DEF 14A 1 d214293ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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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

Filed by the Registrant x                            Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to §240.14a-12

 

 

RALPH LAUREN CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

 

 

  

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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LOGO

Notice of 2016 Annual Meeting Of Stockholders

Purpose of the Meeting

The 2016 Annual Meeting of Stockholders of Ralph Lauren Corporation, a Delaware corporation, will be held at the St. Regis Hotel, 20th Floor, 2 East 55th Street, New York, New York, on Thursday, August 11, 2016, at 9:30 a.m., local time, for the following purposes:

 

  1.

To elect eleven directors to serve until the 2017 Annual Meeting of Stockholders;

 

  2.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 1, 2017;

 

  3.

To approve, on an advisory basis, the compensation of our named executive officers and our compensation philosophy, policies and practices as described herein;

 

  4.

To (i) approve an amendment and restatement of our 2010 Long-Term Stock Incentive Plan, as amended (the “2010 Stock Incentive Plan”), to increase the maximum number of shares of the Company’s Class A Common Stock available for award grants under the 2010 Stock Incentive Plan from 6,062,518 shares to 6,972,518 shares and (ii) re-approve the material terms of the performance goals under the 2010 Stock Incentive Plan to extend the five-year period for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended; and

 

  5.

To transact such other business as may properly come before the meeting and any adjournments or postponements thereof.

The foregoing items of business are described more fully in the accompanying Proxy Statement. Only holders of record of the Company’s Class A and/or Class B Common Stock at the close of business on June 13, 2016 are entitled to notice of, and to vote at, the 2016 Annual Meeting of Stockholders and any adjournments or postponements thereof.

Notice Regarding the Availability of Proxy Materials

We will be using the Securities and Exchange Commission’s Notice and Access model, which allows us to make the proxy materials available on the Internet, as the primary means of furnishing proxy materials to stockholders. On or about June 29, 2016, we will mail to all stockholders a Notice of Internet Availability of Proxy Materials, which contains instructions for accessing our proxy materials on the Internet and voting by telephone or on the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions for requesting a printed set of proxy materials. The Proxy Statement, Annual Report on Form 10-K for the fiscal year ended April 2, 2016 and Notice of Annual Meeting are available at: http://investor.ralphlauren.com.

Your Vote is Important

Please vote promptly by signing, dating and returning the enclosed proxy card or voting by telephone or on the Internet by following the instructions on your Notice of Internet Availability of Proxy Materials. In the event that a stockholder decides to attend the meeting, it, he or she may, if so desired, revoke the proxy by voting the shares in person at the meeting.

By Order of the Board of Directors,

 

LOGO

AVERY S. FISCHER

Corporate Senior Vice President, General Counsel and Secretary

New York, New York

June 29, 2016


Table of Contents

LOGO

PROXY STATEMENT TABLE OF CONTENTS

 

Page

 

GENERAL INFORMATION REGARDING THE ANNUAL MEETING OF STOCKHOLDERS AND PROXY MATERIALS

     1   

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

     1   

(PROPOSAL 1) ELECTION OF DIRECTORS

     4   

Class A Director Nominees For Election

     5   

Class B Director Nominees For Election

     7   

CORPORATE GOVERNANCE

     12   

Overview of Corporate Governance

     12   

Company Leadership Structure

     13   

Director Independence and Non-Management Director Meetings

     13   

Meetings and Director Attendance

     14   

Independent Committees of the Board of Directors

     15   

Board of Directors Oversight of Risk

     16   

Analysis of Risks Arising from Compensation Policies and Programs

     16   

Director Nominating Procedures and Diversity

     17   

Director Communications

     18   

Audit Committee Communications

     19   

AUDIT COMMITTEE REPORT

     20   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     21   

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     24   

DIRECTOR COMPENSATION

     25   

Director Compensation Table

     26   

Director Equity Table

     27   

COMPENSATION DISCUSSION AND ANALYSIS

     28   

Introduction

     28   

Management and Compensation Highlights

     28   

Fiscal 2016 Performance

     28   

Impact on Pay for Performance

     29   

Looking Forward to Fiscal 2017

     30   

 

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Page

 

Named Executive Officers

     31   

Executive Compensation Governance

     32   

Stockholder Feedback and Compensation Committee Response

     32   

Executive Compensation Programs

     33   

Compensation Program Objectives

     33   

Determination of Compensation for Executives

     33   

Employment Agreements

     35   

Key Components of Executive Compensation

     36   

Compensation Element: Base Salary

     37   

Fiscal 2016: Base Salary

     37   

Overview of Performance-Based Compensation Programs

     37   

Compensation Element: Annual Cash Incentive Awards

     38   

Fiscal 2016: Annual Cash Incentive Awards

     39   

Compensation Element: Long-Term Equity-Based Incentives

     42   

Fiscal 2016: Overview of Long-Term Equity-Based Incentives

     42   

Long-Term Equity-Based Incentive Awards Granted in Fiscal 2016

     44   

Previously Awarded Long-Term Equity-Based Incentives Vested in Fiscal 2016

     45   

Stock Ownership Guidelines

     46   

All Other Compensation

     47   

Employee Benefits

     47   

Other Benefits

     47   

Deferred Compensation

     48   

Related Considerations

     48   

Certain Tax Matters

     48   

Accounting Matters

     48   

Adjustment or Recovery of Awards

     49   

COMPENSATION COMMITTEE REPORT

     49   

EXECUTIVE COMPENSATION MATTERS

     50   

Summary Compensation Table

     50   

Grants of Plan-Based Awards Table

     53   

Executive Employment Agreements and Compensatory Arrangements

     54   

Outstanding Equity Awards at Fiscal 2016 Year-End Table

     60   

 

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Page

 

Option Exercises and Stock Vested During Fiscal 2016 Table

     62   

Non-Qualified Deferred Compensation Table

     64   

Potential Payments Upon Termination or Change in Control

     65   

Potential Payments Upon Termination or Change in Control Tables

     74   

CERTAIN RELATIONSHIPS AND TRANSACTIONS

     80   

Written Related Party Transactions Policy

     80   

Registration Rights Agreements

     80   

Other Agreements, Transactions and Relationships

     81   

(PROPOSAL 2) RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     83   

(PROPOSAL 3) ADVISORY VOTE ON EXECUTIVE COMPENSATION

     85   

(PROPOSAL 4) APPROVAL OF THE RALPH LAUREN CORPORATION AMENDED AND RESTATED 2010 LONG-TERM STOCK INCENTIVE PLAN

     86   

ADDITIONAL MATTERS

     98   

Proxy Procedure and Expenses of Solicitation

     98   

Stockholder Proposals for the 2017 Annual Meeting of Stockholders

     98   

Delivery of Stockholders’ Materials and Householding

     99   

Other Business

     99   

APPENDIX A RALPH LAUREN CORPORATION DEFINITION OF “INDEPENDENT” DIRECTORS

     A-1   

APPENDIX B RALPH LAUREN CORPORATION AMENDED AND RESTATED 2010 LONG-TERM STOCK INCENTIVE PLAN

     B-1   

 

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LOGO

Proxy Statement

for the

Annual Meeting Of Stockholders

General Information Regarding the Annual Meeting of Stockholders and Proxy Materials

 

 

This Proxy Statement is furnished to the stockholders of Ralph Lauren Corporation, a Delaware corporation, in connection with the solicitation by its Board of Directors (the “Board”) of proxies for its 2016 Annual Meeting of Stockholders to be held at the St. Regis Hotel, 20th Floor, 2 East 55th Street, New York, New York on Thursday, August 11, 2016, at 9:30 a.m., local time, and at any adjournments or postponements thereof. A proxy delivered pursuant to this solicitation may be revoked by the person executing the proxy at any time before it is voted by giving written notice to our Secretary, by delivering a later dated proxy, or by voting in person at the 2016 Annual Meeting of Stockholders. The address of our principal executive offices is 650 Madison Avenue, New York, New York 10022.

This Proxy Statement, the Annual Report on Form 10-K (“Annual Report on Form 10-K”) for the fiscal year ending April 2, 2016 and the Notice of Annual Meeting will be made available to our stockholders on our website, http://investor.ralphlauren.com, on or about June 29, 2016.

In this Proxy Statement, we refer to Ralph Lauren Corporation as the “Company,” “we” or “us.” Our fiscal year ends on the Saturday closest to March 31. All references to “Fiscal 2020” represent the fiscal year ending March 28, 2020. All references to “Fiscal 2019” represent the fiscal year ending March 30, 2019. All references to “Fiscal 2018” represent the fiscal year ending March 31, 2018. All references to “Fiscal 2017” represent the fiscal year ending April 1, 2017. All references to “Fiscal 2016” represent the fiscal year ended April 2, 2016. All references to “Fiscal 2015” represent the fiscal year ended March 28, 2015. All references to “Fiscal 2014” represent the fiscal year ended March 29, 2014. All references to “Fiscal 2013” represent the fiscal year ended March 30, 2013. All references to “Fiscal 2012” represent the fiscal year ended March 31, 2012.

Questions and Answers About the Annual Meeting and Voting

 

 

Why did I receive these proxy materials?

You received these proxy materials because you were a stockholder of the Company on June 13, 2016, the record date for the 2016 Annual Meeting of Stockholders (the “Record Date”). At the 2016 Annual Meeting of Stockholders, stockholders will be asked to vote on several items of business. Since it is not practical or convenient for all stockholders to attend the meeting in person, our Board is seeking your proxy to vote on these matters.

How do I attend the Company’s 2016 Annual Meeting of Stockholders?

Only stockholders, their proxy holders and our invited guests may attend the meeting. If you are a stockholder whose shares are registered in your name, please bring photo identification. If you are a stockholder whose shares are held through an intermediary such as a bank or broker and you plan to attend the meeting, please bring photo identification and a letter from your bank or broker that confirms that you are the beneficial owner of those shares or a copy of your account statement reflecting your ownership as of June 13, 2016.

What is the “Notice and Access” model and why did the Company elect to use it?

We are making the proxy materials available to stockholders on the Internet under the Securities and Exchange Commission’s (“SEC”) Notice and Access model. On or about June 29, 2016, we will mail to all stockholders a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) in lieu of mailing a full printed set of the proxy

 

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materials. Accordingly, our proxy materials are first being made available to our stockholders on our website, http://investor.ralphlauren.com, on or about June 29, 2016. The Notice of Internet Availability includes instructions for accessing the proxy materials and voting by telephone or on the Internet. You will also find instructions for requesting a full printed set of the proxy materials in the Notice of Internet Availability.

We believe the electronic method of delivery under the Notice of Internet Availability model will decrease postage and printing expenses, expedite delivery of proxy materials to you and reduce our environmental impact, and we encourage you to take advantage of the availability of the proxy materials on the Internet. If you received the Notice of Internet Availability but would like to receive a full printed set of the proxy materials in the mail, you may follow the instructions in the Notice of Internet Availability for requesting such materials.

How can I get electronic access to the proxy materials?

The Notice of Internet Availability will provide you with instructions for viewing our proxy materials for the 2016 Annual Meeting of Stockholders on the Internet and requesting that we send proxy materials to you by email. The proxy materials are also available on our website at http://investor.ralphlauren.com.

Who is entitled to vote?

Only holders of record of shares of our Class A Common Stock and Class B Common Stock (together, the “Common Stock”) at the close of business on the Record Date are entitled to notice of, and to vote at, the 2016 Annual Meeting of Stockholders and adjournments or postponements thereof. The presence, in person or by proxy, of the holders of one-third of the total number of shares of Common Stock outstanding on the Record Date will constitute a quorum for the transaction of business at the 2016 Annual Meeting of Stockholders.

On June 13, 2016, there were 57,260,482 outstanding shares of Class A Common Stock and 25,881,276 outstanding shares of Class B Common Stock. Except for the election of directors, the Class A Common Stock and Class B Common Stock vote together as a single class on all matters presented for the consideration of our stockholders. The Class A Common Stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “RL;” the Class B Common Stock is owned by Mr. Ralph Lauren and entities owned by, or established for the benefit of, Mr. R. Lauren, or members of his family. Each owner of record of Class A Common Stock on the record date is entitled to one vote for each share. Each owner of record of Class B Common Stock on the record date is entitled to ten votes for each share.

What is the difference between a “stockholder of record” and a stockholder who holds stock in “street name”?

If you hold shares of the Company directly in your name with our transfer agent, Computershare, you are a “stockholder of record” or “registered stockholder.” The Notice of Internet Availability has been sent directly to you by the Company or by our representative.

If you own your shares indirectly through a broker, bank or other financial institution, your shares are said to be held in “street name.” Technically, your bank or broker will vote those shares. In this case, the Notice of Internet Availability has been forwarded to you by your broker, bank, other financial institution, or other designated representative. Through this process, your bank or broker collects voting instructions from all of its customers who hold shares of the Company and then submits those votes to us.

What are broker discretionary voting and broker non-votes?

For shares held in “street name,” when a broker or bank does not receive voting instructions from its customers, the question arises whether the broker or bank nonetheless has the discretion to vote those shares.

For routine matters, the NYSE gives brokers and banks the discretion to vote, even if they have not received voting instructions from their customers or the “beneficial owners” of such shares. In this Proxy Statement, only the

 

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ratification of our independent registered public accounting firm, Ernst & Young LLP (“Ernst & Young”), (Proposal 2) is a matter considered routine by the NYSE.

For non-routine matters, the NYSE prohibits brokers and banks from casting votes on behalf of the beneficial owners if they have not received voting instructions. When the bank or broker is unable to vote under these rules, it reports the number of unvoted shares to us as “broker non-votes.” In this Proxy Statement, the election of directors (Proposal 1), the advisory vote on executive compensation (Proposal 3) and the approval of our amended and restated 2010 Long-Term Stock Incentive Plan (the “2010 Stock Incentive Plan”) (Proposal 4) are matters considered non-routine by the NYSE. As a result, on each of these items, if you hold your shares in street name, your shares will be voted only if you give instructions to your bank or broker.

What are my voting options and what vote is needed to pass the proposals included in this Proxy Statement?

Only votes cast “FOR” a nominee will be counted in the election of directors. Votes that are withheld with respect to one or more nominees will result in those nominees receiving fewer votes but will not count as a vote against the nominees. You have the right to vote “FOR” or “AGAINST” each of the other proposals, or to “ABSTAIN” from voting. The following table summarizes each proposal, the Board’s recommendation, the affirmative vote required for approval and whether broker discretionary voting is allowed.

 

 Proposal 

Number

 

  

Proposal

 

 

Board
Recommendation

 

 

Affirmative

Vote

Required

for

Approval

 

 

Broker
Discretionary
Voting
Allowed

 

1   

Election of Directors:

 

Three directors (the “Class A Directors”) will be elected by a plurality vote of the shares of Class A Common Stock present in person or by proxy at the 2016 Annual Meeting of Stockholders and eligible to vote.

 

Eight directors (the “Class B Directors”) will be elected by a plurality vote of the shares of Class B Common Stock present in person or by proxy at the 2016 Annual Meeting of Stockholders and eligible to vote.

 

 

FOR
each nominee

 

 

Plurality

vote

 

 

No

 

2

  

 

Ratification of the appointment of Ernst & Young as our independent registered public accounting firm for Fiscal 2017.

 

 

FOR

 

 

 

Majority of
votes cast

 

 

 

Yes

 

3    Approval, on an advisory basis, of the compensation of our named executive officers and our compensation philosophy, policies and practices.   FOR   Majority of
votes cast
  No
4    Approval of an amendment and restatement of our 2010 Stock Incentive Plan to increase the maximum number of shares of the Company’s Class A Common Stock available for award grants under the 2010 Stock Incentive Plan from 6,062,518 shares to 6,972,518 shares and re-approval of the material terms of the performance goals under the 2010 Stock Incentive Plan to extend the five-year period for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).   FOR   Majority of
the votes cast
  No

How will broker non-votes and abstentions be counted?

Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. Only “FOR” and “AGAINST” votes are counted for purposes of determining the votes cast in connection with each proposal. Therefore, broker non-votes and abstentions will not be counted as a vote “FOR” the election of directors in Proposal 1 and will have no effect on determining whether the affirmative vote constitutes a majority of the votes cast with respect to Proposals 2, 3 and 4.

 

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(PROPOSAL 1)

ELECTION OF DIRECTORS

Our Third Amended and Restated By-laws provide that our Board may fix the number of directors constituting the entire Board between six and twenty. The Board has currently fixed the number of directors constituting the entire Board at eleven. Our Board is presently divided into two classes, with all directors being elected annually. Pursuant to our Amended and Restated Certificate of Incorporation, the three Class A Directors will be elected by the holders of Class A Common Stock and the eight Class B Directors will be elected by the holders of Class B Common Stock, each to serve until the 2017 Annual Meeting of Stockholders and until his or her successor is elected and qualified.

Eleven of our current directors have been nominated for re-election at the 2016 Annual Meeting of Stockholders. Joel L. Fleishman, Frank A. Bennack, Jr. and Hubert Joly have been nominated for election as Class A Directors. Ralph Lauren, Stefan Larsson, David Lauren, John R. Alchin, Arnold H. Aronson, Joyce F. Brown, Judith A. McHale and Robert C. Wright have been nominated for election as Class B Directors. We know of no reason why any nominee would be unable or unwilling to serve. If any nominee becomes unable or unwilling to serve for any reason, our Board, based on the recommendation of the Nominating & Governance Committee, may either reduce the number of directors or designate a substitute nominee. If a substitute nominee is designated, the persons named in the enclosed proxy will vote all proxies that would otherwise be voted for the named nominee or nominees for the election of such substitute nominee or nominees.

OUR BOARD RECOMMENDS A VOTE FOR EACH NOMINEE AS A DIRECTOR TO HOLD OFFICE UNTIL THE 2017 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL HIS OR HER SUCCESSOR IS ELECTED AND QUALIFIED. PROXIES RECEIVED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES THAT AUTHORITY IS WITHHELD AS TO ONE OR MORE NOMINEES.

 

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Class A Director Nominees for Election

 

 

 

Frank A. Bennack, Jr.

  Age 83   

Mr. Bennack has been a director of the Company since January 1998. He is Executive Vice Chairman of The Hearst Corporation (“Hearst”) and served as Hearst’s Chief Executive Officer from 1979 to 2002 and then again from June 2008 to June 2013. Mr. Bennack has been the Chairman of the executive committee and Executive Vice Chairman of the board of directors of Hearst since 2002. He serves on the board of Lincoln Center for the Performing Arts, and is also Chairman of the New York-Presbyterian Hospital and The Paley Center for Media, and a Managing Director of the Metropolitan Opera. He has previously served on the boards of Hearst-Argyle Television, Inc., Wyeth Corporation and JPMorgan Chase & Co. The Board has determined that Mr. Bennack is an audit committee financial expert.

    

Experience, Qualifications, Attributes and Skills

    

Mr. Bennack brings to our Board a distinguished career and extensive business experience as Executive Vice Chairman of Hearst, one of the nation’s largest private companies engaged in a broad range of publishing, broadcasting, cable networking and diversified communications activities. His current position as Hearst’s Executive Vice Chairman and previous position as Chief Executive Officer gives him critical insights into the operational issues facing a large corporation and provides our Board with valuable experience in the areas of finance, financial reporting and strategic planning. As a result of his current and past service as a member of the boards of other various public companies and non-profit organizations, he provides our Board with perspective with respect to governance and other important matters that come before our Board. Mr. Bennack has been a member of our Board since 1998, and therefore, his extensive knowledge of our business is a valuable aspect of his service on our Board.

Joel L. Fleishman

  Age 82   

Mr. Fleishman, a director of the Company since January 1999, has been Professor of Law and Public Policy at the Sanford School of Public Policy at Duke University since 1971 and the Director of the Samuel and Ronnie Heyman Center for Ethics, Public Policy and the Professions at Duke University since 1991. He is also the Director of the Center for Strategic Philanthropy and Civil Society. He is a founding member of the board of trustees of the Partnership for Public Service, on which he continues to serve, and also serves on the board of The Hunt Institute. Mr. Fleishman also previously served on the boards of Boston Scientific Corporation and the Urban Institute, including serving as Chairman of the Urban Institute’s board of trustees from 2004 to 2014. He continues to serve as a Life Trustee of the Urban Institute.

 

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Experience, Qualifications, Attributes and Skills

    

Mr. Fleishman brings strong leadership and extensive public policy and legal experience to our Board. He also brings a unique perspective to the Board from his long tenure in the academic world. Mr. Fleishman’s long-standing scholarly work and public service and extensive experience as a professor of law and public policy provides our Board with valuable insight into a variety of legal and ethical issues relevant to us. He also previously served as a board member of Boston Scientific Corporation and, as a result of this service, he has a broad understanding of the operational, financial and strategic issues facing a public company. He has been a member of our Board since 1999 and accordingly, his knowledge of our business is an important aspect of his service on our Board.

Hubert Joly

 

Age 56

  

Mr. Joly has been a director of the Company since June 2009. He has served as the President and Chief Executive Officer of Best Buy Co., Inc. (“Best Buy”) since September 2012. Mr. Joly also serves as a member of Best Buy’s board of directors and has been its Chairman since June 2015. Previously, he served as President and Chief Executive Officer of Carlson from 2008 to 2012, after he joined Carlson in 2004 as President and Chief Executive Officer of Carlson Wagonlit Travel. He also previously served as Executive Vice President, American Assets at Vivendi Universal from 2002 to 2004 and in various other positions at Vivendi Universal since 1999. Mr. Joly is currently a member of the executive committee of the Minnesota Business Partnership, the board of directors of the Retail Industry Leaders Association, and the board of trustees of the Minneapolis Institute of Art. He previously served on the boards of Carlson, The Rezidor Hotel Group, Carlson Wagonlit Travel and the World Travel and Tourism Council. The Board has determined that Mr. Joly is an audit committee financial expert.

    

Experience, Qualifications, Attributes and Skills

    

Mr. Joly brings to our Board extensive management and leadership experience obtained through his current roles as Chairman, President and Chief Executive Officer of Best Buy and formerly as President and Chief Executive Officer of Carlson. His current position as President and Chief Executive Officer, as well as Chairman of the board of directors, of Best Buy gives him critical insights into the operational issues facing a large international corporation, as well as unique perspective on issues and opportunities facing a large multi-channel retailer. In his current position at Best Buy and as a former executive at Carlson, Vivendi Universal and Electronic Data Systems, Mr. Joly possesses a deep understanding of international issues affecting us and he provides our Board with valuable insight in the areas of finance, financial reporting and strategic planning.

 

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Class B Director Nominees For Election

 

 

 

Ralph Lauren

    Age 76      

Mr. Ralph Lauren founded our business in 1967 and, for nearly five decades, has cultivated the iconography of America into a global lifestyle brand. He is currently our Executive Chairman and Chief Creative Officer and has been a director of the Company since prior to our initial public offering in 1997. He had previously been our Chairman and Chief Executive Officer since prior to our initial public offering in 1997 until November 2015. In addition, he was previously a member of our Advisory Board or the Board of Directors of our predecessors since their organization.

    

Experience, Qualifications, Attributes and Skills

    

Mr. R. Lauren is an internationally recognized fashion designer. His unique role as our founder and Chief Creative Officer, as well as his experience as our previous Chief Executive Officer, provides our Board with valuable leadership, including in the areas of design, brand management and marketing. Mr. R. Lauren’s contributions to us since the founding of our business have been instrumental in defining our image and direction. As one of the world’s most innovative design leaders and a fashion icon, his career has spanned nearly five decades that have resulted in numerous unique tributes for his role within the fashion industry. He is uniquely qualified to bring strategic insight, experience and in-depth knowledge of our business and the fashion industry to the Board.

Stefan Larsson

    Age 41      

Mr. Larsson has been our President and Chief Executive Officer and a director of the Company since November 2015. He was the Global President of Old Navy, Inc., a division of The Gap, Inc., from October 2012 to October 2015. Previously, Mr. Larsson held various leadership positions at H&M Hennes & Mauritz AB (“H&M”), serving as Head of Global Sales from 2010 to 2012; Head of Global Expansion from 2009 to 2010; Head of Operations, Global Expansion from 2007 to 2009; and Regional Manager, U.S. West Coast from 2005 to 2007. Prior to that, he served in numerous global roles at H&M with responsibility for products, including merchandising, planning and production.

    

Experience, Qualifications, Attributes and Skills

    

Mr. Larsson brings substantial leadership and business experience to our Board. His 18 years of experience in the fashion and apparel industry provide him with a deep understanding of building brands, product assortment and creation, marketing, global distribution, and supply chain and manufacturing operations. His position as our President and Chief Executive Officer provides our Board with critical perspective into the global issues and opportunities facing our business. Mr. Larsson’s extensive experience in managing global, diversified retail businesses, along with his in-depth knowledge of the fashion and apparel industry, provides our Board with valuable strategic insights into our business.

 

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David Lauren

    Age 44      

Mr. D. Lauren is the Company’s Executive Vice President of Global Advertising, Marketing and Communications. He has been a director of the Company since August 2013. Mr. D. Lauren oversees the Company’s global print and digital advertising campaigns, corporate and fashion communications, strategic marketing partnerships, social media platforms and key philanthropic and citizenship initiatives. Mr. D. Lauren has been instrumental in growing the Company’s global e-commerce business and building the Company’s global fashion image as it has expanded internationally. He serves on the board of trustees of the Ralph Lauren Center for Cancer Care and Prevention and the board of directors of The National Museum of American History. Mr. D. Lauren is also the President of The Polo Ralph Lauren Foundation. Before joining the Company in 2000, he was Editor-In-Chief and President of Swing, a general interest publication for Generation X. Mr. D. Lauren is the son of Mr. R. Lauren.

    

Experience, Qualifications, Attributes and Skills

    

Mr. D. Lauren brings strong leadership and business experience to our Board. He has been instrumental in the development of the Company’s global communications, marketing and advertising campaigns, and brand awareness, and was responsible for growing the Company’s e-commerce business. Mr. D. Lauren has been recognized as a leader on the use of new technologies in retail marketing and on using digital platforms to market luxury brands. His in-depth knowledge of these areas and his current position as our Executive Vice President of Global Advertising, Marketing and Communications provides our Board with valuable insight and perspective into our global brand, marketing, communication and media initiatives.

John R. Alchin

    Age 68      

Mr. Alchin has been a director of the Company since February 2007. He served as Executive Vice President and Co-Chief Financial Officer and Treasurer of Comcast Corporation, a broadband cable provider offering a variety of consumer entertainment and communication products and services, from November 2002 to December 2007. Prior to that, he served as Executive Vice President and Treasurer of Comcast Corporation from January 2000 to November 2002. Mr. Alchin joined Comcast Corporation in 1990 as Senior Vice President and Treasurer. He is currently a member of the board of trustees of BNY Mellon Funds Trust, the board of trustees of the Philadelphia Museum of Art (“PMA”), the board of directors of Xplornet Communications Inc. (“Xplornet”), and the advisory group of Catalyst Investors. Mr. Alchin also serves on the audit committee of BNY Mellon Funds Trust, as Chairman of the PMA finance committee and Chairman of the audit and finance committee of Xplornet. Prior to serving on the board of trustees of BNY Mellon Funds Trust, he served as a member of the board of directors and on the audit committee of BNY Hamilton Funds, Inc. The Board has determined that Mr. Alchin is an audit committee financial expert.

 

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Experience, Qualifications, Attributes and Skills

    

Mr. Alchin brings to the Board substantial business and financial experience. His experience as a Co-Chief Financial Officer and Treasurer of Comcast Corporation, a major broadband cable operator and content and programming supplier, provides our Board with valuable insight in the areas of corporate finance and capital formation, financial reporting, investor relations and treasury functions. Mr. Alchin’s financial expertise offers our Board a deep understanding of accounting and audit-related matters. In addition, his service as a member of the boards of various financial institutions provides our Board with perspective in the areas of corporate finance and governance matters.

Arnold H. Aronson

    Age 81      

Mr. Aronson has been a director of the Company since November 2001. He has been a Managing Director, Retail Strategies at Kurt Salmon, a global management consulting firm specializing in services to retail and consumer products companies, since 1997. In his career, he served as Chairman and Chief Executive Officer of Saks Fifth Avenue, Inc., The Batus Retail Group (the then parent entity of, among others, Saks Fifth Avenue, Marshall Fields and Kohl’s) and subsequently, Woodward & Lothrop/John Wanamaker. Mr. Aronson currently serves as a member of the board of trustees, and its executive committee, of The New School University and is a member of the board of governors and former Chairman of its Parsons School of Design.

    

Experience, Qualifications, Attributes and Skills

    

Mr. Aronson has substantial business and retail industry experience. His experiences as a consultant in a global management consulting firm specializing in retail and consumer products companies and as a chief executive officer of major retail companies provide our Board with valuable insight into operational and strategic issues related to the retail industry. As a former chief executive officer of several major retail entities, including Saks Fifth Avenue, Inc., Mr. Aronson has intimate knowledge in the areas of marketing, financial reporting and merchandising. In addition, his service on the boards of academic institutions provides our Board with valuable understanding of governance matters.

 

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Dr. Joyce F. Brown

    Age 69      

Dr. Brown has been a director of the Company since May 2001. She has been the President of the Fashion Institute of Technology (“FIT”) and Chief Executive Officer of the FIT Foundation since 1998. From 1983 to 1992, Dr. Brown served as Vice Chancellor, as well as the University Dean of the City University of New York and Acting President of Baruch College. From 1993 to 1994, she served as the Deputy Mayor of Public and Community Affairs for the City of New York. From 1994 to 1998, she was a Professor of Clinical Psychology at the Graduate School and University Center of the City University of New York, where she is now Professor Emerita. Dr. Brown has previously served on the boards of USEC Inc., PAXAR Corporation and Linens ‘n Things, Inc.

    

Experience, Qualifications, Attributes and Skills

    

Dr. Brown brings to our Board extensive leadership and insight into the fashion industry through her roles as President of FIT, a complex, multi-faceted college that focuses on educating and preparing the next generation of leaders in the fashion industry, and Chief Executive Officer of the FIT Foundation. Dr. Brown’s professional training as a former psychologist enables her to examine complex interpersonal behaviors that impact the business environment. In addition, Dr. Brown’s prior government service provides our Board with unique perspectives into regulatory issues and processes. She also possesses public company experience as demonstrated by her past service on the boards of Linens ‘n Things, Inc., USEC Inc. and PAXAR Corporation.

Judith A. McHale

    Age 69      

Ms. McHale was appointed a director of the Company in November 2011 and also served as a director of the Company from 2001 to 2009. She has served as the President and Chief Executive Officer of Cane Investments, LLC since 2011. Ms. McHale previously served as the Under Secretary of State for Public Diplomacy and Public Affairs for the U.S. Department of State from 2009 to 2011. In 2006, Ms. McHale worked in partnership with the Global Environment Fund, a private equity firm, to launch the GEF/Africa Growth Fund, an investment vehicle intending to focus on supplying expansion capital to small and medium-sized enterprises that provide consumer goods and services in emerging African markets. From June 2004 to December 2006, Ms. McHale served as the President and Chief Executive Officer of Discovery Communications, Inc., the parent company of Discovery Channel, and served as its President and Chief Operating Officer from 1995 to 2004. She currently serves on the boards of SeaWorld Entertainment, Inc., Hilton Worldwide Holdings Inc. and Yellow Pages Group. She has previously served on the boards of directors of Host Hotel & Resorts, Inc., DigitalGlobe Inc., John Hancock Financial Services, Inc. and Potomac Electric Power Company.

 

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Experience, Qualifications, Attributes and Skills

    

Ms. McHale brings to the Board extensive business and management experience. Through her roles as President and Chief Executive Officer and as Chief Operating Officer of Discovery Communications, Inc., Ms. McHale had broad-based responsibilities with respect to financial reporting, marketing, sales and the creation of product development for a public company which provides the Board with valuable insight into operational and strategic issues facing us. She also possesses public company experience as demonstrated by her current experience on the boards of SeaWorld Entertainment, Inc. and Hilton Worldwide Holdings Inc., as well as her prior experience on the boards of Host Hotel & Resorts, Inc., DigitalGlobe Inc., John Hancock Financial Services, Inc. and Potomac Electric Power Company. In addition, Ms. McHale’s prior government service provides the Board with unique perspectives on governmental matters, regulatory issues and processes.

Robert C. Wright

    Age 73      

Mr. Wright has been a director of the Company since May 2007. He is a Co-Founder of Autism Speaks and has been a Senior Advisor at Lee Equity Partners, LLC, an investment firm, since May 2008 and Chief Executive Officer of the Palm Beach Civic Association since April 2010. He served as the Vice Chairman of the board of directors of General Electric Company (“GE”) and as an Executive Officer and a member of the Corporate Executive Office of GE from 2000 to May 2008. Mr. Wright joined NBC as President and Chief Executive Officer in 1986, and was made Chairman and Chief Executive Officer of the network in 2001. He then served as Chairman and Chief Executive Officer of NBC Universal from 2004 to 2007. Prior to his association with NBC and NBC Universal, Mr. Wright served as President of General Electric Financial Services and, before that, as President of Cox Cable Communications. Mr. Wright serves on the board of directors of AMC Networks Inc. and the board of trustees of the New York-Presbyterian Hospital. He has previously served on the board of directors of GE, NBC Universal and EMI Group Global Inc. and the board of trustees for RAND Corporation.

    

Experience, Qualifications, Attributes and Skills

    

Mr. Wright brings to the Board extensive business leadership and management experience. Mr. Wright’s roles as Vice Chairman of GE’s board of directors and President and Chief Executive Officer of NBC Universal give him knowledge and insight into the complex issues facing us, in particular on the operational, financial, strategic planning and corporate governance fronts. These experiences provide him with a thorough understanding of, and appreciation for, the role of the Board. He also possesses public company experience as demonstrated by his experience on the board of AMC Networks Inc. In addition, Mr. Wright’s service as a member of the boards of non-profit organizations provides our Board with an added perspective in the area of social and corporate responsibility.

 

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CORPORATE GOVERNANCE

Overview of Corporate Governance

 

 

The Board and management are committed to sound corporate governance. We have in place a comprehensive corporate governance framework which incorporates the corporate governance requirements of the Sarbanes-Oxley Act of 2002, the SEC and the NYSE. Consistent with our commitment to corporate governance, we do not rely on the exceptions from certain of the NYSE’s corporate governance listing requirements available to majority controlled companies. Our corporate governance practices include:

 

   

Board Composition, Policies and Practices

 

•     Separate Chairman and Chief Executive Officer roles*

 

•     Majority of Board is independent

 

Board Policies and Practices

 

•     Regular executive sessions of independent directors

 

•     Over 75% Board and Committee meeting attendance

 

Board Committees

 

•     Board Committees are independent

 

•     Majority of Audit Committee consists of financial experts

 

Stockholder Engagement

 

•     All directors are elected annually

 

•     Stockholder advisory vote on executive compensation is held annually

 

•     Continued engagement with the Company’s investors to solicit feedback on a variety of corporate governance topics

 

* Effective as of November 2, 2015, the Company appointed Mr. Stefan Larsson as President and Chief Executive Officer. Mr. Ralph Lauren, who had been the Chairman of the Board and Chief Executive Officer of our Company until Mr. Larsson’s appointment, continues to serve the Company in his new role as Executive Chairman and Chief Creative Officer.

In addition, the key components of our corporate governance framework are set forth in the following documents:

 

   

our Amended and Restated Certificate of Incorporation;

 

   

our Third Amended and Restated By-Laws;

 

   

our Corporate Governance Policies;

 

   

our Audit Committee Charter;

 

   

our Nominating & Governance Committee Charter;

 

   

our Compensation & Organizational Development Committee (the “Compensation Committee”) Charter;

 

   

our Code of Business Conduct and Ethics; and

 

   

our Code of Ethics for Principal Executive Officers and Senior Financial Officers.

Each of the above documents is available on our investor relations website at http://investor.ralphlauren.com by clicking on “Corporate Governance.” Copies of these documents are available to stockholders without charge upon written request to our Investor Relations Department, 625 Madison Avenue, New York, New York 10022. Only the Board may grant a waiver under our codes of ethics to any director or executive officer, and any such waiver, or any amendments to our codes of ethics, will be promptly posted on our website.

 

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In addition, we strive to operate our business in a manner that incorporates our guiding principles and ethics, including having global programs that protect human rights and fair labor practices, instituting supply chain initiatives that protect the environment, and participating in wide ranging community service and philanthropic efforts that assist underserved communities. Our most recently published Citizenship Report on these matters may be found on our investor relations website.

Company Leadership Structure

 

 

In Fiscal 2016, the Company appointed Stefan Larsson as President and Chief Executive Officer. Our founder and creator, Ralph Lauren, who had been the Chairman of the Board and Chief Executive Officer of our Company until Mr. Larsson’s appointment, continues to actively drive the Company’s vision and strategy in his new role as Executive Chairman and Chief Creative Officer.

The Board believes that the Company’s current leadership structure, in which Mr. R. Lauren holds the position of Executive Chairman and Chief Creative Officer and Mr. Larsson holds the position of President and Chief Executive Officer, is appropriate for the Company at this time, taking into consideration the Company’s evolving needs, corporate strategy and operating environment. Mr. R. Lauren’s service as our Executive Chairman and Chief Creative Officer allows the Company to continue to benefit from his unique aesthetic vision, which is an integral component of our success, and from his nearly five decades of experience in leading our Company and creating one of the strongest brands in the world. Mr. Larsson’s service as our President and Chief Executive Officer allows the Company to leverage his extensive leadership and business experience in the fashion and retail industry, including his deep knowledge and understanding of building brands, product creation and assortment, marketing and distribution, supply chain and sourcing on a global scale. For these reasons, the Board believes that the Company’s current leadership structure enables it to fully benefit from the leadership experience and industry background that each of Mr. R. Lauren and Mr. Larsson possesses, and serves the best interests of our stockholders. The Board also believes that appointing a lead independent director is not desirable because the Board’s size, composition and experience together make interaction among all members and communication with management engaging and relatively easy. As a result, we do not have a lead independent director.

Director Independence and Non-Management Director Meetings

 

 

Our Board believes that a majority of our directors should be independent, and has determined that the following non-management directors, which includes each of the current members of our Audit Committee, Compensation Committee and Nominating & Governance Committee, are independent: John R. Alchin, Frank A. Bennack, Jr., Dr. Joyce F. Brown, Joel L. Fleishman, Hubert Joly, Judith A. McHale and Robert C. Wright. Prior to the resignation of Steven P. Murphy from the Board in Fiscal 2016, the Board also determined that he was independent during his tenure as a non-management director. In Fiscal 2017, Arnold H. Aronson was no longer deemed to be independent under our Corporate Governance Policies and the NYSE’s corporate governance listing standards. Mr. Aronson is no longer a member of the Audit Committee or the Nominating & Governance Committee, effective as of the date he was determined to be non-independent.

In considering the independence of our independent directors, we considered, among other factors, commercial transactions made, from time to time, in the ordinary course of business between us and certain entities affiliated with these directors. In the case of each of our independent directors, the transactions have substantially the same terms as are prevailing at the time for comparable businesses and the indirect interest of the independent director in the transaction, if applicable, was found to be immaterial and in amounts that do not impair the independence of the relevant director under our Corporate Governance Policies and the NYSE’s corporate governance listing standards. We also considered charitable contributions to entities affiliated with our independent directors. The indirect interests of our independent directors in these charitable contributions were found to be immaterial and in amounts that do not impair the independence of the relevant director under the NYSE’s corporate governance listing standards. Our guidelines for determining directors’ independence are set forth as Appendix A to this Proxy Statement.

 

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At each of our regularly scheduled Board and committee meetings, the non-management directors participate in an executive session without any members of the Company’s management present. In Fiscal 2016, these executive sessions included all of our non-management directors, each of whom was then considered independent. Beginning in Fiscal 2017, one of our non-management directors is no longer deemed to be independent. Accordingly, the Board will conduct at least one executive session per fiscal year with only independent directors, and without any non-management directors, who are not independent, present. In Fiscal 2016, our independent directors met together as a Board, without any management representatives present, once per quarter. During these executive sessions of independent directors, the Chairs of each of the Audit Committee, the Compensation Committee and the Nominating & Governance Committee presided on a rotating basis based on the topics to be discussed. In addition, our independent directors also met together in executive session without any management representatives present after each regularly scheduled meeting of the Audit Committee, the Compensation Committee and the Nominating & Governance Committee.

Meetings and Director Attendance

 

 

 

 

Type of Meeting

 

 

 

Number of Meetings and Director Attendance

 

   

2015 Annual Meeting of Stockholders

 

Our directors are expected to attend each Annual Meeting of Stockholders. All of our current directors attended the 2015 Annual Meeting of Stockholders.

 

   

Meetings of:

 

•     the Board;

 

•     the Audit Committee;

 

•     the Nominating & Governance         Committee; and

 

•     the Compensation Committee

 

In Fiscal 2016:

 

•     Our Board met five times;

 

•     Our Audit Committee met four times;

 

•     Our Nominating & Governance Committee met three times; and

 

•     Our Compensation Committee met eight times.

 

All of the incumbent members of our Board attended at least 75% of the meetings held by the Board and the committees of the Board on which he or she served.

 

The Board and its committees also act from time to time by unanimous written consent in lieu of meetings.

 

 

 

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Independent Committees of the Board of Directors

 

 

Our Board has established three committees consisting solely of independent directors—the Audit Committee, the Compensation Committee and the Nominating & Governance Committee. The table below indicates the membership of our committees.

 

Director

 

  

Audit

Committee1

 

   Compensation
Committee2

 

   Nominating &            
Governance              
Committee1            

 

 

Alchin, John R.

 

  

 

ü

 

     

 

Bennack, Jr., Frank A.

 

  

 

C

 

  

 

ü

 

  

 

Brown, Dr. Joyce F.

 

  

 

ü

 

     

 

C

 

 

Fleishman, Joel L.

 

     

 

C

 

  

 

ü

 

 

Joly, Hubert

 

  

 

ü

 

  

 

ü

 

  

 

McHale, Judith A.

 

        

 

ü

 

 

Wright, Robert C.

 

        

 

ü

 

 

 

  (C)

Chair

 
  (ü)

Member

 
  (1)

Arnold H. Aronson was a member of each of the Audit Committee and the Nominating & Governance Committee until the date he was determined to be non-independent in Fiscal 2017.

 
  (2)

Steven P. Murphy was a member of the Compensation Committee until his resignation from our Board on May 12, 2015, during our Fiscal 2016.

 

Audit Committee

 

   

Role of the Audit Committee. The Audit Committee appoints our independent registered public accounting firm, and approves in advance all audit and permitted non-audit services performed by them and the scope and cost of their annual audits. The Audit Committee reviews, among other things, (i) the results of the independent registered public accounting firm’s annual audits and quarterly reviews, (ii) management’s compliance with our major accounting and financial reporting policies, (iii) the adequacy of our financial organization and management’s procedures and policies relating to our internal control over financial reporting and (iv) our compliance with applicable laws relating to accounting practice. The Audit Committee has adopted a formal policy for the approval of the performance of all audit and non-audit services of the independent registered public accounting firm. This policy is described under “(PROPOSAL 2) RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.”

 

   

Audit Committee Financial Experts. The Board has determined that each member of the Audit Committee is financially literate and that at least three members of the Audit Committee are audit committee financial experts, as defined by the SEC: Mr. Bennack, its Chair, and Mr. Alchin and Mr. Joly.

Compensation Committee

 

   

Role of the Compensation Committee. The Compensation Committee reviews and approves the compensation of executive officers and certain key members of our senior management, and compensation plans and arrangements with respect to such executive officers and members of senior management. The Compensation Committee also administers the plans in which certain employees may participate, including our 2010 Stock Incentive Plan, which replaced our 1997 Long-Term Stock Incentive Plan (the “1997 Stock Incentive Plan”), our Amended and Restated Executive Officer Annual Incentive Plan (“EOAIP”) and our

 

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Executive Incentive Plan (“EIP”). In addition, the Compensation Committee maintains oversight in the development of succession plans for certain key executive positions within our senior management and may review and provide guidance on certain of our programs relating to our diversity, talent review and leadership development. The Compensation Committee may form and delegate its authority to subcommittees when appropriate.

 

   

Compensation Committee Interlocks and Insider Participation. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board or Compensation Committee. There are no Compensation Committee interlocks. Steven P. Murphy served as an independent member of the Compensation Committee for a portion of Fiscal 2016. In Fiscal 2016, the Company and Mr. Murphy entered into a consulting services agreement, pursuant to which he served as an independent consultant and advised the Company on strategic and business projects. In Fiscal 2016, he was compensated by the Company in the approximate amount of £956,445. Prior to entering into this agreement, Mr. Murphy resigned from our Board.

Nominating & Governance Committee

 

   

Role of the Nominating & Governance Committee. The Nominating & Governance Committee identifies individuals qualified to become directors, recommends director nominees to the Board, develops and recommends corporate governance policies to the Board, reviews related party transactions, exercises oversight of the evaluation of the members of the Board and committees and recommends to the Board policies and principles for Chief Executive Officer succession, selection and performance reviews.

Board of Directors Oversight of Risk

 

 

Our management is responsible for understanding and managing the risks that we face in our business, and the Board is responsible for overseeing management’s overall approach to risk management. The involvement of the full Board in reviewing our strategic objectives and business plans is a significant element of the Board’s assessment of management’s approach and tolerance for risk. In addition, the committees of the Board, primarily through the Audit Committee and Compensation Committee, report to the full Board at regularly scheduled Board meetings on any identified material risks within that committee’s area of responsibilities. The Audit Committee has responsibility for oversight of corporate finance and financial reporting related risks, including those related to our accounting, auditing and financial reporting practices. The Compensation Committee is responsible for the oversight of our compensation policies and practices, including conducting annual risk assessments, and evaluating and approving our executive compensation and benefit plans and programs.

Analysis of Risks Arising from Compensation Policies and Programs

 

 

The Compensation Committee has reviewed an assessment by management of our compensation programs and practices for our employees, including our executive and non-executive programs and practices. This assessment focused on program design features and controls to evaluate whether such programs encourage unnecessary or excessive risk taking, and how policies and programs are structured to mitigate any such risks.

Selected key elements of our compensation programs that were reviewed include the following:

 

   

Pay Mix and Structure. Our executive compensation programs appropriately balance both short-term and long-term performance through our annual cash incentive bonus program and long-term equity awards. Equity awards deliver value to employees through both stock price appreciation and company performance. A significant portion of variable pay is delivered through equity awards with vesting schedules and performance periods covering multiple years, thus emphasizing long-term company performance.

 

   

Incentive Caps. Our executive annual cash incentive bonus plan as well as our non-executive bonus plans do not allow for unlimited payouts. We believe that the range of payouts should be capped to avoid

 

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encouraging decisions that maximize short-term gain at the expense of long-term viability. In addition to caps on all cash incentive bonus awards, performance-based restricted stock units (“PRSUs”) cannot exceed target levels and performance share units (“PSUs”) cannot exceed a fixed percentage above target levels.

 

   

Performance. To strengthen the relationship between pay and performance, our executive annual cash incentive bonus plan, our non-executive commission and bonus plans and performance-based equity awards are subject to the achievement of pre-established performance targets, which are established independently of plan participants. We believe that our incentive plan metrics are appropriately balanced between short-term incentives such as net income before taxes (“NIBT”) for the executive annual cash incentive bonus plan and earnings per share (“EPS”) for PRSUs and long-term metrics such as cumulative EPS for our PSUs.

 

   

Change in Control Policy. The change in control arrangements for our named executive officers (“NEOs”) provide for cash payments only upon actual termination of employment. All unvested equity awards are subject to “double-trigger” vesting so that acceleration of vesting does not occur unless the executive’s employment is actually terminated under certain limited circumstances following a change in control.

 

   

Ownership Guidelines. We have stock ownership guidelines for the NEOs and select other members of our senior management group that are intended to align the interests of these individuals with our stockholders. As a result, such individuals may be less likely to take short-term risk if a meaningful portion of their personal financial investment is linked to our long-term holdings.

 

   

Clawback Policy. We have adopted a clawback policy applicable to our NEOs. Under our clawback policy, the Compensation Committee may, in its reasonable discretion, require a NEO to reimburse us for the amount of any payment previously received by such officer under our cash incentive bonus plan as well as our long-term equity plan if, as a result of such officer’s intentional misconduct or gross negligence, we are required to restate our financial statements.

As a result of this review, the Compensation Committee determined that any risks that may result from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on our Company.

Director Nominating Procedures and Diversity

 

 

The Nominating & Governance Committee identifies and evaluates candidates for nomination as directors and submits its recommendations to the full Board for its consideration. The Nominating & Governance Committee, guided by the membership criteria established by the Board in our Corporate Governance Policies, seeks highly qualified candidates who combine a broad spectrum of experience and expertise with a reputation for integrity. We maintain a majority of independent directors and the Board considers a number of factors in selecting director candidates. Although we do not have a formal policy concerning diversity considerations, the Nominating & Governance Committee does consider diversity with respect to viewpoint, skills and experience in determining the appropriate composition of the Board and identifying director nominees. In addition, the Board considers the contributions the individual can make to the Board and management as we strive for a body of directors reflecting different genders, ethnic backgrounds and professional experiences and expertise. In the Board’s annual self-evaluation, one of the factors that the Board considers is whether the membership of the Board provides an adequate mix of characteristics, experience and skills to serve the Company and its stockholders effectively. The Nominating & Governance Committee solicits and receives suggestions for, as well as comments upon, director candidates from other directors, including the Executive Chairman of the Board, and usually engages third parties either to assist in the search for director candidates or to assist in gathering information regarding director candidates’ background and experience. If the Nominating & Governance Committee engages a third party to assist it, the Nominating & Governance Committee approves the fees that we pay for these services.

The Nominating & Governance Committee will consider candidates recommended by our directors, members of management and stockholders, and will evaluate candidates properly recommended by stockholders on the same basis as

 

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other candidates. Candidates should have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Upon receiving a stockholder recommendation, the Nominating & Governance Committee will initially determine the need for additional or replacement members of the Board and then evaluate the candidate based on the information it receives with the stockholder recommendation or that it may otherwise acquire, and may, in its discretion, consult with the Executive Chairman and other members of our Board. If the Nominating & Governance Committee determines that a more comprehensive evaluation is warranted, it may obtain additional information about the director candidate’s background and experience, including by means of interviews with the candidate.

Our stockholders may recommend candidates at any time, but the Nominating & Governance Committee requires recommendations for election at an annual meeting of stockholders to be submitted to the Nominating & Governance Committee no later than 120 days before the first anniversary of the date of the proxy statement sent to stockholders in connection with the previous year’s Annual Meeting of Stockholders in order to be considered for nomination by the Nominating & Governance Committee. The Nominating & Governance Committee believes this deadline is appropriate and in our best interests and those of our stockholders because it ensures that it has sufficient time to evaluate properly all proposed candidates. Therefore, to submit a candidate for consideration for nomination at the 2017 Annual Meeting of Stockholders, a stockholder must submit the recommendation, in writing, by March 1, 2017. The written notice must include:

 

   

all information relating to each potential candidate whom the stockholder is recommending that would be required to be disclosed in a solicitation of proxies for the election of such person as a director pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (“Exchange Act”), including such person’s written consent to being named in the proxy statement as a nominee and to serve as a director if elected;

 

   

the name and address of the stockholder giving the notice, as they appear on the Company’s books, and of the beneficial owner of those shares; and

 

   

the class and number of shares which are owned beneficially or of record by the stockholder and the beneficial owner.

Recommendations must be sent to the Nominating & Governance Committee, Office of the Secretary/Legal Department, Ralph Lauren Corporation, 625 Madison Avenue, New York, New York 10022.

Our stockholders may directly nominate an individual for election as a director at an annual meeting of stockholders by complying with the nominating procedures set forth in our Third Amended and Restated By-laws, which are described below under the caption “Additional Matters—Stockholder Proposals for the 2017 Annual Meeting of Stockholders.”

Director Communications

 

 

Stockholders and interested parties may contact any of our directors, including the Executive Chairman of the Board, the Chairs of the Board’s independent committees, any committee of the Board, the Board’s non-management directors as a group or the entire Board, by writing to them as follows: [Name(s)/Title(s)], c/o Legal Department and Office of the Corporate Secretary, Ralph Lauren Corporation, 625 Madison Avenue, New York, New York 10022. Communications received in this manner will be handled in accordance with the procedures approved by our non-management directors, who have also requested that certain items that are unrelated to the duties and responsibilities of the Board should be excluded, such as spam, junk mail and mass mailings, product complaints, product inquiries, new product suggestions, resumés and other forms of job inquiries, surveys and business solicitations or advertisements. In addition, material that is threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is filtered out will be available to any non-management director upon request.

 

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Audit Committee Communications

 

 

Complaints and concerns relating to accounting, internal control over financial reporting or auditing matters may be communicated to the Audit Committee, which consists solely of non-employee directors, through the Office of the Secretary/Legal Department as described above under “Director Communications.” Any such communication may be anonymous.

All complaints and concerns will be reviewed by the Audit Committee or a designated member of the Audit Committee. If the Audit Committee or its member designee determines that a reasonable basis exists for conducting a formal investigation, the Audit Committee will direct and supervise the investigation, and may retain independent legal counsel, accountants and other advisors as it deems necessary. Confidentiality will be maintained to the fullest extent consistent with the need to conduct an adequate review. Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the Audit Committee.

We will not discharge, demote, suspend, threaten, harass or in any manner discriminate or retaliate against any employee in the terms and conditions of his or her employment or otherwise to the extent prohibited by law based upon any lawful actions of such employee with respect to good faith reporting of complaints regarding accounting, internal controls or auditing matters.

 

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AUDIT COMMITTEE REPORT

The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s system of internal control over financial reporting and the qualifications, independence and performance of the Company’s internal and independent registered public accounting firm. The Audit Committee has the sole authority and responsibility to select, evaluate and, when appropriate, replace the Company’s independent registered public accounting firm. The Audit Committee currently is composed of four independent directors and operates under a written charter adopted by the Audit Committee and ratified by the Board.

Management is responsible for the Company’s financial reporting process, including the Company’s internal control over financial reporting, and for the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles. Ernst & Young, as the Company’s independent registered public accounting firm for Fiscal 2016, was responsible for auditing those financial statements and expressing its opinion as to the fairness of the financial statement presentation in accordance with generally accepted accounting principles, and the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to oversee and review these processes. The Audit Committee is not, however, professionally engaged in the practice of accounting or auditing and does not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or generally accepted accounting principles or as to auditor independence. The Audit Committee relies, without independent verification, on the information provided to us and on the representations made by management and the independent registered public accounting firm.

In this context, the Audit Committee has met and held discussions with management and Ernst & Young, the Company’s independent registered public accounting firm for Fiscal 2016. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed with management, the Company’s internal auditors and Ernst & Young, the Company’s consolidated financial statements for Fiscal 2016 and the Company’s internal control over financial reporting. The Audit Committee also discussed with Ernst & Young the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees). Ernst & Young provided to the Audit Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1, as amended (Independence Discussions with Audit Committees), and the Audit Committee discussed their independence with them. In determining Ernst & Young’s independence, the Audit Committee considered whether their provision of non-audit services to the Company was compatible with maintaining independence. The Audit Committee received regular updates on Ernst & Young’s fees and the scope of audit and non-audit services it provided. All such services were provided consistent with applicable rules and the Company’s pre-approval policies and procedures.

Based on our discussions with management, the Company’s internal auditors and Ernst & Young and our review of the audited financial statements, including the representations of management and Ernst & Young with respect thereto, and subject in all cases to the limitations on our role and responsibilities referred to above and set forth in the Audit Committee Charter, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements for Fiscal 2016 be included in the Company’s Annual Report on Form 10-K.

The Audit Committee also approved, subject to stockholder ratification, the selection of Ernst & Young as the Company’s independent registered public accounting firm for Fiscal 2017.

Members of the Audit Committee

Frank A. Bennack, Jr. (Chair)

John R. Alchin

Dr. Joyce F. Brown

Hubert Joly

 

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Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of June 13, 2016 by: (i) each of our NEOs, (ii) each director, (iii) each stockholder who is known by us to beneficially own in excess of five percent of any class of our voting securities and (iv) all directors and executive officers as a group. Except as otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned by such person. The rules of the SEC consider a person to be the “beneficial owner” of any securities over which the person has or shares voting power or investment power. In addition, a person is deemed to be the beneficial owner of securities if that person has the right to acquire beneficial ownership of such securities within 60 days, including through conversion or exercise of an option or other right. Unless otherwise indicated below, the address of each stockholder is 650 Madison Avenue, New York, New York 10022. As of June 13, 2016, there were 751 holders of record of our Class A Common Stock.

 

     Class A
        Common Stock        
  Class B
        Common Stock 1        
  Voting
Power of
Total
Common
    Stock%    
             Number                   %               Number                   %          

 

Ralph Lauren

 

    

 

 

 

 

642,221

 

 

2

 

   

 

 

 

 

1.1%  

 

 

  

 

   

 

 

 

 

25,881,2763

 

 

  

 

   

 

 

 

 

100

 

 

%

 

   

 

 

 

 

81.9%

 

 

  

 

 

Stefan Larsson

 

    

 

 

 

 

2,720

 

 

4

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

David Lauren

 

    

 

 

 

 

30,770

 

 

5

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

6 

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Valérie Hermann

 

    

 

 

 

 

11,964

 

 

7

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Robert L. Madore

 

    

 

 

 

 

7,968

 

 

8

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Jackwyn L. Nemerov

 

    

 

 

 

 

196,344

 

 

9

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Christopher H. Peterson

 

    

 

 

 

 

42,640

 

 

10

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Mitchell A. Kosh

 

    

 

 

 

 

15,974

 

 

11

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

John R. Alchin

 

    

 

 

 

 

20,721

 

 

12

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Arnold H. Aronson

 

    

 

 

 

 

13,153

 

 

13

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Frank A. Bennack, Jr.

 

    

 

 

 

 

24,480

 

 

14

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Dr. Joyce F. Brown

 

    

 

 

 

 

10,344

 

 

15

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Joel L. Fleishman

 

    

 

 

 

 

22,333

 

 

16

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Hubert Joly

 

    

 

 

 

 

14,039

 

 

17

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Judith A. McHale

 

    

 

 

 

 

5,636

 

 

18

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

Robert C. Wright

 

    

 

 

 

 

25,114

 

 

19

 

   

 

 

 

 

*  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

*

 

 

  

 

 

The Vanguard Group and related parties

 

    

 

 

 

 

4,978,955

 

 

20

 

   

 

 

 

 

8.7%  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

1.6%

 

 

  

 

 

Manulife Financial Corporation and related parties

 

    

 

 

 

 

4,330,172

 

 

21

 

   

 

 

 

 

7.6%  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

1.4%

 

 

  

 

 

BlackRock, Inc. and related parties

 

    

 

 

 

 

3,320,946

 

 

22

 

   

 

 

 

 

5.8%  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

1.1%

 

 

  

 

 

Goldman Sachs Asset Management

 

    

 

 

 

 

3,162,205

 

 

23

 

   

 

 

 

 

5.5%  

 

 

  

 

   

 

 

 

 

 

 

  

 

   

 

 

 

 

 

 

 

 

   

 

 

 

 

1%

 

 

  

 

 

All directors and executive officers as a group (16 persons)

 

    

 

 

 

 

1,086,421

 

 

24

 

   

 

 

 

 

1.9%  

 

 

  

 

   

 

 

 

 

25,881,276

 

 

3 

 

   

 

 

 

 

100

 

 

%

 

   

 

 

 

 

82%

 

 

  

 

 

 

*

Less than 1.0%

 

  (1)

Each share of Class B Common Stock is convertible at the option of the holder into one share of Class A Common Stock. Each share of Class B Common Stock will be automatically converted into one share of Class A Common Stock upon transfer to a person who is not a member of the Lauren family.

 

  (2)

For Mr. R. Lauren, includes 561,009 options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase shares of Class A Common Stock and 35,854 shares of Class A Common Stock held by a revocable trust of which Mr. R Lauren is the sole trustee and sole beneficiary.

 

      

Does not include (i) unvested options representing the right to purchase 26,543 shares of Class A Common Stock, (ii) unvested performance-based stock awards with respect to 143,864 shares of our Class A Common Stock, a portion of which are subject to upward or downward adjustment, and (iii) 431,984 vested time-based restricted share units (“RSUs”) (the underlying shares of our Class A Common Stock for these time-based RSUs will not be delivered until Mr. R. Lauren’s

 

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separation of service from the Company or, if earlier, upon a change in control (as defined in Mr. R. Lauren’s employment agreement)).

 

  (3)

Includes (i) 10,749,906 shares of Class B Common Stock held by a revocable trust of which Mr. R. Lauren is the sole trustee and sole beneficiary, (ii) 1,629,044 shares of Class B Common Stock held by a revocable trust of which Mrs. Ricky Lauren is the sole trustee and sole beneficiary, (iii) an aggregate of 4,289,028 shares of Class B Common Stock held by trusts established for the benefit of Mr. R. Lauren’s issue and of which Mrs. R. Lauren is a trustee and of which Mr. R. Lauren has the power to remove and replace the trustees, provided that Mr. R. Lauren may not serve as the replacement trustee and the replacement trustee is not related or subordinate to Mr. R. Lauren, (iv) 2,370,956 shares of Class B Common Stock held by a trust established for the benefit of Mrs. R. Lauren’s issue and of which Mr. R. Lauren has the power to remove and replace the trustees, provided that Mr. R. Lauren and Mrs. R. Lauren may not serve as the replacement trustees, and (v) 6,842,342 shares of Class B Common Stock held by the Lauren Family, L.L.C., a limited liability company of which Mr. R. Lauren has the power to remove and replace the managers, provided that any such replacement manager is not related to or subordinate to Mr. R. Lauren and Mr. R. Lauren may not serve as manager. The current managers of the Lauren Family, L.L.C. are Mr. R. Lauren and Mrs. R. Lauren’s children, Andrew Lauren, David Lauren and Dylan Lauren. Actions by the Lauren Family, L.L.C. require the consent of a majority of the managers.

 

  (4)

For Mr. Larsson, does not include (i) unvested performance-based stock awards with respect to 49,804 shares of Class A Common Stock and (ii) 26,660 unvested time-based RSUs (the underlying shares of our Class A Common Stock for these time-based RSUs will be delivered in four equal annual installments beginning on November 3, 2016).

 

  (5)

For Mr. D. Lauren, includes options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 21,101 shares of Class A Common Stock. Does not include (i) unvested options representing the right to purchase 1,522 shares of Class A Common Stock, (ii) unvested performance-based stock awards with respect to 3,947 shares of Class A Common Stock, a portion of which are subject to upward or downward adjustment, and (iii) 1,256 unvested time-based RSUs (the underlying shares of our Class A Common Stock for these time-based RSUs will be delivered in two equal annual installments on May 15, 2017 and May 15, 2018).

 

  (6)

An aggregate amount of 6,842,342 shares of Class B Common Stock are held by the Lauren Family, L.L.C., a limited liability company of which Mr. D. Lauren is one of the three current managers. The other two current managers of the Lauren Family, L.L.C. are Mr. R. Lauren’s other children, Andrew Lauren and Dylan Lauren. Actions by the Lauren Family, L.L.C. require the consent of a majority of the managers. Mr. R. Lauren has the power to remove and replace the managers, provided that any such replacement manager is not related to or subordinate to Mr. R. Lauren and Mr. R. Lauren may not serve as manager.

 

  (7)

For Ms. Hermann, includes options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 6,086 shares of Class A Common Stock. Does not include (i) unvested options representing the right to purchase 3,043 shares of Class A Common Stock, (ii) unvested performance-based stock awards with respect to 12,061 shares of Class A Common Stock, a portion of which are subject to upward or downward adjustment, and (iii) 4,216 unvested time-based RSUs (the underlying shares of our Class A Common Stock for these time-based RSUs will be delivered on April 7, 2017).

 

  (8)

For Mr. Madore, includes options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 4,937 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 773 shares of Class A Common Stock and unvested performance-based stock awards with respect to 4,959 shares of Class A Common Stock.

 

  (9)

For Ms. Nemerov, represents options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 196,344 shares of Class A Common Stock. Does not include unvested performance-based stock awards with respect to 93,616 shares of Class A Common Stock, a portion of which are subject to upward or downward adjustment.

 

  (10)

For Mr. Peterson, includes options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 34,182 shares of Class A Common Stock.

 

  (11)

For Mr. Kosh, includes options vested as of June 13, 2016 or within 60 days thereafter representing the right to purchase 13,132 shares of Class A Common Stock. Does not include unvested performance-based stock awards with respect to 2,528 shares of Class A Common Stock, a portion of which are subject to upward or downward adjustment.

 

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Table of Contents
  (12)

For Mr. Alchin, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 4,381 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (13)

For Mr. Aronson, includes 2,650 shares owned by Mr. Aronson’s spouse, 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 4,381 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (14)

For Mr. Bennack, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 4,381 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (15)

For Dr. Brown, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 3,929 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (16)

For Mr. Fleishman, includes 5,589 shares held indirectly in a retirement account, 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 4,381 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (17)

For Mr. Joly, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 6,429 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (18)

For Ms. McHale, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 1,357 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (19)

For Mr. Wright, includes 1,807 restricted shares of Class A Common Stock and vested options representing the right to purchase 4,381 shares of Class A Common Stock. Does not include unvested options representing the right to purchase 278 shares of Class A Common Stock.

 

  (20)

According to a Schedule 13G/A filed on February 10, 2016, The Vanguard Group (“Vanguard”), may be deemed the beneficial owner of 4,978,955 shares of Class A Common Stock with the sole power to vote or direct the vote over 107,003 shares of Class A Common Stock, sole dispositive power over 4,864,925 shares of Class A Common Stock and shared dispositive power over 114,030 shares of Class A Common Stock. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 90,920 shares of the Class A Common Stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments, Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc. is the beneficial owner of 39,193 shares of Class A Common Stock as a result of its serving as investment manager of Australian investment offerings. The address for Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

 

  (21)

According to a Schedule 13G filed on February 16, 2016, Manulife Financial Corporation (“MFC”), may be deemed the beneficial owner of 4,330,172 shares of Class A Common Stock through its parent-subsidiary relationship to Manulife Asset Management (US) LLC (“MAM (US)”), Manulife Asset Management (North America) Limited (“MAM (NA)”) and Manulife Asset Management Limited (“MAML”). MAM (US) is the beneficial owner of 4,196,306 shares of Class A Common Stock. MAM (NA) is the beneficial owner of 38,965 shares of Class A Common Stock and MAML is the beneficial owner of 94,901 shares of Class A Common Stock. Each of MAM (US), MAM (NA) and MAML have sole voting and dispositive power of the shares it beneficially owns. The address for MFC, MAM (NA) and MAML is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5. The address for MAM (US) is 197 Clarendon Street, Boston, Massachusetts 02116.

 

  (22)

According to a Schedule 13G/A filed on January 27, 2016, BlackRock, Inc. (“BlackRock”) may be deemed the beneficial owner of 3,320,946 shares of Class A Common Stock beneficially owned by its subsidiaries, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock (Singapore) Limited, BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, Blackrock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd., BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd., BlackRock Investment Management, LLC, BlackRock Japan Co. Ltd., and BlackRock

 

23


Table of Contents
 

Life Limited, with the sole power to vote or direct the vote over 2,775,426 shares of Class A Common Stock and sole dispositive power over 3,320,946 shares of Class A Common stock. BlackRock’s address is 55 East 52nd Street, New York, New York 10055.

 

  (23)

According to a Schedule 13G filed on February 4, 2016, Goldman Sachs Asset Management, L.P. and GS Investment Strategies, LLC (“GS Investment Strategies” and, together with Goldman Sachs Asset Management, L.P., “Goldman Sachs Asset Management”) may be deemed the beneficial owner of 3,162,205 shares of Class A Common Stock with shared power to vote or direct the vote of 3,136,293 shares of Class A Common Stock and shared dispositive power over 3,162,205 shares of Class A Common stock. Goldman Sachs Asset Management’s address is 200 West Street, New York, New York 10282.

 

  (24)

Includes (i) options vested, as of June 13, 2016 or within 60 days thereafter, granted under our 1997 Stock Incentive Plan and our 2010 Stock Incentive Plan, representing the right to purchase 870,411 shares of Class A Common Stock and (ii) 14,456 unvested restricted shares of Class A Common Stock granted under our 2010 Stock Incentive Plan. Does not include (i) unvested options granted under the 2010 Stock Incentive Plan, representing the right to purchase 34,105 shares of Class A Common Stock, (ii) 310,779 unvested performance-based stock awards, a portion of which are subject to upward or downward adjustment, (iii) 32,132 unvested time-based RSUs, and (iv) 431,984 vested time-based RSUs (the underlying shares of our Class A Common Stock for these time-based RSUs will not be delivered to Mr. R. Lauren until his separation of service from the Company or if earlier, upon a change in control), granted under the 1997 Stock Incentive Plan.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING

COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers to file initial reports of ownership and reports of changes in ownership of our Class A Common Stock with the SEC and to provide copies of these reports to us. These filing requirements also apply to certain beneficial owners of more than ten percent of our Class A Common Stock. To our knowledge, based solely on our review of the copies of Section 16(a) reports furnished to us during and with respect to Fiscal 2016 and on written representations from certain reporting persons, all reportable transactions during Fiscal 2016 were reported on a timely basis.

 

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Table of Contents

DIRECTOR COMPENSATION

For Fiscal 2016 and beyond, the compensation for non-employee directors is as follows:

 

 

Type of Compensation   Compensation Amount

Annual retainer for each non-employee director1

 

$70,000

Annual retainer for the Chair of each Board Committee1

 

•      Chair of the Audit Committee: $20,000

 

•      Chair of the Compensation Committee: $20,000

 

•      Chair of the Nominating & Governance Committee: $15,000

Annual equity award2

 

Target equity value of $110,000, which is delivered in the form of restricted shares of Class A Common Stock. These restricted shares vest over three years in equal annual installments.

Attendance fee for each Board committee meeting attended1

 

 

$2,000

 

 

  (1)

The annual retainers and attendance fees are paid to the non-employee directors in quarterly installments in arrears.

 

  (2)

The annual equity award to non-employee directors is awarded on April 1 of each year to those non-employee directors who have served as directors for at least half of the preceding fiscal year.

Our Board and Compensation Committee believe it is important for our NEOs, key members of our senior management team and our non-employee directors to build and maintain a long-term ownership position in the Company, to further align their financial interests with those of our stockholders and to encourage the creation of long-term value. Effective June 30, 2010, the Compensation Committee established stock ownership guidelines for our non-employee directors, our NEOs and select other members of our senior management group. Further details on the guidelines for NEOs and certain members of our senior management group are provided in “Compensation Discussion and Analysis—Stock Ownership Guidelines.” In June 2015, the Board approved changes to the stock ownership guidelines for non-employee directors to better align with the competitive practice of focusing on the value of shares owned. The current stock ownership guidelines for the non-employee directors are as follows:

 

   

Ownership requirement is defined as a multiple of annual cash retainer. The target for directors is set at five times the annual cash retainer.

 

   

There is a hold-and-retain requirement of 50% of net equity proceeds acquired via restricted shares vesting and the exercise of stock options until the stock ownership target is attained.

 

   

In addition to counting shares owned outright by the director or his or her family members, unvested restricted shares count toward the achievement of ownership targets.

 

   

As of June 13, 2016, all non-employee directors exceeded their Fiscal 2016 stock ownership target.

We reimburse our non-employee directors for reasonable travel and other related expenses to attend Board and committee meetings and for director education courses. Non-employee directors are also provided with a merchandise discount on most of our products.

 

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Table of Contents

Director Compensation Table

 

 

The following table provides information concerning the compensation of those individuals who served as our non-employee directors during any portion of Fiscal 2016. Directors who are our employees receive no compensation for their services as directors and do not serve on any committees of the Board.

 

Name   

Fees
Earned

or Paid
in Cash1

($)

     Stock
Awards2
($)
     Option
Awards
($)
     Non-Equity
Incentive
Plan
Compensation
($)
    

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings

($)

     All Other
Compensation3
($)
   

Total          

($)          

 

John R. Alchin

     78,000         219,936                                 1,031        298,967             

Arnold H. Aronson

     84,000         219,936                                 1,031        304,967             

Frank A. Bennack, Jr.

     114,000         219,936                                 1,031        334,967             

Dr. Joyce F. Brown

     99,000         219,936                                 1,031        319,967             

Joel L. Fleishman

     112,000         219,936                                 1,031        332,967             

Hubert Joly

     88,000         219,936                                 1,031        308,967             

Judith A. McHale

     76,000         219,936                                 542 4      296,478             

Steven P. Murphy5

     17,500         109,978                                 1,031        128,509             

Robert C. Wright

     76,000         219,936                                 1,031        296,967             

 

  (1)

Reflects the amount of fees paid in arrears for Fiscal 2016. The annual retainer for each non-employee director is $70,000. The annual retainer for the Chair of each of the Audit Committee and Compensation Committee is $20,000 and the Chair of the Nominating & Governance Committee is $15,000. The fee paid to non-employee directors for each meeting of a committee of the Board that such non-employee director attends is $2,000 per committee meeting. In Fiscal 2016, the Audit Committee met four times, the Compensation Committee met eight times and the Nominating & Governance Committee met three times.

 

  (2)

We grant annual stock-based awards to non-employee directors on April 1 of each year. Since our fiscal year ends on the Saturday closest to March 31st, in certain years there may be no grants made during our fiscal year, and in certain years, there may be two years’ worth of grants made during a fiscal year. Fiscal 2016 was a 53-week period, which resulted in our non-employee directors receiving two annual equity award grants during the fiscal year, on each of April 1, 2015 and April 1, 2016. The grants awarded to our non-employee directors during Fiscal 2016 included the following for each non-employee director:

 

   

April 1, 2015: $109,977.62 representing the aggregate grant date fair market value of the annual grant, made on April 1, 2015, of 837 restricted shares of the Company’s Class A Common Stock, calculated in accordance with FASB Accounting Standards Codification topic 718, “Stock Compensation” (“ASC 718”); and

 

   

April 1, 2016: $109,958.70 representing the aggregate grant date fair market value of the annual grant, made on April 1, 2016, of 1,146 restricted shares of the Company’s Class A Common Stock, calculated in accordance with ASC 718.

 

  (3)

This amount represents deferred cash dividends paid during Fiscal 2016 in connection with the vesting of restricted shares of our Class A Common Stock.

 

  (4)

Judith A. McHale rejoined the Board during Fiscal 2012 on November 8, 2011 and thus, she did not receive any grants of restricted shares until Fiscal 2014. During Fiscal 2016, like the rest of our non-employee directors, she received deferred cash dividend payments in connection with the vesting of restricted shares of our Class A Common Stock.

 

  (5)

Steven P. Murphy resigned from the Board on May 12, 2015, during the Company’s Fiscal 2016. Therefore, he received a portion of his annual retainer with respect to the first quarter of Fiscal 2016 when he served as a director. He also received the annual equity award made on April 1, 2015, and deferred cash dividend payments in connection with the vesting of restricted shares of our Class A Common Stock. He did not receive the annual equity award granted on April 1, 2016.

After his resignation, the Company and Mr. Murphy entered into a consulting services agreement, pursuant to which he served as an independent consultant and advised the Company on strategic and business projects. In Fiscal 2016, he was compensated by the Company for his services as an independent consultant in the approximate amount of £956,445.

 

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Director Equity Table

 

 

At the end of Fiscal 2016, each individual who served as a non-employee director for any portion of Fiscal 2016 held options to purchase shares of our Class A Common Stock and restricted shares of our Class A Common Stock as follows:

 

     Options    Restricted Stock

John R. Alchin

       4,659          1,807  

Arnold H. Aronson

       4,659          1,807  

Frank A. Bennack, Jr.

       4,659          1,807  

Dr. Joyce F. Brown

       4,207          1,807  

Joel L. Fleishman

       4,659          1,807  

Hubert Joly

       6,707          1,807  

Judith A. McHale

       1,635          1,807  

Steven P. Murphy1

       3,836          0  

Robert C. Wright

       4,659          1,807  

 

 

(1)

Steven P. Murphy resigned from the Board on May 12, 2015, during the Company’s Fiscal 2016.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

 

 

Management and Compensation Highlights

Fiscal 2016 was a year of transition for our Company as we appointed a new chief executive officer, evolved our organizational structure and responded to stockholder feedback on our compensation programs.

 

   

Appointed a New Chief Executive Officer and Clarified Management Succession. For the first time since the Company’s founding, we appointed a new Chief Executive Officer, with Stefan Larsson succeeding Ralph Lauren. Upon Mr. Larsson’s appointment, Mr. R. Lauren became Executive Chairman and Chief Creative Officer, a position from which he will continue to actively drive the Company’s creative vision and strategy.

 

   

Established Framework for New Global Brand Management Structure. In Fiscal 2016, the Company began its transition to a global brand structure and established six distinct global brand groups. Each brand is run by a brand president and supported by a dedicated team. These global brand groups were created to improve merchandise assortments, product creation and development and improve the customer and direct-to-consumer experience, creating enough differentiation of the brands to engage our customers with a clear brand experience. We believe that this global brand reorganization and our Way Forward Plan (as described below) will allow us to leverage the power of our brands, be more nimble and responsive to the marketplace, maximize growth, achieve meaningful operating and financial efficiencies and drive stockholder value.

 

   

Responded to Stockholder Feedback. In response to stockholder feedback, we modified both our executive long-term incentive program and Mr. R. Lauren’s compensation. Beginning with Fiscal 2016, 100% of our senior executive officers’ annual equity awards are performance-based, using EPS to differentiate from our short-term cash incentive plan. In addition, Mr. R. Lauren agreed to reduce his total compensation by 24% and modify his compensation framework in a manner designed to support and recognize Mr. R. Lauren’s unique contributions as founder, executive, chief designer and spokesperson for the Company.

Fiscal 2016 Performance

Our financial performance was challenged during Fiscal 2016 due to a number of factors, including, foreign exchange rate volatility and a weak global retail environment. The leadership and organizational changes, among others, that we implemented are intended to improve our performance. We made progress on our objectives as follows:

 

   

Assessment of Company, Developed Growth Strategy and Restructuring Plan. Under the leadership of our new Chief Executive Officer, we conducted a formal and comprehensive assessment of the entire organization to determine our strengths and evaluate our challenges and opportunities. The assessment covered all business and operational areas that drive profitability and growth including, brand, product marketing, supply chain and distribution. We also fully assessed our regions, customers and competitors. Using the results of the assessment, we started developing our Fiscal 2017 restructuring plan and multi-year growth strategy. See “Looking Forward to Fiscal 2017” for more details about our restructuring plan and growth strategy.

 

   

Continued Investment in our Infrastructure. We continued to make investments in our global next generation e-commerce platform and SAP implementation in Europe, both of which we believe will enable us to generate revenue growth and margin improvement over the long term.

 

   

Returned Capital to Stockholders. During Fiscal 2016, we repurchased approximately 4.2 million shares of our Class A Common Stock, utilizing approximately $480 million of our aggregate stock repurchase authorization. Over the last three years, the Company has returned approximately $1.5 billion of capital to our

 

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stockholders through share repurchases. We also maintained our quarterly dividend payment of $0.50 per share in Fiscal 2016. Over the last five years we have increased our dividend payments by 400%.

 

 

LOGO

Impact on Pay for Performance

Our Fiscal 2016 financial performance translated directly into the amounts earned under our senior executive compensation programs.1

 

Fiscal 2016 Earned Awards    Performance Measure  

Performance

Period

 

Performance

Result as a % of

Target

  Amount
Earned as a %
of Target

Annual Cash Incentive Bonus:

           
         

Executive Officer Annual Incentive Plan (EOAIP)

 

  

Net Income Before Taxes

(NIBT)

  Fiscal 2016     87%   68%2

Long-term Equity-Based Incentives:

       
         

Cliff-vesting Restricted Performance Share Units (RPSUs)

 

   Net Income  

Fiscal 2014 –  

Fiscal 2016  

  86%   88%
         

Cliff-vesting RPSUs with Total Shareholder Return (TSR) Modifier

 

  

Net Income with TSR modifier relative to S&P 500

 

  Fiscal 2014 –   Fiscal 2016     86% and below  

30th percentile for  

TSR modifier  

 

  66%

(88% x 75%)

Performance-based Restricted Stock Units (PRSUs)3

 

  

Earnings per Share (EPS)

 

  Fiscal 2016     Exceeded

Threshold level

  100%4

 

  (1)

Mr. D. Lauren was not in our senior executive compensation programs for Fiscal 2016 but is in our senior executive compensation programs for Fiscal 2017.

 

  (2)

Includes impact of strategic objective, which can adjust bonus payment by -10% to +10%. For Fiscal 2016, the strategic goal was selling, general, and administrative expenses (excluding expense for cash bonuses and expense for stock awards) as a percentage of net revenues. For Fiscal 2016 there was no adjustment for the strategic goal as the performance expectation was achieved at target level. Any adjustment in annual bonus attributable to the strategic financial goal is not applicable to Mr. R. Lauren.

 

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  (3)

PRSUs vest ratably over a three-year period once the performance level is achieved in the first fiscal year, contingent on continued service. Per the terms of his amended employment agreement, Mr. R. Lauren did not receive PRSUs in Fiscal 2016 as his equity award is 100% performance-based in the form of PSUs, which vest based on our cumulative EPS over a three-year performance period.

 

  (4)

The performance level that needed to be achieved in order for the Fiscal 2016 PRSUs to be earned and available for vesting was the Threshold EPS level of $4.91, which, in this case, was 70% of the target EPS of $7.01. Actual achievement for this goal was $6.42, which was above the Threshold level. Shares will vest on a pro-rata basis at target levels over a three-year period contingent on continued service.

See “Key Components of Executive Compensation – Compensation Element: Annual Cash Incentive Awards” and “Key Components of Executive Compensation – Previously Awarded Long-Term Equity-Based Incentives Vested in Fiscal 2016,” for specific performance measures, payout criteria and results for each of these awards.

Looking Forward to Fiscal 2017

Beginning in the second half of Fiscal 2016, we began a comprehensive assessment of each of the key challenges and value-creating components of the company and, on June 7, 2016, we announced our “Way Forward” strategy and operational and restructuring plan (the “Way Forward Plan”). The Way Forward Plan is intended to strengthen our brand and drive sustainable profitable sales growth. Under the Way Forward Plan, we intend to refocus on our core brands and evolve our product, marketing and shopping experience to increase desirability and relevance. We also intend to evolve our operating model to enable sustainable, profitable sales growth by significantly reducing supply chain lead times, improving our sourcing and executing a disciplined multi-channel distribution and expansion strategy. As part of the Way Forward Plan, we intend to rightsize our cost structure and implement a return on investment-driven financial model to free up resources to invest in the brand and drive high-quality sales. The plan also includes strengthening our leadership team and creating a more nimble organization by moving from an average of nine to six layers of management.

In connection with the Way Forward Plan, we expect to incur total estimated charges of up to $400 million. When substantially completed by the end of Fiscal 2017, we expect to achieve approximately $180 million to $220 million of annualized expense savings associated with the plan. We also expect to incur an additional non-cash charge of up to $150 million associated with the reduction of inventory out of current liquidation channels.

Our Way Forward Plan will serve as the basis for our incentive compensation plans going forward as we continue to closely align our executives’ compensation with performance and increase in stockholder value.

 

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Named Executive Officers

 

 

This Compensation Discussion and Analysis explains our executive compensation programs as it pertains to the following individuals, all of whom were considered NEOs during Fiscal 2016. The changes to our leadership team in Fiscal 2016 are summarized below.

 

  Name

 

  

Title

 

  Ralph Lauren1

 

  

Executive Chairman and Chief Creative Officer

 

  Stefan Larsson1

 

  

President and Chief Executive Officer (“CEO”)

 

  Valérie Hermann2

 

  

Global Brand President, Luxury, Women’s Collections, and World of Accessories

 

  David Lauren3

 

  

Executive Vice President, Global Advertising, Marketing and Communications

 

  Robert L. Madore4

 

  

Corporate Senior Vice President and Chief Financial Officer (“CFO”)

 

  Jackwyn L. Nemerov5

 

  

Former President and Chief Operating Officer (“COO”)

 

  Christopher H. Peterson6

 

  

Former President, Global Brands

 

  Mitchell A. Kosh7

 

  

Former Executive Vice President, Chief Administrative Officer (“CAO”)

 

 

  (1)

On September 29, 2015, the Company announced the change in role for Mr. R. Lauren, from Chairman and CEO to Executive Chairman and Chief Creative Officer, effective as of November 2, 2015, upon the appointment of Mr. Larsson as our President and CEO.

  (2)

Ms. Hermann was promoted to Global Brand President, Luxury, Women’s Collections, and World of Accessories effective as of April 4, 2016, during the Company’s Fiscal 2017. She previously served as Global Brand President, Ralph Lauren Luxury Collections.

  (3)

Mr. D. Lauren has been with the Company since 2000 and has been in his current role leading global advertising, marketing and communications since 2010. In 2013, he became a member of the Company’s Board. Mr. D. Lauren is the son of Mr. R. Lauren. Mr. D. Lauren did not participate in our senior executive compensation programs in Fiscal 2016, but as a result of senior management changes, he became a NEO and will participate in our senior executive compensation programs in Fiscal 2017.

  (4)

Mr. Madore was promoted to Corporate Senior Vice President and CFO effective as of April 1, 2015. He previously served as Senior Vice President, Finance and has been with the Company since 2004. In Fiscal 2017, the Company announced the appointment of Jane Nielsen as Corporate Senior Vice President and CFO, effective as of September 7, 2016 or such date as mutually agreed upon by the Company and Ms. Nielsen. Mr. Madore is expected to remain as the Company’s Corporate Senior Vice President and CFO until the effective date of Ms. Nielsen’s appointment.

  (5)

Ms. Nemerov separated from the Company and resigned as an officer of the Company effective as of November 13, 2015.

  (6)

Mr. Peterson, who served as our Executive Vice President, CAO and CFO for a portion of Fiscal 2016, was promoted to President, Global Brands effective as of April 1, 2015. He separated from the Company and resigned as an officer of the Company effective as of May 31, 2016.

  (7)

Mr. Kosh, who served as our Executive Vice President, Human Resources for a portion of Fiscal 2016, was promoted to Executive Vice President, CAO effective as of April 1, 2015. Mr. Kosh separated from the Company and resigned as an officer of the Company effective as of October 15, 2015.

 

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Executive Compensation Governance

 

 

We seek to maintain high standards with respect to the governance of executive compensation. Key features of our compensation policies and practices that aim to drive performance and align with stockholder interests are highlighted below:

 

     

Our Compensation Practices

(What we do)

 

 

 

Our Prohibited Compensation Practices

(What we don’t do)

ü    At-Risk Compensation: Our incentive-based compensation represents a significant portion of our executives’ compensation (90% or more for both our Executive Chairman and our President and CEO).

 

ü    Stock Ownership Guidelines: We require our NEOs and other select members of our senior management to hold a significant portion of our common stock.

 

ü    Double Trigger Vesting: We provide for double-trigger vesting following a change-of-control for equity awards granted in Fiscal 2013 and beyond for all equity participants.

 

ü    Clawback Policy: Our NEOs are subject to a robust recoupment policy in the event the Company is required to restate its financial statements.

 

ü    Annual Review: We conduct an annual review of our executive compensation program to ensure it rewards executives for strong performance, aligns with stockholder interests, retains top talent, and discourages unnecessary risk taking by our executives.

 

ü    Independent Consultant: We use an independent compensation consultant retained by the Compensation Committee, in its sole discretion, who performs no consulting or other services for the Company’s management.

 

ü    Independent Compensation Committee: Our Compensation Committee is composed solely of independent directors.

 

     

×     No Guaranteed Increases: We do not guarantee salary increases or annual incentives for our NEOs.

 

×     No Hedging: We prohibit the hedging of the Company’s stock by directors, officers, or employees of the Company.

 

×     No Pledging: We prohibit the pledging of the Company’s stock by directors and officers of the Company.

 

×     No Repricing Without Stockholder Approval: We do not reprice underwater stock options without stockholder approval.

 

×     No Discount Grants: We do not provide for grants of equity below fair market value.

   

Stockholder Feedback and Compensation Committee Response

The Compensation Committee considered the results of the non-binding, advisory proposal on our executive compensation philosophy, policies and practices as set forth in our 2015 Proxy Statement, in making executive compensation decisions during Fiscal 2016. In 2015, our stockholders approved our executive compensation program with approximately 91% support. As in prior years, we continued to engage some of our largest investors and solicit and consider feedback on a variety of corporate governance topics, including executive compensation practices.

 

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Changes in Long-Term Incentive Design. Effective Fiscal 2016, our long-term equity incentive program was redesigned to better support our business strategy, drive long-term performance and promote retention of key talent. In particular, we:

 

  Ø  

changed our equity program so that 100% of our NEOs’ annual equity awards will be performance-based;

  Ø  

eliminated grants of stock options;

  Ø  

changed the performance measure used in our long-term equity incentive plans from net income to EPS to differentiate from our short-term cash incentive plan, which utilizes net income as a measure to determine payout; and

  Ø  

discontinued the use of Total Shareholder Return (“TSR”) as a modifier under our long-term incentive plans which we believe is not a meaningful comparative measure given the lack of an appropriate defined peer group.

 

   

Amendment to Employment Agreement with Ralph Lauren. Effective beginning Fiscal 2016, we entered into an amendment to our employment agreement with Mr. R. Lauren (the “Lauren Amendment”), which modified Mr. R. Lauren’s performance and equity-based compensation in a manner designed to closely align his pay to the Company’s performance and to support and recognize Mr. R. Lauren’s unique contributions as founder, executive, lead designer and spokesperson for the Company. In particular, Mr. R. Lauren agreed to the following:

 

  Ø  

reduction of his total target compensation by 24% from $24.75 million to $18.75 million;

  Ø  

modification of his annual equity award so that his long-term incentive payments will be 100% performance-based equity;

  Ø  

elimination of stock options from his annual equity award; and

  Ø  

increase in maximum bonus payout from 150% to 200% of the new target, to reward him with a greater maximum payout for outstanding performance.

During Fiscal 2016, we entered into a second amendment, effective as of November 2, 2015, in connection with Mr. R. Lauren’s change in role to Executive Chairman and Chief Creative Officer, and commencement of Mr. Larsson’s employment as President and CEO. The components of Mr. R. Lauren’s compensation, including his performance and equity-based compensation levels, are set forth in Mr. R. Lauren’s employment agreement, as reduced pursuant to the Lauren Amendment, and are not subject to change by the Company until the expiration of the term of his employment agreement on April 1, 2017.

Executive Compensation Programs

 

 

 

Compensation Program Objectives

We maintain executive compensation programs designed to reward sustained business growth and results. These programs are intended to drive stockholder value through the following principles:

 

   

attract, motivate and retain highly qualified employees;

   

establish challenging goals balanced between short-term and long-term objectives;

   

award a meaningful portion of compensation in variable (versus fixed) pay, with a significant portion of variable compensation in the form of long-term equity awards;

   

promote collaborative leadership behavior designed to achieve goals in a complex global organization; and

   

avoid unnecessary or excessive risk-taking that could reward employees at the expense of stockholders.

Determination of Compensation for Executives

 

   

Market Data. In Fiscal 2016, we operated in three distinct but integrated business segments: wholesale, direct-to-consumer (which includes brick and mortar stores and e-commerce) and licensing, and our primary products included apparel for men, women and children, accessories, home furnishings and fragrance. In

 

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addition, we initiated a reorganization during Fiscal 2016 to highlight our six distinct global brand groups. As a result, we believe our product breadth, multi-channel distribution and global reach are unique among luxury and apparel companies. Accordingly, while the Compensation Committee considers, among other things, competitive market compensation paid by other companies in our industries in establishing our executive compensation programs, it does not use a designated peer group as a primary comparative metric.

In determining the compensation for Mr. Larsson as our new President and CEO, the Compensation Committee reviewed compensation levels at various categories of companies such as leading apparel and accessories manufacturers, high-profile branded retail organizations and companies of similar revenue size and industry. However, the Compensation Committee does not set executive compensation at, or near, any particular target percentile within a peer group. Instead, the Committee uses compensation market data across multiple peer groups as a consideration in setting our executive compensation levels.

 

   

Other Considerations. In addition to market data, the Compensation Committee considers several other factors in determining executive compensation levels, including internal pay equity, nature and scope of responsibility, an employee’s current performance and expected future contributions, succession planning considerations relative to development and retention, and our performance, financial plans and budget.

In determining the compensation for Mr. Larsson, our new President and CEO, the Compensation Committee, in consultation with its independent compensation consultant and independent outside counsel, also considered, among other things, Mr. Larsson’s extensive global retail leadership experience, his prior compensation and achievements at his former employer, the Company’s internal pay equity and his expected future contributions in his role with the Company. See the “Executive Employment Agreements and Compensatory Arrangements” section for a summary of the terms of Mr. Larsson’s employment agreement.

At the time that the Compensation Committee determined the compensation structure under Mr. R. Lauren’s employment agreement, he served as our Chairman and CEO and the Compensation Committee took into consideration that Mr. R. Lauren not only drives the vision and strategy of a unique, complex, global organization with highly successful wholesale, direct-to-consumer and licensing divisions in multiple product categories, but he is also the founder, creator and name behind our brands. Mr. R. Lauren is our chief designer and brings to us extraordinary and rare talent that is unrivaled by others in our industry. His career has resulted in numerous tributes for his contributions to the fashion industry, including the Council of Fashion Designers of America’s four highest honors: The Lifetime Achievement Award, the Womenswear Designer of the Year Award, the Menswear Designer of the Year Award and the Retailer of the Year Award. The Compensation Committee believes that Mr. R. Lauren’s leadership, aesthetic vision, direction and the public’s association of his name and likeness with our branded products are unparalleled, unique and integral components of our success, and that his contributions to our longstanding, consistent achievement over nearly five decades have been, and continue to be, instrumental in creating significant stockholder value. These factors were taken into account with respect to setting Mr. R. Lauren’s compensation opportunity during Fiscal 2016, the terms set forth in his employment agreement entered into on June 26, 2012, and the terms set forth in the Lauren Amendment, which also took into account recent stockholder and proxy advisor feedback. See the “Stockholder Feedback and Compensation Committee Response” section for a summary of the terms of Mr. R. Lauren’s amended employment agreement.

In determining the compensation of our other NEOs, the Compensation Committee considered the impact, scope of responsibility and leadership structure required to support the long-term growth of our business in an increasingly complex global environment. See the “Executive Employment Agreements and Compensatory Arrangements” section for a summary of the terms of the other NEOs’ employment agreements and other compensatory arrangements.

 

   

Role of the Compensation Committee and Management. In addition to its responsibilities to, among other things, review and administer our compensation plans and to maintain oversight in the development of succession plans for certain key executive positions within our senior management, the Compensation Committee is responsible for reviewing and approving the employment agreements for each of our NEOs

 

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which include their salary, bonus and certain other compensation components. In determining the long-term incentive component of the compensation for each of our NEOs pursuant to each of their employment agreements, as applicable, the Compensation Committee considered, among such other factors as it deemed relevant, our performance, long-term stockholder returns, the value of similar incentive awards to executive officers at comparable companies and the awards given to each of our NEOs in past years. As noted above under “Executive Compensation Programs – Determination of Compensation for Executives – Market Data,” while the Compensation Committee considers market information, the Compensation Committee believes that considerations unique to our Company have a greater impact in setting executive compensation. On an annual basis, the Compensation Committee also reviews and approves the corporate performance goals and objectives relevant to the compensation payable to our NEOs.

Subject to previously approved applicable obligations in an officer’s employment agreement, the Compensation Committee also reviews and approves, on an annual basis, the compensation of key members of our senior management, and reviews and approves the corporate performance goals and objectives relevant to the compensation payable to each of them. In addition, the Compensation Committee regularly reviews the design and structure of our executive compensation programs to ensure that management’s interests are closely aligned with stockholders’ interests and that the compensation programs are designed to further our strategic priorities.

 

   

Role of Compensation Consultants. We engage our compensation consultants to assist in reviewing our overall compensation strategy and total compensation package and to provide input on the competitive market for executive talent, evolving executive and director compensation market practices, program design and regulatory compliance. The Compensation Committee retains an independent compensation consulting firm, Steven Hall & Partners (“SHP”), to provide guidance in connection with significant executive compensation decisions. The Compensation Committee has the sole authority to retain and terminate the independent compensation consulting firm and approve the firm’s fees and other retention terms. SHP does not provide other services to the Company or the Company’s management. In Fiscal 2016, the Compensation Committee engaged SHP to provide these independent advisory services, including those in connection with Mr. Larsson’s compensation as reflected in his employment agreement, which is discussed in the “Executive Employment Agreements and Compensatory Arrangements” section below. The Compensation Committee meets with its advisor, as needed, in the Compensation Committee’s sole discretion.

Separate from the Compensation Committee’s consultant, during Fiscal 2016, our Company’s management continued to retain the services of Compensation Advisory Partners, LLC (“CAP”), as its independent compensation consultant. CAP’s role is to assist management in the development and analysis of executive compensation matters.

Employment Agreements

In general, we have a longstanding practice of entering into employment agreements with our corporate officers and select members of our senior management. We believe that employment agreements provide greater assurance of continuity and retention of critical creative and operating talent in a highly competitive industry. All of our NEOs have employment agreements other than Mr. D. Lauren. Employment agreements for our NEOs are reviewed and approved by the Compensation Committee in consultation with the Compensation Committee’s independent compensation consultant and, when appropriate, the Committee’s independently retained legal advisors, and with Mr. R. Lauren and Mr. Larsson with respect to our other NEOs. The terms of Mr. D. Lauren’s compensation arrangement were determined based on his role in the organization and were also approved by the Compensation Committee.

The guidelines for salary, bonus and certain other compensation components for each NEO with an employment agreement are set forth in his or her respective employment agreement. The agreements also provide for certain benefits, including those in the event of various termination or change in control situations. We believe that providing for these benefits in such situations enhances the value of the business by preserving the continuity of management during potential change in control situations and by focusing our senior executives on our long-term priorities. See “Executive Employment Agreements and Compensatory Arrangements,” “Summary Compensation Table” and “Potential Payments

 

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Upon Termination or Change in Control” below for a more detailed description of the payments and benefits provided under each NEO’s employment agreement and other compensatory arrangements.

 

   

New Employment Agreement with Stefan Larsson. In Fiscal 2016, we entered into an employment agreement with Stefan Larsson, our new President and CEO, effective as of November 2, 2015 (the “Larsson Employment Agreement”). The Larsson Employment Agreement provided that Mr. Larsson shall be entitled to an annual equity award and bonus that will be 100% based on the Company’s performance, and also provided for a sign-on equity award, over two-thirds of which will vest based on the Company’s performance. The remaining portion of Mr. Larsson’s sign-on equity award was time-based, which, along with a sign-on cash award, was intended to compensate Mr. Larsson for equity that he forfeited when he left his former employer. Mr. Larsson’s time-based equity award vests ratably over a four-year period.

 

   

Amendment to Employment Agreement with Ralph Lauren. As discussed under “Stockholder Feedback and Compensation Committee Response” above, effective beginning Fiscal 2016, we entered into an amendment to our employment agreement with Mr. R. Lauren.

 

   

New and/or Amended Employment Agreements with Our Other NEOs. In addition, during Fiscal 2016 we entered into a new employment agreement with each of Mr. Madore, Mr. Peterson and Mr. Kosh, in connection with their promotions to Corporate Senior Vice President and CFO, President, Global Brands and Executive Vice President, CAO, respectively. In determining the compensation of each of these executives, we considered, among other things, the increased responsibility of Mr. Madore, Mr. Peterson and Mr. Kosh. Mr. Peterson and Mr. Kosh subsequently separated from the Company effective as of May 31, 2016 and October 15, 2015, respectively. In Fiscal 2017, we entered into a new employment agreement with Ms. Hermann in connection with her promotion to Global Brand President, Luxury, Women’s Collections, and World of Accessories and we announced the appointment of Jane Nielsen as Corporate Senior Vice President and CFO, effective as of September 7, 2016 or such date as mutually agreed upon by us. Mr. Madore is expected to remain as the Company’s Corporate Senior Vice President and CFO until the effective date of Ms. Nielsen’s appointment.

Key Components of Executive Compensation

 

 

 

The principal elements of our senior executive compensation programs are summarized in the following table and described in more detail below.

 

     

Compensation Element

 

  

Performance-Based 

 

 

Objective

 

Base Salary

      

Provide a competitive, fixed level of cash compensation to attract and retain talented and skilled employees

          
Annual Cash Incentive Bonus   

 

ü

 

Motivate and reward employees to achieve or exceed our current-year financial goals with variable cash compensation earned based on achieving pre-established annual goals

          
Long-Term Equity-Based Incentives   

 

ü

 

Align an employee’s interest with that of our stockholders and encourage executive decision-making that maximizes value creation over the long-term with variable equity compensation earned based on achieving pre-established long-term goals

 

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Compensation Element: Base Salary

We pay base salaries to attract and retain talented executives and to provide a fixed base of cash compensation. Base salaries for each of our NEOs are determined and approved by the Compensation Committee. In general, base salaries may be reviewed periodically by the Compensation Committee and are provided in each NEO’s employment agreement other than Mr. D. Lauren.

Fiscal 2016: Base Salary

As of the end of Fiscal 2016, the annual base salaries for our NEOs were as follows:

 

Name/Title

 

  

Fiscal 2016

  Base Salary ($)  

 

 

 

Ralph Lauren

 

Executive Chairman and Chief Creative Officer

 

     1,750,000     

 

Stefan Larsson

 

President and CEO

 

     1,250,000     

 

Valérie Hermann 1

 

Global Brand President, Luxury, Women’s Collections, and World of Accessories

 

     900,000     

 

David Lauren 2

 

Executive Vice President, Global Advertising, Marketing and Communications

 

     850,000     

 

Robert L. Madore 1

 

Corporate Senior Vice President and CFO

 

     700,000     

 

Jackwyn L. Nemerov

 

Former President and COO (until November 13, 2015)

 

     1,000,000     

 

Christopher H. Peterson 1

 

Former President, Global Brands (until May 31, 2016)

 

     1,000,000     

 

Mitchell A. Kosh 1

 

Former Executive Vice President and CAO (until October 15, 2015)

 

     900,000     

 

 

  (1)

The base salaries of Mr. Madore, Mr. Peterson and Mr. Kosh were adjusted to reflect each of their promotions into new roles with expanded responsibility. In April 2015, Mr. Madore’s base salary was increased from $575,000 to $700,000; Mr. Peterson’s base salary was increased from $900,000 to $1,000,000; and Mr. Kosh’s base salary was increased from $850,000 to $900,000. In Fiscal 2017, Ms. Hermann’s base salary was increased from $900,000 to $950,000 to reflect her promotion to a new role with expanded responsibilities.

 

 

  (2)

The base salary of Mr. D. Lauren was adjusted in April 2015 from $775,000 to $850,000 in recognition of his role in the transition of our organization to our new global brand management structure.

 

Overview of Performance-Based Compensation Programs

The Compensation Committee strongly believes that our compensation practices accomplish the goal of pay-for-performance by rewarding our executives for the achievement of both short-term and long-term superior financial and strategic performance. To align our executives’ compensation with stockholders’ interests, the Compensation Committee has concluded that a majority of our executives’ compensation should be at-risk — in the form of annual cash incentive and long-term equity-based awards.

 

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The charts below show the balance of the at-risk elements that comprised the target direct compensation for our NEOs. These charts also correlate to the “Summary Compensation Table” with the exception of Mr. Larsson. The chart for Mr. Larsson represents his annual target direct compensation per the terms of his employment agreement, but does not include his one-time, sign-on cash and equity awards. These charts illustrate the significance of the performance-based portions of our NEO compensation programs relative to total compensation and the alignment with performance and stockholder interests. Based on annual targets, excluding sign-on cash and equity awards, 90% of Mr. Larsson’s target total direct compensation is at-risk. Ninety-one percent of Mr. R. Lauren’s target total direct compensation was at-risk.

 

LOGO

 

  (1) Does not include one-time, sign-on cash and equity awards provided to Mr. Larsson.

 

  (2) Does not include Ms. Nemerov, Mr. Peterson and Mr. Kosh, who have separated from the Company.

Compensation Element: Annual Cash Incentive Awards

We have two cash incentive bonus plans – our EOAIP and our EIP. Each plan is designed to promote executive decision-making and achievement that supports the realization of key overall Company financial goals.

 

   

Amended and Restated Executive Officer Annual Incentive Plan (EOAIP). The EOAIP is a stockholder-approved, short-term cash incentive bonus plan, in which the Compensation Committee determines the eligible EOAIP participants from among our executive officers. Key features of the EOAIP are:

 

  Ø  

Payouts are based on different levels of achievement, which include Threshold, Target and Maximum levels, established by the Compensation Committee each year. In Fiscal 2016, the Compensation Committee determined that the following performance levels were applicable to EOAIP participants:

 

  Threshold    

 

The minimum level of performance for which a bonus is paid is set at 80% of the Target level. No bonuses will be earned if the Threshold level of performance is not achieved

 

 

  Target  

 

 

 

100% achievement of financial goals

 

 

    Maximum    

 

 

 

Achievement at a superior level of performance of up to 110% of the Target level

 

 

  Ø  

No payouts are made in any year in which we fail to earn a profit.

  Ø  

Participants are eligible for a bonus opportunity based 100% on our overall financial performance, without consideration of performance of specific divisions or any discretionary performance factors. Bonus payments are subject to adjustments, if applicable, as described further below.

  Ø  

Participants may have individual payout schedules based upon each such participant’s existing employment agreement.

 

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  Ø  

All bonuses under the EOAIP are capped, subject to the respective employment agreements of each participant.

  Ø  

The Compensation Committee has the authority to:

 

  ¡   

determine the eligible EOAIP participants from among our executive officers;

  ¡   

establish the financial performance goals (from the list of performance measures previously approved by stockholders) and payout schedules, including any adjustments;

  ¡   

to the extent permitted under Section 162(m) of the Code, omit, among other things, the effect of unbudgeted extraordinary items, any gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles;

  ¡   

establish the required achievement levels against pre-determined performance goals under the EOAIP; and

  ¡   

exercise discretion to reduce or eliminate, but not increase, the bonus amounts payable under the EOAIP.

The Compensation Committee believes that the EOAIP is an incentive plan that provides executive officers with compensation that is tightly aligned with their significant roles and broad responsibilities within the Company and reflects their contributions to our overall success.

In connection with their respective promotions during Fiscal 2016, each of Mr. Madore’s, Mr. Peterson’s and Mr. Kosh’s EOAIP targets increased during Fiscal 2016. As a percentage of base salary; Mr. Madore’s target increased from 50% to 75%, Mr. Peterson’s target increased from 200% to 300% and Mr. Kosh’s target increased from 75% to 100%. In Fiscal 2017, in connection with her promotion, Ms. Hermann’s target increased from 150% to 175%.

 

   

Executive Incentive Plan (EIP). Eligible EIP participants are those employees who are in positions of Senior Director level and above (“EIP Participants”), other than those who participate in the EOAIP. Effective Fiscal 2017, Director level employees are also eligible EIP Participants. EIP Participants are eligible to receive a bonus based on the Company’s overall corporate performance or a combination of the Company’s overall corporate performance and their division’s performance. In Fiscal 2016, Mr. D. Lauren’s EIP was based on the Company’s overall corporate performance. Mr. D. Lauren’s EIP target increased from 50% to 75% of base salary during Fiscal 2016 in recognition of his critical role and responsibilities in our new global brand management structure.

Fiscal 2016: Annual Cash Incentive Awards

Each year, we engage in an extensive and deliberate process to establish our financial budget, performance measures and performance targets which are subject to Compensation Committee approval. After our independent auditors issue their audit opinion for the completed fiscal year, the Compensation Committee determines the extent, if at all, to which financial performance has been achieved against pre-established targets and, based upon the degree of achievement, the Compensation Committee approves the annual cash incentive bonuses payable to each NEO under the EOAIP and EIP, as applicable. The Compensation Committee believes that the performance of each of our NEOs is represented by the Company’s financial results and thus, discretionary individual performance is not considered in determining their bonuses.

For Fiscal 2016, under both of the EOAIP and EIP, the corporate performance measure selected was NIBT. The Compensation Committee believes that NIBT is aligned with stockholders’ interests and is a comprehensive indicator of our annual performance. In establishing Fiscal 2016 financial targets, the Compensation Committee took into consideration factors such as: deceleration of the global luxury market, core business slowdown, unfavorable foreign currency exchange rates, and investment costs for operating systems and infrastructure to support our global growth objectives and maximize customer relationship management. As a result, the Compensation Committee established full-year Fiscal 2016 financial goals at a level that would require a sufficiently challenging level of performance, taking into account these factors, in order to achieve target bonus payouts.

 

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Each of Mr. Larsson, Ms. Hermann, Mr. D. Lauren, Mr. Madore and Mr. Peterson may have their respective bonuses adjusted (from minus 10% to plus 10%) based upon the degree of achievement of a previously established additional strategic financial goal. The Compensation Committee also believes that managing the Company’s expenses is an important part of our ongoing strategic objectives. As a result, the strategic financial goal performance measure selected for Mr. Larsson, Ms. Hermann and Mr. Madore was selling, general and administrative expenses (excluding expense for cash bonuses and expense for stock awards) as a percentage of net revenues. In connection with his area of responsibility, Mr. D. Lauren’s strategic goal measured the management of global advertising expenses. The bonus payment for Mr. R. Lauren is based solely on actual financial performance against the Company’s overall performance measures, as selected by the Compensation Committee for the applicable fiscal year, and is not adjusted based on performance against any additional strategic financial goal.

Each of our NEOs was eligible for a bonus in Fiscal 2016 (with the exception of Ms. Nemerov and Mr. Kosh due to each of their resignations from the Company prior to the end of Fiscal 2016) when we reached 80% of the full year NIBT target. In Fiscal 2016, we achieved 87% of the NIBT target which resulted in payment of bonuses less than target. The Compensation Committee believes this level of payout represents strong pay for performance alignment. The following table sets forth our Fiscal 2016 EOAIP and EIP target NIBT goals compared to Fiscal 2015, and actual performance as measured against those goals.

 

Performance Period

 

 

Target Goal
(millions)

 

 

Actual

Performance1
(millions)

 

 

Adjustment for
Strategic Financial
Goal (expense
management)2

 

 

Actual

Compensation
Awarded as % of
Target2

 

 

Fiscal 2016

 

 

 

$882.1

 

 

 

$770.6

 

 

 

0%

 

 

 

68%

 

 

Fiscal 2015

 

 

 

$1,138.7

 

 

 

$1,071.1

 

 

 

0%

 

 

 

85%

 

 

  (1) Represents actual NIBT performance results after giving effect to various adjustments approved by the Compensation Committee.  

 

  (2) For Fiscal 2016 there was no adjustment for the strategic goal, other than for Mr. D. Lauren, as the performance expectation was achieved at target level. The strategic goal adjustment for Mr. D. Lauren was +10%. Any adjustment in annual bonus attributable to the strategic financial goal is not applicable to Mr. R. Lauren.  

 

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The table below sets forth the target bonus and actual Fiscal 2016 bonus for each of our NEOs:

 

Name/Title   

Target

 

 Bonus ($) 

      

Actual Fiscal

 

2016 Bonus ($)

 

 

Ralph Lauren1

 

Executive Chairman and Chief Creative Officer

 

     6,000,000           4,101,695    

 

Stefan Larsson1,3

 

President and CEO

 

     1,546,500           1,051,620    

 

Valérie Hermann1

 

Global Brand President, Luxury, Women’s Collections, and World of Accessories

 

     1,350,000           918,000    

 

David Lauren

 

Executive Vice President, Global Advertising, Marketing and Communications

 

     637,500           476,850    

 

Robert L. Madore1

 

Corporate Senior Vice President and CFO

 

     525,000           357,000    

 

Jackwyn L. Nemerov4

 

Former President and COO

 

     N/A   

 

Christopher H. Peterson1

 

Former President, Global Brands

 

     3,000,000           2,040,000    

 

Mitchell A. Kosh5

 

Former Executive Vice President and CAO

 

     N/A   

 

 

 

  (1)

Target bonus amounts payable to Mr. R. Lauren, Mr. Larsson, Ms. Hermann, Mr. Madore and Mr. Peterson are set forth in their respective employment agreements. Target bonus in Fiscal 2016 reflects a pro-rated amount for Mr. Larsson based on the date that he commenced employment with the Company, on November 2, 2015. Mr. Larsson’s full year target annual bonus is $3,750,000. Target bonus amount payable to Mr. D. Lauren is based on his role in the organization and was approved by the Compensation Committee.

 

 

  (2)

For Fiscal 2016 there was no adjustment for the strategic goal in the EOAIP as the performance expectation was achieved at target level. Any adjustment in annual bonus attributable to the strategic financial goal is not applicable to Mr. R. Lauren. The strategic financial goal in the EOAIP was selling, general and administrative expenses as a percentage of net revenue. Mr. R. Lauren’s actual bonus equaled 68.4% of target as determined by calculating the interpolated amount set forth on the bonus schedule in his employment agreement. For Fiscal 2016 there was a +10% adjustment based on the achievement of the EIP strategic goals set for Mr. D. Lauren. The strategic financial goal for Mr. D. Lauren measured the management of global advertising expenses.

 

 

  (3)

Excludes one-time cash sign-on bonus received by Mr. Larsson as part of his compensation package.

 

  (4)

Ms. Nemerov was not eligible for a bonus payout for Fiscal 2016 as per her separation agreement and release effective as of September 30, 2015.

 

 

  (5)

Mr. Kosh was not eligible for a bonus payout for Fiscal 2016 as per his separation agreement and release effective as of September 29, 2015.

 

 

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Compensation Element: Long-Term Equity-Based Incentives

Long-term equity-based incentives are intended to align executive and stockholder interests and encourage executive decision-making that maximizes stockholder value creation over the long term. The values, mix, and type of annual grants for each senior executive are discussed by management and the Compensation Committee and ultimately approved by the Compensation Committee, unless the terms have been previously approved and set forth in an employment agreement. Mr. Larsson, as an incentive to join the Company, was provided with a one-time sign-on equity award for equity that he forfeited when he left his former company. The terms of these awards are outlined in his employment agreement. For Mr. R. Lauren, the determination of the mix and type of his Fiscal 2016 annual grant was provided for under his employment agreement. We also require, through stock ownership guidelines, that our directors, our NEOs and select other members of our senior management team hold a certain amount of equity in order to build and maintain a long-term ownership position in our Company. See “Stock Ownership Guidelines” below.

Fiscal 2016: Overview of Long-Term Equity-Based Incentives

All equity awards to our NEOs in Fiscal 2016 were granted under our 2010 Stock Incentive Plan. These awards all provide the recipient with the opportunity to receive shares of our Class A Common Stock over a specified period. The achievement of our performance goals, for our performance-based equity awards, is subject to adjustment to exclude the effect of certain unbudgeted events and transactions, as permitted under the 2010 Stock Incentive Plan, in accordance with the rules established by the Compensation Committee at the beginning of each fiscal year.

During Fiscal 2016, these awards consisted of:

 

 

Fiscal 2016 Awards Granted

 

 

 

Performance Measure*

 

 

 

Performance Period

 

 

Performance Share Units (PSUs)

 

 

 

Cumulative Earnings per Share (EPS)

 

 

 

Fiscal 2016 – Fiscal 2018

 

 

Performance-Based Restricted

Stock Units (PRSUs)

 

 

 

EPS

 

 

 

Fiscal 2016

 

 

Performance Shares

 

 

 

Net Income Before Taxes (NIBT)

 

 

 

Fiscal 2017 – Fiscal 2020

 

 

Time-based Restricted Stock Units

(RSUs)**

 

 

 

N/A

 

 

 

N/A

 

* The performance measures for each kind of performance-based equity award were set by the Compensation Committee at the time of grant.

** Time-based awards are only granted to NEOs in limited situations. During Fiscal 2016, we granted time-based RSUs to Mr. Larsson as part of his sign-on equity award when he joined the Company and to Mr. D. Lauren as part of his annual compensation package prior to his determination as a NEO.

Details regarding the PSUs, PRSUs, Performance Shares and time-based RSUs are outlined below.

 

   

PSUs. PSUs granted in Fiscal 2016 will vest based on our cumulative EPS over a three-year performance period. The Compensation Committee chose EPS as the performance measure applicable for performance-based equity grants following collaboration with its independent compensation advisors in conjunction with the analysis of proxy advisor and stockholder feedback. The Compensation Committee believes EPS is an appropriate performance measure since it is a comprehensive metric that assesses our overall performance over a significant period of time, aligns with the creation of stockholder value and differs from the metric used in our short-term cash incentive plan.

 

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The PSU grant provides for a target number of shares that will vest and be paid out subject to achievement of pre-established financial goals. The performance and payout levels are summarized as follows:

 

 

Performance level

 

 

 

% of Goal Achieved

 

 

 

% of PSUs Vested

 

     

Threshold

Target

Maximum

 

 

70%

100%

110%

 

75%

100%

150%

 

No payout is earned for performance below Threshold. Vesting is

interpolated for performance between 70% and 100% of Target, and for

performance between 100% and 110% of Target.

The Compensation Committee believes the payout percentages provide an appropriate balance between the performance levels required relative to the level of payout, based on targets that require significant effort for achievement over a multi-year period. Once an award is granted in any fiscal year, the pre-established performance measures, performance goals, vesting schedule or payout schedule cannot be modified for that grant, unless otherwise approved by the Compensation Committee, during the applicable performance term.

 

   

PRSUs. Beginning in Fiscal 2016, for NEOs other than Mr. R. Lauren and Mr. D. Lauren, we granted PRSUs with a performance threshold for the first fiscal year of the three-year vesting period. All three tranches of the Fiscal 2016 PRSUs were earned and available for vesting based on our achievement of the Fiscal 2016 performance goal. The Compensation Committee believes that the use of EPS as a measure for the award of PRSUs is, like the performance measure utilized for the PSUs, a comprehensive indicator of our annual performance. Unlike the PSUs, PRSUs do not provide for payouts above or below the target shares awarded. If the performance goal for the first fiscal year had not been achieved in Fiscal 2016, all three tranches of the PRSUs would have been forfeited.

The performance level that had to be achieved in order for the Fiscal 2016 PRSUs to be earned and available for vesting was the Threshold level of $4.91, which was 70% of the target EPS of $7.01.

 

   

Performance Shares. Only Mr. Larsson received Performance Shares, which were granted in connection with his appointment. Mr. Larsson’s Performance Shares are a performance-based equity award that vests over a four-year performance period (Fiscal 2017 through Fiscal 2020), and is designed to reward Mr. Larsson if the Company’s earnings increase at a rate of 7.5% year-over-year over the course of the performance period, based on the performance metric of adjusted NIBT and using the Company’s Fiscal 2016 adjusted NIBT as an initial baseline. Although the grant was made by the Company on November 3, 2015, the grant date for accounting purposes under ASC 718 did not occur until after the end of Fiscal 2016. As a result, Mr. Larsson’s Performance Shares are not included in the compensation tables under “Executive Compensation Matters” below. Mr. Larsson’s Performance Shares will be included as Fiscal 2017 grants in the compensation tables in the Company’s 2017 Proxy Statement.

 

   

Time-Based RSUs. In limited situations with respect to our NEOs, such as in connection with new hires and critical retention needs, we will grant time-based RSUs, as we did for Mr. Larsson in Fiscal 2016. Mr. Larsson’s one-time time-based vesting award is discussed in the “Executive Employment Agreements and Compensatory Arrangements” section below. Mr. D. Lauren was also granted time-based RSUs prior to his determination as a NEO during Fiscal 2016. Time-based RSUs replaced Pro-Rata vesting (“Pro-Rata”) restricted performance share units (“RPSUs”) (as described under “Previously Awarded Long-Term Equity-Based Incentives Vested in Fiscal 2016”) as the primary equity vehicle for our broad-based executive population. Mr. D. Lauren’s equity grants for Fiscal 2017 were 100% performance-based.

In addition, certain shares underlying vested time-based RSUs held by Mr. R. Lauren must continue to be held and are not distributable to him until his employment is terminated.

 

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Long-Term Equity-Based Incentive Awards Granted in Fiscal 2016

The Compensation Committee establishes guidelines annually for determining long-term equity-based incentive grants to certain of our employees under the 2010 Stock Incentive Plan. These guidelines generally provide that the type of awards and the number of shares to be granted to employees are based on their position levels within our Company. In Fiscal 2016, with the exception of Mr. D. Lauren, the NEOs received long-term equity-based incentive awards as provided under their respective employment agreements. Mr. D. Lauren’s Fiscal 2016 annual grants were determined based on his role in the organization and approved by the Compensation Committee.

In Fiscal 2016, each of our NEOs received an annual long-term equity award consisting of PSUs, PRSUs and/or time-based RSUs, as applicable. Mr. Larsson also received a grant of Performance Shares, which is not reflected in the table below because the grant date was established in the first quarter of Fiscal 2017, in accordance with ASC 718 as noted above. The grant of Performance Shares to Mr. Larsson will be included in the compensation tables in the Company’s 2017 Proxy Statement.

In Fiscal 2016, each of our NEOs received the following long-term equity grants:

 

Name/Title

 

  

PSUs1

 

      

Performance-

Based RSUs1

 

      

RSUs

 

 

 

Ralph Lauren1

Executive Chairman and Chief Creative Officer

 

  

 

 

 

82,838

 

  

    

 

 

 

 

  

    

 

 

 

 

  

 

Stefan Larsson1,2

President and CEO

  

 

 

 

13,886

 

  

    

 

 

 

              13,887

 

  

    

 

 

 

        26,660

 

  

 

Valérie Hermann1

Global Brand President, Luxury, Women’s Collections, and World of Accessories

 

  

 

 

 

4,707

 

  

    

 

 

 

4,707

 

  

    

 

 

 

 

  

 

David Lauren3

Executive Vice President, Global Advertising, Marketing and Communications

 

  

 

 

 

1,883

 

  

    

 

 

 

 

  

    

 

 

 

1,884

 

  

 

Robert L. Madore1

Corporate Senior Vice President and CFO

 

  

 

 

 

2,071

 

  

    

 

 

 

2,070

 

  

    

 

 

 

 

  

 

Jackwyn L. Nemerov1

Former President and COO

 

  

 

 

 

33,888

 

  

    

 

 

 

33,888

 

  

    

 

 

 

 

  

 

Christopher H. Peterson1

Former President, Global Brands

 

  

 

 

 

16,944

 

  

    

 

 

 

16,944

 

  

    

 

 

 

 

  

 

Mitchell A. Kosh1

Former Executive Vice President and CAO

 

  

 

 

 

3,012

 

  

    

 

 

 

3,012

 

  

    

 

 

 

 

  

 

 

 

  (1)

PSUs and/or PRSUs were granted to all NEOs on May 15, 2015, except Mr. Larsson. Mr. Larsson was granted PSUs and PRSUs effective as of November 3, 2015, shortly after he joined the Company.

  (2)

Pursuant to Mr. Larsson’s employment agreement, time-based RSUs granted in Fiscal 2016 vest in four equal installments on the anniversary of the grant in Fiscal 2017, Fiscal 2018, Fiscal 2019, and Fiscal 2020.

  (3)

Mr. D. Lauren was granted time-based RSUs prior to his determination as a NEO in Fiscal 2016. His time-based RSUs granted in Fiscal 2016 vest in three equal installments on the anniversary of the grant in Fiscal 2017, Fiscal 2018, and Fiscal 2019.

 

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Previously Awarded Long-Term Equity-Based Incentives Vested in Fiscal 2016

Cliff-vesting (“Cliff”) RPSUs, Cliff RPSUs with TSR Modifier, and Pro-Rata RPSUs were part of the Company’s equity incentive program in Fiscal 2015 and in prior years. None of these are awarded under our current long-term equity incentive program.

 

   

Cliff RPSUs. Cliff RPSU awards that were granted in Fiscal 2014 vested in May 2016 based upon our achievement of pre-established financial goals for the three-year performance period (Fiscal 2014-2016). Our cumulative net earnings performance target for this three-year fiscal period from Fiscal 2014 through Fiscal 2016 was approximately $2,660 million. The target for the Fiscal 2014 Cliff RPSUs was based on the three-year plan established during the fall of 2012, as our Fiscal 2014 began on March 31, 2013. In establishing the targets for the Fiscal 2014 Cliff RPSUs, we required ongoing performance improvement based on the three-year plan. The Compensation Committee established the Fiscal 2014 Cliff RPSU financial targets for the three-year performance period to require a higher level of performance relative to Fiscal 2013’s strong results and taking into consideration various other factors, including additional investment costs for new products, retail development and operational infrastructure, as well as increasing global digital presence, and international repositioning of stores. Actual performance for the three-year period was approximately $2,287 million, or approximately 86% of target, after giving effect to various adjustments approved by the Compensation Committee in accordance with the terms of the awards. Based on this performance, the Cliff RPSUs that vested in May 2016 were paid out at 88% of target.

 

   

Cliff RPSUs with TSR Modifier. In addition, Cliff RPSUs with TSR Modifier awards that were granted in Fiscal 2014 vested in May 2016 based on the same cumulative net earnings goal over three fiscal years, in accordance with the vesting percentages described above for Cliff RPSUs, and included a TSR performance modifier. The TSR Modifier was based on relative TSR that compares our TSR (which measures the performance of our stock price and dividends) to the TSR generated by the S&P 500 during the applicable three-year performance period. At the end of the performance period, the Compensation Committee adjusted the final Cliff RPSU with TSR Modifier award by the amount of the TSR Modifier as set forth below:

 

Relative TSR Performance Range

  

    TSR Adjustment    

>80th Percentile

 

  

125%        

 

>60th but <80th Percentile

 

  

112.5%      

 

>40th but <60th Percentile

 

  

100%        

 

>30th but <40th Percentile

 

  

87.5%        

 

< 30th Percentile

 

  

75%        

 

There is no interpolation for performance between identified Relative TSR performance ranges.

The actual three-year TSR performance related to Fiscal 2014 Cliff RPSUs with TSR Modifier was below the 30th percentile. This percentile ranking resulted in a payout multiplier of 75% of the Fiscal 2014 Cliff RPSU award payout. Based on this payout multiplier, the Cliff RPSUs with TSR Modifier were paid out at 66% of target (88% multiplied by 75%).

 

   

Pro-Rata RPSUs. In May 2016, the second and third tranches of Pro-Rata RPSUs, previously granted to Mr. Madore in Fiscal 2015 and 2014, vested based on continuous service. A pro-rated portion of the third tranche of Pro-Rata RPSUs, previously granted to Mr. Kosh in Fiscal 2014, vested in May 2016 in accordance to the terms of his separation agreement and release effective as of September 29, 2015. All three tranches of the Pro-Rata RPSUs were earned and available for vesting based on achievement of the first year performance goal of NIBT which was achieved for both the Fiscal 2015 and Fiscal 2014 Pro-Rata RPSUs.

 

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Stock Ownership Guidelines

 

 

Our Board and Compensation Committee believe it is important for key members of our senior management team and non-employee directors to build and maintain a long-term ownership position in our Company, to further align their financial interests with those of our stockholders and to encourage the creation of long-term value. Our compensation structure for these individuals provides for a significant percentage of compensation to be equity-based, which places a substantial portion of compensation at risk over a long-term period.

In June 2010, the Compensation Committee established stock ownership guidelines for our non-employee directors, our NEOs and select other members of our senior management group to further link the interests of these individuals with those of our stockholders.

In June 2015, the Compensation Committee approved changes to our stock ownership guidelines to better align with competitive practice by focusing on the value of shares owned. The philosophy for the Company’s stock ownership guidelines remains unchanged and continues to apply to our non-employee directors, our NEOs and select other members of senior management. Effective June 2015, our stock ownership guidelines were modified as follows:

 

   

The application of a multiple of salary approach is used to establish stock ownership targets. The five-year threshold for achievement was replaced with a hold-and-retain requirement of 50% of net shares earned from stock award vestings and stock option exercises until the ownership target is met.

   

Unvested time-based RSUs, and PRSUs with a one year performance target, also count toward the achievement of ownership targets.

For all employees who are hired, promoted, or holding a position or title designated as covered by the guidelines after June 30, 2015, the participation date will be as of June 30 in the year following their designation as a participant. As such, Mr. Larsson, as a designated participant, will be subject to the stock ownership guidelines with an effective date of participation on June 30, 2016. His target will be set at six times his annual base salary.

The minimum number of shares required will be determined annually in June using the NEO’s applicable multiple and base salary as of the beginning of the current fiscal year and the average daily closing share price for the 20 trading days ending on May 31 of that year. If at any time the minimum number of shares owned is not achieved, the NEO will be required to retain 50% of the net shares resulting from the vesting of all time-based RSU awards, performance-based awards and 50% of the net shares resulting from the exercise of all stock option awards, until the NEO’s applicable level of ownership is met and maintained. The guidelines for NEOs and other senior members of management were based on competitive multiples of salary depending on such employee’s position within our Company. Further details on the guidelines for non-employee directors are provided in the “Director Compensation” section.

 

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As of the end of Fiscal 2016, the following stock ownership targets were in effect for our NEOs:

 

Name

 

  

Share Ownership Target Value

 

   

Ralph Lauren, Executive Chairman and Chief Creative Officer1

 

  

6 times base salary

 

 

Valérie Hermann, Global Brand President, Luxury, Women’s Collections, and

World of Accessories1

 

  

2 times base salary

 

 

David Lauren, Executive Vice President, Global Advertising, Marketing and

Communications1

 

  

1 times base salary

 

 

Robert L. Madore, Corporate Senior Vice President and CFO2

 

  

2 times base salary

 

 

Jackwyn L. Nemerov, Former President and COO3

 

  

N/A

 

 

Christopher H. Peterson, Former President, Global Brands3

 

  

N/A

 

 

Mitchell A. Kosh, Former Executive Vice President and CAO3

 

  

N/A

 

 

 

  (1)

These designated participants have exceeded their Fiscal 2016 stock ownership target. The participation date for Mr. Larsson under our stock ownership guidelines will be June 30, 2016.

 

  (2)

In Fiscal 2017, the Company announced the appointment of Jane Nielsen as Corporate Senior Vice President and CFO, effective as of September 7, 2016 or such date as mutually agreed upon by the Company and Ms. Nielsen. Mr. Madore is expected to remain as the Company’s Corporate Senior Vice President and CFO until the effective date of Ms. Nielsen’s appointment, after which Mr. Madore will no longer be subject to our stock ownership guidelines.

 

  (3)

Each of Ms. Nemerov and Mr. Kosh separated from our Company prior to the end of Fiscal 2016. Mr. Peterson separated from our Company effective as of May 31, 2016. As a result, they are no longer subject to our stock ownership guidelines.

Shares directly or beneficially owned by an employee subject to the guidelines count toward the achievement of ownership guidelines, including certain shares underlying vested time-based RSUs that may not be distributed to Mr. R. Lauren until his employment is terminated.

All Other Compensation

 

 

Employee Benefits

We provide a number of benefit plans to all eligible employees, including our NEOs. These benefits include programs such as medical, dental, life insurance, business travel accident insurance, short and long-term disability coverage and a 401(k) plan. Our NEOs are also eligible for financial counseling and an annual car allowance (except for those NEOs who receive the use of an automobile and driver as provided below), and in the case of Mr. R. Lauren, Mr. D. Lauren, Mr. Madore, Ms. Nemerov (prior to her resignation) and Mr. Kosh (prior to his resignation), an annual executive physical.

Other Benefits

We provide our NEOs with other benefits that we believe are reasonable, competitive and consistent with our overall executive compensation programs. We believe that these benefits generally allow our executives to work more efficiently, promote our brand and are legitimate business expenses. The costs of these benefits constitute only a small percentage of each NEO’s total compensation. We provide the use of an automobile and driver to Mr. R. Lauren and

 

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Ms. Nemerov (prior to her resignation). In addition, pursuant to his employment agreement and for security purposes, Mr. R. Lauren is required to use private aircraft for any travel and is reimbursed for the expense of such business travel. Furthermore, under Mr. R. Lauren’s current employment agreement, we will reimburse him up to a maximum aggregate amount of $200,000 for any expense incurred as a result of his use of his private aircraft, or other acceptable private aircraft, for personal travel. Under her employment agreement, prior to her resignation, Ms. Nemerov was able to use the Company’s aircraft for any travel. Our other NEOs, including Mr. Larsson, are permitted to use our aircraft for personal travel on a limited basis. In addition, Mr. Larsson is eligible for relocation benefits as provided for in his employment agreement. We also provide a merchandise discount on most of our products to all of our employees, including our NEOs. See the “All Other Compensation” column of the “Summary Compensation Table” and related footnotes for a discussion of all perquisites and other personal benefits provided to our NEOs.

Deferred Compensation

We maintain a Supplemental Executive Retirement Plan (“SERP”) for certain of our employees, generally for those who had a title of Vice President and above when they were admitted to such plan. In October 2004, we ceased admitting new participants under the SERP. During Fiscal 2009, we suspended annual contributions to the SERP, and participants were allowed to withdraw their balances early in the fiscal year ending April 3, 2010 if they no longer wished to remain a participant in the SERP. Participants who remain in the SERP continue to receive interest on SERP balances based on the mid-term Applicable Federal Rate. All participants in the SERP are 100% vested. Mr. Kosh was the only NEO who remained a participant during Fiscal 2016. Mr. Kosh resigned from the Company effective as of October 15, 2015 and his deferred compensation balance will be distributed to him as provided in the SERP.

Related Considerations

 

 

Certain Tax Matters

Although Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to certain of our NEOs, qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. In assessing compensation proposals with respect to our NEOs, the Compensation Committee considers, among other things, the tax deductibility of such compensation, but reserves the right in all events to compensate our NEOs in a manner commensurate with performance and the competitive environment for executive and creative talent. As a result, some or all portions of the compensation paid to a NEO whose compensation is subject to the deduction limits described above may not be deductible by us.

Our EOAIP and 2010 Stock Incentive Plan are generally designed to permit the deductibility of awards payable to our NEOs for federal income tax purposes even if the compensation paid to any such officer exceeds $1,000,000. However, a portion of each of Mr. R. Lauren’s and Mr. Larsson’s annual base salary will not be deductible since it exceeds $1,000,000. In addition, a portion of the compensation attributable to the sign-on equity awards, including the PSUs, the PRSUs and the time-based RSUs, as well as the payment earned under the Fiscal 2016 EOAIP, the cash sign-on bonus and relocation benefits that Mr. Larsson received upon his hire will not be deductible because such awards are not considered performance-based compensation for purposes of Section 162(m). In addition, the compensation attributable to the time-based RSUs previously awarded to Ms. Hermann and Mr. Peterson that vested during Fiscal 2016 will not be deductible, as such awards are not considered performance-based compensation for purposes of Section 162(m). See “Executive Employment Agreements and Compensatory Arrangements.”

Accounting Matters

Each element of the compensation paid to our executives is expensed in our financial statements as required by U.S. generally accepted accounting principles. The financial statement impact of various compensation awards is an important factor that the Compensation Committee considers in determining the amount, form, and design of each pay component for our executives.

 

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Adjustment or Recovery of Awards

The EOAIP includes a formal policy regarding the recovery of awards granted under the EOAIP in connection with a restatement of our financial statements. Under this policy, if, as a result of a NEO’s intentional misconduct or gross negligence, we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee may, in its reasonable discretion, require such executive to promptly reimburse us for the amount of any payment previously received by the executive pursuant to the EOAIP that was earned or accrued during the 12 month period following the earlier of the first public issuance or filing with the SEC of any financial document embodying such financial reporting requirement that required such accounting restatement.

COMPENSATION COMMITTEE REPORT

The Compensation Committee, composed entirely of independent directors, reviewed and discussed the above Compensation Discussion and Analysis (CD&A) with management and with the other members of the Board. Based on these reviews and discussions, the Compensation Committee recommended to the Board that the CD&A be included in our Annual Report on Form 10-K and this Proxy Statement.

Members of the Compensation Committee:

Joel L. Fleishman (Chair)

Frank A. Bennack, Jr.

Hubert Joly

 

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EXECUTIVE COMPENSATION MATTERS

Summary Compensation Table

 

 

The following table sets forth a summary of all compensation awarded or paid to or earned by our NEOs for Fiscal 2016, Fiscal 2015 and Fiscal 2014.

 

  Name and

  Principal Position

 

 

Fiscal

Year

 

   

Salary1
($)

 

   

Bonus2
($)

 

   

Stock
Awards3
($)

 

   

Option
Awards4
($)

 

   

Non-Equity
Incentive Plan
Compensation5
($)

 

 

Change in

Pension Value
and
Nonqualified

Deferred
Compensation
Earnings6

($)

 

 

All Other
Compensation7
($)

 

 

Total8

($)

 

Ralph Lauren

    2016        1,783,654        -        11,000,058        -      4,101,695   -   274,151     17,159,558   

Executive Chairman and Chief Creative Officer

    2015        1,750,000        -        9,701,760        4,576,836      7,657,895   -   271,086     23,957,577   
    2014        1,750,000        -        9,440,416        4,977,166      8,107,759   -   262,595     24,537,936   
                                                             

Stefan Larsson

    2016        528,846        2,750,000        5,857,731        -      1,051,620   -   901,103     11,089,300   

President and CEO

                 
                                                             

Valérie Hermann

    2016        917,308        -        1,203,670        -         918,000   -     18,000     3,056,978   

Global Brand President, Luxury, Women’s

Collections, and World of Accessories

    2015        882,692        2,000,000        2,584,042        325,357      1,147,500   -     28,000     6,967,591   
                 
                                                             

David Lauren

    2016        864,904        -        481,648        -         476,850   -     25,575     1,848,977   

Executive Vice President, Global Advertising, Marketing and Communications

                 
                 
                                                             

Robert L. Madore

    2016        712,500        -        529,465        -         357,000   -     42,955     1,641,920   

Corporate Senior Vice President and CFO

                 
                                                             

Jackwyn L. Nemerov

    2016        634,615        -        8,665,812        -       -   -   466,047     9,766,474   

Former President and COO

    2015        1,000,000        -        6,028,588        2,928,531      2,550,000   -   123,447     12,630,566   
    2014        940,769        -        5,897,707        3,069,526      2,271,500   -   140,829     12,320,331   
                                                             

Christopher H. Peterson

    2016        1,018,462        -        4,332,907        -      2,040,000   -     54,679     7,446,048   

Former President, Global Brands

    2015        900,000        -        1,205,847        585,706      1,530,000   -     53,979     4,275,532   
    2014        840,769        -        1,179,306        618,628      1,435,500   -   251,871     4,326,074   
                                                             

Mitchell A. Kosh

    2016        498,077        -        770,226        -       -   -   442,756     1,715,559   

Former Executive Vice President, CAO

    2015        850,000        -        468,833        227,739         541,875   -     48,036     2,136,483   
    2014        803,846        -        2,002,640        245,219         495,000   -     46,012     3,592,717   
                                                             

 

  (1)

The amounts reported in this column represent base salaries paid to each of the NEOs for the applicable fiscal year as provided for in each of their respective employment agreements or compensation arrangements. Fiscal 2016 was a 53-week period. Each of Fiscal 2015 and Fiscal 2014 was a 52-week period. The amount for Mr. Larsson in Fiscal 2016 reflects base salary paid since he joined the Company effective as of November 2, 2015. The amounts for each of Ms. Nemerov and Mr. Kosh in Fiscal 2016 reflect base salaries paid until their employment with the Company ended on November 13, 2015 and October 15, 2015, respectively. See “Executive Employment Agreements and Compensatory Arrangements.”

 

  (2)

With the exception of Mr. Larsson, who received a $2,750,000 one-time sign-on bonus in connection with his initial hire in Fiscal 2016, and Ms. Hermann, who received a $2,000,000 one-time sign-on bonus in connection with her hire in Fiscal 2015, the NEOs did not receive any discretionary bonuses, sign-on bonuses, or other annual bonus payments that are not contingent on the achievement of stipulated performance goals. Cash bonus payments that are contingent on achieving pre-established, substantially uncertain and communicated goals, including payments under the EOAIP (or in the case of Mr. D. Lauren, under the EIP), appear in the column headed, “Non-Equity Incentive Plan Compensation.”

 

  (3)

The stock-based compensation amounts shown in this column reflect the aggregate grant date fair value, assuming no risk of forfeiture, of PSU, PRSU, RPSU (Pro-Rata RPSU, Cliff RPSU and Cliff RPSU with TSR Modifier), and time-based RSU awards granted during Fiscal 2016, Fiscal 2015 and Fiscal 2014, calculated in accordance with ASC 718. For Cliff RPSU

 

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awards that include a market condition in the form of a TSR Modifier, a Monte Carlo simulation model is used to estimate the award’s fair value on the date of grant. We determine the fair value of PSU, RPSU (without a TSR modifier), and time-based RSU awards using the average of the high and low stock prices on the date of grant, as adjusted to reflect the absence of dividends for those awards that are not entitled to dividend equivalents. For PSUs and RPSUs, the amounts shown in the table reflect the aggregate grant date fair value at the Target achievement level.

If Performance were assumed to be achieved at the Maximum level for PSUs, Cliff RPSUs and Cliff RPSUs with TSR Modifier, the aggregate grant date fair value would increase as follows:

 

    

Fiscal 2016

        

Fiscal 2015

        

Fiscal 2014

      
   PSUs          Cliff
RPSUs
    Cliff RPSUs
with TSR
Modifier
         Cliff
RPSUs
    Cliff RPSUs
with TSR
Modifier
      
                                                    

Ralph Lauren

     $5,500,029            $2,344,731        $4,385,761            $2,317,893        $4,204,052       

Stefan Larssona

     $740,503            N/A        N/A            N/A        N/A       

Valérie Hermannb

     $298,651            $159,494        $288,095            N/A        N/A       

Robert L. Madorec

     $131,401            N/A        N/A            N/A        N/A       

David Laurenc

     $119,473            N/A        N/A            N/A        N/A       

Jackwyn L. Nemerov

     $2,150,133            $1,458,069        $2,723,394            $1,480,047        $2,570,412       

Christopher H. Peterson

     $1,075,066            $291,645        $544,737            $294,226        $516,998       

Mitchell A. Kosh

     $191,106            $113,391        $211,793            $112,594        $203,912       

 

           

 

  (a)

Mr. Larsson received his initial equity award in the form of PSUs, PRSUs, and time-based RSUs on November 3, 2015. His Fiscal 2016 stock award of time-based RSUs can only be paid out at Target. PRSUs can be paid at a range of zero to Target. As previously noted, Mr. Larsson’s Performance Shares will be included in the compensation tables in the Company’s 2017 Proxy Statement.

 

 

  (b)

Ms. Hermann received her initial equity award in the form of Cliff RPSUs, Cliff RPSUs with TSR Modifier and time-based RSUs on her date of hire, April 7, 2014. Her Fiscal 2015 stock award of time-based RSUs can only be paid out at Target.

 

 

  (c)

Mr. Madore and Mr. D. Lauren became NEOs in Fiscal 2016.

 

  (4)

No stock options were granted in Fiscal 2016. The stock-based compensation amounts shown reflect the aggregate grant date fair value, assuming no risk of forfeiture, of stock option awards granted during Fiscal 2015 and Fiscal 2014, calculated in accordance with ASC 718. We use the Black-Scholes option pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions. The assumptions used in the valuation of stock-based awards are discussed in Note 19 to our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2016.

 

  (5)

The amounts reported in this column represent payments made under the EOAIP (or in the case of Mr. D. Lauren, under the EIP) in June following the end of the fiscal year to which the payments relate.

 

  (6)

The NEOs did not receive any above-market or preferential earnings on compensation deferred on a basis that is not tax qualified. See the “Non-Qualified Deferred Compensation Table.”

 

  (7)

The amounts reported in this column represent the aggregate dollar amount for each NEO of all other compensation for the year, including perquisites and other personal benefits. Under SEC rules, we are required to identify by type all perquisites and other personal benefits for a NEO if the total value for that individual equals or exceeds $10,000, and to report and quantify each perquisite or personal benefit that exceeds the greater of $25,000 or 10% of the total amount for that individual.

In Fiscal 2016, Mr. R. Lauren received perquisites and other personal benefits, including: personal use of an automobile and driver ($71,890), enhanced amount of business travel accident coverage, and reimbursement for personal travel ($200,000).

 

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In Fiscal 2016, Mr. Larsson received perquisites and other personal benefits, including: a relocation allowance ($100,000) and relocation expenses ($358,205), tax gross-up related to relocation expenses ($427,748), and an automobile allowance and financial planning services.

In Fiscal 2016, each of Ms. Hermann and Mr. D. Lauren received perquisites and other personal benefits, including an automobile allowance.

In Fiscal 2016, Mr. Madore received perquisites and other personal benefits, including an automobile allowance and financial planning services.

In Fiscal 2016, prior to her separation from the Company, Ms. Nemerov received perquisites and personal benefits, including the use of an automobile and driver, use of the Company’s aircraft ($41,568) and financial planning services. In addition, included in Ms. Nemerov’s amount are severance payments ($384,615) received pursuant to a separation agreement and release that the Company entered into with her in connection with her separation of employment.

In Fiscal 2016, prior to his separation from the Company in Fiscal 2017, Mr. Peterson received perquisites and other personal benefits, including personal use of the Company’s aircraft, an automobile allowance and financial planning services.

In Fiscal 2016, prior to his separation from the Company, Mr. Kosh received perquisites and other personal benefits, including an automobile allowance and financial planning services. In addition, included in Mr. Kosh’s amount are severance payments ($418,846) received pursuant to a separation agreement and release that the Company entered into with him in connection with his separation of employment.

The calculation of incremental cost to the Company for any executive’s personal use of the Company’s aircraft includes the variable costs incurred by the Company as a result thereof, consisting of a portion of aircraft fuel, any flight-related fees and any travel expenses for the flight crew. In addition, Mr. D. Lauren, Ms. Nemerov and Mr. Kosh participated in an executive long-term disability insurance plan in Fiscal 2016, for which the Company incurred no incremental cost.

 

  (8)

The amounts reported in this column are the sum of columns 1 through 7 for each of the NEOs. All compensation amounts reported in this column include amounts paid and amounts deferred.

 

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Grants of Plan-Based Awards Table

 

 

The following table provides information concerning the annual performance bonus and long-term incentive awards made to each of the NEOs in Fiscal 2016.

 

                  

 

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards

   

 

Estimated Future Payouts Under

Equity Incentive Plan Awards

 

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units3

(#)

 

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     Approval Date   Grant Date          Threshold1
($)
    Target1
($)
    Maximum1
($)
    Threshold2
(#)
  Target2
(#)
  Maximum2
(#)
       
Ralph        

 

 

 

 

3,000,000

 

 

  

 

 

 

 

 

 

6,000,000

 

 

  

 

 

 

 

 

 

12,000,000

 

 

  

 

             
Lauren   05/11/2015   05/15/2015     4                              62,129   82,838   124,257                 11,000,058   
Stefan          

 

773,250

 

  

 

   

 

1,546,500

 

  

 

   

 

2,319,750

 

  

 

             
Larsson   11/03/2015

 

  11/03/2015

 

   

 

3

 

  

 

              26,660

 

       

 

2,868,979

 

  

 

    11/03/2015

 

  11/03/2015

 

   

 

4

 

  

 

        10,415

 

  13,886

 

    20,829

 

         

 

1,481,006

 

  

 

    11/03/2015   11/03/2015     5                                       0   13,887     13,887                 1,507,746   
Valérie          

 

675,000

 

  

 

   

 

1,350,000

 

  

 

   

 

2,700,000

 

  

 

             
Hermann   05/11/2015

 

  05/15/2015

 

   

 

4

 

  

 

          3,530

 

    4,707

 

      7,061

 

         

 

597,301

 

  

 

    05/11/2015   05/15/2015     5                     0     4,707       4,707           606,369   
                                                                         
David          

 

318,750

 

  

 

   

 

637,500

 

  

 

   

 

1,275,000

 

  

 

             
Lauren   05/11/2015

 

  05/15/2015

 

   

 

3

 

  

 

                1,884

 

       

 

242,702

 

  

 

    05/11/2015   05/15/2015     4              1,412     1,883       2,825           238,946   
                                                                         
Robert L.          

 

262,500

 

  

 

   

 

525,000

 

  

 

   

 

1,050,000

 

  

 

             
Madore   05/11/2015

 

  05/15/2015

 

   

 

4

 

  

 

          1,553

 

    2,071

 

      3,107

 

         

 

262,802

 

  

 

    05/11/2015   05/15/2015     5                     0     2,070       2,070           266,663   
                                                                         
Jackwyn L.          

 

N/A

 

  

 

   

 

N/A

 

  

 

   

 

N/A

 

  

 

             
Nemerov   05/11/2015

 

  05/15/2015

 

   

 

4

 

  

 

        25,416

 

  33,888

 

    50,832

 

         

 

4,300,265

 

  

 

    05/11/2015   05/15/2015     5                     0   33,888     33,888           4,365,547   
                                                                         
Christopher          

 

1,500,000

 

  

 

   

 

3,000,000

 

  

 

   

 

4,500,000

 

  

 

             
H. Peterson   05/11/2015

 

  05/15/2015

 

   

 

4

 

  

 

        12,708

 

  16,944

 

    25,416

 

         

 

2,150,133

 

  

 

    05/11/2015   05/15/2015     5                     0   16,944     16,944           2,182,774   
                                                                         
Mitchell A.          

 

N/A

 

  

 

   

 

N/A

 

  

 

   

 

N/A

 

  

 

             
Kosh   05/11/2015

 

  05/15/2015

 

   

 

4

 

  

 

          2,259

 

    3,012

 

      4,518

 

         

 

382,212

 

  

 

    05/11/2015   05/15/2015     5                                       0     3,012       3,012                 388,014   

 

  (1)

Represents grants of cash incentive awards under the Company’s EOAIP (or in the case of Mr. D. Lauren, under the EIP). See “Compensation Discussion and Analysis—Key Components of Executive Compensation—Compensation Element: Annual Cash Incentive Awards” for a description of the material terms of these awards. Mr. Larsson’s award is pro-rated based upon his hire date of November 2, 2015. Ms. Nemerov and Mr. Kosh were not eligible for a payout under the EOAIP due to their respective separations from the Company prior to the end of Fiscal 2016.

 

  (2)

Represents the number of PSUs and PRSUs that were granted in Fiscal 2016 under our 2010 Stock Incentive Plan. See “Compensation Discussion and Analysis—Key Components of Executive Compensation—Fiscal 2016: Overview of Long-Term Equity-Based Incentives” for a description of the material terms of these awards.

 

  (3)

Represents time-based RSUs granted in Fiscal 2016 pursuant to Mr. Larsson’s employment agreement and time-based RSUs granted in Fiscal 2016 to Mr. D. Lauren, prior to his determination as a NEO. See “Compensation Discussion and Analysis-Key Components of Executive Compensation—Fiscal 2016: Overview of Long-Term Equity-Based Incentives” and “Executive Employment Agreements and Compensatory Arrangements” for a description of the material terms of these awards.

 

  (4)

Represents the PSU grant.

 

  (5)

Represents the PRSU grant.

 

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Executive Employment Agreements and Compensatory Arrangements

 

 

 

   

Ralph Lauren’s Employment Agreement. During Fiscal 2016, Ralph Lauren was employed as our Chairman of the Board and CEO until November 2, 2015, and as our Executive Chairman and Chief Creative Officer thereafter, pursuant to an amended and restated employment agreement dated June 26, 2012, as amended as of March 29, 2015, and further amended as of November 2, 2015 (the “R. Lauren Employment Agreement”). The key terms of the R. Lauren Employment Agreement are indicated below:

 

  Ø  

Term: The R. Lauren Employment Agreement provides for Mr. R. Lauren’s employment through April 1, 2017, the last day of our Fiscal 2017.

 

  Ø  

Salary: Mr. R. Lauren is entitled to an annual base salary of not less than $1.75 million.

 

  Ø  

Bonus: Mr. R. Lauren’s target bonus is in the amount of $6 million for each of the fiscal years during the term of his agreement. The maximum bonus provided for under his agreement in any fiscal year is 200% of that fiscal year’s target bonus.

 

  Ø  

Equity Awards: Mr. R. Lauren receives an annual stock award grant with an aggregate target grant date fair market value of $11 million for each fiscal year during the term of the agreement. PSUs make up 100% of the awards. Each PSU award vests at the end of a three-year performance period, subject to Mr. R. Lauren’s continued employment with us and our achievement of our performance goals (except in certain circumstances subject to accelerated vesting upon the termination of his employment as discussed below in “Potential Payments Upon Termination or Change in Control—Ralph Lauren”). Three levels of achievement are used to determine vesting: Threshold, Target and Maximum. The Threshold level, which is 70% of the financial goal, must be achieved in order for any PSUs to vest and be provided to him at the end of the applicable vesting period. If performance is at the Threshold level, 75% of Mr. R. Lauren’s target shares plus accrued dividends will vest and be paid out. If performance is at the Target level, which is 100% of the financial goal, then his target shares plus accrued dividends will vest and be paid out. If performance is at the Maximum level, which is 110% or more of the financial goal, then 150% of the target shares plus accrued dividends will vest and be paid out. Vesting with respect to his PSUs shall be interpolated for performance between 70% and 110% of target goal(s) and none of his PSUs shall vest for performance below threshold goal(s).

 

  Ø  

Other Benefits: Under the R. Lauren Employment Agreement, Mr. R. Lauren is required, for security purposes, to use his or other acceptable private aircraft for any travel. In addition to being entitled to reimbursement for any aircraft travel expenses he incurs which are business-related, he is also entitled to reimbursement for any personal aircraft travel expenses which he incurs, without any tax gross-up, up to a maximum aggregate amount of $200,000 per fiscal year. Mr. R. Lauren is also provided with a car and driver paid by us, and is eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers.

 

  Ø  

Non-compete: Under the R. Lauren Employment Agreement, Mr. R. Lauren is prohibited from competing with us anywhere in the world during the term of his employment and for a period of two years after the termination of his employment for any reason.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. R. Lauren under his employment agreement.

 

   

Stefan Larsson’s Employment Agreement. Stefan Larsson has been employed as our President and CEO since November 2, 2015, pursuant to the Larsson Employment Agreement dated September 25, 2015. The key terms of the Larsson Employment Agreement are as follows:

 

  Ø  

Term: The Larsson Employment Agreement provides for Mr. Larsson’s employment through March 28,

 

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2020, the last day of our Fiscal 2020, subject to automatic, successive one-year extensions thereafter unless either party gives at least 180 days’ prior notice that the term will not be extended.

 

  Ø  

Salary: Under the Larsson Employment Agreement, Mr. Larsson is entitled to an annual base salary of not less than $1.25 million.

 

  Ø  

Bonus: Under the Larsson Employment Agreement, Mr. Larsson is entitled to an annual incentive bonus opportunity up to 450% of his annual base salary, subject to the achievement of performance goals established by the Compensation Committee under the EOAIP, with a target bonus of 300% of his annual base salary. For Fiscal 2016, his bonus was pro-rated based on his start date. Mr. Larsson was also eligible to receive a cash sign-on bonus of either $2.75 million or $4.35 million, depending on whether certain of his unvested equity from his prior employer vested prior to his start date.

 

  Ø  

Equity Awards: Under the Larsson Employment Agreement, Mr. Larsson is eligible, starting in Fiscal 2017, to receive annual equity awards under the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $7.5 million. In addition, Mr. Larsson received a one-time equity award (“One-Time Award”) under the 2010 Stock Incentive Plan with a target value of $9,125,000, granted on or before the last day of the fiscal quarter in which his start date occurred. Of this One-Time Award, a target value of $1.5625 million was in the form of PSUs, a target value of $1.5625 million was in the form of PRSUs, a target value of $3 million was in the form of time-based RSUs and a target value of $3 million was in the form of Performance Shares. The PSUs and the PRSUs were subject to the same performance goals and vesting period as those granted on May 15, 2015 to the Company’s NEOs. The time-based RSUs will vest in four equal installments on the anniversary date of the grant in Fiscal 2017, Fiscal 2018, Fiscal 2019 and Fiscal 2020, subject to continued service through each vesting date. The Performance Shares will vest in equal installments at the end of each fiscal year during the four-year performance period consisting of Fiscal 2017 through Fiscal 2020, subject to achievement of an annual earnings goal for each such fiscal year that is 7.5% higher than the earnings goal for the prior fiscal year, provided that if the earnings goal for the final fiscal year of the performance period (Fiscal 2020) is reached, all Performance Shares that did not vest in previous years shall then vest.

 

  Ø  

Other Benefits: Under the Larsson Employment Agreement, Mr. Larsson is eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and receives a monthly car allowance of $1,500. The Larsson Employment Agreement also provides that he will receive a relocation allowance of $100,000 and other benefits in accordance with the Company’s relocation policy.

 

  Ø  

Non-compete: Under the Larsson Employment Agreement, if Mr. Larsson’s employment terminates for any reason, he may not compete with us for one year after the termination of his employment.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. Larsson under his employment agreement.

 

   

Valérie Hermann’s Employment Agreement. During Fiscal 2016, under an employment agreement effective as of April 7, 2014, as amended (the “Former Hermann Employment Agreement”), Ms. Hermann was employed as our President of Ralph Lauren Luxury Collections. In Fiscal 2017, effective April 4, 2016, we entered into a new employment agreement with Ms. Hermann (the “New Hermann Employment Agreement”), which promoted her to the position of Global Brand President, Luxury, Women’s Collections and World of Accessories. The key terms of the Former Hermann Employment Agreement in effect during Fiscal 2016, and the key terms of the New Hermann Employment Agreement, are indicated below:

 

  Ø  

Term: The New Hermann Employment Agreement provides for Ms. Hermann’s employment through July 1, 2020.

 

  Ø  

Salary: Under the Former Hermann Employment Agreement, Ms. Hermann was entitled to an annual

 

55


Table of Contents
 

base salary of not less than $900,000. Under the New Hermann Employment Agreement, she is entitled to a base salary of not less than $950,000.

 

  Ø  

Bonus: Under the Former Hermann Employment Agreement, Ms. Hermann was entitled to an annual incentive bonus opportunity under the terms of the EOAIP with a target bonus of 150% of her annual base salary and a maximum of 300% of her annual base salary. Under the New Hermann Employment Agreement, she is entitled to an annual incentive bonus opportunity under the terms of the EOAIP with a target bonus of 175% of her annual base salary and a maximum of 350% of her annual base salary.

 

  Ø  

Equity Awards: Under the Former Hermann Employment Agreement, Ms. Hermann was eligible to receive annual equity awards pursuant to the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of at least $1 million. Under the New Hermann Employment Agreement, Ms. Hermann is eligible to receive annual equity awards pursuant to the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $2.5 million.

 

  Ø  

Other Benefits: Under both the Former Hermann Employment Agreement and the New Hermann Employment Agreement, Ms. Hermann is eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and receives a monthly car allowance of $1,500.

 

  Ø  

Non-compete: Under the New Hermann Employment Agreement, if Ms. Hermann’s employment terminates for any reason, she may not compete with us for one year after the termination of her employment.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Ms. Hermann under her employment agreement.

 

   

David Lauren’s Employment Terms. David Lauren is employed on an at-will basis as our Executive Vice President, Advertising, Marketing & Communications. The key terms of Mr. D. Lauren’s employment are as follows:

 

  Ø  

Salary: Mr. D. Lauren’s base salary is $850,000.

 

  Ø  

Bonus: Mr. D. Lauren is eligible for an annual incentive bonus opportunity under the terms of the EOAIP with a target bonus of 75% of annual base salary and a maximum of 150% of annual base salary.

 

  Ø  

Equity Awards: Mr. D. Lauren is eligible to receive annual equity awards pursuant to the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $550,000.

 

  Ø  

Other Benefits: Mr. D. Lauren is eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and receives a monthly car allowance of $1,500.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. D. Lauren under the terms of his employment.

 

   

Robert L. Madore’s Employment Agreement. In Fiscal 2016, we entered into an employment agreement with Robert L. Madore, our Corporate Senior Vice President and Chief Financial Officer, effective as of April 1, 2015 (the “Madore Employment Agreement”). The key terms of the Madore Employment Agreement are as follows:

 

  Ø  

Term: The Madore Employment Agreement provides for Mr. Madore’s employment through March 31, 2018. In Fiscal 2017, the Company announced the appointment of Jane Nielsen as Corporate Senior Vice President and CFO, effective as of September 7, 2016 or such date as mutually agreed upon by the Company and Ms. Nielsen. Mr. Madore is expected to remain as the Company’s Corporate Senior Vice

 

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Table of Contents
 

President and CFO until the effective date of Ms. Nielsen’s appointment, in our Fiscal 2017.

 

  Ø  

Salary: Under the Madore Employment Agreement, Mr. Madore is entitled to an annual base salary of not less than $700,000.

 

  Ø  

Bonus: Under the Madore Employment Agreement, Mr. Madore is entitled to an annual incentive bonus opportunity under the terms of the EOAIP with a target bonus of 75% of annual base salary and a maximum of 150% of annual base salary.

 

  Ø  

Equity Awards: Under the Madore Employment Agreement, Mr. Madore is eligible to receive annual equity awards pursuant to the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $550,000.

 

  Ø  

Other Benefits: Mr. Madore is eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and receives a monthly car allowance of $1,500.

 

  Ø  

Non-compete: If Mr. Madore’s employment terminates before the end of the employment term for any reason other than death, termination by us without cause (as defined below in “Potential Payments Upon Termination or Change in Control—Robert L. Madore”) or voluntary termination by him for good reason (as defined below in “Potential Payments Upon Termination or Change in Control—Robert L. Madore”), he may not compete with us during the remainder of his scheduled employment term.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. Madore under his employment agreement.

 

   

Christopher H. Peterson’s Employment Agreement. In Fiscal 2016, we entered into an employment agreement with Christopher H. Peterson, our President, Global Brands, effective as of April 1, 2015 (the “Peterson Employment Agreement”). Mr. Peterson’s employment ended effective as of May 31, 2016, in our Fiscal 2017. The key terms of the Peterson Employment Agreement were as follows:

 

  Ø  

Term: The Peterson Employment Agreement had provided for Mr. Peterson’s employment through June 1, 2018, although his employment ended effective as of May 31, 2016.

 

  Ø  

Salary: Under the Peterson Employment Agreement, Mr. Peterson was entitled to an annual base salary of not less than $1,000,000.

 

  Ø  

Bonus: Under the Peterson Employment Agreement, Mr. Peterson was entitled to an annual incentive bonus opportunity ranging from 150% to 450% of his annual base salary, subject to the achievement of performance goals established by the Compensation Committee under the EOAIP, with a target bonus of 300% of his annual base salary.

 

  Ø  

Equity Awards: Pursuant to the Peterson Employment Agreement, Mr. Peterson was eligible to receive annual equity awards under the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $4.5 million.

 

  Ø  

Other Benefits: Under the Peterson Employment Agreement, he was eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and received a monthly car allowance of $1,500.

 

  Ø  

Non-compete: Under the Peterson Employment Agreement, if Mr. Peterson’s employment was terminated for cause or he resigned without good reason, in each case as defined in the agreement, he could not compete with us for the remainder of his scheduled employment term or six months, whichever was greater, and if he was terminated without cause or resigned without good reason, he could not compete with us for six months following termination.

 

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Table of Contents

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. Peterson under his employment separation agreement and release.

 

   

Jackwyn L. Nemerov’s Employment Agreement. Jackwyn L. Nemerov was employed as our President and Chief Operating Officer pursuant to an employment agreement effective as of November 1, 2013, as amended (the “Nemerov Employment Agreement”). Her employment ended on November 13, 2015. The key terms of the Nemerov Employment Agreement were as follows:

 

  Ø  

Term: The Nemerov Employment Agreement had provided for her employment through April 1, 2017, the last day of our Fiscal 2017, subject to automatic, successive one-year extensions thereafter unless either party gave at least 180 days’ prior notice that the term would not be extended. Ms. Nemerov’s employment with the Company ended effective as of November 13, 2015.

 

  Ø  

Salary: Under the Nemerov Employment Agreement, Ms. Nemerov was entitled to an annual base salary of not less than $1 million.

 

  Ø  

Bonus: Under the Nemerov Employment Agreement, Ms. Nemerov was entitled to an annual incentive bonus opportunity ranging from 150% to 450% of her annual base salary, subject to the achievement of performance goals established by the Compensation Committee under the EOAIP, with a target bonus of 300% of her annual base salary.

 

  Ø  

Equity Awards: Under the Nemerov Employment Agreement, Ms. Nemerov was eligible to receive annual equity awards under the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $9 million.

 

  Ø  

Other Benefits: Under the Nemerov Employment Agreement, Ms. Nemerov was entitled to be reimbursed for the cost of a car and driver and to participate in all other employee benefit plans that by their terms were applicable to her or that were provided to other similarly situated senior executives. In addition, for security purposes, she was permitted to use the Company aircraft for any travel.

 

  Ø  

Non-compete: Under the Nemerov Employment Agreement, if Ms. Nemerov’s employment terminated for any reason, she could not compete with us for one year after the termination of her employment.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Ms. Nemerov under her employment separation agreement and release.

 

   

Mitchell A. Kosh’s Employment Agreement. In Fiscal 2016 and effective April 1, 2015, we entered into an employment agreement with Mr. Kosh (the “Kosh Employment Agreement”), which promoted him to the position of Executive Vice President, Chief Administrative Officer. His employment ended effective as of October 15, 2015. The key terms of the Kosh Employment Agreement were as follows:

 

  Ø  

Term: The Kosh Employment Agreement had provided for Mr. Kosh’s employment through June 1, 2018, although his employment ended effective as of October 15, 2015.

 

  Ø  

Salary: Under the Kosh Employment Agreement, Mr. Kosh was entitled to an annual base salary of not less than $900,000.

 

  Ø  

Bonus: Under the Kosh Employment Agreement, Mr. Kosh was entitled to an annual incentive bonus opportunity under the terms of the EOAIP with a target bonus of 100% of his annual base salary and a maximum of 200% of his annual base salary.

 

  Ø  

Equity Awards: Under the Kosh Employment Agreement, Mr. Kosh was eligible to receive annual equity awards pursuant to the terms of the Company’s 2010 Stock Incentive Plan with an aggregate target value of $800,000.

 

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  Ø  

Other Benefits: Under the Kosh Employment Agreement, he was eligible to participate in all employee benefit plans and arrangements made available to our senior executive officers, and received a monthly car allowance of $1,500.

 

  Ø  

Non-compete: Under the Kosh Employment Agreement, if Mr. Kosh’s employment terminated before the end of the employment term for any reason other than death, termination by us without cause (as defined below in “Potential Payments Upon Termination or Change in Control—Mitchell A. Kosh”) or voluntary termination by him for good reason (as defined below in “Potential Payments Upon Termination or Change in Control—Mitchell A. Kosh”), he could not compete with us during the remainder of his scheduled employment term.

See “Potential Payments Upon Termination or Change in Control” for a discussion of severance and change in control payments payable to Mr. Kosh under his employment separation agreement and release.

 

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Table of Contents

Outstanding Equity Awards at Fiscal 2016 Year-End Table

 

 

The following table provides information concerning the unexercised stock options outstanding and unvested stock awards for each of our NEOs as of the end of Fiscal 2016.

 

Option Awards

   

Stock Awards

 

    Name

 

 

Number of

Securities

Underlying

Unexercised

Options #

Exercisable1

 

 

Number of

Securities

Underlying

Unexercised

Options #

Unexercisable2

 

   

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

Vested3 (#)

 

 

Market
Value of
Shares or

Units of

Stock That

Have Not

Vested4 ($)

 

   

Equity Incentive

Plan Awards:

Number of

Unearned Shares,
Units or Other
Rights That Have
Not Vested5 (#)

 

 

Equity Incentive

Plan Awards:

Market or Payout
Value of Unearned

Shares, Units or

Other Rights That
Have Not Vested4 ($)

 

Ralph

Lauren

 

 

150,000

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

100.560

 

 

  

 

 

 

 

 

 

07/16/2017

 

 

  

 

       
 

 

100,000

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

75.190

 

 

  

 

 

 

 

 

 

07/16/2017

 

 

  

 

       
 

 

100,000

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

134.530

 

 

  

 

 

 

 

 

 

07/15/2018

 

 

  

 

       
 

 

  86,724

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

140.975

 

 

  

 

 

 

 

 

 

07/16/2019

 

 

  

 

       
 

 

  47,466

 

 

 

 

 

 

23,733

 

 

 6 

 

 

 

    0

 

 

 

$

 

 

181.935

 

 

  

 

 

 

 

 

 

07/15/2020

 

 

  

 

       
 

 

  26,543

 

 

 

 

 

 

53,086

 

 

 7 

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

07/14/2021

 

 

  

 

       
             

 

44,007

 

 

 

 

 

 

$4,280,121

 

 

  

 

 

 

101,775

 

 

 

$9,898,637

 

Stefan

Larsson

 

   

 

   

 

 

 

 

 

 

 

N/A

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,547

 

 

 

 

 

 

$3,943,601

 

 

  

 

 

 

  10,415

 

 

 

$1,012,963

 

Valérie

Hermann

 

 

 

    3,043

 

 

 

 

 

 

6,086

 

 

 7 

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

07/14/2021

 

 

  

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,139

 

 

 

 

 

 

$1,277,899

 

 

  

 

 

 

    6,297

 

 

 

   $612,446

 

David

Lauren

 

 

    4,668

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

54.145

 

 

  

 

 

 

 

 

 

07/16/2016

 

 

  

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

    3,180

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

75.190

 

 

  

 

 

 

 

 

 

07/16/2017

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    1,764

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

134.530

 

 

  

 

 

 

 

 

 

07/15/2018

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    2,676

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

140.975

 

 

  

 

 

 

 

 

 

07/16/2019

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    3,846

 

 

 

 

 

 

1,923

 

 

 6 

 

 

 

    0

 

 

 

$

 

 

181.935

 

 

  

 

 

 

 

 

 

07/15/2020

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    1,522

 

 

 

 

 

 

3,044

 

 

 7 

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

07/14/2021

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  3,053

 

 

 

 

 

 

$296,935

 

 

  

 

 

 

    2,767

 

 

 

   $269,118

 

Robert L.

Madore

 

 

       352

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

140.975

 

 

  

 

 

 

 

 

 

07/16/2019

 

 

  

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

    2,026

 

 

 

 

 

 

1,013

 

 

 6 

 

 

 

    0

 

 

 

$

 

 

181.935

 

 

  

 

 

 

 

 

 

07/15/2020

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

       773

 

 

 

 

 

 

1,546

 

 

 7 

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

07/14/2021

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  3,335

 

 

 

 

 

 

$324,362

 

 

  

 

 

 

    2,554

 

 

 

   $248,402

 

Jackwyn L.

Nemerov

 

 

  15,801

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

134.530

 

 

  

 

 

 

 

 

 

11/13/2016

 

 

  

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

  23,985

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

140.975

 

 

  

 

 

 

 

 

 

11/13/2016

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  27,270

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

181.935

 

 

  

 

 

 

 

 

 

11/13/2016

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  47,118

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

170.145

 

 

  

 

 

 

 

 

 

11/13/2016

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

  82,170

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

11/13/2016

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,651

 

 

 

 

 

 

$5,996,176

 

 

  

 

 

 

  49,787

 

 

 

$4,842,284

 

Christopher

H. Peterson

 

 

  18,906

 

 

 

 

 

 

0

 

 

  

 

 

 

    0

 

 

 

$

 

 

150.170

 

 

  

 

 

 

 

 

 

09/28/2019

 

 

  

 

   

 

   

 

 

 

 

 

   

 

   

 

 

 

    5,270

 

 

 

 

 

 

2,635

 

 

  

 

 

 

    0

 

 

 

$

 

 

181.935

 

 

  

 

 

 

 

 

 

07/15/2020

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    4,528

 

 

 

 

 

 

2,264

 

 

  

 

 

 

    0

 

 

 

$

 

 

170.145

 

 

  

 

 

 

 

 

 

11/04/2020

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

    5,478

 

 

 

 

 

 

10,956

 

 

  

 

 

 

    0

 

 

 

$

 

 

159.680

 

 

  

 

 

 

 

 

 

07/14/2021