DEF 14A 1 p58888_def14a.htm PROXY STATEMENT

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

 

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Walmart Inc.

 

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Notice of
2018 Annual
Shareholders’
Meeting

 

Wednesday, May 30, 2018

 

John Q. Hammons Center
Rogers, Arkansas

 

 

OUR BELIEFS

 

Since Sam Walton founded our company, it always
has been a values-based, ethically led organization. Our beliefs
and values guide our decisions and our leadership.

 

Act with RESPECT for
INTEGRITY the Individual
   
We act with the highest level of integrity
by being honest, fair and objective, while
operating in compliance with all laws and
our policies.
We value every associate, own the
work we do, and communicate by
listening and sharing ideas.
   
   
   
   
SERVICE Striving for
to our Customers EXCELLENCE
   
We’re here to serve customers,
support each other, and give to
our local communities.
We work as a team and model
positive examples while we innovate
and improve every day.
   
 

Dear Fellow Shareholders:

 

We are pleased to invite you to attend Walmart’s 2018 Annual Shareholders’ Meeting on May 30, 2018 at 10:00 a.m. Central Time, and to our Associates/Shareholders Celebration Event on June 1, 2018 at 8:00 a.m. Central Time. If you plan to attend either or both of these events, please see pages 95-96 for admission requirements. For those unable to join in person, both events will be webcast at http://stock.walmart.com.

 

From Our Chairman

 

In fiscal 2018, we continued to accelerate our transformation, guided by four key objectives:

 

Make every day easier for busy families;
   
Change how we work;
   
Deliver results and operate with discipline; and
   
Be the most trusted retailer.

 

We made significant progress on all four fronts this past year. We’re continuing to accelerate innovation and leverage technology to save our customers both money and time. We’ve continued to invest in our associates’ pay, benefits, tools, and training, which results in a better experience for our customers. We’ve lowered prices and reduced inventory in stores. And we are engaging in the communities we serve to create shared value. Your Board continues to play a key role in overseeing our ongoing transformation.

 

We are committed to thoughtful Board succession planning, and have added six new directors in the past five years. This refreshment has resulted in a Board with a broad mix of skills and diversity in backgrounds and perspectives. I firmly believe that your Board is a strategic asset for Walmart, and I’m excited about the future.

 

Thank you for your investment in Walmart and your continued support. I look forward to seeing many of you at our Annual Shareholders’ Meeting or our celebration for Associates and Shareholders. Regardless of whether you are able to attend our Annual Shareholders’ Meeting in person, your vote is important and I encourage you to vote as described on page 96.

 

Sincerely,

 

Gregory B. Penner

Chairman

 

From Our Lead Independent Director

 

As Walmart continues its transformation to better serve our customers seamlessly, we are committed to continuously enhancing our Board governance to align with our strategy. We’ve brought fresh and diverse perspectives to the Board by recruiting new independent directors with strong backgrounds in technology, eCommerce, and finance and accounting. We’ve also engaged a third-party consulting firm to help us further develop our long-term Board succession plan and a pipeline of future director candidates. And we recently amended our bylaws to adopt a proxy access provision.

 

Our Compensation and Management Development Committee is committed to ensuring that our compensation program continues to support the transformation of our business. To this end, we made important changes to our executive compensation program, which you can read about in the CD&A beginning on page 39. These changes were informed by our ongoing and extensive engagement with our institutional shareholders, whose views are always important to us. This past year, we engaged with shareholders representing approximately 450 million shares to hear their perspectives on our strategy, governance, compensation, and other topics.

 

After 12 years of service, I will now be retiring from the Board at our upcoming 2018 Annual Shareholders’ Meeting in accordance with our term limits. It has been a privilege to serve this great company and you, our shareholders. I am confident that I leave your company in great hands to win the future of retail.

 

Sincerely,

 

Dr. James I. Cash, Jr.

Lead Independent Director

 


 

Letter to Shareholders    Walmart  |  2018 Proxy Statement    3

 

Notice of 2018 Annual
Shareholders’ Meeting

 

How To Cast Your Vote (PAGE 96)
 
       
INTERNET   CALL   MOBILE DEVICE   MAIL   IN PERSON
www.proxyvote.com   1-800-690-6903   Scan the QR code on your proxy card, notice of internet availability of proxy materials, or voting instruction form   Mail your signed proxy card or voting instruction form   Wednesday, May 30, 2018
10:00 a.m., Central Time
John Q. Hammons Center
3303 S. Pinnacle Hills Parkway
Rogers, AR 72758

 

Items of Business Board
Recommendation
Reference
Page
1. To elect as directors the 11 nominees identified in this proxy statement; FOR 10
2. To vote on a non-binding, advisory resolution to approve the compensation of Walmart’s named executive officers; FOR 38
3. To ratify the appointment of Ernst & Young LLP as the company’s independent accountants for the fiscal year ending January 31, 2019; FOR 82
4. To vote on the 2 shareholder proposals described in the accompanying proxy statement, if properly presented at the meeting; and AGAINST each
Shareholder Proposal
87
5. To transact any other business properly brought before the 2018 Annual Shareholders’ Meeting.   101

 

Annual Shareholders’ Meeting

 

Wednesday, May 30, 2018

 

10:00 a.m., Central Time

 

John Q. Hammons Center
3303 S. Pinnacle Hills Parkway
Rogers, Arkansas 72758

Associate/Shareholder Celebration

 

Friday, June 1, 2018

 

8:00 a.m., Central Time

 

Bud Walton Arena
University of Arkansas Campus
Fayetteville, Arkansas 72701

How to Attend the Meeting

 

2018 Annual Shareholders’ Meeting

 

If you plan to attend the 2018 Annual Shareholders’ Meeting in person, please see pages 95-96 for admission requirements.

 

2018 Associate/Shareholder Celebration

 

If you plan to attend the 2018 Associate/Shareholder Celebration, please see pages 95-96 for admission requirements.

 

The record date for the meeting is April 6, 2018. 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 6, 2018.

 

April 20, 2018

 

By Order of the Board of Directors,

 

Rachel Brand

 

Executive Vice President, Global Governance and Corporate Secretary


 

The proxy statement and our Annual Report to Shareholders for the fiscal year ended January 31, 2018, are available in the “Investors” section of our corporate website at http://stock.walmart.com/annual-reports.

 

4    Walmart  |  2018 Proxy Statement

 
Table of Contents

 

Chairman and Lead Independent Director Letters 3
   
Notice of 2018 Annual Shareholders’ Meeting 4
   
Proxy Summary 6
   
Proposal No. 1: Election of Directors 10
   
Director Skills Criteria and Qualifications 10
   
Director Nominees for 2018 13
   
Corporate Governance 20
   
Board Leadership Structure 21
   
Board Committees 22
   
Communicating with the Board 25
   
Board Evaluations and Board Effectiveness 26
   
Board Refreshment and Succession Planning 26
   
Director Onboarding and Engagement 27
   
Management Development and Succession Planning 28
   
The Board’s Role in Risk Oversight 28
   
Board Oversight of Legislative Affairs, Public Policy Engagement, Charitable Giving, and Sustainability 29
   
Shareholder Outreach and Engagement 29
   
How We Determine Director Independence 30
   
Related Person Transaction Review Policy 32
   
Fiscal 2018 Review of Related Person Transactions 33
   
Director Compensation 35
   
Proposal No. 2: Advisory Vote to Approve Named Executive Officer Compensation 38
   
Executive Compensation 39
   
Compensation Discussion and Analysis (See Separate Table of Contents) 39
   
Compensation Committee Report 64
   
Risk Considerations in Our Compensation Program 65
   
Compensation Committee Interlocks and Insider Participation 65
   
Executive Compensation Tables 66
   
Summary Compensation 66
   
Fiscal 2018 Grants of Plan-Based Awards 69
Outstanding Equity Awards at Fiscal 2018 Year-End 71
   
Fiscal 2018 Option Exercises and Stock Vested 72
   
Fiscal 2018 Nonqualified Deferred Compensation 73
   
Walmart’s Deferred Compensation Plans 75
   
Potential Payments Upon Termination or Change in Control 76
   
CEO Pay Ratio 78
   
Equity Compensation Plan Information 79
   
Stock Ownership 80
   
Holdings of Major Shareholders 80
   
Holdings of Officers and Directors 81
   
Section 16(a) Beneficial Ownership Reporting Compliance 81
   
Proposal No. 3: Ratification of Independent Accountants 82
   
Audit Committee Report 84
   
Audit Committee Pre-Approval Policy 86
   
Shareholder Proposals 87
   
Proposal No. 4: Request to Adopt an Independent Chair Policy 88
   
Proposal No. 5: Request for Report on Racial or Ethnic Pay Gaps 91
   
Annual Meeting Information 94
   
Questions and Answers About 2018 Annual Shareholders’ Meeting and Associate/Shareholder Celebration 94
   
Voting 96
   
Proxy Materials 99
   
Shareholder Submissions for the 2019 Annual Shareholders’ Meeting 101
   
Other Matters 101
   
Table of Abbreviations 102
   
Annex A Non-GAAP Financial Measures A-1
   
Directions for 2018 Annual Shareholders’ Meeting and Associate/Shareholder Celebration Inside Back Cover


 

Walmart  |  2018 Proxy Statement    5

 

Proxy Summary

 

Annual Shareholders’ Meeting

 

Wednesday, May 30, 2018
10:00 a.m., Central Time

 

John Q. Hammons Center
3303 S. Pinnacle Hills Parkway
Rogers, Arkansas 72758

 

You have received these proxy materials because the Board is soliciting your proxy to vote your Shares at the 2018 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 102 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, 2018.

 

If you are unable to attend in person, you can view a live webcast of the 2018 Annual Shareholders’ Meeting at http://stock.walmart.com.

 

Items of Business   Board
Recommendation
  Ref. Pages
1. To elect as directors the 11 nominees identified in this proxy statement;   FOR   10
2. To vote on a non-binding, advisory resolution to approve the compensation of Walmart’s named executive officers;   FOR   38
3. To ratify the appointment of Ernst & Young LLP as the company’s independent accountants for the fiscal year ending January 31, 2019; and   FOR   82
4. To vote on the 2 shareholder proposals described in the accompanying proxy statement, if properly presented at the meeting.   AGAINST each
Shareholder Proposal
  87

 

In addition, shareholders may be asked to consider and vote on any other business properly brought before the meeting.

 

6     Walmart  |  2018 Proxy Statement  •  Proxy Summary

 

Board Nominee Overview

 

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

 

 

 

Proxy Summary  •  Walmart  |  2018 Proxy Statement    7

 

Our Director Nominees

 

7 of our 11 Board nominees are independent, all members of the Audit Committee, the CMDC, and the NGC are independent, and our key committee chairs are independent. Our Board has separated the roles of Chairman and CEO, and we have a robust Lead Independent Director role. Despite their significant Share ownership, only three members of the Walton family are Board members.

 

              Key Committee Membership
Chair           l Member                     
Name/Age  Experience  Director
Since
  Principal Occupation  Independent  Other Pubic
Company Boards
  Audit  Compensation
& Management
Development
  Nominating & Governance  Strategic Planning & Finance  Technology & eCommerce
Steve Easterbrook
(50)
 

Senior Leadership

Brand Management

Global/International

Retail

Finance/Accounting

  Nominee  CEO, McDonald’s Corporation  l  1               
Tim Flynn
(61)
 

Senior Leadership

Global/International

Finance/Accounting

Regulatory/Legal

  2012  Retired Chairman and CEO, KPMG  l  3          l   
Sarah Friar
(45)
 

Senior Leadership

Global/International

Finance/Accounting

Technology/eCommerce

  2018  CFO, Square, Inc.  l  1  l        l   
Carla Harris
(55)
 

Senior Leadership

Global/International

Finance/Accounting

Regulatory/Legal

  2017  Vice Chairman, Wealth Management, Managing Director and Head of Multicultural Client Strategy, Morgan Stanley  l  0     l     l   
Tom Horton
(56)
 

Senior Leadership

Global/International

Finance/Accounting

Regulatory/Legal

  2014  Senior Advisor, Warburg Pincus LLC, and retired Chairman and CEO, AMR Corporation  l  1  l     l     
Marissa Mayer
(42)
 

Senior Leadership

Global/International

Technology/eCommerce

Marketing/Brand Management

  2012  Co-founder, Lumi Labs, Inc. and Former President and CEO, Yahoo! Inc.  l  0     l        l
Doug McMillon
(51)
 

Senior Leadership

Retail

Global/International

Technology/eCommerce

  2013  President and CEO, Walmart     0               
Greg Penner
(48)
(Board Chairman)
 

Senior Leadership

Retail

Global/International

Technology/eCommerce

Finance/Accounting

  2008  Chairman, Walmart and Partner, Madrone Capital Partners     0               
Steve Reinemund
(70)
 

Senior Leadership

Global/International

Marketing/Brand Management

  2010  Retired Dean of Business, Wake Forest University, and retired Chairman and CEO, PepsiCo., Inc.  l  2       l     l
Rob Walton
(73)
 

Senior Leadership

Retail

Global/International

Regulatory/Legal

  1978  Retired Chairman, Walmart     0           l   
Steuart Walton
(36)
 

Retail

Global/International

Regulatory/Legal

  2016  Founder and Chair, RZC Investments     0           l   

 

8    Walmart  |  2018 Proxy Statement  •  Proxy Summary

 

Corporate Governance Highlights

 

(PAGES 20-37)

 

•  Majority Independent Board

 

•  Separate Chair and CEO

 

•  Lead Independent Director

 

•  Robust Board Evaluations

 

•  Extensive Shareholder Engagement

 

•  Proxy Access

 

•  Shareholder Right to Call Special Meetings

 

•  Independent Key Committee Chairs

 

•  No Poison Pill

 

•  No Supermajority Voting Requirements

 

•  Board Oversight of Political and Social Engagement

 

•  Annual Election of All Directors

 

•  Majority Voting for Director Elections

 

•  Board-Level Risk Oversight

 

•  Commitment to Board Refreshment and Succession Planning

 

•  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 39-64)

 

Our executive compensation program is heavily based on performance and aligned with our strategy. More than 75% of our CEO’s fiscal 2018 total direct compensation was based on metrics related to 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 CEO’s realized pay and TSR over the last three fiscal years:

 

CEO Realized Pay

 

 

 

(1) Realized pay includes base salary, annual incentive earned for the fiscal year shown, restricted stock vested in the fiscal year shown, and performance equity with a performance period ending during the fiscal year shown. Restricted stock and performance equity is valued using the closing price of Walmart stock on the last trading day prior to the vesting date.

 

(2) TSR illustrates the total shareholder return on Walmart common stock during the three fiscal years ending January 31, 2018, assuming $100 was invested on the first day of fiscal 2016 and assuming reinvestment of all dividends.

 

 

Proxy Summary  •  Walmart  |  2018 Proxy Statement    9

 

Proposal No. 1

Election of Directors

 

Director Skills Criteria and Qualifications

 

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 the director nominees named in this proxy statement at the 2018 Annual Shareholders’ Meeting, Walmart will have 11 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 Nominating and Governance Committee and the Board consider when selecting candidates for nomination?

At Walmart, we believe an effective Board should be made up of individuals who collectively provide an appropriate balance of distinguished leadership, diverse perspectives, strategic skill sets, and professional experience relevant to our business and strategic objectives.

 

The Nominating and Governance Committee (NGC) 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 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 NGC determines qualify candidates for service on the Board.

 

The NGC 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 NGC’s charter and our Corporate Governance Guidelines, which are available on the Corporate Governance page of our website at http://stock.walmart.com/investors/corporate-governance/governance-documents.

 

Director Skills Criteria:

Walmart is moving with speed to better serve our customers and pursue our key objectives of making every day easier for busy families, changing how we work, delivering results and operating with discipline, and being the most trusted retailer. Depending on the current composition of the Board and Board committees and expected future turnover on our Board, the NGC generally seeks director candidates with experience, skills, or background in one or more of the following areas:

 

STRATEGY   GOVERNANCE   LEADERSHIP   DIVERSITY
             
       
                 
Retail   Global or International   Regulatory, Legal, or
Risk Management
  Senior Leadership   Diversity
                 
           
                 
Technology or
eCommerce
  Marketing or Brand
Management
  Finance, Accounting, or
Financial Reporting
       

 

 

10    Walmart  |  2018 Proxy Statement  •  Proposal No. 1: Election of Directors

 
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.

 

   

Technology or eCommerce Experience

 

In order to deliver on our strategy to be the first retailer to offer customers a seamless shopping experience at scale, we seek directors who can provide advice and guidance based on their experiences in eCommerce or related industries such as digital, mobile, or consumer internet.

             
             
 

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.

 

   

Marketing or Brand Management Experience

 

Directors with relevant experience in consumer marketing or brand management, especially on a global basis, provide important insights to our Board.

 


 

Leadership
 

Senior Leadership Experience

 

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.


 

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, Legal, or Risk Management Experience

 

Our company’s business requires compliance with a variety of regulatory requirements across a number of federal, state, and international jurisdictions. 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, legal, and risk management experience and expertise.


 

Diversity
 

Board Diversity

 

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 decision-making 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.


 

 

Proposal No. 1: Election of Directors    Walmart  |  2018 Proxy Statement    11

 

Summary of Director Nominee Qualifications and Experience

The chart below identifies the balance of skills and qualifications each 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 NGC 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.

 

  Leadership Strategy Governance
 
Director Nominee Senior Leadership Retail Global or
International
Business
Technology or
eCommerce
Marketing
or Brand
Management
Finance,
Accounting,
or Financial
Reporting
Regulatory,
Legal, or Risk
Management
Steve Easterbrook l l l   l l  
Tim Flynn l   l     l l
Sarah Friar l   l l   l  
Carla Harris l   l     l l
Tom Horton l   l     l l
Marissa Mayer l   l l l    
Doug McMillon l l l l      
Greg Penner l l l l   l  
Steve Reinemund l   l   l    
Rob Walton l l l       l
Steuart Walton   l l       l
TOTAL 10 5 11 4 3 6 5

 

 

12    Walmart  |  2018 Proxy Statement  •  Proposal No. 1: Election of Directors

 

Director Nominees for 2018

 

Who are the 2018 director nominees?

Based on the recommendation of the NGC, the Board has nominated the following candidates for election as directors at the 2018 Annual Shareholders’ Meeting. The information provided below includes, for 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.

 

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

 

  Stephen J. Easterbrook

 

Independent Nominee

       
  Joined the Board: Nominee

 

Age: 50

  Board Committees
  N/A
  Other Current Public
Company Directorships
McDonald’s Corporation


 

Mr. Easterbrook has been the President and CEO and a member of the board of directors of McDonald’s Corporation since March 2015. Prior to this appointment, he served in various senior leadership positions with McDonald’s including as Senior Executive Vice President and Global Chief Brand Officer from June 2013 to February 2015. From September 2012 through May 2013, Mr. Easterbrook served as the Chief Executive Officer of Wagamama Limited, a Japanese-inspired restaurant chain, and from September 2011 to September 2012, he served as the Chief Executive Officer of PizzaExpress Limited, a casual dining company

in the United Kingdom. From December 2010 to September 2011, he held the position of President, McDonald’s Europe. Prior to that, Mr. Easterbrook served in a number of roles with McDonald’s over the course of 18 years having joined McDonald’s as a financial reporting manager in London in 1993. He is a Chartered Accountant and serves as a Visiting Fellow at Oxford University Centre for Corporate Reputation. He also serves on the board of directors of Catalyst Inc., a global nonprofit organization that promotes inclusive workplaces for women, and on the board of trustees for Ronald McDonald House Charities.


 

SKILLS AND
QUALIFICATIONS


  Mr. Easterbrook brings broad expertise in marketing and brand management developed during more than 20 years of experience with the world’s largest restaurant company with retail locations in 100 countries and more than 25 years of service in the restaurant industry.   Our board would benefit from the valuable insights and perspective Mr. Easterbrook has developed during his extensive career with a large global company with restaurant locations in over 100 countries.   Mr. Easterbrook’s experiences in executive leadership positions at McDonald’s and his expertise as a Chartered Accountant would bring valuable and broad perspective and insights to the Board.

 

 

Proposal No. 1: Election of Directors  •  Walmart  |  2018 Proxy Statement    13

 
  Timothy P. Flynn        
  Independent Director        
  Joined the Board: 2012

 

Age: 61

  Board Committees
•  Audit (Chair)
•  SPFC
  Other Current Public
Company Directorships
JPMorgan Chase & Co.
Alcoa Corporation
UnitedHealth Group Incorporated


 

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 CEO 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 joined the boards of Alcoa Corporation in November 2016 and UnitedHealth Group Incorporated in January 2017. He also has served as a member

of the board of directors of JPMorgan Chase & Co. since 2012. He previously served as a member of the board of directors of The Chubb Corporation from September 2013 until its acquisition in January 2016. He previously served as a trustee of the Financial Accounting Standards Board, a member of the World Economic Forum’s International Business Council, and a director of the International Integrated Reporting Council. Mr. Flynn graduated from the University of St. Thomas, St. Paul, Minnesota and is a member of the school’s board of trustees.


 

SKILLS AND
QUALIFICATIONS


  Mr. Flynn has more than 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.

 

  Sarah J. Friar

 

Independent Director

 

       
  Joined the Board: 2018

 

Age: 45

  Board Committees
•  Audit
•  SPFC
  Other Current Public
Company Directorships
New Relic, Inc.

 


 

Since July 2012, Ms. Friar has served as the CFO of Square, Inc., a provider of commerce solutions, including managed payments and point-of-sale systems for businesses and mobile financial offerings for consumers. Prior to that she served as the Senior Vice President of Finance & Strategy at Salesforce.com, Inc. from April 2011 to July 2012, and in various positions from 2002 to 2012 at The Goldman Sachs Group, Inc. including as a Managing Director in the Equity Research Division and other various positions where she focused on corporate finance, mergers and acquisitions, and equity research. She joined The Goldman Sachs Group, Inc. from McKinsey & Company. Ms. Friar has served on the boards of directors of New Relic, Inc.,

a software analytics company, since December 2013, and Slack Technologies, Inc., a business communications platform, since March 2017. She also has served as the vice-chair of the board of Spark Program Inc., a nonprofit focused on changing the lives of at-risk middle schoolers through mentorship. She previously served on the board of directors of Model N, Inc. from September 2012 until May 2015. Ms. Friar is a Fellow of the inaugural class of the Finance Leaders Fellowship Program and a member of the Aspen Global Leadership Network. Ms. Friar graduated from the University of Oxford with a Master of Engineering in Metallurgy, Economics, and Management and also from Stanford Graduate School of Business with an M.B.A.


 

SKILLS AND
QUALIFICATIONS

 

 

Ms. Friar brings financial, accounting, and risk management expertise as the CFO of a multinational publicly-traded company and from her prior experience with a multinational investment banking firm.

 

The Board benefits from her leadership experience as CFO of

 

 

a publicly-traded company and other various leadership positions at Salesforce.com and Goldman Sachs.

 

Ms. Friar brings a global perspective gained from her service as CFO with a multinational company that supports customers across a variety of businesses and industries.

 

 

The Board benefits from Ms. Friar’s perspective regarding eCommerce and information technology in light of her leadership position with a publicly-traded company that provides managed payments and point-of-sale systems for businesses and mobile financial offerings for consumers.

 

 

 

14    Walmart  |  2018 Proxy Statement  •  Proposal No. 1: Election of Directors

 
  Carla A. Harris

 

Independent Director

 

       
  Joined the Board: 2017

 

Age: 55

  Board Committees
•  CMDC
•  SPFC
  Other Current Public
Company Directorships
None

 


 

Ms. Harris has served as the Vice Chair, Wealth Management and Head of Multicultural Client Strategy for Morgan Stanley since August 2013, and as Managing Director and Senior Client Advisor since June 2012. In these roles, she is responsible for increasing client connectivity and penetration to enhance revenue generation across the firm. Ms. Harris joined the mergers and acquisitions team at Morgan Stanley in 1987 and since then has held a number of positions during her tenure. Her experiences at Morgan Stanley range from investment banking, equity capital markets, equity

private placements, and initial public offerings in a number of industries such as technology, media, retail, telecommunications, transportation, healthcare, and biotechnology. In August 2013, President Obama appointed Ms. Harris to serve as Chair of the National Women’s Business Council. She currently serves on the boards of several non-profit organizations including St. Vincent’s HealthCare and the Morgan Stanley Foundation.


 

SKILLS AND
QUALIFICATIONS

 

 

Ms. Harris brings broad-based and valuable insights in finance and strategy gained from more than 30 years of experience at a prominent global investment banking firm.

 

The Board benefits from Ms. Harris’ senior leadership experience at Morgan Stanley.

 

 

The Board values Ms. Harris’ extensive work experience in a regulated industry and advising clients across a broad range of other regulated industries.

 

 

  Thomas W. Horton

 

Independent Director*

 

       
  Joined the Board: 2014

 

Age: 56

  Board Committees
•  Audit
•  NGC
•  SPFC (Chair)
  Other Current Public
Company Directorships
QUALCOMM Incorporated


 

Mr. Horton has served as a Senior Advisor at Warburg Pincus LLC, a private equity firm focused on growth investing, since October 2015. Mr. Horton was the Chairman of American Airlines Group Inc. (“American”) from December 2013 to June 2014. He also served in other executive leadership positions at American, including as President from 2010 until his appointment as Chairman and CEO in 2011, during which time he led the company through a successful restructuring and turnaround that culminated in the 2013 merger with US Airways, creating the world’s largest airline. From 2006 to 2010, Mr. Horton served as Executive Vice President of Finance and Planning at American. Mr. Horton joined American 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 American, where he had served in various roles from 1985 until 2002, including as Senior Vice President and Chief Financial Officer. He has served on the board of directors of QUALCOMM Incorporated since 2008. He has been the Presiding Director of QUALCOMM since 2015. Mr. Horton also serves on the executive board of the Cox School of Business at Southern Methodist University.


 

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 leadership experience in several complex, international industries.

 

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

 

   
* The independent directors of the Board have appointed Mr. Horton to serve as our Lead Independent Director effective upon his re-election as a Director at the 2018 Annual Shareholders’ Meeting. In this role, Mr. Horton will succeed Dr. James I. Cash, Jr. who is retiring from the Board and is not standing for re-election at the 2018 Annual Shareholders’ Meeting.

 

 

Proposal No. 1: Election of Directors  •  Walmart  |  2018 Proxy Statement    15

 
  Marissa A. Mayer

 

Independent Director

 

       
  Joined the Board: 2012

 

Age: 42

  Board Committees
•  CMDC
•  TeCC
  Other Current Public
Company Directorships
None

 


 

In March 2018, Ms. Mayer co-founded Lumi Labs Inc., a technology incubator focused on consumer internet technologies. From July 2012 through June 2017, Ms. Mayer served as the President and Chief Executive Officer and a member of the board of directors of Yahoo! Inc. (“Yahoo”) (now Altaba Inc.). At Yahoo, she led the internet giant’s push to reinvent itself for the mobile era. With a renewed focus on user experience, Ms. Mayer grew Yahoo to serve over 1 billion people worldwide - with over 600 million mobile users - and transformed its advertising approach. 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 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. From March 2013 until October 2016, Ms. Mayer served on the board of directors for AliphCom, which operates as Jawbone. She also serves on the boards of the Stanford Children’s Hospital, the San Francisco Museum of Modern Art, the San Francisco Ballet, and the foundation board for the Forum of Young Global Leaders at the World Economic Forum.


 

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.

 

The Board values Ms. Mayer’s insights into global business and strategy gained from her experience as the CEO of a global company.

 

  C. Douglas McMillon

 

President and Chief Executive Officer

 

       
  Joined the Board: 2013

 

Age: 51

  Board Committees
•  Executive Committee (Chair)
•  GCC (Chair)
  Other Current Public
Company Directorships
None

 


 

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 more than 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.


 

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 leading Walmart’s International segment.

 

 

The Board benefits from Mr. McMillon’s more than 25 years of retail experience and his leadership role developing and executing our strategy to deliver seamless shopping at scale.

 

 

 

16    Walmart  |  2018 Proxy Statement  •  Proposal No. 1: Election of Directors

 
  Gregory B. Penner*

 

Chairman

 

       
  Joined the Board: 2008

 

Age: 48

  Board Committees
•  Executive Committee
•  GCC
  Other Current Public
Company Directorships
None

 


 

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 served as a member of the board of directors of Baidu, Inc. from May 2004 until February 2017, and he previously served on the boards of Hyatt Hotels Corporation; eHarmony, Inc.; Castleton Commodities International, LLC; 99Bill Corporation; and Cuil, 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 leadership service as our non-executive Chairman.

 

 

In addition, Mr. Penner has broad knowledge of international business, particularly in Japan and China.

 

Mr. Penner brings unique 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.

 

  Steven S Reinemund

 

Independent Director

 

       
  Joined the Board: 2010

 

Age: 70

  Board Committees
•  CMDC (Chair)
•  NGC
•  TeCC
  Other Current Public
Company Directorships
Exxon Mobil Corporation
Marriott International, Inc.


 

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 as 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.


 

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.

 

 

 

Proposal No. 1: Election of Directors  •  Walmart  |  2018 Proxy Statement    17

 
  S. Robson Walton*

 

Director

 

       
  Joined the Board: 1978

 

Age: 73

  Board Committees
•  SPFC
•  Executive Committee
•  GCC
  Other Current Public
Company Directorships
None


 

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.


 

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, risk management, and corporate governance expertise gained as Walmart’s Chairman, 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, and Steuart Walton is the nephew of Rob Walton.

 

  Steuart L. Walton*

 

Director

 

       
  Joined the Board: 2016

 

Age: 36

  Board Committee
SPFC
  Other Current Public
Company Directorships
None

 


 

Mr. Walton is the founder and Chairman of RZC Investments, LLC, an investment business which he founded in May 2016. He is also the founder of Game Composites, Ltd., a company that manufactures carbon fiber aircraft and aircraft parts. He served as the CEO of Game Composites from its founding in February 2013 until November 2017. 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. Mr. Walton is also a member of the boards of directors of Rapha Racing Limited, Crystal Bridges Museum of American Art, Leadership for Educational Equity, and the Smithsonian National Air and Space Museum. 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.


 

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 retail operations and global businesses.

 

 

He also brings valuable leadership and financial insights gained from his entrepreneurial experiences and investments.

 

 

   
* Steuart Walton is the nephew of Rob Walton.

 

 

18    Walmart  |  2018 Proxy Statement  •  Proposal No. 1: Election of Directors

 

Are there any directors not standing for re-election?

Yes. Dr. James I. Cash, Jr. and Kevin Y. Systrom will retire from the Board at the conclusion of their current term and will not stand for re-election at the 2018 Annual Shareholders’ Meeting. In accordance with the term limits set forth in our Corporate Governance Guidelines, Dr. Cash is retiring from our Board after 12 years of service. Following discussions, the Board and Mr. Systrom have mutually agreed that he will not stand for re-election at the 2018 Annual Shareholders’ Meeting as he prioritizes work, board responsibilities, and other outside commitments.

 

  James I. Cash, Jr.

 

Lead Independent Director

 

       
  Joined the Board: 2006

 

Age: 70

  Board Committees
•  Audit
•  Executive
•  NGC (Chair)
•  TeCC
  Other Current Public
Company Directorships
Chubb Limited


 

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 since its acquisition in January 2016 and had previously served on the board of its predecessor, 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.


 

  Kevin Y. Systrom

 

Independent Director

 

       
  Joined the Board: 2014

 

Age: 34

  Board Committees
•  CMDC
•  TeCC (Chair)
  Other Current Public
Company Directorships
None

 


 

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.


 

 

Proposal No. 1: Election of Directors  •  Walmart  |  2018 Proxy Statement    19

 

Corporate Governance

 

Effective corporate governance is essential for maximizing long-term value creation for our shareholders. Our values of honesty, accountability, and integrity guide our business and ensure that we maintain the trust of our shareholders, customers, and communities.

 

Our governance structure is based on our Corporate Governance Guidelines and other key governance documents. These guidelines are reviewed at least annually and updated as needed in response to evolving best practices, regulatory requirements, feedback from our annual Board and committee evaluations, and recommendations made by our shareholders, all with the goal of supporting and effectively overseeing our ongoing strategic transformation.

 

Our Corporate Governance Guidelines address, among other topics:

 

Board size, structure, and composition;
   
Board refreshment and tenure of independent directors;
   
Board leadership structure, including the separation of the Chairman and CEO roles and the selection, role, and responsibilities of the Lead Independent Director;
   
Board committees;
   
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 CMDC and the Board; and
   
annual Board and Board committee evaluations.


 

Governance Materials Available on our Website

 

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/investors/corporate-governance/governance-documents.

 

You may also access and review the following additional corporate governance documents on our corporate website:

 

¢ Amended and Restated Bylaws;   ¢ Fair Disclosure Procedures;
         
¢ Code of Ethics for the CEO and Senior Financial Officers;   ¢ Global Anti-Corruption Policy;
         
¢ Global Statement of Ethics (available at www.walmartethics.com);   ¢ Government Relations Policy; and
         
¢ Procedures for Accounting and Audit-Related Complaints;   ¢ Privacy Policy.
         
¢ Investment Community Communications Policy;      

 

These materials are also available in print at no charge to any shareholder who requests a copy by writing to: Walmart Inc., Global Investor Relations Department, 702 Southwest 8th Street, Bentonville, Arkansas 72716-0100.

 

 

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 within four business days following the date of the amendment or waiver (http://stock.walmart.com/investors/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 2018.

 

 

20    Walmart  |  2018 Proxy Statement    Corporate Governance

 

Board Leadership Structure

 

The leadership structure of our Board is designed to ensure robust oversight, independent viewpoints, and the promotion of the overall effectiveness of the Board. The Board annually reviews its leadership structure as part of the process described on page 26. As discussed on page 80, approximately 51% of our company’s Shares are held by members of the family of Sam Walton, our company’s founder. Three generations of Walton family members have served on our Board, which demonstrates the Walton family’s interests in and commitment to the long-term success of our company. Despite their substantial ownership in the company, the members of the Walton family traditionally have held only three seats on our Board. While the NYSE Listed Company Rules provide exemptions from independence requirements for controlled companies, Walmart has not and has no plans to rely on any of those governance exemptions because we believe it is important to have a majority independent board.

 

Our current Board leadership structure consists of:

 

Non-Executive Chairman

Greg Penner

 

Primary Responsibilities

 

•  Presides over meetings of the Board and shareholders

 

•  Focuses on Board oversight and governance matters

 

•  Provides advice and counsel to the CEO

 

•  Agenda review process

 

Lead Independent Director

Jim Cash*

 

Primary Responsibilities

 

•  Liaison between Independent Directors and Chairman

 

•  Agenda review process

 

•  Board and committee development and evaluation

 

•  Shareholder engagement

   

President and CEO

Doug McMillon

 

Primary Responsibilities

 

•  Leadership of Walmart’s complex global business

 

•  Implements strategic initiatives

 

•  Development of robust management team

 

We have separated the Chairman and CEO roles since 1988. 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.

 

We have had a Lead Independent Director since 2004. The role of the Lead Independent Director is designed to enhance the candor and communication between the independent members of the Board, the Chairman, and the CEO. Our Lead Independent Director is appointed annually by the independent members of the Board and has a robust set of responsibilities, including:

 

presiding over executive private sessions of the Outside Directors and the Independent Directors;
   
authority to call meetings of the directors, including separate meetings of the Outside Directors and the Independent Directors; and
   
is available, when appropriate, for consultation with major shareholders.

 

In addition to his role as Lead Independent Director, Dr. Cash also serves as the Chair of the NGC, which means he also oversees the annual Board and Board committee evaluation process and actively participates in the work related to overall Board effectiveness, including Board development, succession planning, and refreshment. Due to the 12 year term limit for independent directors under our Corporate Governance Guidelines, Dr. Cash, who has served on our Board since 2006 and as our Lead Independent Director since 2013, is not standing for re-election at the 2018 Annual Shareholders’ Meeting. In April 2018, the Independent Directors appointed Mr. Horton to succeed Dr. Cash as our next Lead Independent Director effective upon Mr. Horton’s re-election as a Director at the 2018 Annual Shareholders’ Meeting.

 

Independent Board Committee Chairs: Each of the Board’s key committees currently 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  
       
       
  Audit   Compensation
and Management
Development
  Nominating and
Governance
    Strategic Planning
and Finance
  Technology and
eCommerce
 
                       
                       
  Tim Flynn
Independent Chair
  Steve Reinemund
Independent Chair
  Jim Cash*
Independent Chair
    Tom Horton*
Independent Chair
  Kevin Systrom*
Independent Chair
 

 

 

* Dr. Cash and Mr. Systrom are not standing for re-election at the 2018 Annual Shareholders’ meeting. Our Independent Directors have appointed Mr. Horton to succeed Dr. Cash as Lead Independent Director effective upon Mr. Horton’s re-election as a Director at the 2018 Annual Shareholders’ Meeting. The Board will review the Board committee assignments recommended by the NGC at its meeting to be held in connection with the 2018 Annual Shareholders’ Meeting.

 

Corporate Governance    Walmart  |  2018 Proxy Statement    21

 

Board Committees

 

To enhance the effectiveness of the Board’s risk oversight function, the Board regularly 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 seven standing committees, which are described below. In addition to the duties described below, our Board committees perform the risk oversight functions described on page 28.

 

STRATEGIC PLANNING AND FINANCE COMMITTEE

 

meetings
during fiscal 2018

 

 

 

TECHNOLOGY AND eCOMMERCE COMMITTEE

 

meetings
during fiscal 2018

 

 

 

 

(1) Not standing for re-election at the 2018 Annual Shareholders’ meeting.

 

22    Walmart  |  2018 Proxy Statement    Corporate Governance

 

AUDIT COMMITTEE

 

meetings
during fiscal 2018

 

 

 

* 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 35.
   
(1) Not standing for re-election at the 2018 Annual Shareholders’ Meeting.

 

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE

 

meetings
during fiscal 2018

 

 

 

* Independence: The Board has determined that each member of the CMDC 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 re-election at the 2018 Annual Shareholders’ Meeting.

 

Corporate Governance    Walmart  |  2018 Proxy Statement    23

 

NOMINATING AND GOVERNANCE COMMITTEE

 

meetings
during fiscal 2018

 

 

 

* Independence: The Board has determined that each member of the NGC is independent as defined by the NYSE Listed Company Rules.
(1)  Not standing for re-election at the 2018 Annual Shareholders’ Meeting.

 

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

 

GLOBAL COMPENSATION COMMITTEE

 

 

meetings
during fiscal 2018

 

Primary Responsibilities

 

Administers Walmart’s equity and cash incentive compensation plans for associates who are not Directors or Executive Officers

 

Total Members: 3

 

Doug McMillon, Chair

Greg Penner
Rob Walton

EXECUTIVE COMMITTEE

 

 

No meetings*
during fiscal 2018

 

Primary Responsibilities

 

Implements policy decisions of the Board
Acts on the Board’s behalf between Board meetings

 

Total Members: 4

 

Doug McMillon, Chair
Jim Cash1
Greg Penner
Rob Walton

 

* The Executive Committee acted by unanimous written consent 13 times during fiscal 2018. The Board reviewed and ratified all unanimous written consents of the Executive Committee during fiscal 2018.
(1)  Not standing for re-election at the 2018 Annual Shareholders’ Meeting.


 

 

24    Walmart  |  2018 Proxy Statement    Corporate Governance

 

Governing Documents

In addition to our Corporate Governance Guidelines, each standing committee of the Board has a written charter, which defines the roles and responsibilities of the Board committee. The committee charters and the Corporate Governance Guidelines provide the overall framework for our corporate governance practices. The NGC and the Board review the Corporate Governance Guidelines, and the NGC, 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.

 

Board Meetings and Director Attendance

The Board held a total of five meetings during fiscal 2018.The Outside Directors and Independent Directors met regularly in separate executive sessions, with the Lead Independent Director presiding over those sessions. As a whole, during fiscal 2018, our directors attended approximately 97% of the aggregate number of Board meetings and meetings of Board committees on which they served.

 

Under our Board policy, 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.

 

Eleven Board members attended the 2017 Annual Shareholders’ Meeting, including 8 of the 9 director nominees named in this proxy statement who were members of the Board or Board nominees at the time of the 2017 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.

 

Via mail:   Via email:
Name of Director(s) or Board of Directors
c/o Gordon Y. Allison, Vice President and General Counsel, Corporate Division Walmart Inc.
702 Southwest 8th Street
Bentonville, Arkansas 72716-0215
  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.

 

We receive 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 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 NGC on the same basis as any other director candidates.

 

 

Corporate Governance  •  Walmart  |  2018 Proxy Statement    25

 

Board Evaluations and Board Effectiveness

 

The Board is committed to robust Board and Board committee evaluations as an important tool for promoting effectiveness and continuous improvement. The Board has implemented a two-year evaluation cycle, with the evaluation process led by the Lead Independent Director and by a third-party consulting firm in alternating years. The evaluation process was led by our Lead Independent Director in fiscal 2018 and will be led by a third-party consulting firm in fiscal 2019 to bring an outside perspective to the evaluation process.

 

Our Board Evaluation Process

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.

 

Interviews  

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 interviews – Members of Walmart’s senior executive team also participate 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.

 

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 Board committees operate, including:

 

•  reducing the size of the Board to promote engagement and input into our strategic decision-making;

 

•  changing the Board committee structure to create a separate Compensation and Management Development Committee and a Nominating and Governance Committee;

 

•  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 Board committees; and

 

•  increased focus on continuous Board succession planning and refreshment, including engaging a third-party consulting firm to help further develop our robust long-term director candidate pipeline.

 

 

Board Refreshment and Succession Planning

 

The NGC 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 NGC 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 long-term strategy, and the skills and qualifications of directors who are expected to retire in the future.


 

 

26    Walmart  |  2018 Proxy Statement  •  Corporate Governance

 

 

   

 

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 re-election 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 “stagger” turnover on the Board or a Board committee. The Board believes these policies 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 7.

 

During fiscal 2018, the NGC engaged a third-party consulting firm to help further refine its refreshment and succession planning process and to cultivate a pipeline of potential director candidates as a resource for both planned retirements as a result of our term limits or in the event of a director’s unanticipated early departure from the Board. As a part of the process of identifying potential director candidates, the NGC may also consult with other directors and senior officers. If the NGC decides to proceed with further consideration of a potential candidate, the Chair of the NGC and other members of the NGC, as well as other members of the Board, may interview the candidate. The NGC then may recommend that the full Board appoint or nominate the candidate for election to the Board. Ms. Friar was appointed to the Board in February 2018 and is standing for election for the first time at the 2018 Annual Shareholders’ Meeting. Ms. Friar and Mr. Easterbrook were initially identified as a potential director candidates by the NGC’s consulting firm, and their nominations were the result of the process outlined above.


 

 

Director Onboarding and Engagement

 

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. We develop tailored onboarding plans for each new director, taking into account his or her background and experience. 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 business market through meetings with our business leaders in these 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 one of our eCommerce offices, where our Board members participate in intensive sessions focused on our eCommerce strategies and operations.

Our Board members are also expected to participate in other company activities and engage directly with our associates at a variety of events throughout the year. Examples of activities and events that members of our Board have participated in 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;
   
attending a summit of our controllers from our worldwide markets;
   
touring facilities with our compliance associates;
   
speaking at various culture, diversity and inclusion events held at our home office in Bentonville, Arkansas and other locations; and
   
attending and speaking at meetings of Walmart business segments, divisions, and corporate support departments.


 

 

Corporate Governance    Walmart  |  2018 Proxy Statement    27

 

Management Development and Succession Planning

 

Our Board places a high priority on senior management development and succession planning. The CMDC 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 CMDC.

 

At these meetings, the members of our CMDC, in consultation with our CEO, our Executive Vice President – Global People, and others as the CMDC 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 adopted a CEO succession planning process to address unanticipated events and emergency situations.

 

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 actively oversee and monitor the management of the most significant risks that could impact our company’s operations. The Board does not view risk in isolation, but instead considers risk in conjunction with its oversight of Walmart’s strategy and operations.

 

Walmart identifies, assesses, and assigns responsibility for managing risks through its annual enterprise risk assessment process, other internal processes, and internal control environment. The Board, Board committees, and management coordinate the risk oversight role in a manner that serves the long-term interests of our company and our shareholders through established periodic reporting and open lines of communication.

 

 

 

Additional information regarding the roles and responsibilities of our Board committees can be found under “Board Committees” beginning on page 22.

 

 

28    Walmart  |  2018 Proxy Statement  •  Corporate Governance

 

Board Oversight of Legislative Affairs, Public Policy Engagement, Charitable Giving, and Sustainability

 

The NGC 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 other 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. Since 2015, we have compiled lobbying disclosure information from our U.S. state-level public filings and presented them on our corporate website, and since 2016 we have also disclosed 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/policies.  

 

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.

 

Senior leaders and subject matter experts from the company meet regularly with representatives at many of our top institutional shareholders and periodically with leading proxy advisory firms to discuss Walmart’s strategy, governance practices, executive compensation, compliance programs, and other ESG related matters. Members of our Board participate from time to time in these meetings. Management reports regularly to the CMDC and NGC 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 2019, 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 reach 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 2018, we engaged with more than half of our 60 largest institutional shareholders, representing approximately 450 million Shares.  
       
  The CMDC and NGC receive 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  

 

 

Corporate Governance  •   Walmart  |  2018 Proxy Statement    29

 

How We Determine Director Independence

 

Our Board is committed to ensuring its membership consists of the right mix of skill sets in light of Walmart’s strategy, the Board’s tenure policies, and the Board’s desire to maintain at all times a majority of directors who are independent in accordance with the NYSE Listed Company Rules. Historically, three members of the Walton family have been members of our Board, and the NGC and the Board believe this is appropriate in light of the Walton family’s significant and long-term Share ownership. Our CEO also serves on the Board, and our former CEOs have historically served on the Board for a period of time after they retire. Our incoming CEOs have supported this practice and we believe this practice has contributed to successful CEO transitions during our company’s history. Consistent with our Board’s commitment to independent Board oversight, the Board generally seeks to fill the remaining Board seats with directors who are independent as defined in the NYSE Listed Company Rules.

 

In making independence determinations, the Board complies with all NYSE criteria, and with respect to Board committee membership, certain 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 described 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 it considers in its independence assessment process. While not determinative of independence, these guidelines 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 2018, the Board and the NGC conducted their annual review of the directors’ and the director nominee’s responses to a questionnaire soliciting information regarding their direct and indirect relationships with the company (and the directors’ and the director nominee’s immediate family members’ direct and indirect relationships with the company) and other relationships that may be relevant to independence. They also reviewed due diligence performed by management regarding any transactions, relationships, or arrangements between the company and the directors and director nominee or parties related to the directors and director nominee.

 

As a result of this review, the Board has determined that the following directors and the director nominee either are or will be Independent Directors under the independence standards in the NYSE Listed Company Rules: Stephen J. Easterbrook; Timothy P. Flynn; Sarah J. Friar; Carla A. Harris;Thomas W. Horton; Marissa A. Mayer; and Steven S Reinemund. The Board has also determined that James I. Cash, Jr. and Kevin Y. Systrom, who are not standing for re-election at the 2018 Annual Shareholders’ Meeting, are Independent Directors. In addition, the Board determined that the currently serving members of the Audit Committee and the CMDC meet the heightened independence

 

 

30    Walmart  |  2018 Proxy Statement  •  Corporate Governance

 

standards for membership on those Board committees under the NYSE Listed Company Rules and the SEC’s rules. The Board also determined that Linda S. Wolf, who did not stand for re-election at the 2017 Annual Shareholders’ Meeting and, therefore, ceased to be a director of Walmart on June 2, 2017, was independent and met the heightened independence standards under the NYSE Listed Company Rules and the SEC’s rules for compensation committee membership during the portion of fiscal 2018 during which she served on the Board.

 

In making its determination as to the independence of our Independent Directors and our director nominee, the Board considered whether any relationship between a director or director nominee 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 or director nominee’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 and director nominee to be immaterial to the director’s or director nominee’s independence. The types of relationships considered by the Board are noted below:

 

Relationship Type Director or Nominee
The director or director nominee was an officer and less than 5% equity owner of a Walmart vendor or service provider Mr. Easterbrook
Ms. Friar
  Ms. Harris
  Ms. Mayer
  Mr. Systrom
Immediate family members of the director or director nominee were employees or officers and less than 5% equity owners of Walmart vendors or service providers Dr. Cash
Mr. Easterbrook
  Mr. Flynn
  Ms. Friar
  Mr. Reinemund
  Mr. Systrom
  Ms. Wolf
The director or director nominee was a director or trustee and less than 5% equity owner of a Walmart vendor or service provider Dr. Cash
  Mr. Easterbrook
  Mr. Flynn
  Ms. Friar
  Mr. Horton*
  Ms. Mayer
  Mr. Reinemund
Walmart employed one or more members of the director’s immediate family for compensation not exceeding $120,000 during Walmart’s last fiscal year Ms. Harris
The director’s immediate family member directly or indirectly owned 5% or less of, but was not a director, officer, or employee of, a Walmart service provider or vendor Ms. Mayer

*Mr. Horton has been nominated to serve as a director of a Walmart vendor.

 

The aggregate amounts involved in each of the relationships and transactions described in the preceding table were less than $1 million or, if greater, 2% of the consolidated gross revenues for the entity’s last fiscal year, with the exception of certain relationships involving Mr. Reinemund.

 

Immediate family members of Mr. Reinemund are or were employed by and had a less than 5% 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 Mr. Reinemund’s independence because in each case neither Mr. Reinemund nor his immediate family member: (i) is or was an executive officer of the entity; (ii) is or was involved in the marketing or sale of goods or services to Walmart, the negotiation of transactions, or the management of the business relationship between Walmart and the entity; (iii) does or did receive compensation from the entity based on the marketing or sale of the entity’s goods or services to Walmart; or (iv) had an advancement within or continued employment with 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 prior to Mr. Reinemund’s immediate family members’ employment with these entities.

 

The Board does not believe S. Robson Walton, Gregory B. Penner, or Steuart L. Walton have any relationships with Walmart that would disqualify them from being considered independent under the NYSE Listed Company Rules. However, the Board has deferred its determination as to their independence. If the Board had made such an independence determination, then

 

 

Corporate Governance  •  Walmart  |  2018 Proxy Statement    31

 

10 of 11 of Walmart’s nominees, or 91%, would have been independent.

 

In addition, although the Walton family holds approximately 51% of our company’s Shares, we have not and do not plan to rely on any of the exemptions from certain board independence requirements available to controlled companies under the NYSE Listed Company Rules. Our Board is committed to maintaining a majority independent Board and believes that this independence ensures robust oversight, independent viewpoints, and promotes the Board’s overall effectiveness.

 

  The Board and the NGC 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 the director nominee; or (iii) otherwise constitutes a material relationship between Walmart and the director or director nominee.  
     

 

Related Person Transaction Review Policy

 

The Board has adopted a written policy applicable to all Walmart officers who serve as executive vice presidents or above; all directors and director nominees; all shareholders beneficially owning more than five percent of Walmart’s outstanding Shares; and the immediate family members of each of the preceding persons (collectively, the “Covered Persons”). Any entity in which a Covered Person has a direct or indirect material financial interest or of which a Covered Person is an officer or holds a significant management position (each a “Covered Entity”) is also covered by the policy. The Transaction Review Policy applies to any transaction or series of similar or related transactions in which a Covered Person or Covered Entity has a direct or indirect material financial interest and in which Walmart is a participant (each, a “Covered Transaction”).

 

Under this Transaction Review Policy, each Covered Person is responsible for reporting to Walmart’s chief audit executive any Covered Transactions of which he or she has knowledge. Walmart’s chief audit executive, with the assistance of other appropriate Walmart personnel, reviews each Covered Transaction and submits the results of this review to the Audit Committee. The Audit Committee reviews each Covered Transaction and either approves or disapproves the transaction. To approve a Covered Transaction, the Audit Committee must find that:

 

the substantive terms and negotiation of the Covered Transaction are fair to Walmart and its shareholders and the substantive terms are no less favorable to Walmart and its shareholders than those in similar transactions negotiated at an arm’s-length basis; and
   
if the Covered Person is a director or officer of Walmart, he or she has otherwise complied with the terms of Walmart’s Global Statement of Ethics as it applies to the Covered Transaction.

 

 

32    Walmart  |  2018 Proxy Statement  •  Corporate Governance

 

Related Person Transaction Process

The following chart shows our process for identification and disclosure of related person transactions.

 

 

 

Fiscal 2018 Review of Related Person Transactions

 

Our company’s Legal Department reviews each Covered Person transaction that 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 whether the related person has or will have a material interest in the transaction. If so, under the company’s Transaction Review Policy, then the related person transaction is presented to the Audit Committee for its review and approval or ratification. As described in our “Transaction Review Policy,” the Audit Committee also considers the following factors when reviewing a related person transaction:

 

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, as required 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.  
     

 

On September 19, 2016, Walmart acquired Jet.com in a merger transaction, with Jet.com becoming a wholly-owned subsidiary of Walmart. The aggregate transaction consideration paid by the Company consisted of a combination of cash of approximately $3.0 billion and restricted stock units representing the right to receive shares of Walmart common stock determined using the closing date trading

 

 

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  price equal to approximately $300 million. Marc Lore, the founder and largest stockholder of Jet.com (approximately 15.9% of the outstanding Jet.com shares on a fully-diluted basis) received the right to approximately $477 million in cash consideration payable by the Company for his Jet.com shares as part of the merger transaction. Of this amount, approximately $80 million was paid in fiscal 2017 following the closing of the transaction and Mr. Lore received cash consideration payments of approximately $44 million related to the transaction in fiscal 2018. The remaining approximately $353 million of cash consideration from the transaction will be paid to Mr. Lore over the next four (4) years, subject to Mr. Lore remaining a Walmart associate during such period. However, if Walmart terminates Mr. Lore’s employment without cause, or Mr. Lore resigns for good reason, Mr. Lore will continue to receive these payments over the remaining portion of the five (5) year period following the closing date of the transaction. Mr. Lore’s portion of the transaction equity consideration consisted of restricted stock units for 3,554,093 shares of Walmart stock vesting over the five (5) year period following the closing date of the transaction, subject to Mr. Lore remaining a Walmart associate during such period as further discussed and described in the footnotes to the Summary Compensation table on page 66. During fiscal 2018,Walmart issued 533,113 Shares to Mr. Lore pursuant to such vestings. Mr. Lore is the Executive Vice President – President and Chief Executive Officer, U.S. eCommerce, of Walmart. His employment with Walmart in this role began immediately following the closing of the transaction.
   
During fiscal 2018, Walmart paid Some Spider Inc. (“Some Spider”), an internet marketing company, approximately $350,000 for internet marketing services. Marc E. Lore, an Executive Officer of Walmart, owns approximately 16% of the outstanding capital stock of Some Spider. We cannot estimate the dollar value of Mr. Lore’s interest in such transaction as that amount will depend in large measure on the dividends paid on the stock of Some Spider held by Mr. Lore and the appreciation, if any, in the fair value of that stock that would be attributable to the proposed transaction described above. Walmart may engage Some Spider in fiscal 2019 to purchase similar services.
   
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 2018, Walmart paid Mahco and its subsidiaries approximately $21.5 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 2019.
   
Greg T. Bray, a management associate in Walmart’s Finance department, is the brother-in-law of C. Douglas McMillon, a director of Walmart and an Executive Officer. For fiscal 2018, Walmart paid Mr. Bray a salary of approximately $230,000, a payment pursuant to the cash incentive plan of approximately $87,000, and other benefits totaling approximately $26,000 (including Walmart’s matching contributions to Mr. Bray’s 401(k) Plan account and health insurance premiums). In fiscal 2018, Mr. Bray also received a grant of 821 restricted stock units with a calculated value of approximately $60,000 at the date of grant. Mr. Bray continues to be an associate, and, in fiscal 2019, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2018.
   
Nichole R. Bray, a management associate 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 2018,Walmart paid Ms. Bray a salary of approximately $144,000, a payment pursuant to the cash incentive plan of approximately $47,000, and other benefits totaling approximately $22,300 (including Walmart’s matching contributions to Ms. Bray’s 401(k) Plan account and health insurance premiums). In fiscal 2018, Ms. Bray also received a grant of 890 restricted stock units having a calculated value of approximately $65,000 at the date of grant. Ms. Bray continues to be an associate, and, in fiscal 2019, she may receive compensation and other benefits in amounts similar to or greater than those she received during fiscal 2018.
   
Jason Turner, a store manager for a Walmart Neighborhood Market, is the brother-in-law of John R. Furner, an Executive Officer. For fiscal 2018, Walmart paid Mr. Turner a salary of approximately $86,400, a payment pursuant to the cash incentive plan of approximately $52,000, and other benefits totaling approximately $12,300 (including Walmart’s matching contributions to Mr. Turner’s 401(k) Plan account and health insurance premiums). Mr. Turner continues to be an associate, and, in fiscal 2019, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2018.
   
Stephen Furner, a store manager for a Walmart Neighborhood Market, is the father of John R. Furner, an Executive Officer. For fiscal 2018, Walmart paid Mr. Stephen Furner a salary of approximately $86,400, a payment pursuant to the cash incentive plan of approximately $55,000, and other benefits totaling approximately $100. Mr. Stephen Furner continues to be an associate, and, in fiscal 2019, he may receive compensation and other benefits in amounts similar to or greater than those he received during fiscal 2018.

 

 

34    Walmart  |  2018 Proxy Statement    Corporate Governance

 

Other Transactions

During fiscal 2018, certain banking subsidiaries of a bank holding company that is collectively owned by Mr. Jim C. Walton, Mr. S. Robson Walton, and certain members of the Walton family and related trusts, made payments to Walmart in the aggregate amount of approximately $336,000 for supercenter, discount store, and Neighborhood Market banking facility rent pursuant to negotiated arrangements. The banking subsidiaries 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 remains in effect, and we anticipate that in fiscal 2019 such banking subsidiaries will pay Walmart approximately $330,000 pursuant to those leases not awarded on a competitive-bid basis. Mr. Jim C. Walton is the father of Mr. Steuart L. Walton, a director of Walmart. We do not believe that either Walmart or the members of the Walton family have a direct or indirect material interest in any of the transactions between Walmart and the banking subsidiaries.

 

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.

 

Each year, the CMDC and Board undertake a comprehensive review of Outside Director compensation including a comparison of director compensation at Walmart’s peer group companies. Based on this review, the CMDC and Board determined to make no changes to Walmart’s Outside Director compensation for the term beginning at the 2018 Annual Shareholders’ Meeting, with the exception of introducing an additional retainer for the Chair of the NGC, as described below.

 

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
Additional Fees – Some Outside Directors   Non-Executive Chairman Retainer   $200,000   50% Shares/50% Cash
    Lead Independent Director Retainer   $  30,000   Cash
    Audit and CMDC Chair Retainers   $  25,000   Cash
    NGC, SPFC and TeCC Chair Retainers   $  20,000   Cash

 

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. Also, each member of the Audit Committee received an additional fee during fiscal 2018. 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 these 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 2018, 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 2018, the Audit Committee Chair received an additional fee of $90,000, and the other members of the Audit Committee received an additional fee of $45,000.

 

 

Corporate Governance    Walmart  |  2018 Proxy Statement    35

 

Form and Timing of Payment

Stock grants to Outside Directors are made annually upon election to the Board at our annual shareholders’ meeting, which was most recently held on June 2, 2017. Each Outside Director may elect to defer the receipt of this stock grant in the form of stock units that are settled in Shares following the end of the director’s Board service. 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 2018

 

    Fees Earned or   Stock   All Other    
    Paid in Cash   Awards   Compensation   Total
Name   ($)   ($)   ($)   ($)
(a)   (b)   (c)   (g)   (h)
James I. Cash, Jr.   176,593   175,005   1,701   353,299
Pamela J. Craig   38,077   0   0   38,077
Timothy P. Flynn   205,070   175,005   1,654   381,729
Carla A. Harris   52,152   175,005   0   227,157
Thomas W. Horton   146,593   175,005   915   322,513
Marissa A. Mayer   89,985   175,005   2,210   267,200
Gregory B. Penner   190,036   275,007   0   465,043
Steven S Reinemund   112,953   175,005   0   287,958
Kevin Y. Systrom   109,964   175,005   0   284,969
S. Robson Walton   90,000   175,005   0   265,005
Steuart L. Walton   89,985   175,005   0   264,990
Linda S. Wolf   48,654   0   167   48,821

 

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 2018 and did not receive any additional compensation for his duties as a director. Sarah J. Friar is omitted from this table because she was appointed to the Board after the end of fiscal 2018 and therefore did not receive any compensation from Walmart during fiscal 2018.

 

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

 

Certain Outside Directors elected to either receive Shares in lieu of some or all of these amounts or defer these amounts in the form of deferred stock units, as shown below. These amounts were converted into Shares or deferred stock units quarterly using the closing price of a Share on the NYSE as of the respective payment dates.

 

        Number of Shares   Number of Deferred Stock
    Amount   Received in Lieu of   Units in Lieu of
Director   ($)   Cash   Cash
Timothy P. Flynn   205,070     2,350
Carla A. Harris   26,067   305  
Marissa A. Mayer   89,985     1,125
Gregory B. Penner   190,036     2,376
Kevin Y. Systrom   109,964   1,375  
Steuart L. Walton   89,985     1,125

 

 

36    Walmart  |  2018 Proxy Statement  •  Corporate Governance

 

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 2018, 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 2017 Annual Shareholders’ Meeting received a stock award of 2,198 Shares ($175,000 divided by $79.62, 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 3,454 Shares ($275,000 divided by $79.62, rounded to the nearest Share). Dr. Cash, Mr. Flynn, Ms. Mayer, Mr. Penner, Mr. Rob Walton, and Mr. Steuart Walton elected to defer these Shares in the form of deferred stock units. Ms. Craig and Ms. Wolf did not stand for re-election at the 2017 Annual Shareholders’ Meeting and, therefore, did not receive a stock grant during fiscal 2018.

 

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.

 

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

 

While directors are permitted to defer cash retainers into an interest-credited account under the Director Compensation Deferral Plan, none of our current directors have elected to do so and do not have any balances in any such account. Therefore, we have omitted this column from the table.

 

All Other Compensation (column (g))

 

The amounts in this column include tax gross-up payments paid during fiscal 2018 relating to imputed income attributable to spousal travel expenses, meals, and related activities in connection with certain Board meetings during fiscal 2018. The cost of the underlying spousal travel expenses, meals, and related activities for each of the other directors is omitted from this column because the total incremental cost for such benefits for each director was less than $10,000.

 

 

Corporate Governance    Walmart  |  2018 Proxy Statement    37

 

Proposal No. 2 Advisory Vote to Approve Named Executive Officer Compensation

 

We are asking our shareholders to approve, on a non-binding advisory basis, under Section 14A of the Exchange Act, the compensation of our NEOs as disclosed in this proxy statement. We have held a similar shareholder vote every year since 2011 and expect to hold a similar vote at the 2019 Annual Shareholders’ Meeting.

 

As described in the CD&A, our executive compensation program is designed with an emphasis on performance and is intended to closely align the interests of our NEOs with the interests of our shareholders. The CMDC regularly reviews our executive compensation program to ensure that compensation is closely tied to aspects of our company’s performance that our Executive Officers can impact and that are likely to have an impact on shareholder value.

 

Our compensation program is also designed to balance long-term performance with shorter-term performance and to mitigate any risk that an Executive Officer would be incentivized to pursue good results with respect to a single performance measure, company segment, or area of responsibility to the detriment of our company as a whole.

 

In the CD&A, we discuss why we believe the compensation of our NEOs for fiscal 2018 was appropriately aligned with our company’s performance during fiscal 2018. The CD&A also describes feedback we received regarding our executive compensation program during our shareholder outreach efforts, and is intended to provide additional clarity and transparency regarding the rationale for and philosophy behind our executive compensation program and practices. We urge you to read carefully the CD&A, the compensation tables, and the related narrative discussion in this proxy statement when deciding how to vote on this proposal.

 

The vote on this proposal is advisory, which means that the vote will not be binding on Walmart, the Board, or the CMDC. However, the Board and CMDC value our shareholders’ opinions, and the CMDC will consider the results of the vote on this proposal when making future decisions regarding executive compensation and when establishing our NEOs’ compensation opportunities.

 

In view of the foregoing, shareholders will vote on the following resolution at the 2018 Annual Shareholders’ Meeting:

 

RESOLVED, that the company’s shareholders hereby approve, on an advisory basis, the compensation of the Named Executive Officers of Walmart as disclosed in Walmart’s proxy statement for the 2018 Annual Shareholders’ Meeting in accordance with the Securities and Exchange Commission’s compensation disclosure rules.

 

FOR The Board recommends that shareholders vote FOR this proposal.

 

 

38     Walmart  |  2018 Proxy Statement     Proposal No. 2 Advisory Vote to Approve Named Executive Officer Compensation

 

 

Compensation Discussion and Analysis

 

 

In this section, we describe our executive compensation philosophy and program that support our strategic objectives and serve the long-term interests of our shareholders. We also discuss how our CEO, CFO, and other Named Executive Officers (our NEOs) were compensated in fiscal 2018 and describe how their compensation fits within our executive compensation philosophy. For fiscal 2018, our NEOs were:

 

     
C. Douglas McMillon   M. Brett Biggs
     
President and Chief   Executive Vice
Executive Officer   President and Chief
    Financial Officer
     
     
     
Gregory S. Foran   John R. Furner
     
Executive Vice   Executive Vice
President, President   President, President
and CEO, Walmart U.S.   and CEO, Sam’s Club
     
     
     
Marc E. Lore    
     
Executive Vice    
President, President    
and CEO, Walmart U.S.    
eCommerce    
     

Table of Contents

 

This CD&A is organized as follows:

 

 

Executive Summary provides an overview of our strategy, our executive compensation philosophy, framework, and practices, how our pay is aligned with performance, and the feedback we have received from our shareholders. 40
     
     
NEO Compensation Components and Pay Mix explains the primary components of our NEO compensation packages and how our NEO compensation is heavily weighted towards performance-based compensation. 44
     
     
Executive Compensation Governance and Process describes our governance related to executive compensation and the roles of the CMDC, the CMDC’s independent compensation consultant, and others in setting NEO compensation, and explains how the CMDC uses peer group data and other analysis when making compensation decisions. 45
     
     
Fiscal 2018 Performance Metrics describes the performance metrics used in our incentive programs and why the CMDC selected these metrics. 50
     
     
Incentive Goal Setting Philosophy and Process provides insight into how the CMDC sets performance goals aligned with our strategy and operating plan. 52
     
     
Fiscal 2018 Performance Goals and Performance describes the specific goals under our incentive programs for fiscal 2018, how we performed compared to those goals, and the resulting NEO incentive payouts. 54
     
     
Fiscal 2018 NEO Pay and Performance Summaries describes how we link pay and performance to determine NEO compensation; each NEO’s summary includes their individual accomplishments for fiscal 2018 and how those accomplishments were considered by the CMDC when making compensation decisions. 57
     
     
Other Compensation Programs and Policies describes limited perquisites and other items not included in Total Direct Compensation (TDC); this section also describes our practices regarding employment agreements, clawbacks, stock ownership guidelines, tax considerations, and other matters. 62


 

 

Executive Compensation    Walmart  |  2018 Proxy Statement    39

 

 
 

 

1 Executive Summary

 

Fiscal 2018 Highlights

 

Our Strategy

 

Fiscal 2018 marked the continuation of a transformational period of investment 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 the year, we continued to articulate four key areas of focus to drive continued success:

 

     

Make every day easier for busy families

 

  Price and value

 

  Be great merchants

 

  Easy, fast, friendly, and fun experience

 

Change how we work

 

  Invest in/empower associates

 

  Create a high- performance culture

 

  Strengthen diversity and inclusion

 

  High-performance digital enterprise

 

Deliver results and operate with discipline

 

  Strong, efficient growth

 

  Consistent operating discipline

 

  Strategic capital allocation

 

Be the most trusted retailer

 

  Model excellence in global compliance and ethics

 

  Lead on social and environmental issues

 

  Contribute to the communities where we operate

 

Our Performance

 

Since the beginning of fiscal 2018, we have continued to deliver on these key strategic priorities in a challenging and highly competitive global environment. Key accomplishments included:

 

Accelerated innovation by introducing free 2-day shipping, expanding online grocery, and completing additional eCommerce acquisitions Continued incremental price investments for customers in the U.S. and certain international markets Slowed new store openings and prioritized growth from comp sales and eCommerce
     
     
Increased starting hourly wage in the U.S. to $11/hour and paid over $625 million in bonuses to hourly Walmart U.S. store associates Invested in our associates through expanded maternity and parental leave and a new adoption benefit Expanded to nearly 200 Walmart Academies with more than 250,000 associates completing the Academy training program

 

 

40    Walmart  |  2018 Proxy Statement     CD&A  |  1: Executive Summary

 

 
 

As we execute our strategy, we are seeing momentum in our business, with improving customer satisfaction and good financial results:

 

Surpassed $500 billion total revenue for the first time in our company’s history, an increase of approximately 3% 2.1% Walmart U.S. comp sales growth, our highest growth since 2009 Walmart U.S. eCommerce sales of $11.5 billion, an increase of 44%
     
     
Sam’s Club comp sales growth excluding fuel, of 2.0%, and including fuel sales, Sam’s Club comp sales grew 3.0% $14.4 billion returned to shareholders through dividends and share repurchases; announced dividend increase for the 45th consecutive year EPS of $3.28 and adjusted EPS of $4.42, with adjusted EPS exceeding our initial full-year guidance

 

Comparable sales for the 52-week period ended January 26, 2018, compared to the 52-week period ended January 27, 2017. For more information regarding our fiscal 2018 financial performance, see our Annual Report on Form 10-K for fiscal 2018 filed with the SEC on March 30, 2018. Certain financial measures discussed above are non-GAAP measures under the SEC’s rules. See Annex A for more information about how we calculate these financial measures, why those financial measures provide important information, 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.

 

 

Provide competitive pay to attract and retain highly-qualified executives.

 

 

 

Align management interests with the interests of our shareholders by providing long-term incentives in the form of equity.

 

 

Establish performance goals that are aligned with our enterprise strategy and financial plans.

 

 

Encourage leadership accountability by tying a higher percentage of compensation to performance at higher levels of seniority.

 

 

 

Our Executive Compensation Practices are Aligned with Shareholders’ Interests

 

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


 

 

CD&A  |  1: Executive Summary    Walmart  |  2018 Proxy Statement    41

 

 
 

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 2018 Total Direct Compensation (at target)

 

 

CEO Pay is Aligned with Performance

 

CEO Realized Pay

 

 

 

 

(1) Realized pay includes base salary, annual incentive earned for the fiscal year shown, restricted stock vested in the fiscal year shown, and performance-based equity with a performance period ending during the fiscal year shown. Equity awards are valued using the closing price of Walmart common stock on the day prior to the vesting date.
   
(2) TSR illustrates the total shareholder return on Walmart common stock during the three fiscal years ending January 31, 2018, assuming $100 was invested on the first day of fiscal 2016 and assuming reinvestment of all dividends.

 

 

42    Walmart  |  2018 Proxy Statement    CD&A  |  1: Executive Summary

 

 
 

Our Shareholder Engagement on Executive Compensation

Our Board actively seeks and values feedback from shareholders. Over the past several years, in addition to our day-to-day interactions with investors, we have expanded our shareholder engagement to include an annual outreach program focused on strategy, governance, executive compensation, and other topics suggested by our shareholders. Since our 2017 Annual Shareholders’ Meeting, we invited most of our 60 largest institutional shareholders, representing over 500 million Shares, to participate in this outreach program, and we ultimately engaged with shareholders representing approximately 450 million Shares. We also had conversations with leading proxy advisory firms.

 

This engagement gave us an opportunity to discuss our strategy, our commitment to corporate governance and executive compensation practices, and how our governance and compensation practices help to support our strategy. While our shareholders expressed a wide range of perspectives in these meetings, we received generally positive feedback on our strategy, our recent changes to our Board and committee structure to support that strategy, our executive compensation program, and recent enhancements to our proxy statement disclosures. Additionally our 2017 say-on-pay proposal received 83.1% support. The feedback we receive from our shareholders, including the results of our say-on-pay proposal, is regularly communicated to the CMDC, the NGC, and the Board, and helped inform the changes to our executive compensation program for fiscal 2018 described below.

 

Executive Compensation Program Changes for Fiscal 2018

During fiscal 2017, the CMDC oversaw a comprehensive review of our overall compensation and performance management programs to ensure that our programs continue to be aligned with our strategy as we transform our business to deliver a seamless shopping experience at scale. As a result of this review, the CMDC approved changes to our programs with the goals of increasing differentiation for high performance, balancing long-term and short-term incentives, and simplifying our long-term incentive plan. Key changes, which took effect beginning in fiscal 2018, include the following:

 

What we changed       Why we made this change    
         
         
Introduced greater differentiation to annual salary adjustments tied to individual performance   Allows us to reward high performers and emphasize the link between pay and performance
     
     
Reduced annual cash incentive opportunities by 25%; reallocated to long-term performance-based restricted stock units   Appropriately balances short-term and long-term goals and increases focus on long-term results
     
     
     
Replaced performance share units – which vested based on average performance over three separate performance periods – with performance equity, which has a one-year performance period followed by an additional two-year vesting period   Promotes simplicity and understandability of performance goals, while retaining long-term focus and shareholder alignment of program over a three-year period

 

 

CD&A  |  1: Executive Summary    Walmart  |  2018 Proxy Statement    43

 

 
 

 

2 NEO Compensation Components and Pay Mix

 

What are the primary components of our fiscal 2018 NEO compensation packages?

 

There are three components of our executives’ fiscal 2018 TDC: base salary, annual cash incentive, and long-term equity:

 

Component   Description/Objective   Performance Metrics   Form and Timing of Payout
Base Salary   Fixed base of cash compensation commensurate with job responsibilities and experience   Subject to annual adjustment based on individual performance   Paid in cash bi-weekly, unless voluntarily deferred
Annual Cash Incentive   Variable pay intended to incentivize performance against key operational metrics, depending on position

 

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

 

•  Sales

 

•  Operating Income

 

•  Also tied to diversity/inclusion and ethics/compliance goals

  Paid in cash after the end of the fiscal year, unless voluntarily deferred
Long-Term Equity

 

Performance Equity ~77%

 

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

•  ROI

 

•  Sales

 

•  Value realized also depends on stock performance

  Paid in Shares after the end of a three-year vesting period, unless voluntarily deferred; payout based on performance during first year of vesting period
Retention Stock ~ 23%)

 

 

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

 

  Value realized depends on stock performance   Paid in Shares with three year cliff vesting

 

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

 

As shown in the charts below, a substantial majority of our NEOs’ fiscal 2018 target TDC was performance-based.

 

 

44    Walmart  |  2018 Proxy Statement  •  CD&A  |   2: NEO Compensation Components and Pay Mix

 

 

3 Executive Compensation Governance and Process

 

At Walmart, we are committed to the highest standards of compensation governance. We design and administer our executive compensation program to motivate and retain key executives to drive our strategy, generate strong operating results, and deliver solid returns to our shareholders. Our compensation programs are also intended to align the interests of our leadership team with our shareholders and to promote our pay-for-performance culture and philosophy.

 

Who sets executive compensation at Walmart?

 

The CMDC, which consists of four independent directors, is responsible for establishing and approving executive compensation for all officers subject to Section 16, including the CEO and other NEOs, and for overseeing our executive compensation program (see page 23 for more information about the CMDC).

 

The CMDC considers a variety of factors in setting Total Direct Compensation for our NEOs, including:

 

  the overall financial and operating performance of our company and its operating segments and/or areas of responsibility;

 

  each NEO’s individual performance and contributions to the achievement of financial goals and operational milestones;

 

  the performance of each executive’s business unit or function against pre-determined financial objectives;

 

  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 benchmarking data and compensation analyses (see pages 45-47 for more details).

 

For our CEO. Our CEO has no role in determining his own compensation, which is set by the CMDC in consultation with our Chairman and with input from the CMDC’s independent compensation consultant and Walmart’s Global People division.

 

For other Executive Officers, including our NEOs. Our CEO makes recommendations to the CMDC regarding the compensation of our NEOs and other Executive Officers. He bases these recommendations on, among other factors, those listed above.

 

The CMDC reviews these recommendations and may set a particular NEO’s TDC at a different amount as it deems appropriate.

 

Role of the CMDC’s Independent Compensation Consultant

 

Since early 2010, the CMDC has engaged Pay Governance LLC (“Pay Governance”) as its independent executive compensation consultant. Under the terms of its engagement, Pay Governance reports directly and exclusively to the CMDC; the CMDC 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 CMDC. Other than its engagement by the CMDC, Pay Governance does not perform and has never performed any other services for Walmart. The CMDC’s independent consultant attends and participates in CMDC meetings at which executive compensation matters are considered, and performs various analyses for the CMDC, including:

 

  peer group 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 CMDC 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 CMDC.

 

How is peer group data used by the CMDC?

 

The CMDC reviewed publicly available compensation information for three separate peer groups when establishing fiscal 2018 TDC for our executives. Walmart is significantly larger than most of our peer group companies, and as the world’s largest retailer, we believe that our 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, the CMDC seeks to set our NEOs’ target TDC at competitive levels relative to our peer groups; however, peer group compensation information is only one factor in the CMDC’s decision-making process. The CMDC’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. See pages 57-61 for more information regarding how our NEOs’ TDC compares with our peer groups.

 

CD&A  |  3: Executive Compensation Governance and Process  •  Walmart  |  2018 Proxy Statement    45

 

Retail Industry Survey. This peer group allows the CMDC to compare our NEO compensation to that of our primary competitors in the retail industry. For fiscal 2018, the Retail Industry Survey included all publicly-traded retail companies with significant U.S. operations with annual revenues exceeding approximately $10 billion:

 

 

  Amazon.com, Inc. L Brands, Inc.
  AutoNation, Inc. Lowe’s Companies, Inc.
  AutoZone, 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 Sears Holdings Corporation
  Dollar Tree, Inc. The Sherwin-Williams Company
  The Gap, Inc. Staples, Inc.
  Group 1 Automotive, Inc. SUPERVALU INC.
  The Home Depot, Inc. Target Corporation
  J. C. Penney Company, Inc. The TJX Companies, Inc.
  Kohl’s Corporation Walgreens Boots Alliance, Inc.
  The Kroger Co. Whole Foods Market, Inc.


 

Select Fortune 100. This group of peer companies was chosen from among the Fortune 100 by our Global People division, with input from the CMDC’s independent compensation 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. For fiscal 2018 those companies 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 The Procter & Gamble Company
  HP Inc. Twenty-First Century Fox, Inc.
  Honeywell International Inc. Tyson Foods, Inc.
  Ingram Micro Inc. United Parcel Service, Inc.
  Intel Corporation Verizon Communications Inc.
  International Business Machines Corporation  
     


 

46    Walmart  |  2018 Proxy Statement  •  CD&A  |  3: Executive Compensation Governance and Process

 

Top 50 Market Capitalization. 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 CMDC 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. For fiscal 2018 the Top 50 companies were:

 

 

  AbbVie Inc. International Business Machines Corporation
  Allergan plc Johnson & Johnson
  Alphabet Inc. MasterCard, Incorporated
  Altria Group, Inc. McDonald’s Corporation
  Amazon.com, Inc. Medtronic Public Limited Company
  Amgen Inc. Merck & Co., Inc.
  Anheuser-Busch InBev SA/NV Microsoft Corporation
  Apple Inc. Nestlé S.A.
  AT&T Inc. Novartis AG
  Berkshire Hathaway Inc. Novo Nordisk A/S
  Bristol-Myers Squibb Company 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 Roche Holding AG
  CVS Health Corporation Royal Dutch Shell plc
  Exxon Mobil Corporation Sanofi S.A.
  Facebook, Inc. Tencent Holdings Ltd
  General Electric Company Total S.A.
  Gilead Sciences, Inc. Unilever N.V.
  GlaxoSmithKline plc UnitedHealth Group Incorporated
  The Home Depot, Inc. Verizon Communications Inc.
  HSBC Holdings plc Visa Inc.
  Intel Corporation The Walt Disney Company


 

CD&A  |  3: Executive Compensation Governance and Process  •  Walmart  |  2018 Proxy Statement     47

 

The CMDC uses benchmarking data as a general guide to setting appropriately competitive compensation consistent with our emphasis on performance-based compensation. The CMDC 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 CMDC also reviews peer group data for retail CEO positions for purposes of benchmarking the compensation of our executives who lead our operating segments. These executives have significant responsibilities and lead organizations that, considered separately from the rest of our company, are larger than many of the other retailers in the retail peer group, and we believe that these positions are often comparable to or carry greater responsibilities than 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 to lead an operating segment of a company. Therefore, the CMDC also benchmarks these executives’ compensation against the compensation of CEOs within our retail peer group.

 

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

 

Individual Performance

The CMDC considers the individual performance of each NEO, including each NEO’s contributions to our key strategic priorities and operational goals, as described under “Fiscal 2018 NEO Pay and Performance Summaries” beginning on page 57.

 

CEO Pay and Performance Alignment

The CMDC reviews an assessment by Pay Governance regarding the alignment of our CEO’s pay with our company’s performance, including the appropriateness of our CEO’s pay opportunity compared to peers and the alignment of our CEO’s realizable pay and our performance relative to our peer group companies. Pay Governance concluded that, on a size-adjusted basis, our CEO’s fiscal 2018 pay opportunity and realizable pay are aligned with Walmart’s relative performance.

 

Tally Sheets

The CMDC 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 seven annual shareholders’ meetings. The CMDC 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 2018.

 

48    Walmart  |  2018 Proxy Statement  •  CD&A  |  3: Executive Compensation Governance and Process

 

Summary of Compensation Setting Process

This chart summarizes the process and analyses the CMDC considers when setting executive compensation and validating our pay targets.

CMDC’s independent compensation consultant, Pay Governance, performs various pay-for-performance analyses for the CMDC.

 

Process/Analysis   Data Source/
Responsibility
  Purpose   How it’s Used   When it’s
conducted
Review of Annual and Long-term Business Plans  

•  Board

 

•  SPFC

 

•  CDMC

 

•  Management

  Establish performance goals aligned with annual operating plan and long-term objectives   To review choice of incentive metrics and ensure they support strategic initiatives and drive results tied to shareholder value   September – January
Individual Performance Assessments  

•  Board

 

•  CDMC

 

•  CEO (for other NEOs)

 

•  Global People Division

  Evaluate individual performance of CEO and other NEOs against performance measures   To determine award payments for current year, determine merit increases (if any) and adjust individual award opportunities for the next award cycle   January
Peer Group Benchmarking  

•  Independent compensation consultant

 

•  Publicly available compensation information for three separate peer groups

  Setting pay and establishing Target TDC  

Benchmarking data is used as a general guide to setting appropriately competitive compensation consistent with our emphasis on performance-based compensation

 

To set our NEOs’ target TDC at competitive levels relative to our peer groups

 

•  A statistical analysis of our NEOs’ target TDC determined that, on a size-adjusted basis, our NEOs’ target TDC are near the median of comparable positions within our peer groups

  January
Pay-for- Performance Alignment  

•  Independent compensation consultant

 

•  Publicly available financial and compensation information

  Evaluate pay and performance to validate pay-for-performance alignment of individual compensation plans  

To assess achievement under incentive plans, Pay Governance conducts:

 

•  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

  January
Tally Sheets   •  Global People division   Evaluating total compensation and internal pay equity  

Tally sheets:

 

•  Summarize the total value of the compensation realizable by each NEO for the upcoming fiscal year;

 

•  Quantify the value of each element of that compensation, including perquisites and other benefits; and

 

•  Quantify the amounts that would be owed to each NEO upon retirement or separation from our company

  January
Company Achievement of Performance Goals  

•  Board

 

•  CDMC

 

•  Management

  Assess current year company performance against financial and operating metrics  

To determine award payments for the recently completed fiscal year and set target levels for following year

 

To assess the ease or difficulty of attaining performance goals and whether adjustments need to be made to incentive metrics for following award cycle

  February
– March
Shareholder Outreach  

•  Board

 

•  Management

 

•  Investor Relations

  Obtain investor feedback on our executive compensation program  

To understand investor expectations and monitor trends in executive compensation; used to evaluate compensation policies, practices, and plans

 

•  Shareholder feedback helped inform the changes to our executive compensation program for fiscal 2018

  Ongoing

 

CD&A  |  3: Executive Compensation Governance and Process  •  Walmart  |  2018 Proxy Statement     49

 

 

4 Fiscal 2018 Performance Metrics

 

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

 

Our NEOs’ performance-based pay for fiscal 2018 was based on achieving objective, pre-established financial goals for the following metrics:

 

2018 Financial Performance Metrics

 

 

   
* For purposes of our incentive programs, total company and International sales, operating income, and ROI are calculated on a constant currency basis and exclude certain items, such as revenue from fuel sales. See page 56 for more information.

 

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

 

These performance metrics are aligned with our enterprise 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, and ROI 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.
   
The CMDC believes that success with respect to these metrics will support shareholder value over the long term. The CMDC’s independent compensation consultant has reviewed the historical correlation of various performance metrics and TSR within the retail industry and 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 time.
   
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. While the CMDC closely monitors Walmart’s performance relative to that of our peers when making compensation decisions, the CMDC 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.
   
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 prioritize increasing 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.

 

50    Walmart  |  2018 Proxy Statement  •  CD&A  |  4: Fiscal 2018 Performance Metrics

 

What non-financial metrics were used to assess the performance of our NEOs under our incentive programs for fiscal 2018?

 

Culture, Diversity and Inclusion Goals. Since fiscal 2005, our NEOs and many other management associates have had objectives under our culture, diversity and inclusion program. The CMDC established these objectives because it believes that diversity and inclusion contribute to an engaged and effective workforce. For fiscal 2018, our culture, diversity and inclusion goals program included objectives related to representation and promotion, mentoring, participation in diversity and inclusion events, and development of business-specific diversity and inclusion plans.

 

Associates subject to our culture, diversity and inclusion goals program have 10% of their annual performance evaluation tied to diversity and inclusion, and can have their annual cash incentive payment reduced by up to 30% if they violate our discrimination and harassment policies.

 

Based on the report of our chief culture, diversity and inclusion officer, the CMDC determined that each NEO satisfied his or her diversity goals for fiscal 2018.

 

 

For more information about Walmart’s commitment to diversity and inclusion and key diversity and inclusion initiatives, please see Walmart’s 2017 Culture, Diversity and Inclusion Report, which is available on our website at
https://cdn.corporate.walmart.com/11/0d/f9289df649049a38c14bdeaf2b99/2017-cdi-report-web.pdf.

 

 

 

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 to our ethics and compliance program around the world.

 

2018 Objectives

In early fiscal 2018, our company’s senior leadership again developed objectives for implementing further enhancements to our global ethics and compliance program on a prioritized basis.

 

Objectives covered subject matters such as anti-corruption, anti-money laundering, responsible sourcing, food safety, environmental compliance, health and safety compliance, and licensing and permits. These objectives sought to enhance key elements of our 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 CMDC could have exercised negative discretion to reduce or eliminate the fiscal 2018 cash incentive payments to one or more of our Executive Officers. During fiscal 2018, 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 2018, the Audit Committee determined that, in its qualitative judgment, adequate progress had been achieved in implementing these objectives and reported its determination to the CMDC. 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 CMDC determined not to exercise negative discretion to reduce or eliminate the cash incentive payments to any of our Executive Officers for fiscal 2018.

 

 

For more information about specific enhancements to our global ethics and compliance program during fiscal 2018, please see Doug McMillon’s letter about our Global Ethics and Compliance Program, which is available on our website at
https://corporate.walmart.com/global-responsibility/global-compliance-program-report-on-fiscal-year-2018.

 

 

 

CD&A  |  4: Fiscal 2018 Performance Metrics  •  Walmart  |  2018 Proxy Statement     51

 

 

5 Incentive Goal Setting Philosophy and Process

 

How does the CMDC 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 planning meeting. Following the strategic planning meeting, the annual operating plans of the company and each of its operating segments are established with SPFC and Board input. The CMDC then establishes performance goals under our annual and long-term incentive programs that are consistent with these operating plans:

 

 

In fiscal 2016, we articulated our strategy to become the first retailer to deliver a seamless shopping experience at scale. We began executing on this strategy by making significant multi-year investments in our people, technology, and eCommerce 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 by closing certain underperforming stores and selling certain assets while also continuing our investments in eCommerce, including acquiring eCommerce businesses.

 

In October 2015, we provided greater visibility into the long-term implications of our strategy by announcing our 3-year financial plan. At that time, highlights of our 3-year financial plan included:

 

  Adding $45 billion to $60 billion in sales growth over a three-year period.

 

  Generating approximately $80 billion in operating cash flow over a three-year period.

  Investing an incremental $2.7 billion over two years in U.S. associate wage and training initiatives.

 

  Investing several billion dollars over a three-year period in lower prices for our U.S. customers.

 

As a result of our strategic investments, operating income and earnings per share were expected to decline during fiscal 2016 and 2017, and be relatively flat in fiscal 2018.

 

Consistent with our 3-year financial plan, in February 2017 we provided specific guidance regarding earnings per share for fiscal 2018, which at that time we estimated would remain relatively flat. In March of 2017, the CMDC established sales, operating income, and ROI goals for fiscal 2018 under our incentive plans, consistent with our guidance. For example, the total company target operating income and sales goals for fiscal 2018 were as follows:

 

Incentive Metric   Fiscal 2018 Target Goal
(in millions)
  % Change from Fiscal 2017
(excluding currency and fuel)
 
Total Company Operating Income   $ 22,639   -0.5%  
Total Company Sales   $ 487,803   3.2%  

 

52    Walmart  |  2018 Proxy Statement  •  CD&A  |  5: Incentive Goal Setting Philosophy and Process

 

These incentive goals were established with the intent that performance in line with our operating plans and guidance should result in payouts approximately at target. In order to achieve the maximum payout 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 CMDC’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 CMDC set goals each year under our long-term equity incentive program?

 

The CMDC has found setting goals each year annually for long-term equity awards, with awards having a three-year vesting period, is the most effective approach for our long-term equity incentive program for the following reasons:

 

As the largest global retailer, Walmart’s operating results are significantly impacted by macroeconomic and regional economic factors that may change drastically and that are 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.

 

We believe that performance goals cease to be an effective tool in motivating performance if the goals either become unrealistic or too easy to achieve due to macroeconomic factors beyond the control of our executives. While some companies attempt to address the impact of macroeconomic factors by using relative goals in their long-term incentive plans, the CMDC has determined that relative goals are not the right approach for Walmart for the reasons described on page 50.

 

The CMDC 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 this approach is more easily understandable and better aligned performance goals, which the CMDC believes are more effective in motivating performance. Our incentive goals are aligned with our enterprise strategy, business plan, and expectations regarding financial performance. These expectations necessarily change from year-to-year based on macroeconomic conditions, strategic investments, and other factors.

 

For example, if we were to set three-year sales goals, this 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 equity.

 

The CMDC believes that combining annual performance goals with a three-year vesting period effectively balances long-term focus with clear and understandable performance goals. As described on page 43, beginning with the awards granted in January 2017, the CMDC simplified our long-term equity program by providing for a one-year performance period followed by an additional two-year time-based vesting period.

 

CD&A  |  5: Incentive Goal Setting Philosophy and Process  •  Walmart  |  2018 Proxy Statement     53

 
   
6 Fiscal 2018 Performance Goals and Performance

 

What were the fiscal 2018 financial goals under our annual and long-term incentive plans?

 

Our NEOs’ performance-based pay for fiscal 2018 was based on achieving objective, pre-established financial goals for the following weighted metrics:

 

 

In order to make results comparable from year-to-year for purposes of our incentive programs, total company and International sales, operating income, and ROI are calculated on a constant currency basis and exclude certain items, such as revenue from fuel sales

 

How did we perform in comparison to those goals?

 

Fiscal 2018 Annual Cash Incentive Goals and Results

(in millions)

 

Adjusted Constant Currency Operating Income*

 

 

Adjusted Constant Currency Sales (excluding fuel)*

 

 

* In order to make results comparable from year-to-year, we exclude fuel sales, the impact of currency exchange rate fluctuations, and the effects of certain other items from our reported results of operations for incentive plan purposes. See page 56 for more information.

 

 

54    Walmart  |  2018 Proxy Statement    CD&A  |  6: Fiscal 2018 Performance Goals and Performance

 

Fiscal 2018 Long-Term Performance Equity Goals and Results

 

Adjusted Constant Currency Sales (excluding fuel)*

(in millions)

 

 

Adjusted ROI*

 

 

* In order to make results comparable from year-to-year, we exclude fuel sales, the impact of currency exchange rate fluctuations, and the effects of certain other items from our reported results of operations for incentive plan purposes. See page 56 for more information.

 

How were these results used to determine fiscal 2018 award payouts?

 

The performance compared to each of the goals shown above was then weighted according to each NEO’s performance measure weightings, and was then averaged with results for the prior two years within each three-year performance cycle, as illustrated below. Beginning with the fiscal 2017 grant, our NEOs received performance-based RSUs with a one-year performance period followed by a two-year vesting period ending January 31, 2020.

 

Fiscal 2015 Grant                    
Segment FY 16   FY 17   FY 18       Fiscal 2018  
  Performance   Performance   Performance       Payout  
Walmart U.S. 106.35%   124.83%   121.32%       117.50%  
Sam’s Club 95.32%   124.07%   124.89%       114.76%  
Total Company 104.35%   125.90%   122.46%       117.57%  
                     
Fiscal 2016 Grant                    
Segment     FY 17   FY 18   FY 19      
      Performance   Performance   Performance      
Walmart U.S.     124.83%   121.32%   TBD      
Sam’s Club     124.07%   124.89%   TBD      
Total Company     125.90%   122.46%   TBD      

 

Fiscal 2017 Grant        
Segment   FY 18 Time-based vesting through  
    Performance FY 19 and FY20  
Walmart U.S.   121.32% Scheduled to vest on Jan. 31, 2020  
Sam’s Club   124.89% based on continued employment  
Total Company   122.46%    

 

 

CD&A  |  6: Fiscal 2018 Performance Goals and Performance    Walmart  |  2018 Proxy Statement    55

 

Why do the results used in our incentive plans differ from our reported results of operations for fiscal 2018?

 

The CMDC’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. The CMDC 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.

 

For the reasons above, 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 shareholder-approved incentive plans require that incentive payouts be calculated by excluding the impact of recent acquisitions and divestitures, restructurings and store closings, and similar items on our operating results. For fiscal 2018, items excluded by the terms of our incentive plans represented the majority of the difference between our reported sales and operating income and our sales and operating income as calculated for incentive plan purposes.
   
Items excluded at the time incentive goals are established. When the CMDC sets incentive goals, it typically excludes the impact of certain items from the performance goals. For example, because as a matter of policy we generally do not hedge for currency exchange rate fluctuations, the CMDC sets incentive goals on a “pegged” currency basis excluding the impact of currency exchange rate fluctuations. Similarly, sales goals that exclude the impact of fuel sales because fuel prices are volatile and subject to significant fluctuation, which is out of our management’s control. Also, in light of our significant ongoing investments in eCommerce, when the CMDC established fiscal 2018 operating income goals for our operating segments, it limited the impact of certain operating losses attributable to the eCommerce operations of those operating segments for incentive plan purposes in order to encourage our segment leaders to make these necessary investments. Losses from eCommerce 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 CMDC may exclude certain other items so that results can be calculated on a comparative basis from year-to-year. During fiscal 2018, these included, among others, the exclusion of expenses related to unplanned bonus payments to our U.S. associates, as well as an accrual related to our ongoing FCPA investigation.

 

Impact of excluded items on fiscal 2018 performance for incentive plan purposes

As shown below, by a significant margin, the largest items excluded from our fiscal 2018 reported results of operations consisted of (i) items automatically excluded by the terms of our plans, such as the impact of acquisitions, divestitures, and restructurings, and (ii) items predetermined to be excluded at the time incentive goals were set, such as the impact of currency exchange rate fluctuations, fuel sales, and certain eCommerce losses above the pre-set limit established when goals were set at the beginning of fiscal 2018.

 

$ in millions Operating Income Sales
Metric Total Company Walmart U.S. Sam’s Club Total Company Walmart U.S. Sam’s Club
As Reported $20,437 $17,869 $982 $495,761 $318,477 $59,216
Plan and pre-determined items $1,706 $1,413 $745 ($9,081) ($3,159) ($4,599)
Comparative items $1,148 $143 $25 ($363) ($257) ($105)
Performance for Incentive Plan Purposes $23,291 $19,425 $1,752 $486,317 $315,061 $54,512

 

2018 ROI Adjustments for Long-Term Performance Equity Purposes. When calculating ROI for long-term performance equity purposes, we used the adjusted operating income shown in the table above in the row titled “Performance for Incentive Plan Purposes.” We also made certain minor adjustments to our average invested capital, which is a component of the ROI calculation, to make the calculation comparable year-over-year. The adjustments to average invested capital had the impact of slightly reducing our ROI for incentive plan purposes. Primarily as a result of applying the incentive plan adjustments to operating income described above, our ROI was 15.3% for purposes of our long-term performance share plan, compared to a reported ROI of 14.2%.

 

 

56    Walmart  |  2018 Proxy Statement    CD&A  |  6: Fiscal 2018 Performance Goals and Performance

 
   
7 Fiscal 2018 NEO Pay and Performance Summaries

 

How did our fiscal 2018 performance impact our NEOs’ compensation?

 

Doug McMillon – President and CEO

 

Fiscal 2018 Highlights

 

In addition to the solid financial performance described above on pages 40-41, during fiscal 2018 Mr. McMillon accelerated Walmart’s transformation strategy to become the first company to offer a seamless shopping experience at scale.

 

We continued to deliver on our key strategic priorities and saw continued top-line momentum in stores, clubs, and eCommerce.
   
Our adjusted earnings per share exceeded our initial guidance and we experienced significant stock price appreciation.
   
We accelerated innovation in our business to make shopping faster and easier for our customers.
   
We continued to make investments in our associates, increasing wages, expanding benefits, and opening nearly 200 academies that have trained more than 250,000 associates.


 

Fiscal 2018 Incentive Payouts

 

Annual cash incentive. As our CEO, Mr. McMillon’s annual cash incentive is based on the total company operating income and sales performance, as calculated for incentive plan purposes and as described above on page 56.

 

Performance Metric Weighting Performance (% of Target) Payout (% of Target) Fiscal 2018 Incentive Payout
Total Company OI 75% 125.0%    
      116.4% $ 4,736,751
Total Company Sales 25% 90.5%    

 

Long-term incentive. Mr. McMillon’s long-term performance equity is based on the total company sales and ROI performance, as calculated for incentive plan purposes and as described above on page 56. The table below shows the number of Shares Mr. McMillon earned from his 2015 performance share grant with a performance period ending January 31, 2018.

 

Performance Metric Fiscal 2018
Weighting
3 Year Performance (% of Target) Number of Shares Earned
Total Company Sales 50%    
    117.6% 152,915
Total Company ROI 50%    

 

Key Compensation Decisions for Fiscal 2018   Substantial Stock Ownership
The CMDC made no changes to Mr. McMillon’s target TDC for fiscal 2018, and Mr. McMillon did not receive any special awards for fiscal 2018. When compared to comparable positions within our peer group companies, Mr. McMillon’s fiscal 2018 target TDC was approximately at the 75th percentile of the Top 50 Market Cap peer group and in the top quartile of the Retail Industry and Select Fortune 100 peer groups.   Mr. McMillon is significantly invested in Walmart common stock, owning Shares valued at approximately 70 times his annual base salary, well in excess of his stock ownership guidelines of 7 times annual base salary. We believe that Mr. McMillon’s significant interest in Walmart stock serves to align his interests with those of our shareholders.
     


 

 

CD&A  |  7: Fiscal 2018 NEO Pay and Performance Summaries    Walmart  |  2018 Proxy Statement    57

 

Brett Biggs – EVP and CFO

 

Fiscal 2018 Highlights

 

Mr. Biggs’ integrated financial framework, business perspective, and guidance has continued to help Walmart build trust with customers, investors, and other stakeholders.
   
We maintained consistent working capital discipline and management of inventory and payables in the context of continued key strategic investments and our ongoing transformation.
   
We returned $14.4 billion to shareholders in the form of dividends and share repurchases.


 

Fiscal 2018 Incentive Payouts

 

Annual cash incentive. As our CFO, Mr. Biggs’ annual cash incentive is based on the total company operating income and sales performance, as calculated for incentive plan purposes and as described above on page 56.

 

Performance Metric Weighting Performance (% of Target) Payout (% of Target) Fiscal 2018 Incentive Payout
Total Company OI 75% 125.0%    
      116.4% $2,207,758
Total Company Sales 25% 90.5%    

 

Long-term incentive. Mr. Biggs’ long-term performance equity is based on the total company sales and ROI performance, as calculated for incentive plan purposes and as described above on page 56. The table below shows the number of Shares Mr. Biggs earned from his 2015 performance share grant with a performance period ending January 31, 2018.

 

Performance Metric Fiscal 2018 3 Year Performance (% of Target) Number of Shares Earned
  Weighting    
Total Company Sales 50%    
    117.6% 41,691
Total Company ROI 50%    

 

Key Compensation Decisions for Fiscal 2018

For fiscal 2018, the CMDC increased Mr. Biggs’ salary by 2.5% in light of his performance and peer group positioning, which resulted in a 1.0% increase in Mr. Biggs’ target TDC. When compared to comparable positions within our peer group companies, Mr. Biggs’ fiscal 2018 target TDC was slightly above the 75th percentile of the Retail Industry peer group and below the median of the Top 50 Market Cap and Select Fortune 100 peer groups. Mr. Biggs received no special awards during fiscal 2018.

 


 

 

58    Walmart  |  2018 Proxy Statement    CD&A  |  7: Fiscal 2018 NEO Pay and Performance Summaries

 

Greg Foran – EVP, President and CEO, Walmart U.S.

 

Fiscal 2018 Highlights

 

Walmart U.S. continued its strong top-line performance, with its highest comp sales growth since fiscal 2009.
   
Walmart U.S. continued to show sustained improvements in its stores and customer service scores.
   
Walmart U.S. continued to innovate, expanding online grocery to more than 1,100 locations in the U.S. and accelerating Fresh and prepared meals.
   
Walmart U.S. maintained disciplined inventory management and effectively controlled expenses.
   
Walmart U.S. continued its investments in associate training and opportunity.


 

Fiscal 2018 Incentive Payouts

 

Annual cash incentive. Mr. Foran’s annual cash incentive is based on a combination of total company and Walmart U.S. performance, as calculated for incentive plan purposes and as described above on page 56.

 

Performance Metric Weighting Performance (% of Target) Payout (% of Target) Fiscal 2018 Incentive Payout
Total Company OI 25% 125.0%    
         
Walmart U.S. OI 50% 125.0% 115.3% $2,921,173
         
Walmart U.S. Sales 25% 86.2%    

 

Long-term incentive. Mr. Foran’s long-term performance equity is based on Walmart U.S. sales and total company ROI performance, as calculated for incentive plan purposes and as described above on page 56. The table below shows the number of Shares Mr. Foran earned from his 2015 performance share grant with a performance period ending January 31, 2018.

 

Performance Metric Fiscal 2018
Weighting
3 Year Performance (% of Target) Number of Shares Earned
Walmart U.S. Sales 50%    
    117.5% 64,630
Total Company ROI 50%    

 

Key Compensation Decisions for Fiscal 2018

For fiscal 2018, the CMDC increased Mr. Foran’s salary by 5% in light of his performance and peer group positioning, which resulted in a 2.0% increase in Mr. Foran’s target TDC. The CMDC believes that Mr. Foran, as the head of our Walmart U.S. retail operations, has responsibilities comparable to many CEO positions within our peer group companies, and that it is likely that he would be recruited for a CEO position in the retail industry or elsewhere. When compared to CEO positions at our peer group companies, Mr. Foran’s target TDC is below the median. In January 2016, the CMDC approved a grant of 15,760 shares of performance-based restricted stock to Mr. Foran. In order for the second half of these shares to vest, Walmart U.S. operating, selling, general and administrative expenses during fiscal 2018 were required to be no more than $69.88 billion after adjusting U.S. GAAP results as required by our incentive plans described above. The purpose of this award was to emphasize the importance of managing expenses in our largest operating segment, even as we continue to make critical strategic investments. This goal was achieved, and therefore 7,880 of these shares vested based on fiscal 2018 performance.

 


 

 

CD&A  |  7: Fiscal 2018 NEO Pay and Performance Summaries    Walmart  |  2018 Proxy Statement    59

 

John Furner – EVP, President and CEO, Sam’s Club

 

Fiscal 2018 Highlights

 

Sam’s Club delivered continued solid top-line results and eCommerce growth.
   
Restructured merchandising and club management roles to enhance the member experience.
   
In February 2018, launched free shipping for Plus members.


 

 

Fiscal 2018 Incentive Payouts

 

Annual cash incentive. Mr. Furner’s annual cash incentive is based on a combination of total company and Sam’s Club performance, as calculated for incentive plan purposes and as described above on page 56.

 

Performance Metric Weighting Performance (% of Target) Payout (% of Target) Fiscal 2018 Incentive Payout
Total Company OI 25% 125.0%    
      118.6% $1,665,728
Sam’s Club OI 50% 125.0%    
         
Sam’s Club Sales 25% 99.6%    

 

Long-term incentive. Mr. Furner’s long-term performance equity is based on Sam’s Club sales and total company ROI performance, as calculated for incentive plan purposes and as described above on page 56. The table below shows the number of Shares Mr. Furner earned from his 2015 performance share grant with a performance period ending January 31, 2018.

 

Performance Metric Weighting 3 Year Performance (% of Target) Number of Shares Earned
Sam’s Club Sales 50%    
    124.9% 88,603
Total Company ROI 50%    

 

Key Compensation Decisions for Fiscal 2018

Mr. Furner was promoted to his current position on February 1, 2017, so fiscal 2018 was his first year in role. The CMDC believes that Mr. Furner, as head of our Sam’s Club segment, has responsibilities comparable to many CEO positions within our peer group companies, and that it is likely that he would be recruited for a CEO position within the retail industry or elsewhere. When compared to CEO positions within our peer group companies, Mr. Furner’s target TDC is below the median. In accordance with our customary practice when executives are promoted to significantly larger roles, the CMDC approved an additional grant of performance equity to Mr. Furner for fiscal 2018. This additional “feather-in” grant is intended to allow Mr. Furner to realize a performance equity payout commensurate with his new role for performance equity cycles already in progress.

 


 

 

60    Walmart  |  2018 Proxy Statement    CD&A  |  7: Fiscal 2018 NEO Pay and Performance Summaries

 

Marc Lore – EVP, President and CEO, U.S. eCommerce

 

Fiscal 2018 Highlights

 

U.S. eCommerce sales growth of approximately 44% during the year.
   
Continued to partner with our store and club businesses to accelerate innovation and enhance the customer experience.
   
Continued expansion of our online assortment through acquisitions and strategic partnerships.
   
Successfully completed acquisitions of complementary eCommerce retailers.


 

 

Fiscal 2018 Incentive Payouts

 

Annual cash incentive. Mr. Lore’s fiscal 2018 annual cash incentive was based on the total company operating and sales performance, as calculated for incentive plan purposes and as described above on page 56. His cash incentive was also conditioned on achieving an operating income threshold goal for U.S. eCommerce, which was achieved in fiscal 2018.

 

Performance Metric Weighting Performance (% of Target) Payout (% of Target) Fiscal 2018 Incentive Payout
Total Company OI 75% 125.0%    
      116.4% $2,792,895
Total Company Sales 25% 90.5%    

 

Long-term incentive. Mr. Lore’s long-term performance equity is based on the total company sales and ROI performance, as calculated for incentive plan purposes and as described above on page 56. Because Mr. Lore joined our company in September 2016, his first annual equity grant was granted in January 2017 and is not scheduled to vest until January 31, 2020.

 

Key Compensation Decisions for Fiscal 2018

The CMDC made no changes to Mr. Lore’s target TDC for fiscal 2018. Mr. Lore’s target TDC is near the 75th percentile when compared to presidents and divisional presidents at select technology companies. Mr. Lore did not receive any special awards for fiscal 2018.

 


 

 

CD&A  |  7: Fiscal 2018 NEO Pay and Performance Summaries    Walmart  |  2018 Proxy Statement    61

 
8   Other Compensation Programs and Policies

 

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 our 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. Our NEOs do not participate in any pension or other defined benefit retirement plan.

 

What are our practices for granting equity awards?

 

Timing of Equity Awards. The CMDC 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 most recently completed fiscal year. The CMDC 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 CMDC 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 CMDC take tax consequences into account when setting executive compensation?

 

Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. While the CMDC considers the deductibility of awards as one factor in determining executive compensation, the CMDC also looks at other factors in making its decisions, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by Walmart for tax purposes.

 

Historically, our annual cash incentive opportunities and performance-based equity awards granted to our Executive officers were designed in a manner intended to be exempt from the deduction limitation of Section 162(m) because they were paid based on the achievement of pre-determined performance goals established by the CMDC pursuant to our shareholder-approved incentive plans. Additionally, the CMDC had adopted a policy requiring our “covered employees” subject to Section 162(m) to defer annual restricted stock grants until after they separate from employment from Walmart, subject to certain exceptions.

 

62    Walmart  |  2018 Proxy Statement  •  CD&A  |  8: Other Compensation Programs and Policies

 

Federal legislation signed into law on December 22, 2017, referred to as the Tax Cuts and Jobs Act (the “Tax Act”), repealed the exemption from Section 162(m)’s deduction limit for performance-based compensation, effective for taxable years beginning after December 31, 2017. In addition, the Tax Act expanded the group of covered employees under Section 162(m) to include the chief financial officer and mandated that once an individual is treated as a covered employee for a given year, that individual will be treated as a covered employee for all subsequent years. Accordingly, any compensation paid to our covered Executive Officers in excess of $1 million in any one year, regardless of employment status, will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

 

Despite the CMDC’s efforts to structure incentive compensation in a manner intended to be exempt from Section 162(m) and therefore not subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) as revised by the Tax Act, including the uncertain scope of the transition relief applicable to certain outstanding arrangements, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) will in fact be exempt. Further, the CMDC reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the objectives of our executive compensation program.

 

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 non-competition agreement with each NEO. As described in more detail under “Potential Payments Upon Termination or Change in Control” on page 76, for each of our NEOs other than Mr. Lore, these agreements provide that, if we terminate the NEO’s employment for any reason other than his or her violation of company policy, we will generally make limited severance payments to the NEO.

 

Under these agreements, each NEO other than Mr. Lore 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.

 

In connection with our acquisition of Jet.com, we entered into a non-competition agreement with Mr. Lore under which he agreed that for a period of time from the closing date of the acquisition he will not participate in a business that competes with us and will not solicit our associates for employment. For purposes of this agreement, a competing business generally means a business engaged in eCommerce, selling goods, groceries, merchandise or services directly online or through an online marketplace.

 

These agreements reduce the risk that any 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 of time after leaving our company, or, in the case of Mr. Lore, within a reasonable period of time after the acquisition of Jet.com. 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.

 

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 CMDC 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 CMDC 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 equity awards. 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.

 

CD&A  |  8: Other Compensation Programs and Policies  •  Walmart  |  2018 Proxy Statement     63

 

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 enhanced 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.

 

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 such 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 directors or Executive Officers has any pledging arrangements in place involving Walmart stock.

 

Compensation Committee Report

 

The CMDC 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 CMDC recommended to the Board that the CD&A be included in this proxy statement.

 

The CMDC submits this report:

 

Marissa A. Mayer

 

Carla A. Harris

 

Steven S Reinemund, Chair

 

Kevin Y. Systrom

 

64    Walmart  |  2018 Proxy Statement  •  CD&A  |  8: Other Compensation Programs and Policies

 

Risk Considerations in our Compensation Program

 

The CMDC, 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 CMDC 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 program are capped at 125% and 150% of target payouts, respectively. We believe that these limits mitigate excessive risk-taking, since the maximum amount that can be earned in a single 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.

 

Compensation Committee Interlocks and Insider Participation

 

None of the directors who served on the CMDC or the predecessor committee at any time during fiscal 2018 were officers or associates of Walmart or were former officers or associates of Walmart. Further, none of the members who served on the CMDC or the predecessor committee at any time during fiscal 2018 had any relationship with our company requiring disclosure under the section of this proxy statement entitled “Fiscal 2018 Review of 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 CMDC or the predecessor committee.

 

CD&A  |  8: Other Compensation Programs and Policies  •  Walmart  |  2018 Proxy Statement     65

 

Executive Compensation Tables

 

Summary Compensation

 

Name and
Principal Position
(a)
  Fiscal
Year
ended
Jan. 31
(b)
  Salary
($)
(c)
  Bonus
($)
(d)
  Stock Awards
($)
(e)
  Non-Equity
Incentive Plan
Compensation
($)
(g)
  Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
  All Other
Compensation
($)
(i)
  Total
($)
C. Douglas McMillon   2018   1,276,982   0   15,692,464   4,736,750   611,315   473,765   22,791,276
President and CEO   2017   1,278,989   0   15,224,706   4,851,561   510,155   486,732   22,352,143
    2016   1,263,231   0   14,270,786   3,406,971   404,755   463,054   19,808,797
M. Brett Biggs   2018   871,087   0   4,237,993   2,027,759   140,199   316,133   7,593,171
Executive Vice President   2017   854,670   0   3,176,574   2,026,251   101,880   249,785   6,409,160
and CFO   2016   623,126   0   6,864,337   924,965   81,490   119,140   8,613,058
Gregory S. Foran   2018   1,051,426   0   6,857,031   2,921,173   9,954   178,168   11,017,752
Executive Vice President   2017   1,006,424   0   6,650,490   2,861,535   7,731   1,027,673   11,553,853
    2016   976,334   0   7,035,147   2,491,090   5,929   1,035,779   11,544,279
John R. Furner   2018   780,827   0   9,856,525   1,665,728   35,324   538,384   12,876,788
Executive Vice President                                
                                 
Marc E. Lore   2018   1,030,770   0   6,316,436   2,792,895   0   123,862   10,263,963
Executive Vice President   2017   346,154   0   242,449,136   1,055,136   0   26,113   243,876,539
                                 

 

Explanation of information in the columns of the table:

 

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

Mr. Furner was an NEO for the first time in fiscal 2018. Accordingly, only information relating to his fiscal 2018 compensation is included in the compensation tables and related discussions of NEO compensation. Mr. Lore became an associate in September 2016 upon Walmart’s acquisition of Jet.com and was an NEO for the first time in fiscal 2017; therefore, only information relating to his fiscal 2017 and fiscal 2018 compensation is included in the compensation tables and related discussions of NEO compensation.

 

Salary (column (c))

Represents salaries earned during the fiscal years shown. Mr. McMillon, Mr. Biggs, and Mr. Furner elected to defer $130,000, $299,000, and $13,000 of their fiscal 2018 base salaries, respectively, under the Deferred Compensation Matching Plan.

 

Stock Awards (column (e))

The amount reported in this column for Mr. Lore for fiscal 2017 includes 3,554,093 restricted stock units (“RSUs”), which were granted to Mr. Lore in connection with Walmart’s acquisition of Jet.com. Mr. Lore was the founder, largest shareholder, and CEO of Jet.com. These RSUs vest over a five-year period from the date of the closing of this acquisition, as described in more detail in the footnotes to the “Outstanding Equity Awards at Fiscal 2018 Year-End” table on page 71. In order for these RSUs to vest and be paid out, Mr. Lore generally must continue to be employed by Walmart through the various vesting dates. However, if Walmart terminates Mr. Lore’s employment without cause, or Mr. Lore resigns for good reason, any unvested RSUs will continue to vest in accordance with the vesting schedule. More information regarding amounts that may be owed to Mr. Lore in the event his employment terminates under these circumstances can be found in “Potential Payments Upon Termination or Change in Control” on page 76. Because these RSUs were part of the consideration paid by Walmart to acquire Jet.com, the CMDC does not view the RSUs as part of Mr. Lore’s compensation package,

 

66    Walmart  |  2018 Proxy Statement  •  Executive Compensation Tables

 

and did not consider them when establishing Mr. Lore’s total direct compensation for fiscal 2017 or fiscal 2018. Absent this grant of RSUs, Mr. Lore’s fiscal 2017 total compensation, as reported on the Summary Compensation table, would have been approximately $7.6 million.

 

The CMDC 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 and performance-based restricted stock units approved by the CMDC on January 29, 2018. As described on page 60 of the CD&A, Mr. Furner was also granted additional “feather-in” performance-based restricted stock units during fiscal 2018, which is customary when executives are promoted to significantly larger roles. The value of these additional stock units are included in the amount for Mr. Furner in this column.

 

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.

 

The number of performance-based restricted stock 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-based restricted stock 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-based restricted stock units granted to each NEO during fiscal 2018, 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-based restricted stock 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:

 

Name   Fiscal Year of Grant   Grant Date Fair Value
(Probable Performance)
($)
  Grant Date Fair Value
(Maximum Performance)
($)
C. Douglas McMillon   2018   11,849,998   17,775,049
M. Brett Biggs   2018   3,176,015   4,764,023
Gregory S. Foran   2018   5,232,076   7,848,165
John R. Furner   2018   8,356,566   12,534,849
Marc E. Lore   2018   4,816,477   7,224,715

 

Option Awards (column (f))

We have omitted this column because we did not grant any option awards to NEOs during fiscal 2018, 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 2018, fiscal 2017, and fiscal 2016, respectively, but paid to our NEOs during the following fiscal year. Certain of our NEOs elected to defer a portion of their annual cash incentive payment for fiscal 2018, as follows:

 

Name Amount of Fiscal 2018
Annual Cash Incentive Deferred
($)
C. Douglas McMillon 1,184,188
M. Brett Biggs 1,013,879
John R. Furner 1,026,010

 

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.

 

Executive Compensation Tables  •  Walmart  |  2018 Proxy Statement     67

 

All Other Compensation (column (i))

“All other compensation” for fiscal 2018 includes the following amounts:

 

Name   401(k) Plan Matching
Contributions
($)
  Personal Use
of Company Aircraft
($)
  Company Contributions to
Deferred Compensation Plans
($)
C. Douglas McMillon   16,200   77,020   371,700
M. Brett Biggs   16,200   79,422   216,903
Gregory S. Foran   16,200   75,717   0
John R. Furner   16,200   88,605   130,109
Marc E. Lore   0   123,496   0

 

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.

“All other compensation” for fiscal 2018 also includes the following amounts:

 

$41,202 in tax preparation and related services provided to Mr. Foran in connection with his prior expatriate assignments and current position based in the U.S. outside of his home country, as well as tax gross-ups primarily related to these services in the amount of $42,813.
   
$298,201 in net tax equalization and tax preparation and related services provided to Mr. Furner in connection with his prior expatriate assignments. In accordance with our tax equalization policy for all expatriates, Walmart provided tax services and made certain income tax payments on Mr. Furner’s behalf so that Mr. Furner’s effective income tax equalization was equal to what it would have been if all of his taxable income was subject only to state and federal income taxes in the U.S. Certain of these amounts were paid in Chinese Yuan Renminbi (CNY) and in Hong Kong Dollars (HKD) and are reported here using average exchange rates during fiscal 2018 of 1 USD = 8.105 CNY and 1 USD = 7.030 HKD.

 

The amounts in this column for fiscal 2018 also include tax gross-up payments for certain of our other NEOs in amounts less than $10,000. The amounts in this column for fiscal 2018 also include the cost of term life insurance premiums and physical examinations for certain of our NEOs and upgrades to security systems at Mr. McMillon’s primary residence. 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 threshold set forth in Instruction 4 to Item 402(c)(2)(ix) of Regulation S-K.

 

68    Walmart  |  2018 Proxy Statement  •  Executive Compensation Tables

 

Fiscal 2018 Grants of Plan-Based Awards

 

                All Other    
                Stock Awards:   Grant Date
        Estimated Future Payouts Under   Estimated Future Payouts Under   Number of   Fair Value of
        Non-Equity Incentive Plan Awards   Equity Incentive Plan Awards   Shares of Stock   Stock and
        Threshold   Target   Maximum   Threshold   Target   Maximum   or Units   Option Awards
    Grant   ($)   ($)   ($)   (#)   (#)   (#)   (#)   ($)
Name   Date   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (l)
C. Douglas McMillon       1,526,400   4,070,400   5,088,000                    
    1/29/18               57,269   114,537   171,806       11,849,998
    1/29/18                           35,075   3,842,466
M. Brett Biggs       669,773   1,786,062   2,232,578                    
    1/29/18               15,349   30,698   46,047       3,176,015
    1/29/18                           9,694   1,061,978
Gregory S. Foran       997,618   2,660,314   3,325,392                    
    1/29/18               25,286   50,571   75,857       5,232,076
    1/29/18                           14,833   1,624,955
John R. Furner       539,663   1,439,100   1,798,875                    
    1/29/18               39,741   79,482   119,223       8,356,566
    1/29/18                           13,692   1,499,959
Marc E. Lore       922,500   2,460,000   3,075,000                    
    1/29/18               23,277   46,554   69,831       4,816,477
    1/29/18                           13,692   1,499,959

 

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 2019. 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    
John R. Furner 25% Total Company Operating Income   25% Sam’s Club Sales
  50% Sam’s Club Operating Income    
Marc E. Lore 75% Total Company Operating Income   25% Total Company Sales

 

In addition, Mr. Lore’s annual cash incentive payment for fiscal 2019 is conditioned on losses from U.S. eCommerce not exceeding a pre-determined dollar amount. The CD&A provides additional information regarding our annual cash incentive plan.

 

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

The amounts in these columns represent the threshold, target, and maximum number of Shares that may vest with respect to performance-based restricted stock units granted during fiscal 2018. Holders of performance-based restricted stock units do not earn dividends or enjoy other rights of shareholders until such performance-based restricted stock units have vested. All performance-based restricted stock units granted to our NEOs in fiscal 2018 are scheduled to vest on January 31, 2021, with the number of units vesting based on performance during fiscal 2019, with the exception of 32,928 of the target performance-based restricted stock units granted to Mr. Furner, which are scheduled to vest on January 31, 2019, with the number of units vesting based on performance during fiscal 2019. The CD&A provides additional information regarding our performance equity program and the related performance measures. For these grants made in fiscal 2018 related to performance in fiscal 2019, the applicable performance measures are: (i) return on investment; and (ii) sales growth of our

 

Executive Compensation Tables  •  Walmart  |  2018 Proxy Statement     69

 

company or one of its operating segments, depending on each NEO’s primary area of responsibility. Each NEO’s performance measure weighting for fiscal 2019 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
John R. Furner 50% Total Company Return on Investment   50% Sam’s Club Sales
Marc E. Lore 50% Total Company Return on Investment   50% Total Company Sales

 

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

The amounts in this column represent Shares of restricted stock granted during fiscal 2018. Restricted stock awards vest based on the continued service of the NEO as an associate through the vesting date. All Shares of restricted stock included in this column are scheduled to vest on January 19, 2021.

 

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 2018.

 

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-based restricted stock units are based on the probable outcome of those awards on the date of grant. The fair values of performance-based restricted stock units and restricted stock units are discounted for the expected dividend yield during the vesting period. The grant date fair value of the equity awards awarded on January 29, 2018 was determined based on a per-Share amount of $109.55, which was the closing price of a Share on the NYSE on that date. Performance-based restricted stock units granted on January 29, 2018 with a vesting period ending January 31, 2021 were valued using a discounted per-Share value of $103.46. Performance-based restricted stock units granted on January 29, 2018 with a vesting period ending January 31, 2019 were valued at a weighted per-Share fair value of $107.51.

 

70    Walmart  |  2018 Proxy Statement  •  Executive Compensation Tables

 

Outstanding Equity Awards at Fiscal 2018 Year-End

 

   Stock Awards
         Equity Incentive Plan Awards:  Equity Incentive Plan Awards:
      Market Value of Shares  Number of Unearned Shares,  Market or Payout Value of
   Number of Shares or Units of  or Units of Stock That  Units or Other Rights That Have  Unearned Shares, Units or Other
   Stock That Have Not Vested  Have Not Vested  Not Vested  Rights That Have Not Vested
   (#)  ($)  (#)  ($)
Name  (g)  (h)  (i)  (j)
C. Douglas McMillon  383,829  40,916,171  413,056  44,031,770
M. Brett Biggs  85,013  9,062,386  93,136  9,928,298
Gregory S. Foran  168,121  17,921,699  177,314  18,901,672
John R. Furner  141,399  15,073,133  137,344  14,640,870
Marc E. Lore  3,150,883  335,884,128  69,831  7,443,985

 

Explanation of information in the columns of the table:

 

Option Awards (columns (b) through (f))

We have omitted these columns because none of our NEOs held any options to purchase Shares or other Walmart securities as of the end of fiscal 2018.

 

Number of Shares or Units of Stock that Have Not Vested (column (g))

The amounts in this column represent Shares of restricted stock and restricted stock units with service-based vesting requirements, including performance-based restricted stock units for which the performance conditions have been satisfied, scheduled to vest in amounts and on the dates shown in the following table (restricted stock units are identified with a (1), and performance-based restricted stock units for which the performance conditions have been satisfied are identified with a (2)):

 

Vesting Date  C. Douglas McMillon  M. Brett Biggs  Gregory S. Foran  John R. Furner  Marc E. Lore  
February 15, 2018      2,454(1)     
March 13, 2018    3,097    1,858(1)   
August 7, 2018        3,236(1)   
January 25, 2019  60,559  11,820  25,611     
March 19, 2019        4,542   
January 21, 2020  57,652  11,253  24,381  22,506  22,506  
January 31, 2020  230,543(2)  49,149(2)  100,842(2)  95,565(2)  93,705 (2) 
January 19, 2021  35,075  9,694  14,833  13,692  13,692  

 

In addition, the amount for Mr. Lore shown in this column includes 3,020,980 restricted stock units granted to Mr. Lore on September 19, 2016 in connection with Walmart’s acquisition of Jet.com, as described in the footnotes to the Summary Compensation table on page 66. These restricted stock units are scheduled to vest in installments through September 28, 2021, as follows: 44,426 restricted stock units are scheduled to vest per month through September 2018; 59,353 restricted stock units are scheduled to vest per month from October 2018 through September 2019; 73,925 restricted stock units are scheduled to vest per month from October 2019 through September 2020; 88,852 restricted stock units are scheduled to vest per month from October 2020 through August 2021; and 88,864 restricted stock units are scheduled to vest on September 28, 2021. In order for these restricted stock units to vest and be paid out, Mr. Lore generally must continue to be employed by Walmart through the various vesting dates. However, if Walmart terminates Mr. Lore’s employment without cause, or Mr. Lore resigns for good reason, any unvested restricted stock units will continue to vest in accordance with the vesting schedule described above.

 

Market Value of Shares or Units of Stock That Have Not Vested (column (h))

This column shows the market value of the Shares of restricted stock and restricted stock units in column (g), based on the closing price of a Share on the NYSE on the last trading day of fiscal 2018 ($106.60 on January 31, 2018).

 

Executive Compensation Tables     Walmart  |  2018 Proxy Statement     71

 

Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (column (i))

The amounts in this column represent performance share units and performance-based restricted stock units held by our NEOs, the vesting of which is subject to our company meeting certain performance goals as described in the CD&A and in the notes to the Summary Compensation and Fiscal 2018 Grants of Plan-Based Awards tables. The amounts in this column assume that performance share units and performance-based restricted stock units will vest at maximum levels. The maximum number of Shares scheduled to vest for each of the NEOs on January 31, 2019 and January 31, 2021 if maximum level performance goals are met are as follows:

 

   Scheduled to Vest  Scheduled to Vest
Name  1/31/2019  1/31/2021
C. Douglas McMillon  241,250  171,806
M. Brett Biggs  47,089  46,047
Gregory S. Foran  101,457  75,857
John R. Furner  67,513  69,831
Marc E. Lore    69,831

 

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (column (j))

This column shows the market value of the performance share units in column (i), assuming payouts at maximum levels and based on the closing price of a Share on the NYSE on the last trading day of fiscal 2018 ($106.60 on January 31, 2018).

 

Fiscal 2018 Option Exercises and Stock Vested

 

   Option Awards  Stock Awards
   Number of Shares  Value Realized  Number of Shares  Value Realized
   Acquired on Exercise  on Exercise  Acquired on Vesting  on Vesting
   (#)  ($)  (#)  ($)
Name  (b)  (c)  (d)  (e)
C. Douglas McMillon      196,269  18,065,823
M. Brett Biggs      53,950  4,497,151
Gregory S. Foran      96,854  8,788,040
John R. Furner      97,170  8,511,747