UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
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LOWE’S COMPANIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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April 16, 2020
Dear Fellow Shareholders:
We are pleasedOn behalf of the Board of Directors and management team, we would like to invite you to attend our 2020 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Time, on Friday, May 29, 2020 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. Details regarding admission to the meeting and the business to be conducted are described in the accompanying Notice of 2020 Annual Meeting of Shareholders and Proxy Statement.
Your vote is important. Regardless of whether you plan to attend the meeting, we strongly encourage you to vote as soon as possible to ensure that your shares are represented at the meeting. The accompanying Proxy Statement explains more about voting. Please read it carefully, and thank you for your continued investment in Lowe’s. This past year presented unprecedented challenges as the COVID-19 global health crisis brought far-reaching economic and social implications for our company, our associates and our society. We are incredibly proud of the hard work and dedication of our front-line associates, who supported our communities in their time of need and helped our customers keep their homes and businesses safe and operational.
We would like to highlight several of the ways the Board and management team have been working on your behalf.
Our Response to the COVID-19 Pandemic: Our commitment to our associates and communities has never been more evident than in this extraordinary year. In fiscal 2020, we provided nearly $1.3 billion in COVID-related support for associates, communities and store safety. As an essential retailer, we responded to the pandemic by establishing three key priorities:
• | Creating a safe store environment for our associates and our customers: We quickly implemented numerous safety standards in support of social distancing and enhanced sanitizing and cleaning. We also adopted safety measures by requiring all front-line associates to wear masks and a standard for all customers to wear masks as well. |
• | Financially supporting our front-line associates: We provided over $900 million in incremental COVID-related financial support for our front-line hourly associates, including special payments, as well as providing additional emergency paid leave and extending telemedicine benefits. |
• | Providing support for our communities: Serving customers and giving back to the communities in which we operate and live have always been core values at Lowe’s. In 2020, we contributed more than $150 million to support our communities, including more than $100 million in pandemic-related relief. |
Strategy and Performance Throughout our Company Transformation: Our improved execution across our store operations and supply chain enabled us to meet the unprecedented levels of consumer demand for home improvement products and services in 2020. We delivered outstanding results, with a 41% increase in diluted earnings per share to $7.75 and a 54% increase in adjusted diluted earnings per share to $8.86,* driven by total sales growth of 24%, comparable sales growth of 26%, a 53% increase in operating income and a 47% increase in adjusted operating income.*
Shareholder Engagement: We have a robust shareholder engagement program, and we value the feedback we have received from our shareholders over the years. This past winter, we reached out to 34 investors representing 47% of shares outstanding and met with 17 investors representing 35% of shares outstanding to discuss a range of ESG-related topics. These conversations focused on our response to the COVID-19 pandemic, strategy, human capital management efforts, diversity and inclusion programs and initiatives, Board composition, environmental sustainability and our corporate governance and executive compensation practices.
Commitment to Corporate Responsibility: Acting in a socially responsible manner is a cornerstone of our company and fundamental to our success. Our strategy is responsive to the needs of our key stakeholders and focused on promoting sustainability throughout our value chain, improving the health and well-being of our team and reducing the environmental footprint of our operations. We have a track record of setting and achieving rigorous corporate responsibility goals and will continue to enhance our commitments and expand our focus areas in the years ahead, including around greenhouse gas emissions, net waste and responsible sourcing of materials.
Embracing Diversity and Inclusion: At Lowe’s, we are committed to fostering an inclusive culture that enables everyone who touches our business to thrive and contribute to our success. We believe that, by building diverse and inclusive teams, we drive better ideas, positive business results and improved service through a deeper connection with our customers. We are focused on integrating diversity and inclusion initiatives into our corporate strategy across three key areas: talent, culture and business.
In closing, we would like to say a special thank you to our shareholders and the over 300,000 associates of Lowe’s who delivered extraordinary results this year and remain steadfast in their commitment to customer service. As we look forward to 2021, we are excited about the many opportunities ahead.
Sincerely,
Richard W. Dreiling Chairman of the Board | Marvin R. Ellison President and Chief Executive Officer |
* | Adjusted diluted earnings per share and adjusted operating income are non-GAAP financial measures. Refer to Appendix B for a reconciliation of non-GAAP measures. |
LOWE’S COMPANIES, INC.
1000 Lowes Boulevard
Mooresville, North Carolina 28117
(704)758-1000
Notice of 20202021 Annual Meeting of Shareholders
April 16, 202015, 2021
The 20202021 Annual Meeting of Shareholders (the “Annual Meeting”) of Lowe’s Companies, Inc. (the “Company”) will be held virtually via live audio webcast at 10:00 a.m., Eastern Time, on Friday, May 29, 202028, 2021 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277,www.virtualshareholdermeeting.com/LOW2021, for the purpose of voting on the following matters:
1. | To elect the 11 candidates nominated by the Board of Directors and named in the Proxy Statement for election as directors; |
2. | To approve, on an advisory basis, the Company’s named executive officer compensation in fiscal |
3. | To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal |
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To consider and vote upon one shareholder proposal set forth in the accompanying Proxy Statement, if properly presented at the Annual Meeting; and |
To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
The Board of Directors unanimously recommends a vote “FOR” itemseach of the director nominees in proposal 1, “FOR” proposals 2 3, 4 and 5,3, and a vote “AGAINST” the shareholder proposal in item 6.proposal. The persons named as proxies will use their discretion to vote on other matters that may properly arise at the Annual Meeting or any adjournment or postponement thereof.
Only shareholders of record as of the close of business on March 23, 202022, 2021 will be entitled to notice of, and to vote at, the Annual Meeting.Meeting or any adjournment or postponement thereof.
In light of the ongoing public health concerns related to the COVID-19 pandemic, we are holding the Annual Meeting in a virtual-only format. You will not be able to attend the Annual Meeting in person. We look forward to returning to the in-person meeting format once it is safe to do so. To attend the Annual Meeting, vote and submit your questions during the Annual Meeting, you will need to visit the Annual Meeting website noted above and enter your 16-digit control number found on your proxy card, voting instruction form, Notice of Internet Availability of Proxy Materials or legal proxy, as applicable. Prior to the Annual Meeting, you will be able to vote at www.proxyvote.com using your 16-digit control number or by the other methods described in the Proxy Statement. For more information about the virtual-only meeting format, please see page 65 of the Proxy Statement.
Your vote is important. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote as soon as possible to ensure that your shares are represented at the meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy using one of the following methods: (i) vote via the Internet; (ii) vote by telephone; or (iii) complete, sign, date and return your proxy card in the postage-paid envelope provided. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares at the Internet site address listed on your notice. If you hold your shares through an account with a bank, broker or similar organization, please follow the instructions you receive from the holder of record to vote your shares.
Sincerely,
Ross W. McCanless
Executive Vice President, General Counsel and Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Shareholders Toto Be Held on May 29, 2020:28, 2021:
The Notice of 20202021 Annual Meeting of Shareholders, Proxy Statement and
20192020 Annual Report to Shareholders are available at www.proxyvote.com.
PROXY SUMMARY
We generate sustainable shareholder value by driving operational excellence throughout the enterprise, consistently generating high levels of cash flow and optimizing our capital deployment. We have demonstrated a strong commitment to returning capital to our shareholders and have had continued dividend growth since 1961.
$ | $18.9 Billion | |||
ANNUAL DIVIDEND | DIVIDENDS PAID IN THE LAST FIVE YEARS | SHARES REPURCHASED IN LAST FIVE YEARS |
This summary includeshighlights certain financial, operational, governance and executive compensation highlights.information contained in the Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. References to “Lowe’s,” the “Company,” “we,” “us,” “our” and similar terms refer to Lowe’s Companies, Inc.
Executive Compensation Highlights
Our executive compensation program is designed to hold our executives accountable for business results and reward them for consistently strong financial performance and the creation of value for our shareholders. To that end, the primary objectives of our executive compensation program are to:FISCAL 2020 FINANCIAL HIGHLIGHTS
Governance Highlights
Our Board of Directors is committed to sound and effective corporate governance practices. The following are highlights of our corporate governance practices:
i | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
RESPONDING TO THE COVID-19 PANDEMIC
FISCAL 2019 FINANCIAL AND OPERATIONAL HIGHLIGHTS
In 2020, Lowe’s rose to the challenges presented by the COVID-19 pandemic through the hard work and dedication of our associates, especially those on the front lines, who supported our communities and helped our customers keep their homes and businesses safe and operational. In late February, Lowe’s rapidly responded to the crisis by establishing a cross-functional COVID-19 taskforce and opening a company-wide Command Center. As an essential retailer, we established three key priorities:
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Creating a safe store environment for our associates and our customers; |
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YOY = Year over Year Comparison
* Adjusted diluted earnings per common share is anon-GAAP financial measure. Refer to Appendix CFinancially supporting our front-line associates; and
Providing support for a reconciliation ofnon-GAAP measures. Fiscal 2018 diluted earnings per share was $2.84 and adjusted diluted earnings per share was $5.11.our communities.
In fiscal 2019,2020, we made significant progressprovided nearly $1.3 billion in transforming our company and building a strong foundation from which to create shareholder value. Our focus on improvingin-stocks and customer service coupled with our effort on winning with the Pro supported improved performance.
While we are still in the early stagesfinancial support of a multi-year transformation, we are focused on generating long-term profitable growth and substantial returns for our shareholders. This means taking a balanced approach to capital allocation with a focus on making strategic investments to grow our business while returning excess value to shareholders in the form of dividends and share repurchases.these critical priorities.
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NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ii |
SUCCESSFUL IMPLEMENTATION OF RETAIL FUNDAMENTALS STRATEGY
Shortly after joining the Company in fiscal 2018, the new executive leadership team led by our President and Chief Executive Officer (“CEO”), Marvin R. Ellison, established a retail fundamentals strategy with the objective of transforming Lowe’s into a world-class omni-channel retailer. This strategy focused on building our operating capabilities through strategic investments in merchandising excellence, supply chain transformation, operational efficiency and customer engagement.
With the onset of the COVID-19 pandemic, there was a need to quickly implement numerous safety standards in support of social distancing and enhanced sanitizing and cleaning and respond to a sharp increase in customer demand for contactless shopping options. We leveraged the improved operating capabilities achieved from our retail fundamentals strategy, and we were able to move nimbly and effectively to meet the needs of our customers. For example:
We improved fulfillment capabilities at our stores through a rapid roll out of curbside pickup followed by touchless, easy-to-use pickup lockers.
We enhanced the Lowe’s mobile app to improve the customer pickup experience and accelerated the re-platforming of Lowes.com, which transformed site stability and enabled the site to handle an over 70% increase in traffic volumes in 2020.
We accelerated technology updates that enabled quicker fulfillment, and we more than doubled the number of items available online.
These efforts, combined with the continued execution on our strategic initiatives, have driven outstanding results. In fiscal 2020, the Company began to take market share through outsized gains in sales to our DIY and Pro customers. These achievements enabled us to deliver value to shareholders through the payment of $1.7 billion in dividends and the repurchase of $5.0 billion of our shares of common stock.
Given the success of our retail fundamentals strategy, combined with the sharp increase in customer demand and our improved execution, we unveiled a new strategy to accelerate our market share gains at the end of 2020. The Total Home strategy reflects Lowe’s commitment to providing a “total home solution” across every area in the home, including products and services for everything needed to repair and improve the home. This encompasses simple and complex installation services, as well as all product categories, including new categories that Lowe’s has not traditionally provided. The Total Home strategy is designed to enhance customer engagement and grow market share by intensifying the Company’s focus on the Pro customer, expanding our online business, modernizing installation services, improving localization efforts and elevating our product assortment.
We are confident that we are making the right investments in the business to generate long-term growth and continue to create sustainable shareholder value.
iii | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
OVERVIEW OF OUR EXECUTIVE COMPENSATION PROGRAM
Our Executive Compensation Program is Linked to Our Strategy
Lowe’s has a long-standing commitment to pay for performance and provides a significant portion of compensation opportunities through variable pay arrangements. The Board of Directors (the “Board”) places significant emphasis on the long-term success of the Company and strong alignment with the interests of all stakeholders, including shareholders, customers, our associates and the communities in which we operate. Our executive compensation program is designed to drive long-term shareholder value by aligning executive pay with our strategy and shareholder interests and attracting and retaining talented executives.
For fiscal 2020, we maintained the principal features and performance-based elements of our executive compensation program while making select changes to our annual incentive plan to support our retail fundamentals strategy. We added a strategic metric for Pro sales growth in the U.S. home improvement market in support of our strategy and business plan. We also re-aligned the weightings of the financial and strategic metrics for our annual incentive plan to allow for the addition of the Pro sales growth metric. Our executive compensation program is designed to reward executives for growth in the Company’s sales and earnings, the creation of long-term shareholder value and the effective execution of our business strategies and operating priorities. The primary objectives of our program are to:
Attract and retain executives who have the requisite leadership skills to support the Company’s culture and strategic growth priorities;
Maximize long-term shareholder value through alignment of executive and shareholder interests;
Align executive compensation with the Company’s business strategies, which are focused on driving operational excellence and better serving our customers; and
Provide market competitive total compensation with an opportunity to earn above market median pay when the Company delivers results that exceed performance targets, and below median pay when the Company falls short of performance targets.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | iv |
Key Elements of our 2020 Executive Compensation Program
Lowe’s compensation mix is heavily performance-based with 72% of the CEO’s and 67% of the other named executive officers’ annualized target compensation at-risk and contingent upon the achievement of performance objectives or relative and absolute share price performance. Additionally, 67% of the CEO’s and 65% of the other named executive officers’ compensation is in the form of long-term incentives.
v | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Compensation Best Practices
HUMAN CAPITAL MANAGEMENT
The full Board and the Compensation Committee oversee and regularly engage with our President and CEO, our Executive Vice President, Human Resources and senior leadership on a broad range of human capital management topics, including culture, talent management and succession planning, compensation and benefits, diversity and inclusion and employee engagement feedback gathered from the Company’s annual Building Engagement and Success Together (“BEST”) associate engagement survey. In addition to the full Board’s review of talent management topics as standing agenda items, including CEO and senior management succession planning, diversity and inclusion and culture, the Board also receives regular reports from the Compensation Committee on human capital management topics throughout the year.
When it comes to recruiting and retaining top talent, Lowe’s strives to be an employer of choice. We are committed to creating valuable career opportunities for our associates, supporting them and the communities where they live and cultivating a culture that invites and encourages diverse opinions and ideas. We enable our associates to build meaningful careers and unlock their potential in an inclusive workplace as we work together to deliver the right home improvement products, with the best service and value, across every channel and community we serve.
Diversity and Inclusion
We believe that, by building diverse and inclusive teams, we drive better ideas, positive business results and improved service through a deeper connection with our customers. During fiscal 2019, we kicked-off a multi-year program to integrate diversity and inclusion initiatives into our corporate strategy across three areas: talent, culture and business. To foster an inclusive culture, we launched seven employee business resource groups (“BRGs”) sponsored by our executive leadership team (“ELT”) in 2019 and continued to support those groups virtually in 2020. Additionally, we have committed to begin publicly disclosing our Consolidated EEO-1 Report data in 2021.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | vi |
Our Approach and Highlights
vii | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Board of Directors and ELT Diversity
Talent Development
We are committed to securing top talent and providing ongoing training to facilitate meaningful careers at Lowe’s. We offer a variety of leadership and development programs that develop diverse and other high potential associates. We also have certification programs available to our store and technology associates to further develop their skills and knowledge base. Additionally, through our partnership with Guild Education, Lowe’s Track to the Trades program provides tuition reimbursement to our associates, encouraging them to complete apprentice certifications in carpentry, plumbing, electrical, HVAC or appliance repair.
We have also seen great strides in our internal culture. This year, we saw higher participation and engagement scores in our annual BEST associate engagement survey, which helps senior management understand from our associates what Lowe’s is doing well and where we have opportunities for improvement.
Total Rewards and Wellness
In the spirit of building the best team and providing them with the best care, we are proud of the financial and well-being benefits we offer to our associates. We have a history of investing in our workforce by offering locally competitive salaries and wages. We offer a wide variety of health, welfare and financial benefits to our full-time and part-time associates, including health care and insurance benefits, retirement plans, an employee stock purchase plan, paid time off, leave programs and tuition assistance, among many others. See the “Responding to the COVID-19 Pandemic” section on page ii of this Proxy Summary for examples of how we expanded benefits and wellness programs to increase associate access to care during the COVID-19 pandemic.
Store and Workplace Safety
Our associates and customers drive our success, and providing them a safe environment for both working and shopping is essential. We strive to maintain a culture of safety beginning with our leaders modeling the behaviors we want our associates to adopt, and we embed safety into associate onboarding, developmental e-learning and on-the-job training. In fiscal 2020, in response to the COVID-19 pandemic, we implemented numerous safety standards in support of social distancing and enhanced sanitizing and cleaning.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | viii |
CORPORATE RESPONSIBILITY
Corporate responsibility is a cornerstone of our Company and critical to our success. We are committed to our people, communities and planet. The Sustainability Committee of the Board oversees Lowe’s corporate responsibility strategies and our Sustainability Council, composed of executives and subject matter experts from across the Company, leads the Company’s efforts to integrate corporate responsibility into our business. In 2020, we refreshed our materiality assessment and conducted a Task Force on Climate-related Financial Disclosures (“TCFD”) analysis to enhance our sustainability strategy and programs.
We have adopted a number of policies that highlight the Company’s commitment to social and environmental responsibility and that seek to promote sustainability in the operation of our business. More information about Lowe’s corporate responsibility efforts and initiatives, including the 2019 Corporate Responsibility Report and our sustainability policies, is available on the Company’s website at responsibility.lowes.com.
Significant Recognitions in 2020 | ||||||||||||
DJSI | FTSE4Good | ENERGY STAR | SmartWay | Newsweek | ||||||||
North American Index Member | Index Member | Partner of the Year | High Performer | Most Responsible Companies List |
SHAREHOLDER ENGAGEMENT
Lowe’s recognizes the value of and is committed to engaging with our shareholders and soliciting their views and input. This past year, members of Lowe’s management and the Board continued our long-standing practice of shareholder engagement, reinforcing our commitment to building long-term, responsive relationships with our shareholders. Since the beginning of fiscal 2020, we have interacted with shareholders representing approximately 70% of our institutionally-held shares in a number of forums, including as part of our regular investor relations outreach efforts and environmental, social and governance (“ESG”)-focused dialogue.
This past winter, we conducted a round of investor engagement focused primarily on ESG topics, including our response to the COVID-19 pandemic, strategy, human capital management efforts, diversity and inclusion programs and initiatives, Board composition, environmental sustainability and our corporate governance and executive compensation practices. As part of this engagement effort, we contacted 34 investors, representing approximately 47% of our outstanding shares, as well as proxy advisory firms, and met with 17 investors, representing approximately 35% of our outstanding shares. Our independent Chairman met with shareholders representing 30% of our outstanding shares to provide a direct line of communication between our shareholders and the Board of Directors. Overall, we received generally positive feedback on our current practices. Additional detail on our shareholder engagement efforts can be found in the “Shareholder Engagement” and “Compensation Discussion and Analysis” sections in the Proxy Statement.
Winter 2020 – 2021 ESG Engagement
ix | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
CORPORATE GOVERNANCE BEST PRACTICES
Sound and Effective Corporate Governance Practices
Active Board oversight of Lowe’s strategy, business initiatives, industry positioning, human capital management, diversity and inclusion and environmental and social topics |
Active Board oversight of risk management, including cybersecurity |
Robust shareholder engagement program |
Active Board engagement in succession planning of executive officers |
Annual Board, committee, individual director and CEO evaluations |
Engaged Board with Demonstrated Commitment to Refreshment and Independence
10 out of 11 director nominees (91%) are independent |
Independent Chairman |
Audit, Compensation, Nominating and Governance, Sustainability and Technology Committees are comprised solely of independent directors |
Regular executive sessions of independent directors |
Director mandatory retirement age of 72 years-old |
Commitment to Shareholder Rights
Shareholder ability to call special meetings (recently reduced ownership threshold to 15%) |
Market standard shareholder right of proxy access |
Directors elected annually to serve one-year terms |
Majority voting standard in uncontested director elections |
No shareholder rights plan |
2021 PROPOSALS | Board Recommends | See Page | ||||||||
Proposal 1: Election of Directors | ||||||||||
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation | ||||||||||
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm | ||||||||||
Proposal 4: Shareholder Proposal Regarding Amending the Company’s Proxy Access Bylaw to Remove Shareholder Aggregation Limits |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | x |
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, “opportunity”, “outlook”, “guidance” and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future priorities, shareholder value, Lowe’s strategic initiatives and our environmental, social and other sustainability plans and goals. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements. Investors should carefully consider the risk and uncertainties described in “Item 1A – Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the Securities and Exchange Commission (the “SEC”). All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.
Proxy Statement
The Board of Directors (the “Board of Directors” or the “Board”) of Lowe’s Companies, Inc. is providing these materials to you in connection with the 20202021 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held virtually via live audio webcast at 10:00 a.m., Eastern Time, on Friday, May 29, 202028, 2021 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. The Board, upon proper notice to shareholders, may change the Annual Meeting date, time or location due to developments relating to the outbreak ofCOVID-19.www.virtualshareholdermeeting.com/LOW2021. This Proxy Statement and related materials were first made available starting April 15, 2021. References in this Proxy Statement to “Lowe’s,” the “Company,” “we,” “us,” “our” and similar terms refer to Lowe’s Companies, Inc.
Why am I receiving these materials?
You have received these materials because the Board is soliciting your proxy to vote your shares at the Annual Meeting. This Proxy Statement includes information that the Company is required to provide you under the Securities and Exchange Commission rules and regulations (the “SEC rules”) and is designed to assist you in voting your shares.
What is a proxy?
The Board is asking for your proxy. This means you authorize the individuals selected by the Company to vote your shares at the Annual Meeting in the way that you instruct. All shares represented by valid proxies received and not revoked before the Annual Meeting will be voted in accordance with the shareholder’s specific voting instructions.
Why did I receive aone-page notice regarding Internet availability of proxy materials instead of a full set of proxy materials?
The SEC rules allow companies to choose the method for delivery of proxy materials to shareholders. For most shareholders, the Company has elected to mail a notice regarding the availability of proxy materials on the Internet (the “Notice of Internet Availability of Proxy Materials” or the “Notice”), rather than sending a full set of these materials in the mail. The Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement and form of proxy), as applicable, was sent to shareholders beginning April 16, 2020, and the proxy materials were posted on the investor relations portion of the Company’s website, www.Lowes.com/investor, and on the website referenced in the Notice on the same day. Utilizing this method of proxy delivery expedites receipt of proxy materials by the Company’s shareholders and lowers the cost of the Annual Meeting. If you would like to receive a paper ore-mail copy of the proxy materials, you should follow the instructions in the Notice for requesting a copy.
What is included in these proxy materials?
These materials include:
If you received a printed copy of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.
What items will be voted on at the Annual Meeting?
There are six proposals scheduled to be voted on at the Annual Meeting:
The Board is not aware of any other matters to be brought before the Annual Meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by proxy in their discretion.
What are the Board’s voting recommendations?
The Board unanimously recommends that you vote your shares:
General Information
Who can attend the Annual Meeting?
Admission to the Annual Meeting is limited to:
Admission to the meeting will be on a first-come, first-served basis. Each shareholder may be asked to present valid photo identification, such as a driver’s license or passport, and proof of stock ownership as of the record date for admittance.
When is the record date and who is entitled to vote?
The Board set March 23, 2020 as the record date. As of the record date, 754,948,648 shares of common stock, $0.50 par value per share, of the Company (“Common Stock”) were issued and outstanding. Shareholders are entitled to one vote per share of Common Stock outstanding on the record date on any matter presented at the Annual Meeting.
What is a shareholder of record?
A shareholder of record or registered shareholder is a shareholder whose ownership of Common Stock is reflected directly on the books and records of the Company’s transfer agent, Computershare Trust Company, N.A. If you hold Common Stock through an account with a bank, broker or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a shareholder of record. For shares held in street name, the shareholder of record is your bank, broker or similar organization. The Company only has access to ownership records for the registered shares. If you are not a shareholder of record and you wish to attend the Annual Meeting, the Company will require additional documentation to evidence your stock ownership as of the record date, such as a copy of your brokerage account statement, a letter from your bank, broker or other nominee, or a copy of your voting instruction form or Notice.
How do I vote?
You may vote by proxy or in person at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy using one of the following methods: (i) vote via the Internet; (ii) vote by telephone; or (iii) complete, sign, date and return your proxy card in the postage-paid envelope provided. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares at the Internet site address listed on your Notice. If you hold your shares through an account with a bank, broker or similar organization, please follow the instructions you receive from the holder of record to vote your shares. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote as described in the following Q&A.
How can I revoke my proxy or change my vote?
You may revoke your proxy or change your vote as follows:
What happens if I vote by proxy and do not give specific voting instructions?
Shareholders of record. If you are a shareholder of record and you vote by proxy, via the Internet, by telephone or by signing, dating and returning a proxy card, without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion for any other matters properly presented for a vote at the Annual Meeting.
General Information
Beneficial owners of shares held in “street name.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote onnon-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on anon-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on that matter with respect to your shares. This is referred to as a “brokernon-vote.”
The election of directors, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2019, the approval of the Bylaw amendment, the approval of the 2020 Employee Stock Purchase Plan and the shareholder proposal arenon-routine matters. Consequently, without your voting instructions, the organization that holds your shares cannot vote your shares on these proposals. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020 is considered a routine matter.
What is the voting requirement to approve each of the proposals?
Proposal 1: Election of Directors. In uncontested elections, directors are elected by the affirmative vote of a majority of the outstanding shares of the Company’s voting securities voted at the meeting in person or by proxy, including those shares for which votes are cast as “withheld.” In the event that a director nominee fails to receive the required majority vote, the Board may decrease the number of directors, fill any vacancy or take other appropriate action. If the number of nominees exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast by the holders of voting securities entitled to vote in the election.
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation. Approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2019 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). The results of the advisory vote will not be binding on the Company, the Compensation Committee or the Board. The Compensation Committee and the Board will, however, review the voting result and take it into consideration when making future decisions regarding executive compensation.
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Proposal 4: Approval of Bylaw Amendment. Approval of an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special meeting requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Proposal 5: Approval of 2020 Employee Stock Purchase Plan. Approval of the Company’s 2020 Employee Stock Purchase Plan requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Proposal 6: Shareholder Proposal. Approval of the shareholder proposal requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the numbers of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Other Items. Approval of any other matters requires the affirmative vote of a majority of the votes cast on the item at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the item must exceed the number of shares voted “against” such item).
What is the quorum for the Annual Meeting? How are withhold votes, abstentions and brokernon-votes treated?
The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast by the holders of Common Stock is necessary for the transaction of business at the Annual Meeting. Your shares are counted as being present if you vote in person at the Annual Meeting, via the Internet, by telephone or by submitting a properly executed proxy card or voting instruction form by mail. Abstentions and brokernon-votes are counted as present or represented for the purpose of determining a quorum for the Annual Meeting.
General Information
With respect to Proposal 1, the election of directors, only “for” and “withhold” votes may be cast. Brokernon-votes will not be counted as votes cast and, therefore, will not have any effect on the election of director nominees.
With respect to Proposals 2, 3, 4, 5 and 6, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2019, ratifying the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020, approving an amendment to the Company’s Bylaws, approving the Company’s 2020 Employee Stock Purchase Plan and the shareholder proposal, respectively, abstentions and brokernon-votes will not be counted as votes cast and, therefore, will not have any effect on the outcomes of these proposals.
Who pays for solicitation of proxies?
The Company is paying the cost of soliciting proxies and will reimburse brokerage firms and other custodians, nominees
and fiduciaries for their reasonableout-of-pocket expenses for sending proxy materials to shareholders and obtaining their proxies. In addition to soliciting the proxies by mail and the Internet, certain of the Company’s directors, officers and employees, without compensation, may solicit proxies personally or by telephone, facsimile ande-mail. The Company has engaged Innisfree M&A Incorporated to assist in distributing proxy materials and soliciting proxies for the Annual Meeting for a fee of approximately $25,000.
Where can I find the voting results of the Annual Meeting?
The Company will publish final voting results in the Company’s Quarterly Report on Form10-Q for the first quarter of fiscal 2020 or in a Current Report on Form8-K filed with the Securities and Exchange Commission (the “SEC”) within four business days of the Annual Meeting.
Shareholder Engagement
Understanding the issues that are important to our shareholders is critical in ensuring that we address their interests in a meaningful and effective way. Lowe’s recognizes the value of and is committed to engaging with our shareholders and soliciting their views and input. In fiscal 2019,This past year, members of Lowe’s management and the Board continued thisour long-standing practice of shareholder engagement, reinforcing our commitment to building long-term, responsive relationships with our shareholders. WeIn December 2020, the Company continued its biennial tradition of holding an Investor Update and invited institutional shareholders to virtually attend presentations by our Chief Executive Officer and Chief Financial Officer, which provided a forum to better understand the Company’s strategy and expected financial outcomes. In addition, we conduct shareholder outreach throughout the year to ensure that we understand and consider the issues of importance to our shareholders and are able to address them appropriately. During
Since the beginning of fiscal 2019,2020, we engagedhave interacted with representatives of manyshareholders representing approximately 70% of our top institutionalinstitutionally-held shares in a number of forums, including as part of our regular investor relations outreach efforts and environmental, social and governance (“ESG”)-focused dialogue. We report the feedback from our shareholders to discuss performance, strategy, board composition, refreshment and tenure, cybersecurity and risk management, climate change and sustainability efforts, governance practices, executive compensation, culture, human capital management and other matters. We reporton a regular cadence to our Nominating and Governance Committee and Board, aboutwho have used this information to inform numerous changes to enhance our compensation, governance and sustainability efforts. In addition to a number of changes to our executive compensation program design and metrics, these changes have included the commitment to publish our Consolidated EEO-1 Report data in 2021, the amendment of our Bylaws in 2020 to reduce the ownership threshold to call shareholder special meetings to 15% of outstanding shares, an expanded clawback policy in 2019 to allow recovery for conduct resulting in reputational or financial harm and provide feedback from our shareholders.
The following diagram provides an overviewthe establishment of Lowe’s shareholder engagement practice:
the Technology and Sustainability Board Committees in 2018.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Shareholder Engagement
We have a proven track record of responsiveness to shareholders and are committed to continued engagement. The following diagrams illustrate changesdiagram provides an overview of Lowe’s shareholder engagement cycle:
This past winter, we have madeconducted a round of investor engagement focused primarily on ESG topics, including our response to the COVID-19 pandemic, strategy, human capital management efforts, diversity and inclusion programs and initiatives, Board composition, environmental sustainability and our corporate governance and executive compensation practices over the years in response to shareholder feedbackpractices. As part of this engagement effort, we contacted 34 investors, representing approximately 47% of our outstanding shares, as well as proxy advisory firms, and met with 17 investors, representing approximately 35% of our commitmentoutstanding shares, and one proxy advisory firm. Our independent Chairman met with shareholders representing 30% of our outstanding shares to ongoing improvement.provide a direct line of communication between our shareholders and the Board of Directors. Overall, we received generally positive feedback on our current governance, compensation and sustainability practices. We plan to continue this enhanced program of ESG engagement going forward.
Key Items Discussed with Shareholders in 2020 and 2021 | ||
Corporate Response to COVID-19 Pandemic | Business Performance, Strategic Direction and Transformation | |
Human Capital Management Efforts | Diversity and Inclusion Programs and Initiatives | |
Board Composition and Risk Oversight | Environmental Sustainability and Corporate Responsibility | |
Executive Compensation Program Design and Link to Strategy | Corporate Governance Practices |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Shareholder Engagement
Proposal 1: Election of Directors
Proposal 1: Election of Directors
We are asking our shareholders to vote on the election of the 11 candidates nominated by the Board of Directors for election as directors.
The Board has nominated the 11 candidates named in this proposal for election as directors at the Annual Meeting. If elected, each nominee will serve until his or her term expires at the 20212022 Annual Meeting of Shareholders or until his or her successor is duly elected and qualified. Each nominee has agreed to be named in this Proxy Statement and to serve if elected.
All of the nominees are currently serving as directors except Daniel J. Heinrich and Mary Beth West, whose Board service would commence upon their election at the 2021 Annual Meeting of Shareholders. The other current directors were elected to the Board at the 20192020 Annual Meeting of Shareholders. In accordance with the Board’s mandatory retirement policy, Mr. James H. Morgan will retire after 5After 10 years of service on the Board, Eric C. Wiseman was not re-nominated based on his desire to retire from service, and therefore is not a nomineestanding forre-election at the 20202021 Annual Meeting of Shareholders. The Board, after conferring with Lisa W. Wardell, determined not to re-nominate Ms. Wardell at the 2021 Annual Meeting of Shareholders due to her increased professional commitments as a result of joining another public company’s board in March 2021. The Board thanks Mr. Wiseman and Ms. Wardell for their commitment and service to the Company.
The Nominating and Governance Committee identifies, considers and recommends to the Board director candidates who have expertise that would complement and enhance the current Board’s skills and experience. It also reviews the existing time commitments of director candidates to ensureconfirm that they do not have any obligations that would conflict with the time commitments of a director of the Company. The Nominating and Governance Committee also looks to recruit candidates with different perspectives so that they can contribute to the cognitive diversity on the Board, while also recognizing the importance of having diversity of age, gender, race and ethnicity on the Board. Generally, the Nominating and Governance Committee identifies candidates through third-party search firms and, from time to time, through business and organizational contacts of the directors and management.
InAmong our 11 nominees for election to the past five years, the CompanyBoard, four self-identify as women and four self-identify as people of color (meaning an individual who self-identifies as Black or African American, Hispanic or Latino, Asian, Native Hawaiian or Other Pacific Islander or American Indian or Alaska Native).
The Board has refreshedremained mindful of refreshing its membership, with more than half of itsthe directors nominated for election at the Annual Meeting having joined the Board by adding seven new independent directors.in the last six years. At the same time, the Company also believes that it benefits from having several longer tenured directors on the Board, including our Chairman, on the Board who are familiar with the Company’s business and can help facilitate the transfer of institutional knowledge. We believe the average tenure for our independent directorsdirector nominees of less thanfive-and-a-halffive years reflects the appropriate balance the Board seeks between different perspectives brought by longer-serving and new directors.
Although the Company knows of no reason why any of the nominees would not be able to serve, if any nominee is unavailable for election, the proxy holders intend to vote your shares for any substitute nominee proposed by the Board. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the 11 nominees named in this Proxy Statement.
The Board of Directors unanimously recommends a vote “FOR” the election of each of the 11 nominees named in this proposal. |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 3 |
Proposal 1: Election of Directors
IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
Board Nomination Process
The Nominating and Governance Committee, in consultation with the Chairman of the Board, reviews each director’s continuation on the Board prior to his or herre-nomination to serve on the Board. The Nominating and Governance Committee evaluates whether or not the director, based upon his or her skills, background, expertise and contribution to the Board, is capable of supporting Lowe’s present and future needs. After the evaluation of a director, the Chair of the Nominating and Governance Committee and the Chairman of the Board inform each director under consideration of the Committee’s decision.
Additionally, with the assistance of an independent search firm, the Nominating and Governance Committee conducts targeted searches to identify well-qualified candidates who may have different skills or backgrounds needed for the Company to execute its strategic vision. If an independent search firm is used, the Nominating and Governance Committee retains the search firm and approves payment of its fees.
The Nominating and Governance Committee will consider nominees recommended by shareholders, and its process for doing so is no different than its process for screening and evaluating candidates suggested by directors, management of the Company or third parties. See “Shareholder Proposals for the 20212022 Annual Meeting” elsewhere in this Proxy Statement for the timeframe for shareholders to provide notice of any nominations of persons for election to the Board.
Mr. Heinrich and Ms. West were recommended to the Nominating and Governance Committee by an independent search firm.
Board Composition and Refreshment
At least annually, the Board seeks input from each of its directors with respect to the current composition of the Board
in light of changes in our current and future business strategies, as well as our operating environment, as a means to identify any backgrounds or skill sets that may be helpful in maintaining or improving alignment between our Board composition and our business. In addition, we seek feedback from our shareholders regarding the backgrounds and skill sets that they would like to see represented on our Board. The Nominating and Governance Committee considers this feedback in its director search process.
Additionally, in order to promote thoughtful Board refreshment and to provide additional opportunities to maintain a balanced mix of perspectives and experience, the Board has adopted a mandatory retirement policy for non-employee directors as set forth in our Corporate Governance Guidelines. No director who is, or would be over, the age of 72 at the expiration of his or her current term may be nominated to a new term.
The Board also prioritizes having robust director orientation andon-boarding programs to ensure thathelp new directors arebecome rapidly integrated into boardroom discussions and maximize their contributions are maximized.contributions.
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Following Mr. Morgan’s retirement and the election
Proposal 1: Election of our director nominees, the Board will be reduced to eleven directors and seven of the eleven directors will have joined the Board within the past five years.Directors
IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
Board Commitment
The Board understands the significant time commitment involved with serving on the Board and its committees, and it takes steps to assess that all directors and director nominees have the time necessary to fulfill their duties. Our Nominating and Governance Committee and Board only nominate candidates who they believe are capable of devoting the necessary time to successfully meet their duties, taking into account principal occupations, memberships on other boards and other responsibilities. For the nominees this year, this assessment included a review of Mr. Dreiling’s fulfillment of his responsibilities as our independent Chairman of the Board while also serving as member of three other public company boards. Directors must advise our Chairman of the Board prior to joining the board of another public company or any assignment to the audit or compensation committee of the board of directors of any public
company of which such director is a member. In addition,
Proposal 1: Election of Directors
IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
directors must offer to resign from the Board as a result of changes to their principal occupation, subject to further consideration by the Nominating and Governance Committee. The Nominating and Governance Committee assesses directors’ time commitment to the Board throughout the year, including through the annual evaluation process, and it determined that all of the director nominees clearly demonstrated the necessary time commitment involved in serving on our Board and its committees.
Board Diversity
The Board is committed to having diverse (inclusive of gender and race) individuals from different backgrounds with varying perspectives, professional experience, education and skills serving as members of the Board. The Board believes that a diverse membership with a variety of perspectives and experiences is an important feature of a well-functioning board, and the composition of the Board
reflects the Board’s commitment to diversity. The Nominating and Governance Committee assesses effectiveness with regard to this policy in connection with its annual evaluation of the Corporate Governance Guidelines.
Board Qualifications and Criteria
Candidates nominated for election orre-election to the Board should possess the following qualifications:
When determining whether to recommend a director forre-election, the Nominating and Governance Committee also considers the evaluation results of the Board, committees and individual directors and the attendance and overall engagement of the director in Board activities.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 5 |
Proposal 1: Election of Directors
IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
Director Nominees’ Skills, Backgrounds and Expertise
Our director nominees possess a balance of distinguished leadership, diverse perspectives, strategic skill sets, backgrounds and professional experience relevant to our business and strategic objectives, including:
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
RAUL ALVAREZ |
Director Since: 2010
Age:
Lowe’s Board Committees: • Compensation • Sustainability • Technology
Current Public Company Directorships: •
|
Mr. Alvarez ishas been an Operating Partner of Advent International Corporation, a private equity firm.firm, since 2017. He retired as a director and the Chairman of Skylark Co., Ltd., a public Japanese holding company operating more than 3,000 restaurants, in March 2018. Mr. Alvarez served as President and Chief Operating Officer of McDonald’s Corporation, which franchises and operates over 32,000 McDonald’s restaurants in the global restaurant industry, from August 2006 until his retirement in December 2009. Previously, he served as President of McDonald’s North America from January 2005 to August 2006 and as President of McDonald’s USA from July 2004 to January 2005. Mr. Alvarez joined McDonald’s in 1994 and held a variety of leadership positions during his tenure with the company, including Chief Operations Officer and President of the Central Division, both with McDonald’s USA, and President of McDonald’s Mexico. Before joining McDonald’s, Mr. Alvarez served as a Corporate Vice President and as Division Vice President-Florida for Wendy’s International, Inc. from 1990 to 1994. Prior to that, he was with Burger King Corporation from 1977 to 1989 where he held a variety of positions, including Managing Director of Burger King Spain, President of Burger King Canada and Regional Vice President for the Florida Region.
Mr. Alvarez served on the boardboards of Realogy Holdings Corp. from August 2013 to May 2018.2018 and Dunkin’ Brands Group, Inc. from May 2012 to December 2020.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. Alvarez brings to the Lowe’s Board more than 40 years of experience in the retail industry, as well as extensive executive leadership experience in managing some of the world’s best known brands. As a senior executive of the leading global foodservice retailer and other global restaurant businesses, Mr. Alvarez developedin-depth knowledge of consumer marketing, brand management, multi-national operations and strategic planning.
DAVID H. BATCHELDER |
|
Director Since: 2018
Age:
Lowe’s Board Committees: • Compensation • Nominating and Governance
|
Mr. Batchelder was a founder, principal and member of the investment committee at Relational Investors, which managed over $6.5 billion for some of the largest pension funds in the world, from 1996 to 2015. He has over 30 years of financial management and mergers and acquisitions experience. Mr. Batchelder has served as a director of both large public and private companies in a wide range of industries (including retail, pharmaceuticals, waste disposal, healthcare, technology, energy and construction), including his service as a director on the board of The Home Depot, Inc. from 2007 to 2011.
From 1988 to 2005, Mr. Batchelder was also a Principal of Relational Advisors LLC, a financial advisory and investment banking firm. Prior to founding Relational Investors, Mr. Batchelder held various executive positions at Mesa Petroleum Company, including Chief Financial Officer and President and Chief Operating Officer, and served on Mesa’s board of directors. Prior to working at Mesa, Mr. Batchelder was an Audit Manager with Deloitte & Touche LLP.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. Batchelder’s experience as a board member of several public and private companies provides him with valuable perspectives on corporate governance and board dynamics. In addition, his experience from Relational Investors provides our Board invaluable insights into the views of institutional investors and perspectives on Company performance and opportunities. Having served in a number of senior executive positions at Mesa, Mr. Batchelder contributes to the operational management and strategic business development skills of our Board.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
ANGELA F. BRALY |
Director Since: 2013
Age:
Lowe’s Board Committees: • Compensation, Chair • Sustainability • Technology
Current Public Company Directorships: • Brookfield Asset Management, Inc. • • The Procter & Gamble Company |
Ms. Braly is the former Chair, President and Chief Executive Officer of WellPoint, Inc. (now Anthem, Inc.), a health benefits company. She served as Chair of the board from March 2010 until August 2012 and President, Chief Executive Officer and director from June 2007 through August 2012. Prior to that, Ms. Braly served as Executive Vice President, General Counsel and Chief Public Affairs Officer of WellPoint from 2005 to 2007, and President and Chief Executive Officer of Blue Cross Blue Shield of Missouri from 2003 to 2005.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
As Chair and Chief Executive Officer of a publicly-traded company, Ms. Braly developed strong executive leadership and strategic management skills while leading a Fortune 50 company in a highly regulated industry. Ms. Braly also brings extensive legal experience as a former partner of an NLJ 500 law firm and General Counsel of RightCHOICE Managed Care, Inc. and WellPoint, Inc. As Chief Public Affairs Officer for WellPoint, Ms. Braly was also responsible for the company’s public policy development, government relations, legal affairs, corporate communications, marketing and social responsibility initiatives.
SANDRA B. COCHRAN |
Director Since: 2016
Age:
Lowe’s Board Committees: • Compensation • Sustainability
Current Public Company Directorships: • Cracker Barrel Old Country Store, Inc.
|
Ms. Cochran has served as a director and as President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc., which operates over 664 old country stores andrestaurants across 45 states, since September 2011. Ms. Cochran joined Cracker Barrel in April 2009 as Executive Vice President and Chief Financial Officer and was named President and Chief Operating Officer in November 2010. She was previously Chief Executive Officer at book retailerBooks-A-Million, Inc. from February 2004 to April 2009 and also served as that company’s President from August 1999 to February 2004, Chief Financial Officer from September 1993 to August 1999 and Vice President of Finance from August 1992 to September 1993.
Ms. Cochran served on the board of directors of Dollar General Corporation from December 2012 to April 2020.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Ms. Cochran brings to Lowe’s Board more than 25 years of retail experience as well as expertise in a number of critical areas, including marketing, risk management and strategic planning. Ms. Cochran also has significant executive-level financial experience, which she developed while serving in multiple leadership finance positions, including Chief Financial Officer of both Cracker Barrel Old Country Store, Inc. andBooks-A-Million, Inc. Her financial expertise will continue to be a tremendous asset as the Company continues to develop as an omni-channel home improvement company.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
LAURIE Z. DOUGLAS |
Director Since: 2015
Age:
Lowe’s Board Committees: • Audit • Nominating and Governance • Technology, Chair |
Ms. Douglas has served as Senior Vice President, Chief Information Officer and Chief Digital Officer of Publix Super Markets, Inc., an operator of retail food and pharmacy in Florida, Georgia, Alabama, South Carolina, Tennessee, North Carolina and Virginia, since 2019. From 2006 through 2018, she was Senior Vice President, Chief Information Officer and Chief Security Officer of Publix Super Markets. Before joining Publix Super Markets, Ms. Douglas served as Senior Vice President and Chief Information Officer of FedEx Kinko’s Office and Print Services, Inc. from 2004 to 2005. From 2003 to 2004, she was Senior Vice President and Chief Information Officer of Kinko’s, Inc.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Ms. Douglas brings to Lowe’s Board many years of setting the enterprise technology, digital and security visions and driving the related implementations for two Fortune 500 companies. Ms. Douglas’ expertise spans broad IT disciplines, including application development and infrastructure, digital and mobile, omni-channel, data security and regulatory compliance. Ms. Douglas is a highly respected technology leader focused on driving shareholder value with technology solutions that foster premier customer service, operational excellence and profitable growth and who has financial management responsibility for IT investments. Ms. Douglas also has relevant experience with emerging technologies to ensure ongoing relevance as technology changes at an unprecedented rate.
RICHARD W. DREILING |
Director Since: 2012
Age:
Current Public Company Directorships: • Aramark Corporation • Kellogg Company • PulteGroup, Inc. |
Mr. Dreiling serves as the independent Chairman of the Board of Directors of Lowe’s. Mr. Dreiling retired in June 2015 from Dollar General Corporation, the nation’s largestsmall-box discount retailer, as Chief Executive Officer, a position he held since January 2008. Mr. Dreiling served as Chairman of Dollar General Corporation from December 2008 until January 2016 and as Senior Advisor from June 2015 until January 2016. Before joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., the largest drugstore chain in New York City, from November 2005 until January 2008, and as Chairman of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President-Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug stores on the West Coast and Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President-Marketing, Manufacturing and Distribution at Safeway, Inc., a food and drug retailer. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a southern California food and drug division of Safeway.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. Dreiling brings to Lowe’s Board more than 40 years of retail industry experience at all operating levels and a unique perspective as a result of his experience progressing through the ranks within various retail companies. Over the course of his career, Mr. Dreiling has developed deep insight into all key areas of a retail business as a result of his experience overseeing the operations, marketing, manufacturing and distribution functions of a number of retail companies. Mr. Dreiling also has strong business development expertise in expanding the footprint and offerings provided by several retailers into new regions.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
MARVIN R. ELLISON |
Director Since: 2018
Age:
Current Public Company Directorships: • FedEx Corporation |
Mr. Ellison has served as President and Chief Executive Officer of Lowe’s since July 2018. Mr. Ellison previously served as Chief Executive Officer of J. C. Penney Company, Inc., a department store retailer, from August 2015 to May 2018 and Chairman of the Board from August 2016 to May 2018. He served as President of J. C. Penney from November 2014 to July 2015. Mr. Ellison served as Executive Vice President–U.S. Stores of The Home Depot, Inc., a home improvement retailer, from August 2008 to October 2014. He also served in a variety of operations roles at The Home Depot, including as President–Northern Division from 2006 to 2008, Senior Vice President–Logistics from 2005 to 2006, Vice President–Logistics from 2004 to 2005, and Vice President–Loss Prevention from 2002 to 2004. From 1987 to 2002, Mr. Ellison served in a variety of operational roles with Target Corporation. Mr. Ellison served as a director of H&R Block, Inc. from 2011 to 2014 and a director of J. C. Penney Company, Inc. from 2014 to 2018. Mr. Ellison also serves on the board of the Retail Industry Leaders Association.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. Ellison has more than 30 years of leadership and operational experience in the retail industry, including expertise in managing a large network of stores and employees as well as global logistics networks. He brings extensive experience in the home improvement industry, having spent 12 years in senior-level operations roles with The Home Depot, where he oversaw U.S. sales, operations, install services and pro strategic initiatives, and improved customer service and efficiency across the organization to serve bothdo-it-yourself and pro customers.
DANIEL J. HEINRICH |
Age: 65 Current Public Company Directorships: • Aramark Corporation • Edgewell Personal Care Company • Ball Corporation |
Mr. Heinrich most recently served as Executive Vice President, Chief Financial Officer of The Clorox Company, a global manufacturer and marketer of consumer and professional products, from June 2009 to November 2011. Mr. Heinrich joined Clorox in 2001 as Vice President, Controller and served in that role until 2003. In 2003, he became Vice President, Chief Financial Officer and in 2004 he became Senior Vice President, Chief Financial Officer. Prior to joining Clorox, his roles included Senior Vice President and Treasurer of Transamerica Finance Corporation, Senior Vice President, Treasurer and Controller of Granite Management Company, Senior Vice President, Controller and Chief Accounting Officer of First Nationwide Bank and Senior Audit Manager with Ernst & Young.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
As the former Chief Financial Officer of a large, global organization, Mr. Heinrich brings extensive executive-level financial knowledge and experience to the Lowe’s Board. Mr. Heinrich has strong expertise in the areas of strategic business development, risk management, mergers and acquisitions, accounting and information technology. Additionally, Mr. Heinrich brings to our Board valuable perspectives on corporate governance through his experience serving as a director of several public companies.
10 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
BRIAN C. ROGERS |
Director Since: 2018
Age:
Lowe’s Board Committees: • Audit • Nominating and Governance, Chair
Current Public Company Directorships: • |
Mr. Rogers retired as theNon-Executive Chairman of T. Rowe Price Group, Inc., a global investment management organization, in April 2019. He served as the Chairman from 2007 to 2017 and as Chief Investment Officer from 2004 to 2017. Mr. Rogers served as a director of the Price Group from 1997 to 2019. In addition, Mr. Rogers was portfolio manager of one of the firm’s largest funds, the T. Rowe Price Equity Income Fund, from its inception until October 2015. Mr. Rogers held a variety of other senior leadership roles and had been involved in investment management with T. Rowe Price since beginning his career there in 1982. Prior to joining T. Rowe Price, Mr. Rogers worked at Bankers Trust Company.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Through his extensive investment and management roles, including Chief Investment Officer of a large investment management firm, Mr. Rogers provides the Board with financial, investment and risk management expertise. In addition, Mr. Rogers’ experience at T. Rowe Price provides our Board invaluable insights into the views of institutional investors and perspectives on Company performance and opportunities.
Proposal 1: Election of Directors
DIRECTOR NOMINEES
BERTRAM L. SCOTT |
Director Since:2015
Age:
Lowe’s Board Committees: • Audit, Chair • Nominating and Governance
Current Public Company Directorships: • AllianceBernstein Holding LP • AXA Equitable Holdings, Inc. and certain wholly-owned subsidiaries • Becton, Dickinson and Company |
Mr. Scott retired as Senior Vice President of Population Health and Value Based Care at Novant Health, a leading healthcare provider, in May 2019, after serving in that role since 2015. Prior to that, Mr. Scott was President, Chief Executive Officer and a director of Affinity Health Plan, a provider of New York State-sponsored health coverage, from 2012 to 2014; President, U.S. Commercial of CIGNA Corporation, a global health services organization, from 2010 to 2011; Executive Vice President and Chief Institutional Development and Sales Officer of TIAA-CREF from 2000 to 2010; and President and Chief Executive Officer of TIAA-CREF Life Insurance Company from 2000 to 2007.
Mr. Scott currently serves on the board of AXA Equitable Holdings, Inc. (“EQH”) and continues to serve on the boards of AXA Equitable Life Insurance Company and MONY Life Insurance Company of America, which are wholly-owned subsidiaries of EQH.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. Scott has served in a variety of senior leadership positions in organizations that are in highly regulated industries and brings invaluable experience to Lowe’s Board in the areas of development and implementation of strategy, mergers and acquisitions and integration. Mr. Scott also brings significant experience and responsibility in the areas of sales and marketing in his roles as Executive Vice President and Chief Institutional Development and Sales Officer of TIAA-CREF and President and Chief Executive Officer of TIAA-CREF Life Insurance Company.
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Ms. Wardell is the President, Chief Executive Officer and Chairman of Adtalem Global Education, Inc. (formerly DeVry Education Group), a leading global education provider. Ms. Wardell was appointed President and Chief Executive Officer in 2016 and Chairman in July 2019, having previously been a member of Adtalem’s board of directors since 2008.
Prior to her current position with Adtalem, Ms. Wardell was Executive Vice President and Chief Operating Officer for 12 years for The RLJ Companies, a diversified holding company with portfolio companies in the financial services, asset management, real estate, hospitality, professional sports, film production and gaming industries. Prior to joining The RLJ Companies, Ms. Wardell was a Principal at Katalyst Venture Partners, a private equity firm that invested instart-up technology companies in the media and communications industries from 2000 to 2003. She was a senior consultant for Accenture from 1998 to 2000, in the organization’s communications and technology strategic services practice, and an attorney with the Federal Communications Commission from 1994 to 1996.
Ms. Wardell served on the board of directors of Christopher and Banks, Inc. from July 2011 to January 2017 and served as the chair of the board from November 2015 to January 2017. Ms. Wardell also served as a director of RLJ Entertainment, Inc. from 2012 to 2015.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Ms. Wardell brings extensive experience to the Board as a senior business executive in private equity, operations and strategy and financial analysis, including mergers and acquisitions. Her previous experience in a legal capacity with a federal regulatory agency gives her valuable perspective on the issues that come before the Board, including business, legal, financial and regulatory matters.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 1: Election of Directors
DIRECTOR NOMINEES
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Current Public Company Directorships: • • Hasbro, Inc. |
Mr. WisemanMs. West retired as the ChairmanSenior Vice President, Chief Growth Officer of V.F. Corporation,The Hershey Company, a global leaderconfectionary manufacturer and marketer, in the design, production, procurement, marketing and distribution of branded lifestyle apparel, footwear and related products,January 2020 after serving in Octoberthat role since May 2017. Mr. Wiseman served as the Chairman from 2008 to October 2017; Chief Executive Officer from 2008 to January 2017; and President from March 2006 to June 2015. Prior to that, heMs. West served as Executive Vice President, Chief Customer and Marketing Officer of J. C. Penney Company, Inc., a department store retailer, from 2015 to March 2017. From 2012 to 2014, she served as Executive Vice President, Chief Category and Marketing Officer of Mondelez International, Inc., one of the world’s largest snack companies. Ms. West served as Chief OperatingMarketing Officer of V.F.Kraft Foods, Inc. from March 20062007 to January 2008. Mr. Wiseman served as a director of V.F. from 2006 to October 2017. Mr. Wiseman joined V.F. in 19952012 and held a variety of leadership positions during his tenure withother general management and marketing roles at Kraft Foods, Inc., since beginning her career there in 1986.
Ms. West served on the company.board of J.C. Penney Company, Inc. from 2005 to 2015.
Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s
Mr. WisemanMs. West brings to the Lowe’s Board extensive executive leadership experience in marketing and building some of the world’s most iconic brands. Ms. West has developed valuable strategic management skillsa strong background in developing compelling retail and sales experiences and brings to Lowe’s Board expertise and insights in a number of critical areas, including consumer marketing, brand management, multi-national operationsstrategic and strategic planning. Mr. Wiseman is responsible for transforming V.F. into an industry leader by creating innovative marketing initiativesoperational planning and building powerful brandsexecution, merchandising, communications, disruptive innovation, research and for creating an oversight system to guide the sustainabilitydevelopment and responsibility effortsmergers and goals for one of the largest apparel and footwear companies in the world.acquisitions.
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Corporate Governance
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT AND ETHICS
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT AND ETHICS
The Board has adopted Corporate Governance Guidelines setting forth guidelines and standards with respect to the role and composition of the Board, the functioning of the Board and its committees, the compensation of directors, succession planning and management development, the Board’s and its committees’ access to independent advisors and other matters. The Nominating and Governance Committee of the Board regularly reviews and assesses corporate governance developments and recommends to the Board modifications to the Corporate Governance Guidelines as warranted. The Company has also adopted a Code of Business Conduct and Ethics for its directors, officers and employees. The Corporate Governance Guidelines and the Code of Business Conduct and Ethics are posted on the Company’s website at www.Lowes.com/investor.ir.lowes.com.
10 of 11 Director Nominees are Independent
All Committees are Compromised Solely of
Independent Directors
The Company’s Corporate Governance Guidelines provide that, in accordance with Lowe’s long-standing policy and the applicable rules of the New York Stock Exchange (the “NYSE”), a substantial majority of the members of the Board must qualify as independent directors. The rules and regulations of the New York Stock ExchangeNYSE (the “NYSE rules”) provide that a director does not qualify as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The NYSE rules recommend that a board of directors consider all of the relevant facts and circumstances in determining the materiality of a director’s relationship with a company. The Board has adopted Categorical Standards for Determination of Director Independence (the “Categorical Standards”), which incorporate the independence standards of the NYSE rules, to assist the Board in determining whether a particular relationship a director has with the Company is a material relationship that would impair the director’s independence. The Categorical Standards establish thresholds at which directors’ relationships with the Company are deemed to be not material and, therefore, shall not disqualify any director or
nominee from being considered “independent.” A copy of the Categorical Standards is attached as Appendix A to this Proxy Statement.
In March 2020,2021, the Board, with the assistance of the Nominating and Governance Committee, conducted an evaluation of director independence based on the Categorical Standards, NYSE rules and SEC rules.rules and regulations (the “SEC rules”). The Board considered
all relevant transactions, relationships or arrangements between each director or director nominee (and such individual’s immediate family members and affiliates) and each of Lowe’s, its management and its independent registered public accounting firm in each of the most recent three completed fiscal years. In determining the independence of each director or director nominee, the Board considered and deemed immaterial to such individual’s independence any transactions involving the purchase or sale of products and services in the ordinary course of business between the Company, on the one hand, and, on the other, companies or organizations at which some of our directors, director nominees or their immediate family members were officers, employees or directors in each of the most recent three completed fiscal years. In each case, the amount paid to or received from these companies or organizations was well below 2% of total revenue of such companies or organizations and consequently below the threshold set forth in our Categorical Standards.
In addition, the Board considered the amount of Lowe’s discretionary charitable contributions in each of the most recent three completed fiscal years to charitable organizations where a director, director nominee or a member of such individual’s immediate family, serves as a director or trustee. The Company has not made any payments to such organizations in the last three fiscal years.
As a result of the evaluation of the transactions, relationships or arrangements that do exist or did exist within the most recent three completed fiscal years (except for Mr. Ellison’s), the Board determined that they all fall well below the thresholds in the Categorical Standards. Consequently, the Board determined that each of Messrs. Alvarez, Batchelder, Dreiling, Morgan,Heinrich, Rogers, Scott and Wiseman and Marshall O. LarsenMr. James H. Morgan (during his service in 2020) and Mses. Braly, Cochran, Douglas, Wardell and WardellWest qualifies as an independent director under the Categorical Standards, NYSE rules and SEC rules. The Board also determined that each member of the Audit, Compensation, Nominating and Governance, Sustainability and Technology Committees (see membership information below under “Board Meetings, Committees of the Board and Board Leadership Structure—Board Committees”) is independent, including that each member of the Audit Committee is “independent” as that term is defined under Rule10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that each member of the Compensation Committee is an “outside director” as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended(the “Code”), and a“non-employee director” as defined underRule 16b-3(b)(3)(i) of the Exchange Act. Mr. Ellison is not independent due to his employment by the Company as President and Chief Executive Officer.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Corporate Governance
COMPENSATION OF DIRECTORS
and Board Leadership Structure—Board Committees”) is independent, including that each member of the Audit Committee is “independent” as that term is defined under Rule 10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that each member of the Compensation Committee is an “outside director” as
defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and a “non-employee director” as defined under Rule 16b-3(b)(3)(i) of the Exchange Act. Mr. Ellison is not independent due to his employment by the Company as President and Chief Executive Officer.
Compensation Philosophy
The Compensation Committee reviews director compensation annually and recommends changes to the Board for approval. The Compensation Committee assesses director compensation to align with Board and committee requirements and for market competitiveness against the Company’s Peer Group and Survey Group as described on page 36.37.
Lowe’s philosophy on compensating directors who are not employees(“non-employee directors”) is to use a mix of cash and equity that will align the interests of our directors with the long-term interests of Lowe’s shareholders and compensate our directors fairly and competitively for the obligations and responsibilities of serving as a director at a company of Lowe’s size and scope. To implement this philosophy, we target a split ofone-third cash andtwo-thirds equity, with total target compensation at the median of the market. A director who is an employee of the Company receives no additional compensation for his or her services as a director. Anon-employee director receives compensation for his or her services as described in the following paragraphs. All directors are reimbursed for reasonable expenses incurred in connection with attendance at Board and committee meetings, conducting store visits and participating in other corporate functions. No perquisites are provided to ournon-employee directors.
Annual Retainer Fees
For fiscal 2019,2020, eachnon-employee director was paid an annual retainer of $90,000. Our directors do not receive any meetingsmeeting fees and do not receive any additional compensation for committee service other than for serving as a committee chair.Non-employee directors who served as the Chair of the Nominating and Governance Committee, Sustainability Committee or Technology Committee received an additional $15,000; the Chair of the Compensation Committee received an additional $20,000; and the Chair of the Audit Committee received an additional $25,000. The Chairman received an additional $70,000. All annual retainer and chair fees are paid quarterly.
Stock Awards
The Board believes that director stock ownership is a hallmark of enlightened corporate governance and provides greater alignment of interests between directors and shareholders.shareholders and promotes strong corporate governance practices. The compensation plan adopted by the Board fornon-employee directors adheres to this principle by providing a substantial portion of such director’s compensation in deferred stock units, which are credited to a deferral account during the
term of such director’s service and are payable to the director (or to the director’s estate if the director should die while serving on the Board) in one share of Common Stockcommon stock, $0.50 par value per share, of the Company (“Common Stock”) per deferred stock unit only upon the director’s termination of service as a director.
Non-employee directors receive grants of deferred stock units at the first Board meeting following the Annual Meeting of Shareholders each year (the “Award Date”). The annual grant of deferred stock units for each of the Company’snon-employee directors is determined by taking the annual grant amount and dividing it by the closing price of a share of Common Stock as reported on the New York Stock Exchange (the “NYSE”)NYSE on the Award Date, which amount is then rounded up to the next 100 units. The deferred stock units receive dividend equivalent credits, in the form of additional units, for any cash dividends subsequently paid with respect to Common Stock. All units credited to a director are fully vested and payable in the form of Common Stock after the termination of the director’s service.
For fiscal 2019,2020, eachnon-employee director received an annual equity award of $175,000. The Chairman received an additional equity award of $140,000. In accordance with the Company’s long-term incentive plan, the value of all equity awards granted to anon-employee director in any fiscal year may not exceed $500,000.
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Corporate Governance
COMPENSATION OF DIRECTORS
Deferral of Annual Retainer Fees
Eachnon-employee director may elect to defer receipt of all, but not less than all, of the annual retainer and any committee Chair, Chairman or, if applicable, Lead Director fees otherwise payable to the director in cash. Deferrals are credited to a bookkeeping account, and account values are adjusted based on the investment alternative selected by the director. One investment alternative adjusts the account value based on interest calculated in the same manner and at the same rate as interest on amounts invested in the short-term interest fund option available to employees participating in the Lowe’s 401(k) Plan, atax-qualified, defined contribution plan sponsored by the Company. The other investment alternative assumes that the deferrals are invested in Common Stock with reinvestment of all dividends. At the end of each year, a director participating in the plan makes an election to allocate the fees deferred for the following year between the two investment alternatives in 25% multiples. Account balances may not be reallocated between the investment alternatives. Account balances are paid in cash in a single sum payment following the termination of a director’s service.
Corporate Governance
COMPENSATION OF DIRECTORS
Fiscal 20192020 Compensation
The following table shows the compensation paid to eachnon-employee director who served on the Board in fiscal 2019:2020:
Name |
Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||||||||||||||
Raul Alvarez |
| 102,500 |
| 177,232 |
| 279,732 | 90,000 | 182,490 | 272,490 | ||||||||||||||||||
David H. Batchelder |
| 90,000 |
| 177,232 |
| 267,232 | 90,000 | 182,490 | 272,490 | ||||||||||||||||||
Angela F. Braly |
| 105,000 |
| 177,232 |
| 282,232 | 108,750 | 182,490 | 291,240 | ||||||||||||||||||
Sandra B. Cochran |
| 90,000 |
| 177,232 |
| 267,232 | 90,000 | 182,490 | 272,490 | ||||||||||||||||||
Laurie Z. Douglas |
| 105,000 |
| 177,232 |
| 282,232 | 105,000 | 182,490 | 287,490 | ||||||||||||||||||
Richard W. Dreiling |
| 160,000 |
| 326,480 |
| 486,480 | 160,000 | 325,875 | 485,875 | ||||||||||||||||||
Marshall O. Larsen(2) |
| 52,500 |
| 0 |
| 52,500 | |||||||||||||||||||||
James H. Morgan |
| 90,000 |
| 177,232 |
| 267,232 | |||||||||||||||||||||
James H. Morgan(2) | 45,000 | 0 | 45,000 | ||||||||||||||||||||||||
Brian C. Rogers |
| 101,250 |
| 177,232 |
| 278,482 | 105,000 | 182,490 | 287,490 | ||||||||||||||||||
Bertram L. Scott |
| 108,750 |
| 177,232 |
| 285,982 | 115,000 | 182,490 | 297,490 | ||||||||||||||||||
Lisa W. Wardell |
| 90,000 |
| 177,232 |
| 267,232 | 90,000 | 182,490 | 272,490 | ||||||||||||||||||
Eric C. Wiseman |
| 110,000 |
| 177,232 |
| 287,232 | 107,500 | 182,490 | 289,990 |
(1) | The dollar amount shown for these stock awards represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation—Stock Compensation” (“FASB ASC Topic 718”) for |
(2) | Mr. |
The following table shows the number of deferred stock units held by eachnon-employee director as of January 31, 2020:29, 2021:
Name | Deferred Stock Units(#) | |||
Raul Alvarez |
| |||
David H. Batchelder |
| |||
Angela F. Braly |
| |||
Sandra B. Cochran |
| |||
Laurie Z. Douglas |
| |||
Richard W. Dreiling |
| |||
|
| |||
Brian C. Rogers |
| |||
Bertram L. Scott |
| |||
Lisa W. Wardell |
| |||
Eric C. Wiseman |
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Director Stock Ownership Guidelines
To ensure that our directors become and remain meaningfully invested in Common Stock,non-employee directors are required to own shares of Common Stock having a market value equal to five times the annual retainer fee payable to them. Anon-employee director must meet the stock ownership requirement within five years of becoming a member of the Board. In addition to shares owned bynon-employee directors, the full value of deferred stock units is counted for purposes of determining a director’s compliance with the stock ownership requirement. All of our directors have met or are on track to meet their objectives within the five-year time requirement.
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Director Stock Ownership Guidelines
To ensure that our directors become and remain meaningfully invested in Common Stock, non-employee directors are required to own shares of Common Stock having a market value equal to five times the annual retainer fee payable to them. A non-employee director must meet the stock ownership requirement within five
years of becoming a member of the Board. In addition to shares owned by non-employee directors, the full value of deferred stock units is counted for purposes of determining a director’s compliance with the stock ownership requirement. All of our current directors have met their objectives within the five-year time requirement.
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Attendance at Board and Committee Meetings
During fiscal 2019,2020, the Board held five meetings. Each incumbent director attended 75%90% or more of the aggregate number of meetings of the Board and committees of the Board on which the director served during fiscal 2019,2020. In addition to the regularly scheduled Board and committee meetings, in fiscal 2020, directors were invited to regular calls with the exceptionCompany’s President and Chief Executive Officer and other members of Mr. Larsen who attended 50% ofmanagement regarding the meetings ofCompany’s response to the Board and committees during the time he served.COVID-19 pandemic.
Executive Sessions of the Independent Directors
The independent directors meet in executive session at each of the regularly scheduled Board meetings and as necessary at other Board meetings. The Company’s Chairman or, if applicable, the Lead Director presides over these executive sessions and, in the Chairman’s or, if applicable, the Lead Director’s absence, the independent directors will select another independent director present to preside.
Annual Meetings of Lowe’s Shareholders
Directors are expected to attend the Annual Meeting of Shareholders. All twelve of the directors in office at the time attended last year’s Annual Meeting of Shareholders, except Messrs. Larsen and Alvarez, whose absences were excused due to prior commitments.which was held virtually.
Annual Evaluation of the Board, Committees and Individual Directors
The Board evaluates the performance of the Board, the committees of the Board and individual directors on an annual basis. The data to evaluate the quality and impact of an individual director’s service is gathered by having each director complete a questionnaire assessing the performance of all other directors and the committees of the Board of which the director completing the evaluation is a member. The Chairman of the Board discusses the results of the individual evaluations with
each director. Each committee and the full Board review and discuss the results of the committee and Board evaluations. The goal is to use the results of the assessment process to enhance the Board’s functioning as a strategic partner with management as well as the Board’s ability to carry out its traditional monitoring and oversight function. The ways in which our evaluation processes inform Board composition, refreshment, director nomination, shareholder
engagement and other matters are further discussed elsewhere in this Proxy Statement.
Board Leadership Structure
Lowe’s Board is responsible for ensuring that itscreating a leadership structure that provides independent oversight of senior management and discusses the appropriate structure for Lowe’s on an annual basis. When evaluating the optimal structure, the Board reviews a variety of criteria, including shareholder feedback, Lowe’s strategic goals, the current operating and governance environment, the skill set of the independent directors, the dynamics of the Board and the strengths and talents of Lowe’s senior management at any given point in time. The Board does not believe that there is one leadership structure that is preferred and regularly discusses what the optimal leadership structure is for Lowe’s at that time.
Lowe’s Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. The Corporate Governance Guidelines further provide that if the Board determines the roles of Chairman and Chief Executive Officer are filled by the same individual, or if the Chairman is not an independent director, then a Lead Director, who must be an independent director, will be elected by the independent directors annually at the meeting of the Board held in conjunction with the Annual Meeting of Shareholders. The duties of the Lead Director are consistent with the responsibilities held by lead directors at other public companies and are further described below.
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
The Nominating and Governance Committee analyzed the considerations noted above, and after careful consideration, the independent directors of the Board determined that having a separate Chairman and Chief Executive Officer affords Mr. Ellison the opportunity to focus his time and energy on managing our business and allows Mr. Dreiling, our Chairman, to devote his time and attention to matters of Board oversight and governance. The Board, however, recognizes that no single leadership model is right for all companies and at all times, and the Board will review its leadership structure as appropriate (at least on an annual basis) to ensurehelp it continuescontinue to be in the best interests of the Company and our shareholders.
Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
ROLEROLES AND RESPONSIBILITIES OF THE INDEPENDENT CHAIRMAN
The independent Chairman of the Board:
Presides at all meetings of the Board, including executive sessions of the independent directors;
Presides at all shareholder meetings;
Sets the agenda for executive sessions of independent directors;
Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
Has the authority to call meetings of the Board and independent directors;
Facilitates effective communication between the Board and shareholders and shall be available for consultation and direct communication with major shareholders;
Leads the evaluation process for individual directors, committees and the Board;
Works with the Chair of the Nominating and Governance Committee in an annual performance review of the CEO; and
Serves as the contact person for interested parties to communicate directly with the independent directors.
Lowe’s independent directors appointed Mr. Dreiling to serve as Chairman of the Board effective July 2, 2018. Mr. Dreiling joined the Board in 2012 and brings more than 40 years of retail industry experience at all operating levels. As Chairman and Chief Executive Officer of a publicly-traded retail company prior to his retirement, Mr. Dreiling developed strong executive leadership and strategic management skills in the retail industry, and he has a track record of enhancing operational effectiveness to yield value for shareholders.
ROLEROLES AND RESPONSIBILITIES OF THE LEAD DIRECTOR, IF APPOINTED
The Lead Director, if appointed:
Presides at all meetingasmeetings of the Board at which the Chairman of the Board is not present, including executive sessions of independent directors;
Serves as a liaison between the Chairman and independent directors;
Approves meeting agendas for the Board;
Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
Has the authority to call meetings of the independent directors; and
Will be available for consultation and direct communication with major shareholders.
The Lead Director, if appointed, also serves as the Chair of the Nominating and Governance Committee of the Board, which is comprised entirely of independent directors. With Mr. Dreiling serving as Chairman of the Board, the Company does not currently have a Lead Director.
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Board’s Role in Corporate Strategy
Our Board is actively involved in overseeing, reviewing and guiding our corporate strategy. Our Board formally reviews our Company’s business strategy, including the risks and opportunities facing the Company and its businesses,portfolio, at an annual strategic planning session. In addition, long-range strategic issues, including the performance and strategic fit of our businesses, are discussed as a matter of course at regular Board meetings. Our Board regularly discusses corporate strategy throughout the year with management formally as well as informally and during executive sessions of the Board as appropriate. As discussed in “Board’s Role in the Risk Management Process”Oversight” below, our Board views risk management and oversight as an integral part of our strategic planning process, including mapping key risks to our corporate strategy and seeking to manage and mitigate risk. Our Board also views its own composition as a critical component to
effective strategic oversight. Accordingly, our Board and relevant Board committees consider our business strategy and the Company’s regulatory, geographic and market environments when assessing Board composition, director succession, executive compensation, human capital management, diversity and inclusion, environmental and social issues and other matters of importance.
Board’s Role in the Risk Management Process
The primary responsibility for identifying, evaluating, managing and mitigating the Company’s exposure to risk belongs with management. It is the Board’s responsibility to oversee the Company’s risk management processes and assess whether management has an appropriate framework to manage risks effectively. It is also the Board’s responsibility to challenge management regularly to demonstrate that those processes are effective in operation.
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Board’s Role in Human Capital Management
The Board executes its oversight responsibilities both through active review and discussion ofviews effective human capital management as key risks facing the Company and by delegating certain risk oversight responsibilities to its committees, who regularly report back to the Board.Company’s ability to execute its long-term strategy. As a result, the full Board and the Compensation Committee oversee and regularly engage with our President and Chief Executive Officer, our Executive Vice President, Human Resources and senior leadership on a broad range of human capital management topics, including culture, talent management and succession planning, compensation and benefits, diversity and inclusion and employee engagement feedback gathered from the Company’s annual associate engagement survey. In addition to the full Board’s review of talent management topics as standing agenda items, including CEO and senior management succession planning, diversity and inclusion and culture, the Board also receives regular reports from the Compensation Committee on human capital management topics throughout the year.
Board’s Role in Environmental and Social Issues
The Board views oversight and effective management of environmental and social issues and their related risks as important to the Company’s ability to execute strategy and achieve long-term sustainable growth. The Board receives regular updates on environmental and social topics. In addition to oversight by the full Board, the Board has also delegated primary responsibility for more frequent and in-depth oversight of the Company’s environmental and social strategy, risks and risk mitigation to the Sustainability Committee. The Board also coordinates with its other committees to provide active Board- and committee-level oversight of the Company’s management of environmental and social related risks across the relevant committees.
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Board’s Role in Risk Oversight
Overview
A summary of the current allocation of general risk oversight functions among the committees, as delegated bymanagement, the Board and its committees is as follows:
For more informationBOARD OF DIRECTORS Continuous oversight of overall risks, with emphasis on strategic risks AUDIT COMMITTEE Oversees the Company's risk, policies for risk management and specific areasrisks associated with major financial exposures, legal matters, data privacy, cybersecurity matters, business continuity, operational risks, and compliance with laws and regulations COMPENSATION COMMITTEE Oversees risks associated with the Company's compensation policies and practices NOMINATING AND GOVERNANCE COMMITTEE Oversees risks associated with our corporate governance practices and policies, and our political activity SUSTAINABILITY COMMITTEE Oversees risks associated with environmental and social issues TECHNOLOGY COMMITTEE Oversees risks associated with the Company's strategic technological initiatives and ecommerce matters MANAGEMENT Identification, assessment and management of risks ENTERPRISE RISK COUNCIL Identifies and assesses material risks faced by the Company and evaluates action plans to mitigate material risks
The primary responsibility for the identification, assessment and management of the various risks that we face belongs with management. At the management level, risks are prioritized and assigned to senior leaders based on the risk’s relationship to the leader’s business area and focus. Those senior leaders develop plans to address the risks and measure the progress of risk management efforts. Our General Counsel provides centralized oversight each committee has a charter describing its specific responsibilities,of Lowe’s enterprise risk management program. In 2020, the Company established the Enterprise Risk Council (“ERC”), which can be found on our website at www.Lowes.com/investor.is co-chaired by the Chief Compliance Officer and Vice President of Internal Audit and comprised of senior leaders with broad enterprise experience. The ERC supports the execution of the enterprise risk management program by working to identify and assess material risks faced by the Company and evaluating action plans to mitigate material risks.
The risks periodically reviewed by the various committees are also reviewed by the full Board when a committee orAudit Committee coordinates the Board determinesand each Committee’s risk oversight. The Board’s oversight of risks ensures that thismanagement has processes in place to deal appropriately with risk and is appropriate. The role of the Board’s Audit, Compensation, Nominating and Governance, Sustainability and Technology Committees, each of which
consists solely of independent directors, inintegral to the oversight of the Company’sbusiness as a whole. For example, our principal strategic risks are reviewed as part of the Board’s regular discussion of our strategy and alignment of specific initiatives with that strategy. Similarly, at every meeting the Board reviews the
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Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
principal factors influencing our operating results, including the competitive environment, and discusses the major financial exposuresevents, activities and other enumeratedchallenges affecting the Company with our senior executive officers.
The Board’s ongoing oversight of risk also occurs at the Board committee level on a more focused basis as detailed above. The General Counsel annually presents an overview of the enterprise risk management program to the full Board of Directors and provides it with regular updates on the program and status of key risks preservesfacing the benefitbusiness. The Audit Committee regularly receives updates on key risk areas from members of independentmanagement with primary responsibility for managing those risk areas and receives regular updates from the General Counsel and Chief Compliance Officer on legal and regulatory risk and compliance matters.
COVID-19 Pandemic Oversight
The COVID-19 pandemic has profoundly affected our customers, our associates and the communities we serve. To help coordinate risk oversight alongin addressing the crisis, management has increased the level of its communications and interactions with fullthe Board. Since the start of the pandemic, our Board responsibilityhas remained actively engaged and review. Further, the independent Chairman promotes effective considerations of matters presenting significant risksmeets on a regular basis with management to guide the Company through his rolethis challenging time. Our Board is uniquely qualified to provide counsel and oversight in advising committee chairs, chairing meetingsthese unprecedented circumstances, given our director’s extensive skills, qualifications and perspectives gained during their tenure at a wide array of companies. In addition, we created a management task force to centrally assess, respond, manage and communicate throughout this crisis. Management and the independent directorsBoard will continue to oversee our response and working with the Presidentrisks related to the COVID-19 pandemic.
Cybersecurity Risk Oversight
Securing the information our customers, associates, vendors and other third parties entrust to Lowe’s is important to us. We have adopted physical, technological and administrative controls on data security, and have a defined procedure for data incident detection, containment, response and remediation. While everyone at Lowe’s plays a part in managing these risks, oversight responsibility is shared by the Board, the Audit Committee and management.
Our Chief ExecutiveInformation Security Officer provides regular cybersecurity updates in the form of written reports and presentations to develop Board meeting agendas.the Audit Committee at every quarterly meeting. The Audit Committee regularly reviews metrics about cyber threat response preparedness, program maturity milestones, risk mitigation status and the current and emerging threat landscape. As part of our enterprise risk management program, Lowe’s receives external assessment for Payment Card Industry Data Security Standards compliance. Additionally, we leverage the National Institute of Standards and Technology security framework to drive strategic direction and maturity improvement and engage third-party security experts for risk assessments and program enhancements. We also maintain information security risk insurance coverage.
Compensation Committee Advisors
The Compensation Committee has sole authority under its charter to retain compensation consultants and other advisors and to approve such consultants’ and advisors’ fees and retention terms. Following a review of the engagement with its previous independent compensation consultant, Farient Advisors, LLC, the Compensation Committee, in March 2019, decided to retainIn 2020, Semler Brossy Consulting Group, LLC to actacted as itsthe independent compensation consultant and to provide itprovided the Compensation Committee with advice and support on executive compensation issues. The compensation consultant assists with peer group identification and benchmarking, design of the Company’s executive compensation program and conduct of an annual risk assessment related thereto, review of compensation-related disclosures and related services. A more detailed description of the services performed by the Compensation Committee’s compensation consultant in fiscal 20192020 is included in the “Compensation Discussion and Analysis” section of this Proxy Statement.
The Compensation Committee has reviewed and confirmed the independence of its compensation consultant. Neither the compensation consultant nor any of its affiliates provide any services to the Company except for services provided to the Compensation Committee. In addition to its compensation consultant, the Compensation Committee has reviewed the independence of outside counsel engaged by the Compensation Committee in advance of receiving advice from counsel.
How to Communicate with the Board of Directors andNon-Management Directors
Shareholders and other interested parties can communicate directly with the Board by sending a written communication addressed to the Board or to any member individually in care of Lowe’s Companies, Inc., 1000 Lowes Boulevard, Mooresville, North Carolina 28117. Shareholders and other interested parties wishing to communicate with
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 21 |
Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
Mr. Dreiling, as Chairman, or with the independent directors as a group may do so by sending a written communication addressed to Mr. Dreiling, in care of Lowe’s Companies, Inc. at the above address. Any communication addressed to a director that is
Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
received at Lowe’s principal executive offices will be delivered or forwarded to the individual director as soon as practicable. Lowe’s will forward all communications received from its shareholders or other interested parties that are addressed simply to the Board, to the Chairman or to the Chair of the committee of the Board whose purpose and function is most closely related to the subject matter of the communication. All
such communications are promptly reviewed before being forwarded to the addressee. Lowe’s generally will not forward to directors a shareholder communication that it determines to be primarily commercial in nature, relates to an improper or irrelevant topic or requests general information about the Company.
Board Committees
The Board has five current standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Sustainability Committee and the Technology Committee. The Board may also establish other committees from time to time as it deems necessary. Committee members and committee chairs are appointed by the Board. The members of these committees as of January 31, 202029, 2021 are identified in the following table:
Audit Committee Compensation Committee Nominating and Governance Committee Public Policy Committee Executive Committee Sustainability Committee Technology Committee Member
🌑 Member | ||||||||||
Raul Alvarez(1) | 🌑 | 🌑 | 🌑 | |||||||
David H. Batchelder | 🌑 | 🌑 | ||||||||
Angela F. Braly | 🌑 | Chair | 🌑 | |||||||
Sandra B. Cochran | 🌑 | |||||||||
Laurie Z. Douglas | 🌑 | 🌑 | Chair | |||||||
Richard W. Dreiling | ||||||||||
Marvin R. Ellison | ||||||||||
Marshall O. Larsen(2) | ||||||||||
James H. Morgan | 🌑 | 🌑 | ||||||||
Brian C. Rogers(3) | 🌑 | Chair | ||||||||
Bertram L. Scott(4) | Chair | 🌑 | ||||||||
Lisa W. Wardell | 🌑 | 🌑 | 🌑 | |||||||
Eric C. Wiseman | Chair | 🌑 | 🌑 | |||||||
Number of Meetings in Fiscal 2019 | 7 | 7 | 5 | 3 | 2 |
Raul Alvarez | ||||||||||
David H. Batchelder | ||||||||||
Angela F. Braly(1) | Chair | |||||||||
Sandra B. Cochran | ||||||||||
Laurie Z. Douglas | Chair | |||||||||
Richard W. Dreiling | ||||||||||
Marvin R. Ellison | ||||||||||
Brian C. Rogers | Chair | |||||||||
Bertram L. Scott | Chair | |||||||||
Lisa W. Wardell | ||||||||||
Eric C. Wiseman(2) | Chair | |||||||||
Number of Meetings in Fiscal 2020 | 7 | 9 | 5 | 2 | 2 |
(1) |
|
(2) | Effective May 29, 2020, Mr. |
|
|
Each of the current committees act pursuant to a written charter adopted by the Board. A copy of each committee charter and the Corporate Governance Guidelines are available on the Company’s website at www.Lowes.com/investor.ir.lowes.com.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Corporate Governance
BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
The following table provides information about the operation and key functions of each of the current standing Board committees:
Committee | Key Functions and Additional Information | |
Audit Committee
|
• Oversees the Company’s accounting and financial reporting processes, internal controls and internal audit functions.
• Reviews and discusses with management and the independent registered public accounting firm the annual and quarterly financial statements and earnings press releases.
• Reviews and discusses the Company’s major financial risk exposures, including data protection, cybersecurity, business continuity and operational risks, and the steps management has taken to identify, assess, monitor, control, remediate and report such exposures.
• Reviews with the Company’s General Counsel and Chief Compliance Officer legal matters and the program of monitoring compliance with the Company’s Code of Business Conduct and Ethics.
• Reviews andpre-approves all audit and permitted non-audit services proposed to be performed by the independent registered public accounting firm.
•
• Reports regularly to the Board. | |
Compensation Committee
|
• Reviews and approves on an annual basis the corporate goals and objectives
• Reviews and approves the compensation for the other executive officers.
• Makes recommendations to the Board with respect to incentive compensation and equity-based plans that are subject to Board and shareholder approval.
• Reviews and approves all annual incentive plans for executives and all awards to executives under multi-year incentive plans, including equity-based incentive arrangements authorized under the Company’s equity incentive compensation plans.
• Oversees regulatory compliance and risk regarding compensation matters.
• Reports regularly to the Board.
| |
Nominating and Governance Committee
|
• Develops and recommends to the Board for its approval criteria and qualifications for
• Makes recommendations to the Board concerning committee appointments.
•
• Identifies, evaluates and recommends director candidates to the Board.
• Oversees annual evaluation of the Board, the committees of the Board,
• Develops, recommends, assesses at least annually and recommends changes to the Board regarding, the Corporate Governance Guidelines applicable to the Company.
• Reviews and approves, ratifies or disapproves related person transactions.
• Considers and recommends to the Board other actions relating to corporate governance.
• Reports regularly to the Board.
| |
Sustainability Committee
|
• Oversees
• Assists the Board with the Company’s enterprise risk management system by identifying, evaluating and monitoring
• Reviews and evaluates the Company’s
• Monitors the Company’s performance against relevant external sustainability indices and reviews the Company’s annual Corporate
• Reviews and makes recommendations to the Board regarding responses to stockholder proposals encompassing matters overseen by the Committee.
• Reports regularly to the Board. | |
Technology Committee
|
• Oversees matters of technology, eCommerce and innovation.
•
• Monitors, oversees and provides guidance on issues relating to significant emerging technology, eCommerce and innovation trends and issues that may affect the Company strategy.
• Reports regularly to the Board.
|
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Corporate Governance
FOCUS ON CORPORATE RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT
FOCUS ON CORPORATE RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT
Corporate Responsibility
Corporate responsibility is a cornerstone of our Company and fundamentalcritical to our success. The Sustainability Committee of the Board oversees Lowe’s corporate responsibility strategies and our Sustainability Council, composed of executives and subject matter experts from across the Company, leads the Company’s efforts to integrate corporate responsibility into our business. In 2020, we refreshed our materiality assessment and conducted a Task Force on Climate-related Financial Disclosures (“TCFD”) analysis to enhance our sustainability strategy and programs. The Sustainability Committee receives regular updates related to corporate responsibility strategy and initiatives.
We have built our corporate responsibility strategy around three key areas: Product Sustainability; Our People and Communities; and Operational Excellence. These key areas align with our mission and overall strategic plan.
|
PRODUCT SUSTAINABILITY
We strive to put the customer first in everything we do, stocking our shelves with quality items that people can feel good about buying. As we expand our portfolio of responsibly sourced, innovative and efficienteco-products, we |
|
OUR PEOPLE & COMMUNITIES
The Lowe’s community begins with more than 300,000
|
|
OPERATIONAL EXCELLENCE
We are focused on creating long-term value for our shareholders while preserving our | |||||||||||||||||
| ||||||||||||||||||||||
IN we had more than | IN we provided $45.5 million in planned annual giving and $4.6 million in Lowe’s Foundation giving. We also contributed over $100 million in pandemic-related relief to our
| IN 2020, we were included in the Renewable Energy Buyers Alliance (“REBA”) Deal Tracker Top 10 List for large energy buyers as a result of our 250 megawatt solar virtual power purchase agreement (“VPPA”) in Illinois. Additionally, our 100 megawatt wind farm VPPA in Texas became operational in 2020. |
24 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Corporate Governance
FOCUS ON CORPORATE RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT
IN 2019,
we reduced carbon emissions by 12.26% and recycled 102 thousands of metric tons of cardboard.
We have adopted a number of policies that highlight the Company’s commitment to social and environmental responsibility and that seek to promote sustainability in the operation of our business. Our commitment to building an industry-leading corporate responsibility program is demonstrated by our inclusion in the Dow Jones Sustainability Index for North America, a benchmark for investors who integrate sustainability considerations into their portfolios. More information about Lowe’s corporate responsibility efforts, and initiatives, including the 20182019 Corporate Responsibility Report and our sustainability policies, is available on the Company’s website at newsroom.Lowes.com/responsibility/.responsibility.lowes.com.
Political Advocacy and Oversight
The Nominating and Governance Committee has oversight of Lowe’s political advocacy activities, including political contributions, trade association memberships, lobbying activitiespriorities and the Lowe’s Companies, Inc. Political Action Committee (“LOWPAC”). As part of its oversight role, it reviews our political engagement and contribution policy and monitors our ongoing political strategy as it relates to the overall public policy objectives for the Company. Lowe’s does not make contributions from corporate funds to political campaigns, super political action committees or political parties. Political contributions made by LOWPAC are approved by its board of directors, which consists of members of the senior leadership team spanning corporate and operational roles. All political advocacy is conducted to promote the interests of the Company and is made without regard for the private political preferences of Lowe’s directors or executives. We ranked in the First Tier of the 2020 CPA-Zicklin Index, an annual assessment which benchmarks political disclosure and accountability policies and practices for election-related spending of leading U.S. public companies.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 25 |
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners and Management
The following table provides information about the beneficial ownership of Common Stock as of March 23, 2020,22, 2021, except as otherwise noted, by each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock as well as each director, nominee for director, named executive officer and all current directors and executive officers as a group. Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the securities indicated as beneficially owned by such person, subject to community property laws where applicable. Unless otherwise indicated, the address for each of the beneficial owners is c/o Lowe’s Companies, Inc., 1000 Lowes Boulevard, Mooresville, North Carolina 28117.
Name or Number of Persons in Group | Number of Shares(1) | Percent of Class | Number of Shares(1) | Percent of Class | ||||||||||||||||
Raul Alvarez |
| 31,257 |
| * |
| 33,188 |
| * | ||||||||||||
David H. Batchelder |
| 25,893 |
| * |
| 33,623 |
| * | ||||||||||||
William P. Boltz |
| 32,444 |
| * |
| 74,094 |
| * | ||||||||||||
Angela F. Braly |
| 14,201 |
| * |
| 15,851 |
| * | ||||||||||||
Sandra B. Cochran |
| 9,754 |
| * |
| 11,306 |
| * | ||||||||||||
David M. Denton |
| 46,734 |
| * |
| 106,515 |
| * | ||||||||||||
Laurie Z. Douglas |
| 10,655 |
| * |
| 12,246 |
| * | ||||||||||||
Richard W. Dreiling |
| 27,626 |
| * |
| 30,609 |
| * | ||||||||||||
Marvin R. Ellison |
| 172,991 |
| * |
| 323,620 |
| * | ||||||||||||
Seemantini Godbole |
| 32,587 |
| * | ||||||||||||||||
Daniel J. Heinrich |
| 0 |
| * | ||||||||||||||||
Joseph M. McFarland III |
| 42,298 |
| * |
| 90,660 |
| * | ||||||||||||
James H. Morgan |
| 10,655 |
| * | ||||||||||||||||
Brian C. Rogers |
| 13,893 |
| * |
| 15,373 |
| * | ||||||||||||
Bertram L. Scott |
| 8,254 |
| * |
| 9,806 |
| * | ||||||||||||
Marisa F. Thalberg |
| 26,203 |
| * | ||||||||||||||||
Lisa W. Wardell |
| 4,416 |
| * |
| 5,896 |
| * | ||||||||||||
Mary Beth West |
| 0 |
| * | ||||||||||||||||
Eric C. Wiseman |
| 24,450 |
| * |
| 26,269 |
| * | ||||||||||||
Current Directors and Executive Officers as a Group (20 total) | 760,874 | (2) | * | 1,049,040 | (2) |
| * | |||||||||||||
The Vanguard Group | 61,607,609 | 8.6 | %(3) | |||||||||||||||||
BlackRock, Inc. | 57,618,135 | 7.6 | %(4) | 54,763,092 | 7.6 | %(4) | ||||||||||||||
The Vanguard Group | 66,108,065 | 8.8 | %(5) |
* | Represents holdings of less than 1%. |
(1) | Includes shares that may be acquired or issued within 60 days through exercise of stock options |
(2) | Includes |
(3) | Shares held at December 31, |
|
(4) | Shares held at December 31, 2020, according to a Schedule 13G/A filed with the SEC on February 5, 2021 by BlackRock, Inc. (“BlackRock”). The Schedule 13G/A reports that BlackRock has sole voting power over 47,306,630 shares, shared voting power over no shares, sole investment power over 54,763,092 shares and shared investment power over no shares. |
26 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and compensation decisions as they relate to the following named executive officers (“NEOs”) of the Company in the 20192020 fiscal year:
Marvin R. Ellison | President and Chief Executive Officer | |
David M. Denton | Executive Vice President, Chief Financial Officer | |
Joseph M. McFarland III | Executive Vice President, Stores | |
William P. Boltz | Executive Vice President, Merchandising | |
| Executive Vice President, Chief |
Our CD&A is organized as follows:
|
|
|
|
|
|
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
We have demonstrated a strong commitment to returning capital to our shareholders and continued dividend growth since 1961.
| 28
| |
28 | ||
COVID-19 Response: Financially Supporting Our Front-line Associates | 28 | |
29 | ||
Our Executive Compensation Program is Linked to Our Strategy | 30 | |
30 | ||
31 | ||
31 | ||
32 | ||
33 | ||
33 | ||
| 34 | |
36 | ||
36 | ||
36 | ||
36 | ||
37 | ||
38 | ||
38 | ||
38 | ||
41 | ||
42 | ||
43 | ||
43 | ||
43 | ||
44 | ||
44 | ||
44 | ||
Oversight of Stock Ownership, No Hedging or Pledging and Clawback of Incentive Compensation | 44 | |
45 |
In fiscal 2019, we made significant progress in transforming our company and building a strong foundation from which to create increasing shareholder value. Throughout the year, our team executed the requisite steps allowing us to make progress toward a true omni-channel customer experience. We expect to capitalize on the opportunity in front of us by driving operational excellence and better serving our customers by continued execution on our strategic initiatives:
In fiscal 2019, we began to demonstrate success from executing our retail fundamentals framework. Our focus on improvingin-stocks and customer service coupled with our efforts on winning with the Pro supported improved performance. This progress allowed us to achieve solid results from executing our retail fundamentals framework, with total sales growth of 1.2 percent driven by comparable sales growth of 2.6 percent. Additionally, we made strategic investments across our business throughout the year, including in technology, supply chain, eCommerce, customer service, improved category performance, operational efficiency and Pro business, while continuing to return excess cash to our shareholders. We delivered value to shareholders through the payment of $1.6 billion in dividends and the repurchase of nearly $4.3 billion of our common stock.
Our executive compensation program is designed to maximize long-term shareholder value by aligning executive pay with our strategy and shareholder interests, as well as attracting and retaining talented executives to drive long-term value. For fiscal 2019, we altered the incentive metrics to support our retail fundamentals strategy. Our annual incentive plan incorporated a metric for inventory improvement in support of our corporate strategy and to generate cash flow for investing in the business and returning value to shareholders. We also equally weighted the adjusted sales and adjusted operating income metrics within the annual incentive plan in recognition of the importance of growing our top line while maintaining a healthy focus on profitability. Finally, we replaced the metric of return onnon-cash average assets withreturn-on-invested-capital in our long-term incentive plan, which promotes a strong focus on capital allocation that generates returns consistent with shareholder expectations and aligns with how we measure performance internally and how investors are measuring our capital returns.
We are pleased with the foundation we have built. While we are still in the early stages of our multi-year transformation, we are confident we are on the right path to generate long-term profitable growth.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 27 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
We generate sustainable shareholder value by driving operational excellence throughout the enterprise, consistently generating high levels of cash flow and optimizing our capital deployment. We have demonstrated a strong commitment to returning capital to our shareholders and continued dividend growth since 1961.
8% | $7.2 Billion | $18.9 Billion | ||
2020 PER SHARE INCREASE IN ANNUAL DIVIDEND | DIVIDENDS PAID IN THE LAST FIVE YEARS | SHARES REPURCHASED IN LAST FIVE YEARS |
Our Total Shareholder Return (“TSR”) results over the last 1-, 3- and 5-years have outpaced peers and the broader market.
(1) Includes companies in the Peer Group identified on page 37.
Fiscal 2020 Financial Highlights
In fiscal 2020, we delivered outstanding results, with a 41% increase in diluted earnings per share to $7.75 and a 54% increase in adjusted diluted earnings per share to $8.86,* driven by total sales growth of 24%, comparable sales growth of 26%, a 53% increase in operating income and a 47% increase in adjusted operating income.* We drove improvement in consolidated Pro customer sales, with growth of approximately 20% through improved service and better in-stock inventory levels, while we more efficiently managed inventory to support sales. These results were driven by improved execution across our store operations and supply chain, as we met unprecedented levels of consumer demand for home improvement products and services.
COVID-19 Response: Financially Supporting Our Front-Line Associates
In response to the COVID-19 pandemic, our focus shifted to functioning as an essential retailer with three key priorities:
Creating a safe store environment for our associates and our customers;
Financially supporting our front-line associates; and
Providing support for our communities.
During fiscal 2020, we provided nearly $1.3 billion in COVID-related support through our store safety initiatives and to our front-line associates and communities, including over $900 million in incremental financial support for our front-line hourly associates. Our support included:
Seven discretionary payments of $300 for full-time hourly associates and $150 for part-time hourly associates, as well as a temporary $2 per hour wage increase in the month of April;
14 days of emergency paid leave for all associates who needed it and up to four weeks for those at high risk of severe illness from COVID-19;
* | Adjusted diluted earnings per share and adjusted operating income are non-GAAP financial measures. Refer to Appendix B for a reconciliation of non-GAAP measures. |
28 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
Telemedicine benefits to all associates and their families, regardless of whether they were on a Lowe’s benefit plan or not;
Two extra weeks of paid vacation to salaried front-line managers;
Hired 90,000 associates into permanent roles during a time of high unemployment; and
No lay offs or pay reductions for associates.
Additionally, in September 2020, in recognition of our associates’ extraordinary efforts, and given achievement of pre-defined semi-annual performance goals for the annual incentive plan, the Company awarded a mid-year annual incentive award payout equal to 200% of the target payout level, prorated for active days in the first half of the fiscal year to all of our corporate bonus-eligible associates below Senior Vice President. Also, 100% of our stores earned their hourly associate Winning Together profit-sharing bonuses every quarter of the year, with a total payout of $365 million. Given better than expected performance, this represented an incremental $106 million over the target payment level.
Successful Implementation of Retail Fundamentals Strategy
Shortly after joining the Company in fiscal 2018, the new executive leadership team led by our President and CEO, Marvin R. Ellison, established a retail fundamentals strategy with the objective of transforming Lowe’s into a world-class omni-channel retailer. This strategy focused on building our operating capabilities through strategic investments in merchandising excellence, supply chain transformation, operational efficiency and customer engagement.
With the onset of the COVID-19 pandemic, there was a need to quickly implement numerous safety standards in support of social distancing and enhanced sanitizing and cleaning and respond to a sharp increase in customer demand for contactless shopping options. We leveraged the improved operating capabilities achieved from our retail fundamentals strategy, and we were able to move nimbly and effectively to meet the needs of our customers. For example:
We improved fulfillment capabilities at our stores through a rapid roll out of curbside pickup followed by touchless, easy-to-use pickup lockers.
We enhanced the Lowe’s mobile app to improve the customer pickup experience and accelerated the re-platforming of Lowes.com, which transformed site stability and enabled an approximate 50% increase in traffic volumes for the year.
• | We accelerated technology updates that enabled quicker fulfillment, and we more than doubled the number of items available online. |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 29 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
The CD&A includes disclosureThese efforts, combined with the continued execution on our strategic initiatives, have driven outstanding results. In fiscal 2020, we began to take market share as we made outsized gains in sales to our DIY and Pro customers. These achievements enabled us to deliver value to shareholders through the payment of $1.7 billion in dividends and the repurchase of nearly $5.0 billion of our incentiveCommon Stock.
We are confident that we are making the right investments in the business to generate long-term growth and continue to create sustainable shareholder value.
Our Executive Compensation Program is Linked to Our Strategy
Our executive compensation program is designed to drive long-term shareholder value by aligning executive pay with our strategy and shareholder interests and attracting and retaining talented executives. Around 70% of compensation is based on variable pay arrangements that align pay with performance measures including: adjusted sales, adjusted operating income, returnagainst our strategy and business plan with a balanced focus on invested capital (“ROIC”), inventory improvementtop- and return onnon-cash average assets (“RONCAA”) for incentive compensation prior to 2019. Many of these performance measures are calculated in accordance with U.S. generally accepted accounting principles, or GAAP. However, there are somenon-GAAP performance measures that management uses to assess our year-over-year performance. A reconciliation of thesenon-GAAP financial measures is included in Appendix C. bottom-line growth.
For fiscal 2019,2020, we maintained the principal features and performance-based elements of our executive compensation program while making select changes to our annual incentive plan to support our retail fundamentals strategy. We added a strategic metric for Pro sales growth in the U.S. home improvement market (“Pro sales growth”) in support of our strategy and business plan. We also re-aligned the weightings of the financial and strategic metrics for our annual incentive plan to allow for the addition of the Pro sales growth metric.
Annual Say-on-Pay Vote and Shareholder Engagement
The Board and the Compensation Committee replacedcarefully consider the long-term incentive plan metricresults of RONCAA with ROICour shareholders’ annual advisory “say-on-pay” vote. Lowe’s shareholders continue to express strong support for the reasons described above. Adjusted operating income for fiscal 2019 as presentedCompany’s executive compensation program with the Company receiving more than 94% advisory approval in 2020. This is consistent with the CD&A includes an adjustment for incentive compensation performance achievement approved byadvisory approval over the past ten years. In consideration of this continued support, the Compensation Committee maintained the principal features and performance-based elements of the executive compensation program for 2020 apart from adding the new strategic metric, Pro sales growth, and adjusting weightings for our annual incentive awards as described on pages 38page 39. At the Annual Meeting, the Company’s shareholders will again have the opportunity to 39. Eachapprove Lowe’s executive compensation program through the advisory say-on-pay vote included as Proposal 2 in this Proxy Statement.
We believe that engaging with investors is fundamental to our commitment to sound governance and is essential to maintaining strong corporate governance practices. Since the beginning of 2020, we have engaged with representatives of approximately 70% of our institutionally-held shares as part of our regular investor relations outreach efforts and ESG-focused dialogue. Understanding the issues that are important to our shareholders is critical to ensuring that we address their interests and concerns in a meaningful and effective way. We report the feedback from our shareholders on a regular cadence to our Nominating and Governance Committee and Board, who have used this information to inform numerous changes to enhance our compensation, governance and sustainability efforts. In addition to a number of changes to our executive compensation program design and metrics, these performance measures is further describedchanges have included the commitment to publish our Consolidated EEO-1 Report data in 2021, the amendment of our Bylaws in 2020 to reduce the ownership threshold to call shareholder special meetings to 15% of outstanding shares, an expanded clawback policy in 2019 to allow recovery for conduct resulting in reputational or financial harm and the establishment of the Technology and Sustainability Board Committees in 2018.
This past winter, we conducted a round of investor engagement focused primarily on pages 37ESG topics, including our response to 40.the COVID-19 pandemic, strategy, human capital management efforts, diversity and inclusion programs and initiatives, Board composition, environmental sustainability and our corporate governance and executive compensation practices. As part of this engagement effort, we contacted 34 investors, representing approximately 47% of our outstanding shares, as well as proxy advisory firms, and met with 17 investors, representing approximately 35% of our outstanding shares, and one proxy advisory firm. Our independent Chairman met with shareholders representing 30% of our outstanding shares to provide a direct line of communication between our shareholders and the Board of Directors.
30 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
2019Winter 2020 – 2021 ESG Engagement
During these meetings, we discussed key corporate governance topics and asked our shareholders whether they had any concerns or feedback about our current executive compensation program. Overall, we received generally positive feedback on the structure, evolution and responsiveness of our compensation program, including the metrics in our annual and long-term incentive plans.
Compensation Philosophy and Objectives
Our long-term success depends on our ability to attract and retain highly talented leaders who are committed to our mission, growth and strategy. Our executive compensation program is designed to reward executives for growth in the Company’s sales and earnings, the creation of long-term shareholder value and the effective execution of our business strategies and operating priorities. The primary objectives of our program are to:
Attract and retain executives who have the requisite leadership skills to support the Company’s culture and strategic growth priorities;
Maximize long-term shareholder value through alignment of executive and shareholder interests;
Align executive compensation with the Company’s business strategies, which are focused on driving operational excellence and better serving our customers; and
Provide market competitive total compensation with an opportunity to earn above market median pay when the Company delivers results that exceed performance targets, and below median pay when the Company falls short of performance targets.
Lowe’s has a long-standing commitment to pay for performance thatand provides a significant portion of compensation opportunities through variable pay arrangements. These arrangements are designed to hold our executive officers accountable for business results and reward them for consistently strong financial performance and the creation of value for our shareholders. To align pay with performance, our incentive compensation programs use a number of objective pre-established performance measures, including: sales, operating income, inventory improvement and Pro sales growth for our annual incentive plan, return on invested capital (“ROIC”) for our performance share units awarded in 2019 and 2020 and return on non-cash average assets (“RONCAA”) for performance share units awarded in 2018. There are some non-GAAP performance measures that management uses to assess our year-over-year performance, for example, non-GAAP fiscal 2019 performance was used to establish fiscal 2020 plan targets for the annual incentive plan financial metrics. Each of these performance measures is further described on pages 39 to 42.
Our 20192020 executive compensation program consisted of the following elements:
Base salary
Annual incentive awards
Long-term equity awards granted in the form of:
Performance share unit awards (“PSUs”)
Stock options
Restricted stock awards (“RSAs”)
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 31 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
Retirement, health and severance benefits
Limited perquisites
Lowe’s compensation mix is heavily performance-based with 72% of the CEO’s and 67% of the other NEOs’ annualized target compensation at riskat-risk and contingent upon the achievement of performance objectives or relative and absolute share price performance. Additionally, 67% of the CEO’s and 65% of the other NEOs’ compensation is in the form of long-term incentives.
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
How Our Executive Compensation Isis Tied Toto Performance
A significant portionMore than two-thirds of our executive compensation program is performance-based with a balanced focus ontop- and bottom-line growth and strategic initiatives. The metrics determined by the Compensation Committee, as described below, incentivize our executives to focus on operational objectives that are expected to drive shareholder value.
Annual Incentive Awards: Payout is generally based on the Company’s achievement of financial (adjusted sales(sales and adjusted operating income) and strategic (inventory improvement)improvement and Pro sales growth) goals. Threshold performance objectives must be achieved for payoutsany payout to be earned.
PSUs: Payout is based on the Company’s achievement of (i) a three-year average RONCAA goal for PSUs granted in 2017 and 2018 and a three-year average ROIC goal for PSUs granted in 2019 in each case, established at the beginning ofand 2020 and a three-year performance periodaverage RONCAA goal for PSUs granted in 2018 and (ii) a relative total shareholder return (“TSR”)TSR modifier, which compares the Company’s TSR to the median TSR of companies listed in the S&P 500 Index over a three-year period. Threshold performance objectives must be achieved for any awards to be earned.
Stock Options: Value realized Realized value for stock option awards is based on the increase in the market value of our Common Stock relative to the value when itthe award was awarded.made.
Based on our performance through fiscal 2019 illustrated below, certain2020, eligible executives received the following payouts of performance-based compensation:
Annual incentive payouts were driven by (i) above threshold, but below target,maximum performance in adjustedall metrics: sales, (ii) threshold performance in adjusted operating income, following the adjustment for incentive compensation performance achievement approved by the Compensation Committee as described on pages 38 to 39inventory improvement and (iii) below threshold performance for inventory improvement.Pro sales growth. Overall award paymentspayouts for the NEOs were at 43.4%200% of target.
The NEOs, who all joined the Company in 2018, did not receive the grant of PSUs for the 2017-20192018-2020 performance period.period did not pay out since the 3-year average RONCAA result did not achieve the threshold payout performance level.
Annual Incentive Plan Achievement
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32 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
Impact of COVID-19 on Executive Compensation Matters
Consistent with historical practice, the Compensation Committee approved the 2020 annual incentive plan design, including metrics and target performance levels, in February 2020 and did not subsequently make any adjustments to the 2020 annual incentive plan goals or metrics in light of impacts due to the COVID-19 pandemic.
With respect to our 2020 long-term equity awards, consistent with our typical practice, in March 2020, the Compensation Committee approved the equity award mix for NEOs of 50% PSUs, 25% stock options and 25% time-vested RSAs, which did not change from the prior year, based on a target equity award dollar value established at that time. In addition, consistent with our past practice, the Compensation Committee approved the grant of stock options and RSAs to be granted on April 1, 2020.
However, in light of market uncertainty with respect to operating conditions due to the rapidly changing business environment precipitated by the COVID-19 pandemic at that time, and in order to be better able to establish rigorous performance criteria that would be appropriate in the new retail business environment, the Compensation Committee deferred granting and finalizing the performance goals of the PSU awards. In August 2020, after extensive discussion, the Compensation Committee established performance criteria for the 2020 PSU awards, setting more rigorous ROIC performance goals than were originally presented in March 2020. With the performance criteria established, the Compensation Committee approved the grant of PSUs as of September 1, and consistent with our typical practice, the number of PSUs awarded to our NEOs was determined by dividing the dollar value established for PSUs in March by the closing price of our Common Stock on April 1, 2020. See pages 41 to 42 for additional information.
Pay Decisions and Compensation Governance Practices
WHAT WE DO | WHAT WE DO NOT DO | |||||||||
| Provide 80% to 90% of total direct compensation opportunity (assuming target performance) for NEOs in the form of annual and long-term
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| Provide single-trigger severance or taxgross-ups following
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| Annually assess peer group composition, financial and stock price performance and competitive compensation
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| Permit hedging, pledging or unauthorized trading of the Company’s securities by our employees or
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| Annually assess compensation-related risks associated with regulatory, shareholder and market |
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| Grant discounted stock options, extend the original option term, reprice or exchange underwater options without shareholder
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| Annually assess the design and alignment of our incentive plans in relation to performance goals, business strategy, organizational priorities and shareholder
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The fully independent Compensation Committee retains an independent compensation consultant | Provide employment agreements to executives
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| Link incentive compensation to a clawback policy, which was updated in January 2020 to incorporate misconduct that may result in significant financial or reputational
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NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 33 |
Compensation Discussion and Analysis
EXECUTIVE SUMMARYCOMPENSATION ELEMENTS
AnnualSay-on-Pay Advisory Vote
The Board carefully considers the results of our shareholders’ annual advisory“say-on-pay” vote. Lowe’s shareholders continue to express strong support for the Company’s executive compensation program with the Company receiving approximately 94% advisory approval in 2019. This is consistent with the advisory approval over the past nine years. In consideration of this continued support, the Compensation Committee of the Board maintained the principal features and performance-based elements of the executive compensation program in 2019 apart from replacing certain metrics and adjusting weightings as described on pages 38 to 39. At the Annual Meeting, the Company’s shareholders will again have the opportunity to approve Lowe’s executive compensation program through the advisorysay-on-pay vote included as Proposal 2 in this Proxy Statement.
Shareholder Engagement
We believe in continued shareholder discussions and engagement. We solicit and respond to feedback regarding our compensation program to better understand our shareholders’ concerns and the topics of interest. See page 7 in this Proxy Statement for additional information on changes we have made over time to enhance our compensation program as part of our ongoing shareholder engagement.
II. COMPENSATION PHILOSOPHY AND ELEMENTS
Compensation Philosophy and Objectives
Our long-term success depends on our ability to attract and retain highly talented leaders who are committed to our mission, growth and strategy. Our executive compensation program is designed to reward executives for growth in the Company’s sales, earnings and shareholder value, and the effective execution of our business strategies and operating priorities. The primary objectives of our program are to:
Key Components
To support theseour compensation philosophy and objectives, the Compensation Committee has designed the executive compensation program with an appropriate balance between annual and long-term compensation, as well as between fixed andat-risk pay. The largest portion of our executive compensation program is performance-based andat-risk based upon the Company’s financial and strategic performance objectives.
The Board places significant emphasis on the long-term success of the Company and strong alignment with the interests of all stakeholders, including shareholders, customers, employeesour associates and the communities in which we operate. Accordingly, long-term incentive award opportunities, as a percentage of total compensation, are greater than annual incentive award opportunities.
The following table lists the key elements of the Company’s 2020 executive compensation program:
KEY ELEMENTS OF EXECUTIVE COMPENSATION Element Form Key Characteristics Link to Shareholder Value Key Benchmarks/Metrics Base Salary Cash Fixed cash compensation tied to the scope and responsibilities of each executive's position and the performance and effectiveness of the executive Provide a foundation of fixed income to the executive; encourage retention and attraction of top talent; and recognize effective leadership Subject to annual adjustment after consideration of competitive benchmark and relative compensation positioning Annual Incentive Awards Cash At-risk cash compensation tied to the achievement of annual financial performance and strategic goals established by the Compensation Committee for each fiscal year Promote the achievement of the Company's annual financial and strategic goals; and incent and reward financial and operating performance Sales (40%) Operating Income (40%) Inventory Improvement (10%) Pro Sales Growth (10%) Long-Term Incentive Awards PSUs 50% of LTI PSUs, which cliff vest at the end of the three-year performance period, are based on (i) the Company's average ROIC(1) relative to pre-determined threshold, target and maximum levels of performance for the three-year performance period, and (ii) a relative TSR modifier Promote the achievement of efficient long-term growth and TSR performance Three-year average ROIC goal Relative TSR modifier Stock Options 25% of LTI Stock options with a 10-year term vest ratably over three years(2) Promote the value-creating actions necessary to increase the market value of Common Stock Realized value is based on increases in the market value of our Common Stock relative to the value when the award was made RSAs 25% of LTI RSAs granted pursuant to the annual long-term equity grant cliff vest on the third anniversary of the grant date(2) Promote executive retention, stock ownership and alignment of interests with shareholders Realized value is based on market value of our Common Stock 11% 22% 67%
34 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
COMPENSATION PHILOSOPHY AND ELEMENTS
The followingNote: Compensation mix shown in the preceding table listsreflects target CEO compensation. Compensation mix for other NEOs is as follows: base salary 17%, annual incentive awards 18% and long-term incentive awards 65% with the key elementssame award mix of the Company’s 2019 executive compensation program:PSUs, stock options and RSAs as shown above.
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(1) | ROIC is a comprehensive long-term financial metric that incorporates both operating profit and balance sheet performance in the calculation. This metric motivates management to generate sustained profitable growth over time while balancing the Company’s effectiveness at allocating capital to drive future investment and growth. ROIC is computed by dividing the Company’s net operating profit after taxes for the year by the average of the Company’s invested capital as of the beginning and end of the fiscal year. The return percentages for each fiscal year in the performance period are averaged to yield a ROIC measure for the three-year performance period. |
(2) | Executives must maintain employment with the Company during the three-year period, or terminate employment with the Company due to death, disability or qualified retirement (as defined in the grant agreement), to earn the awards. |
We also provide broad-based retirement and other benefit plans on the same terms and conditions applicable to all eligible employees, including deferred compensation benefits, a supplemental 401(k) with Company match, comprehensive group insurance and voluntary benefits, a discounted employee stock purchase plan and other benefits, including reimbursement of costs associated with tax and financial planning, physical examination and limited personal use of corporate aircraft, each of which are designed to enhance productivity and encourage the retention and attraction of our top talent. Additionally, we offer a severance plan for senior officers, which provides for severance payments, the continuation of healthcare benefits and Company-paid outplacement services.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 35 |
Compensation Discussion and Analysis
COMPENSATION DECISION-MAKING PROCESS
III. COMPENSATION DECISION-MAKING PROCESS
Role of the Compensation Committee
The Compensation Committee, which currently consists of fivefour independent directors, is responsible for developing and administering our executive compensation program. The Compensation Committee works closely with its independent compensation consultant and meets regularly – approximately six times each year – and additionally as necessary, to make decisions related to our executive compensation programs and the compensation of our CEO (with the ratification of the independent directors of the Board) and the Company’s executive officers. The Compensation Committee reports its actions to the Board at the Board meeting following each Compensation Committee meeting. The Compensation Committee’s responsibilities include approving:
The full description of the Compensation Committee’s authority and responsibilities is provided in the Compensation Committee Charter, which is available on our Company website www.Lowes.com/investor.at ir.lowes.com.
Role of the Independent Compensation Consultant
The Compensation Committee directly engages and regularly consults with Semler Brossy Consulting Group, LLC, its independent compensation consultant for ongoing executive compensation matters. In May 2019, the Compensation Committee engaged Semler Brossy Consulting Group, LLC to serve as its independent compensation consultant, replacing Farient Advisors, LLC. The Compensation Committee’s compensation consultant reports directly to the Compensation Committee and does not provide any services to the Company other than the Compensation Committee consulting services. The Compensation Committee has assessed the independence of its fiscal 2019 compensation
consultants consultant pursuant to the independence factors specified by the SEC rules (as incorporated into the NYSE listing standards) and
concluded that no conflict of interest exists that would prevent its compensation consultantsconsultant from independently representing the Compensation Committee. During the 20192020 fiscal year, Semler Brossy Consulting Group, LLC and Farient Advisors LLC performed the following services:
When making decisions on executive compensation, the Compensation Committee considers input from the Company’s Executive Vice President, Human Resources who works most closely with the Compensation Committee, both in providing information and analysis for review and in advising the Compensation Committee concerning compensation decisions (except as it relates specifically to her compensation and the compensation of our CEO). Our CEO reviews the performance of the NEOs (other than himself) and other executive officers and provides recommendations on executive officer compensation for the Compensation Committee’s consideration. The Compensation Committee reviews and discusses pay decisions related to the CEO in executive sessions without the CEO or any other members of management present.
36 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
COMPENSATION DECISION-MAKING PROCESS
Compensation Market Data and Peer Group
Each year, the Compensation Committee reviews the peer group companies used to assess compensation and performance with the advice of the independent compensation consultant. The Compensation Committee approved the use of data from two sources for fiscal 2019:2020: the Survey Group and the Peer Group.
The Survey Group is comprised of a broad group of retail and general industry companies that Lowe’s competes with for executive talent, generally with over $15 billion in annual revenue.
The Peer Group is comprised of retail and customer service companies selected for direct relevance to Lowe’s business using the following criteria:
Headquartered in the United States with publicly-traded securities listed on a major United States exchange;
Operating in the Consumer Discretionary or Food & Staples retail sectors;
Annual revenue greater than $15 billion; and
Retail or customer service-based business model focused on producing strong operating income and TSR growth.
The companies in the Peer Group for fiscal 20192020 were:
Amazon.com, Inc. | Best Buy Co., Inc. | Costco Wholesale Corporation | CVS Health Corporation | |||
Kohl’s Corporation | Macy’s, Inc. |
| Nordstrom, Inc. | |||
Starbucks Corporation | Target Corporation | The Home Depot, Inc. | The Kroger Co. | |||
The TJX Companies, Inc. | Walgreens Boots Alliance, Inc. | Walmart, Inc. |
In fiscal 2019, Nike, Inc. and Starbucks Corporation were added to theThe Peer Group due to their similar size, operations, complexity, store count, omni-channel business model, customer profile and spend and employer brand. Staples, Inc. was removedfor fiscal 2020 did not change from the Peer Group since it is no longer a publicly-traded company.prior year. The Compensation Committee agreed that the remaining companies in the Peer Group from fiscal 20182019 were relevant given our peer selection criteria and that the size of the Peer Group remained appropriate based on market practices.
PEER GROUP DATA FOR FISCAL 2019(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
PEER GROUP DATA FOR FISCAL 2020(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market | TSR | TSR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues (MM)
| Capitalization (MM)
| Operating Income (MM)
| 1-year
| 3-year
| 5-year
| Revenues (MM)
| Market Capitalization (MM)
| Operating
| 1-year
| 3-year
| 5-year
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75th Percentile | $ | 144,785 | $ | 142,470 | $ | 8,493 |
| 26.97% |
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| 91.84% |
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| 131.77% | $ | 153,149 |
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| $183,357 |
| $ | 8,711 |
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50th Percentile | $ | 75,356 | $ | 71,036 | $ | 4,218 |
| 22.77% |
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| 64.37% |
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| 77.66% | $ | 78,112 |
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| $ 90,725 |
| $ | 3,115 |
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| 19.34% |
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25th Percentile | $ | 32,741 | $ | 21,710 | $ | 2,257 |
| -8.60% |
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Lowe’s Companies, Inc. | $ | 71,309 | $ | 89,095 | $ | 4,018 |
| 21.99% |
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Percentile Ranking |
| 49.10% |
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| 51.90% |
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| 48.70% |
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| 65.60% |
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| 72.30% |
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| 87.80% |
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| 66.30% |
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Source: S&P Capital IQ
(1) | Revenues and operating income are as of each company’s latest fiscal year as of January |
At its November 20182019 meeting, the Compensation Committee reviewed thorough compensation benchmarks based on the two groups described above.above with compensation data obtained from publicly available proxy statements and proprietary survey data provided by Equilar and Aon. The Compensation Committee concluded that the benchmarks indicated that the NEOs’ target total direct compensation (“TDC”) approximated market median, with an opportunity to earn above market pay when the Company delivers results that exceed performance targets and below market pay when the Company performance falls short of performance targets.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 37 |
Compensation Discussion and Analysis
20192020 COMPENSATION ACTIONS
IV. 20192020 COMPENSATION ACTIONS
The Compensation Committee reviews and adjusts the NEO base salaries each year after it has considered competitive benchmark and relative compensation positioning, which includes consideration of market adjustments, internal alignment, experienceof:
Market adjustments;
Internal alignment;
Experience in the role, performancerole; and
Performance and any changes to roles or responsibilities.
As a result of the review, Mr.Messrs. Denton, McFarland and Boltz received a salary increaseincreases of 5.9% in March 2019 based on a review of market competitiveness of similar positions at peer companies, and Ms. Godbole received a 5.7% increase in October 2019 due to quick progress on many critical technology priorities.between 2.0%-4.0% for 2020.
In 2019,2020, the Compensation Committee approved the following base salaries for the NEOs:
Name and Position
| 2018 Base Salary
| 2019 Base Salary
| % Increase
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Marvin R. Ellison President and Chief Executive Officer | $ | 1,450,000 | $ | 1,450,000 | — | ||||||||||
David M. Denton Executive Vice President, Chief Financial Officer | $ | 925,000 | $ | 925,000 | — | ||||||||||
Joseph M. McFarland III Executive Vice President, Stores | $ | 750,000 | $ | 750,000 | — | ||||||||||
William P. Boltz Executive Vice President, Merchandising | $ | 675,000 | $ | 715,000 | 5.9 | % | |||||||||
Seemantini Godbole Executive Vice President, Chief Technology Officer | $ | 615,000 | $ | 650,000 | 5.7 | % |
Name and Position | 2019 Base Salary
| 2020 Base Salary
| % Increase
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Marvin R. Ellison President and Chief Executive Officer |
$ |
1,450,000 |
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$ |
1,450,000 |
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David M. Denton Executive Vice President, Chief Financial Officer |
$ |
925,000 |
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$ |
943,500 |
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2.0 |
% | ||||||
Joseph M. McFarland III Executive Vice President, Stores |
$ |
750,000 |
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$ |
780,000 |
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4.0 |
% | ||||||
William P. Boltz Executive Vice President, Merchandising |
$ |
715,000 |
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$ |
743,500 |
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4.0 |
% | ||||||
Marisa F. Thalberg Executive Vice President, Chief Brand & Marketing Officer |
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— |
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$ |
650,000 |
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— |
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Our annual incentive plan provides each NEO the opportunity to receive an annual cash award based on the Company’s achievement of predeterminedpre-determined financial and strategic goals. The formula for computing annual incentive payouts is as follows:
BASE SALARY | TARGET AWARD PERCENTAGE (% of Base Salary) |
PERFORMANCE GOAL ACHIEVEMENT LEVEL (% of Target Level)
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• Based on base salary eligible earnings in fiscal year 2020, with 2019 and 2020 base salaries prorated for the number of days in the fiscal year prior to and following the March 2020 effective date for 2020 base salary adjustments | X | • 200% of base salary for the CEO • 125% of base salary for the CFO • 100% of base salary for the other NEOs | X | • Threshold percentage for all NEOs was 25% • Maximum opportunity of 200% of target for | = | ANNUAL INCENTIVE AWARD EARNED |
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38 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
20192020 COMPENSATION ACTIONS
The following table describes the financial and strategic goals for the 20192020 annual incentive awards and the weighting assigned to each goal, which are the same for all of the NEOs:
Performance Metric
| Metric Weighting
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Description
| Performance Measured By
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Rewards NEOs on effective merchandising, driving market share gains, and the enhancement of the Company’s omni-channel sales and marketing
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Company’s |
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Rewards NEOs for profitability of Company operations and focuses management on operational efficiency and expense management
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Company’s |
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Inventory Improvement |
Rewards NEOs for focusing on improving inventory management, which generates cash flow for investing in the business and
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Cost of goods sold / average inventory and measured in days improvement over the prior year |
10% | |||||
Pro Sales Growth | Rewards NEOs for focusing on growing Pro market share, which drives long-term sustainable sales growth and profitability for the business | Percentage increase in Pro sales over the prior year in the U.S. home improvement market | 10% |
Strategic Goals Financial Goals
For 2019,In March 2020, the Compensation Committee replacedapproved the leadership behavior index with inventory improvementterms for our annual incentive awards, including the following new elements:
The Compensation Committee having consideredset the level of difficulty inherent in the goals, based the 20192020 target performance levels for financial goals based on the Company’s annual operating planmidpoint 2020 guidance provided to the market on February 26, 2020, which was above the target performance level and expected growth over prior year performance based on certainnon-GAAP financial measures. The target adjustedactual results for both sales goal for the 2019 annual incentive plan was set slightly below the median growth rate of a majority of the peers’ expected sales growth rate in 2019. The target adjustedand operating income goal for the 2019 annual incentive plan was aggressive and set higher than the growth rate of a majority of the peers’ expected operating income growth rates in 2019. For the inventory goal, threshold was based onfrom the prior fiscal year actual results, target wasyear. The Compensation Committee set the threshold performance targets for both sales and operating income at a 1.3 day improvement over the prior fiscal year actual results and maximum was a 3 day improvement over thelevel equal to prior fiscal year results.
The threshold Maximum performance as a percentage of target for adjusted sales increased by 200 basis points, and the maximum performance target decreased by 50 basis points. The threshold performance target for adjusted operating income increased by over 300 basis points and 140 basis points, respectively, from the prior fiscal year.
For the 2020 inventory goal, the Compensation Committee set threshold at zero days improvement, the same threshold as the prior fiscal year. Both target and maximum inventory days improvement were set higher than respective performance levels in the prior fiscal year.
For the 2020 Pro sales growth goal, the Compensation Committee set threshold at 4% growth over the prior year, target at 5% growth and maximum performance target was unchanged.at 8% growth.
The Compensation Committee’s objectives in administering our annual incentive plan are to cause incentive awards to be calculated on a comparable basis fromyear-to-year, and to ensure that plan participants are incentivized and rewarded appropriately for Company performance. For these reasons, the Compensation Committee may make adjustments to the achievement under each performance goal at its discretion.
The Compensation Committee adopted adjustment guidelines in January 2011 and refined the guidelines in November 2019 and March 2020. The adjustment guidelines generally relate to (i) amounts required to be reported separately under applicable accounting standards as extraordinary items, (ii) gains or losses as a result of changes in accounting principles, (iii) impact of changes in tax regulations, (iv) business results from unplanned acquisitions and divestitures, (v) costs and any othernon-recurring items related to acquisition and divestiture activity, (vi) unplanned debt restructuring costs or costs associated with change in capital structure, (vii) costs of significant unplanned initiatives or investments and (viii) significant changes to stock buyback programs or capital restructuring.
The adjustment guidelines include the following specific items as potential adjustments for consideration: (i) impact of foreign currency fluctuations; (ii) impact of tariffs and unanticipated regulatory and policy changes; (iii) asset impairments or write-offs, including store closing costs; (iv) restructuring costs; (v) litigation costs
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 39 |
Compensation Discussion and Analysis
2020 COMPENSATION ACTIONS
and settlements for historical transactions; (vi) timing impact for items accelerated or delayed nearyear-end; (vii) acts of God;God and (viii) impact of global pandemics and public health emergencies.
In March 2020,February 2021, the Compensation Committee reviewed the Company’s 20192020 performance results relative to the adjusted sales, adjusted operating income, inventory
improvement and inventoryPro sales growth goals to determine the annual incentive awards earned under the annual incentive plan for fiscal year 2019. Adjusted sales2020. The Company’s 2020 performance results for all annual incentiveaward metrics exceeded the maximum performance levels, and the Compensation Committee determined to not make any adjustments to the 2020 performance results.
Based on the performance metrics established by the Compensation Committee and the Company’s 2020 performance, the Compensation Committee determined that Lowe’s achieved 200% of the target incentive opportunities for the NEOs.
Based on results of $72.060 billion resulted in a payout above threshold but below target. Adjusted operating income results of $6.579 billion fell below the required payout threshold goal due toperformance metrics approved by the unprecedented impact of tariffs. ThroughoutCompensation Committee, the course of the year, the Company was able to take actions to mitigate the majority of this tariff impact on our operating results. However, given the timing of the tariff increases and scale of the impactNEOs earned annual incentive awards for 2020 as follows:
Name
| Base Salary(1)
| x
| Target Award %
| x
| Performance Goal
| =
| Actual Award Earned
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Marvin R. Ellison | $ | 1,450,000 |
| 200 | % |
| 200 | % | $ | 5,800,000 | |||||||||||||||||||||||||
David M. Denton | $ | 941,010 |
| 125 | % |
| 200 | % | $ | 2,352,524 | |||||||||||||||||||||||||
Joseph M. McFarland III | $ | 775,962 |
| 100 | % |
| 200 | % | $ | 1,551,923 | |||||||||||||||||||||||||
William P. Boltz | $ | 739,663 |
| 100 | % |
| 200 | % | $ | 1,479,327 | |||||||||||||||||||||||||
Marisa F. Thalberg | $ | 633,929 |
| 100 | % |
| 200 | % | $ | 1,267,857 |
(1) | Based on base salary eligible earnings in fiscal year 2020, with 2019 and 2020 base salaries prorated for the number of days in the fiscal year prior to and following the March 2020 effective date for 2020 base salary adjustments. For purposes of determining her annual incentive award, Ms. Thalberg’s target annual base salary of $650,000 was prorated based on her start date. |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
20192020 COMPENSATION ACTIONS
on our operating results, the Committee determined to provide partial relief and make an adjustment of $74 million for incentive compensation performance achievement. Following the adjustment approved by the Committee, the adjusted
operating income achievement result of $6.653 billion resulted in a minimum payout at threshold. The inventory results fell below the required payout threshold goal, resulting in no payout for the metric under the plan.
Based on the performance metrics established byIn recent years, the Compensation Committee has consistently determined the Company’s 2019 performanceterms of long-term equity awards in March and granted such awards as of the aforementioned adjustments,first day in April. In keeping with this historical practice, in March 2020, the Compensation Committee determined that Lowe’s achieved approximately 43.4% of the target incentive opportunities for the NEOs.
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Based on results of the performance metrics approved and adjusted by the Compensation Committee, the NEOs earned annual incentive awards for 2019 as follows:
Name
| Base Salary(1)
| x
| Target Award %
| x
| Performance Goal
| =
| Actual Award Earned
| ||||||||||||||||||||||||||||
Marvin R. Ellison | $ | 1,450,000 |
| 200 | % |
| 43.4 | % | $ | 1,258,657 | |||||||||||||||||||||||||
David M. Denton | $ | 925,000 |
| 125 | % |
| 43.4 | % | $ | 501,840 | |||||||||||||||||||||||||
Joseph M. McFarland III | $ | 750,000 |
| 100 | % |
| 43.4 | % | $ | 325,515 | |||||||||||||||||||||||||
William P. Boltz | $ | 715,000 |
| 100 | % |
| 43.4 | % | $ | 310,324 | |||||||||||||||||||||||||
Seemantini Godbole | $ | 615,000 |
| 100 | % |
| 43.4 | % | $ | 266,922 |
|
Long-Term Equity Awards
In March each year, the Compensation Committee approves a target long-term equity award for each executive officer, expressed as a percentage of base salary. salary, and approved the equity award mix for the NEOs of:
50% PSUs
25% stock options
25% time-vested RSAs.
Target awards are determined based on each executive officer’s position and level of responsibility, the Company’s historical grant practices and market benchmarks reviewed annually by the Compensation Committee. For fiscal 2019,2020, target awards as a percentage of base salary increased from 565% to 615% for the CEO to bring Mr. Ellison’s total pay closer to market median and remained the same as the prior year for the NEOs, including the CEO.other NEOs.
In March 2019,2020 Award Mix. For 2020, the Compensation Committee approved equity awards fordid not change the NEOs granted as a mix of 50% PSUs, 25% stock options and 25% time-vested RSAs. The award mix did not changeand weightings from the prior year. The Compensation Committee believes the mix of equity award types reflects an appropriate balance between providing incentive compensation for the achievement of Company-specific performance measures (PSUs), increases in the market value of the Common Stock (stock options) and retention (RSAs).
2020 PSU Grant Approval Process and COVID-19. Consistent with typical practice, at its March meeting, the Compensation Committee also approved the grant of stock options and RSAs to be granted on April 1, 2020. However, in light of market uncertainty with respect to operating conditions due to the rapidly changing business environment precipitated by the COVID-19 pandemic at that time, the Compensation Committee decided to defer granting and finalizing the performance goals of the PSU awards to be better able to establish rigorous performance metrics and targets that would be appropriate in the new retail business environment. In August 2020, after extensive discussion, the Compensation Committee established performance criteria for the PSUs awarded in 2020 (the “2020 PSUs”), as discussed more fully below, and approved the PSUs to be granted on September 1, 2020. Consistent with our typical practice and in alignment with the grant of RSAs and stock options that the Compensation Committee had approved in March, the number of PSUs awarded to our NEOs was determined by dividing the dollar value established for PSUs in March by the closing price of our Common Stock on April 1, 2020.
The following table reflects the target award value for 2019, as well as the actual grant valueof long-term equity awarded to each NEO:NEO for 2020 as a percentage of base salary and in dollars. The grant date fair value for PSUs reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table is higher under accounting and SEC rules due to the timing of the PSU grants. Additionally, given PSUs are disclosed in the Grants of Plan-Based Awards Table based on the grant date fair value, the actual value mix provided to executives is weighted more heavily towards PSUs than the targeted equity mix, resulting in a significantly larger portion of the equity awards as performance-based and at-risk.
2020 Target Long-Term | Target Total Equity | |||||||||||||||||||
Name
| 2019 Target Long-Term % of Base Salary
| Equity Awards ($000s)
| % of Base Salary(1)
| Award Value ($000s)
| ||||||||||||||||
Marvin R. Ellison |
| 565 | % | $ | 8,193 |
| 615 | % | $ | 8,918 | ||||||||||
David M. Denton |
| 450 | % | $ | 4,163 |
| 450 | % | $ | 4,246 | ||||||||||
Joseph M. McFarland III |
| 400 | % | $ | 3,000 |
| 400 | % | $ | 3,120 | ||||||||||
William P. Boltz |
| 400 | % | $ | 2,860 |
| 400 | % | $ | 2,974 | ||||||||||
Seemantini Godbole(1) |
| 300 | % | $ | 1,845 | |||||||||||||||
Marisa F. Thalberg |
| 300 | % | $ | 1,950 |
(1) | Base salary considered for long-term incentive plan purposes is as of April 1, |
2020 PSU Performance Metrics. The Compensation Committee determined that the PSUs awarded in 2020 will be earned based on the Company’s ROIC for the three-year performance period of fiscal years 2020 through 2022 and the relative TSR modifier. As part of the Compensation Committee’s decision to grant the 2020 PSUs in September 2020, the Compensation Committee considered the Company’s operational performance for the first half of the fiscal year
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
20192020 COMPENSATION ACTIONS
Theand the new retail business environment, and determined to increase the threshold, target and maximum ROIC performance goals to be higher than the goals originally considered in March 2020. Notably, the target ROIC performance level was set in the top quartile of the Peer Group based on projected ROIC at the beginning of fiscal 2020 and was set 7% higher than the target ROIC performance level for the 2019-2021 PSUs.
Recognizing that the Company was in the midst of a multi-year business transformation, as well as the uncertainty that remained around potential long-term effects of the COVID-19 pandemic on the Company’s industry, the Compensation Committee determined thatestablished threshold as a wider range of performance below target, with a correspondingly lower payout potential.
As shown below, the PSUs awarded in 2019 will be earned2020 performance award, which includes a relative TSR modifier based on the Company’s ROIC for3-year percentage spread from the three-yearS&P 500 Index, now begins at a 17% payout at threshold performance. The 200% payout at maximum performance periodremains unchanged.
For purposes of fiscal years 2019 through 2021 and the relative TSR modifier.PSUs, ROIC is computed by dividing the Company’s net operating profit after taxes for the year by the average of the Company’s invested capital as of the beginning and end of the fiscal year. The return percentages for each fiscal year in the performance period will beare averaged to yield a ROIC measure for the three-year performance period. The Compensation Committee believes strong ROIC performance is aligned with creating long-term value for the Company’s shareholders. Specifically, ROIC is a comprehensive long-term financial metric that incorporates both operating profit and balance sheet performance in the calculation, incenting management to generate sustained profitable growth over time. This metric also incentivizes the effective allocation of capital toward future growth investments.
The chart below illustrates how the relative TSR modifier expands the 2020 PSU performance award to range from 34%17% of target at threshold performance to 200% of target at maximum performance:
PSU Performance Level
| Payout Percentage (% of Target Award)(1)
| Lowe’s 3-Year TSR Percentage Spread from S&P 500 Index
| Modifier(1)
| PSU Performance Level
| Final Payout Opportunity (% of Target Award)(1)
|
PSU Performance Level
| Payout Percentage (% of Target Award)(1)
| Lowe’s 3-Year TSR Percentage Spread from S&P 500 Index
| Modifier(1)
| PSU Performance Level
| Final Payout Opportunity (% of Target Award)(1)
| |||||||||||||||||||||||||
PSUs | Maximum | 150% | ³+20% | 1.33x | Maximum | 200% | Maximum | 150% | ³+20% | 1.33x | Maximum | 200% | ||||||||||||||||||||||||
Granted | Target | 100% | x | 0% | 1.00x | = | Target | 100% | Target | 100% | x | 0% | 1.00x | = | Target | 100% | ||||||||||||||||||||
Threshold | 50% | £ (20)% | 0.67x | Threshold | 34% | Below Target | 75% | Below Target | 75% | |||||||||||||||||||||||||||
<Threshold | 0% | <Threshold | 0% | Threshold | 25% | £ (20)% | 0.67x | Threshold | 17% | |||||||||||||||||||||||||||
<Threshold | 0% | <Threshold | 0% |
(1) | Performance between discrete points will be interpolated; TSR modifier cannot be lower than 0.67x or higher than 1.33x; if |
20172018 PSU Awards.The performance period for the PSUs awarded in 20172018 (the “2017“2018 PSUs”) ended on January 31, 2020,29, 2021, the last day of the 20192020 fiscal year. The 20172018 PSUs were eligible to be earned based on the Company’s average RONCAA for fiscal years 20172018 through 2019.2020. The NEOs,CEO is the only NEO who all joinedreceived the grant of the 2018 PSUs. Given their start dates with the Company, in 2018,the other NEOs did not receive the grant2018 PSU award. Company RONCAA performance for the 2018 PSU awards fell below the threshold level, and therefore, no shares of the 2017 PSUs.Common Stock were earned.
Special Incentive GrantChief Brand and Marketing Officer Compensation
In October 2019, in addition toJanuary 2020, the Compensation Committee approved Ms. Thalberg’s annual compensation and certain sign-on cash and equity awards as the Company’s Executive Vice President, Chief Brand and Marketing Officer. Ms. Thalberg’s target total compensation package includes a base salary increase described above,of $650,000, target annual incentive opportunity of 100% of base salary and long-term incentive target of 300% of base salary. Additionally, the CompanyCompensation Committee approved a $250,000 cash signing bonus and, to offset equity compensation forfeited by Ms. Thalberg upon departure from her former employer, one-timesign-on equity awards with a grant value of $750,000 consisting of $375,000 in time-based RSAs valued at approximately $1,000,000 to Ms. Godbole, which vest fully on October 1, 2022. Many of the initiativesand $375,000 in our strategic plan have IT dependencies. Ms. Godbole and her team are vital to the success of these critical technology initiatives necessary to develop and execute business strategies, obtain superior results and build long-term shareholder value, and this grant reflects her critical role in support of these initiatives.stock options.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
20192020 COMPENSATION ACTIONS
The Benefit Restoration Plan, adopted by the Company in August 2002, is intended to provide NEOs and other qualifying executives with benefits lost due to qualified plan limitations imposed by the Code that are equivalent to those received by all other employees under the Company’s qualified retirement plans. The Company makes matching contributions to each executive officer’s Benefit Restoration Plan account under the same matching contribution formula based on the executive’s elective contribution to the 401(k) Plan, regardless of the Code limitations.
The Compensation Committee approved a severance plan for senior executives (the “Severance Plan”) in August 2018 that covers all current NEOs other than Mr. Ellison. The terms of the Severance Plan are described on page 49.51. Mr. Ellison’s severance entitlements are governed by his offer letter, the terms of which are described on page 4951.
All NEOs are also parties to agreements that provide severance benefits in the context of achange-in-control of the Company (the“Change-in-Control Agreements”). TheChange-in-Control Agreements are described on page 49.
51.
Since 2010, NEOs and other qualifying executives have been eligible for an annual executive physical to assess overall health, screening and risk reviews for chronic diseases and other specialty consultations, which helps protect the investment we make in these key individuals, at either the Novant or Atrium Health Executive Health Programs or concierge physician provider. In addition, these executives are eligible for a reimbursement of up to $12,000 for financial and tax planning services.
The Company owns and operates business aircraft to allow employees to safely and efficiently travel for business purposes and to allow limited personal travel for certain executives. The corporate aircraft allows executive officers to be far more productive than commercial flights since the corporate aircraft provides a confidential, safe and productive environment in which to conduct business. The personal usage of the corporate aircraft by the President and Chief Executive Officer is currently capped at $200,000 of incremental cost per year. As set forth in the Summary Compensation Table on page 45,46, Mr. Ellison’s personal usage of corporate aircraft in 20192020 accounted for less than twentythirty percent of the cap.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Discussion and Analysis
OTHER COMPENSATION POLICIES
V. OTHER COMPENSATION POLICIES
Each November, the Compensation Committee performs a risk assessment of our compensation programs, which includes a targeted audit and analysis of the risk associated with the Company’s executive compensation program conducted by the Compensation Committee’s independent compensation consultant. In its annual review, the Compensation Committee considers the balance between pay components, measures of performance, magnitude of pay, pay caps, plan time horizons and over-lapping performance cycles, program design and administration and other features that are designed to mitigate risk (e.g., stock ownership guidelines and clawback policy). Following its review, the Compensation Committee has determined that our compensation practices and policies do not incentivize inappropriate or excessive risk taking behavior by Company executives. Management and the Compensation Committee have determined that our compensation practices and policies do not create risks that are reasonably likely to have a material adverse effect on the Company.
The Compensation Committee strongly believes that executive officers should own appropriate amounts of Common Stock to align their interests with those of the Company’s shareholders. The Company’sExecutives can acquire Common Stock through our 401(k) Plan, employee stock purchase plan and long-term incentive plan provide ample opportunity for executives to acquire Common Stock.awards.
The Compensation Committee has adopted stock ownership and retention guidelines for all senior executives in the Company. The ownership targets under the current guidelines are as follows:
Position
|
Target Ownership (Multiple of Base Salary)
| ||||
President and Chief Executive Officer | 6.0x | ||||
Executive Vice Presidents | 4.0x | ||||
Senior Vice Presidents | 2.0x |
The Compensation Committee reviews compliance with the guidelines annually at its March meeting.annually. The Company determines the number of shares of Common Stock required to be held by each senior officer by dividing the ownership requirement (expressed as a dollar amount) by the average closing price of the Common Stock for the preceding fiscal year. Shares of Common Stock are counted towards ownership as follows:
deferred compensation and employee stock purchase plans; |
Senior officers may not sell the net shares resulting from an RSA or PSU vesting event or stock option exercise until the ownership requirement has been satisfied. The CEO isAll of our NEOs are in compliance with the stock ownership guidelines, except for Ms. Thalberg, who joined the Company in 2020 and the other NEOs areis working towards compliance.
Oversight of Stock Ownership, No Hedging or Pledging and Clawback of Incentive Compensation
The Compensation Committee has always supported transparent governance and compliance practices and protecting the interests of the Company’s shareholders. To strengthen the Company’s practices in these areas, the Company has (i) controls over transactions in the Company’s securities and (ii) a policy to claw back incentive compensation in the event an executive officer engaged in fraud or intentional misconduct resulting in significant financial or reputational harm, or resulting in a significant restatement of the Company’s financial results.
The Company prohibits all its employees, officers and directors from:
The above prohibitions apply to all shares of Common Stock held directly or indirectly or granted as part of any employee’s, officer’s or director’s compensation.
44 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Compensation Discussion and Analysis
COMPENSATION COMMITTEE REPORT
Trading in Common Stock, including stock held in an account under the Lowe’s 401(k) Plan, by an executive and the executive’s immediate family members who reside with the executive or whose transactions are subject to the executive’s influence or control, is limited to open window trading periods designated by the Company’s General Counsel. In addition, all transactions by an executive involving Common Stock must bepre-cleared by the General Counsel.
Compensation Discussion and Analysis
COMPENSATION COMMITTEE REPORT
The clawback policy, which was expanded in January 2020 to cover material financial or reputational harm, is a part of the Company’s Corporate Governance Guidelines. The policy provides the Board the right to
recover for the benefit of the Company any portion of incentive compensation that was provided to any executive officer (whether or not such compensation has already been paid or vested), if the Board, in its sole discretion, determines that (i) the incentive compensation was based on the Company having met or exceeded specific performance targets that were satisfied due to the executive officer engaging in fraud or intentional misconduct, including, but not limited to, conduct resulting in a significant restatement of the Company’s financial results or (ii) the executive officer engaged in any intentional misconduct that results in significant financial or reputational harm to the Company.
Tax Deductibility of Compensation
Section 162(m) of the Code limits the amount of compensation paid to the NEOs that may be deducted by the Company for federal income tax purposes in any fiscal year to $1 million.
Prior to the Tax Cuts and Jobs Act of 2017, certain performance-based compensation approved by the Company’s shareholders and administered by a committee composed entirely of outside directors was not subject to the $1 million deduction limit. The Tax Cuts and Jobs Act removed the performance-based compensation exception for any agreements entered into after November 2, 2017. A large portion of our executive compensation, including our annual incentives and long-term incentive awards in the form of stock options and PSUs, were intended to qualify as performance-based compensation under Section 162(m) of the Code. Grants made after November 2, 2017, however, will no longer be subject to the performance-based exception for the $1 million deduction limit under the Tax Cuts and Jobs Act of 2017.
Historically, the Compensation Committee had structured, whenever practical, compensation programs to make the compensation paid thereunder fully deductible. However, the Compensation Committee has always reserved the right to grant awards or enter into compensation arrangements under which payments were not deductible in order to promote the Company’s corporate objectives and strategies.
VI. COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management of the Company. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report onForm 10-K for the fiscal year ended January 31, 2020.29, 2021.
Eric C. Wiseman,Angela F. Braly, Chair
Raul Alvarez
David H. Batchelder
Angela F. Braly
Sandra B. Cochran
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
Summary Compensation Table
This table shows the base salary, annual incentive compensation and all other compensation paid to the NEOs. The table also shows the grant date fair value of the stock and option awards made to the NEOs.
Name and Principal Position
| Year
| Salary ($)
| Bonus
| Stock
| Option
| Non-Equity Incentive Plan
| All Other
| Total ($)
| Year
| Salary ($)(1)
| Bonus
| Stock
| Option
| Non-Equity Incentive Plan
| All Other
| Total ($)
| ||||||||||||||||||||||||||||||||||||||||||||||||
Marvin R. Ellison President and Chief Executive Officer
| 2019 | 1,450,000 | 0 | 6,410,644 | 2,074,702 | 1,258,657 | 427,366 | 11,621,369 |
| 2020
|
|
| 1,450,000
|
|
| 0
|
|
| 13,532,435
|
|
| 2,233,797
|
|
| 5,800,000
|
|
| 59,649
|
|
| 23,075,881
|
| ||||||||||||||||||||||||||||||||
| 2018
|
| 864,423 | 1,712,912 | 7,643,542 | 3,881,205 | 0 | 200,709 | 14,302,791 |
| 2019
|
|
| 1,450,000
|
|
| 0
|
|
| 6,410,644
|
|
| 2,074,702
|
|
| 1,258,657
|
|
| 427,366
|
|
| 11,621,369
|
| |||||||||||||||||||||||||||||||
Marvin R. Ellison President and Chief Executive Officer |
| 2018
|
|
| 864,423
|
|
| 1,712,912
|
|
| 7,643,542
|
|
| 3,881,205
|
|
| 0
|
|
| 200,709
|
|
| 14,302,791
|
| ||||||||||||||||||||||||||||||||||||||||
| 2020
|
|
| 941,010
|
|
| 0
|
|
| 6,442,980
|
|
| 1,063,554
|
|
| 2,352,524
|
|
| 12,000
|
|
| 10,812,068
|
| |||||||||||||||||||||||||||||||||||||||||
David M. Denton Executive Vice President, Chief Financial Officer
| 2019 | 925,000 | 0 | 3,257,042 | 1,054,208 | 501,840 | 39,092 | 5,777,182 |
| 2019
|
|
| 925,000
|
|
| 0
|
|
| 3,257,042
|
|
| 1,054,208
|
|
| 501,840
|
|
| 39,092
|
|
| 5,777,182
|
| ||||||||||||||||||||||||||||||||
| 2018
|
| 195,673 | 1,000,000 | 890,406 | 879,205 | 71,815 | 69,547 | 3,106,646 |
| 2018
|
|
| 195,673
|
|
| 1,000,000
|
|
| 890,406
|
|
| 879,205
|
|
| 71,815
|
|
| 69,547
|
|
| 3,106,646
|
| |||||||||||||||||||||||||||||||
Joseph M. McFarland III Executive Vice President, Stores
| 2019 | 750,000 | 0 | 2,347,848 | 759,583 | 325,515 | 176,225 | 4,359,171 |
| 2020
|
|
| 775,962
|
|
| 0
|
|
| 4,734,560
|
|
| 781,514
|
|
| 1,551,923
|
|
| 2,400
|
|
| 7,846,359
|
| ||||||||||||||||||||||||||||||||
| 2018
|
| 360,577 | 875,000 | 1,225,112 | 1,222,220 | 0 | 52,843 | 3,735,752 |
| 2019
|
|
| 750,000
|
|
| 0
|
|
| 2,347,848
|
|
| 759,583
|
|
| 325,515
|
|
| 176,225
|
|
| 4,359,171
|
| |||||||||||||||||||||||||||||||
Joseph M. McFarland III Executive Vice President, Stores |
| 2018
|
|
| 360,577
|
|
| 875,000
|
|
| 1,225,112
|
|
| 1,222,220
|
|
| 0
|
|
| 52,843
|
|
| 3,735,752
|
| ||||||||||||||||||||||||||||||||||||||||
2019 | 709,615 | 0 | 2,237,661 | 724,108 | 310,324 | 47,063 | 4,028,771 |
| 2020
|
|
| 739,663
|
|
| 0
|
|
| 4,512,954
|
|
| 744,940
|
|
| 1,479,327
|
|
| 76,674
|
|
| 7,553,557
|
| |||||||||||||||||||||||||||||||||
William P. Boltz Executive Vice President, Merchandising
|
| 2019
|
|
| 709,615
|
|
| 0
|
|
| 2,237,661
|
|
| 724,108
|
|
| 310,324
|
|
| 47,063
|
|
| 4,028,771
|
| ||||||||||||||||||||||||||||||||||||||||
Seemantini Godbole Executive Vice President, Chief Information Officer | 2019 | 626,442 | 0 | 2,443,212 | 467,223 | 266,922 | 209,323 | 4,013,122 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marisa F. Thalberg Executive Vice President, Chief Brand & Marketing Officer |
| 2020
|
|
| 637,500
|
|
| 250,000
|
|
| 3,334,062
|
|
| 864,192
|
|
| 1,267,857
|
|
| 220,691
|
|
| 6,574,302
|
|
(1) | The amount reported in this column for Ms. Thalberg represents base salary received based on her start date. |
(2) | The amount reported in this column for Ms. Thalberg represents a sign-on bonus of $250,000 provided under her respective offer letter. |
(3) | The value of the stock and option awards presented in the table equals the grant date fair value of the awards for financial reporting purposes (excluding the effect of estimated forfeitures) computed in accordance with FASB ASC Topic 718. For financial reporting purposes, the Company determines the fair value of a stock or option award accounted for as an equity award on the grant date. The Company recognizes an expense for a stock or option award over the vesting period of the award. PSUs are expensed over the vesting period based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment in the period of the change. NEOs receive dividends on unvested shares of time-vested RSAs during the vesting period. Dividends are not paid or accrued on unearned PSUs. The right to receive dividends has been factored into the determination of the fair values used in the amounts presented above. |
The assumptions used to calculate the grant date fair value of the option awards granted in fiscal 2020 are as follows: expected volatility of 28.31%, expected dividend yield of 1.77%, an assumed risk-free interest rate of .51% and expected term of 7 years. See Note |
The amounts reported in this column include the sum of the grant date fair values of PSUs and RSAs. The |
The amounts shown in this column reflect payments made under the Company annual incentive plan, which paid out |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
Amounts presented consist of the following for the |
Company Matching
| Company Matching
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name
| 401(k)
| Benefit Restoration ($)
| Reimbursement of Tax ($)
| Personal Use of Aircraft
| Cost of Required ($)
| Relocation(i)
| Total
| 401(k)
| Benefit Restoration ($)
| Reimbursement of Tax ($)
| Personal Use of Aircraft
| Cost of Required ($)
| Relocation(i)
| Total
| ||||||||||||||||||||||||||||||||||||||||||
Mr. Ellison | 0 | 0 | 0 | 36,150 | 3,516 | 387,700 | 427,366 |
| 0
|
|
| 0
|
|
| 0
|
|
| 56,548
|
|
| 3,040
|
|
| 61
|
|
| 59,649
|
| ||||||||||||||||||||||||||||
Mr. Denton | 0 | 0 | 12,000 | 0 | 0 | 27,092 | 39,092 |
| 0
|
|
| 0
|
|
| 12,000
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 12,000
|
| ||||||||||||||||||||||||||||
Mr. McFarland III | 0 | 0 | 0 | 4,242 | 0 | 171,983 | 176,225 |
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 2,400
|
|
| 0
|
|
| 2,400
|
| ||||||||||||||||||||||||||||
Mr. Boltz | 14,238 | 0 | 0 | 13,358 | 3,266 | 16,201 | 47,063 |
| 8,875
|
|
| 0
|
|
| 0
|
|
| 65,020
|
|
| 2,778
|
|
| 0
|
|
| 76,674
|
| ||||||||||||||||||||||||||||
Ms. Godbole | 3,899 | 0 | 2,750 | 22,057 | 0 | 180,617 | 209,323 | |||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Thalberg
|
| 2,125
|
|
| 0
|
|
| 8,087
|
|
| 33,511
|
|
| 0
|
|
| 176,967
|
|
| 220,691
|
|
All amounts presented above, other than the amount for personal use of corporate aircraft, equal the actual cost to the Company of the particular benefit or perquisite provided. The amount presented for personal use of corporate aircraft is equal to the incremental cost to the Company of such use. Incremental cost includes fuel, landing and ramp fees and other variable costs directly attributable to personal use. Incremental cost does not include an allocable share of the fixed costs associated with the Company’s ownership of the aircraft.
|
(i) |
|
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
Grants of Plan-Based Awards
This table presents the potential annual incentive awards the NEOs were eligible to earn in fiscal 2019,2020, as well as the stock options, RSAs and PSUs awarded to the NEOs in fiscal 20192020 and the grant date fair value of those awards.
Name | Grant Date | Date of Committee Action | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Price of | Grant Awards ($) | Grant
| Date of
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other
| All Other
| Exercise or Price of
| Grant Awards ($)(5)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold
| Target
| Maximum
| Threshold
| Target
| Maximum
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Ellison | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | 725,000 | 2,900,000 | 7,000,000 | 725,000 | 2,900,000 | 5,800,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/1/2019 | 3/22/2019 | 12,599 | 37,610 | 75,031 | 4,362,760 | 9/1/2020 | 8/21/2020 | 9,287 | 55,447 | 110,616 | 11,302,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2019 | 3/22/2019 | 82,460 | 108.93 | 2,074,702 | 4/1/2020 | 3/24/2020 | 120,014 | 80.42 | 2,233,797 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 4/1/2019 | 3/22/2019 | 18,800 | 2,047,884 |
| 4/1/2020
|
|
| 3/24/2020
|
|
|
|
|
|
|
|
| 27,724
|
|
|
|
| 2,229,564
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Denton | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | 289,063 | 1,156,250 | 2,832,813 | 294,066 | 1,176,262 | 2,352,524 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/1/2019 | 3/22/2019 | 6,401 | 19,110 | 38,124 | 2,216,760 | 9/1/2020 | 8/21/2020 | 4,421 | 26,399 | 52,666 | 5,381,436 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2019 | 3/22/2019 | 41,900 | 108.93 | 1,054,208 | 4/1/2020 | 3/24/2020 | 57,141 | 80.42 | 1,063,554 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 4/1/2019 | 3/22/2019 | 9,550 | 1,040,282 |
| 4/1/2020
|
|
| 3/24/2020
|
|
|
|
|
|
|
|
| 13,200
|
|
|
|
| 1,061,544
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. McFarland III | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | 187,500 | 750,000 | 1,837,500 | 193,990 | 775,962 | 1,551,923 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/1/2019 | 3/22/2019 | 4,612 | 13,770 | 27,471 | 1,597,320 | 9/1/2020 | 8/21/2020 | 3,249 | 19,399 | 38,701 | 3,954,486 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2019 | 3/22/2019 | 30,190 | 108.93 | 759,583 | 4/1/2020 | 3/24/2020 | 41,988 | 80.42 | 781,514 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 4/1/2019 | 3/22/2019 | 6,890 | 750,528 |
| 4/1/2020
|
|
| 3/24/2020
|
|
|
|
|
|
|
|
| 9,700
|
|
|
|
| 780,074
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Boltz | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | 178,750 | 715,000 | 1,751,750 | 184,916 | 739,663 | 1,479,327 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/1/2019 | 3/22/2019 | 4,398 | 13,130 | 26,194 | 1,523,080 | 9/1/2020 | 8/21/2020 | 3,097 | 18,491 | 36,889 | 3,769,390 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2019 | 3/22/2019 | 28,780 | 108.93 | 724,108 | 4/1/2020 | 3/24/2020 | 40,023 | 80.42 | 744,940 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 4/1/2019 | 3/22/2019 | 6,560 | 714,581 |
| 4/1/2020
|
|
| 3/24/2020
|
|
|
|
|
|
|
|
| 9,246
|
|
|
|
| 743,563
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Godbole | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Thalberg | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | 153,750 | 615,000 | 1,506,750 | 158,482 | 633,929 | 1,267,857 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSUs | 4/1/2019 | 3/22/2019 | 2,837 | 8,470 | 16,897 | 982,520 | 9/1/2020 | 8/21/2020 | 2,030 | 12,124 | 24,187 | 2,471,477 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2019 | 3/22/2019 | 18,570 | 108.93 | 467,223 | 4/1/2020 | 1/30/2020 | 20,187 | 80.42 | 375,737 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4/1/2020 | 3/24/2020 | 26,243 | 80.42 | 488,456 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 4/1/2019 | 3/22/2019 | 4,230 | 460,774 | 4/1/2020 | 1/30/2020 | 4,664 | 375,079 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSAs | 10/1/2019 | 9/20/2019 | 9,130 | 999,918 |
| 4/1/2020
|
|
| 3/24/2020
|
|
|
|
|
|
|
|
| 6,062
|
|
|
|
| 487,506
|
|
(1) | The NEOs are eligible to earn annual incentive compensation under the Company’s annual incentive plan for each fiscal year based on the Company’s achievement of one or more performance measures established at the beginning of the fiscal year by the Compensation Committee. For the |
(2) | The PSUs reported in this column are earned based on the Company’s ROIC over a three-year performance period and a relative TSR modifier. No dividends will accrue or be paid on the PSUs during the three-year performance period. The terms of the PSUs are described in more detail beginning on page |
(3) | The time-vested RSAs vest on the third anniversary of the grant date or, if earlier, the date the NEO terminates employment due to death or disability. For the NEOs who meet the retirement provisions of the applicable RSA grant agreements, their awards will vest upon retirement, but will not be transferred to the NEO until the original vesting date of the award. Retirement for this purpose is defined as the voluntary termination of employment with the approval of the Board at least six months after the grant date and on or after the date the NEO has satisfied an age and service requirement, provided the NEO has given the Board advance notice of such retirement. Messrs. Ellison, Denton, McFarland and Boltz and Ms. |
48 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
Compensation Tables
(4) | All options have a10-year term and an exercise price equal to the closing price of the Common Stock on the grant date. The options vest in three annual installments on each of the first three anniversaries of the grant date or, if earlier, the date the NEO terminates employment due to death or disability. The options granted to the NEOs will become exercisable in the event of retirement, as defined in the applicable grant agreement, in accordance with the original three-year vesting schedule and remain exercisable until their expiration dates. |
(5) | ||||||||
Amounts represent the grant date fair value of awards granted in fiscal 2020 for financial reporting purposes (excluding the effect of estimated forfeitures) computed in accordance with FASB ASC Topic 718. The assumptions used to calculate the grant date fair value of the option awards granted are as follows: expected volatility of 28.31%, expected dividend yield of 1.77%, an assumed risk-free interest rate of .51% and expected term of 7 years. The assumptions made in the valuation of the PSU awards are set forth in Note 11, “Accounting for Share-Based Payments,” to the Company’s consolidated financial statements in its Annual Report on Form | for the fiscal year ended January 29, 2021. The valuation of the time-vested RSAs is based on the closing price of our Common Stock on the grant date. |
Compensation Tables
Outstanding Equity Awards at FiscalYear-End
This table presents information about unearned or unvested stock and option awards held by the NEOs on January 31, 2020.29, 2021.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||
Mr. Ellison | 55,414 | 110,826 | (4) | 94.87 | 7/2/2028 | 70,090 | 8,147,262 | 69,166 | 8,039,856 | 110,827 | 55,413(4) | 94.87 | 7/2/2028 | 97,814 | 16,320,266 | 204,792 | 34,169,545 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 82,460 | (5) | 108.93 | 4/1/2029 | 27,487 | 54,973(5) | 108.93 | 4/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 120,014(6) | 80.42 | 4/1/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Denton | 13,567 | 27,133 | (6) | 92.27 | 1/2/2029 | 19,200 | 2,231,808 | 25,416 | 2,954,356 | 27,134 | 13,566(7) | 92.27 | 1/2/2029 | 32,400 | 5,405,940 | 90,790 | 15,148,312 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
13,967 | 27,933(5) | 108.93 | 4/1/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 41,900 | (5) | 108.93 | 4/1/2029 | — | 57,141(6) | 80.42 | 4/1/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. McFarland III | 14,604 | 29,206 | (7) | 114.07 | 10/1/2028 | 17,630 | 2,049,311 | 18,314 | 2,128,819 | 29,207 | 14,603(8) | 114.07 | 10/1/2028 | 27,330 | 4,560,011 | 66,172 | 11,040,798 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 30,190 | (5) | 108.93 | 4/1/2029 | 10,064 | 20,126(5) | 108.93 | 4/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 41,988(6) | 80.42 | 4/1/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Boltz | 9,390 | 18,780 | (7) | 114.07 | 10/1/2028 | 13,460 | 1,564,590 | 17,462 | 2,029,783 | 18,780 | 9,390(8) | 114.07 | 10/1/2028 | 22,706 | 3,788,496 | 63,083 | 10,525,399 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 28,780 | (5) | 108.93 | 4/1/2029 | 9,594 | 19,186(5) | 108.93 | 4/1/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Godbole | 7,617 | 15,233 | (6) | 92.27 | 1/2/2029 | 18,780 | 2,182,987 | 11,265 | 1,309,444 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 18,570 | (5) | 108.93 | 4/1/2029 | — | 40,023(6) | 80.42 | 4/1/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Thalberg | — | 26,243(6) | 80.42 | 4/1/2030 | 10,726 | 1,789,633 | 24,187 | 4,035,601 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 20,187(6) | 80.42 | 4/1/2030 |
(1) | The unvested RSAs vest as follows: |
7/2/2021 | 10/1/2021 | 1/2/2022 | 4/1/2022 |
| Total | 4/1/2021 | 7/2/2021 | 10/1/2021 | 1/2/2022 | 4/1/2022 | 4/1/2023 | Total | ||||||||||||||||||||||||||||||||||||||||
Mr. Ellison |
| 51,290 |
|
| — |
|
| — |
|
| 18,800 |
|
| — |
|
| 70,090 |
|
| — |
|
| 51,290 |
|
| — |
|
| — |
|
| 18,800 |
|
| 27,724 |
|
| 97,814 |
| |||||||||||||
Mr. Denton |
| — |
|
| — |
|
| 9,650 |
|
| 9,550 |
|
| — |
|
| 19,200 |
|
| — |
|
| — |
|
| — |
|
| 9,650 |
|
| 9,550 |
|
| 13,200 |
|
| 32,400 |
| |||||||||||||
Mr. McFarland III |
| — |
|
| 10,740 |
|
| — |
|
| 6,890 |
|
| — |
|
| 17,630 |
|
| — |
|
| — |
|
| 10,740 |
|
| — |
|
| 6,890 |
|
| 9,700 |
|
| 27,330 |
| |||||||||||||
Mr. Boltz |
| — |
|
| 6,900 |
|
| — |
|
| 6,560 |
|
| — |
|
| 13,460 |
|
| — |
|
| — |
|
| 6,900 |
|
| — |
|
| 6,560 |
|
| 9,246 |
|
| 22,706 |
| |||||||||||||
Ms. Godbole |
| — |
|
| — |
|
| 5,420 |
|
| 4,230 |
|
| 9,130 |
|
| 18,780 |
| ||||||||||||||||||||||||||||||||||
Ms. Thalberg |
| 1,554 |
|
| — |
|
| — |
|
| — |
|
| 1,555 |
|
| 7,617 |
|
| 10,726 |
|
(2) | Amount is based on the closing market price of the Company’s Common Stock on January |
(3) | The number of unearned PSUs in this column is calculated in accordance with SEC requirements and equals (i) the minimum number of PSUs that may be earned based on the Company’s RONCAA during the 2018 through 2020 fiscal year period after applying the maximum relative TSR modifier, |
(4) | These options vest in |
(5) | These options vest in |
|
|
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
(6) | These options vest in three annual installments on April 1, 2021, April 1, 2022 and April 1, 2023. |
(7) | These options vest in one annual installment on January 2, 2022. |
(8) | These options vest in one annual installment on October 1, 2021. |
Option Exercises and Stock Vested at FiscalYear-End
This table presents information about stock options exercised by the NEOs and the number and the value of the NEOs’ stock awards that vested during the 20192020 fiscal year.
Option Awards | Stock Awards | |||||||||||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized on Vesting | |||||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||||
Mr. Ellison |
| — |
|
| — |
|
| — |
| — | ||||||||
Mr. Denton |
| — |
|
| — |
|
| — |
| — | ||||||||
Mr. McFarland III |
| — |
|
| — |
|
| — |
| — | ||||||||
Mr. Boltz |
| — |
|
| — |
|
| — |
| — | ||||||||
Ms. |
| — |
|
| — |
|
| — |
| — |
Nonqualified Deferred Compensation
The Company sponsors twonon-qualified deferred compensation plans for the benefit of senior management employees: the Benefit Restoration Plan (the “BRP”) and the Cash Deferral Plan (the “CDP”).
Benefit Restoration Plan
The BRP allows a senior management employee to defer receipt of the difference between (i) 6% of the sum of base salary and annual incentive plan compensation and (ii) the amount the employee is allowed to contribute to the Company’stax-qualified 401(k) Plan. The deferred amounts are credited to the employee’s BRP account. The Company makes matching contributions to the employee’s BRP account under the same matching contribution formula that applies to employee contributions to the 401(k) Plan. An employee’s account under the BRP is deemed to be invested in accordance with the employee’s election in one or more of the investment options available under the 401(k) Plan, except an employee may not elect to have any amounts deferred under the BRP after February 1, 2003 be deemed to be invested in Common Stock. An employee may elect to change the investment of the employee’s BRP account as frequently as each business day. An employee’s account under the BRP is paid to the employee in cash after the endwithin 90 days of the plan year in which the employee terminates employment but no earlier than 180 days after the employee’s termination of employment.a 409A “separation from service”, unless later distribution is required for a “specified employee” under Code Section 409.
Cash Deferral Plan
The CDP allows a senior management employee to elect to defer receipt of up to 80% of his or her base salary, annual incentive plan compensation and certain other bonuses. The deferred amounts are credited to the employee’s CDP account. The Company does not make any contributions to the CDP. An employee’s CDP account is deemed to be invested in accordance with the employee’s election in one or more of the investment options available under the 401(k) Plan, except an employee may not elect to have any amounts deferred under the CDP be deemed to be invested in Common Stock. An employee may elect to change the investment of the employee’s CDP account as frequently as each business day. An employee’s account under the CDP is paid to the employee in cash after the endwithin 90 days of the plan year in which the employee terminates employment but no earlier than 180 days after the employee’s termination of employment.a 409A “separation from service”, unless later distribution is required for a “specified employee” under Code Section 409A. In addition, an employee may elect to have a portion of the employee’s deferrals segregated into a separatesub-account that is paid at a date elected by the employee so long as the date is at least five years from the date of the employee’s deferral election.
Nonqualified Deferred Compensation Elections
None of the NEOs participate in either of the Company’s two deferred compensation plans.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
Potential Payments Upon Termination orChange-in-Control
The Company has entered intoChange-in-Control Agreements with each of the current NEOs and certain other senior officers of the Company. The agreements provide for certain benefits if the Company experiences achange-in-control followed by termination of the executive’s employment within 24 months following suchchange-in-control:
by the Company’s successor without cause, which means continued and willful failure to perform duties or conduct demonstrably and materially injurious to the Company or its affiliates; or
by the executive for certain reasons, including a downgrading of the executive’s position.
The following describes the material provisions of theChange-in-Control Agreements that we have entered into with our NEOs. All of the agreements automatically expire on the second anniversary of achange-in-control notwithstanding the length of the terms remaining on the date of thechange-in-control.
Accrued Obligations | The NEO receives the sum of (1) the NEO’s annual base salary through date of separation and (2) any accrued vacation pay to the extent not paid. | |
Severance Benefit | The NEO receives 2.99 times the sum of the present value of the NEO’s annual base salary, annual incentive compensation (as calculated pursuant to the agreement) and welfare insurance costs. | |
No TaxGross-Up | There are no effective provisions for an excise taxgross-up. Instead,change-in-control payments will be subject to a provision, whereby the executives will receive either the original amount of the payment or a reduced amount, depending on which amount will provide them a greaterafter-tax benefit. | |
Legal Fees | All legal fees and expenses incurred by the executives in enforcing these agreements will be paid by the Company. | |
Restrictive Covenants | TheChange-in-Control Agreements include restrictive covenants including, but not limited to, a covenant not to compete against the Company for the longer of (a) two years following termination of employment and (b) the period following the termination of employment during which Company equity awards held by the NEO continue to vest and a covenant not to solicit Company employees or customers for two years following termination of employment. |
The Company’s long-term incentive plan provides that, if within one year after achange-in-control, an executive’s employment is terminated by the Company without cause or by the executive for Good Reason (as defined in theChange-in-Control Agreement), then all outstanding stock options will become fully exercisable and all outstanding RSAs will become fully vested. In the event of achange-in-control of the Company, the performance periods for all outstanding PSUs will terminate as of the end of the fiscal quarter preceding thechange-in-control and the PSUs will be earned based on Company performance through such date. Under the terms of stock option, RSA and PSU award agreements, the executive is subject to a covenant not to compete against the Company for 24 months following termination of employment and, in the event of a breach, will forfeit awards or be required to repay the Company certain amounts with respect to awards.
Executive Vice Presidents covered by the Severance Plan who experience a Qualified Termination (as defined in the Severance Plan) of employment are, subject to the terms of the Severance Plan, eligible to receive a benefit consisting of (i) cash severance equal to two times the sum of their annual base salary and target annual bonus to be paid in installments
over 24 months in accordance
with the Company’s normal payroll practices, (ii) continued participation in the employee health care plan maintained by the Company upon the same terms and conditions in effect for active employees until the earlier of the second anniversary of such termination or the date the Executive Vice President becomes covered under another employer’s health care plan and (iii) up to one year of Company-paid outplacement services. Payments made pursuant to the Severance Plan shall be reduced, in whole or in part, by all compensation received by or payable to the Executive Vice President for services rendered in any capacity to any third party during the severance period, with the exception of any compensation received for service on a board of directors or similar arrangement that existed on the termination date.
In the event Mr. Ellison’s employment with the Company is terminated involuntarily other than for Cause (as defined in his offer letter), and subject to the terms of his offer letter, Mr. Ellison is entitled to receive severance payments equal to two times the sum of his annual base salary and target annual bonus to be paid over 24 months in accordance with the Company’s normal payroll practices.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Tables
The following table shows the amounts payable to the NEOs in the event their employment terminated at the end of the 20192020 fiscal year due to their resignation, death, disability or retirement and the amounts payable under the Severance Plan, theChange-in-Control Agreements and the long-term incentive plan if achange-in-control of the Company had occurred at the end of the 20192020 fiscal year and/or the NEOs’ employment was terminated by the Company without Cause or by the NEO for Good Reason (in each case, as defined in theChange-in-Control Agreements) on January 31, 2020.29, 2021.
Name and Benefit | Voluntary Resignation ($) | Death ($) | Disability ($) | Retirement(1) ($) | Qualified ($)(2) | Change of Control ($) | Change of Control and Qualifying ($) | Voluntary Resignation ($) | Death ($) | Disability ($) | Retirement ($)(1) | Qualified ($)(2) | Change of Control ($) | Change of Control and Qualifying ($) | |||||||||||||||||||||||||||||||||||||||||||||||||
Mr. Ellison | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance(3) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 8,700,000 |
| 0 |
| 12,643,905 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 8,700,000 |
|
| 0 |
|
| 12,973,552 |
| ||||||||||||||||||||||||||
Stock Options(4) |
| 0 |
| 2,971,134 |
| 2,971,134 |
|
| 0 |
| 0 |
| 0 |
| 2,971,134 |
|
| 0 |
|
| 17,545,474 |
|
| 17,545,474 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 17,545,474 |
| ||||||||||||||||||||||||||
Restricted Stock Awards(4) |
| 0 |
| 8,147,262 |
| 8,147,262 |
|
| 0 |
| 0 |
| 0 |
| 8,147,262 |
|
| 0 |
|
| 16,320,266 |
|
| 16,320,266 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 16,320,266 |
| ||||||||||||||||||||||||||
Performance Shares Units(5) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 0 |
|
| 0 |
|
| 23,941,473 |
|
| 23,941,473 |
|
| 0 |
|
| 0 |
|
| 23,941,473 |
|
| 23,941,473 |
| ||||||||||||||||||||||||||
Welfare Benefits(6) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 65,986 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 69,080 |
| ||||||||||||||||||||||||||
Total |
| 0 |
| 11,118,396 |
| 11,118,396 |
|
| 0 |
| 8,700,000 |
| 0 |
| 23,828,288 |
|
| 0 |
|
| 57,807,213 |
|
| 57,807,213 |
|
| 0 |
|
| 8,700,000 |
|
| 23,941,473 |
|
| 70,849,845 |
| ||||||||||||||||||||||||||
Mr. Denton | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance(3) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 4,162,500 |
| 0 |
| 6,050,101 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 4,245,750 |
|
| 0 |
|
| 6,328,017 |
| ||||||||||||||||||||||||||
Stock Options(4) |
| 0 |
| 956,667 |
| 956,667 |
|
| 0 |
| 0 |
| 0 |
| 956,667 |
|
| 0 |
|
| 7,568,328 |
|
| 7,568,328 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 7,568,328 |
| ||||||||||||||||||||||||||
Restricted Stock Awards(4) |
| 0 |
| 2,231,808 |
| 2,231,808 |
|
| 0 |
| 0 |
| 0 |
| 2,231,808 |
|
| 0 |
|
| 5,405,940 |
|
| 5,405,940 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 5,405,940 |
| ||||||||||||||||||||||||||
Performance Shares Units(5) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 0 |
|
| 0 |
|
| 11,674,828 |
|
| 11,674,828 |
|
| 0 |
|
| 0 |
|
| 11,674,828 |
|
| 11,674,828 |
| ||||||||||||||||||||||||||
Welfare Benefits(6) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 27,319 |
| 0 |
| 58,587 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 27,998 |
|
| 0 |
|
| 61,467 |
| ||||||||||||||||||||||||||
Total |
| 0 |
| 3,188,475 |
| 3,188,475 |
|
| 0 |
| 4,189,819 |
| 0 |
| 9,297,163 |
|
| 0 |
|
| 24,649,096 |
|
| 24,649,096 |
|
| 0 |
|
| 4,273,748 |
|
| 11,674,828 |
|
| 31,038,580 |
| ||||||||||||||||||||||||||
Mr. McFarland III | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance(3) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 3,000,000 |
| 0 |
| 4,360,666 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 3,120,000 |
|
| 0 |
|
| 4,652,645 |
| ||||||||||||||||||||||||||
Stock Options(4) |
| 0 |
| 284,066 |
| 284,066 |
|
| 0 |
| 0 |
| 0 |
| 284,066 |
|
| 0 |
|
| 5,565,467 |
|
| 5,565,467 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 5,565,467 |
| ||||||||||||||||||||||||||
Restricted Stock Awards(4) |
| 0 |
| 2,049,311 |
| 2,049,311 |
|
| 0 |
| 0 |
| 0 |
| 2,049,311 |
|
| 0 |
|
| 4,560,011 |
|
| 4,560,011 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 4,560,011 |
| ||||||||||||||||||||||||||
Performance Shares Units(5) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 0 |
|
| 0 |
|
| 8,516,525 |
|
| 8,516,525 |
|
| 0 |
|
| 0 |
|
| 8,516,525 |
|
| 8,516,525 |
| ||||||||||||||||||||||||||
Welfare Benefits(6) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 25,806 |
| 0 |
| 65,986 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 25,777 |
|
| 0 |
|
| 68,035 |
| ||||||||||||||||||||||||||
Parachute Payments Reduced(7) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| (1,175,321) |
| |||||||||||||||||||||||||||||||||||||||||||||||
Total |
| 0 |
| 2,333,377 |
| 2,333,377 |
|
| 0 |
| 3,025,806 |
| 0 |
| 5,584,709 |
|
| 0 |
|
| 18,642,002 |
|
| 18,642,002 |
|
| 0 |
|
| 3,145,777 |
|
| 8,516,525 |
|
| 23,362,683 |
| ||||||||||||||||||||||||||
Mr. Boltz | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance(3) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 2,860,000 |
| 0 |
| 4,157,169 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 2,974,000 |
|
| 0 |
|
| 4,434,925 |
| ||||||||||||||||||||||||||
Stock Options(4) |
| 0 |
| 251,134 |
| 251,134 |
|
| 0 |
| 0 |
| 0 |
| 251,134 |
|
| 0 |
|
| 5,066,045 |
|
| 5,066,045 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 5,066,045 |
| ||||||||||||||||||||||||||
Restricted Stock Awards(4) |
| 0 |
| 1,564,590 |
| 1,564,590 |
|
| 0 |
| 0 |
| 0 |
| 1,564,590 |
|
| 0 |
|
| 3,788,496 |
|
| 3,788,496 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 3,788,496 |
| ||||||||||||||||||||||||||
Performance Shares Units(5) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 0 |
|
| 0 |
|
| 8,118,921 |
|
| 8,118,921 |
|
| 0 |
|
| 0 |
|
| 8,118,921 |
|
| 8,118,921 |
| ||||||||||||||||||||||||||
Welfare Benefits(6) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 25,806 |
| 0 |
| 65,986 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 25,777 |
|
| 0 |
|
| 68,035 |
| ||||||||||||||||||||||||||
Total |
| 0 |
| 1,815,725 |
| 1,815,725 |
|
| 0 |
| 2,885,806 |
| 0 |
| 6,038,880 |
|
| 0 |
|
| 16,973,462 |
|
| 16,973,462 |
|
| 0 |
|
| 2,999,777 |
|
| 8,118,921 |
|
| 21,476,423 |
| ||||||||||||||||||||||||||
Ms. Godbole | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ms. Thalberg | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance(3) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 2,600,000 |
| 0 |
| 3,677,544 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 2,600,000 |
|
| 0 |
|
| 3,877,204 |
| ||||||||||||||||||||||||||
Stock Options(4) |
| 0 |
| 500,882 |
| 500,882 |
|
| 0 |
| 0 |
| 0 |
| 500,882 |
|
| 0 |
|
| 4,012,945 |
|
| 4,012,945 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 4,012,945 |
| ||||||||||||||||||||||||||
Restricted Stock Awards(4) |
| 0 |
| 2,182,987 |
| 2,182,987 |
|
| 0 |
| 0 |
| 0 |
| 2,182,987 |
|
| 0 |
|
| 1,789,633 |
|
| 1,789,633 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 1,789,633 |
| ||||||||||||||||||||||||||
Performance Shares Units(5) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 0 |
|
| 0 |
|
| 3,348,012 |
|
| 3,348,012 |
|
| 0 |
|
| 0 |
|
| 3,348,012 |
|
| 3,348,012 |
| ||||||||||||||||||||||||||
Welfare Benefits(6) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 25,806 |
| 0 |
| 65,986 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 20,323 |
|
| 0 |
|
| 51,056 |
| ||||||||||||||||||||||||||
Parachute Payments Reduced(7) |
| 0 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| (1,201,451) |
| |||||||||||||||||||||||||||||||||||||||||||||||
Total |
| 0 |
| 2,683,869 |
| 2,683,869 |
|
| 0 |
| 2,625,806 |
| 0 |
| 5,225,949 |
|
| 0 |
|
| 9,150,590 |
|
| 9,150,590 |
|
| 0 |
|
| 2,620,323 |
|
| 3,348,012 |
|
| 13,078,850 |
|
(1) | No NEOs were eligible for retirement as of the end of the fiscal year |
(2) | The Board approved a severance plan on August 16, 2018, described in more detail on page |
(3) | The amounts presented are payable as follows: (i) in the case of a Qualified Termination, in equal installments in accordance with the Company’s payroll practices for 24 months; and (ii) in the case if a Change in Control and Qualified Termination, in cash in a lump sum. |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Compensation Committee Interlocks and Insider ParticipationTables
(4) | The amounts presented for the stock options and RSAs are equal to the values of the unvestedin-the-money stock options and the restricted shares that would become vested based on the closing market price of the Common Stock on January |
(5) | The amounts presented for the PSUs are the value for the 2018, 2019 and |
(6) | The costs for Welfare Benefits include the Company costs for continuing coverage in the case of a Qualified Termination over a period of 24 months. In the case of aChange-in-Control and Qualified Termination these amounts include costs to the Company and to the NEO and would be paid as a cash lump sum. Welfare Benefits costs in the case of death and disability are consistent with Company offerings for all employees. |
|
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K, we are providing the following information regarding the annual total compensationratio of our median employee and the annual total compensation, calculated in accordance with the requirements of Mr. Ellison,Item 402(c)(2)(x) of Regulation S-K (“Annual Total Compensation”), of our median-paid employee and the Annual Total Compensation of our President and Chief Executive Officer.Officer, Marvin R. Ellison.
For 2019, the annual total compensation
• | For 2020, the Annual Total Compensation for Mr. Ellison, as reported in the Summary Compensation Table on page 46, was $23,075,881. |
The Annual Total Compensation for 2020 for our median-paid employee, excluding Mr. Ellison, was $24,554.
Based on this information, for fiscal 2020, the ratio of the Annual Total Compensation of Mr. Ellison to the Annual Total Compensation of our median employee was 940 to 1.
Factors Underlying the Change in the Pay Ratio From 2019
The increase in Mr. Ellison’s Annual Total Compensation for 2020, as reported in the Summary Compensation Table, was $11,621,369.is attributable to several factors that are also discussed in the Compensation Discussion and Analysis:
The total compensation
• | For fiscal 2020, Mr. Ellison’s total long-term equity award target as a percentage of base salary was increased from 565% to 615% to align closer to the market median, as described on page 41. |
• | Given the delay in the timing of the grant of PSUs to September 2020 (seven (7) months into the performance cycle, as described on page 41), the grant date fair value for PSUs reflected in the Summary Compensation Table is higher under accounting and SEC rules than Mr. Ellison’s target PSU award value. |
• | Mr. Ellison received a 200% of target incentive award payout for 2020 performance (described on page 40), whereas he received a 43.4% of target annual incentive award payout the year prior for 2019 performance. |
In addition, the 7.9% increase in compensation for our median employee excluding Mr. Ellison, was $22,748 (calculateddriven largely by higher payouts in accordance with the SEC rules). Based on this information, for fiscal 2019, the ratio of the annual totalincentive plan compensation, of Mr. Ellisonincluding special payments and bonuses awarded to all U.S. hourly full-time, part-time, and seasonal employees during 2020 in response to the annual total compensation ofCOVID-19 pandemic (as described on pages 28 to 29).
Identifying our median employee is 511 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below.Median Compensated Employee
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensationAnnual Total Compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that
reflect their employee populations and employment and compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employee populations and employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
To identify our median compensated employee for 2020, in accordance with SEC rules we used the median of all our 2019 employees thefollowing methodology, and the material assumptions, adjustments and estimates that we used were as follows:estimates:
We determined that,our employee population as of December 31, 2019, our employee population consisted of approximately 292,363 individuals worldwide (266,270 U.S. and 26,093non-U.S.), including full-time and part-time employees but not any individuals paid by a third-party. We also included all employees from our acquisitions to date. We selected December 31, 2019,2020, which iswas within the last three months of our fiscal year 2019,2020 as required by the SEC rules. As of this date, aswe employed a total of which we would identifyapproximately 342,000
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 | 53 |
Compensation Committee Interlocks and Insider Participation
employees, of which approximately 312,200 or 91.3% were employed in the U.S. and approximately 29,800 were employed outside of the U.S. We also included all employees from our acquisitions. In calculating the pay ratio we excluded, under the de minimis exception to the pay ratio rule, all of our approximately 3,200 employees across Asia, or 0.95% of our total global workforce. |
We compared the median employee to allow us sufficient time to make the determination given the global scopepayroll data of our operations.
To identify the median employee from our employee population we collected actualusing a consistently applied compensation measure consisting of base salary, wages (including overtime), special cash payments, bonus or commission paid and any overtime paid during the12-month period ending December 31, 2019.2020 (the “Estimated Compensation”).
Based on the Estimated Compensation of each employee, we identified a cohort of 61 employees (the “Median Cohort”), consisting of the median employee and 30 employees above and 30 employees below the median Estimated Compensation value. After evaluating the shared characteristics of the Median Cohort, we noted that the median employee’s compensation reflected anomalous characteristics (such as participation in non-US compensation programs, a hire date during the fiscal year, or separation prior to the end of the fiscal year) that could significantly distort the pay ratio calculation. Therefore, we selected a similarly compensated employee from the Median Cohort that did not bear anomalous characteristics as a substitute median compensated employee.
We then calculated the Annual Total Compensation of the median compensated employee using the same methodology used for calculating Mr. Ellison’s Annual Total Compensation.
Compensation Committee Interlocks and Insider Participation
Raul Alvarez, David H. Batchelder, Angela F. Braly, Sandra B. Cochran, Brian C. Rogers and Eric C. Wiseman served on the Compensation Committee in fiscal 2019.2020. None of the directors who served on the Compensation Committee in fiscal 20192020 has ever served as one of the Company’s officers or employees or had any relationship with the Company or any of its subsidiaries during fiscal 20192020 pursuant to which disclosure would be required under the SEC rules pertaining to the disclosure of transactions with related persons. During fiscal 2019,2020, none of the Company’s executive officers served as a director or member of the compensation committee (or other committee performing similar functions) of any other entity of which an executive officer of such other entity served on the Company’s Board or the Compensation Committee.
54 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Equity Compensation Plan Information
Equity Compensation Plan Information
The following table provides information as of January 31, 202029, 2021 with respect to stock options and stock unit awards outstanding and shares available for future awards under all of Lowe’s equity compensation plans.
Plan Category | Number of (#)(1) | Weighted- Exercise Price of ($)(1) | Number of Securities Future Issuance Under Reflected in Column (a)) | ||||||||||||
(a) | (b) | (c) | |||||||||||||
Equity compensation plans approved by security holders | 4,123,069 | 86.01 | 50,720,367 | (3) | |||||||||||
Equity compensation plans not approved by security holders | 0 | 0 | 0 | ||||||||||||
Total | 4,123,069 | 86.01 | 50,720,367 | (3) |
Plan Category | Number of (#)(1) | Weighted- Exercise Price of ($)(1) | Number of Securities Future Issuance Under Reflected in Column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 4,676,405 | 89.51 | 47,693,364 | (3) | ||||||||
Equity compensation plans not approved by security holders | 0 | 0 | 0 | |||||||||
Total | 4,676,405 | 89.51 | 47,693,364 | (3) |
(1) | Column (a) contains information regarding stock options and deferred, performance and restricted stock units only; there are no warrants or stock appreciation rights outstanding. As of January |
(2) | In accordance with SEC rules, this column does not include shares available under the Lowe’s 401(k) Plan. |
(3) | Includes the following: |
|
27,693,364 shares available for grants of stock options, stock appreciation rights, stock awards, performance shares, and deferred, performance and restricted stock units to key employees and outside directors under the Lowe’s Companies, Inc. 2006 Long Term Incentive Plan, as amended (“LTIP”). Stock options granted under the LTIP have terms of ten years, with one-third of each grant vesting each year for three years and are assigned an exercise price equal to the closing market price of a share of Common Stock on the date of grant. No awards may be granted under the LTIP after 2024.
|
20,000,000 shares available for issuance under the new Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan. Eligible employees may purchase shares of Common Stock through after-tax payroll deductions. The purchase price of this stock is equal to 85% of the closing price on the date of purchase for each semi-annual stock purchase period.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 55 |
Related Person Transactions
POLICY AND PROCEDURES FOR REVIEW, APPROVAL OR RATIFICATION OF RELATED PERSON TRANSACTIONS
The Company has a written policy and procedures for the review, approval or ratification of any transactions that could potentially be required to be reported under the SEC rules for disclosure of transactions in which related persons have a direct or indirect material interest (the “Policy”). Related persons include directors and executive officers of the Company and members of their immediate families. To help identify related person transactions and relationships, each director and executive officer completes a questionnaire that requires the disclosure of any transaction or relationship that the person, or any member of his or her immediate family, has or is proposed to have with the Company. The Company’s General Counsel is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers about any such transactions. The General Counsel is also responsible for making a recommendation, based on the facts and circumstances in each instance, on whether the Company or the related person has a material interest in the transaction.
The Policy, which is administered by the Nominating and Governance Committee of the Board, includes several
categories ofpre-approved transactions with related persons, such as employment of executive officers and certain banking-related services. For transactions that are notpre-approved, the Nominating and Governance Committee, in determining whether to approve or ratify a transaction with a related person, takes into account, among other things, (i) whether the transaction would violate the Company’s Code of Business Conduct and Ethics, (ii) whether the transaction is on terms no less favorable than terms generally available to or from an unaffiliated third party under the same or similar circumstances and (iii) the extent of the related person’s interest in the transaction as well as the importance of the interest to the related person. No director may participate in any discussion or approval of a transaction for which he or she or a member of his or her immediate family is a related person.
APPROVED OR RATIFIED RELATED PERSON TRANSACTIONS
SinceThe Nominating and Governance Committee of the beginningCompany’s Board of fiscal 2017, there have been no related personDirectors, which is comprised entirely of independent directors, has reviewed all of the material terms and approved or ratified the following transactions. In presenting the transactions in whichto the Nominating and Governance Committee, the Company (orconfirmed that the terms of each are consistent with, and within the established range for, those provided to employees with comparable positions and tenure, and are expected to continue on similar terms for the current fiscal year.
Sylvia Ellison, who is the sister of Marvin R. Ellison, the Company’s President and Chief Executive Officer and director, has been employed by the Company as a subsidiary)field merchant since August 2020. Sylvia Ellison’s compensation for fiscal 2020 (including any bonus and equity compensation amounts) was approximately $116,000. She also received customary employee benefits.
Timothy Lollis, who is the brother-in-law of Marvin R. Ellison, the Company’s President and Chief Executive Officer and director, has been employed by the Company as a participantstore manager since February 2020. Timothy Lollis’ compensation for fiscal 2020 (including any bonus and in whichequity incentive compensation amounts) was approximately $170,000. He also received customary employee benefits.
Christopher McFarland, who is the brother of Joseph M. McFarland, the Company’s Executive Vice President, Stores, has been employed by the Company as an installation merchant since June 2019. Christopher McFarland’s compensation for fiscal 2020 (including any related person (or any of their immediate family members) had a direct or indirect material interest.bonus and equity incentive compensation amounts) was approximately $230,000. He also received customary employee benefits.
56 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Audit Matters
REPORT OF THE AUDIT COMMITTEE
This report by the Audit Committee is required by the SEC rules. It is not to be deemed incorporated by reference by any general statement which incorporates by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, and it is not to be otherwise deemed filed under either such Act.
The Audit Committee has five members, all of whom are independent directors as defined by the Categorical Standards, Section 303A.02 of the NYSE Listed Company Manual and Rule10A-3(b)(1)(ii) of the Exchange Act. Each member of the Audit Committee is “financially literate,” as determined by the Board, in its business judgment, and qualified to review and assess financial statements. The Board of Directors has determined that more than one member of the Audit Committee qualifies as an “audit committee financial expert,” as such term is defined by the SEC, and has designated Bertram L. Scott, Chair of the Audit Committee; James H. Morgan; Brian C. Rogers and Lisa W. Wardell, each as an “audit committee financial expert.”
The Audit Committee reviews the general scope of the Company’s annual audit and the fees charged by the Company’s independent registered public accounting firm, determines duties and responsibilities of the internal auditors, reviews financial statements and accounting principles being applied thereto and reviews audit results and other matters relating to internal control and compliance with the Company’s Code of Business Conduct and Ethics.
In carrying out its responsibilities, the Audit Committee has:
Based on the reviews and discussions noted above and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended January 31, 2020.29, 2021.
Bertram L. Scott, Chair
Laurie Z. Douglas
Brian C. Rogers
James H. Morgan
Lisa W. Wardell
Eric C. Wiseman
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 57 |
Audit Matters
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The aggregate fees billed to the Company for each of the last two fiscal years by the Company’s independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates, were:
Fiscal 2018 | Fiscal 2019 ($) | Fiscal 2019 | Fiscal 2020 ($) | |||||||||
Audit Fees(1) |
| 4,022,829 |
| 3,931,894 |
| 3,931,894 | 4,061,354 | |||||
Audit-Related Fees(2) |
| 142,993 |
| 139,257 |
| 139,257 | 100,265 | |||||
Tax Fees(3) |
| 26,338 |
| 23,824 |
| 23,824 | 20,876 | |||||
All Other Fees(4) |
| 875 |
| 555 |
| 555 | 9,096 |
(1) | Audit Fees consist of fees billed by the independent registered public accounting firm for the respective year for professional services for the audit of the Company’s consolidated financial statements included in the Company’s Annual Report on Form10-K, review of the Company’s consolidated financial statements included in the Company’s Quarterly Reports on Form10-Q and services provided by the independent registered public accounting firm in connection with the Company’s statutory filings for the last two fiscal years. Audit fees also include fees for professional services rendered for the audit of the Company’s internal control over financial reporting. |
(2) | Audit-Related Fees consist of fees billed by the independent registered public accounting firm for the respective year for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and include audits of the Company’s employee benefit plans and other consultations concerning financial accounting and reporting standards. |
(3) | Tax Fees consist of fees billed by the independent registered public accounting firm for the respective year for tax compliance, planning and advice. |
(4) | All Other Fees consist of fees billed by the independent registered public accounting firm in fiscal |
The Audit Committee has an established policy and procedures under which all audit andnon-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee in order to assure that the provision of such services does not impair the independence of the independent registered public accounting firm. The policy also provides that the Audit Committee may delegatepre-approval authority to the Chair of the Audit Committee as permitted by the Audit Committee’s charter, provided that the Chair reports any suchpre-approval decisions to the full Audit Committee at its next meeting. Any proposed services exceedingpre-approved fee levels require specific approval by the Audit Committee. The Audit Committee haspre-approved all audit andnon-audit services provided in fiscal 20182019 and fiscal 20192020 in accordance with the Audit Committee’s policy and procedures.
58 | NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation
As required by Section 14A of the Exchange Act, we are providing our shareholders with the opportunity to vote on an advisory resolution to approve the compensation of our named executive officers in fiscal 2019,2020, which is described in this Proxy Statement.
The fundamental philosophy of our executive compensation program is to align our executives’ pay to overall Company growth and the effective execution of our business strategies. The primary objectives of our program are to:
The “Compensation Discussion and Analysis” section of this Proxy Statement provides a thorough description of how the Compensation Committee has designed and administered the executive compensation program to meet these objectives.
The “Compensation Discussion and Analysis” section also provides a thorough description of the reasoning behind the increases in the annual total compensation for 2020, as reported in the Summary Compensation Table, which was attributable to several factors, including strong financial performance for the year as well as the accounting valuation of PSUs that were granted later in the fiscal year compared to fiscal 2019.
At the 20192020 Annual Meeting of Shareholders, the Company provided shareholders with the opportunity to cast an advisory vote to approve the compensation of our named executive officers (commonly known as a“say-on-pay” vote), and shareholders approved our named executive officer
compensation with approximately 94% of the votes cast in favor. At the 2017 Annual Meeting of Shareholders, the Company also asked shareholders to indicate whether asay-on-pay vote should occur every one, two or three years, with the Board recommending an annual advisory vote. Because the Board views it as a good corporate governance practice, and because at the 2017 Annual Meeting of Shareholders approximately 90% of the votes cast were in favor of an annual advisory vote, you will have the opportunity at the Annual Meeting to provide feedback to the Compensation Committee on our executive compensation program by endorsing or not endorsing the compensation of the named executive officers through anon-binding vote on the following resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby APPROVED.
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby APPROVED. |
Even though the result of thesay-on-pay vote isnon-binding, the Compensation Committee and the Board value the opinions that shareholders express in their votes and will carefully consider the results of the vote when making future executive compensation decisions. The nextsay-on-pay vote will be held at the 20212022 Annual Meeting of Shareholders.
The Board of Directors unanimously recommends a vote “FOR” the resolution. |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | 59 |
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm
We are asking our shareholders to ratify the appointment of Deloitte & Touche LLP as Lowe’s independent registered public accounting firm for fiscal 2020.2021.
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. The Audit Committee has appointed Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for fiscal 2020. 2021.
Deloitte & Touche LLP has served as the Company’s independent registered public accounting firm since 1982 and is considered by management to be well-qualified. From 1962 to 1981, predecessor accounting firms that were ultimately acquired by Deloitte & Touche LLP served as the independent auditors of the Company. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the independent registered public accounting firm’s lead engagement partner, the Audit Committee is involved in the selection of Deloitte & Touche LLP’s new lead engagement partner. A new lead engagement partner was selected for fiscal 2020.
The Audit Committee conducts a comprehensive annual review process to select and retain the Company’s independent registered public accounting firm. In connection with its annual review, the Audit Committee considered various factors as part of its assessment of the qualifications, performance, and independence of Deloitte & Touche LLP and its selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2021. The factors are grouped into the following categories:
The Audit Committee and the Board believe that the continued retention of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders.
Although shareholder ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm is not required by the Company’s Bylaws or otherwise, the Board is submitting the appointment of Deloitte & Touche LLP to the shareholders for ratification as a matter of good corporate governance. If the shareholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain Deloitte & Touche LLP as the Company’s independent registered public accounting firm. In addition, even if the shareholders ratify the appointment of Deloitte & Touche LLP, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the best interests of the Company and its shareholders.
Representatives of Deloitte & Touche LLP are expected to be present atparticipate in the Annual Meeting, where they will have the opportunity to make a statement if they desire to do so. They also are expected to be available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal |
Proposal 4: Approval of Amendment to Company’s Bylaws
Proposal 4: Approval of Amendment to Company’s Bylaws
We are asking our shareholders to vote on an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special meeting.
The Board of Directors has adopted, and recommends that Lowe’s shareholders approve, an amendment to Article II, Section 2(a) of the Company’s Bylaws that would reduce to 15% the percentage of shares outstanding required for shareholders to call a special meeting. Article II, Section 2(a) of Lowe’s Bylaws currently provides that a special meeting of shareholders shall be called by the Secretary upon the written request of shareholders owning in the aggregate 25% of the total number of shares of capital stock of the Company outstanding and entitled to vote on the matter or matters to be brought before the proposed special meeting.
The Board of Directors believes that establishing an ownership threshold of 15% for the right to call a special meeting strikes an appropriate balance between enhancing shareholder rights and protecting against the risk that a small minority of
shareholders could trigger a special meeting to pursue “special interests” that are not in the best interests of the Company and its shareholders in general. This is important because a special meeting is an extraordinary event that imposes significant financial expense and administrative burdens on the Company. The 15% threshold is also consistent with thresholds adopted by a number of other large public companies.
Because the 2010 amendment to the Bylaws setting the threshold ownership requirement to call a special meeting at 25% of shares outstanding was submitted for approval by shareholders at the 2010 annual meeting of shareholders, the proposed amendment requires shareholder approval pursuant to North Carolina Business Corporation Act §55-10-20.
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 5: Approval of Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan4: Shareholder Proposal Regarding Amending the Company’s Proxy Access Bylaw
Proposal 5: Approval of Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan4: Shareholder Proposal Regarding Amending the Company’s Proxy Access Bylaw to Remove Shareholder Aggregation Limits
We are asking our shareholdersJohn Chevedden has informed the Company that he intends to approvepresent the Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan.proposal set forth below for consideration at the Annual Meeting.
Shareholders request that our board of directors take the steps necessary to enable as many shareholders as may be needed to aggregate their shares to equal 3% of our stock owned continuously for 3-years in order to enable shareholder proxy access.
The current arbitrary ration of 20 shareholders to initiate shareholder proxy access can be called Catch-22 Proxy Access. To assemble 20 shareholders, who have owned 3% of company stock for an unbroken 3-years, one would reasonably need to start with 60 activist shareholders who own 9% of company stock for an unbroken 3-years because initiating proxy access is a complicated process that is easily susceptible to errors. It is also highly susceptible to dropouts.
The 60 activist shareholders could then be whittled down to 40 shareholders because some shareholders would be unable to timely meet all the paper chase requirements. After the 40 shareholders submit their paperwork to management—then management might arbitrarily claim that 10 shareholders do not meet the requirements figuring that shareholders do not want a battle in court and management might convince another 10 shareholders to drop out—leaving 20 shareholders. But the current bylaws do not allow 40 shareholders to submit their paperwork to management to end up with 20 qualified shareholders.
And 60 shareholders who own 9% of company stock for an unbroken 3-years might determine that they own 51% of company stock when length of unbroken stock ownership is factored out.
But how does one begin to assemble a group of 60 potential participants if potential participants cannot even be guaranteed participant status after following the tedious rules that are being asked3000-words of dense legalese — because a single shareholder always takes the risk that one will be the 21st shareholder that could be eliminated after a substantial investment of time by the arbitrary ration of 20 shareholders.
More emphasis should be given to approveimproving proxy access because of new limitations on shareholder rights. The shareholder right to call a new stock purchase plan,special meeting has taken a big hit due to the avalanche of online shareholder meetings that can be tightly controlled bare bones meetings where all challenging questions and comments are screened out by management.
Goodyear management even hit the mute button right in the middle of a formal shareholder proposal presentation at its 2020 shareholder meeting.
Plus AT&T management would not allow any shareholder proposal sponsors to read their proposals at the 2020 AT&T online annual meeting during the pandemic.
Currently it takes the formal backing 20% of Lowe’s shares that typically cast ballots at the annual meeting, to call a special shareholder meeting. Plus LOW shareholders are denied in perpetuity the right to act by written consent by the backward laws of North Carolina in regard to shareholder rights. And Mr. Richard Dreiling, Chairman of the Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”), whichBoard, received 20-times the Board approved in March 2020, subject to shareholder approval. The Board has determined that offering a stock purchase program benefits the Company by (i) assisting it in recruiting and retaining the servicesnegative votes of employees with talent and initiative, (ii) providing greater incentive for employees and (iii) aligning the interests2 of employees with those of the Company and its shareholders through opportunities for increased stock ownership.his LOW director peers.
Currently, we maintain the Lowe’s Companies, Inc. Employee Stock Purchase Plan — Stock Options For Everyone (the “ESPP”), under which our employees can purchase shares of Common Stock at a discount through accumulated contributions from their earned compensation at the end of consecutive,non-overlappingsix-month offering periods. The ESPP is scheduled to expire in 2021. There is a scheduled enrollment window in May 2020 for an offering period under the ESPP that is scheduled to end in November 2020. Following this offering period and provided that shareholders approve the 2020 ESPP, there will not be any subsequent offerings under the ESPP, and all future offerings will be under the 2020 ESPP.Please vote yes:
Description of the Material Features of the 2020 ESPPImprove Our Catch-22
The following paragraphs provide a summary of the material features of the 2020 ESPP and its operation. However, this summary is not a complete description of all of the provisions of the 2020 ESPP and is qualified in its entirety by the specific language of the 2020 ESPP, which is attached as Appendix B to the Proxy Statement. The material economic terms of the 2020 ESPP generally are substantially comparable to the expiring ESPP.
Access Purpose—
The 2020 ESPP permits employees of the Company and its designated subsidiaries to purchase Company Common Stock at a 15% discount from market value, subject to limits set by the Internal Revenue Code (the “Code”) and the 2020 ESPP. Sales of shares under the 2020 ESPP are generally made pursuant to offerings that are intended to satisfy the requirements of Section 423 of the Code. Subplans that do not satisfy the requirements of Section 423 can be authorized under the 2020 ESPP.
Shares available for issuance; ParticipationProposal 4
20,000,000 shares of Common Stock will be reserved for issuance under the 2020 ESPP, which we anticipate will provide sufficient shares for purchases during the 2020 ESPP’sten-year term. As of January 31, 2020, 49,844,436 shares had been purchased under the ESPP and 20,155,564 shares remained available for purchases. As of March 4, 2020, there were approximately 237,000 employees eligible to participate in the ESPP, the predecessor to the 2020 ESPP.
Administration
The 2020 ESPP is administered by the Compensation Committee. Subject to the provisions of the 2020 ESPP, the administrator of the 2020 ESPP has full authority and discretion to adopt, administer, and interpret such rules and regulations as it deems necessary to administer the 2020 ESPP, and its decisions are final and binding upon all participants. Under the 2020 ESPP, the Compensation Committee may delegate its administrative authority to the senior corporate officer in charge of the Company’s Human Resources department, who will use the delegated authority to ensure that the 2020 ESPP complies with laws.
In the event of any change in the structure of the Company’s common stock, such as a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation offerings of rights or other similar event, the administrator may make appropriate adjustments to the maximum number of shares as to which options may be granted under the 2020 ESPP and the terms of outstanding options under the 2020 ESPP.
Eligibility and Participation
The 2020 ESPP allows employees of Lowe’s and its designated subsidiaries and affiliates who have satisfied any waiting period not to exceed two years as set by the administrator. 2020 ESPP participants may authorize payroll deductions from 1% to 20% of cash performance-based pay (including salary, overtime or performance bonuses, and other incentive compensation) or any flat dollar amount (not to exceed 20%) to be applied toward the purchase of the Company’s Common Stock.
Offerings
The 2020 ESPP provides for separatesix-month offerings, generally commencing on June 1 and December 1. The
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
Proposal 5: Approval of Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan
administrator may, in its discretion, modify the terms of future offering periods.
Withdrawal and Termination of Employment
An employee may withdraw from an offering at any time before the first day of the last calendar month of the offering. Upon withdrawal, the amount in the employee’s account will be refunded. An employee who has withdrawn from participation in an offering may not participate again in that same offering.
As soon as practicable following termination of employment for any reason, the employee’s participation in the 2020 ESPP will immediately terminate and the payroll deductions credited to the employee’s account will be returned to him or her and such employee’s option will automatically terminate.
Transferability
Options granted under the 2020 ESPP are nontransferable except by will or the laws of descent and distribution. No right or interest of a participant in any option may be liable for, or subject to, any lien, obligation or liability of the participant.
Amendment and termination
The Board and the Compensation Committee may at any time amend or terminate the 2020 ESPP, provided that no amendment may adversely affect an employee’s existing rights under any offering already commenced. No amendment may be made to the 2020 ESPP without prior approval of the shareholders of the Company if such amendment would increase the number of shares reserved thereunder or materially modify the eligibility requirements. The 2020 ESPP will terminate on December 31, 2029, or earlier at the discretion of the Board or in the event all shares reserved under the 2020 ESPP have been purchased.
Federal Income Tax Consequences
The following is a summary of the general U.S. federal income tax rules applicable to purchases offered by the Company and certain of its designated subsidiaries under the 2020 ESPP offerings that are intended to comply with Section 423 of the Code. Employees should consult their own tax advisors since a taxpayer’s particular situation may be such that some variation of the rules described below will apply.
The rights of participants to make purchases under the 2020 ESPP are intended to qualify under the provisions of Section 423 of the Code. Assuming such qualification, no income will be taxable to a participant until the sale or other disposition of shares purchased under the 2020 ESPP. Upon such sale or disposition, the participant will generally be subject to tax in an amount that depends upon the holding period of such shares prior to disposing of them.
If the shares are disposed of (a) more than two years after the date of the beginning of the offering period and (b) more than one year after the stock is purchased in accordance with the 2020 ESPP (the “option holding period”), or if the employee dies while holding the shares, the participant will generally recognize ordinary income upon sale or other disposition of the shares equal to the difference between the fair market value of the Common Stock on the applicable date of exercise and the option price. Any gain in excess of that amount will be characterized as capital gain. If the shares are disposed of prior to the expiration of the option holding period, the participant will recognize, as ordinary income, the difference between the fair market value of the Common Stock on the applicable date of exercise and the option price. Any gain in excess of that amount will be characterized as capital gain.
The Company will not be entitled to a federal income tax deduction with respect to the grant or exercise of an option unless the participant disposes of the Common Stock acquired thereunder prior to the expiration of the option holding period. In that event, the employer corporation (the Company or a subsidiary), generally will be entitled to a federal income tax deduction equal to the amount of ordinary income recognized by the participant. For any options that are granted under a subplan of the 2020 ESPP that does not satisfy the requirements of Section 423 of the Code, participants would recognize ordinary income equal to the difference between our named executive officers, other executive officers or our employees, at the time of purchase.
New Plan Benefits
Participation in the 2020 ESPP will be optional and completely within the discretion of our employees, and therefore the number of shares that we may issue under the 2020 ESPP cannot be determined in advance.
Proposal 6:4: Shareholder Proposal Regarding Shareholder Special MeetingsAmending the Company’s Proxy Access Bylaw
Proposal 6: Shareholder Proposal – Make Shareholder Rights to Call Special Meetings More Accessible
John Chevedden has informed the Company that he intends to present the proposal set forth below for consideration at the Annual Meeting, which is printed exactly as it was submitted.
Resolved, Shareowners ask our board to take the steps necessary to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.
Lowe’s shareholders permanently lack the right to act by written consent. Special shareholder meetings allow shareholders to vote on important matters, such as electing new directors that can arise between annual meetings. This proposal topic won more than 70%-support at Edwards Lifesciences and SunEdison. This proposal topic, sponsored by William Steiner, also won 78% support at a Sprint annual meeting with 1.7 Billionyes-votes. Nuance Communications (NUAN) shareholders gave 94%-support to a 2018 shareholder proposal calling for 10% of shareholders to call a special meeting.
Since special shareholder meetings allow shareholders to vote on important matters, such as electing new directors, adoption of this proposal might motivate our directors to perform better. For instance Sandra Cochran was rejected by40-times in as many shares in 2019 as each of 8 other Lowe’s directors.
It is all the more important to make calling a special shareholder meeting more accessible because the corporate laws of North Carolina do not allow Lowe’s shareholders to act by written consent.
This proposal topic won 46%-support at the 2018 Lowe’s annual meeting. This means that it won majority support from the shares that have access to independent proxy voting advice. The management statement that accompanied the 2018 special meeting proposal hyped the shareholder engagement that Lowe’s purportedly does. Apparently this engagement did not predict the 46%-vote. Perhaps Lowe’s has echo-chamber form of shareholder engagement.
Plus Lowe’s is taking steps to eliminate anin-person annual meeting. How ludicrous for a company to hype purported shareholder engagement while it is taking steps to eliminate the annual shareholder engagement meeting.
After a 45%-vote (less than a majority vote) for a shareholder proposal The Bank of New York Mellon Corporation (BK) said it adopted the shareholder proposal in 2019.
Please vote yes:
Make Shareholder Right to Call Special Meeting More Accessible – Proposal 6
Lowe’s Board of Directors’ Statement OPPOSING this shareholder proposal.
The Board has carefully considered the terms of this shareholder proposal and has determined that it is not in the best interests of our shareholders. This is particularly the case in light of the amendmentOur current proxy access bylaw provides shareholders with a meaningful opportunity to the Bylaws to reduce the share ownership threshold required to call a special meeting that we already approved prior to receipt of the proponent’s proposalnominate directors, aligns with market practice and which we are askingcomplements our shareholders to adopt, pursuant to North Carolina law, at the 2020 Annual Meeting. Proposal 4 of this Proxy Statement (see page 58) will allow shareholders who hold, in the aggregate, at least 15% of the Company’s outstanding Common Stock to call a special meeting of shareholders and is being recommended by the Board.other strong governance practices.
Lowe’s Has Already Taken Action to Make It Easier forImplemented a Proxy Access Bylaw Which Strikes the Right Balance Between Promoting Shareholder Rights and Protecting the Interests of Shareholders to Call Special Meetings
The proponent’s concern appearsBoard adopted proxy access in March 2016. As a result, our Bylaws permit a shareholder, or a group of up to be20 shareholders, owning 3% or more of our outstanding Common Stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of (i) two or (ii) 20% of the Board or, if such amount is not a whole number, the closest whole number below 20%, provided that the current ownership thresholdshareholder(s) and the nominee(s) satisfy the requirements in our Bylaws applicable for all director nominees. When our Board adopted these terms, commonly referred to as a 3/3/20/20 proxy access standard, it evaluated a number of 25% to call a special meetingdifferent factors. Those factors included providing shareholders meaningful participation in the director nomination process, as well as the importance of instituting reasonable procedural requirements,
such as limiting the number of shareholders unduly restricts or limits shareholders’ abilitythat may aggregate their share ownership to achieve the 3% nominating group threshold.
call a special meetingAfter reviewing this shareholder proposal, the terms of our proxy access bylaw and thatadditional information, including the Company has not taken action to change the 25% ownership threshold. The Board, however, has already taken steps to make it easier for shareholders to call a special meeting. In response to the vote at the 2018 Annual Meeting on a proposal to amend the Bylaws to reduce the ownership threshold to call a special meeting of shareholders from 25% to 10%, which did not pass but received support from about 46% of the voted shares,market practices discussed below, the Board taking into accountcontinues to believe that our existing proxy access bylaw appropriately balances the 2018 shareholder vote, an analysis of voting outcomes on similar proposals at other companies and benchmarking data ofright to proxy peer companies, has carefully considered the appropriate ownership threshold to call a special meeting and has submitted to shareholders for approval an amendment to the Bylaws to lower the ownership threshold to 15%. The 15% ownership threshold aligns Lowe’saccess with many of its peers and strikes an appropriate balance between the right of shareholders to call a special meeting and the interests of Lowe’s and our shareholders in promoting the appropriate use of Company resources. The Board believes a
Proposal 6: Shareholder Proposal Regarding Shareholder Special Meetings
15% ownership threshold is effective in preventing a small minority of shareholders, including those with special interests, from triggering the expense and distraction of a special meeting to (i) pursue matters that are not widely shared by our shareholders or are not viewed as requiring immediate attention or (ii) for reasons that may not be in the best interests of Lowe’sall our shareholders. Our Board believes that a 20 shareholder limit is appropriate because it recognizes administrative considerations and costs while still affording shareholders a meaningful proxy access right. In connection with our 2016 Annual Meeting, our shareholders voted on a proxy access proposal submitted by the proponent, which requested, among other things, that we adopt a proxy access bylaw without the 20 shareholder limit. Our shareholders rejected the proposed proxy access bylaw, with more than 69% of votes cast against the proposal.
Our Existing Proxy Access Bylaw Limit is Consistent with Market Practices
Our Bylaw’s limit on the size of a proxy access nominating group is in line with current market practices, with the vast majority of companies imposing the same or a more restrictive limit. Of the 644 companies that adopted proxy access from 2015 through January 2021, 629 companies (over 97%) have adopted a limit on the size of the nominating group, and our shareholders.20 shareholder limit is the same or more permissive than the limit adopted at 96% of companies with proxy access provisions. The limit on the size of the nominating group is designed to control the administrative burden of confirming and monitoring share ownership of a large nomination group. Under the current threshold, our shareholders already have the meaningful ability to aggregate their ownership and participate in the director nomination and election process.
Lowe’s is Committed to Shareholder Engagement and Sound Governance Practices that Empower our Shareholders
The Board also believes that adoption of this proposal is unnecessary because the Company is committed to high standards of corporate governance and has already taken a number of steps to further achieve greater transparency and accountability to shareholders. With respect to our proxy access bylaw in particular, in 2019, the Board amended the proxy access bylaw to remove the restriction on the re-nomination of a proxy access nominee based on the percentage of votes received in prior elections. Furthermore, our robust shareholder engagement program empowers shareholders to raise their concerns with the Company and enables the Company to effectively address these concerns in a transparent manner.
In addition to engaging with our shareholders on a regular basis,proxy access rights described above, the Board regularly reviews our corporate governance practices to identify and, where appropriate, to adopt potential enhancements. Some of the Company’s strong governance policies and practices include:
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Proposal 4: Shareholder Proposal Regarding Amending the Company’s Proxy Statement pursuant to our proxy access bylaws (see page 63);
Consistent with its current practice, the Board will continue to evaluate the future implementation of appropriate corporate governance measures. As a result of these factors, and after careful consideration, the Board has determined that the Company’s proposed special meeting ownership threshold in Proposal 4—and not this shareholder proposal—is in the long-term, best interests of the Company and its shareholders.
Our Proposed Ownership Threshold Strikes the Right Balance; Special Meetings Require Substantial Resources
We believe that special shareholder meetings should only be used to address extraordinary events that require immediate attention when waiting for the next annual meeting is impossible or inadvisable. Moreover, we have found that strong shareholder engagement practices are an effective means for discussing and considering important issues in between regularly scheduled annual meetings. Convening a special meeting is costly and disruptive; doing so involves substantial expenditures on legal and administrative fees as well as distribution costs related to preparing the required disclosure documents and printing and mailing. Additionally, senior management and the Board would be required to divert time from their work on business operations to prepare for and conduct the special meeting. If such a meeting has been called by a small minority of shareholders to address a proposal that has narrow support, it would be detrimental and inappropriate to cause the Board and senior management to shift their attention from their primary focus of maximizing long-term financial returns and operating the Company’s business in the best interests of shareholders. We believe that our proposed 15% ownership threshold appropriately balances the above concerns with the need for shareholders to have a mechanism by which to discuss extraordinary events in a timely manner.
Summary
The Board believescontinues to believe that a 15% ownership threshold ensuresthe current proxy access bylaw provides a meaningful percentage ofopportunity for our shareholders agree onto nominate directors and is in line with current market practices. Our robust shareholder engagement program provides multiple opportunities for our shareholders to communicate directly with the need for a special meeting before a special meeting can be called.Board. In light of these findings as well as the Company’s demonstrated commitment to establishing and implementing good governance practices, the Board believes that adoption of this proposal is not advisable. Lowe’s welcomes continued engagement with shareholders on these issues.
Upon receiving an oral or written request, the Company will promptly provide each shareholder proponent’s address and number of voting securities held.
The Board of Directors unanimously recommends a vote “AGAINST” this shareholder |
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2021 |
General Information
Why am I receiving these materials?
You have received these materials because the Board is soliciting your proxy to vote your shares at the Annual Meeting. This Proxy Statement includes information that the Company is required to provide you under the SEC rules and is designed to assist you in voting your shares.
What is a proxy?
The Board is asking for your proxy. This means you authorize the individuals selected by the Company to vote your shares at the Annual Meeting in the way that you instruct. All shares represented by valid proxies received and not revoked before the Annual Meeting will be voted in accordance with the shareholder’s specific voting instructions.
Why did I receive a one-page notice regarding Internet availability of proxy materials instead of a full set of proxy materials?
The SEC rules allow companies to choose the method for delivery of proxy materials to shareholders. For most shareholders, the Company has elected to mail a notice regarding the availability of proxy materials on the Internet (the “Notice of Internet Availability of Proxy Materials” or the “Notice”), rather than sending a full set of these materials in the mail. The Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement and form of proxy), as applicable, was sent to shareholders beginning April 15, 2021, and the proxy materials were posted on the Investor Relations page of our website at ir.lowes.com, and on the website referenced in the Notice on the same day. Utilizing this method of proxy delivery expedites receipt of proxy materials by the Company’s shareholders and lowers the cost of the Annual Meeting. If you would like to receive a paper or e-mail copy of the proxy materials, you should follow the instructions in the Notice for requesting a copy.
What is included in these proxy materials?
These materials include:
If you received a printed copy of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.
What items will be voted on at the Annual Meeting?
There are four proposals scheduled to be voted on at the Annual Meeting:
The Board is not aware of any other matters to be brought before the Annual Meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by proxy in their discretion.
What are the Board’s voting recommendations?
The Board unanimously recommends that you vote your shares:
When is the record date and who is entitled to vote?
The Board set March 22, 2021 as the record date. As of the record date, 717,178,375 shares of Common Stock were issued and outstanding. Shareholders are entitled to one vote per share of Common Stock outstanding on the record date on any matter presented at the Annual Meeting.
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General Information
What is a shareholder of record and “street name” holder?
A shareholder of record or registered shareholder is a shareholder whose ownership of Common Stock is reflected directly on the books and records of the Company’s transfer agent, Computershare Trust Company, N.A. If you hold Common Stock through an account with a bank, broker or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a shareholder of record. For shares held in street name, the shareholder of record is your bank, broker or similar organization. The Company only has access to ownership records for the registered shares.
Who can attend the Annual Meeting?
In light of the ongoing public health concerns related to the COVID-19 pandemic, we are holding the Annual Meeting in a virtual-only format via live audio webcast. You will not be able to attend the Annual Meeting in person. We have endeavored to provide shareholders with the same rights and opportunities for participation in the Annual Meeting online as an in-person meeting. We look forward to returning to the in-person meeting format once it is safe to do so.
If you are a registered shareholder of Common Stock holding shares at the close of business on the record date (March 22, 2021), you may attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/LOW2021 and logging in by entering the 16-digit control number found on your proxy card or Notice, as applicable. If your shares are held in street name and your voting instruction form or Notice indicates that you may vote those shares through the www.proxyvote.com website, then you may access, participate in and vote at the Annual Meeting with the 16-digit access code indicated on that voting instruction form or Notice, as applicable. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” (which will include a 16-digit control number) in order to be able to attend, participate in or vote at the Annual Meeting.
If you lost your 16-digit control number or are not a shareholder, you will be able to attend the meeting by visiting www.virtualshareholdermeeting.com/LOW2021 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares or submit questions during the meeting.
You may log into the Annual Meeting at www.virtualshareholdermeeting.com/LOW2021 beginning at 9:45 a.m. Eastern Time on May 28, 2021. The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time on May 28, 2021. We recommend that you log in before the Annual Meeting starts to allow time to check your internet connection, confirm your browser is up-to-date, and ensure you can hear the streaming audio. If you experience any technical difficulties during the Annual Meeting, we will have technicians ready to assist you, and a toll-free number will be available on our virtual shareholder meeting site for assistance. If there are any technical issues in convening or hosting the Annual Meeting, we will promptly post information on the Investor Relations page of our website at ir.lowes.com, including information on when the Annual Meeting will be reconvened.
How will the Annual Meeting be Conducted?
The Annual Meeting will be conducted in a virtual-only meeting format via live audio webcast. An Annual Meeting program containing rules of conduct for the Annual Meeting, similar to that used for our regular in-person meetings, will be provided to attendees in advance of and during the Annual Meeting at www.virtualshareholdermeeting.com/LOW2021. The rules of conduct will contain more information regarding the Q&A process, including the number and types of questions permitted, the time allotted for questions and how questions will be recognized, answered and disclosed.
Only shareholders who entered the Annual Meeting by entering the 16-digit control number found on their proxy cards, voter instruction forms, Notices or legal proxies, as applicable, may vote and ask questions at the Annual Meeting.
Shareholders may submit questions before and during the meeting via the “Submit a Question” field at www.virtualshareholdermeeting.com/LOW2021. We plan to answer questions pertinent to company matters as time allows during the Annual Meeting. Questions that are substantially similar may be grouped and answered once to avoid repetition. Shareholder questions related to personal or customer-related matters, that are not pertinent to Annual Meeting matters, or that contain derogatory references to individuals, use offensive language, or are otherwise out of order or not suitable for the conduct of the Annual Meeting will not be addressed during the Annual Meeting. If a pertinent question is
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General Information
unable to be answered because of time constraints, we will post answers to any such unanswered questions (consolidating repetitive questions) on the Investor Relations page of our website as soon as practicable after the Annual Meeting.
We will make a replay of the Annual Meeting available on the Investor Relations page of our website after the Annual Meeting.
How do I vote?
You may vote by proxy or at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy before the Annual Meeting using one of the following methods: (i) vote via the Internet at the Internet site address listed on the proxy card or voting instruction form; (ii) vote by telephone; or (iii) complete, sign, date and return your proxy card or voting instruction form in the postage-paid envelope provided. If you received only a Notice of Internet Availability of Proxy Materials by mail or by email, you may vote your shares at the Internet site address listed on your Notice or by telephone. If you plan to vote during the Annual Meeting rather than in advance, you may do so by entering the 16-digit control number found on your proxy card, voting instruction form, Notice or legal proxy, as applicable, at the time you log into the meeting at www.virtualshareholdermeeting.com/LOW2021. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote as described in the following Q&A.
How can I revoke my proxy or change my vote?
You may revoke your proxy or change your vote as follows:
Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically make that request or vote at the meeting. For all methods of voting, the last vote cast will supersede all previous votes. |
What happens if I vote by proxy and do not give specific voting instructions?
Shareholders of record. If you are a shareholder of record and you vote by proxy, via the Internet, by telephone or by signing, dating and returning a proxy card, without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion for any other matters properly presented for a vote at the Annual Meeting.
Beneficial owners of shares held in “street name.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on that matter with respect to your shares. This is referred to as a “broker non-vote.”
The election of directors, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2020, and the shareholder proposal are non-routine matters. Consequently, without your voting instructions, the organization that holds your shares cannot vote your shares on these proposals. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2021 is considered a routine matter.
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General Information
What is the voting requirement to approve each of the proposals?
Proposal 1: Election of Directors. In uncontested elections, directors are elected by the affirmative vote of a majority of the outstanding shares of the Company’s voting securities voted at the meeting by those attending or by proxy, including those shares for which votes are cast as “withheld.” In the event that a director nominee fails to receive the required majority vote, the Board may decrease the number of directors, fill any vacancy or take other appropriate action. If the number of nominees exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast by the holders of voting securities entitled to vote in the election.
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation. Approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2020 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting by those attending or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). The results of the advisory vote will not be binding on the Company, the Compensation Committee or the Board. The Compensation Committee and the Board will, however, review the voting result and take it into consideration when making future decisions regarding executive compensation.
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2021 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting by those attending or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Proposal 4: Shareholder Proposal. Approval of the shareholder proposal requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting by those attending or by proxy (meaning the numbers of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).
Other Items. Approval of any other matters requires the affirmative vote of a majority of the votes cast on the item at the Annual Meeting by those attending or by proxy (meaning the number of shares voted “for” the item must exceed the number of shares voted “against” such item).
What is the quorum for the Annual Meeting? How are withhold votes, abstentions and broker non-votes treated?
The presence, online at the scheduled time or by proxy, of the holders of a majority of the votes entitled to be cast by the holders of Common Stock is necessary for the transaction of business at the Annual Meeting. Your shares are counted as being present if you vote at the Annual Meeting or by submitting a properly executed proxy card or voting instruction form via the Internet, by telephone or by mail. Abstentions and broker non-votes are counted as present or represented for the purpose of determining a quorum for the Annual Meeting. With respect to Proposal 1, the election of directors, only “for” and “withhold” votes may be cast. “Withheld” votes are counted as votes cast and, because the election of directors requires the affirmative vote of a majority of the votes cast, have the effect of voting against the election of the applicable director nominee(s). Broker non-votes will not be counted as votes cast and, therefore, will not have any effect on the election of director nominees.
With respect to Proposals 2, 3, and 4, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2020, ratifying the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2021 and the shareholder proposal, respectively, abstentions and broker non-votes will not be counted as votes cast and, therefore, will not have any effect on the outcomes of these proposals.
Who pays for solicitation of proxies?
The Company is paying the cost of soliciting proxies and will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their proxies. In addition to soliciting the proxies by mail and the Internet, certain of the Company’s directors, officers and employees, without compensation, may solicit proxies personally or by telephone, facsimile and e-mail. The Company has engaged Innisfree M&A Incorporated to assist in distributing proxy materials and soliciting proxies for the Annual Meeting for a fee of approximately $25,000.
Where can I find the voting results of the Annual Meeting?
The Company will publish final voting results in the Company’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2021 or in a Current Report on Form 8-K filed with the SEC within four business days of the Annual Meeting.
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Additional Information
DELIVERY OF PROXY MATERIALS
As permitted by the Exchange Act, only one copy of this Proxy Statement and the 20192020 Annual Report to Shareholders, or the Notice of Internet Availability of Proxy Materials, as applicable, is being delivered to shareholders residing at the same address, unless such shareowners have notified the Company of their desire to receive multiple copies of proxy statements, annual reports or notices.
The Company will promptly deliver, upon oral or written request, a separate copy of this Proxy Statement and the 20192020 Annual Report to Shareholders, or the Notice of Internet Availability of Proxy Materials, as applicable, to any shareholder residing at a shared address to which only a single copy was mailed. Requests for additional copies of this Proxy Statement, the 20192020 Annual Report to Shareholders, or the Notice of Internet Availability of Proxy Materials, and/or requests for multiple copies of future proxy statements, annual reports or notices should be directed to Lowe’s Companies, Inc., Investor Relations Department, 1000 Lowes Boulevard, Mooresville, North Carolina 28117, or 1-800-813-7613.
Shareholders residing at the same address and currently receiving multiple copies of proxy statements, annual reports or notices may contact Lowe’s Investor Relations Department at the address and phone number above to request that only a single copy be mailed in the future.
ELECTRONIC DELIVERY OF PROXY MATERIALS
Shareholders can elect to view future proxy materials and annual reports over the Internet instead of receiving paper copies in the mail. If you received a paper copy of this year’s proxy materials by mail, you may register for electronic delivery of future proxy materials by following the instructions provided on your proxy card or voting instruction form. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may register for electronic delivery of future proxy materials by following the instructions provided when you vote online at the Internet site address listed on your Notice.
Choosing to receive your future proxy materials bye-mail will help the Company conserve natural resources and reduce the costs of printing and distributing its proxy materials. If you choose to receive
future proxy materials bye-mail, you will receive ane-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to receive proxy materials bye-mail will remain in effect until you terminate it.
SHAREHOLDER PROPOSALS FOR THE 20212022 ANNUAL MEETING
Rule 14a-8 Proposals.Proposals of shareholders intended to be included in the Company’s proxy materials for its 20212022 Annual Meeting of Shareholders must be received by the Company on or before December 17, 2020.16, 2021. Such proposals must also comply with SEC regulations under Rule14a-8 regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Proposals should be addressed to the attention of Ross W. McCanless, General Counsel and Corporate Secretary, at Lowe’s Companies, Inc., 1000 Lowes Boulevard, Mooresville, North Carolina 28117. Submission of a Rule 14a-8 proposal does not guarantee that it will appear in the proxy materials.
Advance Notice & Proxy Access.In addition, (i) shareholder proposals and shareholder nominations for candidates for election as directors submitted for consideration at the 20212022 Annual Meeting of Shareholders but not submitted for inclusion in the Company’s proxy materials for that meeting pursuant to Rule14a-8 and (ii) director nominees submitted to the Company by qualifying shareholders pursuant to itsthe Company’s proxy access bylawsbylaw to be included in the Company’s proxy materials for the 20212022 Annual Meeting of Shareholders must be delivered to, or mailed and received at, the principal executive offices of the Company not less than 120 days nor more than 150 days prior to the first anniversary of the date of the Annual Meeting. As a result, notice given by a shareholder pursuant to the provisions of the Company’s Bylaws (other than notice pursuant to Rule14a-8) must be received no earlier than December 30, 202029, 2021 and no later than January 29, 2021.28, 2022. However, if the date of the 20212022 Annual Meeting of Shareholders is moved more than 30 days before or more than 60 days after May 29, 2021,28, 2022, then notice by the shareholder must be delivered, or mailed and received, not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement (as defined in the Company’s Bylaws) of the date of such
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Additional Information
annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. Shareholder proposals (including proxy access director nominations) must satisfy the applicable requirements and include the specified information concerning the proposal or nominee as described in the Company’s Bylaws.Bylaws
The 2020 Annual Report to Shareholders, which includes the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2021, accompanies this Proxy Statement. The 2020 Annual Report to
Shareholders is also posted at the following website addresses: ir.lowes.com and www.proxyvote.com. The 2020 Annual Report to Shareholders and the Annual Report on Form 10-K for the fiscal year ended January 29, 2021, which contains the Company’s consolidated financial statements and other information about the Company, are not incorporated by reference in this Proxy Statement and are not to be deemed a part of the proxy soliciting material. The Company will also provide, without charge, its Annual Report on Form 10-K for the fiscal year ended January 29, 2021 upon written request addressed to Lowe’s Companies, Inc., Investor Relations Department, 1000 Lowes Boulevard, Mooresville, North Carolina 28117.
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Additional Information
ANNUAL REPORT
The 2019 Annual Report to Shareholders, which includes the Company’s Annual Report on Form10-K for the fiscal year ended January 31, 2020, accompanies this Proxy Statement. The 2019 Annual Report to Shareholders is also posted at the following website addresses: www.Lowes.com/investor and www.proxyvote.com. The 2019 Annual Report to Shareholders and the Annual Report on Form10-K for the fiscal year ended January 31, 2020, which contains the Company’s consolidated
financial statements and other information about the Company, are not incorporated by reference in this Proxy Statement and are not to be deemed a part of the proxy soliciting material. The Company’s Annual Report on Form10-K for the fiscal year ended January 31, 2020 is also available upon written request addressed to Lowe’s Companies, Inc., Investor Relations Department, 1000 Lowes Boulevard, Mooresville, North Carolina 28117.
Appendix A
CATEGORICAL STANDARDS FOR DETERMINATION OF DIRECTOR INDEPENDENCE
It has been the long-standing policy of Lowe’s Companies, Inc. (the “Company”) to have a substantial majority of independent directors. No director shall qualify as independent under the New York Stock Exchange (“NYSE”) corporate governance rules unless the board of directors of the Company (the “Board of Directors”) affirmatively determines that the director has no material relationship with the Company (directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The NYSE’s corporate governance rules include several “bright line” tests for director independence. No director who has a direct or indirect relationship that is covered by one of those tests shall qualify as an independent director. However, a director who meets all of the bright line independence criteria shall not be automatically presumed to be independent; the Board of Directors must still make an affirmative determination that each director has no material relationship with the Company. In making its independence determination for each director, the Board of Directors shall broadly consider all relevant facts and circumstances. In particular, when assessing the materiality of a director’s relationship with the Company, the Board of Directors shall consider the issue not merely from the standpoint of the director, but also from the standpoint of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others.
****
The Board of Directors has determined that the following relationships with the Company, either directly or indirectly, will not be considered material relationships for purposes of determining whether a director is independent:
year within the last three fiscal years do not exceed the greater of (i) $1 million or (ii) 2% of such other organization’s consolidated gross revenues; |
within the preceding three fiscal years, the aggregate amount of such contributions during any single fiscal year of the charitable organization did not exceed the greater of $1 million or 2% of the charitable organization’s consolidated gross revenues for that fiscal year; and
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Appendix A
charitable organization’s consolidated gross revenues for that fiscal year; and |
For purposes of this categorical standard, contributions made to any charitable organization pursuant to a matching gift program maintained by the Company or by its subsidiaries or by any foundation sponsored by or associated with the Company or its subsidiaries shall not be included in calculating the materiality threshold set forth above.
Definitions of Terms Used in these Categorical Standards
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Appendix B
Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan
The Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan is effective June 1, 2020, subject to approval by the Company’s shareholders.
1. Definitions.
1.1 “Account” means the funds accumulated with respect to an individual participant as a result of deductions from such participant’s paycheck (or otherwise as permitted in certain circumstances under the terms of the Plan) for the purpose of purchasing shares of Common Stock under this Plan. The funds allocated to a participant’s Account shall remain the property of the participant at all times but may be commingled with the general funds of the Company, except to the extent such commingling may be prohibited by the laws of any applicable jurisdiction.
1.2 “Administrator” means the Committee or the persons acting within the scope of their authority to administer the Plan pursuant to a delegation of authority from the Committee pursuant to Section 22.
1.3 “Affiliate” means an entity, other than a Subsidiary, in which the Company has an equity or other ownership interest.
1.4 “Board” means the Board of Directors of the Company.
1.5 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
1.6 “Committee” means the Compensation Committee of the Board. The Committee may delegate its responsibilities as provided in Section 22.
1.7 “Common Stock” means the common stock of the Company.
1.8 “Company” means Lowe’s Companies, Inc.
1.9 “Compensation” means, as to payroll periods ending during an offering, the actual base salary or hourly wages received by a participant in any such payroll period from a Participating Company; provided that the Administrator shall have the authority to determine and approve other forms of pay to be included in the definition of Compensation and may change the definition on a prospective basis.
1.10 “Eligible Employee” means an individual (i) classified as an employee of the Company or a Participating Company under the payroll procedures of the Company or Participating Company during the relevant participation periods and (ii) who has satisfied any waiting period not to exceed two (2) years imposed by the Committee, in each case except as otherwise required by law. For purposes of determining whether an individual is employed by a Participating Company, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment. Eligible Employees shall not include individuals classified as independent contractors. Notwithstanding the foregoing, (i) in respect of the 423 Plan, the Administrator may exclude from participation employees who are “highly compensated employees” of the Company or Participating Company (within the meaning of Section 414(q) of the Code) or otherwise limit eligibility to the extent permitted by Section 423 of the Code and (ii) in respect of anyNon-423 Plan, the Administrator may exclude from participation any employees it deems necessary or advisable in accordance with Section 22.2.
1.11 “Enrollment Date” as used in this Plan shall be the commencement date of an enrollment period for participation in the Plan. A different date may be set by the Committee.
1.12 “Enrollment Form” means an agreement between the Company and an employee, in such form as may be established by the Company from time to time, pursuant to which the employee elects to participate in the Plan or elects changes with respect to such participation as permitted under the Plan.
1.13 “Fair Market Value” means the closing price of a share of Common Stock on the primary exchange on which shares of the Common Stock are listed. If, on any given date, no share of Common Stock is traded on an established stock exchange, then Fair Market Value shall be determined with reference to the next preceding day that the Common Stock was so traded.
1.14 “Offering Date” as used in this Plan shall be the commencement date of an offering. A different date may be set by the Committee.
Appendix B
1.15 “Participating Company” means the Company and any Subsidiary or Affiliate that has been designated by the Administrator to participate in the Plan. For purposes of participation in the 423 Plan, only the Company and its Subsidiaries may be considered Participating Companies, and the Administrator shall designate from time to time which Subsidiaries will be Participating Companies in the 423 Plan. The Administrator shall designate from time to time which Subsidiaries and Affiliates will be Participating Companies in particularNon-423 Plans provided, however, that at any given time, a Subsidiary that is a Participating Company in the 423 Plan will not be a Participating Company in aNon-423 Plan. The foregoing designations and changes in designation by the Administrator shall not require shareholder approval. Notwithstanding the foregoing, the term “Participating Company” shall not include any Subsidiary or Affiliate that offers its employees the opportunity to participate in an employee stock purchase plan covering the Subsidiary’s or Affiliate’s common stock.
1.16 “Plan” means the Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan.
1.17 “Plan Broker” means a stock brokerage or other entity designated by the Company to establish accounts for stock purchased under the Plan by participants.
1.18 “Purchase Price” is the price per share of Common Stock as established pursuant to Section 5 of the Plan.
1.19 “Subsidiary” means any corporation (other than the Company), domestic or foreign, that is in an unbroken chain of corporations beginning with Company if, on an Offering Date, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, as described in Code Section 424(f).
2. Purpose and Structure of the Plan.
2.1 The Plan is intended to assist the Company and other Participating Companies in recruiting and retaining individuals with ability and initiative by enabling such persons to participate in the future success of the Company and other Participating Companies and to associate their interests with those of the Company and its shareholders. The Plan document is an omnibus document which includes asub-plan (the “423 Plan”) designed to permit offerings of grants to employees of the Company and certain Subsidiaries that are Participating Companies where such offerings are intended to satisfy the requirements of Section 423 of the Code (although the Company makes no undertaking nor representation to obtain or maintain qualification under Section 423 for any Subsidiary, individual, offering or grant) and also separatesub-plans(“Non-423 Plans”) which permit offerings of grants to employees of certain Participating Companies which are not intended to satisfy the requirements of Section 423 of the Code. Section 6 of the Plan sets forth the maximum number of shares to be offered under the Plan (and itssub-plans), subject to adjustments as permitted under Sections 19 and 20.
2.2 The 423 Plan shall be a separate and independent plan from theNon-423 Plans, provided, however, that the total number of shares of Common Stock authorized to be issued under the Plan applies in the aggregate to both the 423 Plan and theNon-423 Plans. Offerings under theNon-423 Plans may be made to achieve desired tax or other objectives in particular locations outside the United States of America or to comply with local laws applicable to offerings in such foreign jurisdictions. Offerings under theNon-423 Plans may also be made to employees of Participating Companies that are not Subsidiaries.
2.3 All employees who participate in the 423 Plan shall have the same rights and privileges under suchsub-plan except for differences that may be mandated by local law and are consistent with the requirements of Code Section 423(b)(5). The terms of the 423 Plan shall be those set forth in this Plan document to the extent such terms are consistent with the requirements for qualification under Code Section 423. The Administrator may adoptNon-423 Plans applicable to particular Participating Companies or locations that are not participating in the 423 Plan. The terms of eachNon-423 Plan may take precedence over other provisions in this document, with the exception of Sections 6, 19 and 20 with respect to the total number of shares available to be offered under the Plan for allsub-plans. Unless otherwise superseded by the terms of suchNon-423 Plan, the provisions of this Plan document shall govern the operation of suchNon-423 Plan. Except to the extent expressly set forth herein or where the context suggests otherwise, any reference herein to “Plan” shall be construed to include a reference to the 423 Plan and theNon-423 Plans.
3. Employees Eligible to Participate. Any Eligible Employee of the Company or a Participating Company who is employed on the day preceding the Enrollment Date for an offering is eligible to participate in that offering, subject to completion of an Enrollment Form as set forth in Section 7.1.
4. Offerings. Subject to the right of the Company in its sole discretion to sooner terminate the Plan or to change the commencement date or term of any offering, commencing with the Offering Date of December 1, 2020, the Plan will operate with separate
Appendix B
consecutivesix-month offerings with the following Offering Dates: June 1 and December 1; provided, however, that no offering may have a term in excess of 27 months. Unless a termination of or change to the Plan has previously been made by the Company, the final offering under this Plan shall commence on June 1, 2029 and terminate on November 30, 2029. In order to become eligible to purchase shares of Common Stock, an Eligible Employee must complete and submit an Enrollment Form and any other necessary documents at least 15 days (or such other period as may be designated by the Administrator) before the Offering Date of the particular offering in which he or she wishes to participate in accordance with Section 7. Participation in one offering under the Plan shall neither limit, nor require, participation in any other offering.
5. Price. The Purchase Price per share shall be eighty-five percent (85%) of the Fair Market Value of the Common Stock on the last day of the offering.
6. Number of Shares to be Offered. The maximum number of shares that will be offered under the Plan is 20,000,000 shares, subject to adjustment as permitted under Section 20. If the total number of shares of Common Stock for which options are to be granted on any date in accordance with Section 12 exceeds the number of shares of Common Stock then available under the Plan or a givensub-plan (after deduction of all shares for which options have been exercised under the Plan or are then outstanding), the Company shall make a pro rata allocation of the shares remaining available in as nearly a uniform manner as it determines is practicable and equitable. In such event, the payroll deductions to be made pursuant to the authorizations therefor shall be reduced accordingly and the Company shall give written notice of the reduction to each participant affected.
7. Participation.
7.1 An Eligible Employee may become a participant by completing an Enrollment Form provided by the Company and submitting it to the Company, or with such other entity designated by the Company for this purpose, no later than 15 days (or such other period as may be designated by the Administrator) prior to the commencement of the offering to which it relates.
7.2 Payroll deductions for a participant shall commence on the Offering Date as described above and shall continue through subsequent offerings pursuant to Section 10 until the participant’s termination of employment, subject to modification by the participant as provided in Section 8.1, and unless participation is earlier withdrawn or suspended by the employee as provided in Section 9 or deductions are reduced (including to zero) by the Company pursuant to Section 6.
7.3 Payroll deduction shall be the sole means of accumulating funds in a participant’s Account, except in foreign countries where payroll deductions are not allowed, in which case the Company may authorize alternative payment methods.
7.4 The Company may require current participants to complete a new Enrollment Form at any time it deems necessary or desirable to facilitate Plan administration or for any other reason.
8. Payroll Deductions.
8.1 At the time an Eligible Employee files a payroll deduction authorization, he or she shall elect to have deductions made from his or her Compensation on each payday during the time he or she is a participant in an offering at (i) anynon-fractional percentage rate from one percent (1%) to twenty percent (20%) or (ii) any flat dollar amount (not exceeding 20%), but in each case shall not exceed $10,625 in any offering. A participant may change his or her payroll deduction percentage election, including changing the payroll deduction percentage or flat dollar amount to zero, effective as of any Offering Date by filing a revised authorization, provided the revised authorization is filed at least 15 days (or such other period as may be designated by the Administrator) prior to such Offering Date.
8.2 All payroll deductions made for a participant shall be credited to his or her Account under the Plan. A participant may not make any separate cash payment into his or her Account nor may payment for shares be made other than by payroll deduction, except as provided under Section 7.3.
8.3 A participant may withdraw from his or her participation in the Plan as provided in Section 9, but no other change can be made during an offering with respect to that offering. Other changes permitted under the Plan may only be made with respect to an offering that has not yet commenced.
9. Withdrawal.
9.1 A participant may withdraw from an offering, in whole but not in part, at any time prior to the first day of the last calendar month of such offering by submitting a withdrawal notice to the Company, in which event the Company will refund the entire balance of his or her Account as soon as practicable thereafter.
Appendix B
9.2 If a participant withdraws his or her participation pursuant to Section 9.1, he or she shall not participate in a subsequent offering unless and until he or shere-enters the Plan. Tore-enter the Plan, an Eligible Employee who has previously withdrawn participation by reducing payroll deductions to zero must file a new Enrollment Form in accordance with Section 7.1. The Eligible Employee’sre-entry into the Plan will not become effective before the beginning of the next offering following his or her withdrawal.
10. AutomaticRe-Enrollment. At the termination of each offering each participant who continues to be an Eligible Employee shall be automaticallyre-enrolled in the next offering, unless the participant has advised the Company otherwise. Upon termination of the Plan, any balance in each participant’s Account shall be refunded to him or her.
11. Interest. No interest will be paid or allowed on any money in the Accounts of participants, except to the extent payment of interest is required by the laws of any applicable jurisdiction.
12. Granting of Option. On the last day of an offering, each participant shall be deemed to have been granted an option under the Plan for as many whole shares as he or she will be able to purchase with the amounts credited to his or her Account during his or her participation in that offering. An option covering a fractional share will not be granted under the Plan. Any amount remaining to the credit of a participant’s Account after the exercise of an option shall remain in the account and be applied to the payment of the option price of the option granted in the following offering, if the participant continues to participate in the Plan or, if he or she does not continue to participate in the Plan, shall be returned to the participant; provided, however, that in respect of any offering under the 423 Plan, any such remaining amount greater than the Purchase Price for the offering will in any event be returned to the participant.
13. Automatic Exercise of Option. Each Eligible Employee who continues to be a participant in an offering on the last day of that offering shall be deemed to have exercised his or her option on that date and shall be deemed to have purchased from the Company the number of whole shares of Common Stock reserved under the Plan as the balance of his or her Account on such date will pay for at the Purchase Price.
14. Tax Obligations. To the extent any (i) grant of an option to purchase shares of Common Stock, (ii) purchase of shares of Common Stock, or (iii) disposition of shares of Common Stock purchased under the Plan gives rise to any tax withholding obligation (including, without limitation, income and payroll withholding taxes imposed by any jurisdiction) the Administrator may implement appropriate procedures to ensure that such tax withholding obligations are met. Those procedures may include, without limitation, increased withholding from a participant’s current compensation, cash payments to the Company or another Participating Company by an employee, or a sale of a portion of the stock purchased under the Plan, which sale may be required and initiated by the Company.
15. Participant’s Rights as a Shareholder; Unfunded Plan. No participant shall have any right as a shareholder with respect to any shares of Common Stock until the shares have been purchased in accordance with Section 13 above and have been issued by the Company. The Plan, insofar as it provides for option grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by options granted under the Plan. Any liability of the Company to any person with respect to any option granted under the Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company.
16. Evidence of Stock Ownership.
16.1 Following the end of each offering, the number of shares of Common Stock purchased by each participant shall be deposited into an account established in the participant’s name at the Plan Broker.
16.2 A participant may move his or her shares to another brokerage account of his or her choosing at any time, without regard to the satisfaction of the holding period set forth in Section 423(a) of the Code.
17. Rights Not Transferable. No participant shall be permitted to sell, assign, transfer, pledge, or otherwise dispose of or encumber either the payroll deductions credited to his or her Account or an option or any rights with regard to the exercise of an option or rights to receive shares of Common Stock under the Plan other than by will or the laws of descent and distribution, and such right and interest shall not be liable for, or subject to, the debts, contracts, or liabilities of the participant. If any such action is taken by a participant, or any claim is asserted by any other party in respect of such right and interest whether by garnishment, levy, attachment or otherwise, the action or claim will be treated as an election to withdraw funds in accordance with Section 9. During
Appendix B
the Eligible Employee’s lifetime, only he or she can make decisions regarding the participation in or withdrawal from an offering under the Plan.
18. Termination of Employment. Upon termination of employment for any reason whatsoever, including but not limited to death or retirement, the balance in the Account of a participant shall be paid to the participant or his or her estate. Whether and when employment is deemed terminated for purposes of this Plan shall be determined by the Administrator in its sole discretion and may be determined without regard to statutory notice periods or other periods following termination of active employment.
19. Amendment or Discontinuance of the Plan. The Committee and the Board shall have the right at any time and without notice to amend, modify or terminate the Plan; provided, that no participant’s existing rights under any offering already made under Section 4 hereof may be adversely affected thereby, and provided further that no such amendment of the Plan shall, except as provided in Section 20, increase the total number of shares to be offered under the Plan above the limit specified in Section 6 unless shareholder approval is obtained therefor.
20. Changes in Capitalization. In the event of reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, offerings of rights, or any other change in the capitalization structure of the Company, the Committee may make such adjustment, if any, as it may deem appropriate in the number, kind, and the price of shares of Common Stock available for purchase under the Plan, and in the number of shares which a participant is entitled to purchase including, without limitation, closing an offering early and permitting purchase on the last day of the reduced offering period, or terminating an offering and refunding participants’ Account balances.
21. Share Ownership.
21.1 No individual shall be permitted to subscribe for any shares of Common Stock under the Plan if he or she, immediately after such subscription, owns shares (including all shares that may be purchased under outstanding subscriptions under the Plan) possessing five percent (5%) or more of the total combined voting power or value of all classes of shares of the Company or of its parent or subsidiary corporations. For the foregoing purposes, the rules of Section 424(d) of the Code shall apply in determining share ownership, and shares of Common Stock an individual may purchase under outstanding options shall be treated as owned by the individual.
21.2 In addition, no Eligible Employee shall be allowed to subscribe for any shares of Common Stock under the Plan that permit his or her rights to purchase shares under all “employee stock purchase plans” of the Company and its parent or subsidiary corporations to accrue at a rate that exceeds $25,000 of Fair Market Value of such shares (determined at the time such right to subscribe is granted) for each calendar year in which the right to subscribe is outstanding at any time. Notwithstanding the above, lower limitations may be imposed with respect to participants in aNon-423 Plan or participants in the 423 Plan who are subject to laws of another jurisdiction where lower limitations are required.
22. Administration and Board Authority.
22.1 The Plan shall be administered by the Board. The Board has delegated its full authority under the Plan to the Committee, and the Committee may further delegate any or all of its authority under this Plan to the Company’s Executive Vice President of Human Resources or such other senior officer(s) of the Company as it may designate. Notwithstanding any such delegation of authority, the Board may itself take any action under the Plan in its discretion at any time, and any reference in this Plan document to the rights and obligations of the Committee shall be construed to apply equally to the Board. Any references to the Board mean only the Board. The authority that may be delegated by the Committee includes, without limitation, the authority to (i) establishNon-423 Plans and determine the terms of suchsub-plans, (ii) designate from time to time which Subsidiaries will participate in the 423 Plan, which Subsidiaries and Affiliates will be Participating Companies, and which Participating Companies will participate in a particularNon-423 Plan, (iii) determine procedures for Eligible Employees to enroll in or withdraw from asub-plan, setting or changing payroll deduction percentages, and obtaining necessary tax withholdings, (iv) allocate the available shares of Common Stock under the Plan to thesub-plans for particular offerings, and (v) adopt amendments to the Plan or anysub-plan including, without limitation, amendments to increase the shares available for issuance under the Plan pursuant to Section 20 (but not including increases in the available shares above the maximum permitted by Sections 6 and 20 which shall require Board and shareholder approval).
22.2 The Administrator shall be vested with full authority and discretion to construe the terms of the Plan and make factual determinations under the Plan, and to make, administer, and interpret such rules and regulations as it deems necessary to administer the Plan, and any determination, decision, or action of the Administrator in connection with the construction,
Appendix B
interpretation, administration, or application of the Plan shall be final, conclusive, and binding upon all participants and any and all persons claiming under or through any participant. The Administrator may retain outside entities and professionals to assist in the administration of the Plan including, without limitation, a vendor or vendors to perform enrollment and brokerage services. The authority of the Administrator will specifically include, without limitation, the power to make any changes to the Plan with respect to the participation of Eligible Employees of any Subsidiary or Affiliate that is organized under the laws of a country other than the United States of America when the Administrator deems such changes to be necessary or appropriate including without limitation for the purposes of achieving a desired tax treatment in such foreign jurisdiction and complying with the laws applicable to suchnon-U.S. Subsidiaries or Affiliates. Those changes may include, without limitation, the exclusion of particular Subsidiaries or Affiliates from participation in the plan; modifications to eligibility criteria, maximum number or value of shares that may be purchased in a given period, or other requirements set forth herein; and procedural or administrative modifications. Any modification relating to offerings to a particular Participating Company will apply only to that Participating Company and will apply equally to all similarly situated employees of that Participating Company. The rights and privileges of all Eligible Employees granted options under the 423 Plan shall be the same. To the extent any changes approved by the Administrator would jeopardize thetax-qualified status of the 423 Plan, the change shall cause the Participating Companies affected thereby to be considered Participating Companies under aNon-423 Plan orNon-423 Plans instead of the 423 Plan.
23. Notices. All notices or other communications by a participant to the Company or other entity designated for a particular purpose under or in connection with the Plan shall be deemed to have been duly given when received by the Company or other designated entity, or when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
24. Termination of the Plan. This Plan will terminate at the earliest of the following:
(a) December 31, 2029;
(b) The date of the filing of a Statement of Intent to Dissolve by the Company or the effective date of a merger or consolidation wherein the Company is not to be the surviving corporation, which merger or consolidation is not between or among corporations related to the Company. Prior to the occurrence of either of such events, on such date as the Company may determine, the Company may permit a participant to exercise the option to purchase shares of Common Stock for as many shares as the balance of his or her Account will allow at the price set forth in accordance with Section 5. If the participant elects to purchase shares, any remaining balance of the participant’s Account will be refunded to the participant after that purchase;
(c) The date the Board acts to terminate the Plan in accordance with Section 19; and
(d) The date when all shares of Common Stock reserved under the Plan have been purchased.
25. Limitations on Sale of Stock Purchased Under the Plan. The Plan is intended to provide Common Stock for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of the employee’s own affairs. An employee, therefore, may sell stock purchased under the Plan at any time the employee chooses, subject to compliance with any applicable Federal, state or foreign securities laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE COMPANY’S STOCK.
26. Governmental Regulation/Compliance with Applicable Law/Separate Offering. The Company’s obligation to sell and deliver shares of the Company’s Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance, or sale of such shares and to applicable law. No option shall be exercisable, no Common Stock shall be issued, and no payment shall be made under this Plan, except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party and the rules of all domestic stock exchanges on which the Company’s shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. No option shall be exercisable, no Common Stock shall be issued and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters. In addition, the terms of an offering under this Plan, or the rights of a participant under an offering, may be modified to the extent required by applicable law. For purposes of the Plan, the Administrator also may designate separate offerings under the Plan (the terms of which need not be identical) in which Eligible Employees of one or more Participating Companies will participate, even if the dates of the offerings are identical.
27. No Employment/Service Rights. Nothing in the Plan shall confer upon any employee of the Company or any Subsidiary or Affiliate the right to continue in employment for any period of specific duration, nor interfere with or otherwise restrict in any way
Appendix B
the rights of the Company (or any Subsidiary or Affiliate employing such person), or of any employee, which rights are hereby expressly reserved by each, to terminate such person’s employment at any time for any reason, with or without cause.
28. Dates and Times. All references in the Plan to a date or time are intended to refer to dates and times determined pursuant to U.S. Eastern Time. Business days for purposes of the Plan are U.S. business days.
29. Masculine and Feminine, Singular and Plural. Whenever used in the Plan, a pronoun shall include the opposite gender and the singular shall include the plural, and the plural shall include the singular, whenever the context shall plainly so require.
30. Governing Law. The Plan shall be governed by the laws of the State of North Carolina, U.S.A., without regard to North Carolina laws that might cause other law to govern under applicable principles of conflicts of law.
Appendix C
RECONCILIATION OFNON-GAAP FINANCIAL MEASURES
Management uses certainnon-GAAP financial measures, because it considers them to be important supplemental measures of the Company’s performance. Management also believes that thesenon-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company’s financial and operating performance. As used in this Proxy Statement, we have presentednon-GAAP financial measures to exclude, as applicable, the impacts of certain discrete items, as further detailed below, not contemplated in Lowe’s business outlooks for fiscal 20192020 and fiscal 2018.2019. Thesenon-GAAP financial measures should not be considered an alternative to, or more meaningful indicator of, the Company’s financial and operating performance in accordance with GAAP. The Company’s methods of determining thesenon-GAAP financial measures may differ from the methods used by other companies for this or similarnon-GAAP financial measures. Accordingly, thesenon-GAAP measures may not be comparable to the measures used by other companies.
The following provides a reconciliation of adjusted sales to sales, adjusted operating income to operating income and adjusted diluted earnings per share to diluted earnings per common share, the most directly comparable GAAP financial measures.
Sales (MM) | Operating Income (MM) | |||||||
Fiscal 2019 Results, As Reported | $ | 72,148 |
| $ | 6,314 |
| ||
2019 Canada restructuring(1) |
| (25 | ) |
| 230 |
| ||
Mexico adjustments(2) |
| (63 | ) |
| 35 |
| ||
Adjusted Fiscal 2019 Results | $ | 72,060 |
| $ | 6,579 |
|
Operating Income (MM) | ||||
Fiscal 2020 Results, As Reported | $ | 9,647 | ||
Canada restructuring(1) | 45 | |||
Adjusted Fiscal 2020 Results | $ | 9,692 |
Year Ended | ||||||||||||||||||||||||||||
January 31, 2020 | February 1, 2019 | |||||||||||||||||||||||||||
Name | Pre-Tax Earnings | Tax | Net Earnings | Pre-Tax Earnings | Tax | Net Earnings | ||||||||||||||||||||||
Diluted Earnings Per Share, As Reported | $ | 5.49 | $ | 2.84 | ||||||||||||||||||||||||
2019 Canada restructuring(1) | 0.29 | 0.02 | 0.31 | — | — | — | ||||||||||||||||||||||
Mexico adjustments(2) | 0.05 | (0.11 | ) | (0.06 | ) | — | — | — | ||||||||||||||||||||
Canadian goodwill impairment(3) | — | — | — | 1.17 | (0.03 | ) | 1.14 | |||||||||||||||||||||
Orchard Supply Hardware charges(4) | — | — | — | 0.68 | (0.17 | ) | 0.51 | |||||||||||||||||||||
U.S. & Canada charges(5) | — | — | — | 0.33 | (0.08 | ) | 0.25 | |||||||||||||||||||||
Mexico impairment charges(6) | — | — | — | 0.30 | 0.01 | 0.31 | ||||||||||||||||||||||
Non-core activities charges(7) | — | — | — | 0.06 | (0.02 | ) | 0.04 | |||||||||||||||||||||
Project Specialists Interiors charge(8) | — | — | — | 0.02 | — | 0.02 | ||||||||||||||||||||||
Adjusted Diluted Earnings Per Share | $ | 5.74 | $ | 5.11 |
Name | Year Ended | |||||||||||||||||||||||||||
January 29, 2021 | January 31, 2020 | |||||||||||||||||||||||||||
Pre-Tax | Tax | Net | Pre-Tax | Tax | Net | |||||||||||||||||||||||
Diluted Earnings Per Share, As Reported | $ | 7.75 |
| $ | 5.49 |
| ||||||||||||||||||||||
Loss on extinguishment of debt(2) |
| 1.41 |
|
| (0.36) |
|
| 1.05 |
|
| — |
|
| — |
|
| — |
| ||||||||||
Canada restructuring(1) |
| 0.06 |
|
| — |
|
| 0.06 |
|
| 0.29 |
|
| 0.02 |
|
| 0.31 |
| ||||||||||
Mexico adjustments(3) |
| — |
|
| — |
|
| — |
|
| 0.05 |
|
| (0.11) |
|
| (0.06 | ) | ||||||||||
Adjusted Diluted Earnings Per Share | $ | 8.86 |
| $ | 5.74 |
|
(1) | Represents pre-tax operating costs related to inventory write-downs and other closing costs associated |
(2) | Represents costs associated with the extinguishment of debt in connection with cash tender offers on an aggregate principal amount of $3.0 billion in outstanding notes. |
(3) | Represents adjustments associated with the Company’s decision to pursue a sale through liquidation of its Mexico operations, instead of its original intention of selling the operating business. As a result, the Company recognized a favorable tax benefit, offset by operating losses, net of tax, for the period associated with the wind-down of the Mexico operations. |
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NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
LOWE’S COMPANIES, INC.
For Withhold For All To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except” and write the Company Proposals — Lowe’s Board of Directors number(s) of the nominee(s) on the line below. recommends you vote “FOR ALL” of the nominees listed in Proposal 1 and “FOR” Proposals 2 and 3. ! ! ! 1. Election of Directors Nominees: 01) Raul Alvarez 07) Marvin R. Ellison 02) David H. Batchelder 08) Daniel J. Heinrich 03) Angela F. Braly 09) Brian C. Rogers 04) Sandra B. Cochran 10) Bertram L. Scott 05) Laurie Z. Douglas 11) Mary Beth West 06) Richard W. Dreiling For Against Abstain 2. Advisory vote to approve Lowe’s named executive officer compensation in fiscal 2020. ! ! ! 3. Ratification of the appointment of Deloitte & Touche LLP as Lowe’s independent registered public accounting firm for fiscal 2021. ! ! ! Shareholder Proposal — Lowe’s Board of Directors recommends you vote “AGAINST” Proposal 4. For Against Abstain 4. Shareholder proposal regarding amending the Company’s proxy access bylaw to remove shareholder aggregation limits. ! ! ! NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. Authorized Signature(s) - You must sign and date below for your instructions to be executed. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m., Eastern Time, on May 25, 2021 (for shares allocated to a Lowe’s 401(k) Plan account) or on May 27, 2021 (for all other shares). Have your proxy card in hand when you access the website and then follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/LOW2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m., Eastern Time, on May 25, 2021 (for shares allocated to a Lowe’s 401(k) Plan account) or on May 27, 2021 (for all other shares). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Lowe’s Companies, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. LOWE’S COMPANIES, INC. 1000 Lowes Boulevard
Mooresville, North CarolinaLOWES BOULEVARD MAIL CODE: NB3TIR MOORESVILLE, NC 28117
www.Lowes.com TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D43913-P49946 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
Printed on Recycled Paper
Lowe’s and the Gable Mansard Design are trademarks or registered trademarks of LF, LLC.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 28, 2021: The Notice of Annual Meeting and Proxy Statement and Annual Report are available at www.proxyvote.com. D43914-P49946 2021 Annual Meeting of Shareholders THIS PROXY IS SOLICITED ON BEHALF OF LOWE’S BOARD OF DIRECTORS. The undersigned hereby appoint(s) David M. Denton and Ross W. McCanless, each of them, as proxies, and each with the power to appoint his substitute, and hereby authorize(s) each of them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of Common Stock of Lowe’s Companies, Inc. that the undersigned is/are entitled to vote at the 2021 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Time, on Friday, May 28, 2021 virtually at www.virtualshareholdermeeting.com/LOW2021, and any adjournment or postponement thereof. The proxies are authorized to vote on such other business as may properly come before the meeting or any adjournment or postponement thereof, exercising their discretion as set forth in the Notice of Annual Meeting and Proxy Statement. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, this proxy will be voted “FOR ALL” nominees named in Proposal 1 and “FOR” Proposals 2 and 3 and “AGAINST” Proposal 4, and in the discretion of the proxies with respect to such other business as may properly come before the meeting or any adjournment or postponement thereof. This card also constitutes voting instructions to Wells Fargo Bank N.A., the Trustee of the Lowe’s 401(k) Plan, to vote the shares of Common Stock of Lowe’s Companies, Inc., if any, allocated to the undersigned’s 401(k) Plan account pursuant to the instructions on the reverse side. Voting instructions with respect to such plan shares must be received by 11:59 p.m., Eastern Time, on May 25, 2021. Any allocated shares for which no instructions are timely received will be voted by the Trustee in the manner directed by the Lowe’s administrative committee. PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE, OR FOLLOW THE INSTRUCTIONS TO VOTE BY INTERNET OR PHONE. (Items to be voted appear on reverse side.)
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