in understanding our core operating trends and comparing our results with those of our competitors. |
• | Free cash flow refers to cash flow provided by operating activities, 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 insurance and sales (purchases) of investments. Free cash flow is also adjusted for, where applicable, certain acquisition-related transaction costs and the cash contributions related to the termination of our U.S. pension plan. We believe that free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases, and acquisitions. |
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• | Return on total capital incl. acquisition amortization (ROTC) refers to net income excluding the expense and tax benefit of debt financing divided by the average of beginning and ending invested capital. ROTC excl. acquisition amortization refers to ROTC adjusted for the impact of amortization of intangible assets from acquisitions. We believe that ROTC incl. acquisition amortization and ROTC excl. acquisition amortization assist investors in understanding our ability to generate returns from our capital. |
• | Adjusted EBIT refers to earnings before interest expense and taxes, excluding non-cash restructuring costs, |
ORGANIC SALES CHANGE
($ in millions) | 2017 | 2018 | 2019 | 2020 | 2021 | 2017-2021 5-YR CAGR(1) | ||||||||||||||||||
Net sales | $ | 6,613.8 | $ | 7,159.0 | $ | 7,070.1 | $ | 6,971.5 | $ | 8,408.3 | 6.7% | |||||||||||||
Reported net sales change | 8.7% | 8.2% | (1.2)% | (1.4)% | 20.6% |
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Foreign currency translation | (0.5)% | (1.4)% | 3.3% | 0.9% | (3.4)% |
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Extra week impact | – | – | – | (1.3)% | 1.4% |
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Sales change ex. currency (non-GAAP)(2) | 8.2% | 6.9% | 2.0% | (1.7)% | 18.6% | 6.6% | ||||||||||||||||||
Acquisitions and product line divestitures | (3.9)% | (1.4)% | – | (1.7)% | (3.1)% |
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Organic sales change (non-GAAP)(2) | 4.2% | 5.5% | 2.0% | (3.4)% | 15.6% | 4.6% |
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(2) | Totals may not sum due to rounding and other factors. |
ADJUSTED EBITDA MARGIN
($ in millions) | 2021 | |||
Net sales | $ | 8,408.3 | ||
Operating income before interest expense, other non-operating expense (income) and taxes, as reported | $ | 1,058.7 | ||
Operating margin, as reported | 12.6% | |||
Non-GAAP adjustments: | ||||
Restructuring charges: | ||||
Severance and related costs | $ | 10.5 | ||
Asset impairment and lease cancellation charges | 3.1 | |||
Other items(1) | (8.0) | |||
Adjusted operating income (non-GAAP) | $ | 1,064.3 | ||
Adjusted operating margin (non-GAAP) | 12.7% | |||
Depreciation and amortization | $ | 244.1 | ||
Adjusted EBITDA (non-GAAP) | $ | 1,308.4 | ||
Adjusted EBITDA margin (non-GAAP) | 15.6% |
(1) | Includes pretax gain on venture investments, gain on sale of product line, outcomes of legal proceedings, transaction and related costs, and other items. |
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ADJUSTED EARNINGS PER SHARE (EPS)
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2017-2021 5-YR CAGR(1) | 2020-2021 % Change | ||||||||||||||||||||
As reported net income per common share, assuming dilution | $ | 3.54 | $ | 3.13 | $ | 5.28 | $ | 3.57 | $ | 6.61 | $ | 8.83 | 20.1% | 33.6% | ||||||||||||||
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Restructuring charges and other items(2) | 0.48 | 0.29 | 0.68 | 0.47 | 0.48 | 0.05 |
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Pension plan settlement and curtailment losses | – | – | 0.84 | 3.12 | 0.01 | 0.03 |
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Tax benefit from discrete foreign tax structuring and planning transactions | – | – | (0.35) | (0.56) | – | – |
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TCJA provisional amounts and subsequent adjustments(3) | – | 1.91 | (0.39) | – | – | – |
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Impact of previously planned repatriation of foreign earnings for Q4 2017 | – | (0.33) | – | – | – | – |
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Adjusted net income per common share, assuming dilution (non-GAAP) | $ | 4.02 | $ | 5.00 | $ | 6.06 | $ | 6.60 | $ | 7.10 | $ | 8.91 | 17.3% | 25.4% |
The adjusted tax rates were 32.8%, 28.0%, 25.0%, 24.6%, 24.1% and 25.0% for 2016, 2017, 2018, 2019, 2020 and 2021, respectively.
(1) | Reflects five-year compound annual growth |
(2) | Includes restructuring charges, transaction and related costs, gain/loss on venture investments, gain/loss on sale of assets, gain on sale of product line, outcomes of legal proceedings, Argentine peso remeasurement transition loss, |
(3) | In the fourth quarter of 2018, we finalized our provisional
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FREE CASH FLOW
($ in millions) | 2019 | 2020 | 2021 | |||||||||
Net cash provided by operating activities | $ | 746.5 | $ | 751.3 | $ | 1,046.8 | ||||||
Purchases of property, plant and equipment | (219.4) | (201.4) | (255.0) | |||||||||
Purchases of software and other deferred charges | (37.8) | (17.2) | (17.1) | |||||||||
Proceeds from sales of property, plant and equipment | 7.8 | 9.2 | 1.1 | |||||||||
Proceeds from insurance and sales (purchases) of investments, net | 4.9 | 5.6 | 3.1 | |||||||||
Payments for certain acquisition-related transaction costs | – | – | 18.8 | |||||||||
Contributions for U.S. pension plan termination | 10.3 | – | – | |||||||||
Free cash flow (non-GAAP) | $ | 512.3 | $ | 547.5 | $ | 797.7 |
104 | 2022 Proxy Statement | Avery Dennison Corporation |
($ in millions) | 2016 | 2017 | 2018 | |||
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| | | | | | |
Net cash provided by operating activities(1) | $582.1 | $645.7 | $457.9 | |||
Purchases of property, plant and equipment | (176.9) | (190.5) | (226.7) | |||
Purchases of software and other deferred charges | (29.7) | (35.6) | (29.9) | |||
Proceeds from sales of property, plant and equipment | 8.5 | 6.0 | 9.4 | |||
Sales (purchases) of investments and proceeds from insurance, net(1) | 3.1 | (3.9) | 18.5 | |||
Plus: Pension plan contribution for plan termination | — | — | 200.0 | |||
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Free cash flow (non-GAAP) | $387.1 | $421.7 | $429.2 |
RETURN ON TOTAL CAPITAL (ROTC)
($ in millions) | 2017 | 2018 | ||
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| | | | |
Net income | $281.8 | $467.4 | ||
Interest expense, net of tax benefit | 30.1 | 49.5 | ||
Effective tax rate | 52.2% | 15.4% | ||
Income from operations, excluding expense and tax benefit of debt financing (non-GAAP) | 311.9 | 516.9 | ||
Total debt | $1,581.7 | $1,966.2 | ||
Shareholders' equity | 1,046.2 | 955.1 | ||
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Total debt and shareholders' equity | $2,627.9 | $2,921.3 | ||
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Return on Total Capital (ROTC) (non-GAAP) | 12.9% | 18.6% |
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
($ in millions) | 2016 | 2017 | 2018 | |||
---|---|---|---|---|---|---|
| | | | | | |
Net income | $320.7 | $281.8 | $467.4 | |||
Reconciling items: | ||||||
Interest expense | 59.9 | 63.0 | 58.5 | |||
Provision for income taxes | 156.4 | 307.7 | 85.4 | |||
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Earnings before interest expense and taxes | $537.0 | $652.5 | $611.3 | |||
Adjustments: | ||||||
Non-cash restructuring costs | 4.1 | 1.0 | 9.9 | |||
Other items(1) | 45.3 | 3.1 | 91.9 | |||
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Adjusted earnings before interest expense, taxes, non-cash restructuring costs and other items (non-GAAP) | $586.4 | $656.6 | $713.1 |
($ in millions) |
| 2020 | 2021 | |||||||||
As reported net income |
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| $ | 555.9 | $ | 740.1 | |||||
Interest expense, net of tax benefit |
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| 53.1 | 52.7 | |||||||
Effective tax rate |
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| 24.1% | 25% | |||||||
Net income, excluding interest expense and tax benefit of debt financing (non-GAAP) |
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| 609.0 | 792.8 | |||||||
Total debt |
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| $ | 2,116.8 | $ | 3,104.7 | |||||
Shareholders’ equity |
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| 1,484.9 | 1,924.4 | |||||||
Total debt and shareholders’ equity |
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| $ | 3,601.7 | $ | 5,029.1 | |||||
ROTC incl. acquisition amortization (non-GAAP) |
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| 18.1% | 18.4% | |||||||
Intangible amortization, net of tax benefit |
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| $ | 15.1 | $ | 33.5 | |||||
Net income, excluding |
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Interest expense and tax benefit of debt financing and intangible amortization (non-GAAP) | $ | 624.1 | $ | 826.3 | ||||||||
ROTC excl. acquisition amortization (non-GAAP) | 18.5% | 19.1% | ||||||||||
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
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($ in millions) | 2019 | 2020 | 2021 | |||||||||
As reported net income | $ | 303.6 | $ | 555.9 | $ | 740.1 | ||||||
Reconciling items: | ||||||||||||
Interest expense | 75.8 | 70.0 | 70.2 | |||||||||
Provision for (benefit from) income taxes | (56.7) | 177.7 | 248.6 | |||||||||
Earnings before interest expense and taxes | $ | 322.7 | $ | 803.6 | $ | 1,058.9 | ||||||
Adjustments: | ||||||||||||
Non-cash restructuring costs | 4.8 | 6.2 | 2.4 | |||||||||
Other items(1) | 449.5 | 1.0 | (49.2) | |||||||||
Adjusted earnings before interest expense, taxes, non-cash restructuring costs, acquisitions completed since the targets were set, and other items (non-GAAP) | $ | 777.0 | $ | 810.8 | $ | 1,012.1 |
(1) | Includes pension plan settlement and curtailment losses, transaction and related costs, gain/loss on venture investments, gain/loss on sale of assets, gain on sale of product line, outcomes of legal proceedings, Argentine peso remeasurement transition loss, reversal of acquisition-related contingent consideration, impact of acquisitions completed after targets were set and other items.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice
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