DEF 14A 1 d458102ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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LOGO

December 19, 2017

To our Stockholders:

You are invited to attend our annual meeting of stockholders at 9:00 a.m. local time, February 2, 2018, at The Westin Buckhead Atlanta, 3391 Peachtree Road, N.E., Atlanta, GA 30326. Enclosed you will find a meeting notice, a related proxy statement, a proxy or voting instruction card, and our 2017 annual report to stockholders. We encourage you to read the materials and promptly vote your shares whether or not you are able to attend the annual meeting in person.

In the two and a half years since we formed WestRock, we have made remarkable progress toward realizing our vision of becoming the premier partner and unrivaled provider of winning solutions to our customers.

We have pursued our differentiated strategy of delivering winning solutions to our customers and realizing the benefits of our broad product offerings, capabilities and geographic footprint. And this strategy is yielding exceptional results. In fiscal 2017, we generated $14.9 billion of net sales and $1.9 billion of net cash provided by operating activities.

We have transformed our product portfolio to align our resources around our core paper and packaging solutions businesses. In May 2016, we completed the separation of our specialty chemicals business and, in April 2017, we sold our dispensing business for net after-tax proceeds of $1.0 billion. In fiscal 2017, we also made significant progress in monetizing our land and development asset portfolio.

Our financial strength has enabled us to invest in our business to promote long-term value for our stockholders. In fiscal 2017:

 

    We acquired Multi Packaging Solutions International Ltd. for $2.3 billion. This acquisition improved our position as a provider of differentiated paper and packaging products, and increased our participation in higher growth markets.

 

    We also acquired U.S. Corrugated Holdings Inc., Hanna Group Pty Ltd and the assets of Island Container Corp. and Star Pizza Box for aggregate consideration of approximately $370 million. These acquisitions allowed us to increase the integration levels in our Corrugated Packaging segment and expand the geographic footprint of our Consumer Packaging segment.

We have continued to execute our merger integration initiatives, which are more important than ever given the inflationary cost environment within which we operate. In fiscal 2017, we captured $361 million of year-over-year productivity improvements and achieved an annualized run rate of syneries and performance improvements of $840 million at September 30, 2017.

Finally, we returned $496 million to our stockholders in fiscal 2017 through dividends and share repurchases. We recently increased our dividend by 7.5%, and we have increased our dividend by 15% over the past two years.

We are excited about the paper and packaging leader we are building and we will look to capitalize on opportunities in 2018 to continue delivering long-term value for our stockholders.

On behalf of our Board of Directors and our 45,000 team members around the world, thank you for your continued support.

Very truly yours,

 

   LOGO

Steven C. Voorhees

Chief Executive Officer and President


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LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

  TIME AND DATE:      9:00 a.m., local time, on Friday, February 2, 2018
  PLACE:      The Westin Buckhead Atlanta, 3391 Peachtree Road,
       N.E., Atlanta, GA 30326
  ITEMS OF BUSINESS:      (1)      To elect 12 directors
       (2)      To hold an advisory vote to approve executive compensation
       (3)      To approve the WestRock Company Second Amended and Restated Annual Executive Bonus Plan to re-approve the material terms of the plan and the performance goals provided thereunder
       (4)      To approve the WestRock Company Amended and Restated 2016 Incentive Stock Plan and the performance goals provided thereunder
       (5)      To ratify the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm
       (6)      To transact any other business that properly comes before the meeting or any adjournment of the meeting
  WHO MAY VOTE:      You may vote if you were a holder of our common stock of record on December 6, 2017
 

DATE THESE PROXY MATERIALS

WERE FIRST MADE AVAILABLE ON

THE INTERNET:

     December 19, 2017


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TABLE OF CONTENTS

 

PROXY SUMMARY

  

Meeting Information

   2

Meeting Agenda

   2

Director Nominees

   2

Governance Highlights

   3

Performance Highlights and Key Accomplishments

   3

Compensation Highlights and Enhancements

   4

BOARD AND GOVERNANCE MATTERS

  

Item 1. Election of Directors

   5

Governance Framework

   5

Board Composition

   5

Board Operations

   13

Director Compensation

   17

Certain Relationships and Related Transactions

   18

Communicating with the Board

   18

COMPENSATION MATTERS

  

Item 2. Advisory Vote to Approve Executive Compensation

   19

Item  3. Approval of the WestRock Company Second Amended and Restated Annual Executive Bonus Plan

   20

Item  4. Approval of the WestRock Company Amended and Restated 2016 Incentive Stock Plan

   23

Compensation Discussion and Analysis

   28

Executive Compensation Tables

   42

AUDIT MATTERS

  

Item 5. Ratification of the Appointment of Ernst & Young, LLC

   53

Report of the Audit Committee

   53

Fees of the Independent Registered Public Accounting Firm

   54

Pre-Approval Policies and Procedures

   54

OTHER IMPORTANT INFORMATION

  

Beneficial Ownership of Common Stock

   55

Section 16(a) Beneficial Ownership Reporting Compliance

   56

Annual Report on Form 10-K

   56

Stockholder Proposals and Director Nominations for the 2019 Annual Meeting

   56

Frequently Asked Questions Regarding the Annual Meeting and Voting

   57

Non-GAAP Reconciliations

   59

WestRock Company Second Amended and Restated Annual Executive Bonus Plan

   A-1

WestRock Company Amended and Restated 2016 Incentive Stock Plan

   B-1


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PROXY SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting.

 

MEETING INFORMATION   
  Time and Date    9:00 a.m., Eastern time, on Friday, February 2, 2018
  Location    The Westin Buckhead Atlanta, 3391 Peachtree Road, N.E., Atlanta, GA 30326
  Record Date    Wednesday, December 6, 2017

 

MEETING AGENDA      
Proposals    Recommendation    Page    

Election of 12 Directors

   FOR each nominee    5

Advisory Vote to Approve Executive Compensation

   FOR    19

Approval of the WestRock Company Second Amended and Restated Annual Executive Bonus Plan

   FOR    20

Approval of the WestRock Company Amended and Restated 2016 Incentive Stock Plan

   FOR    23

Ratification of Appointment of Ernst & Young, LLC

   FOR    53

DIRECTOR NOMINEES

 

  Name

  Age         Director      
Since
  Experience   Committee
Memberships   
  Other
Public
Company   
Boards
  Timothy J. Bernlohr*   58   2015  

 

Managing Member, TJB Management Consulting, LLC

 

  EC, CC**,NCG   3
  J. Powell Brown*   50   2015  

 

President and CEO, Brown & Brown, Inc.

 

  AC, FC   1
  Michael E. Campbell*   70   2015  

 

Former Chairman, President and CEO, Arch Chemicals, Inc.

 

  CC, NCG   0
  Terrell K. Crews*   62   2015  

 

Former Executive Vice President, CFO, Monsanto Corporation

 

  AC, FC   2
  Russell M. Currey*   56   2015  

 

President, Boxwood Capital, LLC

 

  AC, FC   0
  John A. Luke   69   2015  

 

Non-Executive Chairman, WestRock Company; Former Chairman and CEO, MeadWestvaco Corporation

 

  EC**   3
  Gracia C. Martore*   66   2015  

 

Former President and CEO, TEGNA, Inc.

 

  EC, AC**, CC   2
  James E. Nevels   65   2015  

 

Chairman, The Swarthmore Group

 

  NCG, FC   3
  Timothy H. Powers*   69   2015  

 

Former Chairman, President and CEO, Hubbell, Inc.

 

  AC, CC   1
  Steven C. Voorhees   63   2015  

 

President and CEO, WestRock Company

 

  EC   1#
  Bettina M. Whyte*   68   2015  

 

President/Owner, Bettina Whyte Consultants, LLC

 

  EC, CC, NCG**   0
  Alan D. Wilson*   60   2015  

 

Former Chairman and CEO, McCormick & Company, Inc.

 

  NCG, FC**   2

* Denotes Independent Director; ** Denotes Committee Chairman; § Denotes Lead Independent Director

AC = Audit Committee; CC = Compensation Committee; EC = Executive Committee; FC = Finance Committee; NCG = Nominating and Corporate Governance Committee

# Mr. Voorhees’ appointment to the board of directors of SunTrust Banks, Inc. is effective January 1, 2018.

 

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GOVERNANCE HIGHLIGHTS

We believe good corporate governance promotes long-term value for our stockholders. The “Board and Governance Matters” section beginning on page 5 describes our corporate governance framework that supports independent oversight and accountability.

 

 

 

Independent Oversight

     

 

Accountability

 

   10 of 12 director nominees are independent

     

   Annual election of all directors

 

   Lead Independent Director

     

   Majority voting in uncontested elections

 

   All independent key committees

     

   Annual Board and committee evaluations

 

   Regular executive sessions of independent directors

     

   Annual advisory vote on executive compensation

 

   Mandatory retirement age

     

   Stock ownership guidelines

       

   Over-boarding policy

 

Stockholder engagement is a key pillar of our corporate governance framework and we are committed to active engagement with our stockholders throughout the year. During 2017, we conducted an outreach program pursuant to which we engaged directly with stockholders representing approximately 34% of our outstanding shares to discuss governance and executive compensation matters, as well as other issues of interest to them. We believe our ongoing engagement with stockholders helps us achieve balanced and appropriate solutions for our stockholders.

PERFORMANCE HIGHLIGHTS AND KEY ACCOMPLISHMENTS

Our fiscal 2017 performance highlights include:

 

 

$ 361 Million

 

Of Year-Over-Year

Productivity Improvements

 

   

 

$ 496 Million

 

Returned to Stockholders Through Dividends and Share Repurchases

 

   

 

$1.9 Billion

 

Of Net Cash Provided by Operating Activities

 

Our fiscal 2017 key accomplishments include:

 

 

 

Completed Acquisition of Multi-Packaging Solutions

      

 

Deployed Approximately $370 Million to Other Strategic Opportunities

 

 

We successfully completed the acquisition of Multi- Packaging Solutions International Limited (“MPS”) for approximately $2.3 billion. The acquisition strengthened our differentiated portfolio of paper and packaging solutions, and allowed us to increase the integration levels in our Consumer Packaging segment.

      

 

We allocated a portion of our substantial cash flow to other strategic acquisitions. For example, we acquired U.S. Corrugated Holdings, Inc., Hanna Group Pty Ltd and the assets of Island Container Corp. and Star Pizza Box. These acquisitions allowed us to increase the integration levels in our Corrugated Packaging segment and expand the geographic footprint of our Consumer Packaging segment.

        
 

 

Completed Divestiture of Dispensing Business

 

We successfully completed the divestiture of our dispensing business for approximately $1.0 billion net of tax. The divestiture has allowed us to better focus on our core businesses and markets.

 

      

 

Successfully Refinanced $1.0 billion of Debt

 

We successfully refinanced $1.0 billion of debt at attractive rates of 3.00% for seven-year senior unsecured notes and 3.375% for ten-year senior unsecured notes.

 

 

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COMPENSATION HIGHLIGHTS AND ENHANCEMENTS

Our executive compensation program is based on a pay-for-performance model. Eighty-nine percent of targeted total direct compensation for our CEO in fiscal 2017 was at risk, and only 11% of his compensation was fixed, ensuring a strong link between his targeted total direct compensation and our financial and operating results. An average of approximately 76% of targeted total direct compensation for the other NEOs (other than Mr. Shore, who joined us in June 2017 as part of the MPS acquisition) was at risk in fiscal 2017. The allocation of variable target direct compensation for our CEO and other NEOs aligns with our compensation philosophy of motivating our executive officers to achieve our overall performance objectives in the short term and to grow our business to create long-term value for our stockholders.

We made several enhancements to our 2017 executive compensation program to further link the program with our business strategies and the long-term interests of our stockholders. Key enhancements are highlighted below.

 

 

 

What We Did

 

      

 

Why We Did It

 

        
 

   Increased the weighting of the consolidated EBITDA(1) and productivity goals under our annual incentive program

  LOGO     

   To maximize EBITDA over the long-term in order to drive stockholder value and realize productivity improvements that will help us realize our synergy and performance improvement goals

 

   Transitioned from an approximate 75% to 130% payout range under our annual incentive program to a more competitive 50% to 200% payout range

  LOGO     

   To enhance the reward for outstanding performance and hold executives more accountable for below-target performance, and to conform our practice with the prevalent practice among our peer group

 

   Used the safety goal as a negative modifier, rather than assigning it a weighting

  LOGO     

   To further emphasize safety as a fundamental priority of the Company

 

   Changed the mix of vehicles in the long-term incentive program by replacing stock options with time-based restricted stock grants and added an additional performance-based stock component based on our achievement of a relative total shareholder return measure

 

  LOGO     

   To better align our executives’ and stockholders’ interests, leverage more of our long-term incentive mix against our Common Stock price performance and utilize fewer shares

 

(1) See “Compensation Discussion and Analysis – Compensation Elements – Annual Performance Bonus (STI) – Performance Goals” for the definition of this non-GAAP financial measure and “Other Important Information – Non-GAAP Reconciliations”.

We view our executive compensation program as a strategic tool that supports the successful execution of our business strategy. For fiscal 2017, we continued to focus on EBITDA and free cash flow generation, and realizing productivity improvements. Our short-term incentive program placed substantial weight on achieving consolidated EBITDA, segment EBITDA and productivity goals – for example, 90% of our CEO’s and CFO’s short-term incentive goals were based on the achievement of consolidated EBITDA and productivity goals. Eighty percent of our long-term incentive award value consisted of performance-based stock, of which 50% was based on a cash flow per share measure. See “Compensation Discussion and Analysis – Compensation Elements – Annual Performance Bonus (STI) – Performance Goals” for more information about these financial measures and the weightings we assigned to them within our executive compensation program.

For fiscal 2017, the target opportunity for the consolidated EBITDA and productivity improvements components of our short-term incentive program were $2,347.4 million and $345 million, respectively. In fiscal 2017, we generated consolidated EBITDA of $2,367.7 million and realized $361 million of year-over-year productivity improvements, each of which exceeded the target opportunity of these components of our short-term incentive program and therefore resulted in awards that were greater than the target opportunity for these components of our NEOs’ bonuses.

 

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BOARD AND GOVERNANCE MATTERS

 

 

 

ITEM 1. ELECTION OF DIRECTORS

 
  What am I voting on? Stockholders are being asked to elect each of the 12 director nominees named in this Proxy Statement to hold office until the annual meeting of stockholders in 2019 and until his or her successor is elected and qualified  
  Voting Recommendation: FOR the election of each of the 12 director nominees  
 

Vote Required: A director will be elected if the number of shares voted FOR that director exceeds the number of votes AGAINST that director

 

 

GOVERNANCE FRAMEWORK

All of our corporate powers are exercised by or under the authority of our board of directors (the “Board”), and our business and affairs are managed under the direction of the Board, subject to limitations and other requirements in our charter documents or in applicable statutes, rules and regulations, including those of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”).

Our governance framework supports independent oversight and accountability.

 

  

 

Independent Oversight

       

 

Accountability

  

    10 of 12 director nominees are independent

       

    Annual election of all directors

  

    Lead Independent Director

       

    Majority voting in uncontested elections

  

    All independent key committees

       

    Annual Board and committee evaluations

  

    Regular executive sessions of independent directors

       

    Annual advisory vote on executive compensation

  

    Mandatory retirement age

       

    Stock ownership guidelines

          

    Over-boarding policy

 

Our governance framework is based on the key governance documents listed below, each of which is reviewed by the Board at least annually, except for the Bylaws (as defined below) and certificate of incorporation, which are reviewed periodically:

 

    Second Amended and Restated Bylaws (the “Bylaws”)

 

    Amended and Restated Certificate of Incorporation

 

    Corporate Governance Guidelines (the “Guidelines”)

 

    Charters of the Audit Committee, Compensation Committee, Finance Committee and Nominating and Corporate Governance Committee (the “Governance Committee”)

 

    Code of Conduct

 

    Code of Business Conduct and Ethics for Directors

 

    Code of Ethical Conduct for CEO and Senior Financial Officers.

Copies of these documents are available on our website, www.westrock.com, or upon written request sent to our Corporate Secretary. The information on our website is not part of this Proxy Statement.

BOARD COMPOSITION

The Board consists of 12 directors, six of whom previously served on the Rock-Tenn Company board of directors and six of whom previously served on the MeadWestvaco Corporation board of directors. RockTenn and MeadWestvaco completed a strategic combination of their businesses on July 1, 2015 (the “Combination”).

 

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Director Independence

Under the Guidelines and the corporate governance listing standards of the NYSE (the “NYSE Standards”), the Board must consist of a majority of independent directors. The Board annually reviews director independence under standards set forth in the Guidelines. A director is “independent” under the Guidelines only if he or she satisfies all of the standards for independence regarding directors set forth in (i) the NYSE Standards and other applicable NYSE rules, (ii) final rules and regulations adopted by the SEC and (iii) all other applicable law.

The Board has affirmatively determined that all director nominees, other than Messrs. Luke and Voorhees, are independent. Mr. Luke is not independent because he was an employee of MeadWestvaco immediately prior to the effective date of the Combination. Mr. Voorhees is not independent because he is an employee of WestRock.

In the normal course of business, we purchase products and services from many suppliers and we sell products and services to many customers. In some cases, these transactions occur with companies with which Board members have relationships as directors or executive officers. Board members also have relationships as directors or executive officers with companies that hold or held our securities. For example, the Board considered the aggregate amount of payments made in the ordinary course of business by us to Brown & Brown, Inc. and the aggregate amount of payments received by us from Gannett Company, Inc. and McCormick & Company during the last three years. The Board determined these, and similar, relationships were not material (individually or collectively) for purposes of its affirmative determinations of director independence.

Director Nomination Process

The Governance Committee is responsible for evaluating and recommending candidates for the Board. After completing its evaluation of candidates, the Governance Committee presents its recommendations to the Board for consideration and approval.

 

 

Candidates

recommended to

Governance Committee

 

  u    

Governance Committee

considers candidates’

qualifications

  u     

Governance Committee

recommends candidates

to Board

  u    

Board determines

nominees for election

 

 

The Governance Committee periodically assesses the Board to ensure that it has the right mix of experience, qualifications and skills. To facilitate these assessments, the Governance Committee has developed a matrix to assess the level of experience of each director in certain areas that we consider important in light of our current business strategy and structure. A list of the skills and experiences included in the matrix most recently used by the Governance Committee, along with an indication of how many of the director nominees have the particular skill or experience, appears on page 7. The directors’ biographies (beginning on page 8) note each director’s relevant experience, qualifications and skills.

  

 

2017 Governance

Enhancement

Following an assessment of director experience, qualifications and skills, the Governance Committee enhanced the skills matrix by adding five new skills/ experiences.

 

The Governance Committee also periodically assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. If no vacancies are anticipated, the Governance Committee considers the qualifications of incumbent directors. If vacancies arise or are anticipated, it considers various potential director candidates. Candidates may come to the attention of the Governance Committee through current directors, professional search firms and advisors or other persons, including our stockholders. While nominations for director candidates are closed for the Annual Meeting, to recommend a candidate for next year’s annual meeting of stockholders, a stockholder must deliver or mail its nomination submission to WestRock Company, 1000 Abernathy Road, Suite 125, Atlanta, Georgia 30328, Attention: Corporate Secretary in accordance with the timing requirements set forth under the Bylaws as specified in “Other Important Information — Stockholder Proposals or Director Nominations for 2019 Annual Meeting”.

The Governance Committee evaluates potential candidates against the standards and qualifications set forth in the Guidelines, as well as other relevant factors it deems appropriate. In addition, each candidate must:

 

    Be free of conflicts of interest and other legal and ethical issues that would interfere with the proper performance of the responsibilities of a director (recognizing that some directors may also be executive officers of the Company).

 

    Be committed to discharging directors’ duties in accordance with the Guidelines and applicable law.

 

    Be willing and able to devote sufficient time and energy to carrying out the director’s duties effectively and be committed to serving on the Board.

 

    Have sufficient experience to enable the director to meaningfully participate in deliberations of the Board and one or more of its committees, and to otherwise fulfill the director’s duties.

 

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The table below lists the skills and experiences that we consider important in light of our current business strategy and structure, along with the number of director nominees who have the particular skill or experience.

 

 

 

    Skill/Experience

 

  

 

# of Directors  

 

   

Global Business Experience to help oversee the management of our global operations.

 

   9 of 12    
   

Mergers & Acquisitions Experience to provide insight into developing and implementing strategies for growing our businesses.

 

   11 of 12    
   

Financial Expertise to help drive our operating and financial performance.

 

   9 of 12    
   

Public Company CEO Experience to help us drive business strategy, growth and performance.

 

   7 of 12    
   

Public Company Board Experience to help us oversee an ever-changing mix of strategic, operational and compliance-related matters.

 

   10 of 12    
   

Capital Allocation Experience to help us allocate capital efficiently.

 

   11 of 12    
   

Paper and Packaging Experience to help us deepen our understanding of the markets within which we compete.

 

   5 of 12    
   

Manufacturing Experience to help us drive operating performance.

 

   10 of 12    
   

Senior Executive Experience (1) to assist us in analyzing, shaping and overseeing the execution of important operational and policy issues.

 

   12 of 12    
   

Technology Experience (1) to assist us as we seek to identify, understand and respond to the impact of technology on our long-term success.

 

   2 of 12    
   

Consumer Markets Experience (1) to assist us to better understand and anticipate our customers’ needs and the changing dynamics of our industry.

 

   5 of 12    
   

Enterprise Risk Management Experience (1) to assist us in our oversight and understanding of significant areas of risk to the enterprise and in implementing appropriate policies and procedures to effectively manage risk.

 

   11 of 12    
   

Financial Experience as a CFO or CAO (1) to help us oversee and continuously improve our financial reporting processes.

   3 of 12    

       (1) New for 2017.

The Board does not have a specific diversity policy. The Board strives to select candidates for Board membership who represent a mix of diverse experience, background and thought at policy-making levels that are relevant to our activities, as well as other characteristics that will contribute to the overall ability of the Board to perform its duties and meet changing conditions.

Board Refreshment

The Governance Committee regularly considers the long-term composition of the Board and how its members change over time.

In fiscal 2017, the Governance Committee engaged Russell Reynolds Associates, Inc. to provide advisory services related to board refreshment. Russell Reynolds has since interviewed all current directors to capture their perspectives on our culture and the culture of the Board, and to seek their views on the potential skills needed on the Board in the coming years. The Governance Committee will work with Russell Reynolds to evaluate the Board annually to determine gaps and identify which competencies are most needed to support our long-term strategy.

The Board has established a retirement age for directors. Directors must retire when they reach age 72, provided a director may continue to serve until the next annual or special meeting of stockholders at which the director is to be elected after he or she reaches age 72 and, on an exceptional basis, the Board may extend a director’s term for a limited period of time.

The Board has not established term limits because it believes that, on balance, term limits would sacrifice the contribution of directors who have been able to develop over a period of time increasing insight into us and our operations. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending his or her nomination for an additional term. In addition, a director who has a significant change in his or her full time job responsibilities must submit a letter of resignation resigning from the Board and each committee on which he or she serves. The submission of a letter of resignation provides an opportunity for the Board to review the continued appropriateness of the director’s membership on the Board and each applicable committee under the circumstances.

 

 

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Majority Voting Standard in Uncontested Elections

Our directors are elected by a majority of the votes cast for them in uncontested elections. If a director does not receive a greater number of “for” votes than “against” votes, then the director must tender his or her resignation to the Board. The Board then determines whether to accept the resignation. Our directors are elected by a plurality vote standard in contested elections.

Over-Boarding Policy

Our directors may not serve on more than four other public company boards, and a director who serves as a CEO must limit his or her other public company directorships to two. None of our director nominees serves on more than three other public company boards.

Director Nominees

After evaluating each director and the composition of the Board, the Governance Committee recommended all of the current directors for election. If elected, each of the 12 nominees will hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified. Each nominee has agreed to serve as a director if elected. If for some unforeseen reason a nominee becomes unwilling or unable to serve, proxies will be voted as recommended by the Board to elect substitute nominees recommended by the Board or the Board may allow the vacancy created to remain open until such time as it is filled by the Board, or the Board may determine not to elect substitute nominees and may instead determine to reduce the size of the Board.

Information about the nominees, including information concerning their qualifications for office, is set forth below.

 

 

  TIMOTHY J.

  BERNLOHR

 

  Age:

  58

 

  Director Since:

  2015

 

  Independent

 

  Committees:

 

     Compensation

 

     Executive

 

     Governance

  

 

Background:

 

Mr. Bernlohr served as a director of Smurfit-Stone Container Corporation (“Smurfit-Stone”) from 2010 until it was acquired by RockTenn in 2011, and he served as a director of RockTenn from 2011 until the effective date of the Combination when he became a director of the Company. Mr. Bernlohr is the managing member of TJB Management Consulting, LLC, a consultant to businesses in transformation and a provider of interim executive management and strategic planning services. From 1997 to 2005, he served in various executive capacities, including as president and CEO, at RBX Industries, Inc. Prior to joining RBX Industries, Mr. Bernlohr spent 16 years in various management positions with Armstrong World Industries, Inc.

 

  

 

Key Qualifications

and Skills:

 

Mr. Bernlohr’s experience as a strategic consultant, a director of various publicly traded companies and as the CEO of an international manufacturing company provides him with broad corporate strategy and general business knowledge.

  

 

Other public company boards (3):

 

     Atlas Air Worldwide Holdings, Inc.

 

     Overseas Shipholding Group, Inc.

 

     International Seaways Inc.

  

 

Other public

company boards within five years:

 

     Cash Store Financial Services Inc.

 

     RockTenn

 

     Chemtura Corporation

 

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J. POWELL

BROWN

 

Age:

50

 

Director Since:

2015

 

Independent Board Committees:

 

     Audit

 

     Finance

  

 

Background:

 

Mr. Brown served as a director of RockTenn from 2010 until the effective date of the Combination when he became a director of the Company. He has served as president of Brown & Brown, Inc. since 2007 and as CEO since 2009. Mr. Brown previously served as a regional executive vice president of the company. From 2006 to 2009, he served on the board of directors of SunTrust Bank/ Central Florida, a commercial bank and subsidiary of SunTrust Banks, Inc.

 

  

 

Key Qualifications and Skills:

 

Mr. Brown’s experience as a CEO of a publicly traded insurance services company provides him with broad experience and knowledge of risk management and loss minimization and mitigation, as well as perspective on leadership of publicly traded companies.

 

  

 

Other public company boards (1):

 

     Brown & Brown, Inc.

  

 

Other public company boards within five years:

 

     RockTenn

 

 

MICHAEL E. CAMPBELL

 

Age:

70

 

Director Since:

2015

 

Independent Board Committees:

 

     Compensation

 

     Governance

  

 

Background:

 

Mr. Campbell served as a director of MeadWestvaco from 2001 and its lead independent director from 2007, in each case, until the effective date of the Combination when he became a director of the Company. He served as chairman, president and CEO of Arch Chemicals, Inc. from 1999 to 2011. Mr. Campbell previously served as an executive vice president of Olin Corporation. He was elected chair of the Board of the American Chemistry Council and, subsequently, chair of the Board of the National Association of Manufacturing. President George W. Bush appointed Mr. Campbell to the Advisory Council for Trade Policy and Negotiations, and he was reappointed to the Council by President Barack Obama.

 

  

 

Key Qualifications and Skills:

 

Mr. Campbell’s background, experience and judgment as a CEO of a publicly traded manufacturing company provide him with leadership, business and governance skills, and experience with mergers and acquisitions, as well as public policy issues.

  

 

Other public company boards (0):

 

     None

  

 

Other public company boards within five years:

 

     MeadWestvaco

 

 

TERRELL K.

CREWS

 

Age:

62

 

Director Since:

2015

 

Independent

 

Board Committees:

 

     Audit

 

     Finance

 

  

 

Background:

 

Mr. Crews served as a director of Smurfit-Stone from 2010 until it was acquired by RockTenn in 2011, and he served as a director of RockTenn from 2011 until the effective date of the Combination when he became a director of the Company. Mr. Crews served as executive vice president and CFO of Monsanto Company from 2000 to 2009, and as the CEO of Monsanto’s vegetable business from 2008 to 2009.

  

 

Key Qualifications and Skills:

 

Mr. Crews’ experience as a CFO and executive of a publicly traded company and as a director of other public companies provides him with broad business knowledge and in-depth experience in complex financial matters.

  

 

Other public company boards (2):

 

     Hormel Foods Corporation

 

     Archer Daniels Midland Company

  

 

Other public company boards within five years:

 

     RockTenn

 

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RUSSELL M. CURREY

 

Age:

56

 

Director Since:

2015

 

Independent

 

Board Committees:

 

     Audit

 

     Finance

 

  

 

Background:

 

Mr. Currey served as a director of RockTenn from 2003 until the effective date of the Combination when he became a director of the Company. He has served as the president of Boxwood Capital, LLC, a private investment company, since 2013. Mr. Currey worked for RockTenn from 1983 to 2008, and served as executive vice president and general manager of its corrugated packaging division from 2003 to 2008.

  

 

Key Qualifications and Skills:

 

Mr. Currey’s experience with RockTenn in a number of leadership roles over a period of 32 years provides him with substantial knowledge of our business, employees and customers.

  

 

Other public company boards (0):

 

     None

  

 

Other public company boards within five years:

 

     RockTenn

 

 

JOHN A. LUKE

 

Age:

69

 

Director Since:

2015

 

Non-Executive Chairman

 

Board Committees:

 

     Executive

  

 

Background:

 

Mr. Luke served as chairman and CEO of MeadWestvaco from 2002 until the effective date of the Combination when he became a director and the non-executive chairman of the Company. He spent 36 years with MeadWestvaco and its predecessor company, Westvaco Corporation, serving in a variety of positions. From 1996 to 2002, Mr. Luke served as chairman, president and CEO of Westvaco. He has served as a director of FM Global, a mutual insurance company, since 1999.

 

  

 

Key Qualifications and Skills:

 

Mr. Luke’s background, experience and judgment, and his unique knowledge and understanding of MeadWestvaco’s operations, provide him with valuable leadership, business and governance skills.

  

 

Other public company boards (3):

 

     The Bank of New York Mellon Corporation

 

     Timken Company

 

     Dominion Energy Midstream Partners, L.P.

  

 

Other public company boards within five years:

 

     MeadWestvaco

 

 

GRACIA C. MARTORE

 

Age:

66

 

Director Since:

2015

 

Independent

 

Board Committees:

 

    Audit

 

    Compensation

 

    Executive

  

 

Background:

 

Ms. Martore served as a director of MeadWestvaco from 2012 until the effective date of the Combination when she became a director of the Company. She served as the president and CEO and as a director of TEGNA Inc. (formerly Gannett Co., Inc.) from 2011 to June 2017, and she served as president and COO of Gannett from 2010 to 2011. Ms. Martore also served as Gannett’s executive vice president and CFO from 2006 to 2010, its senior vice president and CFO from 2003 to 2006 and in various other executive capacities beginning in 1985. She has served as a director of FM Global since 2005, as a director of The Associated Press since 2013 and as a Trustee of Wellesley College since 2016.

 

  

 

Key Qualifications and Skills:

 

Ms. Martore’s background, experience and judgment as CEO and CFO of a publicly traded company provide her with leadership, business, financial and governance skills.

  

 

Other public company boards (2):

 

    United Rentals, Inc.

 

    Omnicom Group Inc.

  

 

Other public company boards within five years:

 

    MeadWestvaco

 

    TEGNA Inc.

 

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JAMES E. NEVELS

 

Age:

65

 

Director Since:

2015

 

Lead Independent Director

 

Board Committees:

 

   Finance

 

   Governance

  

 

Background:

 

Mr. Nevels served as a director of MeadWestvaco from 2014 until the effective date of the Combination when he became a director of the Company. He has served as chairman of The Swarthmore Group, an investment advisory firm, since 1991. Mr. Nevels served as a director of The Hershey Trust Company from 2007 to 2016 and as the lead independent director of The Hershey Company from 2015 to May 2017, and he served as chairman of the company from 2009 to 2015. Mr.Nevels also served as a director of the Federal Reserve Bank of Philadelphia from 2010 to 2015 (and as its chairman from 2014 to 2015) and of MMG Insurance Company, a provider of insurance services.

 

  

 

Key Qualifications and Skills:

 

Mr. Nevels’ background and experience as an investment advisor and board member, chairman and lead independent director of public companies provide him with financial expertise and broad knowledge and perspective on the governance and leadership of publicly traded companies.

  

 

Other public company boards (3):

 

   First Data Corporation

 

   Alcoa Corporation

 

   XL Group Ltd.

  

 

Other public company boards within five years:

 

   MeadWestvaco

 

   The Hershey Company

 

 

TIMOTHY H. POWERS

 

Age:

69

 

Director Since:

2015

 

Independent

 

Board Committees:

 

   Audit

 

   Compensation

 

  

 

Background:

 

Mr. Powers served as a director of MeadWestvaco from 2006 until the effective date of the Combination when he became a director of the Company. He served as chairman of Hubbell Incorporated from 2012 to 2014, as executive chairman, president and CEO from 2004 to 2012, as president and CEO from 2001 to 2004 and as senior vice president and CFO from 1998 to 2001. Mr. Powers is a former director of the National Electrical Manufacturers Association.

  

 

Key Qualifications and Skills:

 

Mr. Powers’ background, experience and judgment as a CEO and CFO of a publicly traded manufacturing company provide him with financial expertise and broad leadership, management and governance skills.

  

 

Other public company boards (1):

 

   ITT Corporation

  

 

Other public company boards within five years:

 

   Hubbell Incorporated

 

   MeadWestvaco

 

 

STEVEN C. VOORHEES

 

Age:

63

 

Director Since:

2015

 

President and CEO

 

Board Committees:

Executive

  

 

Background:

 

Mr. Voorhees served as a director of RockTenn from 2013 until the effective date of the Combination when he became a director of the Company. He served as RockTenn’s CEO from 2013 until the effective date of the Combination when he became our president and CEO. Mr. Voorhees served as RockTenn’s executive vice president and CFO from 2000 to 2013, chief administrative officer from 2008 to 2013 and president and COO in 2013.

  

 

Key Qualifications and Skills:

 

Mr. Voorhees’ experience with RockTenn and his service as our president and CEO provide him with extensive knowledge of our operations, history and culture. The Board also believes Mr. Voorhees’ presence on the Board helps provide a unified focus for management to execute our strategy and business plans.

 

  

 

Other public company boards (1):

 

   SunTrust Banks, Inc. (appointment effective January 1, 2018)

  

 

Other public company boards within five years:

 

   RockTenn

 

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BETTINA M. WHYTE

 

Age:

68

 

Director Since:

2015

 

Independent

 

Board Committees:

 

    Compensation

 

    Executive

 

    Governance

  

 

Background:

 

Ms. Whyte served as a director of RockTenn from 2007 until the effective date of the Combination when she became a director of the Company. She has been the president and owner of Bettina Whyte Consultants, LLC since 2015. Ms. Whyte served as a managing director and senior advisor at Alvarez and Marsal Holdings, LLC, a world-wide business consulting firm, from 2011 to 2015. She served as chairman of the advisory board of Bridge Associates, LLC, a turnaround, crisis and interim management firm, from 2007 to 2010, as managing director and head of the Special Situations Group of MBIA Insurance Corporation, a provider of credit enhancement services, from 2006 to 2007, and as managing director of AlixPartners, LLC, a business turnaround management and financial advisory firm, from 1997 to 2006. Ms. Whyte has served as a director of Amerisure Insurance since 2002, and she serves as Vice Chairman of the board of trustees of the National Museum of Wildlife Art of the United States.

 

  

 

Key Qualifications and Skills:

 

Ms. Whyte’s roles in the financial and operational restructuring of complex international and domestic businesses, her service as an executive of numerous troubled multinational public and private companies and her past service as a director of other public companies provide her with broad experience with financial and operational issues, as well as with governance issues.

  

 

Other public company boards (0):

 

    None

  

 

Other public company boards within five years:

 

    Annies Inc.

 

    RockTenn

 

    AGL Resources Inc.

 

 

ALAN D. WILSON

 

Age:

60

 

Director Since:

2015

 

Independent

 

Board Committees:

 

    Finance

 

    Governance

  

 

Background:

 

Mr. Wilson served as a director of MeadWestvaco from 2011 until the effective date of the Combination when he became a director of the Company. He served as chairman of the board of McCormick & Company, Inc. from 2009 to January 2017 and he served as its CEO from 2008 to 2016. Mr. Wilson joined McCormick in 1993 and served in a variety of other positions, including as president from 2007 to 2015, president of North American Consumer Products from 2005 to 2006, president of the U.S. Consumer Foods Group from 2003 to 2005 and vice president — sales and marketing for the U.S. Consumer Foods Group from 2001 to 2003.

 

  

 

Key Qualifications and Skills:

 

Mr. Wilson’s background, experience and judgment as CEO of a publicly traded multinational consumer food company provides him with leadership, market expertise, and business and governance skills.

  

 

Other public company boards (2):

 

    McCormick & Company, Inc.

 

    T. Rowe Price Group, Inc.

  

 

Other public company boards within five years:

 

    MeadWestvaco

 

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BOARD OPERATIONS

Board Leadership Structure

The Bylaws separate the roles of CEO and non-executive chairman of the Board. Mr. Voorhees serves as our president and CEO. In this role, he has general supervision of our business and affairs, and he is recognized as our leader to business partners, employees, stockholders and other parties. Mr. Luke serves as our non-executive chairman. In this role, he provides oversight, direction and leadership to the Board, and facilitates communication among directors and the regular flow of information between management and directors. In addition, the non-executive chairman:

 

    serves as the chair of the Executive Committee,

 

    presides during Board and stockholder meetings, and

 

    provides input to the Compensation Committee and Governance Committee, as appropriate, with respect to the CEO performance evaluation process, the annual Board performance self-evaluation process and Board succession planning.

Mr. Nevels serves as our lead independent director. The lead independent director is selected from among the directors and serves a one-year term, and no director may serve more than two consecutive terms, unless the Board determines otherwise. The lead independent director:

 

    presides during all meetings of the Board at which the non-executive chairman is not present, including executive sessions of the independent directors,

 

    may call meetings of the independent directors,

 

    serves as a liaison between the non-executive chairman and the independent directors, and

 

    if requested by a major stockholder, ensures he or she is available for consultation and direct communication.

The Board believes this leadership structure is the most effective for us at this time because it allows our CEO to focus on running our business and combines a strong non-executive chairman and lead independent director to pursue sound governance practices that benefit the long-term interests of our stockholders.

Stockholder Engagement

We conduct stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. For example, we provide regular updates regarding our performance and strategic actions to the investor community, and we participate in numerous investor conferences, one-on-one meetings, site visits, earnings calls and educational investor and analyst conversations. In fiscal 2016, we engaged a third party to conduct interviews of several large current and prospective stockholders as well as sell-side research analysts in order to better understand the perceptions of WestRock among the investor community. We used the insights derived from these interviews to tailor our outreach efforts in fiscal 2017, which included conducting a governance outreach program pursuant to which we engaged directly with stockholders representing approximately 34% of our outstanding shares. Our general counsel and head of investor relations participated in these meetings and were joined, in certain cases, by our CEO or CFO. Our general counsel reported the results of these meetings to the Board. We believe our ongoing engagement with stockholders helps us achieve balanced and appropriate solutions for our stockholders.    

2017 Governance Enhancement

 

    In fiscal 2017, we conducted a governance outreach program pursuant to which we engaged directly with stockholders representing approximately 34% of our outstanding shares.
     

Board Committees

The Board assigns responsibilities and delegates authority to its committees, and the committees regularly report on their activities and actions to the Board. The Board has determined that all of the members of each committee (other than the Executive Committee) are “independent” within the meaning of the SEC’s regulations, the NYSE Standards and the Guidelines. The purpose and principle responsibilities of each committee are summarized below and set forth in more detail in each committee’s (other than the Executive Committee) written charter, which can be found on our website.

 

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AUDIT COMMITTEE    Purpose:

 

Members:

Gracia C. Martore (Chair)

J. Powell Brown

Terrell K. Crews

Russell M. Currey

Timothy H. Powers

 

Meetings in Fiscal 2017: 8

 

Attendance Rate: 96%

 

* All members meet the independence requirements of Rule 10A-3 of the Exchange Act, the NYSE and the Guidelines and are “financially literate” within the meaning of the NYSE Standards. Each of Ms. Martore and Messrs. Crews and Powers is an “audit committee financial expert” within the meaning of SEC regulations.

  

      Assists the Board in fulfilling its responsibilities with respect to oversight of:

 

-   the integrity of our financial statements

 

-   our system of internal control over financial reporting

 

-   the performance of our internal audit function

 

-   our system of compliance with legal and regulatory requirements.

 

     Oversees the independence, qualifications and performance of our independent auditor.

 

Principal Responsibilities:

     Directly appoints, compensates, retains and oversees the work of our independent auditor.

 

     Discusses with management policies with respect to risk assessment and risk management.

 

   

COMPENSATION COMMITTEE

 

Members:

Timothy J. Bernlohr (Chair)

Michael E. Campbell

Gracia C. Martore

Timothy H. Powers

Bettina M. Whyte

 

Meetings in Fiscal 2017: 5

 

Attendance Rate: 96%

 

* All members meet the independence requirements of the NYSE, the Internal Revenue Code of 1986, as amended (the

“Tax Code”) and the Guidelines, and qualify as a “non-employee director” for purposes of Rule 16b-3(b)(3)(i) of the Exchange Act.

  

Purpose:

     Assists the Board in fulfilling its responsibilities with respect to compensation of our executives and non-employee directors and oversight of matters relating to our equity compensation and employee benefits plans.

 

Principal Responsibilities:

     Sets the overall compensation strategy and compensation policies for our executives and non-employee directors.

 

     Approves corporate goals/objectives relating to CEO compensation, evaluates our CEO’s performance and determines/approves our CEO’s compensation level.

 

     Makes recommendations for compensating our non-employee directors.

 

     Reviews our incentive compensation arrangements to confirm that incentive pay does not encourage inappropriate risk taking.

 

     Directly appoints, terminates, compensates and oversees the work of its advisors.

 

   

EXECUTIVE COMMITTEE

 

Members:

John A. Luke (Chair)

Timothy J. Bernlohr

Gracia C. Martore

Steven C. Voorhees

Bettina M. Whyte

 

Meetings in Fiscal 2017: 0

 

  

Principal Responsibilities:

Exercises the authority of the Board in managing our business and affairs; however, it does not have the power to (i) approve, adopt or recommend to our stockholders any action or matter (other than the election or removal of directors) that Delaware law requires to be approved by stockholders or (ii) adopt, amend or repeal the Bylaws.

 

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Table of Contents
   

 

FINANCE COMMITTEE

 

Members:

Alan D. Wilson (Chair)

J. Powell Brown

Terrell K. Crews

Russell M. Currey

James E. Nevels

 

Meetings in Fiscal 2017: 4

 

Attendance Rate: 95%

 

  

 

Purpose

 

     Assists the Board in fulfilling its responsibilities with respect to overseeing our financial management and resources.

 

Principal Responsibilities:

     Reviews and recommends capital budgets to the Board for approval.

 

     Reviews management’s assessment of our capital structure, including dividend policies and stock repurchase programs, debt capacity and liquidity.

 

     Reviews financing and liquidity initiatives proposed by management.

 

   
   

 

GOVERNANCE COMMITTEE

 

Members:

Bettina M. Whyte (Chair)

Timothy J. Bernlohr

Michael E. Campbell

James E. Nevels

Alan D. Wilson

 

Meetings in Fiscal 2017: 4

 

Attendance Rate: 90%

 

* All members meet the independence requirements of the NYSE and the Guidelines.

  

 

Purpose

     Assists the Board in fulfilling its responsibilities with respect to:

 

-   identifying and recommending qualified candidates for the Board and its committees

 

-   overseeing the evaluation of the effectiveness of the Board and its committees

 

-   reviewing matters on corporate governance, including trends and current practices

 

-   developing and recommending the Guidelines and other governance policies and procedures.

 

-   CEO succession

 

Principal Responsibilities:

     Evaluates and recommends Board candidates.

 

     Evaluates and recommends changes to the size, composition and structure of the Board and its committees.

 

     Oversees annual self-evaluation process.

 

   

Meeting Attendance

In fiscal 2017, the Board held eight meetings and committees of the Board held a total of 21 meetings. Overall attendance at these meetings was approximately 95%, and each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served during fiscal 2017. All of our current directors attended the annual meeting of stockholders held on January 27, 2017.

Meetings of Non-Management Directors and Independent Directors

Our non-management directors meet separately from the other directors in regularly scheduled executive sessions in connection with each Board meeting. These meetings are conducted without the presence of management directors or executive officers, unless the non-management directors request the attendance of one or more members of management. At least once a year, and at such other times as may be scheduled by the non-executive chairman or the lead independent director, the independent directors meet separately from the other directors in executive session.

Evaluations

The Board and each committee (other than the Executive Committee) conducts an annual self-evaluation. The Governance Committee oversees the process and the implementation of the annual self-evaluations.

We assess the process of conducting self-evaluations annually and have utilized a variety of methods over the years, including written questionnaires, interviews and group discussions. In fiscal 2017, all directors completed detailed confidential questionnaires to provide feedback on the effectiveness of the Board, the committees and the contributions of individual directors. Topics covered in the questionnaires included, among others, the quality of interaction between the Board and management, the frequency of meetings of the Board, the dynamics and culture of the Board, and the overall effectiveness of the Board. The results of the questionnaires were compiled anonymously by the Secretary in the form of summaries for the Board and each committee. The feedback was reviewed and discussed by the Governance Committee (as it related to both the Board and all committees) and each other committee (as it related to such committee).

 

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Table of Contents

Director Orientation and Continuing Education

Each new director participates in an orientation program and receives materials and briefings to acquaint him or her with our business, strategies and policies. Continuing education is provided for all directors through board materials and presentations (including by outside speakers), discussions with management, visits to our facilities and other sources. Certain directors also attend programs focused on topics that are relevant to their duties as a director. We reimburse our directors for the cost of one third-party continuing education program every other year; however, our directors may be reimbursed for the costs of additional programs with the approval of the Chairman of the Governance Committee.

In fiscal 2017, the Board visited our Solvay mill and box plant located in Syracuse, New York and our mill located in Cottonton, Alabama, in each case in connection with meetings held in or near those locations.

Risk Oversight

The Board provides oversight of our risk management process. The Board executes its risk oversight function both as a whole and through delegation to its key committees, each of which meets regularly and reports back to the Board. Each key committee’s risk oversight responsibilities are summarized below.

While the Board and its committees oversee risk management, management is charged with managing enterprise risks. The Board recognizes that it is neither possible nor desirable to eliminate all risk. Rather, the Board views appropriate risk taking as essential to our long-term success and seeks to understand and oversee critical business risks in the context of our business strategy, the magnitude of the particular risks and the proper allocation of our risk management and mitigation resources.

We have a robust internal control environment that facilitates the identification and management of risks and regular communications with the Board. The Board and its committees receive regular reports from members of senior management on areas of material risk to us, including operational, financial, strategic, competitive, reputational, legal and regulatory risks, and how those risks are managed. Our general counsel informs each committee and the Board of relevant legal and compliance issues, and each committee also has access to outside counsel when it deems it advisable. Each committee also has the authority to engage independent counsel at our expense as it deems necessary to carry out its duties and responsibilities.

 

 

 

AUDIT COMMITTEE

  

 

COMPENSATION COMMITTEE

 
 

     Oversees risks related to

 

-     financial statements

  

     Oversees risk management related to our compensation philosophy and programs.

 
 

-     financial reporting and disclosure processes

 

-     financial and other internal controls

 

-     accounting

 

-     legal/compliance matters

 

-     information technology

 

-     cyber security.

 

  

     Reviews our incentive compensation arrangements to confirm incentive pay does not encourage inappropriate risk taking.

 

FINANCE COMMITTEE

      Oversees risk management related to our annual capital budget plans and our capital structure.

 
 

     Oversees the internal audit function.

 

     Meets separately on a regular basis with representatives of our independent auditing firm and the head of our internal audit department.

 

  

GOVERNANCE COMMITTEE

     Oversees risk management related to governance policies and procedures, and board organization and membership.

 

 

 

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DIRECTOR COMPENSATION

The Compensation Committee is responsible for setting the overall compensation strategy and policies for our non-employee directors and for recommending to the Board the compensation of non-employee directors. Directors who also serve as employees do not receive payment for service as directors.

In making decisions concerning compensation for non-employee directors, the Compensation Committee considers the director compensation practices of peer companies and whether the recommendations align with the interests of our stockholders. The compensation consultant to the Compensation Committee annually analyzes the competitive position of our director compensation program against the peer group used for executive compensation purposes and examines how each element of our director compensation program compares to those for members of the peer group. We seek to align total non-employee director compensation with the approximate median of peer group total director compensation. For fiscal 2017, the Compensation Committee determined that overall compensation for non-employee directors was at or around the peer group average and median. As a result, the Compensation Committee did not make any changes to our director compensation program for fiscal 2017, other than to establish an annual fee of $20,000 for our lead independent director (a position that was created in September 2016).

Compensation for non-employee directors in fiscal 2017 was comprised of the following components:

 

 

  Component

 

  

 

Compensation ($)

 

  Annual cash retainer

 

  

115,000

 

 

  Annual stock award

 

  

 

130,000

 

 

  Annual Non-Executive Chairman fee

 

  

 

40,000

 

 

  Annual Lead Independent Director fee

 

  

 

20,000

 

 

  Annual Committee chair fees

 

  

 

Audit Committee

 

  

 

20,000

 

 

Compensation Committee

 

  

 

18,500

 

 

Finance Committee; Governance Committee

 

  

 

15,000

 

We paid the following compensation to our non-employee directors for fiscal 2017.

Director Compensation for 2017

 

  Name

 

  

Fees Earned or Paid
in Cash ($)

 

  

Stock Awards ($)

 

  

All Other
Compensation ($)

 

  

Total
($)

 

    

  Timothy J. Bernlohr

 

   133,500

 

   129,977

 

   0

 

   263,477

 

  

  J. Powell Brown

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  Michael E. Campbell

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  Terrell K. Crews

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  Russell M. Currey

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  G. Stephen Felker (1)

 

   9,583

 

   0

 

   0

 

   9,583

 

  

  L.L. Gellerstedt III (1)

 

   9,583

 

   0

 

   0

 

   9,583

 

  

  John A. Luke, Jr.

 

   155,000

 

   129,977

 

   0

 

   284,977

 

  

  Gracia C. Martore

 

   135,000

 

   129,977

 

   0

 

   264,977

 

  

  James E. Nevels

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  Timothy H. Powers

 

   115,000

 

   129,977

 

   0

 

   244,977

 

  

  Bettina M. Whyte

 

   130,000

 

   129,977

 

   0

 

   259,977

 

  

  Alan D. Wilson

 

   130,000

 

   129,977

 

   0

 

   259,977

 

  

 

(1) Messrs, Felker and Gellerstedt retired from the Board at the 2017 annual meeting of stockholders.

 

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The amounts reported in the Fees Earned or Paid in Cash column reflect the cash fees earned by each non-employee director in fiscal 2017, whether or not such fees were deferred. These fees were paid in connection with the annual cash retainer, Mr. Luke’s service as our non-executive chairman, Mr. Nevels’ service as our lead independent director and Committee Chair annual fees.

The amounts reported in the Stock Awards column reflect the grant date fair value associated with stock awards made in fiscal 2017, calculated in accordance with the provisions of ASC 718. Our non-employee directors received their annual stock award on January 27, 2017. Each non-employee director received 2,411 restricted shares of WestRock common stock, par value $0.01 per share (“Common Stock”) or restricted stock units (for those directors who elected to defer their equity awards pursuant to the WestRock Company 2016 Deferred Compensation Plan for Non-Employee Directors (the “Deferred Compensation Plan”)). See “— Deferred Compensation.” The number of shares and units associated with this award was determined by dividing the value of the annual stock award by the closing price of Common Stock as reported on the NYSE on the grant date. The annual stock awards vest on the first anniversary of the grant date.

Deferred Compensation

Non-employee directors may elect annually to defer all of their cash compensation and/or equity award pursuant to the terms of the Deferred Compensation Plan. At the director’s option, we credit his or her (i) cash deferred account with the cash compensation he or she elected to defer and (ii) stock unit account for each restricted share of Common Stock that he or she elected to defer. The rights of the director in the balance credited to his or her deferred cash account are vested at all times, whereas rights in the balance of the stock unit account vest in accordance with the vesting schedule for the related restricted Common Stock grants. During fiscal 2017, Messrs. Campbell, Powers and Wilson and Ms. Martore deferred both their cash compensation and equity award, and Ms. Whyte deferred only her equity award.

Director Stock Ownership and Retention Requirements

Each non-employee director is required to own at least the greater of (i) 5,000 shares of Common Stock or (ii) a number of shares of Common Stock having a value of not less than five times the annual cash retainer. In determining compliance with these guidelines, stock ownership includes vested and unvested restricted stock awards. Directors have five years from the date of their initial election to achieve the targeted level of ownership.

All current directors have achieved the targeted level of ownership.

Our directors are required to retain 50% of the net restricted stock, net of any shares used to satisfy any related tax liability upon vesting, awarded to the individual for a period of two years following the vesting of the restricted stock, or until the individual no longer serves as a director. The retention period does not apply to any shares to the extent the recipient continues to own an amount of Common Stock at least equal to the number of shares required under the preceding sentence, plus a number of shares required to be held under our stock ownership guidelines.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We require that each executive officer, director and director nominee complete an annual questionnaire and report all transactions since the beginning of the last fiscal year that exceed $120,000 in which we were a participant and in which those persons (or their associates or immediate family members) (collectively, “related parties”) had or will have a direct or indirect material interest. Management reviews responses to the questionnaires and, if any such transactions are disclosed, the Governance Committee then makes recommendations to the Board with respect to the appropriateness of such transactions. We do not have a formal written policy for approval or ratification of these transactions. Information included in directors’ responses to the questionnaires is reviewed annually by the Board for the purpose of assessing independence under the Guidelines, applicable rules and regulations of the SEC and the NYSE Standards, and we review all responses to ensure that any such transactions adhere to the standards set forth above as well as our various codes of conduct. There has not been a transaction during fiscal 2017, and we have no currently proposed transaction, in which we were or are to be a participant, the amount involved exceeds $120,000 and an executive officer, director, director nominee, a beneficial owner of five percent or more of our Common Stock (or any immediate family members of such persons) had or will have a direct or indirect material interest.

COMMUNICATING WITH THE BOARD

Stockholders and other interested parties may communicate with directors (i) by mail at WestRock Company, 1000 Abernathy Road, Suite 125, Atlanta, Georgia 30328 or (ii) by facsimile at (770) 263-4402. Communications intended specifically for our non-executive chairman and other non-management directors should be marked “Attention: Independent Director Communications,” while all other director communications should be marked “Attention: Director Communications.” Communications regarding accounting, internal accounting controls or auditing matters may be reported to the Audit Committee using the above address and marking the communication “Attention: Audit Committee Communications.” Comments may also be delivered by using our website contact form.

 

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COMPENSATION MATTERS

 

 

 

ITEM 2. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 
  What am I voting on? The Board is asking our stockholders to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this Proxy Statement  
  Voting Recommendation: FOR the proposal  
 

Vote Required: An affirmative vote requires the majority of those shares present in person or represented by proxy and entitled to vote

 

 

In accordance with SEC rules, our stockholders are being asked to approve, on an advisory basis, the compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement. Last year, more than 97% of the votes cast were in favor of approving the compensation of our NEOs.

As described in detail in the Compensation Discussion and Analysis section beginning on page 28, we believe our compensation policies and procedures are competitive, focused on pay-for-performance principles and strongly aligned with the long-term interests of our stockholders. Our executive compensation philosophy is based on the belief that the compensation of our employees, including our NEOs, should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do so. Our objectives include creating a clear path between realized compensation and the successful execution of our business strategy and enhancing each individual executive’s performance. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance and the performance of the individual executive. We view our compensation program as a strategic tool that supports the successful execution of our business strategy.

Our executive compensation program emphasizes long-term incentives over short-term incentives, with a significant portion of total compensation weighted toward equity awards. This approach allows us to align our executives’ interests with our stockholders’ interests. Our aggregate total stockholder returns for the past three, five and ten fiscal years were 44%, 95% and 419%, respectively. We believe our executive compensation program has been instrumental in helping us to achieve the strong historical financial performance that has driven these returns.

The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our NEOs, as well as the philosophy, policies and practices described in this Proxy Statement. Our stockholders have the opportunity to vote for or against, or to abstain from voting on, the following resolution:

RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of our named executive officers determined by the compensation committee, as described in the Compensation Discussion and Analysis section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.

Because the required vote is advisory, it will not be binding on the Board. The Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation decisions.

As announced in the Form 8-K we filed on April 24, 2017, the Board has determined that we will hold say on pay votes on an annual basis. Accordingly, the next such vote will take place at the 2019 annual meeting of stockholders.

 

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ITEM 3.  APPROVAL OF THE WESTROCK COMPANY SECOND AMENDED AND RESTATED ANNUAL EXECUTIVE BONUS PLAN TO RE-APPROVE THE MATERIAL TERMS OF THE PLAN AND THE PERFORMANCE GOALS PROVIDED THEREUNDER

 
  What am I voting on? The Board is asking our stockholders to approve the WestRock Company Second Amended and Restated Annual Executive Bonus Plan to re-approve the material terms of the plan and the performance goals provided thereunder  
  Voting Recommendation: FOR  
 

Vote Required: An affirmative vote requires the majority of those shares present in person or represented by proxy and entitled to vote

 

 

The Board is asking our stockholders to approve the WestRock Company Second Amended and Restated Annual Executive Bonus Plan (the “Amended STI Plan”) and the performance goals provided thereunder in order to re-approve the material terms of the Amended STI Plan so that we can continue to have the ability to pay annual bonuses that are intended to qualify as “performance-based” compensation for purposes of Section 162(m) of the Tax Code (“Section 162(m)”).

The Board believes that the Amended STI Plan is integral to our compensation strategies and programs, and allows us to:

 

    attract and retain key employees,

 

    provide these individuals with an additional incentive to work to increase the value of our Common Stock, and

 

    provide annual incentive compensation that is deductible by us for income tax purposes.

BACKGROUND

The Rock-Tenn Company Annual Executive Bonus Plan (the “STI Plan”) was originally adopted by RockTenn’s compensation committee in 2001 and approved by its stockholders on January 25, 2002. On October 1, 2012, the RockTenn compensation committee approved an amendment and restatement of the STI Plan, the material terms of which were approved by its stockholders on January 25, 2013. On October 26, 2017, the Compensation Committee approved, subject to stockholder approval, the Amended STI Plan to, among other things, replace references to Rock-Tenn Company with references to WestRock Company and change the amount of the bonus cap under the STI Plan from 300% of a participant’s base salary to $10 million. In order for payments under the Amended STI Plan to be fully deductible under Section 162(m), the material terms of the Amended STI Plan must be approved by our stockholders at least every five years. Stockholders last approved the material terms of the plan in 2013.

IMPACT OF SECTION 162(M)

Section 162(m) limits the deductibility of compensation of “covered employees” to $1 million per year unless the compensation qualifies as “performance-based.” The term “covered employees” includes our CEO and the three other most highly compensated executive officers, other than the CFO, at the end of each calendar year. Cash incentive compensation is considered performance-based if the following four conditions are met:

 

    the compensation is payable on the attainment of one or more pre-established, objective performance criteria,

 

    the performance criteria are established by a committee that is comprised solely of two or more outside directors,

 

    the material terms of the compensation and performance criteria are disclosed to and approved by stockholders before payment, and

 

    the committee that established the performance criteria certifies that the performance criteria have been satisfied before payment.

The Board is requesting stockholder approval to meet the third requirement listed above. Treasury Regulations under Section 162(m) specify that the material terms are (i) who is eligible to participate in the plan, (ii) the business criteria on which the performance goals will be based and (iii) the maximum amount payable to any participant.

The foregoing summarizes the provisions of Section 162(m) as in effect at the time this Proxy Statement is filed. The proposed Tax Cuts and Jobs Act, if signed into law, may amend Section 162(m) to, among other things, eliminate the performance-nased compensation exception noted above.

 

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SUMMARY OF THE KEY AMENDMENTS INCLUDED IN THE AMENDED STI PLAN

The key terms of the Amended STI Plan, including the business criteria upon which performance measures are based, are substantially the same as those of the STI Plan. Changes that have been made to the STI Plan include:

 

    references to Rock-Tenn Company have been changed to WestRock Company, and

 

    the amount of the bonus cap has been changed from 300% of a participant’s base salary to $10 million.

SUMMARY OF THE MATERIAL TERMS REQUIRED TO BE APPROVED

Below is a summary of the material terms of the Amended STI Plan required to be approved by our stockholders under Section 162(m). The discussion of the provisions of the Amended STI Plan is qualified in its entirety by reference to the full text of the Amended STI Plan. See Exhibit A.

Administration and Eligibility

The Amended STI Plan is administered by the Compensation Committee, each member of which is an “outside director” within the meaning of Section 162(m). Each of our executive officers, including our CEO, and each of our other employees who the Compensation Committee deems a key employee is eligible to participate in the Amended STI Plan for any fiscal year. Twenty individuals participated in the Amended STI Plan in fiscal 2017 and approximately 20 individuals will be eligible to participate in the Amended STI Plan. The Amended STI Plan is not our exclusive cash-based incentive plan, and the majority of our employees who receive cash-based incentives receive them under other plans sponsored or maintained by us; however, these other plans do not satisfy the performance-based compensation exception under Section 162(m).

Business Criteria upon which Performance Goals are Based

The Compensation Committee will establish performance goals for each participant for each fiscal year no later than 90 days after the beginning of such year based on the business criteria the Compensation Committee deems appropriate under the circumstances. The performance goals for participants may be different, and each participant’s performance goals may be based on different business criteria; however, all performance goals will be based on one or more of the following business criteria:

 

    return over capital costs or increases in return over capital costs

 

    return on invested capital or increases in return on invested capital

 

    operating performance or operating performance improvement

 

    safety record

 

    customer satisfaction or customer engagement surveys

 

    total earnings or the growth in such earnings

 

    consolidated earnings or the growth in such earnings

 

    earnings per share or the growth in such earnings

 

    net earnings or income or the growth in such earnings or income

 

    earnings before interest expense, taxes, depreciation, amortization and other non-cash items or the growth in such earnings

 

    earnings before interest and taxes or the growth in such earnings

 

    consolidated net income or the growth in such income

 

    the value of our Common Stock or the growth in such value

 

    the price of our Common Stock or the growth in such price

 

    the weight or volume of paperboard or containerboard produced or converted

 

    return on assets or equity or the growth on such returns

 

    cash flow or the growth in our cash flow

 

    total shareholder return or the growth in such return

 

    expenses or the reduction of expenses

 

    sales or sales growth

 

    overhead ratios or changes in such ratios

 

    expense-to-sales ratios or the changes in such ratios

 

    economic value added or changes in such value added.

 

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The performance goals for our CEO will be based on criteria related to Company-wide performance while the performance goals for other participants will (as the Compensation Committee deems appropriate) be based on criteria related to Company-wide performance, business-specific or other business-unit specific performance (where the Compensation Committee can apply the business criteria on such basis), department-specific performance, plant or facility-specific performance, personal performance or any combination of these criteria.

A performance goal may be set in any manner determined by the Compensation Committee, including looking to achievement on an absolute or relative basis in relation to peer groups or indices. The Compensation Committee may express any goal in alternatives, or in a range of alternatives, as it deems appropriate or helpful, such as including or excluding (i) any acquisitions or dispositions, restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) any event either not directly related to the operations of our company or not within the reasonable control of our management or (iii) the effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles.

The Compensation Committee may amend the Amended STI Plan as it deems necessary or appropriate or terminate the Amended STI Plan if it determines such termination to be in the best interests of the Company.

Limitation on Bonus Amount

The STI Plan stipulated that no participant may receive a bonus for any fiscal year in excess of 300% of the participant’s base salary. The Amended STI Plan provides that no participant may receive a bonus for any fiscal year that would exceed $10 million.

Plan Benefits

All future awards under the Amended STI Plan will be made at the discretion of the Compensation Committee. Therefore, we cannot determine future benefits under the Amended STI Plan at this time.

The table below shows the actual bonuses awarded under the STI Plan based on fiscal 2017 performance.

 

 

  Name and Position

 

  

 

Dollar Value ($)

 

     

  Steven C. Voorhees

   1,961,792   

  President and Chief Executive Officer

     

  Ward H. Dickson

   699,029   

  Executive Vice President – Chief Financial Officer

 

     

  James B. Porter III

   932,351   

  President – Business Development and Latin America

 

     

  Robert A. Feeser

   697,905   

  President, Consumer Packaging

 

     

  Jeffrey W. Chalovich

   658,982   

  President, Corrugated Packaging

 

     

  Marc P. Shore(1)

   196,854   

  President, Multi Packaging Solutions

 

     

  Executive officer group(2)

 

   6,128,365

 

  

  Non-employee director group

 

   n/a

 

  

  Non-executive officer employee group(3)

 

   n/a

 

  

 

(1) Reflects bonus awarded under the MPS Stub Plan. See “Compensation Discussion and Analysis – Compensation Elements – Annual Performance Bonus (STI) - MPS Manager Incentive Plan and MPS Stub Plan.”
(2) Includes Messrs. Voorhees, Dickson, Porter, Feeser, Chalovich and Shore, and other executive officers.
(3) Annual incentives paid to our non-executives are administered separately from the STI Plan.

 

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ITEM 4.  APPROVAL OF THE WESTROCK COMPANY AMENDED AND RESTATED INCENTIVE STOCK PLAN AND THE PERFORMANCE GOALS PROVIDED THEREUNDER

 
  What am I voting on? The Board is asking our stockholders to approve the WestRock Company Amended and Restated Incentive Stock Plan and the performance goals provided thereunder  
  Voting Recommendation: FOR the proposal  
 

Vote Required: An affirmative vote requires the majority of those shares present in person or represented by proxy and entitled to vote

 

 

The Board is asking our stockholders to approve the WestRock Company Amended and Restated 2016 Incentive Stock Plan (the “Amended LTI Plan”) and the performance goals provided thereunder so that we can continue to have the ability to grant equity awards that constitute “performance-based compensation” for purposes of Section 162(m).

The Board believes that the Amended LTI Plan is integral to our compensation strategies and programs and allows us to:

 

    attract and retain key employees and non-employee directors,

 

    provide these individuals with an additional incentive to work to increase the value of our Common Stock,

 

    provide these individuals with a stake in our future that corresponds to the stake of our stockholders, and

 

    provide long-term incentive compensation that is deductible by us for income tax purposes.

BACKGROUND

The WestRock Company 2016 Incentive Stock Plan (the “LTI Plan”) was originally adopted by the Board on October 30, 2015 and approved by our stockholders on February 2, 2016. On October 27, 2017, the Board approved, subject to stockholder approval, the Amended LTI Plan. Stockholders last approved the material terms of the plan in 2016.

IMPACT OF SECTION 162(M)

Section 162(m) limits the deductibility of compensation of “covered employees” to $1 million per year unless the compensation qualifies as “performance-based.” The term “covered employees” includes our CEO and the three other most highly compensated executive officers, other than the CFO, at the end of each calendar year. Cash incentive compensation is considered performance-based if the following four conditions are met:

 

    the compensation is payable on the attainment of one or more pre-established, objective performance criteria;

 

    the performance criteria are established by a committee that is comprised solely of two or more outside directors,

 

    the material terms of the compensation and performance criteria are disclosed to and approved by stockholders before payment; and

 

    the committee that established the performance criteria certifies that the performance criteria have been satisfied before payment.

The Board is requesting stockholder approval to meet the third requirement listed above. Treasury Regulations under Section 162(m) specify that the material terms are (i) who is eligible to participate in the plan, (ii) the business criteria on which the performance goals will be based and (iii) the maximum amount payable to any participant.

The foregoing summarizes the provisions of Section 162(m) as in effect at the time this Proxy Statement is filed. The proposed Tax Cuts and Jobs Act, if signed into law, may amend Section 162(m) to, among other things, eliminate the performance-based compensation exception noted above.

 

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SUMMARY OF THE KEY AMENDMENTS INCLUDED IN THE AMENDED LTI PLAN

The key terms of the Amended LTI Plan, including the performance measures established thereunder, are substantially the same as those of the LTI Plan. Changes that have been made to the LTI Plan include:

 

    the maximum amount of annual awards for employees has been increased from $15 million to $25 million (the “Annual Employee Limit”) and the maximum amount of annual awards for non-executive directors has been decreased from $15 million to $3 million,

 

    the Annual Employee Limit will cease to apply if Section 162(m) is amended to eliminate the performance-based compensation exception, as would be the case if the Tax Cuts and Jobs Act, as proposed on the date this Proxy Statement is filed, is enacted,

 

    the number of shares reserved for issuance has been increased by 2.1 million shares to 11.7 million shares, and

 

    the term has been extended from February 2, 2026 to February 2, 2028.

SUMMARY OF THE MATERIAL TERMS REQUIRED TO BE APPROVED

Below is a summary of the material terms of the Amended LTI Plan required to be approved by stockholders under Section 162(m), which is qualified in its entirety by reference to the full text of the Amended LTI Plan. See Exhibit B.

Administration and Eligibility

The Amended LTI Plan is administered by the Compensation Committee, each member of which is an “outside director” within the meaning of Section 162(m). The Compensation Committee has the authority to select eligible employees or directors to whom awards may be granted, determine the number of shares covered by those awards and set the terms, conditions and provisions of those awards. In fiscal 2017, we granted awards to approximately 700 employees, including our executive officers, and all non-employee directors (11 individuals) serving at the time of the awards to directors. All non-employee directors and approximately 700 employees will be eligible to receive awards under the Amended LTI Plan.

Performance Goals

Performance goals may relate to:

 

    return over capital costs or increases in return over capital costs

 

    return on invested capital or increases in return on invested capital

 

    operating performance or operating performance improvement

 

    safety record

 

    customer satisfaction or customer engagement surveys

 

    total earnings or the growth in such earnings

 

    consolidated earnings or the growth in such earnings

 

    earnings per share or the growth in such earnings

 

    net earnings or income or the growth in such earnings or income

 

    earnings before interest expense, taxes, depreciation, amortization and other non-cash items or the growth in such earnings

 

    earnings before interest and taxes or the growth in such earnings

 

    consolidated net income or the growth in such income

 

    the value of our Common Stock or the growth in such value

 

    the price of our Common Stock or the growth in such price

 

    the weight or volume of paperboard or containerboard produced or converted

 

    return on assets or equity or the growth on such returns

 

    cash flow or the growth in our cash flow

 

    total shareholder return or the growth in such return

 

    expenses or the reduction of expenses

 

    sales or sales growth

 

    overhead ratios or changes in such ratios

 

    expense-to-sales ratios or the changes in such ratios

 

    economic value added or changes in such value added.

 

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The Compensation Committee may set performance goals in any manner it determines, including by looking to achievement on an absolute or relative basis in relation to peer groups or indices. The Compensation Committee may also express any goal in alternatives, or in a range of alternatives, such as including or excluding acquisitions or dispositions, restructurings, discontinued operations, extraordinary items and other unusual or non-recurring charges; any event either not directly related to our operations or not within our management’s reasonable control; or the effects of tax and accounting changes in accordance with U.S. generally acceptable accounting principles.

Award Limits

The LTI Plan stipulated that no participant may receive in any calendar year (a) an award of stock options to purchase more than 750,000 shares of Common Stock, or a stock appreciation right with respect to more than 750,000 shares of Common Stock, (b) a stock grant or stock unit grant where the fair market value of the Common Stock that was subject to the grant on the date of the grant exceeds $15 million or (c) a cash bonus incentive in excess of $15 million. The Amended LTI Plan clarifies that the maximum number of shares available under an award will be used to measure the award against the annual award limitations and bifurcates the annual award limitation between employee participants (referred to above as the Annual Employee Limit, which has been increased from $15 million to $25 million) and non-employee director participants (for whom the limit has been decreased from $15 million to $3 million). Award limits in the Amended LTI Plan are subject to the adjustment provisions discussed below.

In addition, the Amended LTI Plan provides that the Annual Employee Limit will cease to apply if Section 162(m) is amended to eliminate the performance-based compensation exception, as would be the case if the Tax Cuts and Jobs Act, as proposed on the date this Proxy Statement is filed, is enacted.

SUMMARY OF AMENDED LTI PLAN

The following summary of the Amended LTI Plan is qualified in its entirety by reference to the full text of the Amended LTI Plan. See Exhibit B.

Award Types

Under the Amended LTI Plan, the Compensation Committee may grant:

 

    stock options, including incentive stock options intended to qualify for special tax treatment under Section 422 of the Tax Code,

 

    stock appreciation rights, in tandem with stock options or freestanding,

 

    stock, which could or could not be subject to issuance or forfeiture conditions,

 

    stock units, which could or could not be subject to forfeiture conditions, and

 

    cash bonus incentives.

Shares Available for Issuance

9,600,000 shares were originally reserved for issuance under the LTI Plan. As of September 30, 2017, 6,915,586 shares remained available for future grant. The Amended LTI Plan increases the number of shares reserved for issuance by 2,100,000 shares to 11,700,000 shares.

Shares reserved for issuance under the Amended LTI Plan are reserved from authorized but unissued shares and treasury shares. All shares remain available for issuance under the Amended LTI Plan until issued pursuant to the exercise of an option or stock appreciation right or issued pursuant to a stock grant. Any shares that are forfeited after grant again become available for issuance under the Amended LTI Plan, other than shares that are applied to settle an option, to satisfy a stock grant or withheld to satisfy any tax liability. In the case of stock appreciation rights, the number of shares deemed issued will be equal to the number of shares with respect to which the share appreciation is measured.

On December 15, 2017, the closing price of the Common Stock was $63.11.

Adjustments

In the event the shares of Common Stock are affected by any equity restructuring or change in capitalization of the Company, including spin-offs, stock dividends or splits, large non-reoccurring dividends or rights offerings, or any merger, consolidation, acquisition of property or stock, separation, reorganization, liquidation or other transaction described in Section 424(a) of the Tax Code that did not constitute a change in control, the Compensation Committee will adjust the aggregate number and class of shares which could be distributed under the Amended LTI Plan, the annual grant caps described above and the number, class and price of shares subject to outstanding awards granted under the Amended LTI Plan, as it deems reasonable and equitable to maintain the aggregate intrinsic value of the outstanding grants immediately before any such transaction.

 

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Change in Control

If there is a “change in control” (as defined in the Amended LTI Plan) of the Company and there is no continuation or assumption of an outstanding award that had been made pursuant to the Amended LTI Plan, then the rights of each eligible employee and director in the then outstanding grants under the Amended LTI Plan that were not so continued or assumed will vest 100% on the effective date of the “change in control” and automatically be cancelled in exchange for certain payments as set forth in the Amended LTI Plan.

If there is a “change in control” and the vesting of an outstanding award made pursuant to the Amended LTI Plan was based in whole or in part on the satisfaction of one or more performance conditions that had a “target” level of performance, then the performance “target,” or each such performance “target,” will be deemed to have been met at 100% of the “target” on the effective date of the “change in control” unless the Compensation Committee determines that the performance level which is reasonably projected to be achieved will exceed 100% of the target performance level (in which event the Compensation Committee would determine the appropriate level of performance with respect to such award) or the related performance measurement period had expired before the effective date of the “change in control”.

The general rules set forth above would be applicable except to the extent that there were different, special rules applicable to an eligible employee or an eligible director that were set forth in his or her award certificate or in an eligible employee’s employment agreement.

Amendment and Termination

The Board may amend the Amended LTI Plan from time to time to the extent that the Board deems necessary or appropriate, provided no amendment may be made without stockholder approval to the extent approval is required under applicable law and after the date of any change in control that might adversely affect any rights that would otherwise vest.

The Board may suspend the granting of awards under the Amended LTI Plan and terminate the Amended LTI Plan at any time, provided that the Board may not modify, amend or cancel an award made before such suspension or termination unless the participant consents in writing or there is a dissolution or liquidation of the Company or a corporate transaction described in the plan with respect to an adjustment or a change in control (see “Adjustments” and “Change in Control” above).

Life of the Plan

The LTI Plan stipulated that no grants may be made on or after the earlier of February 2, 2026 and the date on which all shares of Common Stock reserved for issuance had been issued or were no longer available for use. Under the Amended LTI Plan, the reference to “February 2, 2026” has been replaced by a reference to “February 2, 2028”.

United States Federal Income Tax Consequences

The following discussion is a general summary of the principal U.S. federal income tax consequences under U.S. law relating to awards granted to employees under the Amended LTI Plan. This summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign income and other tax consequences. The federal income tax law and regulations are frequently amended, and participants should rely on their own tax counsel for advice regarding federal income tax treatment under the Amended LTI Plan.

Stock Options and Stock Appreciation Rights (“SAR”). The grant of an option or SAR will create no tax consequences for the participant or the Company. A participant will generally have no taxable income upon exercise of an incentive stock option, except that the alternative minimum tax may apply. Upon exercise of an option other than an incentive stock option, a participant generally must recognize ordinary income equal to the fair market value of the shares acquired minus the exercise price. When disposing of shares acquired by exercise of an incentive stock option before the end of the applicable incentive stock option holding periods, the participant generally must recognize ordinary income equal to the lesser of the fair market value of the shares at the date of exercise minus the exercise price or the amount realized upon the disposition of the shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock option holding periods are met) generally will result in only capital gain or loss.

Other Awards. Other awards under the Amended LTI Plan generally will result in ordinary income to the participant at the later of the time of delivery of cash, shares or other property underlying such awards, or the time that either the risk of forfeiture or restriction on transferability lapses on previously delivered cash, shares or other awards.

Company Deduction. Except as discussed below, the Company is generally entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with options, SARs or other awards, but not for amounts the participant recognizes as capital gain. Thus, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods. Our ability to claim a deduction will be contingent on applicable reporting requirements having been met and that the income is not an “excess parachute payment” within the meaning of Section 280G of the Tax Code and is not disallowed by reason of the $1 million limitation on certain executive compensation under Section 162(m).

 

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As described above, the Tax Cuts and Jobs Act, as proposed on the date this Proxy Statement is filed, would eliminate the performance-based compensation exception to Section 162(m), among other changes to Section 162(m), so that we would not be able to claim a deduction with respect to any compensation paid to a “covered employee” in a calendar year that is in excess of $1 million, even if such compensation is considered “performance-based”.

Section 409A. Section 409A of the Tax Code provides special tax rules applicable to programs that provide for a deferral of compensation. Failure to comply with those requirements will result in accelerated recognition of income for tax purposes along with an additional 20% penalty tax. The Amended LTI Plan and awards thereunder are intended to be designed and administered so that any awards that are considered to be deferred compensation will not give rise to any negative tax consequences to the recipient under these provisions.

Plan Benefits

All future awards to directors, executive officers and employees will be made at the discretion of the Compensation Committee. Therefore, we cannot determine future benefits under the Amended LTI Plan at this time.

The table below shows the grant date fair values of stock-based awards under the LTI Plan for fiscal 2017 as well as the total number of stock-based awards under the LTI Plan since its adoption, with the fair value of relative total shareholder return-based grants being determined using a Monte Carlo simulation. The aggregate grant date fair values of, and number of shares represented by, performance-based restricted stock assumes target performance. The actual number of shares to be earned, if any, will not be determinable until the end of the performance period.

 

 Name and Position

 

  

Dollar Value ($)

 

  

Total Number
of Shares of
Restricted
Stock (#) (1)

 

  

Number of Shares of Restricted 
Stock and Options Since Plan
Adoption(#)(1)(2)

 

 Steven C. Voorhees

 

   8,027,289

 

   143,185

 

   527,551

 

    Chief Executive Officer and President

 

        

 Ward H. Dickson

 

   1,485,060

 

   26,490

 

   109,128

 

    Executive Vice President and Chief Financial Officer

 

        

 James B. Porter III

 

   2,172,986

 

   38,760

 

   148,910

 

    President, Business Development and Latin America

 

        

 Robert A. Feeser

 

   1,277,630

 

   22,790

 

   84,121

 

    President, Consumer Packaging

 

        

 Jeffrey W. Chalovich

 

   1,277,630

 

   22,790

 

   66,251

 

    President, Corrugated Packaging

 

        

 Marc P. Shore (3)

 

   3,466,067

 

   60,750

 

   60,750

 

    President, Multi Packaging Solutions

 

        

 Executive officer group

 

   19,320,984

 

   343,560

 

   1,106,133

 

 Non-employee director group

 

   1,429,747

 

   26,521

 

   80,017

 

 Non-executive officer employee group

 

   43,627,782

 

   775,340

 

   2,694,695

 

 

(1) No associate of any non-employee director or any executive officer has received awards under the LTI Plan.
(2) Reflects an adjustment for the separation of our specialty chemicals business in 2016 and excludes dividend equivalent rights.
(3) Reflects equity awards made in connection with the closing of the MPS acquisition. See “Compensation Discussion and Analysis – Compensation Elements – Long-Term Incentives (LTI).”

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

This section explains our compensation philosophy, summarizes our executive compensation programs and discusses compensation decisions for our NEOs.                

 

NEOs

 

Steven C. Voorhees

 

President and CEO

 

Ward H. Dickson

 

Executive Vice President

and CFO

 

James B. Porter III

 

President, Business

Development and Latin America  

 

Robert A. Feeser

 

President, Consumer Packaging

 

Jeffrey W. Chalovich

 

President, Corrugated

Packaging

 

Marc P. Shore*

 

President, Multi Packaging

Solutions

 

 

EXECUTIVE SUMMARY

        

 

We view our executive compensation program as a strategic tool that supports the successful execution of our business strategy.

        

 

The Compensation Committee has primary oversight over the design and execution of our executive compensation program. Our program is based on a pay-for-performance model – it uses short-term incentives (“STI”) and long-term incentives (“LTI”) to drive performance and align our executives’ and stockholders’ interests. Eighty-nine percent of targeted total direct compensation for our CEO in fiscal 2017 was at risk, and only 11% of his compensation was fixed, ensuring a strong link between his targeted total direct compensation and our financial and operating results. An average of approximately 76% of targeted total direct compensation for the other NEOs (other than Mr. Shore) was at risk in fiscal 2017. The allocation of variable target direct compensation for our CEO and other NEOs aligns with our compensation philosophy of motivating our executive officers to achieve our overall performance objectives in the short-term and to grow the business to create long-term value for our stockholders.

        

 

We believe the compensation paid to our NEOs for fiscal 2017 was commensurate with our performance, and that our STI and LTI achieved their goals of motivating and rewarding performance and aligning our executives’ and stockholders’ interests.

        

 

COMPENSATION GOVERNANCE AND PRACTICES

 

 

Program Features

 

    Independent oversight

 

    Competitive benchmarking

 

    Limited perquisites

     

 

Risk Mitigation

 

    Annual review of compensation plans, policies and practices includes risk assessment

 

    Anti-hedging/pledging policy

 

    Clawback provisions

 

    Stock ownership guidelines and stock retention policy

 

     

 

Pay-for-Performance

 

    Variable, or at-risk, pay represented 89% of our CEO’s total fiscal 2017 target compensation, and an average of 76% for our other NEOs (other than Mr. Shore)

 

    No repricing of stock options

 

SAY ON PAY RESULTS

 

Prior Year

Say on Pay

Support

97%

 

  

 

At last year’s annual meeting of stockholders, more than 97% of the votes cast were in favor of the advisory vote to approve executive compensation. The Compensation Committee took these results into account by continuing to emphasize our pay-for-performance philosophy utilizing challenging performance measures that provide incentives to deliver value to our stockholders.

  

* Mr. Shore joined us in June 2017 as part of the MPS acquisition. For fiscal 2017, we paid him salary and granted him certain equity awards pursuant to the terms of his employment agreement – see “ Other Compensation Practices and Policies – Employment Agreements and Change in Control Agreements” – and he was eligible to receive bonuses under the MPS Plan (as defined below) and the MPS Stub Plan (as defined below) – see “ – Compensation Elements – Annual Performance Bonus (STI) – MPS Manager Incentive Plan and MPS Stub Plan.”

 

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COMPENSATION HIGHLIGHTS AND ENHANCEMENTS

We made several enhancements to our 2017 executive compensation program to further link our program with our business strategies and the long-term interests of our stockholders. Key enhancements are highlighted below.

 

 

 

What We Did        

 

      

 

Why We Did It        

 

        
 

    Increased the weighting of the consolidated EBITDA(1) and productivity goals under our annual incentive program

  LOGO     

   To maximize EBITDA over the long-term in order to drive stockholder value and realize productivity improvements that will help us realize our synergy and performance improvement goals

 

   Transitioned from an approximate 75% to 130% payout range under our annual incentive program to a more competitive 50% to 200% payout range

  LOGO     

   To enhance the reward for outstanding performance and hold executives more accountable for below-target performance, and to conform our practice with the prevalent practice among our peer group

 

   Used the safety goal as a negative modifier, rather than assigning it a weighting

  LOGO     

   To further emphasize safety as a fundamental priority of the Company

 

   Changed the mix of vehicles in the long-term incentive program by replacing stock options with time-based restricted stock grants and added an additional performance-based stock component based on our achievement of a relative total shareholder return measure

 

  LOGO     

   To better align our executives’ and stockholders’ interests, leverage more of our long-term incentive mix against our Common Stock price performance and utilize fewer shares

 

 

 

(1) See “– Compensation Elements – Annual Performance Bonus (STI) – Performance Goals” for the definition of this non-GAAP financial measure and “Other Important Information – Non-GAAP Reconciliations”.

We view our executive compensation program as a strategic tool that supports the successful execution of our business strategy. For fiscal 2017, we continued to focus on EBITDA and free cash flow generation, and realizing synergy and productivity improvements. Our short-term incentive program placed substantial weight on achieving consolidated EBITDA, segment EBITDA and productivity goals – for example, 90% of our CEO’s and CFO’s short-term incentive goals were based on the achievement of consolidated EBITDA and productivity goals. Eighty percent of our long-term incentive award value consisted of performance-based stock, of which 50% was based on a cash flow per share measure. See “– Compensation Elements – Annual Performance Bonus (STI) – Performance Goals” for more information about these financial measures and the weightings we assigned to them within our executive compensation program.

For fiscal 2017, the target opportunity for the consolidated EBITDA and synergies and performance improvements components of our short-term incentive program were $2,347.4 million and $345 million, respectively. In fiscal 2017, we generated consolidated EBITDA of $2,367.7 million and realized $361 million of year-over-year productivity improvements, each of which exceeded the target opportunity of these components of our short-term incentive program and therefore resulted in awards that were greater than the target opportunity for these components of our NEOs’ bonuses.

EXECUTIVE COMPENSATION PROGRAM OVERVIEW

Philosophy and Objectives

Our executive compensation philosophy is based on the belief that the compensation of our employees, including our NEOs, should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do so. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance and the executive’s leadership. Core principles of our executive compensation program include:

 

    Overall compensation must be competitive relative to other comparable organizations in order to attract and retain superior executives.

 

    A substantial portion of total target direct compensation should be linked to variable, at-risk pay.

 

    LTI should be used in addition to STI to encourage a focus on long-term strategy and execution.

 

    Compensation should reflect an employee’s level of responsibility and contribution, and the greater the responsibility, the greater the share of an employee’s compensation that should be at-risk with respect to performance.

 

    Equity compensation should be used in addition to cash compensation to align our executives’ and stockholders’ interests.

 

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Pay-for-Performance

Our executive compensation program is based on a pay-for-performance model. The following graphs illustrate how we used our executive compensation principles in the weighting of the target total direct compensation elements used for fiscal 2017:

 

                CEO                         OTHER NEOs        

 

LOGO      LOGO

 

LOGO

 

 

Approximately 89% of targeted total direct compensation for our CEO in fiscal 2017 was at risk, and only 11% of his compensation was fixed, ensuring a strong link between his targeted total direct compensation and our financial and operating results. An average of approximately 76% of targeted total direct compensation for the other NEOs (other than Mr. Shore) was at risk in fiscal 2017.

 

Effectiveness

 

Our aggregate total stockholder returns for the past three, five and ten fiscal years were 44%, 95% and 419%, respectively. We believe our executive compensation program has been instrumental in helping us to achieve the strong historical financial performance that has driven these returns.

 

ADMINISTRATION

 

Benchmarking

 

The Compensation Committee reviews competitive market data from a combination of a specific peer group of companies within the paper and packaging industry, as well as other industries, and various published survey data for similarly sized companies or business units in the “non-durable goods manufacturing” sector. In some cases, these surveys include “all manufacturing” or “general industry” data, when non-durable goods manufacturing categories are not available. For fiscal 2017, the Compensation Committee selected a peer group based on the recommendation of its compensation consultant, which considered factors such as revenue size, nature of business, talent market, organizational complexity and location. The fiscal 2017 peer group is identical to the peer group used in fiscal 2016, except that the Compensation Committee removed Graphic Packaging Holding Company from the peer group in order to more closely align the peer group to the peer group median for revenue.

  

    TOTAL STOCKHOLDER RETURN*

 

LOGO

  *  Cumulative stock price appreciation, plus dividends, with dividends reinvested; adjusted to reflect the separation of our specialty chemicals business in 2016 and a stock split in 2014.

The Compensation Committee uses the competitive market data regarding base salary, STI and LTI to assist directors in determining appropriate overall compensation levels, but does not specifically benchmark to particular compensation levels.

 

The following summarizes the Compensation Committee’s approach to the various components of executive compensation for our NEOs relative to the competitive market data for executive talent discussed above:

 

    Base salary — Salaries are determined based on the executive’s responsibilities, performance, experience and the Compensation Committee’s judgment regarding competitive requirements and internal equity. The Compensation Committee does not target a specific market data percentile for base salaries. Salaries are individually determined and range broadly among our senior executives.

 

    STI — STI opportunities are determined based on the executive’s individual responsibilities and experience, and are individually set for each executive after reviewing market data. The Compensation Committee does not target a specific market data percentile for STI opportunities. Bonus opportunities range broadly among our executives.

         

 

Fiscal 2017 Peer Group

 

3M Company

 

Alcoa Inc.

 

Ball Corporation

 

Crown Holdings, Inc.

 

The Goodyear Tire & Rubber Company        

 

International Paper Company

 

Kimberly-Clark Corporation

 

Nucor Corporation

 

Owens-Illinois Inc.

 

Packaging Corporation of America

 

Sealed Air Corporation

 

United States Steel Corporation

 

Weyerhaeuser Company

 

 

 

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   LTI — In setting LTI target award values, the Compensation Committee reviews market levels of LTI awards for the peer group and other competitive market data. The Compensation Committee also reviews the types and mix of LTI instruments used by the peer group. The Compensation Committee does not target a specific market data percentile for LTI target values. Individual LTI awards are based on individual assessments, taking into account the executive’s responsibilities, performance, experience and other factors.

While the Compensation Committee reviews competitive market data regarding the various components of compensation for each NEO and certain other executives, the primary data point used to assess executive compensation is target total direct compensation, which is comprised of the target total cash compensation (base salary and target STI opportunity), plus the target value of LTI awards, although the Compensation Committee does not target a specific market data percentile for target total direct compensation. The Compensation Committee has a bias to deliver more performance-based pay, particularly LTI, to deliver competitive pay. Based on our peer group and survey data, in fiscal 2017 the target total direct compensation of our CEO was 101% of the market median, and the target total direct compensation of our other NEOs ranged from 98% to 180% of the market median.

Role of the Compensation Consultant

The Compensation Committee has sole discretion to retain and obtain the advice of a compensation consultant, and is directly responsible for the appointment, termination, compensation and oversight of the work of the compensation consultant. The Compensation Committee retains a compensation consultant to provide objective analysis, advice and information (including competitive market data and compensation recommendations related to our CEO and our other senior executives) to the Compensation Committee. The compensation consultant reports to the chairman of the Compensation Committee and has direct access to the other Compensation Committee members. The compensation consultant attends all significant meetings of the Compensation Committee and also meets with the Compensation Committee in person in executive sessions without management present.

The Compensation Committee retained Korn Ferry Hay Group to serve as its compensation consultant for fiscal 2017. In December 2015, Hay Group, Inc. was acquired by Korn/Ferry International. During fiscal 2016, Korn Ferry provided us with recruiting services (primarily related to the separation of our specialty chemicals business) and training services. We engaged Korn Ferry to provide the recruiting services prior to its merger with Hay Group. We paid Korn Ferry Hay Group $157,040 for rendering executive compensation consulting services in fiscal 2016, and we paid Korn Ferry Hay Group $713,300 for rendering additional services in fiscal 2016. Management approved the additional services in the normal course of business. In connection with retaining Korn Ferry Hay Group to serve as its compensation consultant for fiscal 2017, the Compensation Committee determined that the work of Korn Ferry Hay Group in fiscal 2016 did not raise any conflicts of interest and the Compensation Committee believes the additional services provided by Korn Ferry Hay Group in fiscal 2016 did not impair the objectivity of the advice rendered by Korn Ferry Hay Group to the Compensation Committee on executive and director compensation matters. In making this determination, the Compensation Committee considered the independence of Korn Ferry Hay Group in light of SEC rules and NYSE listing standards.

Role of Management

The Compensation Committee considers input from our CEO in making determinations regarding our overall executive compensation program and the individual compensation of our senior executives, other than our CEO. As part of the annual planning process, our CEO develops targets for our annual bonus program and presents them to the Compensation Committee for consideration, and, based on performance appraisals and information regarding competitive market practices provided by the compensation consultant, recommends base salary adjustments, STI opportunities and LTI levels for our senior executives, other than our CEO. In addition, each year, our CEO presents to the Compensation Committee and the directors his evaluation of each senior executive’s contribution and performance over the past year, strengths and development needs and actions, and reviews succession plans for each of our senior executives.

Setting Compensation Levels

After taking into account advice and recommendations from our CEO and the compensation consultant, the Compensation Committee determines what changes, if any, should be made to the executive compensation program and sets the level of compensation for each senior executive with respect to each element of the compensation program. In setting these levels, the Compensation Committee reviews a detailed analysis of each senior executive’s annual total direct compensation and the value of benefits under our retirement plans, including with respect to the competitive market data discussed below, and reviews compensation tally sheets with respect to our most senior executives that set forth each element of the executives’ compensation and benefits.

 

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COMPENSATION ELEMENTS

We provide a combination of pay elements and benefits to accomplish our executive compensation objectives. STI focus on the performance goals we believe drive stockholder value and for which our executives are responsible. LTI are primarily equity based and include a combination of performance-based restricted stock and time-based restricted stock. We believe LTI are critical in aligning our executives’ and stockholders’ interests, and creating an effective retention measure. Together, these incentives focus our executives on making decisions that will benefit our stockholders and the price of our Common Stock over the long term.

Our executive compensation program includes the following primary components: base salary, STI, LTI and retirement benefits.

 

   Factors

 

 

Base Salary

 

 

 

Annual Performance
Bonus (STI)

 

 

 

Performance-Based

Stock (LTI)

 

 

Time-Based Restricted
Stock (LTI)

 

   Form of Compensation  

 

Cash                

 

 

 

Equity        

 

 

 

Fixed

 

 

 

Performance-Based

 

 

 

Performance-Based

 

 

 

Time-Based

 

 

   Performance Timing

 

 

 

Short-Term Emphasis

 

 

 

Long-Term Emphasis

 

 

   Measurement Period

 

 

 

Annual and Ongoing

 

 

 

1 year

 

 

 

Vests at end of

3 year period

 

 

 

Vests at end of

3 year period

 

 

   Key Performance Metrics

   Applicable

 

 

 

 

 

 

EBITDA and Productivity

 

 

 

Cash Flow Per Share;

Relative Total Shareholder

Return

 

 

 

 Stock price on vest date 

 

 

   Determination of Performance-

   Based Payouts

 

   

Formulaic; Negative

Discretion

 

 

Formulaic; Negative Discretion

 

Base Salary

Base salary is designed to provide competitive levels of compensation to executives based on their responsibilities, performance and experience, in each case in relation to competitive market data. No specific formula is applied to determine the weight of each of these factors. We pay base salaries because they provide a basic level of compensation and are necessary to recruit and retain executives. In fiscal 2017, our CEO’s base salary was 92% of the market median, and our NEOs’ (other than Mr. Shore) base salaries ranged from 97% to 136% of the market median based on our current peer group and survey data. At lower executive levels, base salaries represent a larger portion of total compensation in accordance with our pay philosophy. At more senior executive levels, a greater portion of overall compensation is progressively replaced with larger variable compensation opportunities. The Compensation Committee has historically followed a policy of primarily using performance bonus awards, rather than base salary to reward outstanding performance. Base salary levels are also important because we generally tie the amount of STI and LTI opportunities and a substantial portion of our retirement benefits to a percentage of each executive’s base salary.

 

 

The salary adjustments for Messrs. Feeser and Chalovich were made in connection with their promotions in September 2016 to President of our Consumer Packaging segment and President of our Corrugated Packaging segment, respectively, and were effective October 1, 2016. Mr. Shore joined us on June 6, 2017.

   

  NEO

 

 

 

Percentage

Increase (%)

 

 

 

2017 Annual

Base Salary ($)

 

   

 

Steven C. Voorhees

 

 

 

3.1

 

 

 

1,160,000

 

   

 

Ward H. Dickson

 

 

 

5.1

 

 

 

620,000

 

   

 

James B. Porter III

 

 

 

1.3

 

 

 

785,000

 

   

 

Robert A. Feeser

 

 

 

7.0

 

 

 

600,000

 

   

 

Jeffrey W. Chalovich

 

 

 

13.2

 

 

 

600,000

 

   

 

Marc P. Shore

 

 

 

n/a

 

 

 

750,000

 

Annual Performance Bonus (STI)

Our annual executive bonus program is designed to motivate senior executives and reward the achievement of specific performance goals that support our business strategy. Annual bonus goals are established for each of the executives who participate in the program, including each of our NEOs. Consistent with our philosophy of paying for performance, our NEO’s performance-based compensation rises and falls with our overall performance. The size of the target annual executive bonus program opportunities are designed to provide competitive levels of compensation to executives based upon their experience, duties and scope of responsibilities. Target awards are based on a percentage of the executive’s base salary.

 

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The amount actually paid to an executive under the annual executive bonus program is a function of the following variables:

 

    the executive’s target bonus opportunity,

 

    the goals established by the Compensation Committee for the executive, and

 

    for each goal, the attainment of minimum achievement levels (threshold), capped by maximum achievement levels, and the Compensation Committee’s determination of the extent to which the executive’s goals were met.

Awards earned under the annual executive bonus program are contingent upon continued employment with us through the end of the fiscal year (which is our performance period) and are subject to the negative discretion of the Compensation Committee.

Certain STI awards are administered under the STI Plan. We are asking our stockholders to approve the Amended STI Plan. See “Item 3. Approval of the WestRock Company Second Amended and Restated Annual Executive Bonus Plan to Re-Approve the Material Terms of the Plan and the Performance Goals Thereunder.”

Performance Goals

For fiscal 2017, the primary performance goals for each of our NEOs (other than Mr. Shore) were:

 

 

EBITDA Results

 

     

 

Productivity Results

 

The Compensation Committee again assigned the greatest weighting to the consolidated EBITDA goal and, for fiscal 2017, increased the weighting of the consolidated EBITDA goal for all NEOs, other than Mr. Porter, because it believes maximizing consolidated EBITDA over the long-term will drive stockholder value.

 

For STI purposes in calculating our consolidated performance and the performance of our Brazil business, our Integrated Consumer segment, our Integrated NA Corrugated Packaging business and MPS, EBITDA is calculated as operating income adjusted to exclude:

 

   depreciation and amortization

 

   costs of discontinued operations or closed plants

 

   certain severance costs

 

   LIFO expense

 

   expenses or income from conforming accounting policies or income statement impact from M&A

 

   acquisition inventory step-up

 

   expenses from certain litigation

 

   extraordinary items

 

   asset impairment charges

 

   new accounting pronouncements, cumulative effect of accounting changes and prior period accounting errors.

     

For fiscal 2017, the Compensation Committee increased the weighting of the productivity goal for all NEOs, other than Mr. Dickson, because it believes realizing productivity improvements will help us realize our synergy and performance improvement goals.

 

For STI purposes, the productivity goals are measured based on realized improvements.

 

For fiscal 2017, the target opportunity for year-over-year productivity improvements was $345 million and we realized $361 million of improvements, which exceeded the target goal and therefore resulted in awards that were greater than the target opportunity for this component of our NEOs’ bonuses.

     

 

For example, the measurement of threshold, target and maximum EBITDA were adjusted to reflect the sale of our dispensing business and certain acquisitions we completed in fiscal 2017.

 

 

In fiscal 2017, the target opportunity for consolidated EBITDA was $2,347.4 million and we generated consolidated EBITDA of $2,367.7 million, which exceeded the target goal set by the Compensation Committee and resulted in awards that were greater than the target opportunity for this component of our NEOs’ bonuses.

 

See “Other Important Information – Non-GAAP Reconciliations”.

     

 

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Customer Engagement Survey Results

 

    

 

Safety Results

 

The Compensation Committee utilized customer engagement ratings as a component of our performance goals because they provide us with an objective measure of how our customers view the quality of our products, the level of our service and the value they receive from conducting business with us. During fiscal 2017, we engaged Gallup, an independent market research firm, to conduct our annual customer engagement surveys, which report on a scale of 1 to 5 with 5 being the most favorable rating.

 

For fiscal 2017, the Compensation Committee changed the customer engagement goal so that employees would be assessed on consolidated results, rather than the results of individual business segments, in order to support our enterprise sales approach.

 

In fiscal 2017, we achieved a customer survey result of 4.08, which exceeded the target goal set by the Compensation Committee for the component of our NEOs’ annual bonus opportunities related to customer engagement and resulted in awards that were greater than the target opportunity for this component of our NEOs’ bonuses.

 

    

We place a high value and emphasis on safety. For fiscal 2017, the Compensation Committee utilized the safety goal as a modifier of our overall STI performance by establishing a 5% improvement goal for each of the number of total workers’ compensation claims (“TWCC”) and the severity of injuries as measured by the number of workdays lost due to injuries (“LWD”) compared to the higher of our fiscal 2016 performance or our average performance over the last four years. The objective was to achieve a TWCC of 1.71 and a LWD of 13.05, in each case at the Company level, and failure to achieve the objectives would result in reduced STI payouts of up to 10%.

 

In fiscal 2017, we achieved a TWCC of 1.72 and a LWD of 10.32. As a result, the bonus payout was not negatively modified.

The fiscal 2017 bonus goals for Messrs. Voorhees and Dickson were based exclusively on consolidated Company measures because their positions had a substantial impact on the achievement of those measures. The fiscal 2017 bonus goals for Messrs. Porter, Feeser and Chalovich were based on a combination of consolidated Company measures (e.g., EBITDA, productivity and customer engagement) and measures focused on the results of the businesses they oversaw (e.g., Brazil EBITDA for Mr. Porter, Integrated Consumer Packaging Segment EBITDA for Mr. Feeser and Integrated North American Corrugated Packaging EBITDA for Mr. Chalovich). Each executive’s target bonus amount was set at a certain percentage of his base salary, with payouts of 50% and 200% of that amount for threshold and maximum performance, respectively.

For fiscal 2017, Mr. Voorhees was eligible to earn a cash bonus of up to 300% of his fiscal year-end base salary to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

         

 

Performance Benchmarks ( in 000s of $ for EBITDA/Productivity)

    

  Goal

 

  

Weight (%)    

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

    

 

EBITDA – Consolidated Company

 

  

 

65

 

  

 

1,995,300

 

  

 

2,347,400

 

  

 

2,699,500

 

  

 

Productivity (Realized) – Consolidated Company

 

  

 

25

 

  

 

310,000

 

  

 

345,000

 

  

 

395,000

 

  

 

Customer Engagement– Consolidated Company

 

  

 

10

 

  

 

3.97

 

  

 

4.07

 

  

 

4.17

 

  

For fiscal 2017, Mr. Dickson was eligible to earn a cash bonus of up to 200% of his fiscal year-end base salary to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

 

         

 

Performance Benchmarks ( in 000s of $ for EBITDA/Productivity)

    

  Goal

 

  

Weight (%)    

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

    

 

EBITDA – Consolidated Company

 

  

 

65

 

  

 

1,995,300

 

  

 

2,347,400

 

  

 

2,699,500

 

  

 

Productivity (Realized) – Consolidated Company

 

  

 

25

 

  

 

310,000

 

  

 

345,000

 

  

 

395,000

 

  

 

Customer Engagement – Consolidated Company

 

  

 

10

 

  

 

3.97

 

  

 

4.07

 

  

 

4.17

 

  

 

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For fiscal 2017, Mr. Porter was eligible to earn a cash bonus of up to 200% of his fiscal year-end base salary to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

        

 

Performance Benchmarks ( in 000s of $ for EBITDA/Productivity)

    
  Goal  

Weight (%)    

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

    

 

EBITDA – Consolidated Company

 

 

 

45

 

  

 

1,995,300

 

  

 

2,347,400

 

  

 

2,699,500

 

  

 

EBITDA – Brazil (1)

 

  20

 

  

 

258,600

 

  

 

304,200

 

  

 

349,800

 

  

 

Productivity (Realized) – Consolidated Company

 

 

 

25

 

  

 

310,000

 

  

 

345,000

 

  

 

395,000

 

  

 

Customer Engagement – Consolidated Company

 

  10

 

  

 

3.97

 

  

 

4.07

 

  

 

4.17

 

  

(1) Performance benchmarks are presented in local currency.

For fiscal 2017, Mr. Feeser was eligible to earn a cash bonus of up to 200% of his fiscal year-end base salary to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

        

 

Performance Benchmarks ( in 000s of $ for EBITDA/Productivity)

    

  Goal

 

 

Weight (%)    

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

    

 

EBITDA – Consolidated Company

 

 

 

35

 

  

 

1,995,300

 

  

 

2,347,400

 

  

 

2,699,500

 

  

 

EBITDA – Integrated Consumer Segment

 

  30

 

  

 

688,600

 

  

 

810,100

 

  

 

931,600

 

  

 

Productivity (Realized) – Consolidated Company

 

 

 

25

 

  

 

310,000

 

  

 

345,000

 

  

 

395,000

 

  

 

Customer Engagement – Consolidated Company

 

  10

 

  

 

3.97

 

  

 

4.07

 

  

 

4.17

 

  

For fiscal 2017, Mr. Chalovich was eligible to earn a cash bonus of up to 200% of his fiscal year-end base salary to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

        

 

Performance Benchmarks ( in 000s of $ for EBITDA/Productivity)

    

  Goal

 

 

Weight (%)    

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

    

 

EBITDA – Consolidated Company

 

 

 

35

 

  

 

1,995,300

 

  

 

2,347,400

 

  

 

2,699,500

 

  

 

EBITDA – Integrated NA Corrugated Packaging

 

  30

 

  

 

1,117,900

 

  

 

1,315,200

 

  

 

1,512,500

 

  

 

Productivity (Realized) – Consolidated Company

 

 

 

25

 

  

 

310,000

 

  

 

345,000

 

  

 

395,000

 

  

 

Customer Engagement – Consolidated Company

 

  10

 

  

 

3.97

 

  

 

4.07

 

  

 

4.17

 

  

The Compensation Committee sets performance goals and related performance benchmarks at the beginning of each fiscal year, and as needed to account for changes in the Company after considering management’s recommendations, the confidential business plan and the budget for that fiscal year. The Compensation Committee sets the required performance benchmark to achieve a maximum payout for a particular performance goal at ambitious levels that the Compensation Committee believes can only be attained when applicable results are exceptional and justify the higher award payments.

Potential bonus payouts under the STI Plan depend on the level at which the performance benchmarks are achieved as set forth in the table below, based on a percentage of the executive’s base salary at the end of the fiscal year. The failure to achieve at least a threshold performance benchmark with respect to a particular bonus goal will result in no payout for that portion of the bonus. The achievement in excess of the maximum performance benchmark with respect to a particular bonus goal will result in a maximum payout for that bonus goal. The achievement in excess of the threshold performance benchmark with respect to a particular bonus goal, but at a level below the maximum performance benchmark, will result in a payout based on straight-line linear interpolation for that bonus goal between the relevant benchmarks.

Performance-Based Payouts

The Compensation Committee is responsible for assessing actual performance relative to performance benchmarks for each goal and, in doing so, determines and certifies the amount of any final bonus payout. For fiscal 2017, the Compensation Committee determined and certified that the NEOs achieved overall performance benchmarks resulting in the executive bonus payout as a percentage of their salaries at the end of the fiscal year or the end of the applicable period set forth by their respective names shown below in the column entitled “Actual 2017 Executive Bonus Payout.”

 

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  NEO

 

  

 

Payout Based
on Achieving
Benchmark at
Threshold (%)

 

  

Payout Based
on Achieving
Benchmark at
Target (%)

 

  

Payout Based
on Achieving
Benchmark at
Maximum (%)

 

  

Actual 2017
Executive
Bonus
Payout (%)

 

    

 

Steven C. Voorhees

 

   75    150    300    169   

 

Ward H. Dickson

 

   50    100    200    113   

 

James B. Porter III

 

   50    100    200    119   

 

Robert A. Feeser

 

   50    100    200    116   

 

Jeffrey W. Chalovich

 

   50    100    200    110   

MPS Manager Incentive Plan and MPS Stub Plan

Mr. Shore participated in the MPS Manager Incentive Plan (the “MPS Plan”) during MPS’ fiscal year ended June 30, 2017. The MPS Plan provided for annual, performance-based cash bonuses in the event certain specified MPS and individual measures were achieved. Under the terms of the MPS Plan, Mr. Shore had a target bonus amount equal to $750,000 and awards were based on MPS’ adjusted EBITDA as defined in the MPS Plan.

We closed our acquisition of MPS on June 6, 2017. Because the MPS Plan continued to operate through June 30, 2017, the Compensation Committee approved payments under the MPS Plan in fiscal 2017 based on the achievement of goals previously established by the MPS compensation committee.

 

         

 

MPS Plan (in $Millions)

 

   

  Goal

 

  

Weight (%)    

 

  

 

  Threshold

 

 

Target    

 

 

Maximum

 

   

 

Adjusted EBITDA —MPS

 

   100      246.0   259.0       284.9  

 

Payout

 

        50%   100%       200%  

MPS generated Adjusted EBITDA of $215 million during its fiscal year ended June 30, 2017; therefore, Mr. Shore did not receive a payment under the MPS Plan.

Because we utilize a September 30 fiscal year end and the MPS Plan continued to operate only through June 30, 2017, we implemented a short-term incentive plan for the period July 1, 2017 through September 30, 2017 for MPS employees (the “MPS Stub Plan”). The MPS Stub Plan provided for performance-based cash bonuses in the event certain specified measures were achieved. Under the terms of the MPS Stub Plan, awards paid to Mr. Shore were based on consolidated Company EBITDA and MPS EBITDA.

For the period July 1, 2017 through September 30, 2017, Mr. Shore was eligible to earn a cash bonus of up to $281,250 (representing the pro rata amount of his annual target bonus of $750,000) to the extent we achieved the following goals at or in excess of the maximum performance benchmarks.

 

         

 

MPS Stub Plan (in $Millions)

 

    

  Goal

 

  

Weight (%)    

 

  

 

  Threshold

 

  

Target    

 

  

Maximum

 

    

 

EBITDA – MPS

 

   70      60.9    67.7        74.5   

 

EBITDA – Consolidated Company

 

   30      632.0    702.4        772.8   

 

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As with STI Plan payments, the Compensation Committee was responsible for assessing actual performance relative to performance benchmarks for each goal under the MPS Stub Plan and, in doing so, determined and certified the amount of any final bonus payout. For purposes of the MPS Stub Plan, MPS generated EBITDA of $69.7 million and we generated consolidated EBITDA of $677.5 million, and the Compensation Committee determined and certified that Mr. Shore achieved overall performance benchmarks resulting in the executive bonus payout as a percentage of his salary at the end of September 30, 2017 set forth below in the column entitled “Actual 2017 Executive Bonus Payout.”

 

  NEO

 

  

 

Payout Based

on Achieving

Benchmark at

Threshold (%)

 

  

Payout Based

on Achieving

Benchmark at

Target (%)

 

  

Payout Based

on Achieving

Benchmark at

Maximum (%)

 

  

Actual 2017    
Executive Bonus    

Payout (%)    

 

 

Marc P. Shore

 

   50    100    150    105

Long-Term Incentives (LTI)

We emphasize long-term variable compensation at the senior executive level over short-term variable compensation because of our desire to reward effective long-term management decision-making and our desire to attract and retain executives who have the potential to positively impact our long-term profitability. Long-term incentives are designed to allow us to focus attention on the successful execution of our long-term business strategy and future returns to our stockholders.

For fiscal 2017, LTI awards consisted primarily of performance-based stock (80% of the award value) – consisting of a cash flow per share measure (50% of the award value) and a relative total shareholder return measure (30% of the award value) – and time-based restricted stock (20% of the award value). We believe that the combination of performance-based restricted stock with time-based restricted stock is a strong at-risk, LTI portfolio that provides strong alignment among our stock price performance, our management team’s long-term execution of our strategic plan and the long-term incentive amounts actually realized by our executives.

LTI awards are administered under the LTI Plan. We are asking our stockholders to approve the Amended LTI Plan. See “Item 4. Approval of the WestRock Company Amended and Restated Incentive Stock Plan and the Performance Goals Thereunder.”

Timing

While the Compensation Committee may grant LTI awards at any of its scheduled meetings or by unanimous written consent, it generally grants awards for executives at its January or February meeting each year, except for awards related to promotions, new hires or acquisitions. Grants approved during scheduled meetings become effective and are priced as of the date of approval or as of a pre-determined future date based on a date of hire. Grants approved by unanimous written consent become effective and are priced as of a pre-determined future date.

Performance-Based Restricted Stock

Performance-based restricted stock is designed to reward and retain our executives by offering them the opportunity to receive shares of Common Stock upon achieving pre-determined performance criteria. The performance-based restricted stock awards include a service condition and a performance condition. In fiscal 2017, we utilized two performance conditions: one based on our achievement of a certain “cash flow per share” and another based on our achievement of a certain “relative total shareholder return.” In each case, performance will be assessed during the three-year period beginning January 1, 2017 and ending on December 31, 2019.

For the cash flow per share-based awards, subject to the satisfaction of the applicable service requirement, the actual number of shares that will vest pursuant to the grants made on February 17, 2017 will be a percentage of the respective target awards based on “cash flow per share” as follows:

 

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  Cash Flow Per Share

 

  

 

Percent of Target Award (%)

 

 

> 6.35

 

   200

 

> 5.40 but < 6.35

 

   100

 

> 3.78 but < 5.40

 

   50

 

< 3.78

 

   0

Awards for performance between these goal levels will be interpolated on a linear basis; provided performance in excess of the maximum goal level will not result in vesting in excess of 200% of the target award.

“Cash flow per share” is calculated as our “cash flow” (as defined below), divided by three, divided by the average of the “diluted weighted average shares outstanding” during the 12 quarters in the period beginning January 1, 2017 and ending December 31, 2019. The term “cash flow” means our “net cash provided by operating activities,” as set forth in our statements of cash flow during the period beginning on January 1, 2017 and ending December 31, 2019; minus the actual amount of “capital expenditures” up to $2.41 billion (and any amount over $2.41 billion in the discretion of the Compensation Committee), as set forth in our statements of cash flow during the period beginning January 1, 2017 and ending December 31, 2019; plus the sum of all cash sources included in the “investing activities” section of our statements of cash flow during the period beginning January 1, 2017 and ending December 31, 2019, but excluding any cash acquired in a merger (provided the Compensation Committee may limit cash sources to $100 million in any year); plus the after-tax impact of integration and restructuring costs related to the Combination, including costs related to the separation of our specialty chemicals business, the sale of our dispensing business and the monetization of our land and development portfolio, as well as costs incurred in connection with the provision of services under the transition services agreement with the purchaser of our dispensing business; plus any payments made in connection with the cash settlement of any opening balance sheet liabilities related to costs of mergers and acquisitions recorded on the books of the acquired or merged entities; plus 25% (or our actual ownership percentage, if different than 25%) of the net income of our joint venture with Grupo Gondi; plus the after-tax impact of any cash payments relating to any multi-employer pension plan, other than normal pension contributions; plus any cash tax consequences arising from the prepayment of the Plum Creek Timber Note Holdings notes receivable or notes payable, plus any cash payments made in connection with certain claims and litigation.

For the relative total shareholder return-based awards, subject to the satisfaction of the applicable service requirement, the actual number of shares that will vest pursuant to the grants made on February 17, 2017 will be a percentage of the respective target awards based on “relative total shareholder return” as follows:

 

  Relative Total Shareholder Return   

 

Percent of Target Award (%)

 

 

> 75th percentile

 

   200

 

> 50th percentile but < 75th percentile

 

   100

 

> 30th percentile but < 50th percentile

 

   50

 

< 30th percentile

 

   0

Awards for performance between these goal levels will be interpolated on a linear basis; provided performance in excess of the maximum goal level will not result in vesting in excess of 200% of the target award. Payouts under this performance measure are capped at target if our relative total shareholder return is negative over the performance period.

“Total Shareholder Return” is calculated using the average of our Common Stock price for the 20 trading days prior to the start of the January 1, 2017 through December 31, 2019 performance period (with the 20-day period ending on December 31, 2016 for the initial period and on December 31, 2019 for the ending period) compared to the common stock price of companies included in a comparator group using an identical calculation, provided that in all cases, dividends paid to stockholders during the performance period will be calculated in the results as a reinvestment on the ex-dividend date closing price.

The performance-based stock granted in fiscal 2017 is scheduled to vest on February 17, 2020 and provides for (i) dividend equivalent rights to be credited to the recipient prior to vesting, (ii) early vesting in the event of a change in control and (iii) no voting rights prior to vesting.

Stock Options

Stock options are granted at fair market value, and have a three-year vesting period and a 10-year term. Although stock options have been awarded in the past, the Compensation Committee did not not award them in fiscal 2017.

 

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Time-Based Restricted Stock

For fiscal 2017, 20% of target long-term incentive compensation value was awarded in the form of time-based restricted stock. The Compensation Committee approves a dollar value for these awards and we determine the number of restricted stock equal to that value. The economic value calculated for each award is based on the grant date stock price for restricted stock. The time-based restricted stock typically vests on the third anniversary of the grant date.

In connection with the closing of our acquisition of MPS, the Compensation Committee granted Mr. Shore an award of 43,421 shares of restricted stock, representing the conversion of restricted stock awards that were (a) not subject to performance-based vesting conditions, (b) granted pursuant to MPS plans and (c) outstanding immediately prior to the closing of the acquisition, as adjusted for the exchange ratio defined in the definitive acquisition agreement. These awards are subject to the same terms and conditions applicable to the awards prior to closing of the acquisition. In addition, the Compensation Committee granted Mr. Shore an award of (i) 43,055 shares of restricted stock that will vest in equal installments on the first, second and third anniversaries of the merger date, (ii) 3,540 shares of restricted stock that will cliff vest on the third anniversary of the grant date and (iii) 14,155 shares of restricted stock (at target) that will vest on February 17, 2020. These awards are subject to a performance condition that Mr. Shore remain employed by us on the applicable vesting date. In all cases, the shares of restricted stock represent a contingent right to receive one share of Common Stock.

Fiscal 2017 LTI Awards

The Compensation Committee made the following LTI grants to our NEOs in fiscal 2017.

 

  NEO   

Performance Shares (Target Award) –

Number of Restricted Shares (#)

 

  

Time-Based Restricted Stock –      

Number of Shares (#)      

 

 

Steven C. Voorhees

 

  

 

114,550

 

  

 

28,635

 

 

Ward H. Dickson

 

  

 

21,190

 

  

 

5,300

 

 

James B. Porter III

 

  

 

31,010

 

  

 

7,750

 

 

Robert A. Feeser

 

  

 

18,230

 

  

 

4,560

 

 

Jeffrey W. Chalovich

 

  

 

18,230

 

  

 

4,560

 

 

Marc P. Shore(1)

 

  

 

14,155

 

  

 

46,595

 

 

(1) Reflects awards made to Mr. Shore in connection with our acquisition of MPS and pursuant to the terms of Mr. Shore’s employment agreement.

Retirement Benefits

We provide certain retirement benefits to our NEOs in order to provide financial security in retirement and to attract and retain high quality senior executives. See “Executive Compensation Tables — Retirement Plans” for more information.

Other Benefits

Perquisites are not a significant element of our executive compensation program. We have reimbursed Mr. Porter with respect to his automobile allowance. We do not reimburse our NEOs for club memberships or provide tax gross-up payments (other than for Mr. Porter with respect to his automobile allowance). Certain perquisites are provided that enable our NEOs to perform their responsibilities more efficiently. For example, Messrs. Voorhees and Porter may use our airplanes for business and limited personal use. This perquisite helps keep them more secure, ensures their quick availability for Company matters and permits them to work on Company business without distractions. We believe that the benefit to us of providing this perquisite outweighs the costs to the Company.

OTHER COMPENSATION PRACTICES AND POLICIES

Officer Stock Ownership and Retention Requirements

Certain of our executives, including our NEOs, are expected to meet or exceed specified levels of Common Stock ownership in order to align their interests with those of our stockholders. The Board has established the following ownership guidelines:

 

 

  Position

 

  

Target Ownership

 

 

Chief Executive Officer

 

  

 

6 times base salary

 

 

Other Designated Executives

 

  

 

3 times base salary

 

 

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In determining compliance with these guidelines, stock ownership includes shares owned outright, vested or unvested stock grants, stock unit grants or deferred stock units, and shares held in trust for the benefit of the individual. Executives have five years from the date of their designation to achieve the targeted level of ownership. All of our NEOs have achieved the targeted level of ownership.

Certain of our executives, including our NEOs, are required to retain 50% of the net restricted stock awarded to the individual, net of any shares used to satisfy any related tax liability upon vesting, for a period of two years following the vesting of the restricted stock or until the individual no longer serves as an employee. The retention period does not apply to any shares to the extent the recipient continues to own an amount of Common Stock at least equal to the amount of shares required under the preceding sentence, plus the amount of shares required to be held under our stock ownership guidelines.

Anti-Hedging/Anti-Pledging Policy

We maintain a policy that prohibits our directors and officers who are subject to the reporting requirements of Section 16 of the Exchange Act, members of our leadership team and other designated employees from (i) holding Common Stock in margin accounts, (ii) pledging Common Stock as collateral for a loan, (iii) trading in options, warrants, puts, calls or similar instruments on our Common Stock or (iv) short selling Common Stock.

Clawback Provisions

The Compensation Committee has adopted clawback provisions that apply to awards made to our NEOs pursuant to our annual executive bonus program and incentive stock plans that allow us to recapture amounts paid or stock granted to NEOs that vests based upon financial results that we are required to restate at a future date if the Compensation Committee determines that the restatement is based in whole or in part upon any misconduct by an applicable NEO. These provisions require an applicable NEO to pay us an amount of cash or deliver an amount of shares of Common Stock equal to the benefit received by the NEO because of the misstatement of financial results. These provisions apply to misstatements of financial results that are discovered within 24 months after an applicable stock grant has vested or bonus has been paid. The Compensation Committee may adopt changes to the clawback provisions once the SEC issues final rules and the NYSE adopts related listing standards implementing the provisions of the Dodd-Frank Act related to compensation recovery.

Deductibility of Executive Compensation

In certain circumstances, Section 162(m) may deny a federal income tax deduction for compensation to our NEOs (excluding our CFO) in excess of $1 million per year. Certain compensation that qualifies as “performance-based” and is paid pursuant to a plan that has been approved by stockholders may be exempt from the Section 162(m) limit. Our annual and long-term incentive plans have been structured with the intent of enabling the Compensation Committee to grant compensation that constitutes “qualified performance-based compensation” under Section 162(m), if the Compensation Committee determines to do so. However, we believe that our interests and our stockholders’ interests may sometimes be best served by providing compensation that is not deductible in order to attract, retain, motivate and reward executive talent. Accordingly, the Compensation Committee intends to retain the flexibility to provide for payments of compensation that are not deductible.

The foregoing summarizes the provisions of Section 162(m) as in effect at the time this Proxy Statement is filed. The proposed Tax Cuts and Jobs Act, if signed into law, may amend Section 162(m) to, among other things, eliminate the performance-based compensation exception noted above.

Employment Agreements and Change in Control Agreements

Mr. Porter

We entered into an employment agreement with Mr. Porter in 2015 that superseded an employment agreement with him that we assumed in connection with our acquisition of Southern Container Corp. in 2008. Upon Mr. Porter’s termination for any reason other than for “cause” (as defined in the agreement), he will be entitled to continue to receive compensation and benefits accrued through the termination date and to receive the following benefits:

 

    outstanding unvested stock options, if any, will vest and become exercisable,

 

    provided any applicable performance goals under outstanding unvested long-term incentive awards (other than stock options) are satisfied, awards granted in any calendar year prior to the calendar year in which his employment terminates will vest, and he will be vested in a prorated portion of any awards granted in the calendar year in which his employment terminates, and

 

    (i) an amount equal to 12 months of his base salary and (ii) any bonus he would have been entitled to with respect to the 12-month period.

 

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If Mr. Porter resigns or voluntarily terminates employment with us, he will be entitled to the vesting of his outstanding unvested stock options and long-term incentive awards as described above and any compensation and benefits accrued through the termination date but not to any other benefits. If we terminate Mr. Porter’s employment at any time for “cause”, he will only be entitled to compensation and benefits accrued through the termination date compensation and benefits accrued through the termination date, and he will not be entitled to any other compensation or benefits. Mr. Porter’s employment agreement includes a non-compete provision that is applicable for two years following termination and a non-solicitation provision that is applicable for three years following termination.

Mr. Feeser

We assumed an employment agreement with Mr. Feeser in connection with the Combination that provided for the payment of certain benefits to Mr. Feeser in the event he was terminated for other than “cause” or “disability” (as defined in the agreement) through the second anniversary of the Combination, or July 1, 2017. In 2016, we amended Mr. Feeser’s employment agreement. In consideration for him terminating his right to claim termination for “good cause” (as defined in the agreement), we agreed to provide him with a lump sum payment equal to up to three years of additional pension accrual for age and service under the Pension Plan (as defined in “Compensation Matters – Executive Compensation Tables – Retirement Plans – WestRock Company Consolidated Pension Plan”) and Retirement Restoration Plan (as defined in “Compensation Matters – Executive Compensation Tables – Retirement Plans – MWV Retirement Restoration Plan and MWV Executive Retirement Plan”) depending on his date of retirement. If he retires after December 31, 2020, he will not receive any additional pension accrual.

Mr. Chalovich

We assumed an employment agreement with Mr. Chalovich in connection with our acquisition of Southern Container Corp. in 2008. Pursuant to the agreement, if we terminate Mr. Chalovich without “gross cause” (as defined in the agreement), he will be entitled to receive compensation and benefits accrued through the termination date and to receive salary and paid COBRA continuation for one year, as well as a pro-rated bonus.

Mr. Shore

We entered into an employment agreement with Mr. Shore on January 23, 2017. The agreement became effective on June 6, 2017, the effective date of our acquisition of MPS. Pursuant to the agreement, if we terminate Mr. Shore without “cause” (as defined in the agreement), he will be entitled to receive (i) his salary for 12 months from the date of termination, (ii) a prorated bonus for the year of his termination, (iii) prorated vesting of restricted stock and other long-term incentive awards granted to him by the Company pursuant to his employment agreement and (iv) COBRA continuation coverage for 12 months.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our annual report on Form 10-K for fiscal 2017.

Timothy J. Bernlohr, chairman

Michael E. Campbell

Gracia C. Martore

Timothy H. Powers

Bettina M. Whyte

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised entirely of the five independent directors listed above. No member of the

Compensation Committee is a current, or during fiscal 2017 was a former, officer or employee of ours or any of our subsidiaries. During fiscal 2017, no member of the Compensation Committee had a relationship that must be described under the SEC rules relating to disclosure of related party transactions. In fiscal 2017, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on the Board or the Compensation Committee.

 

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EXECUTIVE COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

The amounts reported in the following table, including base salary, annual and long-term incentive amounts, benefits and perquisites, are described more fully under “Compensation Matters – Compensation Discussion and Analysis”.

 

  Name and Principal Positions

 

 

Fiscal
Year

 

 

Salary ($)(1)

 

 

Stock
Awards
($)
(2)

 

 

Option
Awards
($)
(2)

 

 

Non-Equity
Incentive Plan
Compensation
($)
(3)

 

 

 

Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings

($)(4)

 

 

All Other
Compensation
($)
(5)

 

 

Total ($)        

 

 

Steven C. Voorhees

Chief Executive Officer

and President

 

 

2017

 

 

 

1,151,250

 

 

 

8,027,289

 

 

 

0

 

 

 

1,961,792

 

 

 

0

 

 

 

245,982

 

 

 

11,386,313

 

 

 

2016

 

 

 

1,125,000

 

 

 

5,624,996

 

 

 

1,406,240

 

 

 

2,034,159

 

 

 

322,434

 

 

 

224,627

 

 

 

10,737,456

 

 

 

2015

 

 

 

1,012,603

 

 

 

2,792,523 (6)

 

 

 

1,333,303

 

 

 

1,599,098

 

 

 

452,265

 

 

 

89,680

 

 

 

7,279,472

 

 

Ward H. Dickson

Executive Vice President and Chief

Financial Officer

 

 

2017

 

 

 

612,500

 

 

 

1,485,060

 

 

 

0

 

 

 

699,029

 

 

 

0

 

 

 

98,365

 

 

 

2,894,954

 

 

 

2016

 

 

 

585,000

 

 

 

1,362,089

 

 

 

265,492

 

 

 

721,145

 

 

 

0

 

 

 

86,685

 

 

 

3,020,411

 

 

 

2015

 

 

 

564,959

 

 

 

1,049,178

 

 

 

247,683

 

 

 

589,473

 

 

 

0

 

 

 

43,769

 

 

 

2,495,062

 

 

James B. Porter III

President, Business Development

and Latin America

 

 

2017

 

 

 

782,500

 

 

 

2,172,986

 

 

 

0

 

 

 

932,351

 

 

 

0

 

 

 

513,344

 

 

 

4,401,181

 

 

 

2016

 

 

 

768,750

 

 

 

1,611,955

 

 

 

403,008

 

 

 

911,763

 

 

 

0

 

 

 

504,329

 

 

 

4,199,805

 

 

 

2015

 

 

 

746,219

 

 

 

1,679,250

 

 

 

391,133

 

 

 

906,651

 

 

 

0

 

 

 

476,034

 

 

 

4,199,287

 

 

Robert A. Feeser (7)

President, Consumer Packaging

 

 

2017

 

 

 

600,000

 

 

 

1,277,630

 

 

 

0

 

 

 

697,905

 

 

 

391,996

 

 

 

59,270

 

 

 

3,026,801

 

 

 

2016

 

 

 

558,250

 

 

 

897,551

 

 

 

224,390

 

 

 

475,588

 

 

 

1,084,537

 

 

 

44,817

 

 

 

3,285,133

 

 

Jeffrey W. Chalovich (7)

President, Corrugated Packaging

 

 

2017

 

 

 

600,000

 

 

 

1,277,630

 

 

 

0

 

 

 

658,982

 

 

 

0

 

 

 

41,225

 

 

 

2,577,837

 

 

 

2016

 

 

 

525,375

 

 

 

636,008

 

 

 

159,013

 

 

 

500,104

 

 

 

0

 

 

 

33,615

 

 

 

1,854,115

 

 

Marc P. Shore (7)

President, Multi-Packaging Solutions

 

 

 

2017

 

 

 

241,346

 

 

 

3,466,067

 

 

0

 

 

196,854

 

 

0

 

 

0

 

 

3,904,267

 

(1) The salary amounts for fiscal 2017 reflect three months of salary at the calendar year 2016 rate in effect on October 1, 2016 and nine months of salary at the calendar year 2017 rate for each NEO, other than Mr. Shore, who joined us on June 6, 2017 and received a salary in fiscal 2017 only from that date.
(2) SEC regulations require us to disclose the aggregate grant date fair value of the award of stock or options measured in dollars and calculated in accordance with ASC 718. For grants of restricted stock and stock units with a cash flow per share measure and/or service condition, the fair value per share is equal to the closing sale price of our Common Stock on the NYSE on the dates of the applicable grants ($52.66 on February 17, 2017 and $55.74 on June 7, 2017). For grants of restricted stock and stock units with relative total shareholder return measure and a service condition, the fair value was determined using a Monte Carlo simulation ($64.00 on February 17, 2017 and $70.78 on June 7, 2017). Certain grants of restricted stock and stock units made on February 17, 2017 contain a performance condition that may be adjusted from 0-200% of target subject to the level of performance attained. SEC regulations require us to disclose the aggregate fair value at the grant date based upon the probable outcome of these conditions. The amounts shown for the stock awards made on February 17, 2017 are calculated at 100% of target, which was the expected probable outcome of the performance condition at the grant date. Assuming maximum performance, the aggregate fair value of the fiscal 2017 performance awards made on (a) February 17, 2017 at 200% of target would be as follows: Mr. Voorhees, $11,797,218; Mr. Dickson, $2,182,541; Mr. Porter, $3,193,537; Mr. Feeser, $1,877,691 and Mr. Chalovich, $1,877,691 and (b) June 7, 2017 at 200% of target for Mr. Shore would be $3,959,088. We disclose the aggregate expense without reduction for assumed forfeitures (as we do for financial reporting purposes). See “Compensation Matters—Compensation Discussion and Analysis — Compensation Elements — Long-Term Incentives (LTI)” for more information.
(3) Amounts shown include payments made to our NEOs under our annual executive bonus program. Awards paid under this program for fiscal 2017 were earned in fiscal 2017 and paid in fiscal 2018.
(4) This column shows the increase from September 30, 2016 to September 30, 2017 in the actuarial present value of accumulated benefits for each NEO who participates in a WestRock sponsored pension plan. Mr. Voorhees retains benefits in the WestRock Company Consolidated Pension Plan (formerly the RockTenn Pension Plan (as defined below)) and SERP (as defined below). Mr. Feeser’s benefits are held in the WestRock Company Consolidated Pension Plan (formerly the MWV Pension Plan (as defined below)) and the Retirement Restoration Plan (as defined below). It does not include any above-market or preferential earnings on deferred compensation, as we do not provide above-market or preferential earnings on the deferred compensation of our NEOs. The amounts set forth in this column were calculated using the assumptions from the corresponding end-of-year disclosures. Accrued benefits, calculated at their assumed retirement ages of age 65 for Mr. Voorhees and age 62 for Mr. Feeser, were determined as of the end of fiscal 2017 using compensation data through September 30 and include the bonuses paid for fiscal 2017 after the fiscal year end. The accrued benefits were discounted back to the disclosure date with the discount rate only. The discount rates used as of September 30, 2016 and September 30, 2017 were 4.04% and 4.091%, respectively, for the WestRock Pension Plan, and were 2.98% and 3.20%, respectively, for the SERP. The lump sum rates (SERP only) used as of September 30, 2016 and September 30, 2017 were 1.60% and 2.33%, respectively. The lump sum rate for the Retirement Restoration Plan and the Executive Retirement Plan was 4.091%. The lump sum mortality table (SERP only) used was the applicable table under Revenue Ruling 2001-62 (GAR 94). The lump sum mortality table used for the Retirement Restoration Plan and the Executive Retirement Plan was 2017 417(e) PPA Mortality Table. The post-retirement mortality assumptions used as of September 30, 2017 were based on the adjusted Society of Actuaries RP-2014 Annuitant table and a future mortality improvement scale incorporating the Social Security Administration’s data and assumptions. The RP-2014 table was adjusted to substitute the Social Security Administration mortality improvement assumptions after 2006 and employ the same overall methodology used to develop the Society of Actuaries’ MP-2016 improvement scale, also reflecting white collar life expectancies, and reflecting that WestRock’s white collar male and female populations have 109% and 111% higher mortality experience, respectively, than otherwise expected using these assumptions. Messrs. Chalovich, Porter, Shore and Dickson were never eligible for any of these pension benefits.

 

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5) The amounts shown as “all other compensation” include the following perquisites and personal benefits:

ALL OTHER COMPENSATION TABLE FOR FISCAL 2017

 

    

 

Steven C.
Voorhees    

 

  

Ward H.
Dickson    

 

  

James B.    
Porter

 

  

Robert A.
Feeser

 

  

Jeffrey W.    
Chalovich

 

  

Marc P.
Shore

 

 

Life Insurance Premiums ($)

 

   0    0    0    0    0    0

 

Company Contributions to 401(k) Plan and Supplemental Plan ($) (A)

 

   233,478    98,365    492,493    59,270    41,225    0

 

Airplane Usage ($) (B)

 

   12,504    0    0    0    0    0

 

Other($)(C)

 

   0    0    20,851    0    0    0

 

Total($)

 

   245,982        98,365        513,344        59,270                41,225        0                

 

(A) The WestRock Company 401(k) Retirement Savings Plan (the “401(k) Plan”) provides eligible employees with a matching contribution of 100% of the first 5% of pay they contribute to the plan. In addition, for eligible employees, we contribute 2.5% of their eligible pay at the end of the calendar year. For purposes of the 401(k) Plan, eligible pay is limited by IRS regulation to $270,000 in 2017. Under the Supplemental Plan, the executives receive a match of 100% of the first 5% of their contributions in excess of the IRS limit of $270,000 and an additional 2.5% of eligible salary in excess of $270,000. Eligible salary includes salary and non-equity incentive compensation. Due to the ongoing pension benefits provided to Mr. Feeser, he is not eligible for the additional 2.5% Company contribution in either plan. Additionally, we contributed designated amounts to Mr. Porter’s individual retirement account. Due to Mr. Porter’s individual retirement account contributions, he is not eligible for the additional 2.5% Company contribution. Certain amounts disclosed in this row are also disclosed in the table below titled “Nonqualified Deferred Compensation Table”. Mr. Shore did not participate in the Supplemental Plan in fiscal 2017.
(B) In accordance with SEC regulations, we report the use of corporate aircraft by our executive officers as a perquisite or other personal benefit unless it is “integrally and directly related” to the performance of the executive’s duties. SEC rules require us to report this and other perquisites at our aggregate incremental cost. We estimate our aggregate incremental cost to be equal to our average incremental operating costs, which includes items such as fuel; maintenance; landing fees; trip-related permits; trip-related hangar costs; trip-related meals and supplies; crew expenses during layovers; and any other expenses incurred or accrued based on the number of hours flown. We use this method because we believe, on average, it fairly approximates our incremental cost and because it ensures that some “cost” is allocated to each passenger on each trip.
(C) For Mr. Porter, this amount includes $12,000 for his automobile allowance and $8,851 for tax gross-up payments related to our payment of this allowance.
(6) As reported in our current report on Form 8-K filed with the SEC on September 28, 2017, the stock award made to Mr. Voorhees on August 5, 2015 has been reduced by 50,326 unvested shares, representing the number of shares awarded in excess of the grant limit under the applicable stock incentive plan.
(7) Compensation information for Messrs. Chalovich and Feeser is provided only for fiscal 2017 and 2016 because they were not NEOs in fiscal 2015. Compensation information for Mr. Shore is provided only for fiscal 2017 because he was not a NEO of ours in fiscal 2016 and 2015.

 

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Table of Contents

GRANTS OF PLAN-BASED AWARDS

The following table provides information as to the grants of plan-based awards to each NEO during fiscal 2017. This includes annual performance bonus awards under our annual executive bonus program - see “Compensation Matters— Compensation Discussion and Analysis — Compensation Elements — Annual Performance Bonus (STI)” - and LTI awards - see “Compensation Matters - Compensation Discussion and Analysis — Compensation Elements - Long-Term Incentives (LTI).”

 

       

    Estimated Future Payouts Under    

    Non-Equity Incentive Plan Awards     

 

 

Estimated Future Payouts Under  
Equity Incentive Plan Awards 
(1)

 

     

 

All Other

Stock-Based

Awards:

 

Grant Date

Fair Value of   

Stock-Based

Awards ($)

 

  Name

 

 

Grant

Date

 

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

 

Maximum

(#)

 

     

Number of  

Securities

Underlying

Options

(#)

 

 

 

Steven C. Voorhees

   

 

  870,000

 

 

  1,740,000

 

 

  3,480,000

           
 

 

  2/17/2017

 

        28,635

 

  28,635

 

  28,635

 

    0

 

  1,507,919

 

    2/17/2017

 

        57,275

 

  114,550

 

  229,100

 

    0

 

  6,519,370

 

 

Ward H. Dickson

   

 

  310,000

 

 

  620,000

 

 

  1,240,000

           
 

 

  2/17/2017

        5,300

 

  5,300

 

  5,300

 

    0

 

  279,098

 

 

 

  2/17/2017

        10,596

 

  21,190

 

  42,380

 

    0

 

  1,205,962

 

 

James B. Porter

   

 

  392,500

 

 

  785,000

 

 

  1,570,000

           
 

 

  2/17/2017

 

        7,750

 

  7,750

 

  7,750

 

    0

 

  408,115

 

    2/17/2017

 

        10,505

 

  31,010

 

  62,020

 

    0

 

  1,764,871

 

 

Robert A. Feeser

      300,000     600,000     1,200,000            
 

 

  2/17/2017

 

        4,560

 

  4,560

 

  4,560

 

    0

 

  240,130

 

    2/17/2017

 

        9,116

 

  18,230

 

  36,460

 

    0

 

  1,037,500

 

 

Jeffrey W. Chalovich

   

 

  300,000

 

 

  600,000

 

 

  1,200,000

           
 

 

  2/17/2017

 

        4,560

 

  4,560

 

  4,560

 

    0

 

  240,130

 

    2/17/2017

 

        9,116

 

  18,230

 

  36,460

 

    0

 

  1,037,500

 

 

Marc P. Shore

   

 

  375,000

 

 

  750,000

 

 

 

  1,125,000

 

           
 

 

  6/7/2017

        46,595   46,595   46,595     0   2,597,205
 

 

  6/7/2017

        7,078   14,155   28,310     0   868,862

 

(1) These columns represent restricted stock grants made to the NEOs under the LTI Plan on February 17, 2017 (except for Mr. Shore who received the grant on June 7, 2017), which vest as described under “Compensation Matters - Compensation Discussion and Analysis — Compensation Elements — Long-Term Incentives (LTI).”

 

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Table of Contents

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table summarizes stock-based compensation awards outstanding as of September 30, 2017 and provides information concerning unexercised options, and other stock-based awards that have not vested, and equity incentive plan awards for each NEO outstanding as of the end of fiscal 2017. Each outstanding award is represented by a separate row which indicates the number of securities underlying the award, including awards that have been transferred other than for value (if any). For option awards, the table discloses the exercise price and the expiration date. For stock awards, the table provides the total number of shares of stock that have not vested and the aggregate market value of shares of stock that have not vested. We computed the market value of stock awards by multiplying the closing sale price of our Common Stock at the end of fiscal 2017 by the number of shares of stock or the amount of equity incentive plan awards, respectively. Shares and option exercise prices have been adjusted for the separation of our specialty chemicals business in 2016.

 

   

 

Option Awards

 

 

Stock Awards

 

 

 

  Name

 

 

Number of
Securities
Underlying
Unexercised 
Options (#)
Exercisable

 

 

Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable
(1) 

 

 

 

Equity
Incentive
Plan Awards: 
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

 

 

Option
Exercise 
Price ($)

 

 

Option
Expiration 
Date

 

 

Number of
Shares of
Stock That
Have Not
Vested (#)
(2) 

 

 

Market
Value of
Shares of
Stock That
Have Not
Vested ($)
(3) 

 

 

Equity
Incentive
Plan Awards: 
Number of
Unearned
Shares That
Have Not
Vested (#)
(4)

 

 

Equity
Incentive
Plan Awards:  
Market or
Payout Value
of Unearned
Shares That
Have Not
Vested ($)
(3)

 

 

Steven C. Voorhees (5)

 

 

49,267

 

 

0

 

 

0

 

 

13.00

 

 

3/19/2018

       
 

 

44,788

  0   0   11.81   3/18/2019        
 

 

21,274

  0   0   19.07   1/29/2020        
 

 

15,899

  0   0   30.66   2/28/2021        
 

 

2,015

  0   0   27.72   7/20/2021        
 

 

26,033

  0   0   28.31   2/01/2022        
 

 

20,781

  0   0   35.64   1/25/2023        
 

 

47,833

  0   0   45.32   1/31/2024        
 

 

0

  7,210   0   57.97   1/30/2025        
 

 

48,198

  16,890   0   56.05   1/30/2025        
 

 

65,189

  130,378   0   29.80   2/2/2026        
           

 

45,004

  2,553,070   352,453   19,994,665

 

Ward H. Dickson

 

 

10,480

  0   0   45.32   1/31/2024        
 

 

0

  1,514   0   57.97   1/30/2025        
 

 

8,926

  2,948   0   56.05   1/30/2025        
 

 

12,308

  24,614   0   29.80   2/2/2026        
           

 

15,850

  899,184   75,745   4,297,026

 

James B. Porter

 

 

14,930

  0   0   15.97   8/01/2018        
 

 

25,753

  0   0   19.07   1/29/2020        
 

 

19,202

  0   0   30.66   2/28/2021        
 

 

4,422

  0   0   27.72   7/20/2021        
 

 

34,262

  0   0   28.31   2/01/2022        
 

 

26,514

  0   0   35.64   1/25/2023        
 

 

20,804

  0   0   45.32   1/31/2024        
 

 

0

  2,960   0   57.97   1/30/2025        
 

 

14,006

  4,043   0   56.05   1/30/2025        
 

 

18,682

  37,364   0   29.80   2/2/2026        
           

 

14,412

 

  817,588

 

  113,841

 

  6,458,189

 

 

45


Table of Contents
   

 

Option Awards

 

 

Stock Awards

 

 

 

  Name

 

 

Number of
Securities
Underlying
Unexercised 
Unexercised
Options (#)
Exercisable

 

 

Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable
(1) 

 

 

 

Equity
Incentive
Plan Awards: 
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

 

 

Option

Exercise 
Price ($)

 

 

Option
Expiration 
Date

 

 

Number of
Shares of
Stock That

Have Not

Vested (#)(2) 

 

 

Market
Value of
Shares of
Stock That
Have Not
Vested ($)
(3) 

 

 

Equity
Incentive
Plan Awards: 
Number of
Unearned
Shares That
Have Not
Vested (#)
(4)

 

 

Equity
Incentive
Plan Awards:  
Market or
Payout Value
of Unearned
Shares That
Have Not
Vested ($)
(3)

 

 

Robert A. Feeser(6)

 

 

29,972

 

 

0

 

 

0

 

 

26.99

 

 

2/25/2018

       
 

 

67,755

  0   0   9.02   2/23/2019        
 

 

37,895

  0   0   23.65   2/22/2020        
 

 

30,677

  0   0   29.14   2/28/2021        
 

 

37,747

  0   0   31.30   6/25/2022        
 

 

23,014

  0   0   38.44   2/25/2023        
 

 

31,956

  0   0   41.11   2/24/2024        
 

 

3,165

  0   0   62.71   2/23/2025        
 

 

10,045

  6,605   0   56.05   2/23/2025        
 

 

10,402

  20,804   0   29.80   2/2/2026        
           

 

8,685

  492,701   63,897   3,624,901

 

Jeffrey W. Chalovich

 

 

5,430

 

  0   0   19.07   1/29/2020        
 

4,030

 

  0   0   30.66   2/28/2021        
 

615

 

  0   0   27.72   7/20/2021        
 

6,270

 

  0   0   28.31   2/01/2022        
 

8,666

 

  0   0   35.64   1/25/2023        
 

6,942

 

  0   0   45.32   1/31/2024        
 

0

 

  1,059     57.97   1/30/2025        
 

5,440

 

  1,664   0   56.05   1/30/2025        
 

7,372

 

  14,742   0   29.80   2/2/2026        
           

 

6,971

  395,466   50,970   2,891,548

 

Marc P. Shore(6)

           

 

84,330

  4,784,019   14,258   808,841

 

(1) Vesting dates of unvested stock option awards are as follows, as of September 30, 2017: Mr. Voorhees — 24,100 on January 30, 2018, 65,189 on February 2, 2018 and 65,189 on February 2, 2019; Mr. Dickson — 4,462 on January 30, 2018, 12,307 on February 2, 2018 and 12,307 on February 2, 2019; Mr. Chalovich — 2,723 on January 30, 2018, 7,371 on February 2, 2018 and 7,371 on February 2, 2019; Mr. Feeser — 10,402 on February 2, 2018, 6,605 on February 23, 2018 and 10,402 on February 2, 2019 and Mr. Porter — 7,003 on January 30, 2018, 18,682 on February 2, 2018 and 18,682 on February 2, 2019.
(2) The numbers of shares reported for the restricted stock grants and stock units other than certain grants made on February 17, 2017 and to Mr. Dickson on February 2, 2016 were granted subject to performance conditions; however, in connection with the Combination, the applicable performance conditions were deemed satisfied at the levels described below, and the awards currently remain subject only to service conditions. Excluding Mr. Feeser, the number of shares reported for the stock grants made on March 9, 2015 reflect the actual number of awards that converted to service-based awards at 146.5%, on the effective date of the Combination. For Mr. Feeser, the number of shares reported in this column for the restricted stock grants made prior to the Combination on February 23, 2015 reflect the actual number of shares that converted to service-based awards168% on the effective date of the Combination. The vesting dates of unvested stock grants and stock units are as follows: Mr. Voorhees — 15,948 on January 30, 2018 and 29,056 on February 17, 2020; Mr. Dickson — 3,349 on January 30, 2018, 3,561 on February 2, 2018, 3,562 on February 2, 2019 and 5,378 on February 17, 2020; Mr. Chalovich — 2,344 on January 30, 2018 and 4,627 on February 17, 2020; Mr. Feeser — 4,058 on February 23, 2018 and 4,627 on February 17, 2020; Mr. Porter — 6,548 on January 30, 2018 and 7,864 on February 17, 2020 and Mr. Shore — 14,456 on June 6, 2018, 6,339 on August 3, 2018, 14,456 on June 6, 2019, 24,719 on June 30, 2019, 6,338 on August 3, 2019, 14,456 on June 6, 2020, and 3,566 on June 7, 2020. Certain grants are entitled to receive dividend equivalent units during the vesting period, which are included in the number of shares disclosed. The performance conditions for the restricted stock grants and stock units made in fiscal 2017 are described under “Compensation Matters - Compensation Discussion and Analysis — Compensation Elements — Long-Term Incentives.”
(3) Based on the closing sale price of $56.73 for our Common Stock on September 30, 2017, the last trading date of our fiscal year, as reported on the NYSE.
(4)

The numbers of shares reported for the restricted stock grants and stock units made on February 17, 2017, February 2, 2016 and August 5, 2015 is based upon us achieving the applicable target market or target performance conditions. In the event that the applicable market or performance conditions are met at target, the vesting dates of unearned and unvested stock grants and stock units are as follows: Mr. Voorhees — 35,910 on January 30, 2018, 200,310 on February 2, 2019 and 116,233 on February 17, 2020; Mr. Dickson — 16,426 on January 30, 2018, 37,818 on February 2, 2019 and 21,501 on February 17, 2020; Mr. Chalovich — 9,824 on January 30, 2018, 22,648 on February 2, 2019 and 18,498 on February 17, 2020; Mr. Feeser — 13,438 on February 23, 2018, 31,962 on February 2, 2019 and 18,497 on February 17, 2020; Mr. Porter — 24,972 on January 30, 2018, 57,403 on February 2, 2019 and 31,466 on February 17, 2020; and Mr. Shore — 14,258 on February 17,

 

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  2020. Certain grants are entitled to receive dividend equivalent units during the vesting period, which are included in the number of shares disclosed. The performance conditions for the restricted stock grants and stock units made in fiscal 2016 are described under “Compensation Matters - Compensation Discussion and Analysis — Compensation Elements — Long-Term Incentives.”
(5) As reported in our current report on Form 8-K filed with the SEC on September 28, 2017, the stock award made to Mr. Voorhees on August 5, 2015 has been reduced by 50,326 unvested shares, representing the number of shares awarded in excess of the grant limit under the applicable stock incentive plan.
(6) Mr. Feeser’s awards, other than those granted on February 2, 2016 and August 5, 2015, were granted by MeadWestvaco but were assumed by WestRock and converted into WestRock awards in connection with the Combination. Mr. Shore’s awards, other than those granted on June 7, 2017, were granted by MPS, but were assumed by WestRock and converted into WestRock awards in connection with our acquisition of MPS.

VALUE REALIZED FROM STOCK OPTIONS AND STOCK APPRECIATION AWARDS

The following table provides information concerning exercises of stock options, and vesting of stock, including restricted stock, during fiscal 2017 for each NEO on an aggregated basis. In some cases, this includes the vesting of performance stock, which vested in the most recently completed fiscal year but which was granted in previous years. The table reports the number of securities for which the options were exercised; the aggregate dollar value realized upon exercise of options; the number of shares of stock that have vested; and the aggregate dollar value realized upon vesting of stock.

Option Exercises and Stock Vested Table for Fiscal 2017

 

    

 

Option Awards

  

 

Stock Awards

  Name

 

  

Number of Shares
Acquired on Exercise (#)

 

  

Value Realized
on Exercise ($)

 

  

Number of Shares
Acquired on Vesting (#)

 

  

Value Realized  
on Vesting ($)
(1)  

 

 

Steven C. Voorhees

 

  

 

22,394

 

  

 

849,946

 

  

 

97,418

 

  

 

5,198,224

 

 

Ward H. Dickson

 

  

 

0

 

  

 

0

 

  

 

41,771

 

  

 

2,265,175

 

 

James B. Porter III

 

  

 

0

 

  

 

0

 

  

 

59,578

 

  

 

3,179,082

 

 

Robert A. Feeser

 

  

 

23,670

 

  

 

459,329

 

  

 

20,991

 

  

 

1,121,549

 

 

Jeffrey W. Chalovich

 

  

 

11,868

 

  

 

553,049

 

  

 

19,873

 

  

 

1,060,423

 

 

Marc P. Shore

 

  

 

0

 

  

 

0

 

  

 

6,294

 

  

 

356,177

 

 

(1) Calculated based on the closing sale price of the Common Stock on the vesting date.

EQUITY COMPENSATION PLAN INFORMATION

The table below shows information with respect to all of our equity compensation plans as of September 30, 2017:

 

  Plan Category

 

 

 

Number of Securities
to be Issued Upon
Exercise of Outstanding
Options,  Warrants and
Rights (#)(a)

 

 

 

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
($)(b)

 

 

 

Number of Securities Remaining  
Available for Future Issuance  
Under Equity Compensation Plans  
(Excluding Securities Reflected in  
Column a) (#)(c)  

 

 

Equity compensation plans approved by security holders:

 

     

 

2016 Incentive Stock Plan(1)

 

 

 

1,208,509

 

 

 

29.85

 

 

 

6,915,587

 

 

2004 Incentive Stock Plan(1)

 

 

 

1,300,430

 

 

 

36.25

 

 

 

3,098,528

 

 

RockTenn (SSCC) Equity Incentive Plan(2)

 

 

 

7,268

 

 

 

27.72

 

 

 

5,887,182

 

 

2005 Performance Incentive Plan(1)

 

 

 

3,348,646

 

 

 

28.52

 

 

 

8,930,493

 

 

2016 Employee Stock Purchase Plan

 

 

 

0

 

 

 

0

 

 

 

2,568,723

 

 

Equity compensation plans not approved by security holders

 

 

 

0

 

 

 

0

 

 

 

0

 

 

(1) Our stockholders approved the LTI Plan on February 2, 2016. Our stockholders are being asked to approve the Amended LTI Plan. See “Item 4. Approval of the WestRock Company Amended and Restated Incentive Stock Plan and the Performance Goals Thereunder.” We will not make additional grants of awards under either of the 2004 Incentive Stock Plan or the 2005 Performance Incentive Plan.
(2) In connection with our acquisition of Smurfit-Stone, we assumed the Smurfit-Stone Equity Incentive Plan, which was renamed the RockTenn (SSCC) Equity Incentive Plan. The shares available for issuance, stock options and unvested restricted stock units outstanding at the time of our acquisition of Smurfit-Stone under that plan were converted into shares of our Common Stock and options and restricted stock units, as applicable, with respect to shares of our Common Stock using the conversion factor as described in the Agreement and Plan of Merger by and among RockTenn, SAM Acquisition, LLC and Smurfit-Stone Container Corporation, dated January 23, 2011. We will not make additional grants of awards under the RockTenn (SSCC) Equity Incentive Plan.

 

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RETIREMENT PLANS

WestRock Company Consolidated Pension Plan

Effective July 2, 2015, the RockTenn Pension Plan and MWV Pension Plan merged into the WestRock Company Consolidated Pension Plan (the “Pension Plan”). Mr. Voorhees participated in the legacy RockTenn portion of the Pension Plan’s defined benefit plan for former RockTenn salaried and nonunion hourly employees. We refer to the Pension Plan as it applies to former RockTenn employees as the “RockTenn Pension Plan”. The Compensation Committee determined that there would be no future pension accruals under the RockTenn Pension Plan for any salaried or nonunion hourly participant after December 31, 2015, except with respect to a discrete group of non-union hourly participants. Mr. Voorhees will receive a benefit at retirement equal to the sum of (1) the benefit accrued from the date of hire through February 28, 2005, under the benefit formula in effect during that period, and (2) the benefit accrued under the 2005 benefit formula between March 1, 2005 and December 31, 2015.

The Pension Plan is a defined benefit plan qualified under the Tax Code and, as such, is subject to a limitation under the Tax Code on the amount of benefits that may be paid to a participant each year under the plan as described below.

MWV Pension Plan

Mr. Feeser participated in the legacy MWV portion of the Pension Plan. We refer to the Pension Plan as it applies to former MeadWestvaco employees as the “MWV Pension Plan.” The MWV Pension Plan is a qualified retirement plan that covered all salaried employees of the Company who were employees of MeadWestvaco before the Combination. Effective January 1, 2015, MeadWestvaco added a supplemental cash balance benefit to the MWV Pension Plan (the “Retirement Plus Benefit”) for all salaried employees, which was funded by Company contributions equal to 4% of each participant’s eligible compensation, which contributions are made in lieu of contributions to the participants’ 401(k) plans. The Retirement Plus Benefit terminated effective December 31, 2015 for all participants of the MWV Pension Plan. The Compensation Committee determined that there would be no further pension accruals under other components of the MWV Pension Plan for salaried and nonunion hourly employees after December 31, 2015, unless, on December 31, 2015, a participant is at least age 50 years old and the sum of his or her age and service equal at least 75, in which case pension benefits under the MWV Pension Plan will continue to accrue for five additional years to December 31, 2020, or earlier upon such participant’s termination of employment with the Company. Mr. Feeser qualifies for this additional accrual period under the MWV Pension Plan. However, due to adjustments required to pass non-discrimination testing, Mr. Feeser ceased to accrue benefits under the WestRock qualified plan as of September 30, 2016 but will continue to accrue a benefit under the MWV Restoration Plan until the earlier of December 31, 2020 or his termination.

No employee’s compensation for purposes of the Pension Plan includes amounts in excess of the compensation limit under the Tax Code. This limit is periodically adjusted for inflation by the United States Secretary of the Treasury and this limit, as adjusted, was $265,000 for 2016 and $270,000 for 2017.

The SERP

Our Supplemental Executive Retirement Plan (the “SERP”) was designed to supplement a participant’s benefit under the RockTenn Pension Plan for a relatively small number of participants. The SERP provides unfunded supplemental retirement benefits. The SERP benefit is paid in a lump sum to participants whose employment with the Company is terminated. The Compensation Committee had determined who participated in the SERP and the benefit level for such participant. Mr. Voorhees is the only currently employed NEO who participated in the SERP. No additional benefits accrue under the SERP after December 31, 2015.

MWV Retirement Restoration Plan and MWV Executive Retirement Plan

Mr. Feeser participates in a non-qualified retirement restoration plan (the “Retirement Restoration Plan”) that mirrors the benefits provided under the MWV Pension Plan following the same formulas but recognizing compensation in excess of the limits set forth under the Code limit as described above. Benefits under this plan attributable to the Final Average Pay Benefit are payable in a lump sum option and annuity form. The lump sum option is only available for those benefits that were earned under the Legacy Mead Lump-Sum Eligible Benefit. The Legacy Mead Lump-Sum Eligible Benefit was frozen December 31, 2002. Consistent with the qualified plan, there have been no, and will be no, further accruals after December 31, 2015, unless, as above noted above, on December 31, 2015, a participant had turned at least age 50 and the sum of his or her age and service had equaled at least 75. Mr. Feeser qualifies for this additional accrual period. Benefits under this plan attributable to the Retirement Plus Benefit are payable in lump sum form only. Mr. Feeser also participated in the MWV Executive Retirement Plan (“MERP”), a non-qualified supplemental executive retirement plan. The MERP follows the benefit formula and vesting schedule under the Company’s qualified retirement plan described above, but recognizes additional service equal to .75 year of credited service for each year of actual service completed up to a maximum number of years equal to his age at hire minus 30. Generally, plan benefits are payable in annuity form and are subject to reduction for early retirement. In the case of an executive whose service and age equal 80, the reduction for early payment is reduced.

 

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The following table illustrates the actuarial present value as of September 30, 2017 of benefits accumulated by the NEOs under the Pension Plan, the SERP, the Executive Retirement Plan and the Retirement Restoration Plan using the methodology required by the SEC pursuant to the Financial Accounting Standards Board’s Accounting Standard’s Codification 715, “Compensation — Retirement Benefits,” at the earliest unreduced retirement age under the plan.

Pension Benefits Table for Fiscal 2017

 

  Name

 

 

Plan Name

 

 

Number of Years
Credited Service (#)

 

 

 

Present Value
of Accumulated
Benefit  ($)
(1)

 

 

 

Payments  
During Last  
Fiscal Year ($)
(2)  

 

 

Steven C. Voorhees

 

 

WestRock Company Consolidated Pension Plan

 

 

 

16.08

 

  490,337

 

 

 

0

 

 

RockTenn Supplemental Executive Retirement Plan

 

  16.08

 

  1,579,948

 

  0

 

 

Ward H. Dickson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James B. Porter(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert A. Feeser

 

 

 

WestRock Company Consolidated Pension Plan

 

 

 

30.33

 

 

 

1,238,840

 

 

 

0

 

 

 

MeadWestvaco Retirement Restoration Plan and Executive

 

 

30.33

 

 

5,020,435

 

 

0

 

Retirement Plan

 

     

 

Jeffrey W. Chalovich (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marc P. Shore (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The amounts set forth in this column were calculated using the assumptions from the corresponding end-of-year disclosure. Accrued benefits payable at age 65 for Mr. Voorhees and age 62 for Mr. Feeser were determined as of the end of the fiscal year using compensation data through September 30 and includes bonuses for fiscal 2017 paid after the fiscal year end. The accrued benefits were discounted back to the disclosure date with the discount rate only. The discount rates used as of September 30, 2017 were 4.091% (for the Pension Plan), 3.20% (for the SERP), and 4.091% for the Retirement Restoration Plan. The lump sum rate (SERP only) used as of September 30, 2017 was 2.33%. The lump sum rate for the Retirement Restoration Plan and the Executive Retirement Plan was 4.091%. The lump sum mortality table (SERP only) used as of September 30, 2017 was the applicable table under Revenue Ruling 2001-62 (GAR 94). The lump sum mortality table used for the Retirement Restoration Plan and the Executive Retirement Plan was 2017 417(e) PPA Mortality Table. The post-retirement mortality assumptions used as of September 30, 2017 were based on the adjusted Society of Actuaries RP-2014 Annuitant table and a future mortality improvement scale incorporating the Social Security Administration’s data and assumptions. The RP-2014 table was adjusted to substitute the Social Security Administration mortality improvement assumptions after 2006 and employs the same overall methodology used to develop the Society of Actuaries’ MP-2016 improvement scale. It also reflects white collar life expectancies and the fact that WestRock’s white collar male and female populations have 109% and 111% higher mortality experience, respectively, than otherwise expected using these assumptions.
(2) Due to the changes in discount rate and mortality tables, the increase in defined benefit pension values are negative for Mr. Voorhees therefore the total increase in defined benefit pension value is listed as $0. The actual change in the value of the pension benefit was -$4,654 and -$80,353 for the Pension Plan and SERP, respectively.
(3) Messrs. Dickson, Chalovich, Porter and Shore do not participate in the Pension Plan, the SERP, MERP or the Retirement Restoration Plan.

NONQUALIFIED DEFERRED COMPENSATION

The following table provides information with respect to each nonqualified deferred compensation plan that is a defined contribution plan, also called an individual account plan. The amounts shown include compensation earned and deferred in prior years, and earnings on, or distributions of, such amounts.

The column “Executive Contributions in Last Fiscal Year” indicates the aggregate amount contributed to such plans by each named executive officer during fiscal 2017 taking into account contributions made in fiscal 2018 with respect to fiscal 2017.

The column “Registrant Contributions in Last Fiscal Year” indicates our aggregate contributions on behalf of each named executive officer during fiscal 2017 taking into account contributions made in fiscal 2018 with respect to fiscal 2017. We also make matching contributions or profit sharing contributions to our qualified 401(k) plans, but those plans are tax qualified and, therefore, we do not include our contributions to them in this table. We include our matches to all plans in the table titled “All Other Compensation Table” included in footnote 5 of the table titled “Summary Compensation Table” above.

The column “Aggregate Earnings in Last Fiscal Year” indicates the total dollar amount of interest or other earnings accrued during fiscal 2017, including interest and dividends paid at market rates. We pay such amounts to compensate the executive for the deferral, and we do not consider the payment of interest and other earnings at market rates to be compensation.

The column “Aggregate Balance at Last Fiscal Year-End” reports the total balance of the executive’s account as of September 30, 2017 taking into account contributions made in fiscal 2018 with respect to fiscal 2017.

 

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Table of Contents

Nonqualified Deferred Compensation Table for Fiscal 2017

 

  Name

 

 

Executive Contributions
in Last Fiscal Year ($) 
(1)(2)    

 

 

Registrant
Contributions in
Last Fiscal Year($)
(2)(3)    

 

 

Aggregate
Earnings in Last    
Fiscal Year ($)

 

 

Aggregate
Withdrawals /
Distributions ($)    

 

 

Aggregate Balance  
at Last Fiscal  
Year-End ($)
(4)  

 

 

Steven C. Voorhees

 

 

 

155,652

 

 

 

213,228

 

 

 

177,889

 

 

 

0

 

 

 

2,236,376

 

 

Ward H. Dickson

 

 

 

213,306

 

 

 

78,115

 

 

 

47,640

 

 

 

0

 

 

 

784,800

 

 

James B. Porter

 

 

 

70,500

 

 

 

472,243

 

 

 

782,363

 

 

 

0

 

 

 

5,344,685

 

 

Robert A. Feeser

 

 

 

90,285

 

 

 

45,770

 

 

 

484,212

 

 

 

0

 

 

 

5,681,135

 

 

Jeffrey W. Chalovich

 

 

 

0

 

 

 

20,975

 

 

 

31,587

 

 

 

0

 

 

 

252,901

 

 

Marc P. Shore

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

(1) For fiscal 2017, each NEO (other than Mr. Shore) was able to defer up to 75% of his salary, and separately, defer up to 75% of his bonus pursuant to the Supplemental Plan.
(2) These amounts represent contributions earned in fiscal 2017 by the applicable NEO.
(3) Effective January 1, 2016, we began matching an amount equal to 100% of the first 5% of the executive’s contribution. Messrs. Voorhees, Dickson and Chalovich receive an additional employer contribution of 2.5% of pay in excess of IRC limits. We make additional contributions on behalf of Mr. Porter under the individual retirement accounts. Certain amounts disclosed are also disclosed for fiscal 2017 in “All Other Compensation Table” included in footnote 5 of the table titled “Summary Compensation Table”. The amounts disclosed in the two tables do not correspond because this table discloses only contributions earned under the Supplemental Plan in fiscal 2017, and the amounts disclosed for fiscal 2017 in the other table includes contributions earned in fiscal 2017 under the 401(k) Plan.
(4) The amounts in this column are calculated by adding the amounts set forth in each of the first four columns of this table for each NEO to the applicable NEO’s aggregate balance as of the end of fiscal 2016.

WestRock Company Deferred Compensation Plan

The WestRock Company Deferred Compensation Plan, effective January 1, 2016, is a non-qualified, unfunded deferred compensation plan sponsored and maintained by us and is intended to provide participants with an opportunity to supplement their retirement income through deferral of current compensation. The Deferred Compensation Plan has a match and an automatic employer contribution. The executive can make separate elections for deferral of base pay and for their bonus. We contribute a matching amount to each participant’s account maintained under the plan equal to 100% of the first 5% of the participant’s contributions of both base pay and bonus. In addition, we contribute an additional 2.5% of the executive’s pay if they are not continuing to accrue pension benefits or covered by an individual retirement account. These contributions are deposited to the executives account after the end of the calendar year. The matching contributions and the additional contributions earned as of September 30, 2017, but not yet deposited, are reflected in the table above.

Effective July 20, 2011, the Compensation Committee authorized an amendment to the Supplemental Plan to provide for additional retirement contributions for designated executive officers. In connection with the amendment, Mr. Porter was designated to receive the additional contributions established as individual retirement accounts in the Supplemental Plan. Mr. Porter’s contribution amount is $400,000 per year effective as of May 27, 2011. Contributions are deemed contributed in substantially equal installments each semi-monthly pay period, prorated for partial pay periods on a daily basis. Contributions will end at separation of service.

Amounts deferred and payable under the Deferred Compensation Plan (the “Obligations”) are our unsecured obligations, and rank equally with our other unsecured and unsubordinated indebtedness outstanding from time to time. Each Obligation will be payable on a date selected by the executive pursuant to the terms of the Deferred Compensation Plan. The Obligations generally are payable after termination of the participant’s employment or in certain emergency situations. Each participant’s account will be adjusted for investment gains and losses as if the credits to the participant’s account had been invested in the benchmark investment alternatives available under the Deferred Compensation Plan in accordance with the participant’s investment election or elections (or default election or elections) as in effect from time to time. All such adjustments will be made at the same time and in accordance with the same procedures followed under the 401(k) Plan for crediting investment gains and losses to a participant’s account under the 401(k) Plan. The Obligations are denominated and payable in United States dollars. The benchmark investment alternatives available under the Supplemental Plan are in our view comparable to investment alternatives commonly available under 401(k) retirement savings plans

 

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Table of Contents

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table summarizes the estimated payments to be made under each contract, agreement, plan or arrangement which provides for payments to a named executive officer at, following, or in connection with any termination of employment including by resignation, retirement, disability or a constructive termination of a named executive officer, or our change in control or a reduction in the named executive officer’s responsibilities. However, in accordance with SEC regulations, we do not report any amount to be provided to a named executive officer under any arrangement which does not discriminate in scope, terms, or operation in favor of our executive officers and which is available generally to all salaried employees.

Severance

See “Compensation Matters —Compensation Discussion and Analysis — Other Compensation Practices and Policies – Employment Agreements and Change in Control Agreements” for information related to severance and change in control payments applicable to Messrs. Chalovich, Feeser, Porter and Shore.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL FOR FISCAL 2017

 

  Name

 

  

Benefit

 

 

Before Change
in Control,
Termination
w/o Cause
($)
(1)

 

 

After
Change in
Control,
Termination
w/o Cause ($)

 

 

Termination
With Cause/

Resignation
w/o Good
Reason ($)

 

 

Death or
Disability ($)

 

 

 

Change
in Control ($)    

 

 

 

Steven C. Voorhees

 

  

 

Severance

 

 

 

0

 

 

 

0

 

 

 

0

 

  0

 

  0

 

  

 

Accelerated Vesting of Stock Options(2)

 

 

 

0

 

 

 

3,522,565

 

 

 

0

 

 

 

3,522,565

 

 

 

3,522,565

 

  

 

Accelerated Vesting of Restricted Stock(3)

 

 

 

0

 

 

 

22,547,735

 

 

 

0

 

 

 

22,547,735

 

 

 

0

 

  

 

SERP(4)

 

 

 

1,578,764

 

 

 

1,578,764

 

 

 

1,578,764

 

 

 

1,578,764

 

 

 

1,578,764

 

  

 

Total value:

 

 

 

1,578,764

 

 

 

27,649,064

 

 

 

1,578,764

 

 

 

27,649,064

 

 

 

5,101,329

 

 

Ward H. Dickson

 

  

 

Severance

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Stock Options(2)

 

 

 

0

 

 

 

664,860

 

 

 

0

 

 

 

664,860

 

 

 

664,860

 

  

 

Accelerated Vesting of Restricted Stock(3)

 

 

 

0

 

 

 

5,196,210

 

 

 

0

 

 

 

5,196,210

 

 

 

0

 

  

 

Total value:

 

 

 

0

 

 

 

5,861,070

 

 

 

0

 

 

 

5,861,070

 

 

 

664,860

 

 

James B. Porter

 

  

 

Severance

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Stock Options(2)

 

 

 

0

 

 

 

1,008,962

 

 

 

0

 

 

 

1,008,962

 

 

 

1,008,962

 

  

 

Accelerated Vesting of Restricted Stock(3)

 

 

 

0

 

 

 

7,275,776

 

 

 

0

 

 

 

7,275,776

 

 

 

0

 

  

 

Total value:

 

 

 

0

 

 

 

8,284,738

 

 

 

0

 

 

 

8,284,738

 

 

 

1,008,962

 

 

Robert A. Feeser

 

  

 

Severance

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Stock Options(2)

 

 

 

0

 

 

 

564,743

 

 

 

0

 

 

 

564,743

 

 

 

564,743

 

  

 

Accelerated Vesting of Restricted Stock(3)

 

 

 

0

 

 

 

4,117,603

 

 

 

0

 

 

 

4,117,603

 

 

 

0

 

  

 

RRP(5)

 

 

 

7,781,486

 

 

 

7,781,486

 

 

 

7,781,486

 

 

 

5,557,952

 

 

 

7,781,486

 

  

 

Total value:

 

 

 

7,781,486

 

 

 

12,463,832

 

 

 

7,781,486

 

 

 

10,240,298

 

 

 

8,346,229

 

 

Jeffrey W. Chalovich

 

  

 

Severance

 

 

 

615,559

 

 

 

615,559

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Stock Options(2)

 

 

 

0

 

 

 

398,134

 

 

 

0

 

 

 

398,134

 

 

 

398,134

 

  

 

Accelerated Vesting of Restricted Stock(3)

 

 

 

0

 

 

 

3,287,014

 

 

 

0

 

 

 

3,287,014

 

 

 

0

 

  

 

Total value:

 

 

 

615,559

 

 

 

4,300,707

 

 

 

0

 

 

 

3,685,148

 

 

 

398,134

 

 

Marc P. Shore

 

  

 

Severance

 

 

 

765,516

 

 

 

765,516

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Stock Options(1)

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

  

 

Accelerated Vesting of Restricted Stock(2)

 

 

 

0

 

 

 

5,592,860

 

 

 

0

 

 

 

5,592,860

 

 

 

0

 

  

 

Total value:

 

 

 

765,516

 

 

 

6,358,376

 

 

 

0

 

 

 

5,592,860

 

 

 

0

 

 

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Table of Contents
(1) The numbers contained in this column contemplate that a change in control had occurred as of September 30, 2017.
(2) The calculation of the value of accelerated vesting of stock options is based upon the closing sale price of $56.73 of our Common Stock on the NYSE on September 29, 2017, the last trading day of our fiscal year for all of our NEOs. The exercise prices of the NEOs’ stock options used to make these calculations are $56.05 and $29.80 per share of the NEOs’ stock options granted on August 5, 2015 and February 2, 2016, respectively.
(3) The calculation of the value of accelerated vesting of restricted stock is based on the closing sale price of $56.73 of our Common Stock on the NYSE on September 29, 2017, the last trading day of our fiscal year for all of our NEOs multiplied by the number of shares that would have vested on September 30, 2017 for each NEO upon the occurrence of the specified events. Excluding Mr. Feeser, the number of shares reported in these rows for the stock grants made on March 9, 2015 reflect the actual number of shares that converted into service-based awards at 146.5% on the effective date of the Combination. For Mr. Feeser, the number of shares reported in this column for the stock grants made prior to the Combination on February 23, 2015 reflect the actual number of shares that converted into service-based awards at 168% on the effective date of the Combination. Upon a change in control, the restricted stock awards granted to the named executive officers in fiscal 2017 will vest as described above in the section titled “Compensation Matters - Compensation Discussion and Analysis — Compensation Elements - Long-Term Incentives”.
(4) The SERP benefit above represents the potential payments from the SERP as of the end of fiscal 2017. These benefit payments were based on the accrued benefits at September 30, 2017 and were converted to lump sum amounts using a rate of 2.42%. Mr. Voorhees is the only NEO who is eligible for the SERP.
(5) Mr. Feeser participates in the Retirement Restoration Plan, which is referred to as “RRP” above, and the MeadWestvaco Corporation Executive Retirement Plan, which is referred to as “MERP”.

 

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AUDIT MATTERS

 

 

 

ITEM 5. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP

 
 

 

What am I voting on? The Board is asking our stockholders to ratify the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2018

 

Voting Recommendation: FOR the ratification of our independent registered public accounting firm

 

Vote Required: An affirmative vote requires the majority of shares present in person or represented by proxy and entitled to vote

 

 

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is comprised of five independent directors. The Board has determined that all Audit Committee members are “financially literate” within the meaning of the NYSE Standards and that each of Ms. Martore and Messrs. Crews and Powers qualifies as an “audit committee financial expert” within the meaning of SEC regulations.

The Audit Committee met eight times during fiscal 2017. These meetings included periodic executive sessions with our independent registered public accounting firm, our internal auditor and management. During fiscal 2017, the Audit Committee was updated no less than quarterly on management’s process to assess the adequacy of our system of internal control over financial reporting, the framework used to make the assessment and management’s conclusions on the effectiveness of our internal control over financial reporting.

The Audit Committee is responsible for appointing, compensating, retaining and overseeing our independent auditor. The Audit Committee evaluates the independence, qualifications and performance of our independent auditor each year, and determines whether to re-engage the current independent auditor. In doing so, the Audit Committee considers, among other factors, the quality and efficiency of the services provided by the auditor and its capabilities, technical expertise and knowledge of our operations. Based on this evaluation, the Audit Committee has retained Ernst & Young LLP as our independent auditor for fiscal 2018 and the Board is recommending that our stockholders ratify this appointment.

The Audit Committee oversees our financial reporting process on behalf of the Board. Management has primary responsibility for establishing and maintaining adequate internal financial controls over financial reporting, for preparing our financial statements and for the public reporting process. Ernst & Young LLP, our independent registered public accounting firm for fiscal 2017, is responsible for expressing opinions that (a) our consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles and (b) we maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017.

In this context, the Audit Committee has:

 

    reviewed and discussed the audited consolidated financial statements for the year ended September 30, 2017 with management,

 

    discussed with the independent auditor those matters required to be discussed by auditors with the Audit Committee under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”), and

 

    received the written disclosures and the letter from the independent auditor as required by applicable requirements of the PCAOB regarding the independent auditors’ communication with the Audit Committee concerning independence and has discussed with the independent auditor its independence.

Based on the reviews and discussion described in this report, the Audit Committee recommended to the Board (and the Board approved) that the audited consolidated financial statements be included in the annual report on Form 10-K for the fiscal year ended September 30, 2017 for filing with the SEC.

Gracia C. Martore, Chairman

J. Powell Brown

Terrell K. Crews

Russell M. Currey

Timothy H. Powers

 

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FEES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table presents (in thousands of dollars) the aggregate fees billed in each of the last two fiscal years for professional services rendered by our independent registered public accounting firm, Ernst & Young LLP, and its affiliates.

 

    

 

2017 ($)(4)

 

  

 

2016 ($)(4)

 

    

 

Audit fees(1)

 

  

 

13,182

 

  

 

10,706

 

  

 

Audit-related fees(2)

 

  

 

5,131

 

  

 

681

 

  

 

Tax fees(3)

 

  

 

5,386

 

  

 

6,249

 

  

 

All other fees

 

  

 

 

  

 

 

  

 

Total fees paid to auditor

 

  

 

23,699

 

  

 

17,636

 

  

 

  (1) Audit fees consist primarily of fees related to professional services rendered for the audit of our annual financial statements included in our Form 10-K and the review of interim financial statements included in our quarterly reports on Form 10-Q, accounting consultations to the extent necessary for Ernst & Young to fulfill its responsibility under generally accepted auditing standards, as well as services in connection with other statutory and regulatory filings.

 

  (2) Audit-related fees consist of fees related to professional services rendered for assurance and related services that are reasonably related to the performance of the audit or review of our annual financial statements that are not included in the amounts disclosed as audit fees. For fiscal 2017, these fees primarily related to audit services provided for certain “carve-out” audits related to the sale of our dispensing business and interim reviews, due diligence services and audits required under joint venture agreements. For fiscal 2016, these fees primarily related to audit services provided for certain “carve-out” audits related to the sale of our dispensing business, audits required under joint venture agreements and due diligence services.

 

  (3) Tax fees consist primarily of fees related to professional services rendered for tax compliance, tax advice and transfer pricing services and, additionally in fiscal 2016, as well as tax fees incurred in connection with the separation of our specialty chemicals business.

 

  (4) All such audit fees, audit-related fees and tax fees were pre-approved by the Audit Committee.

PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has established a policy requiring pre-approval of audit and permissible audit-related and non-audit services to be provided by the independent registered public accounting firm. The following services have been pre-approved pursuant to the policy:

 

    work associated with registered or unregistered securities offerings;

 

    statutory audits, employee benefit plan audits or other financial audit work required for non-U.S. subsidiaries that is not required for the audit under the Exchange Act;

 

    attest services;

 

    advice and consultation as to proposed or newly adopted accounting and auditing standards and interpretations, and as to financial accounting and disclosure requirements imposed by the SEC, FASB and other regulatory agencies and professional standard setting bodies;
  assistance and consultation as to questions from us, including comments or inquiries made by the SEC or other regulatory bodies;

 

  access to EY's internet-based accounting and reporting resources;

 

  assistance with understanding our internal control review and reporting obligations;

 

  review of information systems security and controls;

 

  preparation and/or review of tax returns and related tax services;

 

  international tax planning; and

 

  general federal, state and international tax planning and advice.
 

 

All other audit, audit-related and non-audit services must be specifically pre-approved by the Audit Committee or its Chairman. Engagements for our annual audit and quarterly reviews required under the Exchange Act are pre-approved annually, and the nature and dollar value of these services are periodically reviewed with the Audit Committee.

The independent registered public accounting firm and management report to the Audit Committee periodically regarding the services rendered by, and actual fees paid to, the independent registered public accounting firm to ensure that the services are within the limits approved by the Audit Committee.

 

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OTHER IMPORTANT INFORMATION

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table lists information, as of December 6, 2017, about the number of shares of Common Stock beneficially owned by (i) each NEO, (ii) each director and director nominee, (iii) directors and executive officers as a group and (iv) any person known to us to be the beneficial owner of more than 5% of our Common Stock. Unless otherwise noted, voting power and investment power in Common Stock are exercisable solely by the named person.

 

  Name of Beneficial Owner

 

  

 

Total Number of
Shares of Common
Stock Beneficially
Owned (#)
(1)

 

 

Percent of
Outstanding    
Common
Stock (%)
(2)

 

 

Steven C. Voorhees

 

   1,018,066(3)   *

 

Ward H. Dickson

 

   99,884(4)   *

 

James B. Porter III

 

   287,826(5)   *

 

Robert A. Feeser

 

   318,526(6)   *

 

Jeffrey W. Chalovich

 

   97,864(7)   *

 

Marc P. Shore

 

   6,294   *

 

Timothy J. Bernlohr

 

   24,006   *

 

J. Powell Brown

 

   41,311(8)   *

 

Michael E. Campbell

 

   56,561(9)   *

 

Terrell K. Crews

 

   23,863   *

 

Russell M. Currey

 

   936,737(10)   *

 

John A. Luke, Jr

 

   2,215,564(11)   *

 

Gracia C. Martore

 

   18,806(12)   *

 

James E. Nevels

 

   9,522(13)   *

 

Timothy H. Powers

 

   46,393(14)   *

 

Bettina M. Whyte

 

   46,148(15)   *

 

Alan D. Wilson

 

   20,719(16)   *

 

All director nominees and executive officers as a group (20 persons including Jennifer Graham- Johnson, Kelly C. Janzen and Robert B. McIntosh)

 

  

 

5,710,850(17)

 

 

2.2

 

FMR LLC, 245 Summer Street, Boston, MA 02210

 

   29,429,665(18)   11.6

 

The Vanguard Group, Inc., PO Box 2600, V26, Valley Forge, PA 19482-2600

 

   24,621,230(19)   9.7

 

BlackRock Inc., 55 East 52nd Street, New York, NY 10055

 

   23,595,031(20)   9.3

 

J.P. Morgan Chase & Co., 270 Park Avenue, New York, NY 10017

 

   17,392,872(21)   6.8

 

Capital World Investors, 333 South Hope Street, Los Angeles, CA 90071

 

   16,591,388(22)   6.5

 

State Street Corp., One Lincoln Street, Boston, MA 20111

 

   15,941,158(23)   6.3

 

* Less than 1%.
(1) Under SEC rules, a person “beneficially owns” securities if that person has or shares the power to vote or dispose of the securities. The person also “beneficially owns” securities that the person has the right to acquire within 60 days. Under these rules, more than one person may be deemed to beneficially own the same securities, and a person may be deemed to beneficially own securities in which he or she has no financial interest. Except as shown in the footnotes to the table, the stockholders named below have the sole power to vote or dispose of the shares shown as beneficially owned by them. See “Compensation Matters – Executive Compensation – Outstanding Equity Awards at Fiscal Year-End Table” for more information concerning outstanding equity awards to our NEOs and “Board and Governance Matters – Director Compensation – Director Compensation Summary” for more information concerning outstanding equity awards to our directors.
(2) Based on 254,749,575 shares of Common Stock issued and outstanding as of December 6, 2017, plus, for each individual, the number of shares of Common Stock issuable upon exercise of outstanding stock options that are or will become exercisable on or prior to February 2, 2018 (60 days after December 6, 2017).
(3) Share balance includes (i) 15,948 shares of restricted stock beneficially owned by Mr. Voorhees that will vest January 30, 2018 and (ii) 430,566 shares issuable upon exercise of stock options beneficially owned by him.
(4) Share balance includes (i) 3,349 shares of restricted stock beneficially owned by Mr. Dickson that will vest January 30, 2018, (ii) 3,588 shares of restricted stock that will vest on February 2, 2018 and (iii) 48,483 shares issuable upon exercise of stock options beneficially owned by him.
(5) Share balance includes (i) 6,548 shares of restricted stock beneficially owned by Mr. Porter that will vest January 30, 2018 (ii) 204,260 shares issuable upon exercise of stock options beneficially owned by Mr. Porter and (iii) 41,223 shares deemed beneficially owned by Mr. Porter as trustee of a joint trust for the benefit of his wife and him.
(6) Share balance includes (i) 40,649 shares deemed beneficially owned by Mr. Feeser as trustee of a trust for the benefit of his spouse and (ii) 263,058 shares issuable upon exercise of stock options beneficially owned by him.

 

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(7) Share balance includes (i) 2,344 shares of restricted stock beneficially owned by Mr. Chalovich that will vest January 30, 2018, (ii) 817 shares held by his spouse and (iii) 54,859 shares issuable upon exercise of stock options beneficially owned by him.
(8) Share balance includes (i) 27,211 shares held in a joint ownership investment account with Mr. Brown’s spouse, (ii) 477 shares held by his son and (iii) 277 shares held by his daughter.
(9) Share balance includes (i) 47,154 share units representing the same number of shares of Common Stock (“DSUs”) beneficially owned by Mr. Campbell and granted under the MeadWestvaco Corporation Compensation Plan for Non -Employee Directors and the 2005 Performance Incentive Plan. The rights of each applicable former MeadWestvaco director with respect to these stock units are vested at all times, and distributions of the DSUs are required to be made in Common Stock on the earliest practicable date following the end of the calendar quarter in which the applicable director’s membership on the Board is terminated and (ii) 7,148 shares held in the Deferred Compensation Plan.
(10) Share balance includes (i) 85,616 shares deemed beneficially owned by Mr. Currey as trustee of a trust for the benefit of his mother, (ii) 185,932 shares beneficially owned by Mr. Currey that are owned by Boxwood Capital, LLC, a limited liability company of which Mr. Currey is the controlling member and president and (iii) 569,565 shares owned by Mr. Currey’s father for which Mr. Currey is the proxy agent.
(11) Share balance includes (i) 2,269 shares held by Mr. Luke’s spouse, (ii)140,680 shares held in a family trust, and (iii) 1,577,180 shares issuable upon exercise of stock options beneficially owned by him.
(12) Share balance includes (i) 10,623 DSUs beneficially owned by Ms. Martore and (ii) 7,148 shares held in the Deferred Compensation Plan.
(13) Share balance includes 2,168 DSUs beneficially owned by Mr. Nevels.
(14) Share balance includes (i) 37,430 DSUs beneficially owned by Mr. Powers and (ii) 7,148 shares held in the Deferred Compensation Plan.
(15) Share balance includes 7,148 shares beneficially owned by Ms. Whyte held in the Deferred Compensation Plan.
(16) Share balance includes (i) 12,536 DSUs beneficially owned by Mr. Wilson and (ii) 7,148 shares held in the Deferred Compensation Plan.
(17) Ms. Graham-Johnson, Ms. Janzen and McIntosh are executive officers. Share balance includes 2,724,537 shares issuable upon exercise of stock options beneficially owned by our director nominees and executive officers.
(18) Based on a Schedule 13G filed on February 14, 2017, FRM has sole voting power over 1,082,376 of these shares and sole dispositive power over 18,824,022 of these shares.
(19) Based on a Schedule 13G filed on February 10, 2017, Vanguard has sole voting power over 397,899 of these shares, sole dispositive power over 24,185,570 of these shares, shared voting power over 46,811 of these shares and shared dispositive power over 435,660 of these shares.
(20) Based on a Schedule 13G filed on January 27, 2017, BlackRock has sole voting power over 21,092,440 of these shares and sole dispositive power over 23,595,031 of these shares.
(21) Based on a Schedule 13G filed on January 23, 2017, JP Morgan has sole voting power over 16,155,146 of these shares and sole dispositive power over 17,392,872 of these shares.
(22) Based on a Schedule 13G filed on February 13, 2017, Capital World Investors has sole voting power over 16,591,388 of these shares and sole dispositive power over 16,591,388 of these shares
(23) Based on a Schedule 13G filed on February 10, 2017, State Street has shared voting power over 11,797,611 of these shares and shared dispositive power over 15,941,158 of these shares.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based on a review of our records, we believe all reports required to be filed during fiscal 2017 pursuant to Section 16(a) of the Exchange Act were filed on a timely basis.

ANNUAL REPORT ON FORM 10-K

We will provide without charge, at the written request of any stockholder of record as of the record date, a copy of our annual report on Form 10-K, including the financial statements and financial statement schedule, as filed with the SEC, excluding exhibits. Requests for copies of our Form 10-K should be mailed to: WestRock Company, 1100 Abernathy Road, Suite 125, Atlanta, Georgia, 30328, Attention: Corporate Secretary. You may also access a copy of our annual report at www.westrock.com.

STOCKHOLDER PROPOSALS OR DIRECTOR NOMINATIONS FOR 2019 ANNUAL MEETING

SEC rules permit stockholders to submit proposals for inclusion in our Proxy Statement and form of proxy if the stockholder and the proposal meet the requirements specified in Rule 14a-8 under the Exchange Act. To be considered for inclusion in next year’s Proxy Statement, a stockholder proposal submitted in accordance with Rule 14a-8 must be received by us at our principal executive offices by no later than August 21, 2018.

Our Bylaws provide that any stockholder proposal, including director nominations, that is not submitted for inclusion in next year’s Proxy Statement under Rule 14a-8, but is instead sought to be presented directly at next year’s annual meeting of stockholders must be delivered to our principal executive offices not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. In each case, the notice must include the information specified in the Bylaws. If the 2019 annual meeting is held more than 30 days before or more than 60 days after the anniversary date of the Annual Meeting, notice must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the seventh day following the day on which public announcement of the date of such meeting is first made by us. Stockholders will vote at the Annual Meeting on the matters summarized in this Proxy Statement.

 

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Accordingly, to submit any such proposal, stockholders must submit the required notice no earlier than the close of business on October 5, 2018 and no later than the close of business on November 5, 2018, except as described above.

The mailing address of our principal executive offices is 1000 Abernathy Road, Suite 125, Atlanta, GA 30328. Proposals should be addressed to the attention of the Corporate Secretary.

FREQUENTLY ASKED QUESTIONS REGARDING THE ANNUAL MEETING AND VOTING

When and where is the Annual Meeting?

The Annual Meeting will be held at 9:00 a.m. (local time) on February 2, 2018 at The Westin Buckhead Atlanta, 3391 Peachtree Road, N.E., Atlanta, GA 30326.

What is the purpose of the Annual Meeting?

Stockholders will vote at the Annual Meeting on the matters summarized in this Proxy Statement.

Why am I receiving these proxy materials?

You received these proxy materials because you are a Company stockholder and the Board is soliciting your proxy to vote your shares at the Annual Meeting. This Proxy Statement includes information that we are required to provide you under SEC rules and is designed to assist you in voting your shares.

What is included in these proxy materials? What is a Proxy Statement and what is a proxy?

The proxy materials for the Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our annual report. If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction form. A Proxy Statement is a document that SEC regulations require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. A proxy is your legal designation of another person to vote your shares, and that other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated Mr. Voorhees and Mr. Robert B. McIntosh, our General Counsel and Corporate Secretary, as proxies for the Annual Meeting.

What does it mean if I receive more than one notice, proxy materials email or proxy card?

It means you have multiple accounts with brokers and/or our transfer agent. You will need to vote separately with respect to each notice, proxy materials email or proxy card you receive.

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Instead of mailing a printed copy of the proxy materials to each stockholder of record, the SEC permits us to furnish proxy materials by providing access to those documents on the Internet. Stockholders will not receive printed copies of the proxy materials unless they request them. The notice instructs you as to how to submit your proxy on the Internet. If you would like to receive a paper or email copy of the proxy materials, you should follow the instructions in the notice for requesting those materials.

Who may vote?

You may vote if you owned Common Stock as of the close of business on December 6, 2017, the record date.

How may I vote?

You may vote by any of the following methods:

 

    Internet – follow the instructions on your notice, proxy and/or voting instruction card or email notice.

 

    Phone – follow the instructions on your notice, proxy and/or voting instruction card or email notice.

 

    Mail – complete sign and return the proxy and/or voting instruction card provided.

 

    In Person – all registered stockholders may vote in person at the Annual Meeting. beneficial holders may also vote in person at the Annual Meeting if they have a legal proxy.

When voting on proposals, you may vote “for” or “against” the item or you may abstain from voting. You are not entitled to appraisal or dissenters’ rights for any matter being voted on at the Annual Meeting.

 

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Can I change my vote or revoke my proxy after I vote?

You may change your vote at any time before the polls close at the Annual Meeting by:

 

    voting again by telephone or over the Internet prior to 11:59 p.m., EST., on February 1, 2018,

 

    giving written notice to our Corporate Secretary,

 

    delivering a later-dated proxy or

 

    voting in person at the Annual Meeting.

You may also revoke your proxy before it is voted at the Annual Meeting by using one of the methods listed above.

How many votes am I entitled to?

You are entitled to one vote for each share of Common Stock you own.

What constitutes a quorum at the Annual Meeting, and why is a quorum required?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares entitled to vote on the record date will constitute a quorum. A quorum of stockholders is necessary to hold a valid meeting.

How many shares of Common Stock were outstanding on the record date?

254,749,575 shares.

What vote is required to approve each proposal?

 

  Proposal

 

 

Vote Required

 

 

Abstentions

 

  

 

    Broker

    Non-Votes      

    Allowed

 

 

    1. Election of 12 Directors

 

 

 

  Majority of votes cast (for each director)

 

 

 

  No effect

 

  

 

      No

 

 

    2. Say on Pay

 

 

 

Majority of shares present in person or represented by proxy and entitled to vote

 

 

 

  Vote against

  

 

      No

 

    3. Amended STI Plan

 

 

 

Majority of shares present