UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
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Section III 20212022 Notice and Proxy Statement Avery Dennison Corporation | 2022 Proxy Statement SECTION III
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
RECORD DATE | February | |
MEETING DATE | April | |
MEETING TIME | 1:30 p.m. | |
MEETING FORMAT |
MEETING AGENDA
1 | Elect the | |
2 | Approve, on an advisory basis, our executive compensation | |
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| Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year | |
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| Transact any other business properly brought before the meeting or any adjournment or postponement thereof |
Our Board recommends that you vote FOR each of our nine8 director nominees in Item 1 and FOR Items 2 and 3.3.
Stockholders of record as of February 22, 202128, 2022 are entitled to notice of, and to vote during,in connection with, the meeting and any adjournment or postponement thereof. This notice and our proxy materials are being distributedmailed or made available to stockholders on or about March 8, 2021.15, 2022.
We want your shares to be represented and voted. We encourage you to vote promptly as this will save us the time and expense of additional proxy solicitation. As shown on the right, you can vote online, by telephone, by mail or, in certain circumstances, during the meeting.
On behalf of theour Board of Directors, management and employees of Avery Dennison,team members worldwide, thank you for your continued support.investment in us and our company. We look forward to talkingengaging with you during the virtual Annual Meeting.
By Order of the Board of Directors,
Vikas Arora
Vice President, Associate General Counsel and
Corporate Secretary
March 5, 202110, 2022
Online
You can vote online at www.proxyvote.com by 11:59 p.m. Eastern Time on April 21, 2021.27, 2022. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Telephone
In the U.S. and Canada, you can vote by calling 1.800.690.6903 by 11:59 p.m. Eastern Time on April 21, 2021.27, 2022. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Mail
You can vote by mail by completing, dating and signing your proxy card and returning it in the postage-paid envelope or otherwise to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.
During Meeting
Unless your shares are held through our Employee Savings Plan, you can vote during the Annual Meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting.
Avery Dennison Corporation |
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This proxy summary contains highlights of information described in greater detail in other parts ofincludes key messages related to this proxy statement and does not contain all the information you should consider before voting. We strongly encourage you to read the entire proxy statement before voting.
DISTRIBUTION OF PROXY MATERIALS
We will mail our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials online, on or about March 8, 2021.15, 2022. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will mail you our 20202021 integrated report, which includes a letter to stockholders from our Chairman President and Chief Executive Officer;Officer (CEO); our 20202021 annual report; our notice and proxy statement for the 20212022 Annual Meeting of Stockholders (the “Annual Meeting”); information regarding our businesses, financial performance and strategic achievements, andincluding our continued progress as it relates to environmental, social and governance (ESG) matters; and a proxy card, on or about March 8, 2021.card.
TIME, DATE AND FORMAT OF ANNUAL MEETING
The Annual Meeting will take place at 1:30 p.m. PacificEastern Time on April 22, 2021.28, 2022. Due to continued public health concerns about large, indoor in-person gatherings given the coronavirus/COVID-19 pandemic (“COVID-19”), particularly in Los Angeles County, California, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2021AVY2022 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials or proxy card.
TheOnline access to the live audio webcast of the Annual Meeting will begin promptly. Online access will open at 1:15 p.m. PacificEastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the meeting in advance of its designated start time as we plan to begin conducting the start time.meeting promptly. For additional instructions on how to attend the virtual Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
ITEMS BEING VOTED ON DURING ANNUAL MEETING
You are being asked to vote on the items of business shown below during the Annual Meeting. Our Board of Directors (our “Board”) recommends that you vote FOR each of our 98 director nominees and FOR the other two2 items being brought before the stockholder vote.
Item | Item | Board Recommendation | Vote Required | Discretionary Broker Voting | Page Reference | Item | Board Recommendation | Vote Required | Discretionary Broker Voting | Page Reference | ||||||||||||||
1 | Election of directors | FOR each nominee | Majority of votes cast | No | 38 | Election of directors | FOR each nominee | Majority of votes cast | No | 39 | ||||||||||||||
2 | Advisory vote to approve executive compensation | FOR | Majority of shares represented and entitled to vote | No | 48 | Advisory vote to approve executive compensation | FOR | Majority of shares represented and entitled to vote | No | 49 | ||||||||||||||
3 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year 2021 | FOR | Majority of shares represented and entitled to vote | Yes | 91 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for FY 2022 | FOR | Majority of shares represented and entitled to vote | Yes | 89 |
VOTING PRIOR TO OR DURING ANNUAL MEETING
You may vote your shares by submitting a proxy at www.proxyvote.com in advance of the Annual Meeting or, in certain circumstances, voting during the meeting at www.virtualshareholdermeeting.com/AVY2021. If you hold your shares in “street name,” youmeeting. You may not vote during the meeting if your shares are held through our Employee Savings Plan. Beneficial holders may only vote during the meeting if youthey properly request and receive a legal proxy in yourtheir name from the broker, bank or other nominee that holds yourtheir shares. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting as describedby following the instructions contained in the Voting and Meeting Q&A section of this proxy statement.
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ASKING QUESTIONS DURING ANNUAL MEETING
We have designed the format of thevirtual Annual Meeting to ensure that stockholders are affordedyou have the same rights and opportunities to participate as theyyou would at an in-person meeting, using easy-to-use online tools that allow stockholdersyou to attend, vote and participateask questions. After the business portion of the Annual Meeting concludes and the meeting is adjourned, our Chairman/CEO will lead a Q&A session during which we intend to answer all questions submitted on the day of or during
Avery Dennison Corporation | 2022 Proxy Statement | 1 |
the meeting that are pertinent to our company and the items being brought before stockholder vote. Answers to any questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. For additional information on submittinghow to submit questions during the Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
OUR COMPANY
We are a global materials science company specializing in the design and manufacture of a wide variety of labeling and functional materials. Our products and solutions, which are used in nearly every major industry, include pressure-sensitive materials for labellabels and graphic applications; tapes and other bonding solutions for industrial, medical and retail applications; tags, labels and embellishments for apparel; and radio-frequency identification (RFID) solutions serving apparel and other markets. We employ more than 32,000have approximately 36,000 employees in more than 50 countries.
Our company is comprised of the following businesses: Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS) and Industrial and Healthcare Materials (IHM).
STRATEGY OVERVIEW
We are committed to ensuring the continuing success of all our stakeholders – our employees, customers, investors and communities. .In a challenging 2020 due2021, we continued to invest in the extraordinarylong-term success of our company and advance our ESG priorities. To mitigate the challenges presented by the continued impact of COVID-19, we focused on ensuring the healthsafety and well-being of our employees, deliveringemployees; managing a dynamic supply/demand environment and supply chain pressures to deliver for our customers,customers; minimizing the impact of the pandemic-driven recessionpandemic-related effects for our investors,stockholders; and supporting our communities while continuing to invest in the long-term success of our company. We have refined how we present ourOur key strategies and 2021 achievements are shown below and on the following page, butpage. Our overriding focus remains the long-term success of all of our areasstakeholders, and we have a clear set of strategic focus are consistent with recent years.objectives and strategies to deliver for them.
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Drive outsized growth in high-value categories
We striveseek to increase the proportion of our portfolio in high-value products and solutions, both organically and through acquisitions; high-value categories serve markets that are growing faster than gross domestic product (GDP),GDP, represent large pools of potential profit and leverage our core capabilities,capabilities. These products and solutions include our specialty and durable label materials, graphics and reflective solutions, industrial tapes, intelligent labelsIntelligent Labels that use RFID tags and inlays, and external embellishments, and, with our recent acquisition of CB Velocity Holdings, LLC (“Vestcom”), shelf-edge pricing, productivity and consumer engagement solutions.
In 2020,2021, we achieved organic sales change in high-value product categories that outpaced that of our base businesses by more than one point,a high-single digit rate driven by growth in specialty labels, external embellishments and RFID; also advancedIntelligent Labels; added to our RFID platformcapabilities and expanded our position in high-value product categories through our acquisition of Vestcom; and more than tripled the Transponder (RFID inlay) divisionsize of Smartrac, a manufacturerour Intelligent Labels platform over the last five years, reaching net sales of RFID products (which we refer to as “Smartrac”)$0.7 billion in 2021
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Grow profitability in our base businesses
We strive to improvegrow profitability in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies
In 2020,2021, we protected,heightened our focus on material reengineering to drive productivity and even grew, operating margins in our base businessesmitigate the impact of rising input costs
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Focus relentlessly on productivity
We employ product reengineering and enterprise lean sigma to expand our operating margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment
In 2020,2021, we significantly expandedcontinued expanding operating margins, showing agilitywith approximately $65 million in response to COVID-19 by delivering approximately $200 millionsavings from restructuring, net of cost reduction through both structural and temporary actionstransition costs
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Effectively allocateAllocate capital effectively
We balance our investments in organic growth, productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases
In 2020,2021, leveraging our strong balance sheet, we invested nearly $220$272.1 million in fixed and information technology (IT) capital expenditures to support organic growth; completed two acquisitions;three acquisitions and made three venture investments for a total of $1.48 billion; increased our quarterly dividend rate by 7%~10%; and repurchased $180.9 million in October after having maintained it earlier in the year and resumed repurchaseshares of shares in Q3 after having suspended it in March, in each case due to then-uncertain impact of COVID-19 on our businessescommon stock
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Lead in an environmentally and socially responsible manner
We workaim to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive and equitable culture; maintain a culture ofoperations that promote health and safety; and support our communities primarily through contributions from the Avery Dennison Foundation (ADF), supplemented by contributions from our company
In 2020,2021, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in strategic innovation platforms focused on recyclability/enablingmaterial circularity and waste reduction/elimination; redoubling our efforts to drivedriving sustainable change in diversity, equity and inclusion including by sharpening our(DE+I), with a sharpened focus on increasing workforce racial/ethnic workforce diversity, particularly inas well as representation from other underrepresented communities such as LGBTQ+, veteran or disabled individuals; and using the U.S.; and contributing $10 million we contributed to the Avery Dennison FoundationADF in 2020 to significantly increase the scopegrant-making in our communities, resulting in over $6 million of charitable contributions from ADF and pace of its grantmakingour company in the communities in which we operate2021. We also announced more ambitious 2030 sustainability goals.
PERFORMANCE HIGHLIGHTS
COVID-19 Response
Our top priority in 2020 given2021 as the continuing public health crisis of COVID-19 pandemic continued to evolve and impact our global teams was to safeguard the health, safety and well-being of our employees followed immediately by continually adapting our world-class safety protocols. We also were highly focused on delivering for our customers, leveraging our global scale to manage elevated lead times caused by constrained raw material, freight and labor availability and persistent inflation. . To minimize the impacteffects of the pandemic-driven recessionpandemic on our investors, we worked to mitigate the impact of COVID-19 on our supply chain, as well as ensure we maintained a strong balance sheet andto ensure financial flexibility as we confronted uncertain capital markets.flexibility. We also took several actionsmore than doubled our financial support for communities in 2021 compared to support our communities during this difficult time. The actions we took in response to COVID-19 are described in the chart on the following page.prior year.
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Strong 20202021 Performance
In 2020,2021, by consistently executing our strategies, we continued to provedelivered our resilience across business cycles, delivering atenth consecutive year of strong earnings per share (EPS)top- and bottom-line growth, significantexpanded operating margin expansionmargins and achieved record free cash flow, despite the challenging macroeconomic environment caused bycontinued impact of COVID-19.COVID-19 and related supply chain, labor, freight and inflationary challenges. These results reflected the extraordinary efforts undertaken by our leaders and teams globally to respond to COVID-19the difficult macroeconomic environment and mitigate its impactimpacts on our company. Although we could not have predicted the pandemic, ourOur performance in its face evidencesreflects our rigorous scenario planning, which has enabled us to be prepared for a wide range of macroeconomic scenarios. financial situations. We advanced all our key strategies and delivered strong performance, reflecting the preparedness and agilitywhile continuing to deliver for all of our team members worldwide, who came together to help us navigate one of the most challenging periods in our company’s history.stakeholders.
Our strong performance in fiscal year 20202021 performance reflects the strength of our markets, our industry-leading positions, the strategic foundations we have laid and our talented team. Our key financial achievements for the year are described below and on the following page.
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Reported net sales of $6.97$8.41 billion, down 1.4%up ~21%, reflecting volume growth across our businesses and recovery from prior year due tothe prior-year impact of COVID-19 with growth rebounding in 2H from its low in Q2, and roughly one-point benefit from extra week in 2020 fiscal year
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Excluding the impact of currency, sales declined 1.7%increased ~19%; sales on an organic basis increased by ~16% driven by continued strong demand for consumer packaged goods and the accelerated shift to e-commerce in LGM, as well as significant organic growth in Intelligent Labels
Reported earnings per share (EPS) increased ~34% from $6.61 in 2020 to $8.83 in 2021, in part due to the prior-year impact of COVID-19;COVID-19 sales on organic basis declined by 3.4%. Sales declined slightly in our Label and Graphic Materials (LGM) reportable segment, where increase in
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• Reported EPS substantially increased from $3.57 in 2019 to $6.61 in 2020, reflecting prior-year settlement charges resulting from U.S. pension plan termination and significant operating margin expansion in 2020
• Adjusted EPS increased 8%~25% from $6.60$7.10 to $7.10,$8.91, driven by strong growth and operating margin expansion; adjusted EPS for the year was at highsubstantially higher than the top end of $6.90the $7.65 to $7.15$8.05 annual guidance range we provided to investors in January 2020February 2021
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With reported net cash provided by operating activities of $751.3$1,046.8 million, delivered record free cash flow of $547.5$797.7 million, $250+ million higher than 2020 and substantially exceeding 2020 goalour initial 2021 outlook of $500+$600+ million
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On reported net income of $555.9$740.1 million, achieved return on total capital (ROTC) including acquisition amortization of 18.1%~18% and ROTC excluding acquisition amortization of ~19%
Sales change excluding the impact of currency (sales change ex. currency), organic sales change, adjusted EPS, free cash flow and ROTC both including and excluding acquisition amortization – as well as adjusted EBITDA margin, which is used later in this proxy summary – are supplementalnon-GAAP financial measures that we provide to assist investors in assessing our performance and operating trends. These measures are defined, qualified and reconciled from generally accepted accounting principles in the United States of America (GAAP) in the last section of this proxy statement. These non-GAAP financial measures are not a substitute for or superior to the comparable financial measures under GAAP.
AchievingDelivering Financial Targets
Our objective is to deliver GDP+ growth and top-quartile returns on capital to create superior value over the long term.In March 2017, we announced five-year financial goalstargets through 2021, including targets for compound annual organic sales growth, 2021 GAAP operating margin, compound annual adjusted EPS growth and 2021 ROTC. The combination of our growth and ROTC targets is a proxy for growth in economic value added (EVA), one of the performance objectives used in our long-term incentive (LTI) program.2021. As shown below, based onwe exceeded each of these commitments we made to our results forinvestors.
This is the first four yearsthird set of this five-year period,long-term financial targets we have delivered. Our consistently strong performance reflects the strength of our industry-leading market positions, the strategic foundations we have laid, and our agile and talented workforce. Given the diversity of our end markets, strong competitive advantages and resilience as an organization, we are largely on trackconfident in our ability to achieve these commitments. Our 2017-2020 compound annual organic sales growthcontinue delivering for you through a wide range of 2.0% was lower than our top-line target, but higher than forecasted global GDP growth (a key tenet of our top-line objective) of 1.5% over the same period.business cycles.
For the 2017-20202017-2021 period, on a four-yearfive-year compound annual basis (with 2016 as the base period), GAAP reported net sales, net income and reported EPS increased by 3.5%6.7%, 18.2% and 16.9%20.1%, respectively, and reported net income increased by 14.7%.respectively.
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Sales Growth(2) | 5%+ ex. currency(3)
4%+ organic |
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GAAP Operating Margin | 11%+ in 2021 | | ||
Adjusted EPS Growth(2) | 10%+ | | ||
ROTC incl. Acquisition Amortization | 17%+ in 2021 | | ||
(1) | Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. |
(2) | Percentages for targets and results reflect five-year compound annual growth rates, with 2016 as the base period. |
(3) | Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 2017 of approximately one point. |
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In March 2021, we announced five-year financial targets through 2025. As shown below, based on the first year of this five-year period, we are on track to achieve these commitments.
In 2021 (with 2020 as the base period), GAAP reported net sales, net income and EPS increased by 20.6%, 33.1% and 33.6%, respectively.
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Sales Growth(2) | 5%+ ex. currency(3) | 18.6% ex. currency
15.6% organic | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.6% in 2021 | ||
Adjusted EPS Growth(2) | 10% | 25% | ||
ROTC excl. Acquisition Amortization | 18%+ in 2025 | 19.1% in 2021 | ||
ON TRACK TO ACHIEVE 2021-2025 FINANCIAL TARGETS | ||||
(1) Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. (2) Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect one-year annual growth rates, with 2020 as the base period. (3) Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 10, 2021, which represents (0.2)%. |
Effective Capital Allocation
We have been consistently effectivedisciplined in executing our approach to capital allocation strategy, balancing our investments in organic growth, productivity, and acquisitions and venture investments with continuing to return cash to stockholders through dividends and share repurchases. In 2020, on net income of $555.9 million,2021, we invested $218.6$272.1 million in fixed and IT capital expenditures to support our future growth and further productivity improvement and allocated $350.4 million$1.48 billion to acquisitions and venture investments; we also paid $196.8$220.6 million in dividends and repurchased $104.3$180.9 million in shares of our common stock.
We have invested in our businesses to support organic growth and pursued complementary and synergistic acquisitions. Our fixed and IT capital spending onin 2021 was nearly 25% higher than in 2020, reflecting our continued investment in high-value categories, including our fast-growing Intelligent Labels platform, and lower-than-planned capital expenditures in 2020 was 15% lower than 2019 but consistent with our externally communicated outlook forto mitigate the impact of COVID-19. During the year, during which we accelerated our paceacquired Vestcom, an Arkansas-based provider of investmentshelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged goods companies, for $1.47 billion, as well as ZippyYum, LLC (“ZippyYum”), a California-based developer of software products used in high-value categories, particularly RFID. We also allocated over $350 million to acquisitions. In February 2020, we completed our acquisitionthe food service and food preparation industries, and JDC Solutions, Inc. (“JDC”), a Tennessee-based manufacturer of Smartracpressure-sensitive specialty tapes, collectively for approximately $255 million. Together with our then-existing Intelligent Labels business, this acquisition created a platform with over $500 million in annual revenues, with increased potential for long-term growth and profitability, enhanced research and development capabilities, expanded product lines and additional manufacturing capacity. In December 2020, we completed our acquisition of ACPO, Ltd., an Ohio-based manufacturer of self-wound (linerless) pressure-sensitive overlaminate products, for approximately $88$43 million. During 2020,2021, we also investedmade three venture investments in three startup companies developing innovative technological solutions that we believe have the potential to advance our businesses.
In 2020,2021, we deployed $301.1$401.5 million to pay an annual dividenddividends of $2.36$2.66 per share and repurchase 0.80.9 million shares of our common stock. We raised our quarterly dividend rate by approximately 7%10% in October 2020April 2021, after having maintained it earlier in the year due to the impact of COVID-19. Given the uncertain impact of COVID-19 at that time, in March 2020, we suspended our repurchase of shares and did not resume repurchases until the third quarter; as a result, in 2020, we allocated less than half the capital we deployed to share repurchases in 2019..
As shown below, over the last five years, we have allocated over $900$2 millionbillion to acquisitions and venture investments and nearly $2 billion to dividends and share repurchases.
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Total Stockholder Return (TSR) Outperformance
We experiencedBy generating substantial economic value added (EVA), we drove strong TSR in 20202021 despite the continued uncertain macroeconomic environment during most of the year as a result of COVID-19 deliveringand related supply chain, labor, freight and inflationary challenges. Our TSR of over 20% and outperforming40% outperformed the S&P 500. However,500 and the median of the S&P 500 Industrials and Materials subsets, two comparator groups we use to assess our relative performance. We believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our performance (as occurred at various times during 2020).performance. Both our three-year and five-year TSR substantially outperformed these two comparator groups. We focus on TSR because it measures the value we create for our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). We compare ourselves to the median of the S&P 500 Industrials and Materials subsets because we are a member of the Materials subset, and also share many characteristics with members of the Industrials subset; this practice is further informed by feedback from our investors who have indicated that they also look at both subsets in evaluating our performance relative to that of our peers.
5-Year Cumulative TSR
1-, 3- and 5-Year5-YEAR TSR
AVY | S&P 500 | S&P Indus. & Mats.* | AVY | S&P 500 | S&P Indus. & Mats.* | |||||||
2016 | 15% | 12% | 21% | |||||||||
2017 | 67% | 22% | 28% | 67% | 22% | 28% | ||||||
2018 | (20)% | (4)% | (14)% | (20)% | (4)% | (14)% | ||||||
2019 | 49% | 32% | 34% | 49% | 32% | 34% | ||||||
2020 | 21% | 18% | 17% | 21% | 18% | 17% | ||||||
2021 | 41% | 29% | 24% | |||||||||
3-Year TSR | 43% | 49% | 32% | 154% | 100% | 94% | ||||||
5-Year TSR | 173% | 103% | 116% | 237% | 133% | 122% |
* | Based on median of companies in both subsets as of December 31, |
STOCKHOLDER ENGAGEMENTESG GOVERNANCE
In addition toWe have been consistently focused on advancing our extensive investor relations program through which membersESG profile, establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustained progress reflects the commitment and passion of our management engage withand employees, as well as the robust engagement and oversight of our investors throughoutBoard. Our ESG governance structure is shown on the year, we have a longstanding practice of supplemental engagement with stockholders to discuss our strategies, performance, governance, executive compensation, sustainability and human capital management practices and solicit their feedback. This engagement program takes place throughout the year, as shown below.
following page.
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Summary of 2020 Engagement Results
In 2020, we contacted our top 30 investors (representing 60-65% of our outstanding shares) in both the spring and the fall. Board members, in particular our Lead Independent Director, and management were made available to answer questions and address concerns. In the aggregate, we received responses from and engaged with investors representing ~35% and ~30%, respectively, of our outstanding shares. We engaged with every stockholder who requested to meet, and our Lead Independent Director led the majority of our off-season engagements. We also discussed the process, results and feedback from our 2020 engagement with the Talent and Compensation Committee (the “Compensation Committee”) and the Governance Committee of our Board.
Our 2020 engagements focused primarily on two key areas of investor interest: our response to COVID-19’s impact on our employees, customers, investors and communities, and our diversity and inclusion progress in light of the demonstrated need for greater racial and social justice in society. We also shared with our top 30 investors our first ESG Download, a report that consolidates our ESG policies and metrics, which we published in August 2020. This document spurred substantial discussion how we have incorporated ESG matters into our business strategies and progress made in meeting our ESG goals.
In addition, following the lower support director Mark Barrenechea received for his reelection at our 2020 Annual Meeting, we again solicited our stockholders’ views on his board commitments. In these discussions, we highlighted his contributions to our Board, demonstrated commitment to our company and management, industry experience and information technology expertise, skill alignment with our strategic priorities, and consistently strong attendance and engagement during his tenure.
The results of our 2020 engagement with our top 30 stockholders on governance, executive compensation, sustainability and human capital management matters are shown below.
Summary of 2020 Engagement Feedback
Our Board and management believe that regular stockholder engagement fosters a deeper understanding of investors’ evolving expectations on ESG matters and helps us ensure our programs continue to align with best practices.
Governance and Environmental Sustainability Matters
With respect to matters related to governance and environmental sustainability, inclusive of climate change, we discussed Board oversight of our strategies, our response to COVID-19 and progress toward our 2025 sustainability goals, including with respect to plastics recyclability and greenhouse gas emissions; our Board’s expanded stakeholder focus, as reflected in our strategies and evidenced in our ESG Download published in August 2020; and Board composition and refreshment, particularly the outside board commitments of one of our directors and the racial/ethnic and gender diversity on our Board.
Executive Compensation and Social Sustainability Matters
With respect to executive compensation and social sustainability, we discussed Board oversight of our strategies, our response to COVID-19 (including the potential for changes to executive compensation to address the impact of the pandemic, as well as measures implemented to support employees more broadly), and diversity and inclusion initiatives, particularly related to race/ethnicity in the U.S.; the potential for consideration of non-financial measures in our incentive compensation programs to address ESG topics while maintaining pay-for-performance alignment; the status of changes initially approved for 2020 CEO compensation but reversed due to COVID-19; and the Compensation Committee’s oversight of additional talent management topics such as succession planning, leadership development and pay equity.
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ESG GOVERNANCE STRUCTURE
We believe that strong data governance ensures consistency and accuracy of information in support of our ESG priorities and enhances transparency to our stakeholders. Our ESG data is organized and indexed to the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks to facilitate stakeholder usage and comparability with other companies. We have also responded to Carbon Disclosure Project (CDP) Climate, Water and Forests since 2010, 2015 and 2016, respectively. The volume of ESG information we disclose has significantly increased in recent years and our scores from ESG rating agencies have continued to improve.
During 2021, we evolved our ESG data governance program by establishing an ESG Program Management Office to assess our reporting in accordance with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD); engage with targeted ESG rating agencies; manage our data collection and reporting processes; create assurance guidance and controls, and provide reports, data and information for publication. In addition, we engaged an independent third party to review our energy and GHG emissions data; requested our Internal Audit team to perform walkthroughs of key metrics and provide ongoing advisory engagement; and formalized our processes for data owner sign-off, ESG Disclosure Committee review and senior management approval.
Our March 2022 ESG Download, published concurrently with this proxy statement on our ESG website at esg.averydennison.com, reflects the organizational focus we have on these matters. It includes 120 categories covering our policies, goals, strategies, risks, outcomes/metrics and certifications. This information comes from multiple data owners and sources, including our enterprise-wide Sustainability Council, the sustainability teams in our businesses, and representatives from corporate and business functions such as EHS, Operations/Supply Chain, Procurement, HR and Law. The ESG Download and other information on our website are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
Avery Dennison Corporation | 2022 Proxy Statement | 7 |
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability is one of our core values and has long been an integral partto our way of the waydoing business. To create value for all our stakeholders, we do business. Our aim is to improve the sustainability ofadvance our productsstrategic innovation platforms on material circularity and processes,waste reduction/elimination, build a more diverse workforce and an inclusive and equitable culture, maintain a culture ofoperations that promote health and safety, and support our communities to create value for all our stakeholders. Key to our progress has been integratingcommunities. Integrating sustainability into our business strategies has helped us deliver sustained strong financial performance and engagingengage employees at all levels.
In our 2020 integrated sustainability and annual report, we present highlights of our achievements against our 2025 sustainability goals and announce our more ambitious 2030 sustainability goals, which are focused on delivering innovations that advance the circular economy, reducing the environmental impact in our operations and supply chain, and making a positive social impact by enhancing the livelihood of our people and communities.
In the first fivesix years of the 10-year horizon for our 2025 sustainability goals, we have made meaningfulsubstantial progress, as shown in the scorecard shown below. You can find additional information on our ESG progress in our 20202021 integrated sustainability and annual report, as well as on theour ESG website at esg.averydennison.com. The 2021 integrated sustainability sectionand annual report and other information on our website are not and should not be considered part of, our website.nor are they incorporated by reference into, this proxy statement.
Focus Area | Goal(s) | Baseline Year | Highlights of Progress | |||
Greenhouse Gas Emissions
|
Achieve at least 3% absolute reduction year-over-year and at least 26% overall reduction by 2025 |
2015 |
Reduced absolute GHG emissions by | |||
Paper
|
Source 100% certified paper, of which at least 70% is Forest Stewardship Council®-certified |
2015 |
Of total volume of paper procured in | |||
Films
|
Ensure that 70% of films we buy conform to, or enable end products to conform to, our environmental and social guiding principles |
N/A |
~97% of | |||
Chemicals
|
Ensure that 70% of chemicals we buy conform to, or enable end products to conform to, our environmental and social guiding principles |
N/A |
~96% of | |||
Products and Solutions
|
Through innovation, deliver above-average growth in sales from sustainability-driven products and services
Ensure that 70% of our products and solutions conform to, or enable end products to conform to, our environmental and social guiding principles |
2015 |
~ | |||
Waste
|
Be 95% landfill-free, with at least 75% of our waste reused, repurposed or recycled
Eliminate 70% of the matrix and liner waste from our value chain |
2015 |
Diverted ~94% of solid waste from landfills and recycled ~67% of waste as of | |||
People
|
Continue to cultivate diverse (40%+ female at level of manager and above), engaged, safe (recordable incident rate (RIR) of <0.25), productive and healthy workforce
Continue to invest in our employees and the communities in which they live and work |
2015 |
Increased female representation at level of manager and above by
Continued world-class safety record, with | |||
Transparency
|
Commit to goals publicly and be transparent in reporting progress |
N/A |
|
8 | 2022 Proxy Statement | Avery Dennison Corporation |
After updating our materiality assessment in 2020 to better understand the environmental and social sustainability challenges facing our company and our stakeholders, we reframed our eight 2025 goals into three broader goals that we are aiming to achieve by 2030. Within each of these goals, we have specific targets related to environmental and social sustainability. We show our progress against the targets shown below in our 2021 integrated annual and sustainability report.
2030 SUSTAINABILITY GOALS AND TARGETS
GOALS | TARGETS | |
Deliver innovations that advance the circular economy | Satisfy the recycling, composting or reuse requirements of all single-use consumer packaging and apparel with our products and solutions RBIS: 100% within our core product categories (printed fabric labels, woven labels, paper, interior heat-transfer labels, packaging and RFID) will meet our third-party verified Sustainable ADvantage Standard LGM: 100% of our standard label products will contain recycled or renewable content; all of our regions will have labels that enable circularity of plastics | |
Reduce the environmental impact in our operations and supply chain | Reduced our Scope 1 and 2 GHG emissions by 70% from our 2015 baseline. Work with our supply chain to reduce our 2018 baseline Scope 3 GHG emissions by 30%, with an ambition of net zero by 2050 | |
Source 100% of paper fiber from certified sources focused on a deforestation-free future | ||
Divert 95% of our waste away from landfills, with a minimum of 80% of our waste recycled and the remainder either reused, composted or sent to energy recovery | ||
Deliver a 15% increase in water efficiency at our sites that are located in high or extremely high risk countries as identified in the World Resources Institute Aqueduct Tool | ||
Make a positive social impact by enhancing the livelihood of our people and communities | Foster an engaged team and an inclusive workplace. • Inclusion Index: 85% • Employee Engagement: 82% • Females in manager level or above positions: 40% • Safety: 0.2 RIR | |
Support the participation of employees in Avery Dennison Foundation grants and foster the well-being of the communities in which we and our supply chain operate. |
DIVERSITY, EQUITY AND INCLUSION (DE+I)
Diversity is one of our core values, reflecting our commitment to ensuring an inclusive and equitable environment for people of all backgrounds and orientations and our belief that we gain strength from diverse ideas and teams. We are holding ourselves accountable for DE+I progress, with quantitative targets for employee engagement, inclusion and workforce gender diversity in our 2030 sustainability goals. Over the past several years, we have made consistent progress in our DE+I journey, as shown on the following page. Our 2021 EEO-1 statistics, which we collect as required by the U.S. Equal Opportunity Commission and reflect the voluntary self-identification by our U.S. employees, can be found in our March 2022 ESG Download.
Avery Dennison Corporation |
| 9
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DIVERSITY AND INCLUSION
Diversity is one of our core values, reflecting our interest in ensuring an inclusive and respectful environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams. The importance of diversity and inclusion (D+I) to our company is further evidenced by the diversity-related targets included in our 2025 sustainability goals. Over the past several years, we have made consistent progress in our D+I journey, as shown below. In 2020, we redoubled our efforts to drive sustainable change, recognizing the need to accelerate our collective journey toward greater racial and social justice in society. We are for the first time making publicly available our EEO-1 statistics, which we collect as required by the U.S. Equal Opportunity Commission. This information, which reflects the voluntary self-identification by our U.S. employees in 2020, can be found in our ESG Download published in March 2021.
HIGHLIGHTS OF | ||
| • Established 2025 goal of 40%+ female at manager level and above
• Employees established Northeast Ohio Chinese | |
2016
| • Launched unconscious bias training for managers globally
• Released
• Initiated Women.Empowered development program
•
• Added inclusion index to employee engagement survey | |
2017
| • Employees established Elevate,
•
• Joined CEO Action for Diversity & Inclusion
• Formally added Diversity as one of our company values | |
2018
| • Established Regional DE+I Councils
• Employees established BERG, our Black ERG
• Launched Men as Allies program
• Reviewed director+ level gender pay equity, making adjustments where | |
2019
| • Employees established Veterans ERG
• Launched North America iBelong
• Expanded gender pay equity review, making adjustments where | |
2020
| • Employees established Voz Latina ERG
• Launched
•
•
• Continued expanding gender pay equity review and began evaluating U.S. racial/ethnic pay equity, making adjustments where | |
2021
| • Engaged third party expert to assess our baseline and help us establish our global DE+I priorities • Established DE+I infrastructure with global leader and dedicated regional resources • Developed global DE+I strategy with four pillars and supporting regional focus areas • Increased DE+I transparency, including by publishing EEO-1 data and committing to do so annually • Further enhanced pay equity review by engaging third party expert to analyze racial/ethnic equity • Invested to further develop ERG leaders • Employees established ERGs focused on mental awareness, single parenting and young employees • Sponsored 50+ diverse leaders in externally-facilitated leadership academies • Ensured more equitable benefits for LGBTQ+ employees and their families, resulting in 100% score on Human Rights Campaign Foundation’s 2022 Corporate Equality Index |
10
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STOCKHOLDER ENGAGEMENT
In addition to our extensive investor relations program through which our CEO, Chief Financial Officer (CFO), business leaders and Investor Relations team engage with our investors throughout the year, we have a longstanding practice of semiannual engagement with stockholders to further discuss and solicit their feedback on our strategies, performance, executive compensation and ESG matters.
Summary of 2021 Engagement Feedback
Our Board and management believe that regular stockholder engagement fosters a deeper understanding of our investors’ evolving expectations on ESG matters and helps us ensure our programs continue to align with best practices. The objectives of our stockholder engagement program are to maintain thoughtful dialogue and further strengthen our relationships with our top investors; gather feedback on the prior proxy season and identify potential improvement opportunities based on evolving expectations; and discuss our company strategies, Board matters, executive compensation, and ESG progress.
In 2021, we contacted our top 30 investors in the spring and the fall. Board members, in particular our Lead Independent Director, and management were made available to answer questions and address concerns. We engaged with every stockholder who accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements.
We discussed the process, results and feedback from our 2021 engagement with the Talent and Compensation Committee (the “Compensation Committee”) and the Governance Committee of our Board, and also shared highlights with the full Board to supplement the reports from those Committee Chairs.
A summary of the results from our 2021 stockholder engagement is shown on the following page.
Avery Dennison Corporation | 2022 Proxy Statement | 11 |
2021 ENGAGEMENT RESULTS | ||||
Governance Feedback
With respect to governance, our 2021 engagements focused primarily on the matters described below.
Board oversight of ESG matters, including the allocation of responsibilities among Board Committees and our full Board
Board composition, with investors noting that the diversity of skills, qualifications and demographic backgrounds on our Board was appropriate given our company’s strategies and ESG priorities
Board refreshment, including actions underway to mitigate the risk from upcoming concentrated director retirements and the skills and backgrounds we would seek in any new director to complement those of our existing directors
Board leadership structure, including our rationale for maintaining a combined Chairman/CEO with a robust Lead Independent Director role
Director commitments, given the lower level of stockholder support at the 2021 Annual Meeting received by one of our current directors whose board memberships do not comply with certain of our investors’ voting policies
Our shareholder rights profile
Environmental Sustainability Feedback
Investors uniformly commended our significantly expanded ESG transparency with the disclosures contained in our integrated annual and sustainability reports, proxy statements and ESG Downloads and on our ESG website at esg.averydennison.com. Environmental sustainability was a key area of focus for many of our investors in 2021. During our conversations, we primarily discussed the matters described below.
The strong linkage between ESG and our company strategies, as well as the ways in which our environmental and social sustainability creates market opportunity and provides competitive advantage
Our reframed sustainability framework, progress toward our 2025 goals and our new 2030 goals, reviewing the step-change advancement between these sets of goals, including our more objective and ambitious 2030 targets, including those related to Scope 1, 2 and 3 GHG emissions reduction and water to address evolved stakeholder expectations
Our launch of strategic innovation platforms focused on waste reduction/elimination and material circularity
The approval by the Science Based Targets initiative of our 2030 Scope 1 and 2 GHG emissions reduction targets as consistent with reductions required to keep warming to no more than 1.5 degrees Celsius, and our ambition to achieve net zero GHG emissions by 2050
Executive Compensation Feedback
The stockholders with whom we spoke sought information regarding the consideration of ESG matters in our executive compensation program, seeking to ensure that the Compensation Committee is discussing evolving expectations regarding ESG-executive compensation linkage. We discussed our current approach of establishing performance objectives for our annual incentive program based on quantitative financial metrics, supplemented by a qualitative individual assessment of executives that includes consideration of their ESG-related goals. We also explained our Board’s view that our financial success in recent years has been inextricably linked to our ESG focus and progress and that we have made substantial ESG progress as part of our commitment to deliver for all our stakeholders. Investors noted the need to be thoughtful and objective if we were to add ESG performance objectives, cautioning against setting targets without sufficient time and data to assess their appropriateness. To provide additional perspective on the Compensation Committee’s views on the linkage between ESG and executive compensation, we have included additional disclosure in the Compensation Discussion and Analysis section of this proxy statement.
12 | 2022 Proxy Statement | Avery Dennison Corporation |
Social Sustainability and Talent Management Feedback
Social sustainability and talent management continued to be significant areas of investor focus in 2021. In addition to the general feedback on our ESG program noted above, discussions related to these topics included the following:
Training and development opportunities we provide our employees with a view to ensuring an informed and ethical workforce
Our efforts to attract team members from underrepresented communities and ensure diverse hiring slates
The programs we offer to make our company an attractive place to work
Employeeretention and attrition
DE+I continued to be a key topic of engagement. The matters described below were areas of DE+I focus.
The ways in which DE+I aligns with our business strategies, allowing us to recruit and retain an engaged workforce committed to advancing their success and ours
Given our focus on building a more diverse workforce and inclusive and equitable culture, sharing our quantitative achievements, as well as information related to our qualitative efforts to continuously improve
The Compensation Committee’s discussion of our DE+I initiatives and progress at each of its regular meetings in 2021, with supplemental engagement on these matters by our full Board with our CEO, Chief Human Resources Officer (CHRO), business leaders and DE+I leaders
Ourdisclosure of EEO-1 data for the first time in 2021, with investors expressing their interest in learning more about the demographics of our workforce, what drives employee engagement and how our company plans to ensure the continued success of this key stakeholder group
We also candidly discussed our projected inability to achieve our goal of 40%+ women at the manager level and above by 2025, including the challenges we experienced, our key learnings and the organizational enhancements we have made in recent years to ensure we can deliver this renewed goal by 2030.
2022 DIRECTOR NOMINEES (ITEM 1)
Director’s Decision Not to Stand for Reelection
In February 2022, Director Mark Barrenechea notified our Board of Directors of his decision not to stand for reelection at the 2022 Annual Meeting so that he can focus on other endeavors.
Matrix of Director Nominee Skills, Qualifications and Demographic Backgrounds
Our director nominees bring a balance of skills, qualifications and demographic backgrounds to their roles of providing oversight of our company, as shown by individual in the matrix below.on the following page, which we have modified slightly from prior year to conform with the areas of industry expertise by which we now classify directors given our evolved strategic profile. In 2020, we askedThis matrix reflects information received from each of our directors in their responses to complete a Board diversity questionnaire, with a long list of demographic characteristics for them to indicateour annual director questionnaire. At least annually, the categories with which they self-identify; as a result, this matrix has been significantly expanded from previous years based on the characteristics we included in our questionnaire and updated to reflect our directors’ responses. The Governance Committee regularly evaluates and reports to our Board on the skills, qualifications and demographic backgrounds desirable for our Board to best advance our business strategies and serve the interests of all our stakeholders.
Avery Dennison Corporation | 2022 Proxy Statement | 13 |
BOARD MATRIX
|
Governance Guidelines Criteria | Governance Guidelines Criteria | Governance Guidelines Criteria | ||||||||||||||||||||||||||||||||
Independent | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | |||||||||||||||||
Senior Leadership Experience(1) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| |||||||||||||||||
Industry Experience(2) | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||
Global Exposure(3) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||
Board Experience(4) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | |||||||||||||||||
Financial Expertise(5) |
| ✓ |
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|
|
|
| ✓ | ✓ |
| ✓ |
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| ✓ | ✓ | |||||||||||||||||
Industry Experience | ||||||||||||||||||||||||||||||||||
Industry Expertise | Industry Expertise | |||||||||||||||||||||||||||||||||
Software/Digital/Cybersecurity(6) |
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| ||||||||||||||||||||||||||
Retail/Dining |
|
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| ✓ | ✓ |
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| ✓ | ✓ |
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| |||||||||||||||||
Packaging | ✓ |
|
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|
|
| ✓ |
| ✓ |
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| ✓ |
| |||||||||||||||||
Consumer Goods |
|
| ✓ |
| ✓ |
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| ✓ |
|
| ✓ |
| ✓ |
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| ✓ | |||||||||||||||||
Industrial Goods/Technology |
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| ✓ | ✓ | ✓ |
| |||||||||||||||||||||||||
Industrial Goods |
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| ✓ | ✓ |
| ||||||||||||||||||||||||||
Materials Science |
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| ✓ |
| ||||||||||||||||||||||||||
Demographic Background | Demographic Background | Demographic Background | ||||||||||||||||||||||||||||||||
Tenure (years) | 4 | 8 | 11 | 18 | 13 | 2 | 8 | 4 | 15 | 5 | 9 | 12 | 19 | 14 | 9 | 5 | 16 | |||||||||||||||||
Gender(6) |
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Gender |
|
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| ||||||||||||||||||||||||||
Female |
|
|
| ✓ |
|
| ✓ |
|
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| ✓ |
| ✓ |
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| |||||||||||||||||
Male | ✓ | ✓ | ✓ |
| ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ |
| ✓ | ✓ | |||||||||||||||||
Non-Binary Gender |
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Age | 58 | 65 | 64 | 65 | 68 | 56 | 64 | 49 | 65 | 59 | 66 | 65 | 66 | 69 | 65 | 50 | 66 | |||||||||||||||||
Mandatory Retirement Year | 2035 | 2028 | 2029 | 2028 | 2025 | 2037 | 2029 | 2044 | 2028 | 2035 | 2028 | 2029 | 2028 | 2025 | 2029 | 2044 | 2028 | |||||||||||||||||
Race/Ethnicity(6) |
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Race/Ethnicity |
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Black or African American |
| ✓ |
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| ✓ |
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Hispanic or Latino | ✓ |
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| ✓ |
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| |||||||||||||||||
White | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||
Asian (including South Asian) |
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Native Hawaiian or Pacific Islander |
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Native American or Alaska Native |
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| ✓ |
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| ✓ |
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LGBTQ+(6) | ||||||||||||||||||||||||||||||||||
Veteran(6) |
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| ✓ |
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| |||||||||||||||||||||||||
LGBTQ+ | ||||||||||||||||||||||||||||||||||
Veteran |
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| ✓ |
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| ||||||||||||||||||||||||||
Lives/Has Lived Abroad | ✓ |
| ✓ |
|
| ✓ |
| ✓ | ✓ | ✓ |
| ✓ |
|
|
| ✓ | ✓ |
(1) |
|
(2) | Experience in the software/digital/cybersecurity, retail/dining, packaging, consumer goods, industrial goods or |
(3) | Seniority in a global enterprise or significant experience in international markets. |
(4) | Prior or concurrent service on other U.S. public company boards. |
(5) | Expertise in accounting, auditing, tax, banking, insurance or investments. |
(6) |
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Board Performance Highlights
Our Board provides strong oversight of our management team and company, with manyhighlights of its notable accomplishments in recent years highlights of which are described below.
Supported management in navigating challenges presented byour evolving response to COVID-19, including related labor, freight and inflationary challenges in 2021 by ensuring we protected employee safety and well-being, delivered for our customers, mitigated supply chain risk, maintained a strong balance sheet andto provide financial flexibility and supported our communities, while continuing focus on long-term business strategiesto invest in our company’s future growth and ongoing risk mitigationfurther productivity
SupportedOversaw consistent execution of strategic priorities,our business strategies, which delivered significant operating margin expansion and double-digit compound adjusted EPS growth in first four years ofand exceeded our 2017-2021 financial targets, as well as 2016-20202017-2021 TSR of 173%237%, substantially outperforming the S&P 500 and the median of the S&P 500 Materials and Industrials subsets
Oversaw completion of seven acquisitionsAcquired 10 companies through year-end 2021 that advanced ouradded new capabilities and increased proportion ofexpanded our portfolio consisting ofposition in high-value product categories that serve markets that are growing faster than GDP, represent large pools of potential profit and leverage our core capabilities
Oversaw executive leadership developmentAdvanced Board and succession planning,management focus on advancing ESG priorities, with several experienced leaders promoted to senior executive positionsconsistent progress toward achieving our 2025 sustainability goals, more ambitious 2030 goals and effectively transitioning into roles, including both our Chief Human Resources Officerincreased transparency with more frequent and our Chief Legal Officercomprehensive disclosures, resulting in 2020
Onboarded and mentored CEO after he became Chairman in 2019 and successfully transitioned Patrick Siewert into Lead Independent Director role in 2020 following departure of David Pyottimproved scores with key ESG rating agencies
Implemented thoughtful Board refreshment and succession planning, with 4adding 3 new directors appointed in the last 86 years, 2transitioning Patrick Siewert into Lead Independent Director role and appointing new Chairs for the Audit and Governance Committees, and proactively working to mitigate the impact of whom increased racial/ethnic or genderupcoming concentrated retirements under our mandatory retirement policy and further enhance Board diversity
Conducted regular executive leadership development and succession planning, resulting in several experienced leaders promoted to senior executive positions, including our new President and Chief Operating Officer (COO), new leaders of our RBIS Apparel Solutions and IHM businesses, and our CHRO and Chief Legal Officer (CLO) in 2020 who effectively transitioned into their roles during 2021
Board Governance Highlights
Our Board’s governance program reflects our company values and facilitates our directors’ensures independent Board oversight of our company. Highlights of our program, which we believe is generally consistent and aligned with the Investor Stewardship Group’s Corporate Governance Principles for U.S. Listed Companies, are shown below.
Stockholder Rights |
✓ Market-standard proxy access
✓ No supermajority voting requirements
✓ No poison pill
✓No exclusive forum or fee-shifting bylaws | |
Board Governance |
✓ Annual election of directors
✓ Majority voting in director elections
✓ Single class of outstanding voting stock
✓ Current directors
✓ Robust Lead Independent Director role
✓ Regular director succession planning and Board refreshment
✓ Continuous executive succession planning and leadership development
✓ Annual Board evaluations
✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted
✓ Governance Guidelines
✓ Strong Committee governance
✓ Direct access to management and experts |
APPROVAL OF EXECUTIVE COMPENSATION (ITEM 2)
The Compensation Committee designsoversees our executive compensation program, to motivate our leaders to execute our business strategies and deliver long-term value for our investors. The programwhich delivers pay for performance, with realized compensation dependent on our company achieving challenging annual and long-term financial performance targets and value creation objectives that advance the interests of our stockholders.
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Election of President and COO
In late 2021 and early 2022, during Board meetings and executive sessions with our Chairman/CEO, but no other members of management present, and further one-on-one conversations between our Chairman/CEO and each director, our Board conducted leadership planning, among other things, discussing the potential election of Deon M. Stander, the Vice President and General Manager of our RBIS business, as President and COO. As a result of this thorough planning and these robust discussions, in February 2022, Mr. Stander was elected by our Board as our President and COO, effective March 1, 2022. Mr. Butier served as our President through the end of February 2022 and now serves only in the roles of Chairman and CEO.
Performance-Based Compensation
Target total direct compensation (TDC) for our corporate Named Executive Officers (NEOs) is comprised of the elements shown below.
ELEMENTS OF TARGET TDC FOR CORPORATE NEOs
The Compensation Committee establishesapproves the target TDC of our NEOs to incent strong operational and financial performance and stockholder value creation, giving consideration to the market median, role responsibilities, individual performance, tenure, retention and succession.creation. As shown below, the substantial majority of this compensation is performance-based, meaning that our executives ultimately may not realize the value of the at-risk components of TDC if we fail to achieve our strategic, financial and ESG objectives. Our business NEO’s 2021 AIP award and PUs had different performance objectives than those of our corporate NEOs.
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Pay for Performance
As shown in the graph below, over the past fivein recent years, our CEO’s compensation increased commensurate with our cumulative TSR, has increased by 173% while the annual compensation of our CEO has remained relatively constant, except for 2016 when he received a one-time equity grant in connection with his promotion2021 pay reflecting the longer-term approach to CEO. CEO compensation approved by the Compensation Committee in 2021. See the Compensation Discussion andAnalysis section of this proxy statement for more information.
Changes in 2020 Executive Compensation
Changes Approved in April 2020
Given the uncertain impact of COVID-19 on market conditions, our CEO recommended to the Compensation Committee in April 2020 that the base salary increases for our executive leadership team (which includes all of ourNEOs) approved by the committee in February 2020 be indefinitely postponed, and no such increases were given in 2020. In light of market conditions at the time and also at the recommendation of our CEO, the Compensation Committee determined that his 2020 target annual and long-term incentive opportunities should remain at 2019 levels. As a result, the Compensation Committee approved the reductions in CEO compensation for 2020 described below.
His target AIP opportunity for 2020 would remain at previous level of 125% of base salary rather than 140% of base salary approved by Compensation Committee in February 2020
His target LTI opportunity for 2020 would remain at previous level of 475% of base salary rather than 585% of base salary as approved by Compensation Committee in February 2020
Both target opportunities would be based on his 2019 year-end base salary of $1,133,000
In connection with these reductions, our CEO forfeited 5,811 PUs and 6,662 MSUs, with an aggregate grant date fair value of approximately $1.3 million, granted to him in February 2020.
Changes Approved in February 2021
Despite the adverse impact of COVID-19, no adjustments to short- or long-term incentive compensation were made for our corporate NEOs; their 2020 AIP awards and 2018-2020 PUs paid out on the basis of unadjusted company results. Similarly, the goals for their 2020-2022 PUs granted to them in February 2020 were not adjusted to reflect the impact of COVID-19.
COVID-19 had a disproportionate impact on RBIS’ results in 2020. As a result, although the business achieved its short-term objectives while managing a challenging environment during the year, the business did not achieve any of its original goals for 2020. However, RBIS delivered substantial temporary cost savings and accelerated restructuring actions to expand its operating margins; achieved its net income plan for the second half of the year and significantly grew sales on an organic basis in the fourth quarter; successfully integrated Smartrac and exceeded its 2020 performance targets for the acquisition; and achieved a high employee engagement score, despite having taken
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aggressive actions to reduce costs. Using its allowable discretion to exclude some of this impact, the Compensation Committee approved an AIP financial modifier of 60% for the RBIS team to recognize their achievements in navigating the challenges the business faced during the year. Given our business NEO’s 25% linkage to total company adjusted EPS, his overall adjusted AIP financial modifier was 76%.
The Compensation Committee also reviewed the performance of the 2018-2020 PUs for our business NEO. Noting that RBIS had entered 2020 with performance during the first two years of the three-year performance period in excess of the maximum level of performance and using its allowable discretion to exclude some of the extremely adverse impact, the Compensation Committee determined to increase the payouts for the 2018-2020 for all RBIS participants from 84% to 126% to recognize the team’s impressive EVA performance through 2019, as well as their achievements in navigating the challenges related to COVID-19 that the business faced during 2020. In addition, the Compensation Committee reviewed the performance of the 2020-2022 PUs for our business NEO. Noting that RBIS had taken substantial actions to protect operating margins during the year and using its allowable discretion to exclude some of this impact, the Compensation Committee determined to revise RBIS’ EVA goals originally approved in February 2020 for threshold, target and maximum EVA performance. The revised goals continue to require strong growth and margin improvement compared to the 2019 baseline for the business, although on a different trajectory than originally planned given the extraordinary impact of COVID-19 on RBIS’ markets in 2020.
2021 CEO Compensation
Based on expert advice provided by its independent compensation consultant, Willis Towers Watson, and giving further consideration to the feedback from investors received in 2019 and 2020, the Compensation Committee determined to reinstate the longer-term approach it intended for our CEO’s 2020 compensation for 2021. Consistent with the Committee’s initial decision in February 2020, our CEO’s 2021 target TDC was set between the market 50th and 75th percentiles of his market peers, reflecting his strong performance throughout his five-year tenure in the role, during which our company delivered top quartile performance. The committee’s current intent is not to revisit his compensation until 2024 unless warranted by market conditions or our company results.
Reviewing 2020 market pay rates and projected 2021 market pay rates for companies with annual revenues between $6 billion and $10 billion, the Compensation Committee determined to target our CEO’s target TDC for 2021 at $9.9 million by increasing (i) his base salary by 6% to $1.2 million, noting that his base salary had not been increased in the previous three years; (ii) his target AIP opportunity from 125% of base salary to 140% of base salary; and (iii) his target LTI opportunity from 475% of base salary to 585% of base salary. The Compensation Committee recognized that our CEO had delivered strong value creation for all our stakeholders by leading the execution of our strategies during his five-year tenure in the role and successfully navigating the impact of COVID-19 in 2020. The Compensation Committee noted that over 90% of his new target TDC would consist of at-risk, performance-based compensation; our CEO’s realized compensation will depend on our company achieving strong TSR performance, delivering our 2021 financial targets and 2025 sustainability goals, and continuing to engage our employees, serve our customers, deliver for our investors, and support the communities in which we operate.
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Executive Compensation Best Practices
As summarized below and described in further detail in the CD&ACompensation Discussion and Analysis section of this proxy statement, our executive compensation program aligns with our financial goals and business strategies and reflects best practices.
Pay-for-Performance |
✓
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✓ Rigorous stock ownership policy; requires CEO | |
Compensation Best Practices |
✓ Double-trigger equity vesting requires termination of employment after change of control
✓
✓ Compensation clawback in event of accounting restatement
✓ Independent compensation consultant retained and serving at direction of Compensation Committee
✓ Annual Compensation Committee evaluation and charter review
✓ Periodic formal risk assessment of compensation policies and practices
✓ Releases from liability and restrictive covenants for departing executives
✓ | |
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Avery Dennison Corporation | 2022 Proxy Statement | 17 |
RATIFICATION OF APPOINTMENT OF PwC (ITEM 3)
Our Board’s Audit and Finance Committee has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 20212022 and our Board is seeking stockholder ratification of the appointment. PwC remainsis well-qualified to actcontinue serving as our independent registered public accounting firm, has a deep understanding of our operations and accounting practices, and maintains rigorous procedures to continuously ensure auditor independence. The committee considered the qualifications, performance independence and tenureindependence of PwC, the quality of its discussions with PwC, and the fees charged by PwC for the level and quality of services provided by the firm during 2020,2021 – as well as considerations regarding PwC’s tenure as our independent auditor – and determined that the reappointment of PwC to bewas in the best interest of our company and stockholders.
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Under theWith oversight offrom our Board, of Directors (our “Board”), we have designed our governance program to comply with applicable laws and regulations – including the rules of the Securities and Exchange Commission (SEC) and the listing standards of the New York Stock Exchange (NYSE) – and to reflect best practices as informed by the practices of other large public companies, recommendations from our outside advisors, the voting guidelines of our stockholders and the policies of proxy advisory firms. The key features of our program are described in the Board Governance Highlights section of the proxy summary; together they form a governance program that we believe is generally consistent and aligned with the Investor Stewardship Group’s Corporate Governance Principles for U.S. Listed Companies.summary.
We encourage you to visit the investors section of our website under Corporate Governance, where you can view and download the current versions of the documents shown below which areand referenced in this proxy statement:statement.
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws (our “Bylaws”)
Corporate Governance Guidelines (our “Governance Guidelines”)
Charters for our Board’s Audit and Finance Committee (the “Audit Committee”), Talent and Compensation Committee (the “Compensation Committee”), and Governance Committee
Code of Conduct
Code of Ethics for the Chief Executive Officer (CEO)CEO and Senior Financial Officers
Audit Committee Complaint Procedures for Accounting and Auditing Matters
Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement. You can receive copies of these documents, without charge, by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Our Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. The Code includes leadership messages, detailed information regarding higher risk areas, and case studies to provide guidance on situations that raise complex ethical questions. It has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and thereafter as part of our compliance certification process. We regularly train employees on Code topics in instructor-led sessions held in person or virtually, in addition to our online training program generally consisting of four courses per year that our computer-based employees are required to complete.
To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees, we develop and launch three “Talkabout” Toolkits (also in over 30 languages) globally each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides and an introductory subtitled video, which includes messages from our Chief Compliance Officer and other company leaders.
Avery Dennison Corporation | 2022 Proxy Statement | 19 |
Ethics-Based Corporate Culture and Policies
Reflecting the culture of our company, the ethics-based corporate policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to our third party service providers, establishing our expectation that they do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may be reached by (i) calling 800.461.9330 toll-free in the U.S., +1.720.514.4400 direct with applicable charges from any location, or toll-free outside of the U.S. using the country-specific toll-free numbers found in our Code of Conduct or (ii) visiting www.averydennison.com/guidelinereport (www.averydennison.com/guidelinereport-eu in Europe). The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.
Financial Code of Ethics
We have adopted a Code of Ethics that requires our CEO, Chief Financial Officer (CFO)CFO and Controller/Chief Accounting Officer (CAO) to act professionally and ethically in fulfilling their responsibilities. Only the Audit Committee or the Governance Committee can amend or waive the provisions of our Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014.2014 and we have made no exemptions or granted any waivers since its inception.
Code of Ethics Responsibilities |
• Avoid actual or apparent conflicts of interest • Ensure complete and accurate SEC filings • Respect confidentiality of financial and other information • Employ corporate assets responsibly • Report Code of Ethics violations to Chair of Audit or Governance Committees
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Supporting fulfillment of these responsibilities, our controllership and internal audit functions ensure that we maintain a robust internal control environment, with the leaders of these functions regularly reporting to, and periodically meeting in executive session with, the Audit Committee.
CODE OF CONDUCT
Our Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. It includes leadership messages, detailed information regarding higher risk areas, and case studies to provide guidance on situations that raise complex ethical questions. Our Code of Conduct has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and thereafter as part of our annual compliance certification. We train employees on the Code at least biannually, in addition to our online training program generally consisting of four courses per year covering specific risk areas from the Code that computer-based employees are required to complete.
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To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees, we develop and launch three “Talkabout” toolkits (also in over 30 languages) globally each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides and an introductory subtitled video, which includes messages from our Chief Compliance Officer and other company leaders.
Ethics-Based Corporate Culture and Policies
Reflecting the culture of our company, the ethics-based corporate policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to our third party service providers, establishing our expectation that they also do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may be reached by (i) calling 800.461.9330 toll-free in the U.S., 720.514.4400 direct with applicable charges from any location, or toll-free outside of the U.S. using the country-specific toll-free numbers found in our Code of Conduct or (ii) visiting averydennison.com/guidelinereport (averydennison.com/guidelinereport-eu in Europe). The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.
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COMPLAINT PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
The Audit Committee has adopted procedures for the confidential, anonymous submission of complaints related to accounting, accounting standards, internal accounting controls and audit practices.
These procedures relate to reports of (i) fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements or other financial reports; (ii) fraud or deliberate error in the recording or maintenance of our financial records; (iii) deficiencies in, or noncompliance with, our internal accounting controls; (iv) misrepresentation or false statement to or by a senior officer or accountant regarding any matter contained in our financial records, statements or other reports; or (v) deviation from full and fair reporting of our financial condition. Any person, including third parties, may submit a good faith complaint regarding accounting and auditing matters and employees may do so without fear of retaliation. The Audit Committee oversees these procedures, with investigations conducted under the direction of our internal audit department in consultation with our Corporate Secretary, Chief ComplianceLegal Officer law department and senior management to the extent appropriate under the circumstances.
Stockholders and other interested parties interested in communicating regarding these matters may make a confidential, anonymous report by contacting the GuideLine or writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Our stock ownership policy requires that non-employee directors acquire and maintain a minimum ownership interest in our company of $500,000 and our CEO, Level 2 executives and other current NEOsLevel 3 executives acquire and maintain a minimum ownership interest in our company equal to 6x, 3x and 3x his or her annual2x their base salary, respectively;respectively, at least 50% of the applicable minimum ownership requirementwhich must be held in vested shares.
The values of the following shares/units are considered in measuring compliance with our stock ownership policy: shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federal securities laws; for officers, shares or units held in qualified and non-qualified employee benefit plans, unvested restricted stock units (RSUs) subject to time-based vesting, and 50% of the value of unvested market-leveraged stock units (MSUs)MSUs at the target payout level; and, for non-employee directors, RSUs and deferred stock units (DSUs). Unvested performance units (PUs) andNeither stock options nor unvested PUs are not considered in measuring compliance.
IfUntil a director or officer fails to achieve or make reasonable progress towards achievingachieves his or her respective ownership requirement, he or she is required to retain shares acquired, net of taxes, from the exercise of stock options or vesting of stock awards until such levelthe requirement is met. These individuals are not allowed to transact in company stock until they certify that they will remain in compliance with our stock ownership policy after giving effect to the transaction they plan to effectuate.
The Compensation Committee and the Governance Committee reviewed the stock ownership of our non-employee directors in December 2020November 2021 and February 2021,2022, respectively. Both Committees determined that all of our non-employeenon-employee directors were in compliance with our stock ownershipthe policy, with average ownership of 10x12x the minimum ownership requirement, helping ensure their interests remain aligned with those of our stockholders and further incenting their focus on long-term stockholder value creation. The relatively high average ownership level by our non-employee directors is largely due to the inclusion of DSUs for purposes of our stock ownership policy; DSUs represent annual cash retainers deferred at a director’s election. DSUs are included as owned under the policy because they are earned upon receipt and would be paid out to a director upon his or her separation from our Board.
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The Compensation Committee reviewed executive stock ownership in December 2020November 2021 and determined that all of our executive officers, including all NEOs, were in compliance with our stock ownership policy. The compliance of our directors and NEOs with our stock ownership policy as of year-end 2021 is shown on the following page.
STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||
| Shares* as of 2020 FYE (#) | Minimum Requirement | % of Requirement | Policy Compliance | ||||||||||
Non-Employee Directors |
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| $ 500,000 |
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Bradley Alford | 41,050 |
| 1,266% | ✓ | ||||||||||
Anthony Anderson | 16,992 |
| 524% | ✓ | ||||||||||
Peter Barker | 64,465 |
| 1,988% | ✓ | ||||||||||
Mark Barrenechea | 5,593 |
| 172% | ✓ | ||||||||||
Ken Hicks | 42,828 |
| 1,320% | ✓ | ||||||||||
Andres Lopez | 7,438 |
| 229% | ✓ | ||||||||||
Patrick Siewert | 16,485 |
| 508% | ✓ | ||||||||||
Julia Stewart | 61,570 |
| 1,899% | ✓ | ||||||||||
Martha Sullivan | 27,184 |
| 838% | ✓ | ||||||||||
Chairman, President & CEO |
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| 6x Base Salary |
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Mitchell Butier | 240,724 | $6,798,000 | 546% | ✓ | ||||||||||
Other NEOs |
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| 3x Base Salary |
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Gregory Lovins | 41,470 | $1,854,000 | 345% | ✓ | ||||||||||
Deon Stander | 30,339 | $1,665,387 | 281% | ✓ | ||||||||||
Anne Hill | 24,120 | $1,644,018 | 226% | ✓ | ||||||||||
Susan Miller | 14,865 | $1,743,144 | 131% | ✓ |
Avery Dennison Corporation | 2022 Proxy Statement | 21 |
STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||||
| Minimum Requirement(1) | Shares(2) as of 2021 FYE (#) | Requirement Achieved | Policy Compliance | ||||||||||||
Non-Employee Directors | $ | 500,000 |
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Bradley Alford |
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| 42,930 | 18x | ✓ | ||||||||||
Anthony Anderson |
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| 16,069 | 6x | ✓ | ||||||||||
Mark Barrenechea |
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| 6,892 | 2x | ✓ | ||||||||||
Ken Hicks |
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| 43,810 | 18x | ✓ | ||||||||||
Andres Lopez |
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| 8,390 | 3x | ✓ | ||||||||||
Patrick Siewert |
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| 16,842 | 7x | ✓ | ||||||||||
Julia Stewart |
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| 63,471 | 27x | ✓ | ||||||||||
Martha Sullivan |
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| 28,727 | 12x | ✓ | ||||||||||
Chairman & CEO |
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Mitchell Butier | $ | 7,200,000 | 269,668 | 8x | ✓ | |||||||||||
Level 2 NEOs |
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Gregory Lovins | $ | 1,983,780 | 46,051 | 5x | ✓ | |||||||||||
Deon Stander | $ | 1,707,021 | 35,663 | 4x | ✓ | |||||||||||
Level 3 NEOs(3) |
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Deena Baker-Nel | $ | 832,000 | 4,005 | 1x | ✓ | |||||||||||
Ignacio Walker | $ | 850,750 | 6,948 | 1x | ✓ |
Minimum requirements for CEO, Level 2 NEOs and Level 3 NEOs reflect 6x, 3x and 2x, respectively, of their respective base salary as of year-end 2021. |
(2) | Reflects shares/units considered in measuring compliance with our stock ownership policy rather than vested |
(3) | Minimum requirements for Ms. Baker-Nel and Mr. Walker increased from 1x to 2x their respective base salaries in connection with their promotions in September 2020. |
Our insider trading policy prohibits our Board members, officers and employees from engaging in transactions in our company’s stock while in the possession of material non-public information; engaging in transactions in the stock of other companies while in possession of material non-public information that they become aware of in performing their duties; and disclosing material non-public information to unauthorized persons outside our company.
Limited Trading Windows
Our insider trading policy restricts trading by Board members, officers (including our NEOs) and director-level employees during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the release of earnings for the quarter. Additional blackout periods may be imposed with or without notice, depending onas the circumstances.circumstances require.
Prohibitions on Hedging and Pledging
Our insider trading policy prohibits our directors, officers (including our NEOs) and employees from purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of shares of our common stock they hold, directly or indirectly. In addition, directors and officers are expressly prohibited from – and our non-officer employees are strongly discouraged from – pledging anyshares of their shares ofour common stock to secure personal loans or other obligations, including by holding such shares in a margin account.
To our knowledge based on our review of their written representations in our annual director and officer questionnaire, all of our Board members and executive officers complied with our insider trading policy during 2020,2021, and none of them has hedged or pledged shares of our common stock.
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ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability and Diversity are two of our core values and have long been part of our approach to doing business, driving us to work within our company and across our entire value chain to address the environmental and social impacts of our products and practices. We aim to continually improve the environmental sustainability of our products and processes, build a more diverse, equitable and inclusive workforce, and provide meaningful support for our communities to create value for all our stakeholders.
With strategic guidance and direction provided by Mitch Butier, our Chairman, President and Chairman/CEO, responsibility over ensuring that we continue to make meaningful progress toward achieving our 2025 sustainability goals resides with Deon Stander, Vicenow our President and General Manager of our Retail Branding and Information Solutions business.COO. Our enterprise-wide Sustainability Council, led by Mr. Stander and comprised of a cross-divisional and cross-functional group of leaders to drive broad accountability and continually accelerate our progress, generally meets bimonthlymet regularly during 2021 to develop our 2030 sustainability goals and updatestargets, as well as formulate our executive leadership team quarterly.go-forward ESG strategy.
Board oversight over environmental sustainability and community investment is primarily conducted by the Governance Committee, which receives a report from management on each of these topics at least once a year. In addition, our full Board engages with business leaders on their sustainability initiatives during its regular review of their business strategies.strategies. In July and December 2020, October 2021, our full Board held strategy sessions focused on environmental sustainability, and our innovation efforts to address the increasing need and demand for more sustainable products, our strategic innovation platforms focused on waste reduction/elimination and material circularity, and our overall ESG strategy, priorities and progress..
Board oversight over social sustainability is conducted primarily through the Compensation Committee, which regularly reviewsreviewed our diversityDE+I progress at each of its meetings in 2021 and inclusion progress andregularly discusses other matters related to human capitaltalent management. In December 2021, substantially all members of our entirefull Board engaged with, and challenged, management in an in-depth discussion ofon our D+DE+I journeyprogress, including by reviewing the initiatives being undertaken by eachfour pillars of Regional D+our enterprise DE+I Councils and analyzing D+I statistics for our executive leadership team and our U.S. workforce.strategy, as well as its supporting regional focus areas.
We seek to ensure that our sustainability efforts are consistent with the expectations of our stakeholders. We regularly communicate with individuals and organizations interested in how we do business generally and our sustainability efforts in particular, and also conduct stakeholder interviews as part of our regularbiennial materiality assessments. These assessments help set our sustainability agenda, focusing us on the areas in which we can have the most impact. In 2020, we partnered with Environmental Resources Management to refresh our materiality assessment and reprioritize the sustainability topics most significant to our stakeholders. An updatedThe resulting materiality map showing the importance of various ESG topics to our company and our external stakeholders described on the following page may be found in our secondMarch 2022 ESG Download publishedDownload. We have begun working on our next biennial materiality assessment, which we plan to share with our stakeholders in March 2021.2023.
Avery Dennison Corporation |
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SUSTAINABILITY STAKEHOLDERS
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Industry
Trade Associations Cross-Industry Working Groups Conferences
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Customers and Brand Owners
Product Collaborations Surveys Site Audits Working Groups
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Employees
Engagement Survey Works Councils Employee Resource Groups Intranet/Town Halls
Code of Conduct Training Business Conduct GuideLine
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Investors
Annual Meetings Quarterly Earnings Calls Investor Meetings Stockholder Engagement Program
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Non-Governmental Organizations
Consultations on Issues of Concern Specific Initiatives (e.g., responsibilityresponsibly sourcing paper, reducing GHG emissions)
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Policymakers and Regulators
Permitting Audits Certifications
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Communities
Foundation GrantmakingGrant-making Employee Volunteerism Civic Collaboration
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Suppliers
Supplier Standards Compliance Training Supplier Audits Joint Projects
PROGRESS TOWARD ACHIEVING OUR 2025 GOALS; NEWAND 2030 GOALS
InWe present our 2020 integrated sustainability and annual report, we present highlights of ourscorecard showing progress against our 2025 sustainability goals and announce our more ambitious 2030 sustainability goals. After updating our materiality assessment to better understandthrough 2021 in the environmental and social sustainability challenges facing our company and stakeholders, we reframed our eight 2025 goals into the following three broader goals that we are aiming to achieve by 2030: deliver innovations that advance the circular economy; reduce the environmental impact in our operations and supply chain; and make a positive social impact by enhancing the livelihood of our people and communities. Within each of these goals, we have specific targets related to environmental and social sustainability. Going forward, we will reportproxy summary. We present our progress against both setsour 2030 goals in our 2021 integrated annual and sustainability report. You can find additional information in our ESG Downloads available in the investors section of goals.our website at investors.averydennison.com and on our ESG website at esg.averydennison.com. Our 2021 integrated sustainability and annual report, ESG Downloads and other information on our website are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
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In the first five years of the 10-year horizon for our 2025 sustainability goals, we have made meaningful progress, as shown in the scorecard in the proxy summary. You can find additional information in our 2020 integrated sustainability and annual report, our ESG Downloads available in the investors section of our website, and the sustainability section of our website.
In our ESG Downloads published at least annually, weWe disclose our ESG metrics using the frameworks of the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and CDP Worldwide. In November 2020, we joinedWe are a member of the United Nations Global Compact and have made commitments to the UN Sustainable Development Goals and the Science Based Targets initiative (SBTi), with our Scope 1 and 2 GHG emissions reduction targets having been approved by SBTi.as consistent with levels required to meet the goals of the Paris Agreement.
DIVERSITY, EQUITY AND INCLUSION (DE+I)
Diversity is one of our core values, reflecting our desire to ensure an inclusiveequitable and respectfulinclusive environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams. The importance of D+DE+I to our company is further evidenced by the engagement, inclusion and gender diversity-related targets included in our 20252030 sustainability goals. D+I at our company is led by our cross-functional and cross-divisional D+I Council, chaired by our President/CEO and advised by our Chief Human Resources Officer. Highlights of our D+DE+I journey are shown in the proxy summarysummary.
Beginning in 2020, we redoubled our efforts on DE+I, engaging with our employees across the globe to gather information on areas where we most needed to focus. After listening and further described below.learning from our employees, our leaders regularly met to discuss areas of focus, and each of our business’ strategies include quantitative DE+I goals, with their leaders evaluated on the progress they make.
In recent years, among other initiatives,2021, we engaged a third party expert to help us perform DE+I baselining, which included an enterprise-wide inclusion assessment and pipeline analysis, provide external benchmarking and obtain independent anonymous and focus group feedback from our D+team members worldwide. With this information, we identified our DE+I efforts have focused on training priorities and developed our managers globally on unconscious bias;go-forward DE+I strategy,which includes the following four pillars: increasing the number of sites offering flexible work arrangements; adding an inclusion indexwomen who hold leadership positions; enhancing the experience of our shop floor employees; increasing DE+I for underrepresented groups; and making merit and transparency even more foundational to our annual employee engagement survey; and expanding our Women.Empowered program featuring interactive discussions among nominated female participants to facilitate and enhance their development. We joined CEO Action for Diversity & Inclusion, the largest CEO-driven business commitment to advance D+I in the workplace, externally committing ourselves to our internal value. We also began evaluating evaluated gender pay equity annually, making adjustments to compensation for both male and female employees where needed.
In 2019, we began formally encouraging and more actively supporting employee resource groups (ERGs), a few of which had already begun to form through the initiative of their individual founders. ERGs are voluntary executive-sponsored and employee-led groups comprised of individuals who join together based on common interests or demographic backgrounds such as race, ethnicity, sexual orientation and veteran status. Participation in these groups is not limited to individuals in these categories, but rather is open to all employees interested in learning about the experiences and challenges of their colleagues. Our ERGs expanded in number throughout 2019 and 2020, with increasing participation and engagement beyond the U.S. Our ERGs currently include groups centered around women, ethnic Chinese, Black employees, military veterans, Hispanic/Latinx employees, and LGBTQ+ individuals.
In 2020, we established Regional D+I Councils in North America; Latin America; Europe; Middle East and Africa; North Asia; and South Asia, which provide leadership of initiatives that more strongly resonate with employees in their respective regions. In addition, we established Regional D+I Executive Councils in certain of these regions to provide a direct avenue for the initiatives and outcomes sought by those Regional D+I Councils to be heard, aligned upon and implemented by their regional business leaders. We also began evaluating racial/ethnic pay equity in the U.S.
Having delayed the launch of the program in 2020 due to COVID-19, we plan to launch global harassment prevention training in 2021 to supplement the anti-harassment messages we continually reinforce as part of our Values and Ethics program. We are also hiring a global D+I leader for our company,experience. These pillars, as well as similarly dedicatedthe supporting regional focus areas, have been communicated to our employees worldwide.
Each of our strategic pillars is sponsored by members of our Company Leadership Team. To ensure we achieve our goals, we have advanced our internal DE+I capability and leadership, with a Global DE+I Director and additional resources in theeach of our regions, in which we operate. Most important,together forming a global infrastructure of fully-dedicated resources. To keep ourselves accountable, we are increasingcommitted to continuing to enhance external transparency into our D+DE+I journey with more robust, ongoing ESGthrough regular reporting soand engagement with our stakeholders so they may critically assess our progress and provide feedback to help us achieve our goals.
OTHER HUMAN CAPITALTALENT MANAGEMENT MATTERS
Succession Planning
The Compensation Committee and our full Board conduct executive succession planning at least semiannually, reviewing succession plans for our CEO and other senior executives. Consistent with this practice, in October 2020,April 2021, the Compensation Committee discussed potential successors to the members of our CEO;Company Leadership Team, and aligned on a process and timeline to enhance focus on in addition, in June 2020,CEO succession planning as a matter of strong corporate governance. In October 2021, the Compensation Committee again reviewed talent that is ready – or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready – to fill other senior executive positions in the event of a vacancy. These assessments were further discussed with our full Board. In addition, in July and December 2021, our full Board conducted CEO succession planning to ensure ready-now successors over multiple time horizons.The Compensation Committee also regularly reviews executive new hires, promotions, transfers and departures in connection with each of its meetings to assist with executive succession planning and leadership development.
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Leadership Development
Our Board is actively involved in overseeingThe Compensation Committee oversees our company’s human capitaltalent management programs to assist with identifying and developing our future leaders. We maintain a robust performance review process and provide leadership development opportunities for our employees. Senior management reports to the Compensation Committee or our full Board on leadership at executive levels of our organization by identifying high-potential talent and critical experts, cultivating the skills and capabilities to allow identified individuals to become our future leaders, and ensuring that they have appropriate development plans in place to progress them toward expandedgreater responsibility. Through regular reports from management, our Board has the opportunity to meet our business leaders and functional leaders in law, finance, information technology and human resources. In addition, Board members have freedom of access to all our employees, and are encouraged to visit our facilities to meet with local management and attend company events.
Avery Dennison Corporation | 2022 Proxy Statement | 25 |
With Board oversight from the Governance Committee, our community investment efforts help strengthen the locationscommunities around the world in which we operate. We make most of our community investments through the Avery Dennison Foundation (the “Foundation”)(ADF), which annually distributes at least 5% of its assets from the prior year, historically to advance education, sustainability and women’s empowerment, as well as to encourage employee engagement with a spirit of invention and innovation. These priorities shifted in 2020 to supportingyear. ADF’s grant-making, our communities respond to COVID-19. The Foundation supports communities by making grants to community-based organizations, promoting employee volunteerism and engagement, and awarding scholarships. In 2020, we made a $10 million contribution to the Foundation to ensure it is able to increase the scope and pace of its support for our communities, particularly at this time when they continue to be challenged by COVID-19.
In 2020, the Foundation shifted its resources and funds to help our communities respond to COVID-19. In a joint effort with our company, the Foundation provided nearly $3 million in grants to support the efforts of more than 100 nonprofit organizations actively assisting communities respond to the pandemic in over 30 countries, many of which were identified by our employees. These contributions helped serve basic human needs such as food, shelter, education and childcare.
Global Grantmaking
Foundation grantmaking, the primary means of our giving, is aided by our employees worldwide who help identify deserving nonprofit organizations serving communities where our employees live and work. Historically, ADF has given to organizations advancing education, women’s empowerment and sustainability. In 2021, ADF continued to address these funding areas, while also responding to the Foundation plans to review its grantmaking areasCOVID-19 pandemic, natural disasters and the call for greater DE+I worldwide.
In 2021, ADF and our company collectively made $6.3 million in grants and other financial contributions, more than double that of focus to ensure continued alignment with our company’s reframed strategies and advance our broader commitment to D+I, while continuing to support the communities in whichprior year. In the discussion that follows, we operate.provide an overview of this giving.
COVID-19 Employee Assistance Fundand Disaster Response
InBeginning in 2020, ADF shifted its resources to support the response to COVID-19 in communities where our company has a presence. We continued that support in 2021. In a joint effort with the Foundation launched an employee assistancecompany, ADF provided grants to help fundCOVID-19 relief efforts by nonprofit organizations in our global communities, including those described below.
India: A grant of $230,000 to support the American India Foundation in helping meet the acute shortage of portable hospital beds in the city of Gurgaon, where our company has facilities; a second grant of $235,000 to the American India Foundation helped source vaccines, supply diagnostic and medical emergency equipment, raise vaccination awareness and mitigate nutrition gaps in the city of Bangalore, where our company also has operations
Brazil: A grant of $100,000 supported Doctors Without Borders/Médecins Sans Frontières’ with vaccine coordination and the purchase and distribution of medical supplies
Sri Lanka: A grant of $50,000 helped the Rotary Club in the city of Kandy provide ICU beds at a rural hospital and purchase ventilators and other needed medical equipment
Vietnam: Two grants totaling $70,000 helped support the Red Cross Vietnam’s COVID-19 response in Long An and Bac Ninh
In 2021, ADF also continued to support the Employee Assistance Fund it launched in 2020, which provides financial assistance to our employees around the world who were furloughed, laid off, suspended or terminated. Thishave been significantly adversely impacted by COVID-19. The fund was designed to help provide for basic needs such as housing and utilities, medical care, dependent care and other expenses impacted by the pandemic. Grants werepandemic-related expenses. The fund also made availableprovides support to families of our employees who hadhave died offrom COVID-19. A significant amount of employeeEmployee donations have significantly supplemented the FoundationADF funds earmarked for this effort. In all, more than $3.4 million was distributed in 2021 to more than 4,200 individuals in 27 countries. The fund is administered by Global Impact, an independent third party.
Employee Engagement
As the hands and heart of our company,ADF also partnered with third-party nonprofit GlobalGiving to facilitate donations from our employees to disaster relief efforts, ensuring that their donations support legitimate and vetted nonprofit organizations in affected communities. All donations made through GlobalGiving are critical to advancingmatched by ADF, and employees receive regular reports from the Foundation’s efforts. Becauseorganizations they better understandsupport describing accomplishments with the needs of their communities, more than 150 employee teams coordinate volunteerism locally at our global locations.
funding received. In addition,2021, our employees supported 43 charitable organizations through GlobalGiving, with donations totaling $60,000.
DE+I Support
Prompted in part by events in the U.S. in 2020, and in recognition of the role it can play in accelerating society’s journey toward greater equity, ADF made grants to organizations promoting DE+I globally. ADF worked with our regional DE+I councils and ERGs around the world gave their time and resourcesto identify organizations most relevant to underrepresented communities in each region. A selection of these grants is described below.
Education: Included grants of $200,000 to World Vision Honduras to teach life skills to at-risk women; $132,000 to Associação Beneficente ABID to enhance foster care services in São Paulo, Brazil; $17,000 to Fundacion Leer to support their communities respondliteracy programs in Buenos Aires, Argentina; and $5,000 to COVID-19. Their efforts included adapting manufacturing lines to make plastic face shields donated to healthcare facilities; collecting foodBoys and other essential goods for colleagues in need; and creating iron-on patches celebrating healthcare workers, with all sales proceeds benefiting Doctors Without Borders/Médecins Sans Frontières.Girls Club of Pasadena, California
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Sustainability: Included grants of $200,000 to Waste and Resource Action Program to support public-private partnerships aimed at reducing food waste in Indonesia and $50,000 to Lake-Geauga Habitat for Humanity to provide housing for low-income families in Painesville, Ohio
Women’s Empowerment: Included grants of $250,000 to UN Foundation Resilience Fund to support women in South and Southeast Asia; $124,000 to The Smile Foundation to support women’s empowerment in Delhi, India; $100,000 to Right to Play to provide educational opportunities for girls in refugee camps and underserved communities in Pakistan and Burundi; and $88,000 to Gesanghua Education Foundation to provide hygiene care packages for girls in Qinghai, China
DE+I: Included grants of $200,000 to HOLA Ohio to support a new Hispanic community center in Painesville; $50,000 to Youth Opportunities Unlimited to provide job readiness and training to African American youth in Cleveland, Ohio; $25,000 to the LGBT Community Center of Greater Cleveland to support LGBTQ+ awareness and programming in Northeastern Ohio; $25,000 to the Wounded Warrior Project to support veteran mental health; and $10,000 to Stichting – Women in Higher Technical Education to support gender diversity in STEM programs in the Netherlands
Employee Engagement
As the heart and hands of our company, our employees are critical to advancing our community investment efforts through both their giving and volunteerism. More than 150 employee teams coordinate volunteerism locally at our global locations. Examples of employee engagement in 2021 are described below.
Employees in India supported The Smile Foundation’s “Health Cannot Wait” campaign to boost distribution of oxygen concentrators and ventilators to government health institutions
Team members in Ireland honored International Women’s Day by donating to Longford Women’s Link, an organization providing education and training opportunities for women
Our RBIS employees produced limited-edition, iron-on patches designed to celebrate healthcare and frontline workers and promote health and safety, with net proceeds benefiting Doctors Without Borders/Médecins Sans Frontières
Business partnerships with local organizations promoting DE+I, as well as our company hiring interns from community partners such as Esperanza, the National Society of Black Engineers and Black Professionals Charitable Foundation
ADF also engages employees through its Granting Wishes program, which allows thememployees to recommend one-time grants to their local NGOs. Employees often have a connectionnon-governmental organizations (NGOs). Given increased need in 2021, employees were more engaged than ever in nominating charitable organizations for funding and volunteering to thesupport those organizations, they nominate through volunteerism or service on the organization’s board.resulting in grants of $10,000 each to 80 NGOs in 33 countries. In the eight10 years since the FoundationADF launched Granting Wishes, more than 2,000 of our employees have madesubmitted funding recommendations, enablingresulting in grants to more than 360350 organizations.
In 2020, in light of COVID-19,Scholarship Programs the Foundation adjusted its Granting Wishes program, supporting 48 former grantees that remained in good standing, had the capacity
ADF continues to deploy funds quickly, and had a stated purpose related to pandemic response. These grants served communities in nearly 30 countries.
Scholarships
The Foundation providesprovide scholarships to the children of our U.S. employees.employees in the U.S. To date, over 650660 scholarships have been awarded to U.S. Scholars.awarded. This program is administered by Scholarship America, an independent third party.
In ChinaADF has also partnered with our company to develop a Children of Employees Scholarship Program outside the U.S. Initial countries proposed for the program include Bangladesh, Mexico, Sri Lanka and India,Vietnam. This program, which is expected to launch in 2022, will be administered by the Foundation’sInstitute for Internal Education, an independent third party.
ADF’s InvEnt Scholarships have for more than a decade supported the next generation of innovators in science, technology, engineering and mathematics. By providingScholarships have provided undergraduates in those communitiesChina and India with tuition assistance, the opportunity to participate in an invention competition and professional development opportunities, the Foundation seeks to inspire the spirit of innovation in future engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year.opportunities. To date, nearly 200 scholarships have been awarded to Chineseover 100 students in China and Indiannearly 100 students in India who have demonstrated outstanding innovative spirit and strong practical competence.
Racial and Social Justice Funding
Following events in many of our communities globally during 2020 and recognizing the role we can play in accelerating society’s collective journey towards greater racial and social justice, we began taking a more public stand against racial and other forms of inequality. Our company is defining its goals and strategies related to this effort, and Foundation grantmaking will be part of the response. Initial focus areas in the U.S. include recruitment and retention of people of color and scholarships and internships with educational institutions and professional organizations. Beyond the U.S., the Foundation plans to support efforts to address issues involving not only racism, but also inequality and discrimination on the basis of other demographic characteristics such as caste, color, disability and LGBTQ+ status.
Avery Dennison Corporation |
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Our Board oversees, counsels and ensures management is serving the best interests of our company and stockholders, with the goal of maximizing the performance of our businesses and delivering long-term value for all our stakeholders.
PRIMARY BOARD RESPONSIBILITIES
Establish strong governance,, with Board/Committee structure ensuringand responsibilities providing independent oversight
ConductReview Board composition andconduct director succession planning to maintain engaged and diverse Board with balance of skills, qualifications and demographic backgrounds
Oversee businesses, strategy execution, ESG priorities and progress, and risk mitigation
Approve annual operating plan and significant strategic actions,decisions, including significant fixed and IT capital expenditures and acquisitions
Maintain integrity of financial statements
Evaluate performance of senior leaders and determine executive compensation
Conduct executive succession planning and ensure effective human capitaltalent management
Our Board’s top priority in 20202021 given the continuing public health crisis of COVID-19 was supporting management in protecting the health, safety and well-being of our employees, delivering for our customers, minimizing the impact of the pandemic-driven recessionpandemic on our investors and supporting our communities.We implemented rigorous protective measures at our operations worldwide, including requiring remote work for employees whose jobs allowed for it; implementing strict health screening measures at our facilities; mandating that masks be worn on our premises; more frequently disinfecting surfaces; suspending business travel and non-essential in-person meetings; and requiring team members having experienced COVID-19 exposure to quarantine in accordance with public health guidelines. With our Board’s oversight, we also took several other actions to support our employees and communities during this difficult time, including providing additional compensation and benefits in the early stage of the pandemic to reduce the financial impact on our employees in hard hit regions, providing supplemental payments to our frontline workers to thank them for their courage and agility in serving our customers, and increasing our commitment to community investment by, among other things, contributing $10 million to the Avery Dennison Foundation to increasing the scope and pace of its support of communities as they continue to be challenged by COVID-19.
20212022 Director Nominees
Our Bylaws provide that our Board be comprised of between 8 and 12 directors, with the exact number fixed from time to time by Board resolution. Our Board has fixed the current number of directors at 10 and9. In February 2022, director Mark Barrenechea notified our Board of his decision not to stand for reelection at the 2022 Annual Meeting so he can focus on other endeavors; as a result, our Board expects to reduce its sizethat it will fix the number of directors at 8 in April 2021 to reflect Peter Barker’s retirement on the date of the Annual Meeting as required by our age-based mandatory retirement policy. The 92022 assuming that all nominees for election in 2021are reelected.
Our 2022 director nominees are shown in the chart below.
Name | Age | Director Since | Principal Occupation | Independent | AC | CC | GC | Age | Director Since | Principal Occupation | Independent | AC | CC | GC | ||||||||||||||||||||||||||||||||||||||||||
Bradley A. Alford | 64 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
| ¡ | ¡ | 65 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
| ● | ● | ||||||||||||||||||||||||||||||||||||||||||
Anthony K. Anderson | 65 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ✓ | ¡ |
| ¡ | 66 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ✓ | ● |
| ● | ||||||||||||||||||||||||||||||||||||||||||
Mark J. Barrenechea | 56 | 2018 | Vice Chair, CEO & CTO, OpenText Corporation | ✓ |
| ¡ |
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Mitchell R. Butier | 49 | 2016 | Chairman, President & CEO, Avery Dennison Corporation |
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| 50 | 2016 | Chairman & CEO, Avery Dennison Corporation |
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Ken C. Hicks | 68 | 2007 | Chairman, President & CEO, Academy Sports + Outdoors | ✓ |
| ¡ |
| 69 | 2007 | Chairman, President & CEO, Academy Sports + Outdoors | ✓ |
| ● |
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Andres A. Lopez | 58 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ¡ |
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| 59 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ● |
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Patrick T. Siewert | 65 | 2005 | Managing Director & Partner, The Carlyle Group | ✓ | ¡ |
| ¡ | 66 | 2005 | Managing Director & Partner, The Carlyle Group | ✓ | ● |
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Julia A. Stewart | 65 | 2003 | Chair & CEO, Alurx, Inc. | ✓ |
| ¡ | ¡ | 66 | 2003 | Chair & CEO, Alurx, Inc. | ✓ |
| ● | ● | ||||||||||||||||||||||||||||||||||||||||||
Martha N. Sullivan | 64 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ¡ |
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| 65 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ● |
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AC = Audit and Finance Committee CC = Talent and Compensation Committee GC = Governance Committee
= Lead Independent Director ¡● = Chair ●¡ = Member
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The ages of our director nominees range from 4950 to 68,69, with an average age of approximately 62.63. Their lengths of service range from 21⁄25 to 1819 years, with an average tenure on our Board – after Mr. Barrenechea’s scheduled departure in April 2022 – of approximately 9111⁄/2 years.
Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeing our company, as shown by individual in the Board matrix shownincluded in the proxy summary.
2020 Change in Board Leadership Structure
28 | 2022 Proxy Statement | Avery Dennison Corporation |
In February 2020, our then-serving Lead Independent Director, David Pyott, notified our Board of his intention not to stand for reelection at the 2020 Annual Meeting so that he could focus on other endeavors. As a result, his membership on our Board ended on the date of the 2020 Annual Meeting. Our Board regularly reviews its composition and assesses the need for refreshment, determining not to appoint an additional director at that time.
In February 2020, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Patrick Siewert be selected to replace Mr. Pyott as Lead Independent Director. The committee’s decision took into account his significant contribution to our Board’s responsibility for maintaining the integrity of our financial statements as a member of the Audit and Finance Committee for 15 years and its then-Chair for the last four years, as well as his extensive international experience in Asia, a region from which nearly 35% of our sales originated and approximately 60% of our employees were located at that time. The Governance Committee determined that Mr. Siewert was best positioned to provide independent leadership of our Board in overseeing our strategies to deliver long-term value for our employees, customers, investors and communities. Upon the recommendation of the Governance Committee, the independent directors on our Board unanimously selected Mr. Siewert (with him and Mr. Pyott abstaining) to serve as our Lead Independent Director, effective immediately after the 2020 Annual Meeting. In February 2021, upon the recommendation of the Governance Committee, the independent directors on our Board unanimously selected Mr. Siewert (with him abstaining) to continue serving as our Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.
2021 Nomination of Mr. Barrenechea
In nominating Mr. Barrenechea for reelection, the Board evaluatedthe overboarding policies of certain of our investors and proxy advisory firms. As part of our ongoing stockholder engagement program, members of our Board – including our Chairman and our Lead Independent Director – and management proactively discussed this matter with stockholders, reviewing Mr. Barrenechea’s consistent attendance and robust and active engagement not only with the Board and its committees, but also with management by sharing his information technology expertise and mentoring key leaders. Most notably, Mr. Barrenechea has been actively engaged in helping guide management to advance our Intelligent Labels platform, which is the highest priority in our strategy to drive outsized growth in high-value categories and which we believe will be a substantial driver of our long-term profitable growth. This business is expected to continue being a key area of Board and management strategic focus through at least fiscal year 2022, beyond the one-year term to which Mr. Barrenechea is being nominated to serve.
After giving much consideration to the feedback from investors as evidenced both by their prior votes on his reelection and our candid discussions with them in recent years, as well as its assessment of Mr. Barrenechea’s demonstrated ability to meet the time demands of the director role, our Board determined that it was in the best interests of the company and our stockholders to nominate Mr. Barrenechea for reelection. In light of his contributions, commitment to our company and management, and skill alignment with our strategic priorities, our Board recommends that stockholders vote in favor of Mr. Barrenechea’s reelection, as well as that of our other director nominees.
Board Meetings and Attendance
Our Board met five times and acted five timesonce by unanimous written consent during 2020.2021. There were 1514 Board Committee meetings and one Committee action by unanimous written consent during the year. All directors attended at least 75% of their respective Board and Committee meetings, with average attendance of 99%. In addition, our directors regularly discussed matters of critical importance with our Chairman/CEO throughout the year outside of meetings, particularly with regard to our COVID-19 response. All directors attended 100% of their respective Boardresponse; related supply chain, labor, freight and Committee meetings during 2020. inflationary challenges; potential acquisitions; and ESG priorities and progress. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines and all directors attended the virtual 20202021 Annual Meeting.
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Our Governance Guidelines provide the governance framework for our company and reflect the values of our Board, as highlighted below. They are reviewed at least annually and amended from time to time to reflect changes in regulatory requirements, evolving market practices, recommendations from our advisors and feedback from our stockholders. Our Governance Guidelines were most recently amended in FebruaryDecember 2021.
BOARD GOVERNANCE HIGHLIGHTS | ||
Board Composition | ✓ Reasonable Board size of
✓ Mandatory retirement after age
✓ On average, director nominee age of
✓ | |
Director Independence | ✓ Current directors and director nominees
✓ Executive sessions of independent directors held at all five | |
Board Leadership Structure | ✓ Annual review of Board leadership structure
✓ Robust Lead Independent Director role and independent Committee Chairs | |
Board Committees | ✓ 100% independent
✓ Annual composition review and periodic
✓ Act under
✓ Directors required to attend Board/Committee and stockholder meetings | |
Board Duties | ✓ Regular CEO/senior executive succession planning
✓ Ongoing review of long-term strategic plans, including key risks and mitigating strategies
✓ Directors entitled to rely on independent legal, financial or other advisors at our expense | |
Continuous Board Improvement | ✓ New directors participate in initial orientation to familiarize themselves with our company and after joining Board committees to understand their responsibilities
✓ Continuing education through meetings with management, visits to our facilities and participation in director education programs
✓ Annual evaluation process ensures Board, Committees, Chairman, Lead Independent Director and Committee Chairs are functioning effectively; includes peer evaluation | |
Director Qualifications | ✓ Regular review of Board composition (skills, qualifications, demographic backgrounds including with respect to gender, race and | |
Our Governance Guidelines require that our Board be comprised of a majority of directors who satisfy the criteria for independence under NYSE listing standards and require that our audit, compensation and nominating committees be comprised entirely of independent directors. An independent director is one who meets the independence requirements of the NYSE and who our Board affirmatively determines has no material relationship with our company, directly or indirectly as a partner, stockholder or officer of an entity with which we have a relationship.
Avery Dennison Corporation | 2022 Proxy Statement | 29 |
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annualour Board’s independence determination, including all relationships they have with our company, directly or indirectly through our company’s sale or purchase of products or services to or from the companies or firms by which they are employed. The Governance Committee reviews any relevant disclosures made in the questionnaires with our Chief Legal Officer and our Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2021,2022, after review of the facts and circumstances relevant to all directors,each director, the Governance Committee concluded that only Mr. Butier had a relationship that was disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon the recommendation of the Governance Committee, our Board affirmatively determined the 98 current directors named on the following pagebelow to be independent; 89%as shown below, 88% of our director nominees are independent.
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Independent Directors
Bradley Alford Anthony Anderson
Mark Barrenechea Ken Hicks Andres Lopez Patrick Siewert Julia Stewart Martha Sullivan
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Director Nominee Independence
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For a discussion of the potential impact of tenure on director independence, see the Board Refreshment and Director Succession Planning section of this proxy statement.
Our Governance Guidelines give our Board – acting through its independent directors – the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following one-year term to our independent directors taking into account,giving consideration to, among other things, our financial position, business strategies, ESG priorities and any feedback received from our stockholders.
Robust Lead Independent Director Role
Our robust Lead Independent Director role provides an effective balance withbalances our combined Chairman/CEO role by exercising critical duties to ensure independent Board decision-making in the boardroom. Mr. Siewert began serving as our Lead Independent Director in April 2020.2020 and was reelected by our independent directors for another one-year term in April 2021. Our Governance Guidelines clearly define his primary responsibilities, aswhich are shown below.
LEAD INDEPENDENT DIRECTOR | PRIMARY RESPONSIBILITIES | |
Designee:
Patrick Siewert | • Preside over executive sessions of independent directors and Board meetings where Chairman/CEO is not present
• Serve as liaison between Chairman/CEO and independent directors
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Selected annually by independent directors | • Approve Board meeting agendas and schedules
• Call meetings of independent directors
• Consult and meet with stockholders
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In addition to these responsibilities, Mr. Siewert also performed the activities described below during his tenureand on the following page as Lead Independent Director in 2020.2021.
Led majority of our off-season stockholder engagement discussions
RegularlyFrequently engaged with Chairman/CEO to help guide strategic direction, including COVID-19 response and related supply chain, labor, freight and inflationary challenges, review of business strategies, mitigation of related risks, and assessment of potential acquisitions and ESG progress
Consulted frequently with other independent directors and interviewed each of them duringas part of annual Board/Committee evaluation process
30 | 2022 Proxy Statement | Avery Dennison Corporation |
Provided feedback to Chairman/CEO based on discussions with independent directors
Met with members of senior management other than Chairman/CEO
Supplementing our Lead Independent Director in providing independent Board leadership are our Committee Chairs, all of whom are independent.
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2021 Board Leadership Structure
Our Board currently has a Chairman/CEO and a Lead Independent Director. The Governance Committee oversaw the evaluation of their respective performance during theDuring our Board evaluation process conducted induring the fourth quarter of 2020, noting that2021, Messrs. Butier and Siewert each received uniformly positive feedback from our independent directors in their respective roles. Based in part on these evaluations, we believeroles as Chairman/CEO and Lead Independent Director, indicating that our current Board leadership structure is providingenabling effective oversight of our company. During our 20202021 engagement with stockholders, noneonly one investor expressed a preference that the positions of them expressed concerns withChairman and CEO be separated at our Board leadership structure,company, which we believe reflects support for our robust and clearly delineated Lead Independent Director role as well asand Mr. Siewert’s directparticipation and strong engagement in manythe majority of thoseour off-season meetings.
In February 2021,2022, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr. Butier be elected to continue serving as Chairman, noting that he has successfully led our company as CEO for the last fivesix years and isremains best positioned to lead our Board in overseeing our strategies to deliver long-term value for our employees, customers, investors and communities. The committee further noted that Mr. Butier has articulated and worked to realize a long-term vision for our company that has delivered top quartile TSR performance and exceeded our 2017-2021 financial targets and that we can best continue to advance our strategies and ESG progress toward achieving our 2021 financial targets and 2025 sustainability goals – as well as our 2021-2025 financial targets and more ambitious 2030 sustainability goals being announced contemporaneously with the issuance of this proxy statement – continuing with combined leadership in the boardroom at this time. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr. Butier (with him abstaining) to serve as our Chairman, effective immediately after the Annual Meeting subject to his reelection.
At the samethat time, the Governance Committee also recommended that Mr. Siewert (with him abstaining)not participating in the discussion) continue serving as Lead Independent Director. Having an experienceda long-serving director with financial expertise and substantial international experience serve as Lead Independent Director is providinghas provided Mr. Butier valuable mentorship and guidance while ensuring robust independent Board oversight of management. The committee also recognized Mr. Siewert’s valuable support and substantial effort with our stockholder engagement program. The Governance Committee determined that, in light of his demonstrated commitment, engagement and leadership in the firstsecond year in which he served in suchthis capacity, Mr. Siewert should continue in the role of ensuring independent stewardship of our Board in its oversight of our strategies to deliver long-term value for all our stakeholders. The committee’s decision took into account his significant contribution to the Board’s responsibilities as a member of the Audit Committee for 16 yearssince joining our Board and as its Chair for fourfive years, as the current Chair of the Governance Committee, and his extensive international experience in Asia, a region from which approximately 34%35% of our sales originated and approximately 60%58% of our employees were located in 2020.2021. Upon the recommendation of the Governance Committee, our independent directors unanimously selected Mr. Siewert (with him abstaining)abstaining from the vote) to serve as Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.
Each of our Board committeesCommittees has a written charter that describes its purposes, membership and meeting structure, and responsibilities. These charters may be found on the investors section of our website under Corporate Governance and are reviewed by the respective committee at least annually, with any recommended changes adopted upon approval by our Board. Amended charters are promptly posted on our website. The Charters of the Audit, Compensation and Governance Committees were most recently amended in February 2021, which included changes to the names of the Compensation and Governance Committees.2021.
Each of our Board committeesCommittees has the ability to form and delegate authority to subcommittees and may obtain advice and assistance from internal or external consultants, legal counsel or other advisors at our expense. In addition, each committee annually evaluates its performance. The primary responsibilities, current membership and 20202021 meeting and attendance information for the three standing committees of our Board are summarized on the following pages.
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AUDIT AND FINANCE COMMITTEE | PRIMARY RESPONSIBILITIES | |
Current Members:
Martha Sullivan (Chair) Anthony Anderson
Andres Lopez Patrick Siewert
Audit committee financial experts: Anderson
All members satisfy NYSE enhanced independence standards
| • Oversee financial statement and disclosure matters, including quarterly and annual earnings release documentation and SEC reports, internal controls, critical accounting policies and practices, and major financial risk exposures
• Appoint and oversee independent registered public accounting firm, including
• Oversee internal audit function, including appointing/dismissing senior internal auditor, evaluating his performance, reviewing significant issues
• Perform compliance oversight responsibilities, including overseeing cybersecurity risk management and risks related to information technology controls and security; maintaining procedures for complaints regarding accounting, internal accounting controls or auditing matters; reviewing financially material legal matters; and making determinations regarding certain Code of Ethics
• Conduct finance oversight responsibilities, including reviewing capital structure and financing plans, capital allocation strategy, funding status of pension plans, and significant tax matters
• Approve Audit and Finance Committee Report for proxy statement
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TALENT AND | PRIMARY RESPONSIBILITIES | |
Current Members:
Julia Stewart (Chair) Bradley Alford Mark Barrenechea Ken Hicks
All members satisfy NYSE enhanced independence standards and qualify as “non-employee directors” under Exchange Act Rule 16b-3 | • Review and approve corporate goals and CEO objectives and evaluate company and individual performance to determine annual CEO compensation
• Review and approve senior executive compensation, including base salaries and incentive compensation
• Oversee CEO succession planning and
• Oversee appropriate compensation strategy, incentive plans and benefit programs
• Review and provide oversight of policies and strategies related to talent management, including
• Review stockholder engagement process, results and feedback related to executive compensation and talent management
• Approve CD&A and Talent and Compensation Committee Report for proxy statement
• Oversee stockholder approval of executive compensation matters, including say-on-pay votes and frequency of such votes
• Ensure no encouragement of excessive risk-taking in compensation policies/programs
• Recommend non-employee director compensation
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GOVERNANCE COMMITTEE | PRIMARY RESPONSIBILITIES | |
Current Members:
Patrick Siewert (Chair) Bradley Alford Anthony Anderson
Julia Stewart
All members satisfy NYSE independence standards
| • Identify potential or incumbent Board members and recommend director nominees
• Annually consider Board leadership structure and recommend whether to separate or combine positions of Chairman and CEO; if combined, recommend Lead Independent Director
• Recommend Board and Committee structure, Chairs and members
• Recommend independent directors
• Review and approve related person transactions
• Oversee annual performance evaluation of Board and Committees
• Review Governance Guidelines and recommend changes
• Review and provide oversight
• Review stockholder engagement process, results and feedback related to governance, environmental sustainability and community investment
• Review stockholder proposals
• Oversee values and ethics program and Code of Conduct, evaluate significant conflicts of interest and make determinations regarding certain Code of Ethics violations
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Our Board believes it is important to have executive sessionsessions with our Chairman/CEO, and without him or other members of management present, and without him, both of which are generally held at all regulareach Board meetings.meeting. Our independent directors have robust and candid discussions at the executive sessions that exclude Mr. Butier during which they critically evaluate the performance of our company, Chairman/CEO and management. PatrickAs Lead Independent Director, Mr. Siewert presided over the threefive executive sessions of independent directors held since he became Lead Independent Director in April 2020during 2021.,
In 2021, implementing feedback from our annual Board evaluation process, our Board began starting each of its meetings with David Pyott, our previous Lead Independent Director, presiding over theone of two such executive sessions held before that date.with our Chairman/CEO, but no other members of management, to discuss key focus areas and frame meeting discussions; the second such session at the end of the meeting provides time for the Board to reflect and align on key priorities, after which our independent directors meet in executive session without our Chairman/CEO.
Executive sessions are also generally scheduled for regular meetings of the Audit, Compensation and Governance Committees. These executive sessions exclude our Chairman/CEO and other members of management, unless the Committee requests one or more of them to attend a portion of the session to provide additional information or perspective.
Management is responsible for managing the day-to-dayday-to-day risks confronting our businesses, and our Board has responsibility for overseeing enterprise risk management (ERM).In performing its oversight role, our Board is responsible for ensuring that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making. The teams leading our businesses have incorporated ERM into developing and executing their strategies, assessing the risks impacting their businesses, and identifying and implementing appropriate mitigating actions on an ongoing basis. In addition, in consultation with our Chief Compliance Officerleader of Risk Management and senior management, these teams semiannually prepare a risk profile consisting of a heat map and a summary of their key risks and mitigating strategies, which are used to prepare a company risk profile based on identified business-specific risks as well as enterprise-wide risks, including risks related to ESG matters such as greenhouse gasclimate change, GHG emissions and energy use; materials management; advancing the circular economy; diversity, inclusion and equal opportunity;DE+I; waste; and employee health and safety.
Avery Dennison Corporation | 2022 Proxy Statement | 33 |
We have robust global processes that support aour strong internal control environment toand promote the early identification and continued mitigation of risks by our company’s leadership. Our legal and compliance functions report into our Chief Legal OfficerCLO to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit reports to the Audit Committee in the conduct of his operational responsibilities, ensuring his independence from management.
In performing its2021, we enhanced our already robust ERM program by meeting to prepare risk profiles with an expanded group of functional leaders for our RBIS and IHM businesses and each of the regions of our LGM business, in addition to the global risk profiles we have routinely prepared for each of our reportable segments and our company as a whole. We also prepared standalone compliance and information technology risk profiles to enable greater focus on these critical risk areas, and designated risk champions from our Law Department to partner with our Risk Management team in facilitating future ERM discussions with our business leadership teams. These advancements have embedded ERM deeper into our organization, allowing us to benefit from the engagement and critical thinking of a broader cross-section of corporate and business leaders. We plan to continue advancing our ERM program, with leadership from our ERM Steering Committee comprised of members of senior management and oversight role,by our Board is responsible for ensuring that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making.Board.
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Our Board as a whole oversees risks related to our company and business strategies and operations, exercising this responsibility by considering the risks related to its decisions. Each year, our Board receives reports on the ERM process and the strategic plans and risks facing our businesses and company as a whole; these risks include financial risks, geopolitical risks, legal and regulatory risks, supply chain risks, competitive risks, compliance risks, ESG risks, information technology risks and other risks related to the ways in which we do business. Employees who lead various risk areas – such as law, information technology; environmental, health and safety; tax; compliance; sustainability;technology, tax, compliance, sustainability, DE+I and community investment – report periodically to Board Committees and occasionally to our full Board.
Our Board has delegated elements of its risk oversight responsibility to its Committees to better coordinate with management to serve the long-term interests of all our stakeholders. Our Board receives reports from the Committee Chairs regarding topics discussed at committee meetings, including the areas of risk they primarily oversee.oversee, and engages with our leaders on these risk areas during its regular review of our business strategies.
Risk Oversight | ||||
Board of Directors
• Business strategies • Annual operating plan and significant fixed and IT capital expenditures • Corporate governance • Acquisitions, divestitures and other significant transactions • Enterprise risk management |
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• Financial reporting processes and statements, and internal controls • Capital structure • Financing, including debt, liquidity, capital allocation and pension plan funding • Stockholder distributions (dividends and stock repurchases) • Information technology and cybersecurity • |
• Executive compensation and CEO/senior executive succession planning • • Compensation plans and benefit programs • Non-employee director compensation • Social sustainability and talent management, including | • Board and Committee structure and composition • Director succession planning • Values and Ethics/Code of Conduct • Conflicts of interest and related person transactions • Governance, environmental sustainability and community investment • |
Management
• Day-to-day management of risks facing our businesses
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34 | 2022 Proxy Statement | Avery Dennison Corporation |
The Audit Committee oversees our internal control environment and evaluates the effectiveness of our internal controls at least annually. Supplementing these processes, the Audit Committee periodicallyregularly meets in executive session with each of our CEO, CFO, Controller/CAO, Chief Legal Officer, Vice President of Internal Audit and representatives of our independent registered public accounting firm.firm and meets as needed in executive session with other members of management such as our CEO and CLO. The Governance Committee meets semiannually with our Chief Compliance Officer to discuss, among other things, the investigation of allegations reported to the GuideLine.
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During 2020, our Board was particularly focused on the risk areas showndescribed below.
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Impact of COVID-19 on our employees, customers, investors and communities – Prioritized healthPrioritizing safety and well-being of global team members, followed immediately by delivering for customers. Among other things, COVID-19 response encompassed risks related to business continuity,continuity; governmental regulations impacting manufacturing operations,operations; cybersecurity and information technology security in work-from-home environment for office-based employees, temporary cost-saving actions,employees; and finance matters such as cash management collections, liquidity, and stockholder distributionscollections
Diversity and inclusionDelivering for customers – Redoubled effortsManaging constrained raw material, freight and labor availability and elevated lead times to drive sustainable change in light of demonstrated societal need for enhanced focus on combatting inequality and enhancing social justicecontinue providing high-quality service to customers
Inflation management – Offsetting impact of inflation through productivity and pricing
Intelligent Labels – Continued to advanceFurther accelerating primary long-term profitable growth driver, including risks related to acquisition and integration of SmartracVestcom
Innovation – Significantly upgraded and reinvigoratedAdvancing innovation program, including assessing and addressing risks related to investment in disruptive technologies
Sustainability – Increased focusthrough strategic innovation platforms on sustainable packaging, including risks related to strategic platforms to recycle/enablematerial circularity and reduce/eliminate waste reduction/elimination
M&A – WorkedBeing bolder to maintainexpand robust pipeline of acquisition opportunities, including evaluating risks related to our acquisitions and integrations of SmartracZippy Yum and ACPO, integration of Smartrac andJDC, as well as our venture investments,
New functional operating structure – Rationalized corporate/business functional support in areas of finance, law, human resources, and information technology while maintaining our disciplined approach to capital allocation
ESG and human capital managementrisks– HeightenedHeightening focus on non-financial areas of stakeholder interest,ESG matters, resulting in more fulsomefrequent and comprehensive disclosures contained in first ESG Download published in August 2020; 2020 and 2021our integrated sustainability and annual reports;reports, proxy statements and second ESG Download published in March 2021Downloads
Sustainability – Increasing focus on more sustainable packaging, including strategies and risks related to the strategic innovation platforms described above
DE+I – Raising the bar to drive sustainable change with new 2030 goals and more robust global infrastructure
Risks Associated with Compensation Policies and Practices
As described in the CD&ACompensation Discussion and Analysis section of this proxy statement, we maintain best practices in compensation that collectively encourage ongoing risk mitigation. The Compensation Committee annually discusses with management and its independent compensation consultant, Willis Towers Watson,WTW, whether our executive compensation programs are meeting the committee’s objectives. In addition, the Compensation Committee periodically requests Willis Towers Watsonengages WTW to undertake a more formal assessment of our compensation programs to ensure they do not provide incentives that encourage our employees to take excessive risks in managing their respective businesses or functional areas. The committee most recently conducted its most recent formalthis evaluation in 2018.February 2022.
Based on the advice of Willis Towers Watson, theThe Compensation Committee noted the risk-mitigating features of our compensation program described on the following page, which are substantially the same as what they were at the time of the committee’s most recent formal assessment.page.
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Risk-Mitigating Compensation Features | ||||
Governance and Oversight | ✓ Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants ✓ Clawback policy deters fraud or other misconduct that ✓ Incentive compensation plan structure and targets are reviewed within context of ✓ Compensation Committee annually evaluates CEO/senior executive performance against challenging ✓ Rigorous stock ownership policy is consistent with best practices, with minimum ownership level of 6x ✓
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Pay Philosophy and Structure | ✓ ✓ Substantial majority of leadership compensation delivered in long-term equity or cash-based ✓ Executive severance plans consistent with market practices, with double-trigger change of control benefits and only for most senior NEOs ✓ Incentive compensation designed to incent strong annual financial performance and long-term economic and stockholder value creation, and balance growth and efficient capital deployment
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Incentive Program Design | ✓ AIP and LTI awards incent annual profitable growth and long-term financial value creation, using multiple performance objectives ✓ AIP awards ✓ Equity awards use multiple performance objectives, vest over multiple time horizons and are subject to threshold and maximum payout opportunities • Performance units (PUs) cliff vest at end of three years with payout for relative total stockholder return (TSR) component capped at 100% of target if absolute TSR is negative • Market-leveraged stock units (MSUs) vest over one-, two-, three- and four-year performance periods (average performance period of 2.5 years), with threshold performance at absolute TSR of (15)% and target performance at absolute TSR of 10%
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Based onGiven low risk in each of these categories and other factors, Willis Towers Watson determinedWTW advised the Compensation Committee that our compensation program strikes an appropriate pay-risk balance.balance and presents no risk-related concerns.
Based on the expert advice of Willis Towers Watson, theThe Compensation Committee has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company.
Initial Orientation
Our initial director orientation generally covers (i) our strategies, performance and leadership; (ii) investor messaging; (iii) the strategies, risks and risksmitigating strategies, and ESG priorities of our businesses; (iv) finance matters, including our financial reporting policies and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure;allocation; (v) legal and compliance matters, including our Board composition, governance policies and procedures, ESG matters Values and Ethics program, and ERM; (vi) executive compensation and human captialtalent management matters, including succession planning, leadership development, DE+I and diversity and inclusion;community investment; and (vii) information technology and cybersecurity.
36 | 2022 Proxy Statement | Avery Dennison Corporation |
Continuing Education
Our continuing director education program consists of periodic visits to our facilities and regular management presentations regarding our business operations, performance, strategies and risk mitigation activities. We provide updates on these topics to our Board during and between meetings throughout the year, and provide access to a boardroom news resource platform for them to keep informed of emerging best practices. We also reimburse directors who attend continuing director education programs for fees and related expenses.
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BOARD AND COMMITTEE EVALUATIONS
The Governance Committee oversees an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees, including the Committee Chairs. As part of this process, our directors evaluate the performance of their peers serving on the Board, providing candid feedback to ensureenable continuous boardroom improvement and assist with director succession planning. Our Board views the evaluation process as integral to assessing its effectiveness and identifying improvement opportunities in the pursuit of continued excellence. We have made many improvements tocontinually improved our governance practices and Board processes in recent years as a result of thethis annual evaluation process, as shown below.below and on the following page.
BOARD AND COMMITTEE EVALUATIONS
1 | ||||
Process
Written evaluations on Board/Committee
Composition, including diversity of skill, experienceskills, qualifications and demographic backgroundbackgrounds
Meeting materials
Meeting mechanics and structure
Fulfillment of responsibilities
Meeting content and conduct
Overall performance
Effectiveness of Chairman, Lead Independent Director and Committee Chairs
One-on-one interviews with Governance Committee Chair to provide more informationadditional perspectives and discuss feedback
Verbal peer reviews to identify potential improvement opportunities for individual directors
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2021 Review of Results
Discussion of evaluation results and feedback
Chairman/CEO, Lead Independent Director/Governance Committee Chair/Lead Independent Director, Chief Legal OfficerChair, Corporate Secretary, and Corporate SecretaryCLO
All members ofJoint Governance Committee
Full and Board meetingdiscussion in executive session with Chairman/CEO, aligning on improvement opportunities for implementation
3 | ||||
Recent Improvement Actions
Sharpened focus on Board leadership roles in director succession planningstrategic and risk oversight, selecting new Lead Independent Director, appointing new Chairs for Audithighlighting one business group during each Board meeting, establishing mentorships between individual directors and Governance Committees,key business leaders, and updating Committee memberships in 2020
Identified need for independent directors with packagingensuring meeting discussions prioritize discussion of challenges and information technology expertise, appointing Messrs. Lopez and Barrenechea within last 4 years
Expanded reviewopportunities rather than presentation of potential CEO successors and their development plans and increased engagement with leaders below NEO level to enhance executive succession planning and leadership developmentinformation
Heightened focus on financial scenario planning, and cybersecurity preparedness, ESG priorities and progress, and compliance matters
Enhanced discussion of M&A pipeline and potential targets, as well as performance of acquired companies and integration learnings
Conducted annualExpanded review of potential CEO successors and their development plans to ensure ready-now successors over multiple time horizons and increased engagement with leaders below NEO level to enhance post-investment reviews of returns on significant capital expenditures, acquisitionsexecutive succession planning and information technology investmentsleadership development
Avery Dennison Corporation | 2022 Proxy Statement | 37 |
Increased engagement on investor relations, stockholder engagement and competitive landscape to further bring external perspectives into boardroom
Conducted annual post-investment reviews of returns on significant fixed capital expenditures, acquisitions and IT investments
Sharpened focus on director succession planning, selecting new Lead Independent Director, appointing new Chairs for Audit and Governance Committees and refreshing Committee memberships; proactively aligning on steps to mitigate impact of upcoming concentrated retirements; and focusing on software/digital/cybersecurity and materials science industry expertise and increased Board diversity for future directors
Increased Chairman/CEO engagement with directors between meetings, with frequent email updates and one-on-one calls/videoconferencesdiscussions between him and each director; particularlydirector, which were important in 20202021 as we executedcontinued responding to COVID-19, response, redoubled efforts on diversitymitigated related supply chain, labor, freight and inclusion, andinflationary challenges, advanced ESG focus and transparency, and redoubled efforts to advance DE+I
Refined Board schedule and meeting process throughout 2020 to maintain robust dialogue despite move to primarily virtual meetings given COVID-19, including establishing annual strategic discussion calendars, beginning each meeting in executive session with Chairman/CEO, but no other members of management, to discuss management’s key focus areas and frame meeting discussionsdiscussions; holding another such executive session to reflect on the meeting and align on key priorities, after which our independent directors meet in executive session without our Chairman/CEO; and planning to hold certain Committee meetings off-cycle (not coincident with Board meetings) and future Board meetings as a mix of virtual and in-person meetings given equally high level of engagement and discussion in both formats
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STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS
We value stockholder feedback on our governance environmental sustainability and community investment,program and we actively solicit input through stockholder engagement to ensure that we reflect not only our evolving business strategies but also the expectations of our investors.stakeholders. In addition to our extensive investor relations program through which members of management engage with our investors throughout the year, this supplemental engagement program takes place throughoutis depicted – and the year, as depicted the graphic shownfeedback we received on governance matters is described – in the proxy summary.
Stockholder Engagement on Governance and Environmental Sustainability Matters in 2020
With respect to matters related to governance and environmental sustainability, inclusive of climate risk, we discussed Board oversight of our strategies, our response to COVID-19 and progress toward our 2025 sustainability goals, including with respect to plastics recyclability and greenhouse gas emissions; our Board’s expanded stakeholder and ESG focus, as reflected in our strategies and evidenced in our ESG Download published in August 2020; and Board composition and refreshment, particularly the outside board commitments of one of our directors and the racial/ethnic and gender diversity on our Board.
Our Board welcomes feedback from all our stockholders. We review correspondence submitted by stockholders, discussing any substantive feedback received with senior management and/or our Board as appropriate.
Stockholders and other interested parties may contact our Board, Chairman, Lead Independent Director, any Committee Chair, or any other individual director concerning business matters by writing to Board of Directors (or particular Board subgroup or individual director), c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
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ITEM 1 – ELECTION OF DIRECTORS
Our Bylaws provide for a Board of between 8 and 12 directors, with the exact number fixed by resolution of our Board. Our Board has fixed the current number of directors at 10; in April 2021,9. In February 2022, director Mark Barrenechea notified our Board of his decision not to stand for reelection at the 2022 Annual Meeting so he can focus on other endeavors; as a result, our Board expects tothat it will fix the number of directors at 9 to reflect Peter Barker’s retirement on the date of the Annual Meeting as required by our age-based mandatory retirement policy.8 in April 2022 assuming that all nominees are reelected. All nominees are standing for election for a one-year term expiring at the 20222023 Annual Meeting.
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting. Each of our nominees is presently serving on our Board and has consented to being named in this proxy statement and serving if elected by stockholders.
Majority Voting Standard; Unelected Director Resignation Requirement
Our Bylaws provide for the approval by a majority of votes cast for the election of directors in uncontested elections like this one and require that an incumbent director who is not reelected tender his or her resignation from our Board. Our Board, excluding the tendering director, is required to determine whether to accept the resignation – taking into account the recommendation of the Governance Committee and any other factors it considers appropriate – and publicly disclose its decision regarding the tendered resignation, including the rationale for its decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for the election of directors.
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting.
Recommendation of Board of Directors
Our Board of Directors recommends that you vote FOR each of our 98 director nominees. The persons named as proxies will vote for their election, unless you specify otherwise. If any director nominee were to become unavailable prior to the Annual Meeting, your proxy would be voted for a substitute nominee designated by our Board or we would decrease the size of our Board.
SELECTION OF DIRECTOR NOMINEES
Director nominees are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nominees may also be recommended by the Governance Committee for appointment to our Board, with their election by stockholders taking place at the next Annual Meeting. Our Board believes that our directorsdirector nominees reflect a balance and diversity of skills, qualifications and demographic backgrounds, as shown in the Board matrix showncontained in the proxy summary, that allows them to effectively discharge their oversight responsibilities.
In evaluating whether to recommend a new or incumbent director nominee, the Governance Committee primarily uses the criteria in our Governance Guidelines, which are described below.
• | Independence, to ensure substantial majority of Board remains independent |
• | Business and leadership experience, including industry experience and global exposure and considering factors such as size, scope and complexity |
• | Board |
• | Experience in finance, accounting and/or executive compensation |
• | For incumbent directors, attendance and compliance with our stock ownership policy |
• | Time commitments, including service on other |
• | Potential conflicts of interest |
• | Demographic characteristics (including, without limitation, gender, race and ethnicity); when evaluating new nominees, the committee will seek to consider (and ask any search firm engaged to provide) candidates that include highly qualified women and individuals from underrepresented communities |
• | Ability to contribute to oversight, governance and |
• | Ability to represent balanced interests of all stockholders, as well as the interests of our other stakeholders, rather than those of any special interest group |
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For incumbent directors, the Governance Committee also considers their contributions to our Board and Committees, and mandatory retirement dates to assist with director succession planning.planning, and feedback received during our annual Board evaluation process. The Governance Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all nominees.
The Governance Committee reviews the skills, qualifications and demographic background of any candidate with those of our current directors in assessingto assess how our Board can most effectively fulfill its oversight responsibilities. Sources for identifying potential nominees include current Board members, senior management, executive search firms and investors.
Stockholder Submission of Director Nominees
Advance Notice Nominees
Stockholders may recommend director candidates by submitting the candidate’s name, together with his or her biographical information, professional experience and written consent to nomination, to Governance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060. To be considered at the 20222023 Annual Meeting, advance notice stockholder nominations must comply with the requirements described in the Voting and Meeting Q&A section of this proxy statement. The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
Proxy Access Nominees
A stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company’s stock continuously for at least three years is permitted to submit director nominees (up to 20% of the Board) for inclusion in our proxy materials, subject to the requirements specifieddescribed in our Bylaws. For information on submitting proxy access nominees for the 20222023 Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
BOARD REFRESHMENT AND DIRECTOR SUCCESSION PLANNING
Our Board’s ongoing director succession planning is designed to ensure an independent, well-qualified Board, with diversity in skills, qualifications and demographic backgrounds that enables effective independent oversight and aligns with our business strategies and enables effective oversight.ESG priorities.
No Term Limits
Our Governance Guidelines reflect our Board’s belief that directors should not be subject to term limits. While term limits could help facilitate fresh ideas andnew viewpoints being brought to the boardroom, our Board believes they could also result in the premature loss of a director who over a period of time has gained expertise invaluable experience and is continuing to significantly contribute to Board deliberations assessing our strategies, operations, and risks and is continuing to provide valuable contributions to Board deliberations. mitigating strategies, and ESG priorities and progress. We believe that our Board’s decision not to establish term limits at this time is consistent with the prevailing practice among companies in the S&P 500.
Our Board recognizes that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity. However, our Board believes that, except as required by our mandatory retirement policy arbitrarily removing knowledgeable directors and losing the oversight consistency they bring, particularly during periods of executive management change, such as our 2020 Chief Human Resources Officernew President and Chief Legal Officer transitions, or Board change, such asCOO, the 2019 departure ofnew leaders for our former chairmanRBIS Apparel Solutions and 2020 departure ofIHM businesses, and our former Lead Independent Director,CHRO and CLO elected in 2020 weighs against implementing term limits at this time. Ultimately, our Board believes that it is its responsibility to establishresponsible for establishing appropriate board refreshment policies in light of our strategies, leadership teamfinancial position and financial positionESG priorities at any particular time, exercising its discretion in the best interest of our company and stockholders. To assist in discharging this responsibility, in November 2020, 2021 and February 2022, the Governance Committee reviewed the skills, qualifications and demographic backgrounds of our Board members and conducted director succession planning to ensure that our Board continues to meet the needs of our businesses, align with our strategies and advance the interests of all our stakeholdersstakeholders..
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Policies and Events Supporting Regular Board Refreshment
Our Board has adopted the policies described below to facilitate regular refreshment of our Board and ensure that it continues to independently oversee challenge and partner withchallenge our management team.
Policy | Description | Events Occurring at or Since | ||
Mandatory Resignation Policy | Incumbent directors not elected by stockholders must tender their resignation | All incumbent directors standing for election were elected at | ||
Mandatory Retirement Policy | Directors must retire on date of annual meeting of stockholders that follows their reaching age 72; | |||
Resignation Tendered Upon Change in Principal Employment | Directors who change their principal occupation, position or responsibility must volunteer to resign | No directors changed their principal employment since | ||
Prior Notice Requirement to Prevent | Directors must give prior notice before accepting another U.S. public company directorship so that his/her ability to fulfill Board responsibilities may be evaluated if he/she serves on more than four other such boards |
Upon the recommendation of the Governance Committee, Messrs. Barrenechea and Lopez were appointed to our Board as independent directors in September 2018 and February 2017, respectively. In connection with his becoming our CEO, Mr. Butier joined our Board in May 2016. Our former Chairman Dean Scarborough, and Messrs. Pyott andMr. Barker departed or are scheduled to departretired from our Board in April 2019, 20202021 and 2021, respectively.Mr. Barrenechea will leave our Board in April 2022. We believe that this recent experience with both joining and departing directors demonstrates our Board’s commitment to thoughtful and regular refreshment.
Both the Governance Committee and our full Board plan to regularly discuss director succession planning in 2022 to mitigate the impact of upcoming concentrated retirements, develop a candidate profile for one or more new directors that would both complement and advance the skills and qualifications currently represented on our Board, and further enhance Board diversity.
Our Board supports and reflects our values, recognizing the benefits of diversity in the boardroom, including the healthy debate that results from different viewpoints that may stem from diverse backgrounds.backgrounds.
Age and Tenure
The average age of our director nominees is 62,63, which we believe is comparable toconsistent with the average director age in the S&P 500 and within the 60-63-year60 to 63-year band in which the plurality of these companies fall. The average tenure of our director nominees is 9111⁄2 years; were it not for our most recently appointed director’s decision not to stand for reelection, our average tenure of 101⁄2 years which we believe iswould have been comparable to the average tenure for companies in the S&P 500, and within the 6-10-year band in which the majority of these companies fall. which have average tenure of six to ten years. Our director nominees reflect a balance between newer directors who bring fresh ideas and insights and longer-serving directors with deep institutional knowledge of our Board and company.company.
Director Nominee Age and Tenure | ||||
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Demographic Background
Our Governance Guidelines reflect that the Governance Committee’s assessment of the qualifications of director candidates includes consideration of their demographic backgrounds, including, without limitation, race, gender and ethnicity. Although we have no formal policy regarding the consideration of diversity in selecting director nominees, the Governance Committee seeks to recommend individuals with a broad diversity of experience, profession, skill, geographic representation and demographic background. While diversity is a consideration and area of focus in recommending future nominees, area given nominee would not be chosen or excluded solely or primarily on that basis; rather, the Governance Committee focuseswould focus on skills, experience and backgroundan overall candidate profile that canwould complement our existing Board in light of the diverse and global nature of our businesses and operations. When evaluating new nominees, the committeeGovernance Committee will continue seekingseek to increaseconsider (and ask any search firm engaged to provide) candidates that include highly qualified women and individuals from underrepresented communities; 2 of our 4 most recently appointed independent directors increased the overallracial, ethnic or gender diversity on our BoardBoard..
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2 of 4 most recently appointed independent directors increased Board diversity
The following pages provide information on the directors nominated for election, including his or her age, current Board roles, and business experience during at least the past five years. We also indicate the name of any other U.S. public company board on which each nominee currently serves or has served during the past five years.
In addition to the information presented regardingWe also present each nominee’s experience and qualifications that led our Board to conclude that he or she should serve as a director, – which includes senior leadership experience, industry experience,expertise, global exposure, U.S. public company board experience, andand/or financial expertise as defined in the Board matrix shown in the proxy summary – we believe that each of them has integrity and adheres to our high ethical standards.summary. Each nominee also has demonstrated the ability to exercise sound judgment, fulfill the time commitments necessary to serve on our Board and advance the long-term interests of all our stockholders, as well as those of our other stakeholders.
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ANDRES A. LOPEZ | ||||
Age
Director since February 2017
Independent |
RECENT BUSINESS EXPERIENCE O-I Glass, Inc., a glass container manufacturer and supplier to food and beverage brands • President & CEO since January 2016 • COO & President, Glass Containers, from February 2015 to December 2015 • President, O-I Americas, from July 2014 to January 2015 • President, O-I Latin America, from April 2009 to July 2014
BOARD ROLES Audit Committee Member
OTHER PUBLIC COMPANY BOARDS Current: O-I Glass, Inc. Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Oversees company with
Industry • Leads multinational packaging company in food and beverage segment of consumer goods industry into which • Led Latin America and Americas divisions, after having worked in positions of increasing responsibility
U.S. public company board experience • Concurrent service on one other board |
ANTHONY K. ANDERSON | ||||
Age
Director since December 2012
Independent |
RECENT BUSINESS EXPERIENCE Ernst & Young LLP, an assurance, tax, transaction and advisory services firm • Vice Chair, Managing Partner and Member of Executive Board from 2000 to March 2012
BOARD ROLES Audit Committee Member Governance Committee Member
OTHER PUBLIC COMPANY BOARDS Current: AAR Corporation Exelon Corporation Marsh & McLennan Companies, Inc. Past Five Years: First American Financial Corporation |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Served on executive board of Ernst & Young for 12 years, and as managing partner of Midwest and Pacific Southwest regions
Financial expertise • • Substantial experience advising audit committees of large multinational corporations • Certified public accountant (now inactive)
U.S. public company board experience • Concurrent service on three other boards and prior service on other boards |
BRADLEY A. ALFORD | ||||
Age
Director since April 2010
Independent |
RECENT BUSINESS EXPERIENCE Nestlé USA, a nutrition, health and wellness company • Chairman & CEO from January 2006 to October 2012
Nestlé Brands Company, an operating unit of Nestlé USA • President & CEO from 2003 to December 2005
BOARD ROLES Compensation Committee Member Governance Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Perrigo Company PLC Past Five Years: Conagra Brands, Inc. |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led company then with over $12 billion in annual revenues and more than 26,000 employees
Industry • • Knowledge of food and beverage segments into which • Substantial M&A and integration experience
U.S. public company board experience • Concurrent service on one other board and prior service on other boards |
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JULIA A. STEWART | ||||
Age
Director since January 2003
Independent |
RECENT BUSINESS EXPERIENCE Alurx, Inc., a health and wellness company • Founder, Chair & CEO since January 2020
Dine Brands Global, Inc. (formerly DineEquity, Inc.), owner, operator and franchisor of IHOP and Applebee’s restaurants • Chairman & CEO from June 2008 to March 2017
BOARD ROLES Compensation Committee Chair Governance Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Bite Acquisition Corp. Past Five Years: Dine Brands Global, Inc. |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led company then with over $600 million in annual revenues and nearly 1,000 employees
• Substantial operational and marketing experience in retail/dining industry • Expertise in brand positioning, risk assessment, financial reporting and governance
U.S. public company board experience • Concurrent service on one other board and prior service on other boards |
KEN C. HICKS | ||||
Age
Director since July 2007
Independent |
RECENT BUSINESS EXPERIENCE Academy Sports + Outdoors, a sports and recreation retailer • Chairman, President & CEO since May 2018
Foot Locker, Inc., a specialty athletic retailer • Executive Chairman from December 2014 to May 2015 • Chairman, President & CEO from February 2010 to November 2014 • President
BOARD ROLES Compensation Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Academy Sports + Outdoors Past Five Years: Whole Foods Corporation |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Leads company with
Industry •
U.S. public company board experience • Concurrent service on one other board and prior service on other boards |
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MARTHA N. SULLIVAN | ||||
Age
Director since February 2013
Independent |
Sensata Technologies Holding PLC, a supplier of sensors and controls • President & CEO from January 2013 to March 2020 • President & COO from September 2010 to December 2012 • COO from April 2006 to August 2010
Texas Instruments, Inc., Sensata’s predecessor entity • Vice President of Sensor Products from 1997 to 2006
BOARD ROLES Audit Committee Chair
OTHER PUBLIC COMPANY BOARDS Current: Sensata Technologies Holding PLC Past Five Years: Goldman Sachs Acquisition Holding Company Corp II
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Senior leadership experience • Led company then with approximately $3.5 billion in revenues and more than 21,000 employees
Industry • Oversaw all business segments, global operations and strategic planning • Strong technology background, including experience overseeing an RFID business
U.S. public company board experience • Concurrent service on |
44 | 2022 Proxy Statement | Avery Dennison Corporation |
MITCHELL R. BUTIER | ||||
Age
Director since April 2016
Not Independent |
RECENT BUSINESS EXPERIENCE Avery Dennison Corporation • Chairman & CEO since March 2022 • Chairman, President & CEO • President & CEO from May 2016 to April 2019 • President & COO from November 2014 to April 2016 • Senior Vice President & CFO from June 2010 to October 2014; continued serving as CFO until March 2015 • Vice President, Global Finance
BOARD ROLES Chairman
OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Held roles of increasing responsibility at our company, including CAO, CFO, COO and CEO
Industry • Served in positions in our primary business segments, including international assignments in Europe, gaining packaging, industrial goods and materials science industry expertise
Financial expertise • Served as CAO for 3 years and CFO for 5 years |
PATRICK T. SIEWERT | ||||
Age
Director since April 2005
Independent |
RECENT BUSINESS EXPERIENCE The Carlyle Group, a global alternative investment firm • Managing Director and Partner since April 2007
The Coca-Cola Company, a beverage company • Executive Committee member and Group President, Asia, from August 2001 to March 2007
BOARD ROLES Lead Independent Director Governance Committee Chair Audit Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Mondelēz International, Inc. Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Industry • Led division of global consumer goods company in beverage segment of consumer goods industry into which • Work experience, citizenship and residency in Asia, region in which we generate substantial amount of sales and majority of our employees is located
Financial expertise • Advises on investments in consumer goods businesses globally, particularly in Asia
U.S. public company board experience • Concurrent service on one other board |
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In recommending non-employee director compensation to our Board based onwith the independent expert advice of Willis Towers Watson,WTW, the Compensation Committee seeks to target compensation at the median of similarly sized companies similar in size, global scope and complexity with which we compete for director talent. Compensation is reviewed periodically (generally every three years) to ensure market competitiveness and consistency. The majority of compensation is delivered in equity to align director interests with those of our stockholders.
Median Target Compensation
The components of our non-employee director compensation program are summarized in the charts below and described thereafter.
2020 NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM | ||||||||||||
NON-EMPLOYEE DIRECTOR COMPENSATION | NON-EMPLOYEE DIRECTOR COMPENSATION | |||||||||||
Target Grant Date Fair Value of Restricted Stock Units (RSUs) | $ | 155,000 |
| $ | 170,000 |
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Cash Retainer | $ | 100,000 |
| $ | 100,000 |
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Match of Charitable/Educational Contributions | $ | 10,000 |
| $ | 10,000 |
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Additional Cash Retainer for Lead Independent Director | $ | 30,000 |
| $ | 30,000 |
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Additional Cash Retainer for Audit Committee Chair | $ | 20,000 |
| $ | 25,000 |
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Additional Cash Retainer for Compensation Committee Chair | $ | 15,000 |
| $ | 20,000 |
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Additional Cash Retainer for Governance Committee Chair | $ | 15,000 |
| $ | 20,000 |
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TARGETED AT MEDIAN
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Our 2017 Incentive Award Plan, under which RSUs are granted to our non-employee directors, limits the sum of the grant date fair value of equity awards and the amount of any cash compensation in each case granted to any non-employee director during any calendar year to $600,000. In 2020,2021, all but one ofnon-employee directors except for our non-employee directorsLead Independent Director/Governance Committee Chair and our Audit Committee Chair received less than half of thethis maximum compensation amount.
Compensation Setting
In earlyFebruary 2021, at the Compensation Committee’s request, Willis Towers Watsonits independent compensation consultant analyzed trends in non-employee director compensation and assessed the competitiveness of the components of our program, including total cash compensation (Board and Committee Chair retainers), annual equity grant, charitable match, total direct compensation (annual cash plus equity) mix and amount,, our stock ownership policy and the additional retainer for our Lead Independent Director.
Using benchmarkingbenchmark data from public filings of companies ranked in the Fortune 350-500, Willis Towers WatsonWTW recommended that the additional cash retainers for our Audit, Compensation and Governance Committee Chairs each be increasedincrease by $5,000 and the target grant date fair value of our annual equity grant to non-employee directors increase by $15,000, in each case to reflect$15,000. Modestly increasing the current market median. This changeannual equity grant would bring total direct compensation for regular Board service to $270,000 (or $280,000 with the charitable match), the projected median non-employee director compensation of our Fortune 350-500 peerscompanies in 2024, the next time the Compensation Committee expectsplans to review non-employee director compensation. Giving consideration to, among other things, the program. Based on Willis Towers Watson’s recommendation,advice of WTW, the Compensation Committee recommended to our Board in February 2021 that the additional cash retainers for our Audit, Compensation and Governance Committee Chairs be increased to $25,000, $20,000 and $20,000, respectively, and the target grant date fair value of RSUs granted annually to our non-employee directors be increased to $170,000.
After consideration of the advice from the independent compensation consultant,Based on the recommendation of the Compensation Committee and further discussion, our Board approved the revised non-employee director compensation program, effective as of the date of the 2021 Annual Meeting.
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Stock Ownership Policy
Our stock ownership policy requires non-employee directors to own $500,000 of our company stock, 50% of which must be held in vested shares. Stock option gains are not considered when measuring policy compliance; onlyOnly shares owned directly or in a trust, deferred stock units (DSUs) and unvested RSUs, which are subject only to time-based vesting, count for these purposes. Our non-employee directors are prohibited from hedging or pledging our common stock.
All of our non-employee directors have achieved the minimum ownership required by our stock ownership policy; average non-employee director ownership was ~10x~12x the required level at year-end 20202021. Based on our review of their written representations in our 20202021 director questionnaire, none of our non-employee directors has hedged or pledged our common stock.
Equity Compensation
The 20202021 equity grant to non-employee directors was made in the formconsisted of RSUs that vest on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected. Unvested RSUs (i) fully vest upon a director’s death, disability, retirement from our Board after reaching age 72 or termination of service within 24 months after a change of control and (ii) are cancelled in the event a director voluntarily resigns, is not reelected by stockholders or is otherwise asked to leave our Board, unless otherwise determined by the Compensation Committee determines otherwise.Committee. On May 1, 2020,2021, each of our then-serving non-employee directors was granted 1,450792 RSUs with a grant date fair value of $151,600.$167,809.
In connection with his departuremandatory retirement from our Board on the date of the 20202021 Annual Meeting and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to accelerate the vesting of the RSUs granted to Peter Barker in May 2019 to David Pyott, our former Lead Independent Director. These RSUs2020 that were scheduled to vest a few days after his departureseparation from our Board. In making its determination, the Compensation Committee noted that Mr. PyottBarker had served nearly the entire one-year term for which he had been elected by our stockholders.
Deferrable Cash Compensation
Cash retainers are paid semiannually and prorated for any director’s partial service during the year. Directors are also reimbursed for travel expenses incurred to attend Board meetings and continuing director education events.
Our non-employee directors may choose to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation Program (DDECP); or (iii) a combination of cash and DSUs. None of our current non-employee directors participateparticipates in the DVDCP and eight7 of them currently participate in the DDECP. When a director participating in the DDECP retires or otherwise ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director’s service, with the resulting number of shares of our common stock issued to the director. Dividend equivalents, representing the value of dividends per share paid on shares of our common stock calculated with reference to the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP. When a director participating in the DDECP ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director’s service, with the resulting number of shares of our common stock issued to the director.
Charitable Match
We match up to $10,000 per year of each non-employee director’s documented contributions to charitable organizations or educational institutions.
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Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) | All Other Compensation(4) | Total | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||||||||||||||||||||||||||||||
Bradley A. Alford | $ | 100,000 | $ | 151,600 | — | $ | 9,750 | $ | 261,350 | $ | 100,000 | $ | 167,809 | $ | 10,000 | $ | 277,809 | ||||||||||||||||||||||||||||
Anthony A. Anderson | $ | 100,000 | $ | 151,600 | — | — | $ | 251,600 | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | ||||||||||||||||||||||||||||||
Peter K. Barker | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 276,600 | — | — | — | — | ||||||||||||||||||||||||||||||||
Mark J. Barrenechea | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 261,600 | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | |||||||||||||||||||||||||||||
Ken C. Hicks | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 261,600 | $ | 100,000 | $ | 167,809 | $ | 10,000 | $ | 277,809 | ||||||||||||||||||||||||||||
Andres A. Lopez | $ | 100,000 | $ | 151,600 | — | — | $ | 251,600 | $ | 100,000 | $ | 167,809 | — | $ | 267,809 | ||||||||||||||||||||||||||||||
David E.I. Pyott(3)(5) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Patrick T. Siewert | $ | 145,000 | $ | 151,600 | — | $ | 10,000 | $ | 306,600 | $ | 150,000 | $ | 167,809 | $ | 10,000 | $ | 327,809 | ||||||||||||||||||||||||||||
Julia A. Stewart | $ | 115,000 | $ | 151,600 | — | $ | 10,000 | $ | 276,600 | $ | 120,000 | $ | 167,809 | $ | 10,000 | $ | 297,808 | ||||||||||||||||||||||||||||
Martha N. Sullivan | $ | 120,000 | $ | 151,600 | — | $ | 10,000 | $ | 281,600 | $ | 125,000 | $ | 167,809 | $ | 10,000 | $ | 302,809 |
(1) | Mr. Butier does not appear in the table because he serves as |
Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | ||||||||||||||||||||||||||
Alford |
| $ | 100,000 | — | — |
| $ | 100,000 | — | — | ||||||||||||||||||||||||
Anderson |
| $ | 100,000 | — | — |
| $ | 100,000 | — | — | ||||||||||||||||||||||||
Barker |
| $ | 100,000 | — | — |
| — | — | — | |||||||||||||||||||||||||
Barrenechea |
| $ | 100,000 | — | — |
| $ | 100,000 | — | — | ||||||||||||||||||||||||
Hicks |
| $ | 100,000 | — | — |
| $ | 100,000 | — | — | ||||||||||||||||||||||||
Lopez |
| $ | 100,000 | — | — |
| $ | 100,000 | — | — | ||||||||||||||||||||||||
Pyott |
| — | — | — | ||||||||||||||||||||||||||||||
Siewert | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 15,000 | $ | 30,000 | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 20,000 | $ | 30,000 | ||||||||||||||||||||
Stewart | Compensation Committee Chair | $ | 100,000 | $ | 15,000 | — | Compensation Committee Chair | $ | 100,000 | $ | 20,000 | — | ||||||||||||||||||||||
Sullivan | Audit Committee Chair | $ | 100,000 | $ | 20,000 | — | Audit Committee Chair | $ | 100,000 | $ | 25,000 | — |
(2) | Amounts reflect the grant date fair value of |
(3) |
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Amounts reflect our match of documented director contributions made to charitable organizations or educational institutions. |
Mr. |
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ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
After considering the voting results of the advisory vote on the frequency of our say-on-pay vote at ourthe 2017 Annual Meeting, our Board determined to hold say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (which we expect towill take place at ourthe 2023 Annual Meeting).
In this Item 2, our stockholders are being askedThe advisory vote is a vote to vote on the following resolution:
RESOLVED, that the Company’s stockholders approve on an advisory basis, the compensation of the Company’s Named Executive Officers (NEOs),our NEOs, as described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the Company’s 2021compensation of our non-employee directors, our CEO pay ratio, or the features of our compensation program designed to prevent excessive risk-taking as described in the Risks Associated with Compensation Policies and Practices section of this proxy statement.
Recommendation of Board of Directors
We are committed to maintaining ongoing engagement with our stockholders to seek their feedback and discuss why we believe our executive compensation program properly aligns with our strategies by incentingand incents our leaders to deliver strong financial performance and createconsistent ESG progress, creating superior long-term, sustainable value for our customers, employees, investors and communities. Our Board of Directors recommends that you vote FOR approval, on an advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.
Meaning of Advisory Vote
The advisory vote is a vote to approve the compensation of our NEOs, as described in the Compensation Discussion and Analysis (CD&A) and Executive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the compensation of our non-employee directors, our CEO pay ratio, or the features of our compensation program designed to prevent excessive risk-taking as described in the Risks Associated with Compensation Policies and Practices section of this proxy statement.
The results of the advisory vote are not binding on our Board. However, in accordance with SEC regulations, the Compensation Committee will disclose its consideration of the results of the vote in the CD&ACompensation Discussion and Analysis section of our 20222023 proxy statement.
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TALENT AND COMPENSATION COMMITTEE REPORT
The Talent and Compensation Committee (referred to in this report as the “Committee”) of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) of Regulation S-K with management and, based on its review and those discussions, has recommended to our Board of Directors that the CD&A be included in our 20212022 proxy statement and incorporated by reference into our 20202021 Annual Report on Form 10-K.
The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with the Committee by writing to the Talent and Compensation Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Julia A. Stewart, Chair
Bradley A. Alford
Mark J. Barrenechea
Ken C. Hicks
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This Compensation Discussion and Analysis* (CD&A)CD&A* describes our executive compensation program and the decisions made by theof our Board’s Talent and Compensation Committee of our Board of Directors (referred to in this CD&A as the “Committee”) related to 2020on 2021 executive compensation. This CD&A containsIt includes the sections shown below.
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56 | ||||
Overview of Pay Philosophy and Executive Compensation Components | ||||
60 | ||||
61 | ||||
Discussion of Compensation Components and Decisions Impacting | 63 | |||
63 | ||||
63 | ||||
68 | ||||
71 | ||||
73 | ||||
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75 | ||||
Over the last several years, weWe have successfullyconsistently executed our business strategies, which are designed to create delivering long-term, sustainable value for our employees, customers and investors and improveimproving the communities in which we operate. From our stockholders’investors’ perspective, we believe that this value is best measured by our total stockholder return (TSR) and cumulative economic value added (EVA), both of which are performance objectives used in our long-term incentive (LTI) program and inform how we set our goals for sales growth, operating margin improvement, asset efficiency, return on total capital (ROTC) and capital allocation.
In March 2017,Our key strategies and 2021 achievements are shown on the following page. Our overriding focus remains on ensuring the long-term success of all of our stakeholders, and we announced long-term goalshave a clear set of strategies to deliver for our three reportable segments – Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS) and Industrial and Healthcare Materials (IHM) – and our company as a whole, targeting solid compound annual organic sales growth, significant operating margin expansion, double-digit compound annual adjusted earnings per share (EPS) growth, and the ROTC we planned to achieve by 2021.them.
* | This CD&A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our |
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We are committed to ensuring the continued success of all our stakeholders – our employees, customers, investors and communities. In a challenging 2020 due to the extraordinary impact of COVID-19, we focused on ensuring the health and well-being of our employees, delivering for our customers, minimizing the impact of the pandemic-driven recession for our investors, and supporting our communities, while continuing to invest in the long-term success of our company. For additional information on our COVID-19 response, please see the proxy summary. We have refined how we present our key strategies shown below, but our primary areas of strategic focus are consistent with recent years.
1 | ||||
Drive outsized growth in high-value categories
We striveseek to increase the proportion of our portfolio in high-value products and solutions, both organically and through acquisitionsacquisitions; high-value categories serve markets that are growing faster than GDP, represent large pools of potential profit and leverage our core capabilities. These products and solutions include our specialty and durable label materials, graphics and reflective solutions, industrial tapes, Intelligent Labels that use RFID tags and inlays, external embellishments, and, with our recent acquisition of Vestcom, shelf-edge pricing, productivity and consumer engagement solutions.
In 2020,2021, we achieved organic sales change in high-value product categories that outpaced that of our base businesses by more than one point,a high-single digit rate driven by growth in specialty labels, external embellishments and RFID; also advancedIntelligent Labels; added to our RFID platformcapabilities and expanded our position in high-value product categories through our acquisition of Vestcom; and more than tripled the Transponder (RFID inlay) divisionsize of Smartrac, a manufacturerour Intelligent Labels platform over the last five years, reaching net sales of RFID products (which we refer to as “Smartrac”)$0.7 billion in 2021
2 | ||||
Grow profitability in our base businesses
We strive to improvegrow profitability in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies
In 2020,2021, we protected,heightened our focus on material reengineering to drive productivity and even grew, operating margins in our base businessesmitigate the impact of rising input costs
3 | ||||
Focus relentlessly on productivity
We employ product reengineering and enterprise lean sigma to expand our operating margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment
In 2020,2021, we significantly expandedcontinued expanding operating margins, showing agilitywith approximately $65 million in response to COVID-19 by delivering approximately $200 millionsavings from restructuring, net of cost reduction through both structural and temporary actionstransition costs
4 | ||||
Effectively allocateAllocate capital effectively
We work to balance our investments in organic growth, productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases
In 2020,2021, leveraging our strong balance sheet, we invested nearly $220$272.1 million in fixed and IT capital expenditures to support organic growth; completed two acquisitions;three acquisitions and made three venture investments for a total of $1.48 billion; increased our quarterly dividend rate by 7%~10%; and repurchased $180.9 million in October after having maintained it earlier in the year and resumed the repurchaseshares of shares in Q3 after having suspended it in March, in each case due to then-uncertain impact of COVID-19 on our businessescommon stock
5 | ||||
Lead in an environmentally and socially responsible manner
We workaim to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive and equitable culture; maintain a culture ofoperations that promote health and safety; and support our communities primarily through contributions from the Avery Dennison Foundation (ADF), supplemented by contributions from our company
In 2020,2021, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in strategic innovation platforms focused on recyclability/enablingmaterial circularity and waste reduction/elimination; redoubling our effortscontinuing to drive sustainable change in diversity, equity and inclusion including by sharpening our(DE+I), with a sharpened focus on increasing workforce racial/ethnic workforce diversity, particularly inas well as representation from other underrepresented communities such as LGBTQ+, veteran or disabled individuals; and using the U.S.; and contributing $10 million we contributed to the Avery Dennison FoundationADF in 2020 to significantly increase the scopegrant-making in our communities, resulting in over $6 million of charitable contributions from ADF and pace of its grantmakingour company in the communities in which we operate2021. We also announced more ambitious 2030 sustainability goals.
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AchievingDelivering Financial Targets
TheOur objective is to deliver GDP+ growth and five-yeartop-quartile financial goals through 2021 thatreturns on capital to create superior value over the long term. In March 2017, we announced in March 2017 includedfive-year financial targets for compound annual organic sales growth, 2021 GAAP operating margin, compound annual adjusted EPS growth and 2021 ROTC. The combination of our growth and ROTC targets is a proxy for growth in EVA, one of the performance objectives used in our LTI program.through 2021. As shown below, based onwe exceeded each of these commitments we made to our results of the first four years of this five-year period, we are largely on track to achieve these commitments. Our 2017-2020 compound annual organic sales growth of 2.0% was lower than our top-line target, but higher than forecasted global GDP growth (a key tenet of our top-line objective) of 1.5% over the same period.investors.
Sales change ex. currency, organic sales change, adjusted EPS and ROTC, including and excluding acquisition amortization – as well as free cash flow and adjusted EBITDA margin, which is usedare referenced later in this CD&A – are non-GAAPfinancial measures not in accordance with generally accepted accounting principles in the United States of America (GAAP), which we provide investors to assist them in assessing our performance and operating trends. These non-GAAP financial measures are not a substitute for or superior to progress toward the comparable financial measures under GAAP and are defined, qualified and reconciled from GAAP in the last section of this proxy statement.
For the 2017-20202017-2021 period, on a four-yearfive-year compound annual basis (with 2016 as the base period), GAAP reported net sales, net income and reported EPS increased by 3.5%6.7%, 18.2% and 16.9%20.1%, respectively, and reported net income increased by 14.7%.respectively.
| 2017-2021 Targets | |||
Sales Growth(2) | 5%+ ex. currency(3) 4%+ organic |
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GAAP Operating Margin | 11%+ in 2021 | |||
Adjusted EPS Growth(2) | 10%+ | |||
ROTC incl. Acquisition Amortization | 17%+ in 2021 | |||
EXCEEDED 2017-2021 FINANCIAL TARGETS | ||||
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(1) | Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. |
(2) | Percentages for targets and results reflect five-year compound annual growth rates, with 2016 as the base period. |
(3) | Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 2017 of approximately one point. |
In March 2021, we announced five-year financial targets through 2025. As shown below, based on the first year of this five-year period, we are on track to achieve these commitments.
In 2021 (with 2020 as the base period), GAAP reported net sales, net income and EPS increased by 20.6%, 33.1% and 33.6%, respectively.
| 2021-2025 Targets | 2021 Results(1) | ||
Sales Growth(2) | 5%+ ex. currency(3) | 18.6% ex. currency
15.6% organic | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.6% in 2021 | ||
Adjusted EPS Growth(2) | 10% | 25% | ||
ROTC excl. Acquisition Amortization | 18%+ in 2025 | 19.1% in 2021 | ||
ON TRACK TO ACHIEVE 2021-2025 FINANCIAL TARGETS | ||||
(1) Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. (2) Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect one-year annual growth rates, with 2020 as the base period. (3) Target for sales growth ex. currency reflects the impact of completed acquisitions as of March 10, 2021, which represents (0.2)%. |
20202021 Financial Performance
In fiscal year 2020,2021, we delivered another year of strong EPStop- and bottom-line growth, significantexpanded operating margin expansionmargins and record free cash flow, despite the challenging macroeconomic environment during which the safety and well-being offlow. We substantially exceeded our employees remained our top priority given the continuing public health crisis from COVID-19. These results reflect the extraordinary efforts undertaken by our leaders, including our CEO and other NEOs, and teams globally respond to COVID-19 and mitigate its impact on our company. We achieved our adjusted EPS and free cash flow financial goals for the year, with keyachieving the financial results shown below and on the following page. For detailed information regarding our 2020 performance, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and notes thereto contained in our 2020 Annual Report.
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NET SALES $8.41B Reported sales increased by ~21%, reflecting volume growth across our businesses and prior-year impact of COVID-19; sales ex. currency increased by ~19% and organic sales increased by ~16% driven by strong demand for consumer packaged goods and accelerated shift to e-commerce in LGM and significant organic sales growth in Intelligent Labels | REPORTED EPS $8.83 Reported EPS substantially increased by ~34%, in part due to prior-year impact of COVID-19; adjusted EPS increased by ~25% to $8.91 driven by strong growth and operating margin expansion; adjusted EPS substantially exceeded top end of February 2021 guidance range | |||||||||||
CASH FROM OPERATING ACTIVITIES
$
Free cash flow of
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NET INCOME
$
Achieved
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We have been consistently effective in executing our approach to capital allocation strategy, balancing our investments in organic growth, productivity, and acquisitions and venture investments with continuing to return cash to stockholders through dividends and share repurchases. In 2020, on net income of $555.9 million,2021, we invested $218.6$272.1 million in fixed and IT capital expenditures to support our future growth and further productivity improvement and allocated $350.4 million$1.48 billion to acquisitions and venture investments; we also paid $196.8$220.6 million in dividends and repurchased $104.3$180.9 million in shares of our common stock.
We have invested in our businesses to support organic growth and pursued complementary and synergistic acquisitions. Our fixed and IT capital spending onin 2021 was nearly 25% higher than in 2020, reflecting our continued investment in high-value categories, including our fast-growing Intelligent Labels platform, and lower-than-planned capital expenditures in 2020 was 15% lower than 2019 but consistent with our externally communicated outlookto mitigate the impact of COVID-19. During 2021, we acquired Vestcom, an Arkansas-based provider of shelf-edge pricing, productivity and consumer engagement solutions for retailers and consumer packaged goods companies, for $1.47 billion, as well as ZippyYum, a California-based developer of software products used in the year, during which we accelerated our pacefood service and food preparation industries, and JDC, a Tennessee-based manufacturer of investment in high-value categories, particularly RFID. We also allocated over $350 million to acquisitions. In February 2020, we completed our acquisition of Smartracpressure-sensitive specialty tapes, collectively for approximately $255 million. Together with our then-existing Intelligent Labels business, this acquisition created a platform with over $500 million in annual revenues, with increased potential for long-term growth and profitability, enhanced research and development capabilities, expanded product lines and additional manufacturing capacity. In December 2020, we completed our acquisition of ACPO, Ltd., an Ohio-based manufacturer of self-wound (linerless) pressure-sensitive overlaminate products, for approximately $88$43 million. During 2020,2021, we also investedmade three venture investments in three startup companies developing innovative technological solutions that we believe have the potential to advance our businesses.
In 2020,2021, we deployed $301.1$401.5 million to pay an annual dividenddividends of $2.36$2.66 per share and repurchase 0.80.9 million shares of our common stock. We raised our quarterly dividend rate by approximately 7%10% in October 2020April 2021, after having maintained it earlier in the year due to the impact of COVID-19. Given the uncertain impact of COVID-19 at that time, in March 2020, we suspended our repurchase of shares and did not resume repurchases until the third quarter; as a result, in 2020, we allocated less than half the capital we deployed to share repurchases in 2019.
. As shown below,on the following page, over the last five years, we have allocated over $900 million$2 billion to acquisitions and venture investments and nearly $2 billion to dividends and share repurchases.
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We experiencedBy generating substantial EVA, we drove strong TSR in 20202021 despite the uncertain macroeconomic environment during most of the year as a resultdue to the continued impact of COVID-19 deliveringand related supply chain, labor, freight and inflationary challenges. Our TSR of over 20% and outperforming40% outperformed the S&P 500. However, we believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our performance (as occurred at various times during 2020). We focus on TSR because it measures value we create for our stockholders, including stock price appreciation500 and dividends paid (assuming reinvestment of dividends). We compare ourselves to the median of the S&P 500 Industrials and Materials subsets because we are a member of the Materials subset,subsets. More important, both our three-year and also share many characteristics with members of the Industrials subset; this practice is further informed by feedback from our investors, who have indicated that they look at both subsets in evaluating our performance relative to that of our peers.five-year TSR substantially outperformed these two comparator groups.
5-Year Cumulative TSR
1-, 3- and 5-Year TSR
AVY | S&P 500 | S&P Indus. & Mats.* | AVY | S&P 500 | S&P Indus. & Mats.* | |||||||
2016 | 15% | 12% | 21% | |||||||||
2017 | 67% | 22% | 28% | 67% | 22% | 28% | ||||||
2018 | (20)% | (4)% | (14)% | (20)% | (4)% | (14)% | ||||||
2019 | 49% | 32% | 34% | 49% | 32% | 34% | ||||||
2020 | 21% | 18% | 17% | 21% | 18% | 17% | ||||||
2021 | 41% | 29% | 24% | |||||||||
3-Year TSR | 43% | 49% | 32% | 154% | 100% | 94% | ||||||
5-Year TSR | 173% | 103% | 116% | 237% | 133% | 122% |
* | Based on median of companies in both subsets as of December 31, |
20202021 Say-on-Pay Vote and Feedback During Stockholder Engagement
In 2020,2021, we continued our practice of maintainingmaintained proactive engagement with stockholders regarding executive compensation and talent management. The Committee continuallyregularly reviews our executive compensation program, making changes – including previously replacing regular grants of stock options and time-vesting restricted stock units (RSUs) with performance-based market-leveraged stock units (MSUs), capping Annual Incentive Plan (AIP) awards at 200% of target, and establishing additional guardrails on PU and MSU performance criteria –as needed to address feedback from our stockholders andor more closely align our executive compensationthe program with our financial profile, business strategies and business strategies.ESG priorities. We believe this process and the specific actions taken over time demonstrate the Committee’s commitment to paying for performance and being responsive to investor feedback. In 2020,2021, during our ongoing stockholder engagement program, we discussed elements of our executive compensation program with some of our stockholders, who generally expressed support for its structure. We also discussed the Committee’s approach to CEO compensation intended for 2020 but later reversed due to COVID-19, sharing the feedback with the Committee.
Results and Analysis of 20202021 Vote
At the 20202021 Annual Meeting, over 95%nearly 96% of our stockholders approved, on an advisory basis, our executive compensation. The level of strong support we received was consistent with the high approval rates we have received in recent years. The Committee believes that our these strong say-on-pay vote results, in recent years, as well as the generally positive feedback we have received during our ongoing engagement with stockholders, reflects strong support of our executive compensation program as well asand our consistently improving CD&A disclosure.
Stockholder Engagement Process
We actively solicit feedback through stockholder engagement to ensure that we reflect not only our evolving business strategies but also the expectations of our investors. In addition to our extensive investor relations program through which members of management engage with our investors throughout the year, we have a longstanding practice ofthis supplemental engagement with stockholders to discuss our strategies, performance, executive compensation and talent management practices and solicit their feedback. This engagement process, which takes place throughout the year, is depicted in the graphic shown in the proxy summary.program
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is depicted – and the feedback we received on executive compensation, social sustainability and talent management are described – in the proxy summary.
Strong ESG-Executive Compensation Linkage
Information on our ESG progress may be found in the proxy summary and the Environmental and Social Sustainability section of this proxy statement. Additional information may be found in our 2021 integrated sustainability and annual report and our March 2022 ESG Download being published concurrently with this proxy statement, as well as on our ESG website at esg.averydennison.com. The 2021 integrated sustainability and annual report, March 2022 ESG Download and other information on our website are not and should not be considered part of, nor are they incorporated by reference into, this proxy statement.
The stockholders with whom we spoke during 2021 asked about the Committee’s consideration of ESG matters in our executive compensation program. In recent years, the Committee has engaged in frequent discussions with its compensation consultant, WTW, and management regarding ESG–executive compensation linkage, in part due to increasing investor interest in the topic, and reviewed market practices to explore the potential to further incorporate ESG into our program. The Committee noted that our key company strategies include leading in an environmentally and socially responsible manner, and that the committee seeks to approve executive compensation that reflects company strategy and incents achievement of company goals.
The Committee has determined that our existing compensation practices and talent management priorities reflect our ESG strategies, hold our leaders accountable and reward results. The Committee noted, among other things, the items described below.
Nearly half of the measures on our annual business group scorecards using the objectives, goals, strategies and measures (OGSM) framework are ESG-related, aligning our leaders with these objectives and providing visibility and accountability to enable continuous improvement. With their concise format and use of color-coding to indicate progress, these OGSMs surface ESG underperformance relative to our goals and offer an assessment tool in year-end discussions with our business leaders on their annual performance.
Our senior leadership, including our NEOs and Vice Presidents, have accountability for driving our ESG progress, with responsibility for executing toward our goals and targets cascaded throughout our organization. People managers are expected to discuss the progress their team members make toward their annual goals as part of our performance evaluation process. In approving base salary increases, AIP award individual modifiers, structural pay increases and promotions, our managers consider not only financial or business achievements, but also a leader’s success in advancing our ESG priorities, consistent with our company’s strategies and values.
Although the financial modifier in the AIP does not include ESG metrics, our financial performance in part reflects our ESG progress and a key component in determining an AIP award is the individual modifier, which relies on a qualitative assessment of annual performance. For our leaders, this process includes consideration of their ESG-related contributions. In determining their 2021 AIP awards, the Committee discussed the ESG achievements of our CEO and other NEOs in assessing their performance and determining their individual modifiers.
Diversity and Sustainability are two of our company’s values, reflecting the priority with which we hold ESG matters. Our annual Leadership Excellence Awards are granted to teams globally in each of these categories, with winners receiving at least a 120% individual modifier on their AIP award, subject to the overall AIP award cap of 200%. In 2021, over 70 employees globally received awards for diversity and sustainability, a substantial increase from the 10 awards granted in 2018; over 20 additional individuals received awards related to their leadership in the community.
As described in this proxy statement, we have made substantial ESG progress in recent years, and our Board and the Committee are committed to delivering for all our stakeholders. The Committee shares our Board’s view that our financial success in recent years has been inextricably linked to our ESGprogress. We have consistently delivered more sustainable solutions, which have provided significant competitive advantage, fueling our success in the marketplace and strong financial performance. While our compensation programs have played an important part in advancing our ESG initiatives, ESG has become embedded into our workplace culture. We are working diligently to advance our journey because we believe that our company can have a long-term positive impact on people and our planet.
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Executive Compensation/Talent Management Feedback During 2020 Engagement
With respect toAfter reviewing benchmark data on current market practices, the Committee noted that, consistent with our existing practice, the majority of S&P 500 companies consider ESG performance in their executive compensation programs, with most doing so in ways similar to the way in which we do. The Committee is committed to regularly reviewing stakeholder expectations and talentmarket practices, and pressure testing the continued appropriateness of its current approach, in consultation with management we discussed Board oversightand WTW. If or when the Committee determines to include additional ESG metrics as performance objectives in any of our strategies, response to COVID-19 (including the potential for changes to executive compensation to address the impact of the pandemic,incentive programs, it would establish targets that are as wellrigorous and objectively measurable as measures implemented to support employees more broadly), and diversity and inclusion initiatives, particularly related to race/ethnicity in the U.S.; potential consideration of non-financial measures in our incentive compensation programs to address environmental, social and governance (ESG) topics while maintaining pay-for-performance alignment; status of changes initially approved for 2020 CEO compensation but reversed due to COVID-19; and the Committee’s oversight of additional talent management topics such as executive succession, leadership development and pay equity.financial performance objectives.
20202021 Named Executive Officers (NEOs)
In this CD&A and the Executive Compensation Tables section of this proxy statement, we provide compensation information for our 20202021 NEOs, who are identified in the chart below. Mses. HillSubsequent to year-end 2021, Mr. Stander waselected by our Board to serve as President and Miller retired from our company atChief Operating Officer effective March 1, 2022; in connection with this election, Mr. Butier ceased serving in the endcapacity of fiscal year 2020.President. References in this proxy statement to Level 2 NEOs are to Messrs. Lovins and Stander and references to Level 3 NEOs are to Ms. Baker-Nel and Mr. Walker.
Name | Title in 2021 | |
Mitchell R. Butier | Chairman, President & Chief Executive Officer | |
Gregory S. Lovins | Senior Vice President & Chief Financial Officer | |
Deena Baker-Nel | Vice President & Chief Human Resources Officer | |
Deon M. Stander | Vice President & General Manager, RBIS | |
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Overview of Pay Philosophy and Executive Compensation Components
Our executive compensation program reflects the Committee’s philosophy that a substantial majority of compensation should be tied to our success in meetingachieving our performancefinancial objectives and creating stockholder value, providing higher realized compensation when we deliver superior, sustained performance. The objectives of this strategy are to motivate our executives to achieve our annual and long-term financial goals, giving consideration to their contributions to delivering strong performance. In addition, recognizingsupport of our increased focus on ESG matters and greater transparency with all our stakeholders, the Committee considers our ESG progress in evaluating the individual performance of our CEO and other NEOs.NEOs.
The Committee implements its pay-for-performance philosophy primarily through the following:as follows:
• | Establishing target total direct compensation (TDC) to incent strong operational and financial performance and stockholder value creation, |
• | Aligning our annual incentives for executives with our company’s annual operating plan and financial goals for the |
• | Rewarding long-term performance using absolute and relative TSR, as well as cumulative EVA, |
Incentive compensation consists of target award opportunities under our AIP and our LTI compensation program, with payouts determined based on our performance against goals originallyobjectives established by the Committee in February 2020.Committee. The Committee structures annual incentive compensation to reward NEOs based on corporate and/or business performance to align their compensation with stockholder interests, giving consideration to their individual contributions to our performance. AIP targets are generally established at or above the midpoint of the guidance we give to our stockholders on our anticipated performance for the year and consistent with achievement ofachieving our long-termlong-term financial goals. Our LTI awards provide higher realized compensation for exceeding performance targets and downside risk (up to and including cancellation) for failing to achieve threshold performance, with EVA targets setthat are consistent with our externally communicated long-term financiallong-term goals for earnings growth and ROTC.
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ELEMENTS OF TARGET TDC FOR CORPORATE NEOs
As shown in the graph below, the substantial majority of each of our NEOs’ 20202021 target TDC was performance-based, meaning that our executives ultimatelythey may not ultimately realize the value of the at-risk components of TDC if we fail to achieve ourthe designated performance objectives. As a business NEO in 2021, Mr. Stander’s AIP award and PUs had different performance objectives than those of our corporate NEOs.
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As shown in the graph below, over the past fivein recent years, our CEO’s compensation increased commensurate with our cumulative TSR, has increased by 173% while the annual compensation of our CEO has remained relatively constant, except for 2016 when he received a one-time equity grant in connection with his promotion2021 pay reflecting the longer-term approach to CEO.CEO compensation described below.
ChangesChange in NEOApproach to CEO Compensation
Changes in CEO Compensation Originally Approved for 2020
In the few years prior to 2020,2021, the Committee discussed how best to ensure that it was compensating our CEO optimally and in alignment with the long-term interests of our stockholders. The Committee’s objectives were to:
Recognize our company’s performance and delivery of value to our customers, employees, investors and communities during his tenure as our CEO;CEO
Enhance his incentive to continue creating value for these stakeholders, including by driving superior TSR for our investors; and
Encourage his retention for the long term.term
The Committee was seekingsought to maintain market-competitive target TDC for our CEO that was well-aligned with our company’s performance and ensure that his target TDC did not fall substantially below the market median of similarly sized companies, without relying on the traditional approach of annual review and periodic increase to the components of his TDC – base salary, target AIP opportunity and target LTI opportunity – to maintain consistency with a continually rising market median.CEO pay.
After extensive discussion,With expert advice and guidance from its independent compensation consultant, WTW, and giving consideration to the feedback received from dialoguein 2020 and 2021 during engagement with some of our largest stockholdersinvestors, in February 2020, the Committee determined to eliminate potentialshift from considering annual increases to our CEO’s base salary and target AIP and LTI opportunities in favor ofto a longer-term approach that would holdgenerally holds his target TDC constant for a three-year period. During the three-year period, the Committee would retain the discretion to review his target TDC if market conditions or company results warranted a change. At the end of the period, the Committee wouldwill evaluate both his and our company’s performance, andas well as market conditions, before determining the appropriate level of his go-forwardcompensation, continuing to give consideration to factors such as individual performance, tenure, retention and succession. ThisThe Committee intends for this approach to CEO compensation was intended to be more consistent with the long-term approach we take to planning our strategies, setting our financial targets and sustainability goals, and creating value for all our stockholders, developing an engaged and diverse workforce, and investing in the communities in which we operatestakeholders..
To ensure our CEO’s compensation originally determined for 2020 remained competitive and mitigate the potential for his target TDC to substantially trailfall behind his peers inover the next three years, the Committee at that time determined to set his target TDC modestly above market median, recognizing that his base salary had not increased in the previous two years and his target AIP opportunity had not increased since he became CEO in 2016. The committee intended to make no additional increases until 2023. Anticipating that the median for market would continue to grow at historical rates, the
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Committee determined to set our CEO’s compensation package roughly halfway between the then–current 50th and 75th percentiles of companies with annual revenues between $6 billion and $10 billion, reflecting his market peers, withstrong performance during his tenure in the role, during which our company consistently delivered top quartile performance. The Committee’s expectation is that – at the end of the three-year period during which our CEO’s compensation wasis expected not to increase – his TDC would be at or around the market median. This approach was consistent with the longer-term, forward-looking approach taken by the Committee in recommending to our Board the compensation of our non-employee directors.
Based on 2019 marketmedian pay rates and projected 2020 market pay rates for companies with annual revenues between $6 billion and $10 billion, and with the expert advice and recommendation of its independent compensation consultant, Willis Towers Watson, the Committee determined in February 2020 to target our CEO’s TDC for that year at $9.9 million by increasing (i) his base salary by 6% to $1.2 million; (ii) his target AIP opportunity from 125% of base salary to 140% of base salary; and (iii) his target LTI opportunity from 475% of base salary to 585% of base salary. These targets were subject to decrease if warranted by market conditions or our company results. The Committee noted that over 90% of this target TDC would have consisted of at-risk, performance-based compensation; our CEO’s realized compensation would have depended on our company achieving strong TSR performance, delivering our 2021 financial targets and 2025 sustainability goals, and continuing to engage our employees, serve our customers, deliver for our investors, and support the communities in which we operate.
Changes in 2020 NEO Compensation
Changes Approved in April 2020
In light of the uncertain impact of COVID-19 on market conditions, in April 2020, our CEO recommended that the base salary increases for our executive leadership team (which includes all of our NEOs) approved by the committee in February of that year be indefinitely postponed, and no such increases were given in 2020. Given the market conditions at the time and also at the recommendation of our CEO, the Committee determined that it was in the best interests of our company and stockholders that his 2020 target AIP and LTI opportunities remain at 2019 levels rather than the levels approved by the Committee in February 2020. As a result, the Committee approved the reductions in CEO compensation for 2020 described below.
His target AIP opportunity for 2020 would remain at previous level of 125% of base salary rather than 140% of base salary approved in February 2020
His target LTI opportunity for 2020 would remain at previous level of 475% of base salary rather than 585% of base salary approved in February 2020
Both target opportunities would be based on his 2019 year-end base salary of $1,133,000
In connection with these reductions, our CEO forfeited 5,811 PUs and 6,662 MSUs, with an aggregate grant date fair value of approximately $1.3 million, granted to him in February 2020.
Changes Approved in February 2021
Despite the adverse impact of COVID-19, no adjustments to short- or long-term incentive compensation were made for our corporate NEOs; their 2020 AIP awards and 2018-2020 PUs paid out on the basis of unadjusted company results. Similarly, the goals for their 2020-2022 PUs granted to them in February 2020 were not adjusted to reflect the impact of COVID-19.
COVID-19 had a disproportionate impact on RBIS’ results in 2020. As a result, although the business achieved its short-term objectives related to managing the extremely challenging environment its markets faced during the year, it did not achieve any of its original goals for 2020. However, RBIS delivered substantial temporary cost savings and accelerated restructuring actions to expand its operating margins; achieved its net income plan for the second half of the year and significantly grew sales on an organic basis in the fourth quarter; successfully integrated Smartrac and exceeded its 2020 performance targets for the acquisition; and achieved a high employee engagement score, despite having taken aggressive actions to reduce costs. Using its allowable discretion to exclude some of this impact, in February 2021 the Committee approved an AIP financial modifier of 60% for the RBIS team to recognize their achievements in navigating the challenges the business faced during the year. Given our business NEO’s 25% linkage to total company adjusted EPS, his overall adjusted AIP financial modifier was 76%.
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The Committee also reviewed the performance of the 2018-2020 PUs for our business NEO. Noting that RBIS had entered 2020 with performance during the first two years of the three-year performance period in excess of the maximum level of performance and using its allowable discretion to exclude some of the extremely adverse 2020 impact, the Committee determined to increase the payouts for the 2018-2020 for all RBIS participants from 84% to 126% to recognize the team’s impressive EVA performance through 2019, as well as their achievements in navigating the challenges related to COVID-19 that the business faced during 2020. In addition, the Committee reviewed the performance of the 2020-2022 PUs for our business NEO. Noting that RBIS had taken substantial actions to protect operating margins during the year and using its allowable discretion to exclude some of this impact, the Committee determined to revise RBIS’ EVA goals for threshold, target and maximum performance originally approved in February 2020. The revised goals continue to require strong growth and margin improvement compared to the 2019 baseline for the business, although on a different trajectory than originally planned given the extraordinary impact of COVID-19 on RBIS’ markets in 2020.
2021 CEO Compensation
Based on the expert advice of Willis Towers Watson and giving further consideration to the feedback from investors received in 2019 and 2020, the Committee determined to reinstate the longer-term approach it intended for CEO compensation for 2020 in 2021. Consistent with the Committee’s initial decision in February 2020, our CEO’s 2021 target TDC was set between the market 50th and 75th percentiles of his market peers, reflecting his strong performance throughout his five-year tenure in the role, during which our company delivered top quartile performance. The Committee’s current intent is not to revisit his compensation until 2024 unless warranted by market conditions or our company results.similarly sized companies.
Reviewing 2020 market pay ratesbenchmark data and projected 2021 market pay rates, for companies with annual revenues between $6 billion and $10 billion, the Committee determined in February 2021 to targettargeted our CEO’s TDC for the year at $9.9 million by increasing (i) his base salary by 6% to $1.2 million; (ii) his target AIP opportunity from 125% of base salary to 140% of base salary; and (iii) his target LTI opportunity from 475% of base salary to 585% of base salary. The Committee recognizednoted that our CEO had delivered strong value creation for all our stakeholders by leading the development and execution of our strategies during his five-year tenure in the role and successfully navigatingnavigated the impact ofCOVID-19 in 2020. The Committee noted that over2020. Nearly 90% of his new target TDC would consistconsists of at-risk, performance-based compensation; our CEO’shis realized compensation will dependdepends on our company achievingcontinuing to deliver strong TSR performance, deliveringachieving our 2021 and 2025 financial targets and our 2025 and 2030 sustainability goals, and continuing to engage our employees, serve our customers, deliver for our investors and support the communities in which we operate.
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Strong Compensation Governance Practices
Our executive compensation program incorporates the best practices shown below, which the Committee believes ensure that it serves the long-term interests of our stockholders.
Policy or Best Practice | Description and Stockholder Benefit | |
PAY FOR PERFORMANCE | ||
Compensation Primarily Performance-Based | ✓ | |
Capped Annual Incentive Set At or Above Midpoint of Guidance | ✓ AIP award based | |
Majority Long-Term Equity Incentive Compensation | ✓ LTI awards prioritize long-term performance, with PUs cliff-vesting in 3 years and MSUs | |
Strategic Targeting | ✓ TDC (base salary + target AIP opportunity + target LTI opportunity) set to incent strong performance and value creation, giving consideration to median | |
No Annual Stock Options | ✓ Last made regular grant of stock options in 2012, though stock options may be granted for special purposes such as promotion | |
COMPENSATION BEST PRACTICES | ||
No Employment Contracts | ✓ NEOs employed at-will | |
Rigorous Stock Ownership Policy | ✓ CEO required to maintain ownership of 6x his base salary; at | |
No Hedging or Pledging | ✓ Insider trading policy prohibits officers and employees from hedging – and officers from pledging – AVY common stock and all NEOs complied during | |
Limited Trading Windows | ✓ NEOs may only transact in | |
Median Burn Rate | ✓ Three-year average burn rate of | |
Clawback Policy | ✓ Cash and equity incentive compensation subject to clawback in event of fraud or other intentional misconduct | |
No Excise Tax Gross Ups | ✓ No gross-up payments for excise taxes for termination following change of control | |
Double Trigger Equity Vesting | ✓ Equity awards not accelerated on change of control, unless NEO is terminated without cause or terminates employment for good reason within 24 months following change of control | |
No Repricing/Exchange of Underwater Stock Options | ✓ No repricing or exchange of underwater options without stockholder approval | |
Limited Perquisites | ✓ Other than capped financial planning reimbursement for certain NEOs and payment for annual physical | |
Reasonable Severance Benefits | ✓ Severance formula for qualifying termination: CEO: 2x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium)
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Reasonable Change of Control Benefits | ✓ Severance formula for qualifying termination of certain NEOs within 24 months following a change of control: CEO: 3x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium) + prorated target AIP award for year of termination
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STRONG GOVERNANCE | ||
Independent Oversight | ✓ Committee | |
Expert Compensation Consultant | ✓ |
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SUMMARY OF COMPENSATION DECISIONS FOR 20202021
The Committee designsapproves executive compensation to pay for performance, with the target TDC of NEOs established to incent strong financial performance and stockholder value creation, giving consideration to the market median of companies similar in size, global scope and complexity with which we compete for executive talent, role responsibilities, individual performance, tenure, retention and succession.creation. Compensation is primarily performance-based, meaning that our executives may not ultimately not realize some or all of the at-risk components of TDC if we fail to achieve our financial objectives. In 2020,2021, approximately 86%88% and 72%70% of the target TDC of our CEO and the average of our other NEOs, respectively, was performance-basedperformance-based.
In determining 20202021 NEO compensation – in addition to the extraordinarycontinued impact of COVID-19, had and related supply chain, labor, freight and inflationary challenges, on our businesses and results in 2020 and our leaders’ continuous efforts during the year to address and mitigate this impact,these matters – the Committee considered the factors showndescribed below.
Company/Business Performance – Our company’s financial performance, including our 20202021 adjusted sales growth, adjusted EPS and free cash flow for our corporate NEOs, and, for our business NEO, the performance of RBIS
Stockholder Returns – Our TSR on an absolute basis, as well as relative to an objectively determineda designated group of peer companies
Annual Individual Performance – Our CEO’s performance against the predetermined strategic objectives established for him at the beginning of the year and the individual contributions of our other NEOs
Competitiveness – Market payPay practices and company performance relative to peersthe market
Investor Feedback – The results of our 20202021 say-on-pay vote and feedback on executive compensation received during our ongoing stockholder engagement program
The key elements of 20202021 NEO target TDC are described in the table shown below and on the following page. While we provide consistent, market-competitivemarket-competitive target TDC opportunities for our NEOs, the actual compensation they realize varies year-to-yearyear-to-year based primarily on company and business performance.
Component | Rationale | Decisions Impacting | ||
FIXED
Base Salary
Avg. Other NEOs |
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PERFORMANCE-BASED SHORT-TERM CASH
Target AIP Award
Avg. 18% of TDC for
Capped at 200% of target |
Target AIP opportunity based on market survey data; financial modifier based on company and/or business performance; |
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Component | Rationale | Decisions Impacting | ||
PERFORMANCE-BASED LONG-TERM EQUITY
Target LTI Award (50% PUs, 50% MSUs)
Avg. Other NEOs |
Target LTI opportunity based on market survey data; award vehicles, performance criteria and weightings | LTI Awards Granted in •
• 50% in PUs that cliff-vest at the end of three-year period with payouts ranging from zero to 200% based on the achievement of the respective cumulative EVA and relative TSR performance objectives. Payout for the TSR component is capped at 100% of target for any three-year performance period in which absolute TSR is negative.
• 50% in MSUs that vest based on absolute TSR over one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years. | ||
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| LTI Awards Vesting at YE • | ||
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| • MSUs Vesting at YE • 4th Tranche of MSUs granted in
Paid out at 200% of target •
Paid out at • 2nd Tranche of MSUs granted in
Paid out at • 1st Tranche of MSUs granted in Paid out at |
In addition to the primary elements of our executive compensation program described above, we also provide our NEOs with limited perquisites and benefits that the Committee believes are comparable to those offered by other multinational public companies.
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DISCUSSION OF COMPENSATION COMPONENTS AND
DECISIONS IMPACTING 20202021 EXECUTIVE COMPENSATION
The Committee aims to have base salaries at or around the market median pay at similarly sized companies, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Committee’s pay-for-performance philosophy, driving higher realized compensation when our financial and ESG performance is stronger and lower realized compensation when our financial and ESG performance is weaker.
Increases in base salary for NEOs are generally based on the average percentage merit increase given to our U.S. employees, subject to increase based on the NEO’s performance and market comparisons for positions with similar scope and responsibility. In lightAs part of the uncertain impact of COVID-19 and on the recommendation oflonger-term compensation approach implemented for our CEO, his base salary increased by 6% in April 2020, the2021. The Committee determined to reverse theapproved base salary increases of 2.5% for him and our other NEOs, of 6% and 3%, respectively,consistent with the average merit increase for our U.S. employees, except that it had originally approved in February of that year.Mr. Lovins’ base salary increased by 7% to be more consistent with the market.
NEO base salaries at year-end 20202021 were as follows: Mr. Butier – $1,133,000;$1,200,000; Mr. Lovins – $618,000;$661,260; Ms. Baker-Nel – $416,000; Mr. Stander – $555,129; Ms. Hill$569,007; and Mr. Walker – $548,006; and Ms. Miller – $581,048.$425,375.
The 20202021 AIP was designed to incent management to create long-term stockholder value. NEOs are not eligible for guaranteed AIP awards. AIP awards are determined for each fiscal year using the formula below. Individual modifiers for NEOs are generally capped at 100% although the Committee retains the discretion to determine higher individual modifiers to reward individual performance, including for their ESG-related achievements, up to 150%.
Target AIP Opportunities
As a percentage of year-endbase salary, the2021 target AIP opportunities for 2020 were 125%140% for Mr. Butier, 75% for Mr. Lovins, and 60% for Mr. Stander and Mses. Hill50% for Ms. Baker-Nel and Miller. BecauseMr. Walker. As part of the Committee reversed the increasedlonger-term compensation approach implemented for our CEO, his target AIP opportunity originally approved for Mr. Butier in February 2020, thereincreased from 125% of base salary. There were no other changes to NEO target AIP opportunities for 2020.opportunities.
AIP Performance Objectives and Weightings; Target-Setting Principles
The following performance objectives and weightings for the 20202021 AIP were established by the Committee, in consultation with Willis Towers Watson. Thesewhich were the same objectives and weightingsones used for the 20192020 AIP to continue incenting our NEOs to increase sales on an organic basis, improve adjusted EPS and generate strong free cash flow. Our CEO, then-Chief Human Resources OfficerCFO and CFOCHRO participated during portions of the meetings during which the Committee reviewed and recommended performance objectives for ourthe AIP and analyzed our performance against these objectives.
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For our business NEO, the Committee determined to link 75% of his AIP financial modifier to RBIS’ results and 25% to corporate results. RBISRBIS’ performance objectives were designed to provide realized compensation only if the business improved upon its 20192020 performance and delivered results consistent with achievingdelivering its 20212017-2021 financial targetstargets.
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Objective | Description |
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Adjusted Sales Growth (20%) | Focuses management on | • Tied to total company for corporate NEOs (Butier, Lovins, • Tied to RBIS for business NEO (Stander) | ||
Profitability (60%) | Primary driver of stockholder value creation and measure used | • For corporate NEOs, based on our total company adjusted EPS • For business NEO (as a proportion of profitability objective) based: • 42% on total company adjusted EPS • 58% on RBIS’ adjusted net income | ||
Free Cash Flow (20%) | Cash available after investment in our business, which can be
| • Tied to total company for corporate NEOs • Tied to RBIS for business NEO |
In setting 20202021 AIP targets, the Committee aimed to ensure consistency with our 20212017-2021 financial targets and require improvement over the prior year, considering the factors described below.Results in 2020 were significantly impacted by COVID-19, resulting in targets and results that were significantly higher than prior years. Beginning in 2021, the Committee reduced the threshold payout level for the AIP’s profitability performance objective(s) from 50% to 0% to heighten management’s focus on improving profitability and more closely align with market practices.
Target adjusted sales growth of 2.2%5.5% was set lower thanabove our 2017-2021 target of at least 4% but higher than what we achieved in 2019, reflecting the anticipated impactand our 2020 results of COVID-19 on 2020 performance.(3.4)%.
Target adjusted EPS of $6.95$7.90 was established belowset above the midpoint of the annual guidance we provided to investors in January 2020 due to the anticipated impactFebruary 2021 and consistent with our 2017-2021 target of COVID-19, which had only begun to emerge as a concern just a month earlier; target represented a 5%over 10%, representing an 11% increase from our 2019 results for this measure. Adjusted EPS is the measure on which we provide annual guidance to our investors and a primary driver of stockholder value creation.2020 results.
Although we did not externally communicate a free cash flow target as part of our 20212017-2021 financial goals, we aimedour outlook at the beginning of 2021 was to generate 2020deliver free cash flow of $500+at least $600 million. Free cash flow is an important metric used internally and by our investors in evaluating the amount of cash we have available for debt reductions, dividends and share repurchases. Our 20202021 target for corporate free cash flow was 5%11% higher than the record free cash flow we generated in 2019,2020, despite continuedhigher planned investment in fixed and IT capital and cash restructuring paymentsinvestments to support our future growth and profitability.
CORPORATE 2020 AIP TARGETS VS. LONG-TERM TARGETS AND 2019 RESULTS
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CORPORATE 2021 AIP TARGETS VS. LONG-TERM TARGETS AND 2020 RESULTS
| CORPORATE 2021 AIP TARGETS VS. LONG-TERM TARGETS AND 2020 RESULTS
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2017-2021 Long-Term Target | 2019 Results | 2020 AIP Target | 2017-2021 Long-Term Target | 2020 Results | 2021 AIP Target | |||||||
Adjusted Sales Growth | 4%+ | 2.0% | 2.2% | 4%+ | (3.4)% | 5.5% | ||||||
Adjusted EPS Growth | 10%+ | $6.60 | $6.95 (5% over 2019 results) | 10%+ | $7.10 | $7.90 (11% over 2020 results) | ||||||
Free Cash Flow | N/A | $512M | $540M (5% over 2019 results) | N/A | $548M | $610M (11% over 2020 results) |
Financial Modifiers
AIP financial modifiers are currently capped at 200%. In evaluating our achievement of these performance objectives, the Committee has the discretion to exclude the impact, positive or negative, of extraordinary items such as acquisitions and divestitures; restructuring and integration actions not included in our annual net income plan; currency translation fluctuations; changes in accounting principles, tax codes or related regulations and rulings; extraordinary events such as natural disasters, outbreaks of epidemiological disease, terrorism and war; costs related to the early extinguishment of debt and pension plan terminations; costs of litigation outside the normal course of business; and non-cash charges associated with the impairment of long-lived assets.
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The table below shows the 20202021 AIP financial modifiers for our NEOs. As shown, the targetmaximum level was exceeded for two of theall three performance objectives established for our corporate NEOs and onethree of the four performance objectives established for our business NEO. CorporateNEO; the fourth performance resulted in AIP financial modifiers of 94%objective for our corporate NEOs. No adjustments were made to AIP financial modifiers for corporate NEOs as a result of COVID-19.
Although RBIS achieved its short-term objectives while managing a challenging environment during the year, the business did not achieve any of its original goals for 2020 given the disproportionate impact COVID-19 had on its markets, particularlyNEO was in the second quarter. However, RBIS delivered substantial temporary cost savings and accelerated restructuring actions to expand its operating margins; achieved its net income plan for the second halfexcess of the year and significantly grew sales on an organic basis in the fourth quarter; successfully integrated Smartrac and exceeded its 2020 performance targets for the acquisition; and achieved a high employee engagement score, despite having taken aggressive actions to reduce costs. Using its allowable discretion to exclude some of this impact, the Committee approved an AIP financial modifier of 60% for the RBIS team to recognize their achievements in navigating the challenges the business faced during the year. Given our business NEO’s 25% linkage to total company adjusted EPS, his overall AIP financial modifier was 76%.target level.
2020 AIP FINANCIAL MODIFIERS | ||||||||||||||||
NEO(s) | Performance Objective | Weighting | Threshold (50%) | Target (100%) | Maximum (200%) | 2020 Actual | Modifier | Weighted Average Modifier | ||||||||
Butier Lovins Hill Miller | Total Company Adjusted Sales Growth(1) | 20% | 0.8% | 2.2% | 5.6% | (3.4%) | 0% | 0% | ||||||||
Total Company | 60% | $6.60 | $6.95 | $7.58 | $7.10 | 124% | 75% | |||||||||
Total Company | 20% | $468M | $540M | $684M | $548M | 97% | 19% | |||||||||
Corporate NEO Financial Modifier | 94% | |||||||||||||||
Stander | Total Company Adjusted EPS(2) | 25% | $6.60 | $6.95 | $7.58 | $7.10 | 124% | 31% | ||||||||
RBIS Adjusted Sales Growth(4) | 20% | 2.1% | 4.2% | 8.4% | (9.5%) | 0% | 0% | |||||||||
RBIS Adjusted Net | 35% | $137M | $146.1M | $164.4M | $98.4M | 0% | 0% | |||||||||
RBIS Free Cash Flow(4) | 20% | $87M | $108M | $151M | $7M | 0% | 0% | |||||||||
Business NEO Financial Modifier (without COVID-19 adjustments) | 31% | |||||||||||||||
Business NEO Financial Modifier (with 60% aggregate COVID-19 adjustment for RBIS performance objectives)(6) | 76% |
2021 AIP FINANCIAL MODIFIERS | ||||||||||||||||
NEO(s) | Performance Objective | Weighting | Threshold (50%) | Target (100%) | Maximum (200%) | 2021 Actual | Modifier | Weighted Average Modifier | ||||||||
Butier Lovins Baker-Nel Walker | Total Company Adjusted Sales Growth(1)
| 20% | 3.0% | 5.5% | 9.0% | 15.6% | 200% | 40% | ||||||||
Total Company Adjusted EPS(2) | 60% | $7.60 | $7.90 | $8.60 | $8.78 | 200% | 120% | |||||||||
Total Company Free Cash Flow(3) | 20% | $550M | $610M | $730M | $754M | 200% | 40% | |||||||||
Corporate NEO Financial Modifier | 200% | |||||||||||||||
Stander | Total Company Adjusted EPS(2) | 25% | $7.60 | $7.90 | $8.60 | $8.78 | 200% | 50% | ||||||||
RBIS Adjusted Sales Growth(4) | 20% | 6.0% | 11.0% | 15.0% | 25.2% | 200% | 40% | |||||||||
RBIS Adjusted Net Income(4) (5) | 35% | $135.3M | $147.6M | $162.3M | $177.6M | 200% | 70% | |||||||||
RBIS Free Cash Flow(4) (6) | 20% | $133M | $159M | $212M | $175M | 130% | 26% | |||||||||
Business NEO Financial Modifier | 186% |
(1) | Total Company Adjusted Sales Growth refers to reported sales |
(2) | Total Company Adjusted EPS refers to reported net income per common share, assuming dilution, of |
(3) | Total Company Free Cash Flow refers to net cash provided by operations of |
(4) | Adjusted sales growth, adjusted net income and free cash flow measures at the segment level are internal metrics. These metrics |
(5) | Adjusted net income refers to income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges and other |
(6) |
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NEO Performance Evaluations &and Individual Modifiers
Our NEOs are evaluated on their individual performance for the year. In a typical year, theThe Committee approves our CEO’s strategic objectives and our CEO approves the goals of our other NEOs, in each case in February, of that year, with the performance of all NEOs evaluated in February of the following year. The Committee evaluates our CEO’s performance against his predetermined strategic objectives; for our NEOs other than the CEO, this assessment considers the totality of their performance rather than assigning weightings to their annual goals.performance.
While the goal-setting process in 20202021 was consistent with prior years, as it became clear thatensuring the safety and well-being ofour employees and navigating the uncertain macroeconomic environment caused by COVID-19 would have a significant impact on our company, navigating the challenging environment presented by the pandemic and protecting our employees, servingrelated supply chain, labor, freight and inflationary challenges to deliver for our customers managing our supply chain risk, maintaining our strong balance sheet and financial flexibility, and supporting our communities becamewere the primary objectiveobjectives for all our executives, especiallyleaders who continually adjusted our CEO and other NEOs who had to continually adjust our COVID-19 response in the face of continuously evolving health information, governmental regulations and economic conditions.
Avery Dennison Corporation | 2022 Proxy Statement | 65 |
Individual modifiers for all participants are capped at 150%, subject to the total cap on AIP awards of 200%. Although it retains the discretion to determine individual modifiers of up to 150%, the Committee has determined that the individual modifiers for our CEO and other NEOs should generally be capped at 100%. Given the extraordinary impact of COVID-19 and their efforts managing the challenging environment, not all NEOThe individual modifiers for 2020all NEOs for 2021 were capped at 100%, as they had been for the three prior years. As explained later in this section, the individual modifiers of Mr. Butier and Mses. Hill and Miller were capped at 100%; the individual modifiers of Messrs. Lovins and Stander were greater than 100%.
The Committee reviewed and evaluated our CEO’s annual performance, giving precedenceconsideration to his having ledsuccess in navigating the company through the extensive challenges presented byimpact of COVID-19 as well as consideringon our employees and customers, constrained raw material, freight and labor availability, and persistent inflation during the year; his performance against thehis predetermined strategic objectivesestablished in February 20202021; and the self-assessment of his performance discussed with the Committee in February 2021.2022. The Committee determined the individual modifier for our CEO based on its assessment of his performance, within the context of the limits described above.performance. The Committee Chair, together with our Lead Independent Director, discussed with our CEO the feedback from discussions by the Committee and our full Board regarding his 20202021 performance.
For 2020,2021, the Committee evaluated the performance of our CEO against his original strategic objectives for the year, determining that he substantially achieved or exceeded them, as shown in the chart below andbelow. In contrast to prior years, our CEO’s strategic objectives for 2021 had no assigned weightings, reflecting the Committee’s expectation that Mr. Butier delver on all fronts given the following page.uncertain economic environment as a result of COVID-19.
Strategic Objective | Evaluation | |||
| Significantly grew graphics and specialty product categories in | |||
| Managed LGM regional share positions well given constrained raw material availability and inflationary environment; expanded share in RBIS’ base business with sales substantially increasing over prior year; and, although its | |||
| Significantly exceeded targeted restructuring savings | |||
Allocate capital effectively – Invest in capital expenditures within targeted range to enable future growth; continue to build M&A pipeline and integrate acquisitions; invest targeted amount in accelerated growth platforms; and repurchase shares as appropriate | Invested $270+ million in fixed and IT capital expenditures to enable future growth; improved operating working capital; completed 3 acquisitions, made 3 venture investments and continued to ensure robust M&A pipeline; exceeded target for investment in accelerated growth platforms; and repurchased $180+ million in shares | |||
Lead in an environmentally and socially responsible manner – Progress innovation strategy and deployment program; continue to reduce GHG emissions; develop accelerated roadmap to enable greater recyclability of consumer packaged goods in LGM; further increase leadership diversity; and expand ESG reporting and transparency, improving ESG rating agency scores | Developed scorecard and defined innovation pipeline to continue progressing innovation strategy; set bolder 2030 targets for GHG emissions reduction, including new Scope 3 target and net zero ambition by 2050; advanced two strategic innovation platforms focused on material circularity and waste reduction/elimination; increased representation of women in manager-level and above roles to 35% and continued to advance DE+I for members of other underrepresented communities; and published second integrated report and 2021 ESG Downloads, with improved scores from key ESG rating agencies | |||
Refine/Execute leadership succession plan – Progress CEO succession to ensure ready-now successors over multiple time horizons, and refine/execute executive leadership development plans | Progressed CEO succession strategy, ensuring ready-now successors over multiple time horizons, and refined and executed development plans for leadership, resulting in seasoned executives being promoted to serve as President/COO and leaders of RBIS Apparel Solutions and IHM businesses | |||
CEO Individual Modifier Based on Evaluation | 100% |
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Our CEO recommended to the Committee the individual modifiers for our other NEOs based on his assessment of their 20202021 performance. The Committee considered our CEO’s recommendationsassessments and evaluated his assessments of their performance,recommendations, retaining the discretion to approve individual modifiers for them different than what our CEO had recommended. Other than discussing with our CEO their performance against their individual performance plans, our other NEOs played no role in their compensation determinations.
In determining the individual modifiers for our other NEOs, the Committee noted the highlights of the 2020their 2021 performance of our other NEOs described below.
Mr. Lovins – Led our global finance function, continuing to deliver forincluding overseeing our stakeholders, including leading initiatives to ensurestrong controllership environment and our tax, treasury and operational finance teams; ensuring we delivered 2021 results that exceeded our annual goals for adjusted EPS and free cash flow while continuing to make progress toward our long-term financial targets and sustainability goals, despite the challenging macroeconomic environment caused by COVID-19. Mr. Lovins also ensuredpersistent inflation and supply chain disruptions; and ensuring our balance sheet remained strong as we managed through the pandemic, while investingcontinued to invest in our business,businesses, both organically and through acquisitions, andwhile also returning cash to stockholders, and delivered strong operating margins and record free cash flow.stockholders. In addition, heMr. Lovins continued to serve as the interim leader of our IHM segment,business through the end of 2021, achieving strong top-line and operating margin expansion despite the challenging top-line environment,income growth, and oversaw the expended disclosures contained incontinued expansion of our ESG Downloads.disclosures. Mr. Lovins also served as a member of the Board of Trustees of the Avery Dennison Foundation (ADF).
Ms.Mr. Baker-Nel Stander – Led our global human resources, communications and community investment functions, prioritizing the safety, health and well-being of our teams as we continued navigating the impacts of COVID-19; facilitating senior leadership succession, including the appointments of our new President/COO and the new leaders of our RBIS Apparel and IHM businesses; developing our go-forward DE+I strategy and increasing transparency on our progress; onboarding approximately 1,400 new team members from the three acquisitions we completed in 2021; formalizing the guiding principles around the future of work in support of greater workplace flexibility and effectiveness; and fostering employee engagement and enhanced dialogue around key areas of talent management such as DE+I and employee well-being. Ms. Baker-Nel also served as a member of the Board of Trustees of ADF.
Mr. Stander – Led our global RBIS business through an unprecedentedlyanother challenging year, ensuring continued elevation of global service and flexibility for customers while adjusting operating costs to sustain value creation;delivering record growth and margin expansion; investing in and delivering continued growth incontinuing to grow the high-value categories of Intelligent Labels and external embellishments; and ensuring the safety of an engaged and diverse global team. Together with the rest of the RBIS leadership team,In addition, Mr. Stander was also namedled our 2020 Leadersuccessful acquisition of the Year, an annual recognition given byVestcom, further accelerating our company to recognize extraordinary leadershipposition in delivering for our businesshigh-value categories, and living our values. He also continued to leadleading our enterprise-wide Sustainability Council, overseeing our progress toward our 2025 sustainability goals, developing and the development ofbeginning to track progress toward our 2030 sustainability goals.goals, and implementing enhanced ESG reporting protocols. Mr. Stander also served as a member of the Board of Trustees of ADF.
Ms. Hill – Led the execution of our global human resources and communications strategies in support of our company’s overall strategic direction. Ms. Hill also led our response to the impact of COVID-19 on our global workforce while continuing to ensure our ongoing commitment to support the communities in which we operate. In addition, she oversaw our transition to a leaner leadership structure with continued focus on senior leadership succession and development, and completed the transition of her responsibilities to our new Chief Human Resources Officer.
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Ms. Miller – Led our global legal function, advising our Board and management on acquisitions and venture investments, litigation, intellectual property and footprint optimization projects; overseeing the developmentour Values & Ethics and implementation ofrisk management functions, securities and governance work, and government relations efforts; implementing a new functional operational model aligned our company strategies that willto accelerate departmental productivity, standardize processes and deploy best practices across the function. Ms. Miller also supportedpractices; developing strategic priorities for his department that align with our capital allocation strategies, including M&A projects and footprint optimization efforts, and oversaw ourcompany’s values and ethics/compliancestrategies; designing and executing projects to progress the department’s strategic priorities of business risk management programs. In addition, she completed the transition of her responsibilitiesoptimization, people and culture, operational efficiency, and sustainability; and leading training and career development sessions to our new Chief Legal Officer.enhance engagement across his global team.
Based on these assessments and after giving consideration to the recommendations of our CEO (other than with respect to himself), the Committee approved individual modifiers of 150%100% for Messrs. Lovins and Stander, recognizing their performance in an exceptional year in which they demonstrated extraordinary leadership in navigating one of the most challenging periods in our company’s history. Mr. Butier’s individual modifier was capped at 100%, as were the individual modifiers of Mses. Hill and Miller, who transitioned their primary responsibilities to their successors midway through the year and retired from our company at year-end 2020.all NEOs.
Avery Dennison Corporation | 2022 Proxy Statement | 67 |
AIP Awards
Our NEOs received the AIP awards shown in the table below for 2020,2021, based on their respective year-end base salary, AIP opportunity, financial modifier and individual modifier.
2020 AIP AWARDS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 AIP AWARDS | 2021 AIP AWARDS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NEO | 2020 YE Base Salary | AIP Opportunity | Target AIP Award | Financial Modifier | Individual Modifier | AIP Award | 2021 YE Base Salary | AIP Opportunity | Target AIP Award | Financial Modifier | Individual Modifier | AIP Award | ||||||||||||||||||||||||||||||||||||||||||||||||
Butier | $ | 1,133,000 |
| 125 | % | $ | 1,416,250 |
| 94 | % |
| 100 | % | $ | 1,331,275 | $ | 1,200,000 |
| 140 | % | $ | 1,680,000 |
| 200 | % |
| 100 | % | $ | 3,360,000 | ||||||||||||||||||||||||||||||
Lovins | $ | 618,000 |
| 75 | % | $ | 463,500 |
| 94 | % |
| 150 | % | $ | 653,535 | $ | 661,260 |
| 75 | % | $ | 495,945 |
| 200 | % |
| 100 | % | $ | 991,890 | ||||||||||||||||||||||||||||||
Baker-Nel | $ | 416,000 |
| 50 | % | $ | 208,000 |
| 200 | % |
| 100 | % | $ | 416,000 | |||||||||||||||||||||||||||||||||||||||||||||
Stander | $ | 555,129 |
| 60 | % | $ | 333,077 |
| 76 | % |
| 150 | % | $ | 379,708 | $ | 569,007 |
| 60 | % | $ | 341,404 |
| 186 | % |
| 100 | % | $ | 635,011 | ||||||||||||||||||||||||||||||
Hill | $ | 548,006 |
| 60 | % | $ | 328,804 |
| 94 | % |
| 100 | % | $ | 309,076 | |||||||||||||||||||||||||||||||||||||||||||||
Miller | $ | 581,048 |
| 60 | % | $ | 348,629 |
| 94 | % |
| 100 | % | $ | 327,711 | |||||||||||||||||||||||||||||||||||||||||||||
Walker | $ | 425,375 |
| 50 | % | $ | 212,687 |
| 200 | % |
| 100 | % | $ | 425,374 |
Our LTI program provides variable incentive compensation to enhance alignment of executive interests with stockholder interests and drive long-term value creation. The annual and special LTI awards granted to NEOs in 20202021 were fully performance-based and delivered through the equity vehicles described below.
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50% in PUs that cliff-vest at the end of a three-year period subject to the achievement of the respective cumulative EVA and relative TSR performance objectives established for the award
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50% in MSUs that vest at the end of the one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years, based solely on our absolute TSR
Annual LTI awards were granted on February 27, 2020,March 1, 2021. Actual amounts, if any, realized by our NEOs from the dayvesting of these awards will be based on our Board held its regularly scheduled meeting.performance, as well as our stock price at the time of vesting.
The Committee does not offset the loss or gain of prior year grants in determining current year grants, as doing so would compromise the intended risk/reward nature of these incentives.
Actual amounts, if any, realizedSpecial LTI awards may be granted by the Committee for hiring, promotion, retention and/or other incentive purposes, with the awards granted on the first day of the last month of the quarter following the event or decision to make a grant. For retention purposes and to further incent Mr. Stander to contribute to our NEOs from the vestingtotal company – including by driving our ESG progress as leader of these awards will beour enterprise-wide Sustainability Council and continuing to transform our RBIS business – Mr. Stander was granted a special one-time award of PUs with a grant date fair value of approximately $500,000 based 50% on our relative TSR and 50% of total company EVA, the same performance objectives, weightings and targets, and over the same performance period, as well asthe 2021-2023 PUs granted to our stock price at the time of vesting.corporate NEOs.
Target LTI Opportunity
As a percentage of base salary, the 20202021 target LTI opportunities for our NEOs were 475%585% for Mr. Butier; 250% for Mr. Lovins; and 180% for Mr. StanderStander; and Mses. Hill120% for Ms. Baker-Nel and Miller.Mr. Walker. Target LTI award opportunities represented 79%71% and 75%52%, respectively, of our CEO’s and other NEOs’ average performance-basedperformance-based incentive compensation. BecauseAs part of the Committee reversed the increased target LTI opportunity originally approvedlonger-term compensation approach implemented for our CEO in February 2020, there were no changes to NEO2021, Mr. Butier’s target AIP opportunities for 2020.LTI opportunity increased from 475% of base salary.
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Performance Units (PUs)
PUs cliff-vest in shares of our common stock after the end of the a three-year 2020-2022 period at threshold (50% payout), target (100% payout) and maximum (200% payout) levels based on our achievement of the performance objectives established for the award. PUs do not accrue dividend equivalents and are not counted toward measuring compliance withfor purposes of our stock ownership policy.
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The Committee established the following performance objectives for the 2020-20222021-2023 PUs. The Committee believes that these objectives continue to align executive compensation with the long-term interests of our stockholders because delivering cumulative EVA and strong TSR relative to peer companies reflects the value we create for our investors.
Cumulative EVA, weighted 50% for our corporate NEOs (based on our total company EVA)company) and 75% for our business NEO (based on RBIS’ cumulative EVA). EVA is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit.profit, with the cost of capital fixed over the performance period. The Committee established cumulative EVA targets for our corporate NEOs consistent with our 2017-2021 financial goals for earnings growth and ROTC and our primary objective of delivering superior TSR, with the target payout at or slightly above the midpoint of these targets and the maximum payout atexceeding the high end of these targets. The cumulative EVA target for our business NEO focused on RBIS’ EVA change compared to the prior three-year period, with the target payout at the midpointtop end of RBIS’ its 2017-2021 targets and the cost of capital fixed over the performance period. targets. In contrast to the AIP, cash restructuring charges – which include severance and related costs and exclude asset impairment charges and lease and other contract cancellation costs – are included in EVA calculations as the Committee expects that these investments willto generate a return over the three-year performance period (in contrast to the AIP, which measures performance over one year). Whether linked to corporate or business results, the 2020-20222021-2023 cumulative EVA targets require continued improvement in financial performance.
• | Relative TSR compared to an objectively determined peer group of companies, weighted 50% for our corporate NEOs and 25% for our business NEO. TSR measures the return that we provide to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). Consistent with its pay-for-performance philosophy, the Committee designed the TSR objective to provide realized compensation only if our stockholder value creation compares favorably relative to the designated peer group. The Committee set the threshold payout at TSR at the 40th percentile, target payout at TSR at the 50th percentile, and maximum payout at TSR at the 80th percentile, which were the same levels used for the |
Consistent with the 2019-20212020-2022 PUs and uponwith the recommendationadvice of Willis Towers Watson,WTW, to benchmark TSR, the Committee utilized a peer group† comprised of U.S. companies (i) in similar industries based on their classification in one of five GICS groups (diversified chemicals, specialty chemicals, metal and glass containers, paper packaging, and paper products) and (ii) with revenues during the last 12 months of $1 billion to $20 billion. Based on the formulaic application of theApplying this same objective criteria, the peer group changed from the prior year as follows: (A) VersoPactiv Evergreen Inc. was added following a merger; (B) Quaker Chemical Corporation was added because its GICS classification changed; (B) Bemis Company Inc. was deleted because it had been acquired; and (C) Neenah Inc.Ferro Corporation and P.H. Glatfelter CompanyGCP Applied Technologies were deleted because each of their last 12 months’ revenues was less than $1 billion.
† | The following companies comprised the peer group for the 2021-2023 PUs at the end of fiscal year 2021: Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings Inc.; Axalta Coating Systems Ltd.; Avient Corporation (formerly known as PolyOne Corporation); Ball Corporation; Berry Global Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings, Inc.; Eastman Chemical Company; Ecolab Inc.; Ecovyst Inc. (formerly PQ Group Holdings Inc.); Element Solutions Inc.; Graphic Packaging Holding Company; Greif, Inc.; H.B. Fuller Company; Huntsman Corporation; Ingevity Corporation; Innospec Inc.; International Flavors & Fragrances Inc.; Kraton Corporation; Minerals Technologies Inc.; NewMarket Corporation; O-I Glass Inc.; Packaging Corporation of America; Pactive Evergreen; PPG Industries, Inc.; Quaker Chemical Corporation; Rayonier Advanced Materials Inc.; RPM International Inc.; Schweitzer-Maudit International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Chemours Company; The Sherwin-Williams Company; Valhi, Inc.; Verso Corporation; and WestRock Company. |
Avery Dennison Corporation | 2022 Proxy Statement | 69 |
NEO | Performance Objectives | Weighting | ||
Butier
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Total Company Cumulative EVA Relative TSR |
50% 50% | ||
Stander | RBIS Cumulative EVA | 75% | ||
Relative TSR | 25% |
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In February 2021, the Committee reviewed the performance of the 2020-2022 PUs for our business NEO in light of the disproportionate impact COVID-19 had on its results in 2020. Noting that RBIS had taken substantial actions to protect operating margins during the year and using its allowable discretion to exclude some of this impact, the Committee determined to revise RBIS’ EVA goals originally approved in February 2020 for threshold, target and maximum EVA performance. In contrast to the original targets, the results of Smartrac, which had been acquired in February 2020, were included in the revised goals, which continue to require strong growth and margin improvement compares to the 2019 baseline for the business, although on a different trajectory than originally planned given the extraordinary impact of COVID-19 on RBIS’ markets in 2020.
Market-leveraged Stock Units (MSUs)
MSUs are performance-based LTI awards that:
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tied to our absolute TSR performance, which represents appreciation in our stock price and dividends paid. MSUs are designed to achieve the Committee’s combined objectives of retention (similar to RSUs) and higher realizedincentive compensation fromdriven by stock price appreciation (similar to stock options, but more limited due to fewer shares earned for target performance and a cap on the number of shares that can be earned above target), while making our LTI compensation program fully performance-based. The Committee continues to believe that retention is an important objective of our executive compensation program.
MSUs vest based on our performance over periods as shown in the graph below, with the number of shares paid out at vesting based solely on our absolute TSR and the value realized reflecting both the number of shares paid out as well as our stock price at the time of vesting. Although dividend equivalents accrue on MSUs during the performance period, they are earned and paid only at vesting; as such, if the threshold level of performance is not achieved, any dividend equivalents accrued during the performance period are cancelled, as occurred with the first tranche of MSUs granted in 2018.cancelled.
The performance criteria for MSUs are shown in the chart below. Every 1% increase in TSR above 10% increases the payout by 1.54%. The Committee determined to maintain the same MSU performance objectives for 20202021 given that the more challenging MSU structureprogram is achievingaccomplishing the Committee’s goal of incenting strong performance and value creation.
MSU PERFORMANCE CRITERIA | ||||||||||
Absolute TSR | Unit Payout | |||||||||
Cancelled | <(15)% | 0% | ||||||||
Threshold | (15)% | 85% | ||||||||
Target | 10% | 100% | ||||||||
Above Target | >10% | >100% | ||||||||
Maximum | 75% | 200% |
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Annual LTI Awards
Our NEOs were granted the annual LTI awards shown in the table below in February 2020. The2021. Except as noted, the number of awards granted was based on the respective NEO’s (i) base salary at year-end 20192020 and (ii) target LTI opportunity. Consistent with our historical practice, the number of PUs granted was based on the average closing price for shares of our common stock during the first ten10 trading days of February 20202021 and the number of MSUs granted was based on a grant date fair value using the Monte-Carlo simulation method described in footnote (2) of the 20202021 Summary Compensation Table. As a result of the methodology used to determine grant date fair value, awarded LTI values were 13% to 15% lower than target LTI values.
2020 ANNUAL LTI AWARDS | |||||||||||||||||||||||||||||||||||
NEO | 2020 YE Base Salary | Target LTI Opportunity | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI Value | ||||||||||||||||||||||||||||
Butier* | $ | 1,133,000 |
| 475 | % |
| 19,091 | $ | 2,484,316 |
| 21,884 | $ | 2,065,486 | $ | 4,549,802 | ||||||||||||||||||||
Lovins | $ | 618,000 |
| 250 | % |
| 5,480 | $ | 713,116 |
| 6,283 | $ | 594,078 | $ | 1,307,194 | ||||||||||||||||||||
Stander | $ | 555,129 |
| 180 | % |
| 3,587 | $ | 480,421 |
| 4,063 | $ | 384,183 | $ | 864,604 | ||||||||||||||||||||
Hill | $ | 548,006 |
| 180 | % |
| 3,500 | $ | 455,455 |
| 4,011 | $ | 379,266 | $ | 834,721 | ||||||||||||||||||||
Miller | $ | 581,048 |
| 180 | % |
| 3,710 | $ | 482,789 |
| 4,253 | $ | 402,123 | $ | 884,912 |
2021 ANNUAL LTI AWARDS | |||||||||||||||||||||||||||||||||||
NEO | 2020 YE Base Salary | Target LTI Opportunity | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI Value | ||||||||||||||||||||||||||||
Butier(1) | $ | 1,200,000 |
| 585 | % |
| 17,886 | $ | 3,537,766 |
| 16,245 | $ | 3,509,903 | $ | 7,047,669 | ||||||||||||||||||||
Lovins | $ | 618,000 |
| 250 | % |
| 3,936 | $ | 778,523 |
| 3,575 | $ | 772,438 | $ | 1,550,961 | ||||||||||||||||||||
Baker-Nel | $ | 400,000 |
| 120 | % |
| 1,223 | $ | 241,884 |
| 1,111 | $ | 240,066 | $ | 481,950 | ||||||||||||||||||||
Stander(2) | $ | 555,129 |
| 180 | % |
| 2,750 | $ | 505,487 |
| 2,312 | $ | 499,531 | $ | 1,005,018 | ||||||||||||||||||||
Walker | $ | 415,000 |
| 120 | % |
| 1,269 | $ | 251,026 |
| 1,152 | $ | 248,901 | $ | 499,927 |
(1) |
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(2) | On March 1, 2021, in addition to his annual award of PUs tied primarily to RBIS’ performance, Mr. Stander received a one-time special award of 2,547 PUs with a fair market value $503,784 based on the same performance objectives, weightings and targets as the annual award of PUs granted to our corporate NEOs (50% relative TSR and 50% total company EVA). |
70 | 2022 Proxy Statement | Avery Dennison Corporation |
20202021 VESTING OF PREVIOUSLY GRANTED LTI AWARDS
2018-20202019-2021 PUs Eligible for Vesting
The PUs granted to our NEOs in February 20182019 were eligible to vest at the end of 20202021 based (i) for our corporate NEOs, 50% on our company’s cumulative three-year EVA and 50% on our three-year relative TSR compared to a peer group§ of companies determined using the same objective criteria used for the 2020-20222021-2023 PUs; and (ii) for our business NEO, 100%75% on RBIS’ cumulative three-year EVA.EVA and 25% on our relative TSR. The key goal-setting principle in setting cumulative EVA targets was consistency with our 2017-2021 financial goalstargets for earnings growth and ROTC, which the Committee believes translates into delivering above-average TSR.
The cumulative EVA target of $986$1,081 million for our corporate NEOs was consistent with our 2017-2021 financial goals for organic sales growth and operating margin expansion and recognized that increasing sales and operating margin, together with balance sheet efficiency, are key drivers of EVA improvement. The cumulative EVA target established in February 2018 for our corporate NEOs was approximately 64%43% higher than the cumulative EVA we achieved for the three-yearthree-year period ending in 20172018. EVA required for maximum payout – cumulative EVA of $1,047$1,148 million – was consistent with the high end of our long-term growth and operating margin targets. As shown on the following page,below, we delivered cumulative EVA of $985.1$1,132 million for the 2018-20202019-2021 performance period, resulting in a payout of 99%176% for the EVA component for our corporate NEOs. No adjustments were made to cumulative EVA for corporate NEOs as a result of COVID-19.
2019-2021 PUS: CORPORATE CUMULATIVE EVA | ||||||||||||||||
(In millions) | 2019 | 2020 | 2021 | Cumulative EVA | ||||||||||||
Adjusted EBIT(1) | $ | 777.0 |
| $ | 810.8 |
| $ | 1,012.1 |
| |||||||
Taxes(2) |
| (191.1 | ) |
| (195.4 | ) |
| (253.0 | ) | |||||||
Equity method investment net losses |
| (2.6 | ) |
| (3.7 | ) |
| (3.9 | ) | |||||||
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| 583.3 |
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| 611.7 |
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| 755.2 |
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Capital charge(3) |
| (260.9 | ) |
| (281.7 | ) |
| (275.6 | ) | |||||||
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EVA | $ | 322.4 |
| $ | 330.0 |
| $ | 479.6 |
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| $1,132.0 |
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(1) Adjusted EBIT is a non-GAAP financial measure defined and reconciled from GAAP in the last section of this proxy statement.
(2) The GAAP tax rates for 2019, 2020, and 2021 were (22.7)%, 24.1% and 25.0%, respectively. Taxes shown in the table are based on adjusted tax rates of 24.6%, 24.1% and 25.0% for 2019, 2020 and 2021, respectively. The adjusted tax rate represents the full-year GAAP rate, excluding certain unusual or infrequent events that are expected to significantly impact the GAAP tax rate, such as impacts related to the termination of our U.S. pension plan and the effects of discrete tax structuring and planning transactions.
(3) 8.5% of average invested capital of $3.07 billion, $3.31 billion and $3.24 billion for 2019, 2020 and 2021, respectively, using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity, adjusted to exclude the impact of acquisitions completed since the target was set. |
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§ | The following companies comprised the peer group for the |
Avery Dennison Corporation |
| 71
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2018-2020 PUS: CORPORATE CUMULATIVE EVA | ||||||||||||||
(In millions) | 2018 | 2019 | 2020 | Cumulative EVA | ||||||||||
Adjusted EBIT(1) | $ | 713.1 |
| $ | 776.9 |
| $ | 808.5 |
| |||||
Taxes(2) |
| (178.3 | ) |
| (191.1 | ) |
| (194.8 | ) | |||||
Equity method investment net losses |
| (2.0 | ) |
| (2.6 | ) |
| (3.7 | ) | |||||
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| |||||||||
| 532.8 |
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| 583.2 |
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| 610.0 |
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Capital charge(3) |
| (233.9 | ) |
| (243.0 | ) |
| (264.0 | ) | |||||
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EVA | $ | 298.9 |
| $ | 340.2 |
| $ | 346.0 |
| $985.1 | ||||
(1) Adjusted EBIT is a non-GAAP financial measure defined and reconciled from GAAP in the last section of this proxy statement.
(2) The GAAP tax rates for 2018, 2019 and 2020 were 15.4%, (22.7)% and 24.1%, respectively. Taxes shown in the table are based on an adjusted tax rates of 25.0%, 24.6% and 24.1% for fiscal years 2018, 2019 and 2020, respectively. The adjusted tax rate represents the full-year GAAP rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact the GAAP tax rate, such as completion of our 2017 provisional estimate of the impact of the Tax Cuts and Jobs Act (TCJA), impacts related to the termination of our U.S. pension plan, and the effects of discrete tax structuring and planning transactions.
(3) 8.5% of average invested capital of $2.75 billion, $2.86 billion and $3.11 billion for fiscal years 2018, 2019 and 2020, respectively, using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity, adjusted to exclude the impact of termination of our U.S. Pension Plan and acquisitions completed since the target was set. |
In February 2021, the Committee reviewed the performance of the 2018-2020 PUs for our business NEO in light of the disproportionate impact COVID-19 had on RBIS’ results in 2020. Noting that RBIS had entered 2020 with performance during the first two years of the three-year performance period in excess of the maximum level of performance and using its allowable discretion to exclude some of the extremely adverse 2020 impact, the Committee determined to increase the payouts for the 2018-2020 for all RBIS participants from 84% to 126% to recognize the team’s impressive EVA performance through 2019, as well as their achievements in navigating the extraordinary challenges the business faced during 2020.
Relative TSR for the 2018-20202019-2021 performance period was at the 7993thrd percentile of the designated peer group, resulting in a 195%200% payout for this component for all corporate NEOs. The 2018-2020 PUs for our business NEO did not have a relative TSR component.
PUs for 2018-20202019-2021 performance period paid out at 147%188% for our corporate NEOs and 126%115% for our business NEO.
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MSUs Eligible for Vesting at YE 2021
Four tranches of MSUs were eligible for vesting at the end of 20202021 based on our absolute TSR for the four-, three-, two- and one-year performance periods shown below, with the number of shares paid out at vesting determined in accordance with the formula shown below.
Stock price at settlement (avg. closing price for trading days of January reinvested dividends during period
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Stock price at grant (avg. closing price for trading days of January of year of grant)
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Payout at vesting
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÷
| =
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4TH TRANCHE OF MSUs GRANTED IN | 3RD TRANCHE OF MSUs GRANTED IN | |||
Performance period | Performance period of 3 years | |||
2018-2021 Absolute TSR of 87% |
| |||
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Paid out at 200% of target | Paid out at | |||
2ND TRANCHE OF MSUs GRANTED IN | 1ST TRANCHE OF MSUs GRANTED IN | |||
Performance period | Performance period | |||
|
| |||
Paid out at | Paid out at |
Consistent with market practices, ourOur NEOs receive the perquisites shown in the chart below. We do not reimburse our NEOs for the tax consequences of their receipt of these perquisites.
LIMITED PERQUISITES | ||||
Perquisite | Description and Limitations | Benefit to Stockholders | ||
Executive Benefit Allowance |
$70,000 for CEO, |
Flat allowance reduces expense of administering a variety of separate perquisites | ||
Financial Planning |
Annual reimbursement of up to $25,000 for our CEO and $15,000 for our |
Allows senior executives to focus on job duties | ||
Annual Physical Examination |
Paid directly to the service provider only to the extent |
|
72 | 2022 Proxy Statement | Avery Dennison Corporation |
Nonqualified Deferred Compensation Benefits
Our NEOs are eligible to participate in our nonqualified deferred compensation plan, which allows eligible U.S. employees to defer up to 75% of their base salary and up to 90% of their AIP award. The plan provides NEOs and other eligible employees with a long-term capital accumulation opportunity because deferred amounts accumulate on a pre-tax basis. Participating executives may select from a number of investment options. Our only deferred compensation plan currently open for deferrals does not offer above-marketabove-market interest rates. Deferrals are 100% vested.
We made an annual contribution as of January 1, 20202021 to the deferred compensation accounts of our U.S. NEOs for 401(k) eligible earnings and deferred compensation in 20192020 in excess of the Internal Revenue Code of 1986, as amended (the “Code”) compensation limit. This annual contribution provided an automatic contribution of 3% of pay and a matching contribution of up to 50% of the first 7% of pay above the Code compensation limit. This benefit is designed to supplement 401(k) contributions that are limited under the Code.
For additional information regarding our deferred compensation plan and accrued NEO benefits thereunder, see 20202021 Nonqualified Deferred Compensation in Executive Compensation Tables.
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Retirement Benefits
OurOf our NEOs, (excluding Mr. Stander)only Messrs. Butier and Lovins were eligible for retirement benefits under our U.S. pension plan and are eligible for retirement benefits under our benefit restoration plan, a nonqualified excess benefit plan, in each case subject to the same terms and conditions as our other eligible U.S. employees. We terminated our U.S. pension plan as ofin September 28, 2018 and, because the accrual of benefits under the benefit restoration plan was frozen as of December 31,year-end 2010, none of our eligible NEOs accrued additional retirement benefits during 2020.2021. For additional information regarding the benefit restoration plan and accrued NEO benefits thereunder, see 20202021 Pension Benefits in Executive Compensation Tables.
Defined Contribution Benefits
Our NEOs are eligible to participate in our employee savings plan, a qualified 401(k) plan that permits certain U.S. employees to defer up to 100% of their eligible earnings less payroll deductions to the plan on a pre-tax basis and 25% of their eligible earnings on an after-tax basis, subject to the annual limit prescribed by the Internal Revenue Service (IRS) for the aggregate of company contributions and employee pre- and post-tax contributions. Employee deferrals are immediately vested upon contribution. In 2020,2021, we contributed up to 6.5% of an employee’s eligible compensation, 3% of which was an automatic contribution and up to 3.5% of which was a matching contribution of 50% of the employee’s contributions up to 7% of pay, subject to the Codefederal compensation limit. Participants vest in company contributions to their savings plan account after two years of service.
Employees are immediately eligible to participate in the savings plan and all our NEOs participated in the plan during fiscal year 2020.2021. Our NEOs participate in the plan subject toon the same eligibility and terms and conditions as our other U.S. employees.
Life Insurance Benefits
In addition to the $50,000 in life insurance benefits we provide to all U.S. employees, our NEOs are provided with supplemental life insurance benefits equal to three times the NEO’s base salary less $50,000, up to a maximum coverage amount of $1 million.
Executive Long-Term Disability Insurance Benefits
If our NEOs elect to enroll in executive long-term disability coverage, their long-term disability benefit is equal to 65% of their eligible pre-disability monthly earnings up to a maximum of $25,000 per month. Coverage is available only for the executive;NEO; their dependents are not covered.
Personal Excess Liability Insurance Benefits
We provide $3 million of personal excess liability insurance coverage to our NEOs. Personal excess liability coverage provides an additional layer of liability coverage that supplements the coverage provided by the individual’s personal liability insurance. To receive any benefit from this excess liability insurance, the NEO must maintain certain minimum coverage requirements under his or her personal liability policy.
Avery Dennison Corporation | 2022 Proxy Statement | 73 |
Charitable Match Benefits
We match up to $10,000 of our CEO’s and $5,000 of our other NEOs’ annual documented contributions to charitable organizations or educational institutions.
None of our NEOs has an employment contract, and each is employed at-will, which reflects our pay-for-performance philosophy; if an NEO is no longer performing at the expected level, he or she can be terminated immediately without receiving a contractually guaranteed payment. However, consistent with market practices, the Committee believes that providing our executives with severance benefits helps ensure that they act in the best interests of our company and stockholders, even if doing so may be contrary to their personal interests, such as where it could lead to termination of their employment or a change of control of our company.
The compensation of our NEOs in the event of termination not for cause is governed by our Amended and Restated Executive Severance Plan (the “Severance Plan”) and, as applicable, our Amended and Restated Key Employee Change of Control Severance Plan (the “COC Severance Plan”). We use these plans rather than individually negotiated agreements to provide us with the flexibility to change the severance benefits for which ourapplicable NEOs are eligible to reflect market practices without the need to obtain their individual consent. In addition, this plan-based approach eliminates the time and expense it would require to individually negotiate separation payments and ensures that oureligible NEOs are eligible forreceive benefits on the same terms and conditions as employees with similar levels of responsibility. Receipt of benefits under these plans is conditioned on the executive signing a waiver and general release of claims against our company, as well as agreeing to non-competition, non-solicitation, and non-disclosure covenants in favor of our company. Any violation of these covenants could result in our company seeking to recover some or all severance benefits previously paid or pursuing any other claims that may be appropriate under the circumstances.
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Unvested equity awards outstanding on the date of termination are generally cancelled, except for employees who qualify as retirement eligible under the terms of our equity incentive plans, whose awards are accelerated upon termination of service. Mses. Hill and Miller retired from our company at the end of fiscal year 2020 and qualified as retirement eligible under these plans. As a result, all of their unvested PUs and MSUs were eligible to vest on a prorated basis after their respective performance periods based on actual performance.
For additional information regarding potential NEO benefits under these plans, including the treatment of equity awards under various termination scenarios, see Payments Upon Termination as of January 2, 20211, 2022 in Executive Compensation Tables.
Severance Following Involuntary Termination Not for Cause
Our NEOs (excluding Mses. Hill and Miller) are eligible to receive severance benefits upon involuntary termination not for “cause,” in accordance with the terms and conditions of the Severance Plan. In the event of a qualifying termination, our CEO would be eligible to receive two times the sum of his annual salary, his target AIP award for the year of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our other still-participating NEOs would be eligible to receive one times his or hertheir respective sum of these amounts. Eligible NEOs would also be eligible to receive up to $25,000 in outplacement services for up to one year following termination of employment. Any payments made under the Severance Plan would be offset by any payments received by the NEO under any statutory, legislative and regulatory requirement or, if applicable, the COC Severance Plan.
Severance Following Change of Control
Our NEOs (excluding Mses. HillMessrs. Butier, Lovins, and Miller)Stander are eligible for severance payments upon termination not for “cause” or by the executive for “good reason” within 24 months of a “change of control” of our company, in accordance with the terms and conditions of the COC Severance Plan. As Level 3 NEOs, Ms. Baker-Nel and Mr. Walker are not eligible for benefits under this plan. In the event of a qualifying termination following a change of control, our CEO would be eligible to receive three times the sum of his annual salary, his target AIP award for the year of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our other still-participatingLevel 2 NEOs would be eligible to receive two times his or hertheir respective sum of these amounts. EligibleThese NEOs would also be eligible to receive a pro rataprorated AIP award for the year of termination and up to $25,000 in outplacement services for up to one year following termination of employment. Any payments under the COC Severance Plan would be offset by any payments received by the NEO under the Severance Plan and any other statutory, legislative and regulatory requirement.
Under our equity incentive plans, unvested equity awards granted to our NEOs would generally vest only if the NEO is terminated without “cause” or resigns for “good reason” within 24 months after the change of control. Outstanding PUs and MSUs granted beginning in 2018 would vest based on actual performance, if determinable, and otherwise based on target performance.
Our
74 | 2022 Proxy Statement | Avery Dennison Corporation |
Participating NEOs are not eligible to receive any excise tax gross-up on amounts payable under the COC Severance Plan. If anthe NEO would otherwise incur excise taxes under Section 4999 of the Code, payments under the COC Severance Plan would be reduced so that no excise taxes would be due if the reduction results in a greater after-tax benefit to the NEO.
Market Survey Data
The Committee annually considers market survey data to target TDC, looking at companies of similar size with respect tobased on annual revenues that span all industries to reflect the broad talent market across which we seek our executives. The Committee reviews results from a third-party survey to understand market compensation practices and assess our competitiveness, narrowing the scope of the results to account for variations caused by company size.
In February 2020,2021, the Committee was presented with industry-wide data from the most recent Willis Towers WatsonWTW U.S. Compensation General Industry Database, which was narrowed in scope to focus on data of the 4868 participants with $6 billion to $10 billion in annual revenue. The Committee reviewed the data with executive matches based on job and functional responsibility on an aggregated basis, with no consideration of the survey’s component companies, which were not determined or known by the Committee.
The Committee uses the survey data as a reference point to target TDC and the components thereof, giving consideration to the market median pay at similarly sized companies, responsibilities, individual performance, tenure, retention and succession.
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Peer Groups
For determining our relative TSR for purposes of the vesting of the 2018-20202019-2021 PUs and the grant of the 2020-20222021-2023 PUs, the Committee used a peer group comprised of U.S. companies satisfying objective criteria for industry classification and revenue size, the names of which are disclosed earlier in this CD&A. The Committee does not utilize a peer group for any other purpose.
Tally Sheets
The Committee annually reviews tally sheets that reflect the components of each NEO’s compensation. The tally sheets reviewed in February 20212022 included the information shown below for each of the most recent three fiscal years.
Compensation history, including annual cash compensation (base salary and AIP awards), LTI awards, value of vested LTI awards, and annualized cost of benefits and perquisites
Expected value of annual compensation, including base salary, AIP award and grant date fair value of LTI awards
Accumulated value of compensation, including total accumulated value of LTI awards and accumulated benefit values under retirement and deferred compensation plans
Potential payments under various termination scenarios
Compliance with stock ownership policy
The Committee believes that reviewing tally sheets is useful in determining executive compensation because they provide a historical perspective on NEO compensation and include information that will be contained in our proxy statement.
INDEPENDENT OVERSIGHT AND EXPERTISE
Our Board believes that hiring and retaining our executives and providing them with market-competitive compensation are essential to the success of our company and advanceadvancing the interests of our stockholders. The Committee, which is comprised solely of independent/non-employeeindependent directors, is responsible for approving executive compensation. The Committee may delegate authority to subcommittees or, in certain circumstances not related to the compensation of our executive officers, to our CEO.
Under its charter, the Committee has authority, in its sole discretion and at our expense, to obtain advice and assistance from external advisors. The Committee may retain and terminate any compensation consultant or other external advisor and has sole authority to approve the advisor’s fees and other terms and conditions of the retention. In retaining its advisors, the Committee considers each advisor’s independence from management, as required by NYSE listing standards.
Avery Dennison Corporation | 2022 Proxy Statement | 75 |
During 2020,2021, the Committee retained Willis Towers WatsonWTW as its independent compensation consultant, with the firm performing the services described below for the Committee.
• Assisted with setting target TDC for our CEO, including the longer-term compensation approach implemented in 2021 |
• Evaluated a proxy advisory |
• Commented on |
• Provided incentive compensation advice
|
• Conducted analyses of share utilization and stockholder value transfer related to LTI compensation |
• Advised on |
• |
• Prepared for, attended and reviewed documentation for Committee meetings |
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In 2020, Willis Towers Watson2021, WTW received $139,677$127,927 in compensation from our company for professional services performed for or at the request of the Committee. We also reimbursed the firm for its reasonable expenses.
The Committee conducted its annual assessment of Willis Towers Watson’sWTW’s performance in October 2020,2021, which included an evaluation of its services providedand fees year-to-date, the fees paid therefor and the additional criteria described below.
• | Experience – The firm’s depth and breadth of executive compensation knowledge and experience; qualification as a board-level consultant; quality of resources available; and understanding of our business strategy, issues, industry, performance drivers and human capital considerations |
• | Independence – The firm’s objectivity in giving advice and making recommendations, and its willingness to provide candid feedback regarding management and Committee proposals, questions and concerns |
• | Preparation – The quality and timeliness of the firm’s reports, |
• | Committee Relationship – The accessibility and availability of members of the engagement team; the firm’s reporting relationship with the Committee Chair and its working relationship with our human resources team; and the effectiveness of its communication |
Based on this evaluation, the Committee determined that it wasremained satisfied with the performance of Willis Towers WatsonWTW and the individual members of the engagement team serving the Committee.
Advisor Independence
Willis Towers WatsonWTW and the Committee have had the following protocols in place since the engagement commenced to ensure the firm’s independence from management: the Committee has the sole authority to select, retain and terminate Willis Towers Watson,WTW, authorize the firm’s fees and determine the terms and conditions that govern the engagement; the Committee directs Willis Towers WatsonWTW on the process for delivery and communication of its work product, including its analyses, findings, conclusions and recommendations; in the performance and evaluation of its duties, Willis Towers WatsonWTW is accountable, and reports directly, to the Committee; and members of the Committee may consult with Willis Towers WatsonWTW at any time, with or without members of management present, at their sole discretion.
As required by SEC regulations and NYSE listing standards, the Committee considered the independence of its advisors – including WTW and the law firms providing executive compensation counsel to the Committee and/or our company – in October 2020.2021. The Committee reviewed the information provided by Willis Towers WatsonWTW described below.
Willis Towers WatsonWTW performed no services for our company in 20202021 other than executive compensation services performed at the request of the Committee
Fees from our company reflected approximately 0.001% of Willis Towers Watson’sWTW’s revenue for its fiscal year ended December 31, 20202021
76 | 2022 Proxy Statement | Avery Dennison Corporation |
Willis Towers WatsonWTW has several policies and procedures to ensure its advice is objective and independent, including a comprehensive code of conduct and ethics and quality policies that mandate rigorous work reviews and periodic compliance reviews, which the firm has represented to the Committee are highly effective
Based on disclosures from Willis Towers WatsonWTW and members of the Committee, there are no business or personal relationships between them
No members of the Willis Towers WatsonWTW team serving the Committee own stock in our company, other than potentially through investments in mutual or other funds managed without the member’s input
Based on disclosures from the firm and our executive officers, there are no business or personal relationships between Willis Towers WatsonWTW or the members of the engagement team advising the Committee with any executive officer of our company
The Committee affirmatively determined Willis Towers Watson to be independent and both the firm and the members of the engagement team advising the Committee to be free of any conflicts of interest.
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Clawback Policy
In the event of fraud or other intentional misconduct on the part of an NEO that necessitates a restatement of our financial results (including, without limitation, any accounting restatement due to material noncompliance with any financial reporting requirement), the NEO would be required to reimburse our company for any AIP or LTI awards paid or granted in excess of the amount that would have been paid or granted based on the restated financial results. These remedies would be in addition to, not instead of, any other actions taken by our company (through the imposition of any discipline up to and including termination), law enforcement agencies, regulators or other authorities. This clawback policy is contractually acknowledged by our NEOs upon the execution of their LTI award agreements.
Our clawback policy is designed to subject incentive compensation to forfeiture if our financial results are not achieved consistent with our high ethical standards. This policy is expressly incorporated into our AIP and LTI plans and applicable agreements thereunder.plans. The Committee anticipates that it will revise the policy if and as necessary to comply with final rules issued by the SEC.SEC, which are currently expected to be issued in 2022.
Tax Implications of Executive Compensation
The Committee aims to compensate our NEOs in a manner that is tax effective for our company. However, the Committee may, in its discretion, adopt or implement compensation programs and/or practices that are not fully tax deductible if it believes that doing so is in the best interests of our company and stockholders.
Section 162(m) of the Code
Following the enactment of the TCJA,Tax Cuts and Jobs Act (TCJA), for taxable years beginning on or after January 1, 2018, compensation in excess of $1 million paid to executive officers covered by Section 162(m) of the Code (“Section 162(m)”) generally is not deductible, unless it qualifies for limited transition relief under the TCJA. To qualify for transition relief, compensation must, among other things, have been payable pursuant to a written binding contract that was in effect on November 2, 2017 and not subsequently modified in any material respect.
While in the past we have structured certain of our incentive compensation in a manner intended to be tax-deductible for purposes of Section 162(m), due to the TCJA and the uncertainties in the application of Section 162(m), as amended by the TCJA, and the regulations thereunder, there is no guarantee that any deductions claimed under Section 162(m) will not be challenged or disallowed by the IRS and our ability to deduct compensation under Section 162(m) may be restricted. Furthermore, although the Committee believes that the deductibility of executive compensation is a relevant consideration and may continue to consider the effects of Section 162(m) on our future pay practices, it reserves the right to approve incentive compensation that is not fully tax deductible, and/or modify executive compensation without regard to tax deductibility, if it believes that doing so is in the best interests of our company and stockholders.
Section 409A of the Code
Nonqualified deferred compensation must be deferred and paid under plans or arrangements that satisfy the requirements of Section 409A of the Code with respect to the timing of deferral elections and payments and certain other matters. Failure to satisfy these requirements could expose individuals to accelerated income tax liabilities, penalty taxes and interest on their compensation deferred under these plans. As a general matter, we design and administer our compensation and benefit plans and arrangements in a manner intended to cause them to be either exempt from, or satisfy the requirements of, Section 409A of the Code.
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20202021 SUMMARY COMPENSATION TABLE
This table shows the compensation earned by or awarded toof our NEOs in accordance with SEC regulations. Compensation as shown in the table does not reflect the compensation actually realized by our NEOs for these years.
Name and Principal Position | Year | Salary(1) | Bonus | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change In Pension Value and NQDC Earnings | All Other Compensation(4) | Total | Year | Salary(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change In Pension Value and NQDC Earnings | All Other Compensation(4) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chairman, President & | 2020 | $ | 1,133,000 | – | $ | 5,598,133 | $ | 1,331,275 | $ | 464,100 | $ | 182,840 | $ | 8,709,348 |
| 2021 | $ | 1,183,250 | $ | 7,047,669 | $ | 3,360,000 | $ | 662,480 | $ | 180,322 | $ | 12,433,721 | |||||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2019 | $ | 1,133,000 | – | $ | 5,358,043 | $ | 1,288,788 | $ | 508,024 | $ | 207,177 | $ | 8,495,032 |
| 2020 | $ | 1,133,000 | $ | 5,598,133 | $ | 1,331,275 | $ | 464,100 | $ | 182,840 | $ | 8,709,348 | |||||||||||||||||||||||||||||||||||||||||||||||
2018 | $ | 1,133,000 | – | $ | 5,580,651 | $ | 1,741,988 | – | $ | 254,058 | $ | 8,709,697 |
| 2019 | $ | 1,133,000 | $ | 5,358,043 | $ | 1,288,788 | $ | 508,024 | $ | 207,177 | $ | 8,495,032 | |||||||||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President & | 2020 | $ | 618,000 | – | $ | 1,232,041 | $ | 653,535 | $ | 76,327 | $ | 125,223 | $ | 2,705,126 |
| 2021 | $ | 650,445 | $ | 1,550,961 | $ | 991,890 | $ | 133,115 | $ | 126,497 | $ | 3,452,908 | |||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2019 | $ | 613,500 | – | $ | 1,493,462 | $ | 421,785 | $ | 81,676 | $ | 126,425 | $ | 2,736,848 |
| 2020 | $ | 618,000 | $ | 1,232,041 | $ | 653,535 | $ | 76,327 | $ | 125,223 | $ | 2,705,126 | |||||||||||||||||||||||||||||||||||||||||||||||
2018 | $ | 587,500 | – | $ | 1,140,762 | $ | 553,500 | – | $ | 123,963 | $ | 2,405,725 |
| 2019 | $ | 613,500 | $ | 1,493,462 | $ | 421,785 | $ | 81,676 | $ | 126,425 | $ | 2,736,848 | |||||||||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel(5) |
| 2021 | $ | 412,000 | $ | 481,950 | $ | 416,000 | $ | 87,340 | $ | 104,164 | $ | 1,501,454 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vice President & Chief HR Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vice President & | 2020 | $ | 555,129 | – | $ | 791,699 | $ | 379,708 | $ | 120,727 | $ | 122,642 | $ | 1,969,906 |
| 2021 | $ | 565,537 | $ | 1,508,802 | $ | 635,012 | $ | 142,139 | $ | 124,331 | $ | 2,975,821 | |||||||||||||||||||||||||||||||||||||||||||||||
General Manager, RBIS | 2019 | $ | 551,086 | – | $ | 963,728 | $ | 363,887 | $ | 105,550 | $ | 143,172 | $ | 2,127,423 |
| 2020 | $ | 555,129 | $ | 791,699 | $ | 379,708 | $ | 120,727 | $ | 122,642 | $ | 1,969,906 | |||||||||||||||||||||||||||||||||||||||||||||||
2018 | $ | 535,290 | $ | 750,000 | $ | 870,212 | $ | 388,051 | – | $ | 98,242 | $ | 2,641,795 |
| 2019 | $ | 551,086 | $ | 963,728 | $ | 363,887 | $ | 105,550 | $ | 143,172 | $ | 2,127,423 | ||||||||||||||||||||||||||||||||||||||||||||||||
Anne Hill | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker(5) |
| 2021 | $ | 422,781 | $ | 499,927 | $ | 425,375 | $ | 320 | $ | 91,282 | $ | 1,439,685 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Former Senior Vice | 2020 | $ | 548,006 | – | $ | 786,713 | $ | 309,076 | $ | 39,796 | $ | 143,996 | $ | 1,827,587 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President & | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief HR Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Susan C. Miller | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Former Senior Vice | 2020 | $ | 581,048 | – | $ | 834,037 | $ | 327,711 | $ | 607,945 | $ | 142,504 | $ | 2,493,245 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President, General | 2019 | $ | 576,817 | – | $ | 1,010,855 | $ | 317,252 | $ | 1,070,207 | $ | 148,872 | $ | 3,124,003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Counsel & Secretary | 2018 | $ | 560,017 | – | $ | 1,022,200 | $ | 416,324 | – | $ | 147,356 | $ | 2,145,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vice President & Chief Legal Officer |
(1) | Amounts include any portions of salary contributed to our employee savings plan or deferred under our deferred compensation plan. |
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(2) | Amounts in |
Amounts in |
Amount for Mr. Stander also includes grant date for value of additional PUs granted in 2021. The performance objectives, weightings and targets for this special one-time award were the same as the 2021-2023 PUs granted to our corporate NEOs described above. The maximum grant date fair value of the performance condition component of these 2021-2023 PUs was $507,767 and the grant date fair value of the market condition component of these PUs was $249,900. |
(3) | Amounts reflect cash AIP awards for the applicable year, which are determined in February and paid in March of the following year. |
(4) | The table shown on the following page shows the components of these amounts for |
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Perquisites | Benefits | Perquisites | Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Executive Benefit Allowance | Financial Planning | Other* | Company Contribution and Match, Employee Savings Plan | Company Contributions, Deferred Comp. Plan | Excess Life Insurance | Executive Long-Term Disability Insurance | Executive Group Term Life Insurance | Excess Executive Liability Insurance | Total | Executive Benefit Allowance | Financial Planning | Executive Physical | Other | Company Contribution/ Match, Savings Plan | Company Contributions, Deferred Comp. Plan | Company Match Charitable Contribution | Excess Life Insurance | Executive Long-Term Disability Insurance | Executive Group Term Life Insurance | Excess Executive Liability Insurance | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Butier | $ | 70,000 | – | – | $ | 18,525 | $ | 86,971 | $ | 1,944 | $ | 2,700 | $ | 1,800 | $ | 900 | $ | 182,840 | $ | 70,000 |
|
| – |
|
| – |
| – | $ | 18,850 |
| $ | 73,387 |
| $ | 10,000 |
| $ | 1,944 |
| $ | 2,619 |
| $ | 2,622 |
| $ | 900 |
| $ | 180,322 |
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Lovins | $ | 65,000 | – | – | $ | 18,525 | $ | 34,354 | $ | 1,944 | $ | 2,700 | $ | 1,800 | $ | 900 | $ | 125,223 | $ | 65,000 |
|
| – |
|
| – |
| – | $ | 18,850 |
| $ | 31,927 |
| $ | 3,547 |
| $ | 1,944 |
| $ | 2,619 |
| $ | 1,710 |
| $ | 900 |
| $ | 126,497 |
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Baker-Nel | $ | 50,000 |
|
| – |
|
| – |
| $3,795* | $ | 18,850 |
| $ | 18,783 |
| $ | 5,000 |
| $ | 1,944 |
| $ | 2,270 |
| $ | 2,622 |
| $ | 900 |
| $ | 104,164 |
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Stander | $ | 65,000 | – | – | $ | 18,525 | $ | 30,813 | $ | 1,944 | $ | 2,700 | $ | 2,760 | $ | 900 | $ | 122,642 | $ | 65,000 |
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| – |
|
| – |
| – | $ | 18,462 |
| $ | 32,784 |
|
| – |
| $ | 1,944 |
| $ | 2,619 |
| $ | 2,622 |
| $ | 900 |
| $ | 124,331 |
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Hill | $ | 65,000 | $ | 15,000 | $ | 3,177 | $ | 18,525 | $ | 28,830 | $ | 1,944 | $ | 2,700 | $ | 7,920 | $ | 900 | $ | 143,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Miller | $ | 65,000 | $ | 15,000 | – | $ | 18,525 | $ | 30,515 | $ | 1,944 | $ | 2,700 | $ | 7,920 | $ | 900 | $ | 142,504 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Walker | $ | 50,000 |
|
| – |
| $ | 3,125 |
| – | $ | 18,850 |
| $ | 14,446 |
|
| – |
| $ | 1,944 |
| $ | 307 |
| $ | 1,710 |
| $ | 900 |
| $ | 91,282 |
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* |
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(5) | Ms. Baker-Nel and Mr. Walker became NEOs in 2021. As permitted by SEC rules, the table shows their compensation beginning in the year in which they became NEOs. |
20202021 GRANTS OF PLAN-BASED AWARDS
The table below provides information regarding grants of plan-based incentive awards made to our NEOs during 2020.2021.
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock | Grant Date and Option |
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock | Grant Date and Option | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Award Type | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 02/27/20 | – | – | – | 21,714 | 28,546 | 57,092 | – | $ | 2,698,953 | MSUs | 03/01/21 | – | – | – | 13,808 | 16,245 | 32,490 | – | $ | 3,509,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | 02/27/20 | – | – | – | 12,451 | 24,902 | 49,804 | – | $ | 2,899,180 | PUs | 03/01/21 | – | – | – | 8,943 | 17,886 | 35,772 | – | $ | 3,537,766 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 708,125 | $ | 1,416,250 | $ | 2,832,500 | – | – | – | – | – | AIP Award | – | $ | 336,000 | $ | 1,680,000 | $ | 3,360,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 02/27/20 | – | – | – | 5,341 | 6,283 | 12,566 | – | $ | 594,042 | MSUs | 03/01/21 | – | – | – | 3,039 | 3,575 | 7,150 | – | $ | 772,438 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | 02/27/20 | – | – | – | 2,740 | 5,480 | 10,960 | – | $ | 637,999 | PUs | 03/01/21 | – | – | – | 1,968 | 3,936 | 7,872 | – | $ | 778,523 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 231,750 | $ | 463,500 | $ | 927,000 | – | – | – | – | – | AIP Award | – | $ | 99,189 | $ | 495,945 | $ | 991,890 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 02/27/20 | – | – | – | 3,454 | 4,063 | 8,126 | – | $ | 384,183 | MSUs | 03/01/21 | – | – | – | 944 | 1,111 | 2,222 | – | $ | 240,066 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | 02/27/20 | – | – | – | 1,794 | 3,587 | 7,174 | – | $ | 407,553 | PUs | 03/01/21 | – | – | – | 611 | 1,223 | 2,446 | – | $ | 241,884 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 166,539 | $ | 337,077 | $ | 666,155 | – | – | – | – | – | AIP Award | – | $ | 41,600 | $ | 208,000 | $ | 416,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anne Hill | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 02/27/20 | – | – | – | 3,409 | 4,011 | 8,022 | – | $ | 379,230 | MSUs | 03/01/21 | – | – | – | 1,965 | 2,312 | 4,624 | – | $ | 499,531 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | 02/27/20 | – | – | – | 1,750 | 3,500 | 7,000 | – | $ | 407,483 | PUs | 03/01/21 | – | – | – | 1,375 | 2,750 | 5,500 | – | $ | 505,487 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 164,402 | $ | 328,804 | $ | 657,608 | – | – | – | – | – | Special PUs | 03/01/21 | – | – | – | 1,273 | 2,547 | 5,094 | $ | 503,784 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Susan C. Miller | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 42,538 | $ | 341,404 | $ | 682,808 | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSUs | 02/27/20 | – | – | – | 3,615 | 4,253 | 8,506 | – | $ | 402,111 | MSUs | 03/01/21 | – | – | – | 979 | 1,152 | 2,304 | – | $ | 248,901 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PUs | 02/27/20 | – | – | – | 1,855 | 3,710 | 7,420 | – | $ | 431,926 | PUs | 03/01/21 | – | – | – | 634 | 1,269 | 2,538 | – | $ | 251,026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP Award | – | $ | 174,314 | $ | 348,629 | $ | 697,258 | – | – | – | – | – | AIP Award | – | $ | 68,281 | $ | 212,688 | $ | 425,376 | – | – | – | – | – |
(1) | Amounts represent threshold, target and maximum opportunities under the |
(2) | Amounts for MSUs represent threshold, target and maximum opportunities, which are paid out in shares of our common stock over one-, two-, three- and four-year performance periods provided that the absolute TSR performance objective is achieved as of the end of each period. The actual number of shares paid out at each vesting date can range from 0% to 200% of one-fourth of the target number of units on the grant date, with a threshold payout of 85%. MSUs accrue dividend equivalents during the performance period, which are earned and paid only at vesting. |
Amounts for PUs represent threshold, target and maximum opportunities for the |
(3) | The grant date fair value of MSUs was determined using the Monte-Carlo simulation method, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award. |
The grant date fair value for the performance condition component of PUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends during the performance period. The grant date fair value for the market condition component of PUs was determined as of the grant date using the Monte-Carlo simulation method described above. |
For information on the inputs to the Monte-Carlo simulation method, see footnote (2) of the |
(4) |
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20202021 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below shows NEO equity awards outstanding as of January 2, 2021,1, 2022, the end of our 20202021 fiscal year.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options – Exercisable (#) | Number of Securities Underlying Unexercised Options – Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Grant Date | Number of Securities Underlying Unexercised Options – Exercisable (#) | Number of Securities Underlying Unexercised Options – Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
06/01/16 | 141,108 | (2) | 141,108 | (2) | $ | 73.96 | 06/01/26 | – | – | – | – |
| 06/01/16 |
| 141,108 |
| – | $ | 73.96 |
| 06/01/26 |
| – |
| – |
| – |
| – | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/23/17 | – | – | – | – | – | – | 13,300 | (4) | $ | 2,062,963 |
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 11,848 | (2) | $ | 2,565,921 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 34,286 | (5) | $ | 5,318,102 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 45,071 | (3) | $ | 9,761,027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 20,453 | (4) | $ | 3,172,465 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 20,333 | (2) | $ | 4,403,518 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 48,184 | (5) | $ | 7,473,821 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 38,182 | (3) | $ | 8,269,076 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 30,149 | (4) | $ | 4,676,411 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 32,406 | (2) | $ | 7,018,167 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 38,182 | (5) | $ | 5,922,411 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 35,772 | (3) | $ | 7,747,142 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 39,787 | (4) | $ | 6,171,362 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 30,061 | (2) | $ | 6,510,311 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 141,108 | 141,108 |
|
|
| – | – | 224,341 | $ | 34,797,535 |
| 141,108 | – | – | – |
| – | – |
| 213,673 | $ | 46,275,162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/23/17 | – | – | – | – | – | – | 1,407 | (4) | $ | 218,240 |
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 2,424 | (2) | $ | 524,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
09/01/17 | – | – | – | – | 1,453 | (3) | $ | 225,375 | – | – |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 12,562 | (3) | $ | 2,720,552 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 7,009 | (5) | $ | 1,087,166 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 5,668 | (2) | $ | 1,227,519 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 4,182 | (4) | $ | 648,670 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 10,960 | (3) | $ | 2,373,607 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 13,430 | (5) | $ | 2,083,127 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 9,312 | (2) | $ | 2,016,700 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 8,404 | (4) | $ | 1,303,544 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 7,872 | (3) | $ | 1,704,839 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 10,960 | (5) | $ | 1,700,005 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 6,616 | (2) | $ | 1,432,827 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 11,432 | (4) | $ | 1,773,218 |
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|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| – |
| – |
| – |
| – |
| – |
| – |
| 55,414 | $ | 12,001,010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 631 | (2) | $ | 136,656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,340 | (3) | $ | 723,344 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 1,358 | (2) | $ | 294,102 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,864 | (3) | $ | 620,256 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,432 | (2) | $ | 526,698 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,446 | (2) | $ | 529,730 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,056 | (3) | $ | 445,268 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| – | – |
|
|
| 1,453 | $ | 225,375 | 56,824 | $ | 8,813,970 |
|
| – |
| – |
|
|
|
| – |
| – |
| 15,127 | $ | 3,276,054 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/23/17 | – | – | – | – | – | – | 1,219 | (4) | $ | 189,079 |
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 1,939 | (2) | $ | 419,929 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 4,809 | (5) | $ | 745,924 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 8,176 | (3) | $ | 1,770,676 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 3,347 | (4) | $ | 519,153 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,667 | (2) | $ | 794,162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 5,511 | (5) | $ | 854,811 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 7,174 | (3) | $ | 1,553,673 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 5,436 | (4) | $ | 843,178 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 6,022 | (2) | $ | 1,304,185 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 4,452 | (5) | $ | 690,549 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,500 | (3) | $ | 1,191,135 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 7,392 | (4) | $ | 1,146,573 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,094 | (3) | $ | 1,103,208 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 4,278 | (2) | $ | 926,486 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| – | – |
|
|
| – | – | 32,166 | $ | 4,989,267 |
|
| – |
| – |
| – |
| – |
|
| – |
| – |
| 41,850 | $ | 9,063,454 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anne Hill | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/23/17 | – | – | – | – | – | – | 2,646 | (4) | $ | 410,421 |
| 02/22/18 |
| – |
| – |
| – |
| – |
| – |
| – | 791 | (2) | $ | 171,307 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 6,100 | (5) | $ | 946,171 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 3,092 | (3) | $ | 669,634 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 3,147 | (4) | $ | 488,131 |
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 1,397 | (2) | $ | 302,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 5,954 | (5) | $ | 923,525 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,698 | (3) | $ | 584,306 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 3,927 | (4) | $ | 609,117 |
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,293 | (2) | $ | 496,595 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 2,528 | (5) | $ | 392,118 |
| 09/01/20 |
| – |
| – |
| – |
| – |
| 1,734 |
| $375,532 |
| – |
| – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 3,562 | (4) | $ | 552,502 |
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,538 | (3) | $ | 549,655 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,132 | (2) | $ | 461,727 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| – | – |
|
|
| – | – | 27,864 | $ | 4,321,985 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Susan C. Miller | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/23/17 | – | – | – | – | – | – | 2,723 | (4) | $ | 422,365 |
|
| – |
| – |
| – |
| – |
|
| 1,734 |
| $375,532 |
| 14,941 | $ | 3,235,772 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 6,280 | (5) | $ | 974,091 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/22/18 | – | – | – | – | – | – | 3,238 | (4) | $ | 502,246 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 6,312 | (5) | $ | 979,055 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/28/19 | – | – | – | – | – | – | 4,164 | (4) | $ | 645,878 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 2,680 | (5) | $ | 415,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/27/20 | – | – | – | – | – | – | 3,778 | (4) | $ | 586,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| – | – |
|
|
| – | – | 29,175 | $ | 4,525,336 |
(1) | Market value calculated based on the closing price of our common stock of |
(2) |
|
|
MSUs are eligible for vesting |
PUs are eligible for vesting at the end of a three-year performance period, subject to achievement of the |
|
|
20202021 OPTION EXERCISES AND STOCK VESTED
The table below provides information regarding the number of shares acquired and the value realized by our NEOs upon the vesting of stock awards during 2020. Amounts reflect the vesting of (i) PUs granted in 2017 for the 2017-2019 performance period, which paid out at 200% of target for all NEOs based on their respective performance objectives; (ii) the fourth tranche of MSUs granted in 2016 that paid out at 200% of target based on our 2016-2019 absolute TSR; (iii) the third tranche of MSUs granted in 2017 that paid out at 200% of target based on our 2017-2019 absolute TSR; (iv) the second tranche of MSUs granted in 2018 that paid out at 106% of target based on our 2018-2019 absolute TSR; (v) the first tranche of MSUs granted in 2019 that paid out at 147% of target based on our 2019 absolute TSR; and (vi) for Mr. Lovins, RSUs granted in 2017, the third tranche of which vested in 2020. MSU amounts include accrued dividend equivalents paid out at vesting.2021.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Shares on Exercise (#) | Value Realized on Exercise ($) |
| Number of Shares Acquired | Value Realized on Vesting ($)(1) | Number of Shares on Exercise (#) | Value Realized on Exercise ($) |
| Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | – | – | 102,498 | $ | 12,067,090 | – | – | 73,772 | $ | 13,090,841 | ||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | – | – | 14,253 | $ | 1,674,606 | – | – | 16,477 | $ | 2,993,224 | ||||||||||||||||||||||||||||||||||||||||
Dean M. Stander | ��� | – | 21,361 | $ | 2,514,831 | |||||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel | – | – | 4,523 | $ | 802,606 | |||||||||||||||||||||||||||||||||||||||||||||
Anne Hill | – | – | 20,202 | $ | 2,378,381 | |||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | – | – | 10,591 | $ | 1,879,373 | |||||||||||||||||||||||||||||||||||||||||||||
Susan C. Miller | – | – | 20,835 | $ | 2,452,905 | |||||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | – | – | 5,932 | $ | 1,093,985 |
(1) | Amounts reflect the number of shares acquired on vesting multiplied by the fair market value of our common stock on the vesting date, and include the vesting of the following stock |
Name | Award Type | Grant Date | Number of Units Subject To Vesting (#) | Performance Modifier (%) | Number of Shares Acquired on Vesting (#) | Fair Market Value on Vesting Date ($) | Value Realized on Vesting ($) | Award Type | Grant Date | Number of Units Subject to Vesting (#) | Performance Modifier (%) | Number of Shares Acquired on Vesting (#) | Fair Market Value on Vesting Date ($) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Butier |
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/25/16 | 7,542 | 200 | % | 16,332 | $ | 117.73 | $ | 1,922,767 | MSUs | 02/23/17 | 6,394 | 200 | % | 13,812 | $ | 177.45 | $ | 2,450,939 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/23/17 | 6,394 | 200 | % | 13,544 | $ | 117.73 | $ | 1,594,535 | MSUs | 02/22/18 | 5,713 | 146 | % | 8,842 | $ | 177.45 | $ | 1,569,013 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 5,713 | 106 | % | 6,297 | $ | 117.73 | $ | 741,346 | MSUs | 02/28/19 | 4,952 | 197 | % | 10,139 | $ | 177.45 | $ | 1,799,166 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 4,952 | 147 | % | 7,421 | $ | 117.73 | $ | 873,674 | MSUs | 02/27/20 | 5,462 | 120 | % | 6,693 | $ | 177.45 | $ | 1,187,673 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/23/17 | 29,452 | 200 | % | 58,904 | $ | 117.73 | $ | 6,934,768 | PUs | 02/22/18 | 23,324 | 147 | % | 34,286 | $ | 177.45 | $ | 6,084,051 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Lovins |
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 09/01/17 | 1,453 | – | 1,453 | $ | 115.39 | $ | 167,662 | RSUs | 09/01/17 | 1,453 | – | 1,453 | $ | 225.20 | $ | 327,215 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/25/16 | 823 | 200 | % | 1,786 | $ | 117.73 | $ | 210,266 | MSUs | 02/23/17 | 676 | 200 | % | 1,462 | $ | 177.45 | $ | 259,432 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/23/17 | 676 | 200 | % | 1,432 | $ | 117.73 | $ | 168,589 | MSUs | 02/22/18 | 1,168 | 146 | % | 1,806 | $ | 177.45 | $ | 320,475 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 1,168 | 106 | % | 1,286 | $ | 117.73 | $ | 151,401 | MSUs | 02/28/19 | 1,380 | 197 | % | 2,826 | $ | 177.45 | $ | 501,474 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 1,380 | 147 | % | 2,068 | $ | 117.73 | $ | 243,466 | MSUs | 02/27/20 | 1,571 | 120 | % | 1,921 | $ | 177.45 | $ | 340,881 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/23/17 | 3,114 | 200 | % | 6,228 | $ | 117.73 | $ | 733,222 | PUs | 02/22/18 | 4,768 | 147 | % | 7,009 | $ | 177.45 | $ | 1,243,747 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Baker-Nel |
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| MSUs | 02/23/17 | 190 | 200 | % | 413 | $ | 177.45 | $ | 73,287 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 304 | 146 | % | 469 | $ | 177.45 | $ | 83,224 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 331 | 197 | % | 676 | $ | 177.45 | $ | 119,956 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/27/20 | 410 | 120 | % | 502 | $ | 177.45 | $ | 89,080 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/22/18 | 1,239 | 199 | % | 2,463 | $ | 177.45 | $ | 437,059 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stander |
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| MSUs | 02/25/16 | 720 | 200 | % | 1,559 | $ | 117.73 | $ | 183,541 | MSUs | 02/23/17 | 586 | 200 | % | 1,266 | $ | 177.45 | $ | 224,652 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/23/17 | 586 | 200 | % | 1,242 | $ | 117.73 | $ | 146,221 | MSUs | 02/22/18 | 935 | 146 | % | 1,447 | $ | 177.45 | $ | 256,770 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 935 | 106 | % | 1,031 | $ | 117.73 | $ | 121,380 | MSUs | 02/28/19 | 893 | 197 | % | 1,827 | $ | 177.45 | $ | 324,201 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 893 | 147 | % | 1,337 | $ | 117.73 | $ | 157,405 | MSUs | 02/27/20 | 1,016 | 120 | % | 1,242 | $ | 177.45 | $ | 220,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/23/17 | 8,096 | 200 | % | 16,192 | $ | 117.73 | $ | 1,906,284 | PUs | 02/22/18 | 3,817 | 126 | % | 4,809 | $ | 177.45 | $ | 853,357 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Hill |
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Walker |
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| MSUs | 02/25/16 | 1,547 | 200 | % | 3,352 | $ | 117.73 | $ | 394,631 | RSUs | 09/01/20 | 866 | – | 866 | $ | 225.20 | $ | 195,023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/23/17 | 1,272 | 200 | % | 2,693 | $ | 117.73 | $ | 317,047 | MSUs | 02/23/17 | 476 | 200 | % | 1,028 | $ | 177.45 | $ | 182,419 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 1,017 | 106 | % | 1,120 | $ | 117.73 | $ | 131,858 | MSUs | 02/22/18 | 381 | 146 | % | 588 | $ | 177.45 | $ | 104,341 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 881 | 147 | % | 1,321 | $ | 117.73 | $ | 155,521 | MSUs | 02/28/19 | 340 | 197 | % | 694 | $ | 177.45 | $ | 123,150 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/23/17 | 5,858 | 200 | % | 11,716 | $ | 117.73 | $ | 1,379,324 | MSUs | 02/27/20 | 387 | 120 | % | 472 | $ | 177.45 | $ | 83,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Miller |
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| MSUs | 02/25/16 | 1,593 | 200 | % | 3,449 | $ | 117.73 | $ | 406,051 | PUs | 02/22/18 | 1,554 | 147 | % | 2,284 | $ | 177.45 | $ | 405,296 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/23/17 | 1,309 | 200 | % | 2,773 | $ | 117.73 | $ | 326,465 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/22/18 | 1,047 | 106 | % | 1,153 | $ | 117.73 | $ | 135,743 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 02/28/19 | 934 | 147 | % | 1,400 | $ | 117.73 | $ | 164,822 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PUs | 02/23/17 | 6,030 | 200 | % | 12,060 | $ | 117.73 | $ | 1,419,824 |
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The present value of accumulated pension benefits shown in the table below has been calculated based on the assumptions we used to calculate our pension benefit obligations in the consolidated financial statements contained in our 20202021 Annual Report. Since the accrual of additional benefits under this plan has been frozen since December 31, 2010, the change in present value from year to year is based primarily on the assumptions we use to determine the present value of participants’ accumulated benefits for purposes of our year-endMs. Baker-Nel audited financial statements and secondarily on the passage of time. Mr.Messrs. Stander hasand Walker are not been included in the table because he hasthey have no accumulated pension benefits.
Amounts shown reflect the lump-sum present value of the pension benefitbenefits accumulated as of January 2, 2021,1, 2022, the last day of our fiscal year.
Name | Plan Name | Number of Years of Credited Service(#) | Present Value of Accumulated Benefit(1)($) | Payments During Last Fiscal Year(1)($) | Plan Name | Number of Years of Credited Service(#) | Present Value of Accumulated | Payments During Last Fiscal | ||||||||||||||||||||||||||||||||
Mitchell R. Butier | Benefit Restoration Plan | 9.33 | $ | 377,882 | – | Benefit Restoration Plan | 9.33 | $ | 362,434 | – | ||||||||||||||||||||||||||||||
Gregory S. Lovins | Benefit Restoration Plan | 15.58 | $ | 51,224 | – | Benefit Restoration Plan | 15.58 | $ | 48,937 | – | ||||||||||||||||||||||||||||||
Anne Hill | Benefit Restoration Plan | 5.50 | $ | 283,045 | – | |||||||||||||||||||||||||||||||||||
Susan C. Miller | Benefit Restoration Plan | 21.00 | $ | 560,653 | – |
(1) | The Benefit Restoration Plan allows for lump-sum payment. For information regarding the assumptions we use to determine the present value of accumulated benefits for our pension plans, see Note 6, “Pension and Other Postretirement Benefits,” to the consolidated financial statements contained in our |
Pension Plan
We previously provided qualified retirement benefits for eligible U.S. employees under the Avery Dennison Pension Plan (the “Pension Plan”). All NEOs except for Mr. Stander were eligible to receive benefits under the Pension Plan. The accrual of additional benefits under the Pension Plan was frozen as of December 31, 2010. In September 2018, we terminated the Pension Plan. Based on their individual election, all NEOs participating in the Pension Plan either had the lump-sum value of their accrued pension benefit transferred to an annuity insurance provider or received the lump-sum value of their accrued pension benefit, in each case in fiscal year 2019.
Benefit Restoration Plan
Our Benefit Restoration Plan (BRP) is a nonqualified excess benefit plan that provides for the payment of supplemental retirement benefits to eligible participants in an amount equal to the amount by which their benefits payable under the Pension Planour now terminated U.S. pension plan would behave been reduced under the Code. AllMessrs. Butier and Lovins are our only NEOs except for Mr. Stander are eligible to receive benefits under the BRP. The accrual of additional benefits under the BRP was frozen as of December 31, 2010; as a result, no additionalNo accruals were made during 2020.2021.
Compensation covered by the BRP includes base salary and AIP awards, up to applicable statutory limitations each plan year. Employees vested in the BRP after five years of service, or at age 55 upon termination of employment. Benefits under the BRP are based on pensionable earnings, length of service, when benefits commence and how they are paid. Benefits are calculated separately for each year of applicable service using a formula equal to 1.25% times compensation up to the breakpoint (which for each year prior to our freezing the accrual of additional benefits was the average of the Social Security wage bases for the preceding 35 years) plus 1.75% times compensation in excess of the breakpoint. The results of the calculation for each year of service are added together to determine the annual single life annuity benefit under the BRP for an employee at normal retirement (generally age 65), which is not subject to reduction for Social Security payments. Payments are in the form of a lump-sum distribution, unless a timely election is made for monthly payments over the lifetime of the participant and, if applicable, a designated beneficiary, generally payable upon the later of separation from service and age 55.
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20202021 NONQUALIFIED DEFERRED COMPENSATION
The table below provides information regarding NEO and company contributions to our Executive Variable Deferred Retirement Plan (EVDRP). Under the EVDRP, participants may choose among publicly available funds ranging from money market and bond funds to index and other equity/mutual funds. Their rate of return depends on the funds selected by the participant.
Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance At Last FYE ($) | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance At Last FYE ($) | ||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | – | $ | 86,971 | $ | 392,944 | – | $ | 2,637,330 | – | $ | 73,387 | $ | 662,480 | – | $ | 3,373,198 | ||||||||||||||||||||||||||||||||||
Gregory S. Lovins | – | $ | 34,354 | $ | 66,375 | – | $ | 431,573 | – | $ | 31,927 | $ | 133,115 | – | $ | 596,615 | ||||||||||||||||||||||||||||||||||
Deena Baker-Nel | $ | 40,388 | $ | 18,783 | $ | 87,340 | – | $ | 760,929 | |||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | $ | 130,603 | $ | 30,813 | $ | 120,727 | – | $ | 871,554 | $ | 132,495 | $ | 32,784 | $ | 142,088 | – | $ | 1,178,921 | ||||||||||||||||||||||||||||||||
Anne Hill | – | $ | 28,830 | $ | 10,084 | – | $ | 894,902 | ||||||||||||||||||||||||||||||||||||||||||
Susan C. Miller | – | $ | 30,515 | $ | 518,348 | – | $ | 6,630,977 | ||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | – | $ | 14,446 | $ | 320 | – | $ | 89,077 |
(1) | Company contributions to the EVDRP are included in the “All Other Compensation” column of the |
(2) | Amounts reflect EVDRP vested account balances as of January |
Name | Aggregate Company Contributions Previously Reported ($) | Aggregate Company Contributions Previously Reported ($) | ||||||||
Butier | $ | 669,276 | $ | 756,247 | ||||||
Lovins | $ | 113,434 | $ | 147,788 | ||||||
Stander0 | $ | 80,964 | ||||||||
Baker-Nel | – | |||||||||
Hill | $ | 151,701 | ||||||||
Stander | $ | 111,777 | ||||||||
Miller | $ | 202,166 | ||||||||
Walker | – |
Executive Variable Deferred Retirement Plan
Our Executive Variable Deferred Retirement Plan (EVDRP)The EVDRP is the only active deferred compensation plan available to our eligible U.S. employees. Earnings are based on a fixed rate and/or the performance of variable bond and equity funds selected by the participant from available options. The EVDRP does not offer investment options that provide above-marketabove-market interest rates.
Eligible employees are able to defer U.S. taxes until their investment is withdrawn, providing an opportunity for them to accumulate savings on a pre-tax basis. We also benefit from this arrangement because we can use this cash for other corporate purposes until a deferred compensation account is paid to a participant based on his or her election to receive in-service withdrawals or after termination of employment.
All deferred compensation accounts are unfunded obligations of our company and subject to the same risks as any of our general debts and obligations. As a result, these accounts help mitigate risk-seeking behavior by management that could be detrimental to the long-term health of our company.
Employee Contributions
Under the EVDRP, eligible employees can defer up to 75% of their salary and 90% of their AIP award. Deferrals are immediately vested.
Company Contribution
As of January 1, 2020,2021, we made a contribution to the deferred compensation accounts of eligible employees based on 401(k) eligible earnings in excess of the Codefederal compensation limit and deferred compensation in 2019.2020. This annual contribution provided an automatic contribution of 3% of pay plus a matching contribution of 50% on the first 7% of pay not covered by company contributions to our 401(k) Plan. This contribution was added to the deferred compensation accounts of eligible employees who were employed at year-end 2019,2020, which included all our NEOs. This benefit is designed to supplement 401(k) contributions that are limited under the Code.federal law.
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Withdrawals/Distributions
Contributions to deferred compensation accounts are required to be distributed following an eligible employee’s separation from service. Subject to Section 409A of the Code, eligible employees may elect to receive separation from
Avery Dennison Corporation | 2022 Proxy Statement | 83 |
service withdrawals in the form of a lump-sum payment or monthly installments over two to 20 years. Eligible employees may change the method in which payments are distributed provided that they do so at least 12 months before the date of distribution; however, any change results in the distribution occurring or beginning five years later than it would have otherwise. All NEOs are “specified employees” under Section 409A of the Code.409A. Distributions to specified employees cannot be made until at least the seventh month after separation from service, except in the event of death.
PAYMENTS UPON TERMINATION AS OF JANUARY 2, 20211, 2022
The table below shows (i) potential benefits that would have been payable to our NEOs (other than Mses. Hill and Miller) in the event of termination on January 2, 2021,1, 2022, the last day of our 20202021 fiscal year, and (ii) benefits payable to Mses. Hill and Miller in connection with their retirements at year-end 2020.year. Amounts paid or distributed upon actual termination may differ from amounts shown due to timing and any future changes to our benefit plans.
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| Termination Scenarios as of End of Fiscal Year 2020 |
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| Termination Scenarios as of End of Fiscal Year 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Benefit | Death | Qualifying Disability | Qualifying Retirement | Involuntary Termination Not for Cause | Termination within 24 Mos. of Change of Control |
| Benefit | Death | Qualifying Disability | Qualifying Retirement | Involuntary Termination Not for Cause | Termination within 24 Mos. of Change of Control | |||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | Mitchell R. Butier |
| Mitchell R. Butier |
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Severance Payment | – | – | – | $ | 5,144,766 | $ | 7,717,150 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unvested Stock Options(1) | – | – | – | – | – | Severance Payment | – | – | – | $ | 5,808,720 | $ | 8,713,079 | |||||||||||||||||||||||||||||||||||||||||||||||
Unvested PUs(1) | $ | 3,478,342 | $ | 3,478,342 | – | – | $ | 6,698,115 | Unvested PUs(1) | $ | 4,047,549 | $ | 4,047,549 | – | – | $ | 8,008,109 | |||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | $ | 2,573,283 | $ | 2,573,283 | – | – | $ | 5,131,739 | Unvested MSUs(1) | $ | 3,240,074 | $ | 3,240,074 | – | – | $ | 6,249,951 | |||||||||||||||||||||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||||||||||||||||||||||
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Total | $ | 6,051,625 | $ | 6,051,625 | – | $ | 5,169,766 | $ | 19,572,004 | Total | $ | 7,287,623 | $ | 7,287,623 | – | $ | 5,833,720 | $ | 22,996,139 | |||||||||||||||||||||||||||||||||||||||||
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| Value of Forfeited Equity(1) | $ | (5,778,230 | ) | $ | (5,778,230 | ) | $ | (11,829,855 | ) | $ | (11,829,855 | ) | – | ||||||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | Gregory S. Lovins |
| Gregory S. Lovins |
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Severance Payment | – | – | – | $ | 1,104,633 | $ | 2,209,266 | Severance Payment | – | – | – | $ | 1,181,565 | $ | 2,363,130 | |||||||||||||||||||||||||||||||||||||||||||||
Unvested RSUs(1) | $ | 225,375 | $ | 225,375 | – | – | $ | 225,375 | Unvested PUs(1) | $ | 1,075,342 | $ | 1,075,342 | – | – | $ | 2,039,223 | |||||||||||||||||||||||||||||||||||||||||||
Unvested PUs(1) | $ | 977,710 | $ | 977,710 | – | – | $ | 1,891,566 | Unvested MSUs(1) | $ | 858,595 | $ | 858,595 | – | – | $ | 1,606,267 | |||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | $ | 673,018 | $ | 673,018 | – | – | $ | 1,382,803 | Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||||||||||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 |
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| Total | $ | 1,933,937 | $ | 1,933,937 | – | $ | 1,206,565 | $ | 6,033,620 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 1,876,103 | $ | 1,876,103 | – | $ | 1,129,633 | $ | 5,734,010 |
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Deena Baker-Nel | Deena Baker-Nel |
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Severance Payment | – | – | – | $ | 648,360 | $ | 648,360 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unvested PUs(1) | $ | 295,041 | $ | 295,041 | – | – | $ | 574,993 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | $ | 229,875 | $ | 229,875 | – | – | $ | 442,299 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | $ | 524,916 | $ | 524,916 | – | $ | 673,360 | $ | 1,690,652 | |||||||||||||||||||||||||||||||||||||||||||||||||||
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| Value of Forfeited Equity(1) | $ | (1,623,642 | ) | $ | (1,623,642 | ) | $ | (3,499,745 | ) | $ | (3,499,745 | ) | – | ||||||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | Deon M. Stander |
| Deon M. Stander |
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Severance Payment | – | – | – | $ | 911,339 | $ | 1,822,679 | Severance Payment | – | – | – | $ | 934,771 | $ | 1,869,542 | |||||||||||||||||||||||||||||||||||||||||||||
Unvested PUs(1) | $ | 651,721 | $ | 651,721 | – | – | $ | 1,255,771 | Unvested PUs(1) | $ | 900,281 | $ | 900,281 | – | – | $ | 1,924,008 | |||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | $ | 457,329 | $ | 457,329 | – | – | $ | 923,837 | Unvested MSUs(1) | $ | 555,627 | $ | 555,627 | – | – | $ | 1,039,203 | |||||||||||||||||||||||||||||||||||||||||||
Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||||||||||||||||||||||
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Total | $ | 1,109,050 | $ | 1,109,050 | – | $ | 936,339 | $ | 4,027,287 | Total | $ | 1,455,908 | $ | 1,455,908 | – | $ | 959,771 | $ | 4,857,753 | |||||||||||||||||||||||||||||||||||||||||
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Value of Forfeited Equity(1) | $ | (1,070,559 | ) | $ | (1,070,559 | ) | $ | (2,179,608 | ) | $ | (2,179,608 | ) | – | |||||||||||||||||||||||||||||||||||||||||||||||
Anne Hill(2) |
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Ignacio J. Walker | Ignacio J. Walker |
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Unvested PUs(1) | – | – | $ | 657,822 | – | – | Severance Payment | – | – | – | 662,423 | $ | 662,423 | |||||||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | – | – | $ | 480,187 | – | – | Unvested RSUs(1) | $ | 375,532 | $ | 375,532 | – | – | $ | 375,532 | |||||||||||||||||||||||||||||||||||||||||||||
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| Unvested PUs(1) | $ | 286,378 | $ | 286,378 | – | – | $ | 566,980 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | – | – | $ | 1,138,009 | – | – | Unvested MSUs(1) | $ | 227,997 | $ | 227,997 | – | – | $ | 440,873 | |||||||||||||||||||||||||||||||||||||||||||||
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| Outplacement | – | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Value of Forfeited Equity(1) | – | – | $ | (989,689 | ) | – | – |
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Susan C. Miller(2) |
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Unvested PUs(1) | – | – | $ | 697,375 | – | – | Total | $ | 889,907 | $ | 889,907 | – | $ | 687,423 | $ | 2,070,808 | ||||||||||||||||||||||||||||||||||||||||||||
Unvested MSUs(1) | – | – | $ | 513,238 | – | – |
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Total | – | – | $ | 1,210,613 | – | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Value of Forfeited Equity(1) | – | – | $ | (1,047,913 | ) | – | – |
(1) | Values for |
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In the event of termination, our NEOs other than Mses. Hill and Miller would be entitled to receive their accrued and vested balance under the EVDRP. In addition to the amounts shown in the table, each of Mses. Hill and Miller became entitled to receive her accrued and vested balance under the EVDRP as a result of her retirement at year-end 2020. These amounts would be determined and paid in accordance with the terms and conditions of the plan, and are not included in the table. See 20202021 Nonqualified Deferred Compensation for more information.
None of our NEOs has an employment contract, and all of them are employed at-will; if an NEO were no longer performing at the expected level, he or she could be terminated for cause immediately without receiving a contractually guaranteed payment. The other potential payments upon termination or a change of control are described below.
Executive Severance Plan
Our NEOs are eligible participants under the Severance Plan except that Mses. Hill and Miller, who retired from our company at year-end 2020, are no longer eligible for benefits under the Severance Plan.Effective July 1, 2020, the Compensation Committee amended and restated the Severance Plan, to provide that the AIP award portion of the Severance Plan payment be changed from the highest AIP award received during the last three years to the target AIP award for the year of termination. Upon involuntary termination not for cause, our NEOs (excluding Mses. Hill and Miller) would be entitled to the benefits shown below.
Lump-sum payment equal to
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2 For our CEO
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Outplacement services of up to $25,000 for up to one year
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1 For
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Benefits Not Subject to Gross up.Gross-up. Benefits are subject to withholding for all applicable taxes and not grossed-up for taxes.
Trigger for Benefits. Involuntary termination, which excludes termination for cause;cause or due to disability; due to death; due todisability, death, voluntary resignation;resignation, or due to an executive declining simultaneous or continuing employment in a comparable position.
Definition of Cause. Cause is defined as (i) commission of a crime or other act that could materially damage the reputation of our company or its subsidiaries; (ii) theft, misappropriation, or embezzlement of company or subsidiary property; (iii) falsification of company or subsidiary records; (iv) substantial failure to comply with written policies and procedures; (v) misconduct; or (vi) substantial failure to perform material job duties not cured within 30 days after written notice.
Key Executive Change of Control Severance Plan
The COC Severance Plan is designed to retain certain key executives during a period in which a change of control transaction is being negotiated or a hostile takeover is being attempted. Our NEOsMessrs. Butier, Lovins and Stander are the only eligible participants under the COC Severance Plan except that Mses. Hill and Miller, who retired from our company at year-end 2020, are no longer eligible for benefits under the COC Severance Plan. Effective July 1, 2020, the Compensation Committee amended and restated the COC Severance Plan, to provide that the AIP award portion of the COC Severance Plan payment be changed from the highest AIP award received for during the last three years to the target AIP award for the year of termination. ParticipantsThese NEOs are only entitled to benefits only if they are terminated not for “cause” or terminate employment for “good reason” within 24 months of the change of control (a “double trigger”). In these circumstances, ourthese NEOs (excluding Mses. Hill and Miller) would be entitled to the benefits shown below.
Lump-sum payment equal to
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3 For our CEO
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Prorated target AIP award for year in which termination occurs
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Outplacement services of up to $25,000 for up to one year
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2 For
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Benefits Not Subject to Gross-up.Gross-up. Benefits are subject to withholding for all applicable taxes and not grossed-up for excise or other taxes. However, if the payment would trigger an excise tax for a particularparticipating NEO, the NEO can elect to receive (i) his or her full benefits, with him or her responsible for paying any applicable excise taxes, or (ii) reduced benefits to an amount sufficient to eliminate any excise tax liability. In the termination payments table, we assume that any such NEOthese NEOs would elect to reduce his or her benefit.their respective benefits.
Definition of Change of Control. Change of control is defined as (i) replacement of a majority of our Board during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of our Board; or (ii) acquisition by any person, group or corporation that has entered into a merger, acquisition, consolidation, purchase, stock acquisition, asset acquisition, or similar business transaction with our company, of (A) together with any of our company’s stock previously held, more than 50% of the total fair market value or the total voting power of our company’s stock; (B) 30% or more of the total voting power of our company’s stock during any 12-month period; or (C) assets of our company having a total gross fair market value of 40% or more of the total gross fair market value of all of our company’s assets during any 12-month period.
Avery Dennison Corporation | 2022 Proxy Statement | 85 |
Definition of cause.Cause. Cause is defined as it is under the Severance Plan.
Definition of good reason.Good Reason. Good reason is defined as (i) material diminution in base compensation; (ii) material diminution in authority, duties, or responsibilities or supervisor’s authority, duties, or responsibilities; (iii) material change in geographic job location; or (iv) any other action or inaction that constitutes a material breach by our company.
Equity Incentive Plans
Under our previous Amended and Restated Stock Option and Incentive Plan last approved by our stockholders in April 2012 and our 2017 Incentive Award Plan approved by stockholders in April 2017, unvested equity awards held by our NEOs on the date of termination would vest as shown in the table below. Mses. Hill and Miller qualified as retirement eligible under our equity plans because they had reached the age of 55 and had completed over ten years of service with our company; upon their retirement as of our fiscal year-end, their unvested equity awards became eligible to vest after the end of the respective performance period on a prorated basis based on actual performance.
VESTING OF EQUITY AWARDS ON TERMINATION EVENTS | ||||||||
PUs | MSUs | RSUs | Stock Options | |||||
Resignation/Involuntary Termination, | Cancelled | Cancelled | Cancelled | Cancelled | ||||
Death | Vest at time of event on prorated basis based on target performance | Vest at time of event on prorated basis based on target performance | Vest | Cancelled | ||||
Qualifying Disability | Same as death | Same as death | Vest | Cancelled | ||||
Qualifying Retirement | Vest after end of performance period on prorated basis based on actual performance | Vest after end of performance period on prorated basis based on actual performance | Vest | Vest and exercisable | ||||
Change of | Vest based on actual, if determinable, and otherwise target performance only in event of termination without cause or for good reason within 24 months after change of control | Vest based on actual, if determinable, and otherwise target performance only in event of termination without cause or for good reason within 24 months of change of control | Vest only in event of termination without cause or for good reason within 24 months after change of control | Vest only in event of termination without cause or for good reason within 24 months after change of control |
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EQUITY COMPENSATION PLAN INFORMATION AS OF JANUARY 2, 20211, 2022
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | ||||||||||||||||||||||||
Equity compensation plans approved by security holders | Equity compensation plans approved by security holders |
| Equity compensation plans approved by security holders |
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Amended and Restated Stock | 213,994 | $ | 68.84 | – | 141,932 | $ | 73.76 | – | ||||||||||||||||||||||
2017 Incentive Award Plan(2) | 1,169,004 | – | 4,182,064 | 1,146,041 | – | 3,759,493 | ||||||||||||||||||||||||
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Total |
| 1,382,998 | $ | 68.84 |
| 4,182,064 |
| 1,287,973 | $ | 73.76 |
| 3,759,493 |
(1) | Our Amended and Restated Stock Option and Incentive Plan was last approved by stockholders in April 2012. We ceased issuing awards under this plan in March 2017. Under this plan, shares issuable under outstanding equity awards |
(2) | Our 2017 Incentive Award Plan was approved by our stockholders in April 2017. We began issuing awards under this plan in May 2017. Under this plan, shares issuable under outstanding equity awards include (i) RSUs and DSUs for non-employee directors and (ii) restricted stock awards (RSAs), RSUs, PUs and MSUs for officers and other eligible employees. Amount in column (A) includes |
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As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing thisThis disclosure about the relationship betweencompares the median annual total compensation of our employees to the annual total compensation of our CEO.
With approximately 76%75% of our 20202021 revenues originatedoriginating outside the U.S. and approximately half of our revenues having originated in emerging markets (Asia, Latin America, Eastern Europe and Middle East/Northern Africa), our employees are located in over 50 countries to best serve our customers. Approximately 87%84% of our employees at year-end 20202021 were located outside the U.S. and approximately 70%68% were located in emerging markets, where median compensation is substantially lower than it is in the U.S.
The charts shown below provide a breakdownshow the demographics of our global employee population by region and function. Approximately 19,00021,055 of our approximately 32,00036,000 employees at year-end 2021, representing nearly 60%approximately 58% of our global workforce, arewere in Asia, serving our customers in that region. In addition, approximately 67% of our global workforce worksat that time worked in the operations of our manufacturing facilities or in positions directly supporting them from other locations.
Our compensation philosophy is to offer market-based, competitive wages and benefits in all the markets where we compete for talent. All of our employees were paid at least the applicable legal minimum wage, and 97%96% of our employees were paid above the applicable legal minimum wage at year-end 2020.2021. Our CEO’s compensation is substantially driven by pay-for-performance incentive compensation, consistent with the approach used by companies of similar size, scope, complexity and performance.U.S. market practices.
20202021 PAY RATIO
The annual total compensation of our median employee (among all employees except for our CEO) was $11,460.$15,256.
• | Our CEO’s annual total compensation, as reported in the Total column of the |
Based on this information, a reasonable estimate of the 20202021 ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was approximately 760815 to 1.
We calculated this ratio based on the rules and guidance provided by the SEC. SEC rules allow for varying methodologies for companies to use in identifying their median employee; other companies may have different workforce demographics and employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their CEO pay ratios. Consequently,As a result, the CEO pay ratios reported by other companies may not be meaningful comparisons to our CEO pay ratio.
IDENTIFICATION OF MEDIAN EMPLOYEE
For purposes of identifyingTo identify our median employee, we considered annual base compensation, which is the most common pay element for all our employees, as reflected in our global human resources information system. We selected this compensation element because it represents the principal broad-based compensation element for the vast majority of our employees globally. We measured compensation for purposes of determining the median employee using the 12-month period ended December 31, 2020. We made2021, making no cost-of-living adjustments.
Avery Dennison Corporation |
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We selected October 4, 2020January 1, 2022 as the date on which to determine our median employee. As of that date, we had 31,85335,971 employees, 27,87130,320 of which were located outside of the U.S. and 22,20024,571 of which were located in emerging markets. We utilized the de minimis exemption to eliminate those countries representing no more than 5% of our global population in the aggregate. The countries excluded were Mauritius (20(19 employees), the Dominican Republic (120 employees), Pakistan (322(353 employees), Indonesia (493(527 employees) and Sri Lanka (652(669 employees), representing approximately 0.1%, 0.3%, 1.0%, 1.5% and 2.0%1.9%, respectively, of our global workforce.
To determine our medianable group, we used a statistical sampling approach known as stratified sampling to concentrate on medianable employees, which were those within a narrow range of the estimated median salary of $8,889,$10,645, because these employees were all reasonably likely to be our median employee. As a result of this statistical sampling process, we identified 936819 employees with a salary within $500 of this amount. Employees from China represented approximately 61%58% of the medianable group; as a result, we narrowed the medianable group to those 573478 employees. Finally, we identified the 165 employees who were potentially our median employee by analyzing additional qualitative and quantitative characteristics, including pay volatility.
MEDIAN EMPLOYEE COMPENSATION
Using this methodology, we determined that ourOur median employee for 2020 was a full-time, salaried employee working at a manufacturing facility in China, with annual base compensation of $9,041.$10,198. For purposes of this disclosure, we converted the employee’s base compensation from Chinese Yuan to U.S. dollars using the average monthly exchange rate during 20202021 of 0.144047279.0.1548281792.
As required by SEC rules, in determining the annual total compensation of $11,460$15,256 for our median employee, we calculated the employee’s compensation in accordance with Item 402(c)(2)(x) of Regulation S-K, consistent with how we determined our CEO’s total compensation for the 20202021 Summary Compensation Table.
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ITEM 3 – RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee – which is directly responsible for the appointment, compensation (including approval of audit and non-audit fees) and evaluation of the independent registered public accounting firm that audits our financial statements and internal control over financial reporting – has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 20212022 and our Board is seeking stockholder ratification of the appointment. Stockholder ratification is not required by our Bylaws or applicable laws and regulations. However, our Board annually submits thisthe appointment for stockholder ratification as an element of our strong governance program. If stockholders were not to ratify the appointment, the Audit Committee would reconsider whether or not to retain PwC, but could determine to do so in the committee’s discretion. In addition, even if the appointment is ratified, the Audit Committee could subsequently appoint a different independent registered public accounting firm without stockholder approval if the committee were to determine that doing so was in the best interests of our company and stockholders.
Although no formal statement from PwC is planned, representatives of the firm will be presentavailable during the Annual Meeting to answer questions from stockholders.
AUDIT COMMITTEE EVALUATION
In determining whether to reappoint PwC, the Audit Committee considered theits qualifications, performance and independence, as well as those of the firm and the audit engagement team,team; the quality of its discussions with PwC,PwC; and the fees charged by PwC for the quality and scope of services provided. In connection with the 20212022 appointment, the Audit Committee considered, among other things, the factors described below.
Audit Quality – The quality of PwC’s audit and non-audit work based on its oversight of the firm’s work product, considering the firm’s (i) compliance with accounting, auditing and regulatory requirements; (ii) deep and broad understanding of our businesses and the financial environments in which we operate; (iii) use of its experience to identify and resolve issues in a timely manner; and (iv) exercise of integrity, objectivity and professional skepticism when performing our audits, as well as itsthe committee’s discussions with management in executive session without PwC present and its discussions with PwC in executive session without management present
Performance – PwC’s report on its quality controls and its performance during our 20202021 and prior-year audits, noting the firm’s agility and strongcontinued satisfactory performance in 20202021 despite the impact of COVID-19
Qualitative Review – The results of our global survey of members of management and the Audit Committee evaluating PwC’s (i) expertise and resources,resources; (ii) quality and timeliness of audit planning,planning; (iii) communication and interaction,interaction; (iv) independence, objectivity and professional skepticismskepticism; and (v) value from fees
Self-AssessmentSelf-Assessment – PwC’s self-assessment of its performance in connection with the 20202021 audit, its satisfaction of the service needs and expectations of the Audit Committee and management, and areas of strength and improvement opportunities
Regulatory Reviews – External data on the firm’s audit quality and performance, including the most recent Public Company Accounting Oversight Board (PCAOB) reportsreport on PwC and its peer firms
Reasonableness of Fees – The appropriatenessreasonableness of PwC’s fees for audit and non-audit services, both on an absolute basis and relative to comparablepeer firms
Independence – WrittenPwC’s processes to ensure it maintains independence, written disclosures from the firm and the independence letter required by the PCAOB.PCAOB
Tenure – PwC’s tenure as our independent auditor, including therelated feedback we have received from certain of our investors and the benefits of having a longer-tenured auditor, as well as the controls we and theyPwC have in place to mitigate any potential independence risk
The Audit Committee has determined that the appointment of PwC is in the best interest of our company and stockholders. The Audit Committee has appointed subject to stockholder ratification, PwC as our independent registered public accounting firm for fiscal year 20212022 and recommends that stockholders ratify the appointment.
RECOMMENDATION OF BOARD OF DIRECTORS
Our Board recommends that you vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for fiscal year 20212022. Properly dated and signed proxies will be so voted unless you specify otherwise.
Avery Dennison Corporation |
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AUDITOR TENURE
PwC has been our independent registered public accounting firm since 1998 and served in that capacity during fiscal year 2020.2021. Through its predecessor entities, the firm has served as our independent auditor since at least 1960, which was the year our financial statements were first subject to SEC reporting requirements. We have been unable to determine the exact year PwC began serving as the independent auditor for our company. PwC remains is well-qualified to actcontinue serving as our independent registered public accounting firm, has a deep understanding of our operations and accounting practices, and maintains rigorous procedures to continuously ensure auditor independence. Some governance stakeholders, including certain of our investors, have suggested that, because longer tenure poses a risk to auditor independence.independence, the Audit Committee should consider rotating firms. After giving these views due consideration, the Audit Committee determined to appoint PwC.
The Audit Committeereappoint PwC because it continues to believe that PwC’s years of experience auditing our company confers significant benefits, including those showndescribed below.
Audit Quality – PwC has deep institutional knowledge regarding our operations, businesses, and accounting policies and practices, and optimizes its people and technology to deliver quality assurance services
Scale – PwC has a global presence with resources in virtually all of the countries in which we do business, enabling the firm to cost-effectively perform statutory audit work on our subsidiary accounts
Capability – PwC’s capability and experience handling the breadth and complexity of our global operations, including our phased worldwide implementation of a new enterprise resource planning system over the next several years
Efficiency – PwC brings customized knowledge incorporating independent judgment tailored to our audits, allowing for significant time savings
Cost – PwC is able to effectively perform the needed audit, audit-related, tax compliance, and tax planning and other services and ensure audit quality cost-competitively
In conducting its regular review of whether to appoint a new independent registered public accounting firm, among other things, the Audit Committee considers the fact that onboarding a new firm would require a significant time commitment on the part of management, potentially distracting from the paramount focus on financial reporting and internal controls, without necessarily increasing audit quality.
The Audit Committee has noted that PwC’s advanced technological tools have substantially improved the efficiency and effectiveness of its assurance procedures, enhancing the quality of its audit and making it less burdensome for our team members. These digital advancements were particularly in 2020valuable during which2021 when the firm leveraged innovation andcontinued to leverage technology to plan and complete many of its audit procedures remotely as a result of the continued impact of COVID-19.
In addition, PwC has continuously provided management and the Audit Committee with accounting/financial reporting insights and best practices relevant to our business, as well as advance notice of legislative and regulatory developments that couldhave the potential to significantly impact our company.
The Audit Committee has several controls in place to mitigate any potential independence risk related to auditor tenure, including those shown below.described below and on the following page.
Annual Review of Performance and Independence – In addition to its ongoing assessment and real-time feedback provided to PwC, the Audit Committee formally evaluates both the performance and the independence of PwC in determining whether or not to appoint the firm for the following year
Limits on Non-AuditNon-Audit Services – The Audit Committee assesses the impact providing non-audit services may have on PwC’s independence each time it approves the firm’s provision of these services, as well as during its annual assessment of the firm’s independenceindependence; our company regularly uses other independent registered public accounting firms to provide non-audit services, engaging PwC only where doing so confers significant benefits given its role as our independent auditor
90 | 2022 Proxy Statement | Avery Dennison Corporation |
Regular Consideration of Auditor Rotation – The Audit Committee regularly considers whether to change the independent registered public accounting firm based on its assessment of PwC’s audit quality, performance, compensation and independence, having most recently done so in February 2020
Executive Sessions – The Audit Committee meets regularly both with PwC without management present and with management without PwC present
Lead Engagement Partner Rotation and Selection – To regularly bring a fresh perspective to the audit, a new lead engagement partner is designated at least every five years; the Audit Committee selects the new lead engagement partner, in consultation with members of senior management and representatives of PwC
Aa new lead engagement partner was most recently designated beginning within advance of the 2019 audit. The Audit Committee interviewed the partner prior to his designation, and the Audit Committee was directly responsible for making the selection, in consultation with members of senior management and representatives from PwC. The Audit Committee anticipates that it will begin discussions with the firm regarding the next lead engagement partner in late 2022.
Oversight by Lead Relationship Partner – PwC designates a separate lead relationship partner to provide additional assurance and objective oversight; this partner meets at least annually with the Audit Committee and is available as needed to resolve any issues that may arise.
AUDITOR INDEPENDENCE
PwC has advised us that neither the firm nor any member thereof has any financial interest, direct or indirect, in any capacity in our company or our subsidiaries. As a result, PwC has confirmedsubsidiaries, confirming to the Audit Committee that it is in compliance with the rules, standards and policies of the PCAOB and the regulations of the SEC governing auditor independence.
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Among other things, the Audit Committee considers the impact providing non-audit services may have on PwC’s independence each time it approves the firm’s provision of such services, as well as during its annual assessment of the firm’s independence. In February 2021,2022, the Audit Committee reviewed the non-audit services approved by the Committeecommittee and provided by PwC during 2020,2021, including the related fees, and determined that the firm’s provision of these services did not impair PwC’s independence.
The committeeAudit Committee discussed with PwC its independence from our company, Board and management and concluded that PwC was independent during 2020.2021.
AUDITOR COMPENSATION
In negotiating and approving PwC’s feesservices and services,fees, the Audit Committee considers whether PwC is best positioned to provide the services effectively and efficiently due to its familiarity with our operations, businesses, accounting policies and practices, internal controls, and financial and information technology systems, as well as whether the services enhance our ability to manage or control risks and maintain audit quality. The Audit Committee regularly receives updates on the services renderedprovided by, and fees paid to, PwC to ensure that they are within the parameters approved by the Audit Committee.
COMMITTEE APPROVAL OF SERVICES AND FEES
The Audit Committee has adopted procedures for the pre-approval of all audit and non-audit services and fees provided by the independent registered public accounting firm. In the fourth quarter of 2019,2020, the Audit Committee approved the scope of (i) the audit, audit-related and audit-relatedother services PwC would perform duringin the 20202021 audit and (ii) permissible tax services the firm could provide during the year. The Audit Committee pre-approved the estimatedPwC’s budgeted fees for audit, feesaudit-related, tax compliance, tax planning and other services in February 2020,2021, received a mid-year updateupdates on year-to-date fees incurred in July and October of that year, and assessed the final fees in connection with its review of the results of the audit in February 2021.2022. These procedures include reviewing and approving a plan for audit and permitted non-audit services, which includes a description of, and estimated fees for, each category of audit services and non-audit services. Additional Audit Committee approval is required fornon-audit services not included in the initial plan or substantially in excess of the budgeted amount for the particular category of services. The Audit Committee has delegated interim pre-approval authority to its Chair for services not included in the audit plan; these services are reviewed withpresented for approval to the entire Audit Committee at a subsequent meeting.
Avery Dennison Corporation | 2022 Proxy Statement | 91 |
AUDIT FEES
ForIn fiscal years 20202021 and 2019,2020, PwC provided the services shown below for our company – all of which were approved by the Audit Committee under the procedures described above – for which we paid the firm the fees indicated.
2020 | 2019 | 2021 | 2020 | |||||||||||||||
Audit Fees(1) | $ | 8,455,000 | $ | 8,406,000 | $ | 8,690,000 | $ | 8,455,000 | ||||||||||
Audit-Related Fees(2) | 173,000 | 486,000 | 236,000 | 173,000 | ||||||||||||||
Tax Fees: | ||||||||||||||||||
Tax Compliance(3) | 2,190,000 | 2,358,000 | 2,610,000 | 2,190,000 | ||||||||||||||
Tax Planning(4) | 1,984,000 | 2,415,000 | 1,647,000 | 1,984,000 | ||||||||||||||
All Other Fees(5) | 15,000 | 30,000 | 16,000 | 15,000 | ||||||||||||||
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Total | $ | 12,817,000 | $ | 13,695,000 | $ | 13,199,000 | $ | 12,817,000 | ||||||||||
(1) Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to comfort letters, consents and review of our SEC filings.
(2) Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures; and audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans, as well as the audit or review of information technology systems and internal controls unrelated to the audit of the financial statements.
(3) Includes fees associated with tax compliance such as preparation of tax returns in foreign jurisdictions, tax audits and transfer pricing documentation.
(4) Includes fees for domestic and international tax planning, and tax planning related to restructuring actions, acquisitions and divestitures.
(5) Includes fees for any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources and other permissible services that do not fall within the other listed categories. |
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(1) Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to comfort letters, consents and review of our SEC filings.
(2) Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures and the audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans, as well as the audit or review of information technology systems and internal controls unrelated to the audit of the financial statements.
(3) Includes fees associated with tax compliance such as preparation of tax returns in foreign jurisdictions, tax audits and transfer pricing documentation.
(4) Includes fees for domestic and international tax planning, and tax planning related to restructuring actions, acquisitions and divestitures.
(5) Includes fees for any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources and other permissible services. |
(1) Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to comfort letters, consents and review of our SEC filings.
(2) Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures and the audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans, as well as the audit or review of information technology systems and internal controls unrelated to the audit of the financial statements.
(3) Includes fees associated with tax compliance such as preparation of tax returns in foreign jurisdictions, tax audits and transfer pricing documentation.
(4) Includes fees for domestic and international tax planning, and tax planning related to restructuring actions, acquisitions and divestitures.
(5) Includes fees for any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources and other permissible services. |
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AUDIT AND FINANCE COMMITTEE REPORT
COMPOSITION AND QUALIFICATIONS
The Audit and Finance Committee (referred to in this report as the “Committee”) of our Board of Directors (our “Board”) is comprised of the directors named at the end of this report, each of whom meets the enhanced independence and experience standards for audit committee members set forth inrequired by Securities and Exchange Commission (SEC) rules and New York Stock Exchange (NYSE) listing standards. Our Board has determined all members to be financially literate and designated each of Anthony Anderson Peter Barker and Patrick Siewert as an “audit committee financial expert” under applicable SEC regulations. Members of the Committee are prohibited from sitting on the audit committee of more than two other public companies, and all members are in compliance with this restriction.
In April 2020 – after several discussions with members of our Board, including our Chairman/CEO and our Lead Independent Director, and senior management – the Board’s Governance Committee recommended that we rotate the role of Committee Chair. Upon the recommendation of the Governance Committee, our Board appointed Martha Sullivan as Chair effective immediately after the 2020 Annual Meeting, replacing Mr. Siewert who had served in that capacity for the previous four years and remains a member of the Committee.
PRIMARY RESPONSIBILITIES
The Committee has a written charter adopted by our Board, which is available under Corporate Governance in the investors section of our website. The Committee annually reviews the charter and recommends changes to the Board for approval. The charter was last amended in February 2021.
During fiscal year 2020,2021, the Committee primarily performed the activities described below on behalf of our Board.
Reviewed and discussed with management and the independent registered public accounting firm our quarterly and annual financial results, earnings release documentation and the related reports filedwe file with the SEC
Reviewed and discussed with management, theour Vice President of Internal Audit and the independent registered public accounting firm our internal controls report and the independent registered public accounting firm’s attestation thereof
Evaluated the qualifications, performance and independence of the independent registered public accounting firm and met with representatives of the firm to discuss the scope, budget, staffing and progress of the firm’sits audit and considered whether to change the firm in February 2020
Supervised theour Vice President of Internal Audit with respect to the scope, budget, staffing and progress of the internal audit and evaluated his personal performance, as well as the performance of the internal audithis function
Discussed significant financial risk exposures, including our cybersecurity risk management program and risks related to our company’s information technology controls and security, and the steps taken by management to monitor and control these exposures
OVERSIGHT OF CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for our consolidated financial statements, accounting and financial reporting policies, internal control over financial reporting, and disclosure controls and procedures. The Committee appointed the independent registered public accounting firm of PricewaterhouseCoopers LLP (PwC) to provide audit, audit-related and tax compliance services, with limited tax planning and other non-auditservices to the extent approved by the Committee. PwC was responsible for performingperformed an independent audit of our 2021 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and issuingissued an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America (GAAP). The Committee’s responsibility is to monitor and oversee our accounting and financial reporting processes and the audits of our consolidated financial statements and internal control over financial reporting. The members of the Committee are not professionally engaged in the practice of auditing or accounting and rely without independent verification on the information provided to them and the representations made by management and PwC.
The Committee reviewed and discussed our consolidated financial statements and related footnotes for the fiscal year ended January 2, 20211, 2022 – including our company’s critical accounting policies and management’s significant estimates and judgments – with management and PwC, as well as PwC’s report and unqualified opinion on the audit. Management represented to the Committee and PwC that our consolidated financial statements were prepared in accordance with GAAP. PwC presented the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees as adopted by the PCAOB and currently in effect.. The Committee received these written disclosures and the letters from PwC required by the applicable requirements of the PCAOB regarding communications concerning
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independence – including Rule 3524, Audit Committee Pre-approvalPre-approval of Certain Tax Services, and Rule 3526, Communication with Audit Committees Concerning Independence, – and discussed with PwC its independence from our company, Board and management.
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Based on the Committee’s review and discussions with management and PwC described above, as well as the Committee’s review of the representations of management and the audit report and unqualified opinion of PwC, the Committee recommended that our Board approve the inclusion of the audited consolidated financial statements for theour fiscal year ended January 2, 20211, 2022 in our Annual Report on Form 10-K filed with the SEC.
OVERSIGHT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Committee’s responsibilityCommittee is to appointresponsible for appointing the independent registered public accounting firm, and monitormonitoring and overseeoverseeing the firm’s qualifications, compensation, performance and independence. In this capacity, the Committee reviewed with PwC the overall scope of services and fees for its audit, and monitored the progress of PwC’s audit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the firm’s findings and required resources.
PwC provided to the Committee the written disclosures and independence letter required by the PCAOB. The Committee discussed with PwC its independence from our company and management and concluded that PwC was independent during fiscal year 2020.2021. The Committee has a policy requiring pre-approval of fees for audit, audit-related, tax compliance, tax planning and other services and has concluded that PwC’s provision of limited non-audit services to our company in 20202021 was compatible with maintaining its independence.
Under its charter, the Committee is required to regularly consider whether it is appropriate to change the independent registered public accounting firm, having most recently formally evaluated with management and PwC whether it may be appropriate to do so in February 2020. With a view to ensuring that audit quality would continue to be paramount and recognizing that PwC was continuing to independently and appropriately challenge management, the Committee determined at that time to retain PwC, noting the firm’s strong performance during the 2019 audit.and consistently improving service delivery.
The Committee has determined that the appointment of PwC as our independent registered public accounting firm for fiscal year 20212022 is in the best interest of our company and stockholders. The Committee has appointed PwC in this capacity and recommends that stockholders ratify the appointment.
OVERSIGHT OF INTERNAL AUDIT
The Committee’s responsibility is to monitor and oversee our internal audit function, reviewing the significant audit results reported to management and management’s responses thereto. In this capacity, the Committee reviews with theour Vice President of Internal Audit the overall scope and budget for the internal audit, and regularly monitors the progress of the internal audit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including key findings and required resources. The Committee directly supervises theour Vice President of Internal Audit in the conduct of his operational responsibilities and evaluates his individual performance as well as that of the entire internal audit function.
EXECUTIVE SESSIONS
The Committee regularly meets separately in executive session without management present with each of theour Vice President of Internal Audit and PwC to review and discuss their evaluations of the overall quality of our accounting and financial reporting and internal control. The Committee also periodicallyregularly meets, without PwC or theour Vice President of Internal Audit present, with management, our CFO and our Controller/CAO, and meets as wellneeded with other members of management such as occasionally with each of our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer,CEO and Chief Legal Officerour CLO, to discuss, among other things, significant risk exposures impacting our financial statements and accounting policies.
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STOCKHOLDER FEEDBACK
The Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints regarding our accounting, internal controls and auditing matters. See Complaint Procedures for Accounting and Auditing Matters in the Governance section of this proxy statement. The Committee welcomes feedback regarding its oversight of our audit and finance programs. Stockholders may communicate with the Committee by writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Martha N. Sullivan, Chair
Anthony K. Anderson
Peter K. Barker
Andres A. Lopez
Patrick T. Siewert
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SECURITY OWNERSHIP INFORMATION
SECURITY OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS
The table below shows the number of shares of our common stock beneficially owned by our (i) directors; (ii) NEOs; (iii) current directors and executive officers as a group; and (iv) greater-than-five-percent, or “significant,” stockholders, in each case as of the February 22, 202128, 2022 record date for the Annual Meeting (except for Mses. Hill and Miller, for which information is provided as of the end of our 2020 fiscal year). “Beneficial ownership”Meeting. Beneficial ownership means that the individual, group or entity, directly or indirectly, has or shares with others the power to vote (or direct the voting of) or the power to dispose of (or direct the disposition of) the shares; the individual, group or entity may or may not have any economic interest in the shares. The inclusion of information in the table does not constitute an admission that the individual, group or entity is, for the purposepurposes of Section 13 or 16 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), the beneficial owner of the shares shown.
Name of Beneficial Owner | Common Stock(1) | Number of Rights Exercisable and Vesting within 60 Days(2) | Number of Shares Beneficially Owned | Percent of Class(3) | Common Stock(1) | Number of Rights Exercisable and Vesting within 60 Days(2) | Number of Shares Beneficially Owned | Percent of Class(3) | ||||||||||||||||||||||||||||||||
Directors | ||||||||||||||||||||||||||||||||||||||||
Bradley A. Alford | 19,765 | 26,153 | 45,918 | * | 21,563 | 20,575 | 42,138 | * | ||||||||||||||||||||||||||||||||
Anthony K. Anderson | 4,276 | 11,266 | 15,542 | * | 3,382 | 11,895 | 15,277 | * | ||||||||||||||||||||||||||||||||
Peter K. Barker | 31,160 | 31,855 | 63,015 | * | ||||||||||||||||||||||||||||||||||||
Mark J. Barrenechea | 2,294 | 1,849 | 4,143 | * | 3,744 | 2,356 | 6,100 | * | ||||||||||||||||||||||||||||||||
Mitchell R. Butier | 210,109 | 216,006 | 426,115 | * | 243,041 | 226,442 | 469,483 | * | ||||||||||||||||||||||||||||||||
Ken C. Hicks | 26,760 | 20,936 | 47,696 | * | 28,210 | 14,808 | 43,018 | * | ||||||||||||||||||||||||||||||||
Andres A. Lopez | 4,873 | 1,115 | 5,988 | * | 6,323 | 1,275 | 7,598 | * | ||||||||||||||||||||||||||||||||
Patrick T. Siewert | 15,035 | – | 15,035 | * | 16,050 | – | 16,050 | * | ||||||||||||||||||||||||||||||||
Julia A. Stewart | 19,400 | 40,720 | 60,120 | * | 20,850 | 41,829 | 62,679 | * | ||||||||||||||||||||||||||||||||
Martha N. Sullivan | 14,418 | 12,140 | 26,558 | * | 15,868 | 12,891 | 28,759 | * | ||||||||||||||||||||||||||||||||
Non-Director NEOs | ||||||||||||||||||||||||||||||||||||||||
Non-director NEOs | ||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | 33,297 | 14,878 | 48,175 | * | 38,948 | 22,169 | 62,117 | * | ||||||||||||||||||||||||||||||||
Deena Baker-Nel | 2,363 | 5,844 | 8,207 | * | ||||||||||||||||||||||||||||||||||||
Deon M. Stander | 25,740 | 10,480 | 36,220 | * | 31,623 | 11,650 | 43,273 | * | ||||||||||||||||||||||||||||||||
Anne Hill | 20,556 | 13,284 | 33,840 | * | ||||||||||||||||||||||||||||||||||||
Susan C. Miller | 11,134 | 13,766 | 24,900 | * | ||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | 3,529 | 5,749 | 9,278 | * | ||||||||||||||||||||||||||||||||||||
All current directors and executive officers as a group (16 persons) | 436,470 | 407,590 | 844,060 | 1.0 | % | |||||||||||||||||||||||||||||||||||
All current directors and executive officers as a group (15 persons) | 465,131 | 390,794 | 855,925 | 1.0 | % | |||||||||||||||||||||||||||||||||||
Significant stockholders | ||||||||||||||||||||||||||||||||||||||||
The Vanguard Group(4) | 9,301,610 | – | 9,301,610 | 11.2 | % | 9,649,647 | – | 9,649,647 | 11.7 | % | ||||||||||||||||||||||||||||||
BlackRock, Inc.(5) | 6,093,371 | – | 6,093,371 | 7.3 | % | 6,726,210 | – | 6,726,210 | 8.2 | % | ||||||||||||||||||||||||||||||
T. Rowe Price Associates, Inc.(6) | 6,670,587 | – | 6,670,587 | 8.0 | % | 5,486,584 | – | 5,486,584 | 6.7 | % |
(1) | Except as otherwise noted herein, each director, NEO and current executive officer has sole voting and investment power with respect to the shares indicated and no shares have been pledged as security by any such person. Includes for the following beneficial owners the following amounts of shares held in our employee savings plan |
(2) | Numbers reported in this column are not entitled to vote during the Annual Meeting. Includes the following number of DSUs deferred through the DDECP by the following directors as of February |
(3) | Percent of class based on |
(4) | Number of shares beneficially owned based on information as of December 31, |
(5) | Number of shares beneficially owned based on information as of December 31, |
(6) | Number of shares beneficially owned based on information as of December 31, |
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Both our Code of Conduct and our Conflict of Interest Policy (“COI Policy”) provide that conflicts of interest should be avoided. Under our Governance Guidelines, Board members are expected to comply with our Code of Conduct and avoid any action, position or interest that conflicts with the intereststhose of our company, or gives the appearance of a conflict. Our COI Policy proscribes any of our officers (including our executive officers) or employees – or any of their immediate family members – from directly or indirectly doing business, seeking to do business or owning an interest in an entity that does business or seeks to do business with our company without approval in writing from the Governance Committee. Under our COI Policy, any officer or employee who has a question as to the interpretation of the policy or its application to a specific activity, transaction or situation may submit the question in writing to our Chief Compliance Officer or our Chief Legal Officer for any further necessary review by the Governance Committee.
Each year,Generally on an annual basis, all employees at the level of manager and above and all non-supervisory professionals are required to complete a compliance certification in which they must (i) disclose, among other things, whether they or any of their immediate family members have a job, contract or other position with an entity that has commercial dealings with our company and (ii) certify that they have complied with our Code of Conduct and company policies. All disclosures are reviewed by our compliance and law departments in consultation with senior management to determine whether the activity has the potential to significantly influence our business. The Governance Committee receives a report from our Chief Compliance Officer on the disclosures elicited in the annual compliance certification and, in the event that an unresolved disclosure potentially gives rise to a significant conflict of interest, determines whether a conflict of interest exists or whether there is a reasonable likelihood that the activity, transaction or situation would influence the individual’s judgment or actions in performing his or her duties for our company. In 2021, we temporarily suspended the compliance certification process to allow our Corporate Compliance team to implement improvement opportunities aligned upon with an independent third party expert we engaged to benchmark our compliance program. We plan on launching the improved certification process in 2022.
In addition, each of our directors and executive officers annually completes a questionnaire designed to solicit information about any potential related person transactions. Transactions involving directors are reviewed with the Governance Committee by our Corporate Secretary in connection with the annual assessment of director independence and review of related person transactions.independence. Responses from executive officers are reviewed by our Corporate Secretary with oversight by the Governance Committee in the event any transactions are identified.
We review internal financial records to identify transactions with security holders known by us from information contained in Schedules 13D or 13G filed with the SEC to be beneficial owners of more than five percent of our common stock to determine whether we have any relationships with the security holders that might constitute related person transactions under Item 404(a) of Regulation S-K. Our Corporate Secretary discusses any such findings with the Governance Committee.
During fiscal year 2020,2021, there were no related person transactions requiring disclosure under SEC rules and regulations. To our knowledge, all related person transactions were subject to reviewreviewed under our policies and procedures.
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ANNUAL REPORT AND PROXY MATERIALS
WHEN WILL I RECEIVE THE 20202021 ANNUAL REPORT?
We expect to mail or make available our 20202021 Annual Report to all stockholders of record on or about March 8, 2021.15, 2022.
HOW DO I ACCESS THE 20212022 PROXY MATERIALS?
We have elected to provide access to our proxy materials on the internet. Accordingly, we are sending the Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record. Brokers, banks and other nominees (collectively, “nominees”) who hold shares on behalf of beneficial owners (also called “street name” holders) will send a similar notice. You will have the ability to access our proxy materials on the website referred to in the Notice. Instructions on how to request printed proxy materials by mail, including an option to receive paper copies in the future, may be found in the Notice and on the website referred to in the Notice.
On or about March 8, 2021,15, 2022, we intend to make this proxy statement available online and mail the Notice to all stockholders entitled to vote. WeOn or about the same date, we intend to mail this proxy statement, together with a proxy card, to stockholders entitled to vote during the Annual Meeting who have previously requested paper copies on or about March 8, 2021.copies. In addition, if you request paper copies of these materials for the first time, they will be mailed within three business days of your request. If you hold your shares in street name, you may request paper copies of the proxy statement and proxy card from your nominee by following the instructions on the notice your nominee provides to you.
Stockholders of record may obtain a copy of this proxy statement without charge by writing to our Corporate Secretary Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.at 8080 Norton Parkway, Mentor, Ohio 44060.
WHAT IS HOUSEHOLDING?
We have adopted a procedure approved by the SEC called householding. Under this procedure, we will deliver a single copy of our 20202021 integrated sustainability and annual report, which includes our 20212022 notice and proxy statement, to stockholders sharing the same address. Householding allows us to reduce our printing and postage costs, and prevents duplicative information from being received at your household. Householding affectshousehold and impacts only the delivery of proxy materials; it does not impact the delivery of dividend checks.
For holders who share a single address, we are sending only one integrated report to that address unless we have received instructions to the contrary from any stockholder at that address. If you wish to receive an additional copy of our integrated report, or if you receive multiple copies of our integrated report and wish to receive a single copy in the future, you may make your request by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
If you are a street name holder and wish to revoke your consent to householding and receive separate copies of our proxy statement and annual report in future years, you may call Broadridge Investor Communications Services toll-free at 866.540.7095 in the U.S. and Canada or write them c/o Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
HOW CAN I ACCESS THE ANNUAL REPORT AND PROXY MATERIALS ELECTRONICALLY?
Instead of receiving paper copies of proxy statements and annual reports by mail in the future, you can elect to receive an email that will provide a link to these documents on the internet. By electing to access proxy materials online, you can access them more quickly, save us the cost of printing and mailing them to you, reduce the amount of mail you receive from us, and help us preserve environmental resources.
You may enroll to access proxy materials and annual reports electronically for future Annual Meetings by registering online at the following website: https://enroll.icsdelivery.com/avy. If you are voting online, you can follow the links on the voting website to reach the electronic enrollment website.
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VOTING
WHO IS ENTITLED TO VOTE?
Stockholders of record as of the close of business on February 22, 202128, 2022 are entitled to notice of, and to vote at, the Annual Meeting. Our common stock is the only class of shares outstanding, and there were 83,019,45682,355,333 shares of common stock outstanding on February 22, 2021.28, 2022. The list of stockholders entitled to vote will be available for inspection during the virtual Annual Meeting, as well as starting 10 days before the Annual Meeting during regular business hours at our company headquarters.headquarters in Mentor, Ohio. You are entitled to one vote for each share of common stock you held on the record date.
HOW DO I VOTE?
You may vote by submitting a proxy or voting during the Annual Meeting at www.virtualshareholdermeeting.com/AVY2021.AVY2022. If you hold your shares in street name, you may only vote during the meeting if you properly request and receive a legal proxy in your name from the nominee that holds your shares.
The method of voting by proxy differs depending on whether you are viewing this proxy statement online or reviewing a paper copy.
If you are viewing this proxy statement online, you may vote your shares by (i) submitting a proxy by telephone or online by following the instructions on the website or (ii) requesting a paper copy of the proxy materials and following one of the methods described below.
If you are reviewing a paper copy of this proxy statement, you may vote your shares by (i) submitting a proxy by telephone or online by following the instructions on the proxy card or (ii) completing, dating and signing the proxy card included with the proxy statement and returning it in the preaddressed, postage-paid envelope provided.
Whether or not you plan to attend the Annual Meeting, we urge you to vote promptly using one of the methods described in the proxy materials. We encourage you to vote by telephone or online since these methods immediately record your vote and allow you to confirm that your votes have been properly recorded. Telephone and online votes must be received by 11:59 p.m. Eastern Time on April 21, 2021.27, 2022.
WHAT IF MY SHARES WERE ACQUIRED THROUGH THE DIRECT SHARE PURCHASE AND SALE PROGRAM?
Shares acquired through our Direct Share Purchase and Sale Program may be voted by following the procedures described above.
WHAT IF MY SHARES ARE HELD IN THE EMPLOYEE SAVINGS PLAN?
If you hold shares as a participant in our Employee Savings (401(k)) Plan, your vote serves as a voting instruction to Fidelity Management Trust Company, the trustee of the plan, on how to vote the shares you hold through the plan.your shares. Your voting instruction must be received by the trustee by 11:59 p.m. Eastern Time on April 19, 2021.25, 2022.
If the trustee does not receive your instruction in a timely manner, your shares will be voted in the same proportion as the shares voted by participants in the plan who timely furnish instructions. Shares of our common stock that have not been allocated to participant accounts will also be voted by the trustee in the same proportion as the shares voted by participants in the plan who timely furnish instructions.
HOW DO I REVOKE MY PROXY OR CHANGE MY VOTE AFTER I HAVE VOTED?
If you give a proxy pursuant to this solicitation, you may revoke it at any time before it is acted upon during the Annual Meeting by (i) submitting another proxy by telephone or online (only your last voting instructions will be counted); (ii) sending a later dated paper proxy; (iii) delivering to our Corporate Secretary a written notice of revocation prior to the voting of the proxy during the Annual Meeting; or (iv) if you are entitled to do so, voting during the Annual Meeting. Simply attending the Annual Meeting will not revoke your proxy.
If your shares are held in street name, you may only change your vote by submitting new voting instructions to your nominee. You must contact your nominee to find out how to change your vote. Shares held in our Employee Savings Plan cannot be changed or revoked after 11:59 p.m. Eastern Time on April 19, 2021,25, 2022, nor can they be voted during the Annual Meeting.
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IS MY VOTE CONFIDENTIAL?
Except in contested proxy solicitations, when required by law or as authorized by you (such as by making a written comment on your proxy card, in which case the comment, but not your vote, willmay be shared with our company), your vote or voting instruction is confidential and will not be disclosed other than to the broker, trustee, agent or other entity tabulating your vote.
HOW WILL VOTES BE COUNTED?
Votes cast by proxy or during the Annual Meeting will be tabulated by a representative from Broadridge Financial Solutions, Inc., the independent inspector of election appointed by our Board. The inspector of election will also determine whether a quorum is present. During the Annual Meeting, shares represented by proxies that reflect abstentions or “brokerbroker non-votes”non-votes (which are shares held by a nominee that are represented during the meeting, but with respect to which the nominee neither has discretionary authority to vote nor has been given actual authority to vote on a particular item) will be counted as shares that are present and entitled to vote during the Annual Meeting for purposes of determining the presence of a quorum. Items 1 and 2 are “non-routine”non-routine under the rules of the NYSE, and Item 3 is routine. Nominees are prohibited from voting on non-routine items in the absence of instructions from the beneficial owners of the shares; as a result, if you hold your shares in street name and do not submit voting instructions to your nominee, your shares will not be voted on Item 1, election of directors, or Item 2, approval, on an advisory basis, of our executive compensation. We urge you to promptly provide voting instructions to your nominee so that your vote is counted.
The vote required to approve each of the Annual Meeting items, as well as the impact of abstentions and broker non-votes, is shown in the chart below.
Item | Vote Required | Impact of Abstentions | Impact of Broker Non-Votes | |||||
1 | Election of directors | Majority of votes cast | Not counted as votes cast; no impact on outcome | Not counted as votes cast; no impact on outcome | ||||
2 | Advisory vote to approve executive compensation | Majority of shares represented and entitled to vote | Negative impact on outcome | Not counted as represented and entitled to vote; no impact on outcome | ||||
3 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year | Majority of shares represented and entitled to vote | Negative impact on outcome | Not applicable |
WHAT IF THERE IS ADDITIONAL BUSINESS TO BE VOTED ON?
As of the date of this proxy statement, we know of no other business to be presented for consideration during the meeting. If any other business properly comes before the meeting, your vote will be cast on any such other business in accordance with the best judgment of the individuals acting pursuant to your proxy.
HOW DO I FIND VOTE RESULTS?
We expect to announce preliminary voting results during the Annual Meeting and report final voting results in a Current Report on Form 8-K filed with the SEC on or before April 28, 2021.May 4, 2022.
ANNUAL MEETING INFORMATION
WHAT IS THE TIME, DATE AND FORMAT OF THE ANNUAL MEETING?
Due to continued public health concerns about large, indoor in-person gatherings given the COVID-19 pandemic, particularly in Los Angeles County, California, the Annual Meeting will take place at 1:30 p.m. PacificEastern Time on April 22, 202128, 2022 virtually, with attendance via the internet.
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HOW CAN I ATTEND THE VIRTUAL MEETING?
To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2021AVY2022 using the 16-digit control number on the notice andNotice or proxy card mailed or made available to you on or about March 8, 2021. The15, 2022.
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Online access to the live audio webcast of the Annual Meeting will begin promptlyopen at 1:3015 p.m. Pacific Time. Online access to the audio webcast will open 15 minutes prior to the start of the Annual MeetingEastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the meeting in advance of theits designated start time.time as we plan to begin conducting the meeting promptly.
HOW DO I ASK QUESTIONS DURING THE MEETING?
We have designed the format of thevirtual Annual Meeting to ensure that stockholders are affordedyou have the same rights and opportunities to participate as theyyou would at an in-person meeting, using easy-to-useonline tools that allow you to allow stockholders to more easily attend, vote and participate, which may have been more difficult for certain stockholders for in-person meetingsask questions. Only stockholders as of the record date or their properly appointed proxies may ask questions during the meeting, and our Chairman may limit the length of discussion on any particular matter. On the day of, and during, the Annual Meeting, you can view our Ground Rules for Conduct of Meeting and submit questions on www.virtualshareholdermeeting.com/AVY2021.AVY2022.
After the business portion of the Annual Meeting concludes and the meeting is adjourned, we will hold a Q&A session during which we intend to answer all questions submitted before or during the meeting that are pertinent to our company and the items being brought before stockholder vote during the Annual Meeting, as time permits and in accordance with our Ground Rules for Conduct of Meeting.Answers to any questions not addressed during the meeting will be posted promptly after the meeting on the investors section of our website. Questions and answers will be grouped by topic and substantially similar questions will be answered only once. To promote fairness and ensure all stockholder questions are able to be addressed, we will respond to no more than three questions from any single stockholder.Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website.
As a result of time constraints and other considerations, we cannot assure you that every stockholder wishing to address the meeting will have the opportunity to do so. However, all stockholders are invited to direct inquiries or comments regarding business matters to our Investor Relations department by email to investorcom@averydennison.com or by mail to Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060. In addition, stockholders wishing to address matters to our Board or any of its members may do so as described under Contacting Our Board in the Our Board of Directors section of this proxy statement.
WHAT DO I DO IF I AM HAVING TECHNICAL ISSUES ACCESSING OR PARTICIPATING IN THE MEETING?
Beginning 15 minutes prior to, and during, the Annual Meeting, we will have support available to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulty accessing, or during, the virtual meeting, please call the support team at 1.844.986.0822 (toll-free in the U.S. and Canada) or +1.303.562.9302 (for international participants).
HOW ARE PROXIES BEING SOLICITED?
We have retained D.F. King & Co., Inc. to assist in soliciting proxies for a fee of $12,000, plus reimbursement of out-of-pocket expenses incident to preparing and mailing our proxy materials. Some of our employees may solicit proxies by telephone or email; these employees will not receive any additional compensation for their proxy solicitation efforts. We will bear all costs related to this solicitation of proxies and we will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses they incur in forwarding our proxy materials to beneficial stockholders. You can help reduce these costs by accessing our proxy materials electronically.
MATTERS RELATED TO 20222023 ANNUAL MEETING
HOW DO I SUBMIT ITEMS FOR POTENTIAL CONSIDERATION AT THE 20222023 ANNUAL MEETING?
To propose business otherwise satisfying the eligibility requirements of SEC Rule 14a-8 to be considered for inclusion in our proxy statement for the 20222023 Annual Meeting, you must provide notice of proposed items so they are received at our principal executive offices on or before November 8, 2021.15, 2022. If you wish to nominate persons for election to our Board or bring any other business before an annual meeting under the advanced notice provisions or our Bylaws, you must notify our Corporate Secretary at our principal executive offices in writing 90 to 120 days prior to the first anniversary of the preceding year’s annual meeting (with respect to the 20222023 Annual Meeting, no earlier than December 23, 202129, 2022 and no later than January 22, 2022)28, 2023).
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Your notice must include, among other things, the information described below.
As to each person who you propose to nominate for election or reelection as a director:
• All information relating to the person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or is otherwise required pursuant to Regulation 14 under the Exchange Act
• The person’s written consent to be named in our proxy statement as a nominee and serve as a director if elected
• A description of any material relationships between you (and your associates and affiliates) and the nominee (and his or her associates and affiliates), as more particularly set forth in our Bylaws
As to any other item of business you propose to bring before the meeting, a brief description of the business, the reasons for conducting the business during the meeting and any material interest you have in the business being proposed
Your name and address, and class and number of shares you own beneficially and as of record, as well as information relating to your security ownership in our company, as described in greater detail in Article II, Section 14 of our Bylaws, which are available under Corporate Governance in the investors section of our website under Corporate Governance
Stockholder items of business that do not fully comply with the advance notice requirements contained in our Bylaws will not be permitted to be brought before the 20222023 Annual Meeting. In addition to satisfying the foregoing requirements under our Bylaws, to comply with the SEC’s universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than our company’s nominees must provide written notice to our Corporate Secretary at our principal executive offices that includes the information required by Rule 14a-19 under the Exchange Act no later than February 22, 2023.
We intend to file a proxy statement and a WHITE proxy card with the SEC in connection with our solicitation of proxies for the 2023 Annual Meeting.
HOW DO I NOMINATE DIRECTORS FOR INCLUSION IN THE 20222023 PROXY STATEMENT?
Our Bylaws permit a stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company’s outstanding shares of common stock continuously for at least three years to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two nominees or 20% of our Board, subject to the requirements specifiedcontained in Article II, Section 17 of our Bylaws, which are available under Corporate Governance in the investors section of our website under Corporate Governance.website. Notice of proxy access director nominees for the 20222023 Annual Meeting must be delivered to our Corporate Secretary at our principal executive offices no earlier than October 9, 202116, 2022 and no later than November 8, 202115, 2022 and must otherwise comply with our Bylaws.
Avery Dennison Corporation |
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FROM GAAP
We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of our financial results that are prepared in accordance with GAAP. Based uponon feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are useful to their assessment of our performance and operating trends, as well as liquidity.
Our non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it difficult to assess our underlying performance in a single period and full year.period. By excluding the accounting effects, both positive or negative, of certain items (such as restructuring charges, outcomes of certain legal settlements,proceedings, certain effects of strategic transactions and related costs, losses from debt extinguishments, gains or losses from curtailment or settlement of pension obligations, gains or losses on sales of certain assets, gains or losses on venture investments, and other items), we believe that we are providing meaningful supplemental information that facilitates an understanding of our core operating results and liquidity measures. While some of the items we exclude from GAAP financial measures recur, they tend to be disparate in amount, frequency or timing.
We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for a single periodquarters and full year.year-to-date periods, as applicable.
We use the following non-GAAP financial measures described below in this proxy statement:statement.
• | Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation, and, where applicable, an extra week in our fiscal year and the calendar shift resulting from the extra week in the prior fiscal year and currency adjustment for transitional reporting of highly inflationary |
• | Organic sales change refers to sales change ex. currency, excluding the estimated impact of acquisitions and product line |
We believe that sales change ex. currency and organic sales change assists investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period. |
• | Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net sales. Adjusted EBITDA is adjusted operating income before depreciation and amortization. Adjusted operating income is income before taxes; interest expense; other non-operating expense (income), net; and other expense (income), net. We believe that adjusted EBITDA margin assists investors in understanding our core operating trends and comparing our results with those of our competitors. |
• | Adjusted net income per common share, assuming dilution (adjusted EPS), refers to adjusted net income divided by weighted average number of common shares outstanding, assuming dilution. Adjusted net income is income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges and other items. Adjusted tax rate is the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as |
• | Free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments. Free cash flow is also adjusted for, where applicable, certain acquisition-related transaction costs and the cash contributions related to the termination of our U.S. pension plan. We believe that free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases, and acquisitions. |
102 | 2022 Proxy Statement | Avery Dennison Corporation |
• | Return on total capital incl. acquisition amortization (ROTC) refers to net income excluding the expense and tax benefit of debt financing divided by the average of beginning and ending invested capital. ROTC excl. acquisition amortization refers to ROTC adjusted for the impact of amortization of intangible assets from acquisitions. We believe that ROTC incl. acquisition amortization and ROTC excl. acquisition amortization assist investors in understanding our ability to generate returns from our capital. |
• | Adjusted EBIT refers to earnings before interest expense and taxes, excluding non-cash restructuring costs, acquisitions completed since the targets were set, and other items. We believe that adjusted EBIT assists investors in understanding our core operating trends and comparing our results with those of our competitors. We use adjusted EBIT to calculate economic value added (EVA), one of the performance objectives used in our long-term incentive compensation program. |
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ORGANIC SALES CHANGE
($ in millions) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016-2020 5-YR CAGR(1) | 2017-2020 4-YR CAGR(2) | 2017 | 2018 | 2019 | 2020 | 2021 | 2017-2021 5-YR CAGR(1) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 6,086.5 | $ | 6,613.8 | $ | 7,159.0 | $ | 7,070.1 | $ | 6,971.5 | 3.2% | 3.5% | $ | 6,613.8 | $ | 7,159.0 | $ | 7,070.1 | $ | 6,971.5 | $ | 8,408.3 | 6.7% | |||||||||||||||||||||||||
Reported sales change | 2.0% | 8.7% | 8.2% | (1.2)% | (1.4)% |
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Reported net sales change | 8.7% | 8.2% | (1.2)% | (1.4)% | 20.6% |
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Foreign currency translation | 2.6% | (0.5)% | (1.4)% | 3.3% | 0.9% |
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| (0.5)% | (1.4)% | 3.3% | 0.9% | (3.4)% |
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Extra week impact | – | – | – | – | (1.3)% |
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Sales change ex. currency (non-GAAP) | 4.6% | 8.2% | 6.9% | 2.0% | (1.7)% | 3.9% | 3.8% | 8.2% | 6.9% | 2.0% | (1.7)% | 18.6% | 6.6% | |||||||||||||||||||||||||||||||||||
Acquisitions | (0.7)% | (3.9)% | (1.4)% | – | (1.7)% |
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Acquisitions and product line divestitures | (3.9)% | (1.4)% | – | (1.7)% | (3.1)% |
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Organic sales change (non-GAAP) | 3.9% | 4.2% | 5.5% | 2.0% | (3.4)% | 2.4% | 2.0% | 4.2% | 5.5% | 2.0% | (3.4)% | 15.6% | 4.6% |
(1) | Reflects five-year |
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ADJUSTED EBITDA MARGIN
($ in millions) | 2021 | |||
Net sales | $ | 8,408.3 | ||
Operating income before interest expense, other non-operating expense (income) and taxes, as reported | $ | 1,058.7 | ||
Operating margin, as reported | 12.6% | |||
Non-GAAP adjustments: | ||||
Restructuring charges: | ||||
Severance and related costs | $ | 10.5 | ||
Asset impairment and lease cancellation charges | 3.1 | |||
Other items(1) | (8.0) | |||
Adjusted operating income (non-GAAP) | $ | 1,064.3 | ||
Adjusted operating margin (non-GAAP) | 12.7% | |||
Depreciation and amortization | $ | 244.1 | ||
Adjusted EBITDA (non-GAAP) | $ | 1,308.4 | ||
Adjusted EBITDA margin (non-GAAP) | 15.6% |
(1) | Includes pretax gain on venture investments, gain on sale of product line, outcomes of legal proceedings, transaction and related costs, and other items. |
Avery Dennison Corporation | 2022 Proxy Statement | 103 |
ADJUSTED EARNINGS PER SHARE (EPS)
| 2016 | 2017 | 2018 | 2019 | 2020 | 2016-2020 5-YR CAGR(1) | 2017-2020 4-YR CAGR(2) | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2017-2021 5-YR CAGR(1) | 2020-2021 % Change | |||||||||||||||||||||||||||||||||||||
As reported net income per common share, assuming dilution | $ | 3.54 | $ | 3.13 | $ | 5.28 | $ | 3.57 | $ | 6.61 | 17.5% | 16.9% | $ | 3.54 | $ | 3.13 | $ | 5.28 | $ | 3.57 | $ | 6.61 | $ | 8.83 | 20.1% | 33.6% | ||||||||||||||||||||||||||
Non-GAAP adjustments per common share, net of tax: |
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Restructuring charges and other items | 0.48 | 0.29 | 0.68 | 0.47 | 0.48 |
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| 0.48 | 0.29 | 0.68 | 0.47 | 0.48 | 0.05 |
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Pension plan settlements and related charges | – | – | 0.84 | 3.12 | 0.01 |
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Pension plan settlement and curtailment losses | – | – | 0.84 | 3.12 | 0.01 | 0.03 |
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Tax benefit from discrete foreign tax structuring and planning transactions | – | – | (0.35) | (0.56) | – |
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TCJA provisional amounts and subsequent adjustments | – | 1.91 | (0.39) | – | – |
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Impact of previously planned repatriation of foreign earnings for Q4 2017 | – | (0.33) | – | – | – |
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Adjusted net income per common share, assuming dilution (non-GAAP) | $ | 4.02 | $ | 5.00 | $ | 6.06 | $ | 6.60 | $ | 7.10 | 15.6% | 15.3% | $ | 4.02 | $ | 5.00 | $ | 6.06 | $ | 6.60 | $ | 7.10 | $ | 8.91 | 17.3% | 25.4% |
The adjusted tax rates were 32.8%, 28.0%, 25.0%, 24.6%, 24.1% and 24.1%25.0% for 2016, 2017, 2018, 2019, 2020 and 2020,2021, respectively.
(1) | Reflects five-year |
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Includes restructuring charges, transaction and related costs, gain/loss on venture investments, gain/loss on sale of assets, gain on sale of product line, outcomes of legal proceedings, Argentine peso remeasurement transition loss, |
In the fourth quarter of 2018, we finalized our provisional amounts as defined under SEC Staff Accounting Bulletin No. 118 related to the TCJA. |
FREE CASH FLOW
($ in millions) | 2018 | 2019 | 2020 | 2019 | 2020 | 2021 | ||||||||||||||||||
Net cash provided by operating activities | $ | 457.9 | $ | 746.5 | $ | 751.3 | $ | 746.5 | $ | 751.3 | $ | 1,046.8 | ||||||||||||
Purchases of property, plant and equipment | (226.7) | (219.4) | (201.4) | (219.4) | (201.4) | (255.0) | ||||||||||||||||||
Purchases of software and other deferred charges | (29.9) | (37.8) | (17.2) | (37.8) | (17.2) | (17.1) | ||||||||||||||||||
Proceeds from sales of property, plant and equipment | 9.4 | 7.8 | 9.2 | 7.8 | 9.2 | 1.1 | ||||||||||||||||||
Proceeds from insurance and sales (purchases) of investments, net | 18.5 | 4.9 | 5.6 | 4.9 | 5.6 | 3.1 | ||||||||||||||||||
Payments for certain acquisition-related transaction costs | – | – | 18.8 | |||||||||||||||||||||
Contributions for U.S. pension plan termination | 200.0 | 10.3 | – | 10.3 | – | – | ||||||||||||||||||
Free cash flow (non-GAAP) | $ | 429.2 | $ | 512.3 | $ | 547.5 | $ | 512.3 | $ | 547.5 | $ | 797.7 |
104 | 2022 Proxy Statement | Avery Dennison Corporation |
RETURN ON TOTAL CAPITAL
($ in millions) |
| 2020 | 2021 | |||||||||
As reported net income |
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| $ | 555.9 | $ | 740.1 | |||||
Interest expense, net of tax benefit |
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| 53.1 | 52.7 | |||||||
Effective tax rate |
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| 24.1% | 25% | |||||||
Net income, excluding interest expense and tax benefit of debt financing (non-GAAP) |
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| 609.0 | 792.8 | |||||||
Total debt |
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| $ | 2,116.8 | $ | 3,104.7 | |||||
Shareholders’ equity |
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Total debt and shareholders’ equity |
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| $ | 3,601.7 | $ | 5,029.1 | |||||
ROTC incl. acquisition amortization (non-GAAP) |
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| 18.1% | 18.4% | |||||||
Intangible amortization, net of tax benefit |
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Net income, excluding |
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Interest expense and tax benefit of debt financing and intangible amortization (non-GAAP) | $ | 624.1 | $ | 826.3 | ||||||||
ROTC excl. acquisition amortization (non-GAAP) | 18.5% | 19.1% | ||||||||||
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
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($ in millions) | 2019 | 2020 | 2021 | |||||||||
As reported net income | $ | 303.6 | $ | 555.9 | $ | 740.1 | ||||||
Reconciling items: | ||||||||||||
Interest expense | 75.8 | 70.0 | 70.2 | |||||||||
Provision for (benefit from) income taxes | (56.7) | 177.7 | 248.6 | |||||||||
Earnings before interest expense and taxes | $ | 322.7 | $ | 803.6 | $ | 1,058.9 | ||||||
Adjustments: | ||||||||||||
Non-cash restructuring costs | 4.8 | 6.2 | 2.4 | |||||||||
Other items(1) | 449.5 | 1.0 | (49.2) | |||||||||
Adjusted earnings before interest expense, taxes, non-cash restructuring costs, acquisitions completed since the targets were set, and other items (non-GAAP) | $ | 777.0 | $ | 810.8 | $ | 1,012.1 |
(1) | Includes pension plan settlement and curtailment losses, transaction and related costs, gain/loss on venture investments, gain/loss on sale of assets, gain on sale of product line, outcomes of legal proceedings, Argentine peso remeasurement transition loss, reversal of acquisition-related contingent consideration, impact of acquisitions completed after targets were set and other items. |
Avery Dennison Corporation |
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RETURN ON TOTAL CAPITAL (ROTC)
($ in millions) | 2018 | 2019 | 2020 | |||||||||
Net income | $ | 467.4 | $ | 303.6 | $ | 555.9 | ||||||
Interest expense, net of tax benefit(1) | 49.5 | 57.2 | 53.1 | |||||||||
Effective tax rate | 15.4% | 24.6% | 24.1% | |||||||||
Income from operations, excluding expense and tax benefit of debt financing (non-GAAP) | 516.9 | 360.8 | 609.0 | |||||||||
Total debt | $ | 1,966.2 | $ | 1,939.5 | $ | 2,116.8 | ||||||
Shareholders’ equity | 955.1 | 1,204.0 | 1,484.9 | |||||||||
Total debt and shareholders’ equity | $ | 2,921.3 | $ | 3,143.5 | $ | 3,601.7 | ||||||
Return on Total Capital (ROTC) (non-GAAP) | 18.6% | 11.9% | 18.1% | |||||||||
(1) Interest expense, net of tax benefit for 2019, based on our GAAP tax rate of (22.7)%, is not meaningful. Applying the adjusted tax rate of 24.6% removes the benefit of the negative tax rate from pension plan settlements and discrete foreign tax structuring and planning transactions. |
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ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
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($ in millions) | 2018 | 2019 | 2020 | |||||||||
Net income | $ | 467.4 | $ | 303.6 | $ | 555.9 | ||||||
Reconciling items: |
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Interest expense | 58.5 | 75.8 | 70.0 | |||||||||
Provision for (benefit from) income taxes | 85.4 | (56.7) | 177.7 | |||||||||
Earnings before interest expense and taxes | $ | 611.3 | $ | 322.7 | $ | 803.6 | ||||||
Adjustments: |
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Non-cash restructuring costs | 9.9 | 4.8 | 6.2 | |||||||||
Other items(1) | 91.9 | 449.4 | (1.3) | |||||||||
Adjusted earnings before interest expense, taxes, non-cash restructuring costs, acquisitions completed since the targets were set, and other items (non-GAAP) | $ | 713.1 | $ | 776.9 | $ | 808.5 |
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AVERY DENNISON CORPORATION
C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.
P.O. BOX 1342
BRENTWOOD, NY 11717
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on April 21, 202127, 2022 for shares held directly and by 11:59 p.m. Eastern Time on April 19, 202125, 2022 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/AVY2021AVY2022
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on April 21, 202127, 2022 for shares held directly and by 11:59 p.m. Eastern Time on April 19, 202125, 2022 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
AVERY DENNISON CORPORATION | ||||||||
The Board of Directors recommends you vote FOR the | ||||||||
1. Election of Directors | ||||||||
Nominees: | For | Against | Abstain | |||||
1a. Bradley Alford | ☐ | ☐ | ☐ | |||||
1b. Anthony Anderson | ☐ | ☐ | ☐ | |||||
1c. | ||||||||
| ☐ | ☐ | ☐ | |||||
| ☐ | ☐ | ☐ | |||||
| ☐ | ☐ | ☐ | |||||
| ☐ | ☐ | ☐ | |||||
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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. |
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The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | |||||
2. Approval, on an advisory basis, of our executive compensation. | ☐ | ☐ | ☐ | |||||
3. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year | ☐ | ☐ | ☐ | |||||
NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. |
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Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.www.proxyvote.com.
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D30373-P49178D71331-P66687
AVERY DENNISON CORPORATION ANNUAL MEETING OF STOCKHOLDERS APRIL THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
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The undersigned hereby appoints Ignacio Walker and Vikas Arora, or each of them, with full power of substitution, proxies for the undersigned to act and vote at the
IF NO OTHER INDICATION IS MADE, THE PROXIES WILL VOTE FOR THE ELECTION OF ALL DIRECTOR NOMINEES, AND FOR PROPOSALS 2 AND 3.
Consistent with its fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended, Fidelity Management Trust Company, as Trustee of the Avery Dennison Corporation Employee Savings Plan, will vote shares of Company stock for which timely instructions are not received and shares of Company stock that have not been allocated to the account of any participant in the same proportion in which allocated shares of Company stock are voted by participants who timely furnish voting instructions. The proxy card must be received no later than 5:00 p.m. Eastern Time on April
Your voting instructions are confidential and may not be revealed to anyone, except as required by law.
Continued and to be signed on reverse side
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