DEF 14A 1 ltgt2017_def14a.htm TARGET CORPORATION - DEF 14A TARGET CORPORATION - DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

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

 

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TARGET CORPORATION

 

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Notice of 2017 annual meeting of shareholders

 

Wednesday, June 14, 2017

 

9:00 a.m. Eastern Daylight Time

 

The Westin Cincinnati located at 21 East 5th Street,
Cincinnati, Ohio 45202

 

To our shareholders,

 

You are invited to attend Target Corporation’s 2017 annual meeting of shareholders (Annual Meeting) to be held at The Westin Cincinnati located at 21 East 5th Street, Cincinnati, Ohio 45202 on Wednesday, June 14, 2017 at 9:00 a.m. Eastern Daylight Time.

 

Purpose

 

Shareholders will vote on the following items of business:

 

1. Election of all 12 directors named in our proxy statement to our Board of Directors for the coming year;
2. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm;
3. Approval, on an advisory basis, of our executive compensation (“Say on Pay”);
4. Approval, on an advisory basis, of the frequency of our Say on Pay votes;
5. Approval of the Target Corporation Executive Officer Cash Incentive Plan; and
6. Transaction of any other business properly brought before the Annual Meeting or any adjournment.

 

You may vote if you were a shareholder of record at the close of business on April 17, 2017. We hope you will be able to attend the Annual Meeting, but if you cannot do so, it is important that your shares be represented. If you plan to attend the Annual Meeting, please follow the instructions provided in Question 12 “How can I attend the Annual Meeting?” on page 63 of the proxy statement.

 

Following the formal business of the Annual Meeting, our Chairman and Chief Executive Officer will provide prepared remarks, followed by a question and answer session.

 

We urge you to read the proxy statement carefully and to vote in accordance with the Board of Directors’ recommendations by telephone or Internet, or by signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided, whether or not you plan to attend the Annual Meeting.

 

Thank you for your continued support.

 

Sincerely,

 

Don H. Liu  
Corporate Secretary Approximate Date of Mailing of Proxy Materials or
  Notice of Internet Availability:
   
  May 1, 2017

 

  TARGET CORPORATION 2017 Proxy Statement 3
 
  Table of
contents

 

Proxy summary 5
   
Notice of internet availability of proxy materials 6
   
General information about corporate governance and the Board of Directors 7
   
Corporate governance highlights 7
Our directors 8
Board leadership structure 8
Committees 9
Committee composition and leadership 10
Risk oversight 11
Our capital allocation policy and priorities 12
Board’s role in management evaluations and management succession planning 13
Corporate responsibility and reputation 13
Board and shareholder meeting attendance 13
Director independence 13
Policy on transactions with related persons 14
Business ethics and conduct 14
Communications with directors and shareholder outreach 14
   
Item one     Election of directors 15
   
Election and nomination process 15
Determining board composition 15
Board evaluations and refreshment 16
2017 Nominees for director 17
   
Stock ownership information 24
   
Stock ownership guidelines 24
Beneficial ownership of directors and officers 26
Beneficial ownership of Target’s largest shareholders 27
Section 16(a) beneficial ownership reporting compliance 27
   
Human Resources & Compensation Committee Report 28
   
Compensation Discussion and Analysis 28
   
Introduction 28
Executive summary 29
Our performance framework for executive compensation 33
Other benefit elements 38
Compensation governance 39
   
Compensation tables 42
   
Summary compensation table 42
Grants of plan-based awards in fiscal 2016 44
Outstanding equity awards at 2016 fiscal year-end 45
Option exercises and stock vested in fiscal 2016 46
Pension benefits for fiscal 2016 46
Nonqualified deferred compensation for fiscal 2016 47
Potential payments upon termination or change-in-control 48
Table of potential payments upon termination or change-in-control 48
Director compensation 52
Equity compensation plan information 54
Advances of defense costs for certain litigation matters 54
   
Other voting items 55
   
Item two Ratification of appointment of Ernst & Young LLP as independent registered public accounting firm 55
Item three    Advisory approval of executive compensation (Say on Pay) 57
Item four Advisory approval of the frequency of Say on Pay votes 58
Item five Approval of the Target Corporation Executive Officer Cash Incentive Plan 59
   
Questions and answers about our Annual Meeting and voting 61
   
Appendix A Target Corporation Executive Officer Cash Incentive Plan 67

 

  TARGET CORPORATION 2017 Proxy Statement 4
 
Proxy
summary

 

This summary highlights information described in other parts of this proxy statement and does not contain all of the information you should consider in voting. Please read the entire proxy statement carefully before voting.

 

The Board of Directors of Target Corporation solicits the enclosed proxy for the 2017 Annual Meeting of Shareholders and for any adjournment thereof.

 

Target 2017 annual meeting of shareholders

 

Date june 14 2017 Time 9:00 a.m.Eastern Daylight Time Location The Westin Cincinnati 21 East 5th Street Cincinnati, Ohio 45202

 

Items of business

 

  Board’s
Item Recommendation
Election of 12 directors (page 15) FOR each Director Nominee
Ratification of independent registered public accounting firm (page 55) FOR
Advisory approval of executive compensation (“Say on Pay”) (page 57) FOR
Advisory approval of the frequency of Say on Pay votes (page 58) 1 YEAR
Approval of the Target Corporation Executive Officer Cash Incentive Plan (page 59) FOR

 

Questions and answers about our Annual Meeting and voting

 

We encourage you to review the “Questions and Answers About Our Annual Meeting and Voting” beginning on page 61 for answers to common questions on the rules and procedures surrounding the proxy and Annual Meeting process as well as the business to be conducted at our Annual Meeting.

 

Admission at the Annual Meeting

 

If you plan to attend the Annual Meeting in person, please see the information in Question 12 “How can I attend the Annual Meeting?” on page 63. We strongly encourage you to pre-register. If you plan to bring a guest or are attending as an authorized representative of a shareholder you must pre-register by June 9, 2017. Any person who does not present identification and establish proof of ownership will not be admitted to the Annual Meeting.

 

Voting

 

If you held shares of Target common stock as of the record date (April 17, 2017), you are entitled to vote at the Annual Meeting.

 

 Your vote is important. Thank you for voting.

 

  TARGET CORPORATION 2017 Proxy Statement 5
 

Advance voting methods and deadlines

 

Method  Internet  Telephone  Mail
Instruction

● Go to website identified on proxy card, voter instruction form or Notice of Internet Availability of Proxy Materials

● Enter Control Number on proxy card, voter instruction form or Notice of Internet Availability of Proxy Materials

● Follow instructions on the screen

● Call the toll-free number identified on the enclosed proxy card or voter instruction form or, after viewing the proxy materials on the website provided in your Notice of Internet Availability of Proxy Materials, call the toll-free number for telephone voting identified on the website

● Enter Control Number on the proxy card, voter instruction form or Notice of Internet Availability of Proxy Materials

● Follow the recorded instructions

● Mark your selections on the enclosed proxy card or voter instruction form

● Date and sign your name exactly as it appears on the proxy card or voter instruction form

● Promptly mail the proxy card or voter instruction form in the enclosed postage-paid envelope

Deadline

Internet and telephone voting are available 24 hours a day, seven days a week up to these deadlines:

● Registered Shareholders or Beneficial Owners –11:59 p.m. Eastern Daylight Time on June 13, 2017

● Participants in the Target 401(k) Plan – 6:00 a.m. Eastern Daylight Time on June 12, 2017

Return promptly to ensure proxy card or voter instruction form is received before the date of the Annual Meeting or, for participants in the Target 401(k) Plan, by 6:00 a.m. Eastern Daylight Time on June 12, 2017

 

If you received a Notice of Internet Availability of Proxy Materials and would like to vote by mail, you must follow the instructions on the Notice to request a written copy of the proxy materials, which will include a proxy card or voter instruction form.

 

Any proxy may be revoked at any time prior to its exercise at the Annual Meeting. Please see the information in Question 3 “What is a proxy and what is a proxy statement?” on page 61.

 

Voting at the Annual Meeting

 

All registered shareholders may vote in person at the Annual Meeting. Beneficial owners may vote in person at the Annual Meeting if they have a legal proxy. Please see the information in Question 6 “How do I vote?” on page 61. In either case, shareholders wishing to attend the Annual Meeting must follow the procedures in Question 12 “How can I attend the Annual Meeting?” on page 63.

 

Notice of internet availability of proxy materials

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be held on June 14, 2017.

 

The proxy statement and annual report are available at www.proxyvote.com.

 

  TARGET CORPORATION 2017 Proxy Statement 6
 

General information about corporate governance and the Board of Directors

 

Corporate governance highlights

 

Practice Description More
information
Board composition and accountability  
Independence A majority of our directors must be independent. Currently, all of our directors other than our CEO are independent, and all of our Committees consist exclusively of independent directors.
Diversity The composition of our Board represents broad perspectives, experiences and knowledge relevant to our business while maintaining a balanced approach to gender and ethnic diversity.
Lead Independent Director Our Corporate Governance Guidelines require a Lead Independent Director position with specific responsibilities to ensure independent oversight of management whenever our CEO is also the Chair of the Board. The Lead Independent Director and the Chair of the Board are elected annually by the independent directors.
Management Succession Planning Review Our Board conducts an annual review of management development and succession planning, with more frequent reviews conducted by the Human Resources & Compensation Committee.
Director Tenure Policies Our director tenure policies include mandatory retirement at age 72 and a maximum term limit of 20 years in order to ensure the Board regularly benefits from a balanced mix of perspectives and experiences. In addition, a director is required to submit an offer of resignation for consideration by the Board upon any change in the director’s principal employment.
Director Overboarding Policy Any director who is not serving as CEO of a public company is expected to serve on no more than five public company boards (including our Board), and any director serving as a CEO of a public company is expected to serve on no more than two outside public company boards (including our Board).  
Committee Membership and Leadership Rotations The Board appoints members of its Committees on an annual basis, with the Nominating & Governance Committee reviewing and recommending Committee membership, and assignments rotate periodically. The guideline for rotating Committee Chair assignments and the Lead Independent Director position is four to six years.
Board Evaluations and Board Refreshment The Board regularly evaluates its performance through self-evaluations, corporate governance reviews and periodic Charter reviews. Those evaluations, along with assessments of changes in our business strategy or operating environment and the future needs of the Board in light of anticipated director retirements, are used to identify desired backgrounds and skill sets for future Board members.
Risk Oversight We disclose how risk oversight is exercised at the Board and Committee levels and how risk oversight responsibilities are allocated among the Committees.
Capital Allocation Policies and Priorities We disclose our capital allocation policies and priorities and how they are overseen by the Board and its Committees.  
Shareholder rights    
Annual Election of Directors All directors are elected annually, which reinforces our Board’s accountability to shareholders.
Majority Voting Standard for Director Elections Our Articles of Incorporation mandate that directors be elected under a “majority voting” standard in uncontested elections—each director must receive more votes “For” his or her election than votes “Against” in order to be elected.
Director Resignation Policy An incumbent director who is not re-elected must promptly offer to resign. The Nominating & Governance Committee will make a recommendation on the offer, and the Board must accept or reject the offer within 90 days and publicly disclose its decision and rationale.
Proxy Access We allow each shareholder, or a group of up to 20 shareholders, owning 3% or more of Target common stock continuously for at least three years, to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board of Directors or at least two directors.
Single Voting Class Target common stock is the only class of voting shares outstanding.
10% Threshold for Special Meetings Shareholders holding 10% or more of Target’s outstanding stock have the right to call a special meeting of shareholders.  
No Poison Pill We do not have a poison pill.  
Compensation    
Follow Leading Practices See “Target’s Executive Compensation Practices.”

 

  TARGET CORPORATION 2017 Proxy Statement 7
 

Our directors

 

                        Other current
                        public
        Director               company
Name   Age   since   Company   Title   Independent   boards
Roxanne S. Austin   56   2002   Austin Investment Advisors   President   Yes   3
Douglas M. Baker, Jr.   58   2013   Ecolab Inc.   Chairman & CEO   Yes   2
Brian C. Cornell   58   2014   Target Corporation   Chairman & CEO   No   1
Calvin Darden   67   2003   Darden Putnam Energy & Logistics, LLC   Chairman   Yes   1
Henrique De Castro   51   2013   Yahoo! Inc. (Until January 2014)   Former COO   Yes   0
Robert L. Edwards   61   2015   AB Acquisition LLC (Albertsons/Safeway) (Until April 2015)   Former President & CEO   Yes   1
Melanie L. Healey   56   2015   The Procter & Gamble Company (Until December 2014)   Former Group President, North America   Yes   2
Donald R. Knauss   66   2015   The Clorox Company (Until June 2015)   Former Executive Chairman   Yes   2
Monica C. Lozano   60   2016   U.S. Hispanic Media, Inc. (Until January 2016)   Former Chairman   Yes   1
Mary E. Minnick   57   2005   Lion Capital LLP   Partner   Yes   0
Anne M. Mulcahy(1)   64   1997   Save The Children Federation, Inc.   Former Chair of the Board of Trustees   Yes   3
Derica W. Rice   52   2007   Eli Lilly and Company   EVP, Global Services & CFO   Yes   0
Kenneth L. Salazar   62   2013   WilmerHale   Partner   Yes   0
(1)Ms. Mulcahy will retire from the Board when her current term ends at the Annual Meeting in connection with our mandatory retirement policy.

 

Board leadership structure

 

We do not have an express policy as to whether the roles of Chair of the Board and Chief Executive Officer (CEO) should be combined or separated. Instead, the Board prefers to maintain the flexibility to determine which leadership structure best serves the interests of Target and our shareholders based on the evolving needs of the company. We currently have a combined Chair/CEO leadership structure. The Board regularly reevaluates our Board leadership structure as part of the Board evaluation process described under “Board Evaluations and Refreshment” on page 16 and also considers shareholder feedback on the topic. As a result of its most recent evaluation, the Board decided to continue having Mr. Cornell serve as both Chairman and CEO to allow him to coordinate the development, articulation and execution of a unified strategy at the Board and management levels. Where the Chair/CEO roles are combined as they are currently, our Corporate Governance Guidelines require that we have a Lead Independent Director position to complement the Chair’s role, and to serve as the principal liaison between the non-management directors and the Chair. Mr. Baker currently serves as our Lead Independent Director, providing effective, independent leadership of our Board through his clearly defined and robust set of roles and responsibilities.

 

Our Corporate Governance Guidelines require that both the Chairman and Lead Independent Director be elected annually by the independent, non-management directors, which ensures that the leadership structure is reviewed at least annually. The Board is committed to continuing to seek shareholder feedback on its approach as part of its ongoing shareholder outreach efforts, and will continue to reassess its Board leadership structure on a regular basis.

 

Douglas M. Baker, Jr. Lead independent director Regular duties: Has the authority to convene meetings of the Board and executive sessions consisting solely of independent directors at every meeting; Presides at all meetings of the Board of Directors at which the Chair is not present, including executive sessions of independent directors; Conducts the annual performance reviews of the CEO, with input from the other independent directors, and serves as the primary liaison between the CEO and the independent directors; Provides insights to the Human Resources &Compensation Committee as it annually reviews the performance of the CEO for purposes of all elements of the CEO’s compensation; Approves meeting schedules, agendas and the information furnished to the Board to ensure that the Board has adequate time and information for discussion; Is expected to engage in consultation and direct communication with major shareholders, as appropriate; Coordinates with the CEO to establish minimum expectations for non-management directors to consistently monitor Target’s retail operations and those of our competitors; and Consults with the Nominating &Governance Committee regarding Board and Committee composition, Committee Chair selection, the annual performance review of the Board and its Committees, and director succession planning. Annual election: Elected annually by the independent, non-management directors. Service: As a guideline, the Lead Independent Director should serve in that capacity for no more than four to six years.

 

  TARGET CORPORATION 2017 Proxy Statement 8
 

Committees

 

The Board has the following Committees and Committee composition as of the date of this proxy statement. All members of each Committee are independent directors. Each Committee operates under a written Charter, a current copy of which is available on our company website, as described in Question 14 on page 65.

 

Audit & Finance Committee(1) Responsibilities Assists the Board in overseeing our financial reporting process, including the integrity of our financial statements and internal controls, the independent auditor’s qualifications and independence, performance of our internal audit function and approval of transactions with related persons Prepares the “Report of the Audit &Finance Committee” on page 56 and performs the duties and activities described in that report Discusses with management our positions with respect to income and other tax obligations Reviews with management our risk assessment and management policies and our major financial, accounting and compliance risk exposures; conducts a joint meeting annually with the Risk &Compliance Committee to review legal and regulatory risk and compliance matters Assists the Board in overseeing our financial policies, financial condition, including our liquidity position, funding requirements, ability to access the capital markets, interest rate exposures and policies regarding return of cash to shareholders Committee members Mr. Rice (Chair) Ms. Lozano Ms. Minnick Number of meetings during fiscal 2016 7 (1) The Board of Directors has determined that all members of the Audit &Finance Committee satisfy the applicable audit committee independence requirements of the New York Stock Exchange (NYSE) and the Securities and Exchange Commission (SEC). The Board also determined that all members have acquired the attributes necessary to qualify them as “audit committee financial experts” as defined by applicable SEC rules. The determination for each of Ms. Lozano and Mr. Rice was based on past experiences as a principal financial officer, principal accounting officer, controller, public accountant or auditor, or actively supervising a person holding one of those positions. For Ms. Minnick, the determination was based on her experience with analyzing the financial statements and financial performance of portfolio companies of Lion Capital.

 

Human Resources &Compensation Committee(2) Responsibilities Reviews our compensation philosophy, selection and relative weightings of different compensation elements to balance risk, reward and retention objectives and the alignment of incentive compensation performance measures with our strategy Determines the composition and value of non-CEO executive officer compensation and makes recommendations with respect to CEO compensation to the independent members of the Board, who collectively have final approval authority Reviews the compensation provided to non-management directors and makes recommendations to the independent members of the Board Prepares the “Human Resources &Compensation Committee Report” on page 28 Oversees risks associated with our compensation policies and practices, and annually reviews with its compensation consultant whether those policies and practices create material risks to Target Oversees management development, evaluation and succession planning Committee members Ms. Mulcahy (Chair) Ms. Austin Mr. Darden Mr. De Castro Ms. Healey Mr. Knauss Number of meetings during fiscal 2016 4 (2) The Board of Directors has determined that all members of the Human Resources & Compensation Committee satisfy the applicable compensation committee independence requirements of the NYSE and the SEC.

 

Nominating &Governance Committee Responsibilities Oversees our corporate governance practices Leads director succession planning and identifies individuals qualified to become Board members Makes recommendations, in consultation with the Lead Independent Director, on overall composition of the Board, its Committees, and the selection of the Committee Chairs and the Lead Independent Director Leads the annual self-evaluation performance review of the Board and its Committees in consultation with the Lead Independent Director Oversees policies and practices regarding public advocacy and political activities Periodically reviews our Committee Charters and Corporate Governance Guidelines Committee members Mr. Baker (Chair) Mr. Darden Mr. Knauss Ms. Lozano Number of meetings during fiscal 2016 3

 

  TARGET CORPORATION 2017 Proxy Statement 9
 

Risk &Compliance Committee Responsibilities Assists the Board in overseeing management’s identification and evaluation of our principal operational, business and compliance risks, including our risk management framework and the policies, procedures and practices employed to manage risks Oversees and monitors the effectiveness of our business ethics and compliance program Supports the Audit & Finance Committee in oversight of compliance with legal and regulatory requirements Committee members Mr. Salazar (Chair) Ms. Austin Mr. Baker Mr. Edwards Ms. Mulcahy Mr. Rice Number of meetings during fiscal 2016 5

 

Infrastructure & Investment Committee Responsibilities Assists the Board in overseeing our investment activity, including alignment of investments with our strategy and evaluating the effectiveness of investment decisions Oversees management’s resource allocation plans regarding infrastructure requirements Reviews management’s plans for business development, business acquisitions and other significant business relationships, including alignment of opportunities with our strategic objectives, expected return on investment and post-acquisition integration and performance of acquired businesses Committee members Mr. Edwards (Chair) Mr. De Castro Ms. Healey Ms. Minnick Mr. Salazar Number of meetings during fiscal 2016 3

 

Committee composition and leadership

 

The Board appoints members of its Committees on an annual basis, with the Nominating & Governance Committee reviewing and recommending Committee membership, and assignments rotate periodically. The following considerations provide the framework for determining Committee composition and leadership:

 

The guideline for rotating Committee Chair assignments is four to six years, and six to twelve months before the date of a director’s anticipated retirement from the Board;
The Board seeks to have directors on two to three Committees;
The Board considers a number of factors in deciding Committee composition, including individual director experience and qualifications, prior Committee experience and increased time commitments for directors serving as a Committee Chair or Lead Independent Director;
By virtue of the position, the Lead Independent Director is a member of the Nominating & Governance Committee; and
To enhance risk oversight coordination, each Committee Chair serves on the Risk & Compliance Committee.

 

As part of the Nominating & Governance Committee’s annual review, in November 2016 Roxanne Austin was added to the Human Resources & Compensation Committee with the intention that she will become Chair of the Human Resources & Compensation Committee when Anne Mulcahy retires from the Board when her current term ends at the Annual Meeting.

 

  TARGET CORPORATION 2017 Proxy Statement 10
 

Risk oversight

 

A summary of the allocation of general risk oversight functions among management, the Board and its Committees is as follows:

 

Board of Directors Continuous oversight of overall risks, with emphasis on strategic risks, as well as reputation and corporate social responsibility efforts Audit & Finance Committee Financial reporting, internal controls and financial risks Risk & Compliance Committee Principal operating, business, and compliance risks, including information security and incident response Human Resources & Compensation Committee Compensation policies, practices and incentive-related risks, organizational talent and culture, and management succession risks Nominating & Governance Committee Governance structure, Board succession and public policy engagement risks Infrastructure & Investment Committee Risks related to capital expenditures, major expense commitments and infrastructure needs Management Identification, assessment and management of risks

 

The primary responsibility for the identification, assessment and management of the various risks that we face belongs with management. At the management level, risks are prioritized and assigned to senior leaders based on the risk’s relationship to the leader’s business area and focus. Those senior leaders develop plans to address the risks and measure the progress of risk management efforts. Our Chief Risk & Compliance Officer provides centralized oversight of Target’s enterprise risk management program. Our Chairman and CEO and his direct reports meet regularly with the Chief Risk & Compliance Officer to identify, assess and manage risks facing the business. In addition, the Chief Risk & Compliance Officer and other enterprise risk management team members regularly meet with leaders of business areas to inform, coordinate and manage the enterprise risk management program.

 

The Board’s oversight of these risks occurs as an integral and continuous part of the Board’s oversight of our business and seeks to ensure that management has in place processes to deal appropriately with risk. For example, our principal strategic risks are reviewed as part of the Board’s regular discussion and consideration of our strategy, and the alignment of specific initiatives with that strategy. Similarly, at every meeting the Board reviews the principal factors influencing our operating results, including the competitive environment, and discusses with our senior executive officers the major events, activities and challenges affecting the company. The Board’s ongoing oversight of risk also occurs at the Board Committee level on a more focused basis. To help coordinate the oversight of different risks, each Committee Chair is a member of the Risk & Compliance Committee. The Chief Risk & Compliance Officer annually presents an overview of the enterprise risk management program to the Board’s Risk & Compliance Committee and provides them with regular updates on the program and status of key risks facing the business. In addition, the Risk & Compliance Committee and Audit & Finance Committee annually conduct a joint meeting to review legal and regulatory risk and compliance matters.

 

  TARGET CORPORATION 2017 Proxy Statement 11
 

Our capital allocation policy and priorities

 

Three capital allocation priorities

 

Development and execution of our capital allocation policy are primarily the responsibility of our management and are overseen by the Board and its Committees. Our management follows a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance:

 

Priorities   Description
1. Investing in our Business   Fully invest in opportunities to grow our business profitably, create sustainable long-term value, and maintain our current operations and assets
2. Annual Dividend   Maintain a competitive quarterly dividend and seek to grow it annually
3. Share Repurchase   Return excess cash to shareholders by repurchasing shares within the limits of our credit rating goals

 

Dividend and share repurchase philosophy

 

Our business generates more cash than we currently need to fully invest in the growth and long-term health of our business, so we return excess cash to shareholders through an appropriate balance between dividends and share repurchase. We believe that both dividends and share repurchases serve important purposes. We believe that our dividend should be competitive, reliable and sustainable. We also believe that share repurchase is the most effective way to return any excess cash to shareholders after we have met our other priorities of fully investing in our business and maintaining a competitive dividend, because it allows shareholders to redeploy the cash as they choose, while providing us with appropriate flexibility to respond to changes in our operating performance and investment opportunities. For example, we suspended all share repurchase activity for a period from the middle of 2013 through early 2015 in response to changes in our operating performance, but we continued to invest in our business, maintained our quarterly dividend and grew our annual dividend during the entire period.

 

Capital allocation oversight

 

The Board of Directors and its Committees share responsibility for overseeing capital allocation among our three capital allocation priorities:

 

Responsible party   General oversight area   Description of responsibilities
Board of Directors   All Capital Allocation Priorities   Balance three main priorities appropriately for the growth and long-term health of our business and shareholders
        Review annual and long-term capital and operating plans, including planned share repurchase activities
        Authorize dividends and share repurchase programs
Infrastructure & Investment Committee   Investing in Our Business   Monitor the overall level of investments in opportunities to create sustainable long-term value
        Review alignment of investments with our strategies
        Evaluate effectiveness of investments in achieving appropriate returns
Audit & Finance Committee   Annual Dividend and Share Repurchase Priorities   Oversee liquidity to support operations and investments
      Evaluate capacity for and competitiveness of annual dividends
        Monitor execution of share repurchase activity
        Review management’s credit rating goals
        Provide recommendations to full Board on amount of dividends and share repurchase authorization levels
Human Resources & Compensation Committee   Compensation Effects of All Capital Allocation Priorities   Consider effects of our capital allocation strategy during compensation plan design and goal-setting process
        Receive regular performance updates
        Retain ability to use discretion to adjust payouts where extraordinary circumstances occur

 

The mix of responsibilities between the Board of Directors and its Committees ensures that we are fully investing in the growth and long-term health of our business and pursuing our strategic priorities. In addition, it ensures that distribution of any cash remaining after investing our business is in the best interests of shareholders and without unintended consequences.

 

  TARGET CORPORATION 2017 Proxy Statement 12
 

Board’s role in management evaluations and management succession planning

 

One of the primary responsibilities of the Board is to ensure that Target has a high-performing management team in place. On an annual basis, the Board conducts a detailed review of management development and succession planning activities to maximize the pool of internal candidates who can assume top management positions without undue interruption. In addition to the annual review, the Human Resources & Compensation Committee conducts regular reviews of talent development and succession planning activities with a deeper focus than the full Board review, emphasizing career development of promising management talent.

 

Corporate responsibility and reputation

 

Target recognizes that environmental, social and governance issues are of increasing importance to many investors. We have a longstanding dedication to improving the communities where we operate. We know that working together with our team members, guests, suppliers and communities creates better outcomes on issues that matter to us all. Corporate social responsibility is an enterprise-wide commitment informed by and integrated into our business strategy.

 

We are especially proud that since 1946, we have given 5 percent of our profit to communities. Our Board of Directors monitors and supports corporate responsibility efforts, and we publish an annual Corporate Social Responsibility Report, which uses the Global Reporting Initiative framework, to share our work.

 

Our most recent report, published in June 2016, covers a variety of topics, including responsible sourcing practices, diversity and inclusion, responsible products, environmental standards, stakeholder engagement, corporate philanthropy and volunteerism. Through our Corporate Social Responsibility reports, we set goals in a variety of areas, including those relating to the environment and sustainability, and report our progress on those goals. A copy of our most recent Corporate Social Responsibility Report is available on our company website, as described in Question 14 on page 65.

 

Board and shareholder meeting attendance

 

The Board of Directors met six times during fiscal 2016. All directors attended at least 75% of the aggregate total of meetings of the Board and Board Committees on which the director served during the last fiscal year.

 

Thirteen of our fourteen then-serving directors attended our June 2016 Annual Meeting of Shareholders. The Board has a policy requiring all directors to attend all annual meetings of shareholders, absent extraordinary circumstances.

 

Director independence

 

The Board of Directors believes that a majority of its members should be independent directors. The Board annually reviews all relationships that directors have with Target to affirmatively determine whether the directors are independent. If a director has a material relationship with Target, that director is not independent. The listing standards of the NYSE detail certain relationships that, if present, preclude a finding of independence.

 

Given recent investor focus on the impact of director tenure on independence, the Board also specifically considered each director’s length of service on the Board in making its annual independence determination. Specifically, the Board determined that Ms. Austin and Mr. Darden, each of whom are up for re-election and have served on the Board for more than 12 years, continue to demonstrate the independence of judgment expected of independent directors.

 

The Board affirmatively determined that all non-management directors are independent. Mr. Cornell is the only management director and is not independent. The Board specifically considered the following transactions and concluded that none of the transactions impaired any director’s independence. In addition, none of the transactions are related-party transactions because none of the directors have a direct or indirect material interest in the listed transactions.

 

  TARGET CORPORATION 2017 Proxy Statement 13
 
            % of entity’s annual
            revenues in each of
Director   Entity and relationship   Transactions   last 3 years
Douglas M. Baker, Jr.   Ecolab Inc.
Chairman & CEO
  We purchase supplies, servicing, repairs and merchandise from Ecolab.   Less than 0.01%
Mary E. Minnick   Each portfolio company of Lion Capital(1) Partner in Lion Capital   We purchase merchandise for resale from portfolio companies of Lion Capital.   Less than 2% of each portfolio company
Anne M. Mulcahy   Save the Children Federation Former Chair of Board of Trustees   We make charitable contributions to Save the Children.   Less than 2%
Kenneth L. Salazar   WilmerHale Partner   In fiscal 2016, WilmerHale was engaged to provide legal services.(2)   Less than 1%
(1)Ms. Minnick’s indirect ownership in each of these portfolio companies is less than 5%.
(2)WilmerHale represented to us that: (a) Mr. Salazar’s compensation was not affected by the amount of legal services performed by WilmerHale for Target, (b) Mr. Salazar did not receive any of the fees from the Target relationship during each of the last three years and (c) Mr. Salazar will not receive any of the fees from the Target relationship in the future. Mr. Salazar does not personally provide any of the legal services to Target.

 

Policy on transactions with related persons

 

The Board of Directors has adopted a written policy requiring that any transaction: (a) involving Target; (b) in which one of our directors, nominees for director, executive officers, or greater than five percent shareholders, or their immediate family members, have a direct or indirect material interest; and (c) where the amount involved exceeds $120,000 in any fiscal year, be approved or ratified by a majority of independent directors of the full Board or by a designated Committee of the Board. The Board has designated the Audit & Finance Committee as having responsibility for reviewing and approving all such transactions except those dealing with compensation of executive officers and directors, or their immediate family members, in which case it will be reviewed and approved by the Human Resources & Compensation Committee.

 

In determining whether to approve or ratify any such transaction, the independent directors or relevant Committee must consider, in addition to other factors deemed appropriate, whether the transaction is on terms no less favorable to Target than those involving unrelated parties. No director may participate in any review, approval or ratification of any transaction if he or she, or his or her immediate family member, has a direct or indirect material interest in the transaction.

 

We ratified two related party transactions in accordance with this policy during fiscal 2016. Both transactions dealt with compensation of immediate family members of one of our executive officers, Casey Carl, Executive Vice President & Chief Strategy & Innovation Officer. Mr. Carl’s brother joined Target in 2005, has been a team member in merchandising since that time and earned annual compensation of $180,116 in 2016. Mr. Carl’s sister-in-law joined Target in 2009, has been a team member in merchandising since that time and earned annual compensation of $315,318 in 2016. For each of these immediate family members, the compensation is commensurate with the immediate family member’s peers.

 

Business ethics and conduct

 

We are committed to conducting business lawfully and ethically. All of our directors and named executive officers, like all Target team members, are required to act at all times with honesty and integrity. Our Business Conduct Guide covers areas of professional conduct, including conflicts of interest, the protection of corporate opportunities and assets, employment policies, confidentiality, vendor standards and intellectual property, and requires strict adherence to all laws and regulations applicable to our business. Our Business Conduct Guide also describes the means by which any employee can provide an anonymous report of an actual or apparent violation of our Business Conduct Guide.

 

We disclose any amendments to, or waivers from, any provision of our Business Conduct Guide involving our directors, our principal executive officer, principal financial officer, principal accounting officer, controller or other persons performing similar functions on our website within four business days following the date of any such amendment or waiver.

 

Communications with directors and shareholder outreach

 

Shareholders and other interested parties seeking to communicate with any individual director or group of directors may send correspondence to Target Board of Directors, c/o Corporate Secretary, 1000 Nicollet Mall, TPS-2670, Minneapolis, Minnesota 55403 or may send an email to BoardOfDirectors@target.com, which is managed by the Corporate Secretary. The Corporate Secretary, in turn, has been instructed by the Board to forward all communications, except those that are clearly unrelated to Board or shareholder matters, to the relevant Board members.

 

We regularly engage in outreach efforts with our shareholders, both large and small, relating to our business, compensation practices, and environmental, social and governance issues. We involve one or more independent directors in these conversations as appropriate. While we benefit from an ongoing dialogue with many of our shareholders, we recognize that we have not communicated directly with all of our shareholders. If you would like to engage with us, please send correspondence to Target Corporation, Attn: Investor Relations, 1000 Nicollet Mall, Minneapolis, Minnesota 55403 or email investorrelations@target.com.

 

  TARGET CORPORATION 2017 Proxy Statement 14
 
Item oneElection of directors

 

Election and nomination process

 

Our election process is backed by sound corporate governance principles:

 

All directors are elected annually;
Directors are elected under a “majority voting” standard – each director in an uncontested election must receive more votes “For” his or her election than votes “Against” in order to be elected; and
An incumbent director who is not re-elected must promptly offer to resign. The Nominating & Governance Committee will make a recommendation on the offer, and the Board must accept or reject the offer within 90 days and publicly disclose its decision and rationale.

 

The Nominating & Governance Committee is responsible for identifying individuals qualified to become Board members and making recommendations on director nominees to the full Board. The Committee considers the following factors in its efforts to identify potential director candidates:

 

Input from the Board to identify the backgrounds or skill sets that are desired; and
Changes in our business strategy or operating environment and the future needs of the Board in light of anticipated director retirements under our Board tenure policies.

 

The Nominating & Governance Committee has retained a third-party search firm to assist in identifying director candidates and will also consider recommendations from shareholders. Any shareholder who wishes the Committee to consider a candidate should submit a written request and related information to our Corporate Secretary no later than December 31 of the calendar year preceding the next annual meeting of shareholders. Shareholders may also nominate director candidates directly if they comply with our bylaws, which are described in more detail in Question 18 “How do I submit a proposal or nominate a director candidate for the 2018 annual meeting of shareholders?” on page 66 of the proxy statement.

 

Determining board composition

 

The criteria the Board follows in determining the composition of the Board is simple: directors are to have broad perspective, experience, knowledge and independence of judgment. The Board as a whole should consist predominantly of persons with strong business backgrounds that span multiple industries. The Board does not have a specific policy regarding consideration of gender, ethnic or other diversity criteria in identifying director candidates. However, the Board has had a longstanding commitment to, and practice of, maintaining diverse representation on the Board. At least annually the Board seeks input from each of its members with respect to the current composition of the Board in light of changes in our current and future business strategies, as well as our operating environment, as a means to identify any backgrounds or skill sets that may be helpful in maintaining or improving alignment between Board composition and our business. In addition, we seek feedback from our shareholders regarding the backgrounds and skill sets that they would like to see represented on our Board. This input is then used by our Nominating & Governance Committee in its director search process.

 

  TARGET CORPORATION 2017 Proxy Statement 15
 

Board evaluations and refreshment

 

The Board regularly evaluates its performance to enhance Board functioning and the effectiveness of the Board-management relationship.

 

Self-evaluation The Nominating & Governance Committee, in consultation with the Lead Independent Director, annually leads the performance review of the Board and its Committees. In 2016, the Board self-evaluation involved a survey completed by each director about the Board and the Committees on which the director served, followed by individual interviews. Following completion of the interviews, the results were discussed by the full Board and each Committee. In 2016, the Board self-evaluation was administered by the Corporate Secretary’s office. The annual self-evaluation has periodically been conducted by a third-party consultant, as appropriate. The self-evaluation process seeks to obtain each director’s assessment of the effectiveness of the Board, the Committees and their leadership, Board and Committee composition and Board/management dynamics.

 

Corporate governance review Our Nominating & Governance Committee conducts an annual corporate governance review that compares our core corporate governance practices with prevailing best practices, emerging practices and evolving topics as indicated by current literature, corporate governance organizations and institutional shareholders.

 

The Board maintains tenure policies (contained in our Corporate Governance Guidelines) as a means of ensuring that the Board regularly benefits from a balanced mix of perspectives and experiences.

 

Tenure policies Term limit Directors may not serve on the Board for more than 20years Mandatory retirement Directors must retire at the end of the term in which they reach age72 Change in principal employment Directors must offer to resign upon any substantial change in principal employment

 

Our current Board’s composition represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors combined with fresh perspectives from newer directors:

 

Tenure on board Less than 5 years 8 directors 5 to 10 years 1 director More than 10 years 4 directors Average director tenure 6.5 years 38% Female 62% Male Ethnic or racial diversity(1) 38% Diverse 62% Non-diverse

 

(1)We define diverse directors as those that are ethnically or racially diverse. Our diverse directors are Mr. Darden, Ms. Healey, Ms. Lozano, Mr. Rice and Mr. Salazar.

 

  TARGET CORPORATION 2017 Proxy Statement 16
 

2017 nominees for director

 

After considering the recommendations of the Nominating & Governance Committee, the Board has set the number of directors at 12 and nominated all of the current directors to stand for re-election, except for Anne Mulcahy who will retire from the Board at the end of her current term. The Board believes that each of these nominees is qualified to serve as a director of Target and the specific qualifications of each nominee that were considered by the Board follow each nominee’s biographical description. Equally important, the Board believes that the combination of backgrounds, skills and experiences has produced a Board that is well-equipped to exercise oversight responsibilities on behalf of Target’s shareholders and other stakeholders.

 

The following table describes key characteristics of our business and the skills our Board collectively possesses.

 

Target’s business characteristics   Skills our board collectively possesses
Target is a large retailer that offers everyday essentials and fashionable, differentiated merchandise at discounted prices in stores and through digital channels.   Retail industry experience Large retail or consumer products company experience.
Target’s scale and complexity requires aligning many different areas of our operations, including marketing, merchandising, supply chain, technology, human resources, property development, credit card servicing and our community and charitable activities.   Senior
Leadership
Experience as executive officer level business leader or senior government leader.
Our brand is the cornerstone of our strategy to provide a relevant and affordable differentiated shopping experience for our guests.   Marketing or
Brand Management
Marketing or managing well-known brands or the types of consumer products and services we sell.
We operate a large network of stores and distribution centers.   Real Estate Real estate acquisitions and dispositions or property management experience.
We have a large and global workforce, which represents one of our key resources, as well as one of our largest operating expenses.   Workforce Management Managing a large or global workforce.
Our business has become increasingly complex as we have expanded our offerings as well as the channels in which we deliver our shopping experience. This increased complexity requires sophisticated technology infrastructure.   Technology Leadership and understanding of technology, digital platforms and new   media, data security, and data analytics.
Our business involves sourcing merchandise domestically and   internationally from a large number of vendors and distributing it   through our network of distribution centers.   Multi-National   Operations or   Supply Chain   Logistics Executive officer roles at multi-national   organizations or in global supply chain   operations.
We are a large public company committed to disciplined financial and risk management, legal and regulatory compliance and accurate disclosure.   Finance or Risk Management Public company management, financial stewardship or enterprise risk management experience.
To be successful, we must preserve, grow and leverage the value of our reputation with our guests, team members, the communities in which we operate and our shareholders.   Public Affairs or Corporate Governance Public sector experience, community relations or corporate governance expertise.

 

  TARGET CORPORATION 2017 Proxy Statement 17
 

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.

 

Roxanne S. Austin Age 56 Director since 2002 Independent Committees Human Resources & Compensation Risk & Compliance Background Roxanne S. Austin is President of Austin Investment Advisors, a private investment and consulting firm, a position she has held since 2004. Ms. Austin also previously served as President & Chief Executive Officer of Move Networks, Inc., President & Chief Operating Officer of DIRECTV, Inc., Executive Vice President & Chief Financial Officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Qualifications Through her extensive management and operating roles, including her financial roles, Ms. Austin provides the Board with financial, operational and risk management expertise, and substantial knowledge of new media technologies. Other public company boards Current Past 5 years Abbott Laboratories LM Ericsson Telephone Company AbbVie Inc. Teledyne Technologies Incorporated

 

Douglas M. Baker, Jr. Age 58 Director since 2013 Lead Independent Director Committees Nominating & Governance (Chair) Risk & Compliance Background Douglas M. Baker, Jr., is Chairman & Chief Executive Officer of Ecolab Inc., a provider of water and hygiene services and technologies for the food, hospitality, industrial and energy markets. He has served as Chairman of the Board of Ecolab since May 2006 and Chief Executive Officer since July 2004. Qualifications Mr. Baker provides the Board with valuable global marketing, sales and general management experience, as well as operational and governance perspectives. His current role as CEO of a large publicly-held company provides the Board with additional top-level perspective in organizational management. Other public company boards Current Past 5 years Ecolab Inc. None U.S. Bancorp

 

  TARGET CORPORATION 2017 Proxy Statement 18
 

Brian C. Cornell Age 58 Director since 2014 Committees None Background Brian C. Cornell has served as Chairman of the Board & Chief Executive Officer of Target Corporation since August 2014. Mr. Cornell served as Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc., a multinational food and beverage corporation, from March 2012 to July 2014. From April 2009 to January 2012, Mr. Cornell served as Chief Executive Officer & President of Sam’s Club, a division of Wal-Mart Stores, Inc., a discount retailer, and as an Executive Vice President of Wal-Mart Stores, Inc. Qualifications Through his more than 30 years in escalating leadership positions at leading retail and global consumer product companies, including three CEO roles and more than two decades doing business in North America, Asia, Europe and Latin America, Mr. Cornell provides meaningful leadership experience and retail knowledge. His past experience includes time as both a vendor partner and a competitor to Target, and he brings insights from those roles to the company today. Other public company boards Current Past 5 years Yum! Brands, Inc. Polaris Industries Inc.

 

Calvin Darden Age 67 Director since 2003 Independent Committees Human Resources & Compensation Nominating & Governance Background Calvin Darden is Chairman of Darden Putnam Energy & Logistics, LLC, a company that sells fuel products, a position he has held on a full-time basis since February 2015. From November 2009 to February 2015, he was Chairman of Darden Development Group, LLC, a real estate development company. Mr. Darden had a 33-year career with the United Parcel Service of America, Inc., an express carrier and package delivery company, and served in a variety of senior management positions, ending as Senior Vice President of U.S. Operations in February 2005. Qualifications Mr. Darden provides the Board with significant experience in supply chain networks, logistics, customer service and management of a large-scale workforce obtained over his career with United Parcel Service of America, Inc., and more recently has developed expertise in community relations and real estate development. Other public company boards Current Past 5 years Cardinal Health, Inc. Coca-Cola Enterprises, Inc.

 

  TARGET CORPORATION 2017 Proxy Statement 19
 

Henrique De Castro Age 51 Director since 2013 Independent Committees Human Resources & Compensation Infrastructure & Investment Background Henrique De Castro is the former Chief Operating Officer of Yahoo! Inc., a digital media company that delivers personalized digital content and experiences worldwide by offering online properties and services to users. He held that position from November 2012 to January 2014. He previously served at Google Inc., a company that builds technology products and provides services to organize information, as President, Partner Business Worldwide from March 2012 to November 2012 and as President, Global Media, Mobile & Platforms from June 2009 to March 2012. Qualifications Mr. De Castro provides the Board with valuable insight into media, mobile and technology platforms. His experiences at Yahoo! and Google, as well as his prior experience at Dell Inc., provides him with global perspectives on leading operations, strategy, partner management and revenue generation in the technology and media industries. Other public company boards Current Past 5 years None None

 

Robert L. Edwards Age 61 Director since 2015 Independent Committees Infrastructure & Investment (Chair) Risk & Compliance Background Robert L. Edwards is the former President & Chief Executive Officer of AB Acquisition LLC, a North American food and drug retail company, a position he held from January 2015 to April 2015 due to Albertsons’ acquisition of Safeway Inc. Mr. Edwards previously held several executive level positions with Safeway Inc., a United States food and drug retail company, including President & Chief Executive Officer from May 2013 to April 2015, President & Chief Financial Officer from April 2012 to May 2013, and Executive Vice President & Chief Financial Officer from March 2004 to April 2012. Qualifications Mr. Edwards provides the Board with substantial food and drug retail expertise and perspectives from his time at Safeway and Albertsons. In addition, his prior experiences as a CEO of a large publicly-held company and as CFO of multiple public companies provide the Board with extensive public company accounting and financial reporting expertise and a top-level perspective in organizational management. Other public company boards Current Past 5 years Blackhawk Network Holdings, Inc. Flextronics International Ltd. KKR Financial Holdings LLC Safeway Inc.

 

  TARGET CORPORATION 2017 Proxy Statement 20
 

Melanie L. Healey Age 56 Director since 2015 Independent Committees Human Resources & Compensation Infrastructure & Investment Background Melanie L. Healey is the former Group President, North America, of The Procter & Gamble Company, one of the world’s leading providers of branded consumer packaged goods, a position she held from January 2009 to December 2014. Ms. Healey also served as Group President & Advisor to the Chairman & Chief Executive Officer of The Procter & Gamble Company from January 2015 to July 2015. Qualifications Ms. Healey provides the Board with valuable strategic, branding, distribution and operating experience on a global scale obtained over her more than 30-year career in the consumer goods industry in three multinational companies (Procter & Gamble, Johnson & Johnson and S.C. Johnson & Sons). Her deep experience in marketing, including her 18 years outside the United States, provides the Board with strategic and operational leadership and critical insights into brand building and consumer marketing trends globally. Other public company boards Current Past 5 years PPG Industries, Inc. None Verizon Communications Inc.

 

Donald R. Knauss Age 66 Director since 2015 Independent Committees Human Resources & Compensation Nominating & Governance Background Donald R. Knauss is the former Executive Chairman of The Clorox Company, a leading multinational manufacturer and marketer of consumer and professional products, a position he held from November 2014 to June 2015. Mr. Knauss previously served as Chairman & Chief Executive Officer of The Clorox Company from October 2006 until November 2014. Qualifications Mr. Knauss possesses substantial senior management level experience in a variety of areas, including branded consumer products and consumer dynamics, manufacturing and supply chain, the retail environment, and sales and distribution, which strengthens the Board’s collective knowledge, capabilities and experience. Other public company boards Current Past 5 years Kellogg Company The Clorox Company McKesson Corporation URS Corporation

 

  TARGET CORPORATION 2017 Proxy Statement 21
 

Monica C. Lozano Age 60 Director since 2016 Independent Committees Audit & Finance Nominating & Governance Background Monica C. Lozano is the former Chairman of U.S. Hispanic Media, Inc., a leading Hispanic news and information company with outlets in Los Angeles, New York, Chicago and other U.S. cities, a position she held from June 2014 to January 2016. Ms. Lozano previously served ImpreMedia, LLC, a wholly owned subsidiary of U.S. Hispanic Media, Inc., as Chair from July 2012 to May 2014, and as Chief Executive Officer from May 2010 to May 2014. Ms. Lozano served as Publisher of La Opinion, a subsidiary of ImpreMedia, LLC, from 2004 to May 2014 and was Chief Executive Officer from 2004 to July 2012. Qualifications Ms. Lozano possesses substantial senior management experience in areas such as operations, marketing and strategic planning. She also has a deep understanding of issues that are important to Hispanics, a growing U.S. demographic. Ms. Lozano has board-level experience overseeing large organizations with diversified operations on matters such as governance, risk management and financial reporting. Other public company boards Current Past 5 years Bank of America Corporation The Walt Disney Company

 

Mary E. Minnick Age 57 Director since 2005 Independent Committees Audit & Finance Infrastructure & Investment Background Mary E. Minnick is a Partner of Lion Capital LLP, a consumer-focused private investment firm, a position she has held since May 2007. Ms. Minnick had a 23-year career with The Coca-Cola Company, a manufacturer, marketer and distributor of nonalcoholic beverage concentrates and syrups, and served in a variety of senior management positions, including Chief Operating Officer of the Asian region, Division President roles in the Japan, South Pacific and Asian regions, and ending as the company’s Chief Marketing Officer and Global President of Strategy and Innovation in February 2007. Qualifications Ms. Minnick provides the Board with substantial expertise in operations management, building brand awareness, product development, marketing, distribution and sales on a global scale obtained over her career with The Coca-Cola Company. Her current position with Lion Capital provides the Board with additional insights into the retail business and consumer marketing trends outside the United States. Other public company boards Current Past 5 years None Heineken NV The WhiteWave Foods Company

 

  TARGET CORPORATION 2017 Proxy Statement 22
 

Derica W. Rice Age 52 Director since 2007 Independent Committees Audit & Finance (Chair) Risk & Compliance Background Derica W. Rice is Executive Vice President, Global Services & Chief Financial Officer of Eli Lilly and Company, a pharmaceutical company, positions he has held since January 2010 and May 2006, respectively. Qualifications Mr. Rice’s career with Eli Lilly has provided him with substantial experience in managing worldwide financial operations. His expertise gives the Board additional skills in the areas of financial oversight, risk management and the alignment of financial and strategic initiatives. Other public company boards Current Past 5 years None None

 

Kenneth L. Salazar Age 62 Director since 2013 Independent Committees Risk & Compliance (Chair) Infrastructure & Investment Background Kenneth L. Salazar is a Partner at WilmerHale, a full service business law firm, a position he has held since June 2013. Previously, Mr. Salazar served as the U.S. Secretary of the Interior from 2009 to 2013, as U.S. Senator from Colorado from 2005 to 2009 and as Attorney General of Colorado from 1999 to 2005. Qualifications Mr. Salazar has substantial public policy experience at both the state and federal levels. Mr. Salazar provides the Board with additional insights on public policy issues, government regulation and leadership on matters involving multiple stakeholder stewardship. Other public company boards Current Past 5 years None None

 

  TARGET CORPORATION 2017 Proxy Statement 23
 

Stock ownership information

 

Stock ownership guidelines

 

Stock ownership that must be disclosed in this proxy statement includes shares directly or indirectly owned and shares issuable or options exercisable that the person has the right to acquire within 60 days. Our stock ownership guidelines vary from the required ownership disclosure in that they do not include any options, but do include share equivalents held under deferred compensation arrangements as well as unvested restricted stock units (RSUs) and performance-based RSUs (PBRSUs) at the minimum share payout. We believe our stock ownership guidelines for our directors and executive officers are aligned with shareholders’ interests because the guidelines reflect equity that has economic exposure to both upside and downside risk.

 

Ownership guidelines by position Directors Fixed value of $500,000 CEO 7x base salary Other NEOs 3x base salary Equity used to meet stock ownership guidelines Yes Outstanding shares that the person beneficially owns or is deemed to beneficially own, directly or indirectly, under the federal securities laws RSUs and PBRSUs (at their minimum share payout, which is 75% of the at-goal payout level), whether vested or unvested Deferred compensation amounts that are indexed to Target common stock, but ultimately paid in cash No Options, regardless of when they are exercisable Performance Share Units (PSUs) because their minimum share payout is 0% of the at-goal payout level

 

All directors and executive officers are expected to achieve the required levels of ownership under our stock ownership guidelines within five years of their election or appointment. If a director or executive officer has not satisfied the ownership guideline amounts within those first five years, he or she must retain all shares acquired on the vesting of equity awards or the exercise of stock options (in all cases net of exercise costs and taxes) until compliance is achieved. In addition, if an executive officer is below the ownership guideline amounts during the first five years after becoming an executive officer, he or she must retain at least 50% of all shares acquired on the vesting of equity awards or the exercise of stock options (in all cases net of exercise costs and taxes) until compliance is achieved.

 

  TARGET CORPORATION 2017 Proxy Statement 24
 

The following table shows the holdings of our current directors and NEOs recognized for purposes of our stock ownership guidelines as of March 29, 2017, and the respective ownership guidelines calculations.

 

   Shares        Total stock  Stock 
   directly or        ownership for  ownership 
   indirectly  RSUs &  Share  guidelines  guidelines 
   owned  PBRSUs  equivalents  (# of shares)(1)  calculation 
Directors              Total value(2) 
Roxanne S. Austin   10,000   25,359   0   35,359  $1,950,049 
Douglas M. Baker, Jr.   0   12,445   0   12,445  $686,342 
Calvin Darden   0   25,359   803   26,162  $1,442,860 
Henrique De Castro   0   15,335   0   15,335  $845,725 
Robert L. Edwards   10,000   6,503   0   16,503  $910,140 
Melanie L. Healey(3)   0   5,963   0   5,963  $328,859 
Donald R. Knauss   10,000   6,503   0   16,503  $910,140 
Monica C. Lozano(3)   0   4,856   0   4,856  $267,808 
Mary E. Minnick   886   60,811   460   62,157  $3,427,932 
Anne M. Mulcahy   7,114   33,199   0   40,313  $2,223,262 
Derica W. Rice   0   55,301   0   55,301  $3,049,850 
Kenneth L. Salazar   0   11,871   0   11,871  $654,686 
Current named              Multiple of base 
executive officers              salary(2) 
Brian C. Cornell   128,416   118,856   8,497   255,770   10.9 
Cathy R. Smith(4)   19,537   20,911   0   40,448   2.8 
John J. Mulligan   65,624   42,735   19,804   128,163   7.1 
Don H. Liu   4,000   53,557   0   57,557   4.9 
Mark J. Tritton(4)   0   21,998   0   21,998   1.8 
(1)The “Total Stock Ownership” calculation, like the required disclosure of “Total Shares Beneficially Owned” on page 26, starts with “Shares Directly or Indirectly Owned” but differs by (a) excluding all options, regardless of whether they can be converted into common stock on or before May 28, 2017, and (b) including (i) share equivalents that are held under deferred compensation arrangements and (ii) RSUs and PBRSUs (at their minimum share payout, which is 75% of the at-goal payout level), whether vested or unvested, even if they will be converted into common stock more than 60 days from March 29, 2017.
(2)Based on closing stock price of $55.15 as of March 29, 2017.
(3)Ms. Healey joined the Board on November 11, 2015. Ms. Lozano joined the Board on March 9, 2016. They currently comply with our stock ownership guidelines because they have five years from those respective dates to meet the required $500,000 stock ownership level.
(4)Ms. Smith became Executive Vice President & Chief Financial Officer on September 1, 2015, and Mr. Tritton became Executive Vice President & Chief Merchandising Officer on June 5, 2016. They currently comply with our stock ownership guidelines because they have five years from those respective dates to meet the required 3x base salary stock ownership level.

 

  TARGET CORPORATION 2017 Proxy Statement 25
 

Beneficial ownership of directors and officers

 

The following table includes information about the shares of Target common stock (our only outstanding class of equity securities) which are beneficially owned on March 29, 2017 or which the person has the right to acquire within 60 days of March 29, 2017 for each director, named executive officer in the Summary Compensation Table on page 42, and all current Target directors and executive officers as a group.

 

   Shares   Shares   Stock options    
   directly or   issuable   exercisable   Total shares
   indirectly   within   within   beneficially
Directors  owned   60 days(1)   60 days   owned(2)
Roxanne S. Austin   10,000    23,557    20,392    53,949
Douglas M. Baker, Jr.   0    10,643    5,570    16,213
Calvin Darden   0    23,557    0    23,557
Henrique De Castro   0    13,533    5,570    19,103
Robert L. Edwards   10,000    4,701    0    14,701
Melanie L. Healey   0    4,161    0    4,161
Donald R. Knauss   10,000    4,701    0    14,701
Monica C. Lozano   0    3,054    0    3,054
Mary E. Minnick   886    59,009    0    59,895
Anne M. Mulcahy   7,114    31,397    19,368    57,879
Derica W. Rice   0    52,227    0    52,227
Kenneth L. Salazar   0    10,069    3,601    13,670
Named executive officers                   
Brian C. Cornell   128,416    0    0    128,416
Cathy R. Smith   19,537    0    0    19,537
John J. Mulligan   65,624    6,474    257,391    329,489
Don H. Liu(3)   4,000    0    0    4,000
Mark J. Tritton(3)   0    0    0    0
All current directors and executive officers                   
As a group (24 persons)   332,673(4)    247,083    530,340    1,110,096
(1)Includes shares of common stock that the named individuals may acquire on or before May 28, 2017 pursuant to the conversion of vested RSUs into common stock.
(2)All directors and executive officers as a group own less than 1% of Target’s outstanding common stock. The persons listed have sole voting and investment power with respect to the shares listed.
(3)Mr. Liu became Executive Vice President, Chief Legal Officer & Corporate Secretary on August 22, 2016, and Mr. Tritton became Executive Vice president & Chief Merchandising Officer on June 5, 2016.
(4)Includes shares of common stock owned by executive officers in the Target 401(k) Plan as of March 29, 2017.

 

  TARGET CORPORATION 2017 Proxy Statement 26
 

Beneficial ownership of Target’s largest shareholders

 

The following table includes certain information about each person or entity known to us to be the beneficial owner of more than five percent of our common stock:

 

    Number of    
Name and address   common shares   Percent of
of >5% beneficial owner   beneficially owned   class(1)
State Street Corporation   51,204,237(2)   9.3%
One Lincoln Street        
Boston, Massachusetts 02111        
The Vanguard Group   40,599,172(3)   7.4%
100 Vanguard Boulevard        
Malvern, Pennsylvania 19355        
BlackRock, Inc.   38,296,297(4)   6.9%
55 East 52nd Street        
New York, New York 10055        
(1)Based on shares outstanding on March 29, 2017.
(2)State Street Corporation (State Street) reported its direct and indirect beneficial ownership in various fiduciary capacities (including as trustee under Target’s 401(k) Plan) on a Schedule 13G filed with the SEC on February 14, 2017. The filing indicates that as of December 31, 2016, State Street had sole voting power for 0 shares, shared voting power for 51,204,237 shares, sole dispositive power for 0 shares and shared dispositive power for 51,204,237 shares.
(3)The Vanguard Group (Vanguard) reported its direct and indirect beneficial ownership on a Schedule 13G/A filed with the SEC on February 10, 2017. The filing indicates that as of December 31, 2016, Vanguard had sole voting power for 887,398 shares, shared voting power for 121,104 shares, sole dispositive power for 39,595,350 shares and shared dispositive power for 1,003,822 shares.
(4)BlackRock, Inc. (BlackRock) reported its direct and indirect beneficial ownership on a Schedule 13G/A filed with the SEC on January 27, 2017. The filing indicates that as of December 31, 2016, BlackRock had sole voting power for 31,784,390 shares, shared voting power for 19,504 shares, sole dispositive power for 38,276,793 shares and shared dispositive power for 19,504 shares.

 

Section 16(a) beneficial ownership reporting compliance

 

SEC rules require disclosure of those directors, officers and beneficial owners of more than 10% of our common stock who fail to timely file reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year. Based solely on review of reports furnished to us and written representations that no other reports were required during the fiscal year ended January 28, 2017, all Section 16(a) filing requirements were met.

 

  TARGET CORPORATION 2017 Proxy Statement 27
 

Human Resources & Compensation Committee Report

 

The Human Resources & Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on this review and discussion, the Human Resources & Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K and this proxy statement.

 

Human Resources & Compensation Committee

 

Anne M. Mulcahy, Chair

Roxanne S. Austin

Calvin Darden

Henrique De Castro

Melanie L. Healey

Donald R. Knauss

 

Compensation Discussion and Analysis

 

Introduction

 

This Compensation Discussion and Analysis (CD&A) focuses on how our Named Executive Officers (NEOs) were compensated for fiscal 2016 (January 31, 2016 through January 28, 2017) and how their fiscal 2016 compensation aligns with our pay for performance philosophy.

 

For fiscal 2016, our NEOs were:

 

Name and principal position Brian C. Cornell Chairman & Chief Executive Officer Cathy R. Smith Executive Vice President & Chief Financial Officer John J. Mulligan Executive Vice President & Chief Operating Officer Don H. Liu Executive Vice President, Chief Legal Officer & Corporate Secretary Mark J. Tritton Executive Vice President & Chief Merchandising Officer

 

On June 5, 2016, Mr. Tritton joined Target as Executive Vice President & Chief Merchandising Officer. On August 22, 2016, Mr. Liu joined Target as Executive Vice President, Chief Legal Officer & Corporate Secretary.

 

Our CD&A is divided into the following sections:

 

 

  TARGET CORPORATION 2017 Proxy Statement 28
 

Executive summary

 

Guiding principles of our compensation program

 

We believe executive compensation should be directly linked to performance and the creation of long-term value for our shareholders. With that in mind, the three guiding principles of our compensation program are to:

 

Attract, retain and motivate a premier management team to sustain our distinctive brand and its competitive advantage in the marketplace
Provide a framework that encourages outstanding financial results and shareholder returns over the long-term
Deliver on our pay for performance philosophy in support of our strategy

 

A significant portion of our executive compensation is at risk and therefore may vary from targeted compensation based upon the level of achievement of specified performance objectives and stock price performance.

 

Shareholder support for our 2016 advisory vote on executive compensation and shareholder outreach program

 

At our June 2016 annual meeting of shareholders, shareholders approved our Say on Pay proposal in support of our executive compensation program by 96.4%, consistent with the fiscal 2015 vote of 96.6%. We believe open dialogue with our shareholders and incorporation of their feedback into our executive compensation program has been instrumental in obtaining shareholder support for our compensation program’s design and direction.

 

We regularly engage in outreach efforts with our shareholders relating to a variety of topics and involve one or more independent directors in these conversations as appropriate. We use the information gathered through these outreach efforts to help inform our compensation decisions. We look forward to continued dialogue on compensation matters and other issues relevant to our business.

 

Summary of key compensation decisions made in fiscal 2016

 

Topic  Description  More
information
Financial Component of STIP  Based on below threshold performance for fiscal 2016, the financial component of our short-term incentive plan (STIP) had a zero payout. Therefore, our CEO did not receive a STIP payout for the year. 
Team Scorecard Component of STIP  Beginning in fiscal 2016 and to replace the personal performance component of the non-CEO NEOs’ STIP, we introduced the team scorecard. The scorecard was designed to strongly align non-CEO NEO pay opportunity to our strategy, focusing on certain key initiatives believed to ensure a foundation for future growth. 
Strategic Alignment Award Payout  Strategic Alignment Awards were granted in 2015 to connect the management team’s pay with performance in achieving goals designed to reposition Target and drive long-term growth consistent with our key priorities. Payout of these awards was based on important absolute metrics, each selected to drive focused outcomes that complement the relative performance metrics in our annual long-term incentive (LTI) awards. 
NEO New Hire Compensation  As part of the offers given to Mr. Tritton and Mr. Liu to join Target, the Human Resources & Compensation Committee approved sign-on bonuses, make-whole RSUs and pro-rata equity grants consisting of PSUs and PBRSUs. 

 

For context to understand the key compensation decisions made in fiscal 2016, it is also important to understand a compensation decision that took place after the end of fiscal 2016. At our February 2017 Financial Community meeting, we announced that Target is aggressively accelerating investments in its strategic initiatives, including:

 

An expected capital investment of over $2 billion in fiscal 2017, and over $7 billion expected in the next three years, principally in store remodels, new small format stores, and digital and supply chain capabilities; and
A planned $1 billion investment in operating margin in fiscal 2017 to enhance the digital and in-store experience of our guests.

 

These investments, which are intended to position Target for sustained and profitable sales growth and market share gains in the long-term, may result in lower near-term profitability that could negatively affect outstanding LTI awards granted before the decision to make those investments. Accordingly, with the perspective of this extensive long-term investment plan, in April 2017 the Board decided to grant price-vested stock options (Price-Vested Options) to maintain continuity of the executive team throughout this investment period, galvanize them around the key initiatives and reward success in this transformational effort. The Price-Vested Options serve as a supplemental compensation element based exclusively on stock price performance, to complement outstanding LTI awards through the investment period announced in February 2017. The Price-Vested Options have an effective grant date of May 22, 2017, the first trading day that begins after 72 hours following our first quarter earnings release, and the exercise price will be equal to the fair market value on the effective grant date. The key design features of the Price-Vested Options align management’s interests with shareholders:

 

  TARGET CORPORATION 2017 Proxy Statement 29
 
Vesting is Based on Both Time and Stock Price Criteria – The Price-Vested Options are not exercisable during the first three years and will become exercisable only if Target’s stock price exceeds a hurdle of $75 for 20 consecutive trading days within the seven-year term of the options.
The Stock Price Criteria are Challenging – The performance hurdle of $75 maintained for a period of 20 days is challenging, both in terms of historic stock price levels and in relation to our more recent share price following the February 2017 announcement. The $75 price hurdle represents a 40% premium over our closing price of $53.68 on April 17, 2017, the date the awards were approved. The $75 price hurdle is also well above our average price for the period between the February 2017 announcement and approval date, which was $54.62. The 20-consecutive day requirement helps to mitigate temporary stock price fluctuations from influencing potential gains. Finally, at any time prior to the effective grant date, the Board can decide not to issue the Price-Vested Options if it determines that unexpected circumstances have arisen which undermine the purpose of the Price-Vested Options, such as the stock price criteria becoming no longer sufficiently challenging.
Mandatory Post-Exercise Holding Period – The shares received upon exercise, net of exercise costs and taxes, are subject to a one-year post-exercise holding period, even if this period extends beyond termination of employment. During the post-exercise holding period, the shares received upon exercise may not be used by the executive in satisfying our stock ownership guidelines.
Strict Forfeiture Provisions – For voluntary terminations, Price-Vested Options are completely forfeited if the executive leaves within the first three years.
No Retirement-Based Extensions – Notably, and in contrast to the terms of our annual LTI awards, there are no retirement-based extensions of vesting or exercisability for these Price-Vested Options.
Relationship to Other Compensation Elements – 100% of our annual LTI grant features performance-based metrics that measure our performance relative to our peers. In addition, our outstanding PSUs feature an EPS Growth metric, which was affected by the February 2017 announcement to aggressively accelerate investments. The Committee believes the Price-Vested Options provide a market-based complement to the relative performance measures of the other outstanding compensation elements through the investment period announced in February 2017.

 

As a result of these actions, Mr. Cornell and each of the other NEOs would receive Price-Vested Options with effective grant date fair values of $2 million and $1 million, respectively. The grant date present value of the Price-Vested Options was considered in relation to the most recently completed fiscal year with the grant representing approximately 21% of CEO’s annual LTI grant for fiscal 2016. Because these awards were not granted in fiscal 2016, they will be reflected in the Summary Compensation Table for fiscal 2017.

 

Pay for performance

 

We provide our NEOs a mix of base salary, short-term and long-term incentives with compensation opportunities measured by a variety of time horizons to balance our near-term and long-term strategic goals. Our short-term incentives are based on annual absolute financial goals and progress made toward key strategic priorities. 100% of our LTI program features performance-based metrics and is tied to relative performance versus our retail peers over a three-year time period.

 

The charts below illustrate close alignment of executive compensation and our performance. The charts show actual payouts, as a percentage of goal, over the last five years for our STIP and PSU plans. PSU awards and STIP made up more than 65% of at-goal annual total direct compensation (TDC) for our NEOs in fiscal 2016. The calculation of our at-goal TDC is described on page 33. No payout was earned under the financial component of STIP for fiscal 2016; therefore our CEO did not receive a STIP payout. The fiscal 2016 STIP payout as a percentage of goal below reflects the team scorecard payout for our non-CEO NEOS.

 

 

As disclosed in prior proxy statements, PSUs spanning the 2012-2014, 2013-2015 and 2014-2016 performance periods and 2014 STIP payouts were forfeited for active executive officers (including current NEOs Mr. Cornell and Mr. Mulligan) when we did not meet the minimum performance condition under 162(m) for fiscal 2014, due to the discontinuation of Canadian operations. If the awards were not forfeited, the financial results versus our peers would have yielded payouts well below goal. Refer to page 37 for payout information on special, one-time Strategic Alignment Awards granted in 2015 to executive officers to re-connect pay with performance in achieving goals designed to re-position Target and drive long-term growth consistent with our key priorities.

 

  TARGET CORPORATION 2017 Proxy Statement 30
 

Performance highlights

 

The following highlights show our historical performance on key metrics we use in our executive compensation program over each of the last three years. Our performance on these metrics drives our compensation outcomes and provides context to our decisions in setting our goal levels under those metrics. These metrics, including the goal levels and actual results for fiscal 2016, are described in more detail in the narratives for each compensation element.

 

 

(1) Total Adjusted Sales is calculated by excluding pharmacy and clinic sales for fiscal 2014-2016 GAAP from consolidated sales. This adjustment is made for comparison purposes due to the sale of the pharmacy and clinic business to CVS at the end of fiscal 2015.
(2) The computation of segment earnings before interest expense and income taxes (Segment EBIT) under GAAP is found in Note 30, Segment Reporting, to our consolidated financial statements for fiscal 2016. Incentive EBIT, which is one of the metrics we use in our short-term incentive plan, represents Segment EBIT on a pre-incentive compensation basis and is calculated by excluding incentive expense from our Segment EBIT.
(3) Adjusted Earnings Per Share (EPS) from Continuing Operations is calculated by starting with GAAP EPS from Continuing Operations and excluding losses on early retirement of debt, the impact of the 2015 sale of our pharmacy and clinics business, 2015 restructuring costs, net expenses related to the 2013 data breach, and resolution of income tax matters. A reconciliation of Adjusted EPS from Continuing Operations to GAAP EPS from Continuing Operations can be found on page 21 of our annual report on Form 10-K for fiscal 2016.
(4) After-Tax Return on Invested Capital (ROIC) from Continuing Operations is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. For 2015, the After-Tax ROIC from Continuing Operations for the trailing twelve months ended January 30, 2016 was 16.0%, but was 13.9% excluding the net gain on the sale of our pharmacy and clinic businesses.

 

Our performance has allowed us to fully invest in opportunities to grow our business profitably, create sustainable long-term value, maintain our current operations and assets and return excess capital to shareholders over the past three fiscal years.

 

Total three-year shareholder return 28% Dividends paid in the last three years $3.9B Since 2014, $3.9 billion has been returned to shareholders through dividends. 2016 increase in annual dividend per share 7.4% Our 45th successive year of dividend growth. Shares repurchased in the last three years $72 B Since 2014, $7.2 billion has been returned to shareholders through share repurchases.

 

  TARGET CORPORATION 2017 Proxy Statement 31
 

Target’s executive compensation practices

 

The following practices and policies ensure alignment of interests between shareholders and executives, and effective ongoing compensation governance.

 

Compensation
practice
  Target policy  More
information
Pay for Performance  Yes  A significant percentage of the total direct compensation package features performance-based metrics, including 100% of our annual LTI. 
Robust Stock Ownership Guidelines  Yes  We have stock ownership guidelines for executive officers of 7x base salary for CEO, 3x base salary for non-CEO executive officers and $500,000 for directors. 
Annual Shareholder “Say on Pay”  Yes  We value our shareholders’ input on our executive compensation programs. Our Board of Directors seeks an annual non-binding advisory vote from shareholders to approve the executive compensation disclosed in our CD&A, tabular disclosures and related narrative of this proxy statement. 
Double Trigger Change-in-Control  Yes  We grant equity awards that require both a change-in-control and an involuntary termination or voluntary termination with good reason before vesting. 
Annual Compensation Risk Assessment  Yes  A risk assessment of our compensation programs is performed on an annual basis to ensure that our compensation programs and policies do not incentivize excessive risk-taking behavior. 
Clawback Policy  Yes  Our policy allows recovery of incentive cash and equity compensation if it is earned based on inaccurate financial statements. 
Independent Compensation Consultant  Yes  The Human Resources & Compensation Committee retains an independent compensation consultant to advise on the executive compensation program and practices. 
Hedging of Company Stock  No  Executive officers and members of the Board of Directors may not directly or indirectly engage in transactions intended to hedge or offset the market value of Target common stock owned by them. 
Pledging of Company Stock  No  Executive officers and members of the Board of Directors may not directly or indirectly pledge Target common stock as collateral for any obligation. 
Tax Gross-Ups  No  We do not provide tax gross-ups to our executive officers. 
Dividends on Unearned Performance Awards   No   We do not pay dividends on unearned performance awards.  
Repricing or Exchange of Underwater Stock Options  No  Our equity incentive plan does not permit repricing or exchange of underwater stock options without shareholder approval.   
Employment Contracts   No   None of our current NEOs has an employment contract.  

 

  TARGET CORPORATION 2017 Proxy Statement 32
 

Our performance framework for executive compensation

 

Our compensation programs are structured to align the interests of our executive officers with the interests of our shareholders and support our strategy based on the guiding principles discussed above. See the following page for more details on the elements of our compensation program.

 

 

 

(1) Represents annual at-goal TDC, which includes: (a) base salary levels approved for that year, (b) STIP opportunity at-goal for performance for that year, and (c) annual LTI awards representing the aggregate grant date fair value of awards granted in January 2017. For this purpose, TDC excludes items shown under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” and “All Other Compensation”.

 

How annual CEO pay is tied to performance The following pay elements are performance-based and represent a significant percentage of the total direct compensation package. STIP – Payouts range from 0% to 230% of goal when Incentive EBIT and Total Adjusted Sales performance levels are below threshold and at or above maximum, respectively. PSUs – Payouts range from 0% to 175% of goal depending on our performance relative to our retail peer group. PBRSUs – Payouts range from 75% to 125% of goal depending on TSR performance relative to our retail peer group.

 

  TARGET CORPORATION 2017 Proxy Statement 33
 

Elements of fiscal 2016 executive total direct compensation

 

Fixed Element Key characteristics Link to shareholder value How we determine amount Key decisions Base Salary Fixed compensation component payable in cash, representing less than 20% of TDC for our NEOs. Reviewed annually and adjusted when appropriate. A means to attract and retain talented executives capable of driving superior performance. Scope and complexity of each executive officer’s roles, individual skills, contributions, market data and prior experience. For fiscal 2016, one NEO received a base salary increase. See page 35. Performance- Based Short-Term Incentives Variable compensation component payable in cash based on performance against annually established financial goals and assessment of team performance (excluding CEO). Incentive targets are tied to achievement of key annual financial measures. NEOs other than the CEO are also evaluated against identified strategic initiatives important to driving profitable sales growth. Our CEO’s STIP is exclusively tied to financial measures. Financial component of award based on: - Incentive EBIT - Total Adjusted Sales For NEO STIP (excluding CEO), there is a team scorecard component based on the Human Resources & Compensation Committee’s assessment of management’s progress toward strategic priorities. For fiscal 2016, the financial component of our STIP resulted in 0% payout. Beginning in fiscal 2016, we replaced the personal performance component of NEO STIP (excluding CEO) with a team scorecard component, which paid out at 30% of salary. See page 35. Performance Share Unit Awards (75% of annual LTI grants) PSUs cliff vest at the end of the three-year performance period and payouts are based on relative three-year performance versus our retail peer group. PSUs recognize our executive officers for achieving superior long-term relative performance on three key metrics: - Market share change - EPS growth - After-tax ROIC Grant award levels based on individual performance, potential future contributions, historical grant amounts, retention considerations and market data. Actual award payout based on performance versus retail peer group over the three-year performance period. No significant changes from prior year grant levels and award terms. As previously disclosed, we did not meet the 162(m) minimum performance condition for fiscal 2014, effectively cancelling the fiscal 2012-2014, 2013-2015, and 2014- 2016 PSU awards. Performance-Based Restricted Stock Unit Awards (25% of annual LTI grants) PBRSUs cliff vest at the end of the three-year performance period with the number of shares based on relative three-year TSR performance versus our retail peer group. Fosters a culture of ownership, aligns the long-term interests of Target’s executive officers with our shareholders and rewards or penalizes based on relative TSR performance. Grant award levels based on individual performance, potential future contributions, historical grant amounts, retention considerations and market data. No significant changes from prior year grant levels and award terms. As previously disclosed, we did not meet the 162(m) minimum performance condition for fiscal 2014, effectively cancelling the fiscal 2014-2016 PBRSU award.

 

  TARGET CORPORATION 2017 Proxy Statement 34
 

Base salary

 

We provide base salary as a means to deliver a stable amount of cash compensation to our executive officers. In alignment with our pay for performance philosophy, it represents the smallest portion of TDC.

 

In January 2016, the Human Resources & Compensation Committee approved a fiscal 2016 base salary increase of $75,000 for Ms. Smith in recognition of her performance and market considerations. No other NEO received a base salary increase.

 

Short-term incentives

 

All NEOs are eligible to earn cash awards under our STIP program, which is designed to motivate and reward executives for performance on key annual measures. The financial component of our STIP program is based on two financial metrics to align our annual incentives with our strategy of driving growth, with an emphasis on profitability: Incentive EBIT (75%) and Total Adjusted Sales (25%). The CEO STIP design is exclusively based on the financial component. See the Performance Highlights tables and footnotes on page 31 for a description of how Incentive EBIT and Total Adjusted Sales are calculated from our financial statements.

 

For our non-CEO NEOs, 80% of their STIP is based on the financial component. The remaining 20% of their STIP is based on a team scorecard, designed to strongly align pay opportunity to Target’s strategic agenda. The team scorecard component is new for fiscal 2016 and replaced the personal component of STIP that was used for the non-CEO NEOs in prior years. The intent of the scorecard is to align the team around a key set of collective strategic priorities.

 

The following table shows financial and scorecard goals expressed as a percentage of salary.

 

 

* CEO’s maximum: lesser of $7 million and 400% of base salary

Fiscal 2016 (payout as a % of salary) CEO Component Weight Threshold Goal Maximum Actual Payout % Financial (Incentive EBIT 75%, Total Adjusted Sales 25%)100% 75% 175% 400%* 0% Other NEOs Financial (Incentive EBIT 75%, Total Adjusted Sales 25%) 80% 16% 72% 160% 0% Scorecard 20% 4% 18% 40% 30% Total 20% 90% 200% 30%

 

Fiscal 2016 financial STIP performance

 

The final financial STIP goals were based on our overall 2016 performance goals, which were reviewed, discussed and approved by the independent members of the full Board at the beginning of the year. When approving these goals, the Human Resources & Compensation Committee takes into account our business strategies, the economic environment, and how the annual goal aligns with our long-range plan, including anticipated capital allocation needs.

 

Historically, STIP goals have proven rigorous. For fiscal 2016, our Incentive EBIT and Total Adjusted Sales goal amounts were $5,737 million and $71,622 million, respectively. Our actual Incentive EBIT and Total Adjusted Sales results of $5,114 million and $69,495 million resulted in below threshold performance and a $0 financial payout.

 

Based on below threshold financial performance, our CEO did not receive a STIP payout for fiscal 2016.

 

Fiscal 2016 team scorecard assessment

 

The team scorecard portion of the STIP for our non-CEO NEOs is based on the broad priorities of core retail foundations and guest initiatives. The team scorecard provides a general structure for discussing and measuring performance on a team basis for the management team, excluding our CEO. Throughout the year, our CEO provided the Human Resources & Compensation Committee interim assessments of team scorecard performance.

 

For fiscal 2016, primary team scorecard progress indicators identified at the beginning of the year included increased reliability across channels through out-of-stock management; improved stability in digital, stores and point of sale systems; and signature category growth within style, baby, kids and wellness that outperformed the total company.

 

Despite falling well short of the financial goals set at the beginning of the year, our management team drove meaningful progress against these key indicators. We delivered historically low out-of-stock rates for stores, digital and our top 2,000 items. We delivered significantly improved system stability and our digital systems flawlessly performed over the holiday season, which resulted in 100% availability of the website through all-time high peak volume. In our stores, team member satisfaction with systems was at a three-year high. Additionally our signature categories grew 3 percentage points faster than the total company, fueled by digital growth that outpaced the industry.

 

Taking into consideration the outcomes described above, the CEO recommended, and the Human Resources & Compensation Committee approved, a team scorecard payout of 30% of base salary for our non-CEO NEOs.

 

  TARGET CORPORATION 2017 Proxy Statement 35
 

Long-term incentives

 

To align our executive officers’ pay outcomes with long-term performance, 100% of our annual LTI grant features performance-based metrics and comprises the majority of each NEO’s total compensation.

 

Value of LTI awarded at grant

 

In determining the amount of individual LTI awards, the Human Resources & Compensation Committee considered each NEO’s performance during the fiscal year, potential future contributions, historical annual grant amounts and retention considerations, as well as market data for comparable executives from our retail and general industry peer groups. The annual LTI grants for our NEOs are made in January of each year (the last month of our fiscal year) to allow the Committee to include an assessment of our financial performance in determining grant levels.

 

The Human Resources & Compensation Committee made no changes to the NEOs’ annual LTI grants versus the prior year.

 

Mix of LTI

 

Once the total annual grant date present value for a NEO is determined, the Human Resources & Compensation Committee grants 75% of this value in PSUs and 25% in PBRSUs. Under this approach, strong long-term performance relative to peers on critical metrics becomes the key driver of compensation realized by executive officers.

 

PSUs

 

Our PSUs have a three-year performance period and are settled in stock. The plan payout is intended to reflect the same key metrics we use to manage our business and drive shareholder returns over time. Each metric is compared relative to our retail peer group and is intended to incent management to outperform the peer group over the long term. The three relative metrics used in our PSU plan are:

 

Change in Market Share. A company’s change in market share is calculated by determining the difference between (b) and (a) and dividing that difference by (a). The “market” is the sum of domestic net sales for us and our retail peer group.
   
  (a) The company’s domestic net sales in the baseline year is divided by the market’s domestic net sales for the baseline year.
  (b) The company’s domestic net sales in the final year of the performance period is divided by the market’s domestic net sales for the final year.
     
EPS Growth. The compound annual growth rate of our EPS from continuing operations versus the reported EPS from continuing operations of our retail peer group.
After-Tax ROIC. Three-year average net operating profit after-tax divided by average invested capital for both our results and our retail peer group, excluding discontinued operations.

 

With these three independent metrics, our PSU program supports the critical drivers of our success: to grow the top-line relative to the retail sector, to grow it profitably, and to ensure prudent deployment of capital to drive the business. The following example illustrates PSU payouts at various levels of performance:

 

 

For more information about our peer groups, see pages 39-40.

 

  TARGET CORPORATION 2017 Proxy Statement 36
 

PSU adjustments

 

The intent of our PSU program is to measure performance relative to our peer group on the previously described metrics. To achieve this measurement in an objective manner, we base the initial rankings on annual reported financial results of each member of the retail peer group and Target (unless determined otherwise at the time of grant). The Human Resources & Compensation Committee has reserved discretion to adjust the reported financial results for Target or any member of the retail peer group if it believes such adjustments necessary to properly gauge Target’s relative performance. Adjustments to Target and peer results, if any, are disclosed in the proxy in the year of payout.

 

Historically, adjustments to Target’s results have not been material in nature, eliminated items that did not reflect our core operations, and ultimately decreased participants’ resulting payouts. The only adjustment to our peers’ results historically has been a reduction in sales to remove the impact of the 53rd week in the retail accounting calendar to ensure consistency on relative market share comparisons.

 

2014-2016 PSU payout

 

We did not meet the 162(m) minimum performance condition for fiscal 2014 required to earn the 2014-2016 PSU payout.

 

PBRSUs

 

In January 2017, the Human Resources & Compensation Committee granted PBRSU awards in connection with fiscal 2016 performance. The PBRSU amount will be adjusted up or down by 25 percentage points if Target’s TSR is in the top one-third or bottom one-third for the retail peer group, respectively, over the three-year vesting period. These stock-settled awards cliff vest at the end of the three-year performance period.

 

PBRSU payout schedule
TSR performance ranking(1)  Percent of goal
1-6  125%
7-12  100%
13-18  75%
(1) The retail peers for PBRSUs exclude Publix. The value of Publix’s stock price is established on an annual basis, making them an inappropriate comparator for the purpose of assessing our relative TSR performance.

 

2014-2016 PBRSU payout

 

We did not meet the 162(m) minimum performance condition for fiscal 2014 required to earn a payout for the 2014-2016 PBRSU performance period, so the PBRSUs for that performance period were forfeited.

 

Strategic alignment award payout

 

As described in our CD&A the past two years, Strategic Alignment Awards were granted and reported as compensation in 2015 to connect the management team’s pay with performance in achieving goals designed to reposition Target and drive long-term growth consistent with our key priorities. Shareholder feedback gained in 2015 informed our decision to grant these one-time awards.

 

Payout of these awards was based on important absolute metrics, each selected to drive focused outcomes that complement the relative performance metrics in our annual LTI awards. The core metrics include total sales growth, digital channel sales growth, and earnings before interest and taxes growth, which can deliver up to 150% of goal payout. Additionally, ROIC can modify awards upward by 50% of goal payout for a total maximum payout of 200% of goal. Payouts are based on fiscal 2015 and fiscal 2016 performance and assessed based on the metrics below and paid out in March 2017 at 104.7% of goal, as detailed below.

 

Core Metrics Goal Actual Actual Payout % Sales compound annual growth rate (CAGR) 3.0% 0.7% 23.3% Digital channel sales CAGR 30.0% 26.6% 88.7% Segment EBIT dollar growth (in millions) $500 $261 52.2% ROIC Modifier 13.75% 15.0% 50.0% Total Payout Calculation (expressed as a % of goal) Average of Core Metrics 54.7% + ROIC Modifier 50.0% Total Payout 104.7%

 

  TARGET CORPORATION 2017 Proxy Statement 37
 

Competitive sign-on compensation related to new hires

 

On June 5, 2016, Mr. Tritton joined Target as Executive Vice President & Chief Merchandising Officer. To attract Mr. Tritton to Target, he received a sign-on bonus of $500,000, RSUs valued at $1 million which cliff vest three years from the grant date and pro-rata equity grants consisting of PSUs and PBRSUs valued at $1 million. In addition, he received a STIP payout for fiscal 2016 performance pro-rated based on his hire date.

 

On August 22, 2016, Mr. Liu joined Target as Executive Vice President & Chief Legal Officer and Corporate Secretary. To attract Mr. Liu to Target, he received a sign-on bonus of $500,000, RSUs valued at $3 million, which ratably vest over three years, and pro-rata equity grants consisting of PSUs and PBRSUs valued at $1.5 million. In addition, he received a STIP payout for fiscal 2016 performance pro-rated based on his hire date.

 

Sign-on compensation for Mr. Tritton and Mr. Liu is reflective of their respective significant experience and was designed to orient a meaningful portion of their compensation to common goals shared by the other NEOs on terms consistent with the awards granted to Target’s other executive officers in January 2016. The respective RSU grants to Mr. Tritton and Mr. Liu were designed to make them whole for compensation they forfeited from their former employers when they joined Target (Make-Whole RSUs).

 

We have a relocation policy that provides a transfer allowance and pays for certain expenses, including travel related to finding a new home, moving family and reporting to work, home sale assistance for selling a current home and purchasing a new home, interim living and moving personal property. Mr. Tritton and Mr. Liu received approximately $475,000 and $250,000, respectively, in benefits under our relocation policy to help facilitate their moves to our corporate office. The entire relocation benefit is subject to repayment if the recipient voluntarily leaves Target at any time during the recipient’s first 36 months with the company. No tax gross-up is provided for the relocation benefit.

 

Other benefit elements

 

We offer other benefit components designed to encourage retention of key talent including:

 

Pension plan. No pension plan is available to any employee hired after January 2009. We maintain a pension plan for team members hired prior to January 2009 who meet certain eligibility criteria. We also maintain supplemental pension plans for those team members who are subject to IRS limits on the basic pension plan or whose pensions are adversely impacted by participating in our deferred compensation plan. Our pension formula under these plans is the same for all participants—there are no enhanced benefits provided to executive officers beyond extending the pension formula to earnings above the qualified plan limits or contributed to our deferred compensation plan.
401(k) plan. Available to all team members who work more than 1,000 hours for the company. There is no enhanced benefit for executives.
Deferred compensation plan. For a broad management group (approximately 3,500 eligible team members), we offer a non-qualified, unfunded, individual account deferred compensation plan. The plan has investment options that mirror our 401(k) plan.
Perquisites. We provide certain perquisites to our executive officers, principally to allow them to devote more time to our business and to promote their health and safety. The Human Resources & Compensation Committee reviews these perquisites annually to ensure they are consistent with our philosophy and appropriate in magnitude. Mr. Cornell is only eligible for perquisites that support his safety, health and well-being—home security, parking, executive physical and personal use of company-owned aircraft for security reasons. Mr. Cornell is required to reimburse Target for the incremental costs of using company-owned aircraft for personal purposes if his personal use exceeds $175,000 per year. Mr. Cornell did not exceed that amount in fiscal 2016.

 

Greater detail on these components is provided in the tables that follow the Summary Compensation Table on page 42.

 

Income continuance

 

None of our NEOs has an employment contract, enhanced change-of-control benefits or rights to tax gross-ups. We provide an Income Continuance Policy (ICP) to executive officers who are involuntarily terminated without cause to assist in their occupational transitions. The maximum payment under this policy (paid during regular pay cycles over two years) is two times the sum of base salary and the average of the last three years of short-term incentive and personal performance payments. In addition, any NEO who receives severance payments under our ICP also receives a $30,000 allowance for outplacement services.

 

  TARGET CORPORATION 2017 Proxy Statement 38
 

Compensation governance

 

Process for determining executive compensation (including NEOS)

 

Human Resources & Compensation Committee

 

The Human Resources & Compensation Committee is responsible for determining the composition and value of our non-CEO executive officer pay packages and for developing a recommendation for our CEO’s pay package that is reviewed and approved by the independent directors of the full Board. The Human Resources & Compensation Committee receives assistance from two sources: (a) an independent compensation consulting firm, Semler Brossy Consulting Group (SBCG); and (b) our internal executive compensation staff, led by our Executive Vice President & Chief Human Resources Officer. All decisions regarding executive compensation and final recommendations to the independent members of the full Board are made solely by the Human Resources & Compensation Committee. The Human Resources & Compensation Committee may not delegate its primary responsibility of overseeing executive officer compensation, but it may delegate to management the administrative aspects of our compensation plans that do not involve the setting of compensation levels for executive officers.

 

Human Resources & Compensation Committee’s independent consultant

 

SBCG has been retained by and reports directly to the Human Resources & Compensation Committee and does not have any other consulting engagements with management or Target. The Committee assessed SBCG’s independence in light of the SEC and NYSE listing standards and determined that no conflict of interest or independence concerns exist.

 

With respect to CEO compensation, SBCG provides an independent recommendation to the Human Resources & Compensation Committee, in the form of a range of possible outcomes, for the Human Resources & Compensation Committee’s consideration. In developing its recommendation, SBCG relies on its understanding of Target’s business and compensation programs and SBCG’s independent research and analysis. SBCG does not meet with our CEO with respect to CEO compensation. SBCG also provides an independent assessment of the CEO’s recommendations on NEO compensation to the Human Resources & Compensation Committee.

 

Compensation of other executive officers and role of management

 

In developing compensation recommendations for other executive officers, the Executive Vice President & Chief Human Resources Officer provides our CEO with market data on pay levels and compensation design practices provided by management’s external compensation consultants, Willis Towers Watson and Korn Ferry Hay Group, covering our retail and general industry peer group companies. Management’s outside consultants do not have any interaction with either the Human Resources & Compensation Committee or our CEO, but do interact with the Executive Vice President & Chief Human Resources Officer and her staff. In addition to providing market data, management’s external compensation consultants perform other services for Target unrelated to the determination of executive compensation.

 

Our Executive Vice President & Chief Human Resources Officer and the CEO work together to develop our CEO’s compensation recommendations to the Human Resources & Compensation Committee for other executive officers. The CEO alone is responsible for providing final compensation recommendations for the other executive officers to the Human Resources & Compensation Committee.

 

Benchmarking using compensation peer groups

 

Peer group market positioning is another important factor considered in determining each executive officer’s TDC.

 

The TDC levels and elements described in the preceding pages are evaluated annually for each executive officer relative to our retail and general industry peer group companies. The market comparisons are determined by use of compensation data obtained from publicly available proxy statements analyzed by SBCG and proprietary survey data assembled by Willis Towers Watson and Korn Ferry Hay Group.

 

Due to a range of factors, including the scope of NEO positions, tenure in role and company-specific concerns, there is an imperfect comparability of NEO positions between companies. As such, market position served as a reference point in the TDC determination process rather than a formula-driven outcome.

 

The retail peer group was formulated based on an initial screen of companies in the Global Industry Classification Standard retailing index with revenue from core retail operations greater than $15 billion. The retail peer group is also used within our LTI plans. Target’s relative performance compared to this peer group on key metrics determines overall payout for our PSU and PBRSU awards.

 

General industry companies are also included as a peer group because they represent companies with whom we compete for talent. Like the selected retailers, the general industry companies are large and among the leaders in their industries.

 

The composition of the peer groups is reviewed annually to ensure it is appropriate in terms of company size and business focus, and any changes made are reviewed with SBCG and approved by the Human Resources & Compensation Committee. No changes were made to our peer groups in fiscal 2016. The companies included in the 2016 market comparisons are listed below.

 

  TARGET CORPORATION 2017 Proxy Statement 39
 

2016 peer groups Retail Amazon.com, Inc. Lowe’s Companies, Inc. Best Buy Co., Inc. Macy’s, Inc. Cost co Wholesale Corporation Publix Super Markets, Inc. CVS Health Corporation Rite Aid Corporation Dollar General Corporation Sears Holdings Corporation The Gap, Inc. Staples, Inc. The Home Depot, Inc. The TJX Companies, Inc. Kohl’s Corporation Walgreens Boots Alliance, Inc. The Kroger Co. Wal-Mart Stores, Inc. General industry 3M Company Johnson Controls, Inc. Abbott Laboratories McDonald’s Corporation Anthem, Inc. MetLife, Inc. Archer-Daniels-Midland Company Mondelez International, Inc. The Coca-Cola Company PepsiCo, Inc. Deere Company Pfizer Inc. The Dow Chemical Company The Procter & Gamble Company Express Scripts Holding Company Time Warner Inc. FedEx Corporation United Parcel Services, Inc. General Mills, Inc. UnitedHealth Group Incorporated Johnson & Johnson United Technologies Corporation

 

The following table summarizes our scale relative to our retail and general industry peer groups. The financial information reflects fiscal year end data available as of January 28, 2017:

 

   2016 peer group comparison(1)(2)  
   Retail   General industry  
    Revenues    Market cap    Employees    Revenues     Market cap   Employees  
25th Percentile  $25,629   $9,240    125,250   $29,795    $51,324   53,942  
Median   36,073    25,729    162,450    49,608     74,090   98,450  
75th Percentile   109,124    81,467    227,100    67,101     149,355   182,650  
Target Corporation  $69,495   $36,044    323,000   $69,495    $36,044   323,000  
(1) All amounts in millions, except employees.
(2) Data Source: Equilar

 

Compensation policies and risk

 

As part of our regular review of our compensation practices, we conduct an analysis of whether our compensation policies and practices for our employees create material risks to the company. Our risk assessment is two pronged. First, we take a “tops-down” approach by evaluating whether our compensation programs and policies exacerbate top enterprise-wide risks. Next, we take a “bottoms-up” approach to assess the following key compensation risk areas: performance measures, pay mix, goal setting and performance curve, leverage, magnitude of pay, calculation of performance, participant communication, severance and corporate governance.

 

The results of this analysis, which concluded that our policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company, were reviewed by the Human Resources & Compensation Committee’s independent consultant and discussed with the Human Resources & Compensation Committee. More specifically, this conclusion was based on the following considerations:

 

Compensation risk considerations
Pay Mix Compensation mix of base salary and short-term and long-term incentives provides compensation opportunities measured by a variety of time horizons to balance our near-term and long-term strategic goals.
Performance Metrics A variety of distinct performance metrics are used in both the short-term and long-term incentive plans. This “portfolio” approach to performance metrics encourages focus on sustained and holistic overall company performance.
Performance Goals Goals are approved by our independent directors and take into account our historical performance, current strategic initiatives and the expected macroeconomic environment. In addition, short-term and long-term incentive compensation programs are designed with payout curves and leverage that support our pay for performance philosophy.
Equity Incentives Equity incentive programs and stock ownership guidelines are designed to align management and shareholder interests by providing vehicles for executive officers to accumulate and maintain an ownership position in the company.
Risk Mitigation Policies

We incorporate several risk mitigation policies into our officer compensation program, including:

● The Human Resources & Compensation Committee’s ability to use “negative discretion” to determine appropriate payouts under formula-based plans;

 A clawback policy to recover incentive compensation that was based on inaccurate financial statements;

● Stock ownership guidelines for executive officers and directors; and

● Anti-hedging and anti-pledging policies.

 

  TARGET CORPORATION 2017 Proxy Statement 40
 

Clawback policy

 

Our clawback policy, which covers all officers, allows for recovery of the following compensation elements:

 

All amounts paid under the Short-Term Incentive Plan (including any discretionary payments) that were paid with respect to any fiscal year that is restated; and
All awards under the Long-Term Incentive Plan whether exercised, vested, unvested, or deferred.

 

All demands for repayment are subject to Human Resources & Compensation Committees’s discretion. For an officer to be subject to recovery or cancellation under this policy, he or she must have engaged in intentional misconduct that contributed to the need for a restatement of our consolidated financial statements.

 

Anti-hedging and anti-pledging policy

 

Executive officers and members of the Board of Directors may not directly or indirectly engage in capital transactions intended to hedge or offset the market value of Target common stock owned by them, nor may they pledge Target common stock owned by them as collateral for any loan. All of our executive officers and members of the Board of Directors are in compliance with this policy.

 

Grant timing practices

 

The following practices regarding the timing of equity compensation grants have not been formalized in a written policy, but they have been regularly followed:

 

Our annual LTI grant date has been the date of our regularly scheduled January Board of Directors meeting. This meeting is scheduled more than one year in advance. The Board has retained discretion to change the annual grant date in the future under appropriate circumstances.
We have no practice or policy of coordinating or timing the release of company information around our grant dates.
On occasion we grant equity compensation to executive officers outside of our annual LTI grant cycle for new hires, promotions, recognition, retention or other purposes. If the grant date is after the approval date, it must be on a date specified at the time of approval.

 

Compensation tax policy

 

Our short-term and long-term compensation programs, including the compensation paid in fiscal 2016, are intended to qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code (IRC). These compensation programs are generally structured such that executive officers are entitled to receive a maximum payout amount upon achievement of a minimum performance condition determined by the Human Resources & Compensation Committee. The Human Resources & Compensation Committee then uses its negative discretion to determine the actual payout amount. The performance objectives that are communicated to our executive officers, which are described in detail above, guide the Human Resources & Compensation Committee’s exercise of its negative discretion to determine the actual payouts. We may provide non-deductible compensation in situations the Human Resources & Compensation Committee or our Board of Directors believes appropriate.

 

  TARGET CORPORATION 2017 Proxy Statement 41
 

Compensation tables

 

Summary compensation table

 

The following Summary Compensation table contains values calculated and disclosed according to SEC reporting requirements. Salary, Bonus, and Non-Equity Incentive Plan compensation amounts reflect the compensation earned during each fiscal year. Stock Awards reflect awards with a grant date during each fiscal year.

 

Name and
principal position
Fiscal
year
  Salary  Bonus(1)   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 
Brian C. Cornell
Chairman & Chief Executive Officer
 2016  $1,300,000  $0$   9,650,837  $0  $0  $0  $330,532  $11,281,369 
 2015  $1,300,000  $0$   13,422,958  $0  $1,950,000  $0  $273,379  $16,946,337 
 2014  $595,000  $48,390$   27,354,887  $0  $0  $0  $165,747  $28,164,024 
Cathy R. Smith
Executive Vice President & Chief Financial Officer
 2016  $798,558  $240,000$   3,301,662  $0  $0  $0  $99,123  $4,439,343 
 2015  $290,000  $608,750$   5,683,978  $0  $161,313  $0  $788,775  $7,532,815 
                                    
John J. Mulligan
Executive Vice President & Chief Operating Officer
 2016  $1,000,000  $300,000$   5,079,385  $0  $0  $55,765  $595,493  $7,030,643 
 2015  $1,000,000  $387,000$   8,091,035  $0  $534,000  $4,063  $377,385  $10,393,482 
 2014  $919,231  $400,000$   4,555,603  $0  $0  $89,446  $328,348  $6,292,627 
Don H. Liu
Executive Vice President, Chief Legal Officer & Corporate Secretary
 2016  $275,000  $597,500$   6,812,539  $0  $0  $0  $263,804  $7,948,843 
                                    
                                    
Mark J. Tritton
Executive Vice President & Chief Merchandising Officer
 2016  $396,635  $625,000$   3,643,812  $0  $0  $0  $484,867  $5,150,313 
                                    
                                    

 

(1) For NEOs other than our CEO, the “Bonus” amount shows actual payouts earned under our Short-Term Incentive Plan for the team scorecard component in 2016 and the personal component for 2015. The CEO has no team scorecard or personal component to his Short-Term Incentive Plan payout. For Mr. Liu and Mr. Tritton, the “Bonus” amount for 2016 also includes $500,000 each for sign-on bonuses included in their new hire compensation.
   
(2) Amounts represent the aggregate grant date fair value of awards made each fiscal year, as computed in accordance with FASB ASC Topic 718. See Note 26, Share-Based Compensation, to our consolidated financial statements for fiscal 2016 and Note 26, Share-Based Compensation, to our consolidated financial statements for fiscal 2015 for a description of our accounting and the assumptions used.

 

  TARGET CORPORATION 2017 Proxy Statement 42
 
(3) Represents the aggregate grant date fair value of PSUs and PBRSUs that were computed based on the probable outcome of the performance conditions as of the grant date. Actual payments will be based on degree of attainment of the performance conditions and our stock price on the settlement date. For Mr. Liu and Mr. Tritton, this also includes the aggregate grant date fair value of RSUs, PSUs and PBRSUs granted as part of their new hire compensation.
  The range of payments for the PSUs granted in fiscal 2016 is as follows:

 

Name  Minimum
amount
   Amount
reported
   Maximum
amount
 
Mr. Cornell               
PSU Granted 1/11/17  $0   $7,125,037   $12,468,815 
Ms. Smith               
PSU Granted 1/11/17  $0   $2,437,545   $4,265,703 
Mr. Mulligan               
PSU Granted 1/11/17  $0   $3,750,008   $6,562,514 
Mr. Liu               
PSU Granted 8/22/16  $0   $937,514   $1,640,650 
PSU Granted 1/11/17  $0   $1,875,040   $3,281,320 
Mr. Tritton               
PSU Granted 6/6/16  $0   $750,050   $1,312,588 
PSU Granted 1/11/17  $0   $1,200,034   $2,100,060 

 

(4) The “Non-Equity Incentive Plan Compensation” amount shows actual payouts earned under the financial component of our Short-Term Incentive Plan. Fiscal 2015 is the only year of the last three years in which our NEOs earned a payout under the financial component our Short-Term Incentive Plan.
   
(5) For fiscal 2016, Mr. Mulligan’s change in the qualified pension plan value amount was $55,765. Mr. Cornell, Ms. Smith, Mr. Liu and Mr. Tritton are not eligible for the Target Corporation Pension Plan or any supplemental pension plans because they were hired after January 2009. Consistent with applicable law, the accrued benefits under the pension plan cannot be reduced; however, the present value of the benefit is dependent on the discount rate used. The discount rates used in fiscal 2016, 2015 and 2014 were 4.42%, 4.71% and 3.87%, respectively. The Change in Pension Value column reflects the additional pension benefits attributable to additional service, increases in eligible earnings and changes in the discount rate.
   
(6) The amounts reported for fiscal 2016 include matching credits of up to a maximum of 5% of cash compensation allocated between the Target 401(k) Plan and our current executive deferred compensation plan (EDCP), the dollar value of life insurance premiums paid by Target, credits to the EDCP representing annual changes in supplemental pension plan values, relocation benefits and perquisites.

 

Name  Match credits   Life insurance   SPP credits   Relocation   Perquisites   Total 
Mr. Cornell  $162,750   $15,479   $0   $0   $152,303   $330,532 
Ms. Smith  $50,118   $7,491   $0   $27,929   $13,585   $99,123 
Mr. Mulligan  $96,050   $8,279   $459,668   $0   $31,496   $595,493 
Mr. Liu  $0   $4,257   $0   $250,092   $9,455   $263,804 
Mr. Tritton  $3,570   $3,184   $0   $474,540   $3,573   $484,867 

  Supplemental Pension Plans. The SPP Credits for our NEOs represent additional accruals of supplemental pension plan benefits that are credited to their deferred compensation accounts. These benefits are based on our normal pension formula, so they are affected by final average pay, service, age and changes in interest rates. See the narrative following the Pension Benefits for Fiscal 2016 table for more information about our pension plans.
  Relocation. In connection with the hiring and appointment of Mr. Liu as our Chief Legal Officer and Mr. Tritton as our Chief Merchandising Officer, we paid $250,092 and $474,540, respectively, under our relocation policy to facilitate moves to our corporate office in Minnesota. In early fiscal 2016, we paid $27,929 under our relocation policy for Ms. Smith, who was hired as our Chief Financial Officer in September 2015. See page 38 for more information about the benefits provided under our relocation policy. The entire relocation benefit is subject to repayment if the recipient voluntarily leaves Target at any time during the recipient’s first 36 months with the company. No tax gross-up is provided for the relocation benefit.
  Perquisites. The perquisites for our NEOs other than Mr. Cornell consist of reimbursement of financial management expenses, reimbursement of home security expenses, on-site parking, spousal travel on business trips, limited personal use of company-owned aircraft and executive physicals. Mr. Cornell is only eligible for perquisites that support his safety, health and well-being, namely: reimbursement of home security expenses, on-site parking, executive physical, and personal use of company-owned aircraft for security reasons. Mr. Cornell is required to reimburse Target for the incremental costs of using company-owned aircraft for personal purposes if his personal use exceeds $175,000 per year. The only individual perquisite that exceeded $25,000 was Mr. Cornell’s personal use of company-owned aircraft for security reasons, which amounted to $147,036. No tax gross-up is provided on this perquisite.
  The dollar amount of perquisites represents the incremental cost of providing the perquisite. We generally measure incremental cost by the additional variable costs attributable to personal use, and we disregard fixed costs that do not change based on usage. Incremental cost for personal use of company-owned aircraft was determined by including fuel cost, landing fees, on-board catering and variable maintenance costs attributable to personal flights and related unoccupied positioning, or “deadhead,” flights. In addition to the perquisites included in the table in this footnote, the NEOs occasionally use support staff time for personal matters, principally to allow them to devote more time to our business, and receive personal use of empty seats on business flights of company-owned aircraft and personal use of event tickets when such tickets are not being used for business purposes, each of which are benefits for which we have no incremental cost.

 

  TARGET CORPORATION 2017 Proxy Statement 43
 

Grants of plan-based awards in fiscal 2016

 

       Estimated possible payouts
under non-equity incentive
plan awards(1)
   Estimated future payouts
under equity incentive
plan awards(2)
      
Name  Grant
date
   Threshold    Target    Maximum    Threshold
(#)
    Target
(#)
    Maximum
(#)
    Grant date
 fair value
of stock
awards(3)
 
Brian C. Cornell  3/9/16  $975,000   $2,275,000   $5,200,000                     
   1/11/17                  24,906    33,208    41,510   $2,525,800 
   1/11/17                  0    99,623    174,341   $7,125,037 
Cathy R. Smith  3/9/16  $128,000   $720,000   $1,600,000                     
   1/11/17                  8,521    11,361    14,202   $864,118 
   1/11/17                  0    34,082    59,644   $2,437,545 
John J. Mulligan  3/9/16  $160,000   $900,000   $2,000,000                     
   1/11/17                  13,109    17,478    21,848   $1,329,377 
   1/11/17                  0    52,433    91,758   $3,750,008 
Don H. Liu  8/22/16(4)   $52,000   $292,500   $650,000                     
   8/22/16(4)                  0    42,729    42,729   $3,000,003 
   8/22/16(4)                  3,339    4,451    5,564   $335,294 
   8/22/16(4)                  0    13,353    23,368   $937,514 
   1/11/17                  6,555    8,739    10,924   $664,688 
   1/11/17                  0    26,217    45,880   $1,875,040 
Mark J. Tritton  6/6/16(4)  $66,667   $375,000   $833,333                     
   6/6/16(4)                  0    14,550    14,550   $1,000,022 
   6/6/16(4)                  2,729    3,638    4,548   $268,303 
   6/6/16(4)                  0    10,913    19,098   $750,050 
   1/11/17                  4,195    5,593    6,992   $425,404 
   1/11/17                  0    16,779    29,364   $1,200,034 

 

(1) Awards represent potential payments under the current STIP. Payments are based on specified target levels of Incentive EBIT and Total Adjusted Sales, as described in the CD&A. Executive officers must be employed on the date the payments are made (typically in March of each year with respect to the preceding fiscal year) to be eligible for a payment, except in the event of death, disability or retirement eligibility (termination other than for cause after age 55 with at least five years of service). The maximum payment is the annual plan maximum, which is generally four times salary for our CEO and two times salary for executive officers other than our CEO.
   
(2) Awards represent potential payments under PSUs, PBRSUs and RSUs granted under our Amended and Restated 2011 Long-Term Incentive Plan in fiscal 2016. See the CD&A for a more detailed description of the performance measures for those awards. The other terms of the PSUs, PBRSUs and RSUs are described in Notes 2 and 3 to the Outstanding Equity Awards at 2016 Fiscal Year-End table.
   
(3) Grant date fair value for PSUs, PBRSUs and RSUs was determined pursuant to FASB ASC Topic 718.
   
(4) Awards represent the potential payments under the equity grants made to Mr. Liu and Mr. Tritton in connection with their hire dates of August 22, 2016 and June 5, 2016, respectively. Each received a pro-rata equity grant consisting of PSUs and PBRSUs and pro-rata STIP award, each on terms consistent with the awards granted to Target’s other executive officers in January 2016. In addition, to compensate for incentive awards from former employers that were forfeited to join Target, Mr. Liu and Mr. Tritton each received a grant of Make-Whole RSUs that have the same general terms as other RSUs and PBRSUs described in Notes 2 and 3 to the Outstanding Equity Awards at 2016 Fiscal Year-End table except that Mr. Liu’s Make-Whole RSUs vest in one-third increments on each anniversary of the grant date.

 

  TARGET CORPORATION 2017 Proxy Statement 44
 

Outstanding equity awards at 2016 fiscal year-end

 

  Option awards   Stock awards 
                              Equity 
                          Equity   incentive 
                          incentive   plan awards: 
                          plan awards:   market or 
                          number of   payout value 
  Number of   Number of           Number       unearned   of unearned 
  securities   securities           of shares   Market value   shares, units   shares, units 
  underlying   underlying           or units of   of shares or   or other   or other 
  unexercised   unexercised   Option   Option   stock that   units of stock   rights that   rights that 
  options(#)   options(#)   exercise   expiration   have not   that have not   have not   have not 
Name exercisable(1)   unexercisable(1)   price   date   vested(#)(2)   vested   vested(#)(3)   vested(3) 
Brian C. Cornell                                640,375   $40,791,888 
Cathy R. Smith                                142,770   $9,094,449 
John J. Mulligan  11,557    0   $ 55.46    01/12/2021    6,404   $407,935    242,587   $15,452,792 
   29,833    0   $48.88    01/11/2022                     
   76,983    0   $50.51    01/24/2022                     
   139,018    0   $60.48    01/09/2023                     
Don H. Liu                      43,063   $2,743,113    75,870   $4,832,919 
Mark J. Tritton                      14,792   $942,250    52,075   $3,317,178 

 

(1) Stock options have a ten-year term and generally vest and become exercisable in 25% increments on each anniversary of the grant date. In general, recipients of stock options must be continuously employed from the grant date to the applicable vesting date to become vested. If an executive officer’s employment is terminated other than for cause, unvested stock options are forfeited and the executive officer will have 210 days to exercise any vested stock options. An extension of the vesting and post-termination exercise periods may be provided (but not in excess of the original ten-year term of the option) if the executive officer satisfies certain age and years of service conditions as of the date of termination, as follows:

 

 Options granted before  Options granted on or after 
 September 14, 2011  September 14, 2011 
    Minimum years    Vesting and exercise    Minimum years    Vesting and exercise 
Age   of service    extension period    of service    extension period 
65+   5    5 Years    10    10 Years 
60-64   15    5 Years    10    10 Years 
55-59   15    5 Years    15    5 Years 
52-54   15    4 Years    15    4 Years 
48-51   15    3 Years    15    3 Years 
45-47   15    2 Years    15    2 Years 

 

  To receive these extension provisions, the executive officer must sign an agreement that includes a non-solicitation clause and a release of claims, and provides that the award will be terminated if the executive officer becomes employed by specified competitors. If the termination is voluntary, the executive officer must also have commenced discussions with the company regarding the executive officer’s consideration of termination at least six months prior to termination. These vesting-extension provisions are not available if an executive officer’s employment is terminated for cause. If an executive officer’s employment is terminated for cause, both the vested and unvested stock options are forfeited.
   
  A five-year exercise period will apply in the event of the executive officer’s termination due to death or a disability, except that the exercise period will be ten years if the executive officer meets the described age and years of service requirements. The exercise period is not to exceed the original ten-year term of the option, except to the extent necessary to provide at least one year to exercise after the executive officer’s death during employment. Vesting is accelerated upon death and continues during the post-termination exercise period in the event of disability. Stock options are transferable during the life of the executive officer to certain family members and family-controlled entities.
   
(2) Includes RSUs granted to Mr. Mulligan on May 22, 2014 and Make-Whole RSUs granted to Mr. Liu on August 22, 2016, which will vest in one-third increments on each anniversary of the grant date, and Make-Whole RSUs granted to Mr. Tritton on June 6, 2016, which will vest in full on the third anniversary of the grant date. After vesting, the RSUs and Make-Whole RSUs will be converted into shares of our common stock on a 1:1 basis. Dividend equivalents are accrued (in the form of additional units) on RSUs and Make-Whole RSUs during the vesting period and converted to shares if and after the underlying RSUs and Make-Whole RSUs vest. Messrs. Mulligan, Liu and Tritton must generally be continuously employed for three years from the date of grant in order to receive the shares, except that in the event employment is involuntarily terminated without cause Mr. Mulligan’s unvested RSUs will vest in full and 50% of Mr. Liu’s and Mr. Tritton’s outstanding unvested Make-Whole RSUs will vest, provided that they must sign an agreement that includes a non-solicitation clause and a release of claims and provides that the award will be terminated if they become employed by specified competitors. Vesting is also accelerated in the event of death or disability.
   
(3) The shares reported in this column represent potentially issuable shares under outstanding PSU and PBRSU awards. PSUs and PBRSUs represent the right to receive a variable number of shares based on actual performance over the performance period. The number of shares reported is based on our actual performance results through the end of fiscal 2016 under the applicable performance measures and assuming that the payout will occur at the next highest level (threshold, target or maximum). The performance levels required for payouts on outstanding awards are described in the CD&A. The market value of stock reported is calculated by multiplying the number of shares by our 2016 fiscal year-end closing stock price of $63.70.
   
  Dividend equivalents are accrued (in the form of additional units) on PSUs and PBRSUs, respectively, during the vesting period and are subject to the same performance and other conditions as the underlying PSUs and PBRSUs. The dividend equivalents are converted to shares if and after the underlying PSUs and PBRSUs vest.

 

  TARGET CORPORATION 2017 Proxy Statement 45
 

The payment date of the awards, to the extent they are earned, will be within a certain time after the date the Human Resources & Compensation Committee certifies the financial results following completion of the performance period (60 days for PSUs and 90 days for PBRSUs). Recipients must be continuously employed during the performance period to become vested, except that vesting will also occur, and any shares earned upon certification of the financial results following completion of the performance period will be paid, if a termination occurs under the following circumstances prior to the end of the performance period (referred to as “vesting-extension provisions”):

 

Death or disability;
For PSUs and PBRSUs only, executive officer is:
  For awards granted on or after January 13, 2016 – Age 55 or greater and has at least 5 years of service; or
  For awards granted before January 13, 2016 – Age 60 or greater and has at least 10 years of service or age 55-59 and has at least 15 years of service;
For PSUs only, the executive officer is age 45-54, has at least 15 years of service and has worked for a specified minimum amount of the performance period (1-2 years, depending on age); or
For PBRSUs only, 50% of the shares subject to an award will vest if the recipient is involuntarily terminated without cause prior to the scheduled vesting date and the executive officer signs an agreement that includes a non-solicitation clause and a release of claims, and provides that the award will be terminated if the executive officer becomes employed by specified competitors.

 

To receive these vesting-extension provisions, the executive officer must comply with the same conditions that are applicable to the vesting and post-termination extension of stock options that are described in Note 1 to this table. These vesting-extension provisions are not available if an executive officer’s employment is terminated for cause. If an executive officer’s employment is terminated for cause, then all PSUs and PBRSUs are forfeited.

 

The shares reported in this column also include make-whole PBRSUs granted to Mr. Cornell on August 21, 2014 to compensate him for incentive awards from his former employer he forfeited to join Target (Make-Whole PBRSUs). Those Make-Whole PBRSUs have the same general terms as the other PBRSUs described in this Note, except that one third vested in each of March 2016 and March 2017, and the remaining one third vests in March 2018, subject to Mr. Cornell’s continued employment through the applicable vesting dates. If Mr. Cornell’s employment is involuntarily terminated without cause before an applicable vesting date, Mr. Cornell will receive 50% of the at-goal payout of any outstanding unvested Make-Whole PBRSUs.

 

Option exercises and stock vested in fiscal 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)
 
Brian C. Cornell   0   $0    108,866   $7,453,708 
Cathy R. Smith   0   $0    14,363   $793,987 
John J. Mulligan   35,529   $1,103,714    48,787   $2,779,439 
Don H. Liu   0   $0    0   $0 
Mark J. Tritton   0   $0    0   $0 

 

(1) Value Realized on Exercise is calculated as the difference between the market value of Target common stock on the respective exercise date(s) and the exercise price of the option(s).
(2) Value Realized on Vesting is calculated by multiplying the number of shares acquired on vesting by the market value of Target common stock on the respective vesting date(s), except that where the Human Resources & Compensation Committee must certify the number of shares earned, Value Realized on Vesting is calculated by multiplying the number of shares earned by the market value of Target common stock on the date the Human Resources & Compensation Committee certifies the shares that were earned.

 

Pension benefits for fiscal 2016

 

Name(1)  Plan name  Age at FYE   Number of years
credited service(#)
   Present value of
accumulated benefit
 
John J. Mulligan  Target Corporation Pension Plan   51    20   $357,362 

 

(1) Mr. Cornell, Ms. Smith, Mr. Liu and Mr. Tritton are not eligible for the Target Corporation Pension Plan or any supplemental pension plans because they were hired after January 2009.

 

Pension plan

 

The Pension Benefits for Fiscal 2016 table reports benefits under the Target Corporation Pension Plan (Pension Plan), which is a tax qualified retirement plan that provides retirement benefits to eligible employees who were hired prior to January 2009. The Pension Plan benefit for Mr. Mulligan is based on his final average pay as limited by the IRC. The final average pay benefit, expressed as a monthly, single life annuity commencing at age 65, is equal to the sum of: (a) 0.8% of the participant’s final average monthly pay multiplied by the years of service (not to exceed 25 years of service), plus (b) 0.25% of the participant’s final average monthly pay multiplied by the years of service in excess

 

  TARGET CORPORATION 2017 Proxy Statement 46
 

of 25 years of service, plus (c) 0.5% of the participant’s final average monthly pay in excess of 12.5% of the average of the Social Security Taxable Wage Base for the 35-year period ending when the participant terminates employment multiplied by the years of service (not to exceed 25 years of service). Participants can elect among annuity forms that have an actuarially equivalent value. Early retirement payments may commence at age 55.

 

Supplemental pension plans

 

We also provide benefits under supplemental pension plans, which are reflected in the Nonqualified Deferred Compensation table. The Target Corporation Supplemental Pension Plan I (SPP I) restores the lost qualified Pension Plan benefit due to an officer’s eligible pay being greater than the annual compensation limits imposed by the IRC, and is based on the same benefit formula used for determining benefits under the Pension Plan. The Target Corporation Supplemental Pension Plan II (SPP II) restores the lost qualified Pension Plan benefit due to amounts being deferred under the EDCP (our current deferred compensation plan) and therefore not considered for benefit purposes under the Pension Plan or SPP I.

 

Each year, the annual change in the actuarial lump-sum amount of a participant vested benefits under SPP I and II is calculated and added to, or deducted from, the participant’s EDCP account. A final calculation and an EDCP account adjustment occurs upon termination of employment. Because of the feature that annually transfers amounts to a participant’s EDCP account, the benefits accrued under SPP I and II are reflected as EDCP deferrals in the Nonqualified Deferred Compensation table.

 

Nonqualified deferred compensation for fiscal 2016

 

The amounts in the following table represent deferrals under the EDCP, which includes the supplemental pension benefits discussed in the preceding section.

 

Name  Executive
contributions
in last FY(1)
   Registrant
contributions
in last FY(2)
   Aggregate
earnings
in last FY(3)
   Aggregate
withdrawals/
distributions
in last FY
   Aggregate
balance
at last FYE(4)
 
Brian C. Cornell  $164,000   $149,250   $36,586   $0   $472,868 
Cathy R. Smith  $103,856   $34,099   $11,431   $0   $155,014 
John J. Mulligan  $65,000   $542,468   $125,766   $195,512   $2,400,942 
Don H. Liu  $7,500   $0   $218   $0   $7,718 
Mark J. Tritton  $13,942   $120   $481   $0   $14,543 

 

(1) All amounts of Executive Contributions in the table have been reported in the current year Summary Compensation Table.
(2) All of the Registrant Contributions from the table have been reported in the current year Summary Compensation Table. Registrant Contributions include transfers of supplemental pension benefits, net of any negative credits, and restored matching contributions on executive deferrals into the EDCP (i.e., matching contributions not able to be made into the Target 401(k) Plan because of IRC limits).
(3) No amounts from Aggregate Earnings in the table have been reported in the current year Summary Compensation Table.
(4) The following amounts of the Aggregate Balance from the table were reported in the Summary Compensation Tables covering fiscal years 2006-2015.

 

     Reported in prior
years’ summary
compensation
tables
 
  Mr. Cornell  $129,670 
  Ms. Smith  $5,577 
  Mr. Mulligan  $1,269,189 
  Mr. Liu  $0 
  Mr. Tritton  $0 

 

Participants in the EDCP may generally elect to defer up to 80% of their salary, Bonus and Non-Equity Incentive Plan payments; however, certain executive officers may defer up to 100% of their compensation if IRC Section 162(m) could limit our deductibility of such compensation. At any time, EDCP participants are permitted to choose to have their account balance indexed to crediting rate alternatives that mirror the investment choices and actual rates of return available under the Target 401(k) Plan, including a Target common stock fund. Target invests general corporate assets through various investment vehicles to offset a substantial portion of the economic exposure to the investment returns earned under EDCP. See Note 27, Defined Contribution Plans, to our fiscal 2016 consolidated financial statements for additional information.

 

At the time of deferral, participants can elect to receive a distribution of their EDCP account at a fixed date or upon termination of employment. EDCP payouts at a fixed date will be made as lump-sum payments. EDCP payouts made on termination of employment can be made as a lump-sum payment, or installment payments over five or ten years commencing immediately or one year after termination of employment. EDCP payouts are also made in the case of the termination of EDCP, a qualifying change-in-control, or unforeseeable financial emergency of the participant creating severe financial hardship.

 

The EDCP is intended to comply with IRC Section 409A. As a result, payments to executive officers based on a termination of employment will be delayed six months. The EDCP is an unfunded plan and represents a general unsecured obligation of Target. Participants’ account balances will be paid only if Target has the ability to pay. Accordingly, account balances may be lost in the event of Target’s bankruptcy or insolvency.

 

  TARGET CORPORATION 2017 Proxy Statement 47
 

Potential payments upon termination or change-in-control

 

This section explains the payments and benefits to which our currently employed NEOs are entitled in various termination of employment and change-in-control scenarios. The potential payments to the currently employed NEOs are hypothetical situations only, and assume that termination of employment and/or change-in-control occurred on January 28, 2017, the last day of our 2016 fiscal year, and that any change-in-control was at our fiscal year-end closing stock price of $63.70 per share. Beginning in January 2015, a double-trigger applies to RSUs, PBRSUs or PSU awards, meaning that no outstanding awards of those types granted on or after January 14, 2015 will accelerate upon a change-in-control unless an involuntary termination of employment without cause or a voluntary termination of employment for good reason occurs.

 

The intent of this section is to isolate those payments and benefits for which the amount, vesting or time of payment is altered by the described situations. This section does not cover all amounts the NEOs will receive following termination. Specifically, the NEOs are entitled to receive their vested balances under our pension and deferred compensation plans, as disclosed in the preceding tables, under all employment termination scenarios. In addition, unless the termination is for cause (generally defined as deliberate and serious disloyal or dishonest conduct), they retain their vested stock option awards, and if they meet specified minimum age and years of service requirements at the time of termination, the unvested portion of stock options and PSUs are not forfeited, and vesting will continue according to the original schedule for defined periods. A description of these age and years of service requirements is provided in the notes under the Outstanding Equity Awards at 2016 Fiscal Year-End table. Only Mr. Mulligan has met the minimum age and years of service requirements.

 

The following table shows the payments and benefits for which the amount, vesting or time of payment is altered by each situation (referred to as Post-Termination Benefits). The paragraphs following the table explain the general provisions applicable to each termination situation.

 

Table of potential payments upon termination or change-in-control

 

                   Change-in-control 
                       Involuntary 
                       or voluntary 
Name/
Payment type
  Voluntary
termination
   Involuntary
termination
   Death   Disability   No termination   good reason
Termination(6)
 
Brian C. Cornell                              
ICP Payments (Severance)  $0   $6,530,000   $0   $0   $0   $6,530,000 
PBRSU Vesting(1)(2)  $0   $3,161,972   $4,742,959   $4,742,959   $0   $3,503,840 
Make-Whole PBRSU Vesting(1)(3)  $0   $3,662,591   $7,325,182   $7,325,182   $5,896,406   $5,896,406 
PSU Vesting(1)  $0   $0   $0   $0   $0   $9,223,871 
Life Insurance Proceeds  $0   $0   $3,000,000   $0   $0   $0 
Excess Long-Term Disability Plan (Annual Payments)  $0   $0   $0   $441,000   $0   $0 
Total  $0   $13,354,563   $15,068,140   $12,509,140   $5,896,406   $25,154,117 
Cathy R. Smith                              
ICP Payments (Severance)  $0   $2,170,126   $0   $0   $0   $2,170,126 
PBRSU Vesting(1)(2)  $0   $878,423   $1,317,635   $1,317,635   $0   $899,494 
PSU Vesting(1)  $0   $0   $0   $0   $0   $2,020,425 
Life Insurance Proceeds  $0   $0   $3,000,000   $0   $0   $0 
Excess Long-Term Disability Plan                              
(Annual Payments)  $0   $0   $0   $441,000   $0   $0 
Total  $0   $3,048,549   $4,317,635   $1,758,635   $0   $5,090,046 
John J. Mulligan                              
ICP Payments (Severance)  $0   $2,910,667   $0   $0   $0   $2,910,667 
RSU Vesting(1)(4)  $0   $407,935   $407,935   $407,935   $275,276   $275,276 
PBRSU Vesting(1)(2)  $0   $1,523,354   $2,285,030   $2,285,030   $0   $1,656,317 
PSU Vesting(1)  $0   $0   $0   $0   $0   $5,900,223 
Life Insurance Proceeds  $0   $0   $3,000,000   $0   $0   $0 
Excess Long-Term Disability Plan
(Annual Payments)
  $0   $0   $0   $441,000   $0   $0 
Total  $0   $4,841,955   $5,692,965   $3,133,965   $275,276   $10,742,483 

 

  TARGET CORPORATION 2017 Proxy Statement 48
 

 

                   Change-in-control 
                       Involuntary 
                       or voluntary 
Name/
Payment type
  Voluntary
termination
   Involuntary
termination
   Death   Disability   No termination   good reason
Termination(6)
 
Don H. Liu                              
ICP Payments (Severance)  $0   $1,330,000   $0   $0   $0   $1,330,000 
Make-Whole RSU Vesting(1)(5)  $0   $1,371,557   $2,743,113   $2,743,113   $0   $1,371,557 
PBRSU Vesting(1)(2)  $0   $421,216   $631,824   $631,824   $0   $421,216 
PSU Vesting(1)  $0   $0   $0   $0   $0   $153,085 
Life Insurance Proceeds  $0   $0   $1,950,000   $0   $0   $0 
Excess Long-Term Disability Plan                              
(Annual Payments)  $0   $0   $0   $231,000   $0   $0 
Total  $0   $3,122,773   $5,324,937   $3,605,937   $0   $3,275,858 
Mark J. Tritton                              
ICP Payments (Severance)  $0   $1,280,000   $0   $0   $0   $1,280,000 
Make-Whole RSU Vesting(1)(5)  $0   $471,125   $942,250   $942,250   $0   $471,125 
PBRSU Vesting(1)(2)  $0   $295,950   $443,925   $443,925   $0   $295,950 
PSU Vesting(1)  $0   $0   $0   $0   $0   $159,589 
Life Insurance Proceeds  $0   $0   $1,875,000   $0   $0   $0 
Excess Long-Term Disability Plan                              
(Annual Payments)  $0   $0   $0   $216,000   $0   $0 
Total  $0   $2,047,075   $3,261,176   $1,602,176   $0   $2,206,664 
(1) Amounts are determined by multiplying the number of shares for which vesting is accelerated by our closing stock price on January 27, 2017 ($63.70 per share). Any remaining unvested RSUs, PBRSUs and PSUs are forfeited.
(2) For purposes of calculating the number of PBRSU shares vesting upon death and disability, the table uses the minimum payout, though the actual number of shares will be based on the actual performance at the end of the performance period.
(3) For the Make-Whole PBRSUs granted to Mr. Cornell on August 21, 2014, the number of PBRSU shares vesting upon death and disability is equal to the at-goal payout, and the number of shares vesting upon involuntary termination without cause is equal to 50% of the at-goal payout of the outstanding unvested Make-Whole PBRSUs. In addition, in both change-in-control scenarios the Make-Whole PBRSUs would pay out a pro-rata portion of the at-goal payout within ten days following the change-in-control based on percentage of the performance period that had elapsed as of the date of the change-in-control.
(4) The RSUs granted to Mr. Mulligan on May 22, 2014 will vest in full in the event of Mr. Mulligan’s death or disability. In addition, in both change-in-control scenarios Mr. Mulligan’s RSUs would pay out a pro-rata portion of the total shares subject to the award within ten days following the change-in-control.
(5) The Make-Whole RSUs granted to Mr. Liu on August 22, 2016 and the Make-Whole RSUs granted to Mr. Tritton on June 6, 2016 vest in full in the event of death or disability. In addition, in a change-in-control without termination of employment, there is no vesting or acceleration. However, if there is a change in control that includes an involuntary termination of employment without cause or a voluntary termination of employment for good reason, unvested Make-Whole RSUs would accelerate in an amount equal to the greater of (a) 50% of the total number of outstanding unvested Make-Whole RSUs, or (b) a pro-rata portion the outstanding unvested Make-Whole RSUs based on the percentage of the performance period that has elapsed as of the date of the termination following the change-in-control. The balance of those awards is forfeited.
(6) With the exception of Mr. Cornell’s Make-Whole PBRSUs, the PSU and PBRSU awards are subject to a double-trigger, meaning that no vesting will accelerate upon a change-in-control unless an involuntary termination of employment without cause or a voluntary termination of employment for good reason occurs. The amount accelerated is equal to the greater of: (a) the amount the recipient would have been entitled to had the termination occurred without a change-in-control (which ranges from 50% to 100% depending on the award type and the participant’s age and years of service), or (b) a pro-rata portion of the at-goal payout based on the percentage of the performance period that has elapsed as of the date of the termination following the change-in-control. The balance of those awards is forfeited.

 

  TARGET CORPORATION 2017 Proxy Statement 49
 

Voluntary termination

 

None of our currently employed NEOs are entitled to payments and benefits for which the amount, vesting or time of payment is altered by their voluntary termination.

 

Involuntary termination

 

If a NEO was involuntarily terminated for cause, he or she would not be eligible for any of the Post-Termination Benefits described in this section. If a NEO is involuntarily terminated without cause, the potential Post-Termination Benefits generally consist of:

 

Severance payments under our Income Continuance Policy (ICP); and
Accelerated vesting of 50% of the at-goal payout of PBRSU awards, and forfeiture of the remaining 50%.

 

Our ICP provides for continuation of annual cash compensation (salary and average of three most recent Bonuses and Non-Equity Incentive Plan payments) over a period ranging from 12 to 24 months, paid in equal monthly installments. Each of the NEOs is eligible for 24 months of income continuation under the ICP. Payments under the ICP are conditioned on the executive officer releasing any claims against us, a non-solicitation covenant, and are subject to reduction if the executive officer becomes employed by specified competitors. In addition, a NEO who receives severance payments under our ICP also receives a $30,000 allowance for outplacement services.

 

The accelerated vesting provisions of PBRSU awards are described in the notes under the Outstanding Equity Awards at 2016 Fiscal Year-End table.

 

Death

 

If a NEO dies while employed, the Post-Termination Benefits generally consist of:

 

Accelerated vesting of stock options;
Vesting of PBRSUs, with payout occurring after the end of the performance period based on the actual performance at the end of that period; and
Life insurance proceeds equal to three times the sum of the prior year’s annual base salary, plus the most recent Bonus and Non-Equity Incentive Plan payments, up to a maximum of $3 million.

 

In addition, the NEO’s beneficiary will have the right to receive a payout, if any, under PSUs after the end of the performance period based on the actual performance at the end of that period.

 

Disability

 

If a NEO becomes totally and permanently disabled while employed, the Post-Termination Benefits generally consist of:

 

Vesting of PBRSUs, with payout occurring after the end of the performance period based on the actual performance at the end of that period; and
Monthly payments under the Excess Long-Term Disability Plan if he or she also participated in the widely available qualified long-term disability plan.

 

Our Excess Long-Term Disability Plan, a self-insured unfunded plan, provides monthly disability income payments with respect to the portion of annualized salary and three-year average Bonus and Non-Equity Incentive Plan compensation above the annual compensation limit (currently set at $265,000) but not exceeding $1 million. The plan replaces 60% of a participant’s eligible compensation. A participant who becomes disabled before age 65 is eligible to receive payments under the plan while he or she is totally and permanently disabled through age 65 (with a minimum of three years of disability payments) or death, if sooner. In addition, the NEO will have the right to receive a payout, if any, under PSUs after the end of the performance period based on the actual performance at the end of that period.

 

Change-in-Control

 

The following discussion describes the payments and benefits that are triggered by: (a) the occurrence of a change-in-control; and (b) the occurrence of a change-in-control that is followed by the NEO’s employment terminating involuntarily without cause or voluntarily with good reason (a material reduction in compensation or responsibilities or a required relocation following a change-in-control). In general terms, we will experience a change-in-control, as defined in our compensation plans, whenever any of the following events occur:

 

50% or more of our Board of Directors consists of persons who were not initially nominated or appointed by incumbent directors, for which purpose any director who assumes office as a result of an actual or threatened contested election will not be considered as having been nominated or appointed by incumbent directors;
Any person or group acquires 30% or more of our common stock;
We merge with or into another company and our shareholders own less than 60% of the combined company; or
Our shareholders approve an agreement or plan to liquidate or dissolve our company.

 

Our plans do not provide for any gross-ups for taxes due on any payments described in this section.

 

  TARGET CORPORATION 2017 Proxy Statement 50
 

Without termination of employment

 

The consequence of a change-in-control to the NEOs without termination of employment is generally as follows:

 

The deferred compensation balance in the EDCP will be paid in a lump sum as soon as allowed under IRC Section 409A, unless the Board of Directors determines not to accelerate payment of these amounts; and
A double-trigger applies to PBRSUs or PSU awards, meaning that no vesting will accelerate upon a change-in-control unless an involuntary termination of employment without cause or a voluntary termination of employment for good reason occurs.

 

With involuntary or good reason termination of employment

 

In addition to the payments upon a change-in-control explained under “Without Termination of Employment,” if a NEO’s employment terminates involuntarily without cause or voluntarily with good reason (a material reduction in compensation or responsibilities or a required relocation following a change-in-control) following a change-in-control, the double-trigger requirement will be met and the Post-Termination Benefits that may be received generally consist of: