DEF 14A 1 clorox3118955-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.            )
 
Filed by the Registrant [X]
Filed by a Party other than the Registrant [   ] 
 
Check the appropriate box:
 
[   ]        Preliminary Proxy Statement
[   ]   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]   Definitive Proxy Statement
[   ]   Definitive Additional Materials
[   ]   Soliciting Material Pursuant to §240.14a-12

  THE CLOROX COMPANY  
  (Name of Registrant as Specified In Its Charter)  
 
       
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 

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Notice of 2016 Annual Meeting,
Proxy Statement and
Annual Financial Statements
ANNUAL MEETING OF STOCKHOLDERS • NOVEMBER 16, 2016


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To Our Stockholders

Dear Stockholders:

I am pleased to invite you to attend our 2016 Annual Meeting of Stockholders.

Clorox delivered strong results in fiscal year 2016 and we are confident in our strategy, which aims to drive profitable growth and strong returns for stockholders. We continue to invest in innovation, demand creation, and other programs to drive long-term, profitable growth and to generate solid financial returns for our investors. We view our business holistically and I’m equally proud of our results beyond our financial performance. We look forward to highlighting some of these results during our Annual Meeting.

Our financial and strategic plans are regularly reviewed by the Board, which provides valuable input and oversight. We have annual strategy presentations, during which our directors review with senior management the Company’s overall corporate strategy and long-range operating plan. The Board reviews progress against these strategic plans at every meeting and provides valuable input on specific strategic initiatives throughout the year. The Board’s counsel, insight, and leadership are invaluable.

On behalf of the Board and the management team, thank you for your continued support and investment in Clorox.

Sincerely,


Benno Dorer
Chairman and Chief Executive Officer


Dear Stockholders:

The Clorox Company is committed to strong corporate governance that enables the Company to grow long-term financial returns in a sustainable, responsible manner.

During my time as a director, Clorox’s business and strategy have evolved and our Board and governance have changed to meet the Company’s needs. We are focused on having the right Board for Clorox, and since May 2015, we have elected four new directors who bring exceptional knowledge, deep expertise, and diverse perspectives. We regularly evaluate our Board composition, practices, and director experience to best support the Company’s long-term strategy.

We also remain focused on hearing our stockholders’ perspectives. This year, members of the Board and management held numerous meetings with investors to discuss a variety of key corporate governance topics. Our directors considered feedback from these meetings, along with best practices, policies at peer companies, and Clorox’s specific circumstances, when we amended our Bylaws to provide stockholders with a new right to call a special meeting in between annual meetings. This is just one example of the Board’s thoughtful approach toward stockholder feedback; we continually assess our practices and make changes to reflect these discussions. As another example, just last year, the Board adopted a new proxy access framework after thoughtful dialogue and input from some of our largest stockholders.

As new Lead Director of Clorox, it is my pleasure to work closely with Board members who are committed to representing the interests of our stockholders and providing effective oversight and guidance to management. We deeply value your support.

Sincerely,


Pamela Thomas-Graham
Lead Director


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Notice of Annual Meeting of Stockholders

To be held on November 16, 2016

The 2016 Annual Meeting of Stockholders (the “Annual Meeting”) of The Clorox Company (“Clorox” or the “Company”), a Delaware corporation, will be held at 9:00 a.m. Pacific time on Wednesday, November 16, 2016, at the offices of the Company, 1221 Broadway, Oakland, CA 94612-1888, for the following purposes:

1.       To elect the eleven director nominees named in the proxy statement;
2. To conduct an advisory vote to approve the compensation of the Company’s named executive officers;
3. To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2017; and
4. To consider and act upon one stockholder proposal, if properly presented at the Annual Meeting.

Stockholders also will consider and act upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on September 19, 2016 are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

Only record holders and people holding proxies from record holders of Clorox common stock as of the record date may attend the Annual Meeting. Please see the “Attending the Annual Meeting” section of the proxy statement for more information.

On or about September 23, 2016, we began mailing a Notice of Internet Availability of Proxy Materials to our stockholders informing them that our Proxy Statement, Integrated Annual Report—Executive Summary, and voting instructions are available on the Internet as of the same date.

Important Notice Regarding the Availability of Proxy Materials for The Clorox Company Stockholders Meeting to be Held on November 16, 2016: The Notice of Annual Meeting, Proxy Statement, and 2016 Integrated Annual Report—Executive Summary are available at www.edocumentview.com/CLX.

YOUR VOTE IS VERY IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU WILL READ THE PROXY STATEMENT AND VOTE YOUR PROXY BY TELEPHONE, VIA THE INTERNET, OR BY REQUESTING A PRINTED COPY OF THE PROXY MATERIALS AND COMPLETING, SIGNING, AND RETURNING THE PROXY CARD ENCLOSED THEREIN.

By Order of the Board of Directors,

Angela C. Hilt
Vice President – Corporate Secretary
& Associate General Counsel

September 23, 2016

THE CLOROX COMPANY - 2016 Proxy Statement



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YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN

If you have questions about how to vote your shares, or need additional assistance, please contact Innisfree M&A Incorporated, who is assisting us in the solicitation of proxies:

501 Madison Avenue, 20th Floor
New York, New York 10022

Stockholders may call toll-free at (877) 750-9499

Banks and brokers may call collect at (212) 750-5833


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1221 BROADWAY
OAKLAND, CA 94612-1888

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     Proxy Summary      1
  BOARD OF DIRECTORS 4
Proposal 1: Election of Directors 4
     Board of Directors’ Recommendation 4
Vote Required 4
Organization of the Board of Directors 12
Evaluation of Director Qualifications and Experience 12
Diversity 12
Stockholder Recommendations and Nominations of Director Candidates 13
Director Communications 13
Director Compensation 13
Stock Ownership Guidelines for Directors 15
Corporate Governance 16
Corporate Governance Philosophy 16
Our Commitment to Corporate Responsibility 16
Stockholder Engagement 16
The Clorox Company Governance Guidelines 16
Director Independence 17
Board of Directors Leadership Structure 17
Standing Committees 18
Board and Director Evaluation Process 19
Board of Directors Meeting Attendance 19
Executive Sessions 19
Conflict of Interest and Related Person Transaction Policies and Procedures 20
Code of Conduct 20
Board of Directors’ Role in Risk Management Oversight 21
Stock Ownership Information 22
Beneficial Ownership of Voting Securities 22
Section 16(a) Beneficial Ownership Reporting Compliance 23
EXECUTIVE COMPENSATION 24
Proposal 2: Advisory Vote to Approve Executive Compensation 24
Board of Directors’ Recommendation 24
Vote Required 25
Compensation Discussion and Analysis 26
Executive Summary 26
How We Make Compensation Decisions 28
Fiscal Year 2016 Compensation of Our Named Executive Officers 30
What We Pay: Components of Our Compensation Program 31
The Management Development and Compensation Committee Report 39
Compensation Committee Interlocks and Insider Participation 39
Compensation Discussion and Analysis Tables 40


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     Equity Compensation Plan Information      54
  AUDIT COMMITTEE MATTERS 55
Proposal 3: Ratification of Independent Registered Public
                        Accounting Firm 55
     Board of Directors’ Recommendation 55
Vote Required 55
Audit Committee Report 56
Fees of the Independent Registered Public Accounting Firm 57
STOCKHOLDER PROPOSAL 58
Proposal 4: Stockholder Proposal Regarding Special Stockholder Meetings 58
Board of Directors’ Statement in Opposition 58
Board of Directors’ Recommendation 59
Vote Required 59
INFORMATION ABOUT THE ANNUAL MEETING 60
Internet Availability of Proxy Materials 60
Voting Information 60
Form 10-K, Financial Statements, and Integrated Annual Report—Executive Summary 62
Solicitation of Proxies 62
Stockholder Proposals and Director Nominations for the 2017 Annual Meeting 62
Householding 63
Attending the Annual Meeting 64
Appendix A Management’s Discussion and Analysis of Financial Condition
                        and Results of Operations, Audited Financial Statements, and
                        Other Selected Financial Information A-1


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  Proxy Summary

This summary highlights information contained elsewhere in this proxy statement and does not contain all of the information that you should consider. For more complete information, please review the Company’s proxy statement before voting.



Proposals to be Voted on and Board Voting Recommendations

            More
information
     Board’s voting
recommendation
     Votes required
for approval
PROPOSAL 1 Election of Directors Page 4 FOR EACH NOMINEE Majority of votes cast
PROPOSAL 2 Advisory Vote to Approve Executive Compensation Page 24 FOR    
Majority of the votes
present in person or
represented by proxy
and entitled to vote
PROPOSAL 3 Ratification of Independent Registered Public
Accounting Firm
Page 55 FOR
PROPOSAL 4 Stockholder Proposal Regarding Special
Stockholder Meetings
Page 58 AGAINST



Our Director Nominees

The following table provides summary information about each director nominee.

Name      Age      Director
Since
     Principal Occupation      Independent      Committee
Memberships
Amy Banse 57 2016 Managing Director and Head of Funds,
Comcast Ventures
*
Richard H. Carmona 66 2007 Vice Chairman, Canyon Ranch
NGC (Chair)
MDCC
Benno Dorer 52 2014 Chairman and Chief Executive Officer, Clorox
Spencer C. Fleischer 62 2015   Managing Partner, Friedman Fleischer &
Lowe LLC
MDCC
Esther Lee 57 2013   Executive Vice President – Global Chief Marketing
Officer, MetLife Inc.
NGC
A.D. David Mackay 61 2016 Former President and Chief Executive Officer,
Kellogg Company
MDCC
Robert W. Matschullat   68 1999 Former Vice Chairman and Chief Financial Officer,
The Seagram Company Ltd.
NGC
Jeffrey Noddle 70 2013 Former Chairman and Chief Executive Officer,
Supervalu, Inc.
AC
MDCC (Chair)
Pamela Thomas-Graham
Lead Director
53 2005 Former Chair, New Markets, Credit Suisse
Group AG
AC
Carolyn M. Ticknor 69 2005 Former President, Imaging and Printing Systems
group, Hewlett Packard Company
AC (Chair)
NGC
Christopher J. Williams 58 2015 Chairman and Chief Executive Officer, The
Williams Capital Group, L.P. and Williams Capital
Management, LLC
AC

AC Audit Committee
NGC Nominating and Governance Committee
MDCC           Management Development and Compensation Committee
 
*     Ms. Banse was appointed to the Board effective September 15, 2016. Her committee memberships have not yet been determined.

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Corporate Governance Highlights

Our Corporate Governance Policies Reflect Best Practices

       10 of our 11 Director Nominees are Independent        ✓       Annual Election of All Directors
  Majority Voting and Director Resignation Policy in Uncontested
Director Elections
Annual Board, Committee, and Individual Director
Evaluation Process
Strong Independent Lead Director Independent Standing Board Committees
Diverse Board with Effective Mix of Skills, Experience,
and Perspectives
Average Board Tenure of 5.5 Years
Proactive Stockholder Engagement Rigorous Stock Ownership Guidelines for Directors
Proxy Access Right for Stockholders Special Meeting Right for Stockholders
Robust Code of Conduct Regular Executive Sessions of Independent Directors



Executive Compensation Highlights

Fiscal Year 2016 Business Performance

Successes for the Company in fiscal year 2016 included:

Increasing sales growth by 2%;
increasing fiscal year gross margin by 150 basis points to 45.1%;
achieving $109 million in cost savings, the Company’s 13th consecutive year of average cost savings in excess of $100 million;
achieving increased volume of 4%, reflecting gains in all four of the Company’s reportable segments;
increasing earnings from continuing operations to $648 million or $4.92 diluted EPS, versus $606 million or $4.57 diluted EPS in the prior year;
introducing new products in many categories, including Fresh Step® with Febreze® cat litter; new Hidden Valley® dressing flavors; Glad® trash bags with Clorox® antimicrobial protection; Burt’s Bees® lipsticks, BB cream and new flavors of lip balm; and Kingsford® professional briquets, among others;
acquiring Renew Life, a leading maker of digestive health products;
continuing to receive external recognition for its leadership in corporate responsibility and sustainability efforts; and

returning excess capital to stockholders through share repurchases, delivering $398 million in dividends to stockholders, and increasing the quarterly dividend by 4% in May 2016.

Fiscal Year 2016 Pay For Performance

Our fiscal year 2016 results and compensation decisions continue to illustrate that our pay-for-performance philosophy works as intended, with pay being driven by performance in the following ways:

Fiscal Year 2016 Annual Incentive Payout. In alignment with our pay-for-performance philosophy, the annual incentive payout for each of our named executive officers was above target due to the Company’s strong operational results compared to the targets established at the beginning of the fiscal year. The Company’s sales and economic profit (“EP”) performance both significantly exceeded the targets for the fiscal year.

No Fiscal Year 2016 Long-Term Incentive Payout. Our three-year performance share results did not meet the required financial target for cumulative EP, and, as a result, no performance shares were paid out. These awards were granted in September 2013, and payment was determined in August 2016 based on performance over the period commencing July 1, 2013 and ending June 30, 2016. Fiscal year 2014 results were significantly below target, and while we had very strong results in both fiscal years 2015 and 2016, these results were not enough to offset the challenges of fiscal year 2014, as the performance share payout is based on a cumulative EP measure.



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PROXY SUMMARY

What We Pay: Components of Our
Compensation Program

A substantial portion of our targeted executive compensation is at-risk variable compensation, with 85% of compensation for our Chief Executive Officer and 70% of compensation for all our other named executive officers being at risk.

Base salary is the only fixed compensation component, as outlined in the following charts, which reflect target compensation for fiscal year 2016.



Compensation Mix - CEO(1)

Compensation Mix - Average of All Other NEOs(1)

 Fixed compensation = 15%
 Variable compensation = 85%

 Fixed compensation = 30%
 Variable compensation = 70%


(1) Compensation mix represents the actual base salary, target annual incentive award, and actual long-term incentives granted in fiscal year 2016. Refer to the Summary Compensation Table below for further details on actual compensation.

Best Pay Practices Highlights

What We Have

An executive compensation program designed to mitigate inappropriate risk;

Different performance horizons for the goals within our annual and long-term incentive plans;

Use of economic profit as a rigorous incentive metric;

Stringent stock ownership and retention guidelines for all of our executives;

A prohibition on speculative transactions involving the Company’s stock, including hedging and pledging;

Stock options that vest over a four-year period and have an exercise price equal to fair market value of our Common Stock on the date of grant;

Clawback provisions in both our annual and long-term incentive plans;

Double-trigger change in control provisions for all equity awards;

Reasonable cash severance provisions to support talent retention and attraction objectives, promote orderly succession planning and avoid individual negotiation with exiting executives, thus eliminating the need for individual employment agreements;

Modest perquisites supported by sound business rationale;

Annual review of our executive compensation program by the Management Development and Compensation Committee, which is composed solely of independent members of the Board; and

Use of an independent compensation consultant who does not provide any additional consulting services to the Company.

What We Don’t Have

Employment contracts for any executives;

Stock option re-pricing without stockholder approval;

Payment of dividends or dividend equivalents on unvested or unearned performance shares; and

Tax gross-ups for any employee, including executive officers.




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  Board of Directors

  Proposal 1:
Election of Directors

At the Annual Meeting, eleven people will be elected as members of the Board to serve until the 2017 Annual Meeting of Stockholders, or until their respective successors are duly elected and qualified. The Board, upon the recommendation of the Nominating and Governance Committee, has nominated the eleven people listed below for election at the Annual Meeting.

Each of the nominees for director has agreed to be named in this proxy statement and to serve as a director if elected. Each nominee is currently serving as a director of the

Company. Amy Banse and David Mackay were appointed to the Board during calendar year 2016 and are being nominated for election by the stockholders for the first time. Ms. Banse and Mr. Mackay were recommended to the Nominating and Governance Committee by a director recruitment firm retained by the Committee to identify potential director candidates. Messrs. Harad and Rebolledo will be retiring from the Board on the date of the Annual Meeting and are therefore not standing for re-election.




Board of Directors’ Recommendation

The Board unanimously recommends a vote FOR each of the Board’s eleven nominees for director listed below. The Board believes that each of the nominees listed below is highly qualified and has the background, skills, experience, and attributes that qualify them to serve as directors of the Company (see each nominee’s biographical information and the “Evaluation of Director Qualifications and Experience” section below for more information). The recommendation of the Board is based on its carefully considered judgment that the background, skills, experience, and attributes of the nominees make them the best candidates to serve on our Board.

Certain information with respect to each nominee appears on the following pages, including age, period served as a director, position (if any) with the Company, business experience, directorships of other publicly owned corporations, including other such directorships held during the past five years (if any), and other relevant experience and qualifications, including service on certain non-profit or non-public company boards, that contributed to the conclusion that each director is qualified to serve as a director of the Company.




Vote Required

Majority Voting for Directors. The Company’s Bylaws require each director to be elected by a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted FOR a director must exceed the number of shares voted AGAINST that director). Under the Company’s Bylaws, any director who fails to be elected by a majority of the votes cast in an uncontested election must tender his or her resignation to the Board. The Nominating and Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board would act on the Nominating and Governance

Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. A director who tenders his or her resignation would not participate in the Board’s decision.

The people designated in the proxy and voting instruction card intend to vote your shares represented by proxy FOR the election of each of these nominees, unless you include instructions to the contrary. In the event any director nominee is unable to serve, the persons named as proxies may vote for a substitute nominee recommended by the Board.



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Board of Directors

Director Since       Name, Principal Occupation, and Other Information

2016

Amy Banse

Ms. Banse has served as Managing Director and Head of Funds of Comcast Ventures, the venture capital arm of Comcast Corporation (a global media and technology company) since August 2011. From 2005 to 2011, Ms. Banse was Senior Vice President, Comcast Corporation and President, Comcast Interactive Media, a division of Comcast responsible for developing online strategy and operating the company’s digital properties, including Fandango, Xfinity. com, and Xfinitytv.com. Since joining Comcast in 1991, Ms. Banse has held various positions at the company, including content development, programming investments, and overseeing the development and acquisition of Comcast’s cable network portfolio. Earlier in her career, Ms. Banse was an associate at Drinker, Biddle & Reath LLP.

Other Public Company Boards:
Ms. Banse serves as a director of Adobe Systems, Inc. (May 2012 to present).

Non-Profit/Other Boards:
Ms. Banse serves on the boards of a number of Comcast Ventures’ portfolio companies, including Quantifind and TuneIn.

Director Qualifications:
Ms. Banse’s expertise in media and technology enable her to contribute valuable insights into digital media and online business. Her experience in investing in, starting, and building businesses provides her with deep strategic and financial understanding, and her previous executive leadership roles contribute to her management and operational knowledge. Age: 57.

 

2007

Richard H. Carmona, M.D., M.P.H., F.A.C.S.

Dr. Carmona has been Vice Chairman of Canyon Ranch (a life-enhancement company) since October 2006. He also serves as Chief Executive Officer of the Canyon Ranch Health Division and President of the non-profit Canyon Ranch Institute. He is also the first Distinguished Professor of Public Health at the Mel and Enid Zuckerman College of Public Health at the University of Arizona. Prior to joining Canyon Ranch, Dr. Carmona served as the 17th Surgeon General of the United States from 2002 through 2006, achieving the rank of Vice Admiral. Previously, he was Chairman of the State of Arizona Southern Regional Emergency Medical System, a professor of surgery, public health, and family and community medicine at the University of Arizona, and surgeon and deputy sheriff of the Pima County, Arizona, Sheriff’s Department. Dr. Carmona served in the United States Army and the Army’s Special Forces.

Other Public Company Boards:
Dr. Carmona serves as a director of Taser International (March 2007 to present) and Herbalife Ltd. (October 2013 to present).

Director Qualifications:
Dr. Carmona’s experience as the Surgeon General of the United States and extensive background in public health provide him with a valuable perspective on health and wellness matters, as well as insight into regulatory organizations and institutions, which are important to the Company’s business strategy. In addition, his executive leadership experience, including with a global lifestyle enhancement company, provides him with international experience and enables him to make valuable contributions to the Company’s international growth strategies. Dr. Carmona’s experience in the United States Army and in academia also strengthens the Board’s collective qualifications, skills, and experience. Age: 66.


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Director Since       Name, Principal Occupation, and Other Information

2014

Benno Dorer

Mr. Dorer has served as Chief Executive Officer of the Company since November 2014 and was appointed Chairman of the Board in August 2016. Prior to becoming CEO, Mr. Dorer was Executive Vice President and Chief Operating Officer – Cleaning, International and Corporate Strategy since January 2013, with responsibility for the Laundry, Home Care, and International businesses as well as Corporate Strategy and Growth. He previously served as Senior Vice President – Cleaning Division and Canada from March 2011 through December 2012, Senior Vice President – Cleaning Division from 2009 to 2011, and Vice President & General Manager – Cleaning Division from 2007 to 2009. Mr. Dorer joined Clorox in 2005 as Vice President & General Manager – Glad® Products. Prior to that role, he worked for The Procter & Gamble Company for 14 years, leading the marketing organization for the Glad® Products joint venture since its inception and holding marketing positions across a range of categories and countries.

Non-Profit/Other Boards:
Mr. Dorer serves on the executive committee of the board of GMA (Grocery Manufacturers Association). He previously served on the executive committee of the board of directors of the American Cleaning Institute and the board of directors of the Chabot Space & Science Center Foundation in Oakland, California.

Director Qualifications:
Mr. Dorer’s leadership experience and his in-depth knowledge of the consumer packaged goods industry, the Company’s businesses, and his leadership in developing the Company’s 2020 Strategy and Strategy Accelerators enable him to provide valuable contributions with respect to strategy, growth, and long-range plans. Additionally, his extensive international background provides him with a broad perspective on international customer and consumer dynamics and business strategy. Age: 52.

 

2015

Spencer C. Fleischer

Mr. Fleischer is Managing Partner of Friedman Fleischer & Lowe LLC (FFL) (a private equity firm), where he has served in various roles since co-founding FFL in 1997. Before co-founding FFL, Mr. Fleischer spent 19 years with Morgan Stanley & Company as an investment banker and manager. At Morgan Stanley & Company, he was a member of the worldwide Investment Banking Operating Committee and also held roles including head of investment banking in Asia and head of corporate finance for Europe.

Other Public Company Boards:
Mr. Fleischer is a director of Banner Corporation (October 2015 to present).

Non-Profit/Other Boards:
Mr. Fleischer is a director of Levi Strauss & Co., Speedstar Holding Corporation, and Strategic Investment Management, LLC. He previously served on the board of WiltonRe Holdings Limited.

Director Qualifications:
Mr. Fleischer brings to the Board more than 35 years of financial and operational expertise as well as deep international experience. His significant experience in both private equity and investment banking enables him to contribute valuable insights into strategic planning, mergers and acquisitions, and operating expertise to the Company. His leadership role at FFL also allows him to provide significant experience in compensation matters. Age: 62.


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Board of Directors

Director Since       Name, Principal Occupation, and Other Information

2013

Esther Lee

Ms. Lee has served as Executive Vice President – Global Chief Marketing Officer at MetLife Inc. (an insurance, annuities, and employee benefits company) since January 2015. Previously, Ms. Lee served as Senior Vice President – Brand Marketing, Advertising and Sponsorships for AT&T (a telecommunications company) from 2009 to December 2014. From 2007 to 2008 she served as CEO of North America and President of Global Brands for Euro RSCG Worldwide. Prior to that, she served for five years as Global Chief Creative Officer for The Coca-Cola Company. Earlier in her career, as co-founder of DiNoto Lee advertising firm, Ms. Lee worked with several consumer packaged goods companies, including The Procter & Gamble Company, Unilever, and Nestle.

Non-Profit/Other Boards:
Ms. Lee serves on the boards of the MetLife Foundation and the Ad Council.

Director Qualifications:
Ms. Lee brings to the Company significant executive and brand-building expertise. Her current and prior executive leadership roles enable her to provide valuable contributions with respect to creativity and vision for long-term growth. In addition, Ms. Lee brings to the Company significant experience in the areas of marketing and digital media. Her prior experience with global brand marketing, advertising, media, and sponsorship, as well as developing operating models in these areas, enable her to provide valuable contributions to the Company’s business strategies. Age: 57.

 

2016

A. D. David Mackay

Mr. Mackay served as President and Chief Executive Officer of Kellogg Company (a food manufacturing company) from 2006 until his retirement in 2011. From 2003 to 2006, he served as the company’s President and Chief Operating Officer. Prior to that, Mr. Mackay held a number of other leadership positions at Kellogg, including roles at Kellogg Australia, United Kingdom, and Republic of Ireland. He also previously served as Managing Director of Sara Lee Corporation in Australia and held various positions at Mars, Inc.

Other Public Company Boards:
Mr. Mackay is a director of Fortune Brands Home and Security Inc. (September 2011 to present). Mr. Mackay previously served as a director of Keurig Green Mountain, Inc. (December 2012 to March 2016), Beam, Inc. (October 2011 to April 2014), Fortune Brands, Inc. (January 2006 to October 2011), and Kellogg Company (February 2005 to January 2011).

Non-Profit/Other Boards:
Mr. Mackay formerly served on the boards of McGrath Ltd. and Woolworths Ltd., which are Australia-based companies.

Director Qualifications:
Mr. Mackay brings significant strategic leadership and operational experience to the Board. His extensive consumer products background and his international experience allow him to contribute valuable insights regarding the Company’s industry, operations, and international businesses. In addition, his previous leadership roles provide him with expertise in executive compensation and succession planning matters. Age: 61.


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Director Since       Name, Principal Occupation, and Other Information

1999

Robert W. Matschullat

Mr. Matschullat served as independent lead director of the Board from November 2012 until July 2015. He was interim Chairman and interim Chief Executive Officer of the Company from March 2006 through October 2006, served as presiding director of the Board from January 2005 through March 2006, and served as Chairman of the Board from January 2004 through January 2005. Previously, he was the Vice Chairman and Chief Financial Officer of The Seagram Company Ltd. (a global company with entertainment and beverage operations). Prior to joining The Seagram Company Ltd., Mr. Matschullat served as head of worldwide investment banking for Morgan Stanley & Co. Incorporated, and was on the Morgan Stanley Group board of directors.

Other Public Company Boards:
Mr. Matschullat is a director of The Walt Disney Company, Inc. (December 2002 to present) and is Chairman of the Board of Visa, Inc. (April 2013 to present), having served as a director of Visa, Inc. since October 2007.

Director Qualifications:
Mr. Matschullat brings to the Company a wealth of public company leadership experience at the board and executive levels. Mr. Matschullat’s executive leadership experience includes service as the chief financial officer of a major global company and as the division head of a major financial institution, providing him with expertise in business and financial matters as well as broad international experience. In addition, Mr. Matschullat has an extensive understanding of the Company’s business, having served more than 15 years on the Board, including in the leadership roles of independent lead director, non-executive Chairman, and presiding director of the Board. Mr. Matschullat also served as the Company’s interim Chief Executive Officer. These experiences have provided him with a long-term perspective, as well as valuable management, governance, and leadership experience. Age: 68.


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Board of Directors

Director Since       Name, Principal Occupation, and Other Information

2013

Jeffrey Noddle

Mr. Noddle was the Executive Chairman of SuperValu, Inc. (SuperValu) (a food retailer and provider of distribution and logistical support services) from 2009 until his retirement in 2010. He served as SuperValu’s Chairman and Chief Executive Officer from 2002 to 2009. During his career with SuperValu, which commenced in 1976, Mr. Noddle held a number of other leadership positions, including President and Chief Operating Officer, Vice President – Merchandising, and President of SuperValu’s Fargo and former Miami divisions.

Other Public Company Boards:
Mr. Noddle is Chairman of the Board of Donaldson Company, Inc. (April 2016 to present), having served as a director of Donaldson Company, Inc. since November 2000. He is a director of Ameriprise Financial, Inc. (September 2005 to present). Mr. Noddle previously served on the board of SuperValu, Inc. (May 2002 to June 2010).

Non-Profit/Other Boards:
Mr. Noddle previously served on the boards of the University of Minnesota Carlson School of Management, The Food Industry Center at the University of Minnesota, and the Greater Twin Cities United Way. Mr. Noddle was also a member of the executive committee of the Minnesota Business Partnership and past chairman of the board of The Food Marketing Institute.

Director Qualifications:
Mr. Noddle’s prior leadership roles enable him to provide valuable operational and supply chain insights as well as strategic leadership and human resources guidance to the Company. His over 30-year career with SuperValu provides him with valuable perspective on the Company’s retail environment, as well as experience in the areas of mergers and acquisitions, including integration planning and execution, stockholder relations and communications, corporate governance issues, executive succession planning, and director recruitment. Mr. Noddle’s expertise in leading one of the largest grocery retail companies in the United States and his extensive knowledge of the Company’s customers and consumers enable him to make valuable contributions to the Company. Age: 70.


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Director Since       Name, Principal Occupation, and Other Information

2005

Pamela Thomas-Graham

Ms. Thomas-Graham served as Chair, New Markets, of Credit Suisse Group AG (a global financial services company) from October 2015 to June 2016. She served as Chief Marketing and Talent Officer, Head of Private Banking & Wealth Management New Markets, and member of the Executive Board, of Credit Suisse from January 2010 to October 2015. From 2008 to 2009, she served as a managing director in the private equity group at Angelo, Gordon & Co. From 2005 to 2007, Ms. Thomas-Graham held the position of Group President at Liz Claiborne, Inc. She served as Chairman, President, and Chief Executive Officer of CNBC from 2001 to 2005. Previously, Ms. Thomas-Graham served as an Executive Vice President of NBC and as President and Chief Executive Officer of CNBC.com. Prior to joining NBC, Ms. Thomas-Graham was a partner at McKinsey & Company.

Other Public Company Boards:
Ms. Thomas-Graham previously served as a director of Idenix Pharmaceuticals, Inc. (June 2005 to January 2010).

Non-Profit/Other Boards:
Ms. Thomas-Graham serves on the board of the New York Philharmonic, the Parsons School of Design, and the Education Committee of the Museum of Modern Art in New York City. She is a member of the Business Council of the Metropolitan Museum of Art in New York City. Additionally, she previously served on the Visiting Committee of Harvard Business School and on the board of the Harvard Alumni Association.

Director Qualifications:
Ms. Thomas-Graham brings to the Company significant executive expertise. Her current and prior executive leadership roles enable her to provide valuable contributions with respect to management, operations, growth, and long-range plans. In addition, Ms. Thomas-Graham brings to the Company significant experience in the area of branding. Her prior experience as a management consultant also enables her to provide valuable contributions to the Company’s business strategies and mergers and acquisitions activities. Additionally, her leadership experience at a private equity firm provides her with financial and accounting expertise, enabling her to contribute to the oversight of the Company. Age: 53.


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Board of Directors

Director Since       Name, Principal Occupation, and Other Information

2005

Carolyn M. Ticknor

Ms. Ticknor was President of the Imaging and Printing Systems group of the Hewlett Packard Company (a global IT company) from 1999 until her retirement in 2001. Previously, she served as President and General Manager of the Hewlett Packard Company’s LaserJet Solutions.

Other Public Company Boards:
Ms. Ticknor previously served as a director of OfficeMax Incorporated (formerly Boise Cascade Corporation) (February 2000 to April 2006).

Non-Profit/Other Boards:
Ms. Ticknor is currently a director of The Center for the Advancement of Science in Space (CASIS). She previously served as a director of Lucile Packard Children’s Hospital, a private non-profit organization at the Stanford University Medical Center.

Director Qualifications:
Ms. Ticknor’s prior executive leadership roles enable her to provide valuable contributions with respect to management, operations, strategy, growth, and long-range plans. Her prior leadership at a global IT company enables her to provide valuable contributions with respect to the Company’s international operations, strategies, and growth plans. She also brings to the Company significant expertise in the areas of innovation and supply chain management. Ms. Ticknor’s service as a director of Lucile Packard Children’s Hospital at Stanford University Medical Center enhances her understanding of health and wellness issues, as well as the Company’s focus on community involvement. Age: 69.

 

2015

Christopher J. Williams

Mr. Williams has served as the Chairman and Chief Executive Officer of The Williams Capital Group, L.P. and Williams Capital Management, LLC (Williams Capital) (an investment banking and financial services firm) since the company’s formation in 1994. Prior to founding Williams Capital, Mr. Williams managed the derivatives and structured finance division of Jefferies & Company. He previously worked at Lehman Brothers, where his roles included managing groups in the corporate debt capital markets and derivatives structuring and trading.

Other Public Company Boards:
Mr. Williams is a director of Caesars Entertainment Corporation (April 2008 to present) and Ameriprise Financial, Inc. (September 2016 to present). He previously served on the board of Wal-Mart Stores Inc. (June 2004 to June 2014).

Non-Profit/Other Boards:
Mr. Williams serves on the board of Cox Enterprises Inc., Lincoln Center for the Performing Arts, and The Partnership for New York City. Mr. Williams is also Chairman of the Board of Overseers at the Tuck School of Business at Dartmouth.

Director Qualifications:
Mr. Williams brings a wealth of financial, accounting, and strategic knowledge to the Board with his years of experience in investment banking and finance, and as the former chair of the audit committee of a Fortune 100 company. He also contributes important executive management and leadership experience as the chairman and chief executive officer of an investment management firm. As a current and former director of several public and private companies, he brings a valuable perspective for the Company’s strategy and operations as well as extensive customer insights. Age: 58.


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  Organization of the Board of Directors

Evaluation of Director Qualifications and Experience

In evaluating the current Board composition and assessing potential new directors, as part of director succession planning, the Nominating and Governance Committee considers individuals from various disciplines and diverse backgrounds. While the Board has not established any specific minimum qualifications that a potential nominee must possess, director candidates, including incumbent directors, are assessed based upon criteria established by the Nominating and Governance Committee in light of the Company’s long-term strategy. These criteria include broad-based business skills and experience, prominence and reputation in their professions, global business and social perspective, ability to effectively represent the long-term interests of the stockholders, and personal integrity and judgment. The ability of incumbent directors to continue to contribute to the Board is also considered in connection with the renominating process.

The following experience and skills, among others, have been specifically identified by the Nominating and Governance Committee as being important in creating a diverse and well rounded Board:

Significant Current or Prior Leadership Experience (such as service in a significant leadership role, including as a chief executive officer, or other executive officer or significant leadership position): Enables important contributions to strengthening the Company’s leadership, management expertise, operations, strategy, growth, and long-range plans.

Leadership Experience on Public Company, Non-Profit, or Other Boards: Prepares directors to take an active leadership role in the oversight and governance of the Company.

Knowledge of the Company’s Business, the Consumer Packaged Goods Industry, or Other Complementary Industry: Helps enhance and contribute to the Company’s strategy and position in the Company’s industry.

Experience in Emerging Technology, Innovation (including digital media and e-commerce), Brand Building, or Other Relevant Areas: Supports the Company’s strategy, innovation, effective marketing to consumers, and the Company’s business operations.

Relevant Retail or Customer Experience: Provides insights and contributions to relations and results with the Company’s customer and consumer base.

Significant Mergers and Acquisitions or Strategy Experience: Contributes additional perspectives on the Company’s M&A, partnership, and adjacency strategies.

International Experience: Provides insights and ability to contribute to the Company’s global business strategy.

Financial and Accounting Expertise: Provides additional analysis and oversight of the Company’s financial position, financial statements, and results of operations.

Regulatory Experience (including experience in the health and wellness sector): Enables meaningful contributions on matters relating to the regulatory environment, including in the area of health and wellness.




Diversity

Consistent with the Governance Guidelines, the Board recognizes the value in diversity and endeavors to assemble a Board with diverse skills, professional experience, perspectives, race, ethnicity, gender, and cultural background. The Nominating and Governance Committee

assesses the effectiveness of efforts to assemble a diverse Board by examining the overall composition of the Board and evaluating how a particular director candidate can contribute to the overall success of the Board.



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Stockholder Recommendations and Nominations of Director Candidates

The Nominating and Governance Committee considers recommendations from many sources, including stockholders, regarding possible candidates for director. Such recommendations, together with biographical and business experience information (similar to that required to be disclosed under applicable SEC rules and regulations) regarding the candidate, should be submitted to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The Nominating and Governance Committee evaluates all candidates for the Board in the same manner, including those suggested by stockholders.

In addition, our Bylaws permit a stockholder or group of up to 20 stockholders who have owned at least 3% of the Company’s Common Stock for at least three years to submit director nominees (up to 20% of the Board) for inclusion in the Company’s proxy materials if the stockholder(s) provides timely written notice of such nomination(s) and the stockholder(s) and the nominee(s) satisfy the requirements specified in the Company’s Bylaws. Stockholders who wish to nominate directors for inclusion in the Company’s proxy materials or directly at an annual meeting of stockholders in accordance with the procedures in our Bylaws should follow the instructions under the “Stockholder Proposals and Director Nominations for the 2017 Annual Meeting” section of this proxy statement.




Director Communications

Stockholders and interested parties may direct communications to individual directors, including the lead director, to a Board committee, to the independent directors as a group, or to the Board as a whole, by addressing the communications to the named individual, to the committee, to the independent directors as a group, or to the Board as a whole and sending them to The Clorox

Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The Corporate Secretary will review all communications so addressed and will forward to the addressee(s) all communications determined to bear substantively on the business, management, or governance of the Company.




Director Compensation

Only our non-employee directors receive compensation for their services as directors. The Company’s non-employee director compensation program is comprised of cash compensation and an annual grant of deferred stock units.

The Management Development and Compensation Committee (the “Committee”) has the responsibility for making determinations regarding non-employee director compensation. The Committee reviews the compensation of non-employee directors at least once a year to ensure that the Company’s non-employee directors are being compensated appropriately relative to peer companies. The Committee retains the services of an independent

compensation consulting firm to assist it in the performance of its duties. During fiscal year 2016, the Committee used the services of Frederic W. Cook & Co., Inc. (“FW Cook”). FW Cook’s work with the Committee included data analysis and guidance and recommendations regarding compensation levels relative to our compensation peer group (see discussion regarding the peer group in the “Compensation Discussion and Analysis” section) as well as trends and recent developments in the arena of non-employee director compensation. Clorox generally aims to compensate non-employee directors at or near the median of the compensation peer group.



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The following table sets forth information regarding compensation for each of the Company’s non-employee directors during fiscal year 2016.

  Name Fees Earned
or Paid in Cash
($)(2)
Stock
Awards
($)(3)
Total
($)
 
Amy Banse(1)                                                 
Richard H. Carmona 107,745 130,000 237,745
Spencer C. Fleischer 100,000 130,000 230,000
George J. Harad 250,000 130,000 380,000
Esther Lee 100,000 130,000 230,000
A.D. David Mackay(1)
  Robert W. Matschullat 104,755 130,000 234,755
Jeffrey Noddle 120,000 130,000 250,000
Rogelio Rebolledo 100,000 130,000 230,000
Pamela Thomas-Graham 100,000 130,000 230,000
Carolyn M. Ticknor 120,000 130,000 250,000
Christopher J. Williams 100,000 130,000 230,000
(1) Ms. Banse and Mr. Mackay did not receive any compensation from the Company during fiscal year 2016 as they began service as directors in fiscal year 2017.
(2) The amounts reported in the “Fees Earned or Paid in Cash” column reflect the total annual cash retainer and other cash compensation earned by each director in fiscal year 2016 and include amounts deferred into cash or deferred stock units and/or amounts issued in Common Stock in lieu of cash, as elected by the director. The annual cash retainer is paid to each director in quarterly installments.
(3) The amounts reported reflect the grant-date fair value for financial statement reporting purposes of the annual grant of deferred stock units. Awards are granted on an annual basis at the end of each calendar year. Refer to Note 16 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, for a discussion of the relevant assumptions used in calculating the grant-date fair value under applicable accounting guidance. As of June 30, 2016, the following directors had the indicated aggregate number of deferred stock units accumulated in their deferred accounts for all years of service as a director, which includes deferrals of cash compensation, annual awards of deferred stock units, and additional deferred stock units credited as a result of dividend equivalents earned with respect to the deferred stock units: Dr. Carmona – 15,819 units; Mr. Fleischer – 1,313 units; Mr. Harad – 36,145 units; Ms. Lee – 2,672 units; Mr. Matschullat – 76,851 units; Mr. Noddle – 3,389 units; Mr. Rebolledo – 3,389 units; Ms. Thomas-Graham – 19,841 units; Ms. Ticknor – 26,448 units; and Mr. Williams – 1,313 units.

Fees Earned or Paid in Cash

Cash compensation consists of annual cash retainer amounts and any special assignment fees. The following table lists the various retainers paid for board service and service as the independent chair or a committee chair during fiscal year 2016:

Annual director retainer      $100,000
Independent chair retainer 150,000
Committee chair retainers:
       Nominating and Governance Committee 12,500
       Audit Committee 20,000
       Management Development and Compensation Committee 20,000

Effective August 15, 2016, the lead director receives an annual cash retainer of $50,000 in addition to the annual director retainer paid to all non-employee directors.

Directors who serve as a Board member, lead director, independent chair, or committee chair for less than the full fiscal year receive pro-rated retainer amounts based on the number of days they served in such position during the fiscal year. In addition to the retainer amounts, each non-employee director is entitled to receive a fee of $2,500 per day for any special assignment requested by the Board. No special assignment fees were paid in fiscal year 2016.

Payment Elections

Under the Company’s Independent Directors’ Deferred Compensation Plan, a director may annually elect to

receive all or a portion of his or her cash compensation in the form of cash, Common Stock, deferred cash, or deferred stock units.

Payment in Stock. Directors who elect to receive cash compensation amounts in the form of Common Stock are issued shares of Common Stock based on the fair market value of the Common Stock as determined by the closing price of the Common Stock on the last trading day of the quarter for which the fees were earned.

Elective Deferral Program. For directors who elect deferred cash, the amount deferred is credited to an unfunded cash account that is credited with interest at an annual interest rate equal to Wells Fargo Bank, N.A.’s prime lending rate in effect on January 1 of each year. Upon termination of



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service as a director, the amounts credited to the director’s deferred cash account are paid out in five annual cash installments or in one lump-sum cash payment, as elected by the director. For directors who elect deferred stock units, the amount deferred is credited to an unfunded account in the form of units equivalent to the fair market value of the Common Stock on the date on which the fees are scheduled to be paid. When dividends are declared, additional deferred stock units are allocated to the director’s deferred stock unit account in amounts equivalent to the dollar amount of Common Stock dividends paid by the Company divided by the fair market value of the Common Stock on the date the dividends are paid. Upon termination of service as a director, the amounts credited to the deferred stock unit account, which include any elective deferrals and the annual deferred stock unit grants described below, are paid out in shares of Common Stock in five annual installments or in one lump sum, as elected by the director.

Stock Unit Awards

In addition to the cash compensation amounts described above, each non-employee director also receives an annual grant of deferred stock units. The value of the deferred stock unit award amount earned by a non-employee director serving for the full fiscal year 2016 was $130,000. Awards are made as of the last business day in the calendar year and represent payment for services provided during such calendar year.

Directors who serve as non-employee Board members for less than the full calendar year receive pro-rated awards based on the number of full fiscal quarters they served as a non-employee Board member during the calendar year. As noted above, deferred stock units accrue dividend equivalents and the balance of a director’s deferred stock unit account is paid out in Common Stock following the director’s termination of service.




Stock Ownership Guidelines for Directors

The Board believes that the alignment of directors’ interests with those of stockholders is strengthened when Board members are also stockholders. The Board therefore requires that each non-employee director, within five years of being first elected, own Common Stock or deferred stock units having a market value of at least five times his

or her annual cash retainer. This program is designed to ensure that directors acquire a meaningful and significant ownership interest in the Company during their tenure on the Board. As of June 30, 2016, each non-employee director was in compliance with the guidelines.



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  Corporate Governance

Corporate Governance Philosophy

Clorox is committed to strong corporate governance and regularly reviews its policies and practices to further the interests of our stockholders, promote the long-term health of our business, provide effective oversight of management, and encourage responsible and ethical behavior by our

directors and employees. Our Corporate Governance Guidelines, Code of Conduct, and other company policies set forth a framework to further these goals and guide our decisions, as described greater detail below.




Our Commitment to Corporate Responsibility

Corporate responsibility is the foundation of how Clorox operates. As a signatory to the United Nations Global Compact, we’re committed to its Ten Principles by driving our corporate responsibility strategy, a comprehensive set of commitments across our company: from human rights, labor, and product safety to transparency, environmental sustainability, and contributions to communities where we operate. Our commitment to sustainability includes, among other goals, reducing our operational footprint while growing our business, making sustainability improvements to our products, and working to drive transparency and sustainability progress in our supply chain.

Clorox is also committed to helping communities by supporting causes that promote health and well-being and education. The Clorox Company Foundation

provides grants to support youth, education, and cultural and civic organizations where our employees live and work; we encourage our employees to support causes of their choosing by volunteering and by participating in our corporate giving campaign; and we have a long history of providing products and donations to assist with disaster relief.

We also believe our financial performance and commitment to corporate responsibility go hand in hand. Each year, we publish an integrated report that highlights the intersection of our business and corporate responsibility commitments by reporting our financial, environmental, social, and governance performance.




Stockholder Engagement

During the past fiscal year, members of the Board and management held meetings with investors to discuss a variety of key corporate governance and executive compensation topics. These meetings provide an opportunity for our management and the Board to understand and examine the issues that matter most to our stockholders. Our directors considered the feedback from these meetings, along with

best practices, policies at peer companies, and Clorox’s specific circumstances, in making the decision to amend our Bylaws in September 2016 to provide stockholders representing 25% or more of outstanding shares with a right to call a special meeting, as well as in adopting proxy access in August 2015.




The Clorox Company Governance Guidelines

The Board has adopted Corporate Governance Guidelines (“Governance Guidelines”) that can be found in the Corporate Governance section on the Company’s website at https://www.thecloroxcompany.com/who-we-are/ corporate-governance/governance-guidelines, and are available in print to any stockholder who requests them from The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The Governance Guidelines present a framework for the governance of the

Company. They describe responsibilities, qualifications, and operational matters applicable to the Board and the Board committees and include provisions relating to the evaluation of the CEO and ordinary-course and emergency succession planning. The Governance Guidelines are reviewed at least annually by the Nominating and Governance Committee, which recommends changes to the Board as appropriate.



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Director Independence

The Governance Guidelines provide that a substantial majority of the Board must consist of independent directors. The Board determines whether individual Board members are independent, as defined by the New York Stock Exchange (“NYSE”). The Board has adopted director independence standards, which are set forth in the Governance Guidelines, to assist it in assessing the independence of directors. The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Nominating and Governance Committee.

The Board has determined that each of the Company’s non-management directors is independent under the NYSE listing standards and the independence standards set forth in the Governance Guidelines: Messrs. Fleischer, Harad, Mackay, Matschullat, Noddle, Williams and Rebolledo, Mmes. Banse, Lee, Thomas-Graham and Ticknor and Dr. Carmona. Mr. Dorer is not independent as a result of his service as the Company’s CEO.




Board of Directors Leadership Structure

The Board believes that it is in the best interests of the Company and its stockholders for the Board to make a determination on whether to separate or combine the roles of Chairman and CEO based upon the Company’s circumstances at any particular point in time, and whether the Chairman role should be held by an independent director. The Nominating and Governance Committee regularly reviews the leadership structure to determine if it is in the best interests of the Company and its stockholders. Since August 2016, the positions of Chairman and CEO have been held by Mr. Dorer. The Board believes that Mr. Dorer’s leadership in developing the Company’s 2020 Strategy and his in-depth knowledge of the Company’s operations enable him to drive execution of the Company’s strategic plans and to facilitate effective communication between management and the Board. As Chairman and CEO, Mr. Dorer is able to see that key issues are brought to the attention of the Board and to help effectuate the Board’s guidance and decisions. Having the CEO serve as the Chairman also provides a unified leadership structure that promotes accountability for the Company’s performance.

The Board also believes that independent leadership is important, and the Company’s Governance Guidelines require an independent director to serve as a lead director while the position of Chairman is held by a management director. Our current lead director is Ms. Thomas-Graham. Ms. Thomas-Graham’s knowledge about the Company’s business and strategy from her service as a director and her significant leadership experience contribute to her ability to fulfill the role of lead director effectively and independently.

The lead director is elected annually by and from the independent directors with clearly delineated and comprehensive duties and responsibilities. To qualify as lead director, a director must have served as a member of the Board for a minimum of one year. The duties of the

lead director, which are also included in the Governance Guidelines, include coordinating the activities of the independent directors and serving as a liaison between the Chairman and the independent directors. In addition, the lead director:

assists the Board and Company officers in promoting compliance with and implementation of the Governance Guidelines;

presides at executive sessions of the independent directors and has the authority to call additional executive sessions or meetings of the independent directors;

presides at Board meetings in the Chairman’s absence;

approves information sent to the Board;

approves meeting agendas and meeting schedules for the Board to ensure that there is sufficient time for discussion of all agenda items;

is available for consultation and direct communication with major stockholders if requested; and

evaluates, along with the members of the Management Development and Compensation Committee and the other independent directors, the performance of the CEO.

In addition, in support of the responsibilities and authority of the lead director, our Bylaws were recently amended to provide the lead director with the ability to call special meetings of the Board.

All of the Company’s directors other than Mr. Dorer are “independent” as defined by the NYSE rules. The Board believes that this structure promotes effective governance and, under the present circumstances, the leadership structure described above is in the best interests of the Company and its stockholders.



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Standing Committees

The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Management Development and Compensation Committee. Each of these committees consists only of non-management directors whom the Board has determined are independent under the NYSE listing standards and the Board’s independence standards set forth in the Company’s Governance Guidelines. In addition, directors who serve on the Audit Committee and the Management Development and Compensation Committee must meet additional, heightened independence

and qualification criteria applicable to directors serving on these committees under the NYSE listing standards. The charters for these committees are available in the Corporate Governance section of the Company’s website at https://www.thecloroxcompany.com/who-we-are/ corporate-governance/committee-charters, or in print by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.

The table below indicates the current members of each standing Board committee:



  Director       Audit       Nominating and
Governance
      Management
Development and
Compensation
 
Amy Banse(1)
Richard H. Carmona Chair
Benno Dorer
Spencer C. Fleischer  
George J. Harad(2)
  Esther Lee
A.D. David Mackay
Robert W. Matschullat
Jeffrey Noddle Chair
Rogelio Rebolledo(2)
Pamela Thomas-Graham
Carolyn M. Ticknor Chair
Christopher J. Williams
Number of meetings in fiscal year 2016 9 6 4
(1) Ms. Banse was appointed to the Board effective September 15, 2016. Her committee memberships have not yet been determined.
(2) Messrs. Harad and Rebolledo will retire from the Board on the date of the Annual Meeting.

Audit Committee. The Audit Committee is the principal link between the Board and the Company’s independent registered public accounting firm. The Audit Committee has the functions and duties set forth in its charter, including representing and assisting the Board in overseeing:

the integrity of the Company’s financial statements;

the independent registered public accounting firm’s qualifications, independence, and performance;

the performance of the Company’s internal audit function;

the Company’s system of disclosure controls and procedures and system of internal control over financial reporting;

the Company’s compliance with legal and regulatory requirements relating to accounting and financial reporting matters;

the Company’s framework and guidelines with respect to risk assessment and risk management; and

the Company’s material financial policies and actions.

The Audit Committee’s duties also include preparing the report required by the SEC proxy rules to be included in the Company’s annual proxy statement. The Board has determined that directors Noddle, Rebolledo, Thomas-Graham, Ticknor, and Williams are audit committee financial experts, as defined by SEC rules, and each member of the Audit Committee is financially literate, as defined by NYSE rules.

Nominating and Governance Committee. The Nominating and Governance Committee has the functions set forth in its charter, including:

identifying and recruiting individuals qualified to become Board members;

recommending to the Board individuals to be selected as director nominees for the annual meeting of stockholders;

reviewing and recommending to the Board changes in the Governance Guidelines and the Code of Conduct;



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overseeing the Company’s ethics and compliance program and activities, including the Company’s compliance with legal and regulatory requirements relating to matters other than accounting and financial reporting matters; and

performing a leadership role in shaping the Company’s corporate governance and overseeing the evaluation of the Board and its committees.

Management Development and Compensation Committee. The Management Development and Compensation Committee has the functions and duties set forth in its charter, including:

reviewing and approving the performance goals and objectives for the Chief Executive Officer (“CEO”) and other executive officers and the extent to which such performance goals and objectives have been met;

assessing the CEO’s performance and determining and approving the CEO’s compensation based on a variety of factors;

reviewing periodically with the CEO the performance of each of the other executive officers and approving the compensation of each such executive officer;

determining the amount and other material terms of individual short- and long-term incentive awards to be made to executive officers;

reviewing and approving recommendations regarding retirement income and other deferred benefit plans applicable to executive officers;

reviewing and approving employment-related arrangements with executive officers; and

evaluating the outcome of the advisory vote of the stockholders regarding “say on pay” and making recommendations or taking appropriate actions in response to such advisory vote.

In addition, the Management Development and Compensation Committee oversees, with involvement of the full Board, the Company’s management development and succession planning processes.




Board and Director Evaluation Process

The Nominating and Governance Committee is responsible for overseeing the Board, committee, and individual director evaluation process. Under the Governance Guidelines, the Board and each of the Audit, Nominating and Governance, and Management Development and Compensation Committees are required to conduct an annual self-evaluation. The evaluations include a range of issues designed to assess Board and committee performance, including Board and committee composition, structure, information received, accountability, and effectiveness, among other topics.

Additionally, the Board conducts individual director interviews as part of its evaluation process. Each director provides an individual assessment as well as any feedback they may have on other Board members’ performance on an annual basis. The individual assessments are conducted by the chair of the Nominating and Governance Committee, who summarizes and reports the results and any related recommendations to the Nominating and Governance Committee and the full Board.




Board of Directors Meeting Attendance

The Board held eight meetings during fiscal year 2016. All incumbent directors attended at least 75% of the meetings of the Board and committees of which they were members during fiscal year 2016. All members of the Board are

expected to attend the Annual Meeting of Stockholders. Each of the eleven members of the Board at the time of the Company’s 2015 Annual Meeting of Stockholders held on November 18, 2015, attended the meeting.




Executive Sessions

The independent directors generally meet in executive session at each regularly scheduled Board meeting without the presence of management directors or employees of the Company to discuss various matters related to the oversight

of the Company, the management of the Board’s affairs, and the CEO’s performance. The lead director chairs the executive sessions.



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Conflict of Interest and Related Person Transaction Policies and Procedures

The Company has a long-standing policy of prohibiting its directors, officers, and employees from entering into transactions that are an actual or potential conflict of interest. The Company’s Code of Conduct has a detailed provision prohibiting conflicts of interests and is available on the Company’s website at https://www.thecloroxcompany.com/who-we-are/corporate-governance/codes-of-conduct.

Additionally, the Company has a written policy regarding review and approval of related person transactions by the Audit Committee (“Related Person Policy”). The Related Person Policy defines an “Interested Transaction” as any transaction, arrangement, or relationship or series of similar transactions, arrangements, or relationships (including any indebtedness or guarantee of indebtedness) in which (i) the aggregate amount involved in any fiscal year will or may be expected to exceed $120,000 (including any periodic payments or installments due on or after the beginning of the Company’s last completed fiscal year and, in the case of indebtedness, the largest amount expected to be outstanding and the amount of annual interest thereon), (ii) the Company is a participant, and (iii) any Related Person (as defined below) has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).

A “Related Person” is (i) any person who is or was (since the beginning of the Company’s last fiscal year, even if such person does not presently serve in that role) an executive officer, director, or nominee for election as a director, (ii) a beneficial owner of more than 5% of the Company’s Common Stock, or (iii) an immediate family member of any of the foregoing. For purposes of this definition, “immediate family member” includes a person’s spouse, parents,

stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone residing in such person’s home (other than a tenant or employee).

Under the Related Person Policy, if a new Interested Transaction is identified for approval, it is brought to the Audit Committee to determine if the proposed transaction is reasonable and fair to the Company. The Audit Committee will review the material facts of all Interested Transactions that require its approval and either approve or disapprove of the entry into the Interested Transaction.

The Related Person Policy also contains categories of preapproved transactions that the Board has identified as not having a significant potential for an actual or potential conflict of interest or improper benefit.

In determining whether to approve or ratify an Interested Transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the Related Person’s interest in the transaction.

No director participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except that the director will provide all material information concerning the Interested Transaction to the Audit Committee. There were no transactions considered to be an Interested Transaction during the Company’s 2016 fiscal year.




Code of Conduct

The Company has adopted a Code of Conduct, which can be found in the Governance section under Company Information on the Company’s website, https://www.thecloroxcompany.com/who-we-are/corporate-governance/codes-of-conduct, or obtained in print by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.

The Code of Conduct applies to all of the Company’s employees, including executives, as well as directors. We also have established a separate Business Partner Code of Conduct outlining our standards and expectations of our suppliers and other business partners, which can also be found at https://www.thecloroxcompany.com/who-we-are/corporate-governance/codes-of-conduct.



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Corporate Governance


Board of Directors’ Role in Risk Management Oversight

The Board has responsibility for the oversight of the Company’s risk management, while the Company’s management is responsible for the day-to-day risk management process. With the oversight of the Board, the Company has a comprehensive enterprise risk management program in place. The Company has an Enterprise Risk Management Steering Committee (“ERM Committee”), which consists of a cross functional team of senior leaders and key executives. The ERM Committee oversees the annual key risk identification process, whereby the ERM Committee identifies the top risks that the Company faces with respect to its business, operations, strategy, and other factors, as well as the key mitigation strategies and the risk owner(s). At least annually, and generally in connection with the Board’s annual strategy meeting, management reports on and discusses the identified risks and risk mitigation and management efforts with the Board. The Board may allocate responsibility to a specific committee to examine a particular risk in detail if the committee is in the best position to review and assess the risk. For example, the Audit Committee reviews compliance and risk management programs and practices related to accounting and financial reporting matters and financial risk management, and the Management Development and Compensation Committee reviews the risks related to the executive compensation structure. In the event that a committee is allocated responsibility for examining and analyzing a specific risk, such committee reports on the relevant risk exposure during its regular reports to the full Board to facilitate proper risk oversight by the entire Board.

As part of its responsibilities, the Management Development and Compensation Committee periodically reviews the Company’s compensation policies and programs to ensure that the compensation program is able to provide incentives to employees, including executive officers, while mitigating

excessive risk-taking. The overall executive compensation program contains various provisions that mitigate against excessive risk-taking, including:

An appropriate balance between annual cash compensation and equity compensation that is earned over a period of three to four years;

Caps on the payouts under executive and non-executive incentive plans, which protect against executives taking short-term actions to maximize bonuses that are not supportive of long-term objectives;

Financial metrics under the executive annual incentive plan that are equally weighted between net customer sales and economic profit (as defined in the Compensation Discussion and Analysis section), which discourage revenue generation at the expense of profitability and vice versa;

Clawback provisions applicable to current and former executives as set forth in the applicable plans that enable the recapture of previously paid compensation under certain circumstances, which serve as a deterrent to inappropriate risk-taking activities; and

Stock ownership guidelines that require executive officers to accumulate meaningful levels of equity ownership in the Company, which align executives’ short- and long-term interests with those of the Company’s stockholders.

Based on its review and the analysis provided by its independent compensation consultant, FW Cook, the Management Development and Compensation Committee has determined that the risks arising from the Company’s compensation policies and practices for its employees, including executive officers, are not reasonably likely to have a material adverse effect on the Company.



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  Stock Ownership Information

Beneficial Ownership of Voting Securities

The following table shows, as of July 29, 2016 (except as otherwise indicated), the holdings of Common Stock by (i) any entity or person known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director and nominee

for director and each of the five individuals named in the Summary Compensation Table (the “named executive officers”), and (iii) all current directors and executive officers of the Company as a group:



Name of Beneficial Owner Amount and Nature
of Beneficial Ownership
(1)(2)
Percent of Class(3)
The Vanguard Group, Inc.(4)      
     100 Vanguard Blvd.  
     Malvern, PA 19355 12,953,394 10.0
BlackRock, Inc.(5)
     55 East 52nd Street
     New York, NY 10055 11,694,338 9.0
State Street Corporation(6)
     One Lincoln Street
     Boston, MA 02111 7,175,153 5.5
Amy Banse(7) 0 *
Richard H. Carmona(2) 0 *
Benno Dorer 291,304   *
Spencer C. Fleischer(2) 0 *
George J. Harad(2) 6,503 *
Esther Lee(2) 0 *
Robert W. Matschullat(2) 1,324 *
A. D. David MacKay(8) 0 *
Jeffrey Noddle(2) 1,150 *
Rogelio Rebolledo(2) 0 *
Stephen M. Robb 138,204 *
Laura Stein 134,598 *
Pamela Thomas-Graham(2) 1,778 *
Carolyn M. Ticknor(2) 0 *
Nikolaos Vlahos 34,906 *
Christopher J. Williams(2) 0 *
Dawn Willoughby 75,619 *
All current directors and executive officers as a group (27 persons)(9) 960,376 *
 
*

Does not exceed 1% of the outstanding shares.

(1) Unless otherwise indicated, each beneficial owner listed has sole voting and dispositive power concerning the shares indicated. These totals include the following numbers of shares of Common Stock that such persons have the right to acquire through stock options exercisable within 60 days of July 29, 2016, or with respect to which such persons have shared voting or dispositive power: Mr. Dorer – 287,432 options; Mr. Harad – shared voting and dispositive power with respect to 5,503 shares held jointly with spouse and 1,000 shares held in limited partnership; Mr. Robb – 124,437 options; Ms. Stein – 113,010 options; Mr. Vlahos – 26,569 options; Ms. Willoughby – 66,555 options and shared voting and dispositive power with respect to 3,411 shares held in family trust; and all current directors and executive officers as a group – 854,594 options. The numbers in the table above do not include the following numbers of shares of Common Stock that the executive officers have the right to acquire upon the termination of their service as employees pursuant to vested performance units that were deferred at the executive officers’ election: Mr. Dorer – 11,098; Mr. Robb – 10,239; Ms. Stein – 27,231; Mr. Vlahos – 4,700; Ms. Willoughby – 4,700; and all current executive officers as a group – 73,016.
(2) The numbers in the table above do not include the following numbers of shares of Common Stock that the non-management directors have the right to acquire upon the termination of their service as directors pursuant to deferred stock units granted under the Independent Directors’ Stock-Based Compensation Plan: Dr. Carmona – 15,819; Mr. Fleischer – 1,313; Mr. Harad – 36,145; Ms. Lee – 2,672; Mr. Matschullat – 76,851; Mr. Noddle – 3,389; Mr. Rebolledo – 3,389; Ms. Thomas-Graham – 19,841; Ms. Ticknor – 26,448; and Mr. Williams – 1,313.
(3) On July 29, 2016, there were 129,469,454 shares of Common Stock outstanding.

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Stock Ownership Information

(4) Based on information contained in a report on Schedule 13G/A filed with the SEC on March 10, 2016, The Vanguard Group reported, as of February 29, 2016, sole voting power with respect to 253,445 shares, sole dispositive power with respect to 12,688,414 shares, shared voting power with respect to 11,600 shares and shared dispositive power with respect to 264,980 shares.
(5) Based on information contained in a report on Schedule 13G/A filed with the SEC on February 10, 2016, BlackRock, Inc. reported, as of December 31, 2015, sole voting power with respect to 10,313,341 shares and sole dispositive power with respect to all shares reported.
(6) Based on information contained in a report on Schedule 13G filed with the SEC on February 12, 2016, State Street Corporation reported, as of December 31, 2015, shared voting and dispositive power with respect to all of these shares.
(7) Effective September 15, 2016, Ms. Banse was appointed to the Board.
(8) Effective August 15, 2016, Mr. Mackay was appointed to the Board.
(9) Pursuant to Rule 3b-7 of the Exchange Act, executive officers include the Company’s current CEO and all current executive vice presidents and senior vice presidents. Effective September 15, 2016, there were 27 current directors and executive officers as a group.


Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act and SEC regulations require the Company’s directors, certain officers, and holders of more than 10% of the Company’s Common Stock to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. The reporting directors, officers, and 10% stockholders are also required by SEC

rules to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of copies of such reports received or written representations from its directors and such covered officers, the Company believes that its directors and officers complied with all applicable Section 16(a) filing requirements during fiscal year 2016.



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Table of Contents

  Executive Compensation

  Proposal 2:
Advisory Vote to Approve Executive Compensation

In accordance with the provisions of Section 14A of the Exchange Act, as enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010, we are providing our stockholders the opportunity to vote on a non-binding, advisory resolution to approve the compensation of our named executive officers. This proposal gives our stockholders the opportunity to express their views on the Company’s executive compensation, and is commonly referred to as a “say-on-pay” proposal. This vote is only advisory and will not be binding upon the Company or the Board. However, the Management Development and Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders and encourages all stockholders to vote their shares on this matter.

The Company’s compensation programs are designed to enable and reinforce its overall business strategy by aligning pay with the achievement of short- and long-term financial and strategic objectives to build stockholder value and by providing a competitive level of compensation needed to recruit, retain, and motivate talented executives critical to the Company’s long-term success. The key principle underlying

these compensation programs is pay for performance. Our pay-for-performance principle and the alignment of our compensation programs with the building of stockholder value are fully discussed in the Compensation Discussion and Analysis section of this proxy statement, which begins on page 26. The Board urges you to consider the factors discussed in the Compensation Discussion and Analysis section of this proxy statement when deciding how to vote on this Proposal 2.

At our 2015 Annual Meeting of Stockholders held on November 18, 2015, our stockholders overwhelmingly approved our executive compensation policies, with approximately 93% of votes cast in favor of our proposal. We value this positive endorsement by our stockholders and believe that the outcome signals our stockholders’ support of our compensation program. We continued our general approach to compensation for fiscal year 2016, specifically our pay-for-performance philosophy and our efforts to attract, retain, and motivate our named executive officers. We provide our stockholders the opportunity to vote on the compensation of our named executive officers every year. The next vote on executive compensation will be at the 2017 Annual Meeting of Stockholders.




Board of Directors’ Recommendation

The Board recommends a vote FOR the advisory vote to approve executive compensation. The Company is asking its stockholders to support the compensation of the named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers in fiscal year 2016 and the philosophy, policies, and practices underlying that compensation, which are described in this proxy statement. The Board believes that the Company’s overall compensation process effectively implements its compensation philosophy and achieves its goals.

Accordingly, the Board recommends a vote FOR the adoption of the following advisory resolution, which will be presented at the Annual Meeting:

“RESOLVED, that the stockholders of The Clorox Company approve, on an advisory basis, the compensation of the named executive officers, as disclosed in The Clorox Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure.”



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Vote Required

The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this proposal.

This vote is advisory, and therefore not binding on the Company, the Board, or the Management Development and Compensation Committee. However, the Board and the Management Development and Compensation Committee value the opinions of the Company’s stockholders and, to the extent there is any significant vote against the named

executive officers’ compensation as disclosed in the proxy statement, we will consider such stockholders’ concerns and the Management Development and Compensation Committee will evaluate whether any actions are necessary to address those concerns.

The people designated in the proxy and voting instruction card will vote your shares FOR approval unless you include instructions to the contrary.



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Table of Contents

  Compensation Discussion
and Analysis

Executive Summary

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and program, the compensation decisions made under this program and the specific factors we considered in making those decisions. This CD&A focuses on the compensation of our “named executive officers” for fiscal year 2016, who were:

Benno Dorer – Chief Executive Officer (“CEO”);

Stephen M. Robb – Executive Vice President – Chief Financial Officer (“CFO”);

Laura Stein – Executive Vice President – General Counsel and Corporate Affairs;

Nikolaos A. Vlahos – Executive Vice President and Chief Operating Officer – Household, Lifestyle and Core Global Functions; and

Dawn Willoughby – Executive Vice President and Chief Operating Officer – Cleaning, International and Corporate Strategy

On August 15, 2016, Mr. Dorer was named Chairman of the Board of Directors (the “Board”) in addition to his role as CEO.

Fiscal Year 2016 Performance Highlights

In fiscal year 2016, the Company delivered strong results, including 2% sales growth and an 8% increase in diluted earnings per share from continuing operations, despite an ongoing difficult macroeconomic environment, particularly in certain international markets that included unfavorable foreign exchange rates. In the face of these challenges, the Company delivered volume and sales growth across all of our U.S. segments and strong earnings growth behind our 2020 Strategy, on top of strong growth in the prior fiscal year. In addition, the Company delivered margin expansion, supported by productivity gains and another year of substantial cost savings. The Company also continued to invest strongly in its demand building programs, which include innovation across our portfolio and digital marketing communications enhancing brand engagement with our consumers.

The Company’s 2020 Strategy aims to accelerate profitable growth by engaging employees as business owners; increasing brand investment behind superior products and technology that reaches consumers in a dynamic marketplace; expanding

its brands into new categories and channels; and driving out waste in its work, processes and products. Successes for the Company in fiscal year 2016 included:

increasing fiscal year gross margin by 150 basis points to 45.1%;

achieving $109 million in cost savings, the Company’s 13th consecutive year of average cost savings in excess of $100 million;

achieving increased volume of 4%, reflecting gains in all four of the Company’s reportable segments;

increasing earnings from continuing operations to $648 million or $4.92 diluted EPS, versus $606 million or $4.57 diluted EPS in the prior year;

introducing new products in many categories, including Fresh Step® with Febreze® cat litter; new Hidden Valley® dressing flavors; Glad® trash bags with Clorox® antimicrobial protection; Burt’s Bees® lipsticks, BB cream and new flavors of lip balm; and Kingsford® professional briquets, among others;

acquiring Renew Life, a leading maker of digestive health products;

continuing to receive external recognition for its leadership in corporate responsibility and sustainability efforts; and

returning excess capital to stockholders through share repurchases, delivering $398 million in dividends to stockholders, and increasing the quarterly dividend by 4% in May 2016.

How Pay Was Tied to the Company’s Performance in Fiscal Year 2016

Our fiscal year 2016 results and compensation decisions continue to illustrate that our pay-for-performance philosophy works as intended, with pay being driven by performance in the following ways:

Fiscal Year 2016 Annual Incentive Payout. In alignment with our pay-for-performance philosophy, the annual incentive payout for each of our named executive officers was above target due to the Company’s strong operational results compared to the targets established at the beginning of the fiscal year. The Company’s sales and economic profit (“EP”) performance both significantly exceeded the targets for the fiscal year.



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Compensation Discussion and Analysis

No Fiscal Year 2016 Long-Term Incentive Payout. Our three-year performance share results did not meet the required financial target for cumulative EP, and, as a result, no performance shares were paid out. These awards were granted in September 2013, and payment was determined in August 2016 based on performance over the period commencing July 1, 2013, and ending June 30, 2016. Fiscal year 2014 results were significantly below target, and while we had very strong results in both fiscal years 2015 and 2016, these results were not enough to offset the challenges of fiscal year 2014, as the performance share payout is based on a cumulative EP measure.

Compensation Philosophy

The key principle of our compensation philosophy is to align pay with performance. We do so by delivering the majority of executive pay through “at-risk” variable incentive awards that help ensure that realized pay is tied to attainment of critical operational goals and sustainable appreciation in stockholder value. In fiscal year 2016, approximately 85% of the targeted compensation for our CEO and approximately 70% of the targeted compensation for our other named executive officers was directly tied to the achievement of short- and long-term operating goals and total stockholder return. This approach is designed to accomplish the following:

Pay for Performance. To reward performance that drives the achievement of the Company’s short- and long-term goals and, ultimately, stockholder value.
Align Management and Stockholder Interests. To align the interests of our executive officers with our stockholders by using long-term, equity-based incentives, maintaining stock ownership and retention guidelines that encourage a culture of ownership, and rewarding executive officers for sustained and superior Company performance as measured by operating results and total stockholder return.
Attract, Retain, and Motivate Talented Executives.To compete and provide incentives for talented, high-performing executives.

Address Risk-Management Considerations. To motivate our executives to pursue objectives that create long-term stockholder value and discourage behavior that could lead to unnecessary or excessive risk-taking inconsistent with our strategic and financial objectives, by providing a certain amount of fixed pay and balancing our executives’ at-risk pay between short-term (one-year) and long-term (three-year) performance horizons, using a variety of financial and other performance metrics.

Support Financial Efficiency. To help ensure that payouts under our cash-based and equity-based incentive awards are appropriately supported by performance and to allow the Management Development and Compensation Committee (the “Committee”) to design these awards in a way that is intended to be treated as performance-based compensation that is tax-deductible by the Company under Internal Revenue Code (“IRC”) Section 162(m) (“Section 162(m)”), as appropriate.

What We Have and Don’t Have – Elements of Our Executive Compensation Program

The following elements of our executive compensation program reflect our continued commitment to our compensation philosophy:

What We Have

An executive compensation program designed to mitigate inappropriate risk;
Different performance horizons for the goals within our annual and long-term incentive plans;
Use of economic profit as a rigorous incentive metric;
Stringent stock ownership and retention guidelines for all of our executives;
A prohibition on speculative transactions involving the Company’s stock, including hedging and pledging;
Stock options that vest over a four-year period and have an exercise price equal to fair market value of our Common Stock on the date of grant;
Clawback provisions in both our annual and long-term incentive plans;
Double-trigger change in control provisions for all equity awards;
Reasonable cash severance provisions to support talent retention and attraction objectives, promote orderly succession planning, and avoid individual negotiation with exiting executives, thus eliminating the need for individual employment agreements;
Modest perquisites supported by sound business rationale;
Annual review of our executive compensation program by the Committee, which is composed solely of independent members of the Board; and
Use of an independent compensation consultant who does not provide any additional consulting services to the Company.

What We Don’t Have

Ø Employment contracts for any executives;
Ø Stock option re-pricing without stockholder approval;
Ø Payment of dividends or dividend equivalents on unvested or unearned performance shares; and
Ø Tax gross-ups for any employee, including executive officers.


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Components of our Executive Compensation Program

The table below outlines the components of our executive compensation program, their purpose, and certain characteristics of these components.

Component       Purpose       Characteristics
Base Salary   Compensate named executive officers for their role and level of responsibility, as well as individual performance.   Fixed component.
Annual Incentives(1) Promote the achievement of the Company’s annual corporate financial and strategic goals, as well as individual objectives. Performance-based cash bonus opportunity.
Long-Term Incentives(1) Promote the achievement of the Company’s long-term corporate financial goals and stock price appreciation. Values of performance share grants and stock option awards vary based on actual Company financial and stock price performance.
Retirement Plans Provide replacement income upon retirement (a long-term retention incentive). Fixed component; however, Company contributions vary based on pay and employee contributions.
Post-Termination Compensation Provide contingent payments to attract and retain named executive officers and promote orderly succession for key roles. Only payable if a named executive officer’s employment is terminated under specific circumstances as described in the applicable severance plan.
Perquisites Provide other benefits competitive with the compensation peer group and encourage executives to proactively manage their health and financial wellness. Financial planning, Company car or car allowance, paid parking, annual executive physical and health club allowance.
(1)      Payouts under the annual and long-term incentive plans are determined based on the achievement of objectives established by the Committee at the beginning of the performance period. The performance period is one year for the cash awarded under the Annual Incentive Plan, which is further described in “What We Pay: Components of Our Compensation Program” and three years for the performance shares awarded under the long-term incentive plan. Specific financial goals cannot be changed during the performance period, except in accordance with principles set by the Committee at the time the goals were established, which, in the case of our long-term incentive plan, provide for adjustments in limited circumstances, including acquisitions, restructuring charges, or significant changes to generally accepted accounting principles, and only if the adjustments exceed a specified minimum financial impact to the Company.


How We Make Compensation Decisions

Roles and Responsibilities in Setting Executive Compensation

Management Development and Compensation Committee. The Committee is made up entirely of independent directors as defined by our Governance Guidelines and NYSE listing standards. The Committee regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to the Board. In particular, the Committee (i) oversees our executive compensation program, (ii) approves the performance goals and strategic objectives for our named executive officers, evaluates results against those targets each year, and determines and approves the compensation of our CEO (after consulting with the other independent members of the Board) and our other named executive officers, as well as officers at or above the level of senior vice president and any other officers covered by Section 16 of the Securities Exchange Act of 1934, as amended, and (iii) makes recommendations to the Board with respect to the structure of overall incentive and equity-based plans.

The Committee makes its determinations regarding executive compensation after consulting with management and the Committee’s independent compensation consultant (as further described below), and its decisions are based on a variety of factors, including the Company’s performance, individual executives’ performance, peer group data, and input and recommendations from the independent compensation consultant. Individual performance is evaluated based on the performance of the business or operations for which the executive is responsible, the individual’s skill set relative to industry peers, overall experience and time in the position, the critical nature of the individual’s role, difficulty of replacement, expected future contributions, readiness for promotion to a higher level, role relative to that of other executive officers, and, in the case of externally recruited named executive officers, compensation earned with a prior employer.

In determining the compensation package for each of our named executive officers other than our CEO, the Committee receives input and recommendations from our CEO and our Senior Vice President – Chief People Officer. Named


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Compensation Discussion and Analysis

executive officers do not have a role in the determination of their own compensation, but named executive officers other than our CEO do discuss their individual performance objectives with our CEO. The Committee currently consists of Dr. Carmona and Messrs. Fleischer, Harad, Mackay, Noddle, and Rebolledo.

Board of Directors. The independent members of the Board undertake a thorough process during which they review our CEO’s annual performance, and each independent director provides candid feedback and observations that are shared in aggregate with our CEO. The Board considers a variety of substantive factors it has identified as being most important for effective CEO performance, with a focus on strategy, people, operations, and values. The full Board discusses the evaluations of our CEO’s performance against these factors and then provides its compensation recommendations to the Committee. The Committee, after evaluating the Board’s recommendations and receiving input from the independent compensation consultant, then makes a final determination on our CEO’s compensation. Our CEO does not have a role in his own compensation determination other than participating in a discussion with the Board regarding his performance relative to specific targets and strategic objectives set at the beginning of the fiscal year, which the Board considers in both its compensation determination and when setting performance targets for the upcoming fiscal year.

Independent Compensation Consultant. The Committee retains the services of an independent compensation consulting firm to assist it in the performance of its duties. During fiscal year 2016, the Committee used the services of Frederic W. Cook & Co., Inc. FW Cook’s work with the Committee included data analysis and guidance and recommendations on the following topics: compensation levels relative to our peers, market trends in incentive plan design, risk and reward structure of executive compensation plans, and other policies and practices, including the policies and views of third-party proxy advisory firms. See the section entitled “Independence of the Compensation Consultant” for a discussion of FW Cook’s independence from management.

Chief Executive Officer. Our CEO makes compensation recommendations to the Committee for all executive officers other than himself. In making these recommendations, our CEO evaluates the performance of each executive officer and considers his or her responsibilities as well as the compensation analysis provided by the independent compensation consultant.

Other Members of Management. Senior human resources management provides analyses regarding competitive practices and pay ranges, compensation and benefit plans, policies and procedures for equity awards, perquisites, general compensation, and benefits philosophy. Senior human resources, legal, and, from time to time, finance executives attend non-executive sessions of Committee meetings to provide additional perspective and expertise.

Independence of the Compensation Consultant

Pursuant to its charter, the Committee is authorized to retain, oversee, and terminate any consultants it deems necessary, as well as to approve the fees and other retention terms of any such consultants. Prior to retaining a compensation consultant or any other external advisor, from time to time as the Committee deems appropriate but at least annually, the Committee assesses the independence of the advisor from management. In evaluating FW Cook, the Committee’s compensation consultant, the Committee took into consideration all factors relevant to FW Cook’s independence, including the following factors specified in the NYSE listing standards:

other services provided to the Company by FW Cook or any of its affiliates;
the fees paid by the Company to FW Cook as a percentage of FW Cook’s total revenue;
the policies and procedures of FW Cook that are designed to prevent a conflict of interest;
any business or personal relationship between individuals at FW Cook performing consulting services for the Committee and a Committee member;
any ownership of Company stock by the individuals at FW Cook performing consulting services for the Committee; and
any business or personal relationship between individuals at FW Cook performing consulting services for the Committee and an executive officer of the Company.

FW Cook has provided the Committee with appropriate assurances and confirmation of its independent status in accordance with the Committee’s charter and other considerations. The Committee believes that FW Cook has been independent throughout its service to the Committee and that there is no conflict of interest between FW Cook or individuals at FW Cook and the Committee, the Company’s executive officers, or the Company.



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Our Peer Group

The Committee uses a peer group of consumer products companies (the “compensation peer group”) to help determine competitive compensation rates for the Company’s executive officers, including the named executive officers. The compensation peer group was selected by the Committee based on the factors described

below, with input from FW Cook. The compensation peer group is used to evaluate both the levels of executive compensation and compensation practices within the consumer products industry.

For fiscal year 2016, the compensation peer group was composed of the following 19 companies:



Avon Products, Inc.       General Mills, Inc.        Molson Coors Brewing Company
Campbell Soup Company The Hershey Company Newell Rubbermaid Inc.
Church & Dwight Co., Inc.   Hormel Foods Corporation Revlon, Inc.
Colgate-Palmolive Company The J.M. Smucker Company S.C. Johnson & Son, Inc.
Dr. Pepper Snapple Group, Inc. Kellogg Company Tupperware Brands Corporation
Edgewell Personal Care McCormick & Company, Incorporated
The Estee Lauder Companies Inc. Mead Johnson Nutrition Company

To determine the compensation peer group for each year, the Committee considers companies that:

hold leadership positions in branded consumer products;
are of reasonably similar size based on market capitalization and revenue;
compete with the Company for executive talent; and
have executive positions similar in breadth, complexity, and scope of responsibility to those of the Company.

The Committee annually reviews and makes adjustments to the compensation peer group as appropriate to ensure that the peer group companies continue to meet the relevant

criteria. Energizer Holdings, Inc. split its personal care and battery businesses into two companies in fiscal year 2016; Edgewell Personal Care is the personal care product business and replaced Energizer Holdings, Inc. in the compensation peer group. There were no other changes to the compensation peer group for this fiscal year.

The Company was at the 40th percentile for revenue, 66th percentile for net income, and 50th percentile for market capitalization compared with the compensation peer group.




Fiscal Year 2016 Compensation of Our Named Executive Officers


For fiscal year 2016, management engaged Aon Hewitt to obtain and aggregate compensation data for the compensation peer group. This data was used to advise the Committee on setting target compensation for our named executive officers. FW Cook reviewed this information and performed an independent compensation analysis of the compensation peer group data to advise the Committee. Although each individual component of executive compensation is reviewed, particular emphasis is placed

on targeting total compensation within 15% of the median target dollar amounts of compensation of the compensation peer group. Other factors, such as an executive’s level of experience, may result in target total compensation for individual named executive officers being set above or below this median range. For fiscal year 2016, each named executive officer’s target total compensation is within 15% of the compensation peer group median.



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Compensation Discussion and Analysis


What We Pay: Components of Our Compensation Program

A substantial portion of our targeted executive compensation is at-risk variable compensation, with 85% of compensation for our CEO and 70% of compensation for all our other named executive officers being at risk. Base salary is the

only fixed compensation component, as outlined in the following charts, which reflect target compensation for fiscal year 2016.



Compensation Mix - CEO(1)
Fixed compensation = 15%
Variable compensation = 85%
Compensation Mix - Average of All Other NEOs(1)
Fixed compensation = 30%
Variable compensation = 70%


(1)       Compensation mix represents the actual base salary, target annual incentive award, and actual long-term incentives granted in fiscal year 2016. Refer to the Summary Compensation Table below for further details on actual compensation.

Additional elements of our executive compensation program include retirement plans, post-termination compensation, and perquisites as appropriate to support our executive compensation philosophy. Further detail about each element is provided in the discussion below:

Base Salary. The Committee generally seeks to establish base salaries for our named executive officers within 15% of the median of the compensation peer group. The Committee considered factors such as the executive’s specific role, level of experience, and sustained performance, as well as the compensation peer group market data, in determining each named executive officer’s base salary for fiscal year 2016. Changes in base salary are approved by the Committee in September and become effective in October of each year. All base salaries that went into effect in October 2015 for the named executive officers, excluding our CEO, were within this target pay range with the exception of Ms. Stein, who was slightly above the range given her experience and tenure with the Company.

After conducting a review for Mr. Dorer and evaluating his individual performance and overall Company performance for fiscal year 2015, the Committee approved a base salary increase of 2.6% for fiscal year 2016, to $975,000, which

was within 15% of the compensation peer group median for CEOs. The annual base salary increases for our named executive officers, other than our CEO, ranged from 1.7% to 5.5%, with an average increase of 3.3%. Our CFO’s salary increase was at the high end of the range to bring his salary closer to market median, in recognition of his continued strong performance and increased experience. The actual base salaries earned by our named executive officers in fiscal year 2016 are listed in the “Salary” column of the Summary Compensation Table.

Annual Incentives. The Company provides annual incentive awards to our named executive officers under the Company’s Executive Incentive Compensation Plan (“Annual Incentive Plan”). Payouts under the Annual Incentive Plan are based on the level of achievement of Company performance goals set annually by the Committee, not to exceed the stockholder-approved maximums. These performance goals are tied to Board-approved corporate financial and strategic performance goals and individual objectives, which are described below. The amounts actually paid under the Annual Incentive Plan are based on four factors: (1) a target award for each named executive officer, which is the base salary multiplied by the annual incentive target (“Target Award”), (2) the Company’s performance



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measured against pre-established corporate financial goals (“Financial Performance Multiplier”), (3) the Company’s level of achievement of various strategic metrics (“Strategic Metrics Multiplier”), and (4) the named executive officer’s individual performance (“Individual Performance Multiplier”), which

is based primarily on the performance of the operations or functions under the individual’s responsibility. The final individual Annual Incentive Plan payout is determined by the following formula:



The Financial Performance Multiplier can range from 0% to 200% based on an objective assessment of Company performance versus goals established by the Committee at the beginning of the year. The Strategic Metrics and Individual Performance Multipliers, which are also determined by the Committee, typically have a much narrower range, which makes the impact they have on the total payout significantly smaller than the Financial Performance Multiplier. Over the past three years, the range for the Strategic Metrics Multiplier was 90% to 110%, and the range for the Individual Performance Multipliers for the named executive officers was 90% to 115%. By comparison, the range for the Financial Performance Multiplier during this same time period was 28% to 171%.

Below is an illustration of the annual incentive calculation, using our CEO’s Annual Incentive Plan payout as an example. Because the Financial Performance Multiplier was 161% in fiscal year 2016, based on the Company’s strong performance compared to the targets for annual net sales and EP that were established by the Committee at the beginning of the year, the impact it had on the final incentive payout was much greater than that of either the Strategic Metrics Multiplier or the Individual Performance Multiplier.



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Each of the elements of the annual incentive formula is further described below.

Base Salary. The named executive officer’s actual fiscal year 2016 base salary is the starting point for the annual incentive calculation.

Annual Incentive Target. Each year, the Committee sets an annual incentive target level for each named executive officer as a percentage of his or her base salary, based on an assessment of median bonus targets in the compensation peer group and other factors such as individual experience, as noted above. The annual incentive target level is generally set near the median of bonus targets for comparable positions in the compensation peer group. The table below sets forth the targets for the fiscal year 2016 annual incentive awards.



Named Executive Officer      Annual Incentive
Target (% of
Base Salary)
Benno Dorer – Chairman and Chief Executive Officer(1)                         130 %
Stephen M. Robb – Executive Vice President – Chief Financial Officer 80 %
Laura Stein – Executive Vice President – General Counsel and Corporate Affairs 70 %
Nikolaos A. Vlahos – Executive Vice President and Chief Operating Officer – Household, Lifestyle and Core Global Functions 80 %
Dawn Willoughby – Executive Vice President and Chief Operating Officer – Cleaning, International and Corporate Strategy 80 %

(1)    Mr. Dorer’s target was increased from 125% in fiscal year 2015 to 130% in fiscal year 2016.

Financial Performance Multiplier. At the beginning of each fiscal year, the Committee sets financial goals for the Annual Incentive Plan based on targets approved by the Board. At the end of the year, the Committee reviews the Company’s results against the goals set at the beginning of the year.

For fiscal year 2016, the Committee established financial goals with a focus on increasing net sales and increasing EP when compared to actual operating results for fiscal year 2015, as described in greater detail below, in order to drive sustainable profitable growth and short- and long-term total stockholder returns. The net sales and EP metrics that determine the Financial Performance Multiplier are each weighted 50% as the Committee continues to

believe this mix effectively balances a focus on both top-line and bottom-line performance. In selecting the metrics and setting the financial goals of the Annual Incentive Plan, the Committee carefully considered whether the goals appropriately align with the goals of the long-term incentive program so that the overall compensation design does not encourage participants to take unnecessary or excessive risk or actions that are inconsistent with the Company’s short- and long-term strategic and financial objectives.

For fiscal year 2016, the financial goals for the Annual Incentive Plan, the potential range of payouts for achieving those goals, and the actual results as determined by the Committee were as follows:



Annual Incentive
Financial Goals (in millions)
Goal 0%
(Minimum)
      100%
(Target)
      200%
(Maximum)
      Actual(1)
Net Sales (weighted 50%)(2) $ 5,512 $ 5,682 $ 5,852 $ 5,740
EP (weighted 50%)(3) $ 428 $ 468 $ 508 $ 503
(1) Results exclude the impact of the Renew Life acquisition, which added $21 of net sales and reduced EP by $19.
(2) Net sales as reported in the Company’s consolidated financial statements, adjusted for the impact of Renew Life.
(3) EP for purposes of the financial performance multiplier is defined by the Company as earnings from continuing operations before income taxes, non-cash restructuring, and interest expense, which is then tax affected and reduced by a capital charge.

Strategic Metrics Multiplier. At the beginning of each fiscal year, the Committee sets multiple strategic metrics for the Annual Incentive Plan based on what it believes will best drive the Company’s overall strategy of engaging

employees, increasing brand investment behind superior value, keeping the core healthy and growing into new categories and channels, and reducing waste. For fiscal year 2016, the Committee set 11 metrics, each with one or



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more associated targets that are objectively measurable, to be evaluated in determining the Strategic Metrics Multiplier used in the Annual Incentive Plan payout.

For example, to determine whether the results of the high-performing employee engagement metric were met, the Company measured its annual engagement survey results against a benchmark of other fast-moving consumer goods companies. To calculate the consumer value metric, the

Company measured a brand’s value to consumers in terms of product, price, and brand equity, while the innovation and strategic product pipeline metric was measured against a target based on historical and projected sales resulting from innovation. Goals related to reshaping the portfolio include mergers and acquisitions as well as organic growth. For fiscal year 2016, the 11 strategic metrics and the Company’s results were as follows:



Strategic Metric       FY 2016 Result       Strategic Metric       FY 2016 Result
 High-performing employee engagement Exceeded
Innovation and strategic product pipeline
Exceeded
Diversity targets within the Company
Not Met
Targeted goals related to reshaping the portfolio
Met
Consumer value measure
Exceeded
Targeted level of cost savings
Exceeded
Domestic dollar share
Met
Gross margin improvement
Exceeded
International volume
Exceeded
Target selling and administrative expenses of 13.5% of net sales
Not Met
Future net sales growth projections
Met

While the diversity and selling and administrative expenses were not met, the Company came very close to meeting these targets and met or exceeded all of the other strategic metrics. The diversity target was met for two of the three sub-targets, while the selling and administrative expenses missed the target primarily due to higher anticipated incentive payouts as a result of the strong Company performance for fiscal year 2016. Based on the Company’s performance against these strategic metrics, the Committee determined that the level of payout for the Strategic Metrics Multiplier was 110%. Over the past three years, the range for the Strategic Metrics Multiplier has been 90% to 110%.

Individual Performance Multiplier. Consistent with our pay-for-performance philosophy, the annual incentive payouts initially are determined by financial results and performance against strategic metrics, multiplied by an Individual Performance Multiplier. Based on its evaluation of individual performance, the Committee reviewed and approved the Individual Performance Multiplier for each named executive officer to reflect the officer’s individual contributions in fiscal year 2016. In determining the multiplier for individual performance, the Committee carefully evaluates several performance factors against objectives established at the beginning of the year. For our CEO, the Committee conducts a detailed evaluation covering the key categories of strategy, people, operations, values and relationships, and overall performance, with specific goals within each category. To set specific targets for our CEO, the Committee uses a balanced scorecard with annual strategic priorities of financial goals, people, customer and consumer, growth, and margin, with specific metrics and targets within each strategic priority. These targets are used to measure the CEO’s performance twice a year, with a mid-year review and a year-end evaluation. This assessment is then used to determine the appropriate individual multiplier for the fiscal year performance.

The range of Individual Performance Multipliers in 2016 was 105% to 115% based on the contributions made in the fiscal year by our named executive officers. Our CFO received an Individual Performance Multiplier of 115%, primarily for his contributions in delivering above-target performance on financial and operational goals, including sales, EPS, cost savings, cash flow, and capital management. He also delivered best-in-class organizational leadership with record high employee engagement and widespread training and development, while meeting diversity goals and reducing turnover. The remaining non-CEO named executive officers received Individual Performance Multipliers of 105%. The Committee reviewed the results for our CEO and determined his Individual Performance Multiplier was 110%. Our CEO’s Individual Performance Multiplier was based on his continued strong performance since taking the role in November 2014, including progress on the strategy accelerators, delivering overall operational and financial results for fiscal year 2016 that exceeded expectations, and continuing to shape a highly successful senior management team.

Final Individual Annual Incentive Plan Payouts. In accordance with the formula described above, the final annual incentive payouts to our named executive officers in fiscal year 2016, excluding our CEO, ranged from $754,980 to $945,010, and from 186% to 204% of the named executive officers’ Target Awards. Mr. Dorer’s annual incentive payout was $2,469,220. This award was 195% of his Target Award and is composed of a Financial Performance Multiplier of 161%, a Strategic Metrics Multiplier of 110%, and an Individual Performance Multiplier of 110%. These payouts are also reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.



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Compensation Discussion and Analysis

Long-Term Incentives. Each year, we provide long-term incentive compensation to our named executive officers. For the past several years, these awards have been made in the form of performance shares and stock options. We believe these forms of compensation align Company performance and executive officer compensation with the interests of our stockholders. These incentive awards also support the achievement of our long-term corporate financial goals.

We occasionally use time-based restricted stock for special purposes, such as in connection with a promotion or as a replacement for compensation forfeited by an externally recruited executive at a prior employer.

The Committee annually reviews the costs of, and potential stockholder dilution attributable to, our long-term incentive program to ensure that the overall program is financially efficient and in line with that of our compensation peer group. The Committee also seeks to calibrate the long-term incentive program design to appropriately drive performance in line with that of the compensation peer group. In determining the total value of the long-term incentive opportunity for each named executive officer, the Committee reviews the compensation peer group data presented by both management and the independent compensation consultant on a role-by-role basis and considers recommendations by our CEO for the other named executive officers.

The Committee’s goal is to target long-term incentive awards in amounts that are generally competitive with the median of the compensation peer group. Actual long-term incentive award target levels for individual named executive officers may vary from the median based on a variety of factors, such as the named executive officer’s sustained performance, individual experience, critical nature of his or her role, and expected future contributions. Like the annual incentive awards, actual payouts under the long-term incentive awards will vary from the target based on how the Company performs against pre-established targets. The value of payouts will also vary based on changes in the market price of our Common Stock.

The Committee determined that our named executive officers would receive 50% of the value of their total annual long-term incentive award granted in fiscal year 2016 in performance shares and 50% in stock options. The Committee believes this mix of equity awards supports several important objectives, including compensating named executive officers for achievement of long term goals tied to our business strategy, rewarding named executive officers for sustained increases in the price of our Common Stock, enhancing retention by mitigating the impact of price fluctuations of our Common Stock in the overall long-term incentive value, and ensuring that the overall cost of the program is aligned with the compensation realized by the

named executive officers and the performance delivered to stockholders. The Committee does not consider the amount of outstanding performance shares, stock options, and restricted stock currently held by a named executive officer when making annual awards of performance shares and stock options because such amounts represent compensation attributable to prior years.

Long-Term Incentive Award. The long-term incentive awards granted to our named executive officers for fiscal year 2016 were made in September 2015. The Committee considered factors such as the executive’s role, level of experience, and sustained performance, as well as the compensation peer group market data, in determining each named executive officer’s long-term incentive award. For fiscal year 2016, the annual long-term incentives for our named executive officers, excluding our CEO, ranged in value from $800,000 to $1,100,000. Mr. Dorer received a long-term incentive award valued at $4,350,000. The long-term incentives awarded to our named executive officers in fiscal year 2016 are listed in the Stock Awards and Option Awards columns of the Summary Compensation Table.

Performance Shares. Performance shares are grants of restricted stock units that pay out after a three-year performance period only if the Company meets pre-established financial performance goals, which are described below. We believe that performance shares align the interests of our named executive officers with the interests of our stockholders because the number of shares earned and the shares’ potential value are tied to the achievement of performance targets. The performance target is a cumulative EP target informed by our three-year financial long-range plan and the budget developed by management, which is reviewed and approved by the Board. In setting the performance targets for the performance shares, the Committee reviews the budget and long-range plan and seeks to appropriately align the performance goals with the objectives of the Annual Incentive Plan, so that the overall compensation design does not encourage participants to take unnecessary or excessive risk or actions that are inconsistent with the Company’s short- and long-term strategic and financial objectives. The Committee believes its use of cumulative EP as a metric provides rigor and an ability to align performance with pay over the three-year performance period.

The payout of the performance share awards granted in September 2015 is subject solely to the Company’s achievement of a cumulative EP target during the performance period of July 2015 through June 2018. The percentage range for payouts is from 0%, if the minimum cumulative EP target is not met, to a maximum of 150% of the target number of shares, with a payout of 25% of the target number of shares when the minimum cumulative EP target is attained.



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For the grant made in September 2013, which was based on a performance period of July 2013 through June 2016 and was scheduled to pay out in August 2016, the Committee established cumulative EP targets and set various payout levels tied to cumulative EP for the performance period. For the September 2013 grant, the cumulative EP target was set so a payout of 100% would be made if the Company achieved EP growth of approximately 5% per year during the performance period. The Committee believes this metric directly supports the Company’s corporate strategy and long-term financial goals and correlates to stock price performance.

In August 2016, the Committee certified the results of the September 2013 grant for the 2013-2016 performance period. The adjusted financial target for the grant was a cumulative EP of $1,430 million over the three-year performance period for a 100% payout. The cumulative EP target was adjusted by the Committee for the events in Venezuela that ultimately led to the Company’s discontinuation of operations in that country, which the Committee determined to be an extraordinary, unusual, or non-recurring event, as well as for the acquisition of Renew Life in May 2016. The Company’s actual cumulative EP was below the payout threshold of $1,346 million, resulting in the Committee certifying a payout of 0%. This payout supports the Company’s belief in pay for performance over the long term.

Stock Options. Stock options align the interests of our named executive officers with those of our stockholders because the options only have value if the price of the Company’s stock increases after the stock options are granted. Stock options vest in 25% increments over a four-year period (beginning one year from the date of grant) and expire ten years from the date of grant. In fiscal year 2016, the Committee awarded stock options to our named executive officers as part of our annual long-term incentive plan. The exercise price for the stock options was equal to the closing price of our Common Stock on the date of grant. Information on all stock option grants is shown in the Grants of Plan-Based Awards table.

Retirement Plans

Our named executive officers participate in the same tax-qualified retirement benefit programs available to all other United States-based salaried and non-collectively bargained hourly employees. The Company’s retirement plans are designed to provide replacement income upon retirement and to be competitive with programs offered by our peers.

In addition, because the IRC limits the amount of benefits that can be contributed to and paid from a tax-qualified retirement plan, the Company also provides our executive officers, including our named executive officers, with additional retirement benefits intended to restore amounts that would otherwise be payable under the Company’s tax-qualified retirement plans if the IRC did not have limits on includable compensation and maximum benefits. We call these plans “restoration plans” because they restore total executive retirement benefits to the same percentage level provided to our salaried employees who are not limited by IRC restrictions.

A brief description of each of our retirement programs is set forth below. Each of our named executive officers participates in these retirement programs with the exception of the Supplemental Executive Retirement Plan.

The Clorox Company Pension Plan. The Clorox Company Pension Plan (the “Pension Plan”) is a cash balance pension plan that was frozen effective July 1, 2011. This freeze did not affect the benefits previously accrued under the Pension Plan, which remain fully funded.

The Clorox Company 401(k) Plan. After the Pension Plan was frozen in July 2011, the Clorox Company 401(k) Plan (the “401(k) Plan”) became the base retirement plan for the Company. The Company makes an annual fixed contribution of 6% of eligible pay and a matching contribution of up to 4% of eligible pay to employees under the 401(k) Plan.

Nonqualified Deferred Compensation Plan. Under the Nonqualified Deferred Compensation Plan (the “NQDC”), eligible employees may voluntarily defer receipt of up to 50% of base salary and up to 100% of their annual incentive awards. In fiscal year 2016, deferred amounts could be invested in a manner that generally mirrored the funds available in the 401(k) Plan. The NQDC permits the Company to contribute amounts that exceed the IRC compensation limits in the tax-qualified plans through a 401(k) restoration provision.

Supplemental Executive Retirement Plan. The Supplemental Executive Retirement Plan (the “SERP”), a defined benefit plan, was closed to new participants effective April 2007 and, effective June 30, 2011, was frozen with regard to pay and offsets, while still accruing age and service credits. Benefits under the SERP have historically been calculated as an annuity based on a percentage of average compensation adjusted by age and years of service and offset by the annuity value of Company contributions to the tax-qualified retirement plans



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and by Social Security. Effective July 1, 2011, the SERP was replaced by the Executive Retirement Plan (the “ERP”) (described below). Moving from the SERP to the ERP created a defined contribution structure that is more closely aligned with the benefits provided by the Company’s compensation peer group. As of July 1, 2016, only three of our named executive officers are still eligible for the SERP.

Executive Retirement Plan. Our executive officers (including named executive officers) participate in the ERP. Under the ERP, the Company makes an annual contribution of 5% of an eligible participant’s base salary and annual incentive award into the plan.

Further details about the provisions of the Pension Plan, NQDC, SERP and ERP are provided in the “Overview of Pension Benefits” and the “Overview of the Nonqualified Deferred Compensation Plans” sections below.

Post-Termination Compensation

The Company has a severance plan (the “Severance Plan”) that provides our named executive officers with post-termination payments if the named executive officers’ employment is terminated by the Company other than for cause. These payments are intended to provide a measure of financial security following the loss of employment, which we believe is important to attract and retain executives. The severance benefits are designed to be competitive with the compensation peer group and external market practices.

The Company also has an Executive Change in Control Severance Plan (the “CIC Plan”), which provides severance benefits to certain eligible executives of the Company, including all of the Company’s named executive officers, if their employment with the Company is involuntarily terminated in connection with a change in control of the Company. In addition to helping mitigate the financial impact associated with termination after a change in control, these benefits further align the interests of our executive officers with the interests of our stockholders by providing incentives for retention, for business continuity purposes. Under the CIC Plan, a named executive officer is eligible for change in control severance benefits if his or her employment is terminated in connection with a change in control, either by the Company without cause or by the named executive officer for good reason. See the section entitled “Potential Payments upon Termination or Change in Control” for additional information.

Perquisites

We provide our named executive officers with other limited benefits we believe are competitive with the compensation peer group and consistent with the Company’s overall

executive compensation program. These benefits allow our named executive officers to proactively manage their health, work more efficiently, and, in the case of the financial planning program, help them optimize the value received from our compensation and benefits programs. These perquisites are a Company car or car allowance, paid parking at the Company’s headquarters, an annual executive physical exam, reimbursement for health club membership, and financial planning services.

Other Executive Compensation Policies and Practices

Tally Sheets. To help ensure that our executive compensation design is aligned with our overall compensation philosophy of pay for performance and that total compensation levels are appropriate, the Committee annually reviews compensation tally sheets for each of our named executive officers. These tally sheets outline current target total compensation (including the compensation elements described above), the potential wealth creation of long-term incentive awards granted to our officers under various potential stock prices, and the potential value of payouts under various termination scenarios. As such, these tally sheets help provide the Committee with a comprehensive understanding of all elements of the Company’s compensation program and enable the Committee to consider changes to the Company’s compensation program, arrangements, and plans in light of best practices and emerging trends. The Committee may consider the information presented in the tally sheets in determining future compensation.

Results of 2015 Advisory Vote to Approve Executive Compensation. At our 2015 Annual Meeting of Stockholders held on November 18, 2015, we asked our stockholders to approve, on an advisory basis, our fiscal year 2015 compensation awarded to our named executive officers, commonly referred to as a “say-on-pay” vote. Our stockholders overwhelmingly approved the compensation to our named executive officers, with approximately 93% of votes cast in favor of our proposal. We value this positive endorsement by our stockholders of our 2015 executive compensation policies and believe that the outcome signals our stockholders’ support of our compensation program. We continued our general approach to compensation for fiscal year 2016, specifically our pay-for-performance philosophy and our efforts to attract, retain, and motivate our named executive officers. We value the opinions of our stockholders and will continue to consider the results from this year’s and future advisory votes on executive compensation, as well as feedback received throughout the year, when making compensation decisions for our named executive officers.



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Stock Award Granting Practices. The Company awards annual long-term incentive grants each September at a regularly scheduled Committee meeting, which typically occurs during the third week of the month, or about six weeks after the Company has publicly reported its annual earnings. The meeting date is the effective grant date for the awards, and the exercise/grant price is equal to the closing price of our Common Stock on that date.

The Committee may also make occasional grants of stock options and other equity-based awards at other times to recognize, retain, or recruit executive officers. The Committee did not approve any additional grants to the named executive officers in fiscal year 2016.

Executive Stock Ownership Guidelines. To maintain alignment of the interests of the Company’s executive officers and our stockholders, all executive officers, including the named executive officers, are expected to build and maintain a significant level of direct stock ownership. Ownership levels can be achieved over time in a variety of ways, such as by retaining stock received upon the exercise of stock options or the vesting of stock awards or by purchasing stock in the open market. At a minimum, executive officers are expected to establish and maintain direct ownership of Common Stock having a value, based on the current market price of the stock, equal to a multiple of each executive officer’s annual base salary. The current minimum ownership guidelines are as follows:

Chief Executive Officer       6x annual base salary
Executive Officers (other than the CEO) 3x annual base salary
Other Senior Executives 2x annual base salary

Ownership levels are based on shares of Common Stock owned by the named executive officer or held pursuant to Company plans, including performance shares that have vested and been deferred for settlement. Unexercised stock options and shares that have not vested due to time or performance restrictions are excluded from the ownership levels.

As of the date of this proxy statement, all of our named executive officers except our CEO have met the required ownership levels. Mr. Dorer became subject to a higher threshold with his promotion to CEO in fiscal year 2015, when his ownership threshold increased from 3 times annual base salary to 6 times annual base salary required for the CEO.

Retention Ratios. Executive officers, including our named executive officers, are required to retain a certain percentage of shares obtained upon either the exercise of stock options or the release of restrictions on performance

shares and restricted stock, after satisfying applicable taxes. Our CEO is expected to retain 75% of shares acquired (after taxes) until the minimum ownership level is met. After attaining the minimum ownership level, our CEO must retain 50% of any additional shares acquired (after taxes) until retirement or termination. Other executive officers must retain 75% of shares acquired (after taxes) until the minimum ownership levels are met and thereafter must retain 25% of shares acquired (after taxes) for one year after receipt.

Securities Trading Policy; Prohibition on Hedging and Pledging. To ensure alignment of the interests of our stockholders and executive officers, including our named executive officers, the Company’s Insider Trading Policy does not permit executive officers to engage in short-term or speculative transactions or derivative transactions involving the Company’s stock and includes prohibitions on options trading, hedging, or pledging the Company’s stock as collateral. Trading is permitted only during announced trading periods or in accordance with a previously established trading plan that meets SEC requirements. At all times, including during announced trading periods, executive officers are required to obtain preclearance from the Company’s General Counsel or Corporate Secretary prior to entering into any transactions in Company securities, unless those sales occur in accordance with a previously established trading plan that meets SEC requirements.

Clawback Provisions. Under our Annual Incentive Plan and long-term incentive plan, in the event of a restatement of financial results to correct a material error or other factors as described in the long-term incentive plan, the Committee is authorized to reduce or recoup an executive officer’s award, as applicable, to the extent that the Committee determines such executive officer’s fraud or intentional misconduct was a significant contributing factor to the need for a restatement.

Tax Deductibility Limits on Executive Compensation. Section 162(m) limits the tax deductibility of compensation paid to our CEO and the three other most highly compensated named executive officers employed at the end of the year (other than the CFO) to $1 million per year, unless such amounts are determined to be performance-based compensation. Our policy with respect to Section 162(m) seeks to balance the interests of the Company in maintaining flexible incentive plans against the possible loss of a tax deduction when taxable compensation for any of the executive officers subject to Section 162(m) exceeds $1 million per year. The Annual Incentive Plan and long-term incentive plan are designed to provide the Committee with the ability to decide whether or not to make performance-based compensation awards that



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are intended to meet the requirements of Section 162(m). The Committee generally seeks to satisfy the requirements necessary to allow the compensation of its executives to be deductible under Section 162(m) of the Internal Revenue Code, but retains the discretion and may also approve compensation that is not deductible under Section 162(m). The rules and regulations promulgated under Section

162(m) are complex and subject to change from time to time, sometimes with retroactive effect. There can be no guarantee, therefore, that amounts potentially subject to the Section 162(m) limitations will be treated by the Internal Revenue Service as “qualified performance-based compensation” under Section 162(m) and/or deductible by the Company.




The Management Development and Compensation Committee Report

As detailed in its charter, the Management Development and Compensation Committee of the Board oversees the Company’s executive compensation program and policies. As part of this function, the Committee discussed, and reviewed with management, the CD&A. Based on this review and discussion, we have recommended to the Board that the CD&A be included in the proxy statement.

THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

Jeffrey Noddle, Chair
Richard H. Carmona
Spencer C. Fleischer
George Harad
David Mackay
Rogelio Rebolledo


Compensation Committee Interlocks and Insider Participation

Each of Dr. Carmona and Messrs. Fleischer, Harad, Noddle, and Rebolledo served as a member of the Management Development and Compensation Committee during part or all of fiscal year 2016. None of the members was an officer or employee of the Company or any of the subsidiaries during fiscal year 2016 or in any prior fiscal year. No executive officer of the Company served on the board of directors or compensation committee of any other entity that has or had one or more executive officers who served as a member of the Board or Management Development and Compensation Committee during fiscal year 2016.

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Compensation Discussion and Analysis Tables

FISCAL YEAR 2016 SUMMARY COMPENSATION TABLE

The following table sets forth the compensation earned, paid or awarded to our named executive officers for the fiscal years ended June 30, 2016, 2015 and 2014.

Name and Principal
Position
    Year      Salary
($)(1)
     Bonus
($)
     Stock
Awards
($)(2)(3)
     Option
Awards
($)(2)
     Non-Equity
Incentive Plan
Compensation
($)(4)
     Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5)
     All Other
Compensation
($)(6)
     Total
($)
Benno Dorer 2016 $ 976,154 $ 2,175,084 $ 2,175,010 $ 2,469,220 $ 710,100 $ 428,424 $ 8,933,992
Chairman and Chief 2015 789,762 2,000,344 2,999,979 1,680,820 242,911 144,371 7,858,187
Executive Officer 2014 522,669 462,786 462,526 106,440 397,824 192,377 2,144,622
Stephen M. Robb 2016 576,846 550,188 550,065 945,010 366,586 224,752 3,213,447
Executive Vice President 2015 539,423 549,698 549,984 827,640 33,073 121,604 2,621,422
— Chief Financial Officer 2014 491,731 400,293 399,965 94,500 187,877 162,675 1,737,041
Laura Stein 2016 582,050 399,528 400,023 754,980 862,607 226,861 3,226,049
Executive Vice President 2015 570,537 399,699 400,032 751,180 86,515 136,964 2,344,927
— General Counsel and
Corporate Affairs 2014 556,792 390,159 390,010 118,960 483,075 203,834 2,142,830
Nikolaos A. Vlahos 2016 515,154 399,528 400,023 766,130 3,988 213,887 2,298,710
Executive Vice President
and Chief Operating
Officer — Household,
Lifestyle and Core
Global Functions
Dawn Willoughby 2016 515,154 399,528 400,023 766,130 2,293 177,569 2,260,697
Executive Vice President
and Chief Operating
Officer — Cleaning,
International and
Corporate Strategy
   
(1) Reflects actual salary earned for fiscal years 2016, 2015, and 2014. Fiscal year 2016 had an extra day of earnings versus prior year as a result of the leap year.
(2) The amounts reflected in these columns are the values determined under FASB ASC Topic 718 for the awards granted in the fiscal years ended June 30, 2016, 2015, and 2014, in accordance with the applicable accounting standard. The assumptions made in valuing stock awards and option awards reported in these columns are discussed in Note 1, Summary of Significant Accounting Policies under subsection “Stock-Based Compensation”, and in Note 16, Stock-Based Compensation Plans, to the Company’s consolidated financial statements for the three years in the period ended June 30, 2016, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. Additional information regarding the stock awards and option awards granted to our named executive officers during fiscal year 2016 is set forth in the Grants of Plan-Based Awards Table.
(3) The grant date fair value of the performance share awards reflected in this column is the target payout based on the probable outcome of the performance-based conditions, determined as of the grant date. The maximum potential payout of the stock awards would be 150% of the target shares awarded on the grant date. The maximum value of the performance share award for 2016 determined as of the date of grant would be as follows for each respective named executive officer: Mr. Dorer – $3,262,626; Mr. Robb – $825,282; Ms. Stein – $599,292; Mr. Vlahos – $599,292; and Ms. Willoughby – $599,292. See the Grants of Plan-Based Awards Table for more information about the performance shares granted under the 2005 Stock Incentive Plan.
(4) Reflects annual incentive awards earned for fiscal years 2016, 2015, and 2014 and paid out in September 2016, 2015, and 2014, respectively, under the Annual Incentive Plan. Information about the Annual Incentive Plan is set forth in the Compensation Discussion and Analysis under "Annual Incentives".

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(5) The amounts reflect the aggregate change in the present value of accumulated benefits during fiscal years 2016, 2015, and 2014 under the SERP, the Pension Plan, and the cash balance restoration benefit of the NQDC (note that the SERP, the Pension Plan, and the cash balance restoration benefit of the NQDC are all frozen benefits; refer to the Pension Benefits Table for further information). Each plan amount in fiscal year 2016 is set forth in the following table:
   
        Benno
Dorer
        Stephen M.
Robb
        Laura
Stein
        Nikolaos A.
Vlahos
        Dawn
Willoughby
The Pension Plan $ 1,449 $ 4,111 $ 3,590 $ 3,488 $ 2,257
SERP 704,867 362,341 852,486
Cash Balance Restoration Benefit 3,784 134 6,531 500 36
Total $ 710,100 $ 366,586 $ 862,607 $ 3,988 $ 2,293
   
(6) The amounts shown in the All Other Compensation column represent (i) actual Company contributions under the Company’s 401(k) Plan, (ii) nonqualified contributions under the NQDC and ERP, and (iii) perquisites available to named executive officers of the Company:
   
        Benno
Dorer
        Stephen M.
Robb
        Laura
Stein
        Nikolaos A.
Vlahos
        Dawn
Willoughby
The Clorox Company 401(k) Plan $ 27,825 $ 25,172 $ 26,187 $ 26,770 $ 25,882
Nonqualified Deferred Compensation Plan 369,543 179,063 173,152 149,210 125,912
Company Paid Perquisites 31,056 20,517 27,522 37,907 25,775
Total $ 428,424 $ 224,752 $ 226,861 $ 213,887 $ 177,569
   
     The following table sets forth the perquisites we make available to our named executive officers and the cost to the Company for providing these perquisites during fiscal year 2016. The amounts shown in the Other Perquisites row consist of paid parking at the Company’s headquarters, health club reimbursement, and an annual executive physical.
   
        Benno
Dorer
        Stephen M.
Robb
        Laura
Stein
        Nikolaos A.
Vlahos
        Dawn
Willoughby
Executive Automobile Program $ 13,200 $ 13,200 $ 13,200 $ 13,200 $ 13,200
Basic Financial Planning 11,771 3,837 8,846 19,346 6,969
Other Perquisites 6,085 3,480 5,476 5,361 5,606
Total $ 31,056 $ 20,517 $ 27,522 $ 37,907 $ 25,775

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FISCAL YEAR 2016 GRANTS OF PLAN-BASED AWARDS

This table shows grants of plan-based awards to the named executive officers during fiscal year 2016.

Name    Grant
Date
   Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
   Estimated Possible
Payouts Under Equity
Incentive Plan Awards
   All Other
Stock
Awards:
   All Other
Option
Awards:
   Exercise    Grant Date
Threshold
($)
   Target
($)
  

Maximum
($)
Threshold
(#)
   Target
(#)
   Maximum
(#)
Number of
Shares or
Stock or
Units
(#)
Number of
Securities
Underlying
Options
(#)
or Base
Price of
Option
Awards
($/Sh)
Fair Value
of Stock
and Option
Awards
($)
Benno Dorer
Annual Incentive Plan(1) $— $ 1,267,500 $ 9,830,000
Performance Shares(2) 9/15/2015 4,873 19,490 29,235 $ 2,175,084
Stock Options(3) 9/15/2015 165,400 $ 111.60 2,175,010
Stephen M. Robb
Annual Incentive Plan(1) 464,000 5,898,000
Performance Shares(2) 9/15/2015 1,233 4,930 7,395 550,188
Stock Options(3) 9/15/2015 41,830 111.60 550,065
Laura Stein
Annual Incentive Plan(1) 406,000 5,898,000
Performance Shares(2) 9/15/2015 895 3,580 5,370 399,528
Stock Options(3) 9/15/2015 30,420 111.60 400,023
Nikolaos A. Vlahos
Annual Incentive Plan(1) 412,000 5,898,000
Performance Shares(2) 9/15/2015 895 3,580 5,370 399,528
Stock Options(3) 9/15/2015 30,420 111.60 400,023
Dawn Willoughby
Annual Incentive Plan(1) 412,000 5,898,000
Performance Shares(2) 9/15/2015 895 3,580 5,370 399,528
Stock Options(3) 9/15/2015 30,420 111.60 400,023
   
(1) Represents estimated possible payouts of annual incentive awards for fiscal year 2016 under the Annual Incentive Plan for each of our named executive officers. The Annual Incentive Plan is an annual cash incentive opportunity and, therefore, awards are earned in the year of grant. The target amounts represent the potential payout if both Company performance, including financial and strategic metrics, and individual performance are at target levels. The maximum amount represents the stockholder-approved maximum payout in the Annual Incentive Plan of 1.0% of Company earnings before income taxes for Mr. Dorer and 0.6% of Company earnings before income taxes for all other named executive officers. The Annual Incentive Plan is designed to enable the Committee to make awards that meet the requirements of IRC Section 162(m), as appropriate, and the maximum column reflects maximum awards possible under the Annual Incentive Plan. The Committee historically has paid annual incentive awards that are substantially lower than the maximum Annual Incentive Plan payouts. See the Summary Compensation Table for the actual payout amounts in fiscal year 2016 under the Annual Incentive Plan. See “Annual Incentives” in the Compensation Discussion and Analysis for additional information about the Annual Incentive Plan.
(2) Represents possible future payouts of Common Stock underlying performance shares awarded in fiscal year 2016 to each of our named executive officers as part of their participation in the 2005 Stock Incentive Plan. These awards will vest upon the achievement of performance measures based on cumulative economic profit growth over a three-year period, with the threshold, target, and maximum awards equal to 25%, 100%, and 150%, respectively, of the number of performance shares granted. If the minimum financial goals are not met at the end of the three-year period, no awards will be paid out under the 2005 Stock Incentive Plan. See “Long-Term Incentives” in the Compensation Discussion and Analysis for additional information.
(3) Represents stock options awarded to each of our named executive officers under the 2005 Stock Incentive Plan. All stock options vest in equal installments on the first, second, third, and fourth anniversaries of the grant date.

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OUTSTANDING EQUITY AWARDS AT FISCAL 2016 YEAR-END

The following equity awards granted to our named executive officers were outstanding as of the end of fiscal year 2016.

Option Awards

Stock Awards

Name Number of
Securities
Underlying
Unexercised
Options-
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options-
Unexercisable
(#)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares
or
Units of
Stock
That
Have Not
Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1)
Benno Dorer                              
Stock Options(2) 12,350   $ 61.16 9/18/2017
14,380 63.95 9/16/2018
17,460 57.25 9/15/2019
19,826 66.48 9/14/2020
19,809 68.15 9/13/2021
23,293 7,765 (3) 72.11 9/11/2022
19,919 6,640 (4) 74.09   1/2/2023
20,399 20,399 (5) 84.45 9/17/2023
12,695 38,085 (6) 89.82 9/17/2024
55,292 165,878 (7) 100.24 11/20/2024
165,400 (8)   111.60 9/15/2025
Performance Shares(2)   (9)   $
5,430 (10) 751,458
    15,090 (11) 2,088,305
  19,490 (12) 2,697,221
Stephen M. Robb        
Stock Options(2)   40,950 13,650 (3) 72.11 9/11/2022  
20,490 20,490 (5) 84.45 9/17/2023    
14,322 42,968 (6)   89.82 9/17/2024  
41,830 (8) 111.60 9/15/2025
Performance Shares(2) (9)
6,120 (10) 846,947
  4,930 (12) 682,263
Laura Stein
Stock Options(2) 40,950 13,650 (3) 72.11 9/11/2022
19,980 19,980 (5) 84.45 9/17/2023
10,417 31,253 (6) 89.82 9/17/2024
30,420 (8) 111.60 9/15/2025
Performance Shares(2)
(9)
4,450 (10) 615,836
3,580 (12) 495,436

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Option Awards

Stock Awards

Name Number of
Securities
Underlying
Unexercised
Options-
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options-
Unexercisable
(#)
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares
or
Units of
Stock
That
Have Not
Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
($)(1)
Nikolaos A. Vlahos                           
Stock Options(2) 5,387 (3)   $ 72.11 9/11/2022
1,435 (13) 83.98 3/1/2023
10,245 (5) 84.45 9/17/2023
17,580 (6) 89.82 9/17/2024
7,785 (14) 97.23 9/22/2024
30,420 (8) 111.60 9/15/2025
Performance Shares(2) (9)
2,510 (10)   $ 347,359
1,290 (15) 178,523
3,580 (12) 495,436
Dawn Willoughby
Stock Options(2) 16,163 5,387 (3) 72.11 9/11/2022
5,123 1,707 (4) 74.09 1/2/2023
10,245 10,245 (5) 84.45 9/17/2023
5,860 17,580 (6) 89.82 9/17/2024
2,595 7,785 (14) 97.23 9/22/2024
30,420 (8) 111.60 9/15/2025
Performance Shares(2) (9)
2,510 (10) 347,359
1,290 (15) 178,523
3,580 (12) 495,436
 
(1) Represents unvested “target” number of performance shares under the 2005 Stock Incentive Plan multiplied by the closing price of our Common Stock on June 30, 2016, except as noted below in footnote (9). The ultimate value will depend on whether performance criteria are met and the value of our Common Stock on the actual vesting date.
(2) Grants were made under the 2005 Stock Incentive Plan.
(3) Represents unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 11, 2012.
(4) Represents unvested portion of off-cycle stock options granted to Mr. Dorer and Ms. Willoughby when they were promoted effective January 1, 2013. Mr. Dorer was promoted to Executive Vice President, Chief Operating Officer – Cleaning, International and Corporate Strategy and Ms. Willoughby was promoted to SVP, General Manager – Cleaning Division. Options vest in four equal installments beginning one year from the grant date of January 2, 2013.
(5) Represents unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 17, 2013.
(6) Represents unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 17, 2014.
(7) Represents unvested portion of off-cycle stock options granted to Mr. Dorer when he was promoted to Chief Executive Officer effective November 20, 2014. Options vest in four equal installments beginning one year from the grant date of November 20, 2014.
(8) Represents unvested portion of stock options that vest in four equal installments beginning one year from the grant date of September 15, 2015.
(9) Represents the actual number of performance shares that were paid out under our 2005 Stock Incentive Plan. The grants from the plan have a three-year performance period (fiscal years 2014 through 2016). Performance is based on achievement of cumulative economic profit growth. After completion of fiscal year 2016, the Committee determined whether the performance measures had been achieved and based on the results, on August 8, 2016, the Committee approved the payout of this award at 0% of target.
(10) Represents the “target” number of performance shares that can be earned under our 2005 Stock Incentive Plan. The grants from the plan have a three-year performance period (fiscal years 2015 through 2017). Performance is based on achievement of cumulative economic profit growth. The Committee will determine whether the performance measures have been achieved after the completion of fiscal year 2017.

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(11) Represents the “target” number of performance shares that can be earned under our 2005 Stock Incentive Plan. The off-cycle grants from the plan, which were granted to Mr. Dorer when he was promoted to Chief Executive Officer effective November 20, 2014, have a three-year performance period (October 1, 2014 through September 30, 2017). Performance is based on achievement of cumulative economic profit growth. The Committee will determine whether the performance measures have been achieved after the completion of the performance period.
(12) Represents the “target” number of performance shares that can be earned under our 2005 Stock Incentive Plan. The grants from the plan have a three-year performance period (fiscal years 2016 through 2018). Performance is based on achievement of cumulative economic profit growth. The Committee will determine whether the performance measures have been achieved after the completion of fiscal year 2018.
(13) Represents unvested portion of off-cycle stock options granted to Mr. Vlahos when he was promoted to Senior Vice President – Chief Customer Officer effective March 1, 2013. Options vest in four equal installments beginning one year from the grant date of March 1, 2013.
(14) Represents unvested portion of off-cycle stock options granted to Mr. Vlahos and Ms. Willoughby when they were promoted to Executive Vice President, Chief Operating Officer – Household, Lifestyle and Core Functions, and Executive Vice President, Chief Operating Officer – Cleaning and International, respectively, effective September 22, 2014. Options vest in four equal installments beginning one year from the grant date of September 22, 2014.
(15) Represents the “target” number of performance shares that can be earned under our 2005 Stock Incentive Plan. The off-cycle grants from the plan, which were granted to Mr. Vlahos and Ms. Willoughby when they were promoted to Executive Vice President, Chief Operating Officer – Household, Lifestyle and Core Functions and Executive Vice President, Chief Operating Officer – Cleaning and International, respectively, effective September 22, 2014, have a three-year performance period (fiscal years 2015 through 2017). Performance is based on achievement of cumulative economic profit growth. The Committee will determine whether the performance measures have been achieved after the completion of fiscal year 2017.

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FISCAL YEAR 2016 OPTION EXERCISES AND STOCK VESTED

This table shows stock options exercised and stock vested for the named executive officers during fiscal year 2016.

Option Awards

Stock Awards

Name Number of
Shares
Acquired on
Exercise
(#)
Value
Realized on
Exercise
($)(1)
Number of
Shares
Acquired
on Vesting
(#)
Value
Realized
on Vesting
($)(2)
Benno Dorer       (3)       $       5,077 (4)       $ 596,598
Stephen M. Robb      114,767 (3) 6,144,403 5,932 (4) 697,069
Laura Stein 86,120 (3)   4,358,142 5,932 (4) 697,069
Nikolaos A. Vlahos 43,218 (3)   1,882,737   2,341 (4) (5)   275,091
      1,186 (6) 157,596
Dawn Willoughby 38,860 (3) 2,246,079 2,341 (4) (7)   275,091
  1,186 (6) 157,596
 
(1) The dollar value realized reflects the difference between the market price of the Common Stock upon exercise and the stock option exercise price.
(2) The dollar value realized reflects the market value of the vested shares and dividend equivalent units based on the closing price of the Common Stock on the vesting date.
(3) The number represents the exercise of nonqualified stock options granted in previous years under the Company’s 2005 Stock Incentive Plan.
(4) The number of stock awards listed represent the vesting of performance shares and dividend equivalent units at 105% of target, granted through participation in the Company’s 2005 Stock Incentive Plan. The grant from the plan had a three-year performance period (fiscal years 2013 through 2015). Performance is based on the achievement of cumulative economic profit growth. On August 13, 2015, the Committee approved the payout of this award at 105% of target and the award was settled on August 17, 2015.
(5) These shares have been deferred and will be distributed in a single installment at separation.
(6) Represents vesting of restricted stock and dividend equivalent units granted under the Company’s 2005 Stock Incentive Plan in previous years.
(7) These shares have been deferred and will be distributed annually over two years at separation.

Overview of Pension Benefits

Historically, pension benefits have been paid to the named executive officers under the following plans: (i) the Pension Plan, (ii) the cash balance restoration provision in the NQDC, and (iii) the SERP. Effective July 1, 2011, the

Pension Plan and the cash balance restoration provision under the NQDC were frozen. The SERP was also frozen as of June 30, 2011, with regard to pay and offsets, while still allowing age and service credits, as described in the “Retirement Plan” section of the CD&A.



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FISCAL YEAR 2016 PENSION BENEFITS TABLE

The following table sets forth each named executive officer’s pension benefits under the Company’s pension plans for fiscal year 2016.

Name Plan Name Number of Years
of Credited
Service
(#)(1)
Present Value of
Accumulated
Benefit
($)(2)
Payments
During Last
Fiscal Year
($)
Benno Dorer       The Pension Plan(3)       11       $ 52,219       $—
SERP(4) 11 2,322,845
Cash Balance Restoration(5) 11 135,645
Stephen M. Robb The Pension Plan(3) 27 148,160
SERP(4) 27 1,783,998
Cash Balance Restoration(5) 27 67,169  
Laura Stein The Pension Plan(3) 19 129,405
SERP(4)   19 4,593,122
Cash Balance Restoration(5) 19 208,797
Nikolaos A. Vlahos The Pension Plan(3) 20 125,723
SERP(4)  
Cash Balance Restoration(5) 20 48,267
Dawn Willoughby The Pension Plan(3) 15   81,346
SERP(4)
Cash Balance Restoration(5) 15 17,964
 
(1) Number of years of credited service is rounded down to the nearest whole number.
(2) Present value of the accumulated benefit was calculated using the following assumptions: mortality table: MILES-CGFD; discount rate: 3.40%; and age at June 30, 2016.
(3) The Pension Plan was frozen effective July 1, 2011. Participants keep their accumulated pay credits and receive only quarterly interest credits after that date.
(4) The SERP was frozen with regards to pay and offsets effective June 30, 2011. Age and service credits continue to accrue. Messrs. Dorer and Robb and Ms. Stein are the only named executive officers eligible for the SERP.
(5) The cash balance restoration provision in the NQDC was eliminated effective July 1, 2011, when the Pension Plan was frozen. Participants keep their accumulated pay credits but no contributions were made under this provision after July 1, 2011.

Overview of the Nonqualified Deferred Compensation Plans

Executive Retirement Plan. Our executive officers (including each of our named executive officers) are eligible for participation in the ERP. The ERP provides that the Company will make an annual contribution of 5% of an eligible participant’s base salary plus annual incentive payment into the plan. Company contributions will vest over a three-year period and will fully vest upon the participant’s attainment of age 62 with ten years of service with the Company (at which time the individuals are considered retirement-eligible under the ERP). An eligible participant can elect distribution in a lump sum or up to 15 annual installments upon a qualifying payment event.

Nonqualified Deferred Compensation Plan. Under the NQDC, participants, including each of our named executive officers, may voluntarily defer the receipt of up to 50% of their base salary and up to 100% of their annual incentive award. In addition, the NQDC offers a 401(k) restoration provision. All Company retirement contributions

are made in the form of (i) a fixed 6% employer annual contribution and (ii) an employer match of up to 4% of pay into the 401(k) Plan, subject to IRC compensation limits. Contributions on eligible compensation that exceed the IRC compensation limits are contributed into a participant’s NQDC account under the 401(k) restoration provision.

Participants in the NQDC may elect to receive benefits from the NQDC either in a lump sum or up to 15 annual payments upon a qualifying payment event. Participants may choose from an array of investment crediting rates that generally mirror the investment fund options available in the 401(k) Plan. The NQDC uses the same benefit formulas, types of compensation to determine benefits, and vesting requirements as our frozen tax-qualified retirement plans. The responsibility to pay benefits under the NQDC is an unfunded and unsecured obligation of the Company.

The following table provides information regarding the accounts of the named executive officers under the NQDC and ERP in fiscal year 2016.



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FISCAL YEAR 2016 NONQUALIFIED DEFERRED COMPENSATION

Name Executive
Contributions
in Last FY
($)(1)
Registrant
Contributions
in Last FY
($)(2)
Aggregate
Earnings
in Last FY
($)(3)
Aggregate
Balance
at Last FYE
($)(4)(5)
Benno Dorer       $ 96,272       $ 369,543       $ 59,100       $ 1,979,718
Stephen M. Robb 50,253   179,063   42,573   1,408,966
Laura Stein   44,494 173,152   43,825     3,197,094
Nikolaos A. Vlahos   37,369 149,210 24,301 657,549
Dawn Willoughby 318,887   125,912 (52,540 ) 1,007,922
 
(1) Amounts represent the annual base salary and incentive award that each executive deferred during fiscal year 2016. Deferred base salary is also reported in the Summary Compensation Table – Salary. Deferred annual incentive awards are also reported in the Summary Compensation Table – Non-Equity Incentive Plan Compensation.
(2) Represents that portion of the Company’s 401(k) match and Company contribution of up to 10% of eligible compensation that is in excess of IRC compensation limits pursuant to the 401(k) restoration provision of the NQDC and the Company’s contribution under the ERP. These contributions are also reported in the Summary Compensation Table – All Other Compensation and are included under the caption “Nonqualified Deferred Compensation Plan” in footnote (6) to the Summary Compensation Table.
(3) Earnings are based on an array of investment options that generally mirror the 401(k) Plan. Earnings vary based on participant investment elections.
(4) Reflects aggregate balances under the restoration provision of the NQDC and any deferred base salary and annual incentive awards as of the end of fiscal year 2016.
(5) The executive and registrant contribution total amounts in the table below are also reported as compensation in the Summary Compensation Table in the years indicated:

Fiscal Year Benno
Dorer
Stephen M.
Robb
Laura
Stein
Nikolaos A.
Vlahos
Dawn
Willoughby
2016       $465,815       $229,316       $217,646       $186,579       $444,799
2015   111,795 82,161 104,967  
2014 254,906   144,432 688,420  

Potential Payments upon Termination or Change in Control

Payments upon Termination

Severance Plan for Named Executive Officers. Under the terms of the Severance Plan, our named executive officers are eligible to receive benefits if their employment is terminated by the Company without cause (other than in connection with a change in control). No benefits are payable under the terms of the Severance Plan if the Company terminates the employment of the named executive officer for cause or if the named executive officer voluntarily resigns.

Regardless of the manner in which a named executive officer’s employment terminates, each named executive officer would retain the amounts he or she had earned over the course of his or her employment prior to the termination event, such as balances under the NQDC, vested and accrued retirement benefits, and previously vested stock options, except as outlined below under “Termination for Cause.” For further information about previously earned amounts, see the Summary Compensation Table, Outstanding Equity Awards at Fiscal Year-End, Option Exercises and Stock Vested, Pension Benefits Table, and Nonqualified Deferred Compensation tables.

Under the Severance Plan, each named executive officer agrees to return and not to use or disclose proprietary information of the Company and, for two years following any such termination, the named executive officer is also prohibited from soliciting for employment any employee of the Company, or diverting or attempting to divert from the Company any business.

Termination benefits under the Severance Plan for our named executive officers are as follows:

Involuntary Termination Without Cause. If the Company terminates the employment of a named executive officer (other than the CEO) without cause, the Severance Plan entitles the named executive officer to receive a lump-sum severance payment after termination equal to two times the named executive officer’s then current base salary. In the case of the CEO, the severance amount is equal to the sum of (i) two times the CEO’s base salary and (ii) two times the CEO’s 3-year average annual bonus multiplied by 75%. Under the Severance Plan, a named executive officer (other than the CEO) is also entitled to an amount equal to 75% of his or her Annual Incentive Plan award for the fiscal year in which he or she was terminated.



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Compensation Discussion and Analysis

The CEO is entitled to an amount equal to 100% of his Annual Incentive Plan award for the fiscal year in which he was terminated.

The amount of severance paid is calculated using the actual Company Financial Performance Multiplier and Strategic Metrics Multiplier, and assumes an Individual Performance Multiplier of 100%, prorated to the date of termination. If the named executive officer is retirement-eligible under the terms of the Annual Incentive Plan, the executive would be eligible for either the treatment under the Severance Plan or retirement treatment for purposes of the Annual Incentive Plan award payout (retirement treatment would be 100%, versus 75%, of his or her Annual Incentive Plan award for the fiscal year in which he or she was terminated, prorated to the date of termination). It is the Committee’s decision as to which treatment to apply.

The Severance Plan provides that the named executive officer is entitled to continue to participate in the Company’s medical, vision, and dental insurance programs for up to two years following termination on the same terms as active employees. In addition, at the end of this coverage, a named executive officer will be eligible to participate in the Company’s medical, vision, and/or dental plans offered to former employees who retire at age 55 or older, provided the executive has completed at least ten years of service, on the same terms as such other former employees. If eligible, this coverage will continue until the named executive officer turns age 65. Thereafter, the named executive officer may participate in the Company’s general retiree health plan as it may exist in the future, if otherwise eligible. If the named executive officer will be age 55 or older and will have completed at least ten years of service at the end of, and including, the two-year period following termination, the named executive officer will be deemed to be age 55 and/ or to have ten years of service under any pre-65 retiree health plan as well as the SERP.

The above severance-related benefits are provided only if the named executive officer executes a general release prepared by the Company.

Termination Due to Retirement. Under the Company’s policy applicable to all employees, upon retirement the named executive officer is entitled to his or her salary through the last day of employment and is eligible for a pro-rata portion of the Annual Incentive Plan award for the fiscal year in which his or her retirement occurs. Based on the provisions of the respective plans, he or she will also be eligible to receive SERP, ERP, and other benefits under applicable Company retirement plans. In addition to the amounts that the named executive officer has earned or accrued over the course of his or her employment under the Company’s

qualified and nonqualified plans, a named executive officer who is at least age 55 with ten years of service or who has 20 years of service regardless of age is eligible to receive retirement-related benefits under the long-term incentive program. Stock options held for longer than one year will vest in full and remain exercisable for five years following the named executive officer’s retirement, or until the expiration date, whichever is sooner, and performance shares held longer than one year will be paid out on a pro-rata basis at the end of the relevant performance period based on the actual level of performance achieved during that period.

Termination Due to Death or Disability. Under the Company’s policy applicable to all employees, if the named executive officer’s employment is terminated due to his or her death, the named executive officer’s beneficiary or estate is entitled to (i) the named executive officer’s salary through the date of his or her death, (ii) a pro-rata portion of the named executive officer’s actual Annual Incentive Plan award for the fiscal year of his or her death, and (iii) benefits pursuant to the Company’s life insurance plan. Stock options will vest in full, and all vested options remain exercisable for an additional year following the named executive officer’s death or until the expiration date, whichever is earlier, and all performance shares will be paid out at the end of the relevant performance period based on the actual level of performance achieved during that period.

If the named executive officer begins to receive benefits under the Company’s long-term disability plan, the Company may terminate the named executive officer’s employment at any time, in which case the named executive officer will receive his or her salary through the date of his or her termination and will also be entitled to a pro-rata portion of his or her actual Annual Incentive Plan award for the fiscal year of his or her termination. Stock options will vest in full, and all vested options will remain exercisable for an additional year following the named executive officer’s disability or until the expiration date, whichever is earlier, and all performance shares will be paid out at the end of the relevant performance period based on the actual level of performance achieved during that period.

Termination for Misconduct. The Company may terminate a named executive officer’s employment for misconduct at any time without notice. Upon the named executive officer’s termination for misconduct, the named executive officer is entitled to his or her salary through the date of his or her termination, but is not entitled to any Annual Incentive Plan award for the fiscal year in which his or her termination for misconduct occurs. “Misconduct” under the Severance Plan means: (i) the willful and continued neglect of significant duties or willful and continued violation of a material



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Company policy after having been warned in writing, (ii) a material act of dishonesty, fraud, misrepresentation, or other act of moral turpitude, (iii) gross negligence in the course of employment, (iv) the failure to obey a lawful direction of the Board or a corporate officer to whom the named executive officer reports, directly or indirectly, or (v) an action that is inconsistent with the Company’s best interests and values. All outstanding stock option grants are forfeited upon a termination for misconduct. In addition, any retirement-related benefits a named executive officer would normally receive related to performance shares are also forfeited upon a termination for misconduct.

Voluntary Termination. A named executive officer may resign from his or her employment at any time. Upon the named executive officer’s voluntary resignation, the named executive officer is entitled to his or her salary through the date of termination, but is not entitled to any Annual Incentive Plan award for the fiscal year of termination. All unvested outstanding stock option and performance share grants are forfeited upon voluntary termination.

The Company also maintains a Change in Control Severance Plan for the benefit of each of our named executive officers. Please see the “Potential Payments upon Termination or Change in Control” section for further details on the Change in Control Severance Plan.

Potential Payments upon Change in Control

Change in Control Severance Plan for Named Executive Officers. Under the CIC Plan, executives are eligible for change in control severance benefits, subject to the execution of a waiver and release, if they are terminated without cause or resign for good reason (each as defined under the CIC Plan and as further described below) during (i) the two-year period following a change in control or (ii) a period of up to one year prior to the change in control in limited circumstances where the executive’s termination is directly related to or in anticipation of a change in control.

The severance benefits under the CIC Plan include (i) a lump-sum severance payment equal to two times (or, in the case of the CEO, three times) the sum of (a) the executive’s base salary and (b) average Annual Incentive Plan award for the three completed fiscal years prior to termination, (ii) a lump-sum amount equal to the difference between the actuarial equivalent of the benefit the named executive officer would have been entitled to receive if his or her employment had continued until the second anniversary of the date of termination and the actuarial equivalent of the aggregate benefits paid or payable as of the date of termination under the qualified and nonqualified retirement plans, (iii) continuation of healthcare benefits for a maximum

of two (or, in the case of the CEO, three) years following a severance-qualifying termination, (iv) continued financial planning services for the year of termination, (v) vesting of all outstanding equity awards granted prior to the change in control, and (vi) an amount equal to the average Annual Incentive Plan award for the three completed fiscal years preceding termination prorated for the number of days employed in the fiscal year during which termination occurred. In addition, the CIC Plan provides for an excise tax cutback such that the excise tax under Sections 280G and 4999 of the IRC would not apply (unless the executive would receive a greater amount of severance benefits on an after-tax basis without a cutback, in which case the cutback would not apply). The CIC Plan permits the Committee to make changes to the CIC Plan that are adverse to covered executives with 12 months’ advance notice. If a change in control of the Company occurs during that 12-month period, then such changes would not become effective. Each participant under the CIC Plan is subject to certain restrictive covenants including confidentiality and non-disparagement provisions and a non-solicitation provision during the term of his or her employment and for two years thereafter.

“Cause” is generally defined as (i) willful and continued failure to substantially perform duties upon written demand or (ii) willfully engaging in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company. A termination for cause requires a vote of 75% of the Board at a meeting after notice to the executive has been given and the executive has had an opportunity to be heard.

“Good Reason” is generally defined as (i) an assignment of duties inconsistent with the executive officer’s position (including offices and reporting requirements), authority, duties, or responsibilities (other than reassignments with a substantially similar level and scope of authority, duties, responsibilities, and reporting relationships), (ii) any failure to substantially comply with any of the material provisions of compensation plans, programs, agreements, or arrangements as in effect immediately prior to the change in control, which material provisions consist of base salary, cash incentive compensation target bonus opportunity, equity compensation opportunity in the aggregate, savings and retirement benefits in the aggregate, and welfare benefits (including medical, dental, life, disability, and severance benefits) in the aggregate, (iii) relocation of principal place of employment that increases the executive officer’s commuting distance by more than 50 miles, (iv) termination of employment by the Company other than as expressly permitted by the CIC Plan, or (v) failure of a successor company to assume the CIC Plan.



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Compensation Discussion and Analysis

Estimated Potential Payments upon
Termination or Change in Control

The following table reflects the estimated amount of compensation payable to each of the Company’s named executive officers upon termination of the named executive officer’s employment under various scenarios. The amounts exclude earned amounts such as vested or accrued benefits, other than benefits vested under the Company’s SERP. If a named executive officer is eligible for his or her SERP benefit as of the assumed termination date, the respective SERP benefit amount reported under the “Retirement” column is also included in the scenarios for Involuntary Termination without Cause and Involuntary Termination after Change in Control on the Retirement Plan Benefits line.

The amounts shown are calculated using an assumed termination date effective as of the last business day of fiscal year 2016 (June 30, 2016) and the closing trading price of our Common Stock of $138.39 on such date. Although the calculations are intended to provide reasonable estimates of the potential compensation payable upon termination, they are based on assumptions outlined in the footnotes of the table and may not represent the actual amount the named executive officer would receive if an eligible termination event were to occur.

The table does not include compensation or benefits provided under plans or arrangements that are generally available to all salaried employees. Amounts reflected for change in control assume that each named executive officer is involuntarily terminated by the Company without cause or voluntarily terminates for good reason within two years after a change in control.



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FISCAL YEAR 2016 TERMINATION TABLE

   Name and Benefits Involuntary
Termination
Without Cause
Involuntary
Termination
After Change
In Control
Retirement Disability Death   
Benno Dorer                                                  
Cash Payment $ 4,312,725 (1) $ 5,845,600 (2) $ (3) $ (4) $ (4)
Stock Options 14,651,038 (5) 14,050,958 (6) 14,050,958 (6)
Performance Shares 3,495,705 (7) 6,482,744 (8) 6,482,744 (8)
Retirement Plan Benefits 3,316,552 (9) 1,550,871 (10)
Health & Welfare Benefits 22,656 (11) 33,984 (12)
Financial Planning 16,500 (13)
       Total Estimated Value $ 4,335,381 $ 24,042,827 $ $ 23,850,254 $ 22,084,573
Stephen M. Robb
Cash Payment $ 1,624,000 (14) $ 2,539,067 (15) $ (3) $ (4) $ (4)
Stock Options 3,440,988 (16) 4,584,741 (5) 3,440,988 (16) 4,584,741 (6) 4,584,741 (6)
Performance Shares 1,280,950 (17) 1,512,167 (7) 1,280,950 (17) 2,267,728 (8) 2,267,728 (8)
Retirement Plan Benefits 1,783,998 (9) 1,136,553 (10)
Health & Welfare Benefits 35,107 (11) 35,107 (12)
Financial Planning 16,500 (13)
       Total Estimated Value $ 6,381,045 $ 8,687,582 $ 4,721,938 $ 8,636,467 $ 7,989,022
Laura Stein
Cash Payment $ 1,464,500 (14) $ 2,494,830 (15) $ (3) $ (4) $ (4)
  Stock Options 4,315,353 (5) 4,139,562 (6) 4,139,562 (6)
Performance Shares 1,271,290 (7) 1,820,234 (8) 1,820,234 (8)
Retirement Plan Benefits 6,034,767 (18) 6,274,264 (19) 4,593,122 (9) 2,551,730 (10)
Health & Welfare Benefits 23,271 (11) 23,271 (12)
Financial Planning 16,500 (13)
       Total Estimated Value $ 7,522,538 $ 14,395,508 $ $ 10,552,918 $ 8,511,526
Nikolaos A. Vlahos
Cash Payment $ 1,442,000 (14) $ 2,131,953 (15) $ (3) $ (4) $ (4)
Stock Options 1,826,283 (16) 2,658,053 (5) 1,826,283 (16) 2,658,053 (6) 2,658,053 (6)
Performance Shares 711,362 (17) 879,264 (7) 711,362 (17) 1,397,075 (8) 1,397,075 (8)
Retirement Benefits
Health & Welfare Benefits 36,443 (11) 36,443 (12)
Financial Planning 16,500 (13)
       Total Estimated Value $ 4,016,088 $ 5,722,213 $ 2,537,645 $ 4,055,128 $ 4,055,128
Dawn Willoughby
Cash Payment $ 1,339,000 (14) $ 1,922,860 (15) $ (3) $ (4) $ (4)
Stock Options 3,008,669 (5) 2,888,343 (6) 2,888,343 (6)
Performance Shares 879,264 (7) 1,397,075 (8) 1,397,075 (8)
Retirement Benefits
Health & Welfare Benefits 26,441 (11) 26,441 (12)
Financial Planning 16,500 (13)
       Total Estimated Value $ 1,365,441 $ 5,853,734 $ $ 4,285,418 $ 4,285,418
(1) This amount reflects two times Mr. Dorer’s current base salary plus two times 75% of his average Annual Incentive Plan awards from the preceding three years. In addition, the amount includes 100% of his current year target Annual Incentive Plan award, pro-rated to the date of termination.
(2) This amount represents three times Mr. Dorer’s current base salary, plus three times the average Annual Incentive Plan awards for the preceding three years, plus the average Annual Incentive Plan awards for the preceding three years, pro-rated to the date of termination, subject to the excise tax cut back provision in the Change in Control Severance Plan.
(3) Messrs. Robb and Vlahos are retirement-eligible and thus are eligible for a pro-rata Annual Incentive Plan award upon retirement. However, all bonus-eligible employees active as of June 30, 2016 are eligible to receive an annual incentive award, so a pro-rata Annual Incentive Plan award would not be applicable as of this date as the assumed termination date is June 30, 2016. Mr. Dorer and Mmes. Stein and Willoughby are not retirement-eligible and thus not eligible for an annual incentive award upon retirement.
(4) Named executive officers whose termination is the result of disability or death are eligible to receive a pro-rata Annual Incentive Plan award through the date of termination. However, all bonus-eligible employees active as of June 30, 2016 are eligible to receive an annual incentive award, so a pro-rata Annual Incentive Plan award would not be applicable since the assumed termination date is June 30, 2016.

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(5) For Messrs. Robb and Vlahos who are retirement-eligible, this amount represents the expected value of the accelerated vesting of all outstanding stock options, and assumes a five-year expected life, or the remaining original term, whichever is sooner. For Mr. Dorer and Mmes. Stein and Willoughby, this amount represents the intrinsic value of the accelerated vesting of all outstanding stock options (based on the provision that non-retirement eligible executives exercise stock options within 90 days of termination), calculated as the difference between the June 30, 2016 closing Common Stock price of $138.39 and the exercise price for each option.
(6) For Messrs. Robb and Vlahos who are retirement-eligible, this amount represents the expected value of the accelerated vesting of all outstanding stock options upon the named executive officer’s termination of employment due to disability or death, and assumes a five-year expected life, or the remaining original term, whichever is sooner. For Mr. Dorer and Mmes. Stein and Willoughby, this amount represents the expected value of the accelerated vesting of all outstanding stock options (based on the provision that non-retirement eligible executives exercise stock options within one-year of death or disability), calculated as the difference between the June 30, 2016 closing Common Stock price of $138.39 and the exercise price for each option.
(7) Performance shares will vest based on performance through the day of the change in control. This amount assumes a pro-rated targeted payout and is valued at the closing price of our Common Stock on June 30, 2016 of $138.39.
(8) This amount represents the value of the accelerated vesting of performance shares upon a death or disability, assuming a target payout and valued at the closing price of our Common Stock on June 30, 2016 of $138.39. Upon a death or disability termination, the entire performance share grant will vest. The actual payout will not be determined until the end of the performance period.
(9) This amount represents the present value of the SERP benefit payable to the named executive officer at the time of termination due to disability.
(10) This amount represents the present value of the SERP benefit payable to the named executive officer’s beneficiary at the time of death.
(11) This amount represents the estimated Company cost of providing welfare benefits, including medical, dental, and vision, for the two-year period following termination.
(12) For Messrs. Robb and Vlahos and Mmes. Stein and Willoughby, this amount represents the estimated Company cost of providing welfare benefits, including medical, dental, and vision, for the two-year period following a qualifying termination after a change in control. For Mr. Dorer, this amount represents the estimated Company cost of providing welfare benefits, including medical, dental, and vision, for the three-year period following a qualifying termination after a change in control.
(13) This amount represents the cost of providing financial planning for the year of termination.
(14) This amount reflects two times the named executive officer’s current base salary. In addition, for Messrs. Robb and Vlahos, who are retirement-eligible, this amount includes 100% of their current year target Annual Incentive Plan award pro-rated to the date of termination. For Mmes. Stein and Willoughby, this amount includes 75% of her current year target Annual Incentive Plan award, pro-rated to the date of termination.
(15) This amount represents two times the named executive officer’s current base salary, plus two times the average Annual Incentive Plan awards for the preceding three years, subject to the excise tax cut back provision in the Change in Control Severance Plan. For Messrs. Robb and Vlahos, who are retirement-eligible, this amount also includes 100% of their current year target Annual Incentive Plan award, pro-rated to the date of termination. For Mmes. Stein and Willoughby, this amount includes the average Annual Incentive Plan awards for the preceding three years, pro-rated to the date of termination.
(16) Messrs. Robb and Vlahos are retirement-eligible and, thus, all unvested stock options held greater than one year will automatically vest upon termination. This amount represents the expected value of the accelerated vesting of the stock options, and assumes a five-year expected life, or the remaining original term, whichever is sooner.
(17) Messrs. Robb and Vlahos are retirement-eligible and, thus, are entitled to receive a pro-rata portion of all performance shares held at least one year at the date of termination. This value represents the pro-rata vesting of the eligible shares from the September 2014 and September 2015 grants, assuming a target payout and valued at the closing price of our Common Stock on June 30, 2016 of $138.39. The actual payout of the shares will not be determined until the end of the performance period. Named executive officers who are not retirement-eligible forfeit shares upon termination under these scenarios.
(18) This amount represents the present value of the Company SERP per the provisions of the Severance Plan for Clorox Executive Committee Members, assuming Ms. Stein will be deemed age 55 and/or with ten years of service at the date of termination.
(19) This amount represents the difference between the actuarial equivalent of the benefit Ms. Stein would have been eligible to receive if her employment had continued until the second anniversary of the date of termination or the first day of the month following her 65th birthday, if earlier, under the qualified and nonqualified retirement plans and the actuarial equivalent of her actual aggregate benefits paid or payable, if any, as of the date of termination under the qualified and nonqualified retirement plans.

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  Equity Compensation Plan Information

The following table sets out the number of shares of Common Stock to be issued upon exercise of outstanding options, warrants, and rights, the weighted-average

exercise price of outstanding options, warrants, and rights, and the number of securities available for future issuance under equity compensation plans as of June 30, 2016.



          [a]           [b]           [c]
Plan category Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
(in thousands)
Weighted-average
exercise price of
outstanding options,
warrants, and rights
Number of securities
remaining for future
issuance under non-
qualified stock-based
compensation programs
(excluding securities
reflected in column [a])
(in thousands)
Equity compensation plans approved by
security holders 8,036 $85 7,688
Equity compensation plans not approved by
security holders
Total 8,036 $85 7,688

Column [a] includes the following outstanding equity-based awards (in thousands):

6,827 stock options

952 performance units and deferred shares

244 deferred stock units for non-employee directors

13 restricted stock units



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  Audit Committee Matters

  Proposal 3:
Ratification of Independent Registered Public
Accounting Firm

The Audit Committee has the authority to appoint (subject to ratification by the Company's stockholders), retain, compensate and oversee the Company’s independent registered public accounting firm. The Audit Committee of

the Board has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2017. Ernst & Young LLP has been so engaged since February 15, 2003.




Board of Directors’ Recommendation

The Board unanimously recommends that stockholders vote FOR the ratification of the selection of Ernst & Young LLP. While ratification of the selection of Ernst & Young LLP by stockholders is not required by law, as a matter of policy, such selection is being submitted to the stockholders for ratification at the Annual Meeting (and it is the present intention of the Board to continue this policy). The Audit Committee and the Board believe that the continued retention of Ernst & Young LLP as the Company’s independent registered public

accounting firm is in the best interests of the Company and its stockholders, and recommend the ratification of the Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2017.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they desire to do so.




Vote Required

The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the appointment of Ernst & Young LLP. If stockholders fail to ratify the appointment of this firm, the Audit Committee will reconsider the appointment.

The people designated in the proxy and voting instruction card will vote your shares represented by proxy FOR ratification unless you include instructions to the contrary.



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  Audit Committee Report

The Audit Committee assists the Board in its oversight of corporate governance by fulfilling its responsibility for overseeing the quality and integrity of the accounting, auditing, and reporting practices of the Company. The Audit Committee operates in accordance with a written charter, which was adopted by the Board. A copy of that charter is available on the Company’s website at https://www.thecloroxcompany.com/who-we-are/corporate-governance/committee-charters, or in print by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. Each member of the Audit Committee is “independent,” as required by the applicable listing standards of the NYSE and the rules of the SEC. The Board has determined that each member of the Audit Committee meets the SEC’s criteria for “audit committee financial experts.”

The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the Company’s independent registered public accounting firm. The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. The Company’s management has primary responsibility for the financial statements and reporting process, including the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for performing an integrated audit of the Company’s financial statements and internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board.

The Audit Committee appointed Ernst & Young LLP (“EY”) to audit the Company’s financial statements as of and for the year ended June 30, 2016, and the effectiveness of the Company’s internal control over financial reporting as of June 30, 2016. EY has served as the Company’s independent registered public accounting firm since February 2003. The Audit Committee considered several factors in selecting EY as the Company’s independent registered public accounting firm, including the firm’s independence and internal quality controls, the overall depth of talent, their experience with the Company’s industry, and their familiarity with the Company’s business and internal control over financial reporting. In determining whether to reappoint EY as the Company’s independent registered public accounting firm for the year ending June 30, 2017, the Audit Committee again took those factors into consideration along with its evaluation of the past performance of EY. The Audit Committee is responsible for the appointment (subject to ratification by the Company’s stockholders), retention, compensation and oversight of the Company’s independent registered public accounting firm, including the audit fee negotiations. Further, in conjunction with the mandated rotation of the auditing

firm’s coordinating partner, the Audit Committee and its chairperson are directly involved in the selection of EY’s new coordinating partner.

EY has also issued reports on its review of certain corporate responsibility and sustainability metrics and information provided in the Company’s Annual Report.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2016. This review included a discussion of the quality and the acceptability of the Company’s financial reporting and system of internal controls, including the clarity of disclosures in the financial statements, reasonableness of significant contingency accruals, reserves and allowances, critical accounting policies and estimates and risk assessment. The Audit Committee also reviewed and discussed with the Company’s independent registered public accounting firm the audited financial statements of the Company for the fiscal year ended June 30, 2016, the independent registered public accounting firm’s judgments as to the quality and acceptability of the Company’s financial reporting, critical accounting policies and estimates and such other matters as are required to be discussed by Auditing Standard No. 16, as adopted by the Public Company Accounting Oversight Board.

The Audit Committee obtained from the independent registered public accounting firm the written disclosures and the letter from the auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding communications with the Audit Committee concerning independence of the auditors and discussed with the auditors their independence. The Audit Committee meets periodically with the independent registered public accounting firm, with and without management present, to discuss the results of the independent registered public accounting firm’s examinations and evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, for filing with the SEC.

THE AUDIT COMMITTEE

Carolyn Ticknor, Chair
Jeffrey Noddle
Rogelio Rebolledo
Pamela Thomas-Graham
Christopher Williams



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Audit Committee Report


Fees of the Independent Registered Public Accounting Firm

The table below includes fees related to fiscal years 2016 and 2015 of the Company’s independent registered public accounting firm, Ernst & Young LLP:

2016 2015
Audit Fees(1) $4,763,000 $4,701,000
Audit-Related Fees(2) 118,000 123,000
Tax Fees(3) 78,000 277,000
All Other Fees(4)
Total 4,959,000 5,101,000
(1) Consists of fees for professional services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, included in the Company’s Annual Reports on Form 10-K for each of the fiscal years ended June 30, 2016 and 2015, and for review of the financial statements included in the Company’s Quarterly Reports on Form 10-Q during those fiscal years.
(2) Consists of fees for assurance and related services (including the Company’s employee benefit plans) not included in the Audit Fees listed above.
(3) Consists of fees for tax compliance, tax advice and tax planning for the fiscal years ended June 30, 2016 and 2015. These services included tax return preparation and review services for foreign subsidiaries and affiliates and advisory services on tax matters.
(4) Consists of fees for all other services not included in the three categories set forth above. There were no such services in fiscal years 2016 and 2015.

The Audit Committee has established a policy that requires it to approve all services provided by the Company’s independent registered public accounting firm before services are provided. The Audit Committee has pre-approved the engagement of the independent registered

public accounting firm for audit services, and certain specified audit-related services and tax services within defined limits. The Audit Committee has not pre-approved engagement of the independent registered public accounting firm for any other non-audit services.



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  Stockholder Proposal

  Proposal 4:
Stockholder Proposal Regarding
Special Stockholder Meetings

The Board expects the following proposal (Proposal 4 on the proxy card and voting instruction card) to be presented by a stockholder at the Annual Meeting. The name, address, and, to our knowledge, the number of voting securities held by the stockholder proponent will be supplied promptly upon receipt of oral or written request.

Proposal 4 – Special Shareowner Meetings

Resolved, Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.

Delaware law allows 10% of our shares to call a special meeting. Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. Shareowner input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moot by the next annual meeting. This is important because there could be 15-months or more between annual meetings. Plus shareholders have no right to act by written consent.

It may be possible to adopt this proposal by incorporating brief text similar to this into our governing documents:

“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 10% of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”

Please vote to enhance shareholder value:

Special Shareowner Meetings – Proposal 4




Board of Directors’ Statement in Opposition

Clorox is supportive of a properly defined special meeting mechanism and has already implemented a special meeting right for its stockholders on terms that we believe serve the best interests of the Company and its stockholders. Accordingly, the Board recommends a vote AGAINST this proposal.

We amended our Bylaws on September 13, 2016, to permit stockholders owning 25% of the Company’s outstanding stock to call a special stockholder meeting upon written request to the Board. The Board adopted the stockholder special meeting right after careful consideration and engagement with many of our stockholders, and we believe that our existing special meeting right is most appropriate for the Company and its stockholders at this time. Specific procedural requirements and provisions for a stockholder-called special meeting are set forth in the Bylaws, which have been publicly filed.

Stockholders already have a meaningful, balanced right to call a special meeting, which also protects Company resources and the interests of all stockholders.

The Board evaluated a number of different factors in adopting the Company’s special meeting right, including the interests of the Company’s total stockholder base, the resources required to convene a special meeting and the existing opportunities the Company’s stockholders have to engage with the Company in between annual meetings to provide their perspectives and engage in substantive dialogue. The Board also considered the characteristics and composition of the Company’s stockholder base, including that a single investor holds approximately 10% of our outstanding stock and some additional stockholders each hold approximately 5% of our stock. The Board



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believes that giving stockholders owning 25% of the Company’s outstanding stock the right to call a special meeting strikes a reasonable balance between enhancing our stockholders’ ability to act on important and urgent matters and protecting against misuse of the right by a few individuals whose interests may not be shared by the majority of stockholders.

Convening a meeting of stockholders also imposes significant administrative and operational costs. The Company must prepare required disclosures, print and distribute materials, solicit proxies, and tabulate votes. The Board and management must devote time to preparing for and conducting the meeting, distracting them from managing the business and enhancing returns for all stockholders. Because special meetings require a considerable diversion of resources, they should be limited to circumstances where a substantial number of stockholders believe a matter is sufficiently urgent or extraordinary that it must be addressed between annual meetings. Unlike a 10% ownership threshold, the Company’s 25% threshold prevents a small minority of stockholders (or even a single stockholder) from calling a special meeting and imposing these costs on all stockholders even when most stockholders do not want a special meeting. Therefore, the Board believes that the existing right for our stockholders to call a special meeting is reasonable to provide an additional mechanism to address important issues.

We are committed to strong and effective corporate governance practices and stockholder engagement.

Clorox has a demonstrated commitment to best practices in corporate governance and accountability to our stockholders, which makes adoption of the stockholder

proposal unnecessary. Our Board regularly reviews corporate governance trends and evaluates how best to apply these practices to the Company. In recommending that our stockholders vote against this proposal, the Board believes that it is important to consider not only the fact that the Company already provides its stockholders with a meaningful special meeting right, but also the Company’s current governance practices, including that:

Last year, we adopted proxy access following conversations with stockholders representing a significant portion of our stockholder base.

All of our directors are elected annually, with a majority voting standard. In addition, any director who fails to be elected by a majority of the votes cast in an uncontested election must tender his or her resignation to the Board.

All of our directors, other than our CEO, are independent.

We have a strong lead independent director.

Our Board and management are engaged and responsive to our stockholders.

Our independent directors have participated in investor meetings and other stockholder engagement efforts, and our management team is also deeply engaged with our stockholders.

There are multiple channels for stockholders and other interested parties to communicate with our directors, as described in the “Director Communications” section and elsewhere in this proxy.

In light of the Company’s history of strong corporate governance practices and our implementation of a special meeting right following extensive stockholder engagement, the Board believes that adoption of this stockholder proposal is not necessary.





Board of Directors’ Recommendation

The Board unanimously recommends a vote AGAINST this stockholder proposal for the reasons stated above.



Vote Required

The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the stockholder proposal.

The people designated in the proxy and voting instruction card will vote your shares represented by proxy AGAINST this proposal unless you include instructions to the contrary.



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1221 BROADWAY
OAKLAND, CA 94612-1888

  Information About the Annual Meeting

This proxy statement is furnished in connection with the solicitation of proxies by the board of directors (the “Board”) of The Clorox Company (“Clorox” or the “Company”), a Delaware corporation, for use at the Company’s 2016 Annual Meeting of Stockholders (the “Annual Meeting”), to be held at 9:00 a.m. Pacific time on Wednesday,

November 16, 2016, at the offices of the Company, 1221 Broadway, Oakland, CA 94612-1888. Please refer to the “Attending the Annual Meeting” section of this proxy statement for more information about procedures for attending the Annual Meeting.





Internet Availability of Proxy Materials

We are pleased to take advantage of the U.S. Securities and Exchange Commission’s “Notice and Access” rule that allows us to provide stockholders with notice of their ability to access proxy materials via the Internet. This allows us to conserve natural resources and reduces the costs of printing and distributing the proxy materials, while providing our stockholders with access to the proxy materials in a fast and efficient manner via the Internet. Under this process, on or about September 23, 2016, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders, other than those stockholders who previously requested electronic or paper delivery of communications from us, informing them that our Proxy

Statement, Integrated Annual Report—Executive Summary, and voting instructions are available on the Internet as of the same date. You may then access these materials and vote your shares via the Internet or by telephone or you may request that a printed copy of the proxy materials be sent to you. You will not receive a printed copy of the proxy materials unless you request one in the manner described in the Notice.

The Notice of Annual Meeting, Proxy Statement, and Integrated Annual Report—Executive Summary are available at www.edocumentview.com/CLX.





Voting Information

Who Is Entitled to Vote

Only stockholders of record at the close of business on September 19, 2016 (the “Record Date”), are entitled to vote at the Annual Meeting. On that date, there were 129,575,797 shares of Clorox common stock (“Common Stock”) outstanding and entitled to vote. Holders of Common Stock as of the close of business on the Record Date are entitled to one vote per share on each matter submitted to a vote of stockholders.

How to Vote Before the Annual Meeting

Even if you plan to attend the Annual Meeting, we strongly urge you to vote in advance. You may vote via the Internet or by telephone by following the instructions on your proxy card, voting instruction form or Notice or (if you received a printed copy of the proxy materials) by completing and returning a proxy card or voting instruction form by mail. If you are the beneficial owner of shares held in “street name” (that is, you hold your shares through a broker, bank or other holder of record), you must follow that nominee’s instructions to vote.



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Please note that if you received a Notice, you cannot vote your shares by filling out and returning the Notice. Instead, you should follow the instructions contained in the Notice on how to cast your vote.

How to Vote in Person at the Annual Meeting

You may vote your shares at the Annual Meeting if you attend in person and use a written ballot. However, if your shares are held in the name of a broker, bank, or other nominee, you must obtain and bring with you to the Annual Meeting a legal proxy from that nominee granting you authority to vote your shares directly at the Annual Meeting. If you vote by proxy and also attend the Annual Meeting, you do not need to vote again at the Annual Meeting unless you wish to change your vote.

Voting Shares Held in the Clorox 401(k) Plan

If you are a participant in our 401(k) plan, you will receive a voting instruction card to direct Mercer Trust Company, as trustee of our 401(k) plan, how to vote the shares of our Common Stock attributable to your individual account. Mercer Trust Company will vote shares as instructed by participants prior to 11:59 p.m. Eastern time on November 15, 2016. If you do not provide voting directions to Mercer Trust Company by that time, the shares attributable to your account will not be voted.

How to Revoke Your Proxy or Change Your Vote

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by taking any of the following actions:

submitting written notice of revocation to the Corporate Secretary of the Company;
voting again electronically by telephone or via the Internet or by submitting another proxy card with a later date; or

voting in person at the Annual Meeting.

If you are the beneficial owner of shares held in “street name,” you must follow the instructions of your bank, broker or other nominee to revoke your voting instructions.

Effect of Not Providing Voting Instructions to Your Broker

If you are the beneficial owner of shares held in “street name,” you have the right to direct your bank or broker how to vote your shares, and it is required to vote those shares in accordance with your instructions. Under applicable NYSE rules, if you do not give instructions to your bank or brokerage firm, it will have discretion to vote your shares on “routine” matters, but it will not be permitted to vote

your shares on “non-routine” matters. In the case of a non-routine matter, your shares will be considered “broker non-votes” on that proposal.

Proposal 3 (Ratification of Independent Registered Public Accounting Firm) is the only routine matter on the agenda at this year’s Annual Meeting. Thus, the broker is entitled to vote your shares on Proposal 3 even if you do not provide voting instructions to your broker. The broker is not entitled to vote your shares on Proposal 1, 2, or 4 without your instructions.

Quorum

We must have a “quorum” to conduct the Annual Meeting. A quorum is a majority of the outstanding shares of Common Stock entitled to vote at the meeting, present in person or by proxy. Abstentions and broker non-votes (described below) will be counted for the purpose of determining a quorum.

Votes Required; Effect of Abstentions and Broker Non-Votes

Proposal 1 (Election of Directors). A director nominee will be elected if he or she receives a majority of the votes cast in person or represented by proxy. A majority of the votes cast means that the number of shares voted FOR a director must exceed the number of shares voted AGAINST that director. An abstention or a broker non-vote on Proposal 1 will not have any effect on the election of directors and will not be counted in determining the number of votes cast. Your broker is not entitled to vote your shares on Proposal 1 unless you provide voting instructions.

Proposals 2-4. Approval of each of Proposals 2-4 requires the affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect and will not be counted.

Board’s Recommendations

The Board recommends that you vote:

FOR the election of each of the eleven nominees for director named in this proxy statement (Proposal 1);
FOR the proposal to approve (on an advisory basis) the compensation of the Company’s named executive officers (Proposal 2);
FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2017 (Proposal 3); and

AGAINST the stockholder proposal (Proposal 4).



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Other Matters

Management of the Company is not aware of any matters other than those described in this proxy statement that may be presented for action at the Annual Meeting. If any other matters are properly presented at the Annual Meeting for consideration, the proxy holders will have discretion to vote for you on those matters.

Counting Votes; Vote Results

Votes will be counted by Computershare Trust Company, N.A., our inspector of election appointed for the Annual Meeting.We will report final results in a filing with the SEC on Form 8-K, which will be filed within four business days following the Annual Meeting.





Form 10-K, Financial Statements, and Integrated Annual Report—
Executive Summary

The following portions of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, are attached as Appendix A to this proxy statement: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Management’s Report on Internal Control over Financial Reporting; Report of Independent Registered Public Accounting Firm; Consolidated Financial Statements; Valuation and Qualifying Accounts and Reserves; and Reconciliation of Economic Profit. The Company’s Form 10-K

has been filed with the SEC and posted on the Company’s website and a copy may be obtained, without charge, by calling Clorox Stockholder Direct at 888-CLX-NYSE (259-6973) toll-free, 24 hours a day, seven days a week, or by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The 2016 Integrated Annual Report—Executive Summary is available with the Proxy Statement at www.edocumentview.com/CLX.





Solicitation of Proxies

We will pay for the entire cost of soliciting proxies on behalf of the Company. We will also reimburse brokerage firms, banks, and other agents for the cost of forwarding the Company’s proxy materials to beneficial owners. In addition, our directors and employees may solicit proxies in person, by telephone, via the Internet, or by other means of communication. Directors and employees will not be

paid any additional compensation for soliciting proxies. We have retained Innisfree M&A Incorporated (“Innisfree”) to assist in soliciting proxies for the Annual Meeting at an estimated cost of $20,000 plus out-of-pocket expenses. In addition, we have agreed to indemnify Innisfree against certain liabilities arising out of or in connection with its engagement.





Stockholder Proposals and Director Nominations for the 2017 Annual Meeting

Stockholder Proposals for Inclusion
in the Proxy Statement for the 2017
Annual Meeting

In the event that a stockholder wishes to have a proposal considered for presentation at the 2017 Annual Meeting of Stockholders and included in the Company’s proxy statement and form of proxy used in connection with such meeting pursuant to Exchange Act Rule 14a-8, the proposal must be received by the Company’s Corporate Secretary no later than the close of business on May 26, 2017. Any such proposal must comply with the requirements of Rule 14a-8.

Director Nominations for Inclusion
in the Proxy Statement for the 2017
Annual Meeting

The Board recently adopted proxy access, which allows a stockholder or group of up to 20 stockholders who have owned at least 3% of the Company’s Common Stock for at least three years to submit director nominees (up to 20% of the Board) for inclusion in the Company’s proxy materials if the stockholder(s) provides timely written notice of such nomination(s) and the stockholder(s) and the nominee(s) satisfy the requirements specified in the Company’s Bylaws. To be timely for inclusion in the Company’s proxy materials for the 2017 Annual Meeting of Stockholders,



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notice must be received by the Corporate Secretary at the principal executive offices of the Company no earlier than the close of business on April 26, 2017, and no later than the close of business on May 26, 2017. The notice must contain the information required by the Company’s Bylaws, and the stockholder(s) and nominee(s) must comply with the information and other requirements in our Bylaws relating to the inclusion of stockholder nominees in the Company’s proxy materials.

Other Proposals and Director Nominations for Presentation at the 2017 Annual Meeting

Our Bylaws also establish an advance notice procedure for stockholders who wish to present a proposal, including the nomination of directors, before an annual meeting of stockholders, but do not intend for the proposal to be included in our proxy statement. Under our Bylaws, if a stockholder, rather than including a proposal or director nomination in the proxy statement as discussed above, seeks to nominate a director or propose other business for consideration at that meeting, notice must be received by the Corporate Secretary at the principal executive offices of the Company not later than the close of business on the 90th day or earlier than the close of business on the 120th day prior to the first anniversary of the preceding

year’s annual meeting. To be timely for the 2017 Annual Meeting of Stockholders, the notice must be received by the Corporate Secretary on any date beginning no earlier than the close of business on July 19, 2017, and ending no later than the close of business on August 18, 2017. However, in the event that the date of the annual meeting is advanced by more than 30 days, or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so 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 10th day following the day on which public announcement of the date of such meeting is first made. The notice must contain the information required by the Company’s Bylaws. If a stockholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the annual meeting.

All notices of proposals or nominations, as applicable, must be addressed to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888.





Householding

The SEC’s “householding” rules permit us to deliver only one Notice of Annual Meeting and Proxy Statement or Notice of Internet Availability of Proxy Materials to stockholders who share an address unless otherwise requested. This procedure reduces printing and mailing costs. If you share an address with another stockholder and have received only one set of proxy materials, you may request a separate copy of these materials at no cost to you by calling Clorox Stockholder Direct at 888-CLX-NYSE (259-6973) toll-free, 24 hours a day, seven days a week, or by contacting The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. Alternatively, if you are currently receiving multiple copies of the proxy materials at the same address and wish to receive a single copy in the future, you may contact us by calling or writing to us at the telephone number or address given above.

If you are a beneficial owner (i.e., your shares are held in the name of a bank, broker, or other holder of record), the bank, broker, or other holder of record may deliver only one copy of the proxy materials to stockholders who have the same address unless the bank, broker, or other holder of record has received contrary instructions from one or more of the stockholders. If you wish to receive a separate copy of the proxy materials, now or in the future, you may contact us at the address or telephone number above and we will promptly deliver a separate copy. Beneficial owners sharing an address who are currently receiving multiple copies of the proxy materials and wish to receive a single copy in the future should contact their bank, broker, or other holder of record to request that only a single copy be delivered to all stockholders at the shared address in the future.



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  Attending the Annual Meeting

The Annual Meeting will be held on Wednesday, November 16, 2016, at 9:00 a.m. Pacific time, at the offices of the Company, 1221 Broadway, Oakland, CA 94612-1888. Check-in for the Annual Meeting begins promptly at 8:30 a.m. To attend the Annual Meeting, you must be a stockholder of the Company as of the close of business on the Record Date and provide proof that you owned Clorox Common Stock on the Record Date or hold a legal proxy from a Record Date stockholder. Please see the more detailed information below. Admission will be on a first-come, first-served basis, and seating is limited. Even if you plan to attend the Annual Meeting, we strongly urge you to vote in advance by proxy.

If you plan to attend the Annual Meeting this year, please be aware of the following information:

To be admitted to the Annual Meeting, you must have a current form of government-issued photo identification (such as a driver’s license or passport).

Because attendance at the Annual Meeting is limited to Record Date stockholders, you must provide proof that you owned Clorox Common Stock on the Record Date.

If you hold your shares with Clorox’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), your ownership of Clorox Common Stock as of the Record Date will be verified through reports provided by Computershare prior to admittance to the meeting.

If you hold your shares with a broker, trustee, bank, or nominee, you must provide proof of beneficial ownership as of the Record Date, such as a brokerage account statement showing that you owned Clorox Common Stock for the statement period immediately prior to the Record Date, a copy of your Notice of Internet Availability of Proxy Materials, a copy of your proxy and voting instruction card, a letter or legal proxy provided by your broker, trust, bank, or nominee, or other similar evidence of ownership on the Record Date.

If you are not a Record Date stockholder, you will be admitted to the Annual Meeting only if you have a legal proxy from a Record Date stockholder.

Cameras, recording equipment, and other electronic devices will not be allowed to be used in the meeting except for use by the Company.

For your protection, briefcases, purses, packages, etc. may be subject to inspection as you enter the meeting. We regret any inconvenience this may cause you.




By Order of the Board of Directors,

Angela C. Hilt
Vice President – Corporate Secretary
& Associate General Counsel

September 23, 2016

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  Appendix A

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Clorox Company
(Dollars in millions, except share and per share data)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of The Clorox Company’s (the Company or Clorox) financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements and Supplementary Data included in this Annual Report on Form 10-K.

The following sections are included herein:

Executive Overview

Results of Operations

Financial Position and Liquidity

Contingencies

Quantitative and Qualitative Disclosures about Market Risk
Recently Issued Accounting Standards
Critical Accounting Policies and Estimates

Summary of Non-GAAP Financial Measures

EXECUTIVE OVERVIEW

Clorox is a leading multinational manufacturer and marketer of consumer and professional products with approximately 8,000 employees worldwide as of June 30, 2016 and fiscal year 2016 net sales of $5,761. Clorox sells its products primarily through grocery and mass retail outlets, e-commerce channels, wholesale distributors and medical supply distributors. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products, Pine-Sol® cleaners, Liquid-Plumr® clog removers, Poett® home care products, Fresh Step® cat litter, Glad® bags, wraps and container products, Kingsford® charcoal, Renew Life® digestive health products, Hidden Valley® dressings and sauces, Brita® water-filtration products and Burt’s Bees® natural personal care products. The Company also markets brands through professional services channels, including infection control products for the healthcare industry under Clorox Healthcare®, HealthLink®, Aplicare® and Dispatch® brands. The Company manufactures products in more than a dozen countries and sells them in more than 100 markets.

The Company primarily markets its leading brands in midsized categories considered to be financially attractive. Most of the Company’s products compete with other nationally advertised brands within each category and with “private label” brands.

The Company operates through strategic business units that are aggregated into the following four reportable segments based on the economics and nature of the products sold:

Cleaning consists of laundry, home care and professional products marketed and sold in the United States. Products within this segment include laundry additives, including bleach products under the Clorox® brand and Clorox 2® stain fighter and color booster; home care products, primarily under the Clorox®, Formula 409®, Liquid-Plumr®, Pine-Sol®, S.O.S® and Tilex® brands; naturally derived products under the Green Works® brand; and professional cleaning and disinfecting products under the Clorox®, Dispatch®, Aplicare®, HealthLink® and Clorox Healthcare® brands.


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Household consists of charcoal, cat litter, digestive health products and bags, wraps and container products marketed and sold in the United States. Products within this segment include charcoal products under the Kingsford® and Match Light® brands; cat litter products under the Fresh Step®, Scoop Away® and Ever Clean® brands; digestive health products under the Renew Life® brand; and bags, wraps and containers under the Glad® brand.

 

Lifestyle consists of food products, water-filtration systems and filters and natural personal care products marketed and sold in the United States. Products within this segment include dressings and sauces, primarily under the Hidden Valley®, KC Masterpiece® and Soy Vay® brands; water-filtration systems and filters under the Brita® brand; and natural personal care products under the Burt’s Bees® brand.

 

International consists of products sold outside the United States. Products within this segment include laundry, home care, water-filtration, digestive health products, charcoal and cat litter products, dressings and sauces, bags, wraps and containers and natural personal care products, primarily under the Clorox®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett®, Mistolin®, Lestoil®, Bon Bril®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Renew Life®, Kingsford®, Fresh Step®, Scoop Away®, Ever Clean®, KC Masterpiece®, Hidden Valley® and Burt’s Bees® brands.

Non-GAAP Financial Measures

This Executive Overview, the succeeding sections of MD&A and Exhibit 99.3 include certain financial measures that are not defined by accounting principles generally accepted in the United States of America (U.S. GAAP). These measures, which are referred to as non-GAAP measures, are listed below.

Currency-neutral net sales growth represents U.S. GAAP net sales growth excluding the impact of the change in foreign currency exchange rates.

Economic profit (EP) is defined by the Company as earnings from continuing operations before income taxes, excluding noncash U.S. GAAP restructuring and intangible asset impairment costs, and interest expense; less an amount of tax based on the effective tax rate and less a charge equal to average capital employed multiplied by a cost of capital rate.

Free cash flow and free cash flow as a percentage of net sales. Free cash flow is calculated as net cash provided by continuing operations less capital expenditures related to continuing operations.

Earnings from continuing operations before interest and taxes (EBIT) margin (the ratio of EBIT to net sales)

Debt to earnings from continuing operations before interest, taxes, depreciation and amortization, and noncash intangible asset impairment charges ratio (Consolidated Leverage ratio)

For a discussion of these measures and the reasons management believes they are useful to investors, refer to “Summary of Non-GAAP Financial Measures” below. For a discussion of the Consolidated Leverage ratio, please refer to “Credit Arrangements” below. This MD&A and Exhibit 99.3 include reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

Fiscal Year 2016 Financial Highlights

A detailed discussion of strategic goals, key initiatives and results of operations is included below. Key fiscal year 2016 financial results are summarized as follows:

The Company’s fiscal year 2016 net sales increased by 2%, from $5,655 in fiscal year 2015 to $5,761 in fiscal year 2016, reflecting higher volume and the benefit of price increases, partially offset by unfavorable foreign currency exchange rates and higher trade promotion spending. On a currency-neutral basis, net sales increased 5%.

 

Gross margin increased 150 basis points to 45.1% in fiscal year 2016 from 43.6% in fiscal year 2015, reflecting the benefits of favorable commodity costs, cost savings and price increases, partially offset by higher manufacturing and logistics costs, increased trade promotion spending, and the impact of unfavorable foreign currency exchange rates.

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The Company reported earnings from continuing operations of $648 in fiscal year 2016 compared to $606 in fiscal year 2015. The Company reported earnings from continuing operations before income taxes of $983 in fiscal year 2016, compared to $921 in fiscal year 2015.

 

The Company delivered diluted net EPS from continuing operations in fiscal year 2016 of $4.92, an increase of approximately 8% from fiscal year 2015 diluted net EPS of $4.57.

 

EP increased to $490 in fiscal year 2016 compared to $458 in fiscal year 2015 (refer to the reconciliation of EP to earnings from continuing operations before income taxes in Exhibit 99.3).

 

The Company’s net cash flows provided by continuing operations were $768 in fiscal year 2016, compared to $858 in fiscal year 2015 reflecting higher tax payments and higher performance-based incentive compensation payments in fiscal year 2016 related to the Company’s strong fiscal year 2015 financial results. Free cash flow was $596 or 10% of net sales in fiscal year 2016, a decrease from $733 or 13% of net sales in fiscal year 2015.

 

The Company paid $398 in cash dividends to stockholders in fiscal year 2016 compared to $385 in cash dividends in fiscal year 2015. In May 2016, the Company announced an increase of 4% in the quarterly cash dividend from prior year. In fiscal year 2016, the Company repurchased approximately 2 million shares of its common stock at a cost of $254.

 

On May 2, 2016, the Company acquired Renew Life, a leading brand in digestive health for $290. Results for Renew Life’s domestic business are reflected in the Household reportable segment and results for Renew Life’s international business are reflected in the International reportable segment. Included in the Company’s results for fiscal year 2016 was $21 of Renew Life’s global net sales.

Strategic Goals and Initiatives

The Clorox Company’s 2020 Strategy serves as its strategic growth plan, directing the Company to the highest value opportunities for long-term, profitable growth and total shareholder return.

The long-term financial goals reflected in the Company’s 2020 Strategy include annual net sales growth of 3-5%, annual EBIT margin growth of 25-50 basis points and annual free cash flow of 10-12% of net sales. Clorox anticipates using free cash flow to invest in the business, maintain appropriate debt levels and return excess cash to stockholders.

In fiscal year 2017, Clorox anticipates ongoing macroeconomic challenges that may impact its sales and margins, including unfavorable foreign currency exchange rates, particularly in Argentina, and a continuation of challenging international economies. The Company is monitoring anticipated slower U.S. category growth, driven primarily by expected competitive activity and changes to commodity costs and manufacturing and logistics costs.

The Company’s priority in fiscal year 2017 remains investing strongly in its U.S. businesses, particularly in its “3D” demand-creation model of Desire, Decide and Delight, including advertising and trade promotion spending. The Company is also focused on product innovation to delight and deliver superior value to consumers. Importantly, the Company will work to continue to improve its margins by driving cost savings initiatives and slowing the growth of selling and administrative expenses by driving out low-value activity.

As the Company executes its 2020 Strategy, a particular focus on “Strategy Accelerators,” will help drive investment decisions with the goal to deliver profitable long-term growth:

Accelerating portfolio momentum reallocates resources to faster-growing countries, categories and brands in the portfolio or focuses investment in new categories with growth tailwinds like the Company’s recent acquisition of Renew Life digestive health products.

 

Accelerating 3D technology transformation reflects an emphasis in digital communications that can deliver more targeted messages based on how consumers research, shop and buy their products. The Company continues to invest in digital marketing and social media and is focused on driving its e-commerce business.


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Accelerating innovation across the Company’s 3D demand-creation model of Desire, Decide and Delight will continue to support category growth and market share improvement. The Company is focused on delivering superior value to consumers through the introduction of new products and product improvements.
 
Accelerating the Company’s growth culture involves fostering a work environment where employees directly support the Company’s effort to drive profitable growth. The growth culture vision provides a framework to deliver on that goal through five calls to action: put the consumer first, be curious, think boldly, embrace change and act like an owner.

Looking forward, the Company will continue to execute against its 2020 Strategy and seek to achieve its goals to deliver long-term profitable growth.

RESULTS OF OPERATIONS

Unless otherwise noted, management’s discussion and analysis compares results of continuing operations from fiscal year 2016 to fiscal year 2015, and fiscal year 2015 to fiscal year 2014, with percentage and basis point calculations based on rounded numbers, except for per share data and the effective tax rate.

CONSOLIDATED RESULTS

Continuing operations


Net sales in fiscal year 2016 increased 2%. Volume increased 4% reflecting higher shipments in all reportable segments and most significantly in Cleaning, Household and Lifestyle. Higher shipments in the Cleaning segment were driven by Home Care and Professional Products, partially offset by Laundry; higher shipments in the Household segment were primarily due to the acquisition of the Renew Life business, Charcoal, and Bags and Wraps, partially offset by Cat Litter; and higher shipments in the Lifestyle segment primarily were due to Natural Personal Care and Dressing and Sauces. Volume outpaced net sales primarily due to unfavorable foreign currency exchange rates and higher trade promotion spending, partially offset by the benefit of price increases.

Net sales in fiscal year 2015 increased 3%. Volume increased 2%, reflecting higher product shipments in the International segment, primarily due to growth in Latin America, Canada, Europe and Asia; higher shipments of Burt’s Bees® natural personal care products, largely due to innovation in lip and face care products combined with distribution gains; higher shipments of cleaning and healthcare products in the professional products business; higher shipments of Clorox® toilet bowl cleaner due to increased merchandising activities and distribution gains; and higher shipments of Kingsford® charcoal products behind increased merchandising support to launch the start of the grilling season. Volume results also reflected lower shipments of Clorox® liquid bleach due to the February 2015 price increase, category softness and increased competition; and lower shipments of Brita® water-filtration products, primarily due to continuing

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Appendix A

category softness and increased competition. The variance between volume and net sales was primarily due to the benefit of price increases, partially offset by unfavorable foreign currency exchange rates. On a currency-neutral basis, net sales increased about 5%.


Gross margin, defined as gross profit as a percentage of net sales, in fiscal year 2016 increased 150 basis points from 43.6% to 45.1%. Gross margin expansion in fiscal year 2016 was driven by the benefits of favorable commodity costs, strong cost savings and price increases, partially offset by higher manufacturing and logistics costs, increased trade promotion spending and the impact of unfavorable foreign currency exchange rates.

Gross margin, defined as gross profit as a percentage of net sales, in fiscal year 2015 increased 90 basis points from 42.7% to 43.6%. Gross margin expansion in fiscal year 2015 was driven by the benefits of cost savings and price increases, partially offset by the impact of higher manufacturing and logistics costs.

Expenses

% Change % of Net sales
        2016       2015       2014       2016
to
2015
      2015
to
2014
      2016       2015       2014
Selling and administrative expenses   $ 806   $ 798   $ 751   1 %   6 %   14.0 %   14.1 %   13.6 %
Advertising costs 587 523 503   12     4 10.2 9.2 9.1
Research and development costs 141 136 125 4 9 2.4 2.4 2.3

Selling and administrative expenses were relatively flat in fiscal year 2016.

Selling and administrative expenses increased 6% in fiscal year 2015, primarily from higher performance-based incentive costs as a result of fiscal year financial performance exceeding financial targets. Expenses in the prior year reflected lower performance-based incentive costs when the Company’s results fell below financial targets. In addition, the Company continued to experience inflationary pressures in international markets. These increases were partially offset by the benefit of cost savings, one-time costs in fiscal year 2014 related to the change in information technology (IT) service providers and a one-time impact related to a change in the Company’s long-term disability plan in fiscal year 2015 to bring it more in line with the marketplace.

Advertising costs as a percentage of net sales increased during fiscal year 2016 mainly to drive awareness and trial behind innovation and maintain the health of the Company’s core business. The Company’s U.S. retail advertising spend was approximately 11% of net sales during the year.

Advertising costs as a percentage of net sales increased slightly during fiscal year 2015, reflecting continued support behind the Company’s brands, including driving the trial of new products. The Company’s U.S. retail advertising spend was approximately 10% of net sales during the year.

Research and development costs as a percentage of net sales was flat in fiscal year 2016.

Research and development costs increased slightly as a percentage of net sales in fiscal year 2015, driven by higher performance-based incentive costs.

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Interest expense, Other (income) expense, net, and the effective tax rate on earnings

                     2016       2015       2014
Interest expense $ 88 $ 100   $ 103
Other income, net   (7 )   (13 )   (10 )
Income taxes on continuing operations 335 315 305

Interest expense decreased $12 in fiscal year 2016, primarily due to a lower weighted-average interest rate on total debt.

Interest expense decreased $3 in fiscal year 2015, primarily due to a lower weighted-average interest rate on long-term debt resulting from the issuance of senior notes in December 2014 and the maturities of senior notes in January 2015, combined with less interest expense on a lower balance of commercial paper throughout fiscal year 2015.

Other (income) expense, net, of $(7) in fiscal year 2016 included $(15) of income from equity investees, $(11) gain on the sale of the Los Angeles bleach manufacturing facility, partially offset by $9 of noncash asset impairment charges and $8 of amortization of trademarks and other intangible assets.

Other (income) expense, net, of $(13) in fiscal year 2015 included $(14) of income from equity investees, $(13) gain on the sale of real estate assets by a low-income housing partnership and $(4) of interest income, partially offset by $9 of foreign currency exchange losses, $8 of amortization of trademarks and other intangible assets and $3 of noncash asset impairment charges.

Other (income) expense, net, of $(10) in fiscal year 2014 included $(13) of income from equity investees, $(5) of insurance and litigation settlements and other smaller items, partially offset by $8 of amortization of trademarks and other intangible assets and $3 of noncash asset impairment charges.

The effective tax rate on earnings was 34.1%, 34.2% and 34.6% in fiscal years 2016, 2015 and 2014, respectively. The effective tax rate in fiscal year 2016 compared to fiscal year 2015 was essentially flat. The lower effective tax rate in fiscal year 2015 compared to fiscal year 2014 was primarily due to higher uncertain tax position releases, partially offset by higher tax on foreign earnings, in fiscal year 2015.

Diluted net earnings per share

% Change
        2016       2015       2014       2016
to
2015
       2015
to
2014
Diluted net EPS from continuing operations $ 4.92 $ 4.57 $ 4.39     8 %            4 %

Diluted net earnings per share (EPS) from continuing operations increased $0.35, driven by the benefits of higher sales and gross margin expansion, partially offset by increased advertising investments.

Diluted net EPS from continuing operations increased $0.18 in fiscal year 2015, driven by the benefits of higher sales and gross margin expansion, partially offset by increased selling and administrative expenses, primarily from higher performance-based incentive costs as a result of fiscal year financial performance exceeding financial targets. Expenses in the prior year reflected lower performance-based incentive costs when the Company’s results fell below financial targets. Increased investments in total demand-building programs also reduced fiscal year diluted EPS.

Discontinued Operations

On September 22, 2014, Clorox Venezuela announced that it was discontinuing its operations, effective immediately, and seeking to sell its assets. Since fiscal year 2012, Clorox Venezuela was required to sell more than two thirds of its products at prices frozen by the Venezuelan government. During this same period, Clorox Venezuela experienced successive years of hyperinflation resulting in significant sustained increases in its input costs, including packaging, raw materials, transportation and wages. As a result, Clorox Venezuela had been selling its products at a loss, resulting in ongoing operating losses. Clorox Venezuela repeatedly met with government authorities in an effort to help them

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Appendix A

understand the rapidly declining state of the business, including the need for immediate, significant and ongoing price increases and other critical remedial actions to address these adverse impacts. Based on the Venezuelan government’s representations, Clorox Venezuela had expected significant price increases would be forthcoming much earlier; however, the price increases subsequently approved were insufficient and would have caused Clorox Venezuela to continue operating at a significant loss into the foreseeable future. As such, Clorox Venezuela was no longer financially viable and was forced to discontinue its operations.

On September 26, 2014, the Company reported that Venezuelan Vice President Jorge Arreaza announced, with endorsement by President Nicolás Maduro, that the Venezuelan government had occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela. On November 6, 2014, the Company reported that the Venezuelan government had published a resolution granting a government-sponsored Special Administrative Board full authority to restart and operate the business of Clorox Venezuela, thereby reaffirming the government’s expropriation of Clorox Venezuela’s assets. Further, President Nicolás Maduro announced the government’s intention to facilitate the resumed production of bleach and other cleaning products at Clorox Venezuela plants. He also announced his approval of a financial credit to invest in raw materials and production at the plants. These actions by the Venezuelan government were taken without the consent or involvement of Clorox Venezuela, its parent Clorox Spain S.L. (Clorox Spain) or any of their affiliates. Clorox Venezuela, Clorox Spain and their affiliates reserved their rights under all applicable laws and treaties. Since the exit of Clorox Venezuela in the first quarter of fiscal year 2015, the Company has recognized $49 in after-tax exit costs and other related expenses within discontinued operations related to the exit of Clorox Venezuela. The Company believes it is reasonably possible that it will recognize $1 to $11 in after-tax exit costs and other related expenses in discontinued operations for Clorox Venezuela during fiscal years 2017 through 2019, for a total of $50 to $60 over the entire five-year period.

See Notes to Consolidated Financial Statements for more information regarding discontinued operations of Clorox Venezuela.

Unrelated to Clorox Venezuela, in the fiscal year ended June 30, 2015, the Company recognized $32 of previously unrecognized tax benefits relating to other discontinued operations upon the expiration of the applicable statute of limitations. Recognition of these previously disclosed tax benefits had no impact on the Company’s cash flows or earnings from continuing operations for the fiscal year ended June 30, 2015.

SEGMENT RESULTS FROM CONTINUING OPERATIONS

The following presents the results from continuing operations of the Company’s reportable segments and certain unallocated costs reflected in Corporate (see Notes to Consolidated Financial Statements for a reconciliation of segment results to consolidated results):

Cleaning

% Change
        2016       2015       2014       2016
to
2015
      2015
to
2014
Net sales $ 1,912 $ 1,824 $ 1,776 5 % 3 %
Earnings from continuing operations before income taxes 511 445 428   15     4

Fiscal year 2016 versus fiscal year 2015: Volume, net sales and earnings from continuing operations before income taxes increased by 6%, 5% and 15%, respectively, during fiscal year 2016. Both volume and net sales growth were driven primarily by higher shipments across several Home Care brands, including Clorox® disinfecting wipes resulting from increased merchandising support and expanded warehouse club distribution, and in Professional Products mainly in cleaning products. These increases were partially offset by lower shipments in Laundry, primarily due to the impact of the February 2015 price increase on Clorox® liquid bleach. Volume outpaced net sales due to unfavorable product mix. The increase in earnings from continuing operations before income taxes was mainly due to net sales growth, the benefit of favorable commodity costs, strong cost savings, and the gain on the sale of the Company’s Los Angeles bleach manufacturing facility, partially offset by higher manufacturing and logistics costs and increased advertising investments.

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Fiscal year 2015 versus fiscal year 2014: Volume, net sales and earnings from continuing operations before income taxes increased by 2%, 3% and 4%, respectively, during fiscal year 2015. Both volume and net sales grew primarily due to higher shipments of Clorox® toilet bowl cleaner and Clorox® disinfecting wipes in Home Care, behind increased merchandising activities. The Professional Products Division also grew volume, which was driven primarily by distribution gains across a number of brands. These increases were partially offset by lower shipments of Clorox® liquid bleach in Laundry, primarily due to the February 2015 price increase. Net sales growth outpaced volume growth primarily due to the benefit of price increase. The increase in earnings from continuing operations before income taxes was driven by the benefit of sales growth and cost savings, partially offset by an increase in demand-building investments.

Household

% Change
        2016       2015       2014       2016
to
2015
      2015
to
2014
Net sales $ 1,862 $ 1,794 $ 1,709 4 % 5 %
Earnings from continuing operations before income taxes 428 375 326 14 15

Fiscal year 2016 versus fiscal year 2015: Volume, net sales and earnings from continuing operations before income taxes increased by 3%, 4% and 14%, respectively, during fiscal year 2016. Both volume growth and net sales growth were driven by the acquisition of the Renew Life business, higher shipments of Charcoal resulting from increased merchandising support and increased shipments across several Glad® products, including continued strength in premium trash bags. These increases were partially offset by lower shipments of Cat Litter, largely due to continuing competitive activity. Net sales growth outpaced volume growth, primarily due to favorable product mix and the benefit of price increases, partially offset by higher trade promotion spending, mainly in Bags and Wraps. The increase in earnings from continuing operations before income taxes was mainly due to net sales growth, the benefit of favorable commodity costs and strong cost savings, partially offset by higher manufacturing and logistics costs and increased advertising investments.

Fiscal year 2015 versus fiscal year 2014: Volume, net sales and earnings from continuing operations before income taxes increased by 2%, 5% and 15%, respectively, during fiscal year 2015. Both volume growth and net sales growth were driven by higher shipments of Kingsford® charcoal products behind increased merchandising activities. Net sales growth outpaced volume growth primarily due to the benefits of price increases on Glad® bags and wraps. The increase in earnings from continuing operations before income taxes was driven by strong sales growth and the benefit of cost savings, partially offset by an increase in demand building investments and manufacturing and logistics costs.

Lifestyle

% Change
        2016       2015       2014       2016
to
2015
      2015
to
2014
Net sales $ 990 $ 950 $ 936 4 % 1 %
Earnings from continuing operations before income taxes 251 257 258    (2 )    —

Fiscal year 2016 versus fiscal year 2015: Volume and net sales increase by 5% and 4%, respectively, while earnings from continuing operations before income taxes decreased 2% during fiscal year 2016. Both volume growth and net sales growth were primarily driven by higher shipments of Burt’s Bees® Natural Personal Care largely due to innovation in lip and face care and higher shipments of Hidden Valley® bottled salad dressings due to innovation. Volume growth outpaced net sales growth primarily due to increased trade promotion spending. The decrease in earnings from continuing operations before income taxes was primarily due to increased advertising investments to support new products and increased selling and administrative expenses to support innovation and growth, partially offset by net sales growth and cost savings.

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Appendix A

Fiscal year 2015 versus fiscal year 2014: Net sales and volume both increased by 1%, while earnings from continuing operations before income taxes remained flat during fiscal year 2015. Both net sales growth and volume growth were driven by higher shipments of Burt’s Bees® natural personal care products, largely due to innovation in lip and face care products combined with distribution gains. The increase was partially offset by lower shipments of Brita® water-filtration products, primarily due to continuing category softness and increased competition. Flat earnings from continuing operations before income taxes reflected lower commodity costs, cost savings and favorable product mix. These increases were offset by higher manufacturing and logistics costs and demand building investments.

International

% Change
      2016       2015       2014       2016
to
2015
      2015
to
2014
Net sales $ 997 $ 1,087 $ 1,093 (8 )% (1 )%
Earnings from continuing operations before income taxes 66 79 99   (16 )    (20 )

Fiscal year 2016 versus fiscal year 2015: Volume increased 1%, while net sales and earnings from continuing operations before income taxes decreased by 8% and 16%, respectively, during fiscal year 2016. Volume grew primarily due to higher shipments, mainly in Canada, which included the benefit of Renew Life acquisition, Mexico, and Europe, partially offset by lower shipments in certain other Latin American countries largely due to the impact of price increases taken to offset inflationary pressures. The decline in net sales was primarily due to unfavorable foreign currency exchange rates across multiple countries, including the impact of the significant devaluation of the Argentine peso, partially offset by the benefit of price increases. The decrease in earnings from continuing operations before income taxes was primarily due to lower net sales, unfavorable foreign currency exchange rates, inflationary pressure on manufacturing and logistics costs and higher advertising costs, offset by the benefits of price increases and cost savings.

Fiscal year 2015 versus fiscal year 2014: Volume increased 3%, while net sales and earnings from continuing operations before income taxes decreased 1% and 20%, respectively, during fiscal year 2015. Volume grew primarily due to higher shipments in Latin America, Canada, Europe and Asia. Volume growth outpaced net sales growth primarily due to unfavorable foreign currency exchange rates, partially offset by the benefit of price increases and favorable product mix. The decrease in earnings from continuing operations before income taxes was primarily driven by unfavorable foreign currency exchange rates and inflation across multiple countries, primarily in Argentina (see “Argentina” below), which resulted in higher selling and administrative expenses, higher manufacturing and logistics costs and higher commodity costs. These decreases in earnings were partially offset by the benefit of price increases, favorable product mix and cost savings.

Argentina

The Company operates in Argentina through certain wholly owned subsidiaries (collectively, “Clorox Argentina”). Net sales from Clorox Argentina represented approximately 3% and 4% for the fiscal years ended June 30, 2016 and 2015, respectively, of the Company’s consolidated net sales for those periods. The operating environment in Argentina and the Latin America region continues to present business challenges, including significant devaluing currency and inflation.

Clorox Argentina manufactures products at three plants that it owns and operates across Argentina and markets those products to consumers throughout the country. Products are advertised nationally and sold to consumers through wholesalers and retail outlets located throughout Argentina. Sales are made primarily through the use of Clorox Argentina’s sales force. Small amounts of products produced in Argentina are exported each year, including sales to the Company’s subsidiaries located primarily in Latin America. Clorox Argentina obtains its raw materials almost entirely from local sources. The Company also conducts research and development activities at its owned facility in Buenos Aires, Argentina. Additionally, Clorox Argentina performs marketing, legal, and various other shared service activities to support the Company’s Latin American operations. Clorox Argentina in turn benefits from shared service activities performed within other geographic locations, such as information technology support and manufacturing technical assistance.

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For the fiscal year ended June 30, 2016 and 2015, the value of the Argentine peso (ARS) declined 39% and 10%, respectively. As of June 30, 2016, using the exchange rate of 15 ARS per U.S. dollar (USD), Clorox Argentina had total assets of $77, including cash and cash equivalents of $22, net receivables of $13, inventories of $19, net property, plant and equipment of $15 and intangible assets excluding goodwill of $3. Goodwill for Argentina is aggregated and assessed for impairment at the Latin America reporting unit level, which is part of the Company’s International reportable segment. Based on the results of the annual impairment test performed in the fourth quarter of fiscal year 2016, the fair value of the Latin America reporting unit exceeded its carrying value by more than 20% and reflected unfavorable foreign currency exchange rates across several countries and the Company’s expectations of continued challenges from the Latin America region. Although Argentina is not currently designated as a highly inflationary economy for accounting purposes, further volatility and declines in the exchange rate are expected in the future, which would have an additional adverse impact on Clorox Argentina’s net sales, net earnings, and net monetary asset position.

The Company is closely monitoring developments in Argentina and is taking steps intended to mitigate the adverse conditions, but there can be no assurances that these actions will be able to mitigate these conditions.

Corporate

% Change
       2016        2015        2014        2016
to
2015
       2015
to
2014
Losses from continuing operations before income taxes $ (273) $ (235) $ (227)   16 %     4 %

Corporate includes certain non-allocated administrative costs, interest income, interest expense and other non-operating income and expenses. Corporate assets include cash and cash equivalents, property and equipment, other investments and deferred taxes.

Fiscal year 2016 versus fiscal year 2015: The increase in losses from continuing operations before income was primarily due to higher current year benefits and performance-based employee incentive costs including the prior year change in the Company’s long-term disability plan to bring it more in line with the marketplace, absence of the prior year’s gain on the sale of real estate assets by a low-income housing partnership and increased current year information technology spending to support the Company’s initiatives. This was partially offset by lower current year interest expense primarily due to a lower weighted-average interest rate on total debt.

Fiscal year 2015 versus fiscal year 2014: The increase in losses from continuing operations before income taxes was primarily due to higher performance-based incentive costs as a result of fiscal year financial performance exceeding financial targets, compared to the prior year which reflected lower performance-based incentive costs when the Company’s results fell below financial targets. This factor was partially offset by cost savings, a gain on the sale of real estate assets by a low-income housing partnership and benefits from a change in the Company’s long-term disability plan to bring it more in line with the marketplace.

FINANCIAL POSITION AND LIQUIDITY

Management’s discussion and analysis of the Company’s financial position and liquidity describes its consolidated operating, investing and financing activities from continuing operations, contractual obligations and off-balance sheet arrangements.

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Appendix A

The following table summarizes cash activities from continuing operations for the years ended June 30:

      2016         2015         2014
Net cash provided by continuing operations $ 768 $ 858   $ 786
Net cash used for investing activities (430 ) (106 ) (137 )
Net cash used for financing activities (316 ) (696 ) (592 )

The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional tax costs in excess of tax benefits. However, these cash balances held by foreign subsidiaries are generally available without legal restriction to fund local business operations.

In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in Other (income) expense, net. The Company’s cash holdings at June 30 were as follows:

      2016       2015       2014
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent $ 249 $ 221 $ 180   
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries 133 142 132
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries 19 19 12
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries 5
Total $ 401 $ 382 $ 329
 

The Company’s total cash balance was $401 as of June 30, 2016, as compared to $382 as of June 30, 2015. The increase of $19 was primarily attributable to $768 of net cash provided by continuing operations, largely offset by cash used in investing activities of $430, which included the $290 acquisition of Renew Life and $172 in capital expenditures, and cash used in financing activities of $316, which included cash dividends of $398 and share repurchases of $254, partially offset by proceeds from the issuance of common stock for employee stock plans of $210 and incremental borrowings of $126.

The Company’s total cash balance was $382 as of June 30, 2015, as compared to $329 as of June 30, 2014. The increase of $53 was primarily attributable to $858 of net cash provided by continuing operations, $495 of net proceeds from the December 2014 long-term debt issuance and $251 of proceeds from the issuance of common stock for employee stock plans. These increases were partially offset by $575 of repayments of long-term debt, $434 of share repurchases, $385 of dividend payments, $125 of capital expenditures and $48 of repayments of commercial paper borrowings.

Operating Activities

Net cash provided by continuing operations decreased to $768 in fiscal year 2016 from $858 in fiscal year 2015. The decrease reflected higher payments in the current year for both taxes and performance-based employee incentive compensation related to the Company’s strong 2015 fiscal year results. These factors were partially offset by higher earnings from continuing operations in fiscal year 2016 and $25 in prior year payments to settle interest-rate hedges related to the Company’s issuance of long-term debt.

Net cash provided by continuing operations increased to $858 in fiscal year 2015 from $786 in fiscal year 2014. The increase was primarily due to the company’s fiscal year performance, including solid net sales growth and margin expansion. Other contributing factors include lower performance-based incentive payments related to the company’s fiscal year 2014 performance and lower tax payments in the current period, as well as the initial funding of the company’s non-qualified deferred compensation plan in the year-ago period. These benefits were partially offset by $25 in payments to settle interest-rate hedges related to the company’s issuance of long-term debt in December 2014.

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Investing Activities

Capital expenditures were $172, $125 and $137, respectively, in fiscal years 2016, 2015 and 2014. Capital spending as a percentage of net sales was 3.0%, 2.2% and 2.5% for fiscal years 2016, 2015 and 2014, respectively. The increase in fiscal year 2016 was due to additional capital spending to drive cost savings and to support innovation and growth. The relatively flat fiscal year 2015 capital spending as a percentage of net sales was due to prudent management of capital spending against manufacturing, technology and facility projects which meet growth, efficiency, replacement or compliance requirements.

In April 2016, the Company sold its Los Angeles bleach manufacturing facility, resulting in $20 in cash proceeds from investing activities and a gain of $(11) recorded in Other (income) expense, net, on the consolidated statement of earnings for the year ended June 30, 2016. In September 2015, the Company sold its corporate jet to an unrelated party for cash proceeds of $11.

In April 2015, a low-income housing partnership, in which the Company was a limited partner, sold its real estate holdings. The real property sale resulted in $15 in cash proceeds from investing activities and a gain of $(14) recorded in Other (income) expense, net, on the consolidated statement of earnings for the year ended June 30, 2015.

Acquisition

On May 2, 2016, the Company acquired Renew Life, a leading brand in digestive health. The amount paid was $290 funded through commercial paper.

Free cash flow

      2016       2015       2014
Net cash provided by continuing operations $ 768 $ 858 $ 786
Less: capital expenditures (172 ) (125 ) (137 )
Free cash flow $ 596 $ 733 $ 649
Free cash flow as a percentage of net sales 10.3% 13.0% 11.8%

Financing Activities

Capital Resources and Liquidity

Net cash used for financing activities was $316 in fiscal year 2016, as compared to $696 in fiscal year 2015. Net cash used for financing activities was lower in fiscal year 2016, mainly driven by the increase in net borrowings to fund the Renew Life acquisition.

Net cash used for financing activities was $696 in fiscal year 2015, as compared to $592 in fiscal year 2014. Net cash used for financing activities was higher in fiscal year 2015 due to a net reduction in long-term debt and an increase in share repurchases and dividends paid. These factors were partially offset by an increase in proceeds from the issuance of common stock for employee stock plans.

Credit Arrangements

As of June 30, 2016, the Company had a $1,100 revolving credit agreement (the Credit Agreement), which expires in October 2019. There were no borrowings under the Credit Agreement as of June 30, 2016 or 2015, and the Company believes that borrowings under the Credit Agreement are and will continue to be available for general corporate purposes. The agreement includes certain restrictive covenants and limitations. The primary restrictive covenant is a maximum ratio of total debt to earnings before interest, taxes, depreciation and amortization and intangible asset impairment (Consolidated EBITDA) for the trailing four quarters (Consolidated Leverage ratio), as defined and described in the Credit Agreement, of 3.50.

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Appendix A

The following table sets forth the calculation of the Consolidated Leverage ratio as of June 30, using Consolidated EBITDA for the trailing four quarters, as contractually defined:

      2016   
Earnings from continuing operations $ 648
Add back:
       Interest expense 88
       Income tax expense 335
       Depreciation and amortization 165
       Noncash intangible asset impairment charges 9
Deduct:
       Interest income 5
Consolidated EBITDA $ 1,240
Total debt $ 2,320
Consolidated Leverage ratio 1.87
 

The Company was in compliance with all restrictive covenants and limitations in the credit agreement as of June 30, 2016, and anticipates being in compliance with all restrictive covenants for the foreseeable future. The Company continues to monitor the financial markets and assess its ability to fully draw on its revolving credit agreement, and currently expects that any drawing on the agreement will be fully funded.

Of the $28 of foreign and other credit lines as of June 30, 2016, $5 was outstanding and the remainder of $23 was available for borrowing. Of the $29 of foreign and other credit lines as of June 30, 2015, $4 was outstanding and the remainder of $25 was available for borrowing.

Short-term Borrowings

The Company’s notes and loans payable include U.S. commercial paper issued by the parent company and a short-term loan held by a non-U.S. subsidiary. These short-term borrowings have stated maturities less than one year and provide supplemental funding for supporting operations. The level of U.S. commercial paper borrowings generally fluctuate depending upon the amount and timing of operating cash flows and payments for items such as dividends, income taxes, share repurchases and pension contributions. The average balance of U.S. commercial paper borrowings outstanding was $371 and $104 for the fiscal year ended June 30, 2016 and 2015, respectively.

Long-term Borrowings

In November 2015, $300 of the Company’s senior notes with an annual fixed interest rate of 3.55% became due and were repaid using commercial paper borrowings and cash on hand.

In January 2015, $575 of the Company’s senior notes with an annual fixed interest rate of 5.00% became due and were repaid using the net proceeds from the December 2014 debt issuance and commercial paper borrowings.

In December 2014, under a shelf registration statement filed with the SEC that will expire in December 2017, the Company issued $500 of senior notes with an annual fixed interest rate of 3.50%. Interest on the notes is payable semi-annually in June and December and the notes have a maturity date of December 15, 2024. The notes carry an effective interest rate of 4.10%, which includes the impact from the settlement of interest rate forward contracts in December 2014 (see Notes to Consolidated Financial Statements). The notes rank equally with all of the Company’s existing senior indebtedness.

Based on the Company’s working capital requirements, anticipated ability to generate positive cash flows from operations in the future, investment-grade credit ratings, demonstrated access to long- and short-term credit markets and current borrowing availability under credit agreements, the Company believes it will have the funds necessary to meet its financing requirements and other fixed obligations as they become due. The Company may consider other transactions which may require the issuance of additional long- and/or short-term debt or other securities to finance acquisitions,

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repurchase shares, refinance debt or fund other activities for general business purposes. Such transactions could require funds in excess of the Company’s current cash levels and available credit lines, and the Company’s access to or cost of such additional funds could be adversely affected by any decrease in credit ratings, which were the following as of June 30:

2016 2015
      Short-term       Long-term       Short-term       Long-term
Standard and Poor’s A-2 BBB+ A-2 BBB+
Moody’s P-2 Baal P-2 Baa1

Share Repurchases and Dividend Payments

The Company has two share repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to $750, all of which was available for share repurchases as of both June 30, 2016 and 2015, and a program to offset the anticipated impact of share dilution related to share-based awards (the Evergreen Program), which has no authorization limit as to amount or timing of repurchases.

Share repurchases under authorized programs were as follows during the fiscal years ended June 30:

2016 2015 2014
      Amount       Shares
(000)
      Amount       Shares
(000)
      Amount       Shares
(000)
  
Open-market purchase programs         $               $         $
Evergreen Program 254 2,151 434 4,016 260 3,046
Total $ 254 2,151 $ 434 4,016 $ 260 3,046
 

Dividends per share and total dividends amount paid were as follows during the fiscal years ended June 30:

      2016       2015       2014
Dividends per share declared $ 3.11 $ 2.99 $ 2.87
Total dividends paid 398 385 368

Contractual Obligations

The Company had contractual obligations as of June 30, 2016, payable or maturing in the following fiscal years:

      2017       2018       2019       2020       2021       Thereafter       Total   
Long-term debt maturities including interest payments       $ 72       460       48       47       47         1,495       $ 2,169
Notes and loans payable 523 523
Purchase obligations(1) 150 54 37 12 2 1 256
Capital leases 3 2 1 6
Operating leases 49 45 38 32 29