UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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ToLetter from Our Fellow ShareholdersIndependent Chair
This past year presented another year of unprecedented challenges. Through ongoing uncertainty, the board has continued to be stewards of the company, guiding its strategy to ensure long-term, sustainable value creation for all stakeholders. We believe that the foundation of Clorox's resilience through uncertainty and challenges has been strong corporate governance, together with our commitment to our corporate purpose and values. We appreciate the opportunity to share with you our progress and governance enhancements over this past fiscal year. |
I am pleasedEnhancing Board ESG Governance
Board oversight of ESG has never been more critical, given its strategic importance to invite youour company and the increasing scrutiny by regulators, shareholders and other stakeholders on corporate disclosures and activities around these matters. We believe our approach to attendstewardship of these issues continues to serve us, the company, and our 2020 Annual Meeting of Shareholders –shareholders well. We made progress on our first meeting to be held virtually.
TheESG priorities and goals and enhanced our governance over these areas across the organization, which, we believe, will create long-term stakeholder value. For example, this past year has been a challenging one. Amid the COVID-19 global pandemic, The Clorox Company has been guided by our IGNITE strategy. When we launched our IGNITE strategy lastfiscal year, we did not know how prescient it would be, but it has grounded uscontinued to broaden our board's knowledge on these topics through engagement and provided the framework for us to act quicklydialogue with internal and boldly – not only in overcoming the challenges we have faced due to COVID-19 butexternal experts. We also in confronting the systemic racial injustice that has plagued our nation for centuries.
By integrating environmental, social and governance (ESG) goals into our IGNITE strategy, we put Planet, Product, People and Governance squarely at the centerundertook a review of our roadmapESG governance across the full Board and committees, including benchmarking and discussion among board leadership, to ensure these areas were managed in an integrated manner across committees, with oversight and visibility to the full Board. Based on this, we updated our board committee charters to enhance oversight and coordination on these key matters.
Maintaining Active Board Refreshment
Since our last annual meeting, we appointed two new directors to the board — Julia Denman and Stephanie Plaines — who collectively bring additional deep strategic, financial and industry leadership experience as well as strong track records of value creation and transformation. These two directors serve on the Audit Committee, and the board has determined that they are audit committee financial experts for fiscal year 2023. Their appointments add to the near term. These core facetsstrength and diversity of our strategy have guideddirector nominee group, which is 50% women and 25% people of color.
After 15 years of service, Dr. Richard Carmona will be retiring from the board. We congratulate Rich on his retirement and thank him for his dedicated years of service, including six years as chair of the NGCRC. We are very grateful for his substantial contributions to the board, the company and our priorities during this time – maximizing supply to get our products where they’re needed; protectingshareholders, particularly his important perspectives as a former surgeon general of the health, safety and well-beingU.S. as the company navigated through the height of the pandemic.
Year-round, Ongoing Shareholder Engagement
As part of our employees; supporting caregivers and people most impacted by COVID-19; and donating to community-based racial justice initiatives. And we are committed to enhancing our leadership in these areas through an unwavering commitment to strong corporate governance, our directors also continued to engage with shareholders to discuss key issues and to listen to their perspectives. The feedback from these conversations informed the implementation of recent practices such as the launch of our new ESG performance overseen byData Hub, which provides a centralized source for our board of directors.
key ESG disclosures. As of September 14, 2020, I stepped down as CEO, and Linda Rendle stepped into this role. Linda has been with Clorox for 17 years and was a key part of the team that developedboard's effort to continually enhance and expand their knowledge and skills, we invited one of our IGNITE strategy. With her outstanding track record of achieving results and her deep business and functional experience, I am confident Linda will lead the company’s ongoing progress against our IGNITE strategy and ESG goals – and will continue to make bold decisions, guided by Clorox’s core value, Do the Right Thing.
I am so proud of what we, as a team, have accomplished for our shareholders, as well as for our employees, consumers and communities, during my tenure as CEO – and we look forward to sharing that progress with you at our annual meeting. Thank you for your continued support and investment in Clorox.
Sincerely,
As lead independent director of The Clorox Company, it is my honor to serve with our other independent directors as the independent voices representing you, ourlargest shareholders to help ensure thata board meeting and had the company continues to be managed with integrity and strong corporate governance.
The board of directors was faced with significant challenges this past year in overseeing and navigating the new risks presented by the COVID-19 pandemic as well as by the reawakening of deep wounds created by longstanding and systemic racial injustices. Clorox’s core value, Do the Right Thing, has been a beacon for the board of directors during this challenging time, guiding our work of overseeing strategy, risks and corporate culture.
During the COVID-19 pandemic, my role as liaison between the CEO and the other independent directors has become even more important in ensuring appropriate board oversight of risks. Benno and I have met at least weekly as the situation has progressed to ensure connectivity with and input from the Board. This work with Benno will continue, even as he steps into his new executive chair role. In addition, this year, as in past years, I participated in valuable discussions with a number of shareholders, particularly around our ESG efforts. I always appreciate theunique opportunity to hear their perspectives and feedback, which I shareengage in a dialogue with the rest of the Clorox board and management.them on emerging ESG issues.
As Benno recently transitioned to the role of executive chair, our new CEO, Linda Rendle, began assuming her new responsibilities. I worked closely with the executive committee and the other independent directors on her appointment, and I am very excited and proud that our thoughtful, long-term succession planning positioned us to name the company’s first female CEO.
The board of directors, upon recommendation of the Nominating, Governance and Corporate Responsibility Committee, has also nominated Linda for election to the board, along with four other female director nominees, putting our director nominee slate at 38% female. The director nominee slate is also ethnically diverse, with 31% of our director nominees self-identifying as an ethnic minority.
Inclusion and diversity is an important priority at Clorox – a priority that is encapsulated in the ESG goals of the company’s IGNITE strategy. This commitment starts at the top, with our board of directors, which is why we adopted a Board Diversity Policy over the last fiscal year, formalizing our historical practice of considering many forms of diversity to ensure we have the optimal mix of perspectives for effective governance.
On behalf of the independent directors,board, I want to thank you for your continued investment and confidence in Clorox. We believe that Clorox is well-positioned to drive sustainable growth, build a stronger, more resilient company and support.create long-term value for all of our stakeholders, including our shareholders. We look forwardthank you for the opportunity to engaging withcontinue serving you at our annual meeting.and the company.
Sincerely,
Pamela Thomas-GrahamMatthew J. ShattockLead Independent DirectorChair
THE CLOROX COMPANY - | i |
MessageLetter from Linda Rendle, DirectorOur Chief Executive Officer
Even in the face of a challenging macroeconomic environment, we made strong progress against our IGNITE strategy this past year, while staying true to our corporate purpose of championing people to be well and thrive every single day. As we look ahead, bolstered by our strong brands and lasting consumer trend tailwinds, we remain focused on delivering 3% to 5% long-term sales growth and positioning the company for long term success through a broad set of actions and key investments. |
Some of the actions we are taking include:
● | Operating with discipline: We are focused on our commitment to rebuild margins, which we are implementing through pricing, a focus on operational excellence, and our hallmark cost savings program. |
● | Delivering bigger, stickier innovation platforms: We have a robust innovation pipeline and introduced innovations across 28 categories in fiscal year 2022, setting us up well to drive growth for years to come. |
● | Building purpose-driven, personalized brands: We have also been focused on our 2025 goal of knowing 100 million consumers and are 75% of the way to reaching our goal. This enables greater efficiencies and engagement and allows our brands to have the highly personalized and customized interactions that consumers expect. |
● | Accelerating our digital transformation: We're upgrading our digital infrastructure and capabilities to better position us for the long term in supply chain, digital commerce, innovation and brand building, including transitioning to a new global Enterprise Resource Planning (ERP) system over the next five years, through a $500 million investment. |
● | Reimagining how we work: We started implementing a streamlined operating model in the first quarter of fiscal year 2023 to further support our goals of driving both growth and productivity, by creating a simpler, faster company that puts the business even closer to our consumers and customers. |
Our ESG goals are integrated into our business strategy and CEOwe are committed to helping build a more sustainable and inclusive world because we recognize the connection between ESG issues and our company's long-term performance.
Dear Shareholders:
● | Putting People at the Center: We continue to lead with a human-centric approach. Supporting people's well-being starts with our own teammates, who are critical enablers of Clorox's success. Over the past year, we continued to enhance our benefits and programs to support the physical, mental and financial well-being of our incredible Clorox team. We also maintained our strong safety standards with a recordable incident rate well below our target and the industry average. |
● | Continuing Commitment to Inclusion, Diversity, Equity and Allyship: We recently expanded the scope of our inclusion and diversity strategy to highlight the importance of equity and allyship and formalize our work in these areas. In July, Clorox's first-ever Chief Diversity and Social Impact Officer joined the Clorox Executive Committee, and under her leadership, we will continue to drive systemic and lasting change to build an even more people-centered, purpose-driven culture. |
● | Taking Climate Action: We also made further progress on our long-term environmental sustainability goals, which are an integral part of our IGNITE strategy. Building on our accomplishment of reaching 100% renewable electricity in the U.S. and Canada last year, we signed a second virtual power purchase agreement to underscore our commitment to renewable energy. We also set out our path to achieving net zero emissions by 2050 in our recently published climate action plan. |
As a longtime Clorox employee and your new chief executive officer,the world around us continues to rapidly change, I am honoredconfident that we are taking the necessary actions to write my first letter better position Clorox to you.
If the pandemicnavigate this uncertain macroeconomic environment, drive sustainable, profitable growth and societal shiftsdeliver long-term value to all our stakeholders. I encourage you to read more about our results and our progress against our IGNITE strategy in our 2022 Integrated Annual Report. Thank you, fellow shareholders, for your continued support of 2020 have shown us anything, it’s that crises do not create leaders; they reveal them — all over our company. During COVID-19 we needed to find creative ways to protect our people’s health and safety while asking them to work around the clock on the front lines to produce record numbers of disinfecting and essential household products. We have aggressively expanded our production capacity, simultaneously reshaping and redeploying our output to focus on people who needed our products most, including healthcare workers. Continuing this expansion, while keeping our employees safe, remains our highest priority.
Throughout this period, we’ve never lost focus on the bigger picture: our commitment to Good Growth – growth that’s profitable, sustainable and responsible. It starts with continuing to serve more consumers through our global portfolio of trusted brands; helping people feel safer and more confident in public spaces as communities begin to reopen; making supply chain enhancements, including running some plants 24/7 to get as much of our products to people who need them most; and continuing to make progress in inclusion and diversity so that our employees and management team increasingly reflect the diverse make up of our consumers and communities.
It is in recognition of these things that the July 2020 Axios-Harris Poll 100, which surveyed about 35,000 Americans, ranked The Clorox Company No. 1 for corporate reputation based on vision, growth, products, culture, ethics and citizenship. Recent months have showcased my teammates’ courage, creativity and leadership; I take very seriously my responsibility to protect, enable and learn from them as we move forward together.
Sincerely,
Linda Rendle
Director and Chief Executive Officer
ii | THE CLOROX COMPANY - |
Notice of Annual Meeting of Shareholders
The 2020 Annual Meeting of Shareholders (the Annual Meeting) of The Clorox Company (Clorox or the Company) will be held at Information
Date and Time
Wednesday, November 16, 2022
9:00 a.m. Pacific timeTime
Virtual Meeting URL
meetnow.global/MXNXWKW
Record Date
You can vote electronically at the Annual Meeting if you were a shareholder of record on Wednesday, November 18, 2020, for the following purposes:September 23, 2022.
Agenda
1. | To elect the |
2. | To hold an advisory vote to approve executive compensation; and |
3. | To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting |
Due to concerns relating to the coronavirus (COVID-19) pandemic, and to support the health and well-being of our employees and shareholders, this year’s Annual MeetingShareholders will be virtual and will be held entirely online via live webcast at www.meetingcenter.io/246179169 (password: ‘CLX2020’). There will not be an option to attend the meeting in person.
Shareholders also will consider and act upon such other business as may properly come before the Annual Meeting or any adjournment or postponement.
ShareholdersHow to Vote
Internet
www.envisionreports.com/CLX
Telephone
Call toll-free 1-800-652-VOTE (8683) within the USA, US territories and Canada.
Mail
Mark, sign and date your proxy card or voting instruction form and return it in the postage-paid envelope.
During the Annual Meeting
Visit meetnow.global/MXNXWKW. Log in using the 15-digit control number included on your Notice of record atInternet Availability of Proxy Materials on your printed proxy card, or on the closeinstructions that accompanied your proxy materials to access the meeting.
How to Attend the Annual Meeting
Visit meetnow.global/MXNXWKW. Log in using the 15-digit control number included on your Notice of businessInternet Availability of Proxy Materials on September 25, 2020, are entitledyour printed proxy card, or on the instructions that accompanied your proxy materials to access the meeting.
If you are a beneficial owner (you own shares through a broker, bank or other holder of record) and plan on attending, voting or asking questions at the Annual Meeting, you may need to pre-register with Computershare by 5:00 p.m. Eastern Time on November 11, 2022. Please see pg 88 of the Attending the Virtual Annual Meeting section for more information. |
You may also vote atonline and examine our shareholder list during the Annual Meeting by following the instructions provided on the meeting website during the Annual Meeting.
On or about October 5, 2022, we began mailing a Notice of Internet Availability of Proxy Materials (the Notice) to our shareholders informing them that our Proxy Statement, 2022 Integrated Annual Report – Executive Summary, and any adjournmentvoting instructions are available on the Internet.
Your vote is very important. Whether or postponement.
not you plan to attend the virtual Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described on pages 83-84. While you will not be able to attend the Annual Meeting at a physical location, we have designed the virtual Annual Meeting to ensure that our shareholders are given the same rights and opportunities to actively participate in the Annual Meeting as they would at an in-person meeting, using online tools to facilitate shareholder access and participation.
How to Attend the 2020 Virtual Annual Meeting. This year’s Annual Meeting will be virtual and held online via live webcast. In order to attend the Annual Meeting, you will need to visit www.meetingcenter.io/246179169, and you will be required to enter the meeting password ‘CLX2020’ and the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card (if you received a printed copy of the proxy materials), or on the instructions that accompanied your proxy materials to access the meeting. If you are the beneficial owner of shares held in “street name” (that is, you hold your shares through a broker, bank or other holder of record), you must register in advance to gain access to the Annual Meeting and to vote your shares or ask questions during the Annual Meeting. Please see the Attending the Virtual Annual Meeting section of the proxy statement for more information. Whether or not you plan to attend the virtual Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described on pages 72-73. You may also vote online and examine our shareholder list during the Annual Meeting by following the instructions provided on the meeting website during the Annual Meeting. To vote at the meeting, visit www.meetingcenter.io/246179169 and log in using the aforementioned information.
On or about October , 2020, we began mailing a Notice of Internet Availability of Proxy Materials to our shareholders informing them that our Proxy Statement, Integrated Annual Report – Executive Summary, and voting instructions are available on the Internet as of the same date.
Your vote is very important. Even if you plan to attend the virtual Annual Meeting, we hope that you will read the proxy statement and vote your proxy by telephone, via the Internet, or by signing, dating, and returning the proxy card in the envelope provided.
By Order of the Board of Directors, Iké Adeyemi |
October , 2020
Important Notice Regarding the Availability of Proxy Materials for The Clorox Company Shareholders Meeting to be Held on November 18, 2020: The Notice of Annual Meeting, Proxy Statement, and 2020 Integrated Annual Report – Executive Summary will be available at www.edocumentview.com/CLX.
1221 Broadway
Oakland, California 94612
October 5, 2022
THE CLOROX COMPANY - | iii |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE CLOROX COMPANY 2022 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 16, 2022 |
The Notice of Annual Meeting, Proxy Statement, and 2022 Integrated Annual Report – Executive Summary will be available at www.edocumentview.com/CLX. |
Pursuant to rules adopted by the United States Securities and Exchange Commission (the SEC), we are furnishing proxy materials to our shareholders primarily over the Internet. We believe that this process expedites shareholders’ receipt of these materials, lowers the costs of our Annual Meeting and reduces the environmental impact of mailing printed copies. Accordingly, on or about October 5, 2022, we began mailing the Notice to our shareholders informing them that our Proxy Statement, 2022 Integrated Annual Report – Executive Summary, and voting instructions are available on the Internet. The Notice also contains instructions on how to receive a paper copy of the proxy materials and a proxy card or voting instruction form. If you received the Notice by mail or our proxy materials by e-mail, you will not receive a printed copy of the proxy materials unless you request one. If you received paper copies of our proxy materials, you may also view these materials on our website at www.proxyvote.com. |
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWNELECTRONIC DELIVERY OF PROXY MATERIALS
We encourage our shareholders to enroll in voluntary e-delivery of future proxy materials. We believe that this process expedites shareholders’ receipt of these materials, lowers the costs of our Annual Meeting and reduces the environmental impact of mailing printed copies.
If you are a Registered Shareholder (you own shares in your own name through our transfer agent, Computershare Trust Company, N.A.): visit www.computershare.comand log into your account to enroll.
If you are a Beneficial Owner (you own shares through a broker, bank or any other account): If you hold shares beneficially, please follow the instructions provided to you by your broker, bank, trustee or nominee.
If you have questions about how to vote your shares, or need additional assistance, please contact Innisfree M&A Incorporated, who is assisting us in the solicitation of proxies:
501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free at (877) 750-9499
Banks and brokers may call collect at (212) 750-5833
THE CLOROX COMPANY - 2022 Proxy Statement | v |
Table of Contents
| THE CLOROX COMPANY - 2022 Proxy Statement |
Proxy Summary |
This summary highlights information contained elsewhere in this proxy statement and does not contain all of the information that you should consider. Please review the entire proxy statement before voting.
Proposals to be Voted onVoting Matters and Board Voting Recommendations
More information | Board’s voting recommendation | |||||
PROPOSAL 1 | Election of Directors | Page | FOR EACH NOMINEE | |||
PROPOSAL 2 | Advisory Vote to Approve Executive Compensation | Page | FOR | |||
PROPOSAL 3 | Ratification of Independent Registered Public Accounting Firm | Page | FOR | |||
For more information on how to vote before and during the Annual Meeting, see Information About the Virtual Annual Meeting—Voting Information on pg 83 of this proxy statement.
The following table provides summary information about each director nominee as of the date of the Annual Meeting.
Name | Age | Director Since | Principal Occupation | Independent | Committee Memberships | Age | Director Since | Principal Occupation | Independent | Committee Memberships | ||||||||||
Amy Banse | 61 | 2016 | Senior Adviser to the Executive Committee, Comcast Corporation | ✓ | ●AC | |||||||||||||||
Richard H. Carmona | 70 | 2007 | Chief of Health Innovations, Canyon Ranch | ✓ | ●NGCRC (Chair) ●MDCC | |||||||||||||||
Benno Dorer | 56 | 2014 | Executive Chair, Clorox | |||||||||||||||||
Amy L. Banse | 63 | 2016 | Venture Partner, Mastry, Inc. | ✓ | ●AC | |||||||||||||||
Julia Denman | 51 | 2022 | Corporate Vice President and Head of Internal Audit, Enterprise Risk and Compliance, Microsoft Corporation | ✓ | ●AC | |||||||||||||||
Spencer C. Fleischer | 67 | 2015 | Managing Partner, FFL Partners, L.P. | ✓ | ●MDCC (Chair) | 69 | 2015 | Chairman, FFL Partners, L.P. | ✓ | ●MDCC (Chair) | ||||||||||
Esther Lee | 61 | 2013 | Executive Vice President – Global Chief Marketing Officer, MetLife Inc. | ✓ | ●NGCRC | 63 | 2013 | Former Executive Vice President – Global Chief Marketing Officer, MetLife Inc. | ✓ | ●NGCRC (Chair) | ||||||||||
A. D. David Mackay | 65 | 2016 | Former President and Chief Executive Officer, Kellogg Company | ✓ | ●AC ●MDCC | 67 | 2016 | Former President and Chief Executive Officer, The Kellogg Company | ✓ | ●AC ●MDCC | ||||||||||
Paul Parker | 57 | — | Senior Vice President, Strategy and Corporate Development, Thermo Fisher Scientific Inc. | ✓ | ●—(1) | 59 | 2020 | Senior Vice President, Strategy and Corporate Development, Thermo Fisher Scientific Inc. | ✓ | ●AC | ||||||||||
Stephanie Plaines | 55 | 2022 | Chief Financial Officer, J.C. Penney | ✓ | ●AC | |||||||||||||||
Linda Rendle | 42 | 2020 | Chief Executive Officer, Clorox | 44 | 2020 | Chief Executive Officer, Clorox | ||||||||||||||
Matthew J. Shattock | 58 | 2018 | Non-Executive Chairman, Beam Suntory Inc. | ✓ | ●AC | 60 | 2018 | Former Non-Executive Chairman, Beam Suntory Inc. | ✓ | ●NGCRC | ||||||||||
Kathryn Tesija | 57 | 2020 | Senior Adviser / Consultant, Simpactful LLC | ✓ | ●MDCC | 59 | 2020 | Former Executive Vice President and Chief Merchandising and Supply Chain Officer, Target Corporation | ✓ | ●MDCC ●NGCRC | ||||||||||
Pamela Thomas-Graham Lead Independent Director | 57 | 2005 | Lead Independent Director, Clorox | ✓ | ●NGCRC | |||||||||||||||
Russell J. Weiner | 52 | 2017 | Chief Operating Officer and President of Domino’s US, Domino's Pizza, Inc. | ✓ | ●AC ●MDCC | 54 | 2017 | Chief Executive Officer, Domino’s Pizza, Inc. | ✓ | ●MDCC | ||||||||||
Christopher J. Williams | 62 | 2015 | Chairman, Siebert, Williams, and Shank LLC | ✓ | ●AC (Chair) | 64 | 2015 | Chairman, Siebert, Williams, Shank & Co. LLC | ✓ | ●AC (Chair) |
AC | Audit Committee |
NGCRC | Nominating, Governance and Corporate Responsibility Committee |
MDCC | Management Development and Compensation Committee |
THE CLOROX COMPANY - | 1 |
IGNITE Strategy and ESG Highlights
Last year, we announced our IGNITE strategy which includes a commitment to Good Growth – profitable, sustainable and responsible growth. IGNITE also puts environmental, social and governance (ESG) priorities at the forefront of our decision-making to ensure Clorox remains a leader in corporate responsibility.
ESG Goals
Our ESG goals are organized around the themes of Planet, Product and People and are integrated with the strategic choices of our IGNITE strategy.
|
ESG Accomplishments and Recognition
Just a year after launching our IGNITE strategy, we are already making progress on our ESG goals – and being recognized for our performance to date.
During fiscal year 2020, we launched two major projects, bleach compaction (a conversion process that went forward despite the COVID-19 pandemic, demonstrating our commitment to sustainability) and conversion to 100% recycled fiber cartons in our Glad business, which is projected to contribute approximately 15% of our goal to reduce our virgin plastic and fiber packaging by 50%, by 2030. We also entered into a virtual power purchase agreement for the purchase of renewable energy starting in 2021, which is expected to help us achieve our goal of 100% renewable electricity in our U.S. and Canadian operations in 2021, four years ahead of our original plan.
We are also proud of the diversity across our organization. Our CEO is a woman – one of 38 among the Fortune 500 -- and our Lead Independent Director is a black woman. In 2020, Forbes also ranked Clorox as one of America’s Best Employers for Diversity, and Parity.org named Clorox one of The Best Companies for Women to Advance. As of the Annual Meeting date, women comprise 38% of our director nominees and 46% of our executive committee, and 31% of our director nominees and 23% of our executive committee are comprised of ethnic minorities. Two of our executive committee members openly identify as LGBTQ. As part of our ongoing focus on transparency, we plan on sharing our Employer Equal Opportunity data (EEO-1 data) which is submitted annually to the U.S. Equal Employment Opportunity Commission and will be available in our 2020 integrated annual report.
|
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Proxy Summary
Corporate Governance Strengths
Board Structure and Independence | ✓ | All of our director nominees are independent, except for our CEO | |
✓ | |||
✓ | 100% independent | ||
✓ | |||
Board Composition | ✓Diverse board of directors (Board) with effective mix of skills, experiences, and perspectives ✓Diverse Board leadership on committees ✓Adopted formal Board diversity policy in fiscal year 2020 ✓Active Board refreshment – average Board tenure is approximately 4.5 years (as of the Annual Meeting date) ✓Effective annual Board, Board committee, and individual director evaluation process – which will periodically incorporate a third-party facilitator starting in fiscal year 2023 ✓Majority voting and director resignation policy in uncontested director elections | ||
Board Oversight | ✓Robust processes for overseeing key enterprise risks ✓Board receives regular updates on key ESG topics from management and internal and external experts and consultants ✓Strong Board and management succession planning process | ||
Shareholder Rights and Accountability | ✓Annual election of all directors ✓Special meeting right for shareholders ✓Proxy access right for shareholders ✓Proactive shareholder engagement | ||
Good Governance Practices | ✓Robust code of conduct applicable to directors, officers and employees |
✓ | |
Rigorous stock ownership guidelines for directors and executives | |
✓ |
✓Both our annual and long-term incentive plans include clawback provision | |
✓ | |
| THE CLOROX COMPANY |
Proxy Summary
Executive Compensation Highlights
| |
Business Performance and Executive Compensation Highlights
The past fiscal year was like no other in our 107-year history. In the first half of fiscal year 2020, we set the stage for growth with strong investments in our robust innovation and distribution plans. Amid a global health crisis and significant social change, our management team and dedicated global workforce successfully rose to the challenge to be a force for good for millions of consumers.
Successes for the Company in fiscal year 2020 included:
● | Our incentive plan results reflect Company performance. Our significantly below-target payout on short-term incentives and below-target payout on long-term incentives align to the disappointing business outcomes in |
● | The Company multiplier for our short-term incentive for fiscal year 2022 was 50%. This result reflected declines in fiscal year 2022 for all three of our underlying metrics: net sales, |
● | Performance share units from our long-term incentive awards vesting in 2022 paid out at 89%. The performance-based award vesting in fiscal year 2022 was based on economic profit (EP) growth during fiscal years 2020 through 2022, covering one breakout year with |
● | The Management Development and Compensation Committee continues to evolve our program. As we look ahead to fiscal year 2023, anticipating continued volatility and unpredictability, we remain committed to our philosophy of pay for |
We received strong shareholder support with approximately 92% say on pay support at the 2019 Annual Meeting of Shareholders. This vote is a positive endorsement of the Company’s pay for performance philosophy and executive compensation decisions.
Our fiscal year 2020 results and compensation decisions continue to illustrate the application of our pay-for-performance philosophy, with pay being driven by performance in the following ways:
For more information, see the Compensation Discussion and Analysis section of this proxy statement.
THE CLOROX COMPANY - | 3 |
Proxy Summary
Components of Our Compensation Program
A substantial portion of our target total direct compensation for our executives is variable, with 88% of compensation at risk for our CEO and 82% of compensation at risk on average for our other NEOs. Base salary is the only fixed component of direct compensation.
Component and Rationale | Proportion(1) | NEO(2) Proportion(1) | Performance Measures | Performance Period | Characteristics | |||||
Base Salary | ●N/A | N/A | Fixed cash | |||||||
Annual Incentives | ●Annual net sales (50%) ●Net earnings (30%) ●Gross margin (20%) ●Individual performance goals | One Year | Performance-based cash | |||||||
Long-Term Incentives | ●Three-year annual economic profit growth rate ●Variation in underlying stock price due to overall business results | Three Years | PSUs, stock options, and RSUs |
(1) | Proportion represents the |
Additional elements of our executive compensation program include retirement plans, post-termination compensation, and perquisites as appropriate to support our executive compensation philosophy.
SeeFor more information, see the Compensation Discussion and Analysis section of this proxy statement for additional information.statement.
What We Pay: Components of Our Compensation Program
4 | THE CLOROX COMPANY - |
Our Company |
Clorox is a leading multinational manufacturer and marketer of consumer and professional products with fiscal year 2022 net sales of $7.1 billion and about 9,000 employees worldwide as of June 30, 2022. About 80% of the Company’s sales are generated from brands that hold the No. 1 or No. 2 market share positions in their categories, and our products are in nine out of 10 U.S. homes.
FY22 | $7.1 Billion | 83% | U.S. | 26+ | ~9000 |
17% | Rest of World |
Sales by Segment | ●37% Health & Wellness | ●18% Lifestyle | ●17% International | ●28% Household |
Our Corporate Values and Purpose
Clorox is led by our purpose to champion people to be well and thrive every single day, and we believe our purpose helps drive long-term value for our stakeholders. At the heart of our business success is a resolve to do this work while operating ethically, putting people at the center of our decision-making and always maintaining a competitive edge, which are encapsulated in our corporate values.
Do the Right Thing | Put People at the Center | Play to Win |
Regardless of the external forces impacting our business, our corporate purpose and values guide our decision-making and are foundational in our relationship with our stakeholders, especially our shareholders.
THE CLOROX COMPANY - 2022 Proxy Statement | 5 |
Our Company
Our IGNITE Strategy and Integrated ESG Pillars
Launched in 2019, Clorox’s integrated IGNITE strategy—the long-term strategic plan that guides our business—includes both financial goals, as well as ESG goals that are organized into three pillars—Healthy Lives, Clean World, and Thriving Communities. Underpinning our three ESG pillars is our strong governance. See the ESG Governance section of this proxy statement for information regarding our ESG governance structure and recent enhancements.
HEALTHY Improving people’s health | CLEAN Taking climate action and | THRIVING Investing in our people |
Strong Governance |
This past year brought ongoing challenges and volatility, but we continued to live our corporate purpose and values and to execute on our IGNITE strategy, including our ESG goals – as demonstrated by the highlights below from the past fiscal year. For more information about our ESG pillars and recent highlights, we invite you to read our Integrated Annual Report which is available on our website at investors.thecloroxcompany.com/investors/financial-information/annual-reports/.
Healthy Lives FY22 Highlights
Improving people’s health and well-being
● | Brita announced an expanded partnership program with municipalities across the U.S. with lead in their drinking water, to provide immediate water filtration solutions while these municipalities repair their water infrastructure and seek longer-term solutions for public access to safe water. |
● | The Company was named U.S. Environmental Protection Agency Safer Choice Partner of the Year 2021 for outstanding achievement in the manufacturing of products with safer ingredients. |
● | We also continued to support our employees’ well-being by introducing a new benefit providing paid time off to care for the physical and mental health of our employees and their dependents. |
Clean World FY22 Highlights
Taking climate action and reducing plastic and other waste
● | We achieved our target of reducing our absolute scopes 1 and 2 emissions by 50% against our 2020 baseline. |
● | We recently unveiled a climate action plan with a roadmap to achieve our 2050 net zero goal and interim milestones in achieving our science-based targets, including our goal of a 25% reduction in our absolute scope 3 emissions from purchased goods and services and use of sold products by 2030 (as compared to our 2020 baseline). |
6 | THE CLOROX COMPANY - 2022 Proxy Statement |
Our Company
● | We signed our second virtual power purchase agreement to purchase renewable electricity beginning in calendar year 2023, reinforcing our long-term commitment to 100% renewable electricity in our operations and to help expand new renewable energy infrastructure in the U.S. |
Thriving Communities FY22 Highlights
Investing in our people and communities to contribute to a more equitable world
Clorox remains committed to increasing diversity within our Board, management and workforce, consistent with the Company’s values and policies, as well as investor and other stakeholder expectations.
● | Our Board in fiscal year 2022 was comprised of 46% women and 31% people of color (compared to 27% and 18%, respectively, for Fortune 500 companies in 2020). |
● | We recently expanded the scope of our I&D strategy (from I&D to Inclusion, Diversity, Equity and Allyship – IDEA), to acknowledge the importance of equity and allyship in the culture we expect and to formalize our efforts in these areas. |
● | We welcomed our first-ever Chief Diversity and Social Impact Officer who is part of the Executive Committee and reports directly into the CEO, which, we believe, creates appropriate accountability and oversight given the importance of IDEA to our IGNITE strategy and goal of being a people-centered, purpose-driven company where every member of the Clorox team is actively creating an inclusive culture. |
● | The Clorox Company Foundation launched the Healthy Parks Project, a new initiative to advance environmental justice through investment in community parks to help provide better access to green spaces in underserved communities. |
THE CLOROX COMPANY - 2022 Proxy Statement | 7 |
Board of Directors |
Proposal 1: Election of Directors |
The Board, upon the recommendation of the Nominating, Governance and Corporate Responsibility Committee (NGCRC), has nominated the thirteen12 people listed below for election at the Annual Meeting to serve until the 20212023 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified. All of the director nominees except Paul Parker, currently serve on the Board.
TheAs part of our ongoing, proactive efforts to implement effective corporate governance practices, the NGCRC annually examines the overall composition of the Board on an annual basis (or more frequently, if needed) to assess the skills and characteristics that are currently represented on the Board, and in incumbent Board members, as well as voting results in recent director elections, legislative and regulatory developments, corporate governance trends, and the skills and characteristics that the Board may find valuable in the future in light of the Company’s strategic and anticipated business needs.
Consistent with the foregoing, Kathryn Tesija was appointed to the Board during calendar year 2020, and both she and Mr. Parker are being nominated by the Board for election by the shareholders for the first time. In separate search processes, Ms. Tesija and Mr. Parker were recommended to the NGCRC, along with other candidates, through a targeted, Company-led internal search process, with guidance from the NGCRC as to the parameters and criteria for candidates for membership on the Board. The NGCRC reviewed and evaluated the qualifications of all candidates identified and referred to them through such search process.
Robert Matschullat,Dr. Richard Carmona, who has served on the Board since 1999,2007, is not being re-nominated for re-election in accordance with the Board’s retirement age policy and, therefore, will be retiring from the Board onas of the date of the Annual Meeting.
Unless otherwise directed, the persons named in the proxy as proxyholders intend to vote all proxies FOR the election of the nominees, as listed below. If, at the time of the Annual Meeting, any nominee is unable or declines to serve as a director, the discretionary authority provided in the enclosed proxy will be exercised to vote for a substitute candidate designated by the Board, unless the Board chooses to reduce its own size. The Board has no reason to believe that any of the nominees will be unable or will decline to serve if elected. Proxies cannot be voted for more than 12 persons since that is the total number of nominees.
Who We Are: Our Director Nominees
We invite you to read about our director nominees below. Our director nominees represent diverse perspectives and experiences and bring core strategic, operating, financial and governance skills as well as consumer product
expertise to our Board.experiences. Each of the director nominees has agreed to be named in this proxy statement and to serve as a director, if elected.
elected.We believe that our directors should satisfy a number of qualifications, including demonstrated integrity, a record of personal accomplishments, a commitment to participation in board activities, and other attributes discussed below in the Director Candidate Evaluation and Nomination section. We also endeavor to have a board that represents a range of qualifications, skills, and depth of experience in areas that are relevant to and contribute to the Board’s oversight of the Company’s activities. Each director biography includes the key experiences and qualifications the director nominee brings to the Board that we believe are important to our businesses and structure. The Board considered these key experiences and qualifications in determining to recommend that they be nominated for election.
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THE CLOROX COMPANY - |
Proposal 1: Election of Directors
Amy L. Banse | ||
Independent Director Committees: | Skills and Qualifications Amy
Experience Highlights Mastry, Inc., an early-stage venture capital firm ● Comcast Corporation, a global media and technology company ●Senior adviser to the executive committee (September 2020 to December 2021) ●Executive vice president, Comcast Corporation (January 2020 to September 2020) ●Managing director and head of funds, Comcast Ventures LLC (August 2011 to September 2020) ○Under her leadership, Comcast Ventures grew the size and diversity of its portfolio, making it one of the country’s most active corporate venture arms. ●President, Comcast Interactive Media, a division of Comcast responsible for developing online strategy and operating the company’s digital properties ●Served in various positions, including content development, programming investments and overseeing the development and acquisition of Comcast’s cable network portfolio Earlier in her career, Banse was an associate at Drinker, Biddle & Reath LLP. Other Public Company Boards ●Adobe, Inc. (May 2012 to present) ●Lennar Corporation (February 2021 to present) ●On Holding AG (September 2021 to present) Nonprofit/Other Boards ●Domestika Inc. ●Quantifind, Inc. |
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Proposal 1: Election of Directors
Julia Denman Independent Director Committees: | Skills and Qualifications Julia (Charter) Denman’s operational and risk management leadership, as well as her experience in executing transformation strategies enable her to provide valuable perspective on the Company’s growth strategy and capital allocation framework, as well as important contributions to the Board’s oversight of risk and compliance. She also brings deep financial and accounting expertise, having served as divisional chief financial officer of a publicly traded company, as well as highly relevant knowledge of the consumer packaged goods industry. Experience Highlights Microsoft Corporation, a global technology company ●Corporate vice president and head of internal audit, enterprise risk and compliance (December 2019 to present) ○Leading a team that provides independent and objective assessments of the company’s business strategies and operations, oversight of its governance and strategy for global risk management and compliance and leading investigations related to business conduct ●Corporate vice president and chief financial officer of worldwide marketing and consumer business (August 2016 to November 2019) ●Corporate vice president and chief financial officer of devices business The Procter & Gamble Company, a global consumer goods company ●Various leadership roles, including assistant treasurer and divisional finance director ○During her 20-year tenure, oversaw the most strategic and central elements of treasury, including capital markets, cash management and risk management; developed product and marketing innovation strategies and cost savings initiatives, resulting in higher profits; and led the turnaround of a $3 billion division |
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BoardProposal 1: Election of Directors
Spencer C. Independent Director | ||
Since: 2015 | ||
Committees: |
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Spencer
Experience Highlights FFL Partners, L.P., a private equity firm ●Chairman (March 2021 to present) ●Managing Partner (April 1998 to March 2021)
●Various leadership roles, including head of investment banking in Asia, head of corporate finance for Europe, and member of worldwide investment banking operating committee Other Public Company Boards ●Levi Strauss & Co. (July 2013 to present) ●Banner Corporation (October 2015 to December 2016) Nonprofit/Other Boards ●Americans for Oxford, Inc. |
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BoardProposal 1: Election of Directors
| Esther Lee | |
Independent Director Committees: | Skills and Qualifications Esther Lee brings to the Company significant executive and marketing expertise. Her marketing expertise has Experience Highlights MetLife Inc., an insurance, annuities and employee benefits company ●Executive vice president – global chief marketing officer AT&T Corporation, ●Senior vice president – brand marketing, advertising and sponsorships Euro RSCG Worldwide, a French advertising agency ●Chief executive officer of North America and president of global brands The Coca Cola Company, a global beverage company ●Global chief creative officer Earlier in her career, Lee worked in several leadership positions in the advertising industry, including as co-founder of DiNoto
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Other Public Company |
12 | THE CLOROX COMPANY - 2022 Proxy Statement |
Proposal 1: Election of Directors
A.D. David
Committees: |
Experience Highlights The Kellogg Company, a food and manufacturing company
Sara Lee Corporation, a food and manufacturing company ●Managing director, Australia Mars, Incorporated, a multinational confections company ●Various positions Other Public Company Boards ●Fortune Brands Home and Security, Inc. (September 2011 to present) ●Keurig Green Mountain, Inc. (December 2012 to March 2016) Nonprofit/Other Boards ●FSHD Global Research Foundation Ltd. ●Facio Therapies ●Tropic Sport LLC |
THE CLOROX COMPANY - | |
Proposal 1: Election of Directors
Paul Parker Independent Director Committees: |
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| Paul Parker brings deep strategic | |
expertise
Experience Highlights Thermo Fisher Scientific Inc., a global supplier of scientific instrumentation, clinical trials and pharmaceutical development and manufacturing services ●Senior vice president, strategy and corporate development (April 2020 to present) ○Responsible for corporate strategy, mergers and acquisitions, integration management, corporate social responsibility and government relations Goldman Sachs & Co., an investment bank and financial services company ●Co-chairman of global mergers and acquisitions group (August 2014 to March 2020) ○Served on the firm’s partnership committee and investment banking senior leadership council Barclays PLC, an investment bank and financial services company ●Chairman and head of global mergers and acquisitions, member of executive committee for investment banking division and Americas management committee ●Head of global corporate finance Lehman Brothers Holdings Inc., an investment bank and financial services company ●Chairman and head of global mergers and acquisitions ●Head of U.S. mergers and acquisitions and member of executive committee for investment banking division |
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Proposal 1: Election of Directors
Independent Director Committees: | Skills and Qualifications Stephanie Plaines brings extensive financial and accounting expertise gained from over 30 years of financial experience, including as chief financial officer of a publicly traded company. Her executive leadership experience across a wide variety of consumer, e-commerce and financial services companies also enables her to contribute unique insights to Clorox on strategy and growth. She also has experience with transformation agendas and leveraging consumer and data insights to drive growth, which provides valuable perspective for the Company’s brand-building, marketing and digital transformation efforts. Experience Highlights J. C. Penney, a department store chain ●Chief financial officer (August 2022 to present) Jones Lang LaSalle Inc., a global real estate services company ●Chief financial officer (March 2019 to November 2020) Starbucks Corporation, a global chain of coffee houses ●Chief financial officer of U.S. retail division (April 2017 to December 2018) Walmart, Inc. and Sam’s Club, a chain of department stores and retail warehouse clubs ●Chief financial officer of e-commerce business Koninklijke Ahold N.V., a retail and wholesale company ●Chief financial officer of Stop & Shop division ●Vice president of finance – business planning and performance for Ahold USA ●Vice president of group treasury for Ahold Delhaize Catalina Marketing, a media company ●Head of international finance PepsiCo, Inc., a global beverage company ●Worked in global planning and analysis for Tropicana business and in corporate development Plaines started her career in investment banking and mergers and acquisitions at UBS. Other Public Company Boards ●KKR Acquisition Holdings I Corp. (January 2022 to present) ●Nielsen Holdings plc (April 2021 to present). |
THE CLOROX COMPANY - 2022 Proxy Statement | 15 |
Proposal 1: Election of Directors
Linda Rendle Director Since: 2020 | Skills and Qualifications Linda | |
Experience Highlights The Clorox Company ●Chief executive officer (September 2020 to present) ●President (May 2020 to September 2020) ●Executive vice president – Cleaning, international, strategy and operations (July 2019 to May 2020) ●Executive vice president – strategy and operations (January 2019 to July 2019) ●Executive vice president – Cleaning, Professional Products and strategy (June 2018 to January 2019) ●Senior vice president and general manager – Cleaning and Professional Products (April 2017 to May 2018) ●Senior vice president and general manager – Cleaning (August 2016 to April 2017) ●Vice president and general manager – Home Care ●Vice president of sales – Cleaning ●Various positions in sales planning and supply chain Earlier in her career, Rendle worked for Procter & Gamble, where she held several positions in sales management. Other Public Company Boards ●Visa Inc. (November 2020 to present) Nonprofit/Other Boards ●Vice chair of The Consumer Brands Association | ||
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BoardProposal 1: Election of Directors
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| Matthew J. | ||
Independent Director Committees: | Skills and Qualifications Matthew
Experience Highlights Beam Suntory Inc., a global premium spirits company
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●President and ●President and chief executive officer, Beam Global Spirits and Wine, Inc. (March 2009 to October 2011) During his tenure, Shattock led the Cadbury plc, an international confectionary manufacturer ●Regional president, where he led its businesses first in The Americas and then in the Unilever plc, an international manufacturer of ●Chief operating officer, Unilever Best Foods North America ●Various leadership roles Other Public Company ●Chairman of Nonprofit/Other Boards ●Cooler Screens Inc. ●Tropicale Foods Inc. ●Reliefband Technologies LLC ●Kendra Scott Design, Inc. ●The Boys and Girls Club of Lake County, Illinois |
THE CLOROX COMPANY - 2022 Proxy Statement | 17 |
Proposal 1: Election of Directors
Kathryn Tesija Independent Director Committees: | Skills and Qualifications Kathryn Tesija brings to Clorox large-scale global merchandising and supply chain experience as well as operational and strategic planning expertise. Her tenure as a retail industry executive allows her to provide insights into customer and consumer behavior. This experience, together with her expertise in digital, innovation and marketing, allows her to provide valuable perspective on the
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●Executive vice president and chief ●Oversaw all functions of ●Executive vice president, merchandising (May 2008 to September 2012) ●Numerous positions of Other Public Company ●Verizon Communications (December
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BoardProposal 1: Election of Directors
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| Russell J. | ||
Independent Director Committees: | Skills and Qualifications Russell J.
Experience Highlights Domino’s Pizza, Inc., a restaurant chain ●Chief executive officer (May 2022 to present) ●President of Domino’s U.S. (July 2020 to April 2022) ●Chief operating officer (July 2018 to April 2022) ●President of the Americas (July 2018 to June 2020) ●President of Domino’s USA (September 2014 to June 2018) ●Executive vice president, chief marketing officer PepsiCo, Inc., a global beverage company ●Vice president of marketing, Colas at Pepsi-Cola North America ●Various leadership
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Proposal 1: Election of Directors
Christopher J. | |||
Independent Director Committees: | Skills and Qualifications Christopher
Experience Highlights Siebert, Williams, Shank & Co., LLC, an investment banking and financial services company, formed from the merger of The Williams Capital Group, L.P. and Williams Capital Management, LLC, with Siebert Cisneros Shank ●Chairman (November 2019 to present) The Williams Capital Group, L.P. and Williams Capital Management, LLC, an investment banking and financial services firm ●Chairman and chief executive officer (1994 to 2019) Jeffries & Company, an investment bank ●Managed derivatives and structured finance division Lehman Brothers Holdings Inc., an investment bank and financial services company ●Managed groups in corporate debt capital markets and derivatives structuring and trading Other Public Company Boards ●Ameriprise Financial, Inc. (September 2016 to present) ●Union Pacific Corporation (November 2019 to present) ●Caesars Entertainment Corporation (April 2008 to March 2019) ●Wal-Mart Stores Inc. (June 2004 to June 2014). Nonprofit/Other Boards: ●Cox Enterprises Inc. ●Lincoln Center for the Performing Arts |
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Proposal 1: Election of Directors
We maintain active, year-round engagement with our shareholders. We aim to engage with shareholders representing at least one-third of our total shares outstanding, on an annual basis.
Who meets with shareholders | How we interact with shareholders | |
●Corporate Secretary and ESG team ●Investor Relations team ●NGCRC chair ●Independent chair ●Management, including CEO | ●In-person or virtual meetings ●Investor conferences ●Annual shareholder meeting ●Shareholder proposals ●Written correspondence with investors throughout the year |
These interactions enable two-way dialogue between our shareholders and the Company and provide a forum for our Board members and leadership to listen to our shareholders’ perspectives, answer any questions and engage in dialogue on any feedback they may have. These engagements also inform and improve our disclosures, decision-making and commitments. The Board also considers shareholder feedback from these meetings in its deliberations and decision-making.
The table below sets forth recent changes we made after considering shareholder feedback, along with market standards and emerging best practices, in conjunction with our strategic and business priorities.
Executive compensation | Diversity disclosures |
Updated executive compensation clawback policy Allows for recoupment of incentive compensation granted to current and former executive officers if the executive engages in conduct that is materially detrimental to Clorox, or in the event of a financial restatement. Expanded the factors considered in executive compensation award determinations For fiscal year 2022 and onwards, certain ESG-related goals from our IGNITE scorecard will be factored into the MDCC’s evaluation of each executive’s performance for their annual incentive awards. | Expanded our disclosures regarding diversity and inclusion Our EEO-1 information is available on the Company’s website at thecloroxcompany.com/company/inclusion-diversity/. We also further enhanced our disclosures by including representation data by Clorox job category starting in our 2021 Integrated Annual Report. |
Third-party board and director evaluator | ESG Data Hub |
Starting this fiscal year 2023, we plan to utilize a third-party facilitator periodically for our board and director evaluations in line with best practice, in order to add external perspective and insight to our evaluation process. | In response to shareholder feedback, this year, we launched the ESG Data Hub which will provide a centralized, more user-friendly information source to our stakeholders. The ESG Data Hub can be found at |
THE CLOROX COMPANY - | |
Shareholder EngagementProposal 1: Election of Directors
Climate action |
We recently unveiled our climate action plan with a roadmap to achieving our science-based targets (SBTs) and net-zero commitments by 2050. In September 2021, we announced our SBTs as part of our climate strategy, which will put the Company on a path to net zero emissions across scopes 1, 2 and 3 by 2050. |
Shareholder Outreach and Communications
We maintain active, year-round engagement with our shareholders. During the past fiscal year, our directors and management met with many of our investors to discuss key corporate governance, executive compensation, corporate responsibility, culture and other important ESG topics. These meetings enable two-way dialogue between our shareholders and our Board and management, and for our leadership to listen to our shareholders’ perspectives and understand any concerns or feedback they may have.
The Board considers shareholder feedback from these meetings, along with emerging best practices, market standards, and policies at other companies in its perspectives. The feedback we have received from our shareholder engagement activities has informed the Board’s decisions and deliberations as well as our disclosures. For example, shareholder feedback helped inform the Board’s determination that elimination of the supermajority voting provision in our Company charter, as proposed in Proposal 4, is appropriate for the Company and our shareholders.
Our Board also considered shareholder input in reviewing the Company’s compensation plan design and metrics, as described in greater detail in the Compensation Discussion and Analysis section of this proxy statement, and in other key areas. Additionally, as part of the Company’s recent CEO succession process and the NGCRC’s evaluation of the Board’s leadership structure, as discussed in more detail on page 18, the NGCRC considered shareholder feedback as to whether separating the chief executive officer and chair roles would be in the Company’s best interest. We have also expanded some of our disclosures based on helpful feedback from our shareholders, including expanding our disclosures regarding diversity and inclusion, such as our EEO-1 data which will be available in our 2020 integrated annual report, as well as regarding the skills and experience identified by the Board as being important in creating a diverse and well-rounded Board, among other areas.
Shareholder Recommendations and Nominations of Director Candidates
The NGCRC considers recommendations from many sources, including shareholders, regardingShareholders may recommend possible director candidates for director. Such recommendations, together withby sending the candidate’s biographical and business experience information (similar to that required to be disclosed under the applicable Securities and Exchange Commission (SEC)SEC rules and regulations) regarding the candidate, should be submitted to The Clorox Company, c/o Corporate Secretary, 1221
Broadway, Oakland, CA 94612-1888. The NGCRC evaluates all candidates for the Board in the same manner, including those suggestedrecommended by shareholders.
In addition, ourThe Clorox Company Amended and Restated Bylaws (the Bylaws) permit a shareholder or group of up to 20 shareholders who have owned at least 3% of the outstanding shares of the Company’s common stock (Common Stock) for at least three years to submit director nominees (up to 20% of the Board) for inclusion in the Company’s proxy statement and form of proxy used in connection with the Annual Meeting (proxy materials) ifMeeting. Notice of the shareholder(s) provide(s)nomination must be timely, written notice of such nomination(s) and the shareholder(s)shareholder and the nominee(s)nominee must satisfy the requirements specified in the Company’s Bylaws. Shareholders who wish to nominate directors for inclusion in the Company’s proxy materials or directly at an annual meeting of shareholders in accordance with the procedures in our Bylaws should follow the instructions under the Shareholder Proposals and Director Nominations for the 20212023 Annual Meeting section of this proxy statement.
Shareholders and interested parties may direct communications to individual directors, including the lead independent director,chair, to a Board committee, to the independent directors as a group, or to the Board as a whole, by addressing the communications to the appropriate party and sending them to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The Corporate Secretary will review allthese communications so addressed and will forward to the addressee(s) allany communications determined to bearthat they determine bears substantively on the business, management, or governance of the Company.
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Board of Directors
How We Identify, EvaluateDirector Candidate Evaluation and Nominate Our DirectorsNomination
The NGCRC engages in continuous Board succession planning and evaluation of Board composition, working closely with our Board in determining the skills, experiences, and characteristics desired for the Board as a whole and for its individual members, and also screening and recommending candidates for nomination by the full Board.
While the Board has not established any specific minimum qualifications that a potential nominee must possess, director candidates, including incumbent directors, are assessed based uponon criteria established by the NGCRC in light of the Company’s long-term strategy, the skills and backgroundsexperience currently represented on the Board, legislative and regulatory developments, corporate governance trends, and any specific needs identified in the Committee’sNGCRC’s evaluation of Board composition.
22 | THE CLOROX COMPANY - 2022 Proxy Statement |
Proposal 1: Election of Directors
Criteria include broad-basedinclude:
✓ | Broad-based leadership and relevant business skills and experiences |
✓ | Prominence and reputation in their professions |
✓ | Global business and social perspective |
✓ | Ability to effectively represent the long-term interests of our shareholders and other stakeholders |
✓ | Ability to devote sufficient time to the Company’s affairs |
✓ | Personal integrity and judgment |
✓ | Diversity of thought, background and experience |
The Board’s approach to refreshment is robust, combining experience and business skills and experience, prominence and reputation in their professions, global business and social perspective, ability to effectively represent the long-term interests of our shareholders and other stakeholders, personal integrity and judgment, and diversity of thought, background and experience.continuity with fresh perspectives. The Board also adopted a Board Diversity Policy during fiscal year 2020, which requires the NGCRC tostrongly believes that its composition should include longer-tenured directors who have institutional memory and to have any search firm they engage include, diverse candidates who meet the Board membership criteria set forth in the Governance
Guidelines, in any pool from which the NGCRC selects director candidates. See Board Diversity Policy below for more information.worked with different CEOs and management teams, middle-tenured directors, and newer directors.
The NGCRC focuses on achieving the right balance of director experience, diversity and tenure of ourin evaluating new director candidates and current directors to obtain a Board with a combination of fresh perspectives andfor nomination. Further, the institutional memory of longer-tenured directors who have seen issues arise over time and have worked with different CEOs and management teams to guideNGCRC carefully considers the Company.
The ability of incumbent directors to continue to contribute to the Board and the Company’s evolving needs, is also carefully considered in connection withas part of the renominatingrenomination process. Further, under the Company’s Corporate
The Governance Guidelines (Governance Guidelines),also provide that non-management directors whose personal circumstances change in a manner that affects their ability to contribute to the Company, including a change in their principal position, primary job responsibilities, or personal circumstances, must offer their resignation for the Board’s consideration, to ensure that the individual iscurrent directors are still qualified and have the capacity to perform their duties as a director, in light of other commitments.
The Board also adopted a Board Diversity Policy during fiscal year 2020, which requires the Company.NGCRC and any search firm they utilize to include diverse candidates who meet the Board membership criteria set forth in the Company’s Corporate Governance Guidelines (Governance Guidelines) in any director candidate pool. See Board Diversity Policy below for more information.
The following graphic summarizes the experience and skills among others,composition of the Board, with additional information in our director biographies in the Our Director Nominees section of this proxy statement. These attributes have been specifically identified by the NGCRC as being important in creating a diverse and well-rounded Board:Board.
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Contributes important perspectives on fueling growth, one of the core strategic choices of our IGNITE strategy. | INTERNATIONAL EXPERIENCE Supports key strategic decision-making in international markets, and helps us market and sell to our diverse consumer base. | |||||
Provides guidance on the Company’s strategy and position in our industry, in addition to providing market insights. | ||||||
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Contributes insight into strategy, |
THE CLOROX COMPANY - 2022 Proxy Statement |
Proposal 1: Election of Directors
Supports effective oversight and | REGULATORY/SCIENTIFIC/R&D EXPERIENCE Provides insight into navigating regulatory environments both in the U.S. and globally, especially in health and wellness and other relevant regulated | |||||
Provides insights and | RETAIL/CUSTOMER EXPERIENCE Provides insight into navigating regulatory environments both in the U.S. and globally, especially in health and wellness and other relevant regulated sectors | |||||
INNOVATION/DIGITAL KNOWLEDGE Contributes perspectives on the disruptive forces in our industry (including digital, social media, e-commerce) and the development and execution of our | ||||||
Supports the Board in | ||||||
Provides insights into these critical areas in helping us continue to successfully develop and | SIGNIFICANT M&A/FINANCIAL/ ACCOUNTING EXPERTISE Provides perspective on the Company’s strategic | |||||
HUMAN CAPITAL/CULTURE EXPERIENCE Provides valuable perspective in talent acquisition, development and retention and fostering a corporate culture that reflects our values and encourages IDEA. |
Director Continuing Education and New Director Orientation
To enhance and expand on the key skills and experiences relevant to the Company’s industry, we provide our directors with continuing education and presentations developed by both internal and external expert speakers. In addition to the regular ESG updates it reviews at each meeting, the NGCRC led a deep-dive session with the full Board on multiple ESG topics presented by management, our external advisers and ESG consultants. Topics included the evolving nature of stakeholder capitalism and interests from our multiple stakeholder groups, emerging proxy voting trends, Clorox’s approach to its ESG materiality assessment and how that informs its strategic priorities and reporting, among other areas.
24 | THE CLOROX COMPANY - 2022 Proxy Statement |
Proposal 1: Election of Directors
Additionally, we encourage our directors to participate in external continuing director education programs. New directors also participate in comprehensive orientation sessions that provide them with a thorough understanding of their fiduciary duties as well as a robust overview of the Company’s business and strategies, which allows new directors to begin making contributions to the Board at the start of their service.
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Board of Directors
Diverse Backgrounds & Experiences
Our director nominees represent diverse perspectives and experiences, and we regularly assess our Board to ensure that we have a mix of tenures balancing fresh perspectives with institutional memory of longer-tenured directors who have seen issues arise over time and have worked with different CEOs and management teams to guide the Company.teams.
Average Director Tenure
Note: As of the Annual Meeting date, assuming election of all director nominees.4.5 Years
6 Directors | 3 Directors | |||
3-6 years | 7+ years |
* | As of the Annual Meeting |
As highlighted in our Governance Guidelines, the Board values diversity and recognizes the importance of having unique and complementary backgrounds and perspectives in the boardroom. The Board also actively seeks refreshment of the Board with directors who can provide diverse perspectives and add strong and unique value to our ever-evolving business through skills highly relevant to our corporate strategy.
The Company and the Board both have a long-standing commitment to inclusion and diversity -increasing representation across the company and fostering an inclusive environment where everyone can be their true self and do their best work—which, we believe, helps the Company attract and retain the best talent and also helps lead to a better business strategy and execution. The Board endeavors to bring together the following attributes that reflect the Company’s diverse stakeholders. |
● | Diverse skills and perspectives |
● | Professional experience |
● | Age |
● | Race |
● | Ethnicity |
● | Gender |
● | Sexual identity and orientation |
● | Cultural backgrounds |
The Board believes that setting the tone at the top – that people of all backgrounds are welcome and empowered – helps the Company attract and retain the best talent and also helps lead to a better business strategy and execution. The Board endeavors to bring together diverse skills, professional experience, perspectives, age, race, ethnicity, gender, sexual identity and orientation, and cultural backgrounds that reflect the Company’s diverse stakeholders. The NGCRC assesses the effectiveness of these efforts by examining the overall composition of the Board, assessing how individual director candidates, including incumbent directors, can contribute to the overall success of the Board, and reviewing individual, committee, and Board evaluation results. Furthermore, we are very
proud that our commitment to diversity does not end with just representation; diverse directors hold key leadership roles on our Board – our Lead Independent Director is a Black woman, our NGCRC chair is Hispanic, and our Audit Committee Chair is Black.
Clorox’s commitment to inclusion and diversity also forms a key part of our IGNITE strategy. Ethnic minoritiesAs of June 30, 2022, people of color represent 34%42% of our nonproduction employees and 30%32% of our nonproduction managers in the US, and women represent 51%36% of our employees and 47% of our nonproduction employees and 44% of our nonproduction managers globally. We are committed to inclusion and diversity because we fundamentally believe that diversity leads to better outcomes for our business; we are in 9 of 10 US households and empowering diverse thinking enables us to better meet the needs of our loyal and diverse consumers.business. We have also seen the value of diversity during times of uncertainty when different ways of thinking enablesenable us to be nimble, creative, and step up to meet challenges.
THE CLOROX COMPANY - | |
The Board regards diversity as an important consideration for determining the optimal Board composition and adopted a Board diversity policy during fiscal year 2020, formalizing and reinforcing the NGCRC’s long-existing practice of considering diversity as an important factor in the director selection process in accordance with our Board membership criteria.
The NGCRC has oversight overof the implementation and delivery of the Board Diversity Policy, which guides and helps drive the Board’s commitment to actively seek out diverse director candidates. This policy requires that women and people of color who meet the Board membership criteria set forth in our Governance Guidelines are included in each slate of potential
directors the Board considers in director searches.candidate pools. The policy recognizes that in considering director candidates for the Board, the NGCRC considers many forms of diversity such as, diversity of skills, professional experience, perspective, age, race, ethnicity, gender, sexual identity and orientation and cultural backgrounds, and considers whether the diversity of the Board is appropriately reflective of the diversity of the Company’s stakeholders.
The Board believes this policy supports the Company’s commitment to inclusion and diversity and its ability to adapt to ever-changing business and policy environments.
As part of our ongoing, proactive efforts to implement effective and progressive corporate governance practices, the NGCRC regularly reviews the leadership structure of the Board, taking into account the Company and its needs, market practices, board skills and experiences, investor feedback, and corporate governance perspectives, among other things. The Board believes it is in the best interests of the Company and its shareholders for the Board to have flexibility in determining the Board leadership structure of the Company. As part of our ongoing, proactive efforts to implement effective corporate governance practices, the NGCRC regularly reviews the leadership structure of the Board, taking into account the Company based on these factors.and its needs, legislative and regulatory developments, and corporate governance trends, among other things. Accordingly, over the years, the Board has had a variety of leadership structures.
Independent Chair | Independent Committee Chairs | |||
Matthew J. Shattock | Esther Lee NGCRC Chair | Christopher J. Williams Audit Committee Chair | Spencer C. Fleischer MDCC Chair |
Currently, we have separate board chair and CEO roles, which we believe aids in the Board’s oversight of the Company's recent CEO succession planning process, the Board created a new leadership structure, with a new executive chair, a continuing strong lead independent director, a new separate chief executive officer and continuingmanagement, supported by strong independent committee chairs.
Responsibilities of the Company and its shareholders at this time. As CEO, Ms. Rendle is responsible for developing and overseeing the Company's business strategy and culture as well as managing the day-to-day operations of the Company and the Company's relationships with stakeholders. With Mr. Dorer serving as Executive Chair, the Company continues to leverage his significant experience and strong working relationships with the independent members of the Board. This role allows him to facilitate effective communication between management and the Board and to bring key issues to the Board's attention.chair
The duties of the executive chair include advising the CEO in connection with matters relating to the Board. In addition, the executive chair, among other responsibilities:
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| THE CLOROX COMPANY - |
BoardProposal 1: Election of Directors
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While the duties listed above, Ms. Thomas-Graham has taken an active role inindependent chair facilitates the Board’s oversight of management, promotes communication between management and our Board, and leads our Board’s consideration of key governance matters, Linda Rendle, as our CEO, is responsible for developing and overseeing the Company’s diversity efforts and outreach to employees, including participating in and speaking at events with our employee resource and affinity groups and meeting with high-potential employees of color. She also actively participates in discussions with shareholders, particularly around our ESG efforts, and shares feedback from these meetings withbusiness strategy, as well as managing the Board and executive committee. During the COVID-19 pandemic, Ms. Thomas-Graham has met at least weekly with the CEO, to ensure connectivity with and input from the Board.
Lastly, the Board is guided by strong, independent committee chairs, with Dr. Carmona leading the NGCRC, Mr. Fleischer leading the MDCC, and Mr. Williams serving as the Audit Committee chair.
The Board believes that this structure promotes effective governance and that the leadership structure described above is in the best interests of the Company and its shareholders, in light of current circumstances.
Annual Board and Director Evaluation Process
In addition to regularly reviewing its leadership structure, the Board, committee, and individual director evaluation process. Under the Governance Guidelines, the Board committees and each Board committee are required toindividual director conduct an annual self-evaluation. The evaluations includeself-assessment of their performance, a rangeprocess that is overseen by the NGCRC. In fiscal year 2023, the evaluation will utilize a third-party facilitator in line with best practices to gain additional external perspective and insight.
Each director considers self- and board assessment questions and any peer feedback. | The NGCRC | The NGCRC Chair | The Board reviews |
In these discussions, directors have the opportunity to provide feedback on a number of issues designed to assess Board performance and committee performance,effectiveness, including Board and committee composition, structure, adequacy of information received, accountability,appropriate oversight, and effectiveness, among other topics.
Each Board members’committee also conducts a separate self-evaluation that is designed to assess committee performance on an annual basis. The individual assessments are conducted by the chair of the NGCRC, who summarizes and reports the results and any related recommendations to the NGCRC and the full Board.
THE CLOROX COMPANY - | |
Proposal 1: Election of Directors
This multi-step evaluation process generates robust comments and discussion at all levels of the Board, and these evaluations have led to new and evolved practices designed to increase Board effectiveness and efficiency, including, for example:
Board meeting format and materials ●Adjusting the Board meeting format to facilitate continued deep engagement on key strategic areas ●Revising the format and focus of Board materials Board and committee engagement ●Increased engagement of committees in certain topics to facilitate deeper engagement, with periodic reporting to the full Board ●Providing additional Company and industry updates to the Board between board meetings to increase connectivity to the Company | Board meeting agenda items ●Adding regular cyber and data security updates to each quarterly Audit Committee meeting agenda, starting a few years ago ●Providing additional updates on key strategic topics, including the Company’s digital transformation and portfolio review ●Adding new topics or devoting more time to particular topics of interest ●Incorporating external speakers when helpful and appropriate |
How Our Directors Are ElectedVote Required
The people designated in the proxy and voting instruction card intend to vote your shares represented by proxy FOR the election of each of these nominees, unless you include instructions to the contrary. In the event any director nominee is unable to serve or for good cause will not serve, the personsindividuals named as proxies may vote for a substitute nominee recommended by the Board, or the Board may reduce the size of the Board or leave a vacancy.
Under the Company’s Bylaws, any director who fails to be elected by a majority of the votes cast in an uncontested election must tender their resignation to the Board. The NGCRC would then make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The Board would act on the NGCRC’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. A director who tenders their resignation would not participate in the Board’s decision.
The Board unanimously recommends a vote FOR each of the Board’s thirteen12 nominees for director listed aboveabove. . The Board believes that each nominee listed above is highly qualified and has the background, skills, experience, and attributes that qualify each nominee to serve as a director of the Company. See each nominee’s
28 | THE CLOROX COMPANY - 2022 Proxy Statement |
Table of ContentsHow Our Directors Govern
Corporate Governance and Board Matters |
The Clorox Company Governance Guidelines
The Board has adopted Governance Guidelines to reflect the Board’s views and the Company’s policies regarding significant corporate governance matters, which the Board believes are best practice. The Governance Guidelines present a framework for the governance of the Company by setting forth the Board’s and the Board committees’ responsibilities, qualifications, and operational matters and describing key matters, such as the evaluation of the CEO and ordinary-course and emergency succession planning.matters. The NGCRC reviews the Governance Guidelines on at least, an annual basis and recommends changes to the Board based on current corporate governance best practices.
The Governance Guidelines can be found in the Corporate Governance section on the Company’s website at https://www.thecloroxcompany.com/who-we-are/thecloroxcompany.com/company/corporate-governance/governance-guidelines/, and are available in print to any shareholder who requests them from The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.
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TableBoard Oversight of Contents
Board of Directors
Our Corporate Governance Process
We believe that a critical component of meaningful corporate governance is a robust annual process that includes active and transparent shareholder engagement. In addition to our regularly scheduled governance cadence described below, our Board reviews, considers, and acts, as necessary, upon ESG matters throughout the year.
Our annual engagement process typically includes the following:
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While the Company’s management is responsible for the day-to-day risk management process, the Board has ultimate responsibility for the oversight of the Company’s risk management, shaping effective corporate governance, and setting the right tone for integrity, ethics and culture.culture, for the benefit of the Company’s stakeholders, including shareholders, employees, and customers. This is in line with the Company’s purpose of championing people to be well and thrive every single day. The Board exercises direct oversight of strategic risks to the Company has instituted a robust, comprehensive enterpriseand the risk management program, which involves Board oversight,process to ensure that it is properly designed, well-functioning and an Enterprise Risk Management Steering Committee (ERM Committee), which consists of a cross-functional team of senior leaders and key executives. The ERM Committee oversees the annual key risk identification process, whereby it identifies the top risks that the Company facesconsistent with respect to its business, operations,our overall corporate strategy, and other factors, as well as key mitigation strategies andalso delegates certain risk owners. The Company’s management reports and discusses identified risks and risk mitigation and management efforts withareas to each of the Board at minimum, on an annual basis and typically in connection with the Board’s annual strategy meeting.committees.
TheRisk Oversight by Board also overseesCommittees
As part of executing its risk management through its committees by allocating certain matters tooversight responsibility, the Board committeesdelegates specific oversight duties to each Board committee based on expertise, and theseas set forth below. These committees report on risk exposure on and have oversight over these delegated areas during its regular reports to the full Board to facilitate proper risk oversight by the entirefull Board.
Audit Committee ●Integrity of the financial statements ●Accounting and financial reporting matters and controls, including the independent and internal auditors ●Risk management ●Data privacy, cybersecurity and | ||
NGCRC ●Corporate governance practices, director nominations, and Board, committee, director and peer evaluations ●Supports the Board in reviewing, monitoring and engaging with management on climate change and environmental policies, programs, goals and progress ●ESG program, including corporate citizenship, charitable giving, political participation, issue advocacy and lobbying ●Shareholder engagement ●Compliance and ethics program | MDCC ●Management ●Individual performance, including ESG achievements, and ●The Company’s diversity, equity and inclusion initiatives, programs and key metrics |
THE CLOROX COMPANY - 2022 Proxy Statement | 29 |
Corporate Governance and Board Matters
Oversight of Key Risks
Culture
To aid its responsibility for oversight of the Company’s corporate culture, the Board receives information through a number of channels, including:
● | updates from the chief people officer and the chief diversity and social impact officer on data and metrics from periodic pulse surveys and IDEA updates, |
● | our annual employee engagement survey which gauges employee perception of the |
● | the activities of our employee resource groups, |
● | Company and |
● | updates from the chief legal officer on any significant compliance, discrimination and |
Furthermore, asAs part of its responsibilities,their oversight, the Board also provides guidance to management regarding significant cultural challenges facing the Company and also evaluates management’s efforts to align corporate culture with the Company’s values and strategy.
Executive Compensation
The MDCC periodically reviews the Company’s compensation policies and programs to ensure thatour compensation design offers performance incentives to employees and executives, while mitigating excessive risk-taking. The overall executive compensation program contains various provisions thatto mitigate against excessive risk-taking, including:
● | Balancing cash compensation under the |
● | Capping the payouts under |
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● | Using different financial metrics under our Annual Incentive Plan and long-term performance shares; |
● | Including clawback provisions that allow the recapture of compensation paid to current and former executives, including in the event of a restatement of the Company’s financial statements or if the individual engages in conduct materially detrimental to the Company, which serve as a deterrent to inappropriate risk-taking activities; and |
● | Implementing and enforcing stock ownership guidelines that require executive officers to accumulate meaningful levels of equity ownership in the Company, which align executives’ |
Based on its review and the analysis provided by its independent compensation consultant, Frederic W. Cook & Co., Inc. (FW Cook), the MDCC has determined that the risks arising from the Company’s compensation policies and practices for its employees, including executive officers, are not reasonably likely to have a material adverse effect on the Company.
30 | THE CLOROX COMPANY - 2022 Proxy Statement |
Corporate Governance and Board Matters
Enterprise Risk Management The Company has instituted a robust, comprehensive enterprise risk management program, which involves Board oversight, and an Enterprise Risk Management Steering Committee (ERM Committee), which consists of a cross-functional team of senior leaders and key executives. The ERM Committee oversees the annual key risk identification process, which identifies the top risks that the Company faces with respect to its business, operations, strategy, and other factors, including cybersecurity and climate-related risks, as well as key mitigation strategies and risk owners. Our management discusses identified risks and risk mitigation and management efforts with the Board on an annual basis, at minimum, and typically in connection with the Board’s annual strategy meeting. | Reporting Protocol and Crisis Management The Company also has formalized governance structure and reporting channel policies that require management to notify the Board of, among other things, any instances of significant threatened or actual litigation, significant governmental or regulatory inquiry or proceeding, and any events or occurrences that could materially impact the Company’s reputation, including any cybersecurity-related issues that could involve the significant misappropriation of personal or sensitive/valuable Company data, or that may have significant operational, financial, legal or reputational impacts. This reporting protocol is a key component of the Board’s oversight of the Company’s crisis management program. |
Cybersecurity Risk Management and Preparedness
The Company’s cyber preparedness team is led by our chief information and enterprise analytics officer and overseen by our information security officer. Some components of our cybersecurity risk management program:
● | Leverages various frameworks from the National Institute of Standards and Technology (NIST) for managing cybersecurity risks. |
● | Seeks to employ cybersecurity best practices, including implementing new technologies to proactively monitor new vulnerabilities and reduce risk, enhancing governance, risk and compliance management, maintaining security policies and standards, and continuously updating our response planning and protocols. |
● | Cybersecurity insurance policy to cover the costs relating to a data breach. |
● | Program maturity assessment performed every two years by our internal audit function. |
● | Regular phishing and cyber hygiene training for all employees who have access to company email and connected devices. |
● | Management consults regularly with external specialists and advisors on enhancements and opportunities for regular and continued strengthening of our cyber practices and policies. |
The Audit Committee is responsible for oversight of data privacy, cybersecurity and IT risks. In order to fulfill its duties, the Audit Committee receives regular updates from our chief information and enterprise analytics officer, information security officer and CLO, including quarterly updates on topics related to information security and cyber risks and readiness. The Audit Committee includes directors with knowledge, skills and experience in data security, privacy, IT governance, and cyber risk.
Security and cybersecurity risks are presented to the full Board at least annually as part of the Board’s oversight of enterprise risk management.
THE CLOROX COMPANY - 2022 Proxy Statement | 31 |
Corporate Governance and Board Matters
Clorox’s ESG governance starts at the top—with robust oversight of our ESG strategy from the Board and implementation of our strategy through a cross-functional approach that allows us to effectively execute against our ESG priorities and drive long-term growth for our stakeholders. In line with our commitment to continuously strengthen our governance practices, we continue to evolve our ESG governance to ensure we are taking into account stakeholder expectations while executing against our IGNITE strategy.
ESG Governance Structure | |
Board of Directors ●Responsible for overseeing the Company’s ESG strategy and risks and ensuring ESG priorities are integrated into long-term strategy ●Receives regular updates and engages on key ESG topics ●Ongoing director education on ESG matters from internal and external experts and stakeholders | |
ESG Executive Committee ●Oversees execution against our ESG priorities and ensures that our ESG work is integrated into our business units | |
ESG Core Team ●Senior cross-functional management team that helps to define and execute on our ESG priorities and guides periodic ESG strategy enhancements | |
Sustainability Center ●Cross-functional working team that defines, drives and tracks progress against environmental goals and strategy, including Clorox’s climate stewardship ambitions and performance | |
ESG Disclosure Committee ●Cross-functional team that meets at least quarterly to review and discuss ESG reporting and disclosures, monitors current and emerging ESG disclosure trends and best practices, and evaluates the effectiveness of ESG disclosure controls and procedures | Enterprise Risk Management Steering Committee ●Overseen by the chief financial officer and chief legal officer ●Proactively identifies, assesses, prioritizes, and continuously manages enterprise-wide risks, including climate risk, and updates the Board at least bi-annually on key ERM updates |
32 | THE CLOROX COMPANY - 2022 Proxy Statement |
Corporate Governance and Board Matters
Recent Enhancements to ESG Governance
In overseeing culture, the Board also receives information throughrecent years, we have made a number of channels, including updates fromenhancements to further evolve governance of the chief people officer, such as dataCompany’s ESG progress and metrics fromactivities.
Board committee charters. In fiscal year 2022, we refreshed our annual employee engagement surveyBoard committee charters to provide further clarity on each committee’s roles and also relatingresponsibilities around ESG oversight and to inclusionensure coordinated coverage of ESG issues across the Board and diversity,committees. Although the NGCRC has historically overseen the Company’s sustainability policies, the NGCRC charter now explicitly includes oversight of the Company’s climate change and environmental policies, programs, goals and progress. The MDCC’s scope and responsibilities were similarly expanded to explicitly include oversight of the Company’s consideration of ESG matters in its compensation programs, as well as its key human capital policies and practices below the executive level. See theBoard Committees sectionof this proxy statement for more information about each Board committee’s scope, responsibilities and duties.
Director ESG education and ESG shareholder engagement. In fiscal year 2022, our directors had opportunities to continue to deepen their knowledge base on ESG topics relevant to the company. In addition to the regular ESG updates it reviews at each meeting, the NGCRC led a deep-dive session with the full Board on multiple ESG topics presented by management, our external advisers and ESG consultants. Topics included the evolving nature of stakeholder capitalism and interests from the general counsel on any significant compliance, discriminationour multiple stakeholder groups, emerging proxy voting trends, and Clorox’s approach to its ESG materiality assessment and harassment complaints.
The Company also has formalized governance structurehow that informs its strategic priorities and reporting, channel policies that require management to notify the Board of, among other things, any instancesareas. As part of significant threatened or actual litigation, significant governmental or regulatory inquiry or proceeding, and any events or occurrences that could materially impactthis discussion, we invited one of the Company’s reputation,largest shareholders to join the meeting and engage in a dialogue to share its perspective on emerging ESG topics of relevance to issuers like Clorox and perspective on board oversight of these issues. We also have regular in-depth discussions regarding our ESG priorities and progress with our shareholders during our annual as well as ad hoc shareholder engagement opportunities. See the Shareholder Engagement section of this proxy statement for more information.
Launch of ESG Data Hub. This past year, in response to stakeholder interest in easily accessible ESG data, we launched our ESG Data Hub. We believe that this new data hub resource will foster simpler, more transparent, and centralized access to our ESG information for our stakeholders.
Formation of ESG Disclosure Committee. In fiscal year 2022, we also formed a cross-functional ESG Disclosure Committee to enhance the processes around review of our ESG reporting and disclosures, including any cybersecurity-related issues that could involve the significant misappropriationour SEC filings, and monitoring of personal or sensitive/valuable company data, or that mayregulatory changes, as well as trends and best practices in ESG disclosure and reporting, including ESG disclosure controls and procedures. The committee meets at least quarterly and includes participants from our legal, internal audit, corporate communications, finance, financial reporting controls and human resources functions, as well as executives who have significant operational, financial, legal or reputational impacts.oversight of ESG matters.
The Board held nineeight meetings during fiscal year 2020.2022. All incumbent directors attended at least 75% of the meetings of the Board and committees of which they were members during fiscal year 20202022 during the period in which they served on the Board. All members of the Board are expected to attend the Annual Meeting. Each of the eleven10 members of the Board at the time of the Company’s 20192021 Annual Meeting of Shareholders attended that meeting.
| THE CLOROX COMPANY - | 33 |
Corporate Governance and Board of DirectorsMatters
TheUnder the Governance Guidelines, provide that a substantial majority of the Board must consist of a substantial majority of independent directors. The Board determines, in the exercise of its business judgment, in light of all facts and circumstances, whether individual Board members are independent, as defined by the New York Stock Exchange (NYSE). The Board has adopted and in accordance with the director independence standards which are set forth in the Governance Guidelines, to assist it in assessing the independence of directors.Guidelines. The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the NGCRC.
The Board has determined that each of our directors (Messrs. Fleischer, Mackay, Matschullat, Shattock, Weiner,(during fiscal year 2022, including Dr. Richard H. Carmona) and Williams, Mmes. Banse, Lee, Tesija, and Thomas-Graham, and Dr. Carmona) and our director nominee (Mr. Parker) arenominees is independent under the NYSE listing standards and the independence standards set forth in the Governance Guidelines, except for Mr. Dorer and Ms.Linda Rendle as a result
100% of our director nominees is | ●Amy L. Banse ●Julia Denman ●Spencer C. Fleischer ●Esther Lee ●A. D. David Mackay ●Paul Parker | ●Stephanie Plaines ●Matthew J. Shattock ●Kathryn Tesija ●Russell J. Weiner ●Christopher J. Williams |
The independent directors generally meet in executive session at each regularly scheduled Board meeting without the presence of management directors or employees of the Company to discuss various matters related to the oversight of the Company, the management of the Board’s affairs, and the CEO’s performance. The lead independent director chairschair presides over the independent executive sessions.
Related Person Transaction and Conflict of Interest Policies and Procedures
The Company has a written policy regarding Audit Committee review and approval of related person transactions by the Audit Committee (Related Person Policy). The Related Person Policy defines anany Interested Transactions. An “Interested Transaction” asis any transaction, arrangement, or relationship or series of similar transactions, arrangements, or relationships (including any indebtednessdebt or guarantee of indebtedness)debt) in which (i) the aggregate amount involved since the beginning of the Company’s last completed fiscal year will or may be expected to exceed $120,000 (including any periodic payments or installments due on or after the beginning of the Company’s last completed fiscal year and, in the case of indebtedness, the largest amount expected to be outstanding and the amount of annual interest on that amount), (ii) the Company or any of its subsidiaries is a participant, and (iii) any Related Person (as defined below) has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of an equity interest in another entity).which:
A “Related Person” is (i) any person who is or was (since the beginning of the Company’s last fiscal year, even if they do not presently serve in that role) an executive officer, director, or nominee for election as a director, (ii) a beneficial owner of more than 5% of the Company’s Common Stock, or (iii) an immediate family member of any of the foregoing. For purposes of this definition, “immediate family member” includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers-and fathers-in-law, sons- and daughters-in-law, brothers-and sisters-in-law, and anyone residing in such person’s home (other than a tenant or employee).
Under the Related Person Policy, if a new Interested Transaction is identified for approval, it is brought to the Audit Committee to determine if the proposed transaction is reasonable and fair to the Company. The Audit Committee will review the material facts of all Interested Transactions that require its approval and either approve or disapprove of the entry into the Interested Transaction.
● | the aggregate amount will or may be expected to exceed $120,000, |
● | the Company or any of its subsidiaries is a participant, and |
● | any executive officer, director or director nominee; beneficial owner of 5% or more of our stock; or any immediate family member of the foregoing individuals (each, a Related Person) has or will have an interest (other than solely as a result of being a director or a less than 10% beneficial owner of an equity interest in another entity). |
The Related Person Policypolicy also contains categories of preapproved transactionsInterested Transactions that the Board has identified as not having a significant potential for an actual or potential conflict of interest or improper benefit.
In determining whether to approve or ratify anreviewing any Interested Transaction, the Audit Committee will take into account, among other factors it deems appropriate,consider whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the Related Person’s interest in the transaction. No director participates in any discussion or approval of an Interested Transaction for which he or she (or an immediate family member) is a Related Person, except that the director will provide all material information concerning the Interested Transaction to the Audit Committee. There have been no transactions considered to be an Interested Transaction (excluding any pre-approved transactions) since the beginning of the Company’s 20202022 fiscal year.
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34 | THE CLOROX COMPANY - 2022 Proxy Statement |
Corporate Governance and Board Matters
The Company has adopted a Code of Conduct, which sets forth the ethical and legal standards of behavior and business practices that are required of all our directors, executives and global employees and can be found in the Corporate Governance section of the Company’s website, https://www.thecloroxcompany.com/who-we-are/corporate-governance/thecloroxcompany.com/company/policies-and-practices/codes-of-conduct, or can be obtained in print by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.
The Code of Conduct applies to all of the Company’s employees, including executives, as well as directors. We require that all Board members and employees complete
training and certify compliance with the Code of Conduct annually. We also perform an annual audit of internal compliance with our Code of Conduct.
We also have established a separate Business Partner Code of Conduct outlining our standards and expectations of our suppliers and other business partners, which can also be found at https://www.thecloroxcompany.com/who-we-are/corporate-governance/thecloroxcompany.com/company/policies-and-practices/codes-of-conduct.
The Board has established three standing committees: the Audit Committee, the NGCRC, and the MDCC.
Each of these committees consists only of non-management directors whom the Board has determined are independent under the NYSE listing standards and the Board’s independence standards set forth in the Company’s Governance Guidelines. Directors who serve on the Audit Committee and the MDCC must meet additional, heightened
independence and qualification criteria applicable to directors serving on these committees under the NYSE listing standards.
The charters for these committees are available in the Corporate Governance section of the Company’s website at https://www.thecloroxcompany.com/who-we-are/thecloroxcompany.com/company/corporate-governance/committee-charters, or in print by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.
The table below indicates the current members of each standing Board committee as of the date of the Annual Meeting:
Director | Audit | Nominating, Governance and Corporate Responsibility | Management Development and Compensation | |||
Amy Banse | • | |||||
Richard H. Carmona | Chair | • | ||||
Benno Dorer | ||||||
Spencer C. Fleischer | Chair | |||||
Esther Lee | • | |||||
A.D. David Mackay | • | • | ||||
Paul Parker* | ||||||
Linda Rendle | ||||||
Matthew J. Shattock | • | |||||
Kathryn Tesija | • | |||||
Pamela Thomas-Graham | • | |||||
Russell J. Weiner | • | • | ||||
Christopher J. Williams | Chair | |||||
Number of meetings in fiscal year 2020 | 9 | 6 | 6 |
| THE CLOROX COMPANY - | 35 |
Corporate Governance and Board of DirectorsMatters
Audit Committee Met 9 times in FY2021. Current Committee Members Christopher J. Williams (Chair) | Primary Responsibilities The Audit Committee is the principal connection between the Board |
and the Company’s independent registered public accounting firm. Among its other functions and duties, the Audit Committee oversees: ● | the integrity of the Company’s financial statements; |
● | the independent registered public accounting firm’s qualifications, independence, and performance; |
● | the performance of the Company’s internal audit |
function and independent registered public accounting firm; ● | the Company’s |
reporting that management has established; ● | |
● | the Company’s framework and guidelines with respect to risk assessment and risk management; and |
● | the Company’s material financial policies and actions. The Board has determined that, with respect to fiscal year 2022, there were three audit committee financial experts, as defined by SEC rules: Christopher J. Williams, A.D. David Mackay and Paul Parker, and each member of the Audit Committee is financially literate, as defined by NYSE rules. For fiscal year 2023, there will be five audit committee financial experts: Christopher J.Williams, A.D. David Mackay, Paul Parker, Julia Denman and Stephanie Plaines. |
Nominating, Governance and Corporate Responsibility Committee Met 5 times in FY2021. Current Committee Members Esther Lee (Chair) | Primary Responsibilities The NGCRC has the |
The Board has determined that, with respect to fiscal year 2020, director Mr. Williams is an audit committee financial expert, as defined by SEC rules, and each member of the Audit Committee is financially literate, as defined by NYSE rules.
its charter, including:
identifying and recruiting individuals qualified to become Board |
● | recommending |
nominees; ● | reviewing and recommending to the Board changes in the Governance Guidelines and the Code of Conduct; |
● | overseeing corporate responsibility (including corporate citizenship, charitable giving, political participation, issue advocacy and lobbying), governance of the Company’s ●shareholder and |
ethics program. ● | performing a leadership role in shaping the Company’s corporate governance and overseeing |
committee evaluations; and ● | |
36 | THE CLOROX COMPANY - 2022 Proxy Statement |
Management DevelopmentTable of Contents
Corporate Governance and Compensation Committee. The MDCC has the functions and duties set forth in its charter, including:Board Matters
Management Development and Compensation Committee Met 5 times in FY2021. Current Committee Members Spencer C. Fleischer (Chair) | The MDCC has the functions and duties set forth in its charter, including: ●assisting the Board in discharging its responsibilities relating to compensation of the CEO and other executive officers; |
● | reviewing, approving and |
● | overseeing the Company’s management development and succession planning ●review and |
discuss with management the Company’s diversity, equity and inclusion initiatives programs and key metrics and review these matters with the Board at least annually; and ● | evaluating, making recommendations and taking appropriate action in response to the shareholders’ advisory “say on pay” vote. |
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How Our Directors Are PaidDirector Compensation
Only our non-employee directors receive compensation for their service as directors. The Company’sdirectors in the form of:
● | cash compensation, and |
● | an annual grant of deferred stock units. |
As part of its oversight of non-employee director compensation, program is comprised of cash compensation and an annual grant of deferred stock units.
The MDCC has the responsibility for making recommendations regarding non-employee director compensation. The MDCC reviews the form and amount of compensation of non-employee directors at least once a yearannually to ensure that the Company’s non-employee directors are compensated appropriately relative to peer companies. The MDCC retains the services of an
independent compensation consulting firm to assist it in the performance of its duties. During fiscal year 2020,2022, the MDCC used the services of Frederic W.worked with FW Cook & Co., Inc. (FW Cook). FW Cook’s work with the MDCC includedfor data analysis, and guidance and recommendations regarding compensation levels relativeas compared to our compensation peer group (see discussion regardingas defined in the peer group in theCompensation Discussion and Analysis section below)of this proxy statement, as well as trends and recent developments in the area of non-employee director compensation. Clorox generally aims to compensate non-employee directors at or near the median of the compensation peer group.
The following table sets forth information regarding compensation for each of the Company’s non-employee directors during fiscal year 2020.2022.
Name | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Total ($) | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Total ($) | ||||||
Amy Banse | 102,250 | 155,875 | 258,125 | |||||||||
Amy L. Banse | 103,000 | 157,000 | 260,000 | |||||||||
Richard H. Carmona | 117,250 | 155,875 | 273,125 | 103,000 | 157,000 | 260,000 | ||||||
Julia Denman | 13,016 | 0 | 13,016 | |||||||||
Spencer C. Fleischer | 122,250 | 155,875 | 278,125 | 123,000 | 157,000 | 280,000 | ||||||
Esther Lee | 102,250 | 155,875 | 258,125 | 118,000 | 157,000 | 275,000 | ||||||
A. D. David Mackay | 102,250 | 155,875 | 258,125 | 103,000 | 157,000 | 260,000 | ||||||
Robert W. Matschullat | 102,250 | 155,875 | 258,125 | |||||||||
Paul Parker | 103,000 | 157,000 | 260,000 | |||||||||
Stephanie Plaines | 13,016 | 0 | 13,016 | |||||||||
Matthew J. Shattock | 102,250 | 155,875 | 258,125 | 278,000 | 157,000 | 435,000 | ||||||
Kathryn Tesija | 12,451 | 0 | 12,451 | 103,000 | 157,000 | 260,000 | ||||||
Pamela Thomas-Graham | 152,250 | 155,875 | 308,125 | |||||||||
Carolyn M. Ticknor(1) | 47,391 | 38,125 | 85,516 | |||||||||
Pamela Thomas-Graham(1) | 38,905 | 39,250 | 78,155 | |||||||||
Russell J. Weiner | 102,250 | 155,875 | 258,125 | 103,000 | 157,000 | 260,000 | ||||||
Christopher J. Williams | 117,603 | 155,875 | 273,478 | 128,000 | 157,000 | 285,000 |
THE CLOROX COMPANY - 2022 Proxy Statement | 37 |
Corporate Governance and Board Matters
(1) | |
(2) | The amounts reported in the |
(3) | The amounts reported reflect the grant-date fair value for financial statement reporting purposes of the annual grant of deferred stock units. Deferred stock units are shares of the Company’s |
|
|
Board of Directors
Directors receive cash compensation, which consists of annual cash retainer amounts and any special assignment fees. of:
● | annual cash retainer amounts, and |
● | any special assignment fees. |
The following table lists the various retainers paid for Board service and service asin the lead independent director or a committee chairpositions set forth below during fiscal year 2020:2022.
Annual director retainer | $ | |
Committee chair retainers: | ||
Nominating, Governance and Corporate Responsibility Committee | 15,000 | |
Audit Committee | ||
Management Development and Compensation Committee | 20,000 |
Directors who serve as a Board member, independent chair, lead independent director, or committee chair for less than the full fiscal year receive pro-rated retainer amounts based on the number of days they served in such position during the fiscal year. In addition to the retainer amounts, each non-employee director is entitled to receive a fee of $2,500 per day for any special assignment requested by the Board. No special assignment fees were paid in fiscal year 2020.2022.
Payment ElectionsElections.
Under the Company’s Independent Directors’ Deferred Compensation Plan, a director may annually elect to receive all or a portion of their cash compensation in the form of cash, Common Stock,common stock, deferred cash, or deferred stock units.
Payment in Stock.Directors who elect to receive cash compensation amounts in the form of Common Stockcommon stock are issued shares of Common Stockcommon stock based on the fair market value of the Common Stockcommon stock as determined by the closing price of the Common Stockcommon stock on the last trading day of the quarter for which the fees were earned.
Elective Deferral Program: Deferred Cash.For directors who elect deferred cash, the amount deferred is credited to an unfunded cash account that is credited with interest at an annual interest rate equal to Wells Fargo Bank, N.A.’s prime lending rate in effect on January 1 of each year. Upon termination of service as a director, the amounts credited to the director’s deferred cash account are paid out in five annual cash installments or in one lump-sum cash payment, as elected by the director.
Elective Deferral Program: Deferred Stock Units.For directors who elect deferred stock units, the amount deferred is credited to an unfunded account in the form of units equivalent to the fair market value of the Common Stockcommon stock on
the last trading day of the quarter for which the fees were earned. When dividends are declared, additional deferred stock units are allocated to the director’s deferred stock unit account
38 | THE CLOROX COMPANY - 2022 Proxy Statement |
Corporate Governance and Board Matters
in amounts equivalent to the dollar amount of Common Stockcommon stock dividends paid by the Company divided by the fair market value of the Common Stockcommon stock on the date the dividends are paid. Upon termination of service as a director, the amounts credited to the deferred stock unit account, which include any elective deferrals and the annual deferred stock unit grants described above, are paid out in shares of Common Stockcommon stock in five annual installments or in one lump sum, as elected by the director. Deferred stock units may only be settled in shares of Common Stock.common stock.
Each non-employee director receives a majority of their annual compensation in the form of deferred stock units. Deferred stock units are shares of the Company’s Common Stockcommon stock that the director receives only upon terminating their service with the Company. Each non-employee director receives an annual grant of deferred stock units, the value of which was increased from $152,500 to $157,000 effective October 1, 2019.units. The aggregate value of the deferred stock unit award amount earned by a non-employee director serving for the full fiscal year 20202022 was $155,875.$157,000. Awards are made as of the last business day in the calendar year and represent payment for services provided during such calendar year.
The Company believes that the use of deferred stock units provides a stronger alignment between directors and the Company’s shareholders compared to outright stock ownership since directors have no ability to sell the deferred stock units while they remain on the Board. The Company has maintained the deferred stock unit program for its directors for over 20 years.
|
Directors who serve as non-employee Board members for less than the full calendar year receive pro-rated awards based on the number of full fiscal quarters they served as a non-employee Board member during the calendar year. Deferred stock units accrue dividend equivalents, and the balance of a director’s deferred stock unit account is paid out in Common Stockcommon stock only following the director’s termination of service, as described in greater detail under Payment Elections above.
Fiscal Year 20212023 Compensation Changes
As discussed above, the MDCC reviews the form and amount of compensation of non-employee directors at least once a year to ensure that the Company’s non-employee directors are being compensated appropriately relative to peer companies. The MDCC again reviewed non-employee director compensation in September 2020.2022. As part of its review, the MDCC considered the data provided by FW Cook as well as its guidance and recommendations regarding compensation levels relative to our compensation peer group as well as trends and recent developments in the area of non-employee director compensation. After taking all of this information into account, the MDCC recommended, and the Board agreed, not to increase director compensation or make other changes to the director compensation program. No other changes were made to the Company’s director compensation program.
Stock Ownership Philosophy and Guidelines for Directors
The Board believes that the alignment of directors’ interests with those of shareholders is strengthened when Board members are also shareholders. The Board therefore requires that each non-employee director, within five years of first being elected, own Common Stockcommon stock or deferred stock units that are settled only in Common Stockcommon stock having a market value of at least five times their annual cash retainer. This program is designed to ensure that directors acquire a meaningful and significant ownership interest in the Company during their tenure on the Board. Furthermore, as directors must hold the deferred stock units until termination of their service on the Board, they have aligned interests and appropriate incentives to promote long-term value for shareholders during their service as a director. As of August 31, 2020,2022, each non-employee director was in compliance with the guidelines, and in fact, the majority of our directors held Common Stockcommon stock or deferred stock units with value far in excess of this amount.
THE CLOROX COMPANY - 2022 Proxy Statement | 39 |
Executive Officers |
Information about our Executive Officers
The names, ages, year first elected and current titles of each of the executive officers of the Company as of September 20, 2022, are set forth below. The Company made certain changes to its executive officers in the first quarter of fiscal year 2023 as part of the streamlining of its operating model.
Name | Age | Year First Elected | Title | |||
Linda Rendle | 44 | 2016 | Chief Executive Officer | |||
Stacey Grier | 59 | 2019 | Executive Vice President – Chief Growth and Strategy Officer | |||
Angela Hilt | 50 | 2020 | Executive Vice President – Chief Legal Officer | |||
Kevin B. Jacobsen | 56 | 2018 | Executive Vice President – Chief Financial Officer | |||
Kirsten Marriner | 50 | 2016 | Executive Vice President – Chief People and Corporate Affairs Officer | |||
Eric Reynolds | 52 | 2015 | Executive Vice President – Chief Operating Officer |
| THE CLOROX COMPANY - |
The Company’s role as a health and wellness company has never been clearer. The global COVID-19 pandemic has created unprecedented demand for our products as consumers turn to trusted sources and brands to support their safety.
Thanks to the heroic work of our entire Clorox team, especially our production employees on the front lines making and shipping our products, we were able to rise to the occasion and contribute to the safety and wellbeing of people around the globe. Our product supply team reacted early to increase production and simplify our product assortment, and we partnered with our suppliers and retailers to get product where it’s needed most.
Our performance in fiscal year 2020 was strong – we delivered sales growth of 8% and organic sales growth of 10%.
Our efforts and hard work during the COVID-19 pandemic earned us high marks among rankings and ratings organizations. We were named to the No. 1 spot in the Axios-Harris Poll 100 reputation rankings, which lists the top 100 most visible companies in the U.S. based on consumer polling, largely due to our response to the COVID-19 pandemic, and the No. 2 spot in The Harris Poll Essential 100, a ranking of corporate response to the global pandemic.
|
IGNITE Strategy Guided by ESG Principles
Last year, we announced our IGNITE strategy with the objective of maximizing economic profit while maintaining a commitment to Good Growth — profitable, sustainable and responsible growth. Under IGNITE, we laid out four strategic choices integrated with our ESG goals—organized around the themes of Planet, Product and People— to
sustain Good Growth over the long term. IGNITE has been a beacon helping us navigate through the uncharted territory of the COVID-19 pandemic, guiding our decision-making and allowing us to pivot quickly and respond to unprecedented demand.
|
IGNITE ESG goals:
Our ESG goals — organized around the themes of Planet, Product, People — are integrated with the four strategic choices set forth above and guide the Company in pursuing innovative ways to meet consumer needs, helping to address some of the planet’s most pressing environmental challenges, doing more with less, and doing more to create value for all stakeholders.
Planet: We strive to be a leader in environmental sustainability with a focus on plastic and other waste reduction and science-based climate action.
Virgin packaging reduction. During fiscal year 2020, we set a goal of a 50% combined reduction in virgin plastic and fiber packaging by 2030 and launched two major projects, bleach compaction — a conversion
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|
Our Company
process that went forward despite the pandemic, demonstrating our commitment to sustainability – and a move to 100% recycled fiber cartons in our Glad business, which is projected to contribute approximately 15% of our reduction target.
Zero waste to landfill. 38% of our plants are currently zero waste to landfill, with a goal of 100% global plants achieving zero-waste-to-landfill status by 2025.
Renewable energy. As part of our IGNITE Strategy, we have committed to achieving 100% renewable electricity in our operations in the US and in Canada by 2025, and in November 2019, we signed a 12-year, 70-megawatt virtual power purchase agreement (VPPA) for the purchase of renewable energy beginning in 2021. This VPPA represents about half of our 100% renewable electricity goal for our operations in the U.S. and Canada and is expected to help us achieve our goal of 100% renewable electricity in our U.S. and Canadian operations in 2021, four years ahead of our original plan.
Greenhouse gas emission reduction. We’ve committed to setting and achieving greenhouse gas emission reduction targets in our operations and across our value chain that are consistent with climate science and the goals of the 2015 Paris Agreement. Reduction goals will be set in coordination with and be approved by the Science-Based Target Initiative (a partnership between UN Global Compact and other environmental non-governmental organizations) by October 2021.
Product: We strive to be a leader in responsible product stewardship, with a focus on progressive actions to enhance our own and the consumer packaged goods industry’s practices.
End animal testing. For decades, Clorox has been actively working toward a future where animal testing has no role in product development. Clorox participates in U.S. government activities to develop predictive toxicity methods to replace animal tests and holds meetings with state regulatory agencies to facilitate acceptance of animal testing alternatives. We have recently set our sights on eliminating the current regulation that requires conducting animal testing on EPA-registered disinfecting products. For example, Clorox is currently leading efforts to develop alternatives for certain safety testing protocols in collaboration with scientific experts, regulatory agencies and industry stakeholders.
Ingredient transparency. We transitioned ingredient listings for our U.S. cleaning products to the online industry portal SmartLabel, where users will now find ingredient information as well as expanded directions for use and safety data sheets. We also announced a commitment to voluntarily list ingredients on the labels of our household disinfecting products, which goes above and beyond the labeling law requirement that will take effect in 2021.
People: We strive to help our consumers and employees through purpose-led choices that enhance well-being.
Consumer well-being. Clorox is a health and wellness company at heart, and since fiscal year 2019 the number of our wellness-related product categories in U.S. households has grown by 6.5 million.
Board and executive committee diversity. Our board and executive committee are highly diverse by race, ethnicity, gender and other protected categories. Our CEO is a woman – one of 38 among the Fortune 500 -- and our Lead Independent Director is a Black woman. As of the Annual Meeting date, women comprise 38% of our director nominees and 46% of our executive committee, and 31% of our director nominees and 23% of our executive committee are comprised of ethnic minorities. Two of our executive committee members openly identify as LGBTQ.
Workforce diversity. Our 8,800 employees come from diverse backgrounds – 30% of our nonproduction managers and more than one-third of our nonproduction employees in the U.S. are ethnic minorities, and globally 44% of our nonproduction managers and over half of our nonproduction employees are women. In fact, in 2020 Forbes ranked Clorox as one of America’s Best Employers for Diversity, and Parity.org named Clorox one of The Best Companies for Women to Advance.
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Employee health and safety. During fiscal year 2020, we continued to invest in our No. 1 resource – our people – through wellness initiatives, such as enhanced benefits to support our employees’ total well-being, including operational safety, inclusion and engagement in the workplace, and retirement readiness. During the COVID-19 pandemic, we have prioritized our employees’ health and safety, and also offered a special incentive for our frontline teams who have been working around the clock to make and ship products to our consumers.
Employee engagement. During fiscal year 2020, we again had best-in-class employee engagement – 88% of our employees reported that they have pride in the Company, intend to stay, get intrinsic motivation from their work and would refer to the Company as a good place to work, based on our annual employee engagement survey.4
Community investment. During fiscal year 2020, Clorox donated more than $25 million in cash and product to COVID-19 relief, racial justice initiatives and community building in fiscal year 2020 in communities where we have facilities and our employees live and work.
Standing up for racial justice. Clorox has deep roots in Oakland, California (our corporate headquarters for 107 years) and Atlanta, Georgia (home of our largest manufacturing operations). In fiscal year 2020, we pledged financial donations of $3.1 million to support Black businesses in our communities, engage Black youth who represent our future and accelerate Black community access to justice and criminal justice reform. We have also developed good governance practices to determine when and how we speak out as a company on social issues, in consultation with our Board and senior management. It is important to us that when Clorox and our brands choose to take a public stance on a social issue, it demonstrates our
core value, Do the Right Thing, is undertaken with our strategic goals in mind and is impactful to our business interests.
As part of our commitment to trust and transparency, in our integrated annual report we have chosen to report our ESG performance against voluntary frameworks – namely, the Sustainability Accounting Standards Board (SASB), Task Force on Climate-Related Financial Disclosures (TCFD) and the United Nations Global Compact’s (UNGC) Ten Principles.
Governance
Our integrated IGNITE strategy is supported by an unwavering commitment to strong ESG performance overseen by the Board and NGCRC, and executed by our management team.
We believe that this structure reflects our long-standing values and commitment to best practices in ESG.
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|
Our Company
Our governance guidelines, code of conduct and other company policies, consistent with our focus on Good Growth, also establish a framework to guide our decisions and lead with our actions. Our governance profile includes these features:
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Stock Ownership Information |
Beneficial Ownership of Voting Securities
The following table shows asthe holdings of common stock (as of August 31, 2020 (except2022, except as otherwise indicated below), the holdings of Common Stock by (i) any entity or person known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock,common stock, (ii) each director and director nominee and each of the five individualsnamed executive officers (NEOs) named in the Summary Compensation Table (the NEOs), and (iii) all directors and executive officers of the Company as a group.
As discussed in the Director Compensationsection of this proxy statement, the majority of director compensation is delivered in the form of deferred stock units, which are paid out in Common Stockcommon stock following a director’s termination of service. Because the directors cannot dispose of those shares while they serve on the Board, they are not reflected in this table. See footnote 2 below.
The address of each individual listed in the table below is 1221 Broadway, Oakland, California 94612-1888.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1)(2) | Percent of Class(3) | ||
The Vanguard Group, Inc.(4) 100 Vanguard Blvd. Malvern, PA 19355 | 14,500,034 | 11.77 | ||
BlackRock, Inc.(5) 55 East 52nd Street New York, NY 10055 | 10,774,842 | 8.74 | ||
State Street Corporation(6) One Lincoln Street Boston, MA 02111 | 8,240,920 | 6.69 | ||
Amy Banse(2) | 0 | * | ||
Richard H. Carmona(2)(7) | 0 | * | ||
Julia Denman | 0 | * | ||
Rebecca Dunphey | 20,513 | * | ||
Spencer C. Fleischer(2) | 1,305 | * | ||
Kevin Jacobsen | 92,218 | * | ||
Esther Lee(2) | 0 | * | ||
A. D. David Mackay(2) | 600 | * | ||
Kirsten Marriner | 68,499 | * | ||
Paul Parker | 251 | * | ||
Stephanie Plaines(2) | 0 | * | ||
Linda Rendle | 177,726 | * | ||
Eric Reynolds | 114,829 | * | ||
Matthew J. Shattock(2) | 0 | * | ||
Kathryn Tesija(2) | 0 | * | ||
Russell J. Weiner(2) | 0 | * | ||
Christopher J. Williams(2) | 0 | * | ||
All directors and executive officers as a group (18 persons)(8) | 510,191 | * |
THE CLOROX COMPANY - 2022 Proxy Statement | 41 |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1)(2) | Percent of Class(3) | ||
The Vanguard Group, Inc.(4) | ||||
100 Vanguard Blvd. | ||||
Malvern, PA 19355 | 15,841,012 | 12.57 | ||
BlackRock, Inc.(5) | ||||
55 East 52nd Street | ||||
New York, NY 10055 | 10,685,218 | 8.48 | ||
State Street Corporation(6) | ||||
One Lincoln Street | ||||
Boston, MA 02111 | 8,463,983 | 6.72 | ||
Amy Banse(2) | 0 | * | ||
Richard H. Carmona(2) | 0 | * | ||
Benno Dorer | 643,279 | * | ||
Spencer C. Fleischer(2) | 317 | * | ||
Kevin Jacobsen | 68,347 | * | ||
Esther Lee(2) | 0 | * | ||
A. D. David Mackay(2) | 1,600 | * | ||
Paul Parker(7) | 10 | * | ||
Linda Rendle | 84,952 | * | ||
Eric Reynolds | 72,287 | * | ||
Matthew J. Shattock(2) | 0 | * | ||
Laura Stein | 219,638 | * | ||
Kathryn Tesija(2) | 0 | |||
Pamela Thomas-Graham(2) | 1,778 | * | ||
Russell J. Weiner(2) | 0 | * | ||
Christopher J. Williams(2) | 0 | * | ||
All directors and executive officers as a group (25 persons)(8) | 1,385,881 | 1.09 |
Stock Ownership Information
* | Does not exceed 1% of the outstanding shares. |
(1) | Unless otherwise indicated, each beneficial owner listed has sole voting and dispositive power concerning the shares indicated. These totals include the following numbers of shares of |
(2) | The numbers in the table above do not include the following numbers of shares of |
|
|
Stock Ownership Information
directors. The total financial commitment of each non-management director in the Company’s | |
(3) | On August 31, |
(4) | Based on information contained in a report on Schedule 13G/A filed with the SEC on February |
(5) | Based on information contained in a report on Schedule 13G/A filed with the SEC on February |
(6) | Based on information contained in a report on Schedule 13G filed with the SEC on February 14, |
(7) |
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(8) | Pursuant to Rule 3b-7 of the Securities Exchange Act of 1934, as amended (Exchange Act), executive officers include the Company’s CEO and all executive vice |
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act and SEC regulations require the Company’s directors, certain officers, and holders of more than 10% of the Company’s common stock to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. The reporting directors, officers, and 10% shareholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of copies of such reports received and written representations from its directors and such covered officers, the Company believes that its directors and officers complied with all applicable Section 16(a) filing requirements during fiscal year 2022, with the exception of four late Form 4s to report one transaction each for Eric Reynolds, Matt Gregory, Tony Matta and Eric Schwartz, all of which were not reported in a timely manner due to an administrative oversight.
42 | THE CLOROX COMPANY - |
Executive Compensation |
Proposal 2: Advisory Vote to Approve Executive Compensation |
We are seeking a non-binding, advisory vote from our shareholders to approve the compensation of our NEOs that are listed in the Compensation Discussion and Analysis section of this proxy statement. This proposal gives our shareholders the opportunity to express their views on the Company’s executive compensation and is commonly referred to as a “say-on-pay” proposal. This vote is only advisory and will not be binding upon the Company or the Board. However, the MDCC, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders and encourages all shareholders to vote their shares on this matter.
As discussed in the Compensation Discussion and Analysis section of this proxy statement, which begins on page 3845, the Company’s compensation programs are designed to align pay with short-performance, by delivering the majority of executive pay through “at-risk” incentive awards that help ensure realized pay is tied to attaining operation goals and long-term financial and strategic objectives to buildsustainable appreciation in shareholder value, while providing
At our 20192021 Annual Meeting of Shareholders, our shareholders overwhelmingly approved our executive compensation policies, with approximately 92% of votes cast in favor of our proposal. We value this positive endorsement by our shareholders and believe that the outcome signals our shareholders’ support of our compensation program, and we continued our general approach to compensation for fiscal year 2020.2022. We provide our shareholders the opportunity to vote on the compensation of our named executive officersNEOs every year. It is expectedyear and expect that the next vote on executive compensation will be at the 20212023 Annual Meeting of Shareholders.
The Board unanimously recommends a vote FOR the advisory vote to approve executive compensation. The Company is asking its shareholders to support the compensation of the named executive officersNEOs as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officersNEOs in fiscal year 20202022 and the philosophy, policies, and practices underlying that compensation, which are described in this proxy statement. The Board believes that the Company’s overall compensation process effectively implements its compensation philosophy and achieves its goals.
Accordingly, the Board recommends a vote FOR the adoption of the following advisory resolution, which will be presented at the Annual Meeting:
“RESOLVED, that the shareholders of The Clorox Company approve, on an advisory basis, the compensation of the named executive officers, as disclosed in The Clorox Company’s Proxy Statement for the 20202022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure.”
| THE CLOROX COMPANY - | 43 |
Proposal 2: Advisory Vote to Approve Executive Compensation
The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote on the matter is required to approve this proposal.
This vote is advisory, and therefore not binding on the Company, the Board, or the MDCC. However, the Board and the MDCC value the opinions of the Company’s shareholders and, to the extent there is any significant vote against the named executive officers’NEOs’ compensation as disclosed in the proxy statement, we will consider such shareholders’ concerns, and the MDCC will evaluate whether any actions are necessary to address thoseshareholder concerns.
The people designated in the proxy and voting instruction card will vote your shares FOR approval unless you include instructions to the contrary.
44 | THE CLOROX COMPANY - |
This Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and program, the compensation decisions made under this program, and the specific factors we considered in making those decisions. This CD&A focuses on the compensation of our “named executive officers”NEOs for fiscal year 2020,2022, who were:
Title | ||
Linda Rendle | Chief Executive Officer | |
Executive Vice President | ||
Executive Vice President and Chief People & Corporate Affairs Officer | ||
Rebecca Dunphey(1) | Senior Vice President and General Manager – |
(1) | Ms. Dunphey was hired on March 21, 2022. |
Table of Contents
The Clorox Company was founded more than a century ago. We have successfully managed through significant global challenges during our 107-year history, although the last fiscal year was like no other. With the world experiencing a growing and extreme health crisis, along with significant social issues, our Company rose to the challenge. Early in the fiscal year, we introduced the Company’s IGNITE strategy, designed to continue delivering Good Growth – profitable, sustainable and responsible. Building on the previous 2020 Strategy, IGNITE aims to strengthen our advantage through strategic business choices and fully integrated ESG goals. At the beginning of our third quarter, we saw the early signs of COVID-19. As a result, we anticipated potential increases in demand and started building supply in January, before COVID-19 grew into a global pandemic. As demand grew in March, we quickly responded through substantive efforts across our businesses and every one of our functions. We supplied 100 million more disinfecting products in the first half of 2020 than we did in the same period last year – a 50% increase – along with other essential household products from our trusted brands including Brita®, Glad®, Kingsford®, and more.
We are extremely proud of the role we play, the broad set of stakeholders we’ve served and we’ve been guided by our core values to improve the lives of millions of consumers. We’ve been a force for good, contributing to the well-being of people around the world and prioritizing organizations that serve the public health. We increased our charitable company match this year so that employees could make even more meaningful contributions to the causes they support and we gave more than $25 million in foundation and cash grants, cause marking, and product donations in fiscal year 2020. Simultaneously we have cared for our own employees, over half of whom have done essential on-site work throughout the pandemic. In
these unprecedented times, we quickly responded to the evolving physical, financial and emotional needs of our employees. We provided premium pay to our frontline employees working on-site, paid broad-based incremental cash recognition bonuses, ensured employees had access to company-sponsored health insurance, assumed full cost of coverage for COVID-related testing and treatment, established a COVID relief fund, and enhanced our benefit offerings with additional tools and resources to support the health and emotional wellness of our employees and their families. And, we engaged in strong partnership with customers and supply chain partners (e.g., extending more flexible credit terms to suppliers). During this time, we were recognized as No. 1 in the Axios-Harris Poll 100 corporate reputation rankings, a testament to the breadth of positive impact across all our stakeholders.
Clorox has a long history of principles-based reward decisions and a strong pay-for-performance philosophy. Alignment of executive and employee rewards with shareholder interests is a critical principle of our longtime pay-for-performance philosophy. Over time, awards have fluctuated significantly in line with financial results, resulting in strong collective and individual accountability. In the past ten years, funding (as a percent of target) for our Annual Incentive Plan has ranged from a low of 28% to this year’s high of 200%, with average funding at 114%. Performance share unit payouts for the past 10 cycles have also varied from a 0% payout to 150% of target shares, with an average payout of 95%. While performance share payouts are formulaic, annual incentive awards are a function of both individual and company performance. For each of our named executive officers, individual performance is evaluated holistically and for 2020 included how each executive addressed challenges posed by COVID-19, their management of human capital including inclusion &
| 45 |
Compensation Discussion and Analysis
●Clorox continued to experience unprecedented business disruption in fiscal year 2022. In fiscal year 2022, Clorox navigated through unprecedented inflationary pressures, supply chain challenges, and multiple COVID-19 waves. We implemented a broad set of actions within our control to address these issues; however, those actions couldn’t overcome the magnitude of the headwinds we faced. ●Our incentive plan results reflect company performance. Our significantly below-target payout on short-term incentives and below-target payout on long-term incentives align to the disappointing business outcomes in fiscal year 2022. ●The company multiplier for our short-term incentive for fiscal year 2022 was 50%. This result reflected declines in fiscal year 2022 for all three of our underlying metrics: net sales, net earnings attributable to Clorox, and gross margin. Although a material portion of the basis for the company multiplier was attributable to forces outside Clorox’s control, the Management Development and Compensation Committee chose not to apply its discretion to increase the company multiplier. ●Performance share units from our long-term incentive awards vesting in 2022 paid out at 89%. The performance-based award vesting in fiscal year 2022 was based on economic profit (EP) growth during fiscal years 2020 through 2022, covering one breakout year with extremely high EP growth, one year of lower-than-expected EP growth, and one year of below-threshold EP growth. ●The Management Development and Compensation Committee continues to evolve our program. As we look ahead to fiscal year 2023, anticipating continued volatility and unpredictability, we remain committed to our philosophy of pay for performance. In consideration of target performance goals for fiscal year 2023 being set below historic Clorox norms due to the challenging operating environment, we applied a payout ceiling equal to 75% of target for performance share units if a threshold adjusted EPS level is not attained over the three-year performance period. The committee will continue to evaluate incentive plan changes based on the evolution of our competitive market and Clorox’s long-term transformational business plan. | Fiscal 2022 Net Sales $7,107M -3% from prior fiscal year Fiscal 2022 Net Earnings Attributable to Clorox $462M -35% from prior fiscal year Fiscal 2022 Gross Margin 35.8% -780 basis points from prior fiscal year Three-Year Total Shareholder Return1 -2.4% |
Clorox is a leading multinational manufacturer and marketer of consumer and professional products with about 9,000 employees worldwide as of June 30, 2022. Clorox markets some of the most trusted and recognized consumer brand names, including our namesake bleach and cleaning products; Pine-Sol cleaners; Liquid-Plumr clog removers; Poett home care products; Fresh Step cat litter; Glad bags and wraps; Kingsford grilling products; Hidden Valley dressings, dips, seasonings, and sauces; Brita water-filtration products; Burt’s Bees natural personal care products; and RenewLife, Rainbow Light, Natural Vitality, and NeoCell vitamins, minerals and supplements. We also market industry-leading products and technologies for professional customers, including those sold under the CloroxPro and Clorox Healthcare brand names. More than 80% of our net sales are generated from brands that hold the No. 1 or No. 2 market share positions in their categories.
1 | Overall change in price per share, plus dividends, during the three fiscal years beginning July 1, 2019 and ending June 30, 2022. |
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Compensation Discussion and Analysis
diversity, management of environmental risks, contributionsOur ongoing IGNITE strategy accelerates innovation in key areas to Company operationsdrive growth and strategy, as well as position-specific business outcomes.
As described above, through the efforts ofdeliver value for both our employees across the globe, we significantly over-deliveredshareholders and society. Specifically, IGNITE focuses on all of our fiscal year 2020 financialfour strategic choices to achieve long-term, profitable growth: Fuel Growth, Innovate Experiences, Reimagine Work, and Evolve Portfolio. Integrated goals and generated very strong results on our ESG- and people-related goals in addition to delivering strong shareholder returns. The payouts for our incentive compensation programs reflect those results. Our Annual Incentive Plan generated a 200% company multiplier, which represents the maximum funding level and reflects significant overachievement on all threeESG performance metrics - net sales, net earnings and gross margin. Performance share units granted in fiscal year 2017 paid out at 129% of target based on overachievement of the economic profit growth target for fiscal years 2018, 2019 and 2020.
In addition to our proactive and comprehensive response to the pandemic and evolving social issues and our outstanding overall financial and strategic performance, we continued our work on leadership succession, which culminatedare focused in the promotionareas of Linda Rendle to CEO effective September 14, 2020 following two earlier promotions that occurred during fiscal year 2020.Healthy Lives, Clean World, and Thriving Communities. See Our prior CEO, Benno Dorer, remains Executive Chair of the Board, which enables a smooth leadership transition. In addition, we promoted
Eric Reynolds to Executive Vice President, HouseholdIGNITE Strategy and Lifestyle Integrated ESG Pillars in July 2019 and to Executive Vice President - Chief Operating Officer, which was also effective on September 14, 2020. These promotions reflect our deep commitment to talent development and succession planning, which the Board views as one of its highest priorities, and ensures that the Company has the depth of leadership in place to continue our strong performance into the future.this proxy statement for more information about IGNITE.
Effective with his transition to Executive Chair on September 14, 2020, Mr. Dorer’s compensation arrangement will include the following: his base salary will remain at $1,230,000, annual incentive target will remain at 150% of base salary, and he will continue to be eligible for the same level of benefits and perquisites. In addition, he received a one-time grant of restricted stock units (RSU) valued at $500,000 that will vest over four years in equal annual installments. The RSU award was granted on September 22, 2020 at the same time as long-term incentives awards for other executives.
With her appointment to CEO, Ms. Rendle will receive a salary of $1,075,000 with an annual incentive target of 150% of base salary. Her long-term incentive award of $5,000,000 was granted on September 22, 2020 with long-term incentive awards for other executives given in conjunction with the Company’s annual year-end compensation.
Components of Our Executive Compensation ProgramFiscal Year 2022 Business Highlights
The table below outlines the components of our executive compensation program, their characteristics and summary description of these components.
● | Guided by our IGNITE strategy, we remained focused on making significant investments in our strong brands and strategic digital capabilities to drive long-term value creation. These investments were made to support category growth and market share improvements. Clorox launched new products in 28 categories in fiscal year 2022, including Clorox disinfecting mists; Clorox multipurpose cleaner concentrate; Glad ForceFlexPlus trash bags in Cherry Blossom scent; Glad ForceFlexPlus with Clorox trash bags in Eucalyptus and Peppermint scent; Glad compostable drawstring bags (Canada); Glad to Be Green 50% ocean bound plastic recycled trash bags (Australia); Fresh Step Outstretch cat litter; Kingsford Signature Flavors charcoal, pellets and flavor boosters for charcoal and pellet grills; and Neocell collagen powders and gummies. | |||
As announced in August 2021, a significant long-term investment in digital capabilities and |
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● | We continued to make progress on our ESG goals, which are |
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THE CLOROX COMPANY - | |
Compensation Discussion and Analysis
this year we launched an environmental justice initiative to provide better access to green spaces for underserved communities. Through the Healthy Parks Project, The Clorox Company Foundation plans to invest in community parks in support of Clorox’s purpose and ESG focus on the interconnectedness of environmental and social sustainability. | |
● | Clorox has been broadly recognized for our corporate responsibility efforts. This includes recognition in the Human Rights Campaign Foundation’s Corporate Equality Index 2022 as one of the Best Places to Work for LGBTQ+ Equality; being listed on the 2022 Bloomberg Gender-Equality Index, which tracks the performance of public companies committed to transparency in gender-data reporting; and inclusion on Barron’s 100 Most Sustainable U.S. Companies list. |
Fiscal Year 2020 Performance HighlightsLooking Ahead
In fiscal year 2023, we anticipate ongoing challenges that may impact our sales and margins, including continued uncertainty related to the COVID-19 pandemic, persistently high manufacturing, logistics, and commodity costs, continued effects from the conflict in Ukraine, evolving consumer behaviors, high levels of competition in select categories, a more competitive and evolving retail environment, changes in foreign currency exchange rates, and an uncertain macroeconomic environment in the U.S. and in many international markets.
As announced in August 2022, we will be implementing a streamlined operating model beginning in the first halfquarter of fiscal year 2020, we set the stage for growth in the back half behind strong investments in2023 to advance our robust innovationIGNITE strategy and distribution plans. We had delivered five consecutive quarters of gross margin expansion, and were on track for record annual cost savings and strong cash flow. As COVID-19 spread and was declared a global pandemic in March, our management team and committed global workforce collectively addressed spikes in demand, rising manufacturing and logistics costs, disruptions to the supply chain, safety and hygiene protocols, and more. Our product supply organization increased capacityas part of our portfolioresponse to these challenges. Our goal is to be closer to our consumers and customers so we can more effectively anticipate what’s coming and better meet their increasing expectations, understand the end-to-end implications of cleaningour choices, and disinfecting products,execute better—all while reducing costs to be a more streamlined and efficient company. The changes are essential to position Clorox for long-term success.
Our Executive Compensation Program
Executive Compensation Philosophy
A core principle of our compensation philosophy is to align pay with performance. We do so by delivering the majority of executive pay through a variety“at-risk” incentive awards that help ensure realized pay is tied to attainment of strategies including identification of additional suppliers, additional shifts, a simpler product assortmentcritical operational goals and consolidated linessustainable appreciation in shareholder value. This approach is designed to reduceaccomplish the line variation and accelerate output. The Company continued to maintain focus on operational efficiencies through record cost savings and a commitment to strong environmental, social and governance practices in a macroeconomic environment that was dominated by significantly higher demand for essential household products, in which we grew market share as consumers disproportionately chose our trusted brands.following:
Other successes for the Company in fiscal year 2020 included:
How we achieve this | ||
We reward performance that drives achievement of Clorox’s short- and long-term goals and, ultimately, shareholder value. | ||
Align Management and Shareholder Interests | We provide long-term, equity-based incentives and encourage a culture of ownership with stock retention guidelines. We reward executive officers for sustained company performance as measured by operating results and total shareholder return. | |
Attract, Retain, and Motivate Talented Executives | We maintain market-based pay targets and a program design that allows Clorox to be a magnet for high-performing executives. | |
Address Risk-Management Considerations | We motivate our executives to create long-term shareholder value and discourage behavior that could lead to unnecessary or excessive risk-taking by providing a balance of fixed and at-risk pay, with short-term and long-term performance horizons, using a variety of metrics tied to key drivers of sustainable value creation. | |
Support Financial Efficiency | We ensure that cash- and equity-based incentive payouts are appropriately driven by performance, and design awards to minimize unnecessary accounting charges. |
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Compensation Discussion and Analysis
How We Make Compensation Decisions
Roles and Responsibilities in | ||
Management | The MDCC regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to The MDCC makes its determinations regarding executive compensation based on a variety of factors, including Clorox’s performance, individual executives’ performance, peer group data, and input and recommendations from The MDCC evaluates individual performance based on the performance of the business or operations for which the executive is responsible, including the individual’s contribution to achieving ESG-related goals (as described in the | |
How Pay Was Tied to the Company’s Performance in Fiscal Year 2020
Our fiscal year 2020 results and compensation decisions continue to illustrate application of our pay-for-performance philosophy, with pay being driven by performance in the following ways:
Fiscal Year In determining the compensation package for each of our | ||
Board of Directors | The independent members of the Board undertake a thorough process to review our CEO’s annual performance, with each independent director providing candid feedback and observations that are then shared in aggregate with our CEO. The Board considers a variety of substantive factors it has identified as being most important for effective CEO performance, with a focus on strategy, people, and operations. The full Board discusses the evaluations of our CEO’s performance against these factors and then provides its input on CEO compensation to the The MDCC, after evaluating input from the |
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Compensation Discussion and Analysis
Independent Compensation Consultant | The MDCC retains the services of an independent compensation consulting firm to assist it in the performance of its duties. During fiscal year 2022, the MDCC used the services of FW Cook. FW Cook’s work with the MDCC included data analysis, guidance, and recommendations on the following topics: compensation levels relative to our FW Cook has provided the MDCC with appropriate assurances and confirmation of its independent status in accordance with the MDCC’s charter and other considerations, including factors specified in the NYSE listing standards. The MDCC believes FW Cook has been independent throughout its service to the MDCC and that there is no conflict of interest between FW Cook or individuals at FW Cook and the MDCC, Clorox’s executive officers, or Clorox. FW Cook does not work for Clorox apart from its services to the MDCC. | |
Chief Executive Officer | Our CEO makes compensation recommendations to the MDCC for all executive officers other than herself. In making these recommendations, our | |
Other Members of Management | Senior human resources management provides analyses regarding competitive practices and pay ranges, compensation and benefit plans, policies and procedures for equity awards, perquisites, general compensation, and benefits philosophy. Senior human resources, legal, and finance executives attend non-executive sessions of the MDCC meetings to provide additional perspective and expertise. |
Say-on-Pay Vote and Shareholder Engagement
At our 2021 Annual Meeting of Shareholders, we asked our shareholders to approve, on an advisory basis, our fiscal year 2021 compensation awarded to our NEOs, commonly referred to as a “say-on-pay” vote. Our shareholders overwhelmingly approved the compensation to our NEOs, with approximately 92% of votes cast in favor of our proposal. We believe this outcome signals our shareholders’ support of our compensation program. We continued our general approach to compensation for fiscal year 2022, specifically our pay-for-performance philosophy and our efforts to attract, retain, and motivate our NEOs. We value the opinions of our shareholders and will continue to consider the results from advisory votes on executive compensation, as well as feedback received from our shareholders throughout the year, when making compensation decisions for our NEOs.
Use of Market Data
The MDCC uses a peer group of consumer products companies (the compensation peer group) to help determine competitive compensation rates for our executive officers, including the NEOs. The compensation peer group was selected by the MDCC, with input from FW Cook. The compensation peer group is used to evaluate both the levels of executive compensation and compensation practices within the consumer products industry.
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Compensation Discussion and Analysis
The MDCC reviews the compensation peer group annually, and makes adjustments as needed, to ensure the companies included continue to meet relevant criteria. To determine the compensation peer group for each year, the MDCC considers companies that:
● | Hold leadership positions in branded consumer products. |
● |
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● | Compete with Clorox for |
● | Have executive positions similar in breadth, complexity, and |
Fiscal Year 2020 Compensation of Our Named Executive Officers
For fiscal year 2020, management2022, the compensation peer group was composed of the following 18 companies:
Campbell Soup Company | General Mills, Inc. | McCormick & Company, Inc. |
Church & Dwight Co., Inc. | The Hershey Company | Newell Brands Inc. |
Colgate-Palmolive Company | Hormel Foods Corporation | Post Holdings, Inc. |
Conagra Brands, Inc. | The J.M. Smucker Company | Revlon, Inc. |
Edgewell Personal Care Company | Kellogg Company | Reynolds Consumer Products Inc. |
The Estée Lauder Companies Inc. | Keurig Dr Pepper Inc. | S.C. Johnson & Son Inc. |
At the time of our peer group review in May 2022, Clorox was at the 34th percentile for revenue and 45th percentile for market capitalization compared with the compensation peer group in effect for the fiscal year 2022 compensation analysis.
Management engaged Aon Hewitt to obtain and aggregate compensation data for the compensation peer group.group in fiscal year 2022. This data was used to advise the MDCC on setting target compensation for our named executive officers.NEOs for fiscal year 2022. FW Cook reviewed this information and performed an independent compensation analysis of the compensation peer group data to advise the MDCC. Although each individual component of executive
compensation is reviewed, particular emphasisour overall goal is placed on targeting total direct compensation within 15% of the medianto target total direct compensation competitive with the median of the compensation peer group, which we view to be a competitive range around our target positioning.group. Other factors, such as an executive’s level of experience, may result in target total direct compensation for individual named executive officersNEOs being set above or below this median range.
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Compensation Discussion and Analysis
Executive Compensation Governance
We are focused on creating an effective compensation program that successfully aligns our key strategic objectives with the interests of our shareholders. We believe our executive pay is reasonable and provides appropriate incentives to our executive officers to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. To reinforce this, we have adopted policies that guide our compensation practices as summarized below.
We Do… | We Do Not… | |
✓Vary our incentive plans: We use different metrics and performance horizons for the goals within our annual and long-term incentive plans. ✓Focus on financial measures relevant to shareholder value: We use economic profit as a rigorous long-term incentive metric and net sales, net earnings, and gross margin for our annual incentive metrics. ✓Require meaningful ownership: We apply stringent stock ownership and retention guidelines for all our executives. ✓Operate clawback provisions: Both our annual and long-term incentive plans include clawback provisions. ✓Use a double-trigger: Change-in-control provisions for all equity awards require both change in control and termination. ✓Engage with shareholders: We have ongoing discussions with key institutional investors, including on the topic of compensation. ✓Engage an independent consultant: The MDCC engages a consultant and assesses their independence annually. | ✕Provide employment contracts: All executives are employed at will. ✕Reprice stock options: Any stock option re-pricing would require shareholder approval in advance. ✕Pay unearned dividends: No dividends or dividend equivalents are paid on unvested equity awards. ✕Pay tax gross-ups: No tax gross-ups are provided by Clorox to executives under any circumstances. ✕Provide excessive benefits or perquisites: Benefits and perquisites are limited, reflecting market benchmarks. ✕Permit hedging or pledging: Our policy prohibits hedging and pledging of Clorox stock. ✕Encourage inappropriate risk-taking: The MDCC and its independent consultant annually review incentive design for unintended consequences. |
Tally Sheets. To help ensure our executive compensation design is aligned with our overall compensation philosophy of pay for performance and total compensation levels are appropriate, the MDCC annually reviews compensation tally sheets for each of our NEOs. These tally sheets outline current target total compensation, the potential wealth creation of long-term incentive awards granted to our officers under various potential stock prices, and the potential value of payouts under various termination scenarios. These tally sheets help provide the MDCC with a comprehensive understanding of all elements of our compensation program and enable the MDCC to consider changes to our compensation program, arrangements, and plans considering best practices and emerging trends.
Stock Award Granting Practices. Clorox grants long-term incentive awards each September at a regularly scheduled MDCC meeting, which typically occurs during the third week of the month. The meeting date is the effective grant date for the awards, and the exercise/grant price is equal to the closing price of our common stock on that date.
The MDCC may also occasionally grant equity-based awards at other times to recognize, retain, or recruit executive officers.
Executive Stock Ownership Guidelines. To maintain alignment of the interests of our executive officers and our shareholders, all executive officers are expected to build and maintain a significant level of direct stock ownership. Ownership levels may be achieved over time in a variety of ways, such as by retaining
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Compensation Discussion and Analysis
stock received upon the exercise of stock options or the vesting of stock awards or by purchasing stock in the open market. At a minimum, executive officers are expected to establish and maintain direct ownership of common stock having a value equal to a multiple of each executive officer’s annual base salary: six times base salary for the CEO, three times base salary for NEOs and non-NEO members of the Clorox Executive Committee, and two times base salary for other executives. The following table reflects the guidelines and our NEOs’ ownership requirement status, as of September 19, 2022:
Name | Ownership Guideline (Salary Multiple) | Guideline Met | ||
Linda Rendle(1) | 6x | No | ||
Kevin Jacobsen | 3x | Yes | ||
Eric Reynolds | 3x | Yes | ||
Kirsten Marriner | 3x | Yes | ||
Rebecca Dunphey(2) | 3x | No |
(1) | Ms. Rendle became subject to a higher ownership requirement upon her appointment as CEO effective September 14, 2020 (from three times to six times base salary). |
(2) | Ms. Dunphey was hired on March 21, 2022, and the ownership requirement of three times base salary became effective immediately. |
Ownership levels are based on shares of common stock owned by the NEO or held pursuant to Clorox plans, including performance share units (PSUs) that have vested and been deferred for settlement. Unexercised stock options and units that have not vested due to time or performance restrictions are excluded from the ownership calculations.
Retention Requirements. Executive officers are required to retain a certain percentage of shares obtained upon either the exercise of stock options or the release of restrictions on PSUs and restricted stock units (RSUs). All executive officers are expected to retain 75% of net shares acquired after tax withholding until the minimum ownership level is met. After attaining the minimum ownership level, our CEO must retain 50% of net shares acquired after tax withholding until retirement or termination, and other executive officers must retain 25% of net shares acquired after tax withholding for one year after receipt.
Securities Trading Policy and Prohibition on Hedging and Pledging. To ensure alignment of the interests of our shareholders with all of our directors, officers, employees, and consultants, our Insider Trading Policy does not permit any director, officer, employee, or consultant of Clorox either (1) to trade in the stock or other securities of any company when aware of material nonpublic information about that company, including Clorox as well as any customers or suppliers of Clorox or firms with which Clorox may be negotiating a major transaction, or (2) to engage in short-term or speculative transactions or derivative transactions involving Clorox stock. This policy includes prohibitions on options trading and hedging and restrictions and cautions on pledging Clorox stock as collateral.
The Insider Trading Policy’s prohibition on engaging in hedging transactions in Clorox securities covers the purchase of a financial transaction instrument, or otherwise engaging in a transaction that hedges or offsets, or is designed to hedge or offset, any decrease in the market value of Clorox’s equity securities that were granted as part of the individual’s compensation or that the individual holds directly or indirectly. The following transactions are expressly prohibited by this policy:
● | Short sales (selling Clorox securities you do not own). |
● | Transactions involving publicly traded options or other derivatives whose value is tied to Clorox securities, including trading in or writing puts or calls on Clorox securities. |
● | Pre-paid forward contracts. |
● | Collars. |
Directors, executive officers, the principal accounting officer, and 10% beneficial owners of Clorox common stock are also prohibited from borrowing against the value of any Clorox stock they own using a margin account or other pledge of Clorox stock as collateral.
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What We Pay: ComponentsTable of Our Contents
Compensation ProgramDiscussion and Analysis
Trading of Clorox’s securities by directors, executive officers and certain other employees who are so designated from time to time (collectively, Insiders) is permitted only during announced trading periods or in accordance with a previously established trading plan that meets SEC requirements. At all times, including during announced trading periods, Insiders are required to obtain preclearance from our chief legal officer or corporate secretary prior to executing any transactions in Clorox securities, unless those sales occur in accordance with a previously established trading plan that meets SEC requirements.
Clawback Provisions. Effective February 9, 2021, the MDCC adopted a Clawback Policy related to incentive compensation granted, promised, or paid to certain current and former executive officers (and others as the MDCC may determine) on or after the effective date. Under the terms of the Clawback Policy:
● | In the event a covered individual engages in conduct materially detrimental to Clorox (including, but not limited to, the name, business interests, or corporate, brand, business, or other reputation of Clorox), the MDCC may recoup incentive compensation paid to such individual at any time up to three years after the end of the year in which it vested or was paid. |
● | In the event of a restatement of Clorox financial statements, the MDCC may recoup incentive compensation paid to a covered individual during the three-year period preceding the announcement of the restatement that would not have been paid based upon the restated results if the covered individual’s fraud or intentional misconduct was a significant contributing factor to the restatement. |
Certain of our existing compensation plans and agreements, including the AIP and our long-term incentive plan award agreements, contain a provision providing for clawback of the incentive compensation following a restatement of Clorox financial statements. The Clawback Policy incorporates such existing provisions without any material changes, to consolidate all clawback-related provisions into a single policy.
Tax Deductibility Limits on Executive Compensation. Section 162(m) of the Internal Revenue Code (IRC) limits the federal income tax deductibility of compensation paid to our covered employees to $1 million per year. In setting executive compensation, the MDCC does not take this limit on deductibility into account.
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Compensation Discussion and Analysis
Executive Compensation Framework
A substantial portion of our target total direct compensation for our executives is variable, with 88% of compensation at risk for our CEO and 82% of compensation at risk on average for our other NEOs. Base salary is the only fixed component of direct compensation.
Component and Rationale | Proportion(1) | Proportion(1) | Performance Measures | Performance Period | Characteristics | |||||
Fixed pay to attract and retain talent, based on role, level of responsibilities, and individual performance. | N/A | Fixed cash | ||||||||
Annual Incentives Variable pay to incent and recognize performance in areas of short-term strategic importance. | ●Annual net sales (50%) ●Net earnings (30%) ●Gross margin (20%) ●Individual performance goals | One Year | Performance-based cash | |||||||
Long-Term Incentives Equity-based pay to incent and recognize performance in areas of long-term strategic importance, promote retention and stability, and align executives with shareholders. | ●Three-year annual economic profit growth rate ●Variation in underlying stock price due to overall business results | Three Years | PSUs, stock options, and RSUs |
(1) | |
(2) | Represents the average of all NEOs active on June 30, 2022, other than the CEO. |
Additional elements of our executive compensation program include retirement plans, post-termination compensation, and perquisites as appropriate to support our executive compensation philosophy. Further detail about each element is provided in the discussion below:
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Compensation Discussion and Analysis
Fiscal Year 2022 Compensation of Our Named Executive Officers
The MDCC generally seeks to establish base salaries for our named executive officers within 15% ofNEOs competitive with the median of the compensation peer group, which we view to be a sufficiently wide competitive range to ensure that salariesgroup. Salaries vary in relation to each executive’s specific role, level of experience, and sustained performance.performance over time. For fiscal year 2020,2022, base salary changes within this target pay range were approved by the MDCC in September 20192021 and went into effect in September 2019.2021.
Name | FY 2022 Base Salary(1) | Increase in FY 2022(2) | ||||
Linda Rendle | $ | 1,125,000 | 4.7 | % | ||
Kevin Jacobsen | $ | 740,000 | 5.7 | % | ||
Eric Reynolds | $ | 740,000 | 5.7 | % | ||
Kirsten Marriner | $ | 650,000 | 4.0 | % | ||
Rebecca Dunphey(3) | $ | 600,000 | — |
(1) | Annualized salary as of June 30, 2022. |
(2) | Increase relative to salary as of June 30, 2021. |
(3) | Salary upon hire, as of March 21, 2022. |
After conducting a review for Mr. Dorer and evaluating hisBased on company performance and overall Company performanceduring fiscal year 2022, management has proposed holding NEO salaries at their current level (with no increases for fiscal year 2019 in light of his competitive pay positioning,2023), and the MDCC approved a base salary increasehas agreed. Instead of 2.5%increases to $1,230,000 effective September 2019. The annual base salary increases for our other named executive officers represented a combination of merit increases and market adjustments in light of competitive pay positioning and ranged from 2.5% to 12.2% with an average increase
of 6.5%. The actual base salaries earned by our named executive officersguaranteed compensation, in fiscal year 2020 are listed2023 our NEOs’ opportunity for increased compensation will be focused on at-risk, performance-based pay from the short- and long-term incentive programs.
In addition to her annual salary, Ms. Dunphey received a one-time cash sign-on payment of $750,000 as part of her hire, subject to clawback upon resignation or termination for cause prior to completing one year of employment, to compensate for expected compensation she would otherwise have received in the Salary column of the Summary Compensation Table.short term from her former employer had she not terminated her employment there to join Clorox.
Annual Incentives. IncentivesThe Company
Clorox provides annual incentive awards to our named executive officersNEOs under the Annual Incentive Plan.AIP. Payouts under the Annual Incentive PlanAIP are based on the level of achievement of Companycompany performance goals set annually by the MDCC, notsubject to exceed the stockholder-approvedshareholder-approved maximums. These performance goals are tied to Board-approved corporate financial performance goals and individual objectives, which are described below.objectives.
Annual Incentive Design. Our annual incentive programThe AIP balances financial performance with the individual performance of each of our named executive officers. Financial metrics include net sales (weighted at 50%), net earnings (weighted at 30%) and gross margin (weighted at 20%).NEOs. The amounts actually paid under the Annual Incentive PlanAIP are based on the following factors:
(1) | A target |
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(2) | |
(3) |
0% to 150%. The Individual Performance Multiplier is also determined by the MDCC and typically has a much narrower range, which makes its impact on the total payout significantly smaller than the Financial Performance Multiplier. Historically, the MDCC approved individual multipliers for the CEO at no more than 110% over the previous fiveTarget Award years. For fiscal year 2020, the MDCC approved individual multiplier for the CEO was 100%.
The final individual Annual Incentive Plan payout is determined by the following formula:
Over the past three years, the range for the Individual Performance Multipliers for the named executive officers was 90% to 115%. By comparison, the range for the Financial Performance Multiplier during this same time period was 67% to 200%.
Each element of the annual incentive formula is further described below.
Base Salary. The named executive officer’s actual fiscal year 2020 base salary is the starting point for the annual incentive calculation.
Annual Incentive Target. Each year, the MDCC sets an annual incentive target level for each named executive officerNEO as a percentage of their base salary, based on an assessment of median bonusshort-term incentive targets in the compensation peer group and other factors such as individual experience, as noted above.experience. The annual incentive target level is generallytypically set near the median of bonusshort-term incentive targets for comparable positions in the compensation peer group. The table below sets forth the targets for the fiscal year 2020 annual incentive awards.
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Compensation Discussion and Analysis
Financial PerformanceCompany Multiplier. At the beginning of each fiscal year, the MDCC sets financial goals for the Annual Incentive PlanAIP based on targets approved by the Board. At the end of the year, the MDCC reviews the Company’sClorox’s results against the goals set at the beginning of the year.year and approves the final Company Multiplier.
For fiscal year 2020,2022, the MDCC established financial goals to drivefor net sales, net earnings, and gross margin as described in greater detail below, in order to drive sustainable, profitable growth and short- and long-term total stockholdershareholder returns. The Financial Performance Multiplier is based on the following metrics.
The MDCC believes this mixThis combination of metrics effectively balances a focus on both top-line and bottom-line performance. In selectingConsistent with our standard practice for over a decade, fiscal year 2022 targets for our AIP metrics were set equal to our Board-approved fiscal year 2022 budget. Setting targets equal to budget aligns the AIP with the Board’s approval of an appropriate expected outcome for the year and Clorox’s financial outlook as communicated to investors at the beginning of each fiscal year.
While fiscal year 2022 targets for all three AIP metrics were lower in absolute terms compared to fiscal year 2021 results, this was the due to an unprecedented year-over-year comparison, with fiscal year 2021 impacted by COVID-driven sales volumes, and settinguncertainty around the financial goalsvolatility of the Annual Incentive Plan,business environment, including supply chain conditions and inflation. Our actions to rebuild share and mitigate cost inflation were expected to be incorporated by stages throughout the MDCC carefully considered whetheryear, versus the goals appropriately align withsteep and immediate impacts of inflation we experienced starting as the goals of the long-term
incentive program so that the overall compensation design does not encourage participants to take unnecessary or excessive risk or actions that are inconsistent with the Company’s short- and long-term strategic and financial objectives.fiscal year opened.
Fiscal year 2020 targets for net sales and net earnings were set slightly above prior year’s actual results, and gross margin target was the same as prior year’s target, reflecting increasingly competitive retail landscape, focus on strategic business choices and driving operational efficiencies. Our strong management planning and crisis management capabilities, our quick response to growing demand, and the heroic efforts of our people around the world to make and ship unprecedented amounts of our products drove performance significantly above those targets and generated commensurate funding for our incentive compensation programs. We funded our Annual Incentive Plan at the maximum funding level with a 200% company multiplier, with significant overachievement on all three performance metrics - net sales, net earnings and gross margin.
Fiscal year 20202022 financial goals for the Annual Incentive Plan,AIP, the potential range of payouts for achieving those goals, and the actual results as determined by the MDCC were as follows:
Annual Incentive Financial Goals (in millions) | ||||||||||||||||
Goal | 0% (Minimum) | 100% (Target) | 200% (Maximum) | Actual(1) | ||||||||||||
Net Sales (weighted 50%) | $ | 6,115 | $ | 6,264 | $ | 6,390 | $ | 6,740 | ||||||||
Net Earnings (weighted 30%) | $ | 769 | $ | 800 | $ | 832 | $ | 922 | ||||||||
Gross Margin (weighted 20%) | 41.6 | % | 43.6 | % | 45.1 | % | 45.6 | % |
2022 Annual Incentive Financial Goals (in millions) | Weight | Threshold (0%) | Target (100%) | Maximum (200%) | Actual(1) | Result(2) | ||||||||||||||||
Net Sales | 50 | % | $ | 6,693 | $ | 7,120 | $ | 7,547 | $ | 7,107 | 100 | % | ||||||||||
Net Earnings | 30 | % | $ | 543 | $ | 662 | $ | 782 | $ | 462 | 0 | % | ||||||||||
Gross Margin | 20 | % | 36.3 | % | 40.3 | % | 44.3 | % | 35.8 | % | 0 | % | ||||||||||
Company Multiplier | 50 | % |
(1) | Results exclude the fiscal year 2022 net impact of the |
(2) | Due to the volatility of our business environment starting in FY20 and the resulting unpredictability of results, the funding curve for each of the three AIP metrics includes a flat slope around the target value (a “landing pad”) where results slightly above and below target result in 100% funding. For fiscal year 2022, the landing pads were plus or minus 1% variance versus target for Net Sales, plus or minus 2% variance versus target for Net Earnings, and plus or minus 50 basis points versus target for Gross Margin. Actual results for Net Sales were within the landing pad range for that metric, resulting in 100% funding. |
Individual Performance Multiplier. Consistent with our pay-for-performance philosophy, the annual incentiveAIP payouts are determined by financial results multiplied bythe Company Multiplier and an Individual Performance Multiplier. Based on its evaluation of individual performance, the MDCC reviewed and approved the Individual Performance Multiplier for each named executive officerNEO to reflect the officer’s individual contributions in fiscal year 2020.2022. In determining the multiplier for individual performance, the MDCC carefully
evaluates several performance factors against objectives established at the beginning of the year. Individual performance for each of our named executive officersNEOs is evaluated holistically and for 20202022 included how each executive addressed continuing challenges posed by COVID-19, theirCOVID-19; ESG-related achievements such as management of human capital including diversity &and inclusion and management of environmental risks,risks; contributions to company operations and strategy, as well asstrategy; and position-specific business outcomes.
Beginning in fiscal year 2022, as part of the holistic performance assessment of each member of the Clorox Executive Committee (including NEOs), the MDCC determined our executives’ annual performance will be assessed in part based on each executive’s contribution toward certain ESG-related metrics from our IGNITE scorecard for the applicable fiscal year. The IGNITE scorecard is an internal list of metrics (both ESG-related and otherwise) selected annually by the Board, reflecting areas we plan to prioritize during the year, and is intended to help align our near-term focus and facilitate incremental progress toward our long-term strategic objectives. The IGNITE scorecard measures progress toward objectives through quantitative and qualitative key performance indicators supporting our IGNITE strategy, and, while our IGNITE scorecard is not publicly available, our progress on many of these objectives is reported publicly
THE CLOROX COMPANY - | |
Compensation Discussion and Analysis
on the Clorox Company ESG Data Hub. Clorox has integrated ESG into our IGNITE strategy because we believe in the strategic link between our societal impact and value creation. We strive to maintain top-third ESG leadership among our peer companies by driving continued progress against our goals while considering emerging stakeholder expectations. See Our IGNITE Strategy and Integrated ESG Pillars in this proxy statement for more information about IGNITE.
We hold ourselves accountable by ensuring ESG components of our IGNITE scorecard link to executive compensation. The full board assesses the company’s performance on the IGNITE scorecard, including our ESG accomplishments. At the beginning of fiscal year 2022, goals related to ESG metrics from the IGNITE scorecard relevant to each NEO’s role and responsibilities were embedded in each NEOs’ fiscal year 2022 priorities. Scorecard results, and the executive’s role in achieving such results, informed the MDCC’s assessment of individual multipliersperformance and the Individual Multiplier for each executive. We expect the MDCC’s philosophy on the incorporation of ESG-related metrics into the assessment of individual performance will evolve over time as we consider ways to best align the compensation of our NEOs with our long-term goals.
A performance summary for each NEO for fiscal year 2020 are2022 is provided in the table below along with a performance summary for each named executive officer. While under normal circumstances, individual multipliers would have averaged above 100% given the outstanding individual contributionsbelow.
by our named executive officers throughout the year, the MDCC elected to apply negative discretion to the Annual Incentive Plan award for the named executive officers by capping the cash awards at a 100% individual multiplier, in recognition of the broader macroeconomic outlook.
Individual Multiplier | Performance Summary | |||
Rendle | 100% | |||
Kevin Jacobsen | 100% | |||
Reynolds | 100% | |||
Marriner | 100% | |||
Dunphey | 100% |
Final Individual Annual Incentive Plan Payouts. In accordance with the formula described above, the final annual incentive calculations and payouts for our named executive officers in fiscal year 2020 are found in the table below. The Financial Performance Multiplier was 200% in fiscal year 2020, which resulted in final payouts that exceeded target. These payouts are also reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
Named Executive Officer | Base Salary | Annual Incentive Target (As a % of Base Salary) | Financial Performance Multiplier | Individual Performance Multiplier | Final Annual Incentive Plan Payout | ||||||||||
Benno Dorer – Chair and Chief Executive Officer | $ | 1,230,000 | 150 | % | 200 | % | 100 | % | $ | 3,690,000 | |||||
Kevin B. Jacobsen – Executive Vice President – Chief Financial Officer | $ | 600,000 | 85 | % | 200 | % | 100 | % | $ | 1,020,000 | |||||
Linda Rendle – President(1) | $ | 800,000 | 125 | % | 200 | % | 100 | % | $ | 1,343,262 | |||||
Laura Stein – Executive Vice President, General Counsel and Corporate Affairs | $ | 670,000 | 70 | % | 200 | % | 100 | % | $ | 938,000 | |||||
Eric Reynolds – Executive Vice President, Household & Lifestyle(2) | $ | 700,000 | 100 | % | 200 | % | 100 | % | $ | 1,028,350 |
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Compensation Discussion and Analysis
Final AIP payouts. We funded the AIP at a 50% Company Multiplier, reflecting our achievement on each of the three performance metrics.
NEO | Base Salary | Annual Incentive Target (% of Salary) | Company Multiplier | Individual Multiplier | Final Annual Incentive Plan Payout | ||||||||||
Linda Rendle | $ | 1,125,000 | 150 | % | 50 | % | 100 | % | $ | 843,750 | |||||
Kevin Jacobsen | $ | 740,000 | 90 | % | 50 | % | 100 | % | $ | 333,000 | |||||
Eric Reynolds | $ | 740,000 | 100 | % | 50 | % | 100 | % | $ | 370,000 | |||||
Kirsten Marriner | $ | 650,000 | 80 | % | 50 | % | 100 | % | $ | 260,000 | |||||
Rebecca Dunphey(1) | $ | 600,000 | 70 | % | 50 | % | 100 | % | $ | 58,685 |
(1) | Ms. Dunphey’s AIP payment for fiscal year 2022 is prorated based on her hire date of March 21, 2022. |
Long-Term Incentives. IncentivesEach year, we
We provide long-term, equity-based incentive compensation to our named executive officers. These awards have been made in the form of performance shares and stock options,NEOs, which we believe align Companyaligns Clorox performance and executive officer compensation with the interests of our stockholders.shareholders. These incentive awards also support the achievement of our long-term corporate financial goals. Equity awards are granted under Clorox’s 2005 Stock Incentive Plan.
The MDCC annually reviews the costs of, and potential shareholder dilution attributable to, our long-term incentive program to ensure the overall program is financially efficient and aligned with those of our compensation peer group. The MDCC also seeks to calibrate the long-term incentive program design to drive performance and deliver awards that are competitive with the median of the compensation peer group. Actual long-term incentive award targets for individual NEOs may vary from the median based on a variety of factors, such as the NEO’s performance over time, individual experience, critical nature of their role, and expected future contributions.
Name | Target Value | ||
Linda Rendle | $ | 6,100,000 | |
Kevin Jacobsen | $ | 2,000,000 | |
Eric Reynolds | $ | 2,300,000 | |
Kirsten Marriner | $ | 1,300,000 | |
Rebecca Dunphey(1) | $ | 2,500,000 |
(1) | Represents a one-time RSU award of $2,500,000, reflecting primarily a buyout of existing equity awards Ms. Dunphey forfeited upon termination of her prior employment plus an inducement to join Clorox. |
Like annual incentive awards, actual long-term incentive award payouts vary from the target based on how Clorox performs against pre-established targets. The value of payouts also varies based on changes in the market price of our common stock.
For fiscal year 2020, the MDCC determined that our named executive officers would receive 50%2022, NEOs received 60% of the value of their total annual long-term incentive award granted in performance shares and 50%PSUs, 20% in stock options. Beginning with fiscal year 2021, the MDCC approved a changeoptions, and 20% in the composition of long-term incentives for executive officers including all named executive officers, to increase the weighting on performance shares from 50% to 60%, reduce the weighting on stock options to 20% and introduce restricted share units at 20% weighting. The newRSUs. This equity mix provides additional balance in the long-term incentive program, increasing the program’s efficiency, improvingbalancing retention value and more closely aligningalignment to peers’ weighting for stock options while continuing to reinforceof equity types with reinforcement of long-term company performance.
From time to time, we grant additional time-based restricted stock unitsRSUs for special purposes for both executive and non-executive officers, such as in connection with a promotion or as a replacement for compensation forfeited by an externally recruited executive at a prior employer.
The MDCC annually reviewsPerformance share units. PSUs align the costs of, and potential stockholder dilution attributable to, our long-term incentive program to ensure that the overall program is financially efficient and in line with thatinterests of our compensation peer group. The MDCC also seeks to calibrateNEOs with the long-term incentive program design to drive performanceinterests of our shareholders because the number of shares earned and deliver appropriate rewards relativethe shares’ potential value are tied to the compensation peer group. In determining the total value of the long-term incentive opportunity for each named executive officer, the MDCC reviews the compensation peer group data presented by both management and the independent compensation consultant for each role and considers recommendations by our CEO for the other named executive officers.
The MDCC’s goal is to make long-term incentive awards that are generally competitive with the median of the compensation peer group. Actual long-term incentive award target levels for individual named executive officers may vary from the median based on a variety of factors, such as the named executive officer’s sustained performance, individual experience, critical nature of their role, and expected future contributions. Like annual incentive awards, actual long-term incentive award payouts vary from the target based on how the Company performs against pre-established targets. The value of payouts will also vary based on changes in the market price of our Common Stock. The MDCC does not consider the amount of outstanding performance shares,
stock options, and restricted stock currently held by a named executive officer when making annual awardsachievement of performance shares and stock options because such amounts represent compensation attributable to prior years.
Long-Term Incentive Award. The long-term incentive awards granted to our named executive officers for fiscal year 2020 were made in September 2019. The MDCC considered factors such as the executive’s role, level of experience, and sustained performance,targets, as well as the compensation peer group market data,changes in determining each named executive officer’s long-term incentive award. For fiscal year 2020, the long-term incentives for our named executive officers, excluding our CEO, ranged in value from $1,250,000 to $2,000,000. Mr. Dorer received a long-term incentive award valued at $5,900,000. The long-term incentives awarded to our named executive officers in fiscal year 2020 are listed in the Stock Awards and Option Awards columns of the Summary Compensation Table.
Performance Shares. Performance shares are grants of restrictedClorox stock units thatprice. PSUs pay out after a three-year performance period only if the CompanyClorox meets pre-established financial performance goals.
THE CLOROX COMPANY - 2022 Proxy Statement | 59 |
Compensation Discussion and Analysis
The performance metric for the fiscal year 2022 awards, granted in September 2021, is EP growth during the performance period of July 2021 through June 2024. This metric directly supports our corporate strategy and long-term financial goals which are described below. Economic profit (EP)and correlates to stock price performance is measured relative to a three-year average annual growth rate that is established atover the beginning of the cycle and held constant. Forlong term.
Solely for purposes of the PSU performance shares,metric, EP is defined as earnings before interest and taxes, adjusted for non-cash restructuring charges, times one minus the tax rate, less capital charge. The potential payout can range from 0% to 200%This internal calculation of target.
We believe thatEP for the PSU performance shares align the interests of our named executive officersmetric holds management accountable for asset impairments, aligning payouts with the interestsimpact of balance sheet-related decisions. It differs from, and therefore may not reconcile with, the external calculation of EP used in our stockholders because the number of shares earnedpress releases and the shares’ potential value are tied to the achievement of performance targets. As discussed above, the performanceSEC filings.
The EP target for the awards granted in September 2019 isfirst year of the performance period was set as a three-year annualbase dollar value, with EP growth rate target informed by our three-year financial long-range plan and the budget developed by management, which is reviewed and approved by the Board. In setting the performance targets set for the performance shares,second and third years. Performance against target (whether dollar value or growth rate) will be measured for each year, generating three annual payout percentages. The three annual payout percentages will be averaged to determine the MDCC reviewsfinal payout percentage for the budget and long-range plan and seeks to appropriately align the performance goals with the objectives of the Annual Incentive Plan, so that the overall compensation design does not encourage participants to take unnecessary or excessive risk or actions that are inconsistent with the Company’s short- and long-term strategic and financial objectives. The MDCC believes its use of growth in EP as a metric provides rigor and an ability to align performance with pay over the three-year performance period.
The payout of the performance share awards granted in September 2019 is subject solely to the Company’s achievement of a three-year EP annual growth rate target
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during the performance period of July 2019 through June 2022.fiscal year 2022 awards. The payout percentage ranges from 0%, if the minimumthreshold EP value or growth target is not met,achieved, to a maximum of 200% of the target number of shares.
For the grant madefiscal year 2020 awards, granted in September 2017,2019, the performance metric was EP growth during the performance period of July 2019 through June 2022. EP performance was measured relative to a three-year average annual growth rate target established at the beginning of the cycle and held constant throughout the three-year period. The MDCC approved payout levels tied to 5.6%a 1.6% average annual EP growth target for the three-year performance period commencingfrom July 20172019 through June 2020. The MDCC believes this metric directly supports the Company’s corporate strategy and long-term financial goals and correlates to stock price performance. The 3-year average annual EP target was subsequently adjusted to 6.5% in accordance with predetermined criteria established by the MDCC at the time initial grants2022.
were approved as set forth in the grant agreements for the impact of the Nutranext acquisition in April 2018, fiscal year 2018 net impact of hurricanes, Argentina tax reform, Healthlink divestiture, the Tax Cuts and Jobs Act that went into effect January 1, 2018, the adoption of Accounting Standard Codification 842 - Leases, and certain net adjustments related to certain trade expenses. In August 2020,2022, the MDCC certified thata final payout for the 2019 awards of 89% of target, based on the average of the annual EP growth ratepayout percentages for the three-year performance period was 10.9%, inclusive of the predetermined adjustments, which exceeded the adjusted growth rate of 6.5%, resultingthree fiscal years in the MDCC certifying a payout of 129% of target for the 2017 grants.performance period.
Annual EP Growth | Adjusted(1) Actual EP Growth | Payout | ||||||||
Performance share units | Threshold (0%) | Target (100%) | Maximum (200%) | |||||||
FY20 Economic Profit Growth Rate | -13.4% | 1.6% | 9.1% | 17.0% | 200% | |||||
FY21 Economic Profit Growth Rate | -13.4% | 1.6% | 9.1% | -3.4% | 66% | |||||
FY22 Economic Profit Growth Rate | -13.4% | 1.6% | 9.1% | -56.1% | 0% | |||||
Three-Year Average Annual Economic Profit Growth Rate | 1.6% | 89% |
(1) | In accordance with predetermined criteria established by the MDCC at the time initial awards were approved, annual growth rates were adjusted for the impacts of the following Events (as defined in the 2019 PSU award agreements): a fiscal year 2021 non-cash impairment charge in the Better Health Vitamins, Minerals and Supplements business and acquisition of a majority share in a joint venture in the Kingdom of Saudi Arabia in July 2020. For the three-year performance period ended June 30, 2022, the impact of other defined Events—a fiscal year 2021 non-cash charge related to investments and arrangements made with a Professional Products business unit supplier, the fiscal year 2021 net impact of an insurance settlement for hurricanes during fiscal year 2018, and the fiscal year 2021 closure of our Dominican Republic business—was too small to affect the final payout. |
Performance Shares | Target | Adjusted Target | Achievement | Payout | ||||
3-Year Annual Economic Profit Growth Rate | 5.6% | 6.5% | 10.9% | 129% |
Stock Optionsoptions. Stock options align the interests of our named executive officersNEOs with those of our stockholdersshareholders because the options only have value if the price of the Company’sClorox stock increases after the stock options are granted. Stock options vest in 25% increments over a four-year period, (beginningbeginning one year from the date of grant)grant, and expire ten years from the date of grant. In fiscal year 2020,
Restricted stock units. RSUs align the MDCC awarded stock options to our named executive officers as partinterests of our annual long-term incentive plan. Information on allNEOs with those of our shareholders because the value of RSUs increases or decreases as the price of Clorox stock option grants is shownchanges. RSUs vest in 25% increments over a four-year period, beginning one year from the Grantsdate of Plan-Based Awards table.grant.
Our named executive officersNEOs participate in the same tax-qualified retirement benefit programs available to all other United States-based salaried and non-collectively bargained hourly employees. The Company’semployees, plus an additional executive-only plan. Our retirement plans are designed to provide replacement income upon retirement and to be competitive with programs offered by our peers.
60 | THE CLOROX COMPANY - 2022 Proxy Statement |
In addition, becauseTable of Contents
Compensation Discussion and Analysis
Because the Internal Revenue Code (IRC)IRC limits the amount of benefitsbenefit value that canmay be contributed to and paid from a tax-qualified retirement plan, the CompanyClorox also provides our executive officers, including our named executive officers,NEOs, with additional retirement benefits intended to restore amounts that would otherwise be payable under the Company’sour tax-qualified retirement plans if the IRC did not have limits on includable compensation and maximum benefits. We call these plans “restoration plans” because they restore total executive retirement benefits to the same percentage level provided to our salaried employees who are not limited by IRC restrictions.
ABelow are brief descriptiondescriptions of each of our retirement programs is set forth below.programs. Each of our named executive officersNEOs participates in these retirement programs, withexcept for the exception of the Supplemental Executive RetirementClorox Company Pension Plan.
The Clorox Company Pension Plan. Plan. The Clorox Company Pension Plan (the Pension Plan) is a cash balance pension plan that was frozen effective June 30, 2011. This freeze did not affect the benefits previously accrued under the Pension Plan, which remain fully funded.
In fiscal year 2023, we will begin to transition administration of the Pension Plan to an insurance company specializing in pension fund management. All benefits earned under the Pension Plan will be protected during this change, meaning it will not impact the value of individual plan participants’ benefits. This transition is regulated by the IRS through a standard pension plan termination process and typically takes 18 to 24 months.
The Clorox Company 401(k) Plan. Plan. After the Pension Plan was frozen in June 2011, the Clorox Company 401(k) Plan (the 401(k) Plan) became the primary retirement plan for the Company. The CompanyClorox. Clorox makes an annual fixed contribution of 6% of eligible pay and a matching contribution of up to 4% of eligible pay to eligible employees.
Nonqualified Deferred Compensation Plan. Plan. Under the Nonqualified Deferred Compensation Plan (the NQDC), eligible employees may voluntarily defer receipt of up to 50% of base salary and up to 100% of their annual incentive awards. In fiscal year 2020, deferredDeferred amounts couldcan be invested in a manner that generally mirroredmirrors the funds available in the 401(k) Plan. The NQDC permits the CompanyClorox to contribute amounts that exceed the IRC compensation limits in the tax-qualified plansplan through a 401(k) restoration provision for those employees deferring at required levels in the plan.
Supplemental Executive Retirement Plan. The Supplemental Executive Retirement Plan (the SERP), a defined benefit plan, was closed to new participants effective April 2007 and, effective June 30, 2011, was frozen with regard to pay and offsets, while still accruing age and service credits. Benefits under the SERP have historically been calculated as an annuity based on a percentage of average compensation adjusted by age and years of service and offset by the annuity value of Company contributions to the tax-qualified retirement plans and by Social Security. Effective July 1, 2011, the SERP was replaced by. Only our executive officers participate in the Executive Retirement Plan (the ERP), which is described below. Moving from the SERP to the ERP created a defined contribution structure that is more closely aligned with the benefits provided by the
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Compensation Discussion and Analysis
Company’s compensation peer group. In March 2018, the SERP was amended to provide that designated participants whose service as an executive of the Company is succeeded by service as a consultant or advisor will be entitled to receive age and service credits while serving as a consultant or advisor for purposes of accruing an early retirement benefit under the SERP, provided that they have attained a minimum of 25 years of service and be at least 50 years old at the time that service as a consultant or advisor commences. As of July 1, 2020, only two of our named executive officers are still eligible for the SERP.
Executive Retirement Plan. Our executive officers (including named executive officers) participate in the ERP.(ERP). Under the ERP, the CompanyClorox makes an annual contribution of 5% of an eligible participant’s base salary and annual incentive award into the plan.
Further details about the provisions of the Pension Plan, NQDC, SERP, and ERP are provided in the Overview of Pension Benefits and the Overview of the Nonqualified Deferred Compensation Plans sections below.
The CompanyClorox has a severance plan (the Severance Plan) that provides our named executive officersNEOs with post-termination payments if the named executive officers’NEOs’ employment is terminated by the CompanyClorox other than for cause. These payments are intended to provide a measure of financial security following the loss of employment, which we believe is important to attract and retain executives. The severance benefits are designed to be competitive with the compensation peer group and external market practices.
The CompanyClorox also has an Executive Change in Control Severance Plan (the CIC Plan), which provides severance benefits to certain eligible executives of the Company,Clorox, including all of the Company’s named executive officers,NEOs, if their employment with the CompanyClorox is involuntarily terminated
in connection with a change in control of the Company.Clorox. In addition to helping mitigate the financial impact associated with termination after a change in control, these benefits further align the interests of our executive officers with the interests of our stockholdersshareholders by providing incentives for retention, for business continuity purposes. Under the CIC Plan, a named executive officer isNEOs are eligible for change in control severance benefits if their employment is terminated in connection with a change in control, either by the CompanyClorox without cause or by the named executive officerNEO for good reason. See the Potential Payments Upon Termination or Change in Control section of the CD&A for additional information.
We provide our named executive officers with other limited benefits we believe are competitive with the compensation peer group and consistent with the Company’s overall executive compensation program. These benefits allow our named executive officers to proactively manage their health, work more efficiently, and, in the case of the financial planning program, help them optimize the value received from our compensation and benefits programs. These perquisites are a Company car or car allowance, paid parking at the Company’s headquarters, an annual executive physical exam, reimbursement for health club membership, and financial planning services.
A core principle of our compensation philosophy is to align pay with performance. We do so by delivering the majority of executive pay through “at-risk” variable incentive awards that help ensure realized pay is tied to attainment of critical operational goals and sustainable appreciation in stockholder value. In fiscal year 2020, approximately 86% of the targeted compensation for our CEO and approximately 72% of the targeted compensation for our other named executive officers was directly tied to the achievement of short- and long-term operating goals and total stockholder return. This approach is designed to accomplish the following:
THE CLOROX COMPANY - | |
What We Have and Don’t Have – Elements of Our Executive Compensation Program
The following elements of our executive compensation program reflect our continued commitment to our compensation philosophy:
What We Have
What We Don’t Have
How We Make Compensation Decisions
Roles and Responsibilities in Setting Executive Compensation
Management Development and Compensation Committee. The MDCC is made up entirely of independent directors as defined by our Governance Guidelines and NYSE listing standards. The MDCC regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to the Board. In particular, the MDCC (i) oversees our executive compensation program, (ii) approves the performance goals and strategic objectives for our named executive officers, evaluates results against those targets each year, and determines and approves the compensation of our CEO (after consulting with the other independent members of the Board) and our other named executive officers, as well as other executive officers and any other officers covered by Section 16 of the Exchange Act, and (iii) makes recommendations to the Board with respect to the structure of overall incentive and equity-based plans.
The MDCC makes its determinations regarding executive compensation after consulting with management and the MDCC’s independent compensation consultant (as further described below), and its decisions are based on a variety of factors, including the Company’s performance, individual executives’ performance, peer group data, and input and recommendations from the independent compensation consultant.
The MDCC evaluates individual performance based on the performance of the business or operations for which the executive is responsible, the individual’s skill set relative to industry peers, overall experience and time in the position, the critical nature of the individual’s role, difficulty of replacement, expected future contributions, readiness for promotion to a higher level, and role relative to that of other executive officers.
In determining the compensation package for each of our named executive officers other than our CEO, the MDCC receives input and recommendations from our CEO and our Executive Vice President – Chief People Officer. Named executive officers do not have a role in the determination of their own compensation, but named executive officers other than our CEO do discuss their individual performance objectives and results with our CEO.
Board of Directors. The independent members of the Board undertake a thorough process during which they review our CEO’s annual performance, and each independent director provides candid feedback and observations that are shared in aggregate with our CEO. The Board considers a variety of substantive factors it has identified as being most important for effective CEO performance, with a focus on strategy, people, and operations. The full Board discusses the evaluations of our CEO’s performance against these factors and then provides its compensation recommendations to the MDCC.
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Compensation Discussion and Analysis
The MDCC, after evaluating the Board’s recommendations and receiving input from the independent compensation consultant, then makes a final determination onPerquisites
We provide our CEO’s compensation. Our CEO does not have a role in his own compensation determinationNEOs with other than participating in a discussion with the Board regarding his performance relative to specific targets and strategic objectives set at the beginning of the fiscal year, which the Board considers in both its compensation determination and when setting performance targets for the upcoming fiscal year.
Independent Compensation Consultant. The MDCC retains the services of an independent compensation consulting firm to assist it in the performance of its duties. During fiscal year 2020, the MDCC used the services of FW Cook. FW Cook’s work with the MDCC included data analysis and guidance and recommendations on the following topics: compensation levels relative to our peers, market trends in incentive plan design, risk and reward structure of executive compensation plans, and other policies and practices, including the policies and views of third-party proxy advisory firms. See the Independence of the Compensation Consultant section below for a discussion of FW Cook’s independence from management.
Chief Executive Officer. Our CEO makes compensation recommendations to the MDCC for all executive officers other than himself. In making these recommendations, our CEO evaluates the performance of each executive officer and considers their responsibilities as well as the compensation analysis provided by the independent compensation consultant.
Other Members of Management. Senior human resources management provides analyses regardinglimited benefits competitive practices and pay ranges, compensation and benefit plans, policies and procedures for equity awards, perquisites, general compensation, and benefits philosophy. Senior human resources, legal, and, from time to time, finance executives attend non-executive sessions of the MDCC meetings to provide additional perspective and expertise.
Independence of the Compensation Consultant
Pursuant to its charter, the MDCC is authorized to retain, oversee, and terminate any consultants as it deems necessary, as well as to approve the fees and other
retention terms of any such consultants. Prior to retaining a compensation consultant or any other external advisor, from time to time as the MDCC deems appropriate but at least annually, the MDCC assesses the independence of the advisor from management. In evaluating FW Cook, the MDCC’s compensation consultant, the MDCC took into consideration all factors relevant to FW Cook’s independence, including the following factors specified in the NYSE listing standards:
FW Cook has provided the MDCC with appropriate assurances and confirmation of its independent status in accordance with the MDCC’s charter and other considerations. The MDCC believes that FW Cook has been independent throughout its service to the MDCC and that there is no conflict of interest between FW Cook or individuals at FW Cook and the MDCC, the Company’s executive officers, or the Company.
The MDCC uses a peer group of consumer products companies (the compensation peer group) to help determine competitive compensation rates for the Company’s executive officers, including the named executive officers. The compensation peer group was selected by the MDCC based on the factors described below, with input from FW Cook. The compensation peer group is used to evaluate both the levels of executive compensation and compensation practices within the consumer products industry.
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For fiscal year 2020, the compensation peer group was composed of the following 18 companies:
The MDCC annually reviews and adjusts the compensation peer group as appropriate to ensure that the companies continue to meet the relevant criteria. To determine the compensation peer group for each year, the MDCC considers companies that:
Other Executive Compensation Policies and Practices
Tally Sheets. To help ensure that our executive compensation design is alignedconsistent with our overall compensation philosophy of pay for performance and that total compensation levels are appropriate, the MDCC annually reviews compensation tally sheets for each of our named executive officers. These tally sheets outline current target total compensation (including the compensation elements described above), the potential wealth creation of long-term incentive awards granted to our officers under various potential stock prices, and the potential value of payouts under various termination scenarios. As such, these tally sheets help provide the MDCC with a comprehensive understanding of all elements of the Company’s compensation program and enable the MDCC to consider changes to the Company’s compensation program, arrangements, and plans in light of best practices and emerging trends. The MDCC may consider the information presented in the tally sheets in determining future compensation.
Results of 2019 Advisory Vote on Executive Compensation. At our 2019 Annual Meeting of Stockholders, we asked our stockholders to approve, on an advisory basis, our fiscal year 2019 compensation awarded
Stock Award Granting Practices. The Company awards long-term incentive grants each September at a regularly scheduled MDCC meeting, which typically occurs during the third week of the month, or about six weeks after the Company has publicly reported its annual earnings. The meeting date is the effective grant date for the awards, and the exercise/grant price is equal to the closing price of our Common Stock on that date.
The MDCC may also make occasional grants of stock options and other equity-based awards at other times to recognize, retain, or recruit executive officers.
Executive Stock Ownership Guidelines. To maintain alignment of the interests of the Company’s executive officers and our stockholders, all executive officers, including the named executive officers, are expected to build and maintain a significant level of direct stock ownership. Ownership levels can be achieved over time in a variety of ways, such as by retaining stock received upon the exercise of stock options or the vesting of stock awards or by purchasing stock in the open market. At a minimum, executive officers are expected to establish and maintain direct ownership of Common Stock having a value, based on the closing market price of the
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Compensation Discussion and Analysis
Ownership levels are based on shares of Common Stock owned by the named executive officer or held pursuant to Company plans, including performance shares that have vested and been deferred for settlement. Unexercised stock options and shares that have not vested due to time or performance restrictions are excluded from the ownership calculations.
As of the date of this proxy statement, Messrs. Dorer, Jacobsen and Reynolds and Ms. Stein have met the required ownership levels. Ms. Rendle became subject to a higher threshold with her promotion to the Executive Committee in fiscal year 2017 and her ownership threshold increased from 2 times annual base salary to 3 times annual base salary required for executive officers other than the CEO. In addition, with her appointment to Chief Executive Officer effective September 14, 2020, Ms. Rendle is now subject to the stock ownership requirement at 6 times her annual base salary.
Retention Ratios. Executive officers, including our named executive officers, are required to retain a certain percentage of shares obtained upon either the exercise of stock options or the release of restrictions on performance shares and restricted stock, after satisfying applicable taxes. Our CEO and Executive Chair of the Board are expected to retain 75% of shares acquired (after taxes) until the minimum ownership level is met. After attaining the minimum ownership level, our CEO and Executive Chair of the Board must retain 50% of any additional shares acquired (after taxes) until retirement or termination. Other executive officers must retain 75% of shares acquired (after taxes) until the minimum ownership levels are met and thereafter must retain 25% of shares acquired (after taxes) for one year after receipt.
Securities Trading Policy; Prohibition on Hedging and Pledging. To ensure alignment of the interests of our stockholders with all of our directors, officers, employees and consultants, including our named executive officers, the Company’s Insider Trading Policy does not permit any director, officer, employee or consultant of the Company, including any of the Company’s executive officers, either (1) to trade in the stock or other securities of any company when aware of material nonpublic information about that company, including the Company as well as any customers or suppliers of the Company or firms with which the Company may be negotiating a major transaction or (2) to engage in short-term or speculative transactions or derivative transactions involving the Company’s stock and
The Policy’s prohibition on engaging in hedging transactions in Company securities covers the purchase of a financial transaction instrument, or otherwise engaging in a transaction that hedges or offsets, or is designed to hedge or offset, any decrease in the market value of the Company’s equity securities that were granted as part of the individual’s compensation or that the individual holds directly or indirectly. The following transactions are expressly prohibited by the Policy: (1) short sales (selling Company securities you do not own), (2) transactions involving publicly traded options or other derivatives whose value is tied to the Company’s securities, including trading in or writing puts or calls on the Company’s securities, (3) pre-paid forward contracts and (4) collars. Directors, executive officers, the principal accounting officer and 10% beneficial owners of the Company’s common stock are also prohibited from borrowing against the value of any Company stock that they own through the use of a margin account or other pledge of Company stock as collateral.
Trading of the Company’s securities by directors, executive officers and certain other employees who are so designated from time to time and are informed of their status by the office of the Company’s general counsel is permitted only during announced trading periods or in accordance with a previously established trading plan that meets SEC requirements. At all times, including during announced trading periods, directors, executive officers and certain other employees notified by the office of the Company’s general counsel are required to obtain preclearance from the Company’s general counsel or corporate secretary prior to entering into any transactions in Company securities, unless those sales occur in accordance with a previously established trading plan that meets SEC requirements.
Clawback Provisions. Under our Annual Incentive Plan and long-term incentive plan, in the event of a restatement of financial results to correct a material error or other factors as described in the long-term incentive plan, the MDCC is authorized to reduce or recoup an executive officer’s award, as applicable, to the extent that the MDCC determines such executive officer’s fraud or intentional misconduct was a significant contributing factor to the need for a restatement.
Tax Deductibility Limits on Executive Compensation. Section 162(m) of the IRC limits the federal income tax deductibility of compensation paid to our covered employees to $1 million per year. In setting executive compensation, the MDCC considers Company performance, individual performance and other factors identified in more detail in How We Make Compensation Decisions and does not take this limit on deductibility into account.
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Table of Contentsbenefits programs.
The Management Development and Compensation Committee Report
As detailed in its charter, the Management Development and Compensation CommitteeMDCC of the Board oversees the Company’sClorox’s executive compensation program and policies. As part of this function, the MDCC discussed, and reviewed with management, the CD&A. Based on this review and discussion, we have recommended to the Board that the CD&A be included in the proxy statement.
THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE as of June 30, 2022
Spencer C.
Spencer C. Fleischer, Chair | Richard H. Carmona | A. D. David Mackay | Kathryn Tesija | Russell J. Weiner |
Compensation Committee Interlocks and Insider Participation
Each of Dr. Carmona, and Messrs. Fleischer, Mackay, and Weiner, and Ms. Tesija each served as a member of the MDCC during part or all of fiscal year 2020.2022. None of the members was an officer or employee of the CompanyClorox or any of its subsidiaries during fiscal year 20202022 or in any prior fiscal year. No executive officer of the CompanyClorox served on the board of directorsBoard or compensation committee of any other entity that has or had one or more executive officers who served as a member of the Board or MDCC during fiscal year 2020.2022.
| THE CLOROX COMPANY - |
Compensation Discussion and Analysis Tables |
Compensation Discussion and Analysis
Compensation Discussion and Analysis Tables
FISCAL YEAR 2020 SUMMARY COMPENSATION TABLE – FISCAL YEAR 2022
The following table sets forth the compensation earned, paid, or awarded to our named executive officersNEOs for the fiscal years ended June 30, 2020, 2019,2022, 2021, and 2018.2020.
Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||
Benno Dorer Chair and Chief Executive Officer | 2020 | $ | 1,269,231 | $ | 2,949,972 | $ | 2,950,287 | $ | 3,690,000 | $ | 1,161,950 | $ | 402,459 | $ | 12,423,899 | ||||||||
2019 | 1,166,346 | 2,874,521 | 2,874,816 | 1,206,000 | 859,528 | 381,504 | 9,362,715 | ||||||||||||||||
2018 | 1,061,538 | 2,624,635 | 2,625,829 | 1,269,840 | 131,210 | 420,015 | 8,133,067 | ||||||||||||||||
Kevin Jacobsen Executive Vice President — Chief Financial Officer | 2020 | 609,615 | 699,930 | 700,059 | 1,020,000 | 5,999 | 154,644 | 3,190,247 | |||||||||||||||
2019 | 536,539 | 649,918 | 649,958 | 331,650 | 4,612 | 122,077 | 2,294,753 | ||||||||||||||||
2018 | 388,463 | 349,952 | 350,091 | 168,040 | 7,476 | 107,965 | 1,371,987 | ||||||||||||||||
Linda Rendle(7) President | 2020 | 686,346 | 999,967 | 1,000,099 | 1,343,262 | 1,313 | 167,422 | 4,198,409 | |||||||||||||||
2019 | 523,965 | 600,194 | 600,006 | 291,182 | 1,572 | 144,820 | 2,161,739 | ||||||||||||||||
2018 | 435,923 | 563,379 | 312,577 | 271,900 | 1,401 | 117,181 | 1,702,362 | ||||||||||||||||
Laura Stein Executive Vice President — General Counsel and Corporate Affairs | 2020 | 687,692 | 624,960 | 625,044 | 938,000 | 1,119,609 | 139,898 | 4,135,203 | |||||||||||||||
2019 | 632,461 | 549,697 | 549,965 | 315,168 | 787,857 | 133,721 | 2,968,869 | ||||||||||||||||
2018 | 607,288 | 500,253 | 500,093 | 321,300 | — | 177,933 | 2,106,867 | ||||||||||||||||
Eric Reynolds(8) Executive Vice President Household & Cleaning | 2020 | 601,923 | 649,846 | 650,049 | 1,028,350 | 2,597 | 142,952 | 3,075,718 | |||||||||||||||
2019 | 462,788 | 450,587 | 450,016 | 231,071 | 3,120 | 119,035 | 1,716,617 | ||||||||||||||||
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3)(4) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||
Linda Rendle Chief Executive Officer | 2022 | 1,111,538 | — | 4,919,815 | 1,229,989 | 843,750 | 1,098 | 428,618 | 8,534,808 | |||||||||
2021 | 1,006,250 | — | 3,999,753 | 1,000,180 | 1,526,132 | 833 | 366,161 | 7,899,309 | ||||||||||
2020 | 523,965 | — | 600,194 | 600,006 | 291,182 | 1,572 | 144,820 | 2,161,739 | ||||||||||
Kevin Jacobsen Executive Vice President and Chief Financial Officer | 2022 | 729,231 | — | 1,599,869 | 399,996 | 333,000 | — | 231,809 | 3,293,904 | |||||||||
2021 | 654,038 | — | 1,361,356 | 340,450 | 617,400 | 7,423 | 277,187 | 3,257,854 | ||||||||||
2020 | 609,615 | — | 699,930 | 700,059 | 1,020,000 | 5,999 | 154,644 | 3,190,247 | ||||||||||
Eric Reynolds Executive Vice President and Chief Operating Officer | 2022 | 729,231 | — | 1,839,792 | 459,998 | 370,000 | 1,844 | 239,785 | 3,640,651 | |||||||||
2021 | 700,000 | — | 1,679,713 | 420,084 | 720,300 | 2,245 | 286,907 | 3,809,250 | ||||||||||
2020 | 601,923 | — | 649,846 | 650,049 | 1,028,350 | — | 110,378 | 3,040,546 | ||||||||||
Kirsten Marriner | 2022 | 643,269 | — | 1,039,776 | 259,989 | 260,000 | — | 204,913 | 2,407,947 | |||||||||
2021 | 587,885 | — | 959,958 | 240,048 | 489,992 | — | 250,310 | 2,528,192 | ||||||||||
Rebecca Dunphey Senior Vice President and General Manager – Specialty Division | 2022 | 138,462 | 750,000 | 2,499,941 | — | 58,685 | — | 8,238 | 3,455,326 |
(1) | Reflects actual salary earned for fiscal years |
(2) | Ms. Dunphey received a one-time cash sign-on payment at hire to compensate for a portion of expected cash and equity compensation she would otherwise have received from her former employer had she not terminated her employment there to join Clorox. |
(3) | The amounts reflected in these columns are the values determined under FASB ASC Topic 718 for the awards granted in the fiscal years ended June 30, |
The grant date fair value of the | |
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Linda Rendle | Kevin Jacobsen | Eric Reynolds | Kirsten Marriner | Rebecca Dunphey | ||||||||||
Maximum PSU Value | $ | 7,379,804 | $ | 2,399,886 | $ | 2,759,852 | $ | 1,559,745 | — |
THE CLOROX COMPANY - | |
Compensation Discussion and Analysis Tables
(5) | Reflects annual incentive awards earned for fiscal years 2022, 2021, and 2020 and paid out in September 2022, September 2021, and September 2020, respectively, under the AIP. Information about the AIP is set forth in the Compensation Discussion and Analysis under “Annual Incentives”. |
(6) | The amounts reflect the aggregate change in the present value of accumulated benefits during fiscal years 2022, 2021, and 2020 |
Benno Dorer | Kevin Jacobsen | Linda Rendle | Laura Stein | Eric Reynolds | |||||||||||
The Pension Plan | $ | 1,456 | $ | 3,465 | $ | 1,313 | $ | 3,607 | $ | 2,570 | |||||
SERP | 1,146,388 | — | — | 1,096,626 | — | ||||||||||
Cash Balance Restoration Benefit | 14,106 | 2,534 | — | 19,376 | 27 | ||||||||||
Total | $ | 1,161,950 | $ | 5,999 | $ | 1,313 | $ | 1,119,609 | $ | 2,597 |
Linda Rendle | Kevin Jacobsen | Eric Reynolds | Kirsten Marriner | Rebecca Dunphey | |||||||||
The Pension Plan | $ | 1,098 | $ | 2,899 | $ | 2,150 | — | — | |||||
Cash Balance Restoration | — | -9,820 | -306 | — | — | ||||||||
Total | $ | 1,098 | $ | -6,921 | $ | 1,844 | — | — |
(7) | |
The amounts shown in the All Other Compensation column represent (i) actual | |
NEOs: |
Benno Dorer | Kevin Jacobsen | Linda Rendle | Laura Stein | Eric Reynolds | |||||||||||
The Clorox Company 401(k) Plan | $ | 28,133 | $ | 27,832 | $ | 28,200 | $ | 28,586 | $ | 32,574 | |||||
Nonqualified Deferred Compensation Plan and ERP | 334,391 | 98,548 | 104,278 | 89,752 | 83,960 | ||||||||||
Company Paid Perquisites | 39,935 | 28,263 | 34,944 | 21,560 | 26,418 | ||||||||||
Total | $ | 402,459 | $ | 154,644 | $ | 167,422 | $ | 139,898 | $ | 142,952 |
Linda Rendle | Kevin Jacobsen | Eric Reynolds | Kirsten Marriner | Rebecca Dunphey | |||||||||||
The Clorox Company 401(k) Plan | $ | 29,600 | $ | 28,411 | $ | 35,062 | $ | 31,638 | — | ||||||
Nonqualified Deferred Compensation Plan | 363,207 | 170,320 | 185,884 | 139,263 | — | ||||||||||
Company-Paid Perquisites | 35,811 | 33,078 | 18,840 | 34,012 | 8,238 | ||||||||||
Total | $ | 428,618 | $ | 231,809 | $ | 239,785 | $ | 204,913 | $ | 8,238 |
The following table sets forth the perquisites utilized byprovided to our named executive officersNEOs and the cost to the CompanyClorox for providing these perquisites during fiscal year 2020. The amounts shown in the Other Perquisites row consist of paid parking at the Company’s headquarters, health club reimbursement, and an annual executive physical where applicable.2022.
Benno Dorer | Kevin Jacobsen | Linda Rendle | Laura Stein | Eric Reynolds | |||||||||||
Executive Automobile Program | $ | 13,200 | $ | 7,683 | $ | 13,200 | $ | 13,200 | $ | 13,200 | |||||
Basic Financial Planning | 21,125 | 16,500 | 16,500 | 3,560 | 9,768 | ||||||||||
Non-Business Use of Company Aircraft | — | — | — | — | — | ||||||||||
Other Perquisites | 5,610 | 4,080 | 5,244 | 4,800 | 3,450 | ||||||||||
Total | $ | 39,935 | $ | 28,263 | $ | 34,944 | $ | 21,560 | $ | 26,418 |
Linda Rendle | Kevin Jacobsen | Eric Reynolds | Kirsten Marriner | Rebecca Dunphey | |||||||||||
Executive Automobile Program | $ | 13,200 | $ | 8,988 | $ | 13,200 | $ | 13,200 | $ | 3,300 | |||||
Basic Financial Planning | 16,971 | 16,971 | — | 12,853 | 4,578 | ||||||||||
Paid Parking at Oakland Headquarters | 4,200 | 3,360 | 4,200 | 4,200 | — | ||||||||||
Health Club Allowance | 1,440 | 1,440 | 1,440 | 1,440 | 360 | ||||||||||
Annual Executive Physical | — | 2,319 | — | 2,319 | — | ||||||||||
Total | $ | 35,811 | $ | 33,078 | $ | 18,840 | $ | 34,012 | $ | 8,238 |
| THE CLOROX COMPANY - |
Compensation Discussion and Analysis Tables
FISCAL YEAR 2020 GRANTS OF PLAN-BASED AWARDS – FISCAL YEAR 2022
This table shows grants of plan-based awards to the named executive officersNEOs during fiscal year 2020.2022.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares if Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||
Benno Dorer | ||||||||||||||||||||||||||
Annual Incentive Plan(1) | — | $ | 1,845,000 | $ | 5,535,000 | |||||||||||||||||||||
Performance Shares(2) | 9/17/2019 | — | 18,966 | 37,932 | $ | 2,949,972 | ||||||||||||||||||||
Stock Options(3) | 9/17/2019 | 147,367 | $ | 155.54 | 2,950,287 | |||||||||||||||||||||
Kevin Jacobsen | ||||||||||||||||||||||||||
Annual Incentive Plan(1) | — | 510,000 | 1,530,000 | |||||||||||||||||||||||
Performance Shares(2) | 9/17/2019 | — | 4,500 | 9,000 | 699,930 | |||||||||||||||||||||
Stock Options(3) | 9/17/2019 | 34,968 | $ | 155.54 | 700,059 | |||||||||||||||||||||
Linda Rendle | ||||||||||||||||||||||||||
Annual Incentive Plan(1) | — | 671,631 | 2,014,893 | |||||||||||||||||||||||
Performance Shares(2) | 9/17/2019 | — | 6,429 | 12,858 | 999,967 | |||||||||||||||||||||
Stock Options(3) | 9/17/2019 | 49,955 | $ | 155.54 | 1,000,099 | |||||||||||||||||||||
Laura Stein | ||||||||||||||||||||||||||
Annual Incentive Plan(1) | — | 469,000 | 1,407,000 | |||||||||||||||||||||||
Performance Shares(2) | 9/17/2019 | — | 4,018 | 8,036 | 624,960 | |||||||||||||||||||||
Stock Options(3) | 9/17/2019 | 31,221 | $ | 155.54 | 625,044 | |||||||||||||||||||||
Eric Reynolds | ||||||||||||||||||||||||||
Annual Incentive Plan(1) | — | 514,175 | 1,542,525 | |||||||||||||||||||||||
Performance Shares(2) | 9/17/2019 | — | 4,178 | 8,356 | 649,846 | |||||||||||||||||||||
Stock Options(3) | 9/17/2019 | 32,470 | $ | 155.54 | 650,049 |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||
Linda Rendle | ||||||||||||||||||||||
Annual Incentive Plan(1) | — | 1,687,500 | 5,062,500 | |||||||||||||||||||
Performance Share Units(2) | 9/21/2021 | — | 22,531 | 45,062 | 3,689,902 | |||||||||||||||||
Restricted Stock Units(3) | 9/21/2021 | 7,510 | 1,229,913 | |||||||||||||||||||
Stock Options(4) | 9/21/2021 | 55,224 | 163.77 | 1,229,989 | ||||||||||||||||||
Kevin Jacobsen | ||||||||||||||||||||||
Annual Incentive Plan(1) | — | 666,000 | 1,998,000 | |||||||||||||||||||
Performance Share Units(2) | 9/21/2021 | — | 7,327 | 14,654 | 1,199,943 | |||||||||||||||||
Restricted Stock Units(3) | 9/21/2021 | 2,442 | 399,926 | |||||||||||||||||||
Stock Options(4) | 9/21/2021 | 17,959 | 163.77 | 399,996 | ||||||||||||||||||
Eric Reynolds | ||||||||||||||||||||||
Annual Incentive Plan(1) | — | 740,000 | 2,220,000 | |||||||||||||||||||
Performance Share Units(2) | 9/21/2021 | — | 8,426 | 16,852 | 1,379,926 | |||||||||||||||||
Restricted Stock Units(3) | 9/21/2021 | 2,808 | 459,866 | |||||||||||||||||||
Stock Options(4) | 9/21/2021 | 20,653 | 163.77 | 459,998 | ||||||||||||||||||
Kirsten Marriner | ||||||||||||||||||||||
Annual Incentive Plan(1) | — | 520,000 | 1,560,000 | |||||||||||||||||||
Performance Share Units(2) | 9/21/2021 | — | 4,762 | 9,524 | 779,873 | |||||||||||||||||
Restricted Stock Units(3) | 9/21/2021 | 1,587 | 259,903 | |||||||||||||||||||
Stock Options(4) | 9/21/2021 | 11,673 | 163.77 | 259,989 | ||||||||||||||||||
Rebecca Dunphey | ||||||||||||||||||||||
Annual Incentive Plan(1) | — | 117,370 | 352,110 | |||||||||||||||||||
Performance Share Units(2) | — | — | — | — | ||||||||||||||||||
Restricted Stock Units(3) | 3/21/2022 | 18,673 | 2,499,941 | |||||||||||||||||||
Stock Options(4) | — | — | — |
(1) | Represents estimated possible payouts of annual incentive awards for fiscal year |
(2) | Represents possible future payouts of |
(3) | Represents RSUs awarded to each of our NEOs under the 2005 Stock Incentive Plan. All RSUs vest in equal installments on the first, second, third, and fourth anniversaries of the grant date other than the one-time off-cycle award of 18,673 RSUs granted to Ms. Dunphey when she was hired as Senior Vice President and General Manager – Specialty Division, effective March 21, 2022, which vest 100% on the third anniversary of the grant date. |
(4) | Represents stock options awarded to each of our |
THE CLOROX COMPANY - | |
Compensation Discussion and Analysis Tables
OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END – 2022
The following equity awards granted to our named executive officersNEOs were outstanding as of the end of fiscal year 2020.2022.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options- Exercisable (#) | Number of Securities Underlying Unexercised Options- Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market | 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 ($)(1) | Number of Securities Underlying Unexercised Options- Exercisable (#) | Number of Securities Underlying Unexercised Options- Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price ($) | 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 ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||
Benno Dorer | ||||||||||||||||||||||||||||||||||||||||||
Linda Rendle | ||||||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 165,400 | — | $ | 111.60 | 9/15/2025 | 2,935 | — | 84.45 | 9/17/2023 | |||||||||||||||||||||||||||||||||
129,637 | 43,213 | (3) | $ | 123.09 | 9/13/2026 | |||||||||||||||||||||||||||||||||||||
85,980 | 85,980 | (4) | $ | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||||||
32,200 | 96,600 | (5) | $ | 151.85 | 9/18/2028 | |||||||||||||||||||||||||||||||||||||
— | 147,367 | (6) | $ | 155.54 | 9/17/2029 | |||||||||||||||||||||||||||||||||||||
Performance Shares(2) | 24,974 | (9) | $ | 5,478,634 | ||||||||||||||||||||||||||||||||||||||
18,930 | (10) | $ | 4,152,674 | |||||||||||||||||||||||||||||||||||||||
18,966 | (11) | $ | 4,160,571 | |||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 7,850 | — | 89.82 | 9/17/2024 | ||||||||||||||||||||||||||||||||||||||
12,360 | — | 111.60 | 9/15/2025 | |||||||||||||||||||||||||||||||||||||||
14,560 | — | 123.09 | 9/13/2026 | |||||||||||||||||||||||||||||||||||||||
20,470 | — | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||||||||
14,280 | 4,760 | (3) | 151.85 | 9/18/2028 | ||||||||||||||||||||||||||||||||||||||
5,199 | 1,733 | (4) | 154.88 | 1/7/2029 | ||||||||||||||||||||||||||||||||||||||
24,977 | 24,978 | (5) | 155.54 | 9/17/2029 | ||||||||||||||||||||||||||||||||||||||
8,079 | 24,237 | (6) | 212.38 | 9/22/2030 | ||||||||||||||||||||||||||||||||||||||
— | 55,224 | (7) | 163.77 | 9/21/2031 | ||||||||||||||||||||||||||||||||||||||
5,722 | (8) | 806,661 | ||||||||||||||||||||||||||||||||||||||||
Performance Share Units(2) | 14,125 | (9) | 1,991,343 | |||||||||||||||||||||||||||||||||||||||
22,531 | (10) | 3,176,420 | ||||||||||||||||||||||||||||||||||||||||
3,531 | (11) | 497,800 | ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(2) | 7,510 | (12) | 1,058,760 | |||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 11,410 | — | $ | 111.60 | 9/15/2025 | 2,458 | — | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||
8,190 | 2,730 | (3) | $ | 123.09 | 9/13/2026 | |||||||||||||||||||||||||||||||||||||
4,915 | 4,915 | (4) | $ | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||||||
5,580 | 5,580 | (7) | $ | 128.69 | 4/2/2028 | |||||||||||||||||||||||||||||||||||||
7,280 | 21,840 | (5) | $ | 151.85 | 9/18/2028 | |||||||||||||||||||||||||||||||||||||
— | 34,968 | (6) | $ | 155.54 | 9/17/2029 | |||||||||||||||||||||||||||||||||||||
Performance Shares(2) | 1,432 | (9) | 314,116 | |||||||||||||||||||||||||||||||||||||||
2,000 | (12) | 438,630 | ||||||||||||||||||||||||||||||||||||||||
4,280 | (10) | 938,904 | ||||||||||||||||||||||||||||||||||||||||
4,500 | (11) | 987,165 | ||||||||||||||||||||||||||||||||||||||||
Linda Rendle | ||||||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 1,697 | — | $ | 72.11 | 9/11/2022 | 5,580 | — | 128.69 | 4/2/2028 | |||||||||||||||||||||||||||||||||
2,935 | — | $ | 84.45 | 9/17/2023 | ||||||||||||||||||||||||||||||||||||||
7,850 | — | $ | 89.82 | 9/17/2024 | ||||||||||||||||||||||||||||||||||||||
12,360 | — | $ | 111.60 | 9/15/2025 | ||||||||||||||||||||||||||||||||||||||
10,920 | 3,640 | (3) | $ | 123.09 | 9/13/2026 | |||||||||||||||||||||||||||||||||||||
10,235 | 10,235 | (4) | $ | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||||||
4,760 | 14,280 | (5) | $ | 151.85 | 9/18/2028 | |||||||||||||||||||||||||||||||||||||
1,733 | 5,199 | (8) | $ | 154.88 | 1/7/2029 | |||||||||||||||||||||||||||||||||||||
— | 49,955 | (6) | $ | 155.54 | 9/17/2029 | |||||||||||||||||||||||||||||||||||||
Performance Shares(2) | 2,980 | (9) | 653,701 | |||||||||||||||||||||||||||||||||||||||
2,800 | (10) | 614,236 | ||||||||||||||||||||||||||||||||||||||||
1,130 | (13) | 247,888 | ||||||||||||||||||||||||||||||||||||||||
6,429 | (11) | 1,410,330 | ||||||||||||||||||||||||||||||||||||||||
Restricted Shares(2) | 1,850 | (14) | $ | 405,835 | ||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 21,840 | 7,280 | (3) | 151.85 | 9/18/2028 | |||||||||||||||||||||||||||||||||||||
17,484 | 17,484 | (5) | 155.54 | 9/17/2029 | ||||||||||||||||||||||||||||||||||||||
2,750 | 8,250 | (6) | 212.38 | 9/22/2030 | ||||||||||||||||||||||||||||||||||||||
— | 17,959 | (7) | 163.77 | 9/21/2031 | ||||||||||||||||||||||||||||||||||||||
4,005 | (8) | 564,625 | ||||||||||||||||||||||||||||||||||||||||
4,808 | (9) | 677,832 | ||||||||||||||||||||||||||||||||||||||||
Performance Share Units(2) | 7,327 | (10) | 1,032,960 | |||||||||||||||||||||||||||||||||||||||
1,148 | (11) | 161,845 | ||||||||||||||||||||||||||||||||||||||||
2,442 | (12) | 344,273 | ||||||||||||||||||||||||||||||||||||||||
Eric Reynolds | ||||||||||||||||||||||||||||||||||||||||||
Stock Options(2) | 15,210 | — | 111.60 | 9/15/2025 | ||||||||||||||||||||||||||||||||||||||
15,470 | — | 123.09 | 9/13/2026 | |||||||||||||||||||||||||||||||||||||||
16,380 | — | 135.57 | 9/12/2027 | |||||||||||||||||||||||||||||||||||||||
10,080 | 3,360 | (3) | 151.85 | 9/18/2028 | ||||||||||||||||||||||||||||||||||||||
4,456 | 1,486 | (4) | 154.88 | 1/7/2029 | ||||||||||||||||||||||||||||||||||||||
16,235 | 16,235 | (5) | 155.54 | 9/17/2029 | ||||||||||||||||||||||||||||||||||||||
3,393 | 10,180 | (6) | 212.38 | 9/22/2030 | ||||||||||||||||||||||||||||||||||||||
— | 20,653 | (7) | 163.77 | 9/21/2031 | ||||||||||||||||||||||||||||||||||||||
Performance Share Units(2) | 3,718 | (8) | 524,223 | |||||||||||||||||||||||||||||||||||||||
5,932 | (9) | 836,293 | ||||||||||||||||||||||||||||||||||||||||
8,426 | (10) | 1,187,897 | ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(2) | 1,431 | (11) | 201,742 | |||||||||||||||||||||||||||||||||||||||
2,808 | (12) | 395,872 |
| THE CLOROX COMPANY - |
Compensation Discussion and Analysis Tables
Option Awards | Stock Awards | ||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options- Exercisable (#) | Number of Securities Underlying Unexercised Options- Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||
Laura Stein | |||||||||||||||||||||
Stock Options(2) | 39,960 | — | $ | 84.45 | 9/17/2023 | ||||||||||||||||
41,670 | — | $ | 89.82 | 9/17/2024 | |||||||||||||||||
30,420 | — | $ | 111.60 | 9/15/2025 | |||||||||||||||||
22,515 | 7,505 | (3) | $ | 123.09 | 9/13/2026 | ||||||||||||||||
16,375 | 16,375 | (4) | $ | 135.57 | 9/12/2027 | ||||||||||||||||
6,160 | 18,480 | (5) | $ | 151.85 | 9/18/2028 | ||||||||||||||||
31,221 | (6) | $ | 155.54 | 9/17/2029 | |||||||||||||||||
Performance Shares(2) | 4,760 | (9) | 1,044,223 | ||||||||||||||||||
3,620 | (10) | 794,119 | |||||||||||||||||||
4,018 | (11) | 881,429 | |||||||||||||||||||
Eric Reynolds | |||||||||||||||||||||
Stock Options(2) | 15,210 | — | $ | 111.60 | 9/15/2025 | ||||||||||||||||
11,602 | 3,868 | (3) | $ | 123.09 | 9/13/2026 | ||||||||||||||||
8,190 | 8,190 | (4) | $ | 135.57 | 9/12/2027 | ||||||||||||||||
3,360 | 10,080 | (5) | $ | 151.85 | 9/18/2028 | ||||||||||||||||
1,485 | 4,457 | (8) | $ | 154.88 | 1/7/2029 | ||||||||||||||||
— | 32,470 | (6) | $ | 155.54 | 9/17/2029 | ||||||||||||||||
Performance Shares(2) | 2,374 | (9) | 520,697 | ||||||||||||||||||
1,980 | (10) | 434,353 | |||||||||||||||||||
968 | (13) | 212,350 | |||||||||||||||||||
4,178 | (11) | 916,528 |
Option Awards | Stock Awards | ||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options- Exercisable (#) | Number of Securities Underlying Unexercised Options- Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | 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) | ||||||||||||
Kirsten Marriner | |||||||||||||||||||||
Stock Options(2) | 6,143 | — | 135.57 | 9/12/2027 | |||||||||||||||||
14,280 | 4,760 | (3) | 151.85 | 9/18/2028 | |||||||||||||||||
11,864 | 11,864 | (5) | 155.54 | 9/17/2029 | |||||||||||||||||
1,939 | 5,817 | (6) | 212.38 | 9/22/2030 | |||||||||||||||||
— | 11,673 | (7) | 163.77 | 9/21/2031 | |||||||||||||||||
Performance Share Units(2) | 2,717 | (8) | 383,067 | ||||||||||||||||||
3,390 | (9) | 477,922 | |||||||||||||||||||
4,762 | (10) | 671,347 | |||||||||||||||||||
Restricted Stock Units(2) | 848 | (11) | 119,551 | ||||||||||||||||||
1,587 | (12) | 223,735 | |||||||||||||||||||
Rebecca Dunphey | |||||||||||||||||||||
Restricted Stock Units(2) | 18,673 | (13) | 2,632,520 |
(1) | Represents the unvested “target” number of |
(2) | |
(3) | Represents |
Represents | |
Represents the unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 18, 2019. | |
(6) | Represents the unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 22, 2020. |
(7) | Represents the unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 22, 2021. |
(8) | Represents the actual number of |
|
Represents the “target” number of | |
(10) | Represents the “target” number of PSUs that can be earned under our 2005 Stock Incentive Plan. The awards have a three-year performance period (fiscal years 2022 through 2024). Performance is based on achievement of economic profit growth goals. The Committee will determine whether the performance measures have been achieved after the completion of fiscal year 2024. |
(11) | Represents unvested portion of RSUs that vest in four equal installments beginning one year from the grant date of September 22, 2020. |
(12) | Represents unvested portion of RSUs that vest in four equal installments beginning one year from the grant date of September 21, 2021. |
Represents unvested one-time off-cycle |
THE CLOROX COMPANY - 2022 Proxy Statement | 67 |
Table of ContentsFISCAL YEAR 2020
Compensation Discussion and Analysis Tables
OPTION EXERCISES AND STOCK VESTED – FISCAL YEAR 2022
This table shows stock options exercised and stock vested for the named executive officersNEOs during fiscal year 2020.2022.
Option Awards | Stock Awards | ||||||||||||||||||||
Number | Number of | ||||||||||||||||||||
of Shares | Value | Shares | Value | ||||||||||||||||||
Acquired | Realized on | Acquired | Realized on | ||||||||||||||||||
on Exercise | Exercise | on Vesting | Vesting | Option Awards | Stock Awards | ||||||||||||||||
Name | (#) | ($)(1) | (#) | ($)(2) | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | |||||||||||||
Benno Dorer | 271,950 | (3) | $ | 19,307,028 | 22,777 | (4) | $ | 5,199,989 | |||||||||||||
Linda Rendle | 1,697 | 146,230 | 5,176 | (5) | 755,384 | ||||||||||||||||
Kevin Jacobsen | 19,215 | (3) | 2,263,612 | 1,353 | (4)(5) | 308,890 | — | — | 4,787 | 815,691 | |||||||||||
Linda Rendle | — | (3) | — | 3,382 | (4) | 772,111 | |||||||||||||||
Laura Stein | — | (3) | — | 3,954 | (4) | 902,698 | |||||||||||||||
Eric Reynolds | — | (3) | — | 1,920 | (4)(5) | 438,336 | — | — | 3,535 | (6) | 510,987 | ||||||||||
Kirsten Marriner | — | — | 3,116 | 530,573 | |||||||||||||||||
Rebecca Dunphey | — | — | — | — |
(1) | The number of shares represents the exercise of nonqualified stock options granted in previous years under Clorox’s 2005 Stock Incentive Plan. |
(2) | The dollar value realized reflects the difference between the market price of |
The number of shares represents the vesting of RSUs, PSUs, and dividend equivalent units granted through participation in Clorox’s 2005 Stock Incentive Plan. | |
(4) | The dollar value realized reflects the market value of the vested shares and dividend equivalent units based on the closing price of |
(5) | These shares have been deferred and will be distributed over |
(6) | These shares have been deferred and |
Overview of Pension Benefits
Historically, pension benefits have been paid to the named executive officers under the following plans: (i) the Pension Plan, (ii) the cash balance restoration provision in the NQDC, and (iii) the SERP. Effective June 30, 2011, the Pension Plan and the cash balance restoration provision under the NQDC were frozen. The SERP was also frozen as of June 30, 2011, with regard to pay and offsets, while still allowing age and service credits, as most recently amended in March 2018, as described in the Retirement Plans section of the CD&A.
| THE CLOROX COMPANY - |
Compensation Discussion and Analysis Tables
PENSION BENEFITS – FISCAL YEAR 2020 PENSION BENEFITS TABLE2022
The following table sets forth each named executive officer’s pension benefits under the Company’s pension plans for fiscal year 2020.
Number of Years | Present Value | Payments | ||||||||||||||||
of Credited | of Accumulated | During Last | ||||||||||||||||
Service | Benefit | Fiscal Year | ||||||||||||||||
Name | Plan Name | (#)(1) | ($)(2) | ($) | ||||||||||||||
Benno Dorer | The Clorox Company Pension Plan(3) | 15 | $ | 58,325 | $— | |||||||||||||
SERP(4) | 15 | 4,622,393 | — | |||||||||||||||
Cash Balance Restoration(5) | 15 | 171,227 | — | |||||||||||||||
Name(1) | Plan Name | Number of Years of Credited Service (#)(2) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||||
Linda Rendle | The Clorox Company Pension Plan(3) | 19 | 54,533 | — | ||||||||||||||
Kevin Jacobsen | The Clorox Company Pension Plan(3) | 24 | 138,812 | — | The Clorox Company Pension Plan(3) | 26 | 143,907 | — | ||||||||||
SERP(4) | 24 | — | — | |||||||||||||||
Cash Balance Restoration(5) | 24 | 52,927 | — | |||||||||||||||
Linda Rendle | The Clorox Company Pension Plan(3) | 17 | 52,602 | — | ||||||||||||||
SERP(4) | 17 | — | — | |||||||||||||||
Cash Balance Restoration(5) | 17 | — | — | |||||||||||||||
Laura Stein | The Clorox Company Pension Plan(3) | 23 | 144,536 | — | ||||||||||||||
SERP(4) | 23 | 6,163,073 | — | |||||||||||||||
Cash Balance Restoration(5) | 23 | 312,043 | — | Cash Balance Restoration(4) | 26 | 48,334 | — | |||||||||||
Eric Reynolds | The Clorox Company Pension Plan(3) | 21 | 102,952 | — | The Clorox Company Pension Plan(3) | 23 | 10,6731 | — | ||||||||||
SERP(4) | 21 | — | — | Cash Balance Restoration(4) | 23 | 2,285 | — | |||||||||||
Cash Balance Restoration(5) | 21 | 1,975 | — | |||||||||||||||
Kirsten Marriner | The Clorox Company Pension Plan(3) | — | — | — | ||||||||||||||
Rebecca Dunphey | The Clorox Company Pension Plan(3) | — | — | — |
(1) | Only Messrs. Jacobsen and Reynolds participate in the cash balance restoration provision of the NQDC. Mses. Marriner and Dunphey do not participate in any of the pension plans. |
(2) | Number of years of credited service is rounded down to the nearest whole number. |
(3) | The Pension Plan was frozen effective |
(4) | The |
Overview of Pension Benefits
Pension benefits may be paid to the NEOs under the Pension Plan or the cash balance restoration provision of the NQDC. Effective June 30, 2011, the Pension Plan and the cash balance restoration provision under the NQDC were frozen.
In fiscal year 2023, we will begin to transition administration of the Pension Plan to an insurance company specializing in pension fund management. All benefits earned under the Pension Plan will be protected during this change, meaning it will not impact the value of individual plan participants’ benefits. This transition is regulated by the IRS through a standard pension plan termination process and typically takes 18 to 24 months.
THE CLOROX COMPANY - 2022 Proxy Statement | 69 |
Compensation Discussion and Analysis Tables
NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2022
The following table provides information regarding the accounts of the NEOs under the NQDC and ERP in fiscal year 2022.
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Balance at Last FYE ($)(4)(5) | ||||
Linda Rendle | 105,507 | 363,207 | -217,255 | 1,575,375 | ||||
Kevin Jacobsen | 644,367 | 170,320 | -110,794 | 2,586,285 | ||||
Eric Reynolds | 190,768 | 185,884 | -210,703 | 1,138,191 | ||||
Kirsten Marriner | 37,365 | 139,263 | -139,455 | 803,744 | ||||
Rebecca Dunphey | 3,692 | — | -138 | 3,554 |
(1) | Amounts represent the annual base salary and incentive award that each executive deferred during fiscal year 2022. Deferred base salary is also reported in the Summary Compensation Table – Salary. Deferred annual incentive awards are also reported in the Summary Compensation Table – Non-Equity Incentive Plan Compensation. |
(2) | Represents that portion of the 401(k) Plan company match and annual contribution of up to 10% of eligible compensation that is in excess of IRC compensation limits, pursuant to the 401(k) restoration provision of the NQDC and Clorox’s contribution under the ERP. These contributions are also reported in the Summary Compensation Table – All Other Compensation and are included under the caption “Nonqualified Deferred Compensation Plan” in footnote (7) to the Summary Compensation Table. |
(3) | Earnings are based on an array of investment options that generally mirror the 401(k) Plan. Earnings vary based on participant investment elections. |
(4) | Reflects aggregate balances under the restoration provision of the NQDC and any deferred base salary and annual incentive awards as of the end of fiscal year 2022. |
(5) | The executive and registrant contribution total amounts in the table below are also reported as compensation in the Summary Compensation Table in the years indicated: |
Fiscal Year | Linda Rendle | Kevin Jacobsen | Eric Reynolds | Kirsten Marriner | Rebecca Dunphey | |||||||||||
2022 | $ | 468,714 | $ | 814,687 | $ | 376,651 | $ | 176,628 | $ | 3,692 | ||||||
2021 | 394,957 | 518,257 | 287,062 | 230,049 | — | |||||||||||
2020 | $ | 104,278 | $ | 98,548 | $ | 83,960 | — | — |
Overview of Nonqualified Deferred Compensation Plans
Executive Retirement Plan. Our executive officers (including each of our named executive officers) are eligible for participation in the ERP. The ERP provides that the Company will make an annual contribution of 5% of an eligible participant’s base salary plus an annual incentive payment into the plan. Company contributions will vest over a three-year period and will fully vest upon the participant’s attainment of age 62 with 10 years of service with the Company (at which time the individuals are considered retirement-eligible under the ERP). An eligible participant can elect distribution in a lump sum or up to 15 annual installments upon a qualifying payment event.
Nonqualified Deferred Compensation Plan. Plan
Under the NQDC, participants including each of our named executive officers, may voluntarily defer the receipt of up to 50% of their base salary and up to 100% of their annual incentive award. In addition, the NQDC offers a 401(k) restoration provision for those who defer at a required
level. All CompanyClorox retirement contributions are made in the form of (i) a fixed 6% employer annual contribution and (ii) an employer match of up to 4% of pay into the 401(k) Plan, subject to IRC compensation limits. Contributions on eligible compensation that exceed the IRC compensation limits are contributed into a participant’s NQDC account under the 401(k) restoration provision.
Participants in the NQDC may elect to receive benefits from the NQDC either in a lump sum or up to 15 annual payments upon a qualifying payment event. Participants may choose from an array of investment crediting rates that generally mirror the investment fund options available in the 401(k) Plan. The NQDC uses the same benefit formulas, types of compensation to determine benefits, and vesting requirements as our tax-qualifiedthe 401(k) plan.Plan. The responsibility to pay benefits under the NQDC is an unfunded and unsecured obligation of Clorox.
Executive Retirement Plan
Our executive officers are eligible for participation in the Company.ERP. The ERP provides that Clorox will make an annual contribution of 5% of an eligible participant’s base salary plus annual incentive payment into the ERP. Clorox contributions vest over a three-year period and individuals are considered retirement-eligible under the ERP upon attainment of age 62 with 10 years of service with Clorox. An eligible participant may elect distribution in a lump sum or up to 15 annual installments upon a qualifying payment event.
70 | THE CLOROX COMPANY - 2022 Proxy Statement |
Compensation Discussion and Analysis Tables
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL – FISCAL YEAR 2022
The following table provides information regardingreflects the accountsestimated amount of compensation payable to each of our NEOs upon termination of the named executive officersNEO’s employment under various scenarios. The amounts exclude earned amounts such as vested or accrued benefits.
The amounts shown are calculated using an assumed termination date of the NQDC and ERP inlast business day of fiscal year 2020.2022 (June 30, 2022) and the closing price of our common stock on that date ($140.98). Although the calculations are intended to provide reasonable estimates of the potential compensation payable upon termination, they are based on assumptions outlined in the footnotes of the table and may not represent the actual amount the NEO would receive if an eligible termination event were to occur.
The table does not include compensation or benefits provided under plans or arrangements that are generally available to all salaried employees. Amounts reflected for change in control assume that each NEO is involuntarily terminated by Clorox without cause or voluntarily terminates for good reason within two years after a change in control.
Name and Benefits | Involuntary Termination Without Cause ($) | Involuntary Termination After Change In Control ($) | Resignation or Retirement ($) | Disability or Death ($) | ||||||||
Linda Rendle | ||||||||||||
Cash Payment | 6,468,750 | (1) | 10,125,000 | (2) | — | (3) | — | (4) | ||||
Stock Options | 1,418,752 | (5) | 1,418,752 | (6) | — | 2,311,880 | (7) | |||||
Restricted Stock Units | — | 1,556,560 | (8) | — | 1,556,560 | (8) | ||||||
Performance Share Units | — | 6,343,927 | (9) | — | 6,343,927 | (10) | ||||||
Retirement Plan Benefits | — | — | — | — | ||||||||
Health & Welfare Benefits | 29,794 | (11) | 44,690 | (12) | — | — | ||||||
Financial Planning | — | 16,500 | (13) | — | — | |||||||
Total Estimated Value | 7,917,295 | 19,505,429 | — | 10,212,367 | ||||||||
Kevin Jacobsen | ||||||||||||
Cash Payment | 2,146,000 | (14) | 3,478,000 | (15) | — | (3) | — | (4) | ||||
Stock Options | 1,557,482 | (5) | 1,557,482 | (6) | 1,557,482 | (5) | 1,557,482 | (7) | ||||
Restricted Stock Units | 506,118 | (16) | 513,661 | (8) | 506,118 | (16) | 506,118 | (8) | ||||
Performance Share Units | 1,519,834 | (17) | 2,464,190 | (9) | 1,519,834 | (17) | 2,464,190 | (10) | ||||
Retirement Plan Benefits | — | — | — | — | ||||||||
Health & Welfare Benefits | 28,809 | (11) | 28,809 | (12) | — | — | ||||||
Financial Planning | — | 16,500 | (13) | — | — | |||||||
Total Estimated Value | 5,758,243 | 8,058,641 | 3,583,434 | 4,527,790 | ||||||||
Eric Reynolds | ||||||||||||
Cash Payment | 2,220,000 | (14) | 3,700,000 | (15) | — | (3) | — | (4) | ||||
Stock Options | 2,453,639 | (5) | 2,453,639 | (6) | 2,453,639 | (5) | 2,453,639 | (7) | ||||
Restricted Stock Units | 597,614 | (16) | 604,910 | (8) | 597,614 | (16) | 597,614 | (8) | ||||
Performance Share Units | 1,635,024 | (17) | 2,741,028 | (9) | 1,635,024 | (17) | 2,741,028 | (10) | ||||
Retirement Plan Benefits | — | — | — | — | ||||||||
Health & Welfare Benefits | 10,726 | (11) | 10,726 | (12) | — | — | ||||||
Financial Planning | — | 16,500 | (13) | — | — | |||||||
Total Estimated Value | 6,917,004 | 9,526,803 | 4,686,278 | 5,792,282 |
THE CLOROX COMPANY - | |
FISCAL YEAR 2020 NONQUALIFIED DEFERRED COMPENSATIONCompensation Discussion and Analysis Tables
Executive | Registrant | Aggregate | Aggregate | |||||||||
Contributions | Contributions | Earnings | Balance | |||||||||
in Last FY | in Last FY | in Last FY | at Last FYE | |||||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($)(4)(5) | ||||||||
Benno Dorer | $ | 97,117 | $ | 334,391 | $ | 349,239 | $ | 4,585,978 | ||||
Kevin Jacobsen | 105,668 | 98,548 | 66,927 | 1,128,871 | ||||||||
Linda Rendle | 37,870 | 104,278 | 34,466 | 633,703 | ||||||||
Laura Stein | 33,500 | 89,752 | 177,782 | 5,263,670 | ||||||||
Eric Reynolds | 80,088 | 83,960 | 19,967 | 507,903 |
Name and Benefits | Involuntary Termination Without Cause ($) | Involuntary Termination After Change In Control ($) | Resignation or Retirement ($) | Disability or Death ($) | ||||||||
Kirsten Marriner | ||||||||||||
Cash Payment | 1,690,000 | (14) | 2,860,000 | (15) | — | (3) | — | (4) | ||||
Stock Options | 33,234 | (5) | 33,234 | (6) | — | 411,016 | (7) | |||||
Restricted Stock Units | — | 343,216 | (8) | — | 343,286 | (8) | ||||||
Performance Share Units | — | 1,660,701 | (9) | — | 1,660,701 | (10) | ||||||
Retirement Plan Benefits | — | — | — | — | ||||||||
Health & Welfare Benefits | 28,809 | (11) | 28,809 | (12) | — | — | ||||||
Financial Planning | — | 16,500 | (13) | — | — | |||||||
Total Estimated Value | 1,752,042 | 4,942,459 | — | 2,415,003 | ||||||||
Rebecca Dunphey | ||||||||||||
Cash Payment | 1,515,000 | (14) | 2,460,000 | (15) | — | (3) | — | (4) | ||||
Stock Options | — | (5) | — | (6) | — | — | (7) | |||||
Restricted Stock Units | — | 2,632,520 | (8) | — | 2,632,520 | (8) | ||||||
Performance Share Units | — | — | (9) | — | — | (10) | ||||||
Retirement Plan Benefits | — | — | — | — | ||||||||
Health & Welfare Benefits | — | (11) | — | (12) | — | — | ||||||
Financial Planning | — | 16,500 | (13) | — | — | |||||||
Total Estimated Value | 1,515,000 | 5,109,020 | — | 2,632,520 |
(1) | This amount reflects two times Ms. Rendle’s current base salary |
(2) | This amount represents three times Ms. Rendle’s current base salary, plus three times her target AIP award, plus her current-year AIP award, pro-rated to the |
(3) | Messrs. Jacobsen and Reynolds are eligible for retirement, including a pro-rata AIP award upon retirement. Mses. Rendle, Marriner, and Dunphey are not eligible for retirement, nor for a pro-rata annual incentive award upon retirement. However, all AIP-eligible employees active as of June 30, 2022 are eligible to receive an annual incentive award for the full fiscal year. This means, based on |
(4) | NEOs whose termination is the |
(5) | For Messrs. Jacobsen and Reynolds, who are retirement-eligible, this amount represents the expected value of the |
(6) | For Messrs. Jacobsen and Reynolds, who are retirement-eligible, this amount represents the expected value of the accelerated vesting of all outstanding stock options, and assumes a five-year expected life or the remaining original term, whichever is shorter. For Mses. Rendle, Marriner, and Dunphey, this amount represents the intrinsic value of the accelerated vesting of all outstanding stock options, based on the provision that non-retirement eligible executives exercise stock options within 90 days of termination, calculated as the difference between the June 30, 2022 closing Clorox common stock price of $140.98 and the exercise price for each option. |
(7) | For Messrs. Jacobsen and Reynolds, who are retirement-eligible, this amount represents the expected value of the accelerated vesting of all outstanding stock options upon the NEO’s termination of employment due to disability or death, and assumes a five-year expected life or the remaining original term, whichever is shorter. For Mses. Rendle, Marriner, and Dunphey, this amount represents the expected value of the accelerated vesting of all outstanding stock options, based on the provision that non-retirement eligible executives exercise stock options within one year of death or disability, calculated as the difference between the June 30, 2022 closing Clorox common stock price of $140.98 and the exercise price for each option. |
(8) | This amount represents the value of the accelerated vesting of RSUs upon change in control, death, or disability. |
(9) | PSUs will vest based on actual performance through the date of the change in control. This amount assumes a prorated target payout and is valued at the closing price of Clorox common stock on June 30, 2022 of $140.98. |
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Compensation Discussion and Analysis Tables
(10) | This amount represents the value of the accelerated vesting of PSUs upon a death or disability, assuming a target payout and valued at the closing price of Clorox common stock on June 30, 2022 of $140.98. Upon termination for death or disability, the entire PSU award will vest immediately. The actual payout will be determined after the end of the performance period, based on actual performance. |
(11) | This amount represents the estimated cost to Clorox of providing welfare benefits, including medical, dental, and vision, for the two-year period following termination. |
(12) | This amount represents the estimated cost to Clorox of providing welfare benefits, including medical, dental, and vision, for the two-year period (three-year period for Ms. Rendle) following a qualifying termination after a change in control. |
(13) | This amount represents the cost of providing financial planning for the year of termination. |
(14) | This amount reflects two times the NEO’s current base salary. In addition, for Messrs. Jacobsen and Reynolds, who are eligible for retirement, this amount includes 100% of their current year target AIP award, pro-rated to the date of termination. For Mses. Rendle, Marriner, and Dunphey, this amount includes 75% of their current year’s target AIP award, pro-rated to the date of termination. |
(15) | This amount represents two times the NEO’s current base salary, plus two times the target AIP award, subject to the excise tax cut back provision in the CIC Plan. For Messrs. Jacobsen and |
(16) | Messrs. Jacobsen and Reynolds are retirement-eligible and all unvested RSUs held longer than six months will continue to vest after termination. This amount represents the expected value of the continued vesting of such RSUs. |
(17) | Messrs. Jacobsen and Reynolds are eligible for retirement and are entitled to receive a pro-rata portion of all PSUs for the September 2018, 2019, and 2020 awards. This value represents the full vesting of eligible shares from the September 2019 award, since they would have completed the entire performance period as of the assumed termination date of June 30, 2022, and the pro-rata vesting of the eligible shares from the September 2020 and 2021 awards, assuming a target payout and valued at the closing price of Clorox common stock on June 30, 2022 of $140.98. The actual payout of the shares will not be determined until the end of |
Benno | Kevin | Linda | Laura | Eric | |||||||||||
Fiscal Year | Dorer | Jacobsen | Rendle | Stein | Reynolds | ||||||||||
2020 | $ | 334,391 | $ | 98,548 | $ | 104,278 | $ | 89,752 | $ | 83,960 | |||||
2019 | 329,899 | 68,694 | 83,562 | 86,874 | 63,278 | ||||||||||
2018 | 423,145 | 113,227 | 112,495 | 172,578 |
Potential Payments Upon Termination or Change in Control
Payments Upon Termination
Severance Plan for Named Executive Officers.
Under the terms of the Severance Plan, our named executive officersNEOs are eligible to receive benefits if their employment is terminated by the CompanyClorox without cause, (otherother than in connection with a change in control).control. No benefits are payable under the terms of the Severance Plan if the CompanyClorox terminates the employment of the named executive officerNEO for cause or if the named executive officerNEO voluntarily resigns.
Regardless of the manner in which a named executive officer’s employment terminates, each named executive officer wouldnature of any NEO’s termination, NEOs retain the amounts he or she had earned over the course of their employment prior to the termination event, such as balances under the NQDC, vested and accrued retirement benefits, and previously vested stock options, except as outlined below under Termination for Misconduct.Misconduct. For further information about amounts previously earned, amounts, see the Summary Compensation Table and Outstanding Equity Awards at Fiscal 2020 Year-End, Table, Option Exercises and Stock Vested Table, , Pension Benefits Table,, and Nonqualified Deferred Compensation Table.tables.
Under the Severance Plan, each named executive officerNEO agrees to return and not to use or disclose proprietary information of the CompanyClorox and, for two years following any such termination, the named executive officerNEO is also prohibited from soliciting for employment any employee of the Company.Clorox.
Termination benefits under the Severance Plan for our named executive officersNEOs are as follows:
Involuntary Termination Without CauseCause. . If the CompanyClorox terminates the employment of a named executive officer (otherNEO other than the CEO)CEO without cause, the Severance Plan entitles the named executive officerNEO to receive a lump-sum severance payment after termination equal to two times the named executive officer’sNEO’s then-current base salary. In the case of the CEO, the severance amount is equal to the sum of (i) two times the CEO’s base salary and (ii) two times the CEO’s three-year averagetarget annual bonusshort-term incentive for that fiscal year, multiplied by 75%.
Under the Severance Plan, a named executive officer (otherNEOs other than the CEO) isCEO are also entitled to an amount equal to 75% of their Annual Incentive Plan awardAIP awards for the fiscal year in which he or she was terminated.they are terminated, prorated to the date of termination. The CEO is entitled to an amount equal to 100% of his Annual Incentive Planher AIP award for the fiscal year in which heshe was terminated.terminated, prorated to her date of termination. In each case, the AIP award calculation uses the actual Company Multiplier for the fiscal year in which the executive is terminated and is paid after the end of the fiscal year at the same time AIP awards are paid to active employees.
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The amount of severance paid is calculated using the actual Company Financial Performance Multiplier and assumes an Individual Performance Multiplier of 100%, prorated to the date of termination. If the named executive officer isNEOs who are retirement-eligible under the terms of the Annual Incentive Plan, the executive would beAIP are eligible for either the treatment under the Severance Plan (75% for NEOs or 100% for the CEO) or retirement treatment (an Individual Multiplier determined at the discretion of Clorox) for purposes of the Annual Incentive PlanAIP award payout. The MDCC decides which treatment to apply; in either case, the AIP award payout (retirement treatment would be 100%, versus 75%, of their Annual Incentive Plan award for the fiscal year in which he or she was terminated,remain prorated to the date of termination). It is the MDCC’s decision as to which treatment to apply.termination.
The Severance Plan provides that the named executive officer is entitled to continue to participateNEOs with a lump-sum cash payment in the Company’slieu of continued participation in our medical, vision, and dental insurance programs for up to two years followingprograms. The cash payment represents the value of the monthly employer contribution toward those benefits in which the NEO was enrolled at termination, on the same terms as active employees.times 24 months. In addition, at the end of this coverage, a named executive officerNEOs will be eligible to participate in the Company’sany combination of our medical, vision, and/orand dental plans offered to former employees who retire at age 55 or older, provided the executive has completed at least 10 years of service, on the same terms as such other former employees. If eligible,employees, provided the NEO has completed at least 10 years of service. Where applicable, this coverage will continuecontinues until the named executive officerNEO turns age 65. Thereafter, the named executive officerNEO may participate in the Company’sour general retiree health plan as it may exist in the future, if otherwise eligible. If the named executive officerNEO will be age 55 or older and will have completed at least 10 years of service at the end of, and including, the two-year period following termination, the named executive officerNEO will be deemed to be age 55 and/orand to have 10 years of service under any pre-65 retiree health plan as well as the SERP.plan.
The above severance-related benefits are provided only if the named executive officer executes a general release prepared by the Company.
Termination Due to Retirement. Under the Company’sClorox’s policy applicable to all employees, upon retirement the named executive officer is entitled to their salary through the last day of employment and is eligible for a pro-rata portion of the Annual Incentive Plan award for the fiscal year in which their retirement occurs. Based on the provisions of the respective plans, he or she will also be eligible to receive SERP, ERP, and other benefits under applicable Company retirement plans. In addition to the amounts that the named executive officer has earned or accrued over the course of their employment under the Company’s qualified and nonqualified plans, a named executive officerNEOs who is at least age 55 with 10 years of service or who has 20 years of service regardless of age on the date of termination is eligible to receive retirement-related benefits under the long-term incentive program. StockBeginning with the fiscal year 2021 awards, granted in September 2020, stock options held for longer thanat least six months will vest in full in accordance with the original vesting schedule and remain exercisable for five years following the named executive officer’sNEO’s retirement or until the expiration date, whichever is sooner, and performance
sharessooner. PSUs will be paid out on a pro-rata basis at the end of the relevant performance period based on the actual level of performance achieved during that period. Beginning with the fiscal year 2021 grant, restricted stock unitsawards, granted in September 2020, RSUs held for longer thanat least six months will vest in full in accordance with the original vesting schedule.
Severance-related benefits are provided only if the NEO executes a general release prepared by Clorox.
Termination Due to Death or DisabilityRetirement. . Under the Company’sClorox’s policy applicable to all employees, if the named executive officer’s employment is terminated due to their death, the named executive officer’s beneficiary or estate is entitled to (i) the named executive officer’s salary through the date of their death, (ii)upon retirement, NEOs are eligible for a pro-rata portion of the named executive officer’s actual Annual Incentive PlanAIP award for the fiscal year in which their retirement occurs. Based on the provisions of the respective plans, they also will be eligible to receive ERP and other benefits under applicable Clorox retirement plans, including our general retiree health plan as it may exist in the future, if otherwise eligible.
In addition to the amounts that the NEO has earned or accrued over the course of their death, (iii)employment under our qualified and nonqualified plans, under Clorox’s policy applicable to all employees, a NEO who is at least age 55 with 10 years of service or who has 20 years of service regardless of age on the date of termination is eligible to receive retirement-related benefits under the long-term incentive program. Beginning with the fiscal year 2021 awards, granted in September 2020, stock options held for at least six months will vest in full in accordance with the original vesting schedule and remain exercisable for five years following the NEO’s retirement or until the expiration date, whichever is sooner. PSUs will be paid out on a pro-rata basis at the end of the relevant performance period based on the actual level of performance achieved during that period. Beginning with the fiscal year 2021 awards, granted in September 2020, RSUs held for at least six months will vest in full in accordance with the original vesting schedule.
Termination Due to Disability or Death. If a NEO begins to receive benefits under our long-term disability plan, Clorox may terminate the NEO’s employment at any time, in which case the NEO will receive a pro-rata portion of the named executive officer’sAIP award and a pro-rata portion of the NEO’s 6% annual contribution to the 401(k) plan for the fiscal year of their death, and (iv) benefits pursuant to the Company’s life insurance plan.termination. Stock options and restricted stock units will vest in full, and all vested options will remain exercisable for an additional year following the named executive officer’s deathNEO’s disability or until the expiration date, whichever is earlier, and all performance sharesPSUs will be paid out at the end of the relevant performance period based on the actual level of performance achieved during that period.
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Compensation Discussion and Analysis Tables
Under Clorox’s policy applicable to all employees, if a NEO’s employment is terminated due to death, the named executive officer beginsNEO’s beneficiary or estate is entitled to receive benefits under the Company’s long-term disability plan, the Company may terminate the named executive officer’s employment at any time, in which case the named executive officer will receive their salary through the date of their termination and will also be entitled to(i) a pro-rata portion of theirthe NEO’s actual Annual Incentive PlanAIP award for the fiscal year of their termination.death, (ii) a pro-rata portion of the NEO’s 6% annual contribution to the 401(k) plan for the fiscal year of death, and (iii) benefits pursuant to our life insurance plan. Stock options and RSUs will vest in full, and all vested options will remain exercisable for an additional year following the named executive officer’s disabilityNEO’s death or until the expiration date, whichever is earlier, and all performance sharesPSUs will be paid out at the end of the relevant performance period based on the actual level of performance achieved during that period.
Termination for Misconduct. The CompanyClorox may terminate a named executive officer’sNEO’s employment for misconduct at any time without notice. Upon the named executive officer’sNEO’s termination for misconduct, the named executive officer is entitled to their salary through the date of their termination, butNEO is not entitled to any Annual Incentive PlanAIP award for the fiscal year in which their termination for misconduct occurs. “Misconduct” under the Severance Plan means:means any act or omission of the NEO through which the NEO: (i) the willful and continued neglect ofwillfully neglects significant duties he or willful and continued violation ofshe is required to perform or willfully violates a material CompanyClorox policy, and, after having beenbeing warned in writing, continues to neglect such duties or continues to violate the specified Clorox policy; (ii) commits a material act of dishonesty, fraud, misrepresentation or other act of moral turpitude,turpitude; (iii) acts (or omits to act) with gross negligence in the course of employment,employment; (iv) the failurefails to obey a lawful direction of the Board or, for NEOs other than the CEO, a corporate officer to whom the named executive officerhe or she reports, directly or indirectly,indirectly; or (v) an action that isacts in any other manner inconsistent with the Company’sClorox’s best interests and values.
|
All outstanding stock optionoptions and restricted stock units grantsRSUs awards are forfeited upon a termination for misconduct. In addition, any retirement-related benefits a named executive officerNEO would normally receive related to performance sharesPSUs are also forfeited upon a termination for misconduct.
Voluntary Termination. A named executive officerNEO may resign from their employment at any time. Upon the named executive officer’sa NEO’s voluntary resignation, the named executive officer is entitled to their salary through the date of termination, butNEO is not entitled to any Annual Incentive PlanAIP award for the fiscal year of termination. All unvested outstanding stock options, restricted stock units,RSUs, and performance share grantsPSUs are forfeited upon voluntary termination.
The Company also maintains the CIC Plan for the benefit of each of our named executive officers. Please see the Potential Payments Upon Termination or Change in Control section below for further details on the CIC Plan.
Potential Payments Upon Change in Control
Executive Change in Control Severance Plan for Named Executive Officers.
Under the CIC Plan, executives are eligible for change in control severance benefits, subject to the execution of a waiver and release, if they are terminated without cause or resign for good reason (each as defined under the CIC Plan and as further described below) during (i) the two-year period following a change in control or (ii) a period of up to one year prior to the change in control in limited circumstances where the executive’s termination is directly related to or in anticipation of a change in control.
The severance benefits under the CIC Plan include (i) a lump-sum severance payment equal to two times (or,times—or, in the case of the CEO, three times) times—the sum of (a) the executive’s base salary and (b) average Annual Incentive PlanAIP award for the three completed fiscal years prior to termination, (ii) a lump-sum amount equal to the difference between the actuarial equivalent of the benefit the named executive officerNEO would have been entitled to receive if their employment had continued until the second anniversary of the date of termination and the actuarial equivalent of the aggregate benefits paid or payable as of the date of termination under the qualified and nonqualified retirement plans, (iii) a payment equal to the cost of applicable healthcare benefits for a maximum of two (or,two—or, in the case of the CEO, three) three—years following a severance-qualifying termination, (iv) continued financial planning services for the year of termination, (v) vesting of all outstanding equity awards granted prior to the change in control, and (vi) an amount equal to the average Annual Incentive PlanAIP award for the three completed fiscal years preceding termination prorated for the number of days employed in the fiscal year during which termination occurred.
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Compensation Discussion and Analysis Tables
In addition, the CIC Plan
provides for an excise tax cutback such that the excise tax under Sections 280G and 4999 of the IRC would not apply, (unlessunless the executive would receive a greater amount of severance benefits on an after-tax basis without a cutback, in which case the cutback would not apply).apply. The CIC Plan permits the MDCC to make changes to the CIC Plan that are adverse to covered executives with 12 months’ advance notice. If a change in control of the CompanyClorox occurs during that 12-month period, then such changes would not become effective. Each participant under the CIC Plan is subject to certain restrictive covenants including confidentiality and non-disparagement provisions and a non-solicitation and non-diversion of business provision during the term of their employment and for two years thereafter.
“Cause” is generally defined as (i) willful and continued failure to substantially perform duties upon written demand or (ii) willfully engaging in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company.Clorox. A termination for cause requires a vote of 75% of the Board at a meeting after notice to the executive has been given and the executive has had an opportunity to be heard.
“Good Reason” is generally defined as (i) an assignment of duties inconsistent in any material respects with the executive officer’s position (including offices and reporting requirements), authority, duties, or responsibilities (ii) any failure to substantially comply with, or any reduction by the CompanyClorox in, any of the material provisions of compensation plans, programs, agreements, or arrangements as in effect immediately prior to the change in control, including any material reduction in base salary, cash incentive compensation target bonus opportunity, equity compensation opportunity in the aggregate, or employee benefits or perquisites in the aggregate, (iii) relocation of principal place of employment that increases the executive officer’s commuting distance by more than 35 miles, (iv) termination of employment by the CompanyClorox other than as expressly permitted by the CIC Plan, or (v) failure of a successor company to assume the CIC Plan.
Estimated Potential Payments Upon Termination or Change in Control
The following table reflects the estimated amount of compensation payable to each of the Company’s named executive officers upon termination of the named executive officer’s employment under various scenarios. The amounts exclude earned amounts such as vested or accrued benefits, other than benefits vested under the Company’s SERP. If a named executive officer is eligible for their SERP benefit as of the assumed termination date, the respective SERP benefit amount reported under the Retirement column is also included in the scenarios for Involuntary Termination Without Cause and Involuntary Termination After Change in Control on the Retirement Plan Benefits line.
| THE CLOROX COMPANY - |
Compensation Discussion and Analysis Tables
The amounts shown are calculated using an assumed termination date effective as of the last business day of fiscal year 2020 (June 30, 2020) and the closing trading price of our Common Stock of $219.37 on such date. Although the calculations are intended to provide reasonable estimates of the potential compensation payable upon termination, they are based on assumptions outlined in the footnotes of the table and may not represent the actual amount the named executive officer would receive if an eligible termination event were to occur.
The table does not include compensation or benefits provided under plans or arrangements that are generally available to all salaried employees. Amounts reflected for change in control assume that each named executive officer is involuntarily terminated by the Company without cause or voluntarily terminates for good reason within two years after a change in control.
FISCAL YEAR 2020 TERMINATION TABLE
The following table sets forth the compensation earned, paid or awarded to our named executive officers for the fiscal years ended June 30, 2020.
Name and Benefits | Involuntary Termination Without Cause | Involuntary Termination After Change In Control | Retirement | Disability | Death | |||||||||||||||
Benno Dorer | ||||||||||||||||||||
Cash Payment | $ | 7,072,500 | (1) | $ | 11,070,000 | (2) | $ | — | (3) | $ | — | (4) | $ | — | (4) | |||||
Stock Options | 23,947,633 | (16) | 23,947,633 | (5) | 23,947,633 | (16) | 23,947,633 | (6) | 23,947,633 | (6) | ||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||
Performance Shares | 8,719,807 | (17) | 12,962,881 | (7) | 8,719,807 | (17) | 12,962,881 | (8) | 12,962,881 | (8) | ||||||||||
Retirement Plan Benefits | 5,369,911 | (18) | 5,698,108 | (19) | 5,369,911 | (18) | 4,680,718 | (9) | 2,910,445 | (10) | ||||||||||
Health & Welfare Benefits | 22,860 | (11) | 34,290 | (12) | — | — | — | |||||||||||||
Financial Planning | — | 16,500 | (13) | — | — | — | ||||||||||||||
Total Estimated Value | $ | 45,132,711 | $ | 53,729,412 | $ | 38,037,351 | $ | 41,591,232 | $ | 39,820,959 | ||||||||||
Kevin Jacobsen | ||||||||||||||||||||
Cash Payment | $ | 1,710,000 | (14) | $ | 2,730,000 | (15) | $ | — | (3) | $ | — | (4) | $ | — | (4) | |||||
Stock Options | 4,331,530 | (16) | 4,331,530 | (5) | 4,331,530 | (16) | 4,331,530 | (6) | 4,331,530 | (6) | ||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||
Performance Shares | 1,589,512 | (17) | 2,580,288 | (7) | 1,589,512 | (17) | 2,580,288 | (8) | 2,580,288 | (8) | ||||||||||
Retirement Plan Benefits | — | — | — | — | — | |||||||||||||||
Health & Welfare Benefits | 36,648 | (11) | 36,648 | (12) | — | — | — | |||||||||||||
Financial Planning | — | 16,500 | (13) | — | — | — | ||||||||||||||
Total Estimated Value | $ | 7,667,690 | $ | 9,694,966 | $ | 5,921,042 | $ | 6,911,818 | $ | 6,911,818 | ||||||||||
Linda Rendle | ||||||||||||||||||||
Cash Payment | $ | 2,350,000 | (14) | $ | 4,600,000 | (15) | $ | — | (3) | $ | — | (4) | $ | — | (4) | |||||
Stock Options | — | 5,696,249 | (5) | — | 5,438,016 | (6) | 5,438,016 | (6) | ||||||||||||
Restricted Stock | — | 405,835 | (20) | — | 405,835 | (20) | 405,835 | (20) | ||||||||||||
Performance Shares | — | 2,851,303 | (7) | — | 2,851,303 | (8) | 2,851,303 | (8) | ||||||||||||
Retirement Plan Benefits | — | — | — | — | — | |||||||||||||||
Health & Welfare Benefits | 22,008 | (11) | 22,008 | (12) | — | — | — | |||||||||||||
Financial Planning | — | 16,500 | (13) | — | — | — | ||||||||||||||
Total Estimated Value | $ | 2,372,008 | $ | 13,591,894 | $ | — | $ | 8,695,153 | $ | 8,695,153 |
|
Name and Benefits | Involuntary Termination Without Cause | Involuntary Termination After Change In Control | Retirement | Disability | Death | |||||||||||||||
Laura Stein | ||||||||||||||||||||
Cash Payment | $ | 1,809,000 | (14) | $ | 2,747,000 | (15) | $ | — | (3) | $ | — | (4) | $ | — | (4) | |||||
Stock Options | 4,689,547 | (16) | 4,689,547 | (5) | 4,689,547 | (16) | 4,689,547 | (6) | 4,689,547 | (6) | ||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||
Performance Shares | 1,693,697 | (17) | 2,563,132 | (7) | 1,693,697 | 2,563,132 | (8) | 2,563,132 | (8) | |||||||||||
Retirement Plan Benefits | 7,333,051 | (18) | 7,691,598 | (19) | 7,333,051 | (18) | 6,307,609 | (9) | 3,097,848 | (10) | ||||||||||
Health & Welfare Benefits | 13,680 | (11) | 13,680 | (12) | — | — | — | |||||||||||||
Financial Planning | — | 16,500 | (13) | — | — | — | ||||||||||||||
Total Estimated Value | $ | 15,538,974 | $ | 17,721,457 | $ | 13,716,294 | $ | 13,560,288 | $ | 10,350,527 | ||||||||||
Eric Reynolds | ||||||||||||||||||||
Cash Payment | $ | 2,100,000 | (14) | $ | 3,500,000 | (15) | $ | — | (3) | $ | — | (4) | $ | — | (4) | |||||
Stock Options | 3,638,324 | (16) | 3,638,324 | (5) | 3,638,324 | (16) | 3,638,324 | (6) | 3,638,324 | (6) | ||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||
Performance Shares | 1,177,812 | (17) | 2,019,943 | (7) | 1,177,812 | (17) | 2,019,943 | (8) | 2,019,943 | (8) | ||||||||||
Retirement Plan Benefits | — | — | — | — | — | |||||||||||||||
Health & Welfare Benefits | 12,240 | (11) | 12,240 | (12) | — | — | — | |||||||||||||
Financial Planning | — | 16,500 | (13) | — | — | — | ||||||||||||||
Total Estimated Value | $ | 6,928,376 | $ | 9,187,007 | $ | 4,816,136 | $ | 5,658,267 | $ | 5,658,267 |
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Compensation Discussion and Analysis
Fiscal Year 20202022 CEO Pay Ratio
Under rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), we are required to disclose the ratio of the annual total compensation of our Chair & CEO to the annual total compensation of our median compensated employee. To identify our median employee for purposes of this disclosure, we first determined the pool of all individuals employed by us (other than the CEO) on June 20, 2019. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation and no exclusions were utilized during this process. We selected our median employee from that pool in accordance with the SEC rules as explained in our proxy statement for fiscal year 2019. We believe there has been no change to our employee population and compensation arrangements, or the circumstances of the median employee used in fiscal year 2019 that we believe would result in a significant change to our pay ratio disclosure. Accordingly, as permitted under SEC rules, we are using the same median employee for the pay ratio for fiscal year 2020 by examining the total cash compensation utilizing data as of June 30, 2020.
We calculated annual total compensation for that employee using the same methodology we use for our named executive officersNEOs as set forth in the Summary Compensation Table in this proxy statement.
● | Total compensation for our median compensated employee |
● | Our CEO to median compensated employee pay ratio is |
The pay ratio reported here is a reasonable estimate calculated in a manner consistent with SEC rules basedrules.
To identify our median compensated employee for purposes of this disclosure, we first determined the pool of all individuals employed by us, other than the CEO, on June 30, 2022. Subsequently, we reviewed the total cash compensation earned by each such individual during fiscal year 2022. All employees (full-time, part-time, and temporary) other than the CEO were included in this analysis. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation and no exclusions were used during this process. Finally, we selected as our payroll and employment records andmedian compensated employee the methodology described above.individual whose total cash compensation for fiscal year 2022 was closest to the median total cash compensation of the entire pool.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies, including our compensation peer group, may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilizeuse different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
THE CLOROX COMPANY - | |
Equity Compensation Plan Information |
The following table sets out the number of shares of Common Stockcommon stock to be issued upon exercise of outstanding options, warrants, and rights, the weighted-average
exercise price of outstanding options, warrants, and rights, and the number of securities available for future issuance under equity compensation plans as of June 30, 2020.2022.
[a] | [b] | [c] | [a] | [b] | [c] | |||||||||
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights (in thousands) | Weighted-average exercise price per share of outstanding options, warrants, and rights | Number of securities remaining for future issuance under non- qualified stock-based compensation programs (excluding securities reflected in column [a]) (in thousands) | Number of | Weighted-average | Number of | ||||||||
Equity compensation plans approved by security holders | 5,759 | $ | 127 | 7,026 | 5,068 | $ | 144 | 4,320 | ||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||
Total | 5,759 | $ | 127 | 7,026 | 5,068 | $ | 144 | 4,320 |
Column [a] includes the following outstanding equity-based awards (in thousands):
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| THE CLOROX COMPANY - |
Proposal 3: |
The Audit Committee has the authority to appoint, retain, compensate, and oversee the Company’s independent registered public accounting firm, and the Company’s shareholders must ratify the Audit Committee’s selection and appointment. The Audit Committee has selected Ernst & Young LLP (E&Y)(EY) as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2021. E&Y2023. EY has been engaged since February 15, 2003.
The Board unanimously recommends that shareholders vote FOR the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2021.2023. While we are not required by law to obtain such ratification from our shareholders, the Board believes it is good practice to do so. The Audit Committee and the Board believe that the continued retention of E&YEY as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders.
Representatives of E&YEY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they desire to do so.
The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote on the matter is required to ratify the appointment of E&Y.EY. If shareholders fail to ratify the appointment of E&Y,EY, the Audit Committee will reconsider the appointment.
The people designated in the proxy and voting instruction card will vote your shares represented by proxy FOR ratification unless you include instructions to the contrary.
THE CLOROX COMPANY - | |
The Audit Committee assists the Board in its oversight of corporate governance by overseeing the quality and integrity of the accounting, auditing, and financial reporting practices of the Company, including:
The Audit Committee operates in accordance with a written charter, which was adopted and is periodically updated by the Board. Each member of the Audit Committee is “independent,” as required by the applicable listing standards of the NYSE and the rules of the SEC.
While the Company’s management has primary responsibility for the financial statements, the reporting process and the Company’s internal control over financial reporting, the independent registered public accounting firm is responsible for performing an integrated audit of the Company’s financial statements and internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board (the PCAOB). The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the Company’s independent registered public accounting firm.Company.
The Audit Committee is responsible for the appointment, retention, compensation, and oversight of the Company’s independent registered public accounting firm, including the review of their qualifications, independence and performance, and approval of the audit fee. In this regard, the Audit Committee appointed Ernst & Young LLP (E&Y)EY to audit the Company’s financial statements as of and for the year ended June 30, 2020,2022, and the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020. E&Y2022. EY has served as the Company’s independent registered public accounting firm since February 2003. The Audit Committee considered several factors in selecting E&YEY as the Company’s independent registered public accounting firm for the year ended June 30, 2020,2021, including the firm’s independence and internal quality controls, the overall depth of talent, their experience with the Company’s industry, and their familiarity with the
Company’s businesses and internal control over financial reporting. In determining whether to reappoint E&YEY as the Company’s independent registered public accounting firm for the year ending June 30, 2021,2023, the Audit Committee again took those factors into consideration along with its evaluation of the past performance of E&YEY and determined that the continued retention of E&YEY as the Company’s independent registered public accounting firm is in the Company’s best interests.
The Audit Committee has a policy that requires it to consider and approve, in advance, any audit and permissible non-audit services to be performed by the independent registered public accounting firm. Among the assurance and related services provided by E&YEY in fiscal year 2020, E&Y2022, EY has issued reports on its review of certain corporate responsibility and sustainability metrics and information provided in the Company’s 2022 Integrated Annual Report – Executive Summary.Report. The Audit Committee obtained from E&YEY the written disclosures and the letter required by the applicable requirements of the PCAOB regarding https://www.thecloroxcompany.com/who-we-are/corporate-governance/committee-charters communications with the Audit Committee concerning independence of the auditors and discussed with the auditors their independence. In evaluating E&Y’sEY’s independence, the Audit Committee considered whether the firm’s provision of any non-audit services impaired or compromised the firm’s independence and concluded that they did not.
Further, in conjunction with the mandated rotation of the auditing firm’s coordinating partner, the Audit Committee and its chairperson oversee and are directly involved in the selection of E&Y’sEY’s new coordinating partner. The Audit Committee periodically considers rotation of the registered independent public accounting firm.
In fulfilling its oversight responsibilities, the Audit Committee meets regularly with management and E&YEY to discuss, prior to their release to the public, the Company’s financial statements and earnings releases and, as appropriate, other Company public communications containing Company financial information or performance measures. The Audit Committee’s meetings with the independent registered public accounting firm, which are both with and without management present, include discussions about the results of the independent registered public accounting firm’s examinations and evaluations of the quality of the Company’s financial statements and the Company’s internal control over financial reporting.
In this regard, the Audit Committee reviewed and discussed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended
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Audit Committee Report
June 30, 2020.2022. This review included a discussion of the quality and the acceptability of the Company’s financial reporting and system of internal controls, including the clarity of disclosures in the financial statements, reasonableness of significant contingency accruals, reserves, allowances and other judgments, critical accounting policies and estimates, and risk assessment. In addition, the Audit Committee reviewed and discussed with the Company’s independent registered public accounting firm the scope and plans for their audit, the audited financial statements of the Company for the fiscal year ended June 30, 2020,2022, the independent registered public accounting firm’s judgments as to the quality and acceptability of the
80 | THE CLOROX COMPANY - 2022 Proxy Statement |
Audit Committee Report
Company’s financial reporting, E&Y’sEY’s discussion about critical audit matters in its report on the audited financial statements for the fiscal year ended June 30, 2020,2022, the Company’s critical accounting policies and estimates, the effectiveness of the Company’s
internal control over financial reporting and such other matters as are required to be discussed by the applicable requirements of the PCAOB and SEC.
In addition to the regular meetings with the independent registered public accounting firm and management noted above, the Audit Committee meets periodically with the internal audit team to discuss the scope, plans and results of their audits and holds private sessions with each of the Company’s General Counsel, Chief Financial Officer, and Vice President of Internal Audit.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020,2022, for filing with the SEC.
THE AUDIT COMMITTEE as of June 30, 20202022
Christopher J. Williams, ChairAmy BanseA.D. David MackayMatthew J. ShattockRussell J. Weiner
Christopher J. Williams, Chair | Amy L. Banse | A.D. David Mackay | Paul Parker |
Fees of the Independent Registered Public Accounting Firm
The table below includes fees related to fiscal years 20202022 and 20192021 of the Company’s independent registered public accounting firm, Ernst & Young LLP:EY:
2020 | 2019 | 2022 | 2021 | |||||||
Audit Fees(1) | $ | 6,187,000 | $ | 5,842,000 | $ | 5,425,000 | $ | 5,751,000 | ||
Audit-Related Fees(2) | 114,000 | 130,000 | 184,000 | 149,000 | ||||||
Tax Fees(3) | 63,000 | 117,000 | 187,000 | 182,000 | ||||||
All Other Fees(4) | 145,000 | 5,000 | 3,000 | 3,000 | ||||||
Total | $ | 6,509,000 | $ | 6,094,000 | $ | 5,799,000 | $ | 6,085,000 |
(1) | Consists of fees for professional services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, included in the Company’s Annual Reports on Form 10-K for each of the fiscal years ended June 30, |
(2) | Consists of fees for assurance and related services (including sustainability assurance, the Company’s employee benefit |
(3) | Consists of fees for tax compliance, tax advice and tax planning for the fiscal years ended June 30, |
(4) | Consists of fees for all other services not included in the three categories set forth above and are primarily related to |
The Audit Committee has established a policy that requires it to approve all services provided by the Company’s independent registered public accounting firm before services are provided. The Audit Committee has pre-approved the engagement of the independent registered public accounting firm for audit services, and certain specified audit-related services and tax services within defined limits. The Audit Committee has not pre-approved engagement of the independent registered public accounting firm for any other non-audit services.
THE CLOROX COMPANY - | |
Article Six of the Company’s Restated Certificate of Incorporation (Certificate of Incorporation) currently requires that certain transactions between the Company and a beneficial owner of more than 5% of the Company’s Common Stock (Interested Stockholder) be approved by a vote of 80% of the outstanding shares of Common Stock at the time of the transaction unless (a) the transaction is approved by the Board or (b) the transaction meets certain pricing requirements.
This “interested stockholder” business combination provision, which is the only provision in the Company’s Certificate of Incorporation that requires approval of more than a majority of outstanding shares of Common Stock, requires a vote of 80% of the outstanding shares of Common Stock to be removed from the Company’s Certificate of Incorporation. This supermajority provision is a legacy provision that was designed to protect minority shareholders under circumstances in which a party would seek to acquire the Company through the open market accumulation of shares.
This year, the Company is again submitting a proposal to eliminate the supermajority provisions in the Certificate of Incorporation by deleting in its entirety the text of Article Six. The Company previously submitted an identical proposal for shareholder approval at the Company’s 2018 and 2019 Annual Meeting of Shareholders. However, the proposal was not approved by the Company’s shareholders as it did not receive the requisite number of votes in 2018 and 2019. After revisiting this topic again this year, the Board continues to believe that this supermajority provision does not substantively enhance the Company’s defense profile. The Board also continues to be mindful of the fact that during the Company’s previous shareholder
engagements, shareholders have expressed disapproval of the Company’s supermajority provisions for “interested stockholder” business combinations, as well as for similar provisions at other companies. The Board also notes that the majority of S&P 500 Companies have, over the past several years, eliminated such supermajority provisions for business combinations.
Further, the Company continues to be subject to and benefit from Section 203 of the Delaware General Corporation Law, which provides that once a stockholder reaches a 15% ownership threshold, such stockholder is prohibited for a period of three years from consummating a broad range of business combination transactions with the Company, unless (a) the business combination is approved by the Board, (b) the business combination is approved by the holders of 2/3 or more of the outstanding voting stock not held by such stockholder, or (c) such stockholder is able to obtain at least 85% of the outstanding shares in one step. Though there are some differences between the Company’s supermajority provision and Section 203, the Board believes that Section 203 provides the Company appropriate protection from unfair acquisition attempts.
Accordingly, the Board is again asking the Company’s shareholders to vote in support of this proposal.
The full text of the proposed amendment to the Certificate of Incorporation, marked to show the proposed deletion of Article Six, is set forth in Appendix A to this Proxy Statement. The general description of the Certificate of Incorporation and the proposed amendment set forth herein are qualified in their entirety by reference to the text of Appendix A.
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Additional Items to be Voted On
The affirmative vote of at least 80% of the then-outstanding voting stock, voting together as a single class, is required to approve this proposal.
The people designated in the proxy and voting instruction card will vote your shares FOR this proposal unless you include instructions to the contrary.
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Information About the Virtual Annual Meeting |
This proxy statement is furnished in connection with the solicitation of proxies by the Board of The Clorox Company, (Clorox or the Company), a Delaware corporation, for use at the Annual Meeting, to be held at 9:00 a.m. Pacific time on Wednesday, November 18, 2020.16, 2022.
The Annual Meeting will be virtual and held online via live webcast at www.meetingcenter.io/246179169 (password: ‘CLX2020’)meetnow.global/MXNXWKW. Please refer to the Attending the Virtual Annual Meeting section of this proxy statement for more information about procedures for attending the virtual Annual Meeting. There will not be an option to attend the meeting in person.
For purposes of the following sections, you are a registered shareholder if your shares are registered in your name with Computershare, and you are a beneficial owner if you hold your shares through a broker, bank or other holder of record.
Providing accessPursuant to rules adopted by the SEC, we are furnishing proxy materials via the Internet allows us to communicate with our shareholders inprimarily over the wayInternet. We believe that is most efficient and convenient for them, and supports us inthis process expedites shareholders’ receipt of these materials, lowers the costs of our efforts to conserve natural resourcesAnnual Meeting and reduces the costsenvironmental impact of printing and distributing the proxy materials. Onmailing printed copies. Accordingly, on or about October , 2020,5, 2022, we began mailing athe Notice of Internet Availability of Proxy Materials (the Notice) to our shareholders (other than those shareholders who previously requested electronic or paper delivery of communications from us), informing them that our Proxy Statement, 2022 Integrated Annual Report – Executive Summary, and voting
As a shareholder, you may access these materials and vote your shares via the Internet or by telephone; youtelephone. You may also request that a printed copy of the proxy materials be sent to you. You will not receive a printed copy of the proxy materials unless you request one in the manner described in the Notice.
The Notice of Annual Meeting, Proxy Statement, and 2022 Integrated Annual Report – Executive Summary will beare available at www.edocumentview.com/CLX.CLX.
Electronic Delivery of Proxy Materials
We encourage our shareholders to enroll in voluntary e-delivery of future proxy materials. We believe that this process expedites shareholders’ receipt of these materials, lowers the costs of our Annual Meeting and reduces the environmental impact of mailing printed copies.
Registered shareholders | Visit computershare.com and log into your account to enroll. | |
Beneficial owner | Please follow the instructions provided to you by your broker, bank, trustee or nominee. |
82 | THE CLOROX COMPANY - 2022 Proxy Statement |
Information About the Virtual Annual Meeting
Who Is Entitled to Vote
Only shareholders of record at the close of business on September 25, 202023, 2022 (the Record Date) are entitled to vote at the Annual Meeting. On that date, there were 123,355,706 shares of Common Stockcommon stock outstanding and entitled to vote. Holders of Common Stockcommon stock as of the close of business on the Record Date are entitled to one vote per share on each matter submitted to a vote of shareholders.
How to Vote Before the Annual Meeting
Even if you plan to virtually attend the Annual Meeting, we strongly urge you to vote in advance. If you are a registered shareholder (i.e., your shares are registered in your name with Clorox’s transfer agent Computershare), you may vote via the Internet or by telephone by following the instructions on your proxy card, voting instruction form or Notice or (if you received a printed copy of the proxy materials) by completing and returning a proxy card or voting instruction form by mail. If you are the beneficial owner of shares held in “street name” (that is, you hold your shares through a broker, bank or other holder of record), you must follow that nominee’s instructions to vote.
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Beneficial owner | You must follow your broker, bank or other holder of record’s instructions to vote. |
Information About the Virtual Annual Meeting
How to Vote During the Annual Meeting
You may vote your shares at the Annual Meeting if you attend the meeting virtually and vote electronically during the Annual Meeting. Shareholders may participate in the Annual Meeting by visiting www.meetingcenter.io/246179169, entering the password ‘CLX2020’ and following the instructions on the website. To access and participate in the meeting you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card (if you received a printed copy of the proxy materials), or on the instructions that accompanied your proxy materials. If you vote by proxy and also attend the Annual Meeting, you do not need to vote again at the Annual Meeting unless you wish to change your vote.
Registered shareholders | You will need the 15-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card (if you received a printed copy of the proxy materials), or on the instructions that accompanied your proxy materials. If you vote by proxy and also attend the Annual Meeting, you do not need to vote again at the Annual Meeting unless you wish to change your vote. | |
Beneficial owner | You may need register with Computershare by 5:00 p.m. Eastern Time on November 11, 2022 to gain access to the Annual Meeting and to vote your shares or ask questions during the Annual Meeting. Please see the Attending the Virtual Annual Meeting section on pg 88 of the proxy statement for more information. |
Voting Shares Held in the Clorox 401(k) Plan
401(k) plan participants | You will receive a voting instruction card to direct Vanguard, as trustee of our 401(k) plan, how to vote the shares attributable to your individual account. Vanguard will vote shares as instructed by participants prior to 12:00 p.m. Eastern time on November 14, 2022. If you do not provide voting directions to Vanguard by that time, the shares attributable to your account will not be voted. Shares held in our 401(k) plan cannot be voted electronically during the Annual Meeting – please ensure that you complete the voting instruction card to direct the 401(k) plan trustee how to vote the shares attributable to your account prior to 12:00 p.m. Eastern time on November 14, 2022. |
THE CLOROX COMPANY - 2022 Proxy Statement | 83 |
If you are a participant in our 401(k) plan, you will receive a voting instruction card to direct Vanguard, as trustee of our 401(k) plan, how to voteInformation About the shares attributable to your individual account. Vanguard will vote shares as instructed by participants prior to 11:59 p.m. Eastern time on November 17, 2020. If you do not provide voting directions to Vanguard by that time, the shares attributable to your account will not be voted. Shares held in our 401(k) plan cannot be voted electronically during theVirtual Annual Meeting – please ensure that you complete the voting instruction card to direct the 401(k) plan trustee how to vote the shares attributable to your account prior to 11:59 p.m. Eastern time on November 17, 2020.
How to Revoke Your Proxy or Change Your Vote
If you are a shareholder of record, you
Registered shareholders | You may change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by taking any of the following actions:
Effect of Not Providing Voting Instructions to Your Broker
Quorum We must have a “quorum” to conduct the Annual Meeting. A quorum is a majority of the outstanding shares of Votes Required; Effect of Abstentions and Broker Non-Votes Proposal 1 (Election of Directors). A director nominee will be elected if he or she receives a majority of the votes cast in person or represented by proxy. A majority of the votes cast means that the number of shares voted FOR a director must exceed the number of shares voted AGAINST that director. An abstention or a broker non-vote on Proposal 1 will not have any effect on the election of directors and will not be counted in determining the number of votes cast. Your broker is not entitled to vote your shares on Proposal 1 unless you provide voting instructions. Proposals 2 (Advisory Vote on Executive Compensation) and
Information About the Virtual Annual Meeting Board’s Recommendations The Board recommends that you vote:
Other Matters Management of the Company is not aware of any matters other than those described in this proxy statement that may be presented for action at the Annual Meeting. If any other matters are properly presented at the Annual Meeting for consideration, the proxy holders will have discretion to vote for you on those matters. Counting Votes; Vote Results Votes will be counted by Computershare Trust Company, N.A., our inspector of election appointed for the Annual Meeting. We will report final results in a filing with the SEC on Form 8-K, which will be filed within four business days following the Annual Meeting. Form 10-K, Financial Statements, and Integrated Annual Report – Executive Summary The following portions of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, filed with the SEC and posted on the Company’s website and a copy may be obtained, without charge, by calling Clorox Investor Relations at We will pay for the entire cost of soliciting proxies on behalf of the Company. We will also reimburse
Information About the Virtual Annual Meeting Shareholder Proposals and Director Nominations for the Shareholder Proposals for Inclusion in the Proxy Statement for the In the event that a shareholder wishes to have a proposal considered for presentation at the Director Nominations for Inclusion in the Proxy Statement for the The Board has adopted proxy access, which allows a shareholder or group of up to 20 shareholders who have owned at least 3% of the Company’s Other Proposals and Director Nominations for Presentation at the Our Bylaws also establish an advance notice procedure for shareholders who wish to present a proposal, including the nomination of directors, before an annual meeting of shareholders but do not intend for the proposal to be included in our proxy statement. Under our Bylaws, if a shareholder, rather than seeking to include a proposal or director nomination in the proxy statement as discussed above, seeks to nominate a director or propose other business for consideration at that meeting, notice must be received by the Corporate Secretary at the principal executive offices of the Company not later than the close of business on the 90th day or earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. To be timely for the In addition to satisfying the requirements of the Bylaws, including the earlier notice deadlines set out above and therein, to comply with universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must also provide notice that sets forth the information required by Rule 14a-10 of the Exchange Act, no later than September 17, 2023. All notices of proposals or nominations, as applicable, must be addressed to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.
Information About the Virtual Annual Meeting Eliminating Duplicative Proxy Materials A single Notice of Annual Meeting and Proxy Statement or Notice of Internet Availability of Proxy Materials will be delivered to shareholders who share an address, unless otherwise requested.
The Annual Meeting will be held on Wednesday, November To attend the Annual Meeting, you must be a shareholder of the Company as of the close of business on the Record Date and have a You are a registered shareholder if your shares are registered in your name with Computershare. You are a beneficial owner if you hold your shares through a broker, bank or other holder of record.
Attending the Virtual Annual Meeting
Submitting Questions for the Virtual Annual Meeting We are committed to ensuring, to the extent possible, that shareholders will be afforded the ability to participate at the virtual meeting similarly to how they would participate at an in-person meeting. The question and answer session will include questions submitted in advance of and submitted live during the Annual Meeting.
Questions pertinent to meeting matters that comply with the meeting rules of conduct will be answered during the meeting, subject to time constraints. However, we reserve the right to exclude questions that are not pertinent to meeting matters, irrelevant to the business of the Company, derogatory or in bad taste, or relate to pending or threatened litigation, personal grievances or are otherwise inappropriate. Questions that are substantially similar may be grouped and answered once to avoid repetition. If there are any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints, management will post answers to all questions on the “Investor Relations” section of the Company’s website at A replay of the Annual Meeting will be made available at
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of The Clorox Company’s (the Company or Clorox) financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements and Supplementary Data included in this Annual Report on Form 10-K. The following sections are included herein:
EXECUTIVE OVERVIEW Clorox is a leading multinational manufacturer and marketer of consumer and professional products with fiscal year The Company primarily markets its leading brands in midsized categories considered to be financially attractive. Most of the Company’s products compete with other nationally advertised brands within each category and with “private label” brands.
Appendix A The Company operates through strategic business units (SBUs)
Non-GAAP Financial Measures This Executive Overview, the succeeding sections of MD&A and Exhibit 99.2 may include certain financial measures that are not defined by accounting principles generally accepted in the United States of America (U.S. GAAP). These measures, which are referred to as non-GAAP measures, are listed below:
For a discussion of these measures and the reasons management believes they are useful to investors, refer to “
Appendix Fiscal Year A detailed discussion of strategic goals, key initiatives and results of operations is included below. Key fiscal year
Strategic Goals and Initiatives As announced in
Appendix
For the fiscal year ended June 30, 2022, the effects of the on-going novel coronavirus (COVID-19) pandemic continued to cause economic and social disruptions. These disruptions led to ongoing uncertainties, heightened by the conflict in Ukraine that Demand for many of the products across the Company’s portfolio remained elevated compared to pre-pandemic levels, but moderated versus the previous fiscal year. An inflationary environment marked by higher manufacturing and
Throughout fiscal year 2022, our focus has been on addressing supply-chain disruptions and
For further discussion of the possible impacts of the COVID-19 pandemic and other recent events on our business, financial conditions and results of operations, see “Risk Factors” in Part I, Item 1A of this Report.
RESULTS OF OPERATIONS Unless otherwise noted, MD&A compares results of operations from fiscal year CONSOLIDATED RESULTS
Appendix
(1) This represents the net impact on net sales growth / (decrease) from pricing actions, mix and other factors. (2) Organic sales growth / (decrease) is defined as net sales growth / (decrease) excluding the effect of any acquisitions and divestitures and foreign exchange rate changes. See “Summary of Non-GAAP Financial Measures” below for reconciliation of organic sales growth / (decrease) to net sales growth / (decrease), the most directly comparable GAAP financial measure. (3) Organic volume represents volume excluding the effect of any acquisitions and divestitures. Net sales in fiscal year 2022 decreased by 3%, reflecting lower shipments primarily in the Health and Wellness reportable segment. Volume decreased by 5% versus the prior period. The variance between volume and net sales was primarily due to the impact of favorable price mix, partially offset by unfavorable foreign currency exchange rates.
Gross margin decreased by 780 basis points in fiscal year 2022 from 43.6% to 35.8%. The decrease was primarily driven by higher manufacturing and logistics costs, increased commodity costs and unfavorable mix, partially offset by the benefit of price increases and cost savings. Expenses
Selling and administrative expenses, as a percentage of net sales, decreased by 30 basis points in fiscal year 2022. The dollar decrease in selling and administrative expenses was primarily due to lower nonqualified deferred compensation plan expense, lower incentive compensation expense and the benefit from cost savings, partially offset by the Company’s digital capabilities and productivity enhancements investments.
Appendix A Advertising costs, as a percentage of net sales, decreased by 80 basis points in fiscal year 2022. The dollar decrease was primarily due to higher spend in the prior period and the Company returning to historical levels of spend in the current period. The Company’s U.S. retail advertising spend as a percentage of net sales was 10% for fiscal year 2022 and 12% for fiscal year 2021, respectively. Research and development costs, as a percentage of net sales, were essentially flat in the current period as compared to the prior period. The Company continues to invest behind product innovation and cost savings. Goodwill, trademark and other asset impairments, Interest expense, Other expense (income), net, and the effective tax rate on earnings
Goodwill, trademark and other asset impairments of $329 in the prior fiscal year reflect non-cash impairment charges related to goodwill, trademarks, and other assets held by the VMS business (included within the Health and Wellness segment). See Notes to Consolidated Financial Statements for further information regarding the impairments recorded. Interest expense was $106 and $99 in fiscal year 2022 and fiscal year 2021, respectively. The increase in the current period interest expense was primarily due to a loss on the early extinguishment of debt. See Notes to Consolidated Financial Statements for further information regarding the loss on the early extinguishment of debt recorded. Other expense (income), net was $37 and ($72) in fiscal year 2022 and fiscal year 2021, respectively. The variance was due to the one-time, non-cash remeasurement gain recognized from the Company’s previously held equity interest in the Saudi joint venture in the first quarter of fiscal year 2021 (see Notes to Consolidated Financial Statements) and the loss in the current period from revaluation of the Company’s trust assets related to its nonqualified deferred compensations plans. The effective tax rate on earnings (losses) was Diluted net earnings per share
Diluted net earnings per share (EPS)
SEGMENT RESULTS The following presents the results of the Company’s reportable segments and certain unallocated costs reflected in Corporate (see Notes to Consolidated Financial Statements for a reconciliation of segment results to consolidated results): Health and Wellness
Fiscal year
Household
Fiscal year 2022 versus fiscal year 2021: Volume and earnings before income taxes decreased by 3% and 38%, respectively, and net sales were flat during fiscal year 2022. The Lifestyle
Appendix
Fiscal year
International
Fiscal year
Argentina The business environment in Argentina continues to be challenging due to significant volatility in Argentina’s currency, high inflation, Effective July 1, 2018, under the requirements of U.S. GAAP, Argentina was designated as a highly inflationary economy, As of September 2019, the government of Argentina reinstated foreign exchange controls in response to further declines in the value of the Argentine peso, limiting the Company’s ability to convert Argentine pesos to U.S. dollars and transfer U.S. dollars outside of Argentina. As of June 30, Volatility in the exchange rate is expected to continue,
Appendix Corporate
Corporate includes certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses. Beginning in fiscal year 2022, losses before income taxes for Corporate include expenses related to the Company's digital capabilities and productivity enhancements investment. Fiscal year
FINANCIAL POSITION AND LIQUIDITY Management’s discussion and analysis of the Company’s financial position and liquidity describes its consolidated operating, investing and financing activities from The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional tax costs. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in Other (income) expense, net. The Company’s financial condition and liquidity remained strong as of June 30,
Operating Activities Net cash provided by operations was
Appendix A Payment Terms Extension and Supply Chain Financing The Company initiated the extension of its payment terms with its suppliers in the second half of fiscal year 2020 in order to improve working capital as part of and to fund the IGNITE strategy and in keeping with evolving market practices. The Company’s current payment terms do not exceed 120 days in keeping with industry standards. The Company’s operating cash flows are directly impacted as a As part of those ongoing efforts, the Company has arranged for a global financial institution to All outstanding amounts related to suppliers participating in SCF are recorded within Accounts payable and accrued liabilities in the Consolidated Balance Sheets and the associated payments are included in operating activities within the Consolidated Statements of Cash Flows. As of June 30, 2022 and 2021, the amount due to suppliers participating in SCF and included in Accounts payable and accrued liabilities was $211 and $152, respectively. While the Company does not have direct access to information on, or influence over, which invoices a participating supplier elects to sell to the financial institution, the Company expects that the majority of these amounts have been sold to the financial institution. Investing Activities Net cash used for investing activities was
Capital expenditures were $251 and $331 in fiscal years 2022 and 2021, respectively. Capital expenditures as a percentage of net sales was 3.5% and 4.5% for fiscal years 2022 and 2021, respectively. The current year-over-year decrease was due to Free cash flow
Appendix
Financing Activities Net cash used for financing activities was
Current period financing activities include repayment of $300 of the Company’s senior notes with an annual fixed interest rate of 3.80% that became due in November 2021 and were repaid using commercial paper borrowings and repayment of $600 of the Company’s senior notes with an annual fixed interest rate of 3.05% due in September 2022 and $500 of senior notes with an annual fixed interest rate of 3.50% due in December 2024 that were redeemed prior to maturity using the proceeds from the May 2022 debt issuance of $1,100. Capital Resources and Liquidity The Company’s current liabilities may periodically exceed current assets as a result of the Company’s debt management policies, including the Company’s use of commercial paper borrowings which fluctuates depending on the amount and timing of operating and investing cash flows and payments for shareholder transactions such as dividends. In addition, the Company’s cash generated from operations has decreased recently primarily due to higher manufacturing and logistics costs and unfavorable commodity costs. The Company Global financial markets have experienced a significant increase in volatility due to heightened uncertainty over the adverse economic impact caused by The Company may consider other transactions that require the issuance of additional long- and/or short-term debt or other securities to finance acquisitions, repurchase stock, refinance debt or fund other activities for general business purposes. Such transactions could require funds in excess of the Company’s current cash levels and available credit lines, and the Company’s access to or cost of such additional funds could be adversely affected by any decrease in credit ratings, which were the following as of June 30:
Credit Arrangements
Appendix either the new Credit Agreement or the prior Credit Agreement as of June 30, 2022 and 2021, respectively, and the Company believes that borrowings under the new Credit Agreement are and will continue to be available for general corporate purposes. The Credit Agreement includes certain restrictive covenants and limitations. The primary restrictive covenant is a minimum ratio of 4.0, calculated as total earnings before interest, taxes, depreciation and amortization and other similar non-cash The
As of June 30,
As of June 30, 2021, the Company maintained $35 of foreign and other credit lines, of which $5 was outstanding and the remainder of $30 was available for borrowing. Short-term Borrowings The Company’s notes and loans payable primarily consist of U.S. commercial paper issued by the parent company and any borrowings under the Credit Agreement. These short-term borrowings have stated maturities of less than one year and provide supplemental funding for supporting operations. The level of U.S. commercial paper borrowings generally fluctuates depending upon the amount and timing of operating cash flows and payments for items such as dividends, income taxes, stock repurchases and pension contributions. Long-term Borrowings In May
In November 2021, $300 of the Company’s
Stock Repurchases and Dividend Payments As of June 30,
Appendix A limit on the dollar amount and no expiration date. During the twelve months ended June 30, 2022 and 2021, the Company purchased 152 thousand and 4,758 thousand shares of common stock at a cost of $25 and $905, respectively.
On On
The
As announced in fiscal year 2021 and with
CONTINGENCIES A summary of contingencies is contained in the Notes to Consolidated Financial Statements and is incorporated herein by reference. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a multinational company, the Company is exposed to the impact of In the normal course of business, where available at a reasonable cost, the Company manages its exposure to market risk using contractual agreements and a variety of derivative instruments. The Company’s objective in managing its exposure to market risk is to limit the impact of fluctuations on earnings and cash flow through the use of derivative instruments, including over-the-counter swaps, forward The Company uses different methodologies, when necessary, to estimate the fair value of its derivative contracts. The estimated fair values of the majority of the Company’s contracts are based on quoted market prices, exchange-traded market prices or broker price quotations, and represent the estimated amounts that the Company would pay or receive to terminate the contracts. See Notes to Consolidated Financial Statements for further discussion of derivatives and hedging policies and fair value measurements. Sensitivity Analysis for Derivative Contracts For fiscal years
The changes in the fair value of derivatives are recorded as either assets or liabilities in the consolidated balance sheets with an offset to Net earnings or Other comprehensive (loss) income, depending on whether or not, for accounting purposes, the derivative is designated and qualified as an accounting hedge. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument either as a fair value hedge or as a cash flow hedge. The Company designates its commodity swaps and futures contracts for forecasted purchases of raw materials, foreign currency forward contracts for forecasted purchases of inventory, and interest rate
Appendix A Commodity Price Risk The Company is exposed to changes in the price of commodities used as raw materials in the manufacturing of its products. The Company uses various strategies, where available at a reasonable cost to manage cost exposures on certain raw material purchases with the objective of obtaining more predictable costs for these commodities, including long-term commodity purchase contracts and commodity derivative contracts. During fiscal years Based on a hypothetical decrease or increase of 10% in these commodity prices as of June 30, Foreign Currency Risk The Company seeks to minimize the impact of certain foreign currency fluctuations by hedging transactional exposures related to inventory purchases with foreign currency forward contracts. Based on a hypothetical decrease of 10% in the value of the U.S. dollar as of June 30, Interest Rate Risk The Company The Company RECENTLY ISSUED ACCOUNTING STANDARDS A summary of all recently issued accounting standards is contained in Note 1 of the Notes to Consolidated Financial Statements.
Appendix CRITICAL ACCOUNTING The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements.
The Company’s critical accounting Revenue Recognition The Company’s revenue is primarily generated from the sale of finished products to customers. This revenue is reported net of certain variable consideration provided to customers, generally in the form of one-time and ongoing trade-promotion programs. These trade-promotion programs include shelf price reductions, in-store merchandising, consumer coupons and other trade-related activities. Amounts accrued for trade-promotions are based on various factors such as contractual terms and sales volumes, and also incorporate estimates that include customer participation rates, the rate at which customers will achieve program performance criteria, product availability and historical consumer redemption rates. The actual amounts remitted to customers for these activities may differ from the Company’s estimates, depending on how actual results of the programs compare to the estimates. If the Company’s trade promotion accrual estimates as of June 30, Goodwill and Other Intangible Assets The Company tests its goodwill and other indefinite-lived intangible assets for impairment annually in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired. Goodwill For fiscal year In its evaluation of goodwill impairment, the Company has the option to first assess qualitative factors such as the maturity and stability of the reporting unit, the magnitude of the excess fair value over the carrying value from
Appendix A quantitative test,
the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk. The cash flows used in the DCF method are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced and the long-term business strategy. The other key estimates and factors used in the DCF method include, but are not limited to, net sales and expense growth rates, commodity prices, foreign exchange rates, inflation and a terminal growth rate. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of the fair
charge was recorded during the third quarter of fiscal year 2021. The results of the fiscal year 2022 annual impairment Except for the VMS reporting unit discussed above, no heightened risk of impairment of reporting units was identified. No impairments were identified in fiscal year 2022 as a result of the Company’s impairment review performed annually during the fourth quarter or during any other quarters of fiscal year 2022. Trademarks and Other Indefinite-Lived Intangible Assets For trademarks and other intangible assets with indefinite lives, the Company has the option to first assess qualitative factors, such as the maturity and stability of the trademark or other intangible asset, the magnitude of the excess fair value over carrying value from
Appendix A During the third quarter of fiscal year 2021, as a result of the interim impairment assessments performed on various VMS assets, an $86 impairment charge to indefinite-lived trademarks was recorded. No Finite-Lived Intangible Assets Finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying value of an asset (or asset group) may not be recoverable. The Company’s impairment review requires significant judgment by management, including estimating the future success of product lines, future sales volumes, revenue and expense growth rates, alternative uses for the assets and proceeds from the disposal of the assets. The Company reviews business plans for possible impairment indicators. During the third quarter of fiscal year 2021, as a result of the interim impairment assessments performed on various VMS assets, a $14 impairment charge to finite-lived intangible assets was recorded. Additionally during the fourth quarter of fiscal year 2021, an impairment charge of $14 was recorded related to other intangible assets with finite lives that were no longer expected to be recoverable due to a pending exit from a Professional Products SBU supplier relationship. No significant impairments for finite-lived intangible assets were identified in fiscal year
Income Taxes The Company’s effective tax rate is based on income by tax jurisdiction, statutory tax rates and tax planning opportunities available to the Company in the various jurisdictions in which the Company operates. Significant judgment is required in determining the Company’s effective tax rate and in evaluating its tax positions. The Company maintains valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account In addition to valuation allowances, the Company
Appendix A for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled.
Venture Agreement Terminal Obligation The Company has a Venture Agreement with P&G for the Company’s Glad bags and wraps business. The estimated fair value of P&G’s interest may increase or decrease up until any such purchase by the Company of P&G’s interest. The Company uses the DCF method under the income approach to estimate the fair value of P&G’s interest. Under this approach, the Company estimates the future cash flows and discounts these cash flows at a rate of return that reflects its risk. The cash flows used are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced and the long-term business strategy. The other key assumptions and estimates used include, but are not limited to, net sales and expense growth rates, commodity prices, foreign exchange rates, discount rates, inflation and terminal growth rates. Fair value determination requires significant judgment, assumptions and market factors which are uncertain and subject to change. Changes in the judgments, assumptions and
SUMMARY OF NON-GAAP FINANCIAL MEASURES The non-GAAP financial measures that may be included in this MD&A and Exhibit 99.2 and the reasons management believes they are useful to investors are described below. These measures should be considered supplemental in nature and are not intended to be a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, these measures may not be the same as similarly named measures presented by other companies. Free cash flow
EBIT represents earnings before income taxes, interest income and interest expense. EBIT margin is the ratio of EBIT to net sales. The Company’s management believes these measures provide useful additional information to investors to enhance their understanding about trends in the Company’s operations and are useful for period-over-period comparisons.
Appendix A Economic profit (EP) is defined by the Company as earnings before income taxes, excluding Organic sales growth / (decrease) is defined as net sales growth excluding the effect of foreign exchange rate changes and any acquisitions and divestitures. Management believes that the presentation of organic sales growth / (decrease) is useful to investors because it excludes sales from any acquisitions and divestitures, which results in a comparison of sales only from the businesses that the Company was operating and expects to continue to operate throughout the relevant periods, and the Company’s estimate of the impact of foreign exchange rate changes, which are difficult to predict, and out of the control of the Company and management. The following table provides a reconciliation of organic sales growth / (decrease) (non-GAAP) to net sales growth / (decrease) (GAAP), the most comparable GAAP measure:
CAUTIONARY STATEMENT This Annual Report on Form 10-K (this Report), including the exhibits hereto and the information incorporated by reference herein, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of governments, consumers, customers, suppliers, employees and the Company, on our business, operations, employees, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions and uncertainties. Except for historical information, statements about future volumes, sales, organic sales growth, foreign currencies, costs, cost savings, margins, earnings, earnings per share, diluted earnings per share, foreign currency exchange rates, tax rates, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management’s estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic and financial performance are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. Important factors that
Appendix A could affect performance and cause results to differ materially from management’s expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, as updated from time to time in the Company’s Securities and Exchange Commission filings. These factors include, but are not limited
Appendix
The Company’s forward-looking statements in this Report are based on management’s current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this Report. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. In this Report, unless the context requires otherwise, the terms “the Company,” “Clorox,” “we,” “us,” and “our” refer to The Clorox Company and its subsidiaries.
Appendix MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management evaluated the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework published in 2013. Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, The Company’s independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of June 30,
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Clorox Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Clorox Company (the Company) as of June 30, We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30,
Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
Appendix A are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Goodwill and Trademarks with Indefinite Lives
Appendix A
Appendix A
/s/ Ernst & Young LLP We have served as the Company’s auditor since 2003. San Francisco, CA
Appendix REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Clorox Company Opinion on Internal Control Over Financial Reporting We have audited The Clorox Company’s internal control over financial reporting as of June 30, We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of The Clorox Company as of June 30, Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Francisco, CA
Appendix A CONSOLIDATED STATEMENTS OF EARNINGS
See Notes to Consolidated Financial Statements
Appendix CONSOLIDATED STATEMENTS OF
See Notes to Consolidated Financial Statements
Appendix CONSOLIDATED
See Notes to Consolidated Financial Statements
Appendix CONSOLIDATED
(1) As a result of adopting ASU No. 2016-02, “Leases (ASC 842),” on July 1, 2019, the Company recorded a cumulative effect of initially applying the new guidance as an adjustment to the fiscal year 2020 opening balance of Retained earnings. See Notes to Consolidated Financial Statements
Appendix CONSOLIDATED STATEMENTS OF
See Notes to Consolidated Financial Statements
Appendix
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Basis of Presentation The Company is principally engaged in the production, marketing and sale of consumer products through mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, drug, pet and military stores, third-party and owned e-commerce channels, and distributors. The consolidated financial statements include the statements of the Company and its wholly owned and controlled subsidiaries. All significant intercompany transactions and accounts were eliminated in consolidation. Use of Estimates The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) requires management to reach opinions as to estimates and assumptions that affect reported amounts and related disclosures. Specific areas requiring the application of management’s estimates and judgments include, among others, assumptions pertaining to accruals for consumer and trade-promotion programs, stock-based compensation, retirement income plans, future cash flows associated with impairment testing of goodwill and other long-lived assets and the valuation of the venture agreement terminal obligation, the valuation of assets acquired and liabilities assumed in connection with a business combination, the credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Actual results could materially differ from estimates and assumptions made. Cash, Cash Equivalents and Restricted Cash Cash equivalents consist of highly liquid interest-bearing accounts, time deposits held by financial institutions and money market funds with an initial maturity at purchase of 90 days or less. The fair value of cash and cash equivalents approximates the carrying amount. The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional withholding tax costs in certain foreign jurisdictions. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books in their functional currency, and the impact on such balances from foreign currency exchange rate differences is recorded in Other (income) expense, net. As of June 30, 2022, 2021, 2020 Inventories The Company values its inventories using both the First-In, First-Out
Appendix NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, Plant and Equipment and Finite-Lived Intangible Assets Property, plant and equipment and finite-lived intangible assets are stated at cost. Depreciation and amortization expense are primarily calculated by the straight-line method using the estimated useful lives or lives determined by reference to the related lease contract in the case of leasehold improvements. The table below provides estimated useful lives of property, plant and equipment by asset classification.
Finite-lived intangible assets are amortized over their estimated useful lives, which range from Property, plant and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be fully recoverable. The risk of impairment is initially assessed based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist. Impairment occurs when the carrying value of the asset (or asset group) exceeds the estimated future undiscounted cash flows generated by the Capitalization of Software Costs The Company capitalizes certain qualifying costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees during the application development stage. Internal and external costs incurred during the preliminary project stage and post implementation-operation stage, mainly training and maintenance costs, are expensed as incurred. Once the application is substantially complete and ready for its intended use, qualifying costs are amortized on a straight-line basis over the software’s estimated useful life. Capitalized internal use software is included in Property, plant and equipment. Capitalized software as a service is included in Prepaid expenses and other current assets or Other assets and is amortized using the straight-line method over the term of the hosting arrangement which is typically no greater than 6 years.
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business Combinations The Company records acquired businesses within the consolidated financial statements using the acquisition method prospectively from the acquisition date. Under the acquisition method, once control is obtained, assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values on the acquisition date. The Company’s estimates of fair value are inherently uncertain and subject to refinement. The excess of the total of the purchase consideration, fair value of the noncontrolling interest and fair value of the previously held equity interest over the identifiable assets acquired and liabilities assumed is recorded as goodwill. Measurement period adjustments to the fair values of the identifiable assets acquired and liabilities assumed with the corresponding offset to goodwill, if applicable, are applied in the reporting period in which the adjustment amounts are determined based on new information obtained during the measurement period. In the event of a step acquisition, the Company records a gain or loss in Other income (expense), net on the consolidated statement of earnings as a result of remeasuring a previously held equity interest to fair value on the acquisition date. Transaction expenses are recognized separately from the business combination and are expensed as incurred. Impairment Review of Goodwill and Indefinite-Lived Intangible Assets The Company tests its goodwill, trademarks with indefinite lives and other indefinite-lived intangible assets annually for impairment in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired. With respect to goodwill, the Company has the option to first assess qualitative factors, such as the maturity and stability of the reporting unit, the magnitude of the excess fair value over carrying value from To determine the fair value of a reporting unit as part of its quantitative test, the Company uses
significant judgments, the Company estimates the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk. The cash flows used in the DCF method are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced, and the broader business strategy for the long term. The other key estimates and factors used in the DCF method include, but are not limited to, net sales and expense growth rates, commodity prices, foreign exchange rates, inflation and a terminal growth rate. Changes in such estimates or the application of alternative assumptions could produce different results. For trademarks and other intangible assets with indefinite lives, the Company has the option to first assess qualitative factors, such as the maturity and stability of the trademark or other intangible asset, the magnitude of the excess fair value over carrying value from
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) for the difference between the carrying value and the estimated fair value. The Company uses the DCF method under the relief from royalty income approach to estimate the fair value of its trademarks and other intangible assets with indefinite lives. This approach requires significant judgments in determining the royalty rates and the assets’ estimated cash flows, as well as the appropriate discount and foreign exchange rates applied to those cash flows to determine fair value. Changes in such estimates or the use of alternative assumptions could produce different results. Leases
Stock-based Compensation The Company grants various nonqualified stock-based compensation awards to eligible employees, including stock options, restricted stock awards and performance shares. For stock options, the Company estimates the fair value of each award on the date of grant using the Black-Scholes valuation model, which requires management to make estimates regarding expected option life, stock price volatility and other assumptions. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each employee grouping. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change. Compensation expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.
For restricted stock awards, the fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. Forfeitures are estimated based on historical data. The total number of restricted stock awards expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change. Compensation expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Company’s performance shares provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The number of shares issued is dependent upon the achievement of specified performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. Performance shares receive dividends earned during the vesting period upon vesting. The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates and management’s assessment of the probability that performance goals will be achieved. A cumulative adjustment is recognized to compensation expense in the current period to reflect any changes in the probability of achievement of performance goals. Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for stock-based payment arrangements (excess tax benefits) are classified as operating cash inflows. Employee Benefits The Company accounts for its retirement income and retirement health care plans using actuarial methods. These methods use an attribution approach that generally spreads “plan events” over the service lives or expected lifetime (for frozen plans) of plan participants. Examples of plan events are plan amendments and changes in actuarial assumptions such as the expected return on plan assets, discount rate, rate of compensation increase and certain employee-related factors, such as retirement age and mortality. The principle underlying the attribution approach is that employees render service over their employment period on a relatively “smooth” basis and, therefore, the statement of earnings effects of retirement income and retirement health care plans are recognized in the same pattern. One of the principal assumptions used in the net periodic benefit cost calculation is the expected return on plan assets. The expected return on plan assets may result in recognized expense or income that differs from the actual returns of those plan assets in any given year. Over time, however, the goal is for the expected long-term returns to approximate the actual returns and, therefore, the expectation is that the pattern of income and expense recognition should closely match the pattern of the services provided by the participants. The Company uses a market-related value method for calculating plan assets for purposes of determining the amortization of actuarial gains and losses. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period or expected lifetime (for frozen plans) of the plan participants using the corridor approach. Under this approach, only actuarial gains (losses) that exceed 5% of the greater of the projected benefit obligation or the market-related value of assets are amortized to the Company’s net periodic benefit cost. In developing its expected return on plan assets, the Company considers the long-term actual returns relative to the mix of investments that comprise its plan assets and also develops estimates of future investment returns by considering external sources. The Company recognizes an actuarial-based obligation at the onset of disability for certain benefits provided to individuals after employment, but before retirement, that Environmental Costs The Company is involved in certain environmental remediation and ongoing compliance activities. Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and based upon a reasonable estimate of the liability. The Company’s accruals reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) uncertainties in evaluating environmental exposures. The accrual for environmental matters is included in Accounts payable and accrued liabilities and Other liabilities in the Company’s consolidated balance sheets on an undiscounted basis due to uncertainty regarding the timing of future payments.
Revenue Recognition The Company’s revenue is primarily generated from the sale of finished product to customers. Revenue is recognized at the point in time when performance obligations under the terms of customer contracts are satisfied, which is when ownership, risks and rewards transfer, and can be on the date of shipment or the date of receipt by the customer, depending upon the particular customer arrangement. Shipping and handling activities are accounted for as contract fulfillment costs and included within Cost of products sold. After the completion of the performance obligation, there is an unconditional right to consideration as outlined in the contract. A right is considered unconditional if nothing other than the passage of time is required before payment of that consideration is due. The Company typically collects its customer receivables within two months. All performance obligations under the terms of contracts with customers have an original duration of one year or less. The Company has trade promotion programs, which primarily include shelf price reductions, in-store merchandising and consumer coupons. The costs of such activities, defined as variable consideration under ASC 606, “Revenue from Contracts with Customers,” are netted against sales and recorded when the related sales take place. Accruals for trade promotion programs are established based on the Company’s best estimate of the amounts necessary to settle existing and future obligations for products sold as of the balance sheet date. Amounts accrued for trade-promotions are based on various factors such as contractual terms and sales volumes, and also incorporate estimates that include customer participation rates, the rate at which customers will achieve program performance criteria, product availability and historical consumer redemption rates. The Company provides an allowance for doubtful accounts based on its historical experience and ongoing assessment of its customers’ credit risk and aging. Cost of Products Sold Cost of products sold represents the costs directly related to the manufacture and distribution of the Company’s products and primarily includes raw materials, packaging, contract manufacturing fees, shipping and handling, warehousing, package design, depreciation, amortization, direct and indirect labor and operating costs for the Company’s manufacturing and distribution facilities, including salary, benefit costs and incentive compensation, and royalties and other charges related to the Company’s Glad Venture Agreement (See Note 8). Costs associated with developing and designing new packaging, including design, artwork, films and labeling, are expensed as incurred and included within Cost of products sold. Selling and Administrative Expenses Selling and administrative expenses represent costs incurred by the Company in generating revenues and managing the business and include market research, commissions and certain administrative expenses. Administrative expenses include salary, benefits, incentive compensation, professional fees and services and other operating costs (such as software and licensing costs) associated with the Company’s non-manufacturing, non-research and development
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advertising and Research and Development Costs The Company expenses advertising and research and development costs in the period incurred. Income Taxes The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. Management reviews the Company’s deferred tax assets to determine whether their value
can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled. Per U.S. GAAP, foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. The Company regularly reviews and assesses whether there are any changes to its indefinite reinvestment assertion and determined that none of the undistributed earnings of its foreign subsidiaries are indefinitely reinvested. As a result, the Company is providing foreign withholding taxes on the undistributed earnings of all foreign subsidiaries where applicable. Foreign Currency Transactions and Translation Local currencies are the functional currencies for substantially all of the Company’s foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of Other (income) expense, net. In addition, certain assets and liabilities denominated in currencies other than a foreign subsidiary’s functional currency are reported on the subsidiary’s books in its functional currency, with the impact from exchange rate differences recorded in Other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, while income and expenses are translated at the respective average monthly exchange rates during the year. Gains and losses on foreign currency translations are reported as a component of Other comprehensive (loss) income. The income tax effect of currency translation adjustments is recorded as a component of deferred taxes with an offset to Other comprehensive (loss) income where appropriate. Effective July 1, 2018, under the requirements of U.S. GAAP, Argentina was designated as a highly inflationary economy, since it has experienced cumulative inflation of approximately 100 percent or more over a three-year period. As a result, beginning July 1, 2018, the U.S. dollar replaced the Argentine peso as the functional currency of the Company’s subsidiaries in Argentina (collectively, “Clorox Argentina”). Consequently, gains and losses from non-U.S. dollar denominated monetary assets and liabilities for Clorox Argentina are recognized in Other (income) expense, net in the consolidated statement of earnings. Derivative Instruments The Company’s use of derivative instruments, principally swaps, futures and forward contracts, is limited to non-trading purposes and is designed to partially manage exposure to changes in commodity prices, interest rates and foreign currencies. The Company’s contracts are hedges for transactions with notional amounts and periods consistent with the related exposures and do not constitute investments independent of these exposures.
Appendix A NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The changes in the fair value (i.e., gains or losses) of a derivative instrument are recorded as either assets or liabilities in the consolidated balance sheets with an offset to Net earnings or Other comprehensive (loss) income depending on whether, for accounting purposes, it has been designated and qualifies as an accounting hedge and, if so, on the type of hedging relationship. The criteria used to determine if hedge accounting treatment is appropriate are: (a) formal designation and documentation of the hedging relationship, the risk management objective and hedging strategy at hedge inception; (b) eligibility of hedged items, transactions and corresponding hedging instrument; and (c) effectiveness of the hedging relationship both at inception of the hedge and on an ongoing basis in achieving the hedging objectives. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument either as a fair value hedge or as a cash flow hedge. The Company designates its commodity forward and future contracts for forecasted purchases of raw materials, interest rate
For derivative instruments designated and qualifying as cash flow hedges, Recently Issued Accounting Standards
Recently Adopted Accounting Standards In
Saudi Joint Venture Acquisition On July 9, 2020, the
Appendix NOTE 2. BUSINESS ACQUIRED (Continued)
The total purchase consideration of $111 consisted of $100 cash paid, which was sourced from operations, and $11 from the net effective settlement of As a result of this transaction, the carrying value of the Company’s previously held equity investment was remeasured to fair value, and resulted in an $85 non-recurring, non-cash gain recorded in Other (income) expense, net in the consolidated statement of earnings and adjusted in Other operating activities in the consolidated statement of cash flows for the first quarter of fiscal year 2021. The fair values of the noncontrolling interests and previously held equity interest were determined using the DCF method under the income approach. Under this approach, the Company estimated future cash flows and discounts these cash flows at a rate of return that reflected the entities’ relative risk. The purchase price allocation was finalized during the
Included in the Company’s results for both fiscal years 2022 and 2021 was $84 of net sales from the joint venture. Pro forma results reflecting this transaction were not presented because it is
Appendix A NOTE 3. INVENTORIES, NET Inventories, net consisted of the following as of June 30:
The LIFO method was used to value approximately
NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET The components of property, plant and equipment, net, consisted of the following as of June 30:
Depreciation and amortization expense related to property, plant and equipment, net, was Non-cash capital expenditures were
Appendix A NOTE 5. GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS The changes in the carrying amount of goodwill by reportable segment for the fiscal years ended June 30,
The changes in the carrying amount of trademarks and other intangible assets for the fiscal years ended June 30, 2022 and 2021 were as follows:
Amortization expense relating to the Company’s intangible assets was $31, $32 and $14 for the years ended June 30, 2022, 2021 and 2020, respectively. Estimated amortization expense for these intangible assets is $29, $28, $27, $27 and $27 for fiscal years 2023, 2024, 2025, 2026 and 2027, respectively. During fiscal year 2021, as a result of lower than expected actual and projected net sales growth and operating performance for the Vitamins, Minerals and Supplements (VMS) SBU, a strategic review was initiated by management that resulted in updated financial and operational plans. These events were considered a triggering event requiring interim impairment assessments to be performed on the VMS reporting unit, indefinite-lived trademarks and other assets. Based on the outcome of these assessments, the following pre-tax impairment charges were recorded during fiscal year 2021 within Goodwill, trademark and other asset impairments:
Appendix NOTE 5. GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued)
To determine the fair value of the VMS reporting unit, the Company used the DCF method under the income approach. Under this approach, the Company estimated the future cash flows of the VMS reporting unit and discounted these cash flows at a rate of return that reflected its relative risk. The other key estimates and factors used in the DCF method included, but were not limited to, net sales and expense growth rates, and a terminal growth rate. To determine the estimated fair values of the VMS related indefinite-lived trademarks, which were included within the Health and Wellness reportable segment, the Company used the relief from royalty income approach. This approach required significant judgments in determining the royalty rates and the assets’ estimated cash flows as well as the appropriate discount rates applied to those cash flows to determine fair value. Additionally during fiscal year 2021, an impairment charge of $14 was recorded within Cost of products sold related to other intangible assets with finite lives that were no longer expected to be recoverable due to a pending exit from a Professional Products SBU supplier relationship. The remaining carrying value of these assets was No other significant impairments were identified as a result of the Company’s impairment reviews during fiscal year 2021 and NOTE 6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consisted of the following as of June 30:
Appendix A NOTE 7. DEBT Short-term borrowings Notes and loans payable are borrowings that mature in less than one year, primarily consisting of U.S. commercial paper issued by the Company and borrowings under the Company’s revolving credit agreements. Notes and loans payable were The weighted average interest rates incurred on average outstanding notes and loans payable during the fiscal years ended June 30, Long-term borrowings Long-term debt, carried at face value net of unamortized discounts, premiums and debt issuance costs, included the following as of June 30:
In May
Appendix NOTE 7. DEBT (Continued) In
The weighted average interest rates incurred on average outstanding long-term debt during the fiscal years ended June 30, 2022, 2021 and 2020, Long-term debt maturities as of June 30, Credit arrangements On The Company’s borrowing capacity under the revolving credit agreements and other financing arrangements as of June 30 was as follows:
Of the NOTE 8. OTHER LIABILITIES Other liabilities consisted of the following as of June 30:
Appendix NOTE 8. OTHER LIABILITIES (Continued) Venture Agreement The Company has an agreement with The Procter & Gamble Company (P&G) for the Company’s Glad bags and wraps business. In connection with this agreement, P&G provides research and development (R&D) support to the Glad business. As of June 30, Upon termination of the agreement, the Company is required to purchase P&G’s 20% interest for cash at fair value as established by predetermined valuation procedures. As of June 30,
NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Financial Risk Management and Derivative Instruments The Company is exposed to certain commodity, foreign currency and interest rate risks related to its ongoing business operations and uses derivative instruments to mitigate its exposure to these risks. Commodity Price Risk Management The Company may use commodity exchange-traded futures and over-the-counter swap contracts, which are generally no longer than 2 years, to fix the price of a portion of its forecasted raw material requirements. Commodity purchase contracts are measured at fair value using market quotations obtained from the Chicago Board of Trade commodity futures exchange and commodity derivative dealers. As of June 30, Foreign Currency Risk Management The Company may also enter into certain over-the-counter derivative contracts to manage a portion of the Company’s forecasted foreign currency exposure associated with the purchase of inventory. These foreign currency contracts generally have durations of no longer than 2 years. The foreign exchange contracts are measured at fair value using information quoted by foreign exchange dealers.
The notional amounts of outstanding foreign currency forward contracts used by the Company’s subsidiaries to hedge forecasted purchases of inventory were
Appendix A NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) Interest Rate Risk Management The Company may enter into over-the-counter interest rate
Commodity, Foreign Exchange and Interest Rate Derivatives The Company designates its commodity forward and futures contracts for forecasted purchases of raw materials, foreign currency forward contracts for forecasted purchases of inventory, and interest rate The effects of derivative instruments designated as hedging instruments on Other comprehensive (loss) income and Net earnings were as follows during the fiscal years ended June 30:
Appendix NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The estimated amount of the existing net gain (loss) in Accumulated other comprehensive net (loss) income as of June 30, Counterparty Risk Management and Derivative Contract Requirements The Company utilizes a variety of financial institutions as counterparties for over-the-counter derivative instruments. The Company enters into agreements governing the use of over-the-counter derivative instruments and sets internal limits on the aggregate over-the-counter derivative instrument positions held with each counterparty. Certain terms of these agreements require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. Of the over-the-counter derivative instruments in liability positions held as of both June 30, Certain terms of the agreements governing the Company’s over-the-counter derivative instruments require the credit ratings, as assigned by Standard & Poor’s and Moody’s to the Company and its counterparties, to remain at a level equal to or better than the minimum of an investment grade credit rating. If the Company’s credit ratings were to fall below investment grade, the counterparties to the derivative instruments could request full collateralization on derivative instruments in net liability positions. As of both June 30, Certain of the Company’s exchange-traded futures contracts used for commodity price risk management include requirements for the Company to post collateral in the form of a cash margin account held by the Company’s broker for trades conducted on that exchange. As of June 30, Trust Assets The Company holds interests in mutual funds and cash equivalents as part of trust assets related to its nonqualified deferred compensation plans. The participants in the nonqualified deferred compensation plans, who are the Company’s current and former employees, may select among certain mutual funds in which their compensation deferrals are invested in accordance with the terms of the plan and within the confines of the trusts, which hold the marketable securities. The trusts represent variable interest entities for which the Company is considered the primary beneficiary, and, therefore, trust assets are consolidated and included in Other assets in the consolidated balance sheets. The gains and losses on the trust assets are recorded in Other (income) expense, net in the consolidated statement of earnings. The interests in mutual funds are measured at fair value using quoted market prices. The Company has designated these marketable securities as trading investments. As of June 30, 2022, the balance of the trust assets related to the Company’s nonqualified deferred compensation plans decreased by $17 as compared to June 30, 2021.
Appendix NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
Fair Value of Financial Instruments Financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets are required to be classified and disclosed in one of the following three categories of the fair value hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions. As of June 30, All of the Company’s derivative instruments qualify for hedge accounting. The following table provides information about the balance sheet classification and the fair values of the Company’s derivative instruments:
Appendix NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) The following table provides information about the balance sheet classification and the fair values of the Company’s other assets and liabilities for which disclosure of fair value is required:
Furthermore, impairment charges of $343 were recorded during the fiscal year 2021, of which $228, $93, and $22 related to goodwill, certain indefinite-lived trademarks and other assets, respectively. These adjustments were included as non-cash charges in the consolidated statement of earnings. The non-recurring fair values utilized included unobservable Level 3 inputs based on management’s best estimates and assumptions. See Note 5 for additional information.
Appendix A NOTE 10. OTHER CONTINGENCIES, GUARANTEES AND COMMITMENTS Contingencies The Company is involved in certain environmental matters, including response actions at various locations. The Company had recorded liabilities totaling $28 One matter, which accounted for $14 of the recorded liability as of both June 30, Another matter in Dickinson County, Michigan, at the site of one of the Company’s former operations for which the Company is jointly and severally liable, accounted for
estimated 30-year remediation period. Although it is reasonably possible that the Company’s exposure may exceed the amount recorded for the Dickinson County matter, any amount of such additional exposures, or range of exposures, is not estimable at this time. The Company’s estimated losses related to these matters are sensitive to a variety of uncertain factors, including the efficacy of any remediation efforts, changes in any remediation requirements and the future availability of alternative clean-up technologies. The Company is subject to various legal proceedings, claims and other loss contingencies, including, without limitation, loss contingencies relating to contractual arrangements (including costs connected to the transition and unwinding of certain supply and manufacturing relationships), product liability, patents and trademarks, advertising, labor and employment, environmental, health and safety and other matters. With respect to these proceedings, claims and other loss contingencies, while considerable uncertainty exists, in the opinion of management at this time, the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, either individually or in the aggregate, on the Company’s consolidated financial statements taken as a whole.
Appendix A NOTE 10. OTHER CONTINGENCIES, GUARANTEES AND COMMITMENTS (Continued) Guarantees In conjunction with divestitures and other transactions, the Company may provide typical indemnifications (e.g., indemnifications for representations and warranties and retention of previously existing environmental, tax and employee liabilities) that have terms that vary in duration and in the potential amount of the total obligation and, in many circumstances, are not explicitly defined. The Company has not made, nor does it believe that it is probable that it will make, any material payments relating to its indemnifications, and believes that any reasonably possible payments would not have a material adverse effect, either individually or in the aggregate, on the Company’s consolidated financial statements taken as a whole. The Company had not recorded any material liabilities on the aforementioned guarantees as of June 30, The Company was a party to a letter of credit of Commitments The Company is a party to certain purchase obligations, which are defined as purchase agreements that are enforceable and legally binding and that contain specified or determinable significant terms, including quantity, price and the approximate timing of the transaction. For purchase obligations subject to variable price and/or quantity provisions, an estimate of the price and/or quantity must be made. Examples of the Company’s purchase obligations include contracts to purchase raw materials, commitments to contract manufacturers, commitments for information technology and related services, advertising contracts, capital expenditure agreements, software acquisition and license commitments and service contracts. The Company enters into purchase obligations based on expectations of future business needs. Many of these purchase obligations are flexible to allow for changes in the Company’s business and related requirements. As of June 30,
NOTE 11. LEASES The Company leases various property, plant and equipment, including office, warehousing, manufacturing and research and development facilities and equipment. These leases have remaining lease terms of up to
Appendix A NOTE 11. LEASES (Continued) Supplemental balance sheet information related to the Company’s leases as of June 30 was as follows:
Components of lease cost were as
Supplemental cash flow information and non-cash activity related to the Company’s leases were as
Appendix NOTE 11. LEASES (Continued) Weighted-average remaining lease term and discount rate for the Company’s leases were as
Maturities of lease liabilities by fiscal year for the Company’s leases as of June 30,
On May 25, 2022, the Company completed an asset sale-leaseback transaction on a plant in Ontario, Canada. The Company received proceeds of $16, net of selling costs, which had a carrying value of $2, and resulted in a $14 gain on the transaction which was recognized in Other (income) expense, net. The leaseback is accounted for as an operating lease. The term of the lease is 10 years, with the option to terminate the NOTE 12. STOCKHOLDERS' EQUITY On November 18, 2020 the Company retired 28 million shares of
Appendix NOTE 12. STOCKHOLDERS’ EQUITY (Continued)
Accumulated Other Comprehensive Net (Loss) Income Changes in Accumulated other comprehensive net (loss) income attributable to Clorox by component were as follows for the fiscal years ended June 30:
Included in foreign currency translation adjustments are re-measurement losses on long-term intercompany loans where settlement is not planned or anticipated in the foreseeable future.
Appendix A NOTE 13. NET EARNINGS PER SHARE (EPS) The following is the reconciliation of the weighted average number of shares outstanding (in thousands) used to calculate basic net EPS to those used to calculate diluted net EPS for the fiscal years ended June 30:
Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Clorox. NOTE 14. STOCK-BASED COMPENSATION PLANS In November Compensation cost and the related income tax benefit recognized for stock-based compensation plans were classified as indicated below for the fiscal years ended June 30:
Cash received during fiscal years Details regarding the valuation and accounting for stock options, restricted stock awards, performance shares and deferred stock units for non-employee directors follow.
Appendix NOTE 14. STOCK-BASED COMPENSATION PLANS Stock Options The fair value of each stock option award granted during fiscal years
The expected life of the stock options is based on historical exercise patterns. The expected volatility is based on implied volatility from publicly traded options on the Company’s stock at the date of grant, historical implied volatility of the Company’s publicly traded options and other factors. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant. Details of the Company’s stock option activities are summarized below:
The weighted-average fair value per share of each option granted during fiscal years Stock option awards outstanding as of June 30, A-58 THE CLOROX COMPANY - 2022 Proxy Statement Appendix A NOTE 14. STOCK-BASED COMPENSATION PLANS (Continued) Restricted Stock Awards The fair value of restricted stock awards is estimated on the date of grant based on the market price of the stock and is amortized to compensation expense on a straight-line basis over the related vesting periods, which are generally 3 to 4 years. The total number of restricted stock awards expected to vest is adjusted by actual and estimated forfeitures. Restricted stock awards receive dividend distributions earned during the vesting period upon vesting.
As of June 30, A summary of the status of the Company’s restricted stock awards is presented below:
Performance Shares As of June 30, A summary of the status of the Company’s performance share awards is presented below:
Appendix A NOTE 14. STOCK-BASED COMPENSATION PLANS (Continued) The non-vested performance shares outstanding as of June 30, Deferred Stock Units for Nonemployee Directors Nonemployee directors receive annual grants of deferred stock units under the Company’s director compensation program and can elect to receive all or a portion of their annual retainers and fees in the form of deferred stock units. The deferred stock units receive dividend distributions, which are reinvested as deferred stock units, and are recognized at their fair value on the date of grant. Each deferred stock unit represents the right to receive one share of the Company’s common stock following the completion of a director’s service. During fiscal year
NOTE 15. OTHER (INCOME) EXPENSE, NET The major components of Other (income) expense, net, for the fiscal years ended June 30 were:
(1) Non-recurring, non-cash gain from the remeasurement of the Company’s previously held investment in its Saudi joint venture (see Note 2).
Appendix A NOTE 16. INCOME TAXES The provision for income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:
The components of Earnings before income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate on operations follows for the fiscal years ended June 30:
Per U.S. GAAP, foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. The Company regularly reviews and assesses whether there are any changes to its indefinite reinvestment assertion.
Appendix NOTE 16. INCOME TAXES (Continued) The components of net deferred tax assets (liabilities) as of June 30 are shown below:
The Company reviews its deferred tax assets for recoverability on a quarterly basis. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Valuation allowances have been provided to reduce deferred tax assets to amounts considered recoverable. Details of the valuation allowance were as follows as of June 30:
As of June 30,
Appendix A NOTE 16. INCOME TAXES (Continued) The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. The federal statute of limitations has expired for all tax years through June 30, 2015. Various income tax returns in state and foreign jurisdictions are currently in the process of examination. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. As of June 30,
The following is a reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits:
Included in the balance of unrecognized tax benefits as of June 30,
Appendix A NOTE 17. EMPLOYEE BENEFIT PLANS Retirement Income Plans The Company has various retirement income plans for eligible domestic and international employees. As of June 30, The Company contributed The Company has a domestic qualified pension plan (the Plan). The Plan is frozen for all participants. The Plan generally was frozen effective June 30, 2011 for all employees, except for certain collectively bargained employees, whose Plan freeze was effective January 1, 2019. As a result of the Plan freeze, no employees are eligible to commence participation in the Plan or accrue any additional benefits under the Plan. On May 17, 2022, the Company’s Board of Directors approved a resolution to terminate the Plan. The amendment will allow the settlement of the pension obligation with either a lump sum payout or a purchased annuity. It is expected to take 18 to 24 months to complete the termination from the date of the approved resolution to terminate the Plan. As of June 30, 2022, the Company reported net unrealized losses of $139, net of tax, in Accumulated other comprehensive net (loss) income on its consolidated balance sheet related to the Plan. These net unrealized losses will be recognized in the Company’s consolidated statement of income as payments are made to settle lump sum elections and to purchase group annuity contracts. Final settlement is dependent on market conditions, which could affect discount rates and returns on plan assets as well as final elections received from plan participants. The completion of the process of offering and accepting lump sum elections are dependent on when certain regulatory approvals are obtained. Currently, there is not enough information available to determine the ultimate charge of the termination. Retirement Health Care Plans The Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The plans pay stated percentages of covered expenses after annual deductibles have been met or stated reimbursements up to a specified dollar subsidy amount. Benefits paid take into consideration payments by Medicare for the domestic plan. The plans are funded as claims are paid, and the Company has the right to modify or terminate certain plans.
Appendix NOTE 17. EMPLOYEE BENEFIT PLANS (Continued) Benefit Obligation and Funded Status Summarized information for the Company’s retirement income and retirement health care plans as of and for the fiscal years ended June 30 is as follows:
For the retirement income plans, the benefit obligation is the projected benefit The ABO for all retirement income plans was
Appendix NOTE 17. EMPLOYEE BENEFIT PLANS (Continued) Retirement income plans with ABO or PBO in excess of plan assets as of June 30 were as follows:
Net Periodic Benefit Cost The net cost of the retirement income and health care plans for the fiscal years ended June 30 included the following components:
Items not yet recognized as a component of postretirement expense as of June 30,
Appendix A NOTE 17. EMPLOYEE BENEFIT PLANS (Continued) Net actuarial loss (gain) recorded in Accumulated other comprehensive net (loss) income for the fiscal year ended June 30,
The Company uses the straight-line amortization method for unrecognized prior service costs and benefits.
Assumptions Weighted-average assumptions used to estimate the actuarial present value of benefit obligations were as follows as of June 30:
Weighted-average assumptions used to estimate the retirement income and retirement health care costs were as follows as of June 30:
The expected long-term rate of return assumption is based on
Appendix A NOTE 17. EMPLOYEE BENEFIT PLANS (Continued) The actuarial benefit obligation gain incurred during fiscal year 2022 was primarily driven by increases in the discount rates for the retirement plans, partially offset by the domestic qualified plan reflecting plan termination lump sum window and annuity buyout assumptions. The actuarial benefit obligation loss during fiscal year 2021 was primarily driven by the increase in assumed interest crediting rate, partially offset by asset gains and increase in the discount rate. Expected Benefit Payments Expected benefit payments for the Company’s retirement income and retirement health care plans as of June 30,
Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.
Plan Assets The target allocations and weighted average asset allocations by asset category of the investment portfolio for the Company’s domestic retirement income plans as of June 30 were:
The target asset allocation is determined based on the optimal balance between risk and return and, at times, may be adjusted to achieve the plan’s overall investment objective to generate sufficient resources to pay current and projected plan obligations over the life of the domestic retirement income plan.
Appendix A NOTE 17. EMPLOYEE BENEFIT PLANS (Continued) The following table sets forth
Common collective trust funds are not publicly traded and were valued at a net asset value unit price determined by the portfolio’s sponsor based on the fair value of underlying assets held by the common collective trust fund on June 30,
The common collective trusts are invested in various trusts that attempt to achieve their investment objectives by investing primarily in other collective investment funds that have characteristics consistent with each trust’s overall investment objective and strategy. Defined Contribution Plans The Company has various defined contribution plans for eligible domestic and international employees. The aggregate cost of the domestic defined contribution plans was NOTE 18. SEGMENT REPORTING The Company operates through SBUs
Appendix NOTE 18. SEGMENT REPORTING (Continued) Certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, prepaid expenses and other current assets, property and equipment, operating lease right-of-use assets, other long-term assets and deferred taxes.
All intersegment sales are eliminated and are not included in the Company’s reportable segments’ net sales. Net sales to the Company’s largest customer, Walmart Stores, Inc. and its affiliates, were 25%
Appendix NOTE 18. SEGMENT REPORTING (Continued) The following table provides Net sales as a percentage of the Company’s consolidated net sales, disaggregated by SBU,
The Company’s products are marketed and sold globally. The following table provides the Company’s global product lines, which were sold in the U.S.
Net sales and property, plant and equipment, net, by geographic area for and as of the fiscal years ended June 30 were as follows:
Appendix A NOTE 19. RELATED PARTY TRANSACTIONS The Company holds various equity investments with ownership percentages of up to 50% in a number of consumer products businesses,
Transactions with the Company’s equity investees typically represent payments for contract manufacturing and purchases of raw materials. Payments to related parties, including equity investees, for such transactions during the fiscal years ended June 30, 2022, 2021 and 2020 NOTE 20. SUBSEQUENT EVENT On
Appendix
THE CLOROX COMPANY
Appendix A
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