DEF 14A 1 lwmt2016_def14a.htm WAL-MART STORES, INC. DEF 14A WALMART STORES, INC. - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

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2016

Notice of Annual
Shareholders’ Meeting and
Proxy Statement

 

Friday, June 3, 2016

8:00 a.m., Central time

 

Bud Walton Arena, University of Arkansas,
Fayetteville, Arkansas
NYSE: WMT

 

 

April 20, 2016

 

Dear Fellow Shareholders:

 

We are pleased to invite you to attend Walmart’s 2016 Annual Shareholders’ Meeting on June 3, 2016 at 8:00 a.m. Central Time. If you plan to attend, please see page 94 for admission requirements. For those unable to join in-person, the meeting will also be webcast at www.stock.walmart.com.

 

Walmart is going through a period of transformation as we make strategic investments to better serve customers and drive shareholder value. Over the past year, we have actively engaged with many of our largest institutional shareholders to understand their perspectives on a variety of topics, including corporate strategy, governance, and compensation. We both participated in this engagement effort and we would like to take this opportunity to update you on some of the themes from these discussions, which are also key focus areas for our Board.

 

Our Board is actively engaged in company strategy

 

  We remain focused on the execution of our enterprise strategy – working to win with stores, deepening digital relationships with customers, and bolstering critical capabilities such as our next generation supply chain, technology and data, our talent, and how we work. The Board believes that this strategy positions the company for sustainable growth in the future. We have challenged management to accelerate the pace of change even further, and we are tracking various metrics such as comp sales and customer satisfaction scores to monitor progress in delivering the strategy. In our conversations with shareholders, they expressed strong support for our investments in our people and technology, as we seek to deliver a seamless shopping experience for our customers.  
       
  Our Board has the right skills and experience to support the company’s strategy  
     
  We believe that Board refreshment and succession planning are critical as Walmart continues to change for our customer. We’ve added 5 new independent directors to the Board in the last 4 years, and we’ve made changes to the way the Board operates to maximize our effectiveness as we adapt to evolving customer needs. These changes include reducing the size of the Board while maintaining its independence, changing the composition of Board committees, and ensuring that Board and committee agendas are focused on Walmart’s strategic priorities. We have revised the Corporate Governance section of our proxy statement to provide more information on these topics (see page 12). Your Board is committed to continuous improvement, and in early 2016 we engaged a third party consulting firm to help us think about ways to further improve our effectiveness. The sentiment from shareholders has been consistent – that the value, quality, and diversity of our directors are strategic assets for Walmart.  

 

Our compensation program is aligned with our strategy

 

  The Compensation, Nominating and Governance Committee of our Board regularly reviews the performance metrics used in our incentive plans and has determined that they are appropriately aligned with shareholder interests. We have revised the disclosure in the Compensation Discussion and Analysis section of our proxy statement to address some of the frequently asked questions from shareholders, and to more clearly describe the direct link between executive compensation and corporate strategy (see page 39). In our conversations, shareholders expressed a variety of viewpoints on our executive compensation program, but most felt it was appropriately performance-based and aligned with our strategy.  

 

The Board greatly values shareholder feedback and thanks those of you who contributed to the constructive dialogue. You have challenged us to continue to improve our proxy statement disclosure, and we hope that you will find this year’s proxy statement even better than the last. Thank you for being a Walmart shareholder and we look forward to seeing many of you at the meeting in June. Regardless of whether or not you attend the meeting in person, your vote is important to us. For instructions on how to vote, please see page 91 of our proxy statement.

 

   
Gregory B. Penner Dr. James I. Cash, Jr.
Chairman Lead Independent Director


 

 

  Notice of 2016 Annual Shareholders’ Meeting  

 

Friday, June 3, 2016

8:00 a.m., Central time

Bud Walton Arena, University of Arkansas Campus, Fayetteville, Arkansas 72701

 

Please join our Board of Directors, senior leadership, and other shareholders for the Wal-Mart Stores, Inc. 2016 Annual Shareholders’ Meeting.

 

ITEMS OF BUSINESS

 

1.To elect as directors the 12 nominees identified in the accompanying proxy statement;
2.To vote on a non-binding, advisory resolution to approve the compensation of the company’s named executive officers;
3.To vote on the approval of the Wal-Mart Stores, Inc. 2016 Associate Stock Purchase Plan;
4.To ratify the appointment of Ernst & Young LLP as the company’s independent accountants for the fiscal year ending January 31, 2017;
5.To vote on the 3 shareholder proposals described in the accompanying proxy statement, if properly presented at the meeting; and
6.To transact any other business properly brought before the 2016 Annual Shareholders’ Meeting.

 

RECORD DATE

 

The record date for the meeting is April 8, 2016. This means that you are entitled to receive notice of the meeting and vote your shares at the meeting if you were a shareholder of record as of the close of business on April 8, 2016.

HOW TO CAST YOUR VOTE (PAGE 91)

 

You can vote by any of the following methods:

 

on the internet at www.proxyvote.com;
   
calling toll-free (U.S. and Canada) at 1-800-690-6903;
   
on your mobile device by scanning the QR code on your proxy card, notice of internet availability of proxy materials, or voting instruction form;
   
mailing in your signed proxy card or voting instruction form (if you received one); or
   
in person at the 2016 Annual Shareholders’ Meeting.

 

HOW TO ATTEND THE MEETING

 

If you plan to attend the meeting in person, please see page 94 for admission requirements.

 

The proxy statement and our Annual Report to Shareholders for the fiscal year ended January 31, 2016, are available in the “Investors” section of our corporate website at http://stock.walmart.com/annual-reports.

 

April 20, 2016

 

By Order of the Board of Directors

 

 

Jeffrey J. Gearhart

Executive Vice President, Global Governance
and Corporate Secretary


 

 

Table of Contents

 

LETTER FROM CHAIRMAN AND LEAD INDEPENDENT DIRECTOR 3
   
NOTICE OF 2016 ANNUAL SHAREHOLDERS’ MEETING 5
   
PROXY STATEMENT SUMMARY 8
   
CORPORATE GOVERNANCE 12
   
Proposal No. 1: Election of Directors 12
Board Leadership Structure 24
Board Committees 25
Board Meetings and Director Attendance 28
Board Attendance at Annual Shareholders’ Meetings 28
Communicating with the Board 28
Board Evaluations and Board Effectiveness 29
Board Refreshment and Succession Planning 29
Director Onboarding and Engagement with the Business 30
Management Development and Succession Planning 30
The Board’s Role in Risk Oversight 31
Oversight of the Company’s Strategies for Legislative Affairs, Public Policy Engagement, Charitable Giving, and Sustainability 32
Shareholder Outreach and Engagement 32
Director Independence 33
Related Person Transactions 35
Director Compensation 36
   
EXECUTIVE COMPENSATION 39
   
Compensation Discussion and Analysis 39
Risk Considerations in our Compensation Program 61
Compensation Committee Report 62
Compensation Committee Interlocks and Insider Participation 62
Summary Compensation 63
Fiscal 2016 Grants of Plan-Based Awards 66
Outstanding Equity Awards at Fiscal 2016 Year-End 68
Fiscal 2016 Option Exercises and Stock Vested 69
Pension Benefits 70
Fiscal 2016 Nonqualified Deferred Compensation 70
Walmart’s Deferred Compensation Plans 72
Potential Payments Upon Termination or Change In Control 73
Equity Compensation Plan Information 74
Proposal No. 2: Advisory Vote to Approve Named Executive Officer Compensation 74
   
STOCK OWNERSHIP 75
   
Holdings of Major Shareholders 75
Holdings of Officers and Directors 76
Section 16(a) Beneficial Ownership Reporting Compliance 77
Proposal No. 3: Approval of the Wal-Mart Stores, Inc. 2016 Associate Stock Purchase Plan 77
   
AUDIT MATTERS 79
   
Audit Committee Report 79
Audit Committee Financial Experts 80
Audit Committee Pre-Approval Policy 81
Transaction Review Policy 81
Proposal No. 4: Ratification of Independent Accountants 82
   
SHAREHOLDER PROPOSALS 84
   
Proposal No. 5: Request to Adopt an Independent Chairman Policy 84
Walmart’s Statement in Opposition to Proposal No. 5 85
Proposal No. 6: Request for Annual Report Regarding Incentive Compensation Plans 86
Walmart’s Statement in Opposition to Proposal No. 6 86
Proposal No. 7: Request for Report Regarding Criteria for Operating in High-Risk Regions 87
Walmart’s Statement in Opposition to Proposal No. 7 88
   
OTHER MATTERS 88
   
INFORMATION ABOUT THE PROXY STATEMENT, THE MEETING, AND VOTING 89
   
SUBMISSION OF SHAREHOLDER PROPOSALS 95
   
TABLE OF ABBREVIATIONS 96
   
ANNEX A  
INFORMATION REGARDING CERTAIN NON-GAAP FINANCIAL MEASURES A-1
   
ANNEX B  
WAL-MART STORES, INC. 2016 ASSOCIATE STOCK PURCHASE PLAN B-1
   
MAP AND 2016 ANNUAL SHAREHOLDERS’ MEETING ADMISSION REQUIREMENTS BACK COVER

 

 2016 Proxy Statement    7

 

Proxy Statement Summary

 

You have received these proxy materials because the Board is soliciting your proxy to vote your Shares at the 2016 Annual Shareholders’ Meeting. This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references (“XX”) are supplied to help you find further information in this proxy statement. Please refer to the Table of Abbreviations on page 96 for the meaning of certain terms used in this summary and the rest of this proxy statement. This proxy statement and the related proxy materials were first released to shareholders and made available on the internet on April 20, 2016.

 

ANNUAL SHAREHOLDERS’ MEETING

 

Date and Time   Place   Record Date   Admission
             
June 3, 2016, 8:00 a.m., Central time   Bud Walton Arena, University of Arkansas Campus, Fayetteville, Arkansas 72701   You can vote if you were a shareholder of record of the company at the close of business on April 8, 2016 (page 89).   You must have proof of ownership of your Shares as of the record date to attend the 2016 Annual Shareholders’ Meeting (page 94).

 

If you are unable to attend in person, you can view a live webcast of the 2016 Annual Shareholders’ Meeting at http://stock.walmart.com.

 

SUMMARY OF VOTING MATTERS

 

The Board is not aware of any matter that will be presented for a vote at the 2016 Annual Shareholders’ Meeting other than those shown below.

 

    Board Vote   Page Reference
    Recommendation   (for more detail)
Item 1: Election of 12 Directors   FOR each    
  Director Nominee   12
Item 2: Advisory Vote to Approve Named Executive Officer Compensation   FOR   74
Item 3: Approval of the Wal-Mart Stores, Inc. 2016 Associate Stock Purchase Plan FOR   77
Item 4: Ratification of Independent Accountants   FOR   82
Items 5-7: Shareholder Proposals   AGAINST each    
  shareholder proposal   84

 

 

 2016 Proxy Statement    8

 
BOARD OVERVIEW

 

Highly Engaged Board

 

Actively involved in Walmart’s strategy
98% overall attendance rate at Board and committee meetings
31 committee meetings during fiscal 2016
   

Thoughtful Board Refreshment

 

12-year term limit for Independent Directors
5 new Independent Directors in the last 4 years
Reducing size of Board to promote effectiveness
Ongoing Board succession planning


 

Experience and Expertise

 

Our 12 director nominees bring a variety of backgrounds, qualifications, skills, and experiences that contribute to a well-rounded Board uniquely positioned to effectively oversee our strategy and operations in a rapidly evolving retail industry.

 

9 Senior leadership 4 Retail Technology or e-commerce 5 4 Marketing or brand management Regulatory or legal 4 Global or international business 12 5 Finance, accounting, or nancial reporting

 

Tenure, Age, and Gender Diversity

 

Our 12 nominees represent an effective mix of deep company knowledge and fresh perspectives.

 

TENURE MEDIAN: 4 YRS AVERAGE: 7 YRS 10 yrs 2 0-3 yrs 5 7-10 yrs 2 4-6 yrs 3 AGE MEDIAN: 57 AVERAGE: 54 5 50 3 50-59 3 60-69 1 70-75 GENDER Female Male

 

 

 2016 Proxy Statement    9

 
BOARD NOMINEES (PAGES 15-21)

 

8 of our 12 Board nominees are independent, all members of the Audit Committee and CNGC are independent, and our key committee chairs are independent. Despite their significant Share ownership, only three members of the Walton family are Board nominees.

 

                                    Other
                                    Public
        Director           Key Committee Membership   Company
Name   Age   Since   Principal Occupation   Independent   AC   CNGC   SPFC   TeCC   Boards
Jim Cash*

  68   2006   James E. Robison Professor of
Business Administration Emeritus,
Harvard Business School
                1
Pam Craig

  59   2013   Retired CFO, Accenture plc                 2
Tim Flynn

  59   2012   Retired Chairman and CEO, KPMG                 1
Tom Horton

  54   2014   Senior Advisor, Warburg
Pincus LLC, and retired Chairman
and CEO, AMR Corporation
                1
Marissa Mayer

  40   2012   President and CEO, Yahoo! Inc.                 1
Doug McMillon

  49   2013   President and CEO, Walmart                       0
Greg Penner**

  46   2008   Chairman, Walmart and Partner,
Madrone Capital Partners
                      1
Steve Reinemund

  68   2010   Retired Dean of Business,
Wake Forest University, and retired
Chairman and CEO, PepsiCo., Inc.
                2
Kevin Systrom

  32   2014   CEO and Co-Founder, Instagram                 0
Rob Walton

  71   1978   Retired Chairman, Walmart                     0
Steuart Walton

  34   Nominee   CEO, Game Composites, Ltd.                       0
Linda Wolf

  68   2005   Retired Chairman and CEO,
Leo Burnett Worldwide, Inc.
                1

 

*Lead Independent Director    Chair    Member
**Board Chairman      
       
Qualifications and Experience:     Committees:
Senior Leadership Marketing/Brand Management AC = Audit Committee
Retail Finance/Accounting CNGC = Compensation, Nominating and Governance Committee
Global/International Regulatory/Legal SPFC = Strategic Planning and Finance Committee
Technology/e-commerce     TeCC = Technology and eCommerce Committee

 

 

 2016 Proxy Statement    10

 
CORPORATE GOVERNANCE HIGHLIGHTS (PAGES 12-38)

 

Majority Independent Board
Shareholder Right to Call Special Meetings
Independent Key Committee Chairs
No Poison Pill
Separate Chair and CEO
Lead Independent Director
No Supermajority Voting Requirements
CNGC Oversight of Political and Social Engagement
Annual Election of All Directors
Robust Board Evaluations
Majority Voting for Director Elections
Board-Level Risk Oversight
Commitment to Board Refreshment
Extensive Shareholder Engagement
Focus on Succession Planning
Board Oversight of Company Strategy
Robust Stock Ownership Guidelines
No Hedging and Restrictions on Pledging
No Employment Agreements with Executives
No Change-in-Control Provisions

 

COMPENSATION ALIGNED WITH PERFORMANCE (PAGES 39-74)

 

Our executive compensation program is heavily based on performance and aligned with our strategy. More than 75% of our CEO’s fiscal 2016 total direct compensation was based on operating income, sales, and ROI, which are aligned with our strategy and important indicators of retail performance. The chart below illustrates the alignment between our TSR and the reported compensation of our CEO each of the last five fiscal years:

 

Total Reported CEO Pay ($ millions) $25 $20 $15 $10 $5 0 Feb. 1, 2011 FY12 FY13 FY14 FY15 FY16 Indexed TSR $175 $150 $125 $100 $75 $50 $25 0 Total Reported CEO Pay Indexed Total Shareholder Return

 

(1) The compensation shown above is the total compensation reported on the Summary Compensation table for our CEO for each fiscal year shown. For fiscal 2015 and fiscal 2016, the amount shown is the total compensation reported for Mr. McMillon. For fiscal 2012 through fiscal 2014, the amount shown is the total compensation reported for our former CEO, Michael T. Duke. Due to his pending retirement, Mr. Duke did not receive any equity awards in fiscal 2014, resulting in relatively low total reported compensation for that year.

 

(2) Indexed TSR illustrates the total shareholder return on Walmart common stock during the five fiscal years ending January 31, 2016, assuming $100 was invested on the first day of fiscal 2012 and assuming reinvestment of all dividends.

 

 

 2016 Proxy Statement    11

 

CORPORATE GOVERNANCE

 

Proposal No. 1 Election of Directors

 

What am I voting on?

 

You are voting to elect each nominee named below as a director of the company for a one-year term. If you return your proxy, your proxy holder will vote your Shares FOR the election of each Board nominee named below unless you instruct otherwise. If the shareholders elect all of the director nominees named in this proxy statement at the 2016 Annual Shareholders’ Meeting, Walmart will have 12 directors. Each director nominee named in this proxy statement has consented to act as a director of Walmart if elected. If a nominee becomes unwilling or unable to serve as a director, your proxy holder will have the authority to vote your Shares for any substitute candidate nominated by the Board, or the Board may decrease the size of the Board.

 

What qualifications do the Compensation, Nominating and Governance Committee and the Board consider when selecting candidates for nomination?

 

An effective Board should be comprised of individuals who collectively provide an appropriate balance of distinguished leadership, diverse perspectives, strategic skill sets, and professional experience relevant to our company’s business and strategic objectives. In fulfilling its responsibility for identifying and evaluating director candidates, in accordance with Walmart’s Corporate Governance Guidelines, the CNGC selects potential candidates on the basis of: outstanding achievement in their professional careers; broad experience and wisdom; personal and professional integrity; ability to make independent, analytical inquiries; experience with and understanding of the business environment; willingness and ability to devote adequate time to Board duties; and such other experience, attributes, and skills that the CNGC determines qualify candidates for service on the Board. The CNGC also considers whether a potential candidate satisfies the independence and other requirements for service on the Board and its committees, as set forth in the NYSE Listed Company Rules and the SEC’s rules. Additional information regarding qualifications for service on the Board and the nomination process for director candidates is set forth in the CNGC’s charter and our Corporate Governance Guidelines, which are available on the Corporate Governance page of our website at http://stock.walmart.com.

 

 2016 Proxy Statement    12

 

Walmart is in a period of transformation as we pursue a long-term strategy to deliver a seamless customer experience in our stores, clubs, and through e-commerce. In light of this, and depending on the current composition of the Board and Board committees and expected future turnover on our Board, the CNGC generally seeks director candidates with experience, skills, or background in one or more of the following areas:

 

 

        STRATEGY  
           
           
      Retail experience: As the world’s largest retailer, we seek directors who possess an understanding of financial, operational, and strategic issues facing large retail companies.
       
      Global or international business experience: As a global organization, directors with broad international exposure provide useful business and cultural perspectives, and we seek directors with experience at multinational companies or in international markets.
       
      Technology or e-commerce experience: We aim to be the first retailer to deliver a seamless shopping experience at scale, and so we seek directors with experience in e-commerce or related industries such as digital, mobile, and consumer internet industries.
       
      Marketing or brand management: Directors with relevant experience in consumer marketing or brand management, especially on a global basis, provide important insights to our Board.
       


 

         LEADERSHIP
EXPERIENCE
               
                    DIVERSITY  
                         
                         
      Directors who have served in relevant senior leadership positions bring unique experience and perspective. We seek directors who have demonstrated expertise in governance, strategy, development, and execution.         Diversity and inclusion are values embedded in our culture and fundamental to our business. We believe that a board comprised of directors with diverse backgrounds, experiences, and perspectives improves the dialogue and decisionmaking in the board room and contributes to overall Board effectiveness. The Board assesses the effectiveness of its approach to Board diversity as part of the Board and committee evaluation process.
                 
                 


 

         GOVERNANCE   
           
      Finance, accounting, or financial reporting experience: We value an understanding of finance and financial reporting processes because of the importance our company places on accurate financial reporting and robust financial controls and compliance. We also seek to have multiple directors who qualify as audit committee financial experts.
      Regulatory or legal experience: Our company’s business requires compliance with a variety of regulatory requirements across a number of countries. Our Board values the insights of directors who have experience advising or working at companies in regulated industries, and it benefits from the perspectives of directors with governmental, public policy, and legal experience and expertise.
       

 

 2016 Proxy Statement    13

 

Summary of Director Qualifications and Experience

 

Below we identify the balance of skills and qualifications each director and director nominee brings to the Board. The fact that a particular skill or qualification is not designated does not mean the director nominee does not possess that particular attribute. Rather, the skills and qualifications noted below are those reviewed by the CNGC and the Board in making nomination decisions and as part of the Board succession planning process. We believe the combination of the skills and qualifications shown below demonstrates how our Board is well-positioned to provide effective oversight and strategic advice to our management.

 

            Strategy          Governance  
                                 
   
Senior
leadership
   
 Retail
 
Global or
international
business
 
Technology
or
e-commerce
 
Marketing or
brand
management
   
Finance,
accounting,
or financial
reporting
 
Regulatory
or legal
 
Jim Cash                          
Pam Craig                          
Tim Flynn                        
Tom Horton                        
Marissa Mayer                      
Doug McMillon                          
Greg Penner                      
Steve Reinemund                        
Kevin Systrom                        
Rob Walton                        
Steuart Walton*                          
Linda Wolf                          
TOTAL   9   4   12   5   4     5   4  
Aida Alvarez(1)                      
Roger Corbett(1)                          
Mike Duke(1)                          
Jim Walton(1)                        

 

* Steuart Walton is standing for election for the first time at the 2016 Annual Shareholders’ Meeting.
   
(1) Aida Alvarez, Roger Corbett, Mike Duke, and Jim Walton are not being nominated for election as directors and will retire from the Board effective June 3, 2016.

 

 2016 Proxy Statement    14

 

Who are the 2016 director nominees?

 

Based on the recommendation of the CNGC, the Board has nominated the following candidates for election as directors at the 2016 Annual Shareholders’ Meeting. The information set forth below includes, with respect to each nominee, his or her age, principal occupation and employment during the past five years, the year in which he or she first became a director of Walmart, each Board committee on which he or she currently serves, whether he or she is independent, and directorships of other public companies held by each nominee during the past five years.

 

The Board recommends that shareholders vote FOR each of the nominees named below for election to the Board.

 

 

  James I. Cash, Jr.      
 

 

Lead Independent
Director

 

    Dr. Cash is the James E. Robison Professor of Business Administration Emeritus at Harvard Business School, where he served from July 1976 to October 2003. Dr. Cash served as the Senior Associate Dean and Chairman of HBS Publishing and Chairman of the MBA Program while on the faculty of the Harvard Business School. Dr. Cash holds an advanced degree in accounting and computer science and has been published extensively in accounting and information technology journals. He currently provides executive development and consulting services through The Cash Catalyst, LLC, which he formed in 2009. He has served as a director of Chubb Limited (formerly The Chubb Corporation) since 1996. Dr. Cash has served as a director of a number of other public companies, including General Electric Company from April 1997 to April 2016, Phase Forward Incorporated from October 2003 to May 2009, and Microsoft Corporation from May 2001 to November 2009, and has served on the audit committees of several public companies. He also serves as a director of several private companies.
 

Joined the Board: 2006

 

Age: 68

 

Board Committees:

Audit Committee; Executive
Committee; TeCC

 

Other Current Public
Company Directorships:
Chubb Limited

    Skills and Qualifications:
      Dr. Cash brings financial, accounting, and strategic planning expertise from his distinguished career in academia, and from his service at HBS Publishing and on the boards of directors and audit committees of other large, multinational public companies.
      Dr. Cash brings a global perspective gained from his service on boards of large, multinational companies in a variety of industries.
      The Board benefits from Dr. Cash’s unique knowledge of information technology, as well as his experiences gained from consulting activities and service on the boards of directors of technology companies.
         

 

 2016 Proxy Statement    15

 
  Pamela J. Craig      
 

 

Independent Director

 

    Ms. Craig was CFO of Accenture plc (“Accenture”), a multinational management consulting, technology and outsourcing company, from October 2006 to June 2013. On July 1, 2013, Ms. Craig stepped down as CFO and retired from Accenture in August 2013. In her 34 years with Accenture and its predecessor companies, she served in a variety of consulting, operational, and finance leadership roles, including as senior vice president, finance, from March 2004 to October 2006, group director, business operations and services, from March 2003 to March 2004, and managing partner, global business operations, from June 2001 to March 2003. She has served on the boards of Akamai Technologies, Inc. since May 2011 and Merck & Co., Inc. since September 2015. She also served on the board of VMWare, Inc. from September 2013 to December 2015. She also serves on the boards of several private and charitable organizations.
 

Joined the Board: 2013

 

Age: 59

 

Board Committee:

Audit Committee; TeCC

 

Other Current Public
Company Directorships:

Akamai Technologies, Inc.;
Merck & Co., Inc.

 

    Skills and Qualifications:
      Ms. Craig brings financial reporting, accounting, and risk management expertise gained through her service as the CFO of a prominent, publicly-held management consulting, technology, and outsourcing firm.
      The Board benefits from Ms. Craig’s experience in global business leadership and governance.
      Ms. Craig also brings experience gained from her service on the boards of directors of various technology companies.

 

  Timothy P. Flynn      
 

 

Independent Director

 

    Mr. Flynn was the Chairman of KPMG International (“KPMG”), a global professional services organization that provides audit, tax, and advisory services, from 2007 until his retirement in October 2011. From 2005 until 2010, he served as Chairman and from 2005 to 2008 as Chief Executive Officer of KPMG LLP in the U.S., the largest individual member firm of KPMG. Prior to serving as Chairman and CEO of KPMG LLP, Mr. Flynn was Vice Chairman, Audit and Risk Advisory Services, with operating responsibility for Audit, Risk Advisory and Financial Advisory Services practices. Mr. Flynn has served as a member of the board directors of JPMorgan Chase & Co. since 2012. He served as a member of the board of directors of The Chubb Corporation from September 2013 until its acquisition in January 2016. He has been a director of the International Integrated Reporting Council since September 2015, and he previously served as a trustee of the Financial Accounting Standards Board, a member of the World Economic Forum’s International Business Council, and was a founding member of The Prince of Wales’ International Integrated Reporting Committee. Mr. Flynn graduated from The University of St. Thomas, St. Paul, Minnesota and is a member of the school’s board of trustees.
 

Joined the Board: 2012

 

Age: 59

 

Board Committee:
Audit Committee (Chair);
SPFC

 

Other Current Public
Company Directorships:

JPMorgan Chase & Co.

 

 

    Skills and Qualifications:
      Mr. Flynn has over 32 years of experience in risk management, financial services, financial reporting, and accounting.
     

 

Mr. Flynn also brings extensive experience with issues facing complex, global companies, and expertise in accounting, auditing, risk management, and regulatory affairs for such companies.
      In addition, Mr. Flynn brings his experiences in executive leadership positions at KPMG and his service on the boards of directors of other large public companies.

 

 

 2016 Proxy Statement    16

 

  Thomas W. Horton      
 

 

Independent Director

 

    Mr. Horton is a Senior Advisor at Warburg Pincus LLC, a private equity firm focused on growth investing. Mr. Horton was the Chairman of AMR Corporation, parent company of American Airlines Group, Inc. (“AMR”) from December 2013 to June 2014. He also served in other executive leadership positions at AMR, including as President from 2010 until his appointment as Chairman and CEO in 2011, during which time he led AMR through a successful restructuring and turnaround that culminated in the merger of AMR and US Airways, creating the world’s largest airline. From 2006 to 2010, Mr. Horton served as Executive Vice President of Finance and Planning at AMR. Mr. Horton joined AMR from AT&T Corporation, where he served in various roles between 2002 and 2005, including as Vice Chairman and as Chief Financial Officer. While at AT&T, Mr. Horton led the evaluation of strategic alternatives that ultimately led to the combination of AT&T and SBC Communications, Inc. Mr. Horton joined AT&T from AMR, where he had served in various roles from 1985 until 2002, including as Senior Vice President and Chief Financial Officer. Before joining AMR, Mr. Horton worked at Peat Marwick & Company, which is now KPMG. He has served on the board of directors of QUALCOMM Incorporated since 2008, and also serves on the executive board of the Cox School of Business at Southern Methodist University.
 

Joined the Board: 2014

 

Age: 54

 

Board Committee:
Audit Committee; SPFC

 

Other Current Public
Company Directorships:

QUALCOMM Incorporated

 

 

    Skills and Qualifications:
      Mr. Horton brings valuable perspective developed from more than 30 years of experience in finance, accounting, auditing, and risk management.
      Our Board benefits from Mr. Horton’s valuable experiences at complex, international business industries.
     

 

In addition, Mr. Horton brings unique insights gained from his executive leadership roles at large, highly-regulated, publicly-traded companies.

 

  Marissa A. Mayer      
 

 

Independent Director

 

    Ms. Mayer is the President and Chief Executive Officer and a member of the board of directors of Yahoo! Inc. (“Yahoo”), a digital media company. Since joining in July 2012, Ms. Mayer has led Yahoo’s focus as a guide to digital information discovery through search, communications, and digital content products. Ms. Mayer also helmed Yahoo’s digital advertising strategy across mobile, video, native, and social. Under her leadership, Yahoo has grown to serve over 1 billion users worldwide, with over 600 million mobile users. Prior to her role at Yahoo, Ms. Mayer spent 13 years at Google Inc. (“Google”) where she led various initiatives including Google Search for more than a decade, and other early stage products such as Google Maps, Gmail, and Google News. Ms. Mayer holds a bachelor’s degree in symbolic systems and a master’s degree in computer science from Stanford University. Ms. Mayer serves on the board of directors for AliphCom, which operates as Jawbone, and she also serves on the boards of the San Francisco Museum of Modern Art and the San Francisco Ballet.
 

Joined the Board: 2012

 

Age: 40

 

Board Committees:
CNGC; TeCC

 

Other Current Public
Company Directorships:
Yahoo! Inc.

 

 
    Skills and Qualifications:
     

 

Ms. Mayer brings extensive expertise and insight into the technology and consumer internet industries, and her senior leadership experience is demonstrated by her executive role at a prominent consumer internet company and her positions on the boards of several non-profit organizations.
       
      Ms. Mayer brings distinguished experience in internet product development, engineering, and brand management.
      As the CEO of a global company, Ms. Mayer brings insights into global business, strategy, and governance.

 

 2016 Proxy Statement    17

 

  C. Douglas McMillon      
 

 

President and
Chief Executive Officer

 

    Mr. McMillon is the President and CEO of Walmart and has served in that position since February 1, 2014. Prior to this appointment, he held numerous other positions with Walmart, including Executive Vice President, President and CEO, Walmart International, from February 1, 2009 through January 31, 2014, and Executive Vice President, President and CEO, Sam’s Club, from August 2005 through January 2009. Mr. McMillon has held a variety of other leadership positions since joining our company 25 years ago. Mr. McMillon also serves as a member of the executive committee of the Business Roundtable, and serves as a member of the boards of directors of a number of organizations, including The Consumer Goods Forum, The US-China Business Council, and Crystal Bridges Museum of American Art.
 

Joined the Board: 2013

 

Age: 49

 

Board Committees:
Executive Committee (Chair); GCC (Chair)

 

Other Current Public
Company Directorships:

None

 

 

    Skills and Qualifications:
      Mr. McMillon brings years of executive leadership experience at our company and extensive expertise in corporate strategy, development, and execution.
      In addition, Mr. McMillon brings extensive knowledge and unique experience with the Walmart International segment.
      Mr. McMillon has more than 25 years of experience in the retail industry and at our company.

 

 

  Gregory B. Penner+      
 

 

Chairman

 

    Mr. Penner was appointed as Chairman of the Board in June 2015, after serving as Vice Chairman of the Board from June 2014 to June 2015. He has been a General Partner of Madrone Capital Partners, LLC, an investment management firm, since 2005. From 2002 to 2005, he served as Walmart’s Senior Vice President and CFO – Japan, and before serving in that role, Mr. Penner was the Senior Vice President of Finance and Strategy for Walmart. com from 2001 to 2002. Prior to working for Walmart, Mr. Penner was a General Partner at Peninsula Capital, an early stage venture capital fund, and a financial analyst for Goldman, Sachs & Co. Mr. Penner has been a member of the board of directors of Baidu, Inc. since 2004, and he previously served on the boards of Hyatt Hotels Corporation; eHarmony, Inc.; Castleton Commodities International, LLC; 99Bill Corporation; and Cuil, Inc.
 

Joined the Board: 2008

 

Age: 46

 

Board Committees:
Executive Committee; GCC

 

Other Current Public
Company Directorships:

Baidu, Inc.

 

 
    Skills and Qualifications:
      Mr. Penner brings expertise in strategic planning, finance, and investment matters, including prior experience as a CFO in our company’s operations in Japan, and his service on the boards of directors of public and private companies in a variety of industries.
     

 

The Board benefits from Mr. Penner’s retail experiences with our company’s operations in Japan and at Walmart.com, as well as his service as our Chairman.
      In addition, Mr. Penner has broad knowledge of international business, particularly in Japan and China.
      Mr. Penner brings unique technology expertise gained through both his service with the company and as a director of various technology companies.
          

 

+ Greg Penner is the son-in-law of Rob Walton.

 

 2016 Proxy Statement    18

 
  Steven S Reinemund      
 

 

Independent Director

 

    Mr. Reinemund is the retired Dean of Business and Professor of Leadership and Strategy at Wake Forest University, a position he held from July 2008 to June 2014, and where he continues to serve in an advisory role as an Executive-in-Residence. Prior to joining the faculty of Wake Forest University, Mr. Reinemund had a distinguished 23-year career with PepsiCo, Inc. (“PepsiCo”), where he served as Chairman of the Board from October 2006 to May 2007, and Chairman and CEO from May 2001 to October 2006. Prior to becoming Chairman and CEO, Mr. Reinemund was PepsiCo’s President and Chief Operating Officer from 1999 to 2001 and Chairman and CEO of Frito-Lay’s worldwide operations from 1996 to 1999. Mr. Reinemund has served as a director of Exxon Mobil Corporation and Marriott International, Inc. since 2007 and Chick-fil-A, Inc. since June 2015. He previously served as a director of American Express Company from 2007 to 2015 and Johnson & Johnson from 2003 to 2008. Mr. Reinemund is a member of the boards of trustees of The Cooper Institute and the U.S. Naval Academy Foundation.
 

Joined the Board: 2010

 

Age: 68

 

Board Committee:
CNGC; SPFC (Chair)

 

Other Current Public
Company Directorships:

Exxon Mobil Corporation;
Marriott International, Inc.

 

    Skills and Qualifications:
      Mr. Reinemund has considerable international business leadership experience gained through his service as Chairman and CEO of a global public company, through his service as dean of a prominent business school, and his service on the boards of several large companies in a variety of industries.
      Mr. Reinemund also brings valuable experience with large, international businesses.
      In addition, Mr. Reinemund’s experience in executive leadership positions at PepsiCo and Frito-Lay provides valuable insights to our Board regarding brand management, marketing, finance, and strategic planning.

 

  Kevin Y. Systrom      
 

 

Independent Director

 

    Mr. Systrom is the CEO and co-founder of Instagram, where he managed the company from its founding in 2010 through a period of extremely rapid growth and through the purchase of Instagram by Facebook, Inc. in April 2012. Under his leadership as CEO, Instagram has continued its entrepreneurial development of a video sharing and direct messaging product, Instagram Direct, and has grown it to hundreds of millions of active users worldwide, making it one of the fastest growing social networks of all time. From 2006 until 2009, he was at Google Inc. and worked on large consumer products such as Gmail and Google Calendar. Before joining Google, Mr. Systrom worked with Odeo, a startup company that eventually became Twitter. He graduated from Stanford University with a bachelor of science in management science and engineering with a concentration in finance and decision analysis. While attending Stanford University, he participated in the Mayfield Fellows Program, a high-tech entrepreneurship program.
 

Joined the Board: 2014

 

Age: 32

 

Board Committees:
CNGC; TeCC (Chair)

 

Other Current Public
Company Directorships:

None

 

    Skills and Qualifications:
      Mr. Systrom provides unique insights, experiences, and expertise in developing impactful social networking and consumer internet products.
      The Board benefits from Mr. Systrom’s successful entrepreneurial leadership in the technology and consumer internet industries.
      In addition, Mr. Systrom brings distinguished experience in the design of internationally-recognized consumer internet products.
        As the CEO of a fast-growing and complex international company, Mr. Systrom brings valuable insights into global business, strategy, and governance.

 

 2016 Proxy Statement    19

 

  S. Robson Walton+      
 

 

 

 

    Mr. Walton was the Chairman of Walmart from 1992 to June 2015 and has been a member of the Board since 1978. Prior to becoming Chairman, he had been an officer at our company since 1969 and held a variety of positions during his service, including Senior Vice President, Corporate Secretary, General Counsel, and Vice Chairman. Before joining Walmart, Mr. Walton was in private law practice as a partner with the law firm of Conner & Winters in Tulsa, Oklahoma. In addition to his duties at Walmart, Mr. Walton is involved with a number of non-profit and educational organizations, including Conservation International, where he serves as Chairman of that organization’s executive committee, and the College of Wooster, where he is an Emeritus Life Trustee for the college.
 

Joined the Board: 1978

 

Age: 71

 

Board Committees: SPFC;
Executive Committee; GCC

 

Other Current Public
Company Directorships:

None

 

    Skills and Qualifications:
      Mr. Walton brings decades of leadership experience with Walmart and his expertise in strategic planning gained through his service on the boards and other governing bodies of non-profit organizations.
      Mr. Walton has extensive legal and corporate governance expertise gained as Walmart’s Corporate Secretary and General Counsel and as an attorney in private practice.
     

The Board benefits from Mr. Walton’s in-depth knowledge of our company, its history and the global retail industry, all gained through more than 35 years of service on the Board and more than 20 years of service as our company’s Chairman.

 

+ Greg Penner is the son-in-law of Rob Walton; Steuart Walton is the nephew of Rob Walton; and Jim Walton and Rob Walton are brothers.

 

  Steuart L. Walton+      
 

 

 

 

    Since February 2013, Mr. Walton has been the CEO and founder of Game Composites, Ltd., a company that designs and builds small composite aircraft. Before founding Game Composites, from June 2011 to January 2013, Mr. Walton worked in our company’s International division as a Senior Director, International Mergers and Acquisitions. Prior to his service at our company, he was an associate at Allen & Overy, LLP in London from 2007 to 2010, where he advised companies on securities offerings. In 2004, he served in the offices of U.S. Senator Peter Fitzgerald. Mr. Walton is also a member of the boards of directors of Crystal Bridges Museum of American Art, Leadership for Educational Equity, the Smithsonian National Air and Space Museum, and the Walton Family Foundation. He is a graduate of Georgetown University Law Center, and he holds a bachelor’s degree in business administration from the University of Colorado, Boulder.
 

Joined the Board: Nominee

 

Age: 34

 

Board Committees: N/A

 

Other Current Public
Company Directorships:

None

 

    Skills and Qualifications:
     

 

Mr. Walton brings broad-based and valuable international legal and regulatory experience gained from his work on complex, international financial transactions.
      Mr. Walton has a strong history and familiarity with our company and its businesses. He also brings valuable leadership and financial insights gained from his entrepreneurial experiences and investments.
         

 

+  Steuart Walton is the son of Jim Walton and the nephew of Rob Walton.

 

 2016 Proxy Statement    20

 

  Linda S. Wolf      
 

 

Independent Director

 

    Ms. Wolf is the retired Chairman and CEO of Leo Burnett Worldwide, Inc. (“Leo Burnett”), a global advertising agency and division of Publicis Groupe S.A. Ms. Wolf served in various positions with Leo Burnett and its predecessors from 1978 to April 2005, including as Chairman and CEO from January 2001 until April 2005. She serves as a trustee for investment funds advised by the Janus Capital Group Inc. and has served on the board of InnerWorkings, Inc., a provider of managed print and promotional procurement solutions, since November 2006, and Wrapports, LLC since 2012. Among other endeavors, Ms. Wolf also serves on the boards of the Rehabilitation Institute of Chicago, Lurie Children’s Hospital of Chicago, The Chicago Council on Global Affairs, and the Chicago Community Trust.
 

Joined the Board: 2005

 

Age: 68

 

Board Committees:
CNGC (Chair); TeCC

 

Other Current Public
Company Directorships:

Innerworkings, Inc.

 

    Skills and Qualifications:
      Ms. Wolf brings executive leadership and management experience gained as a CEO of a global company and through her service on a variety of public company and non-profit boards.
      Ms. Wolf’s qualifications to serve on the Board also include her experience in brand management and advertising gained through her years leading Leo Burnett.
      As the former CEO of a global company, Ms. Wolf brings a valuable international perspective to the Board.

 

Are there any directors not standing for reelection?

 

Yes. Aida Alvarez, Roger Corbett, Mike Duke, and Jim Walton, each of whom currently serves on the Board, will rotate off the Board at the conclusion of her or his current term and will not stand for reelection at the 2016 Annual Shareholders’ Meeting.

 

  Aida M. Alvarez      
 

 

Independent Director

 

    From 1997 to 2001, Ms. Alvarez was a member of President Clinton’s Cabinet as the Administrator of the U.S. Small Business Administration (the “SBA”). She was the founding Director of the Office of Federal Housing Enterprise Oversight from 1993 to 1997. Ms. Alvarez was a vice president in public finance at First Boston Corporation and Bear Stearns & Co., Inc. prior to 1993. She is the Chair of the Latino Community Foundation, and she has served on the boards of directors of Oportun (formerly Progress Financial Corporation) since 2011; Zoosk, Inc. since 2015; and HP Inc. since February 2016. From 2004 to 2014, Ms. Alvarez served on the boards of MUFG Americas Holdings Corporation (formerly UnionBanCal Corporation) and MUFG Union Bank N.A. (formerly Union Bank N.A.).
 

Joined the Board: 2006

 

Age: 66

 

Board Committee:
CNGC; TeCC

 

Other Current Public
Company Directorships:

HP Inc.

 

    Skills and Qualifications:
      Ms. Alvarez gained executive experience through her years in President Clinton’s Cabinet, her executive roles at government agencies, and her leadership at a prominent philanthropic organization.
      Ms. Alvarez brings extensive knowledge of the federal government and insight into public policy.
      The Board also benefits from Ms. Alvarez’s knowledge of investment banking and finance.
        As the head of the SBA, Ms. Alvarez expanded the international role of the SBA and developed a global agenda for the SBA.

 

 2016 Proxy Statement    21

 

  Roger C. Corbett      
 

 

Independent Director

 

    Mr. Corbett is the retired CEO and Group Managing Director of Woolworths Limited, the largest retail company in Australia, where he served from 1990 to 2006. He also is a director and non-executive Chairman of Mayne Pharma Group Limited, an Australian pharmaceutical company. Mr. Corbett has served as the Chairman of Firefly Health Pty Ltd (a venture capital company dealing with monitoring devices in the area of diabetes) since December 2015 and is the Chairman-elect of Australian Leisure Holdings Group (a hotel and retail liquor company). Until recently, he was a director of The Reserve Bank of Australia, Chairman of Fairfax Media Limited (an Australian newspaper, magazine and internet publisher), and Chairman of PrimeAg Australia (an Australian farming enterprise). Mr. Corbett is a former founding director of Outback Stores and holds leadership positions on boards and advisory councils of various industry, charitable, and non-profit organizations.
 

Joined the Board: 2006

 

Age: 73

 

Board Committee: SPFC

 

Other Current Public
Company Directorships:

Mayne Pharma Group
Limited

 

    Skills and Qualifications:
     

 

Mr. Corbett has more than 50 years of experience in the retail industry, and brings unique financial, operational, and strategic expertise in matters facing large retail companies.
      In addition, Mr. Corbett’s leadership positions with multinational companies bring to the Board an international retail perspective and understanding of international markets.
         

 

  Michael T. Duke      
 

 

 

 

    Mr. Duke was Walmart’s President and CEO from February 1, 2009 to January 31, 2014, and served as Chair of the Executive Committee from February 1, 2011 to January 31, 2015, when he retired from the company. Prior to his appointment as our company’s President and CEO, he held other positions with Walmart since July 1995, including Vice Chairman with responsibility for Walmart International beginning in September 2005 and Executive Vice President, President and CEO of Walmart U.S., beginning in April 2003. Since June 2015, Mr. Duke has served on the board of directors of Chick-fil-A, Inc. and on the board of trustees of the Georgia Tech Foundation, where he is also a Distinguished Executive in Residence. He previously has served on the board of directors of The Consumer Goods Forum and the boards of advisors for the University of Arkansas and the Tsinghua University School of Economics and Management in Beijing, China. He is also a member of the National Academy of Engineering.
 

Joined the Board: 2008

 

Age: 66

 

Board Committees:
SPFC

 

Other Current Public
Company Directorships:

None

 

    Skills and Qualifications:
      Mr. Duke brings years of executive leadership experience across multiple operating segments of our company.
      The Board benefits from Mr. Duke’s decades of experience and leadership in the retail industry and at our company.
      Mr. Duke has extensive knowledge of international markets and international retailing.

 

 2016 Proxy Statement    22

 

  Jim C. Walton+      
 

 

 

 

    Mr. Walton has been the Chairman and CEO of Arvest Bank Group, Inc., a group of banks operating in the states of Arkansas, Kansas, Missouri, and Oklahoma since 1990. From 1982 to 2015, Mr. Walton served as Chairman of Community Publishers, Inc., which operated newspapers in Arkansas, Missouri, and Oklahoma. In addition, Mr. Walton serves on the boards of directors of a number of charitable and non-profit organizations.
 

Joined the Board: 2005

 

Age: 67

 

Board Committee: TeCC

 

Other Current Public
Company Directorships:

None

 

    Skills and Qualifications:
     

 

Mr. Walton brings to the Board his executive leadership, strategic planning, and management experience gained through his leadership positions at the companies described above, including in the banking industry.
      Mr. Walton’s qualifications to serve on the Board include his banking and investment expertise.
      The Board benefits from Mr. Walton’s long history and familiarity with our company and its operations gained through his service on the Board and prior service on the SPFC.

 

+  Jim Walton and Rob Walton are brothers; and Steuart Walton is the son of Jim Walton.

 

 2016 Proxy Statement    23

 

Board Leadership Structure

 

As part of its annual evaluation process described below, the Board reviews its leadership structure to ensure that it is designed to provide robust oversight and promote overall Board effectiveness. Our current Board leadership structure consists of:

 

Non-Executive Chairman   Lead Independent Director   President and CEO
     Greg Penner        Jim Cash        Doug McMillon

Primary Responsibilities

 

•   Presides over meetings of the Board and shareholders

•   Focuses on Board oversight and governance matters

•   Provides advice and counsel to the CEO

 

Primary Responsibilities

 

•   Liaison between Chairman and Independent Directors

•   Agenda review process

•   Board and committee development and evaluation

•   Interactions with major shareholders

 

Primary Responsibilities

 

•   Leadership of Walmart’s complex global business

•   Implements strategic initiatives

•   Development of robust management team

Skills and Qualifications   Skills and Qualifications   Skills and Qualifications
   

 

We have separated the Chairman and CEO roles since 1988. As required by our Corporate Governance Guidelines, we separate these roles because we believe Walmart benefits from the distinct perspectives and experiences of a separate Chairman and CEO. By separating these roles, our CEO is able to focus on managing Walmart’s complex daily operations and our Chairman, who is an Outside Director, can devote his time and attention to matters of Board oversight and governance. Moreover, we believe this separation of roles allows the Board to more effectively perform its risk oversight role as described on page 31.

 

We have an active and engaged Lead Independent Director. Pursuant to our Corporate Governance Guidelines, the Independent Directors annually appoint a Lead Independent Director who presides over executive sessions of the Outside Directors and Independent Directors and presides over Board meetings in the Chairman’s absence.

 

We have had a Lead Independent Director since 2004. Dr. Cash has served in this role since 2013. In addition to the responsibilities noted above, he also:

 

has authority to call meetings of the directors, including separate meetings of the Outside Directors and Independent Directors;
in conjunction with the Chair of the CNGC, leads the annual Board and committee evaluation process;
in conjunction with the Chairman and the Chair of the CNGC, actively participates in work related to overall Board effectiveness, including Board development, succession planning, and refreshment; and
is available, when appropriate, for consultation with major shareholders.

 

Committee Chairs: Each of the Board’s key committees is led by an independent chair. These committees play a critical role in our governance and strategy, and each committee has access to management and the authority to retain independent advisors as it deems appropriate.

 

Governance Committees   Strategy Committees
    Tim Flynn     Linda Wolf       Steve Reinemund     Kevin Systrom

•   Audit Committee Chair

•   Independent

•   CNGC Chair

•   Independent

 

•   SPFC Chair

•   Independent

•   TeCC Chair

•   Independent

 Skills and Qualifications  Skills and Qualifications    Skills and Qualifications  Skills and Qualifications
         

 

Additional information about each of the directors in our Board leadership structure may be found in the section titled “Who are the 2016 director nominees?” on pages 15-21.

 

 2016 Proxy Statement    24

 

Board Committees

 

To enhance the effectiveness of the Board’s risk oversight function, the Board reviews its committee structure and committee responsibilities to ensure that the Board has an appropriate committee structure focused on matters of strategic and governance importance to Walmart. Currently, the Board has six standing committees, which are described below. In addition to the duties described below, our Board committees perform the risk oversight functions described on page 31.

 

STRATEGIC PLANNING AND FINANCE COMMITTEE

Number of meetings during fiscal 2016: 5

 

Roles and responsibilities

 

Reviews global financial policies and practices and reviews and analyzes financial matters, acquisition and divestiture transactions
Oversees long-range strategic planning
Reviews and recommends a dividend policy to the Board
Reviews the preliminary annual financial plan and annual capital plan to be approved by the Board, as well as the company’s capital structure and capital expenditures

 

Members:

 

Steve Reinemund, Chair
Roger Corbett*
Tim Flynn
Tom Horton
Mike Duke*
Rob Walton



“For fiscal 2017, the SPFC is focused on disciplined management of our portfolio of assets and effective oversight of the allocation of capital to support our long-term strategy.„

 

– Steve Reinemund

Global 6 Sr. Leadership 6 Regulatory 3 Retail 3 Finance 2 Marketing 1

   

 

* Not standing for reelection at the 2016 Annual Shareholders’ meeting.

 

TECHNOLOGY AND ECOMMERCE COMMITTEE

 

Number of meetings during fiscal 2016: 3

 

Roles and responsibilities

 

Reviews matters relating to information technology, e-commerce, and innovation and oversees the integration of Walmart’s information technology, e-commerce, and innovation efforts with Walmart’s overall strategy
Reviews and provides guidance regarding trends in technology and e-commerce and monitors overall industry trends

 

Members:

 

Kevin Systrom, Chair
Aida Alvarez*
Jim Cash
Pam Craig
Marissa Mayer
Linda Wolf
Jim Walton*



“The TeCC is excited about the company’s strategy to be the first retailer to provide a seamless digital customer experience at scale.„

 

– Kevin Systrom

Global 6 Sr. Leadership 5 Finance 4 Tech 4 Marketing 3 Regulatory 2 Retail 1

   

 

* Not standing for reelection at the 2016 Annual Shareholders’ meeting.

 

 2016 Proxy Statement    25

 
AUDIT COMMITTEE

Number of meetings during fiscal 2016: 10

 

Roles and Responsibilities

 

Reviews and approves the financial statements and oversees the financial reporting policies, procedures, and internal controls
Responsible for the appointment, compensation, and oversight of the independent accountants
Pre-approves audit, audit-related, and non-audit services to be performed by Walmart’s independent accountants
Reviews and approves any related person transactions and other transactions subject to our Transaction Review Policy
Reviews risk management policies and procedures, as well as policies, processes, and procedures regarding compliance with applicable laws and regulations, as well as Global Statement of Ethics and Code of Ethics for the CEO and Senior Financial Officers
Oversees internal investigatory matters, including the internal investigation into alleged violations of the FCPA and other alleged crimes or misconduct#
Oversees Walmart’s enhanced global compliance program
Oversees the company’s internal audit function

 

Members: *

 

Tim Flynn, Chair
Jim Cash
Pam Craig
Tom Horton



“The skills and experience of the Audit Committee are well suited to support our risk oversight function in the context of our company’s long-term strategy.„

 

– Tim Flynn

Global 4 Finance 4 Sr. Leadership 2 Tech 2 Regulatory 2

   

 

* Independence and financial literacy: The Board has determined that each member of the Audit Committee is independent as defined by the Exchange Act, the SEC’s rules, and the NYSE Listed Company Rules. Each Audit Committee member is financially literate as required by NYSE Listed Company Rules, and is an “audit committee financial expert” as defined in the SEC’s rules.

# For more information about the Audit Committee’s role with respect to the FCPA investigation, see “Director Compensation” on page 36.

 

COMPENSATION, NOMINATING AND GOVERNANCE COMMITTEE

Number of meetings during fiscal 2016: 8

 

Roles and responsibilities

 

In consultation with the CEO, approves compensation of Executive Officers other than the CEO, and reviews compensation of other senior officers
Reviews and approves the compensation of the CEO and recommends to the Board the compensation of the Outside Directors
Sets performance measures and goals and verifies the attainment of performance goals under our incentive compensation plans
Reviews compensation and benefits issues
Oversees corporate governance issues and makes recommendations to the Board
Identifies, evaluates, and recommends candidates for nomination to the Board
Reviews and makes recommendations to the Board regarding director independence
Reviews and advises management on social, community, and sustainability initiatives, as well as legislative affairs and public policy engagement
Oversees the management development, succession planning, and retention practices for Executive Officers and senior leaders

 

Members: *

 

Linda Wolf, Chair
Aida Alvarez(1)
Marissa Mayer
Steve Reinemund
Kevin Systrom



“The CNGC continues to focus on monitoring alignment between our compensation programs, performance, and strategy, as well as the overall effectiveness of our Board and management.„

 

– Linda Wolf

Global 5 Sr. Leadership 5 Marketing 4 Tech 2 Finance 1 Regulatory 1

   

 

* Independence: The Board has determined that each member of the CNGC is independent as defined by the Exchange Act, the SEC’s rules, and the NYSE Listed Company Rules,  is an outside director as defined in Section 162(m) of the Internal Revenue Code, and is a “non-employee director” as defined in the SEC’s rules.

(1) Not standing for reelection at the 2016 Annual Shareholders’ Meeting

 

 2016 Proxy Statement    26

 

The remaining two standing committees of the Board are responsible for various administrative matters.

 

GLOBAL COMPENSATION COMMITTEE

Number of meetings during fiscal 2016: 5

 

Roles and Responsibilities

 

•   Administers Walmart’s equity and cash incentive compensation plans for Associates who are not directors or Executive Officers

Members:

 

Doug McMillon, Chair
Greg Penner
Rob Walton

 

EXECUTIVE COMMITTEE

Number of meetings during fiscal 2016: 0*

 

Roles and responsibilities

 

•    Implements policy decisions of the Board

•   Acts on the Board’s behalf between Board meetings

Members:

 

Doug McMillon, Chair
Jim Cash
Greg Penner
Rob Walton

 

*The Executive Committee acted by unanimous written consent 11 times during fiscal 2016. The Board reviewed each unanimous written consent of the Executive Committee during fiscal 2016 and ratified each of them.

 

Governing Documents. Each standing committee of the Board has a written charter, which sets forth the roles and responsibilities of the Board committee. In addition, the Board has adopted Corporate Governance Guidelines, as more specifically described below. The committee charters and the Corporate Governance Guidelines, provide the overall framework for our corporate governance practices. The CNGC and the Board review the Corporate Governance Guidelines, and the CNGC, the Board, and each Board committee review the Board committee charters at least annually to determine whether any updates or revisions to these documents may be necessary or appropriate. Our Corporate Governance Guidelines address, among other topics:

 

Board size, structure, and composition;
the Board leadership structure, including the separation of the Chairman and CEO roles and the selection, role, and responsibilities of the Lead Independent Director;
the committees of the Board;
stock ownership guidelines;
the Board’s commitment to diversified membership;
management development and succession planning, diversity initiatives, and long-term strategic planning;
the directors’ full and free access to officers, other Associates of the company, and the company’s outside advisors;
director compensation;
director orientation and continuing education;
the annual review of the CEO’s performance by the CNGC and the Board; and
annual Board and Board committee self-evaluations.

 

Our Board and Board committee governance documents, including the Board committee charters, the Corporate Governance Guidelines, and other key corporate governance documents are available to our shareholders:

 

•   on our corporate website at http://stock.walmart.com/corporate-governance/governance-documents; or

•   in print at no charge to any shareholder who requests a copy by writing to our Global Investor Relations Department at: Wal-Mart Stores, Inc., Global Investor Relations Department, 702 Southwest 8th Street, Bentonville, Arkansas 72716-0100.

 

You may also access and review the following additional corporate governance documents at http://stock.walmart.com/corporate-governance/governance-documents:

 

•   Amended and Restated Bylaws;

•   Code of Ethics for the CEO and Senior Financial Officers*;

•   Global Statement of Ethics;

•   Procedures for Accounting and Audit-Related Complaints;

•   Investment Community Communications Policy;

•   Fair Disclosure Procedures;

•   Global Anti-Corruption Policy;

•   Government Relations Policy; and

•   Privacy Policy.

 

*Walmart’s Code of Ethics for the CEO and Senior Financial Officers supplements Walmart’s Global Statement of Ethics, which is applicable to all directors, Executive Officers, and Associates and is also available at www.walmartethics.com. A description of any substantive amendment or waiver of Walmart’s Code of Ethics for the CEO and Senior Financial Officers or Walmart’s Global Statement of Ethics granted to Executive Officers or directors will be disclosed on our corporate website (http://stock.walmart.com/corporate-governance/ governance-documents) for a period of 12 months after the date of the amendment or waiver. There were no substantive amendments to or waivers of Walmart’s Code of Ethics for the CEO and Senior Financial Officers or Walmart’s Global Statement of Ethics granted to Executive Officers or directors during fiscal 2016.

 

 2016 Proxy Statement    27

 

Board Meetings and Director Attendance

 

The Board held a total of 6 meetings during fiscal 2016. During fiscal 2016, each director attended 75% or more of the aggregate number of Board meetings and meetings of Board committees on which he or she served. As a whole, during fiscal 2016, our directors attended approximately 98% of the aggregate number of Board meetings and meetings of Board committees on which they served, and 9 of the 11 incumbent director nominees standing for reelection had perfect attendance. The Outside Directors and Independent Directors met regularly in executive sessions, with the Lead Independent Director chairing those sessions.

 

Board Attendance at Annual Shareholders’ Meetings

 

The Board has adopted a policy stating that all directors are expected to attend the company’s annual shareholders’ meetings. While the Board understands that there may be situations that prevent a director from attending an annual shareholders’ meeting, the Board encourages all directors to make attendance at all annual shareholders’ meetings a priority. Fourteen Board members attended the 2015 Annual Shareholders’ Meeting, including all director nominees named in this proxy statement who were members of the Board at the time of the 2015 Annual Shareholders’ Meeting.

 

Communicating with the Board

 

The Board welcomes feedback from shareholders and other interested parties. There are a number of ways that you can contact the Board or individual members of the Board.

 

Name of Director(s) or Board of Directors c/o Gordon Y. Allison, Vice President and General Counsel, Corporate Division Wal-Mart Stores, Inc.

702 Southwest 8th Street Bentonville, Arkansas 72716-0215

Via email:

•  the entire Board at directors@wal-mart.com;

•  the Independent Directors at Independent.Directors@wal-mart.com;

•  the Outside Directors at nonmanagementdirectors@wal-mart.com; or

•  any individual director, at the full name of the director as listed under “Proposal No.1 – Election of Directors” followed by “@wal-mart.com.” For example, our Chairman, Gregory B. Penner, may be reached at gregorybpenner@wal-mart.com.

 

Our company receives a large volume of correspondence regarding a wide range of subjects each day, including correspondence relating to ordinary store operations and merchandise in our stores. As a result, our individual directors are often not able to respond to all communications directly. Therefore, the Board has established a process for managing communications to the Board and individual directors.

 

Communications directed to the Board or individual directors are reviewed to determine whether, based on the facts and circumstances of the communication, a response on behalf of the Board or an individual director is appropriate. If a response on behalf of the Board or an individual director is appropriate, Walmart management may assist the Board or individual director in gathering all relevant information and preparing a response. Communications related to day-to-day store operations, merchandise, and similar matters are typically directed to an appropriate member of management for a response. Walmart maintains records of communications directed to the Board and individual directors, and these records are available to our directors at any time upon request.

 

Shareholders wishing to recommend director candidates for consideration should do so in writing to the address set forth above. The recommendation should include the candidate’s name and address, a resume or curriculum vitae that demonstrates the candidate’s experience, skills, and qualifications, and other relevant information for the Board’s consideration. All director candidates recommended by shareholders will be evaluated by the CNGC on the same basis as any other director candidates.

 

 2016 Proxy Statement    28

 

Board Evaluations and Board Effectiveness

 

Evaluation Process. The Board is committed to continuous improvement, and Board and Board committee evaluations are an important tool for promoting effectiveness. This evaluation process currently includes:

 

Questionnaires – each director completes a detailed questionnaire. Topics covered include, among others:

 

  The effectiveness of the Board’s leadership structure and the Board committee structure;
     
  Board and committee skills, composition, diversity, and succession planning;
     
  Board culture and dynamics, including the effectiveness of discussion and debate at Board and committee meetings;
     
  The quality of Board and committee agendas and the appropriateness of Board and committee priorities; and
     
  Board/management dynamics, including the quality of management presentations and information provided to the Board and committees.

 

Individual director interviews – each director participates in a confidential, open-ended, one-on-one interview to solicit input and perspective on Board and committee effectiveness.
   
Senior management questionnaires and interviews – Since fiscal 2014, members of Walmart’s senior executive team have also completed brief, anonymous questionnaires and participated in confidential, one-on-one interviews designed to solicit management’s perspective on the Board’s effectiveness, engagement, and the dynamic between the Board and management.
   
The evaluation process is led by our Lead Independent Director and the Chair of the CNGC. In 2016, the Board engaged a third party consulting firm to assist with the evaluation process.

 

Action Items. These evaluations have consistently found that the Board and Board committees are operating effectively. Over the past few years, this evaluation process has contributed to various refinements in the way the Board and committees operate, including:

 

reducing the size of the Board to promote engagement and input into our strategic decisionmaking;
   
changing committee assignments so that Independent Directors sit on one “strategy” committee and one “governance” committee;
   
ensuring that Board and committee agendas are appropriately focused on strategic priorities and provide adequate time for director input;
   
additional responsibilities for our Lead Independent Director, including active participation in the agenda-setting process for the Board and committees; and
   
increased focus on continuous Board succession planning and Board refreshment.

 

Board Refreshment and Succession Planning

 

The CNGC is responsible for identifying and evaluating potential director candidates, for reviewing the composition of the Board and Board committees, and for making recommendations to the full Board on these matters. Throughout the year, the CNGC actively engages in Board succession planning, taking into account the following considerations:

 

Input from Board discussions and from the Board and Board committee evaluation process regarding the specific backgrounds, skills, and experiences that would contribute to overall Board and committee effectiveness; and
   
The future needs of the Board and Board committees in light of the Board’s tenure policies, Walmart’s strategy, and the skills and qualifications of directors who are expected to retire in the future.

 

Director Tenure Policies Board/Committee Evaluations Director Recruitment Director Onboarding Allow Board to anticipate future Board turnover Identify skill sets that would enhance Board effectiveness Identify top director talent with desired background and skill setsDirector Tailored onboarding enables new directors to contribute quickly

 

 2016 Proxy Statement    29

 

The Board believes that a mix of longer-tenured directors and newer directors with fresh perspectives contributes to an effective Board. In order to promote thoughtful Board refreshment, the Board has adopted the following retirement policies for Independent Directors, as set forth in Walmart’s Corporate Governance Guidelines:

 

Term Limit Independent Directors are expected to commit to at least six years of service, and may not serve for more than 12 years.
Retirement Age Unless they have not yet completed their initial six-year commitment, Independent Directors may not stand for reelection after age 75.

 

The Board may make exceptions to these retirement policies if circumstances warrant. For example, the Board could extend the term limit or retirement age for an individual director with particular skills or qualifications that are valuable to the Board’s effectiveness until a suitable replacement is found. Similarly, an Independent Director may retire before serving 12 years in order to avoid excessive turnover on the Board or a Board committee in a short period of time. The Board believes that these policies have helped to provide discipline to the Board refreshment process, and have resulted in a diverse Board with an effective mix of skills, experiences, and tenures, as shown on page 9.

 

As a part of the process of identifying potential director candidates, the CNGC may consult with other directors and senior officers and may engage a search firm to assist in the process. If the CNGC decides to proceed with further consideration of a potential candidate, the Chair of the CNGC and other members of the CNGC, as well as other members of the Board, may interview the candidate. The CNGC then may recommend that the full Board appoint or nominate the candidate for election to the Board.

 

Steuart Walton is standing for election to the Board for the first time at the 2016 Annual Shareholders’ Meeting, and was recommended by members of the Walton family who beneficially own more than 5% of our outstanding Shares, including Rob Walton and Jim Walton, who are Outside Directors. Historically, three members of the Walton family have been members of our Board, which the CNGC and Board believe is appropriate given the Walton family’s significant and long-term Share ownership. With Jim Walton not being nominated for reelection, the Walton family recommended Steuart Walton for nomination in the context of the Board’s succession planning process and in light of Steuart Walton’s skills and qualifications described on page 20.

 

Director Onboarding and Engagement with the Business

 

All directors are expected to invest the time and energy required to quickly gain an in-depth understanding of our business and operations in order to enhance their strategic value to our Board. Shortly after joining our Board, each new director is partnered in a mutual mentoring relationship with a member of senior management, and each new director has “learn the business” meetings with the leaders of key operational and corporate support functions. Typically, at least one Board meeting each year is held at a location away from our home office, usually in a market in which we operate. In connection with these Board meetings, our directors learn more about the local market and our business in that market through meetings with our business leaders in the markets, visits to our stores and other facilities in the local market, and visits to the stores of our competitors. We also typically hold one Board meeting per year at our Global eCommerce headquarters in San Bruno, California, where our Board members participate in intensive sessions focused on our e-commerce strategies and operations. Our Board members also participate in other company activities and engage directly with our Associates at a variety of events throughout the year. Activities and events that members of our Board participated in since the beginning of fiscal 2015 include:

 

attending Walmart leadership meetings and traveling with senior business leaders on trips to domestic and international markets;
   
attending a summit of our CFOs from our worldwide markets and speaking at a global governance summit;
   
speaking at various diversity and inclusion events held at our home office in Bentonville, Arkansas; and
   
attending and speaking at meetings of Walmart business segments, divisions, and corporate support departments.

 

Management Development and Succession Planning

 

Our Board places a high priority on senior management development and succession planning. The CNGC has primary responsibility for overseeing the succession planning and retention practices for our Executive Officers and other senior leaders. Executive Officer succession planning and senior management development is a regular topic on the agendas for the meetings of the CNGC. At these meetings, the members of our CNGC, in consultation with our CEO, our Executive Vice President – Global People, and others as the CNGC may deem appropriate, engage in comprehensive deliberations regarding the development and evaluation of current and potential senior leaders, as well as the development of executive succession plans, including succession plans for our CEO position. This process has contributed to two successful CEO transitions since 2009. The Board has also separately developed a CEO succession planning process to address unanticipated events and emergency situations.

 

 2016 Proxy Statement    30

 

The Board’s Role in Risk Oversight

 

Taking reasonable and responsible risks is an inherent part of Walmart’s business and is critical to our continued innovation, growth, and achievement of our strategic objectives. The Board and the Board committees play an active role in overseeing the management of the most significant risks that could impact the company’s operations.

 

The Board does not view risk in isolation, but instead considers risk in conjunction with its oversight of the company’s strategy and operations. The company’s internal processes and internal control environment facilitate the identification and management of risk by the company’s management, the Board committees, and the Board.

 

The open communication between the company’s management and the Board and the Board committees, and between the Board and the chairs and the other members of the Board committees, enables the Board, Board committees, and management to coordinate the risk oversight role in a manner that serves the long-term interests of the company and our shareholders.

 

Additional information regarding the roles and responsibilities of our Board committees can be found under “Board Committees” beginning on page 25.

 

MANAGEMENT BOARD BOARD OVERSIGHT Has primary responsibility for overseeing risk management Evaluates and approves strategic objectives and defines risk tolerance Delegates certain risk management oversight responsibilities to Board committees Receives regular reports from Board Committee chairs regarding risk-related matters Audit Committee Key risks overseen Overall risk identification, monitoring, and mitigation processes and policies Financial statements, systems, and reporting Ethics and compliance Information technology, data security, and cybersecurity Related person transactions Internal investigatory matters Compensation, Nominating and Governance Committee Key risks overseen Corporate governance Senior executive compensation Director and senior executive succession planning Social, community, sustainability, and charitable giving initiatives Legislative and public policy engagement strategy Technology and eCommerce Committee Key risks overseen Integration of information technology, e-commerce, and innovation efforts with overall strategy Emerging trends in technology and e-commerce Strategic Planning and FinanceCommittee Key risks overseen Financial status and financial matters, including capital expenditures, annual financial plans, and dividend policies Long-range strategic plans Potential acquisitions and divestitures Global Audit Services EnterpriseCorporate Strategy Legal, Regulatory,and Compliance Risk Management Committees Financial Risk Management Committees Operational and Strategic Management Committees BOARD MANAGEMENT OVERSIGHT Responsible for enterprise risk assessment and day-to-day management of risks such as: Strategic risk Financial risk Operational risk Reputational risk Legal, regulatory, and compliance risk Supply chain risk Information systems and cybersecurity risk

 

 2016 Proxy Statement    31

 

Oversight of the Company’s Strategies for Legislative Affairs, Public Policy Engagement, Charitable Giving, and Sustainability

 

Pursuant to its charter, the CNGC reviews and advises management regarding the company’s legislative affairs and public policy engagement strategy, as well as the company’s charitable giving strategy and the company’s social, community, and sustainability initiatives. Walmart engages in the political process when we believe that doing so will serve the best interests of the company and our shareholders. Walmart is committed to engaging in the political process as a good corporate citizen and in a manner that complies with all applicable laws. Over the years, Walmart has provided greater transparency regarding the company’s political engagement. In 2015, we compiled lobbying disclosure information from our U.S. state-level public filings and presented them on our corporate website, and in 2016 we will also include on our corporate website the lobbying expense from our public filings at the U.S. federal level.

 

Global Responsibility Report

 

Since 2007, our company has prepared and produced a report describing our company’s progress and initiatives regarding sustainability and other environmental, social, and governance (“ESG”) matters. For the most recent information regarding Walmart’s engagement in the political process, as well as other ESG matters, please see our most recent Global Responsibility Report, available at http://corporate.walmart.com/global-responsibility/. Walmart’s Government Relations Policy is also available at http://corporate.walmart.com/government-relations-policy.

 

Shareholder Outreach and Engagement

 

We recognize the value of listening and taking into account the views of our shareholders, and the relationship with our shareholders is an integral part of our corporate governance practices. We conduct shareholder outreach throughout the year to ensure that management and the Board understand and consider the issues of importance to our shareholders and are able to address them appropriately. During fiscal 2016, at the direction of the CNGC, senior leaders and subject matter experts from the company met with representatives at many of our top institutional shareholders and leading proxy advisory firms to discuss Walmart’s strategy, governance practices, executive compensation, compliance programs, and other ESG related matters. Members of our Board participated in some of these meetings. Management reports regularly to the CNGC about these meetings, including feedback on these diverse topics and concerns raised by our shareholders. We are continuing this program of shareholder engagement during fiscal 2017, in addition to our customary participation at industry and investment community conferences, investor road shows, and analyst meetings. We also have incorporated into this proxy statement some of the feedback we received during these meetings. We also respond to individual shareholders who provide feedback about our business. We have had success engaging with parties to understand shareholder concerns and reaching resolutions on issues that are in the best interests of our shareholders, and we remain committed to these ongoing initiatives.

 

Active Ongoing Shareholder Engagement

 

•   Board members, senior leaders and/or subject matter experts actively solicit feedback from our large shareholders on strategy, governance, compensation, and other topics. During fiscal 2016, we met with more than half of our 50 largest institutional shareholders.

 

•   The CNGC receives regular reports on this engagement.

 

•   We welcome feedback from all shareholders, who can contact our Global Investor Relations team by:

 

–   calling 1-479-273-6463

 

–   emailing IRinqu@wal-mart.com

 

–   using Walmart’s Global Investor Relations app, available for free in iTunes and Google Play

 

–   visiting http://stock.walmart.com

 

 2016 Proxy Statement    32

 

Director Independence

 

A majority of our directors must be independent in accordance with the independence requirements set forth in the NYSE Listed Company Rules. In addition, the Audit Committee and the CNGC must be composed solely of directors who meet additional, heightened independence standards applicable to members of audit committees and compensation committees under the NYSE Listed Company Rules and the SEC’s rules.

 

In making independence determinations, the Board complies with all NYSE and SEC criteria and considers all relevant facts and circumstances. Under the NYSE Listed Company Rules, to be considered independent:

 

the director must not have a disqualifying relationship, as set forth in the NYSE Listed Company Rules; and
   
the Board must affirmatively determine that the director otherwise has no direct or indirect material relationship with our company.

 

To aid in the director independence assessment process, the Board has adopted materiality guidelines that identify the following categories of relationships that the Board has determined will generally not affect a director’s independence.

 

Materiality Guideline Description
Ordinary Retail
Transactions
The director, an entity with which a director is affiliated, or one or more members of the director’s immediate family, purchased property or services from Walmart in retail transactions on terms generally available to Walmart Associates during Walmart’s last fiscal year.
Immaterial Ownership The director or one or more members of the director’s immediate family owns or has owned during the entity’s last fiscal year, directly or indirectly, 5% or less of an entity that has a business relationship with Walmart.
Immaterial Transactions The director or one or more members of the director’s immediate family owns or has owned during the entity’s last fiscal year, directly or indirectly, more than 5% of an entity that has a business relationship with Walmart so long as the amount paid to or received from Walmart during the entity’s last fiscal year accounts for less than $1,000,000 or, if greater, 2% of the entity’s consolidated gross revenues for that entity’s last fiscal year.

The director or a member of the director’s immediate family is or has been during the entity’s last fiscal year an executive officer or employee of an entity that made payments to, or received payments from, Walmart during the entity’s last fiscal year that account for less than $1,000,000 or, if greater, 2% of the entity’s consolidated gross revenues for that entity’s last fiscal year.
Immaterial Positions The director or one or more members of the director’s immediate family is a director or trustee or was a director or trustee (but not an executive officer or employee) of an entity during the entity’s last fiscal year that has a business or charitable relationship with Walmart and that made payments to, or received payments from, Walmart during the entity’s last fiscal year in an amount representing less than $5,000,000 or, if greater, 5% of the entity’s consolidated gross revenues for that entity’s last fiscal year.

Walmart paid to, employed, or retained one or more members of the director’s immediate family for compensation not exceeding $120,000 during Walmart’s last fiscal year.
Immaterial Benefits The director or one or more members of the director’s immediate family received from Walmart, during Walmart’s last fiscal year, personal benefits having an aggregate value of less than $5,000.

 

In April 2016, the Board and the CNGC conducted their annual review of directors’ responses to a questionnaire soliciting information regarding their direct and indirect relationships with the company (and the directors’ immediate family members’ direct and indirect relationships with the company) and other relationships that may be relevant to independence, as well as due diligence performed by management regarding any transactions, relationships, or arrangements between the company and the directors or parties related to the directors. As a result of this review, the Board has determined that the following director nominees are Independent Directors under the independence standards set forth in the NYSE Listed Company Rules: James I. Cash, Jr.; Pamela J. Craig; Timothy P. Flynn; Thomas W. Horton; Marissa A. Mayer; Steven S Reinemund; Kevin Y. Systrom; and Linda S. Wolf. The Board has also determined that Aida M. Alvarez and Roger C. Corbett, who are not standing for reelection at the 2016 Annual Shareholders’ Meeting, are Independent Directors. In addition, the Board determined that the currently serving members of the Audit Committee and the CNGC meet the heightened independence standards for membership on those Board committees. The Board also determined that Douglas N. Daft, who did not stand for reelection at the 2015 Annual Shareholders’ Meeting and, therefore, ceased to be a director of Walmart on June 5, 2015, was independent and met the heightened independence standards for CNGC membership during the portion of fiscal 2016 during which he served on the Board.

 

 2016 Proxy Statement    33

 

In making its determination as to the independence of our Independent Directors, the Board considered whether any relationship between a director and Walmart is a material relationship based on the materiality guidelines discussed above, the facts and circumstances of the relationship, the amounts involved in the relationship, the director’s interest in such relationship, if any, and such other factors as the Board, in its judgment, deemed appropriate. In each case, the Board found the relationship with our Independent Directors to be immaterial to the director’s independence. The types of relationships considered by the Board are noted below:

 

Relationship Type Director
The director was an officer of a Walmart vendor or service provider Ms. Mayer
Mr. Systrom
Immediate family members of the director were employees or officers of Walmart vendors or service providers Ms. Alvarez
Mr. Corbett
Ms. Craig
Mr. Daft
Mr. Flynn
Mr. Reinemund
Ms. Wolf
The director was a director or trustee of a Walmart vendor or service provider Ms. Alvarez
Dr. Cash
Mr. Corbett
Ms. Craig
Mr. Flynn
Ms. Mayer
Mr. Reinemund

 

The aggregate amounts involved in each of the relationships and transactions described in the preceding table were less than $1 million or, if greater, 1% of the consolidated gross revenues for the entity’s last fiscal year, with the exception of certain relationships involving Mr. Corbett and Mr. Reinemund.

 

Mr. Corbett served as a director of a Walmart vendor that received payments from Walmart during the entity’s last fiscal year in an amount that was less than 3% of that entity’s consolidated gross revenues for that entity’s last fiscal year. In light of these facts, the Board determined that this relationship was not material to Mr. Corbett’s independence. In addition, immediate family members of Mr. Corbett and Mr. Reinemund are or were employed by or had a less than 5% indirect ownership interest in (but are not executive officers of) a Walmart supplier or vendor that received payments from Walmart during the entity’s last fiscal year that account for more than 2% of the entity’s consolidated gross revenues for that entity’s last fiscal year. The Board determined these relationships were immaterial to each director’s independence because in each case neither the director nor the immediate family member: (i) is or was not an executive officer of the entity; (ii) is or was not involved in the negotiation of transactions or the business relationship between Walmart and the entity; (iii) does or did not receive compensation from the entity based on the marketing or sale of the entity’s goods or services to Walmart; and (iv) did not have his or her advancement within such entity based on the marketing or sale of the entity’s goods or services to Walmart. Further, the payments made by Walmart to the entities, or by the entities to Walmart, were for various products and services in the ordinary course of business, and Walmart has had a relationship with these entities for many years prior to the directors’ immediate family members’ employment with these entities.

 

In their determination of Ms. Mayer’s independence, the Board and the CNGC considered Ms. Mayer’s positions as the chief executive officer, president, and a member of the board of directors of Yahoo!. During fiscal 2016, Walmart paid Yahoo! for advertising space on Yahoo!’s websites and Yahoo! made ordinary course purchases from Walmart in amounts that account for less than 1% of Yahoo!’s 2015 revenues and Walmart’s fiscal 2016 revenues. Walmart anticipates that it will purchase advertising space on Yahoo!’s websites and will sell goods in the ordinary course to Yahoo! in fiscal 2017. Ms. Mayer was not involved in any transaction between Walmart and Yahoo! and did not have a direct or indirect material interest in any transaction between Walmart and Yahoo!. Based on the Board’s consideration of Ms. Mayer’s positions at Yahoo! and the other factors relating to the transactions between Walmart and Yahoo!, the Board determined that Ms. Mayer’s interest in Yahoo! did not give rise to a material relationship that would impair Ms. Mayer’s independence.

 

The Board and the CNGC concluded that each of the Independent Directors does not currently have, and has not had during any pertinent period, any relationship that: (i) constitutes a disqualifying relationship under the NYSE Listed Company Rules; (ii) otherwise compromises the independence of such directors; or (iii) otherwise constitutes a material relationship between Walmart and the directors.

 

 2016 Proxy Statement    34

 

Related Person Transactions

 

Our company’s Legal Department reviews each transaction in which the company and any director, director nominee, Executive Officer, shareholder beneficially owning more than five percent of Walmart’s outstanding shares, or any immediate family member of any such person has or will have an interest if the amount involved in the transaction exceeds $120,000. The purpose of this review is to determine whether the related person has a direct or indirect material interest in the transaction.

 

Our Legal Department has developed and implemented processes and controls for obtaining information about proposed or existing related person transactions from our directors, director nominees, Executive Officers, and principal shareholders. The Legal Department analyzes each related person transaction and, based upon the facts and circumstances, determines of whether the related person has or will have a material interest in the transaction. If so, consistent with and pursuant to the company’s Transaction Review Policy, the related person transaction is presented to the Audit Committee for its review and approval or ratification. As also described under “Transaction Review Policy” on page 81, when reviewing a related person transaction the Audit Committee considers the following factors:

 

the nature of the related person’s interest in the transaction;
   
the substantive terms of the transaction, including the type of transaction and the amount involved;
   
opinions from the company’s internal audit function and global ethics office regarding the fairness of the transaction to our company; and
   
any other factors the Audit Committee deems appropriate.

 

We disclose in this proxy statement all transactions in which a related person has been determined to have a material interest and the amount involved exceeds $120,000 that are required to be disclosed under SEC rules. Walmart believes that the terms of the transactions described below are comparable to terms that would have been reached by unrelated third parties in arm’s-length transactions. The Audit Committee has approved each of the transactions disclosed below.

 

Dr. G. David Gearhart, who was the Chancellor of the University of Arkansas at Fayetteville (the “University”) through July 31, 2015, is the brother of Jeffrey J. Gearhart, an Executive Officer. During fiscal 2016, Walmart paid the University approximately $1.9 million, including approximately $0.9 million for the use of facilities of the University in connection with Walmart’s 2015 Annual Shareholders’ Meeting, the meetings of Associates held during the week of the 2015 Annual Shareholders’ Meeting, and other meetings and events during fiscal 2016, and approximately $0.9 million for grants. Walmart expects that in fiscal 2017 it will continue to use University facilities for similar events and may make grants to the University.
   
Lori Haynie, the sister of C. Douglas McMillon, a director of Walmart and an Executive Officer, is an executive officer of Mahco, Incorporated (“Mahco”). During fiscal 2016, Walmart paid Mahco and its subsidiaries approximately $27.3 million in connection with Walmart’s purchases of sporting goods and related products. Walmart expects to purchase similar types of products from Mahco during fiscal 2017.
   
During fiscal 2016, a banking corporation that is collectively owned by Mr. Jim C. Walton, Mr. S. Robson Walton, and the John T. Walton Estate Trust, and certain of that banking corporation’s bank subsidiaries made payments to Walmart in the aggregate amount of approximately $0.5 million for supercenter, discount store, and Neighborhood Market banking facility rent pursuant to negotiated arrangements. The banking corporation and its affiliates made other payments to Walmart pursuant to similar arrangements that were awarded by Walmart on a competitive-bid basis. The leases of banking facility space in various stores remain in effect, and we anticipate that in fiscal 2017 such banking corporation and its affiliates will pay Walmart approximately $0.4 million pursuant to those leases not awarded on a competitive-bid basis.
   
Stephen P. Weber, a director in Walmart’s Information Systems Division, is the son-in-law of Michael T. Duke, a member of the Board. For fiscal 2016, Walmart paid Mr. Weber a salary of approximately $132,000, an annual incentive payment of approximately $27,100, and other benefits totaling approximately $15,000 (including Walmart’s matching contributions to Mr. Weber’s 401(k) Plan account and health insurance premiums). In fiscal 2016, Mr. Weber also received a grant of 434 restricted stock units having a value of approximately $35,000 at the date of grant. Mr. Weber continues to be an Associate, and, in fiscal 2017, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2016.
   
Greg T. Bray, a senior director in Walmart’s Finance department, is the brother-in-law of C. Douglas McMillon, a director of Walmart and an Executive Officer. For fiscal 2016, Walmart paid Mr. Bray a salary of approximately $200,200, an annual incentive payment of approximately $61,550, and other benefits totaling approximately $21,200 (including Walmart’s matching contributions to Mr. Bray’s 401(k) Plan account and health insurance premiums). In fiscal 2016, Mr. Bray also received a grant of 743 restricted stock units with a value of approximately $60,000 at the date of grant. Mr. Bray continues to be an Associate, and in fiscal 2017, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2016.
   
Nichole R. Bray, a director in the company’s Information Systems Division, is the sister-in-law of C. Douglas McMillon, a director of Walmart and an Executive Officer. For fiscal 2016, Walmart paid Ms. Bray a salary of approximately $133,500, an annual incentive payment of approximately $27,000, and other benefits totaling approximately $19,000 (including Walmart’s matching contributions to Ms. Bray’s 401(k) Plan account and health insurance premiums). In fiscal 2016, Ms. Bray also received a grant of 434 restricted stock units having a value of approximately $35,000 at the

 

 2016 Proxy Statement    35

 
  date of grant. Ms. Bray continues to be an Associate, and in fiscal 2017, she may receive compensation and other benefits in amounts similar to or greater than those she received during fiscal 2016.
   
Timothy K. Togami, who was a senior director in Walmart’s Human Resources department through June 4, 2015, is the brother-in-law of Rollin L. Ford, an Executive Officer. For fiscal 2016, Walmart paid Mr. Togami a salary of approximately $67,000, an annual incentive payment of approximately $43,300, and other benefits totaling approximately $11,100 (including Walmart’s matching contributions to Mr. Togami’s 401(k) Plan account and health insurance premiums). In fiscal 2016, Mr. Togami also received a grant of 607 restricted stock units having a value of approximately $50,000 at the date of grant. Mr. Togami is no longer an Associate, and, in fiscal 2017, he is not expected to receive any compensation or other benefits from Walmart.
   
Jessica R. Salmon, a senior manager in Walmart’s Finance department, is the daughter of Rollin L. Ford, an Executive Officer. For fiscal 2016, Walmart paid Ms. Salmon a salary of approximately $99,600, an annual incentive payment of approximately $29,300, and other benefits totaling approximately $10,700 (including Walmart’s matching contributions to Ms. Salmon’s 401(k) Plan account and health insurance premiums). In fiscal 2016, Ms. Salmon also received a grant of 310 restricted stock units having a value of approximately $25,000 at the date of grant. Ms. Salmon continues to be an Associate, and in fiscal 2017, she may receive compensation and other benefits in amounts similar to or greater than those she received during fiscal 2016.
   
Brian Salmon, a senior buyer at Walmart, is the son-in-law of Rollin L. Ford, an Executive Officer. For fiscal 2016, Walmart paid Mr. Salmon a salary of approximately $107,600, an annual incentive payment of approximately $20,850, and other benefits totaling approximately $10,200 (including Walmart’s matching contributions to Mr. Salmon’s 401(k) Plan account, and health insurance premiums). In fiscal 2016, Mr. Salmon also received a grant of 310 restricted stock units having a value of approximately $25,000 at the date of grant. Mr. Salmon continues to be an Associate, and in fiscal 2017, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2016.
   
Brittney Duke, a senior director in Walmart’s Marketing department, is the daughter of Michael T. Duke, a director of Walmart. For fiscal 2016, Walmart paid Ms. Duke a salary of approximately $216,000, a signing bonus of $15,000, and other benefits totaling approximately $6,300 (including Walmart’s contributions to Ms. Duke’s health insurance premiums). In fiscal 2016, Ms. Duke also received a grant of 832 restricted stock units having a value of approximately $60,000 at the date of grant. Ms. Duke continues to be an Associate, and in fiscal 2017, she may receive compensation and other benefits in amounts similar to or greater than those she received during fiscal 2016.

 

Director Compensation

 

Walmart’s compensation program for Outside Directors is intended to:

 

provide fair compensation commensurate with the work required to serve on the Board of a company with Walmart’s size, scope, and complexity;
   
align directors’ interests with the interests of Walmart shareholders; and
   
be easy to understand and communicate, both to our directors and to our shareholders.

 

Components of Director Compensation

 

Our Outside Director compensation program consists of the following primary components:

 

Who is Eligible   Component   Annual Amount Form of Payment
Base Compensation – All Outside Directors   Annual Stock Grant   $ 175,000 Shares
  Annual Retainer   $ 90,000 Cash
    Non-Executive Chairman Retainer   $ 200,000 50% Shares/50% Cash
Additional Fees – Some Outside Directors   Lead Independent Director Retainer   $ 30,000 Cash
  Audit and CNGC Chair Retainers   $ 25,000 Cash
    SPFC and TeCC Chair Retainers   $ 20,000 Cash

 

 

 2016 Proxy Statement    36

 

Other Compensation

 

Each Outside Director who attends in person a Board meeting held at a location that requires intercontinental travel from his or her residence is paid an additional $4,000 meeting attendance fee. Finally, each member of the Audit Committee received an additional fee during fiscal 2016. Since 2011, the Audit Committee has been conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other alleged crimes or misconduct in connection with certain foreign subsidiaries, and whether prior allegations of such violations and/or misconduct were appropriately handled by Walmart. The Audit Committee and Walmart have engaged outside counsel from a number of law firms and other advisors who are assisting in the ongoing investigation of these matters. This investigation continues to result in a significant increase in the workload of the Audit Committee members, and during fiscal 2016, the Audit Committee members received frequent updates regarding the investigation via conference calls and other means of communication with outside counsel and other advisors. In light of this continuing significant additional time commitment, during fiscal 2016, the Audit Committee Chair received an additional fee of $57,500, and the other members of the Audit Committee received an additional fee of $45,000.

 

Form and Timing of Payment

 

Stock grants to Outside Directors are made annually upon election to the Board at our annual shareholders’ meeting in June. Each Outside Director may elect to defer the receipt of this stock grant in the form of stock units. The other components of Outside Director compensation listed above are paid quarterly in arrears. Each Outside Director can elect to receive these other components in the form of cash, Shares (with the number of Shares determined based on the closing price of Shares on the NYSE on the payment date), deferred in stock units, or deferred into an interest-credited cash account.

 

Director Stock Ownership Guidelines

 

Each Outside Director is required to own, within five years of his or her initial election to the Board, Shares or deferred stock units with a value equal to five times the annual retainer portion of the Outside Director compensation established by the Board in the year the director was initially elected. All Outside Directors who have reached the five-year compliance date own sufficient Shares or deferred stock units to satisfy this requirement.

 

Director Compensation for Fiscal 2016

 

            Change in Pension Value        
    Fees Earned or   Stock   and Nonqualified Deferred   All Other    
    Paid in Cash   Awards   Compensation Earnings   Compensation   Total
Name   ($)   ($)   ($)   ($)   ($)
(a)   (b)   (c)   (f)   (g)   (h)
Aida M. Alvarez   83,654   174,979   0   0   258,633
James I. Cash, Jr.   160,714   174,979   0   2,027   337,720
Roger C. Corbett   99,571   174,979   0   19,001   293,551
Pamela J. Craig   128,654   174,979   0   0   303,633
Douglas N. Daft   32,143   0   11,626   0   43,769
Michael T. Duke   82,250   174,979   0   1,661   258,890
Timothy P. Flynn   166,154   174,979   0   1,579   342,712
Thomas W. Horton   128,654   174,979   0   411   304,044
Marissa A. Mayer   90,000   174,979   0   0   264,979
Gregory B. Penner   155,604   274,998   0   889   431,491
Steven S. Reinemund   103,654   174,979   0   405   279,038
Kevin Y. Systrom   101,538   174,979   0   0   276,517
Jim C. Walton   86,250   174,979   0   1,674   262,903
S. Robson Walton   90,000   174,979   0   192   265,171
Linda S. Wolf   115,000   174,979   0   0   289,979

 

 2016 Proxy Statement    37

 

Explanation of information in the columns of the table:

 

Name (column (a))

 

C. Douglas McMillon is omitted from this table because he received compensation only as an Associate of our company during fiscal 2016 and did not receive any additional compensation for his duties as a director. Douglas N. Daft did not stand for reelection and retired from the Board as of the 2015 Annual Shareholders’ Meeting.

 

Fees Earned or Paid in Cash (column (b))

 

Mr. Daft elected to defer the receipt of these fees into an interest-credited account. Certain other Outside Directors elected to either receive Shares in lieu of these amounts or defer these amounts in the form of deferred stock units, as shown below:

 

        Number of Shares   Number of Deferred Stock
    Amount   Received in Lieu of   Units in Lieu of
Director   ($)   Cash   Cash
Timothy P. Flynn   166,154       2,523
Marissa A. Mayer   90,000       1,305
Gregory B. Penner   155,604       2,308
Kevin Y. Systrom   101,538   1,486    

 

Stock Awards (column (c))

 

In accordance with SEC rules, the amounts in this column are the aggregate grant date fair value of stock awards granted during fiscal 2016, computed in accordance with the stock-based accounting rules that are part of GAAP (as set forth in Financial Accounting Standards Board’s Accounting Standards Codification Topic 718). Each Outside Director other than Mr. Penner that was elected to the Board at the 2015 Annual Shareholders’ Meeting received a stock award of 2,395 Shares ($175,000 divided by $73.06, the closing price of a Share on the NYSE on the grant date, and rounded to the nearest Share). Mr. Penner received a stock award of 3,764 Shares ($275,000 divided by $73.06, rounded to the nearest Share). Dr. Cash, Mr. Duke, Mr. Flynn, Ms. Mayer, Mr. Penner, Mr. Jim Walton, Mr. Rob Walton, and Ms. Wolf elected to defer these Shares in the form of deferred stock units. Mr. Daft did not stand for reelection at the 2015 Annual Shareholders’ Meeting and, therefore, did not receive a stock grant during fiscal 2016.

 

Option Awards and Non-Equity Incentive Plan Compensation (columns (d) and (e))

 

We do not issue stock options to our Outside Directors and do not provide our Outside Directors with any non-equity incentive plan compensation. Therefore, we have omitted these columns from the table. As of the end of fiscal 2016, Mr. Duke held options to purchase 125,104 Shares. Mr. McMillon also held options to purchase Shares as of the end of fiscal 2016, as disclosed on the Outstanding Equity Awards at Fiscal 2016 Year-End table on page 68. The options held by Mr. Duke and Mr. McMillon were granted to them in prior years as part of their compensation for service as Associates and not as compensation for serving as a director of our company.

 

Change in Pension Value and Non-Qualified Deferred Compensation Earnings (column (f))

 

This column represents above-market interest earned on director compensation deferred to an interest-credited account under the Director Compensation Deferral Plan, as elected by the director. The interest rate on the interest-credited account is set pursuant to the terms of the Director Compensation Deferral Plan based on the ten-year United States Treasury note yield on the first day of January plus 2.70%. This rate was 4.82% for the calendar year ended December 31, 2015, and increased to 4.94% for the calendar year ending December 31, 2016.

 

All Other Compensation (column (g))

 

The amounts in this column include tax gross-up payments paid during fiscal 2016 relating to imputed income attributable to spousal travel expenses, meals, and related activities in connection with certain Board meetings during fiscal 2016. For Mr. Corbett, this column also includes the aggregate cost of such spousal travel expenses, meals, and related activities in the amount of $14,522, primarily related to spousal travel from his residence in Australia to our 2015 Annual Shareholders’ Meeting and Board and committee meetings in June 2015. The cost of any such spousal travel expenses, meals, and related activities for each of the other Outside Directors is omitted from this column because the total incremental cost for such benefits for each other director was less than $10,000.

 

 2016 Proxy Statement    38

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

In this section, we describe our executive compensation philosophy and program that we have implemented to support our strategic objectives and serve the long-term interests of our shareholders. We also discuss how our CEO, CFO, and certain other Executive Officers (our NEOs) were compensated in fiscal 2016 and describe how their compensation fits within our executive compensation philosophy. For fiscal 2016, our NEOs were:

 

Name Title
C. Douglas McMillon President and Chief Executive Officer
Charles M. Holley, Jr. Retired Executive Vice President and Chief Financial Officer*
M. Brett Biggs Executive Vice President and Chief Financial Officer*
Gregory S. Foran Executive Vice President, President and CEO, Walmart U.S.
David Cheesewright Executive Vice President, President and CEO, Walmart International
Rosalind G. Brewer Executive Vice President, President and CEO, Sam’s Club
Neil M. Ashe Executive Vice President, President and CEO, Global eCommerce and Technology

 

*Mr. Holley retired as CFO effective January 1, 2016, and retired from the company on February 1, 2016. Mr. Biggs was promoted to Executive Vice President and CFO effective January 1, 2016.

 

Disclosure regarding Ms. Brewer’s fiscal 2016 compensation is not required under SEC rules. Nevertheless, we have voluntarily included compensation information for Ms. Brewer in this proxy statement on the same basis as our other NEOs. We included this information in the proxy statement for continuity purposes, as we expect that the Executive Officers required to be included as NEOs will vary from year to year among the executives listed above. We also believe it is important to provide shareholders with information about how our compensation plans are designed to incentivize and support each of our operating segments.

 

This CD&A is organized as follows:

 

         
  Executive Summary (page 40) provides an overview of our strategy, our executive compensation philosophy, framework, and practices, our CEO incentive payouts during fiscal 2016, and the feedback we have received from our shareholders.     Incentive Goal Setting Philosophy and Process (page 52) provides insight into how the CNGC sets performance goals aligned with our strategy and operating plan.
  Components of NEO Compensation and Pay Mix (page 44) explains the primary components of our NEO compensation packages and how our NEO compensation is heavily weighted towards performance-based compensation.     Other Compensation (page 54) describes limited perquisites and other elements of compensation not included in total direct compensation, or TDC.
  Fiscal 2016 Performance Metrics (page 46) describes the performance metrics used in our annual and long-term incentive programs, the weightings among these metrics, and why the CNGC selected these metrics.     Executive Compensation Process and Governance (page 56) describes the roles of the CNGC, the CNGC’s independent compensation consultant, and management in setting NEO compensation, how the CNGC uses peer group data, and our practices regarding employment agreements, clawbacks, and other matters.
  Fiscal 2016 Performance Goals and Performance (page 48) describes the specific fiscal 2016 performance goals under our annual and long-term incentive programs, how we performed compared to those goals, and the resulting NEO incentive payouts for fiscal 2016.      
         

 

 2016 Proxy Statement    39

 
  Executive Summary

 

Fiscal 2016 Highlights

 

Our Strategy

 

Fiscal 2016 marked the beginning of a transformational period for Walmart, as we continued to implement our strategy to become the first company to deliver a seamless shopping experience at scale. Regardless of how our customers choose to shop with us – in stores, online, on a mobile device, or in any combination of these – we aim to deliver a fast and convenient shopping experience. During fiscal 2016, we made significant investments in our people, technology, and supply chain to improve our customers’ experience today while positioning Walmart for sustainable growth in the future. We also continued to focus on managing our global portfolio of assets by closing certain underperforming stores in the fourth quarter. To provide greater visibility into the long-term financial implications of our strategy, in October 2015 we announced our 3-year financial plan.

 

Our Performance

 

During fiscal 2016, Walmart continued to deliver on its key strategic priorities in a challenging and highly competitive global environment. Key financial highlights included:

 

EPS of $4.57, and adjusted EPS of $4.59;
   
consolidated operating income of $24.1 billion. On a constant currency basis, operating income was $24.9 billion;
   
revenue of $482.1 billion, and $499.4 billion on a constant currency basis;
   
6 straight quarters of comp sales growth in Walmart U.S., and continued improvement in customer experience scores;
   
invested approximately $1.2 billion to increase wages and training for U.S. hourly store and club Associates;
   
continued solid growth in GMV on a constant currency basis;
   
opened new next-generation fulfillment centers and expanded online grocery to more than 150 locations across more than 20 U.S. markets;
   
generated $27.4 billion in operating cash flow and returned $10.4 billion to shareholders through dividends and share repurchases; and
   
in February 2016, we announced that we are increasing our dividend for the 43rd consecutive year.

 

Despite these accomplishments, our financial performance did not meet the challenging targets established by the CNGC at the beginning of fiscal 2016. Accordingly, as described below, our incentive payouts to our NEOs were below target levels.

 

For more information regarding our fiscal 2016 financial performance, see our Annual Report on Form 10-K for fiscal 2016 filed with the SEC on March 30, 2016. Certain financial measures discussed above are non-GAAP measures under SEC rules. See Annex A for more information about how we calculate these financial measures and, where required, reconciliations to the most directly comparable financial measures calculated in accordance with GAAP.

 

Our Executive Compensation Philosophy and Framework

 

Our executive compensation programs are intended to motivate and retain key executives, with the ultimate goal of generating strong operating results and delivering solid returns to our shareholders. We have developed our compensation programs to support our enterprise strategy and to align our leadership team with our culture, strategy, and structure.

 

Our executive compensation program is built upon our global compensation framework:

 

Pay for performance by tying a majority of executive compensation to pre-established, quantifiable performance goals.
   
Use performance metrics that are understandable, that are tied to key retail performance indicators, and that our executives have the ability to impact.
   
Establish performance goals that are aligned with strategic and financial plans.
   
Align management interests with shareholder value by providing long-term incentives in the form of equity.
   
Provide competitive pay to attract and retain highly-qualified executives.

 

 2016 Proxy Statement    40

 

Our Executive Compensation Practices are Aligned with Shareholders’ Interests

 

WHAT WE DO   WHAT WE DO NOT DO
Directly link pay and performance   No employment contracts
Mitigate risk by using a variety of performance measures     No change-in-control benefits
CNGC’s independent compensation consultant evaluates rigor of performance goals and has consistently found target goals to be challenging   No pension or similar retirement plans in the U.S.
Subject annual and long-term incentives to recoupment and forfeiture provisions   No hedging or short sales of Walmart stock permitted
Robust stock ownership guidelines   No recycling of shares used for taxes or option exercises
  CNGC’s independent compensation consultant has consistently determined that CEO realizable pay is aligned with performance   No dividends or equivalents paid on unvested performance share units
Conduct extensive shareholder outreach on executive compensation   No unapproved pledging of Walmart stock
Annual shareholder “say on pay” vote   No excessive perquisites

 

Our Executive Compensation Program Emphasizes Performance

 

Our executives’ total direct compensation, or TDC, is heavily weighted towards performance and appropriately balances annual and long-term rewards:

 

FISCAL 2016 TOTAL DIRECT COMPENSATION MIX CASH Base Salary Smallest component of target TDC about 6% for CEO about 10%-14% for other NEOs EQUITY Restricted Stock About 19% of CEO’s target TDC - about 15%-17% for other NEOs 3-year vesting period Annual Incentive About 20% of CEO’s target TDC - about 23%-28% for other NEOs Based on operating income and salesrelated metrics, as well as compliance and diversity goals Pays out between 0% and 125% of target (37.5% if threshold goals met) Largest component of target TDC about 56% for CEO about 44%-50% for other NEOs Based on ROI and sales performance over a 3-year period with goals set annually Pays out between 0% and 150% of target (50% if both threshold goals met) Performance Based

 

 2016 Proxy Statement    41

 

Our Incentive Payouts are Aligned with our Performance

 

Payouts under our annual cash incentive plan and long-term performance share unit plan continue to be closely aligned with our performance, as demonstrated by our CEO’s fiscal 2016 incentive payouts, which were significantly below target:

 

CEO Incentive Payouts: Fiscal 2016 In $000 14000 12000 10000 8000 6000 4000 2000 0 $663 Shortfall of Target $5,088 Max $4,070 Target $2,326 Shortfall of Target $14,568 Max $9,712 Target $7,386 Target Actual Annual Cash Incentive Target Actual Long-Term Performance Share Units

 

* Assuming a stock price of $66.46/share, which was the closing price on the NYSE on March 1, 2016.

 

 2016 Proxy Statement    42

 

Our Shareholder Engagement on Executive Compensation

 

Beginning in 2014, we significantly expanded our ongoing shareholder outreach program. The feedback received through this engagement led us to make changes to our disclosure regarding our executive compensation program in our 2015 proxy statement. This engagement and enhanced disclosure was generally well received by our shareholders, and shareholder support for the advisory vote on our executive compensation at our 2015 Annual Shareholders’ Meeting was approximately 96%, up from 86.4% support the prior year.

 

Our 2015 say-on-pay proposal received 96% shareholder support

 

We continued and further expanded this outreach effort in 2015 and 2016, holding direct engagements with more than 30 shareholders, including 28 of our 50 largest shareholders, to discuss various matters including strategy, governance, compensation, and compliance. We also had conversations with leading proxy advisory firms. Members of our Board, including our Chairman, our CEO, and our Lead Independent Director, participated in some of these conversations. In these meetings, our shareholders generally expressed a positive view of our executive compensation program and our disclosure regarding the program. While our investors expressed a wide range of viewpoints during these conversations, key feedback included the following:

 

Shareholder Feedback   Our Responses  
       
Articulate linkage between our incentive plans and our strategy   In fiscal 2016, we outlined our strategy to become the first company to deliver a seamless shopping experience at scale. We also committed to managing capital in a disciplined way. We believe that a combination of metrics related to operating income, sales, and ROI are the right ones to support this strategy. See
p. 46
       
       
Demonstrate that performance goals are sufficiently rigorous   The performance goals used in our annual and long-term incentive plans are closely aligned with our long-range strategic plan and our annual operating plans. Performance goals vary from year to year based on our business cycle, and fiscal 2016 goals reflect the fact that we are currently in an investment cycle. Our incentive payouts were significantly below target for fiscal 2016, confirming the difficulty of these goals. See
p. 52
       
       
Clearly explain differences between reported results of operations and incentive results   In order to ensure that our Associates are appropriately incentivized and rewarded, our performance metrics of operating income, sales, and ROI are calculated differently for purposes of our incentive plan than they are for financial reporting purposes. For example, because currency exchange rate fluctuations are outside of management’s control, we calculate our incentive results on a constant currency basis. See
p. 53
       
       
Articulate compelling rationale for any special awards   We selectively grant special awards, generally for one of two reasons. First, we have used special awards to motivate and retain key executives during periods of leadership transition, such as our most recent CEO succession in 2014. Second, we occasionally grant special awards contingent on achieving a targeted performance goal important to the success of our strategy. We granted one such award in September 2014, which ultimately was not earned because the challenging performance goal was not achieved. See
p. 54
       
       
Concerns regarding annual goal-setting under our performance-share program   Similar to the long-term incentive plans of many retailers, we set performance goals annually for our three-year performance share units, and calculate payouts based on average performance over each of the three years within the performance cycle. Some shareholders told us that they would prefer that we set three-year performance goals. After careful consideration, we believe that our current approach is right for our company. Among other reasons, setting goals annually results in understandable and better aligned performance goals, rather than conflicting goals for each tranche of performance share units. See
p. 52
       
       
Articulate why we set TDC near the 75th percentile   Walmart is significantly larger than most of its peer group companies, and the CNGC believes that Walmart’s size and extensive international operations result in NEO jobs with a high level of complexity. Based on statistical analysis, on a size-adjusted basis, target TDC for our NEOs are near the 50th percentile of our peer group companies. See
p. 56
       

 

 2016 Proxy Statement    43

 
  Components of NEO Compensation and Pay Mix

 

What are the primary components of our NEO compensation packages?

 

There are three components of our executives’ TDC: base salary, annual cash incentive, and long-term equity:

 

Component   Description/Objective   Form and Timing of Payout
Base Salary   Provide a fixed base of cash compensation commensurate with job responsibilities and experience   Paid in cash bi-weekly, unless voluntarily deferred
Annual Cash Incentive  

Variable pay intended to incentivize performance against key operational metrics, depending on position:

 

•   Operating income

•   Sales

•   Gross merchandise value (GMV)

 

Goals are set at the beginning of the fiscal year and aligned with operating plan and public guidance

 

Also tied to compliance and diversity goals

  Paid in cash after the end of the fiscal year, unless voluntarily deferred
Long-Term Equity        
•   Performance Share Units (75%)

 

 

Variable pay intended to incentivize performance against metrics aligned with our long-term strategic goals:

 

•   Return on investment (ROI)

•   Sales

 

Value realized also depends on our stock performance

  Paid in Shares after the end of the three-year performance cycle, unless voluntarily deferred
•   Restricted Stock (25%)

 

 

Intended to align executives’ long-term interests with our shareholders’ interests

 

Value realized depends on our stock performance

 

Three year cliff vesting

 

Section 162(m) “covered employees” must generally defer until after separation from service

 

Base Salary. We pay base salaries commensurate with each NEO’s position and experience. In keeping with our philosophy that a substantial majority of NEO compensation should be performance-based, the CNGC typically allocates a relatively small percentage of TDC to base salary. In general, the CNGC seeks to set base salaries at approximately the median of our peer groups, as described below on page 56. During the fiscal 2016 compensation review process, the CNGC reviewed each NEO’s base salary relative to peer group data and each NEO’s individual performance. Based on that review, the CNGC approved the following base salaries for fiscal 2016. These base salaries represented increases over the prior year base salary ranging from 2.5% to 6.0%, depending on each NEO’s performance evaluation, consistent with our annual base salary increases for our Associates generally:

 

Name Fiscal 2016 Base Salary  
Doug McMillon $ 1,272,000  
Charles Holley $ 949,500  
Greg Foran $ 978,500  
David Cheesewright $ 1,043,623 *
Rosalind Brewer $ 922,500  
Neil Ashe $ 1,007,000  
* Paid in Canadian dollars and converted to U.S. dollars using an exchange rate of 1 CAD = 0.7730 USD.

 

Upon his promotion to Walmart’s CFO effective January 1, 2016, the CNGC set Mr. Biggs’ annual salary at $850,000.

 

 2016 Proxy Statement    44

 

Annual Cash Incentive. Under our Management Incentive Plan, most salaried Associates, including our NEOs, are eligible to earn an annual cash incentive payment based on a percentage of base salary. This cash incentive payment can range from 37.5% of target payout opportunity to a maximum of 125% of target payout opportunity. The CNGC may, in its discretion, reduce the amount of any annual cash incentive payment received by any NEO. During the fiscal 2016 compensation review process, the CNGC reviewed each NEO’s cash incentive opportunity relative to peer group data and each NEO’s job responsibilities. Our NEOs’ fiscal 2016 annual cash incentive opportunities and payouts are described below on page 49. The CNGC made no change to our continuing NEOs’ annual cash incentive opportunities as a percentage of base salary for fiscal 2016.

 

Long-Term Equity. The largest portion of our NEOs’ TDC consists of two types of long-term equity compensation. We believe that long-term equity helps to align the interests of our NEOs with the long-term interests of our shareholders and also serves as a retention tool. The CNGC approved a 6.0% increase in Mr. McMillon’s target equity value for fiscal 2016, and made no changes to the target equity values of our other NEOs.

 

Performance Share Units. Consistent with our pay-for-performance philosophy, 75% of each NEO’s annual long-term equity award value consists of performance share units. Generally, performance share units granted to our executives have a three-year performance period, with the performance metrics and goals set annually by the CNGC. The number of Shares that an NEO receives at the end of the performance period is based on the average performance as compared to these performance goals for each of these three years. Our NEOs can earn from 25% (if one threshold performance goal is met) or 50% (if the both threshold performance goals are met) up to a maximum of 150% of the target number of Shares. The CNGC may, in its discretion, reduce the amount of any performance share unit payout received by any NEO. Our NEOs’ performance share unit opportunities and payouts during fiscal 2016 are described below on page 51.

 

Restricted Stock. The remaining 25% of each NEO’s annual long-term equity award value consists of restricted stock, which vests on the third anniversary of the grant date, provided that the NEO remains employed by our company through the vesting date. In early 2016, the CNGC adopted a policy requiring our “covered employees”, as defined in Section 162(m) of the Internal Revenue Code, to defer these shares until after their separation from employment with Walmart, unless such deferral is not permitted by the income tax rules of such employee’s jurisdiction of residence.

 

How much of our NEOs’ TDC is performance-based?

 

As shown in the chart below, a substantial majority of our NEOs’ fiscal 2016 target TDC was performance-based. The percentages may not total 100.0% due to rounding. Mr. Biggs’ is not included on the chart below because he only served in an NEO role for the last month of fiscal 2016.

 

100% 80% 60% 40% 20% 0% 19.7% 55.7% 18.6% 6.1% Mr. McMillon 27.7% 43.8% 14.6% 13.9% Mr. Holley 23.9% 49.6% 16.5% 10.0% Mr. Foran 26.2% 47.1% 15.7% 10.9% Mr. Cheesewright 24.2% 49.3% 16.4% 10.1% Ms. Brewer 23.2% 50.4% 16.8% 9.7% Mr. Ashe Target TDC Mr. McMillon: $20,712,400 Mr. Holley: $6,848,500 Mr. Foran: $9,826,900 Mr. Cheesewright: $9,548,317* Ms. Brewer: $9,136,500 Mr. Ashe: $10,423,800 Fixed Restricted Stock Base Salary Performance-Based Cash Incentive Performance Share Units

 

* Converted from Canadian dollars using an exchange rate of 1 CAD = 0.7730 USD.

 

 2016 Proxy Statement    45

 
  Fiscal 2016 Performance Metrics

 

What performance metrics are used in our incentive programs, and why did the CNGC select these metrics?

 

As it has been for several years, during fiscal 2016 our NEOs’ performance-based pay was based on achieving objective, pre-established financial goals for the following metrics:

 

Annual Cash Incentive* 25% Sales** (total companyor divisional) 75% Operating Income**(total companyand/or divisional) Long-Term PerformanceShare Units 50% Sales** (total companyor divisional) 50% ROI**(total company)

 

* Mr. Ashe’s annual cash incentive is based on sales, operating income, and GMV performance. See page 49 for more information.
** For purposes of our incentive programs, sales, operating income, and ROI are calculated on a constant currency basis and exclude certain items, such as revenue from fuel sales. See page 53 for more information.

 

The CNGC concluded that the metrics described above are appropriate and effective in driving results tied to shareholder value. In reaching this conclusion, the CNGC considered the following factors:

 

These performance metrics are aligned with our strategy and can be impacted by our executives. Unlike metrics tied to stock price or shareholder return, our executives can have a direct impact on our sales, operating income, and ROI. Furthermore, unlike earnings per share and other share-based metrics, sales, operating income, ROI, and GMV are not materially impacted by our share repurchase program.
These metrics are important for judging retail performance. Sales, operating income, and ROI measures have historically been, and continue to be, important indicators of retail performance, and we believe that our performance in these areas is important to our shareholders. In addition, Mr. Ashe’s annual incentive is tied in part to GMV, a key indicator of e-commerce performance.
The CNGC believes that success with respect to these metrics will support shareholder value over the long term. At the request of the CNGC, the CNGC’s independent compensation consultant reviewed the historical correlation of various performance metrics and TSR within the retail industry. The CNGC’s independent compensation consultant found that the metrics used in our incentive plans are aligned with TSR in the retail industry. We believe that good performance with respect to these metrics should translate into shareholder value over the long term.
It is difficult to effectively apply relative TSR and other relative performance metrics to Walmart’s executive compensation program. There are several key differences in our business compared to other publicly-traded retailers in the U.S., including our size, our significant international operations, our product mix, and our variety of formats. Additionally, the price of Walmart common stock has historically been less volatile than the common stock of most of our retail peers, making relative TSR an imprecise measure of our performance. While the CNGC closely monitors Walmart’s performance relative to that of our peers when making compensation decisions, the CNGC believes that the best approach for Walmart is to tie our executive compensation to performance metrics that are aligned with our strategy and operating plans and that can be directly impacted by our executives.

 

 2016 Proxy Statement    46

 
The combination of these performance metrics mitigates risk. Using a combination of performance metrics mitigates the risk that our executives could be motivated to pursue results with respect to one metric to the detriment of our company as a whole. For example, if management were to seek to increase sales by pursuing strategies that would negatively impact profitability, resulting increases in incentive pay based on sales should be offset by decreases in incentive pay based on operating income and ROI. The following charts show the percentage of target TDC tied to each of these metrics. Mr. Biggs is not included in the charts below because he only served as our CFO for the last month of fiscal 2016.

 

C. DOUGLAS MCMILLON 37.0% 43.5% 19.6% 75.4% PERFORMANCE-BASED CHARLES M. HOLLEY, JR. 30.6% 40.3% 29.1% 71.5% PERFORMANCE-BASED GREGORY S. FORAN 33.7% 41.9% 24.4% 73.5% PERFORMANCE-BASED DAVID CHEESEWRIGHT 30.9% 40.4% 28.7% 73.3% PERFORMANCE-BASED ROSALIND G. BREWER 33.5% 41.8% 24.7% 73.5% PERFORMANCE-BASED NEIL M. ASHE 34.2% 7.9% 15.8% 42.1% 73.6% PERFORMANCE-BASED ROI Sales Operating Income Gross Merchandise Value (“GMV”)

 

In addition to the financial metrics described above, our NEOs’ incentive pay is also based on performance with respect to diversity goals and compliance goals, described below on pages 49-50.

 

 2016 Proxy Statement    47

 
  Fiscal 2016 Performance Goals and Performance

 

What were the fiscal 2016 financial goals under our annual cash incentive plan, and how did we perform in comparison to those goals?

 

As shown below, we fell short of most of the target goals established by the CNGC early in fiscal 2016. The operating income, sales, and GMV goals for our cash incentive plan are expressed in terms of a percentage increase or decrease as compared to our prior fiscal year performance:

 

2016 ANNUAL CASH INCENTIVE GOALS AND RESULTS* Payout Percentage Threshold 37.5% Payout Target 100% Payout Maximum 125% Payout Constant Currency Operating Income* Total Company No Payout Actual: -3.5% -7.6% -1.8% 0.1% Walmart U.S. No Payout Actual: -6.6% -7.1% -3.2% -2.3% International No Payout Actual: 5.6% -5.2% 2.5% 4.6% Sam’s Club No Payout Actual: -4.2% -9.2% -4.4% -2.5% Global eCommerce** No Payout Actual: -14.2% -37.1% -22% -17.1% Constant Currency Sales (excluding fuel) Total Company No Payout Actual: 3.3% 1.4% 3.5% 4.6% Walmart U.S. No Payout Actual: 3.4% 1.5% 3.5% 4.5% International No Payout Actual: 3.5% 1.3% 3.2% 4.2% Sam’s Club No Payout Actual: 1.4% 0.2% 3.1% 4.1% Global eCommerce GMV** No Payout Actual: 13.1% 11.1% 27.8% 33.3%

 

* In order to make results comparable from year to year, we exclude certain items from our reported results of operations for incentive plan purposes. See page 53 for more information.
** Global eCommerce activities are embedded within our segment operations and included within operating income for each of our segments. For purposes of our fiscal 2016 incentive plans, “Global eCommerce operating income” is defined as the allocated portion of the operating income or loss of our operating segments attributable to walmart. com, samsclub.com, Vudu.com, and e-commerce operations in Brazil and China. Expenses related to corporate support for global e-commerce operations are also included. For purposes of our fiscal 2016 incentive plans, “Global eCommerce GMV” is defined as the total sales value of merchandise sold or transacted where the transaction originates online, excluding the sale of gift cards.

 

 2016 Proxy Statement    48

 

As a result of this performance, our fiscal 2016 annual cash incentive payments were below target levels:

 

Annual Cash Incentive Plan – Fiscal 2016 Payouts

 

            % of Target   Target   Actual
Name   Performance Measure(s)   Weighting   Payout   Payout   Payout
Doug McMillon   Total Company Operating Income   75%  

83.70%

  $ 4,070,400     $ 3,406,971  
    Total Company Sales   25%        
Charles Holley   Total Company Operating Income   75%  

83.70%

  $ 1,899,000     $ 1,589,485  
    Total Company Sales   25%        
Brett Biggs*   Total Company Operating Income   75%   96.39%   $ 959,578     $  924,956  
    Total Company Sales   25%        
Greg Foran   Total Company Operating Income   50%  

76.46%

  $ 2,348,400     $ 1,795,581  
    Walmart U.S. Operating Income   25%        
    Walmart U.S. Sales   25%        
David Cheesewright**   Total Company Operating Income   50%  

98.64%

 

  $ 2,504,694     $ 2,470,649  
    International Operating Income   25%        
    Walmart International Sales   25%        
Rosalind Brewer   Total Company Operating Income   50%  

81.86%

  $ 2,214,000     $ 1,812,431  
    Sam’s Club Operating Income   25%        
    Sam’s Club Sales   25%        
Neil Ashe   Total Company Operating Income   25%  

85.76%

  $

2,416,800

    $

2,072,591

 
    Total Company Sales   25%        
    Global eCommerce GMV   25%        
    Global eCommerce Operating Income   25%        

 

* Prior to his appointment to his current role effective January 1, 2016, Mr. Biggs served as Executive Vice President and Chief Financial Officer, Walmart International. As a result, Mr. Biggs’ fiscal 2016 annual cash incentive payout was primarily based on Walmart International results and was prorated to reflect his previous pay grade.
** Mr. Cheesewright’s cash incentive payment is paid in Canadian dollars. The figure above assumes an exchange rate of 1 CAD = 0.7730 USD, which is an average exchange rate during fiscal 2016.

 

What other goals were our NEOs subject to under our annual cash incentive plan for fiscal 2016?

 

Diversity Goals. Since fiscal 2005, a portion of most officers’ cash incentive payment has also been subject to satisfying diversity objectives, and each NEO’s cash incentive payment can be reduced by up to 15 percent if he or she does not satisfy these objectives. The CNGC established these diversity goals because it believes that diversity and inclusion contribute to an engaged and effective workforce. For fiscal 2016, these objectives consisted of one or both of two components: good faith efforts and placement objectives. Each of our NEOs is subject to good faith efforts requirements. In order to satisfy the good faith efforts component of this program, each NEO must actively sponsor at least two Associates and must also participate in at least two diversity-related events.

 

Each of our NEOs with responsibility for Walmart U.S. and/ or Sam’s Club field operations is also subject to placement objectives. For fiscal 2016, Mr. McMillon, Mr. Foran, and Ms. Brewer were subject to placement objectives. The determination as to whether an NEO satisfied his or her placement objectives during the prior fiscal year is based on several factors, including the relative number of diverse candidates placed in specified positions within the NEO’s organization, the NEO’s engagement and participation in diversity and inclusion strategies, the NEO’s leadership efforts in implementing these strategies, and the NEO’s efforts in recruiting and developing diverse Associates. Applying these factors, at the end of each fiscal year, our chief diversity officer reviews each NEO’s performance under our diversity program and reports the results of this review to the CNGC. Based on the report of our chief diversity officer, the CNGC determined that each NEO satisfied his or her diversity goals for fiscal 2016.

 

For more information about Walmart’s commitment to diversity and inclusion and key diversity and inclusion initiatives, please see Walmart’s 2015 Diversity and Inclusion Report, which is available on our website at http://corporate.walmart.com/global-responsibility/diversity-inclusion/.

 

Ethics and Compliance Goals. Since fiscal 2014, our Executive Officers’ cash incentive payments have also been subject to achieving adequate progress in implementing enhancements to the company’s global compliance program (now known as our ethics and compliance program). Our company is committed to having and maintaining a strong and effective global ethics and compliance program in every country in which we operate. Consistent with that commitment, over the past few years, our company has made significant improvements

 

 2016 Proxy Statement    49

 

to our ethics and compliance program around the world. To further emphasize our commitment to ethics and compliance, in early fiscal 2016, our company’s senior leadership again developed a timetable for implementing further enhancements to our global ethics and compliance program on a prioritized basis. These objectives covered such subject matters as anti-corruption, anti-money laundering, health and wellness compliance, food safety, environmental compliance, health and safety compliance, trade compliance, and licensing and permits. These objectives sought to enhance key elements of a corporate ethics and compliance program, including but not limited to developing and implementing enhanced compliance protocols and procedures, hiring and training of key compliance personnel, monitoring and assessment of various elements of the program, internal communications, and access to information.

 

If, in the judgment of the Audit Committee, the company had not achieved adequate progress in implementing these objectives, then the CNGC could have exercised negative discretion to reduce or eliminate the fiscal 2016 cash incentive payments to one or more of our Executive Officers. During fiscal 2016, management reported regularly to the Audit Committee regarding ongoing enhancements to our global ethics and compliance program and progress in implementing these objectives. At the end of fiscal 2016, the Audit Committee determined that, in its qualitative judgment, adequate progress had been achieved in implementing these objectives and reported its determination to the CNGC. Factors relied on by the Audit Committee in making this determination included the progress achieved on workstreams in a variety of ethics and compliance areas and the extent to which that progress reflected sustainable, long-term change in the company’s people, processes, systems, and culture. Based on the qualitative assessment of the Audit Committee, the CNGC determined not to exercise negative discretion to reduce or eliminate the cash incentive payments to any of our Executive Officers for fiscal 2016.

 

For more information about specific enhancements to our global ethics and compliance program during fiscal 2016, please see Walmart’s Global Ethics & Compliance Program Report on Fiscal Year 2016, which is available on our website at http://corporate.walmart.com/global-responsibility/global-compliance-program-report-on-fiscal-year-2016.

 

What were the fiscal 2016 financial goals under our long-term incentive program, and how did we perform in comparison to those goals?

 

The table below shows how we performed against the fiscal 2016 performance goals under our long-term performance share unit program, all of which were set by the CNGC in early fiscal 2016. The sales goals for our performance share unit program are expressed in terms of a percentage increase or decrease as compared to our prior fiscal year performance.

 

2016 PERFORMANCE SHARE UNITS GOALS AND RESULTS* Payout Percentage Threshold 50% Vesting Target 100% Vesting Maximum 150% Vesting ROI No Payout Actual: 16.20% 15.46% 16.11% 16.46% Constant Currency Sales (Excluding Fuel) Total Company No Payout Actual: 3.3% 0.5% 3.5% 5.1% Walmart US No Payout Actual: 3.4% 0.5% 3.5% 5.0% International No Payout Actual: 3.5% 0.8% 3.2% 4.8% Sam’s Club No Payout Actual: 1.4% -0.8% 3.1% 4.6%

 

* In order to make results comparable from year to year, we apply certain adjustments to our reported results for purposes of our incentive plans. See page 53 for more details.

 

 2016 Proxy Statement    50

 

Each of our NEO’s performance share units are weighted 50% to ROI performance and 50% to constant currency sales performance (excluding fuel), either of the total company or one of its operating segments, as follows:

 

Long-Term Performance Share Unit Program – Fiscal 2016

 

Name   Performance Measure(s)   Weighting
Doug McMillon, Charles Holley, Neil Ashe, Brett Biggs   Total Company ROI   50%
    Total Company Sales   50%
Greg Foran   Total Company ROI   50%
    Walmart U.S. Sales   50%
David Cheesewright   Total Company ROI   50%
    Walmart International Sales   50%
Rosalind Brewer   Total Company ROI   50%
    Sam’s Club Sales   50%

 

The performance compared to each of the goals shown above was then weighted according to each NEO’s performance measure weightings shown above, and was then averaged with results for the prior two years within each three-year performance cycle, as illustrated below:

 

    FY14 FY15 FY16 Fiscal 2016  
  Segment Performance Performance Performance Payout  
  Walmart U.S. 51.88% 73.30% 106.35% 77.18%  
Fiscal 2013 Sam’s Club 26.57% 60.48%   95.32% 60.79%  
Grant International 52.42% 74.30% 109.21% 78.64%  
  Total Company 26.57% 71.75% 103.98% 67.44%  

 

          FY17
  Segment   Performance Performance Performance
Fiscal 2014
Grant
Walmart U.S.   73.30% 106.35% TBD
Sam’s Club   60.48% 95.32%
International   74.30% 109.21%
Total Company   71.75% 103.98%

 

          FY18
  Segment   Performance Performance Performance
Fiscal 2015
Grant
Walmart U.S.   106.35% TBD TBD
Sam’s Club   95.32%
International   109.21%
Total Company   103.98%

 

Applying this methodology, our NEOs earned the following performance share unit payouts for the three-year cycle ending January 31, 2016:

 

    Number of Target Performance   Three-Year Performance   Number of Performance
Name   Share Units   (% of Target)   Share Units Earned
Doug McMillon*   146,130   76.05%   111,131
Charles Holley   42,762   67.44%   28,778
Brett Biggs   9,612   67.44%   6,482
Greg Foran**   55,004   78.13%   42,974
David Cheesewright***   60,468   83.26%   50,346
Rosalind Brewer   60,468   60.79%   36,758
Neil Ashe   70,546   67.44%   47,576

 

* Mr. McMillon served as President and CEO of Walmart International during fiscal 2014; therefore, his performance share unit payout for the three-year cycle ended January 31, 2016 was based in part on Walmart International performance during fiscal 2014.
** Mr. Foran served as President and CEO, Walmart China during fiscal 2014 and a portion of fiscal 2015. During a portion of fiscal 2015, Mr. Foran also served as President and CEO, Walmart Asia prior to assuming his current role. Therefore, Mr. Foran’s performance share unit payout for the three-year cycle ended January 31, 2016 was based in part on Walmart International performance during fiscal 2014 and on a combination of Walmart International, Walmart Asia, and Walmart U.S. performance during fiscal 2015.
*** Mr. Cheesewright served as President and CEO, Walmart EMEA during fiscal 2014; therefore, his performance share unit payout for the three-year cycle ended January 31, 2016 was based in part on Walmart EMEA performance during fiscal 2014.

 

 2016 Proxy Statement    51

 
  Incentive Goal Setting Philosophy and Process

 

How does the CNGC set performance goals?

 

Performance goals are established in the context of, and consistent with, the company’s enterprise strategy and financial operating plans each fiscal year. This process begins with the Board’s review of the company’s overall enterprise strategy and long-term financial plan beginning in the spring and culminating at an annual Board strategic retreat each September. Following the strategic retreat, the annual operating plans of the company and each of its operating segments are established with SPFC and Board input. The CNGC then establishes performance goals under our annual- and long-term incentive programs that are consistent with these operating plans:

 

Incentive Plans Informed by Strategicand Financial Planning Process Long-Range Planning April - September Annual Operating Plan September - January Incentive Plans January - March Assess competitive landscape and macro trends Refine enterprise strategy and segment-specific initiatives Develop annual operating plan in light of long-range planning and strategic initiatives October investor conference-review strategy and planned capital expenditures Review choice of incentive metrics to ensure that they support enterprise strategy Establish performance goals aligned with annual operating plan

 

Walmart’s operating plans are intended to be challenging, and fiscal 2016 was no exception. Generally, incentive goals are established so that performance in line with our operating plans should result in target payouts. In order to achieve the maximum goals, our performance would have to exceed our operating plans to a significant degree. Threshold performance goals are set at a level that is attainable and below which the company could not justify a payout.

 

The CNGC generally attempts to set the performance goals so that a consistent level of expected difficulty in achieving these goals is maintained from year-to-year. The CNGC’s independent compensation consultant annually evaluates the difficulty of our target performance goals and has consistently found these goals to be challenging.

 

Why does the CNGC set goals each year under our long-term performance share unit program?

 

The CNGC has found that the current approach of setting goals annually, with payouts determined by averaging performance over a three-year period, is the most effective approach for our long-term performance share unit program for the following reasons:

 

As a global retailer, Walmart’s operating results are significantly impacted by macroeconomic and regional economic factors outside of management’s control. These economic factors, as well as the rapidly evolving retail industry, make it difficult to forecast accurately over a three-year period. For example, in fiscal 2008, our officers were granted performance shares with three-year sales and ROI performance goals. Subsequently, the global financial downturn in 2008 had the effect of making these three-year goals virtually unachievable only a few months into the three-year performance period. The CNGC reasoned that performance goals cease to be an effective tool in motivating performance if the goals either become unrealistic or too easy to achieve. While some companies attempt to address the impact of macroeconomic factors by using relative goals in their long-term incentive plans, the CNGC has determined that relative goals are not the right approach for Walmart for the reasons described on page 46 above. The CNGC regularly reviews Walmart’s performance relative to peers and the relative alignment of pay and performance to ensure that our incentive programs are operating as intended.
   
Another advantage of our current approach is more easily understandable and better aligned performance goals, which the CNGC believes are more effective in motivating performance. As described above, our incentive goals are aligned with our business plan and expectations regarding financial performance. These necessarily change from year-to-year based on macroeconomic conditions, strategic investments, and other factors. Setting three-year sales goals, for example, would result in a situation in which our leaders have three differing sales goals at any one time – one for each outstanding tranche of performance share units. The CNGC believes that the current performance share unit structure effectively balances long-term focus with clear and understandable performance goals.

 

 2016 Proxy Statement    52

 

Why do the results used in our incentive plans differ from our reported results of operations?

 

The CNGC’s objective in administering our incentive plans is to cause incentive awards to be calculated on a comparable basis from year-to-year, and to ensure that plan participants are incentivized and rewarded appropriately. For these reasons, the following types of items are excluded from our incentive goals and/or our incentive calculations:

 

Items excluded by the terms of the incentive plans. Like many other companies, our incentive plans, which are shareholder-approved plans, require that incentive payouts be calculated excluding the impact of currency exchange rate fluctuations, acquisitions and divestitures, restructurings and store closings, and similar items. In fiscal 2016, these items accounted for the substantial majority of the difference between our reported results of operations and our results of operations as calculated for incentive plan purposes. In particular, currency exchange rate fluctuations significantly negatively impacted the reported net sales and operating income of our company and its International division. As a matter of policy, we generally have not historically hedged for currency exchange rate fluctuations.
   
Items excluded at the time incentive goals are established. When the CNGC sets incentive goals, it typically excludes certain items from the performance goals. In particular, the CNGC has historically set sales goals that exclude the impact of fuel sales because fuel prices (and, therefore, our fuel sales) are volatile and subject to significant fluctuation, which is out of our management’s control. Also, in light of our significant ongoing investments in Global eCommerce, when the CNGC established fiscal 2016 operating income goals for our operating segments, it limited the impact of operating losses attributable to the e-commerce operations of those operating segments for incentive plan purposes in order to encourage our segment leaders to make these necessary investments. Losses from e-commerce operations are not limited for purposes of total company incentive goals.
   
Items excluded so that operating results are calculated on a comparative basis from year-to-year. Consistent with the terms of our incentive plans, the CNGC may exclude certain other items so that results can be calculated on a comparative basis from year-to-year. For example, a global review of accounting for leases during fiscal 2016 resulted in accounting adjustments that increased our reported operating income, the effects of which were excluded for incentive plan purposes.

 

The CNGC undertakes a rigorous oversight and certification process to determine the items to exclude from our reported results of operations for purposes of our incentive plans. This process is not outcome-driven and includes both positive and negative adjustments to reported results of operations. While in fiscal 2016 this process had a net positive impact on incentive payouts, this is not always the case. For example, in fiscal 2011 and fiscal 2012, this process resulted in a reduction in incentive payouts.

 

What items were excluded from fiscal 2016 reported results of operations for incentive plan purposes?

 

Operating Income—Annual Cash Incentive Plan. For fiscal 2016, the substantial majority of items excluded from operating income for incentive plan purposes were the following items:

 

Items excluded by the terms of the plan. These items included the impact of currency exchange rate fluctuations; income and expenses related to acquisitions and dispositions; and expenses related to store closings and restructurings. Taken together, excluding these items had a net positive impact on our operating income for purposes of our annual cash incentive plan, and accounted for the substantial majority of the difference between our reported operating income and our operating income for purposes of our annual cash incentive plan.
   
Items excluded at the time incentive goals are established. These items included adjustments to remove the impact of losses attributable to Sam’s Club e-commerce activities in excess of a pre-set limit established by the CNGC at the time goals were set. Excluding these items had the impact of increasing operating income for purposes of our annual cash incentive plan.
 
Items excluded so that operating results are calculated on a comparative basis from year-to-year. These items included, among others, adjustments related to our accounting for leases and an accrual related to our new paid time off policy. Excluding these items had a net impact of increasing operating income for purposes of our annual cash incentive plan.

 

Sales—Annual Cash Incentive Plan and Long-Term Performance Share Unit Program. For fiscal 2016, there were three primary adjustments to sales for purposes of our incentive plans:

 

Items excluded by the terms of the plan. As we have in prior years, we excluded the impact of currency exchange rate fluctuations for purposes of our incentive plans. Excluding this item had the impact of increasing total company and Walmart International sales for incentive plan purposes.
   
Items excluded at the time incentive goals are established. As we have in prior years, we excluded fuel sales from our incentive plan calculations. This exclusion had the impact of reducing sales for incentive plan purposes.
   
Items excluded so that operating results are calculated on a comparative basis from year-to-year. We made an adjustment to our reported sales to reflect that certain wireless transactions are accounted for as commissions, rather than sales as assumed by our fiscal 2016 MIP sales goals. This adjustment had the effect of increasing sales for incentive plan purposes.

 

 2016 Proxy Statement    53

 

ROI—Long-Term Performance Share Unit Program.

 

Adjustments to operating income. Adjusted operating income is a component in the calculation of ROI. When calculating ROI for long-term incentive plan purposes, we exclude the same items from operating income that are excluded from the annual cash incentive calculation, as described above.
   
Adjustments to average invested capital. Average invested capital is a component in the calculation of ROI. When calculating fiscal 2016 ROI for incentive plan purposes, we made certain adjustments to average invested capital. These adjustments include items that correspond to several operating income adjustments described above, such as those related to our accounting for leases and to store closures. These adjustments had the net impact of decreasing our fiscal 2016 average invested capital for incentive plan purposes.

 

The table below shows the net impact of the adjustments described above as compared to our reported results of operations:

 

Performance Metric Actual Performance
(as reported)
Actual Performance
(for incentive plan purposes)
Impact of Adjustments
Total Company Operating Income -11.2% -3.5% 7.7%
Total Company Sales -0.7% 3.3% 4.0%
Walmart U.S. Operating Income -10.5% -6.6% 3.9%
Walmart U.S. Sales 3.6% 3.4% -0.2%
International Operating Income -13.4% 5.6% 19.0%
International Sales -9.4% 3.5% 12.9%
Sam’s Club Operating Income -7.9% -4.2% 3.7%
Sam’s Club Sales -2.1% 1.4% 3.5%
Global eCommerce Operating Income -28.0% -14.2% 13.8%
Global eCommerce GMV 13.1% 13.1% 0.0%
Return on Investment 15.5% 16.2% 0.7%

 

  Other Compensation

 

What other types of compensation do our NEOs receive?

 

Mr. Foran – China Long-Term Cash Incentive. Mr. Foran served as President and CEO of Walmart China during fiscal 2014, and a portion of fiscal 2015. As such, he was eligible for a prorated incentive payment under a Walmart China cash incentive program covering fiscal 2014 through fiscal 2016. In early fiscal 2017, Mr. Foran received a payout of $695,509 under this program, which was 74% of his maximum potential payout and prorated to reflect the portion of the performance period during which Mr. Foran served as President and CEO of Walmart China. The fiscal 2016 performance goals under this program were based on Walmart China operating income performance, as shown on the table below.

 

Performance Metric Threshold
(50% Payout)
Target
(75% Payout)
Maximum
(100% Payout)
Actual Performance
Walmart China Operating Income
(% increase over prior year)
2.09% 2.76% 3.00% 2.73%

 

Special Performance-Based Awards. On occasion, the CNGC may grant special performance-based awards to our executives. The purpose of these awards is to drive strategic or operational initiatives important to our overall enterprise strategy by using performance metrics that are not used in our annual and long-term incentive plans. The CNGC granted one such award in late fiscal 2015 and two such awards in late fiscal 2016:

 

In September 2014, the CNGC approved a special performance-based cash award opportunity for Ms. Brewer in the amount of $1 million. In order for Ms. Brewer to earn this award, Sam’s Club gross membership income had to exceed the amount set forth in our business plan for Sam’s Club gross membership income by at least $3 million during the one-year period ending July 31, 2015. The CNGC approved this special award opportunity for Ms. Brewer to drive performance in light of Sam’s Club’s initiatives to increase membership and membership income, which are key components of our Sam’s Club strategy. Sam’s Club gross membership income fell short of this challenging goal, and therefore Ms. Brewer did not receive any payout with respect to this award.
   
In January 2016, the CNGC approved a grant of 15,760 shares of performance-based restricted stock to Mr. Ashe. In order for one-half of these shares to vest, Walmart must meet a specified expansion goal with respect to the availability of Walmart’s online grocery services in the U.S. by the end of fiscal 2017. The purpose of this award is to drive our online grocery expansion, a key strategic priority for Walmart. The other half of these shares will be conditioned on a fiscal 2018 performance goal to be established by the CNGC at a later date.

 

 2016 Proxy Statement    54

 
Also in January 2016, the CNGC approved a grant of 15,760 shares of performance-based restricted stock to Mr. Foran. In order for one-half of these shares to vest, Walmart U.S. must meet a specified goal with respect to operating, selling, general and administrative expenses during fiscal 2017. The purpose of this award is to emphasize the importance of managing expenses in our largest operating segment, even as we continue to make critical strategic investments. The other half of these shares will be conditioned on a fiscal 2018 performance goal to be established by the CNGC at a later date.

 

“Feather In” Performance Share Awards. Under our long-term performance share unit program, we customarily make additional grants of performance share units to newly-hired executives or when executives are promoted to significantly larger roles. These “feather in” awards allow executives to realize performance share unit payouts commensurate with their positions for three-year cycles that are already in progress. We believe that this approach has helped to effectively recruit and appropriately incentivize and reward short- and long-term performance and also provides retention value. Unlike some companies, when executives retire or otherwise leave the company, they forfeit all unvested performance share units, and we do not accelerate the vesting or otherwise pay out any unvested performance share units.

 

In January 2016, in connection with his recent promotion to Executive Vice President and CFO, Mr. Biggs received two additional “feather in” performance share grants vesting at the conclusion of the performance cycles ending January 31, 2017 and January 31, 2018. These additional performance share awards were intended to increase Mr. Biggs’ target performance share opportunity for each of those cycles to $2,250,000, which is equal to the target value of his annual performance share award granted in January 2016 for the performance cycle ending January 31, 2019.

 

Additional MIP Award. Under the terms of the Management Incentive Plan, the CNGC may award an additional cash incentive amount based on individual performance. For his performance during fiscal 2016, the CNGC awarded Mr. Cheesewright an additional cash incentive amount equal to 20% of his target annual cash incentive award for fiscal 2016 (approximately $500,939). The CNGC awarded this amount to Mr. Cheesewright based on the solid constant currency sales and operating income performance of Walmart International in a difficult global environment, as well as Mr. Cheesewright’s contributions to strategic initiatives, including e-commerce initiatives in international markets, and management of our international portfolio.

 

What perquisites and other benefits do our NEOs receive?

 

Our NEOs receive a limited number of perquisites and supplemental benefits. We cover the cost of annual physical examinations for our NEOs and provide each NEO with personal use of our aircraft for a limited number of hours each year. Our NEOs also receive company-paid life and accidental death and dismemberment insurance. Additionally, our NEOs are entitled to benefits available to officers generally, such as participation in the Deferred Compensation Matching Plan, and benefits available to Associates generally, including a Walmart discount card, a limited 15 percent match of purchases of Shares through our Associate Stock Purchase Plan, participation in our 401(k) Plan, medical benefits, and foreign business travel insurance. We provide these perquisites and supplemental benefits to attract talented executives to our company and to retain our current executives, and we believe their limited cost is outweighed by the benefits to our company.

 

What types of retirement and other benefits are our NEOs eligible to receive?

 

Our NEOs are eligible for the same retirement benefits as our officers generally, such as participation in our Deferred Compensation Matching Plan. They may also take advantage of other benefits available more broadly to our Associates, such as our 401(k) Plan. With the exception of Mr. Cheesewright, who has an interest in a pension plan related to his prior employment with our U.K. subsidiary, our NEOs do not participate in any pension or other defined benefit retirement plan. Mr. Cheesewright is not eligible to make any further contributions to this U.K. pension plan.

 

 2016 Proxy Statement    55

 
  Executive Compensation Process and Governance

 

Who sets executive compensation at Walmart?

 

The CNGC is responsible for establishing and approving the compensation of the officers subject to Section 16, including the CEO and other NEOs. All members of the CNGC are independent (see page 26 for more information about the CNGC).

 

The CNGC met eight times in fiscal 2016. During each of these meetings, the CNGC considered executive compensation matters, including the review and approval of compensation opportunities for our NEOs, the selection of performance metrics aligned with our long-term strategic plan, the setting of performance goals for our annual- and long-term incentive plans, including the difficulty of those goals, and the review of performance against those goals, including compliance and diversity goals.

 

How does the CNGC set executive compensation?

 

The CNGC considers a variety of factors in setting TDC for our NEOs, including:

 

the overall financial and operating performance of our company and its operating segments and/or areas of responsibility, as applicable;
   
each NEO’s individual performance and contributions to the achievement of financial goals and operational milestones;
   
each NEO’s job responsibilities, expertise, historical compensation, and years and level of experience;
   
our overall succession planning and the importance of retaining each NEO and each NEO’s potential to assume greater responsibilities in the future; and
   
peer group data and analyses (see pages 56-58 for more details).

 

What is the role of management and compensation consultants with respect to executive compensation?

 

When evaluating, establishing, and approving the compensation of our CEO, the CNGC considers, among other information, the CEO’s performance evaluation. Our Chairman, with input from other Board members, evaluates our CEO’s performance, and makes recommendations regarding CEO pay with input from our Global People division. Our CEO evaluates the performance of our other NEOs and makes recommendations regarding their pay with input from our Global People division. When making decisions regarding NEO pay, the CNGC also considers recommendations and advice from the CNGC’s independent compensation consultant.

 

Since early 2007, the CNGC has engaged an independent consultant on executive compensation matters. Since early 2010, Pay Governance LLC (“Pay Governance”) has been engaged by the CNGC as its independent executive compensation consultant. Under the terms of its engagement, Pay Governance reports directly and exclusively to the CNGC; the CNGC has sole authority to retain, terminate, and approve the fees of Pay Governance; and Pay Governance may not be engaged to provide any other services to Walmart without the approval of the CNGC. Other than its engagement by the CNGC, Pay Governance does not perform and has never performed any other services for Walmart. The CNGC’s independent consultant attends and participates in CNGC meetings at which executive compensation matters are considered, and performs analyses for the CNGC at the CNGC’s request, including benchmarking, realizable pay analyses, analyses regarding the alignment of pay and performance, analyses of the correlation between performance measures and shareholder return, and assessments of the difficulty of attaining performance goals. The CNGC annually reviews the independence of Pay Governance in light of SEC rules and NYSE Listed Company Rules regarding compensation consultant independence and has affirmatively concluded that Pay Governance is independent from Walmart and has no conflicts of interest relating to its engagement by the CNGC.

 

How is peer group data used by the CNGC?

 

The CNGC reviews publicly available compensation information for three separate peer groups when establishing TDC for our executives. As shown below, Walmart is significantly larger than most of our peer group companies, and as the world’s largest retailer, we believe that Walmart’s size, extensive international presence, and complex operations result in our NEOs’ jobs having a greater level of complexity than similar jobs at many of our peer group companies. For this reason, on an unadjusted basis, the CNGC seeks to place our NEOs’ target TDC near the 75th percentile of comparable positions within our peer groups, taken as a whole. The CNGC’s independent compensation consultant has done a statistical analysis of our NEOs’ target TDC and found that, on a size-adjusted basis, our NEOs’ target TDC are near the median of comparable positions within our peer groups.

 

 2016 Proxy Statement    56

 

Retail Industry Survey. This peer group allows the CNGC to compare our NEO compensation to that of our primary competitors in the retail industry. For fiscal 2016, the Retail Industry Survey included all publicly-traded retail companies with significant U.S. operations with annual revenues exceeding approximately $10 billion. Those companies were:

 

Amazon.com, Inc.   Lowe’s Companies, Inc.  
AutoNation, Inc.   Macy’s, Inc.  
Bed Bath & Beyond Inc.   Nordstrom, Inc.  
Best Buy Co., Inc.   Office Depot, Inc.  
CarMax, Inc.   Penske Automotive Group, Inc.  
Costco Wholesale Corporation   Rite Aid Corporation  
CVS Health Corporation   Ross Stores, Inc.  
Dollar General Corporation   Safeway Inc.  
eBay Inc.   Sears Holdings Corporation  
Family Dollar Stores, Inc.   The Sherwin-Williams Company  
The Gap, Inc.   Staples, Inc.  
The Home Depot, Inc.   SUPERVALU INC.  
J. C. Penney Company, Inc.   Target Corporation  
Kohl’s Corporation   The TJX Companies, Inc.  
The Kroger Co.   Walgreen Co.  
L Brands, Inc.   Whole Foods Market, Inc.  

Retail Industry Survey FY15 Revenue FYE Market Cap $485.7 billion $20.6 billion $273.9 billion $9.9 billion Walmart Peer group median

 

Select Fortune 100. The CNGC also benchmarks our NEO compensation against a select group of companies within the Fortune 100. This group, which we refer to as the “Select Fortune 100,” was chosen from among the Fortune 100 by our Global People division, with input from the CNGC’s independent consultant. The Select Fortune 100 includes companies whose primary business is not retailing but that are similar to us in one or more ways, such as global operations or complexity of business model or operations. We excluded retailers from this group because those companies were already represented in the Retail Industry Survey. We also excluded companies with business models that are broadly divergent from ours, such as financial institutions and energy companies. The companies included in the Select Fortune 100 when setting fiscal 2016 compensation were:

 

Archer-Daniels-Midland Company   Johnson & Johnson    
AT&T Inc.   Johnson Controls, Inc.  
Caterpillar Inc.   McKesson Corporation  
Cisco Systems, Inc.   Microsoft Corporation  
The Coca-Cola Company   Mondelez International, Inc.  
FedEx Corporation   PepsiCo, Inc.  
Ford Motor Company   Pfizer Inc.  
General Electric Company   Philip Morris International Inc.  
Hewlett-Packard Company   The Procter & Gamble Company  
Honeywell International Inc.   Twenty-First Century Fox, Inc.  
Ingram Micro Inc.   Tyson Foods, Inc.  
Intel Corporation   United Parcel Service, Inc.  
International Business
Machines Corporation
  Verizon Communications Inc.  

Select Fortune 100 FY15 Revenue FYE Market Cap $485.7 billion $60.7 billion $273.9 billion $115.8 billion Walmart Peer group median

 

Top 50. While the Select Fortune 100 includes many larger companies than the Retail Industry Survey, Walmart is still the largest company within the Select Fortune 100 in terms of revenues, and is the third largest in terms of market capitalization. To take into account this size discrepancy and the corresponding complexity of our NEOs’ job responsibilities, the CNGC also benchmarks our NEOs’ pay against the 50 largest public companies (including selected non-U.S. based companies), excluding Walmart, in terms of market capitalization at the time of the review. Even among the Top 50, Walmart is the largest company in terms of revenue, and in the top quartile in terms of market capitalization. When the CNGC set fiscal 2016 compensation, the companies within the Top 50 were:

 

 2016 Proxy Statement    57

 
Amazon.com, Inc.   L’Oreal  
Anheuser-Busch InBev SA/NV   MasterCard, Incorporated  
Apple Inc.   Merck & Co., Inc.  
AT&T Inc.   Microsoft Corporation  
Bayer AG   Nestlé S.A.  
Berkshire Hathaway Inc.   Novartis AG  
The Boeing Company   Novo Nordisk A/S  
BP p.l.c.   Oracle Corporation  
British American Tobacco plc   PepsiCo, Inc.  
Chevron Corporation   Pfizer Inc.  
Cisco Systems, Inc.   Philip Morris International Inc.  
The Coca-Cola Company   The Procter & Gamble Company  
Comcast Corporation   QUALCOMM Incorporated  
Exxon Mobil Corporation   Royal Dutch Shell plc  
F. Hoffmann-La Roche Ltd.   Sanofi S.A.  
Facebook Inc.   SAP AG  
General Electric Company   Schlumberger N.V.  
Gilead Sciences, Inc.   Siemens AG  
GlaxoSmithKline plc   Telecom Italia S.p.A.  
Google Inc.   Total S.A.  
The Home Depot, Inc.   United Technologies Corporation  
HSBC Holdings plc   Verizon Communications Inc.  
Intel Corporation   Visa Inc.  
International Business Machines Corporation   Vodafone Group plc  
Johnson & Johnson   The Walt Disney Company  

Top 50 FY15 Revenue FYE Market Cap $485.7 billion $56.1 billion $273.9 billion $156.5 billion Walmart Peer group median

 

The CNGC uses benchmarking data as a general guide to setting appropriately competitive compensation consistent with our emphasis on performance-based compensation. The CNGC did not attempt to quantify or otherwise assign any relative weightings to any of these peer groups or to any particular members of a peer group when benchmarking against them.

 

While the benchmarking data is generally used for comparable positions, the CNGC also reviews peer group data for retail CEO positions for our executives who lead our operating segments and our Global eCommerce operations. These executives have significant responsibilities and lead organizations that are, considered separately from the rest of our company, larger than many of the other retailers in the retail peer group, and we believe that these positions are often comparable to CEO positions at many of our peer group companies. In addition, from a competitive standpoint, we believe that it is more likely that these leaders would be recruited for a CEO position in the retail industry or elsewhere, rather than for a lateral move. Therefore, the CNGC also benchmarks these executives’ compensation against the compensation of CEOs within our retail peer group.

 

The target TDC opportunity for a particular NEO may be higher or lower, and may differ from the TDC of our other NEOs, depending on a number of factors, including the factors described under “How does the CNGC set executive compensation?” on page 56 above.

 

For fiscal 2016, Mr. McMillon’s target TDC was in the top quartile when compared to CEO positions within the Retail Industry Survey and the Top 50. When compared to CEO positions within the Select Fortune 100, Mr. McMillon’s fiscal 2016 target TDC was near the 75th percentile.

 

For fiscal 2016, Mr. Holley’s target TDC was in the top quartile when compared to CFO positions within the Retail Industry Survey, and between the 50th and 75th percentiles when compared to CFO positions within the Select Fortune 100 and Top 50 peer groups.

 

For fiscal 2016, the target TDC for Mr. Foran, Mr. Cheesewright, Ms. Brewer, and Mr. Ashe were each within the top quartile when compared to divisional president positions within our peer groups. When compared to CEO positions within our peer groups, the TDC of these NEOs was near the median of the Retail Industry Survey, and below the median of the Select Fortune 100 and Top 50.

 

 2016 Proxy Statement    58

 

What other information does the CNGC consider when setting executive pay?

 

Pay and Performance Alignment. The CNGC reviews an assessment by Pay Governance regarding the alignment of CEO pay and performance, including the appropriateness of CEO pay opportunity compared to peers and the alignment of CEO realizable pay and relative performance. Pay Governance concluded that, on a size-adjusted basis, our CEO’s pay opportunity and realizable pay are aligned with Walmart’s relative performance.

 

Tally Sheets. The CNGC also reviews “tally sheets” prepared by our company’s Global People division. These tally sheets summarize the total value of the compensation realizable by each NEO for the upcoming fiscal year and quantify the value of each element of that compensation, including perquisites and other benefits. The tally sheets also quantify the amounts that would be owed to each NEO upon retirement or separation from our company.

 

Shareholder Feedback. Our shareholders have expressed support for our executive compensation program at each of our last four annual shareholders’ meetings. The CNGC considered that support, as well as other feedback from our shareholders, when designing our executive compensation program and establishing our NEOs’ compensation opportunities for fiscal 2016.

 

What are our practices for granting equity awards?

 

Timing of Equity Awards. The CNGC meets each January to approve and grant annual equity awards to our Executive Officers, including our NEOs, for the upcoming fiscal year. Because of the timing of these meetings, these equity grants are reported in the executive compensation tables appearing in this proxy statement as granted during the prior fiscal year. The CNGC meets again in February and/or March to establish the performance goals applicable to the performance share units and any other performance-based equity granted at the January meeting.

 

Any special equity grants to Executive Officers during the year are approved by the CNGC at a meeting or by unanimous written consent.

 

Option Exercise Prices. We have not granted stock options to our Executive Officers since 2007, and stock options are not currently a part of our executive compensation program. If and when we grant stock options in the future, the exercise price will be equal to the fair market value of our common stock on the date of grant.

 

Does the CNGC take tax consequences into account when setting executive compensation?

 

Yes. Section 162(m) of the Internal Revenue Code provides that compensation in excess of $1,000,000 paid to certain of our NEOs is generally not deductible by our company unless it is performance-based. The CNGC considers the deductibility of the compensation paid to our NEOs when designing and approving executive compensation. A significant portion of the compensation awarded to our NEOs is intended to satisfy the requirements for deductibility under Section 162(m). Additionally, early in fiscal 2017, the CNGC adopted a policy requiring our “covered employees” to defer annual restricted stock grants until after they separate from employment from Walmart, subject to certain exceptions. However, to maintain flexibility to compensate our Executive Officers in a manner designed to promote our long-term goals and objectives, the CNGC has not adopted a policy that all compensation must be deductible or have the most favorable tax or accounting treatment available to our company. Rather, in certain circumstances, the CNGC may determine that it is in the best interests of our company to award a particular form of compensation, even if our company may not be able to deduct all of that compensation under federal tax laws.

 

Do we have employment agreements with our NEOs?

 

We do not have employment agreements with any of our NEOs. Our NEOs and other Executive Officers are employed on an at-will basis.

 

Do we have severance agreements with our NEOs?

 

We have entered into a post-termination and non-competition agreement with each NEO. Each agreement provides that, if we terminate the NEO’s employment for any reason other than his or her violation of company policy, we will generally pay the NEO an amount equal to two times the NEO’s base salary, one-fourth of which is paid upon termination of employment and the balance of which is paid in installments commencing six months after separation.

 

Under these agreements, each NEO has agreed that for a period of time following his or her termination of employment, he or she will not participate in a business that competes with us and will not solicit our Associates for employment. For purposes of these agreements, a competing business generally means any retail, wholesale, or merchandising business that sells products of the type sold by Walmart with annual revenues in excess of certain thresholds. These agreements reduce the risk that any

 

 2016 Proxy Statement    59

 

of our former NEOs would use the skills and knowledge they gained while with us for the benefit of one of our competitors during a reasonable period after leaving our company. We do not have any contracts or other arrangements with our NEOs that provide for payments or other benefits upon a change in control of our company.

 

See “Potential Payments Upon Termination or Change in Control” beginning on page 73 for more information.

 

Does our compensation program contain any provisions addressing the recovery or non-payment of compensation in the event of misconduct?

 

Yes. Our MIP and our Stock Incentive Plan both provide that we will recoup awards to the extent required by Walmart policies. Furthermore, our MIP provides that, in order to be eligible to receive an incentive payment, the participant must have complied with our policies, including our Global Statement of Ethics, at all times. It further provides that if the CNGC determines, within twelve months following the payment of an incentive award, that prior to the payment of the award, a participant has violated any of our policies or otherwise committed acts detrimental to the best interests of our company, the participant must repay the incentive award upon demand. Similarly, our Stock Incentive Plan provides that if the CNGC determines that an Associate has committed any act detrimental to the best interests of our company, he or she will forfeit all unexercised options and unvested Shares of restricted stock and performance shares. In addition, both the MIP and the Stock Incentive Plan provide that all awards under these plans, whether or not previously paid or deferred, will be subject to the company’s policies and applicable law regarding clawbacks in effect from time to time.

 

Are our NEOs subject to any minimum requirements regarding ownership of our stock?

 

Yes. Our senior officers have been subject to stock ownership guidelines since 2003. In June 2013, our Board strengthened the stock ownership guidelines applicable to our CEO and senior officers, as follows:

 

our CEO must maintain beneficial ownership of unrestricted Shares having a market value equal to seven times his current annual base salary; and
   
our other NEOs and certain other senior officers must maintain beneficial ownership of unrestricted Shares having a market value equal to five times his or her current annual base salary.

 

The CEO and other senior officers must satisfy these stock ownership guidelines no later than the fifth anniversary of his or her appointment to a position covered by the stock ownership guidelines. If any covered officer is not in compliance with these stock ownership guidelines, he or she may not sell or otherwise dispose of more than 50 percent of any Shares that vest pursuant to any equity award until such time as he or she is in compliance with the guidelines and such sale would not cause the covered officer to cease to be in compliance with the guidelines. Further, as noted below, any pledged Shares would not be counted when determining whether the officer is in compliance with the guidelines. Currently, each of our NEOs is in compliance with our stock ownership guidelines, as illustrated by the following graph:

 

Multiple ofBase Salary 50 45 40 35 30 25 20 15 10 5 0 43.4 16.2 14.4 12.1 Actual Share Ownership* Minimum Share Ownership Requirement D. McMillon CEO: 7 timesbase salary Other NEOs: 5 times base salary c. Holley R. Brewer N. Ashe

 

* Assumes a stock price of $69.06/Share, which was the closing price of a share on April 1, 2016. Includes Shares that have vested and been deferred. Does not include Shares that have not yet vested or Shares underlying options. Due to their recent promotions, Mr. Cheesewright, Mr. Foran and Mr. Biggs have not yet reached their required compliance dates under our stock ownership guidelines. We expect that Mr. Cheesewright, Mr. Foran and Mr. Biggs will satisfy their stock ownership requirements by their required compliance dates.

 

 2016 Proxy Statement    60

 

Are there any restrictions on an NEO’s ability to engage in transactions involving Walmart stock?

 

Yes. Our Insider Trading Policy contains the following restrictions:

 

Our directors and Executive Officers may trade in our stock only during open window periods, and then only after they have pre-cleared transactions with our Corporate Secretary.
   
Our directors and Executive Officers may not enter into trading plans pursuant to SEC Rule 10b5-1 without having such plans pre-approved by our Corporate Secretary.
   
Our directors and Executive Officers may not at any time engage in hedging transactions (such as swaps, puts and calls, collars, and similar financial instruments) that would eliminate or limit the risks and rewards of Walmart stock ownership.
   
Our directors and Executive Officers may not at any time engage in any short selling, buy or sell options, puts or calls, whether exchange-traded or otherwise, or engage in any other transaction in derivative securities that reflects speculation about the price of our stock or that may place their financial interests against the financial interests of our company.
   
Our directors and Executive Officers are prohibited from using Walmart stock as collateral for any margin loan.
   
Before using Walmart stock as collateral for any other borrowing, our directors and Executive Officers must satisfy the following requirements:

 

  The pledging arrangement must be pre-approved by Walmart’s Corporate Secretary; and
     
  Any Walmart Shares pledged will not be counted when determining whether the director or Executive Officer is in compliance with our stock ownership guidelines.

 

Currently, none of our Independent Directors or Executive Officers has any pledging arrangements in place involving Walmart stock. One Outside Director not standing for reelection has pledged Shares representing less than one percent of his sole and shared beneficial ownership of Shares as security for a line of credit, as disclosed on page 76 under “Holdings of Officers and Directors.”

 

Risk Considerations in our Compensation Program

 

The CNGC, pursuant to its charter, is responsible for reviewing and overseeing the compensation and benefits structure applicable to our Associates generally, including any risks that may arise from our compensation program. We do not believe that our compensation policies and practices for our Associates give rise to risks that are reasonably likely to have a material adverse effect on our company. In reaching this conclusion, we considered the following factors:

 

Our compensation program is designed to provide a mix of both fixed and variable incentive compensation.
   
Our performance-based compensation is balanced between an annual incentive and a long-term incentive program. We believe this design mitigates any incentive for short-term risk-taking that could be detrimental to our company’s long-term best interests.
   
Our incentive compensation programs reward performance based on a mix of operating income-based metrics; sales-based metrics; and return on investment. We believe that this mix of performance metrics mitigates any incentive to seek to maximize performance under one metric to the detriment of performance under other metrics. For example, our long-term performance share plan is based equally on sales and ROI performance. We believe that this structure mitigates any incentive to pursue strategies that would increase our sales at the detriment of ROI performance. The CNGC regularly reviews the mix and weightings of the performance metrics used in our incentive compensation programs and has concluded that they are aligned with our strategy and provide appropriate incentives to encourage sustainable shareholder value creation.
   
Maximum payouts under both our annual cash incentive plan and our performance share unit program are capped at 125 percent and 150 percent of target payouts, respectively. We believe that these limits mitigate excessive risk-taking, since the maximum amount that can be earned in a single performance cycle is limited.
   
A significant percentage of our management’s incentive compensation is based on the performance of our total company. This is designed to mitigate any incentive to pursue strategies that might maximize the performance of a single operating segment or area of responsibility to the detriment of our company as a whole.
   
Our senior executives are subject to robust stock ownership guidelines, which we believe motivate our executives to consider the long-term interests of our company and our shareholders and discourage excessive risk-taking that could negatively impact our stock price.
   
Our performance-based incentive compensation programs are designed with payout curves that are relatively smooth and do not contain steep payout “cliffs” that might encourage short-term business decisions in order to meet a payout threshold.
   
Our Executive Officers’ cash incentive payments are subject to reduction or elimination if compliance objectives are not satisfied.

 

Finally, our cash incentive plan and our Stock Incentive Plan both contain robust “clawback” provisions under which awards may be recouped or forfeited if an Associate has not complied with our policies, including our Global Statement of Ethics, or has committed acts detrimental to the best interests of our company.

 

 2016 Proxy Statement    61

 

Compensation Committee Report

 

The CNGC has reviewed and discussed with our company’s management the CD&A included in this proxy statement and, based on that review and discussion, the CNGC recommended to the Board that the CD&A be included in this proxy statement.

 

The CNGC submits this report:

 

Aida M. Alvarez

Marissa A. Mayer

Steven S Reinemund

Kevin Y. Systrom

Linda S. Wolf, Chair

 

Compensation Committee Interlocks and Insider Participation

 

None of the directors who served on the CNGC at any time during fiscal 2016 were officers or Associates of Walmart or were former officers or Associates of Walmart. Further, none of the members who served on the CNGC at any time during fiscal 2016 had any relationship with our company requiring disclosure under the section of this proxy statement entitled “Related Person Transactions.” Finally, no Executive Officer serves, or in the past fiscal year has served, as a director of, or as a member of the compensation committee (or other board committee performing equivalent functions) of, any entity that has one or more of its executive officers serving as a director of Walmart or as a member of the CNGC.

 

 2016 Proxy Statement    62

 

Summary Compensation

 

                        Change in        
                        Pension Value        
                        and Nonqualified        
    Fiscal               Non-Equity   Deferred        
    Year           Stock   Incentive Plan   Compensation   All Other    
Name and Principal   ended   Salary   Bonus   Awards   Compensation   Earnings   Compensation    
Position   Jan. 31   ($)   ($)   ($)   ($)   ($)   ($)   Total
(a)   (b)   (c)   (d)   (e)   (g)   (h)   (i)   ($)
C. Douglas McMillon   2016   1,263,231   0   14,270,786   3,406,971   404,755   463,054   19,808,797
President and CEO   2015   1,200,930   0   14,597,374   2,878,272   322,359   393,673   19,392,608
    2014   954,408   0   23,011,020   1,035,019   338,400   254,091   25,592,938
Charles M. Holley, Jr.   2016   942,112   0   0   1,589,485   173,941   300,828   3,006,366
Executive Vice President   2015   885,165   0   4,798,975   1,349,190   137,129   261,382   7,431,841
and CFO   2014   793,617   0   6,227,241   827,762   140,435   210,336   8,199,391
M. Brett Biggs   2016   623,126   0   6,864,337   924,965   81,490   119,140   8,613,058
Executive Vice President and CFO                                
Gregory S. Foran   2016   976,334   0   7,035,147   2,491,090   5,929   1,035,779   11,544,279
Executive Vice President   2015   846,910   500,000   15,781,823   1,273,491   4,084   1,128,815   19,535,123
David Cheesewright   2016   1,033,037   500,939   5,880,740   2,470,649   0   286,240   10,171,605
Executive Vice President   2015   1,152,850   551,852   5,598,373   2,503,814   605,579   252,586   10,665,054
Rosalind G. Brewer   2016   921,202   0   5,570,944   1,812,431   20,130   130,018   8,454,725
Executive Vice President   2015   893,819   0   6,698,382   1,711,746   11,051   245,237   9,560,235
    2014   843,544   0   9,181,738   1,281,066   8,166   349,909   11,664,423
Neil M. Ashe   2016   1,000,058   0   7,499,377   2,072,591   5,746   253,394   10,831,166
Executive Vice President   2015   935,303   0   6,648,142   1,618,926   2,205   232,199   9,436,775
    2014   843,544   0   11,252,483   1,030,705   842   51,169   13,178,743

 

Explanation of information in the columns of the table:

 

Name and Principal Position and Fiscal Year ended Jan. 31 (columns (a) and (b))

 

Disclosure regarding Ms. Brewer’s compensation for fiscal 2016 is not required under SEC rules. Nevertheless, we have included compensation information for Ms. Brewer on the same basis as our other NEOs. We chose to include this information for continuity purposes, as we expect that the executive officers required to be included as NEOs will vary from year-to-year among the executives included in the table.

 

Mr. Foran and Mr. Cheesewright were NEOs for the first time in fiscal 2015. Accordingly, only information relating to their fiscal 2015 and fiscal 2016 compensation is included in the compensation tables and related disclosures. Mr. Biggs was an NEO for the first time in fiscal 2016. Accordingly, only information relating to his fiscal 2016 compensation is included in the compensation tables and related disclosures.

 

Salary (column (c))

 

Represents salaries earned during the fiscal years shown. Mr. Cheesewright’s salary is paid in Canadian dollars, and is reported here using an average exchange rate during fiscal 2016 of 1 CAD = 0.7730 USD, and during fiscal 2015 of 1 CAD = 0.8984 USD. Mr. McMillon and Mr. Holley elected to defer $130,000 and $312,000 of their fiscal 2016 base salaries, respectively, in each case under the Deferred Compensation Matching Plan. See page 72 for further details.

 

Bonus (column (d))

 

The fiscal 2016 amount for Mr. Cheesewright represents an additional cash incentive based on Mr. Cheesewright’s individual performance during fiscal 2016, as further described in the CD&A on page 55. The amount for Mr. Cheesewright was paid in Canadian dollars, and is reported here using an average exchange rate during fiscal 2016 of 1 CAD = 0.7730 USD.

 

Stock Awards (column (e))

 

The CNGC generally grants equity awards to our Executive Officers each January, just prior to the end of our fiscal year, that are intended as part of each Executive Officer’s compensation opportunity for the following year. Under the SEC’s rules, however, these awards are reported as compensation for the year in which the grant date falls. Accordingly, this column includes, for each NEO, an award of restricted stock (or, in the case of Mr. Cheesewright, restricted stock units) and performance share units approved by the CNGC on January 25, 2016. This column also includes, for Mr. Biggs, his fiscal 2016 annual award, which was made in April 2015 prior to his promotion to his current position. As described on page 55 of the CD&A, Mr. Biggs was also granted additional “feather in” performance share units during fiscal 2016, as is customary when executives are promoted to significantly larger roles. The value of these additional awards are included in the amount in this column for Mr. Biggs.

 

In accordance with SEC rules, the amounts included in this column are the grant date fair value for awards granted in the fiscal years shown, computed in accordance with the stock-based compensation accounting rules that are a part of GAAP (as set forth in Financial Accounting Standards Board’s Accounting Standards Codification Topic 718), but excluding the effect of any estimated forfeitures of such awards.

 

 2016 Proxy Statement    63

 

The number of performance share units that vest, if any, depends on whether we achieve certain levels of performance with respect to certain performance measures. The grant date fair values of the performance share units included in this column are based on payouts at target, which we have determined, in accordance with the stock-based compensation accounting rules, to be the probable levels of achievement of the performance goals related to those awards. The table below shows the grant date fair value of the performance share awards granted to each NEO during fiscal 2016, assuming that: (i) our performance with respect to those performance measures will be at target levels (i.e., probable performance); and (ii) our performance with respect to those performance measures will be at levels that would result in a maximum payout. The grant date fair value of each performance share unit was determined based on the closing price of a Share on the NYSE on the grant date discounted for the expected dividend yield for such Shares during the vesting period:

 

        Grant Date Fair Value (Probable   Grant Date Fair Value (Maximum
    Fiscal Year   Performance)   Performance)
Name   of Grant   ($)   ($)
C. Douglas McMillon   2016   10,428,317   15,642,476
M. Brett Biggs   2016   5,864,338   8,796,565
Gregory S. Foran   2016   4,410,157   6,615,235
David Cheesewright   2016   4,410,157   6,615,235
Rosalind G. Brewer   2016   4,070,923   6,106,384
Neil M. Ashe   2016   4,749,391   7,124,086

 

Option Awards (column (f))

 

We have omitted this column because we did not grant any option awards to NEOs during fiscal 2016, and stock options are not currently part of our executive compensation program.

 

Non-Equity Incentive Plan Compensation (column (g))

 

These amounts represent annual cash incentive payments earned by our NEOs for performance during fiscal 2016, fiscal 2015, and fiscal 2014, respectively, but paid to our NEOs during the following fiscal year. For Mr. Foran, this amount also includes a cash incentive payment related to his prior service as President and CEO of Walmart China, as described in the CD&A on page 54. Mr. Cheesewright’s cash incentive is paid in Canadian dollars, and is reported here using an average exchange rate during fiscal 2016 of 1 CAD = 0.7730 USD. Certain of our NEOs elected to defer a portion of their annual cash incentive payment for fiscal 2016, as follows:

 

    Amount of Fiscal 2016
    Cash Incentive Deferred
Name   ($)
C. Douglas McMillon   1,703,485
Charles M. Holley, Jr.   838,165
M. Brett Biggs   462,482
Neil M. Ashe   2,072,591

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings (column (h))

 

The amounts shown in this column represent above-market interest credited on deferred compensation under our company’s nonqualified deferred compensation plans, as calculated pursuant to Item 402(c)(2)(viii)(B) of SEC Regulation S-K. Mr. Cheesewright participates in pension plans administered by Asda, the company’s U.K. subsidiary. During fiscal 2016, the actuarial present value of Mr. Cheesewright’s accumulated benefit in these plans decreased by $140,574 (converting from British Pounds using an average exchange rate during fiscal 2016 of 1 GBP = 1.5235 USD. These pension plans were closed to participants in 2011, but participants’ account balances are adjusted for inflation until they begin to receive distributions from the plan. See the Pension Benefits table on page 70 for more information.

 

All Other Compensation (column (i))

 

“All other compensation” for fiscal 2016 includes the following amounts:

 

    401(k) Plan Matching   Personal Use of   Company Contributions to Deferred  
    Contributions   Company Aircraft   Compensation Plans  
Name   ($)   ($)   ($)  
C. Douglas McMillon   15,900   113,738   328,899  
Charles M. Holley, Jr.   15,900   93,602   186,310  
M. Brett Biggs   15,900   3,809   95,809  
Gregory S. Foran   15,900   105,031   0  
David Cheesewright   0   188,184   9,806 *
Rosalind G. Brewer   15,900   100,677   0  
Neil M. Ashe   15,900   64,034   168,218  

 

The value shown for personal use of Walmart aircraft is the incremental cost to our company of such use, which is calculated based on the variable operating costs to our company per hour of operation, which include fuel costs, maintenance, and associated travel costs for the crew. Fixed costs that do not change based on usage, such as pilot salaries, depreciation, insurance, and rent, are not included.

 

* The amount for Mr. Cheesewright was denominated in Canadian dollars, and is reported here using an average exchange rate during fiscal 2016 of 1 CAD = 0.7730 USD.

 

 2016 Proxy Statement    64

 

“All other compensation” for fiscal 2016 also includes the following amounts:

 

$116,696 in relocation expenses for Mr. Foran. Mr. Foran served on two separate expatriate assignments during fiscal 2015, and was relocated twice, first from China to Hong Kong, and then to Walmart’s headquarters in Bentonville, Arkansas. The company paid or reimbursed standard relocation expenses in connection with these moves, including travel, movement of household goods, and temporary housing. Mr. Foran did not receive any reimbursement for any loss on the sale of a residence. A portion of the expenses related to these relocations was incurred in fiscal 2016.

 

$673,462 in tax equalization for Mr. Foran related to his prior expatriate assignments. In accordance with our tax equalization policy for all expatriates, we made certain income tax payments on Mr. Foran’s behalf so that Mr. Foran’s effective income tax obligation was equal to what it would have been if all of his fiscal 2016 taxable income was subject only to state and federal income taxes in the U.S.

 

$117,042 in tax gross-ups for Mr. Foran related to: (i) Mr. Foran’s relocation benefits described above, and (ii) tax preparation services provided to Mr. Foran related to his prior expatriate service.

 

$76,715 in tax gross-ups for Mr. Cheesewright related to: (i) Mr. Cheesewright’s use of corporate aircraft to travel from his residence in Canada to the company’s headquarters in Bentonville, Arkansas, and (ii) tax preparation services provided to Mr. Cheesewright related to his prior expatriate service.

 

Certain of the amounts for Mr. Foran described above were paid in Chinese Yuan Renminbi (CNY) and have been reported here using an average exchange rate during fiscal 2016 of 1 CNY = 0.1594 USD.

 

The amounts in this column for fiscal 2016 also include tax gross-up payments to our other NEOs in amounts less than $10,000. The amounts in this column for fiscal 2016 also include the cost of term life insurance premiums for each of our NEOs and physical examinations for Mr. Biggs, Mr. Foran, Ms. Brewer, and Mr. Ashe, as well as the cost of tax preparation services for Mr. Foran and Mr. Cheesewright related to their prior expatriate service. The values of these personal benefits are based on the incremental aggregate cost to our company and are not individually quantified because none of them individually exceed the greater of $25,000 or 10% of the total amount of perquisites or personal benefits provided to such NEO.

 

 2016 Proxy Statement    65

 

Fiscal 2016 Grants of Plan-Based Awards

 

                                All Other    
                                Stock    
                                Awards:   Grant Date
        Estimated Future Payouts Under   Estimated Future Payouts Under   Number of   Fair Value
        Non-Equity Incentive Plan Awards   Equity Incentive Plan Awards   Shares of   of Stock
                                Stock or   and Option
        Threshold   Target   Maximum   Threshold   Target   Maximum   Units   Awards
    Grant   ($)   ($)   ($)   (#)   (#)   (#)   (#)   ($)
Name   Date   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (l)
C. Douglas       1,526,400   4,070,400   5,088,000                    
McMillon   1/25/16               90,839 (1)  181,678 (1)  272,517 (1)      10,428,317
    1/25/16                           60,559 (6)  3,842,469
M. Brett Biggs       637,500   1,700,000   2,125,000                    
    1/25/16               17,731 (1)  35,461 (1)  53,192 (1)      2,035,461
    1/25/16               13,086 (2)  26,171 (2)  39,257 (2)      1,555,604
    1/25/16               12,846 (3)  25,692 (3)  38,538 (3)      1,579,030
    4/2/15               4,645 (4)  9,290 (4)  13,935 (4)      694,242
    1/25/16                           11,820 (6)  749,979
    4/2/15                           3,097 (6)  250,021
Gregory S.       904,868   2,412,982   3,016,227                    
Foran   1/25/16               38,416 (1)  76,832 (1)  115,248 (1)      4,410,157
    1/25/16                   15,760 (5)          999,972
    1/25/16                           25,611 (6)  1,625,018
David       990,920   2,642,452   3,303,065                    
Cheesewright   1/25/16               38,416 (1)  76,832 (1)  115,248 (1)      4,410,157
    1/25/16                           25,611 (7)  1,470,584
Rosalind G.       851,007   2,269,351   2,836,689                    
Brewer   1/25/16               35,461 (1)  70,922 (1)  106,383 (1)      4,070,923
    1/25/16                           23,641 (6)  1,500,021
Neil M. Ashe       931,224   2,483,263   3,104,079                    
    1/25/16               41,371 (1)  82,742 (1)  124,113 (1)      4,749,391
    1/25/16                   15,760 (5)          999,972
    1/25/16                           27,581 (6)  1,750,014
                                       

As a result of his retirement, Mr. Holley did not receive any equity awards during fiscal 2016 and is not eligible to earn any additional non-equity incentive awards. Therefore, he is omitted from this table.

 

Explanation of information in the columns of the table:

 

Estimated Future Payments Under Non-Equity Incentive Plan Awards (columns (c), (d) and (e))

 

The amounts in these columns represent the threshold, target, and maximum amounts of potential annual cash incentive payments that may be earned by our NEOs under the Management Incentive Plan for performance during fiscal 2017. The performance measures and weightings applicable to these awards for each of our NEOs are as follows:

 

Name       Weighting    
C. Douglas McMillon   75% Total Company Operating Income       25% Total Company Sales
M. Brett Biggs   75% Total Company Operating Income       25% Total Company Sales
Gregory S. Foran   25% Total Company Operating Income       25% Walmart U.S. Sales
    50% Walmart U.S. Operating Income        
David Cheesewright   25% Total Company Operating Income       25% Walmart International Sales
    50% Walmart International Operating Income        
Rosalind G. Brewer   25% Total Company Operating Income       25% Sam’s Club Sales
    50% Sam’s Club Operating Income        
Neil M. Ashe   20% Total Company Operating Income       25% Total Company Sales
    20% Global eCommerce Operating Income       35% Global eCommerce Gross
            Merchandise Value

 

The CD&A provides additional information regarding our annual cash incentive plan. The amounts for Mr. Cheesewright are payable in Canadian dollars and are reported in these columns using an exchange rate of 1 CAD = 0.7730 USD, which is an average exchange rate during fiscal 2016.

 

 2016 Proxy Statement    66

 

Estimated Future Payouts Under Equity Incentive Plan Awards (columns (f), (g), and (h))

 

The amounts in these columns marked with a (1), (2) and (3) represent the threshold, target, and maximum number of Shares that may vest with respect to performance share units granted during fiscal 2016. Holders of performance share units do not earn dividends or enjoy other rights of shareholders until such performance share units have paid out. The CD&A provides additional information regarding our performance share program and the related performance measures. The CNGC annually establishes performance measures and goals for each fiscal year within each performance period. For fiscal 2017, the applicable performance measures are: (i) return on investment; and (ii) sales growth of our company or one of its operating segments, depending on each NEO’s primary area of responsibility. Each NEO’s performance measure weighting for fiscal 2017 is as follows:

 

Name       Weighting    
C. Douglas McMillon   50% Total Company Return on Investment       50% Total Company Sales
M. Brett Biggs   50% Total Company Return on Investment       50% Total Company Sales
Gregory S. Foran   50% Total Company Return on Investment       50% Walmart U.S. Sales
David Cheesewright   50% Total Company Return on Investment       50% Walmart International Sales
Rosalind G. Brewer   50% Total Company Return on Investment       50% Sam’s Club Sales
Neil M. Ashe   50% Total Company Return on Investment       50% Total Company Sales

 

Amounts marked with a (1) are performance share units with a performance cycle ending January 31, 2019, with vesting based on an average of performance compared to the applicable performance goals during fiscal 2017, fiscal 2018, and fiscal 2019.

 

Amounts marked with a (2) are performance share units with a performance cycle ending January 31, 2018, with vesting based on an average of performance compared to the applicable performance goals during fiscal 2017 and fiscal 2018.

 

Amounts marked with a (3) are performance share units with a performance cycle ending January 31, 2017, with vesting based on an average of performance compared to the applicable performance goals during fiscal 2015, fiscal 2016, and fiscal 2017.

 

Amounts marked with a (4) are performance share units with a performance cycle ending January 31, 2018, with vesting based on an average of performance compared to the applicable performance goals during fiscal 2016, fiscal 2017, and fiscal 2018.

 

The additional amounts marked with a (5) represent performance-based restricted stock granted to Mr. Foran and Mr. Ashe. One half of these shares are scheduled to vest on January 31, 2017, and the other half on January 31, 2018, so long as the applicable performance goals are satisfied. In order for one-half of the shares granted to Mr. Foran to vest, Walmart U.S. must meet a specified goal with respect to operating, selling, general and administrative expenses during fiscal 2017. In order for one-half of the shares granted to Mr. Ashe to vest, Walmart must meet a specified expansion goal with respect to the availability of Walmart’s online grocery services in the U.S. by the end of fiscal 2017. The vesting of the other half of these shares will be conditioned on fiscal 2018 performance goals to be established by the CNGC at a later date.

 

All Other Stock Awards: Number of Shares of Stock or Units (column (i))

 

The amounts in this column represent Shares of restricted stock and restricted stock units granted under the Stock Incentive Plan. Restricted stock and restricted stock units vest based on the continued service of the NEO as an Associate through the vesting date. Amounts marked with a (6) are Shares of restricted stock scheduled to vest on the third anniversary of the grant date, and amounts marked with a (7) are restricted stock units scheduled to vest on the third anniversary of the grant date.

 

All Other Option Awards: Number of Securities Underlying Options and Exercise or Base Price of Option Awards (columns (j) and (k))

 

These columns are omitted because options are not currently part of our executive compensation program and Walmart did not grant options to NEOs during fiscal 2016.

 

Grant Date Fair Value of Stock and Option Awards (column (l))

 

Fair values of equity awards are computed in accordance with the stock-based compensation accounting rules, and exclude the effect of any estimated forfeitures. The grant date fair values of performance share units are based on the probable outcome of those awards on the date of grant. The fair value of performance share units and restricted stock units is discounted for the expected dividend yield during the vesting period. The grant date fair value of the equity awards awarded on January 25, 2016 was determined based on a per-Share amount of $63.45, which was the closing price of a Share on the NYSE on that date. Performance share units granted on January 25, 2016 with a performance cycle ending January 31, 2019 were valued using a discounted per-Share value of $57.40. Performance share units granted on January 25, 2016 with a performance cycle ending January 31, 2018 were valued using a discounted per-Share value of $59.44. Performance share units granted January 25, 2016 with a performance cycle ending January 31, 2017 were valued using a discounted per-Share value of $61.46. Performance share units granted on April 2, 2015 with a performance cycle ending January 31, 2018 were valued using a discounted per-Share value of $74.73. Restricted stock units granted on January 25, 2016 with a vesting date of January 25, 2019 were valued using a discounted per-Share value of $57.42. Restricted stock granted on April 2, 2015 was valued at $80.73/Share, which was the closing price of a Share on the NYSE on that date.

 

 2016 Proxy Statement    67

 

Outstanding Equity Awards at Fiscal 2016 Year-End

 

    Option Awards   Stock Awards
                                    Equity
                                Equity   Incentive Plan
            Equity                   Incentive   Awards:
            Incentive                   Plan Awards:   Market or
            Plan           Number   Market   Number of   Payout Value
            Awards:           of Shares   Value of   Unearned   of Unearned
            Number of           or Units   Shares or   Shares,   Shares, Units
    Number of   Number of   Securities           of Stock   Units of   Units or Other   or Other
    Securities   Securities   Underlying           That   Stock That   Rights That   Rights That
    Underlying   Underlying   Unexercised   Option       Have Not   Have Not   Have Not   Have Not
    Unexercised   Unexercised   Unearned   Exercise   Option   Vested   Vested   Vested   Vested
    Options (#)   Options (#)   Options   Price   Expiration   (#)   ($)   (#)   ($)
Name   Exercisable   Unexercisable   (#)   ($)   Date