UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Exchange Act of 1934
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Brown-Forman Corporation
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2017 PROXY
STATEMENT
2015 PROXY STATEMENT & NOTICE OF ANNUAL SHAREHOLDER
MEETING
WE ENRICH THE EXPERIENCE OF LIFE BY RESPONSIBLY BUILDING BEVERAGE ALCOHOL BRANDS THAT THRIVE AND ENDURE FOR GENERATIONS.
June 27, 2017
June 23, 2015
DEAR BROWN-FORMAN STOCKHOLDER:
It is our pleasure to invite you to attend Brown-Forman Corporation’s 20152017 Annual Meeting of Stockholders, which will be held at the Brown-Forman Conference Center in Louisville, Kentucky, onThursday, July 23, 201527, 2017, at 9:30 A.M. (Eastern Daylight Time). Please see the Notice of Annual Meeting on the next page for more information about this location and our admission procedures.
Your vote is important to us.If you are a Class A stockholder, weWe urge you to complete and return your proxy card or to vote by telephone or online as soon as possible, whether or noteven if you plan to attend the Annual Meeting.
We hope to see you on July 23.27. On behalf of the Board of Directors, thank you for your continued support.
Very truly yours,
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Paul C. Varga,
Geo. Garvin Brown IV,
Chairman of the Board of Directors
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 23, 2015:
The Notice of Annual Meeting, Proxy Statement, and Annual Report to Stockholders, which includes our Form 10-K for fiscal 2015, are available atwww.brown-forman.com/proxy.
We are holding this meeting for the following purposes:
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• | To elect the thirteen directors named in |
• | To vote, on a nonbinding advisory basis, to approve our executive compensation; |
• | To vote, on a nonbinding advisory basis, on the frequency of future advisory votes on executive compensation; and
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• | To transact any other
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Class A stockholders of record at the close of business on June 19, 2017, are entitled to vote at the meeting, either in person or by proxy. Class B stockholders are welcome to attend the meeting but are not entitled to vote at the meeting, either in person or by proxy.
There are several ways to vote.
There are several ways to vote this year. You may complete, sign, and date the enclosed proxy card and return it promptly in the enclosed envelope, or you may vote by telephone (1-800-652-8683) or online(www.investorvote.com/BFB). Whatever method you choose, please vote in advance of the meeting to ensure that your shares will be voted as you direct. Instructions on telephone and online voting are on the proxy card enclosed with this Proxy Statement.
Louisville, Kentucky
June 27, 2017
By order of the Board of Directors
Matthew E. Hamel, Secretary
ADMISSION PROCEDURES
We are committed to providing a safe, secure environment for our stockholders, employees, and guests. To that end, please vote in advance of the meeting to ensure that your shares will be voted as you direct. Instructions on telephone and online voting are on the proxy card enclosed with this Proxy Statement.
Louisville, Kentucky
June 23, 2015
By order of the Board of Directors
Matthew E. Hamel, Secretary
ADMISSION PROCEDURES
As we are committed to providing a safe, secure environment for our stockholders, employees, and guests, we kindly ask that you observe the following procedures if you plan to attend the Annual Meeting:
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• | Before the
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• | When you
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• | What to bring:Everyone attending the meeting should bring
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If you do not register in advance, you may still be admitted if you present a photo ID along with your proxy card, brokerage statement, or other documentation of stock ownership.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 27, 2017:
The Notice of Annual Meeting, Proxy Statement, and Annual Report to Stockholders, which includes our Form 10-K for fiscal 2017, are available atwww.brown-forman.com/ investors/annual-report/.
TABLE OF CONTENTS |
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In this section we highlight certain information about matters discussed in this Proxy Statement. As it is only a summary, we encourage you to read the entire Proxy Statement before voting.
ANNUAL MEETING OF STOCKHOLDERS
Date: | Thursday, July 27, 2017 | Location: | Brown-Forman Conference Center |
850 Dixie Highway | |||
Time: | 9:30 A.M. | ||
(Eastern Daylight Time) | |||
Louisville, Kentucky 40210 |
PROPOSAL
PROPOSALS FOR STOCKHOLDER VOTING
Proposal | Our Board’s voting recommendation | Where to find details | ||
Election of 13 directors | Pages | |||
Advisory vote to approve our executive compensation | FOR the proposal | Page 51 | ||
Advisory vote on the frequency of future advisory votes on executive compensation | For EVERY THREE YEARS as the frequency offuture advisory votes on executive compensation | Page 52 |
PERFORMANCE AND COMPENSATION HIGHLIGHTS
We believe that our executive compensation program continues to attract, motivate, reward, and retain a talented and diverse team of executives. These individuals lead us in our efforts to be the best brand builder in the spirits industry, and enable us to deliver superior and sustainable value for our stockholders. We had strong performance during fiscal 2015, and theThe incentive payouts to our executives described in this Proxy Statement reflect this performance.our performance during fiscal 2017.
The following charts compare our Companytrends in Brown-Forman’s performance with respect to total shareholder return, diluted earnings per share, and underlying operating income(1) growth with trends in the compensation of our Chief Executive Officer, Paul C. Varga. These metrics reflect exceptional long-term value generated for our stockholders, and the charts show the alignment ofhow our compensation strategy aligns with that performance.
OUR PERFORMANCE IN FISCAL 2017:
(compound annual growth rate; Class B common stock) | (compound annual growth rate) | (in $ millions) |
(1) | EPS was adjusted to exclude the effect of acquired and divested brands in fiscal 2016 and fiscal 2017. These measures remove the effects of (a) the gain on the sale of Southern Comfort and Tuaca, (b) those transaction-related costs not included in the gain on the sale of Southern Comfort and Tuaca, (c) financing-related costs for the acquisition of BenRiach, and (d) operating activity for the acquired and divested businesses in the non-comparable periods. (With respect to the comparison of fiscal 2017 to fiscal 2016, the non-comparable period comprised all months of both years.) EPS used for fiscal 2016 was $1.63, compared to the reported GAAP value of $2.61, and EPS used for fiscal 2017 was $1.72, compared to the reported GAAP value of $1.71. Both measures are adjusted in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Fiscal 2017 Highlights — Adjusted Measures for Acquired and Divested Brands.” |
(2) | Reflects growth in “underlying operating income” over the past fiscal years. “Underlying operating income” is |
Mr. Varga’s total compensation includes base salary, stock appreciation rights, non-equity compensation, and all other compensation as reported in the Fiscal |
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BROWN-FORMAN |
OUR DIRECTOR NOMINEES TO THE BOARD
YouClass A stockholders are being asked to vote on the election of the thirteen directors named below. More details about each director’s background, skills, and expertise can be found below under “Election“Proposal 1: Election of Directors.” Dace Brown Stubbs has decided not to seek re-election at the Annual Meeting. At the time of the Annual Meeting, the size ofDirectors” beginning on page 16. One new director, Kathleen M. Gutmann, joined the Board therefore will be reduced to thirteen directors.on May 24, 2017.
Board Nominees
Committee Membership | ||||||||||||
Nominee Name, Age & Occupation |
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Patrick Bousquet-Chavanne,AGE 59 Executive Director of Customer, Marketing and M&S.com, Marks and Spencer Group PLC |
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Geo. Garvin Brown IV,AGE 48 | 2006 | B | • | C | ||||||||
Stuart R. Brown,AGE 52 Managing Partner, Typha Partners, LLC | 2015 | B | ||||||||||
Bruce L. Byrnes,AGE 69 | 2010 | I |
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John D. Cook,AGE 64 Director; Director Emeritus of McKinsey & Company |
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Marshall B. Farrer,AGE 46 Vice President and Managing Director of Global Travel Retail, Brown-Forman Corporation | 2016 | B, M | ||||||||||
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Founding Partner, Haystack Partners LLC |
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Michael J. Roney,AGE 63 Retired Chief Executive, Bunzl plc | 2014 | I | C | |||||||||
Michael A. Todman,AGE 59 Retired Vice Chairman, Whirlpool Corporation | 2014 | I | C | |||||||||
Paul C. Varga,AGE 53 Chairman & CEO, Brown-Forman Corporation | 2003 | M | • |
B=Brown Family Director M=Management Director I=Independent Director C=Chair
—“In building our brands and creating new opportunities, we are writing the next chapter in our story of innovation, perseverance, and success.”
Paul Varga, Chairman and CEO
19% | $561M | $274M | ||
RETURN ON INVESTED | ||||
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(1) | Return on Invested Capital is not derived in accordance with GAAP. |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | BROWN-FORMAN | 3 |
ANNUAL MEETING INFORMATION |
ABOUT YOUR PROXY MATERIALS
Our Board of Directors is soliciting proxies for our upcoming Annual Meeting of Stockholders to be held on July 23, 201527, 2017 (the “Annual Meeting”)Annual Meeting). This means that you can vote “by proxy” at the Annual Meeting—thatMeeting —that is, you can instruct us how you would like your shares to be voted ifat the meeting whether or not you do notpersonally attend.
We are providing you with these proxythis Proxy Statement and accompanying materials to help you make an informed decision on the matters to be considered at the Annual Meeting. We will begin mailing this Proxy Statement and accompanying materials, and also make them available online, on or about June 23, 2015,27, 2017, to holders of record of our Class A and Class B common stock at the close of business on June 15, 2015,19, 2017, which is the “record date” for the Annual Meeting.
This Proxy Statement and our Annual Report to Stockholders, which includes our Form 10-K for fiscal 2015,2017, are available atwww.brown-forman.com/proxy.investors/annual-report/.You may request additional printed copies at any time using the contact information below.
Please let us know as soon as possible how you would like your shares voted. To do this, you may complete, sign, date, and return the enclosed proxy card or voting instruction card, or you may instruct us by telephone or online. See “Voting” below for details.
Contact Information
For information about your stock ownership or other stockholder services, please contact Linda Gering, our Stockholder Services Manager, by telephone at (502) 774-7690, by e-mail at Linda_Gering@b-f.com, or by mail at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210.
Reducing duplicate mailings. Duplicate Mailings
The Securities and Exchange Commission (SEC) permits us to deliver a single Proxy Statement and Annual Report to stockholders who share the same address and last name, unless we receive contrary instructions from any stockholder in thatthe household. EachEven if your household receives only one Proxy Statement and Annual Report, each stockholder still receives his or her ownwill receive an individual proxy card. We participate in this “householding” process to reduce our printing costs, and postage fees, and to better facilitate voting. If you would like to enroll in this “householding” service,“householding,” or if your household is already enrolled but you prefer to receive a separate copy of the proxy materials and/or opt out of “householding” for next year, please inform us using the contact information above and we will promptly fulfill your request.
ATTENDING THE ANNUAL MEETING
Although only Class A stockholders may vote at the Annual Meeting, Class A and Class B stockholders are welcome to attend if theywho owned their shares as of June 15, 2015.19, 2017, are welcome to attend.
If you plan to attend, please register on or beforeby July 21, 201525, 2017, by contacting Linda Gering using the contact information above. We ask that youPlease bring a form of photo identification to the meeting,ID and, if your shares are registered in the name of a bank, broker, or other holder of record, that you bring documentation of your stock ownership as of the date of record.record date.Please see “Admission Procedures” outlined in the Notice of Annual Meeting for full details.
VOTING
Who May Vote
If you held ourshares of Class A common stock at the close of business on the record date (June 15, 2015)19, 2017), you, or your legal proxies, may vote at the Annual Meeting on all three proposals. At the close of business on the record date, there were 169,062,117 shares of Class A common stock outstanding and entitled to vote at the Annual Meeting. At the close of business on the record date, there were 84,528,000215,189,294 shares of Class AB common stock outstanding, andhowever those shares are not entitled to vote at the Annual Meeting.vote.
If you purchased Class A common stock after the record date, you may vote those shares only if you receive a proxy to do so from the person who held the shares on the record date. Each share of Class A common stock is entitled to one vote. If you receive more than one proxy card or voting instruction card, it is important that you should complete, sign, date, and datereturn each proxy card and each voting instruction card that you receiveone (or follow the telephone or online voting instructions) because theythe cards represent different shares.
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BROWN-FORMAN |
ANNUAL MEETING INFORMATION •VOTING
How to Vote
Stockholders of record:record.If you are a Class A stockholder and your shares are registered directly in your name with our stock transfer agent, Computershare, you are considered to be the “stockholder of record” of those shares. If you are a stockholder of record of Class A shares, you can give a proxy to be voted at the meeting:
Unless
• over the telephone by calling a toll-free number (1-800-652-8683);
• online(www.investorvote.com/BFB); or
• by completing, signing, and mailing the enclosed proxy card in the envelope provided.
Even if you are planningplan to vote atattend the meeting, we encourage you to submit a proxy in person, weadvance. We must receive your proxy by 1:00 a.m., Eastern Daylight Time, on Thursday, July 23, 2015.27, 2017, to ensure your vote is recorded. You may override a proxy by following the applicable procedure outlined below in “Changing Your Vote.”
The telephone and online voting procedures have been set up for your convenience and have beenare designed to authenticate your identity, to allowenable you to give voting instructions, and to confirm that those instructions have beenare recorded properly. If you are a stockholder of record and you would likewish to vote by telephone or online, please refer to the instructions set forth on the enclosed proxy card.
By giving your
Your proxy youwill authorize the individuals named on the proxy card to vote your shares for you in accordance with your instructions. These individuals will also have the obligation and authority to vote your shares as they see fit on any other matter properly presented for a vote at the Annual Meeting. If for any reason a director nominee is not available to serve, the personsindividuals named as proxy holders may vote your shares at the Annual Meeting for another nominee. The proxy holders for this year’s Annual Meeting are Geo. Garvin Brown IV, Paul C. Varga, and Matthew E. Hamel.
If you are a stockholder of record and you sign and return your proxy card (or give your proxy by telephone or online) without specifying how you want your shares to be voted, our proxy holders will vote your shares “FOR” the election of each of the nominees to the Board.Board (Proposal 1), “FOR” the advisory resolution to approve our executive compensation (Proposal 2), and for “EVERY THREE YEARS” as the frequency of future advisory votes on executive compensation (Proposal 3). With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote your shares as recommended by the Board or, if no recommendation is given, using their own discretion.
“Street name” stockholders:stockholders.If you are a Class A stockholder and your shares are held in a stock brokerage account or by a bank (known as holding shares in “street name”), you have the right to directinstruct your broker or bank how to vote your shares, and the broker or bank is required to vote your shares in accordance with your instructions. To provide those instructions to your broker or bank by mail, please complete, sign, date, and return your voting instruction card in the postage-paid envelope provided by your broker or bank. Alternatively, if the broker or bank that holds your shares offers online or telephone voting, you will receive instructionsinformation from your broker or bank that you must follow in orderabout how to submit your voting instructions online or by telephone.those methods. You also may vote in person at the meeting, but only if you obtain a “legal proxy” from the broker or bank that holds your shares.
If you are a street name stockholder and you do not instruct your broker how to vote, your broker willis not be ablepermitted to vote your shares on any of the election of directors.proposals we will address at the Annual Meeting. This is known as a “broker non-vote.”
Changing Your Vote
If you are astockholder of record, you may change your vote by submitting another proxy by telephone or online, by mailing another properly signed proxy card bearing a later date than your original one, or by attending the Annual Meeting and casting your vote in person. You also may revoke a proxy that you previously provided by delivering timely written notice of revocation of your proxy to our Secretary, Matthew E. Hamel, via mail at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210, or at Secretary@b-f.com.
If you hold your shares instreet name,and you will needwish to follow thechange or revoke your voting instructions, inplease refer to the materials your broker or bank has provided to you in order to change your or revoke your votingfor instructions.
Voting Privacy
Proxy instructions, ballots, and voting tabulations are handled in a manner that protects the confidentiality of each stockholder’s vote. Your vote will not be disclosed within the Company or to third parties, except as necessary to meet legal requirements, to allow for the tabulation and certification of votes, and to facilitate proxy solicitation. Occasionally, stockholders provide written comments on their proxy cards, which may be forwarded to the Company’s management and the Board.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | BROWN-FORMAN | 5 |
ANNUAL MEETING INFORMATION •ANNOUNCEMENT OF VOTING RESULTS
Quorum Requirements
Business can be conducted at the Annual Meeting only if a quorum consisting of a majority of the outstanding shares of Class A common stock is present in person or represented by proxy. Abstentions and broker non-votes, if any, will be counted as present for purposes of establishing a quorum. Broker non-votes are counted as present for purposes of establishing a quorum but will not be considered entitled to vote on the proposal. We do not expect any broker non-votes to occur because the proposal on the agenda for this year’s Annual Meeting is a matter on which brokers do not have discretionary authority to vote.
Votes Needed For Approval
Election of directors: A nominee will be elected if he or she receives a majority of the votes cast, meaning that the number of shares voted “for” a director exceeds the number of shares voted “against” that director (with abstentions not counted as votes cast).
Proposal | Vote required to pass | Effect of abstentions and broker non-votes | ||
Election of directors | Nominees who receive a majority of the Class A votes cast (thenumber of shares voted “for” the nominee exceeds the number ofshares voted “against” that nominee) will be elected. | No effect. | ||
Advisory resolution to approveexecutive compensation | Approval requires an affirmative vote of the majority of the Class Ashares present (in person or represented by proxy) and entitled to vote. | Abstentions are equivalent to votesagainstthe proposal. Broker non-votes will have no effect. | ||
Advisory resolution on thefrequency of future advisory voteson executive compensation | The frequency receiving the greatest number of votes (every one,two, or three years) will be considered the recommendation of thestockholders. | No effect. | ||
Any other matter | Approval requires an affirmative vote of the majority of the Class Ashares present (in person or represented by proxy) and entitled to vote. | Abstentions are equivalent to votesagainstthe proposal. Broker non-votes will have no effect. |
Any other matter properly presented and brought to a vote at the Annual Meeting: Approval requires the affirmative vote of the majority of the shares present in person or represented by proxy and entitled to vote on the matter (with abstentions counted as votes against the proposal).
Dividend Reinvestment and Employee Stock Purchase Plan Shares
Shares of Class A common stock held by participants in Brown-Forman’s dividend reinvestment and employee stock purchase plans are included in your holdings and reflected on your proxy card. These shares will be voted as you direct.
ANNOUNCEMENT OF VOTING RESULTS
We intend to announce the preliminary voting results at the Annual Meeting and to issue a press release later that day. In addition, we will report the voting results by filing a Form 8-K with the SEC within four business days following the Annual Meeting.
PROXY SOLICITATION EXPENSES
Brown-Forman bears the cost of soliciting proxies. Beginning on June 23, 2015,27, 2017, which is the mailing date for these proxy materials, our directors, officers, and other employees may solicit proxies in person or by regular or electronic mail, phone, fax, or online. Directors, officers, and employees of the CompanyThese individuals will not receive no additional compensation for soliciting proxies. We will reimburse banks, brokers, nominees, and other fiduciaries for their reasonable charges and expenses incurred in forwarding our proxy materials to the beneficial owners of our stock held in street name. In addition, we have retained Proxy Express, Inc. to assist with the distribution of proxy materials for a fee of approximately $14,000,$15,000, plus associated expenses.
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BROWN-FORMAN |
CORPORATE GOVERNANCE |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | BROWN-FORMAN | 7 |
CORPORATE GOVERNANCE •BOARD COMPOSITION
How Our Controlled-Company Status Affects Our Board
Our Board has determined that Brown-Forman is a “controlled company” under New York Stock Exchange (NYSE) rules because more than 50% of our Class A voting stock is held by members of the Brown family.
As a controlled company, we are exempt from NYSE listing standards that require boards to have a majority of independent directors, a fully independent nominating/corporate governance committee, and a fully independent compensation committee. As a matter of good corporate governance, the Board has voluntarily chosen to have a Compensation Committee that is composed entirely of directors who meet the NYSE’s heightened independence standards for compensation committee members. Our Board does not have a majority of independent directors or a fully independent nominating/corporate governance committee.
Our Independent Directors
Under NYSE listing rules, a director qualifies as “independent” if the board of directors affirmatively determines the director has no material relationship with the company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships. While the focus is on independence from management, our Board considers all relevant facts and circumstances in making an independence determination. Our Board recognizes the value of having independent directors, and has determined that six directors are independent under NYSE standards: Patrick Bousquet-Chavanne, Bruce L. Byrnes, John D. Cook, Kathleen M. Gutmann, Michael J. Roney, and Michael A. Todman.
The Board has determined that Geo. Garvin Brown IV, Campbell P. Brown, Marshall B. Farrer, and Paul C. Varga are not independent because they are, or recently have been, members of Brown-Forman management. The Board elected not to make a determination with respect to the independence of Stuart R. Brown, Laura L. Frazier, and Augusta Brown Holland.
Our Brown Family Directors
We believe it is strategically important for Brown family members to be actively engaged in the oversight of Brown-Forman. Through participation on the Board, the Brown family’s long-term perspective is brought to bear, in some measure, upon each and every matter the Board considers. Brown family directors also serve as an effective link between the Board and the controlling family stockholders.
In addition, Board service allows the Brown family to actively oversee its investment in the Company. Following the Annual Meeting,Currently, the Brown family member directors are expected to be:are: Campbell P. Brown, Geo. Garvin Brown IV, Martin S. Brown, Jr., Stuart R. Brown, Sandra A.Marshall B. Farrer, Laura L. Frazier, and Augusta Brown Holland. Dace Brown Stubbs, a current Brown family director, will not stand for re-election at the Annual Meeting.
8 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
CORPORATE GOVERNANCE •BOARD COMPOSITION
Our Management Directors
The Company
We also believesbelieve it is important, from a corporate governance standpoint, that Companyfor management to be represented on the Board. Current Board members who are also members of Company management are:Currently, Campbell P. Brown, Marshall B. Farrer, and Paul C. Varga serve in dual roles as Board members and James S. Welch, Jr.Brown-Forman executives.
Recent Changes to our BoardBROWN-FORMAN BOARD OF DIRECTORS
As previously disclosed, two new directors from the Brown family, Stuart R. Brown and Augusta Brown Holland, joined the Board effective May 21, 2015. Dace Brown Stubbs, a current Brown family director, will not stand for re-election at the Annual Meeting.
PATRICK BOUSQUET-CHAVANNE | CAMPBELL P. BROWN | GEO. GARVIN BROWN IV | |||||
Executive Director of Customer, Marketing and M&S.com, Marks and Spencer Group PLC | President and Managing Director of Old Forester, Brown-Forman Corporation | Chairman of the Board, Brown-Forman Corporation | |||||
STUART R. BROWN | BRUCE L. BYRNES | JOHN D. COOK | |||||
Managing Partner, Typha Partners, LLC | Retired Vice Chairman of the Board, The Procter & Gamble Company | Lead Independent Director; Director Emeritus of McKinsey & Company | |||||
MARSHALL B. FARRER | LAURA L. FRAZIER | KATHLEEN M. GUTMANN | |||||
Vice President and Managing Director of Global Travel Retail, Brown-Forman Corporation | Owner and Chairman, Bittners LLC | Chief Sales and Solutions Officer, United Parcel Service, Inc. and Senior Vice President, The UPS Store and UPS Capital | |||||
AUGUSTA BROWN HOLLAND | MICHAEL J. RONEY | MICHAEL A. TODMAN | |||||
Founding Partner, Haystack Partners LLC | Retired Chief Executive, Bunzl plc | Retired Vice Chairman, Whirlpool Corporation | |||||
PAUL C. VARGA | INDEPENDENT | RECENT CHANGES TO OUR BOARD As previously disclosed, Kathleen M. Gutmann joined the Board on May 24, 2017, as an independent director. | ||||
Chairman & CEO, Brown-Forman Corporation | BROWN FAMILY | |||||
MANAGEMENT | ||||||
BROWN FAMILY & MANAGEMENT | ||||||
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 9 |
CORPORATE GOVERNANCE •LEADERSHIP STRUCTURE
Chairman of the Board
Our Board believes that the determination of whether to separate or combine the roles of Chairman of the Board and Chief Executive Officer should depend largely upon the identity of the Chief Executive Officer and the composition of the Board at the time. For this reason, it does not have a policy on separation of these roles, but rather evaluates the situation as circumstances change.
on a case-by-case basis. Currently, these roles are separate, although they have been combined in the past. Geo. Garvin Brown IV, a Brown family member, serves as Chairman of the Board. He also serves on our Corporate Governance and Nominating Committee and the Executive Committee of the Board, which he chairs.
Company Chairman and CEO
Paul C. Varga serves as the Company Chairman and Chief Executive Officer.Officer of Brown-Forman. Mr. Varga is the Company’sour highest ranking executive officer and has responsibilityis responsible for the Company’sBrown-Forman’s strategy, operations, and performance. He serves as a member of our Board and of the Board’s Executive Committee.
Lead Independent Director
When a non-independent director holds the office of Chairman of the Board or Presiding Chairman of the Board, as is currently the case, the Board may select one independent director (after considering the recommendation of the Corporate Governance and Nominating Committee) may select one independent director to serve as Lead Independent Director. In September 2012, the Board selectedThe Lead Independent Director, if any, will be elected annually. John D. Cook to servehas served in this role.role since 2012.
As Lead Independent Director, Mr. Cook’s responsibilities are to:
call meetings of the independent or non-management directors, when necessary or advisable; | |
• | chair executive sessions attended solely by |
• | facilitate open communications among directors and with management between Board meetings and help directors reach consensus on important matters; |
• | serve as liaison, when necessary or advisable, between the Chairman of the Board or Presiding Chairman of the Board and the independent and non-management directors; |
be available for consultation and direct communication upon the reasonable request of major and/or long-term stockholders; | |
• | play a leadership role in contingency and succession |
• | perform such other duties as the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities. |
Mr. Cook chaired one executive session of non-management directors in fiscal 2015.2017. Also, because our non-management director group includes directors who are not “independent” under NYSE listing standards, Mr. Cook called and presided over one executive session in fiscal 20152017 that was attended solely by our independent directors.
Why the Board Chose this Leadership Structure
OurThe Board has determined that this leadership structure currently serves the best interests of the CompanyBrown-Forman and its stockholders. Having a Brown family member serve as Chairman of the Board promotes the Brown family’s active oversight of, and engagement and participation in, the Company and its business and reflects the fact that Brown-Forman is controlled by the Brown family. In addition, because Mr. Brown handles the responsibilities attendant toassociated with the position of Chairman of the Board, Mr. Varga our Chief Executive Officer, can focus moreconcentrate on the Company’s strategy and operations, while the Board still has access to his comprehensive knowledge of the Company’s business. The Lead Independent Director position provides leadership to, and fosters coordination among, our independent directors, enabling them to better fulfill their role of bringing expert outside perspectives to the Board.
10 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
BOARD GUIDELINES AND PROCEDURES
Corporate Governance Guidelines
The Board believes that transparency is a hallmark of good corporate governance. TheTo that end, the Board has adopted Corporate Governance Guidelines that provide a framework for the Board to exercise its duties. Among other things, these guidelines contain policies and requirements regarding: director qualifications; director responsibilities, including the Lead Independent Director’s role; meetings and attendance; committee composition and responsibilities; director compensation; and director access to management and independent advisors. The guidelines also require an annual self-assessment by the Board. The Corporate Governance Guidelines are published on our website atwww.brown-forman.com/about/corporate-governancecorporate-governance/guidelines//guidelines/.
Board and Committee Self-Assessment
Each year, ourThe Corporate Governance Guidelines require the Board and eachto conduct an annual self-assessment. Each Board committee (except the Executive Committee) also annually assesses how it performed during the preceding 12 months. Thetwelve-month period. These assessment procedures they follow vary, from requiring members to complete questionnaires that call for both quantitative responses and allow for free-ranging comments, to having an independent third party interview each member and then synthesize themes that emerge.
| ||||
| ||||
Director Service
The Board is authorized to fix the numbersize of directors to serve on the Board from time to time, withinat a range ofnumber between three toand seventeen members. Directors are elected each year at the Annual Meeting by a majority of the votes cast by our Class A stockholders. Once elected, a director holds office until the next Annual Meeting of Stockholders or until his or hera successor is elected and qualified, unless he or shethe director first resigns, retires, or is removed. Directors are not subject to term limits. Alimits but a director may not stand for re-election to the Board after he or she has reachedreaching the age of 71. However, inIn exceptional circumstances, the Board may ask a director to remain on the Board until a given date if his or herthe director’s continued service would significantly benefit the Company.Brown-Forman. Service of a director beyond the age of 71 requires approval by two-thirds of the other directors following a recommendation by the Corporate Governance and Nominating Committee.Committee and the approval of two-thirds of the Board (not including the director under consideration).
Board Meetings
The Board held six regular meetings and oneno special meetingmeetings during fiscal 2015.2017. Absent an appropriate reason, all directors are expected to attend the Company’s Annual Meeting, of Stockholders, all Board meetings, and all meetings of each committee on which they serve. Each directorAll directors attended 75%90% or more of the aggregate meetings of the Board and committees on which he or shethey served during fiscal 2015.2017. All directors then serving attended the 20142016 Annual Meeting of Stockholders.
Board Committees
Our Board has the following four standing committees: Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Executive Committee. Each Board committee operates under a written charter that is posted on our company website atwww.brown-forman.com/about/corporate-governance/committee-compositioncommittee-composition//. Each Board committee conducts an annual self-assessment (except the Executive Committee) and may hire independent advisors as it finds necessary or appropriate.
AUDIT COMMITTEE | |||
| |||
The Board has delegated to the Audit Committee responsibility for
|
| ||
| Committee Members: | ||
• | Michael A. Todman (Chair) | ||
• | Bruce L. Byrnes | ||
• | John D. Cook |
Audit Committee members must satisfy director independence standards prescribed by the NYSE and mandated by the Sarbanes-Oxley Act. Each member of our Audit Committee satisfies all of these heightened independence standards. The Board has determined that each member of our Audit Committee is also “financially literate” within the meaning of the NYSE rules, and that Mr. Todman is an “audit committee financial expert” under SEC rules.
| 11 |
CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
COMPENSATION COMMITTEE | |||||
The Compensation Committee’s responsibilities include Officer. | MET 6 TIMES IN FISCAL 2017 | ||||
Committee Members: | |||||
• | Michael J. Roney (Chair) | ||||
• | Patrick Bousquet-Chavanne | ||||
• | John D. Cook | ||||
The Compensation Committee has retained 24. | |||||
Each member of the Compensation Committee |
| ||||
The Corporate Governance and Nominating Committee’s
| MET 8 TIMES IN FISCAL 2017 | ||
Committee Members:
| |||
• | John D. Cook (Chair)
| ||
• | Patrick Bousquet-Chavanne
| ||
• | Geo. Garvin Brown IV
| ||
• | Bruce L. Byrnes | ||
EXECUTIVE COMMITTEE
| |||
The Executive Committee | MET ONCE IN FISCAL 2017 | ||
Committee Members:
| |||
• | Geo. Garvin Brown IV (Chair)
| ||
• | John D. Cook | ||
• | Paul C. Varga |
12 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
Board’s Role in Risk Oversight
The Board believes that its current leadership structure best enables it to fulfill its risk oversight function. Our Corporate Governance Guidelines require the Board to ensure thatwe implement appropriate processes are in place for managing enterprise risk, and our Board considers risk oversight to be an integral part of its role in the Company’s strategic planning process. At its meetings, theThe Board regularly and actively considers how strategic decisions affect the Company’sBrown-Forman’s risk profile.
While the Board has ultimate oversight responsibility for the risk management process, certain committees also take onhave important supplementary roles relating to the Board’s risk oversight function.in that process. During fiscal 2015,2017, the Board tasked the followingits committees to assist it with the responsibilities outlined below:
Audit Committee—overseeing |
Compensation Committee—overseeing |
Corporate Governance and Nominating Committee—overseeing |
These committees met regularly with members of management and outside advisors, as necessary, and providedreported to the Board regular reportsregularly on their risk oversight and mitigation activities. The Audit Committee discussed the Company’s enterprise risk management program with the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, General Counsel, and Director of Internal Audit. In addition, certain management committees—themanagement’s Disclosure Controls Committee and theEnterprise Risk Committee—Management Committee both play an integral role in making sure that relevant risk-related information is reported to senior management and the Board as directly and quickly as possible. Further, our management Ethics, Compliance and Risk Team, comprising a number of senior executives and subject matter experts, meets throughout the year to address issues related to risk, ethics, and compliance; to coordinate the work of those areas; and to oversee the formulation and promulgation of company policies and the training of employees in compliance with them.
Communication with ourOur Board
Stockholders and other interested parties may communicate with our directors, including the non-management directors or the independent directors as a group, by writing to our Secretary, Matthew E. Hamel, at 850 Dixie Highway, Louisville, Kentucky 40210, or at Secretary@b-f.com. The Secretary’s office will forward written communications to the individual director or group of directors to whom they are addressed, with copies to all other directors.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 13 |
CORPORATE GOVERNANCE •COMPANY BEST PRACTICES
Brown-Forman has long believed that good corporate governance is essential to the Company’s long-term success. We continually evaluate our corporate governance practices in the context of our controlled-company status to address the changing regulatory environment, and adopt those practices that we believe are in the best for Brown-Forman.interests of Brown-Forman and all of our stockholders.
Code of Conduct
The Company has adopted the Brown-Forman Code of Conduct which contains our standardsexpresses its expectations of ethical behavior for all of our employees and directors. The Code of Conduct includes our Code of Ethics for Senior Financial Officers, which reflects the Company’s expectation that all of our financial, accounting, reporting, and auditing activities of the Company are towill be conducted in strict compliance with all applicable rules and regulations and underwill conform to the highest ethical standards. Brown-Forman encourages its employees to “speak up” when aware of a potential code of conduct violation and provides multiple channels for doing so, including anonymously. The Code of Conduct, including reporting channels, and the Code of Ethics for Senior Financial Officers can be found on our website atwww.brown-forman.com/about/corporate-governance/code-of-ethics/andwww.brown-forman.com/about/corporate-governance/code-of-ethics-for-senior-financial-officers/.
Disclosure Controls Committee
The Company has a Disclosure Controls Committee which is composed of members of management. This committee has established controls and procedures designed to ensure that information that the CompanyBrown-Forman may be required to disclose is gathered and communicated to the committee and that anyall required disclosure isdisclosures are made in a timely and accurate manner. The committee has implemented a financial review process that enables our Chief Executive Officer and Chief Financial Officer to certify our quarterly and annual financial reports, and also is responsible for developing and implementingas well as procedures designed to ensure our compliance with SEC Regulation FD (Fair Disclosure).
Risk Committee
The mission of the Enterprise Risk Management (ERM) Committee, which is composed of members of management, leads the Company’s enterprise risk management program (ERMP). The objective of the ERMP is to protectensure that all of Brown-Forman’s major risks are identified and evaluated. The ERM Committee also identifies the long-term viability of the Company’s business through the identificationindividuals and management of risk. The ERMP includes the development and implementation of our risk management policies and specific governance structures and the oversight of our processes for identifying, assessing, and mitigating risk. In support of the ERMP’s objectives, the Risk Committee isteams who are responsible for identifying criticalmitigating risks, the Company faces; assessing the adequacy of measuresand ensures that mitigation plans are in place to managemitigate the Company’s significant risks. The ERM Committee reports to the Audit Committee regarding its policies and processes. In addition, the ERM Committee reports to the Board at least annually regarding the top risks facing Brown-Forman, and periodically updates the Board on the mitigation plans related to those risks; communicating the role of all employees in the ERMP; and integrating the discussion of risk into decision-making processes.risks.
14 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
CORPORATE GOVERNANCE •OUR CONTROLLING FAMILY STOCKHOLDERS
OUR CONTROLLING FAMILY STOCKHOLDERS
As noted above, Brown-Forman has an engaged family stockholder base with a long-term ownership perspective. We view our status as a publicly traded, family-controlled company as a distinct competitive advantage, and we believe that a strong relationship with the Brown family is essential to our growth, independence, and ability to create long-term value creation for all stockholders. The Company conducts its interactionsManagement interacts with Brown family members in a manner consistent with all applicable laws and regulations. We actively cultivate our relationship with the Brown family through a numbervariety of different channels, as detailed below.
Brown-Forman/Brown Family Shareholders Committee
In 2007, Geo. Garvin Brown IV and Paul C. Varga organized the Brown-Forman/Brown Family Shareholders Committee, (FSC), which they continue to co-chair. The FSCThis committee provides a forum for frequent, open, and constructive dialogue between the CompanyBrown-Forman and its controlling family stockholders. It includes several non-family Company executives in addition to Mr. Varga and has formed subcommittees to engage certainThe Brown Family Shareholders Committee engages the Brown family members on topics of mutual interest such as family corporatethe Company and industry, governance, Brown-Forman philanthropy,ownership, and Brown family stockholder education.philanthropy.
Director of Family Shareholder Relations
The Director of Family Shareholder Relations, a Brown-Forman employee, works with Companyother employees and certain Brown family members to develop and implement policies and practices designed to further strengthen the relationship between the CompanyBrown-Forman and the Brown family.
Brown Family Member Employees
The CompanyBrown-Forman employs eleventen Brown family members, at various levels. Some Brown family employeessome of whom participate on Company management committeesteams that oversee strategic and operational matters. Participation on these committees enables our Brown family employees to contribute their perspectives toon the important issues facingwe confront. In addition to their management contributions, the Company.Brown family employees play a critical role in upholding the Brown-Forman corporate culture.
| 15 |
PROPOSAL 1: | ||||
ELECTION OF DIRECTORS |
This section provides information about our thirteen director nominees, including the experience, qualifications, attributes, and skills that enable them to make valuable contributions to our Board in light of our business and our status as a family-controlled company.Board.
All of our director nominees are current directors of Brown-Forman. Each director was elected by the stockholders at the Company’s 2014our 2016 Annual Meeting except for Stuart R. Brown and Augusta Brown Holland,Kathleen M. Gutmann, who werewas appointed to the Board in May 2015.2017. Kathleen M. Gutmann was recommended for appointment to the Board by the Corporate Governance and Nominating Committee following a process conducted with the assistance of a third-party executive search firm.
The Board unanimously recommends a vote “FOR” the election of each of the director nominees.nominee.
Your shares will be voted“FOR”the election of all director nominees listed below unless you directinstruct the proxy holders to vote against, or to abstain from voting for, one or more of the nominees. If any nominee becomes unable to serve before the meeting, the proxy holders may vote for a substitute nominee if the Board has designated one. As of the date of this Proxy Statement, it is the Board’s understanding thatBoard believes each nominee is prepared to serve if elected.
NOMINEES
PATRICK BOUSQUET-CHAVANNE | ||||
|
| |||
Director since 2005 Age
Committees:
- Compensation
| CURRENT AND PAST POSITIONS
Positions at Marks and Spencer Group - Executive Director of Customer, Marketing and M&S.com since - Executive Director of Marketing and International from 2014 to 2016 - Executive Director, Marketing and Business Development - Corporate Director of Strategy and Business Development Positions at Yoostar Entertainment - Co-Chairman from 2010 to - President and Chief Executive Officer | QUALIFICATIONS AND SKILLS
- Experience dealing with governance issues relevant to family-controlled public
OTHER - Marks and Spencer Group PLC since - HSNi Corporation from 2008 to
|
CAMPBELL P. BROWN | ||||||||||
Director since 2016 Age 49 | CURRENT AND PAST POSITIONS Positions with Brown-Forman and affiliates: - President and Managing Director of Old Forester, our founding bourbon brand, since 2015 - Led the wine and spirits portfolio in Canada and the Midwest region of the U.S. - Served in the emerging markets of India, the Philippines, and Turkey - Various other positions over a 23-year career - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007 | QUALIFICATIONS AND SKILLS - Business and industry experience gained by serving in operational, management, and executive positions within the Company - Deep knowledge of family corporate governance - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders OTHER DIRECTORSHIPS - Republic Bank and Trust Company since 2008 |
16 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
ELECTION OF DIRECTORS•NOMINEES
GEO. GARVIN BROWN IV |
Director since 2006 Age
Committees:
- Corporate Governance
| CURRENT AND PAST POSITIONS Positions with Brown-Forman and affiliates: - Chairman of the Board since - Executive Vice President - Senior Vice President and Managing Director of Western Europe and Africa from 2009 to - Vice President and Jack Daniel’s Brand Director in Europe and Africa from 2004 to - Director of the Office of the Chairman and Chief Executive Officer from 2002 to - Founding member and Co-Chairman of Brown-Forman/Brown Family Shareholders Committee since 2007 | QUALIFICATIONS AND SKILLS
- Deep knowledge of family corporate governance - Perspective as a fifth generation Brown family - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders |
STUART R. BROWN | ||||
Director since Age |
| |||
|
DendriFund, Inc. Between the Covers Bookstore, Owner from 1998 to Positions with Brown-Forman and affiliates: - Sales and Marketing Management - Founding member of Brown-Forman/Brown Family Shareholders Committee since | QUALIFICATIONS AND SKILLS
- Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of
|
Director since 2010 Age 69 Committees: - Audit - Corporate Governance and Nominating | CURRENT AND PAST POSITIONS Positions with The Procter & Gamble Company: - Vice Chairman of the Board from 2002 to 2008 - Vice Chairman, Global Brand Building Training, from 2007 to 2008 - Vice Chairman, Global Household Care Division, from 2004 to 2007 | QUALIFICATIONS AND SKILLS - Executive leadership of a global consumer goods company - Expertise in brand building, brand management, and finance - Experience with international marketing and operations and corporate strategy OTHER DIRECTORSHIPS - Boston Scientific Corporation from 2009 to 2015 - Diebold, Incorporated from 2010 to 2015 - Cincinnati Bell, Inc. from 2003 to 2013 |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 17 |
Director since
Director since 2012
-Compensation -Corporate Governance -Audit -Executive |
- Director from 2003 to | |||
|
- Leadership and senior management experience - Financial and international expertise - Marketing skills - Experience with strategic acquisitions and integrations
OTHER DIRECTORSHIPS - Winona Capital Management since 2007 | |||
MARSHALL B. FARRER | ||||
Director since Age |
Positions with Brown-Forman and affiliates: - Vice President, Managing Director of Global Travel Retail, which includes Duty Free, Military, Cruise, and Transportation sales globally since 2015 - Led the global Jack Daniel’s Tennessee Honey brand team from 2014 to 2015 - Managing director of the Australia/Pacific region from 2010 to 2014 - Led the Latin America & Caribbean region from 2006 to 2009 - Various other positions over a 19-year career - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007 - Member of the Brown-Forman Management Executive Committee from 2007 to 2009 | QUALIFICATIONS AND - Business and industry experience gained from serving in operational, management, - Deep knowledge of family corporate governance - Perspective as a fifth generation Brown family - A history of service on the Brown-Forman Executive Committee and Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders | ||
LAURA L. FRAZIER | ||||
Age 59 | CURRENT AND PAST POSITIONS Bittners (a more than 160-year-old interior and commercial design firm), Owner, Chairman, and past-CEO Positions with Brown-Forman and affiliates: - Member of the board of directors of Lenox, Inc., a former subsidiary, from 1999 to 2005 - Founding member of Brown-Forman/Brown Family Shareholders Committee since | QUALIFICATIONS AND SKILLS - Executive leadership and - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of shareholders |
18 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
ELECTION OF DIRECTORS •NOMINEES
KATHLEEN M. GUTMANN |
Director since May Age | CURRENT AND PAST POSITIONS
Positions with United Parcel Service: - Chief Sales and Solutions Officer and Senior Vice President of The UPS Store and UPS Capital since 2015 - Senior Vice President of Worldwide Sales and Solutions from 2014 to 2015 - President of Worldwide Sales from 2011 to 2014 | QUALIFICATIONS AND SKILLS - Experience with directing long-term strategy as a member of the UPS Management Committee - Oversight of P&L for UPS Capital, a UPS subsidiary that provides supply chain, financial, insurance, and payment solutions, and The UPS Store, a franchise system of retail shipping, mailbox, print, and business service centers | ||
AUGUSTA BROWN HOLLAND | ||||
Director since 2015 Age 41 | CURRENT AND PAST POSITIONS - Haystack Partners LLC - Founding member of Brown-Forman/Brown Family Shareholders Committee since | QUALIFICATIONS AND SKILLS
- Experience serving on numerous civic - Perspective as a fifth generation Brown - A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of shareholders | ||
MICHAEL J. RONEY | ||||
Director since 2014 Age
Committees:
- Compensation (Chair) | CURRENT AND PAST POSITIONS Bunzl plc, Chief Executive | QUALIFICATIONS AND SKILLS - Extensive senior management and executive leadership experience - Deep expertise in multinational production, distribution, and operations - Financial expertise - International mergers and acquisitions experience OTHER DIRECTORSHIPS - Next plc since - Grafton Group plc since - Johnson Matthey plc from 2007 to
2005, Non-Executive Director |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 19 |
ELECTION OF DIRECTORS •NOMINEES
MICHAEL A. TODMAN | ||||
Director since 2014 Age
Committees:
- Audit (Chair) | CURRENT AND PAST POSITIONS Positions with Whirlpool and affiliates: - Vice Chairman, Whirlpool Corporation - President, Whirlpool International from 2009 to - President, Whirlpool North America from 2007 to | QUALIFICATIONS AND SKILLS
- Executive leadership of large multinational - Financial expertise
OTHER - Newell Rubbermaid, Inc. since - Prudential Financial, Inc. since 2016 - Whirlpool Corporation from 2006 to 2015 | ||
|
PAUL C. VARGA | ||||
Director since 2003 Age
Committees:
- Executive | CURRENT AND PAST POSITIONS
Positions with Brown-Forman and affiliates: - Chief Executive Officer since - Chairman since 2007 - President and Chief Executive Officer of Brown-Forman Beverages - Global Chief Marketing Officer for Brown-Forman Spirits from 2000 to | QUALIFICATIONS AND SKILLS
- Extensive knowledge of the beverage alcohol - Sales and marketing - Strategic thinking, leadership, management, consensus-building, and communication
OTHER
- Macy’s, Inc. since 2012 |
|
|
Family Relationships.relationships. No family relationship—relationship — first cousin or closer—closer — exists between any two directors, executive officers, or personsindividuals nominated or chosen by the Company to become a director or executive officer, except thatfor the following relationships between Brown family directors: Geo. Garvin Brown IV and Campbell P. Brown are brothers, and Marshall B. Farrer is the nephew of Dace Brown Stubbs,their first cousin; and Martin S. Brown, Jr., Stuart R. Brown and Augusta Brown Holland are first cousins.
20 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
DIRECTOR COMPENSATION |
OVERVIEW
Our directors serve one-year terms that begin with their election at an Annual Meeting and end immediately upon the election of directors at the next year’s Annual Meeting (a period weMeeting. We refer to this period as a “Board Year” for director compensation purposes).purposes.
Our non-employee director compensation consists of an annual Board retainer, a Chair of the Board retainer, a Lead Independent Director retainer, committee member retainers, committee chair retainers, and meeting fees. To align the interests of our non-employee directors with those of our stockholders, our non-employee directors receive their Board retainers in a combination of cash and equity. Non-employee directors receive meeting fees only if they attend more than eight meetings (Board), ten meetings (Audit Committee), or six meetings (Compensation Committee and Corporate Governance and& Nominating Committee). The Compensation Committee believes that this compensation structure appropriately reflects the importance of directors’ active participation at Board and committee meetings.
The Compensation Committee reviews, with the assistance of its independent consultant Frederic W. Cook & Co. (FWC) information each year related to the competitiveness of non-employee Director Compensation Structurecompensation and, from time to time, recommends adjustments to its compensation structure to ensure both continued competitiveness and the appropriate compensation. Based upon the review of this information in fiscal 2017, FWC recommended, and the Board confirmed and approved, no changes to the existing retainers and fees listed below.
DIRECTOR COMPENSATION STRUCTURE | ||||||
Pay Element | Amount | |||||
Lead Independent Director Retainer | ||||||
Paid in six installments over the Board Year. | $30,000 | |||||
Board Retainer | ||||||
Directors who have satisfied our stock ownership guidelines may elect to receive up to 100% of the retainer in cash, including the equity retainer. | The cash retainer is paid in six installments over the Board Year. |
• $70,000 cash
(deferred stock units) | ||||
Meeting Fees |
director attends more than eight meetings (Board). | Board | $5,000 per meeting | |||
No fee is paid unless the director attends more than ten meetings (Audit) or six meetings (Compensation and Corporate Governance & Nominating) | Audit, Compensation, and Corporate Governance & Nominating | $2,500 per meeting $1,250 per telephonic meeting | ||||
Committee Member Retainers | Audit | $25,000 | ||||
Paid in six installments over the Board Year. | Compensation | $ | ||||
Corporate Governance & Nominating | $ | |||||
Committee Chair Retainers | ||||||
(Audit, Compensation, and Corporate Governance | ||||||
chairs more than one committee, he or she will receive multiple chair retainers. | $20,000 | |||||
Non-Employee Chair of the Board Retainer Paid in six installments over the Board Year. | $625,000 |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 21 |
DIRECTOR COMPENSATION • OVERVIEW
Deferred Stock Units
Our Deferred Stock Unit (DSU) program for non-employee directors allows us to issue both Class A common DSUs and Class B common DSUs. Each DSU represents the right to receive one share of the Company’sBrown-Forman’s Class A or Class B common stock, based on the closing price of the shares on the date the award is made. After a non-employee director’s Board service ends, his or her DSUs are paid out in shares of Class A or Class B common stock following a six-month waiting period. Directors may elect to receive this distribution either in a single lump sum or in ten equal annual installments.
On each dividend payment date, non-employee directors who hold DSUs are credited with additional DSUs equivalent to the cash dividends on the number of shares represented by the DSUs they held on the record date for that dividend. These dividend credits are calculatedconverted to additional DSUs based on the market value of the Class A or Class B common stock as of the dividend payment date.
If a director’s Board service ends during a Board Year, the DSUs attributable to the remainder of that Board Year and any corresponding dividend-equivalent DSUs, do not vest and are forfeited.
Employee Directors
In addition to his regular compensation as a Brown-FormanPaul C. Varga, Campbell P. Brown, and Marshall B. Farrer are our employee we separately paid Geo. Garvin Brown IV $145,000 per year for his service as Chairman of the Board. Beginning in fiscal 2013, the value of this payment was included in Mr. Brown’s target long-term incentive compensation. Otherwise, wedirectors. They do not pay our employee directors (Paul C. Varga and James S. Welch, Jr.)receive any compensation for serving on our Board, any of its committees, or on the boards or equivalent bodies of any of our subsidiaries. For additional information on Geo. Garvin Brown IV’s compensation as a Brown-Forman employee, please see the “Certain Relationships and Related Transactions” section, which begins on page 58.
Stock Ownership Guideline
Our stock ownership guideline for non-employee directors is equal to five times the value of the annual board retainer, (with a current guideline of $875,000).which in fiscal 2017 was $925,000. When considering whether a non-employee director has satisfied the stock ownership guideline, the Compensation Committee includes DSUs as well as Class A or Class B common stock held directly. The value of any unexercised stock-settled stock appreciation rights (SSARs) is not included. Any non-employee director who has not yet met the stock ownership guideline willmust elect to receive at least 60% of his or her annual equity board retainer in DSUs.
Expense Reimbursement
We reimburse all directors for reasonable and necessary expenses they incur in performing their duties as directors. WeIn addition, we provide a travel stipend of $3,000 per meeting to directors who must travel to Board meetings from outside the United States.
Continuing Education Allowance
The CompanyBrown-Forman covers the cost, up to $10,000 per director per Board Year, of continuing education programs to support our directors’ efforts to remain current on best practices in board governance, industry matters, or other business topics relevant to their boardBoard service.
Events
We occasionally invite our directors and their spouses to certain events, including strategy retreats, retirement celebrations, award dinners, and similar events.functions. We believe these occasions provide valuable opportunities for our directors to establish and develop relationships with our senior executives, long-term stockholders, employees, and each other, furthering our objective of having a strong and cohesive Board.board.
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BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
DIRECTOR COMPENSATION • FISCAL 2017 DIRECTOR COMPENSATION
FISCAL 20152017 DIRECTOR COMPENSATION
The following table shows the compensation we paid to our non-employee directors for their service in fiscal 2015.2017.
FISCAL 2017 DIRECTOR COMPENSATION TABLE
Fiscal 2015 Director Compensation Table
Name | Fees Earned or Paid in Cash (1) | DSU Awards (2) (3) | All Other Compensation | Total | Fees Earned or Paid in Cash(1) | DSU Awards(2)(3) | All Other Compensation(4) | Total | |||||||||||||||||||||
Joan C. Lordi Amble | $ | 85,750 | $ | 175,000 | — | $ | 260,750 | ||||||||||||||||||||||
Joan C. Lordi Amble(5) | $13,615 | $— | $— | $13,615 | |||||||||||||||||||||||||
Patrick Bousquet-Chavanne | 75,500 | 175,000 | — | 250,500 | 59,394 | 185,000 | 15,000 | 259,394 | |||||||||||||||||||||
Martin S. Brown, Jr. | 180,000 | — | — | 180,000 | |||||||||||||||||||||||||
Geo. Garvin Brown IV | 517,727 | 312,500 | 18,000 | 848,227 | |||||||||||||||||||||||||
Martin S. Brown Jr.(5) | 45,066 | — | — | 45,066 | |||||||||||||||||||||||||
Stuart R. Brown | 185,227 | — | — | 185,227 | |||||||||||||||||||||||||
Bruce L. Byrnes | 125,000 | 110,000 | — | 235,000 | 116,477 | 115,000 | — | 231,477 | |||||||||||||||||||||
John D. Cook | 111,250 | 175,000 | — | 286,250 | 115,158 | 185,000 | — | 300,158 | |||||||||||||||||||||
Sandra A. Frazier | 180,000 | — | — | 180,000 | |||||||||||||||||||||||||
Laura L. Frazier | 172,567 | — | — | 172,567 | |||||||||||||||||||||||||
Sandra A. Frazier(5) | 45,066 | — | — | 45,066 | |||||||||||||||||||||||||
Augusta Brown Holland | 85,227 | 115,000 | — | 200,227 | |||||||||||||||||||||||||
Michael J. Roney | 28,500 | 175,000 | — | 203,500 | 26,061 | 185,000 | 18,000 | 229,061 | |||||||||||||||||||||
Dace Brown Stubbs | 92,500 | 87,500 | — | 180,000 | |||||||||||||||||||||||||
Michael A. Todman | 11,651 | 175,000 | — | 186,651 | 115,133 | 115,000 | — | 230,133 |
(1) | Amounts in this column reflect fees earned during fiscal |
(2) | DSUs represent the right to receive one share of Class A or Class B common stock, and are determined by dividing the cash value of the compensation being paid in DSUs by the closing price of Class A or Class B common stock on the date of grant. DSU awards for the |
(3) | The aggregate number of SSARs, DSUs, and |
Name | DSUs Outstanding Class A as of April 30, 2015 | DSUs Outstanding Class B as of April 30, 2015 | Class B SSAR / Options Outstanding as of April 30, 2015 | DSUs Outstanding Class A as of April 30, 2017 | DSUs Outstanding Class B as of April 30, 2017 | Class B SSAR Outstanding as of April 30, 2017 | Class B Time-Based Restricted Stock Units as of April 30, 2017 | |||||||||||||
Joan C. Lordi Amble | 3,412 | 2,297 | — | 9,179 | 4,252 | — | — | |||||||||||||
Patrick Bousquet-Chavanne | 4,380 | 5,117 | 47,045 | 15,773 | 10,526 | — | — | |||||||||||||
Geo. Garvin Brown IV | 12,485 | — | 12,512 | 7,612 | ||||||||||||||||
Martin S. Brown, Jr. | — | 1,709 | 23,053 | — | 3,163 | 24,494 | — | |||||||||||||
Stuart R. Brown | — | — | — | — | ||||||||||||||||
Bruce L. Byrnes | 2,684 | 3,321 | — | 9,747 | 6,831 | — | — | |||||||||||||
John D. Cook | 4,380 | 5,117 | 21,752 | 15,773 | 10,526 | 43,504 | — | |||||||||||||
Laura L. Frazier | — | — | — | — | ||||||||||||||||
Sandra A. Frazier | — | 1,709 | 23,053 | — | 3,163 | 24,494 | — | |||||||||||||
Augusta Brown Holland | 3,424 | — | — | — | ||||||||||||||||
Michael J. Roney | 2,499 | — | — | 11,909 | — | — | — | |||||||||||||
Dace Brown Stubbs | 2,190 | 3,413 | 23,053 | |||||||||||||||||
Michael A. Todman | 1,959 | — | — | 8,259 | — | — | — |
(4) | Reflects taxable travel stipend amounts paid during fiscal 2017 to directors who traveled to Board meetings from outside of the United States. | |||||
Ms. Joan C. Lordi Amble, Mr. Martin S. Brown Jr., and Ms. Sandra A. Frazier’s service as directors ended on July 28, 2016, at the 2016 Annual Meeting. The amounts set forth under “Fees Earned or Paid in Cash” represent the fees earned for their service for part of fiscal 2017. |
| 23 |
COMPENSATION DISCUSSION AND ANALYSIS |
This section describes our executive compensation philosophy and objectives, and programs,the decisions of the Compensation Committee (Committee) regarding the compensation of our Named Executive Officers or “NEOs,” and the factors that contributed to those decisions.(NEOs). For fiscal 2015,2017, our NEOs were:
Name | Title | |
Paul C. Varga | Company Chairman and Chief Executive Officer | |
Jane C. Morreau | Executive Vice President and Chief Financial Officer | |
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Mark I. McCallum | Executive Vice President, President Jack Daniel’s Brands | |
Jill A. Jones | Executive Vice President, President, | |
Lawson E. Whiting | Executive Vice President, Chief Brands and Strategy Officer |
Pay for Performance
We believe in pay for performance and we aim to achieve this objective primarily through our short-termshort- and long-term incentive programs. These programs useutilize key performance metrics to compare our performance relative to that of our peers. We prioritizebelieve the use of peer metrics in our incentive plans because we believe that focusing on external measures rather than internal goals:these metrics:
• | is the clearest way to demonstrate the value |
• | ensures that we hold ourselves to a performance standard that is as objective as possible; |
• | reinforces a competitive and innovative mindset among our leadership; and |
• | ensures that the incentive payments are appropriate. |
We believe thatone of the best reflectionmeasures of the value that our NEOs bring to the Company created by our NEOs is the return provided to our stockholders relative to the returns of other companies within our industry.
In this respect, our long-term performance has outperformed both companies withinin our industry as well asand the broader S&P 500, as shown in the chartcharts below:
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(1) | Compares total shareholder return of Brown-Forman Class B common stock and diluted earnings per share (percent growth over prior fiscal year) with the increase in Mr. Varga’s total compensation (percent growth over prior fiscal year) |
(2) | Represents the |
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BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION DISCUSSION AND ANALYSIS • OVERVIEW OF OUR COMPENSATION PROGRAM
As a result of athe Committee’s annual review conducted during fiscal 2015,process, it was determined that the Committee found that total target direct compensation for our CEO and other NEOs was below the market median with the exceptionwhen compared to our compensation peer group listed on page 28. In light of Mr. Welch. Based on this review we believe that our executive compensation program delivers exceptional value to our stockholders, particularly in light ofconsidering the combination of strong returns accompanied by best-in-classand financial performance by the Companythat Brown-Forman and its management team have delivered over multiple years.
Performance-Based Payouts for Fiscal 20152017
Brown-Forman delivered strong performance in fiscal 2015 with payouts reflecting2017 reflected the alignment ofbetween executive pay with company performance:
CASH INCENTIVEScompensation and Brown-Forman’s performance.
CASH INCENTIVES
• | We reported |
• | Our long-term cash |
EQUITY-BASED INCENTIVES
We use equity-based incentive compensation as a means of aligningto align the long-term economic interests of our executives with those of our stockholders. We offer our NEOs two types of equity-based incentives: performance-based restricted Class A common stock and stock appreciation rights settled in shares of Class B common stock.
• | Performance-based restricted stock awards for the fiscal |
• | Payouts of our stock-settled stock appreciation rights are determined by the increase of our Class B stock price above the awards’ stated grant price. |
Advisory Votes on Executive Compensation
AtIn our first “say-on-pay” vote in our 2014 Annual Meeting, our stockholders voicedexpressed overwhelming support for the compensation of our NEOs, with more than 99% of the votes cast approving the advisory “say-on-pay” resolution. The Committee considered thethese results of this vote as one factorof many factors in its executive compensation decisions for fiscal 2015, 2016, and 2017, and did not make any material changes to the executive compensation program as a result of the say-on-pay vote. program.
Following the expressed preference of our stockholders, the Committee willBrown-Forman expects to continue to conduct future advisory votes on executive compensation every three years, but reserves the right to conduct votes more frequently in order to seek additional feedback from our stockholders.
OVERVIEW OF OUR COMPENSATION PROGRAM
Compensation Objectives and Principles
The objective of our executive compensation program is to attract, motivate, reward, and retain a diverse team of talented executives who will lead the CompanyBrown-Forman to produce superior, sustainable and superior long-term value for our stockholders.
Our
As a family-controlled company, our history guides our perspective on executive compensation is informed by our history. As we are a family-controlled company, memberscompensation. Members of the Brown family have historically served as our senior leadership, and their compensation was modest by competitive market standards. ThisWhile this was not a major concern at the time given their significant stock holdings, as increases in the value of Brown-Forman’s stock and the payment of dividends were considered to be the most important forms of compensation for Brown family members.
In recent years however, employees other than Brown family members have more frequently held our most senior executive positions,positions. These individuals have less substantial ownership in the Company and, all of our current NEOs are from outside the Brown family. The stockholdings of our non-Brown family executives are not as substantial and, therefore, have required the continued evolution ofa result, our compensation structure has evolved over time to better reflect the competitive landscape for executive talent.
Our compensation In order to remain competitive, as well as ensure our alignment with the interests of the Brown Family and our stockholders, we have established programs that remain focused on creating long-term value, reinforcing financial accountability, and delivering outstanding operational performance that drivesoutcomes to drive sustained performance of Brown-Forman’s stock.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 25 |
COMPENSATION DISCUSSION AND ANALYSIS • OVERVIEW OF OUR COMPENSATION PROGRAM
Our company vision is “Building Forever,” which reflects our long-term perspective and desire to remain a strong, independent company indefinitely. We aim to “enrich the experience of life by responsibly building beverage alcohol brands, in our own way, that thrive and endure for generations.” We have identified specific strategic ambitions, known as the BF 150, that support our mission and vision as they represent objectives we believe are necessary to position our enterprise for success in the year 2020, coinciding with our 150th anniversary. These priorities include: | |
• | Building brands and businesses that create stockholder value; |
• | Keeping Jack Daniel’s Tennessee Whiskey strong, healthy, and relevant to consumers worldwide; |
• | Continuing to be the global leader in American whiskey; |
• | Growing our Finlandia and Herradura portfolios; |
• | Growing our business in the United States, our largest market; |
• | Growing our non-U.S. developed and emerging markets; |
• | Engaging our stockholders, including our controlling family stockholders; |
• | Pursuing well-balanced capital deployment strategies; and |
• | Being responsible in everything we do. |
We believe that our executive compensation program enhances our ability to achieve these priorities in a manner that is aligned with our vision, mission, and values. |
Compensation Elements
Principal elements of compensation for our NEOs include:
• | base salary (including holiday bonus); |
• | short-term (one-year) performance-based cash compensation; |
• | long-term (three-year) performance-based cash compensation; |
• | long-term equity-based incentive compensation (stock-settled stock appreciation rights and performance-based restricted stock); |
• | benefits and limited perquisites that are generally available to all senior executives; and |
• | limited post-employment compensation and other benefits. |
Measuring Performance
To measure our financial performance, we use a metric called “underlying depletion-based operating income”, which is equivalent to “underlying operating income” andincome.” This number is determined by adjusting GAAP operating income for the effect of foreign currency changes, the effect of estimated net changes in distributor inventories for our brands, and certain other items that we believe do not reflect the underlying performanceeffect of our business. Despite using these two terms interchangeably within our plans, all references herein will be to “underlying operating income”. acquisitions and divestitures.
The Committee believes that the most relevant measures of our performance are:
• | strong and sustained growth in underlying operating income, both on an absolute basis and relative to |
progress toward our long-term strategic goals, and | |
• | our three-year total shareholder return relative to the S&P Consumer Staples |
Performance Metrics for Brown-Forman Incentive Plans
FISCAL 2017 PERFORMANCE METRICS FOR BROWN-FORMAN INCENTIVE PLANS | ||
Performance-Based Component | Performance Measures | |
Short-Term Cash Incentive |
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Long-Term Cash Incentive(2) |
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Performance-Based Restricted Stock | Total shareholder return relative to S&P Consumer Staples Index | |
Stock Appreciation Rights | Stock price growth above grant price |
(1) | “Underlying operating income” is |
(2) | Weightings for our long-term cash incentives were adjusted beginning with the fiscal 2016 grants. Please see page 32 for more information. |
Competitive Compensation
We aspire to provide target compensation for our NEOs that approximates median target compensation observed amongdelivered to executives in similar positions at companies we consider to be competitorscompetition for senior executive talent. We believe that by providing strong, competitive target compensation aligned towith performance we enhanceenhances our ability to secure the right executive leadership while driving the right results for our Company.stockholders.
To ensure that we meet this objective, the Committee reviews and compares Brown-Forman’s compensation practices towith those of a group of high-performing, brand-building consumer products companies with similar financial characteristics. During fiscal 2015, theThe Committee reviewed and revisedreviews this group of companies annually to ensure continued alignment with the characteristics of Brown-Forman.they continue to meet these criteria. These updatescompanies are describedlisted on page 28.
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BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION DISCUSSION AND ANALYSIS • TARGET COMPENSATION
THE ROLE OF OUR COMPENSATION COMMITTEE
The Committee serves a critical role in our compensation governance. Through providing independent oversight and thought leadership on executive compensation and its relationship to Company performance, the Committee establishes performance objectives that correlate pay and performance. The Committee, with the assistance of its independent compensation consultant, FWC, establishes compensation for our NEOs and other designated executive officers, and helps the Board fulfill its duties relating to the compensation of our directors, officers, and employees. The Committee also has the sole authority, on behalf of the Board, to determine the compensation of our CEO.
The Committee is composed of three independent directors — Messrs. Roney (Chair), Bousquet-Chavanne, and Cook. Each member of the Committee qualifies as an independent director under the NYSE’s heightened independence standards for Compensation Committee members of non-controlled companies, as a non-employee director under SEC rules, and as an outside director under regulations adopted pursuant to Section 162 of the Internal Revenue Code. As a “controlled company,” Brown-Forman is not required to meet all of these standards, but we believe that doing so is in the best interests of our Company and our stockholders.
The Committee’s deliberations and decisions are informed by the diverse experience of its members, input from certain members of management, advice from FWC, and access to functional experts in our human resources department.
Sound Pay Practices
We avoid certain pay practices that we believe do not support the objectives of our executive compensation program or our culture. We do not offer our NEOs employment agreements, non-performance-based cash payments not linked to performance (other than salary and holiday bonus), tax gross-ups, excessive perquisites, or severance and/or change in controlchange-in-control agreements. We also have adopted an Incentive Compensation Recoupment Policy (commonly known as a “clawback” policy) that permits the CompanyBrown-Forman to seek recovery of incentive compensation paid or awarded in the event of a subsequent financial restatement due to material noncompliance with financial reporting requirements, or the discovery of an error in the calculation of the incentive compensation that was awarded or paid.
Each year we conduct an assessmentassess and evaluation ofevaluate potential compensation-related risks. Based upon this year’s review, the Companymanagement and the Committee have concluded that our compensation policies and practices do not create any risk that is reasonably likely to have a material adverse effect on the Company.Brown-Forman. This is our intent and it is consistent with our findings in prior fiscal years.
Compensation Elements
Principal elements of compensation for our NEOs include:
The Compensation Consultant
As an independent compensation advisor, FWC reports directly to the Committee and attends meetings as requested. FWC provides the Committee with information on external compensation trends and guidance on the compensation of our CEO and other NEOs, and also reviews this Compensation Discussion and Analysis. In addition, FWC provides independent advice to the Board on director remuneration, assists with the Board and Committee self-assessment process, and acts as the Committee’s advisor in working with management. FWC provides no other services to Brown-Forman or management.
In accordance with SEC and NYSE requirements, the Committee has reviewed the independence of FWC and determined that no conflict exists that would compromise the independence of the advice the firm provides.
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How We Set Target Compensation for Our NEOs
We apply a customized approach to determine the target compensation of each NEO. We take into accountconsider each NEO’s role, the value of the role in the labor market, and factors specific to eachthe NEO as an individual. These individualIndividual factors include tenure with the Company,Brown-Forman, mastery of current role, potential to move into expanded roles, current performance, scarcity of skill sets,skill-sets, retention risk, fit withwithin our culture, career experience, and internal pay equity. We find that this customized approach leads to a more effective pay program than an approach that considers onlyone solely based on external labor market data.
To ensure that our pay is competitive, we compare NEO compensation with the compensation for executives in similar positions within a comparator group of high-performing, brand-building consumer products companies with financial characteristics similar to Brown-Forman’s.those of Brown-Forman. FWC prepares thea market analysis comparing the target value of each element of compensation for Brown-Forman’s NEOs to those ofthe compensation paid by the comparator group. This analysis produces a range of market-competitive levels of target compensation as one factor for consideration in determining base salaries and target incentive compensationpay for our NEOs.
In setting and evaluating target compensation, we use “total direct compensation,” which consists of salary, holiday bonus, short-term incentives, and long-term incentives.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 27 |
COMPENSATION DISCUSSION AND ANALYSIS • TARGET COMPENSATION
NEOs. While we do not set target compensation to meet specific benchmarks—such as salaries “above the median” or equity compensation “at the 75th percentile”—benchmarks, we do focus onconsider the median of the comparator group as a guide to appropriate target pay ranges for our NEOs.
With respect to determining
To determine the pay elements that make up each NEO’s target compensation, we begin by reviewing a preferred “pro forma”“pro-forma” mix of pay developed and recommended by FWC. Our goal, independentThe objective of prevalent marketthis practice is to have a pay mix that makes sensealigns from an internal perspective and supports our goal of promoting shareholder value creation.value. FWC and the Committee periodically review the “pro-forma” mix to ensure this continued alignment.
BROWN-FORMAN NEO PAY MIX VS. COMPENSATION COMPARATOR GROUP
(1) | ||
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Compensation Comparator Group
During fiscal 2015,2017, the Committee reviewed and revised ourthe compensation comparator group of companies to ensure continued alignment with the characteristics of Brown-Forman. The 2015 compensation comparator group was updated from fiscal 2014 as follows: (1) the removalAs a result of Campbell Soup Co., Clorox Co., and Coach Inc.; and (2) the addition of Campari S.p.A., Pernod Ricard SA, Remy Cointreau SA, The Hain Celestial Group, Inc., and The WhiteWave Foods Company. In addition, Beamthis review, Keurig Green Mountain Inc. was later removed due to being acquired in 2015.as they were recently acquired.
Campari S.p.A. | Mead Johnson Nutrition Co. | The Hain Celestial Group, Inc. | ||||
Church & Dwight Co., Inc. | Hershey Co. | Molson Coors Brewing Co. | The WhiteWave Foods Company | |||
Constellation Brands, Inc. | J.M. Smucker Co. | Monster Beverage Corp. | ||||
Diageo Plc. | lululemon athletica inc. | |||||
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Dr. Pepper Snapple Group, Inc. | McCormick & Co., Inc. | |||||
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28 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION DISCUSSION AND ANALYSIS •
AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION
Target Total Direct Compensation for Fiscal 20152017
The chart below shows the annualized target total direct compensation (TTDC) for each of our NEOs in fiscal 20152017 versus fiscal 20142016, and the percentage increase.increase of each component.
FISCAL 2017 VERSUS FISCAL 2016 NEO TARGET TOTAL DIRECT COMPENSATION |
■ Salary and | ■ Short-Term | ■ Long-Term | Target Total | Percent | ||||||||||
Name | Year | Holiday Bonus(1) | Incentive Target | Incentive Target | Direct Comp | Increase | Pay Mix at Target | |||||||
Paul C. Varga | 2017 | 1,145,870 | 1,455,000 | 4,400,000 | 7,000,870 | 4% | ||||||||
2016 | 1,133,370 | 1,400,000 | 4,200,000 | 6,733,370 | ||||||||||
Jane C. Morreau | 2017 | 598,978 | 420,000 | 900,000 | 1,918,978 | 5% | ||||||||
2016 | 572,935 | 400,000 | 850,000 | 1,822,935 | ||||||||||
Mark I. McCallum | 2017 | 661,480 | 450,000 | 860,000 | 1,971,480 | 2% | ||||||||
2016 | 645,854 | 440,000 | 850,000 | 1,935,854 | ||||||||||
Jill A. Jones | 2017 | 614,603 | 440,000 | 840,000 | 1,894,603 | 4% | ||||||||
2016 | 598,978 | 430,000 | 800,000 | 1,828,978 | ||||||||||
Lawson E. Whiting | 2017 | 494,808 | 300,000 | 650,000 | 1,444,808 | 9% | ||||||||
2016 | 447,931 | 275,000 | 600,000 | 1,322,931 |
(1) | Salary and holiday bonus are based on the one-year period beginning on |
AWARDS AND PAYOUTS IN FISCAL 2015:
2017: FIXED AND SHORT-TERM COMPENSATION
Fixed Compensation
Base salary.Salaries are typically adjusted each AugustJuly following the completion of our annual performance management cycle. However,review process, though an NEO’s salary may be adjusted during the fiscal year if he or she experiences a change in role and responsibility. For example, Ms. Jones’s base salary was increased by $50,000 effective February 1, 2015, due to her expanded role and increased level ofor responsibility.
Holiday bonus.One of our longstanding traditions is to offer a majority of our employees, including our NEOs, a lump sumlump-sum cash bonus during the holiday season. OurThe intent of this bonus is to promote continued service with the Company and likewise to recognize our employees at a time when they are engaged in celebrations and gift-giving. Our NEOs participate in this tradition as well.employees. The holiday bonus, which we consider to be part of base salary, is guaranteed and based solely on the employee’s length of service to the Company.
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The table below shows the total amount of fixed compensation that each of our NEOs received in fiscal 2015.2017.
Fixed Compensation for 2015(1)
Name | Amount | |||
Paul C. Varga | $ | 1,128,370 | ||
Jane C. Morreau | 544,601 | |||
James S. Welch, Jr. | 604,186 | |||
Mark I. McCallum | 621,270 | |||
Jill A. Jones | 529,600 |
FIXED COMPENSATION FOR 2017(1) | |
Name | Amount |
Paul C. Varga | $1,143,865 |
Jane C. Morreau | 594,799 |
Mark I. McCallum | 658,973 |
Jill A. Jones | 612,096 |
Lawson E. Whiting | 487,287 |
(1) | Reflects fiscal year fixed compensation from May 1, |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 29 |
COMPENSATION DISCUSSION AND ANALYSIS •
AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION
Short-Term Incentive Compensation
Our NEOs participate in a short-term (annual)an annual performance-based cash incentive opportunity. Payouts are dependentcompensation program in which payouts depend on the achievement of certain performance goals for the Company and the individual during the fiscal year.
For fiscal 2015,2017, 80% of the target award was tied to Brown-Forman’s Company performance and 20% was tied to individual performance. We believe that basing the majority of short-term incentive awards for NEOs on Company performance appropriately reflects the collective accountability of our most senior executives for the performance of the enterprise. We also believe that basing a lesser, but meaningful, portion of the short-term incentive on individual performance provides flexibility to differentiate awards among NEOs based on their individual achievements during the fiscal year.
Both the corporate and individual portions of our short-term incentive compensationincentives are subject to an adjustmenta performance factor of 0% to 200% based on. After adjusting for performance, against the relevant criteria. After adjustment, the two components are added together to determine the total short-term incentive payment. Therefore,As a result, the total value of short-term incentives may vary between 0% and 200% of target, which is a range we believe to be sufficient to recognizein recognizing our varying levels of performance while not encouraging excessive risk-taking.
Company Performance (80%
Please see the “Non-Equity Incentive Plan Compensation” column of Target Award)
For fiscal 2015, the Company performance goalSummary Compensation Table for Fiscal 2017 found on page 40 for the amounts paid to NEOs (and other participants in the short-term incentive compensation plan) wasfor fiscal 2017.
COMPANY PERFORMANCE (80% OF TARGET AWARD)
Company performance goals for fiscal 2017 were based on the Company’sBrown-Forman’s underlying operating income growth. In establishing this goal,growth compared to the primary consideration was how we expected our industry competitors to perform on this metric, as it is our goal to consistently and sustainably outperformperformance of our industry peers. We also consideredaspire to outperform these peers consistently and sustainably, and consider our historicalhistoric underlying operating income growth trends, and outlook for fiscal 2015 performance.2017 performance, when setting these objectives.
The Committee determined that, for purposes of the short-term incentive compensation plan, the CompanyBrown-Forman achieved underlying operating income of $1,064$1,006 million for fiscal 2015. (On2017 (on an as-reported basis, fiscal 20152017 operating income was $1,027 million.) This resulted$989 million) resulting in a payout of 157%127% of target.
Underlying operating income at Brown-Forman was calculated by adjusting for the following effects:
• | foreign currency changes; |
• | estimated net changes in distributor inventories for our brands; and |
• | acquisitions and divestitures. |
We explain why the Company uses underlying operating income in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures,” in our Annual Report on Form 10-K for fiscal 2017.
The fiscal 20152017 short-term performance goal, our actual performance, and the resulting payout arepercentage of 127% of target is shown in the chart below:
FISCAL 2017 SHORT-TERM INCENTIVE COMPENSATION PERFORMANCE GOAL (IN $MM) |
30 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
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COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
INDIVIDUAL PERFORMANCE (20% OF TARGET AWARD)
Individual Performance (20% of Target Award)
For fiscal 2015, individual performance objectives for the NEOs consistedconsist of qualitative and quantitative goals that support the achievement of our strategic priorities. Finalpriorities, such as individual job responsibilities, diversity leadership, talent development, development of profit-driving ideas, implementation of BF 150 strategies, and overall contributions to Brown-Forman as a senior leader. For fiscal 2017, final individual scores were adjusted to ensure a weighted average reflecting overall Company performance, as we believe the organization’s performance of our Company is a reflection of the performance of our people. Payout levels for the individual portion of the short-term incentive are based on the following guidelines for aligning performance and compensation:
Performance(B-F Nomenclature) | Payout as a Percentage of Target | |||
Superior | (Excellent) | 176%–200% | ||
Above Target | (Very Strong) | 126%–175% | ||
On Target | (Strong) | 76%–125% | ||
Below Target | (Varied or Inconsistent) | Up to 75% | ||
Immediate Improvement Required | (Performance Needs Improvement) | No incentive paid |
Fiscal 2015 Individual Performance Objectives for the NEOs. For fiscal 2015, individual performance objectives for our NEOs included those described below. (Objectives for Mr. Varga were established by the Compensation Committee.) In addition to these objectives, which primarily emphasize individual job responsibilities, all NEOs shared three areas of evaluation: individual diversity leadership, development of profit-driving ideas, and overall contributions to Brown-Forman as a senior leader.
Please see the “Non-Equity Incentive Plan Compensation” column of the Fiscal 2015 Summary Compensation Table on page 39 for the amounts paid to NEOs in short-term incentive compensation for fiscal 2015.
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AWARDS AND PAYOUTS IN FISCAL 2015:2017: LONG-TERM COMPENSATION
Long-term incentives are the most important and largest portion of our NEOs’ target compensation. TheyThese awards are intended to focus the efforts of our executives on our long-range strategic goals, including sustainable growth and performance of our brands, and superior returns to our stockholders. They also serve as a strong retention incentive and enhance the alignment of our executives’ interests with those of our stockholders by building equity ownership.
In order to encourage balanced performance to create sustainable
The Committee initially determines the target dollar value of the total long-term incentive award for stockholders, weeach NEO. We then structure our long-term incentives as follows:
• | 25% of total target: in the form of a performance-based cash incentive; |
• | 25% of total target: in the form of performance-based restricted stock; |
• | 25% of total target: in the form of stock-settled stock appreciation rights; and |
• | 25% of total target: in the form of any combination of the above, based on the NEO’s preference, subject to |
In taking this tailored approach to the allocation of long-term incentives, our aim is to align our NEOs’ financial incentives to the Company’s long-term performance objectives while also delivering compensation that has the highest perceived value for each individual NEO.
The Compensation Committee initially determines the target dollar value of the total long-term incentive award for each NEO. With respecthas discretion to allocate the flexible 25% portion of the award the Committee has discretion to allocate this portion in any manner it chooses. Traditionally, however, it has chosen to follow the individual preferences expressed by our NEOs. Our aim with this approach is to encourage balanced performance in order to create sustainable value for stockholders, while also delivering compensation that has the highest perceived value for each individual NEO.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 31 |
COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
Long-Term Performance-Based Cash Incentive (For the Fiscal 2017–2019 Performance Period)
We provide our NEOs with an opportunity to earn a cash-based incentive award that is linked to the Company’sBrown-Forman��s achievement of long-term performance goals. The graphic below shows how we tie this incentive to our goals.those goals, utilizing the same performance metrics since fiscal 2013. In fiscal 2016, the Committee changed the weightings of the performance metrics to focus more on strategic initiatives and measures relating to underlying net sales. These revised weightings were used for the awards granted in fiscal 2016 and 2017.
LONG-TERM CASH INCENTIVES FORMULA(1)
To calculate the final payout, we:
1. | ||
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each. | ||
2. | Weight these payout percentages using the weightings shown below. | |
3. | Add the three weighted percentages to arrive at the final payout percentage. | |
4. | Multiply each | |
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(1) | |
(2) | Underlying net sales is a non-GAAP measure and is detailed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures,” in our Annual Report on |
32 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
|
COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
Awards Granted in Fiscal 2015 (for the Fiscal 2015-2017 Performance Period)AWARDS GRANTED IN FISCAL 2017 (FOR THE FISCAL 2017–2019 PERFORMANCE PERIOD)
Long-term cash incentives granted in fiscal 20152017 have a three-year performance period and will be paid shortly following the completion of fiscal 2017.2019. The table below shows the target awards granted to each NEO in fiscal 2015.2017.
Target Long-Term Cash Awards for Fiscal 2015-2017 Performance Period
Name | Amount | |||
Paul C. Varga | $ | 1,400,000 | ||
Jane C. Morreau | 264,000 | |||
James S. Welch, Jr. | 300,000 | |||
Mark I. McCallum | 283,195 | |||
Jill A. Jones | 247,909 |
Consistent with the awards granted in fiscal 2014, our fiscal 2015 long-term cash awards employ the metrics that took effect beginning with our fiscal 2013 awards.
Below are the performance objectives for fiscal years 2015-2017:TARGET LONG-TERM CASH AWARDS FOR FISCAL 2017–2019 PERFORMANCE PERIOD
Name | ||
|
| |
| ||
|
|
We believe these measures form a strong link between incentive compensation paid and the achievement of ourB-F 150 strategic priorities.
$1,540,000 | ||||||
306,000 | ||||||
Mark I. McCallum | 430,000 | |||||
420,000 | ||||||
Lawson E. Whiting | 325,000 |
|
Awards Earned in Fiscal 2015 (for the Fiscal 2013—2015 Performance Period)AWARDS EARNED IN FISCAL 2017 (FOR THE FISCAL 2015–2017 PERFORMANCE PERIOD)
Our long-term cash awards for the three-year performance period beginning in fiscal 20132015 were paid out shortly after fiscal 20152017 ended. Based on our performance, the payout was 169%143% of the target award, calculated as shown in the graphic below:
ACTUAL PERFORMANCE AND PAYOUT FOR FISCAL 2015–2017 PERFORMANCE PERIOD
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 33 |
|
COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
We believe that this payout scale strongly aligns incentive compensation with the achievement of our strategic goals.
The table below shows the long-term cash award that each NEO earned in fiscal 20152017 based on the 169%143% payout determined usingfor the methodology described above.fiscal 2015–2017 performance period.
Long-Term Cash Awards Paid for Fiscal 2013-2015 Performance PeriodLONG-TERM CASH AWARDS PAID FOR FISCAL 2015–2017 PERFORMANCE PERIOD
Name | Amount | |||
Paul C. Varga | $ | 1,951,950 | ||
Jane C. Morreau | 375,128 | |||
James S. Welch, Jr. | 365,040 | |||
Mark I. McCallum | 321,100 | |||
Jill A. Jones | 429,156 |
Name | Amount |
Paul C. Varga | $2,002,000 |
Jane C. Morreau | 377,520 |
Mark I. McCallum | 405,191 |
Jill A. Jones | 354,998 |
Lawson E. Whiting | 357,500 |
Performance-Based Restricted Stock
We award our NEOs and certain other executives with shares of Class A common stock through our performance-based restricted stock awards. Unless otherwise determined by the Committee, performance-based restricted stock awards are granted on the date of the Company’s Annual Meeting of Stockholders, typically held in late July.
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Awards Granted in Fiscal 2015 (for the Fiscal 2015-2017 Performance Period)AWARDS GRANTED IN FISCAL 2017 (FOR THE FISCAL 2017–2019 PERFORMANCE PERIOD)
Performance-based restricted stock awardsunits granted in fiscal 20152017 have a three-year performance period. These awards are initially expressed as a dollar value. Followingvalue and converted to a specific number of units. At the end of the three-year performance period, this target dollar value isunits are adjusted for performance and converted to shares that are subject to an additional one-year vesting period, subject to certain events that may cause the award to vest earlier.holding requirement.
Target Performance-Based Stock Restricted Stock Awards for Fiscal 2015-2017 Performance PeriodTARGET PERFORMANCE-BASED RESTRICTED STOCK AWARDS FOR FISCAL 2017–2019 PERFORMANCE PERIOD
Name | Amount | |||
Paul C. Varga | $ | 1,400,000 | ||
Jane C. Morreau | 272,000 | |||
James S. Welch, Jr. | 187,500 | |||
Mark I. McCallum | 268,950 | |||
Jill A. Jones | 234,500 |
Name | Amount |
Paul C. Varga | $1,320,000 |
Jane C. Morreau | 297,000 |
Mark I. McCallum | 215,000 |
Jill A. Jones | 210,000 |
Lawson E. Whiting | 158,750 |
Performance-based restricted stock grants made to our NEOs in fiscal 2015 employ the metrics that took effect beginning with our fiscal 2013 awards.
Performance will be measured by comparing the three-year cumulative total shareholder return of Brown-Forman’s Class B common stock with the three-year cumulative total shareholder return of the companies in the S&P Consumer Staples Index. The payout scale is shown below.on the next page. In addition to the TSR performance measurement, Brown-Forman must achieve an underlying operating income objective during the three-year performance period. If the underlying operating income threshold is not achieved, no awards will be earned.
34 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
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|
COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
PayoutsforPERFORMANCE-BASED RESTRICTED STOCK UNIT AWARDS:
PAYOUT SCALE AND POTENTIAL PAYOUTS FOR FISCAL 2017–2019 PERFORMANCE PERIOD
Payouts for performance between threshold and target and between target and maximum will be interpolated using a straight-line method. In calculating total shareholder return, we look at the average closing stock prices over the sixty trading days preceding the performance period and the final sixty trading days of the performance period. The companies used for the performance comparison will be those that constitute the S&P Consumer StaplesProducts Index at the end of the performance period.
Performance-Based Restricted Stock Awards Earned in Fiscal 2015
(for the Fiscal 2013-2015 Performance Period)AWARDS EARNED IN FISCAL 2017 (FOR THE FISCAL 2015–2017 PERFORMANCE PERIOD)
Performance-based restricted stock awards for the fiscal 2013-20152015–2017 performance period were subject to a three-year performance period followed by a one-year restrictionvesting period. Under the metrics we implemented in fiscal 2013, performancePerformance was measured by comparing the three-year cumulative total shareholder return of Brown-Forman’s Class B common stock with the three-year cumulative total shareholder return of the companies that constituted the S&P Consumer Staples Index when the performance period ended (as of April 30, 2015, as set forth above). Vesting of the performance-adjustedended. Performance-adjusted stock awardawards earned in fiscal 20152017 will occur after the one-year restriction period, i.e.,vest on April 30, 2016,2018, subject to certain events that may cause thean award to vest earlier.
|
The following companies constituted the comparative S&P Consumer Staples Index consisted of the following companies as of April 30, 2015:Index:
Altria Group Inc. | Coty, Inc. | Kimberly-Clark Corp. | Philip Morris International Inc. | |||
CVS Health Corp. | Kraft | Procter & Gamble Co. | ||||
Dr. Pepper Snapple Group Inc. | Kroger Co. | Reynolds American Inc. | ||||
Estee Lauder Cos., Inc. (Cl A) | Sysco Corp. | |||||
General Mills Inc. | The Coca-Cola Co. | |||||
Clorox Co. | Hershey Co. | |||||
Molson Coors Brewing Co. (Cl B) | ||||||
Colgate-Palmolive Co. | ||||||
ConAgra Foods Inc. | Monster Beverage Corp. | |||||
Constellation Brands Inc. (Cl A) | PepsiCo Inc. | Whole Foods Market Inc. | ||||
Costco Wholesale Corp. |
The Committee chose a range of payouts (50% to 150% of target) to support our goals of pay for performance and increased NEO equity ownership, while at the same time discouraging unnecessary risk-taking behavior.risk-taking. Based on performance over the three-year period ending in fiscal 2015,2017, the award’s performance was 118%awards paid out at 50% of target.
This performance level was used to determine the number of restricted shares issuable to our NEOs, as shown below.
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PERFORMANCE-BASED RESTRICTED STOCK AWARDS: PERFORMANCE FOR FISCAL 2015–2017 PERFORMANCE PERIOD
Payoutsfor
Payouts for performance between threshold and target, and between target and maximum, are interpolated using a straight-line method. In calculating total shareholder return, we look at average closing stock prices over the sixty trading days preceding the performance period and the final sixty trading days of the performance period.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 35 |
COMPENSATION DISCUSSION AND ANALYSIS •AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION
The resulting value was adjusted upward to account for dividends paid during the second and third years of the performance period. The number of restricted shares issued was then calculated using the closing price of Class A common sharesstock on the date of grant (at the beginning of the three-year performance period). The Committee chose this calculation method to ensure that our NEOs remain exposed to changes in stock price and dividends issued during the performance period, consistent with the goals of our long-term incentive plan. These restricted shares were issued on June 1, 20152017, and are subject to a restrictionone-year vesting period that ends on April 30, 2016.2018. For more information on the performance-based restricted stock awards granted during fiscal 2015,2017, please see the Fiscal 2015 Grants of Plan-Based Awards Table and the Outstanding Equity Awards at 20152017 Fiscal Year EndYear-End Table, set forth on pages 4142 and 42,43, respectively.
The table below shows the number of shares of performance-based restricted stock that were issued based on June 1, 2017, for the above computation.fiscal 2015–2017 performance period.
Shares Issued for Fiscal 2013-2015 Performance PeriodSHARES ISSUED FOR FISCAL 2015–2017 PERFORMANCE PERIOD
Name | Amount | |||
Paul C. Varga | 15,920 | |||
Jane C. Morreau | ||||
3,094 | ||||
Mark I. McCallum | 3,059 | |||
Jill A. Jones |
2,668 | ||||||||
1,351 |
Stock Appreciation Rights
We award stock-settled stock appreciation rights (SSARs) that allow our NEOs to receive the value of the appreciation of our Class B common stock between the grant date and the exercise date. Unless the Committee determines otherwise, SSARs are granted annually on the date of the Annual Meeting of Stockholders, which is typically held in late July.Stockholders. The number of Class B common SSARs awarded to our NEOs for fiscal 20152017 was determined by dividing the dollar value of each SSAR award by the value of one SSAR (as determined(determined by the Black-Scholes method) at the close of trading on the grant date. SSARs become exercisable on the first day of the third fiscal year following the grant date and are generally exercisable for seven fiscal years thereafter. The SSARs granted in July 20142016 (for fiscal 2015)2017) therefore become exercisable on May 1, 20172019, and expire on April 30, 2024.
2026.
SSAR Grants in Fiscal 2015 (in ClassGRANTS IN FISCAL 2017 (IN CLASS B shares)SHARES)
Name | SSARs Granted | |||
Paul C. Varga | 215,084 | |||
Jane C. Morreau | ||||
41,482 | ||||
Mark I. McCallum | 30,028 | |||
Jill A. Jones | 29,330 | |||
Lawson E. Whiting | 22,696 |
36 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION DISCUSSION AND ANALYSIS •OTHER COMPENSATION ELEMENTS
Post-Termination Compensation and Benefits
We do not have employment agreements with any of our NEOs, nor do we maintain a formal severance plan that provides for post-termination compensation or benefits.
Employee Benefits and Perquisites
We provide our NEOs with certain benefits that are available to nearly all of our salaried employees in the United States, including Company-paid group term life insurance equal(equal to two times target cash compensation,compensation), travel accident insurance, Company matching contributions to a 401(k) savings plan, medical and dental plans,insurance, and a pension that grows with each additional year of service and pay. NEOs and certain other executives receive additional benefits, including a leased automobile, automobile insurance, and limited reimbursement of financial planning expenses.
We purchase tickets to sporting and entertainment events for business outings with customers and suppliers. If the tickets are not used for business purposes, employees (including the NEOs) may use the tickets at no incremental cost to the Company. We believe these benefits further our goal of attracting and retaining a diverse team of talented executives. WeBrown-Forman. In addition, we occasionally invite the NEOs and their spouses to certain events, including retirement celebrations, award dinners, and the like.similar functions. We believe these events provide valuable opportunities for our senior executives to establish and develop relationships with our directors, long-term stockholders, employees, and each other, furthering our objectiveobjectives of retention and having a strong and cohesive management team. For more detail on these employee benefits, please see the “All Other Compensation” column of the Fiscal 2015 Summary Compensation Table for Fiscal 2017 found on page 39.40.
Brown-Forman Corporation Non-qualified Savings Plan
We provide our NEOs and other senior executives the opportunity to defer income on a pre-tax basis to help them plan for future financial needs. This programThe Brown-Forman Corporation Non-qualified Savings Plan (Savings Plan) greatly enhances the perceived value of compensation for participants at very little cost to the Company. The Brown-Forman Corporation Non-qualified Savings Plan (Savings Plan) allows our NEOs to make pre-tax deferrals of up to 50% of base salary (including holiday bonus) and up to 75% of shortshort- and long-term cash incentives. Participants in the Savings Plan may notionally invest their plan balances in mutual funds within generally the same asset classes available to participants in our qualified 401(k) savings plan.
In the event a participant’s deferrals into the Savings Plan reduce the participant’s taxable compensation that would otherwise be considered 401(k)-eligible pay upon which Companya company matching in the 401(k)contribution is calculated, the CompanyBrown-Forman will contribute to the Savings Plan to make up for any lost match under the Company’s 401(k) plan. All deferrals to the Savings Plan, and the Company’sBrown-Forman’s contributions to it, are 100% vested when made, as are any deemed earnings related to those contributions. The benefits owed under the Savings Plan will beare general unsecured obligations of the Company,Brown-Forman, though the Company
haswe have chosen to set aside assets in a trust for the purpose of paying plan benefits. The CompanyBrown-Forman is not entitled to an income tax deduction on the benefits owed under the Savings Plan until the benefits become taxable to the participants, which generally will be when the benefits are actually paid. Benefits accumulated under the Savings Plan are payable at either a participant-selected date at least two years after a contribution is made or after a participant’s termination of employment.employment terminates. Amounts payable after terminationaccumulated are payable in a lump sum six months after termination, except in the case of retirement, where the form of payment (lump sum or installments of up to 10ten years) and the time of payment (up to 10ten years after retirement) will be chosen by the participant. The Fiscal 2015 Non-qualified Deferred Compensation Table for Fiscal 2017 on page 4647 contains information about NEO activity in the Savings Plan during fiscal 2015,2017, including employee contributions, gains and losses attributable to the change in market value of the notional investments, and any payments to our NEOs.
| 37 |
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COMPENSATION DISCUSSION AND ANALYSIS •COMPENSATION POLICIES AND PRACTICES
COMPENSATION POLICIES AND PRACTICES
Incentive Compensation Recoupment Policy
The Compensation Committee oversees our Incentive Compensation Recoupment Policy. If the CompanyBrown-Forman restates its reported financial results due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws within three years after the date the results wereare first publicly issued or filed, or if the Company discoverswe discover an error in the calculation of any incentive compensation that was awarded or paid within the preceding three years, prior to the date of the discovery, then the CompanyBrown-Forman will, at the direction of the Committee, seek to recover all or part of the incentive compensation awarded or paid to executive officers that would not have been awarded or paid based upon the restated financial results or correct incentive calculation. If the Committee determines that any executive officer engaged in fraud or intentional misconduct in connection with either a restatement of resultsany such material noncompliance or an error in incentive calculation, the Committee can direct the CompanyBrown-Forman to seek to recover incentive compensation awarded or paid to anthat executive officer that would not have been awarded or paid to such an executive officer based upon the restated financial results or correct calculation for a period of six years after the date of the first public issuance or filing of such financial results were first publicly issued or filed or six years prior to the date of discovery ofsuch fraud or misconduct.misconduct was discovered.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits to $1 million the amount of annual compensation the CompanyBrown-Forman may deduct for tax purposes when paid to an NEO (other than the Chief Financial Officer) unless the compensation is “performance-based” and paid under a formal compensation plan that meets the Internal Revenue Code’s requirements. To maintain flexibility, we have no policy requiring that all NEO compensation be fully deductible, but the Committee takes this factor into account when making compensation decisions.
Compensation Risk Assessment
To determine the level of risk arising from our compensation policies and practices, we conduct an annual risk assessment, with oversight by the Committee and its independent adviser,advisor, FWC, and by the Company’sour internal auditors. The assessment is based on a framework provided by FWC and examines the risk associated with the compensation programs applicable to all of our employees. The assessment also considers the features of our compensation programs that are designed to mitigate risk. We believe our compensation programs encourage and reward an appropriate level of risk taking. WeManagement and the Committee concluded, based upon the results of the assessment for fiscal 2015,2017, that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Equity Award Grant PolicyGrants
Under our equity award grant policy, the grant date of any award must be the date of the applicable Committee or Board meeting at which it was approved, and the grant price must be the closing price of the relevant class of our common stock on the grant date. We do not have a program, plan, or practice of timing equity award grants in conjunction with the release of material non-public information (or vice-versa). We have never re-priced or back-dated options or SSARs granted under any of our equity compensation plans, and our 2013 Omnibus Compensation Plan specifically prohibits these practices.
Source of Plan Shares
Under the 2013 Omnibus Compensation Plan, weWe try to limit the source of shares delivered to participants under the Planour equity compensation plans to those purchased by the Companywe purchase from time to time inon the open market (in connection with aour publicly announced share repurchase program.program), in private transactions, or otherwise. If we determine that the timing of such purchases may unduly affect the market price of the shares, the purchases may be spread over a period of time sufficient to minimize this effect. We may use newly-issued shares to cover exercises or redemptions of awards under the Plan and then purchase an equal number of shares on the open market or otherwise as quickly as is reasonably practicable thereafter. This practice minimizesThese practices minimize long-term dilution to our stockholders.
Margin Sales, Derivative Transactions Prohibited
The Company’sOur Code of Conduct prohibits employees and directors from selling Brown-Forman securities that they do not own (a “short sale”), purchasing shares on margin, or holding shares in a margin account. Employees and directors also are also prohibited from engaging in transactions involving exchange-traded options, puts, calls, or other derivative securities based on Brown-Forman securities.
38 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION DISCUSSION AND ANALYSIS •COMPENSATION COMMITTEE REPORT
Our Policy on Stock Ownership Guidelines
We do not have stock ownership guidelines for our employees, asemployees. Due to our family-controlled status, we do not feel that encouraging our employees to accumulate large quantities of CompanyBrown-Forman stock is a top priority due to our family-controlled status.priority. However, the Committee does review the stock ownership status of our NEOs before granting additional stock-based compensation each year to ensure that such grants are necessary and to assess potential retention risk. DuringWe list the most recent review, the Committee observed thatstock beneficially owned by our NEOs were exposed to an average value of twenty-one times their base salary in Brown-Forman stock. We believe that this level of exposure to our stock is appropriate and would likely exceed a stock ownership guideline if one were to be put in place.on page 54.
Conclusion | ||||
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We believe | ||||
We, the Compensation Committee of the Board of Directors of Brown-Forman Corporation, have reviewed and discussed with Company management the above Compensation Discussion and Analysis, and based on such review and discussion, have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE |
Michael J. Roney, Chairman
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| 39 |
COMPENSATION TABLES |
The following table sets forth the compensation of our NEOs for the fiscal years shown below, calculated under SEC rules.
Fiscal 2015 Summary Compensation TableFISCAL 2017 SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary (2) | Bonus (3) | Stock (4) | SSAR/Option (5) | Non-Equity (6) | Change in (7) | All Other (8) | Total | |||||||||||||||||||||||||||
Paul C. Varga Company Chairman and Chief Executive Officer | 2015 | $ | 1,128,370 | — | $ | 1,458,380 | $ | 1,200,017 | $ | 4,172,350 | $ | 3,028,728 | $ | 29,232 | $ | 11,017,077 | ||||||||||||||||||||
2014 | 1,112,500 | — | 6,098,247 | 925,007 | 3,649,500 | 439,768 | 34,128 | 12,259,150 | ||||||||||||||||||||||||||||
2013 | 1,104,700 | — | 1,316,573 | 989,900 | 3,793,600 | 2,082,200 | 34,163 | 9,321,136 | ||||||||||||||||||||||||||||
Jane C. Morreau Executive Vice President and Chief Financial Officer | 2015 | 544,601 | — | 283,342 | 264,003 | 1,007,128 | 847,345 | 28,809 | 2,975,228 | |||||||||||||||||||||||||||
2014 | 456,458 | — | 190,460 | 137,507 | 806,716 | 416,455 | 31,042 | 2,038,638 | ||||||||||||||||||||||||||||
2013 | 403,959 | — | 162,434 | 118,749 | 733,107 | 474,369 | 29,731 | 1,922,349 | ||||||||||||||||||||||||||||
James S. Welch, Jr. Vice Chairman, Executive Director of Corporate and Civic Affairs | 2015 | 604,186 | — | 195,319 | 262,508 | 891,660 | 977,941 | 35,046 | 2,966,660 | |||||||||||||||||||||||||||
2014 | 600,417 | — | 288,905 | 219,009 | 849,660 | 252,257 | 28,219 | 2,238,467 | ||||||||||||||||||||||||||||
2013 | 584,792 | — | 328,288 | 215,990 | 872,760 | 696,137 | 28,405 | 2,726,372 | ||||||||||||||||||||||||||||
Mark I. McCallum Executive Vice President, President Jack Daniel’s Brands | 2015 | 621,270 | — | 280,165 | 268,958 | 1,004,920 | 698,440 | 32,211 | 2,905,964 | |||||||||||||||||||||||||||
2014 | 605,625 | — | 312,650 | 237,010 | 1,099,180 | 344,679 | 30,891 | 2,630,035 | ||||||||||||||||||||||||||||
2013 | 584,063 | — | 346,527 | 265,991 | 1,331,430 | 460,703 | 31,388 | 3,020,102 | ||||||||||||||||||||||||||||
Jill A. Jones Executive Vice President, North America and Latin America Regions (1) | 2015 | 529,600 | — | 244,279 | 201,016 | 1,065,215 | 536,006 | 28,992 | 2,605,108 | |||||||||||||||||||||||||||
2014 | 496,458 | — | 143,463 | 145,002 | 853,920 | 249,032 | 25,518 | 1,913,393 | ||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary(2) | Bonus(3) | Stock Awards(4) | SSAR/Option Awards(5) | Non-Equity Incentive Plan Compensation(6) | Change in Pension Value and Non-qualified Deferred Compensation Earnings(7) | All Other Compensation(8) | Total | |||||||||
Paul C. Varga Company Chairman and Chief Executive Officer | 2017 | $1,143,865 | $— | $1,236,048 | $1,540,031 | $3,864,400 | $1,044,793 | $35,863 | $8,865,000 | |||||||||
2016 | 1,133,370 | — | 1,271,130 | 1,470,003 | 4,680,000 | 1,024,961 | 35,375 | 9,614,839 | ||||||||||
2015 | 1,128,370 | — | 1,458,380 | 1,200,017 | 4,172,350 | 3,028,728 | 29,232 | 11,017,077 | ||||||||||
Jane C. Morreau Executive Vice President and Chief Financial Officer | 2017 | 594,799 | — | 278,111 | 297,019 | 915,120 | 777,875 | 32,242 | 2,895,166 | |||||||||
2016 | 569,602 | — | 360,154 | 255,004 | 1,002,512 | 810,430 | 31,434 | 3,029,136 | ||||||||||
2015 | 544,601 | — | 283,342 | 264,003 | 1,007,128 | 847,345 | 28,809 | 2,975,228 | ||||||||||
Mark I. McCallum Executive Vice President, President Jack Daniel’s Brands | 2017 | 658,973 | — | 201,326 | 215,034 | 981,191 | 431,265 | 31,085 | 2,578,874 | |||||||||
2016 | 642,521 | — | 257,253 | 212,519 | 1,008,400 | 484,855 | 33,233 | 2,638,781 | ||||||||||
2015 | 621,270 | — | 280,165 | 268,958 | 1,004,920 | 698,440 | 32,211 | 2,905,964 | ||||||||||
Jill A. Jones Executive Vice President, President, NAR, CCSA, IMEA & GTR | 2017 | 612,096 | — | 196,644 | 210,035 | 915,558 | 458,848 | 31,145 | 2,424,326 | |||||||||
2016 | 594,811 | — | 338,968 | 240,004 | 1,078,900 | 485,063 | 33,885 | 2,771,631 | ||||||||||
2015 | 529,600 | — | 244,279 | 201,016 | 1,065,215 | 536,006 | 28,992 | 2,605,108 | ||||||||||
Lawson E. Whiting Executive Vice President, Chief Brands and Strategy Officer, B-F Brands(1) | 2017 | 487,287 | — | 152,165 | 162,501 | 741,500 | 348,322 | 28,739 | 1,920,514 | |||||||||
(1) | Compensation for |
(2) | Salary includes holiday bonus and is based on the fiscal year beginning May |
Length of Continuous Service | Amount of Holiday Bonus | |||
3 months but less than 6 months | 1/8 of monthly salary | |||
6 months but less than 5 years | 1/4 of monthly salary | |||
5 years but less than 10 years | 3/8 of monthly salary | |||
10 years or more | 1/2 of monthly salary |
(3) | NEOs do not receive non-performance-based compensation that would be considered a “Bonus” under SEC rules. |
(4) | Includes the aggregate grant date fair value of performance-based restricted stock granted during the respective fiscal years, calculated in accordance with FASB ASC Topic 718. The grant date fair value of awards subject to performance conditions was calculated based on the |
(5) | Includes the aggregate grant date fair values of SSARs granted during the respective fiscal years, calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 10 to |
40 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION TABLES •SUMMARY COMPENSATION
(6) | Amounts listed for fiscal |
Short-Term Cash | Long-Term Cash | Total | Short-Term Cash | Long-Term Cash | Total | ||||||||||
Paul C. Varga | $ | 2,220,400 | $ | 1,951,950 | $ | 4,172,350 | $1,862,400 | $2,002,000 | $3,864,400 | ||||||
Jane C. Morreau | 632,000 | 375,128 | 1,007,128 | 537,600 | 377,520 | 915,120 | |||||||||
James S. Welch, Jr. | 526,620 | 365,040 | 891,660 | ||||||||||||
Mark I. McCallum | 683,820 | 321,100 | 1,004,920 | 576,000 | 405,191 | 981,191 | |||||||||
Jill A. Jones | 636,059 | 429,156 | 1,065,215 | 560,560 | 354,998 | 915,558 | |||||||||
Lawson E. Whiting | 384,000 | 357,500 | 741,500 |
(7) | Amounts represent changes between fiscal years in the actuarial present value of the accumulated pension benefits of each of the NEOs under the applicable pension or savings plan. Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings, and the assumptions used to determine the present value, such as the discount rate and mortality tables. |
Qualified | Non-Qualified | Total | Qualified | Non-Qualified | Total | ||||||||||
Paul C. Varga | $ | 165,472 | $ | 2,863,256 | $ | 3,028,728 | $63,045 | $981,748 | $1,044,793 | ||||||
Jane C. Morreau | 162,972 | 684,373 | 847,345 | 78,016 | 699,859 | 777,875 | |||||||||
James S. Welch, Jr. | 171,108 | 806,833 | 977,941 | ||||||||||||
Mark I. McCallum | 107,428 | 591,012 | 698,440 | 73,572 | 357,693 | 431,265 | |||||||||
Jill A. Jones | 98,873 | 437,133 | 536,006 | 47,281 | 411,567 | 458,848 | |||||||||
Lawson E. Whiting | 43,676 | 304,656 | 348,332 |
(8) | The following table sets forth each component of the “All Other Compensation” column. |
Name | 401(k) Matching Contribution (a) | Cost of Company-Provided Life Insurance | Cost of Company- Leased Car (b) | Termination Benefits | Other (c) | Total | 401(k) Matching Contribution(a) | Cost of Company- Provided Life Insurance | Cost of Company- Leased Car(b) | Other(c) | Total | ||||||||||||||||||
Paul C. Varga | $ | 11,387 | $ | 3,120 | $ | 10,725 | — | $ | 4,000 | $ | 29,232 | $13,590 | $3,216 | $15,057 | $4,000 | $35,863 | |||||||||||||
Jane C. Morreau | 12,557 | 2,774 | 9,478 | — | 4,000 | 28,809 | 13,487 | 3,189 | 11,595 | 3,970 | 32,241 | ||||||||||||||||||
James S. Welch, Jr. | 17,104 | 2,916 | 11,026 | — | 4,000 | 35,046 | |||||||||||||||||||||||
Mark I. McCallum | 15,688 | 3,120 | 9,403 | — | 4,000 | 32,211 | 13,469 | 3,216 | 12,645 | 1,755 | 31,085 | ||||||||||||||||||
Jill A. Jones | 15,014 | 2,806 | 9,507 | — | 1,665 | 28,992 | 12,586 | 3,216 | 12,618 | 2,724 | 31,144 | ||||||||||||||||||
Lawson E. Whiting | 15,160 | 2,432 | 10,396 | 750 | 28,738 |
(a) | For the period May 1, |
(b) | Values based on |
(c) | Reimbursement of financial planning expenses up to a limit of $4,000 for the fiscal year. |
| 41 |
COMPENSATION TABLES •GRANTS OF PLAN-BASED AWARDS
The following table contains information regarding the equity and non-equity awards granted to our NEOs during fiscal 20152017 under our 2013 Omnibus Compensation Plan. For additional information on the Plan and the fiscal 20152017 awards, granted thereunder, please see “Awards and Payouts in Fiscal 2015: Fixed and Short-Term Compensation” in ourthe Compensation Discussion and Analysis, which begins on page 23.24.
Fiscal 2015 Grants of Plan-Based Awards TableFISCAL 2017 GRANTS OF PLAN-BASED AWARDS TABLE
All Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option Awards: | Grant Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Exercise or | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under | Estimated Possible Payouts Under | Securities | Base Price | of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant Date
| Award Type (1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (2) |
| Estimated Possible Payouts Under Equity Incentive Plan Awards (3) | All Other Option Awards: Number of Securities Underlying Options (4) | Exercise or Base Price of Option Awards (5) | Grant Date Fair Value of Stock and Option (6) | Grant | Award | Non-Equity Incentive Plan Awards(2) | Equity Incentive Plan Awards(3) | Underlying | of Option | and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Threshold | Target | Maximum | Threshold | Target | Maximum | Date | Type(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | Options(4) | Awards(5) | Awards(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Paul C. Varga | STC | $ | 0 | $ | 1,400,000 | $ | 2,800,000 | STC | $0 | td,455,000 | td,910,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 1,400,000 | 2,800,000 | LTC | 0 | 1,540,000 | 3,080,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | PBRS | 7,970 | 15,940 | 23,910 | $ | 1,458,380 | 7/28/2016 | PBRS | 12,555 | 25,110 | 37,665 | td,236,048 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | SSAR | 61,023 | $ | 91.97 | 1,200,017 | 7/28/2016 | SSAR | 215,084 | $49.01 | 1,540,031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jane C. Morreau | STC | 0 | 400,000 | 800,000 | STC | 0 | 420,000 | 840,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 264,000 | 528,000 | LTC | 0 | 306,000 | 612,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | PBRS | 1,549 | 3,097 | 4,646 | 283,342 | 7/28/2016 | PBRS | 2,825 | 5,650 | 8,475 | 278,111 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | SSAR | 13,425 | $ | 91.97 | 264,003 | 7/28/2016 | SSAR | 41,482 | $49.01 | 297,019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James S. Welch, Jr. | STC | 0 | 335,000 | 670,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 300,000 | 600,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | PBRS | 1,068 | 2,136 | 3,204 | 195,319 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | SSAR | 13,349 | $ | 91.97 | 262,508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark I. McCallum | STC | 0 | 435,000 | 870,000 | STC | 0 | 450,000 | 900,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 283,195 | 566,390 | LTC | 0 | 430,000 | 860,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | PBRS | 1,532 | 3,063 | 4,595 | 280,165 | 7/28/2016 | PBRS | 2,045 | 4,090 | 6,135 | 201,326 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | SSAR | 13,677 | $ | 91.97 | 268,958 | 7/28/2016 | SSAR | 30,028 | $49.01 | 215,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jill A. Jones | STC | 0 | 398,533 | 797,066 | STC | 0 | 440,000 | 880,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 247,909 | 495,818 | LTC | 0 | 420,000 | 840,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | PBRS | 1,336 | 2,671 | 4,007 | 244,279 | 7/28/2016 | PBRS | 1,998 | 3,996 | 5,994 | 196,644 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | SSAR | 10,222 | $ | 91.97 | 201,016 | 7/28/2016 | SSAR | 29,330 | $49.01 | 210,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lawson E. Whiting | STC | 0 | 300,000 | 600,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTC | 0 | 325,000 | 650,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | PBRS | 1,546 | 3,092 | 4,638 | 152,165 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | SSAR | 22,696 | $49.01 | 162,501 |
(1) |
(2) | Amounts represent potential value of the short-term incentive compensation opportunity for the fiscal |
(3) | Amounts represent the estimated |
(4) | The number of SSARs awarded for fiscal |
(5) | The exercise price for the SSARs represents the closing price of our Class B common stock on the grant date. |
(6) | Calculated in accordance with FASB ASC Topic 718. Awards subject to performance conditions are calculated based on the probable outcome of the performance condition as of the grant |
42 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION TABLES •OUTSTANDING EQUITY AWARDS
The following table lists the outstanding equity awards held by our NEOs as of April 30, 2015.2017. The year-end values shown in the table are based on the April 30, 20152017, closing prices for our Class A common stock, $92.33,$48.06, and our Class B common stock, $90.23.$47.32.
Outstanding Equity Awards at 2015 Fiscal Year End TableOUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR END TABLE
SSAR Awards(1) | Stock Awards(2) | SSAR Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised SSARs Exercisable | Number of Securities Underlying Unexercised SSARs Unexercisable | SSAR Exercise Price | SSAR Expiration Date | Number of Shares or Units of Stock That Have Not Vested (3) | Market Value of Units of Have Not | Equity Incentive Plan Awards: Number of Unearned Shares, or Other Rights That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Have Not | Grant Date | Number of Securities Underlying Unexercised SSARs Exercisable | Number of Securities Underlying Unexercised SSARs Unexercisable | SSAR Exercise Price | SSAR Expiration Date | Number of Shares or Units of Stock That Have Not Vested(3) | Market Value of Shares or Units of Stock That Have Not Vested(3)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5)(6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7) | ||||||||||||||||||||||||||||||||||||||
Paul C. Varga | 7/28/2011 | 95,761 | $ | 46.40 | 4/30/2021 | 7/28/2011 | 191,522 | td3.20 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 92,514 | 58.70 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 62,332 | 72.42 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 61,023 | 91.97 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 23,061 | $ | 2,129,222 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 23,096 | $ | 2,132,454 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 69,179 | 6,387,297 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 23,910 | 2,207,610 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul C. Varga | 7/26/2012 | 185,028 | 29.35 | 4/30/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 124,664 | 36.21 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 122,046 | 45.99 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 154,250 | 51.13 | 4/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 215,084 | 49.01 | 4/30/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 140,022 | $6,729,457 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 15,920 | $765,115 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 29,047 | 1,395,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 38,657 | 1,857,855 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/27/2006 | 8,400 | $ | 34.95 | 4/30/2016 | 7/23/2009 | 22,926 | td3.53 | 4/30/2019 | ||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2007 | 9,292 | 33.76 | 4/30/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2008 | 7,131 | 35.51 | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2009 | 11,463 | 27.05 | 4/30/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/22/2010 | 12,590 | 38.43 | 4/30/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 14,365 | 46.40 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 11,098 | 58.70 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 9,266 | 72.42 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 13,425 | 91.97 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 2,846 | $262,771 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 4,007 | $369,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 4,646 | 428,965 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
James S. Welch, Jr. | 7/27/2006 | 13,492 | $ | 34.95 | 4/30/2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2007 | 23,938 | 33.76 | 4/30/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2008 | 21,971 | 35.51 | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2009 | 31,498 | 27.05 | 4/30/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/22/2010 | 31,470 | 38.43 | 4/30/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 22,345 | 46.40 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 20,186 | 58.70 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 14,758 | 72.42 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 13,349 | 91.97 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 5,750 | $530,898 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 6,077 | $561,089 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 3,204 | 295,825 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jane C. Morreau | 7/22/2010 | 25,180 | 19.22 | 4/30/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 28,730 | 23.20 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 22,196 | 29.35 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 18,532 | 36.21 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 26,850 | 45.99 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 26,758 | 51.13 | 4/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 41,482 | 49.01 | 4/30/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 3,094 | td48,698 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 8,231 | $395,582 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 8,699 | 418,074 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2009 | 46,874 | td3.53 | 4/30/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark I. McCallum | 7/22/2010 | 40,910 | 19.22 | 4/30/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 46,288 | 23.20 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 49,718 | 29.35 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 31,942 | 36.21 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 27,354 | 45.99 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 22,300 | 51.13 | 4/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 30,028 | 49.01 | 4/30/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 3,059 | td47,016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 5,880 | 282,593 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 6,298 | 302,682 |
| 43 |
COMPENSATION TABLES •OUTSTANDING EQUITY AWARDS
OUTSTANDING EQUITY AWARDS
The following table lists the outstanding equity awards held by our NEOs as of April 30, 2017. The year-end values shown in the table are based on the April 30, 2017, closing prices for our Class A common stock, $48.06, and our Class B common stock, $47.32.
Outstanding Equity Awards at 2015 Fiscal Year End Table (continued)OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR END TABLE (CONTINUED)
SSAR Awards(1) | Stock Awards(2) | SSAR Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised SSARs Exercisable | Number of Securities Underlying Unexercised SSARs Unexercisable | SSAR Exercise Price | SSAR Expiration Date | Number of Shares or Units of Stock That Have Not Vested (3) | Market Value of Units of Have Not | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That | Grant Date | Number of Securities Underlying Unexercised SSARs Exercisable | Number of Securities Underlying Unexercised SSARs Unexercisable | SSAR Exercise Price | SSAR Expiration Date | Number of Shares or Units of Stock That Have Not Vested(3) | Market Value of Shares or Units of Stock That Have Not Vested(3)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5)(6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7) | ||||||||||||||||||||||||||||||||||||||
Mark I. McCallum | 7/27/2006 | 4,615 | $ | 34.95 | 4/30/2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2007 | 15,957 | 33.76 | 4/30/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2008 | 14,647 | 35.51 | 4/30/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2009 | 23,437 | 27.05 | 4/30/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/22/2010 | 20,455 | 38.43 | 4/30/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 23,144 | 46.40 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 24,859 | 58.70 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 15,971 | 72.42 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 13,677 | 91.97 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 6,070 | $ | 560,443 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 6,576 | $ | 607,162 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 4,595 | 424,256 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jill A. Jones | 7/24/2008 | 8,704 | $ | 35.51 | 4/30/2018 | 7/26/2012 | 22,196 | td9.35 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||
7/23/2009 | 13,755 | 27.05 | 4/30/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/22/2010 | 15,106 | 38.43 | 4/30/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 16,759 | 46.40 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 11,098 | 58.70 | 4/30/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 9,771 | 72.42 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 10,222 | 91.97 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/26/2012 | 2,372 | $ | 219,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 3,018 | $ | 278,652 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 4,007 | 369,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jill A. Jones | 7/25/2013 | 19,542 | 36.21 | 4/30/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 20,444 | 45.99 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 25,184 | 51.13 | 4/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 29,330 | 49.01 | 4/30/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 2,668 | td28,224 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 7,747 | $372,321 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 6,152 | 295,665 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2011 | 17,156 | td3.20 | 4/30/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Lawson E. Whiting | 7/26/2012 | 15,518 | 29.35 | 4/30/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7/25/2013 | 17,184 | 36.21 | 4/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 12,078 | 45.99 | 4/30/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 15,740 | 51.13 | 4/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 22,696 | 49.01 | 4/30/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
7/24/2014 | 1,351 | $64,929 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/23/2015 | 4,152 | td99,545 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/28/2016 | 4,760 | 228,766 |
(1) | SSAR awards are exercisable for shares of Class B common stock. All SSARs vest and become fully exercisable on the first day of the third fiscal year following the fiscal year of grant, and generally are |
(2) | Represents Class A common performance-based restricted stock |
(3) | Reflects the number of shares of restricted Class A common stock that were issued on June 1, |
(4) | The market value for the shares of restricted Class A common stock was determined by multiplying the number of shares of restricted Class A common stock |
(5) |
(6) | On July 25, 2013, Mr. Varga received a one-time performance-based special grant of 67,513 Class A shares of restricted stock. During the performance period, dividends |
(7) | Market value for the PBRS awards was determined by multiplying the number of shares by |
44 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION TABLES •PENSION BENEFITS
OPTION EXERCISES AND STOCK VESTED
The following table shows all stock options and SSARsSSAR awards exercised by the NEOs during fiscal 20152017 and the value realized upon exercise, as well as all stock awards in which our NEOs vested during fiscal 20152017 and the value realized upon vesting.
Fiscal 2015 Option Exercises and Stock Vested TableFISCAL 2017 OPTION EXERCISES AND STOCK VESTED TABLE
Option/SSAR Awards(1) | Stock Awards(2) | |||||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise (3) | Number of Shares Acquired on Vesting (4) | Value Realized on Vesting (5) | ||||||||||||||
Paul C. Varga | — | — | 38,766 | $ | 3,579,265 | |||||||||||||
Jane C. Morreau (6) | 4,558 | $270,107 | 3,635 | 335,620 | ||||||||||||||
James S. Welch, Jr.(7) | 23,515 | 1,536,470 | 9,046 | 835,217 | ||||||||||||||
Mark I. McCallum (8) | 16,845 | 1,071,847 | 8,198 | 756,921 | ||||||||||||||
Jill A. Jones | — | — | 3,635 | 335,620 |
Option/SSAR Awards(1) | Stock Awards(2) | ||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized | ||||||
Name | Acquired on Exercise | on Exercise(3) | Acquired on Vesting(4) | on Vesting(5) | |||||
Paul C. Varga | — | — | 26,776 | $1,286,855 | |||||
Jane C. Morreau(6) | 14,262 | $387,427 | 4,644 | 223,191 | |||||
Mark I. McCallum | — | — | 7,624 | 366,409 | |||||
Jill A. Jones(7) | 63,730 | 1,588,990 | 3,500 | 168,210 | |||||
Lawson E. Whiting(8) | 16,158 | 483,116 | 3,078 | 147,929 |
(1) | All |
(2) | All stock awards are in the form of Class A common stock. |
(3) | Equals the difference between the |
(4) | The grant date for all awards of Class A common performance-based restricted stock shown in the table was July |
(5) | Equals the closing price of the underlying securities on the vesting date multiplied by the number of shares that vested. The closing price of our Class A common stock on the vesting date, April 30, |
(6) | Ms. Morreau exercised |
(7) |
(8) | Mr. |
We maintain both tax-qualified and non-qualified supplemental excess retirement plans. The following table shows the present value of accumulated pension benefits payable to each of our NEOs under our tax-qualified plan (Brown-Forman Corporation Salaried Employees Retirement Plan) and under our non-qualified excess plan (Brown-Forman Supplemental Executive Retirement Plan), based on the pension earned as of our most recent FASB ASC Topic 715 measurement date, April 30, 2015.2017. These plans are described below the table.
Fiscal 2015 Pension Benefits TableFISCAL 2017 PENSION BENEFITS TABLE
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit (1) | Payments During Last Fiscal Year | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit(1) | Payments During Last Fiscal Year | |||||||||||||||
Paul C. Varga | Qualified | 28.00 | $886,387 | — | Qualified | 30.00 | $1,041,931 | — | |||||||||||||||
Non-Qualified | 28.00 | 10,948,197 | — | Non-Qualified | 30.00 | 12,862,407 | — | ||||||||||||||||
Jane C. Morreau | Qualified | 23.58 | 926,885 | — | Qualified | 25.58 | 1,106,364 | — | |||||||||||||||
Non-Qualified | 23.58 | 1,998,950 | — | Non-Qualified | 25.58 | 3,407,776 | — | ||||||||||||||||
James S. Welch, Jr. | Qualified | 25.75 | 981,537 | — | |||||||||||||||||||
Non-Qualified | 25.75 | 3,305,618 | — | ||||||||||||||||||||
Mark I. McCallum | Qualified | 11.75 | 538,558 | — | Qualified | 13.75 | 692,000 | — | |||||||||||||||
Non-Qualified | 11.75 | 2,059,969 | — | Non-Qualified | 13.75 | 2,822,647 | — | ||||||||||||||||
Jill A. Jones | Qualified | 15.17 | 454,969 | — | Qualified | 17.17 | 566,310 | — | |||||||||||||||
Non-Qualified | 15.17 | 1,121,681 | — | Non-Qualified | 17.17 | 1,954,251 | — | ||||||||||||||||
Lawson E. Whiting | Qualified | 19.83 | 566,291 | — | |||||||||||||||||||
Non-Qualified | 19.83 | 946,239 | — |
(1) | Actuarial present value of each NEO’s accumulated pension benefit as of our FASB ASC Topic 715 measurement date, April 30, |
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 45 |
COMPENSATION TABLES •PENSION BENEFITS
Brown-Forman Corporation Salaried Employees Retirement Plan
Most U.S. salaried employees, and all of our NEOs, participate in the tax-qualified Brown-Forman Corporation Salaried Employees Retirement Plan. This plan is a funded, non-contributory, defined benefit pension plan that provides monthly retirement benefits based on the participant’s age at retirement, years of service, and the average of the five highest consecutive calendar years’ compensation during the final ten years of employment.“Final Average Compensation” (described below). Retirement benefits are not offset by Social Security benefits and are assumed for actuarial purposes to be payable at age 65. A participant’s interest vestsParticipants vest in the plan after five years of service.
Brown-Forman Corporation Supplemental Executive Retirement Plan
U.S. federal tax law limits the amount of compensation that may be used annually to accrue benefits under our tax-qualified Salaried Employees Retirement Plan. Therefore, forFor employees whose compensation exceeds these limits, including our NEOs, we maintain a non-qualified Supplemental Executive Retirement Plan (“SERP”)supplemental executive retirement plan (SERP). The SERP provides retirementrestores the benefits that are lost due to make up the difference between a participant’s accrued benefit calculated under the tax-qualified Salaried Employees Retirement Plan and the ceiling imposed byU.S. federal tax law.law limitations. The SERP also provides faster vesting for certain key employees who join us mid-career. All NEOs are vested in the SERP.
Pension Formula
The formula to calculate the combined total pension benefit under both plans includes the following factors:
• | Final Average Compensation |
• | Social Security Covered Compensation |
• | Credited Service |
The table below shows the pension formula and gives a sample calculation:
Monthly Pension Formula for a Participant Retiring at the Regular Retirement Age ofMONTHLY PENSION FORMULA FOR A PARTICIPANT RETIRING AT THE REGULAR RETIREMENT AGE OF 65
Generalized Formula | Sample calculation: assume CC of $80,000,
| Amount | ||||||||||
1.3% multiplied by FAC up to CC | 0.013 | × $80,000 | = | $1,040 | ||||||||
1.75% multiplied by FAC above CC | 0.0175 × $320,000 | = | ||||||||||
6,640 | ||||||||||||
The sum of the above multiplied by years of service | ×30 | = | 199,200 | |||||||||
Divide by 12 to get the monthly pension (before reduction for early retirement or optional forms of payment). | ÷12 | = | $16,600 |
Early retirement is available at age 55 under both plans. However, thoseJane C. Morreau and Mark I. McCallum are the only NEOs who are currently eligible for early retirement.
Those who retire before age 65 under the final average pay formula have their pension payments reduced by 3% for each year (1/4 of 1% for each month) that payments start prior to age 65. Retirees also can also reduce their pension payment to purchase optional forms of payment that protect their spouse or ensure a minimum payment period. James S. Welch, Jr., Jane C. Morreau, and Mark I. McCallum are our NEOs who are currently eligible for early retirement.
Once the final pension is determined, the federal rules that govern the maximum pension that can be paid under the qualified plan are applied to determine the portion to be paid under the qualified plan, and the remainderremaining amount becomes payable under the non-qualified pension plan.
46 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION TABLES •NON-QUALIFIED DEFERRED COMPENSATION
NON-QUALIFIED DEFERRED COMPENSATION
Effective January 1, 2011, we adopted the Brown-Forman Corporation Non-qualified Savings Plan. Additional information on this plan may be found under “Brown-Forman Corporation Non-qualified Savings Plan” on page 36.37. The following table provides information on plan contributions and earnings for our NEOs for fiscal 2015:2017:
Fiscal 2015 Non-qualified Deferred Compensation TableFISCAL 2017 NON-QUALIFIED DEFERRED COMPENSATION TABLE
Executive Contributions in Last FY (1) | Registrant Contributions in Last FY | Aggregate Earnings in Last FY (2) | Aggregate Withdrawals/ Distributions (3) | Aggregate Balance at Last FYE (4) | Executive Contributions in Last FY(1) | Registrant Contributions in Last FY | Aggregate Earnings in Last FY(2) | Aggregate Withdrawals/ Distributions(3) | Aggregate Balance at Last FYE(4) | |||||||||||||||||
Paul C. Varga | $ | 1,685,474 | — | $ | 717,776 | $ | 792,036 | $ | 6,512,227 | $91,667 | $ — | $1,200,021 | $(1,750,963) | $6,345,436 | ||||||||||||
Jane C. Morreau | 241,568 | — | 6,037 | — | 429,506 | 291,846 | — | 75,616 | — | 1,077,414 | ||||||||||||||||
James S. Welch, Jr. | 527,543 | — | 98,015 | — | 2,339,246 | |||||||||||||||||||||
Mark I. McCallum | 439,672 | — | 39,437 | — | 832,953 | — | 154,574 | (100,457) | 1,242,589 | |||||||||||||||||
Jill A. Jones | 344,575 | — | 22,974 | — | 1,057,751 | 80,877 | — | 79,562 | (34,297) | 1,605,989 | ||||||||||||||||
Lawson E. Whiting | — |
(1) | Contributions shown in this column are |
(2) | NEOs participating in the Savings Plan may notionally invest their plan balances in mutual funds within generally the same asset classes available to participants in our qualified 401(k) savings plan. The Savings Plan does not guarantee a return on deferred amounts. Earnings in this column represent deemed investment earnings or losses attributable to the change in market value of the notional investments. These amounts are not reported in the |
(3) | Mr. Varga, Mr. McCallum, and Ms. Jones each made a withdrawal from our non-qualified savings plan, as allowed under its terms and conditions. |
(4) | Includes amounts previously reported as compensation to the NEOs in the |
| 47 |
COMPENSATION TABLES •POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROLCHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We do not provide our NEOs with any separate contract, agreement, or arrangement that allows for payments or benefits upon termination or a change in control andor that discriminates in favor of any of the NEOsan NEO in scope or terms of operation. It is our practice toWe offer certain benefits to executives whose employment terminates prior to the payment ofbefore incentive awards are paid, depending upon the circumstances surrounding their termination. These benefits, shown in the table below, are intended to continue to link executivean executive’s compensation to Brown-Forman’s performance after the performance of the Company after theirexecutive’s employment has ended and to prevent them from being penalizedavoid penalizing executives in situations where the termination of employment was outside of their control.
Treatment of Annual and Long-Term Incentive Awards Upon Termination of EmploymentTREATMENT OF ANNUAL AND LONG-TERM INCENTIVE AWARDS UPON TERMINATION OF EMPLOYMENT
Termination Event | Short-Term Cash Incentives | Long-Term Cash Incentives and Performance-Based Restricted Stock | SSARs | ||||
Retirement(1) | Awards granted in the fiscal year of termination are | Awards granted in the fiscal year of termination are | Awards granted in the fiscal year of termination are prorated based on the time worked during the year. Awards granted in prior fiscal years are not reduced. All awards become exercisable at the same time and in the same manner as for active employees. Retirees must exercise awards by the earlier of the original expiration date or the end of seven years following the date of retirement. | ||||
Involuntary Not for Cause | Awards granted in the fiscal year of termination are prorated based on the time worked during the fiscal year, adjusted for performance, and paid at the same time and in the same manner as to active employees. | Awards granted in the fiscal year of termination are | |||||
| Awards granted in the fiscal year of termination are | ||||||
Death/ Permanent Disability | Awards granted in the fiscal year of termination are | Awards granted in the fiscal year of termination are | Awards granted in the fiscal year of termination are | ||||
Voluntary Termination or Involuntary forPoor Performance | Awards granted in the fiscal year of termination are forfeited. | All unearned or nonvested awards are forfeited. | Awards that are | ||||
Involuntary for Cause | Awards granted in the fiscal year of termination are forfeited. | All unearned or nonvested awards are forfeited. | All outstanding awards are forfeited. |
(1) | Retirement applies to those executives who leave |
Change-in-ControlChange in Control and Termination Upon Change-in-ControlChange in Control
In the event of a change in control, as defined in the Brown-Forman 2013 Omnibus Plan or the Brown-Forman 2004 Omnibus Plan, as applicable, (the “Plan”), short-term and long-term incentive compensation cycles continue unaffected, and outstanding options and SSARs become immediately vested but remain exercisable according to their original vesting schedule. In the event of an executive’s terminationemployment is terminated by the Company without cause or by the executive within 60 days after a constructive discharge, in either case within one year following a change-in-control,change in control, all outstanding awards become immediately vested and exercisable, restriction periods lapse, and cash awards are paid out pro-rata based on target performance through the effective date of termination. In the event of a change-in-controlchange in control that modifies the capital structure of the CompanyBrown-Forman (or its successors), the realizable value on exercise of outstanding options and SSARs is subject to adjustment as described in the applicable Omnibus Plan.
48 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
COMPENSATION TABLES •POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table illustrates the value of compensation available to our NEOs had their employment terminated on April 30, 2015,2017, the last day of our 20152017 fiscal year, under various scenarios. The compensation included is only amounts that which would have been payable as a direct result of the specified triggering event. This table excludes the value of pension benefits that are disclosed in the Fiscal 20152017 Pension Benefits Table on page 45 and the amounts payable under deferred compensation plans that are disclosed in the Fiscal 20152017 Non-qualified Deferred Compensation Table on page 46.47.
FISCAL 2017 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
Name | Death Benefit(1) | Holiday Bonus(2) | STC(3) | LTC(4) | SSARs(5) | PBRS(4) | SRS(7) | Total | ||||||||
Paul C. Varga | ||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination Not for Cause | — | $19,113 | $1,847,850 | $5,222,000 | $162,931 | $3,971,534 | — | $11,223,428 | ||||||||
Retirement | — | 19,113 | 1,847,850 | 5,222,000 | 162,931 | 3,971,534 | — | 11,223,428 | ||||||||
Death | $2,000,000 | 19,113 | 1,455,000 | 4,620,000 | 162,931 | 3,666,305 | $5,383,566 | 17,306,915 | ||||||||
Change in Control | — | — | — | — | 162,931 | — | — | 162,931 | ||||||||
Termination Upon Change in Control | — | 19,113 | 1,455,000 | 4,620,000 | 162,931 | 3,666,305 | 6,729,457 | 16,652,806 | ||||||||
Jane C. Morreau(6) | ||||||||||||||||
Voluntary Termination | — | $9,991 | $537,600 | $981,020 | $35,845 | $753,821 | — | $2,318,277 | ||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination Not for Cause | — | 9,991 | 537,600 | 981,020 | 35,845 | 753,821 | — | 2,318,277 | ||||||||
Retirement | — | 9,991 | 537,600 | 981,020 | 35,845 | 753,821 | — | 2,318,277 | ||||||||
Death | $2,994,000 | 9,991 | 420,000 | 867,500 | 35,845 | 700,426 | — | 5,027,762 | ||||||||
Change in Control | — | — | — | — | 35,845 | — | — | 35,845 | ||||||||
Termination Upon Change in Control | — | 9,991 | 420,000 | 867,500 | 35,845 | 700,426 | — | 2,033,762 | ||||||||
Mark I. McCallum(6) | ||||||||||||||||
Voluntary Termination | — | $11,033 | $576,000 | $1,260,191 | $36,518 | $583,232 | — | $2,466,974 | ||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination Not for Cause | — | 11,033 | 576,000 | 1,260,191 | 36,518 | 583,232 | — | 2,466,974 | ||||||||
Retirement | — | 11,033 | 576,000 | 1,260,191 | 36,518 | 583,232 | — | 2,466,974 | ||||||||
Death | $2,000,000 | 11,033 | 450,000 | 1,157,100 | 36,518 | 584,650 | — | 4,239,301 | ||||||||
Change in Control | — | — | — | — | 36,518 | — | — | 36,518 | ||||||||
Termination Upon Change in Control | — | 11,033 | 450,000 | 1,157,100 | 36,518 | 584,650 | — | 2,239,301 | ||||||||
Jill A. Jones | ||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination Not for Cause | — | $10,251 | $560,560 | $1,054,998 | $27,293 | $602,504 | — | $2,255,606 | ||||||||
Retirement | — | 10,251 | 560,560 | 1,054,998 | 27,293 | 602,504 | — | 2,255,606 | ||||||||
Death | $2,000,000 | 10,251 | 440,000 | 989,500 | 27,293 | 572,347 | — | 4,039,391 | ||||||||
Change in Control | — | — | — | — | 27,293 | — | — | 27,293 | ||||||||
Termination Upon Change in Control | — | 10,251 | 440,000 | 989,500 | 27,293 | 572,347 | — | 2,039,391 | ||||||||
Lawson E. Whiting | ||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||
Involuntary Termination Not for Cause | — | 8,253 | 384,000 | 982,500 | 16,124 | 387,604 | — | 1,778,481 | ||||||||
Retirement | — | 8,253 | 384,000 | 982,500 | 16,124 | 387,604 | — | 1,778,481 | ||||||||
Death | $2,536,000 | 8,253 | 300,000 | 912,500 | 16,124 | 344,782 | — | 4,117,659 | ||||||||
Change in Control | — | — | — | — | 16,124 | — | — | 16,124 | ||||||||
Termination Upon Change in Control | — | 8,253 | 300,000 | 912,500 | 16,124 | 344,782 | — | 1,581,659 |
| 49 |
COMPENSATION TABLES •POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Fiscal 2015 Potential Payments upon Termination or Change-in-Control Table
Name | Death Benefit (1) | Holiday Bonus (2) | STC (3) | LTC (4) | SSARs (5) | PBRS (4) | SRS (7) | Total | ||||||||||||||||||||||||
Paul C. Varga | ||||||||||||||||||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination Not for Cause | — | $ | 18,889 | $ | 2,220,400 | $ | 5,016,950 | $ | 4,027,099 | $ | 6,469,286 | — | $ | 17,752,624 | ||||||||||||||||||
Retirement | — | 18,889 | 2,220,400 | 5,016,950 | 4,027,099 | 6,469,286 | — | 17,752,624 | ||||||||||||||||||||||||
Death | $ | 2,000,000 | 18,889 | 1,400,000 | 4,220,000 | 4,027,099 | 5,022,598 | $ | 2,554,919 | 19,243,505 | ||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination Upon Change-in-Control | — | 18,889 | 1,400,000 | 4,220,000 | 4,027,099 | 5,022,598 | 6,387,297 | 21,075,883 | ||||||||||||||||||||||||
Jane C. Morreau(6) | ||||||||||||||||||||||||||||||||
Voluntary Termination | — | $9,201 | $632,000 | $895,703 | $514,947 | $1,061,702 | — | $3,113,553 | ||||||||||||||||||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination Not for Cause | — | 9,201 | 632,000 | 895,703 | 514,947 | 1,061,702 | — | 3,113,553 | ||||||||||||||||||||||||
Retirement | — | 9,201 | 632,000 | 895,703 | 514,947 | 1,061,702 | — | 3,113,553 | ||||||||||||||||||||||||
Death | $ | 2,896,000 | 9,201 | 400,000 | 742,544 | 514,947 | 795,392 | — | 5,358,084 | |||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination Upon Change-in-Control | — | 9,201 | 400,000 | 742,544 | 514,947 | 795,392 | — | 2,462,084 | ||||||||||||||||||||||||
James S. Welch, Jr.(6) | ||||||||||||||||||||||||||||||||
Voluntary Termination | — | $ | 10,069 | $526,620 | $884,040 | $899,305 | $1,387,812 | — | $3,707,846 | |||||||||||||||||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination Not for Cause | — | 10,069 | 526,620 | 884,040 | 899,305 | 1,387,812 | — | 3,707,846 | ||||||||||||||||||||||||
Retirement | — | 10,069 | 526,620 | 884,040 | 899,305 | 1,387,812 | — | 3,707,846 | ||||||||||||||||||||||||
Death | $ | 1,879,000 | 10,069 | 335,000 | 735,000 | 899,305 | 1,102,174 | — | 4,960,548 | |||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination Upon Change-in-Control | — | 10,069 | 335,000 | 735,000 | 899,305 | 1,102,174 | — | 3,081,548 | ||||||||||||||||||||||||
Mark I. McCallum(6) | ||||||||||||||||||||||||||||||||
Voluntary Termination | — | $ | 10,417 | $683,820 | $841,295 | $1,068,248 | $1,591,861 | — | $4,195,641 | |||||||||||||||||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination Not for Cause | — | �� | 10,417 | 683,820 | 841,295 | 1,068,248 | 1,591,861 | — | 4,195,641 | |||||||||||||||||||||||
Retirement | — | 10,417 | 683,820 | 841,295 | 1,068,248 | 1,591,861 | — | 4,195,641 | ||||||||||||||||||||||||
Death | $ | 2,000,000 | 10,417 | 435,000 | 710,195 | 1,068,248 | 1,248,055 | — | 5,471,915 | |||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination Upon Change-in-Control | — | 10,417 | 435,000 | 710,195 | 1,068,248 | 1,248,055 | — | 3,471,915 | ||||||||||||||||||||||||
Jill A. Jones | ||||||||||||||||||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination for Cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Involuntary Termination Not for Cause | — | $9,549 | $636,059 | $967,065 | $523,941 | $867,625 | — | $3,004,239 | ||||||||||||||||||||||||
Retirement | — | 9,549 | 636,059 | 967,065 | 523,941 | 867,625 | — | 3,004,239 | ||||||||||||||||||||||||
Death | $ | 1,821,000 | 9,549 | 398,533 | 791,847 | 523,941 | 651,419 | — | 4,196,289 | |||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination Upon Change-in-Control | — | 9,549 | 398,533 | 791,847 | 523,941 | 651,419 | — | 2,375,289 |
(1) | Death benefit includes amounts provided by |
(2) |
(3) |
|
performance-adjusted awards paid for fiscal |
(4) | Continued vesting of a |
(5) | Continued vesting of a |
(6) | As retirement-eligible NEOs, |
(7) | On July 25, 2013, Mr. Varga received a one-time special restricted stock grant of 67,513 Class A shares. During the performance period, dividends |
50 | ||||||
BROWN-FORMAN |
ADVISORY VOTE ON EXECUTIVE COMPENSATION |
At this year’s Annual Meeting, we will ask stockholders to vote to approve, on an advisory basis, the compensation of our Named Executive Officers, as described in this Proxy Statement. At the 2011 Annual Meeting, stockholders approved a proposal to hold this vote every three years. Although this “say-on-pay” vote is required by federal law, the voting results are not binding on Brown-Forman, our Board of Directors, or the Compensation Committee. However, the Board values our stockholders’ opinions, and the Compensation Committee will consider the outcome of the advisory vote when making future executive compensation decisions.
As described in detail in the “Compensation Discussion and Analysis” section of this Proxy Statement, which begins on page 24, we believe in pay for performance and aim to achieve this primarily through our short-term and long-term incentive programs. These programs utilize metrics to compare our performance to that of our peers — a process that we believe ensures objective performance standards, reinforces competitive and innovative thinking, and demonstrates the value provided to our stockholders.
We urge you to read the “Compensation Discussion and Analysis” section and to review all other executive compensation information in this Proxy Statement to learn about our compensation objectives and practices, our fiscal 2017 performance, and how our compensation payouts reflect that performance.
The Board recommends that stockholders vote “FOR” the following resolution:
“RESOLVED, that the stockholders approve, on a nonbinding advisory basis, the compensation of Brown-Forman’s Named Executive Officers, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the compensation tables, and the related narrative, tabular and graphic disclosures.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE“FOR”THE APPROVAL OF THE NONBINDING ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 51 |
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION |
In 2011, stockholders had the opportunity to cast a nonbinding advisory vote on how frequently Brown-Forman should seek a nonbinding advisory vote on executive compensation. This vote, which is required by federal law, asks stockholders to indicate whether they prefer the “say-on-pay” vote to occur every one, two, or three years. In 2011, our stockholders approved, and we implemented, a three-year frequency for advisory votes on executive compensation.
At the 2017 Annual Meeting, we will again ask stockholders to cast another nonbinding advisory vote on how frequently Brown-Forman should seek an advisory vote on executive compensation, with a choice of every one, two, or three years. The results of this advisory vote are not binding on Brown-Forman, our Board of Directors, or the Compensation Committee. However, the Compensation Committee and the Board will consider the outcome of the vote when determining the frequency of future advisory votes on executive compensation. Notwithstanding the Board’s recommendation or the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis (but not less than the law requires) and may vary its practice based on factors such as discussions with stockholders, the adoption of material changes to compensation programs, or changes in the regulatory environment surrounding executive compensation.
The Board of Directors, upon recommendation from the Compensation Committee and the Corporate Governance and Nominating Committee, proposes that future advisory votes on Brown-Forman executive compensation be held every three years for the following primary reasons:
• | Our Company’s executive compensation programs are designed to reward sustainable long-term growth and performance. |
• | Our compensation philosophy has been consistently applied, and our compensation programs typically do not change materially from year to year. |
• | A substantial portion of the total compensation we pay our Named Executive Officers is delivered in incentive compensation with one-year and three-year performance periods. A nonbinding advisory vote on executive compensation every three years will give stockholders the ability to properly assess our long-term compensation strategies with the hindsight of three years of performance. |
• | Stockholders have other mechanisms, such as requirements for stockholder approval of equity-based compensation plans and other compensation-related matters, for providing input on our executive compensation programs in years when the advisory votes would not occur. |
• | A nonbinding advisory vote on executive compensation every three years will allow sufficient time for the Compensation Committee to evaluate the results of the most recent vote and to implement changes, if necessary, to our executive compensation programs. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR“EVERY THREE YEARS”AS THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.
52 | BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
STOCK OWNERSHIP |
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY’S VOTING STOCK
The table below identifies each beneficial owner of more than 5% of our Class A common stock, our only class of voting stock, as of April 30, 2015.2017. Each of the beneficial owners listed in the table below is either a Brown family member, a group of Brown family members, or an entity controlled by Brown family members.
The Brown family holds Class A shares in a variety of family trusts and entities, with multiple family members often sharing voting control and investment power as members of advisory committees to the trusts or as owners or officers of the entities. As a result, many of the shares shown in the table below are counted more than once, as they are deemed to be beneficially owned by more than one of the persons identified in the table. Counting each share only once, the aggregate number of shares of Class A common stock beneficially owned by the persons in this table is 56,899,584106,682,221 shares, or 67.4%63.1% of the 84,463,120169,051,360 Class A shares outstanding as of the close of business on April 30, 2015.2017. Taking into account ownership of shares of our non-voting Class B common stock, the Brown family controls more than 50% of the economic ownership in Brown-Forman.
Amount and Nature of Beneficial Ownership (1) Voting and Investment Power | ||||||||||||||||
Name and Address | Sole | Shared | Total | Percent of Class | ||||||||||||
J. McCauley Brown | 3,153,663 | (2) | 9,104,153 | (2) | 12,257,816 | (2) | 14.5% | |||||||||
850 Dixie Highway Louisville, Kentucky 40210 | ||||||||||||||||
Owsley Brown Frazier Family Group(3) | 472,093 | 9,235,264 | 9,707,357 | 11.5% | ||||||||||||
829 West Main Street Louisville, Kentucky 40202 | ||||||||||||||||
Owsley Brown II Family Group(4) | 3,406,130 | 5,970,588 | 9,376,718 | 11.1% | ||||||||||||
c/o Zelkova Strategic Partners, LLC 333 East Main Street, Suite 401 Louisville, Kentucky 40210 | ||||||||||||||||
Avish Agincourt, LLC | — | 9,104,153 | 9,104,153 | 10.8% | ||||||||||||
829 West Main Street Louisville, Kentucky 40202 | ||||||||||||||||
Bond Musselman Family Group(5) | 1,753,795 | 6,230,073 | 7,983,868 | 9.5% | ||||||||||||
c/o The Glenview Trust Company 4969 U.S. Highway 42 Suite 2000 Louisville, Kentucky 40222 | ||||||||||||||||
G. Garvin Brown III Family Group(6) | 6,810,146 | 24,675 | 6,834,821 | 8.1% | ||||||||||||
850 Dixie Highway Louisville, Kentucky 40210 | ||||||||||||||||
Laura Lee Brown | 2,807,798 | 2,933,211 | 5,741,009 | 6.8% | ||||||||||||
710 West Main Street, Third Floor Louisville, Kentucky 40202 | ||||||||||||||||
A. Cary Brown | 761,182 | 4,310,656 | 5,071,838 | 6.0% | ||||||||||||
657 South Hurstbourne Parkway, Suite 228 Louisville, Kentucky 40222 | ||||||||||||||||
Stuart R. Brown | 311,631 | 4,454,990 | 4,766,621 | 5.6% | ||||||||||||
850 Dixie Highway Louisville, Kentucky 40210 |
Amount and Nature of Beneficial Ownership Voting and Investment Power(1) | ||||||||
Name and Address | Sole | Shared | Total | Percent of Class | ||||
Wolf Pen Branch, LP | 88,473,917 | — | 88,473,917 | 52.3% | ||||
Wolf Pen Branch GP, LLC(2) | ||||||||
4969 U.S. Highway 42, Suite 2000 | ||||||||
Louisville, Kentucky 40222 | ||||||||
Avish Agincourt, LLC | 18,208,304 | — | 18,208,304 | 10.8% | ||||
829 West Main Street | ||||||||
Louisville, Kentucky 40202 |
Amount and Nature of Beneficial Ownership (1) Voting and Investment Power | ||||||||||||||||
Name and Address | Sole | Shared | Total | Percent of Class | ||||||||||||
Sandra A. Frazier | 1,406,519 | 3,174,471 | 4,580,990 | 5.4% | ||||||||||||
c/o The Glenview Trust Company 4969 U.S. Highway 42 Suite 2000 Louisville, Kentucky 40222 | ||||||||||||||||
W.L. Lyons Brown III | 696 | 4,399,173 | 4,399,869 | 5.2% | ||||||||||||
Box 119 Batesville, Virginia 22924 | ||||||||||||||||
Martin S. Brown, Sr. | 40,780 | 4,326,112 | 4,366,892 | 5.2% | ||||||||||||
5214 Maryland Way, Suite 404 Brentwood, Tennessee 37027 | ||||||||||||||||
Dace Brown Stubbs | 3,985,867 | 251,756 | 4,237,623 | 5.0% | ||||||||||||
850 Dixie Highway Louisville, Kentucky 40210 |
(1) | Based upon information furnished to |
(2) |
| 53 |
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS |
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of April 30, 2015,2017, the amount of our Class A and Class B common stock beneficially owned by each current director, each director nominee, each named executive officer, named in the Fiscal 2015 Summary Compensation Table on page 39, and by all directors and executive officers as a group. Some shares shown below are beneficially owned by more than one person. As of the close of business on April 30, 2015,2017, there were 84,463,120169,051,360 shares of Class A common stock and 124,236,991215,034,976 shares of Class B common stock outstanding. In calculating the aggregate number of shares and percentages owned by all directors and executive officers as a group, which includes shares owned by persons not named in this table, we counted each share only once.
Stock Beneficially Owned by Directors and Executive Officers as of AprilSTOCK BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS AS OF APRIL 30, 20152017
Class A Common Stock (2)(3) Voting or Investment Power | % of Class | Class B Common Stock (2)(3) Investment Power | % of Class | |||||||||||||||||||||||||||||
Name(1) | Sole | Shared | Total | Sole | Shared | Total | ||||||||||||||||||||||||||
Joan C. Lordi Amble | 6,412 | — | 6,412 | * | 2,297 | — | 2,297 | * | ||||||||||||||||||||||||
Patrick Bousquet-Chavanne | 4,380 | — | 4,380 | * | 57,178 | — | 57,178 | * | ||||||||||||||||||||||||
Geo. Garvin Brown IV | 3,351,011 | 6,071 | 3,357,082 | 4.0% | 649,979 | (4)(5) | 4,349 | 654,328 | * | |||||||||||||||||||||||
Martin S. Brown, Jr. | 259,473 | 45 | 259,518 | * | 92,822 | 10 | 92,832 | * | ||||||||||||||||||||||||
Stuart R. Brown | 311,631 | 4,454,990 | 4,766,621 | 5.6% | 154,168 | 4,653,131 | 4,807,299 | 3.9% | ||||||||||||||||||||||||
Bruce L. Byrnes | 2,684 | — | 2,684 | * | 3,321 | — | 3,321 | * | ||||||||||||||||||||||||
John D. Cook | 4,380 | — | 4,380 | * | 26,869 | — | 26,869 | * | ||||||||||||||||||||||||
Sandra A. Frazier | 1,406,519 | 3,174,471 | 4,580,990 | 5.4% | 376,851 | 793,617 | 1,170,468 | * | ||||||||||||||||||||||||
Augusta Brown Holland | 591,064 | (6) | 4,347,745 | (6) | 4,938,809 | (6) | 5.9% | 194,921 | 8,326,831 | (7) | 8,521,752 | 6.9% | ||||||||||||||||||||
Jill A. Jones | 19,346 | — | 19,346 | * | 92,747 | (5) | 90 | 92,837 | * | |||||||||||||||||||||||
Mark I. McCallum | 25,737 | — | 25,737 | * | 139,846 | 27 | 139,873 | * | ||||||||||||||||||||||||
Jane C. Morreau | 7,593 | — | 7,593 | * | 77,170 | — | 77,170 | * | ||||||||||||||||||||||||
Michael J. Roney | 2,499 | — | 2,499 | * | — | — | — | * | ||||||||||||||||||||||||
Dace Brown Stubbs | 3,985,867 | (8) | 251,756 | 4,237,623 | 5.0% | 898,162 | (9) | 176,378 | 1,074,540 | * | ||||||||||||||||||||||
Michael A. Todman | 1,959 | — | 1,959 | * | — | — | — | * | ||||||||||||||||||||||||
Paul C. Varga | 223,917 | — | 223,917 | * | 289,208 | — | 289,208 | * | ||||||||||||||||||||||||
James S. Welch, Jr. | 38,755 | — | 38,755 | * | 189,902 | — | 189,902 | * | ||||||||||||||||||||||||
All Directors and Executive Officers as a Group (25 persons, including those named above) (10) | 10,257,239 | 12,235,078 | 22,492,317 | (11) | 26.6% | 3,483,557 | 13,954,433 | 17,437,991 | (12) | 14.0% |
Class A Common Stock(2)(3) Voting or Investment Power | Class B Common Stock(2)(3) Investment Power | |||||||||||||||||||||||
Name(1) | Sole | Shared | Total | % of Class | Sole | Shared | Total | % of Class | ||||||||||||||||
Patrick Bousquet-Chavanne | — | — | — | * | 53,332 | — | 53,332 | * | ||||||||||||||||
Campbell P. Brown(4) | 3,917,120 | — | 3,917,120 | 2.3 | % | 1,250,923 | (5)(6) | 72 | 1,250,995 | * | ||||||||||||||
Geo. Garvin Brown IV(4) | 3,696,227 | 18,012 | 3,714,239 | 2.2 | % | 1,308,783 | (6)(7) | 5,946 | 1,314,729 | * | ||||||||||||||
Stuart R. Brown | 720,620 | 2,160 | 722,780 | * | 281,936 | 6,858 | 288,794 | * | ||||||||||||||||
Bruce L. Byrnes | — | — | — | * | — | — | — | * | ||||||||||||||||
John D. Cook | — | — | — | * | 43,504 | — | 43,504 | * | ||||||||||||||||
Marshall B. Farrer(4) | — | — | — | * | 26,546 | — | 26,546 | * | ||||||||||||||||
Laura L. Frazier | 427,490 | — | 427,490 | * | 459,218 | — | 459,218 | * | ||||||||||||||||
Kathleen M. Gutmann | — | — | — | * | — | — | — | * | ||||||||||||||||
Augusta Brown Holland(4) | 1,290,556 | 487,317 | 1,777,873 | 1.1 | % | 251,924 | 115,210 | (8) | 367,134 | * | ||||||||||||||
Jill A. Jones | 48,280 | — | 48,280 | * | 99,275 | (6) | 185 | 99,460 | * | |||||||||||||||
Mark I. McCallum | 44,564 | — | 44,564 | * | 253,800 | 54 | 253,854 | * | ||||||||||||||||
Jane C. Morreau | 21,387 | — | 21,387 | * | 150,550 | — | 150,550 | * | ||||||||||||||||
Michael J. Roney | — | — | — | * | — | — | — | * | ||||||||||||||||
Michael A. Todman | — | — | — | * | — | — | — | * | ||||||||||||||||
Paul C. Varga | 487,859 | — | 487,859 | * | 825,126 | — | 825,126 | * | ||||||||||||||||
Lawson E. Whiting | 1,989 | — | 1,989 | * | 61,936 | — | 61,936 | * | ||||||||||||||||
All Directors and ExecutiveOfficers as a Group(24 persons,including those named above)(9) | 10,691,219 | 507,489 | 11,198,708 | (10) | 6.7 | % | 5,571,701 | 128,325 | 5,700,026 | (11) | 2.7 | % |
* | Represents less than 1% of the class. |
(1) | The address for each person named in the table is 850 Dixie Highway, Louisville, Kentucky 40210. |
(2) | Based upon Company information, information furnished to the Company by the named persons, and information contained in filings with the SEC. Under SEC rules, a person is deemed to beneficially own shares over which the person has or shares voting or investment power or as to which the person has the right to acquire beneficial ownership within 60 days (including shares underlying options or stock appreciation rights that are exercisable within 60 days). |
54 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
STOCK OWNERSHIP •SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
(3) | Includes the following |
Class A | Class B | |||||||||||||||||
Name | Restricted Stock | Deferred Stock Units | SSARs | Deferred Stock Units | ||||||||||||||
Joan C. Lordi Amble | — | 3,412 | — | 2,297 | ||||||||||||||
Patrick Bousquet-Chavanne | — | 4,380 | 47,045 | 5,117 | ||||||||||||||
Geo. Garvin Brown IV | — | — | 10,470 | — | ||||||||||||||
Martin S. Brown, Jr. | — | — | 23,053 | 1,709 | ||||||||||||||
Bruce L. Byrnes | — | 2,684 | — | 3,321 | ||||||||||||||
John D. Cook | — | 4,380 | 21,752 | 5,117 | ||||||||||||||
Sandra A. Frazier | — | — | 23,053 | 1,709 | ||||||||||||||
Jill A. Jones | 2,372 | — | 65,422 | — | ||||||||||||||
Mark I. McCallum | 6,070 | — | 127,114 | — | ||||||||||||||
Jane C. Morreau | 2,846 | — | 74,339 | — | ||||||||||||||
Michael J. Roney | — | 2,499 | — | — | ||||||||||||||
Dace Brown Stubbs | — | 2,190 | 23,053 | 3,413 | ||||||||||||||
Michael A. Todman | — | 1,959 | — | — | ||||||||||||||
Paul C. Varga | 23,061 | — | 188,275 | — | ||||||||||||||
James S. Welch, Jr. | 5,750 | — | 164,900 | — |
Class A | Class B | |||||||
Name | Restricted Stock | Deferred Stock Units | SSARs | Deferred Stock Units | ||||
Patrick Bousquet-Chavanne | — | 15,773 | — | 10,526 | ||||
Campbell P. Brown | — | — | 7,436 | — | ||||
Geo. Garvin Brown IV | — | 12,485 | 12,512 | — | ||||
Bruce L. Byrnes | — | 9,747 | — | 6,831 | ||||
John D. Cook | — | 15,773 | 43,504 | 10,526 | ||||
Marshall B. Farrer | — | — | 24,420 | — | ||||
Laura L. Frazier | — | — | — | — | ||||
Augusta Brown Holland | — | 3,424 | — | — | ||||
Jill A. Jones | 2,668 | — | 62,182 | — | ||||
Mark I. McCallum | 3,059 | — | 243,086 | — | ||||
Jane C. Morreau | 3,094 | — | 144,414 | — | ||||
Michael J. Roney | — | 11,909 | — | — | ||||
Michael A. Todman | — | 8,259 | — | — | ||||
Paul C. Varga | 15,920 | — | 623,260 | — | ||||
Lawson E. Whiting | 1,351 | — | 61,936 | — |
(4) | Campbell P. Brown, Geo. Garvin Brown IV, Marshall B. Farrer and Augusta Brown Holland each hold no voting power over any shares of Class A common stock. Each holds sole or shared investment power over the Class A shares presented in the table. |
(5) | Includes |
Includes Class B common stock held in the |
(7) | Includes |
(8) | Includes |
“All Directors and Executive Officers as a Group” includes |
(11) | Includes 1,687,388 Class B |
SECTION 16(a)16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act as amended,of 1934 (Securities Exchange Act) requires our executive officers, directors, and “beneficial owners” of more than 10% of our Class A common stock to file stock ownership reports and reports of changes in ownership with the SEC. Based on a review of those reports and written representations from the reporting persons, we believe that during fiscal 2015, these persons reported2017, all transactions were reported on a timely basis, except for the following late filings, all of which related to gifts and estate planning-related transactions:filings: one holding omitted from Form 3 by Ralph de Chabert; two holdings omitted from Form 3 by Lisa Steiner; Form 4 by J. McCauley BrownJill A. Jones reporting a swap of 35,190 Class B shares for 35,500 Class A shares;one transaction; Form 4 by AugustaCampbell P. Brown Holland reporting gifts of 146,786 Class B sharestwo transactions; and 1,135 Class A shares.Form 4 by Stuart R. Brown reporting one transaction.
| 55 |
AUDIT MATTERS |
This section contains a report of the Audit Committee of the Board of Directors. It also explains the role of the Audit Committee and sets forth the fees paid to our independent registered public accounting firm.
REPORT OF THE AUDIT COMMITTEE
The Board has delegated to the Audit Committee (the “Committee”) responsibility to assist it in overseeing the Company’s most significant risks–financial and otherwise–and in periodically reviewing how management monitors and manages those risks. During fiscal 2015, the Committee met with management, including the CEO, CFO, Principal Accounting Officer, the Director of Internal Audit and members of the management Risk Committee, to review management’s risk register and confirm that key risks to the Company have been identified and that appropriate mitigation activities are taking place. In addition, during fiscal 2015, risk management was an agenda item for all Committee meetings held in connection with regularly scheduled Board meetings. The Committee reported to the Board the results and findings of all of its enterprise risk oversight activities this past fiscal year.
The Committee is responsible for overseeing the integrity of the Company’s financial statements on behalf of the Board. Management is responsible for establishing and maintaining the Company’s internal controls, for preparing the financial statements, and for the public financial reporting process. The Company’s internal audit function is responsible for preparing and executing an annual internal audit plan under the supervision of the Director of Internal Audit, who is accountable to the Audit Committee. The independent registered public accounting firm is responsible for performing an audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and for issuing a report on its audit. The independent registered public accounting firm also reports on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviews the work of management in respect of these matters and has direct responsibility for compensation, retentionretaining, compensating, and oversight ofoverseeing the independent registered public accounting firm on behalf of the Board.
On behalf of the Board, the Audit Committee retained PricewaterhouseCoopers LLP (“PwC”)(PwC) as the independent registered public accounting firm to audit the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting for fiscal 2015.2017. The Audit Committee reviewed and discussed with management and the independent registered public accounting firmPwC the audited financial statements as of and for the fiscal year ended April 30, 2015.2017. In addition, the Audit Committee reviewed and discussed, with management, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and, with PwC, PwC’s evaluation of the Company’s system of internal controls. These discussions included meetings with PwC without representatives of management present, and executive sessions with the Director of Internal Audit.
The Audit Committee discussed with PwC matters required to be discussed by Statement on Auditing StandardsStandard No. 16, as amended (AICPA, Professional Standards, Vol. 1, AU section 380),1031, as adopted by the Public Company Accounting Oversight Board in Rule 3200T.PCAOB. PwC provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB for independent auditor communications with audit committees concerning independence, and the Audit Committee discussed with PwC the firm’s independence and ability to conduct the audit. The Audit Committee has determined that PwC’s provision of audit and non-audit services to the Company is compatible with maintaining auditor independence.
Based on the foregoing, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2015.2017.
AUDIT COMMITTEE Michael A. Todman, Chair Bruce L. Byrnes John D. Cook
|
56 | ||||||||
BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
AUDIT MATTERS •AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents the fees the CompanyBrown-Forman incurred for the professional services provided by PwC for fiscal years 20142016 and 2015.2017. All such fees were pre-approved by the Audit Committee in accordance with the policy described below.
Fiscal Years | Fiscal Years | ||||||||||
2014 | 2015 | 2016 | 2017 | ||||||||
Audit Fees | $ | 1,877,758 | $ | 1,656,781 | $1,597,000 | $2,241,000 | |||||
Audit-Related Fees | 147,908 | 158,000 | 210,000 | 163,000 | |||||||
Tax Fees | 83,533 | 133,444 | 385,000 | 637,000 | |||||||
All Other Fees | 8,538 | 7,600 | 6,000 | 3,000 | |||||||
Total | $ | 2,117,737 | $ | 1,955,825 | $2,198,000 | $3,044,000 |
Audit Fees
This category consists of the audit of the Company’sBrown-Forman’s annual financial statements included in the Company’s Annual Report on Form 10-K, attestation services relating to the report on internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, review of interim financial statements included in the Company’squarterly reports on Form 10-Q, quarterly reports, services normally provided in connection with statutory and regulatory filings or engagements, and statutory audits required by foreign jurisdictions. For fiscal 2015, this category also included audit procedure fees for tax projects and fees related to accounting and regulatory changes. All such fees were pre-approved by the Audit Committee in accordance with the policy described below.
Audit-Related Fees
This category consists principally of fees related to the audits of employee benefit plans. For fiscal 2015,2017, this category also included fees for an attestation engagement over capital expenditures. All such fees were pre-approved byassurance and related services that are reasonably related to the audit or review of Brown-Forman’s financial statements but are not included in the Audit Committee in accordance with the policy described below.Fees category.
Tax Fees
This category consists principally of fees related to tax planning and transfer pricing services. All such fees were pre-approved by the Audit Committee in accordance with the policy described below.
All Other Fees
This category consists of fees for technical training and an accounting research subscription. All such fees were pre-approved by the Audit Committee in accordance with the policy described below.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
It is the policy of the Audit Committee to pre-approve all audit services and permitted non-audit services (including an estimate of the fees or a range of fees) to be performed for the CompanyBrown-Forman by its independent registered public accounting firm, subject to thede minimisexception for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act. The Audit Committee pre-approved the fiscal 20152017 audit and non-audit services provided by PwC. The non-audit services approved by the Audit Committee were also reviewed to ensure compatibility with maintaining the firm’sPwC’s independence. The Audit Committee has delegated to its Chair the authority to pre-approve proposed audit and non-audit services that arise between meetings, with the understanding that theany such decision will be reviewed at the next scheduled Audit Committee meeting. During the approval process, the Audit Committee considers the potential impact of the type of service on the independence of the registered public accounting firm. Services and fees must be deemed compatible with the maintenance of the registered public accounting firm’s independence, including compliance with SEC rules and regulations. The Audit Committee is prohibited from delegatingmay not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of our independent registered public accounting firm. Throughout the year, the Audit Committee reviews any revisions to the estimates of fees initially approved.
The Audit Committee has adopted other policies in an effort to ensure the independence of our independent registered public accounting firm. The Audit Committee must pre-approve PwC’s rendering of personal financial and tax advice to any of the Company’sBrown-Forman’s designated executive officers. In addition, the Audit Committee has a policy that limits the Company’sBrown-Forman’s ability to hire certain current and former employees of our independent registered public accounting firm.
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APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed PwC to serve as the Company’sour independent registered public accounting firm for the fiscal year ending April 30, 2016.2018. Through its predecessor Coopers & Lybrand L.L.P., PwC has served as the Company’sBrown-Forman’s auditor continuously since 1933. A representative of PwC will attend the Annual Meeting, will be given thehave an opportunity to make a statement, should he or she so desire, and will be available to respond to appropriate questions. We know of no direct or material indirect financial interest that PwC has in the CompanyBrown-Forman or any of our subsidiaries, or of any connection with the Companybetween Brown-Forman or any of our subsidiaries bywith PwC in the capacity of promoter, underwriter, voting trustee, director, officer, or employee.
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BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
OTHER INFORMATION |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Person Transactions
Rules and policies.SEC regulations require disclosure of certain transactions between the CompanyBrown-Forman and a “related person.” For purposes of these regulations, a “related person” generally includes any individual who was a director or executive officer at any time during the last fiscal year, a director nominee, a beneficial owner of more than 5% of the Company’sour voting securities, and any immediate family member of any such person. To ascertain information regarding related person transactions, the CompanyBrown-Forman has asked each director, director nominee, executive officer, and more than 5% beneficial owner to disclose any Company transaction with a related person since May 1, 20142016, or any such proposed transaction. Under the terms of its charter, theThe Audit Committee is responsible for reviewing, and if appropriate, approving or ratifying the Company’s related person transactions. The Audit Committee reviewed and approved all such transactions for fiscal 2015.2017.
Employment of related persons.As a family-controlled company, we employ individuals who are considered “related persons” under SEC regulations. As of April 30, 2015,2017, we employed seven individuals—four individuals — Campbell P. Brown, Christopher L. Brown, Geo. Garvin Brown IV, J. McCauley Brown, Suzanne Brown Siegel, George C. Chapman, and Marshall B. Farrer—Farrer — who are immediate family members of executive officers, directors, or more than 5% beneficial owners, or who are directors or more than 5% beneficial owners in their own right. Each of these employees is compensated in a manner consistent with our employment and compensation policies applicable to all employees, and the aggregate amount of compensation and benefits paid by the Company to each of these employees during fiscal 2015 exceeded $120,000. For certain of these employees, we provided expatriate benefits pursuant to our employee relocation assistance program.2017 was: Campbell P. Brown $480,803; Christopher L. Brown $179,965; Suzanne Brown Siegel $142,717; and Marshall B. Farrer $490,239.
In addition to his service as Chairman of our Board, Geo. Garvin Brown IV served as Executive Vice President of Brown-Forman until June 15, 2015. During fiscal 2015, Mr. Brown received a salary (including holiday bonus) of $320,427, and non-equity incentive compensation of $281,845. In addition, he received long-term equity-based incentive compensation of 3,426 Class B common restricted stock units. The Company included $145,000 in Mr. Brown’s fiscal 2015 long-term incentive compensation award at target for serving as Chairman of our Board. During fiscal 2015, the Company incurred costs at a net amount of $68,373 for certain expenses associated with Mr. Brown’s living abroad and other employee benefits provided to him. Mr. Brown’s compensation as a Company employee was consistent with that of other employees with similar tenures, responsibilities, performance histories, and expatriate status.
Other transactions.Laura Lee Brown is a member of the Brown family and was a 5% beneficial owner of the Company’sBrown-Forman’s voting stock and the sisterfor part of director Dace Brown Stubbs.fiscal 2017. Ms. Brown, together with her spouse, Steve Wilson, owns a parking garage next to our offices in downtown Louisville. We lease, at market rates, a number of parking spaces in this garage, and pay additional amounts for validations of parking for customers and visitors. For fiscal 2015, the Company’s2017, our expense under this arrangement was $235,651.$209,710. In addition, Ms. Brown and Mr. Wilson are owners of the 21c Museum Hotel and Proof on Main restaurant.restaurant (21c and Proof). During fiscal 2015,2017, Brown-Forman rented hotel rooms and conference rooms and provided meals and entertainment at 21c and Proof, at market rates, to various company guests. The amount paid in fiscal 20152017 for these expenses was $240,540.
The Company recently purchased two historic buildings in the Whiskey Row area of downtown Louisville, Kentucky, from Main Street Revitalization, LLC. The seller is managed by Brown Wilson Development, Inc., which entity is controlled by Laura Lee Brown and her husband, Steve Wilson. In addition to Brown Wilson Development, the investors in the seller include, directly or indirectly, the Company; Kentucky Ceramics LLC, which is controlled by Christina Lee Brown; and James S. Welch, Jr. and his wife, Marianne Welch. Ms. Laura Lee Brown and Ms. Christina Lee Brown are each beneficial owners of more than 5% of the Company’s voting stock, and Mr. Welch is a director and executive officer of the Company. The purchase price was $4.5 million.
The Company paid an aggregate of $250,000 in filing fees to the Federal Trade Commission in connection with two notifications filed by Avish Agincourt, LLC, a beneficial owner of more than 5% of the Company’s voting stock. The notifications related to Avish Agincourt, LLC’s holdings of Brown-Forman Class A Common Stock and were filed to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been an officer or employee of the Company,Brown-Forman, and no executive officer of the CompanyBrown-Forman has served on the compensation committee or board of any company that employed any member of our Compensation Committee or Board of Directors either during fiscal 2015,2017 or as of the date of this Proxy Statement.
Other Proposed Action Atat the Meeting
As of June 23, 2015,27, 2017, we know of no additional business tothat will come before the meeting. If any other matters are properly presented for voting at the Annual Meeting, the proxies will be voted on those matters as the Board may recommend, or, in the absence of a recommendation, in accordance with the judgment of the proxy holders.
2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERSBROWN-FORMAN | 59 |
OTHER INFORMATION •STOCKHOLDER PROPOSALS FOR THE 20162018 ANNUAL MEETING
STOCKHOLDER PROPOSALS FOR THE 2018 ANNUAL MEETING
To be considered for inclusion in the Proxy Statement for the 20162018 Annual Meeting of Stockholders, stockholder proposals must be sent to 850 Dixie Highway, Louisville, Kentucky 40210, no later than February 24, 2016.27, 2018. Proposals should be sent to the attention of Matthew E. Hamel, our Secretary, and must comply with SEC requirements related to the inclusion of stockholder proposals in Company-sponsoredcompany-sponsored proxy materials. Any notice of a proposal submitted outside the process of Exchange Act Rule 14a-8, that a stockholder intends to bring at our 20162018 Annual Meeting of Stockholders received aftershould be submitted by May 9, 2016 will be considered untimely,13, 2018, and the proxies solicited by us for next year’s Annual Meeting will confer discretionary authority to vote on any such matters without a description of them in the Proxy Statement for that Annual Meeting.
By Order of the Board of Directors | |
MATTHEW E. HAMEL | |
Secretary | |
Louisville, Kentucky | |
June |
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BROWN-FORMAN2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
Our past is defined by generations of visionary individuals and decades of progress.Our future will be determined by continuity in our direction, commitment to our strategies, and confidence in our capabilities.
850 DIXIE HIGHWAYLOUISVILLE, KENTUCKY 40210 WWW.BROWN-FORMAN.COM
WE ENRICH THE EXPERIENCE
OF LIFE BY RESPONSIBLY
BUILDING BEVERAGE
ALCOHOL BRANDS, IN OUR
OWN WAY, THAT THRIVE AND
ENDURE FOR GENERATIONS.
OUR STORY:
BUILDING FOREVER
–
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Available 24 hours a day, 7 days a week!
YOUR 15-DIGIT VALIDATION NUMBER IS PROVIDED IN THE CIRCLE BELOW.
Proxies submitted online or by telephone must be received by 1:00 a.m., Eastern Time, on Thursday, July | |||||||||||
Vote online • Go towww.investorvote.com/BFB • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website |
Vote by telephone | ||||||||||
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Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | x |
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Annual Meeting Proxy Card |
q6 IF YOU HAVE NOT VOTED ONLINEOR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q6
You are encouraged to specify your choices by marking the appropriate boxes, but you need not mark any boxes if you wish to vote in accordance with the recommendation of the Board of Directors. The Proxies cannot vote your shares unless you vote either online or by telephone or sign and return this card.
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| The Board of Directors recommends a voteFOR the election of all the nominees |
1. | Election of Directors: | For | Abstain | For | Against | Abstain | For | Against | Abstain | ||||
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o | o | |||||
o | o | |||||
03 - Geo. Garvin Brown IV | o | o | o | |||||||||
o | o | |||||||||||
o | o | 06 - John D. Cook | o | o | o | |||||||
o | o | o | 08 - Laura L. Frazier | o | o | o | 09 - Kathleen M. Gutmann | o | o | o | ||
o | o | 11 - Michael J. Roney | o | o | o | 12 - Michael A. Todman | o | o | o | |||
o | o |
For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | ||||||
2. | Nonbinding advisory vote to approve our executive compensation | o | o | o | 3. | Nonbinding advisory vote on the frequency of future advisory votes on executive compensation | o | o | o | o |
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| Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as your name(s) appear on this card. When signing as attorney, executor, administrator, trustee, or guardian, please give your full title. If a corporation, please have an authorized person sign in full corporate name. If a partnership, please have an authorized person sign in partnership name.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
C 1234567890
| 1 U P X | J N T 3 3 6 8 8 8 1 | MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE |
023ZXB
02MLUE
YOUR VOTE IS IMPORTANT.
If you do not vote online or by telephone, please sign and date this proxy card
and return it promptly in the enclosed postage-paid envelope so your
shares may be represented at the Annual Meeting.
The Proxy Materials are available for review at:
www.brown-forman.com/proxyinvestors/annual-report/
q6 IF YOU HAVE NOT VOTED ONLINEOR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q6
PROXY – BROWN-FORMAN CORPORATION
PROXY – BROWN-FORMAN CORPORATION |
This proxy is solicited on behalf of the Board of Directors for the Annual Meeting of Stockholders on July 23, 2015.27, 2017.
The undersigned hereby appoints Geo. Garvin Brown IV, Paul C. Varga, and Matthew E. Hamel, and each of them, attorneys and proxies, with power of substitution, to vote all of the shares of Class A Common Stock of Brown-Forman Corporation (the “Corporation”“Company”) standing of record in the name of the undersigned at the close of business on June 15, 2015,19, 2017, at the Annual Meeting of Stockholders of the CorporationCompany to be held on July 23, 2015,27, 2017, and at any adjournment or postponement thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting and accompanying Proxy Statement and revokes any proxy heretofore given with respect to such meeting. The votes entitled to be cast by the undersigned will be cast as instructed.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder.If no direction is given, this proxy will be voted “FOR” each of the nominees for director.director on Proposal 1, “FOR” Proposal 2, and for “EVERY THREE YEARS” on Proposal 3. The votes entitled to be cast by the undersigned will be cast at the direction of the named proxy holders upon any other matter that may properly come before the meeting and any adjournment ofor postponement thereof.
If you vote online or by telephone, please do not send your proxy by mail.
IMPORTANT – THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON THE REVERSE SIDE OF THIS CARD.
Non-Voting Items |
Change of Address — Please print new address below. |
IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. |