DEF 14A 1 ltgt2020_def14a.htm TARGET CORPORATION - DEF 14A 2020ProxyStatement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

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

 

  Filed by the Registrant    Filed by a Party other than the Registrant

 

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TARGET CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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Notice of 2020 annual meeting of shareholders

 

To our shareholders,

You are invited to attend Target Corporation’s 2020 annual meeting of shareholders (Annual Meeting) to be held as follows:

 

Purpose

Shareholders will vote on the following items of business:

Item

Board’s Recommendation

Election of 11 directors (page 18)

FOR each Director Nominee

Ratification of Ernst & Young LLP as our independent registered public accounting firm (page 60)

FOR

Advisory approval of executive compensation (Say on Pay) (page 62)

FOR

Approval of Target Corporation 2020 Long-Term Incentive Plan (page 63)

FOR

Due to the public health concerns regarding the novel coronavirus disease (COVID-19) pandemic, we are holding the Annual Meeting in a virtual-only meeting format to support the health and well-being of our team members and shareholders. You will not be able to attend the Annual Meeting at a physical location. For more information about the virtual-only meeting format, please see Question 12 “How can I attend the Annual Meeting?” on page 72 of the proxy statement for the Annual Meeting (Proxy Statement).

You may vote if you were a shareholder as of the record date. We urge you to read the Proxy Statement carefully and to vote in accordance with the recommendations of the Board of Directors (Board). If voting in advance, you should vote by the deadlines specified in the Proxy Statement, and may do so by telephone or Internet, or by signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided. If you do not vote in advance and instead plan to vote during the Annual Meeting, you may do so if you enter the 16-digit control number found on your proxy card, voter instruction form, or Notice of Internet Availability of Proxy Materials, as applicable, at the time you log into the meeting at virtualshareholdermeeting.com/TGT2020.

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

Thank you for your continued support.

Sincerely,

Don H. Liu

Corporate Secretary

Approximate Date of Mailing of Proxy Materials or

Notice of Internet Availability:

 

April 27, 2020

 

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

The Board of Directors of Target Corporation (Board) solicits the enclosed proxy for the 2020 annual meeting of shareholders (Annual Meeting) and for any adjournment of the Annual Meeting.

Target 2020 Annual Meeting

Items of business

Item

Board’s

Recommendation

Election of 11 directors (page 18)

FOR each Director Nominee

Ratification of Ernst & Young as our independent registered public accounting firm (page 60)

FOR

Advisory approval of executive compensation (Say on Pay) (page 62)

FOR

Approval of Target Corporation 2020 Long-Term Incentive Plan (page 63)

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 70 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

Due to the public health concerns regarding the novel coronavirus disease (COVID-19) pandemic, we are holding the Annual Meeting in a virtual-only meeting format to support the health and well-being of our team members and shareholders. You will not be able to attend the Annual Meeting at a physical location. The website for the virtual-only Annual Meeting is virtualshareholdermeeting.com/TGT2020. For more information about the virtual-only meeting format and attending the Annual Meeting, please see Question 12 “How can I attend the Annual Meeting?” on page 72.

Voting

If you held shares of Target common stock as of the record date (April 13, 2020), you are entitled to vote on the items of business.

 

 

Your vote is important. Thank you for voting.

 
     
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Advance voting methods and deadlines

 

Method

Instruction

Go to the 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 9, 2020.

Participants in the Target 401(k) Plan — 6:00 a.m. Eastern Daylight Time on June 8, 2020.

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 8, 2020.

 

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 70.

Voting at the Annual Meeting

If you plan to vote during the Annual Meeting, you may do so if you enter the 16-digit control number found on your proxy card, voter instruction form, or Notice of Internet Availability of Proxy Materials, as applicable, at the time you log into the meeting at virtualshareholdermeeting.com/TGT2020. Please see the information in Question 6 “How do I vote?” on page 70.

Notice of internet availability of proxy materials

Important notice regarding the availability of proxy materials for the shareholders meeting to be held on June 10, 2020:
The proxy statement and annual report are available at www.proxyvote.com.

 

 

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General information about corporate governance and the Board

Corporate governance highlights

We have the core corporate governance practices listed below. In addition, we regularly evaluate our practices against prevailing best practices and emerging and evolving topics identified through shareholder outreach, current literature, and corporate governance organizations.

Practice

Description

More information

Accountability to shareholders

 

Board evaluations and refreshment

The Board regularly evaluates its performance in a variety of ways. Those evaluations, changes in business strategy and operations, and anticipated director retirements are used to identify desired characteristics for future Board members.

19

Annual elections

All directors are elected annually, which reinforces our Board’s accountability to shareholders.

18

Majority voting standard

Our Articles of Incorporation require a “majority voting” standard in uncontested director elections—each director must receive more votes “For” his or her election than votes “Against” in order to be elected.

18

Director resignation
policy

An incumbent director that does not meet the majority voting standard must promptly offer to resign. The Governance Committee will make a recommendation and the Board must act on the offer within 90 days and publicly disclose its decision and rationale.

18

Proxy access

Any shareholder or group of up to 20 shareholders owning 3% or more of Target common stock continuously for at least the previous three years may nominate and include in our proxy materials director nominees totaling up to the greater of 20% of the Board or at least two directors.

74

No poison pill

We do not have a poison pill.

 

10% special meeting threshold

Shareholders owning 10% or more of Target’s outstanding stock have the right to call a special meeting of shareholders.

 

Shareholder voting rights are proportionate to economic interests

 

Single voting class

Target common stock is the only class of voting shares outstanding.

70

One share, one vote

Each share of Target common stock is entitled to one vote.

70

Responsiveness to shareholders

 

Responses to shareholder proposals

The Board responds to shareholder proposals that receive significant support by either making the proposed changes or explaining why the actions were not taken through the shareholder engagement process, proxy statement disclosure, or other means.

 

Understanding opposition to management proposals

As part of its shareholder engagement process, the Board seeks to understand the reasons for, and respond to, significant shareholder opposition to management proposals.

 

Availability of independent directors

Target’s Lead Independent Director is expected to communicate with major shareholders, as appropriate, and Target also makes other independent directors available, as appropriate, for shareholder engagement.

10, 18

Strong, independent leadership

 

Independence

A majority of our directors must be independent. Currently, all of our directors other than our Chief Executive Officer (CEO) are independent, and all of our Committees consist exclusively of independent directors.

12, 17

Lead Independent

Director

Whenever our CEO is also the Chair of the Board, we require a Lead Independent Director position with specific responsibilities to provide independent oversight of management. Both the Lead Independent Director and the Chair of the Board are elected annually by the independent directors.

10

Committee membership and leadership rotations

The Governance Committee reviews and recommends Committee membership. The Board appoints members of its Committees annually, rotates Committee assignments periodically, and seeks to rotate the Lead Independent Director position and Committee Chair assignments every four to six years.

10, 11

 

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Practice

Description

More information

Structures and practices enhance Board effectiveness

 

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.

18, 19

Director tenure policies

Our director tenure policies include mandatory retirement at age 72 and a maximum term limit of 20 years. 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. These policies encourage Board refreshment and provide additional opportunities to maintain a balanced mix of perspectives and experiences.

19

Director overboarding policy

Any director serving as a CEO of a public company is expected to serve on no more than two public company boards (including our Board), and other directors are expected to serve on no more than four public company boards (including our Board).

 

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.

14

Capital allocation policies and priorities

We disclose our capital allocation policies and priorities and how they are overseen by the Board and its Committees.

15

Management development and succession planning

Our Board regularly reviews management development and succession planning, with more in-depth reviews regularly conducted by the Human Resources & Compensation Committee.

16

Management incentive structures are aligned with long-term strategy

 

Performance goals linked to long-term strategy drive incentive awards

The Human Resources & Compensation Committee has identified short- and long-term performance goals that underpin Target’s strategy and has incorporated those goals into executive compensation plans to serve as drivers of incentive awards.

33

Communicating executive compensation to shareholders

The Compensation Discussion & Analysis explains how performance goals drive our executive compensation plans and connect to Target’s long-term strategy.

31

Follow leading compensation practices

See “Target’s executive compensation practices.”

43

 

For your convenience, we organized the corporate governance highlights listed above so you can see how our corporate governance practices compare favorably with the corporate governance principles developed by the Investor Stewardship Group (ISG), which includes some of the largest institutional investors and global asset managers and advocates for best practices in corporate governance. ISG’s corporate governance principles reflect common corporate governance beliefs featured in its members’ proxy voting guidelines.

Our directors

Name

Age

 

Director

since

Most recent employer

Title Independent Other current
public company
boards

Roxanne S. Austin(1)

59

2002

Austin Investment Advisors

President Yes 4

Douglas M. Baker, Jr.

61

2013

Ecolab Inc.

Chairman & CEO Yes 1

George S. Barrett

65

2018

Cardinal Health, Inc.

Former Chairman & CEO Yes 0

Brian C. Cornell

61

2014

Target Corporation

Chairman & CEO No 1

Calvin Darden

70

2003

Darden Petroleum & Energy Solutions, LLC

Chairman Yes 2

Henrique De Castro(1)

54

2013

Yahoo! Inc.

Former COO Yes 2

Robert L. Edwards

64

2015

Safeway Inc.

Former President & CEO Yes 0

Melanie L. Healey

59

2015

The Procter & Gamble Company

Former Group President, North America Yes 3

Donald R. Knauss

69

2015

The Clorox Company

Former Chairman & CEO Yes 2

Monica C. Lozano

63

2016

The College Futures Foundation

President & CEO Yes 1

Mary E. Minnick

60

2005

Ocean 14 Capital

Partner Yes 2

Kenneth L. Salazar

65

2013

WilmerHale

Partner Yes 0

Dmitri L. Stockton

56

2018

General Electric Company

Former Senior Vice President & Special Advisor to the Chairman Yes 3

 

(1)

Ms. Austin and Mr. De Castro will not seek re-election and will leave the Board when their current terms end at the Annual Meeting.

 

  TARGET CORPORATION      2020 Proxy Statement 9

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Board leadership structure

We do not have an express policy on whether the roles of Chair of the Board and 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 19 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-employee 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-employee 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.

 

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 at which the Chair is not present, including executive sessions of independent directors.

Consults with the Human Resources & Compensation Committee as it 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 approves 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-employee directors to consistently monitor Target’s operations and those of our competitors.

Consults with the 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-employee directors.

 

Service:

As a guideline, the Lead Independent Director should serve in that capacity for no more than four to six years.

Douglas

M. Baker, Jr.

Lead Independent

Director

(Since 2015)

 

Board and shareholder meeting attendance

The Board met 7 times during fiscal 2019. All directors attended at least 85% of the aggregate total of meetings of the Board and Board Committees on which the director served during the last fiscal year.

All of our then-serving directors attended our 2019 Annual Meeting of Shareholders. The Board has a policy requiring all directors to attend all annual meetings of shareholders, absent extraordinary circumstances.

 

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Committees

Membership

The Board has the following Committees and Committee composition as of the date of this Proxy Statement:

 

 

Name

 

Audit &

Finance

Human

Resources &

Compensation

Governance

Risk &

Compliance

Infrastructure

& Investment

 

 

 

 

Roxanne S. Austin(1)

 

 

 

 

 

 

 

 

Douglas M. Baker, Jr.

 

 

 

 

 

 

 

 

George S. Barrett

 

 

 

 

 

 

 

 

Calvin Darden

 

 

 

 

 

 

 

 

Henrique De Castro(2)

 

 

 

 

 

 

 

 

Robert L. Edwards

 

 

 

 

 

 

 

 

Melanie L. Healey

 

 

 

 

 

 

 

 

Donald R. Knauss

 

 

 

 

 

 

 

 

Monica C. Lozano(3)

 

 

 

 

 

 

 

 

Mary E. Minnick

 

 

 

 

 

 

 

 

Kenneth L. Salazar

 

 

 

 

 

 

 

 

Dmitri L. Stockton

 

 

 

 

 

 

 

 

Meetings held in 2019

 

7

6

4

3

4

 

 

 

 

= Chair = Member

 

 

 

 

 

 

 

 

(1)

Ms. Austin will leave the Human Resources & Compensation Committee and Risk & Compliance Committee when her current Board term ends at the Annual Meeting.

(2)

Mr. De Castro will leave the Audit & Finance Committee and Infrastructure & Investment Committee when his current Board term ends at the Annual Meeting.

(3)

Ms. Lozano was named the Chair of the Human Resources & Compensation Committee, effective June 2020. At that time, she will join the Human Resources & Compensation Committee and rotate off the Audit & Finance Committee.

 

 

Determining committee composition and leadership

The Board appoints members of its Committees annually, with the Governance Committee reviewing and recommending Committee membership, and rotates Committee assignments 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.

The Board seeks to have each director serve on two 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 Governance Committee.

To enhance risk oversight coordination, the Risk & Compliance Committee must include at least one member from each of the other Committees.

 

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Information about our committees

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 “How may I access or receive the proxy materials, other periodic filings, key corporate governance documents, and other information?” on page 73.

 

   

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 61 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 and 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. Edwards (Chair)

Mr. De Castro

Ms. Lozano

Ms. Minnick

Mr. Stockton

 

Number of meetings during fiscal 2019

 

7

Audit &
Finance
Committee(1)

(1)

The Board 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 has 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 Mr. Edwards and Ms. Lozano was based on experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor, or actively supervising a person holding one of those positions. For Mr. De Castro, the determination was based on his experience serving as the Chief Operating Officer of Yahoo! Inc. and analyzing financial statements and financial performance of companies for Cantor Fitzgerald’s corporate venture capital arm. For Ms. Minnick, the determination was based on her experience with analyzing the financial statements and financial performance of portfolio companies of Lion Capital. For Mr. Stockton, the determination was based on his financial oversight experiences with General Electric Company.

 

 

   

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.

In consultation with the Lead Independent Director, reviews and approves goals and objectives for the CEO.

Reviews and approves the composition and value of all executive officer compensation.

Reviews and approves the compensation provided to non-employee members of the Board.

Prepares the “Human Resources & Compensation Committee Report” on page 31.

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. Austin (Chair)

Mr. Barrett

Mr. Darden

Ms. Healey

Mr. Knauss

 

Number of meetings during fiscal 2019

 

6

Human Resources
& Compensation Committee(2)

(2)

The Board has determined that all members of the Human Resources & Compensation Committee satisfy the applicable compensation committee independence requirements of the NYSE and the SEC.

 

 

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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 and 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 corporate responsibility efforts and 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

Ms. Healey

Ms. Lozano

 

Number of meetings during fiscal 2019

 

4

Governance Committee



 

 

 

Responsibilities

Assists the Board in overseeing management’s identification and evaluation of our principal operating, business, and compliance and ethics risks (including information security, cybersecurity, and workplace conduct).

Oversees 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. Barrett

Mr. Edwards

 

Number of meetings during fiscal 2019

 

3

Risk &

Compliance

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

Ms. Minnick

(Chair)

Mr. De Castro

Mr. Knauss

Mr. Salazar

Mr. Stockton

 

Number of meetings during fiscal 2019

 

4

Infrastructure

& Investment Committee

 

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Risk oversight

Overview

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

 

 

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 Legal & Risk Officer provides centralized oversight of Target’s enterprise risk management program. Our Chairman & CEO and his direct reports meet regularly with the Chief Legal & Risk Officer to identify, assess, and manage risks facing the business. In addition, the Chief Legal & Risk 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 Risk & Compliance Committee currently coordinates the oversight of different risks by the Board and each Committee, and is structured to support that coordination by having at least one director from each Committee included in its membership. The Board’s oversight of the risks occurs as an integral and continuous part of the Board’s oversight of our business and seeks to ensure that management has processes in place 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 as detailed above. The Chief Legal & Risk Officer annually presents an overview of the enterprise risk management program to the Board’s Risk & Compliance Committee and provides it with regular updates on the program and status of key risks facing the business. The Risk & Compliance Committee regularly receives updates on key risk areas from members of management with primary responsibility for managing those risk areas. In addition, the Risk & Compliance Committee and Audit & Finance Committee annually conduct a joint meeting to review legal and regulatory risk and compliance matters.

The following sections provide additional detail about risk oversight of the recent COVID-19 pandemic and how risk oversight is currently exercised by the Board and its Committees over some other key risk areas.

The COVID-19 pandemic

The COVID-19 pandemic, which the United States declared a national emergency in March 2020, has profoundly affected our guests, our team, and the communities we serve. To help coordinate risk oversight in addressing the crisis, management has increased the level of Board communications and interactions. In addition, we created a task force to centrally assess, respond, manage and communicate throughout this crisis.

As the crisis has evolved, guests have relied on Target for essential items like food, medicine, cleaning products, and pantry stock-up

 

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items. The Board has been actively monitoring and overseeing management’s response to this crisis, including:

implementing more rigorous cleaning processes and safety measures in our stores and distribution centers,

increasing pay for front-line team members and enhancing team member benefits,

adjusting the expected timing of some strategic initiatives to minimize potential disruptions to store teams and our supply chain network in their work to serve our guests,

suspending share repurchase activity during this period of uncertainty, and

reviewing emergency succession plans in place for key leadership roles.

Management and the Board will continue to oversee our response and the risks related to the COVID-19 pandemic.

Information security, cybersecurity, and data privacy

Securing the information we receive and store about our guests, team members, vendors, and other third parties is important to us. We have systems in place to safely receive and store that information and to detect, contain, and respond to data security incidents. While everyone at Target plays a part in managing these risks, oversight responsibility is shared by the Board, its Committees, and management:

Responsible party

Oversight area for information security, cybersecurity, and data privacy

Board

Oversight of these risks within Target’s overall risks

Risk & Compliance Committee

Delegated by the Board with primary oversight responsibility for information security, cybersecurity, and data privacy risks

Audit & Finance Committee

Internal controls designed to mitigate these risks

Management

Our Chief Information Officer, our Chief Information Security Officer, and senior members of our information security team are responsible for identifying and managing these risks, and reporting to the Risk & Compliance Committee, Audit & Finance Committee, and/or the full Board

Management provides regular updates to the Board and/or Committees of the Board on these risks throughout the year and, at least annually, the Chief Information Security Officer provides an information security program review to the Risk & Compliance Committee to inform the Committee in its oversight of these risks.

Capital allocation

Management is responsible for developing and executing our capital allocation policy with oversight by the Board and its Committees. Our disciplined and balanced approach to capital allocation is based on the following priorities, ranked in order of importance:

Priorities

Description

1. Investing in our business

Fully invest in opportunities to profitably grow our business, 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

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 of dividends and share repurchase. We believe that:

our dividend should be competitive and sustainable,

share repurchase is a necessary component of efficient capital allocation as it returns excess cash to shareholders after we have met our priorities of fully investing in our business and maintaining a competitive dividend, and

cash returned to shareholders through share repurchase can be redeployed to its most productive use.

We use share repurchase to balance the levels of debt and equity on our balance sheet to support our credit rating goals, and have flexibility to adjust the level of share repurchase activity to respond to changes in our operating performance and investment opportunities. For example, in the past we suspended share repurchase activity during certain periods in response to changes in our operating performance, but we continued to invest in our business and grew our annual dividend during those periods. In addition, we recently suspended share repurchase activity during the period of uncertainty related to the COVID-19 pandemic.

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

Responsible party

Oversight area for capital allocation

Board

Primary oversight responsibility over capital allocation policy, balancing the three capital allocation priorities appropriately for the growth and long-term health of our business, and authorizing dividends and share repurchase programs

Infrastructure & Investment Committee

Overall level of investments in our business and their alignment with our strategies and effectiveness in achieving appropriate returns

 

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Responsible party

Oversight area for capital allocation

Audit & Finance Committee 

Liquidity to support operations and investments, capacity for and competitiveness of annual dividends, execution of share repurchase activity, credit rating goals, and recommendations to the full Board on amount of dividends and share repurchase levels 

Human Resources & Compensation Committee

Compensation effects of all capital allocation priorities on plan design, goal-setting process, performance updates, and payouts

Management

Identifying, executing on, and monitoring performance of investment opportunities that meet strategic and return criteria, monitoring dividend policy and periodically recommending changes to maintain a competitive dividend level, and executing the share repurchase program within authorized limits and at a pace that ensures liquidity, maintains our ability to capitalize on investment opportunities, and stays within the limits of our credit ratings goals

Corporate responsibility and reputation

Target recognizes the importance of environmental, social, and governance issues. We have a longstanding dedication to improving the communities where we operate, and since 1946 we have donated 5 percent of our profit to those communities. We know that working together with our team members, guests, suppliers, and communities creates better outcomes on issues that matter to us all. Corporate responsibility is an enterprise-wide commitment informed by and integrated into our business strategy.

We publish an annual Corporate Responsibility Report to report on environmental, social, and governance performance issues most important to our business stakeholders. We align our corporate responsibility efforts to a number of industry-recognized standards and frameworks, including:

the Global Reporting Initiative Standards,

Sustainability Accounting Standards Board,

CDP, and

the United Nations Sustainable Development Goals.

Our most recent report, published in September 2019, covers a variety of environmental, social, and governance issues, including responsible sourcing practices, diversity and inclusion, sustainable products, environmental management and policies, stakeholder engagement, and community investment, and explains how we are aligned to those standards and frameworks. Through our annual Corporate Responsibility Reports, we set goals and targets and report our progress. A copy of our most recent Corporate Responsibility Report is available on our company website at https://corporate.target.com/corporate-responsibility/goals-reporting, as described in Question 14 “How may I access or receive the proxy materials, other periodic filings, key corporate governance documents, and other information?” on page 73.

The Board, its Committees, and management share responsibility for overseeing corporate responsibility and reputation:

Responsible party

Oversight area for corporate responsibility and reputation

Board

Oversight of these risks within Target’s overall risks

Governance Committee

Delegated by the Board with primary oversight responsibility for corporate responsibility matters

Risk & Compliance Committee

Operating, business, compliance and ethics risks, including workplace conduct

Human Resources & Compensation Committee

Compensation policies and practices, and organizational talent and development

Management

The Vice President of Corporate Responsibility and the Corporate Responsibility team work with functional leaders across the company to determine strategies, policies, and goals related to corporate responsibility and sustainability and regularly report to and seek input from the Governance Committee on those matters, including review of the annual Corporate Responsibility Report

Management development and succession planning

One of the primary responsibilities of the Board is to ensure that Target has a high-performing management team. To meet that goal, the Board, the Human Resources & Compensation Committee, and management share responsibility for management development and succession planning:

Responsible party

Oversight area for management development and succession planning

Board

Oversight of these risks within Target’s overall risks, including regular reviews of management development and succession planning to maximize the pool of internal candidates who can assume top management positions without undue interruption

Human Resources & Compensation Committee

Primary responsibilities for organizational talent and development and management succession planning risks, including regular reviews of talent development and succession planning with a deeper focus than the full Board review, emphasizing career development of promising management talent

Management

The Chief Human Resources Officer and senior Human Resources leaders work with functional leaders across the company in developing and implementing programs to attract, assess, and develop management-level talent for possible future senior leadership positions

 

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Director independence

The Board 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 also detail certain relationships that, if present, preclude a finding of independence. The Board affirmatively determined that all non-employee directors are independent. Mr. Cornell is the only employee director and is not independent.

In making its independence determination, the Board specifically considered the following transactions during fiscal 2019 and concluded that none of them impaired any director’s independence:

Mr. Baker serves as Chairman & CEO of Ecolab Inc., from which we purchased supplies, servicing, repairs, and merchandise.

Ms. Minnick serves as a partner in two Lion Capital funds, one of which had one portfolio company from which we purchased wholesale merchandise.

Mr. Salazar serves as a partner in WilmerHale, which provided legal services to us. Mr. Salazar does not personally provide any of the legal services to Target. In addition, 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.

Each of the transactions above involved amounts that represented an immaterial percentage of our, and the other entity’s, revenues, and were well below the amounts that would preclude a finding of independence under the NYSE listing standards. In addition, none of the above transactions are related-party transactions because none of the directors have a direct or indirect material interest in the listed transactions.

In addition to the transactions described above, the Board also considered the following and concluded that none of them impaired any director’s independence:

Each director’s length of service on the Board. Specifically, the Board determined that Mr. Darden and Ms. Minnick, each of whom are up for re-election and have served on the Board for more than 13 years, continue to demonstrate the independence of judgment expected of independent directors.

The employment of the son of Don Knauss as a sales representative by a supplier from which we purchased wholesale merchandise during fiscal 2019. The relationship is discussed in more detail under “Policy on transactions with related persons.”

Policy on transactions with related persons

The Board 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 the director, or the director’s immediate family member, has a direct or indirect material interest in the transaction.

We ratified one related party transaction in accordance with this policy during fiscal 2019. The son of Don Knauss, a non-employee director, is employed as a sales representative by a supplier from which Target purchases wholesale merchandise. Mr. Knauss’s son represented the supplier in its relationship with Target Corporation during fiscal 2019. In fiscal 2019, we purchased approximately $0.7 million of merchandise from the supplier, which represented less than 0.1% of our annual revenues. Target’s decisions regarding purchases of merchandise from its suppliers are made by team members in the merchandising departments and no member of the Board has any input or involvement in such decisions. The transaction involving Mr. Knauss’s son did not affect Mr. Knauss’s independence and, as indicated above under “Director independence,” the Board affirmatively determined that Mr. Knauss is independent.

Business ethics and conduct

We are committed to conducting business ethically and lawfully. 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 Code of Ethics, which applies to all Target team members, including our executive officers and Chief Accounting Officer & Controller, addresses a variety of topics, including putting ethics into action, working together, maintaining trust, conducting business fairly, safeguarding what’s ours, and caring for the world. Included

 

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within those topics is how we address conflicts of interest, fair dealing, required information disclosures, and compliance with laws, rules, and regulations, and prompt reporting. Our Code of Ethics also describes the means by which any employee can provide an anonymous report of an actual or apparent violation of our Code of Ethics. Similarly, our directors are subject to a separate Code of Ethics contained within our Corporate Governance Guidelines, which is tailored to the unique role fulfilled by members of the Board and addresses conflicts of interest, corporate opportunities, maintaining confidentiality, compliance with laws, fair dealing, and compliance procedures.

On our website we disclose any amendments to, or waivers from, any provision of the applicable Code of Ethics involving our directors, executive officers, Chief Accounting Officer & Controller, or other persons performing similar functions.

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 email 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, TPN-0841, Minneapolis, Minnesota 55403 or email investorrelations@target.com.

 

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.

An incumbent director who is not re-elected must promptly offer to resign. The Governance Committee will make a recommendation on the offer to the full Board, and the Board must accept or reject the offer within 90 days and publicly disclose its decision and rationale.

The 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 and management and feedback from our shareholders to identify the backgrounds and skill sets that are desired.

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 criteria the Board follows in determining the composition of the Board are as follows:

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, but understands the value of diversity and inclusion.

The Governance Committee periodically uses a third-party search firm to assist in identifying director candidates and will also consider recommendations from shareholders. Any shareholder who wants the Governance 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 2021 annual meeting of shareholders?” on page 74.

 

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Board evaluations and refreshment

Self-evaluation

The Governance Committee, in consultation with the Lead Independent Director, annually leads the performance review of the Board and its Committees. In 2019, the Board self-evaluation involved a survey completed by each director about the Board and the Committees on which the director served, followed by one-on-one conversations between the Lead Independent Director and each director seeking candid feedback. Following completion of those conversations the results were discussed by the full Board and each Committee. In 2019, 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. In addition, as part of the self-evaluation process the Board evaluates individual director performance through questions in the survey focused on obtaining candid feedback on individual directors and through the one-on-one conversations between the Lead Independent Director and each director.

 

 

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.

 

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:

 

 

(1)

Our ethnically or racially diverse directors are Mr. Darden, Mr. De Castro, Ms. Healey, Ms. Lozano, Mr. Salazar, and Mr. Stockton.

 

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2020 nominees for director

After considering the recommendations of the Governance Committee, the Board has set the number of directors at 11 and nominated all current directors to stand for re-election, except for Roxanne Austin and Henrique De Castro who will depart the Board at the end of their current terms. 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. In addition, 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 tables describe key characteristics of our business, the desired skills for those business characteristics, what those skills represent, and which independent members of our Board nominated for election at the Annual Meeting possess those skills.

Target’s business characteristics

Desired skill

What the skill represents

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 and/or consumer products
company experience.

Target’s scale and complexity requires aligning many 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 and/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 / Brand Management

Marketing and/or managing well-known brands and/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 and/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 and/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/or data analytics.

Our business involves sourcing merchandise domestically and internationally from numerous vendors and distributing it through our network of distribution centers.

Multi-National Operations / Supply Chain Logistics

Executive officer roles at multi-national organizations and/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 / Risk Management

Public company management, financial stewardship, and/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 / Corporate Governance

Public sector experience, community relations, and/or corporate governance
expertise.

Desired skill

Mr.

Baker

Mr.

Barrett

Mr.

Darden

Mr.

Edwards

Ms.

Healey

Mr.

Knauss

Ms.

Lozano

Ms.

Minnick

Mr.

Salazar

Mr.

Stockton

Retail Industry

Experience

 

 

 

 

 

Senior

Leadership

Marketing / Brand Management

 

 

 

Real

Estate

 

 

 

 

 

Workforce

Management

Technology

 

 

 

 

 

 

 

Multi-National Operations / Supply Chain Logistics

 

 

 

Finance /

Risk Management

 

Public Affairs /

Corporate Governance

 

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We believe that all nominees will be able and willing to serve if elected. However, if any nominee should become unable or unwilling to serve for any reason, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.

 

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. Mr. Baker previously held various leadership positions within Ecolab, including President and Chief Operating Officer.

 

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

Douglas M. Baker, Jr.

Age 61

Director since 2013

Lead Independent Director

Committees

Governance (Chair)

Risk & Compliance

Current

Ecolab Inc.

Within past five years

U.S. Bancorp

 

 

Background

George S. Barrett is the former Chairman & Chief Executive Officer of Cardinal Health, Inc., a global integrated healthcare services and products company. He held that position from August 2009 until the end of 2017, when he became Executive Chairman, a position he held until November 2018. Mr. Barrett previously held a number of executive positions with global pharmaceutical manufacturer Teva Pharmaceutical Industries Ltd., including Chief Executive Officer of its North American business and Executive Vice President for global pharmaceuticals.

 

Qualifications

Through his services in leadership positions with companies in the healthcare industry for over 30 years, Mr. Barrett provides the Board with extensive experience in the areas of executive leadership, distribution and manufacturing operations, regulatory compliance, finance, strategic planning, human resources, and corporate governance.

 

Other public company boards

George S. Barrett

Age 65

Director since 2018

Independent

Committees

Human Resources & Compensation

Risk & Compliance

Current

None

Within past five years

Cardinal Health, Inc.

 

 

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Background

Brian C. Cornell has served as Chairman of the Board & Chief Executive Officer of Target Corporation since August 2014. Mr. Cornell previously served as Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc. He also served as Chief Executive Officer & President of Sam’s Club, a division of Wal-Mart Stores, Inc., 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 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

Brian C. Cornell

Age 61

Director since 2014

Committees

None

Current

Yum! Brands, Inc.

Within past five years

Polaris Industries Inc.

 

Background

Calvin Darden is Chairman of Darden Petroleum & Energy Solutions, LLC, a company that sells fuel products, a position he has held on a full-time basis since February 2015. Mr. Darden previously served as Chairman of Darden Development Group, LLC, a real estate development company. He 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.

 

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 in the delivery industry, and more recently has developed expertise in community relations and real estate development.

 

Other public company boards

Calvin Darden

Age 70

Director since 2003

Independent

Committees

Human Resources & Compensation

Governance

Current

Aramark

Cardinal Health, Inc.

Within past five years

Coca-Cola Enterprises, Inc.

 

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Background

Robert L. Edwards is the former President & Chief Executive Officer of Safeway Inc., a United States food and drug retail company. He also served as 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 other executive level positions with Safeway Inc., including President & Chief Financial Officer and Executive Vice President & Chief Financial Officer. He also held executive positions at Maxtor Corporation and Imation Corporation.

 

Qualifications

Mr. Edwards provides the Board with substantial food and drug retail expertise and perspectives. 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

Robert L. Edwards

Age 64

Director since 2015

Independent

Committees

Audit & Finance (Chair)

Risk & Compliance

Current

None

Within past five years

Blackhawk Network Holdings, Inc.

 

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. 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. Ms. Healey held a number of other leadership roles at Procter & Gamble, including Group President, Global Health, Feminine and Adult Care Sector. Prior to working at Procter & Gamble, Ms. Healey served in a variety of marketing leadership roles for Johnson & Johnson and S.C. Johnson & Sons.

 

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 at three multinational companies. 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

Melanie L. Healey

Age 59

Director since 2015

Independent

Committees

Human Resources & Compensation

Governance

Current

Hilton Worldwide Holdings Inc.

PPG Industries, Inc.

Verizon Communications Inc.

Within past five years

None

 

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Background

Donald R. Knauss is the former Chairman & Chief Executive Officer of The Clorox Company, a leading multinational manufacturer and marketer of consumer and professional products. He also served as Executive Chairman of The Clorox Company from November 2014 to June 2015. Mr. Knauss previously served as Executive Vice President and Chief Operating Officer of Coca-Cola North America and in various other senior management roles for its subsidiary businesses, and held various marketing and sales positions with PepsiCo, Inc. and The Procter & Gamble Company. Mr. Knauss also served as an Officer in the United States Marine Corps.

 

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

Donald R. Knauss

Age 69

Director since 2015

Independent

Committees

Human Resources & Compensation

Infrastructure & Investment

Current

Kellogg Company

McKesson Corporation

Within past five years

The Clorox Company

 

 

Background

Monica C. Lozano is President and Chief Executive Officer of The College Futures Foundation, a position she has held since December 2017. She also co-founded The Aspen Institute Latinos and Society Program and served as Chair of its Advisory Board from January 2015 to October 2019. Ms. Lozano previously served as Chairman of U.S. Hispanic Media, Inc., a leading Hispanic news and information company, from June 2014 to January 2016. Ms. Lozano previously served in the roles of Chair and Chief Executive Officer of ImpreMedia, LLC, a wholly owned subsidiary of U.S. Hispanic Media, Inc. Ms. Lozano also served as Chief Executive Officer and Publisher of La Opinion, a subsidiary of ImpreMedia, LLC, and in several management-level roles with the company.

 

Qualifications

Ms. Lozano possesses substantial senior management experience in areas such as operations, strategic planning and marketing, including multi-media content. 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

Monica C. Lozano

Age 63

Director since 2016

Independent

Committees

Audit & Finance(1)

Governance

Current

Bank of America Corporation

Within past five years

The Walt Disney Company

(1)

Ms. Lozano was named the Chair of the Human Resources & Compensation Committee, effective June 2020. At that time, she will join the Human Resources & Compensation Committee and rotate off the Audit & Finance Committee.

 

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Background

Mary E. Minnick has been a partner of Ocean 14 Capital, an Impact Fund dedicated to supporting the UN SDG 14: Life Below Water, since December 2019. She also is an advisor to Lion Capital LLP, a consumer-focused private investment firm, a position she has held since November 2018. Previously, she served as a Partner of Lion Capital LLP from May 2007 to November 2018. 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.

 

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

Mary E. Minnick

Age 60

Director since 2005

Independent

Committees

Infrastructure & Investment (Chair)

Audit & Finance

Current

Glanbia plc

Leo Holdings Corp.

Within past five years

Heineken NV

The WhiteWave Foods Company

 

 

Background

Kenneth L. Salazar is a Partner at WilmerHale, a full service business law firm, a position he has held since June 2013. Mr. Salazar previously served as the U.S. Secretary of the Interior. He also served Colorado as a U.S. Senator and as Attorney General. Mr. Salazar serves on the Mayo Clinic Board of Trustees and is a member of its Audit & Compliance Committee, Finance & Investment Committee, and Information Management & Technology Governance Committee. Mr. Salazar and his family are farmers and ranchers in Colorado.

 

Qualifications

Mr. Salazar has substantial public policy and executive level management 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

Kenneth L. Salazar

Age 65

Director since 2013

Independent

Committees

Risk & Compliance (Chair)

Infrastructure & Investment

Current

None

Within past five years

None

 

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Background

Dmitri L. Stockton is the former Senior Vice President & Special Advisor to the Chairman of General Electric Company, a global infrastructure and technology conglomerate. He held that position from July 2016 to March 2017. He served as Chairman, President, & Chief Executive Officer of GE Asset Management Incorporated, a global asset management company, and Senior Vice President of General Electric Company from May 2011 to December 2016. Mr. Stockton previously served as President & Chief Executive Officer of GE Capital Global Banking and Senior Vice President of General Electric Company based in London, President & Chief Executive Officer of GE Consumer Finance, Central & Eastern Europe, and Vice President of General Electric Company.

 

Qualifications

Mr. Stockton’s 30 year career with General Electric Company has provided him with substantial experience in managing worldwide financial operations. His expertise gives the Board additional skills in the areas of leadership, financial oversight, risk management, consumer banking, asset management, employee benefits, governance, regulatory compliance, and the alignment of financial and strategic initiatives.

 

Other public company boards

Dmitri L. Stockton

Age 56

Director since 2018

Independent

Committees

Audit & Finance

Infrastructure & Investment

Current

Deere & Company

Ryder System, Inc.

Stanley Black & Decker, Inc.

Within past five years

Synchrony Financial

 

 

The Board recommends that shareholders vote For each of the nominees named above for election to our Board.

 

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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 SEC’s 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.

PBRSUs (at their minimum share payout, which is 75% of the at-goal payout level) and RSUs, 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 after 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      2020 Proxy Statement 27

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The following table shows the holdings of our current directors and named executive officers (NEOs) recognized for purposes of our stock ownership guidelines as of April 7, 2020 and the respective ownership guidelines calculations.

 

 

RSUs &

PBRSUs

 

Share

equivalents

 

Other

shares held

Total stock

ownership for

guidelines

(# of shares)(1)

Stock

ownership

guidelines

calculation

Directors

 

 

 

 

 

 

 

 

Total value(2)

Roxanne S. Austin

 

34,838

 

0

 

10,000

 

44,838

$

4,405,782

Douglas M. Baker, Jr.

 

26,200

 

0

 

0

 

26,200

$

2,574,412

George S. Barrett

 

7,724

 

0

 

0

 

7,724

$

758,960

Calvin Darden

 

34,838

 

884

 

0

 

35,722

$

3,510,012

Henrique De Castro

 

23,748

 

0

 

0

 

23,748

$

2,333,478

Robert L. Edwards

 

13,999

 

0

 

10,000

 

23,999

$

2,358,142

Melanie L. Healey

 

13,406

 

0

 

0

 

13,406

$

1,317,274

Donald R. Knauss

 

13,999

 

0

 

11,030

 

25,029

$

2,459,335

Monica C. Lozano

 

12,175

 

0

 

0

 

12,175

$

1,196,316

Mary E. Minnick

 

73,941

 

505

 

886

 

75,332

$

7,402,161

Kenneth L. Salazar

 

19,929

 

0

 

0

 

19,929

$

1,958,224

Dmitri L. Stockton

 

8,422

 

0

 

0

 

8,422

$

827,546

Current named executive officers

 

 

 

 

 

 

 

 

Multiple of base

salary(2)

Brian C. Cornell

 

119,411

 

9,345

 

402,406

 

531,162

 

37.3

Michael J. Fiddelke

 

11,665

 

0

 

8,722

 

20,387

 

3.2

John J. Mulligan

 

56,626

 

0

 

174,981

 

231,607

 

22.8

Michael E. McNamara

 

37,495

 

0

 

59,149

 

96,644

 

13.1

Don H. Liu

 

28,316

 

0

 

33,420

 

61,736

 

9.3

Cathy R. Smith

 

14,563

 

0

 

21,386

 

35,949

 

4.4

(1)

The “Total stock ownership for guidelines” calculation, like the required disclosure of “Total shares beneficially owned” on page 29, includes “Other shares held” but differs by (a) excluding all options, regardless of whether they can be converted into common stock on or before June 6, 2020 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 April 7, 2020.

(2)

Based on closing stock price of $98.62 as of April 7, 2020.

 

  TARGET CORPORATION      2020 Proxy Statement 28

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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 April 7, 2020 or which the person has the right to acquire within 60 days of that date for each director, named executive officer in the “Summary compensation table” on page 47, and all current Target directors and executive officers as a group.

Directors

 

Shares

issuable

within

60 days(1)

 

Stock options

exercisable

within

60 days

 

Other

shares held

 

Total shares

beneficially

owned(2)

Roxanne S. Austin

 

33,555

 

11,524

 

10,000

 

55,079

Douglas M. Baker, Jr.

 

23,758

 

5,570

 

0

 

29,328

George S. Barrett

 

5,621

 

0

 

0

 

5,621

Calvin Darden

 

33,555

 

0

 

0

 

33,555

Henrique De Castro

 

22,465

 

5,570

 

0

 

28,035

Robert L. Edwards

 

12,716

 

0

 

10,000

 

22,716

Melanie L. Healey

 

12,123

 

0

 

0

 

12,123

Donald R. Knauss

 

12,716

 

0

 

11,030

 

23,746

Monica C. Lozano

 

10,892

 

0

 

0

 

10,892

Mary E. Minnick

 

72,658

 

0

 

886

 

73,544

Kenneth L. Salazar

 

18,646

 

3,601

 

0

 

22,247

Dmitri L. Stockton

 

6,319

 

0

 

0

 

6,319

Named executive officers

 

 

 

 

 

 

 

 

Brian C. Cornell

 

0

 

294,551

 

402,406

 

696,957

Michael J. Fiddelke

 

0

 

36,819

 

8,722

 

45,541

John J. Mulligan

 

0

 

147,276

 

174,981

 

322,257

Michael E. McNamara

 

0

 

147,276

 

59,149

 

206,425

Don H. Liu

 

0

 

147,276

 

33,420

 

180,696

Cathy R. Smith

 

0

 

147,276

 

21,386

 

168,662

All current directors and executive officers

 

 

 

 

 

 

 

 

As a group (25 persons)

 

265,024

 

1,419,234

 

896,102(3)

 

2,580,360

 

(1)

Includes shares of common stock that the named individuals may acquire on or before June 6, 2020 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)

Includes shares of common stock owned by executive officers in the Target Corporation 401(k) Plan (Target 401(k) Plan) as of April 7, 2020.

 

  TARGET CORPORATION      2020 Proxy Statement 29

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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:

Name and address of >5% beneficial owner

Number of

common shares

beneficially owned

Percent of

class(1)

State Street Corporation
One Lincoln Street
Boston, Massachusetts 02111

41,967,000(2)

8.4%

The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355

41,271,963(3)

8.3%

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

38,016,168(4)

7.6%

 

(1)

Based on shares outstanding on April 7, 2020.

(2)

State Street Corporation (State Street) reported its direct and indirect beneficial ownership in various fiduciary capacities (including as trustee under the Target 401(k) Plan) on a Schedule 13G filed with the SEC on February 14, 2020. The filing indicates that as of December 31, 2019, State Street had sole voting power for 0 shares, shared voting power for 38,937,427 shares, sole dispositive power for 0 shares and shared dispositive power for 41,892,802 shares.

(3)

The Vanguard Group (Vanguard) reported its direct and indirect beneficial ownership on a Schedule 13G/A filed with the SEC on February 12, 2020. The filing indicates that as of December 31, 2019, Vanguard had sole voting power for 753,827 shares, shared voting power for 145,042 shares, sole dispositive power for 40,419,189 shares and shared dispositive power for 852,774 shares.

(4)

BlackRock, Inc. (BlackRock) reported its direct and indirect beneficial ownership on a Schedule 13G/A filed with the SEC on February 6, 2020. The filing indicates that as of December 31, 2019, BlackRock had sole voting power for 31,843,648 shares, shared voting power for 0 shares, sole dispositive power for 38,016,168 shares and shared dispositive power for 0 shares.

 

 

  TARGET CORPORATION      2020 Proxy Statement 30

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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 that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K and this Proxy Statement.

Human Resources & Compensation Committee

Roxanne S. Austin, Chair
George S. Barrett
Calvin Darden
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 2019 (February 3, 2019 through February 1, 2020) and how their fiscal 2019 compensation aligned with our pay for performance philosophy.

For fiscal 2019, our NEOs were:

 

Name and
principal position

 

Brian C. Cornell

Chairman & Chief Executive Officer

 

 

 

Michael J. Fiddelke

Executive Vice President & Chief Financial Officer

 

 

 

John J. Mulligan

Executive Vice President & Chief Operating Officer

 

 

 

Michael E. McNamara

Executive Vice President & Chief Information Officer

 

 

 

Don H. Liu

Executive Vice President and Chief Legal & Risk Officer

 

 

 

 

Cathy R. Smith

Strategic Advisor and Former Chief Financial Officer

 

On November 1, 2019, Mr. Fiddelke was appointed to the position of Executive Vice President & Chief Financial Officer. In connection with his appointment, he received equity grants of PSUs and PBRSUs consistent with the grants made to other executive officers in March 2019 and a STIP payout for fiscal 2019 performance, pro-rated based on time in his role as Senior Vice President, Operations and Executive Vice President & Chief Financial Officer during fiscal 2019. In accordance with previously announced succession plans, Ms. Smith stepped down from her role as Executive Vice President & Chief Financial Officer and assumed a strategic advisory role effective November 1, 2019.

 

 

  TARGET CORPORATION      2020 Proxy Statement 31

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Executive summary

The retail industry has undergone a significant transformation in recent years, primarily driven by growing consumer preference toward digital commerce. This has challenged traditional “brick and mortar” retailers to find ways to both stay relevant and profitable in this new competitive environment. In early 2017, we purposely reduced our near-term profitability in order to address this challenge; making substantial investments in our stores, supply chain and fulfillment network, new proprietary brands, and higher wages for our team members. These investments over the last three years are working, as evidenced by the 2019 financial highlights noted below and the substantial appreciation in our stock price.

 

 

(1)

Adjusted EPS, a non-GAAP metric, excludes the impact of certain items. See page 21 of our annual report on Form 10-K for fiscal 2019 (2019 Annual Report) for a reconciliation of Adjusted EPS to GAAP diluted earnings per share from continuing operations (EPS) and page 17 of our 2019 Annual Report for the calculation of the “Adjusted EPS growth” provided above.

(2)

ROIC is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. The calculation of the number provided above is disclosed on page 22 of our 2019 Annual Report.

 

With respect to the COVID-19 pandemic discussed on page 14, the rapid development and fluidity of the situation precludes any prediction as to the ultimate impact of the pandemic on our business, financial condition, and financial performance, which could be material. Our pay programs are structured based on operational performance and shareholder outcomes. As a result, the effects of the pandemic on these outstanding programs are unknown at this time.

The balance of this CD&A provides an explanation of how our NEOs were compensated in fiscal 2019, in accordance with our pay for performance philosophy.

Shareholder support for our 2019 advisory vote on executive compensation and shareholder outreach program

At our 2019 annual meeting of shareholders, shareholders approved our Say on Pay proposal in support of our executive compensation program by a vote of 94.8%, consistent with the 2018 vote of 94.9% and 2017 vote of 93.9%. We believe open dialogue with our shareholders and incorporation of their feedback into our executive compensation program have been instrumental in obtaining shareholder support for our compensation program.

We regularly communicate 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.

 

  TARGET CORPORATION      2020 Proxy Statement 32

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Pay for performance

We have a long-standing belief that our executive compensation should be directly linked to performance and the creation of long-term value for our shareholders. We do that by providing 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.

Annual total direct compensation (Annual TDC) is the summed at-goal value of each pay component and is used by the Human Resources & Compensation Committee as the measure of the intended total value of pay at the time the pay decision is made, understanding that the actual amount earned will be higher or lower based on actual performance.

Consistent with our guiding principles, 90% of CEO Annual TDC and 84% of other NEO Annual TDC is performance-based. In addition, 100% of our annual long-term incentive (LTI) grants feature relative performance-based metrics.

Importantly, the financial metrics we use for our pay programs are either based directly on GAAP financial measures, or in the specific circumstances where they are not, we explain how and why they deviate from GAAP.

 

 

 

 

 

(1)

Annual TDC differs from the “Total” for fiscal 2019 in the “Summary compensation table” on page 47 because it (a) includes STIP opportunity at-goal as approved, rather than the actual payout that was earned, (b) includes the annual PBRSU and PSU grants based on the dollar value used by the Human Resources & Compensation Committee in determining the number of shares granted, rather than the aggregate grant date fair value of awards, as computed in accordance with FASB ASC Topic 718, (c) excludes the items shown under the “Change in pension value and nonqualified deferred compensation earnings” and “All other compensation” columns, and (d) excludes the “Durable Model Awards” that are not part of our ongoing LTI program.

 

 

 

 

How annual CEO
pay is tied to
performance

 

The following pay elements are performance-based and represent a significant percentage of Annual TDC. The payout ranges below are based on awards outstanding as of the end of fiscal 2019.

STIP — Payouts range from 0% to 200% of goal depending on Sales and Incentive Operating Income performance.

PSUs — Payouts range from 0% to 200% of goal depending on Adjusted Sales growth, EPS growth, and ROIC performance relative to our retail peer group. Payout value is also tied to stock price performance.

PBRSUs — Payouts range from 75% to 125% of goal depending on total shareholder return (TSR) performance relative to our retail peer group. Payout value is also tied to stock price performance.

 

  TARGET CORPORATION      2020 Proxy Statement 33

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Performance highlights

The following graphs highlight our historical performance on key metrics that we used in our executive compensation programs over each of the last three years. The metrics used in our compensation program are described in more detail in the CD&A narratives for each compensation element, as well as in the footnotes below.

 

 

(1)

Adjusted Sales, a non-GAAP metric, is one of the metrics used in our PSU compensation element and covers a three-year performance period. Adjusted Sales is calculated by starting with sales as reported on page 34 of our 2019 Annual Report (Sales) for all three years, and adjusting fiscal 2017, which was a 53-week accounting year, to reflect a 52-week accounting year to ensure consistent comparison with the PSUs’ fiscal 2016 base year. Fiscal 2017 Adjusted Sales of $70,619 million excluded $1,167 million, which was the amount of Sales attributable to the extra accounting week, from fiscal 2017 Sales calculated under GAAP. We use Sales calculated under GAAP as one of the metrics used in our STIP compensation element. Sales calculated under GAAP for 2019, 2018, and 2017 were $77,130 million, $74,433 million, and $71,786 million, respectively.

(2)

Operating Income is as reported on page 34 of our 2019 Annual Report and provides the basis for Incentive Operating Income, which is one of the metrics we use in our STIP compensation element. Incentive Operating Income, a non-GAAP metric, represents Operating Income on a pre-short-term-incentive compensation basis and is calculated by excluding short-term incentive expense from our Operating Income.

(3)

EPS is as reported on page 34 of our 2019 Annual Report. We use EPS as reported above as one of the metrics in our PSU compensation element.

(4)

ROIC is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. For fiscal 2019 and fiscal 2018 it is as reported on page 22 of our 2019 Annual Report and, for fiscal 2017, page 23 of our annual report on Form 10-K for fiscal 2018 (2018 Annual Report). We use ROIC as reported above as one of the metrics in our PSU compensation element. In calculating the ROIC metric used in our PSU compensation element, we did not adjust our results or those of our peers for the discrete tax benefits of the Tax Cuts and Jobs Act of 2017 (Tax Act). However, for context, on page 23 of our 2018 Annual Report we disclose that ROIC excluding discrete impacts of Tax Act for fiscal 2018 and 2017 would have been 14.6% and 13.6%, respectively.

 

  TARGET CORPORATION      2020 Proxy Statement 34

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Fiscal 2019 performance measures and actual performance

Actual payouts vary based on performance against goals approved by the Human Resources & Compensation Committee at the beginning of the performance period. Our ongoing incentive programs have a proven track record of variable payouts based on performance over time.

For our NEOs, our STIP is based on a combination of annual absolute financial goals and progress made toward key strategic priorities. Our CEO STIP is based exclusively on absolute financial goals. As shown in the table below, our financial performance resulted in payouts modestly above goal. For further discussion of our fiscal 2019 financial goals and performance, refer to page 38. For additional information on our 2019 team scorecard assessment, refer to page 39.

100% of our ongoing LTI program features performance-based metrics and is tied to relative performance versus our retail peers over a three-year time period. In fiscal 2019, we complemented our ongoing LTI program with the Durable Model Award, described below.

 

 

 

 

 

 

 

Actual payout

percentage of goal

 

 

 

Goal(1)

 

Result(1)

Actual performance

percentage of goal

CEO

Other NEO

2019 STI Performance Metrics

Sales

$

77,692

$

77,130

99.3%

119%

125%

Incentive Operating Income(2)

$

4,738

$

5,033

106.2%

Team Scorecard

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance

rank relative to

peers

Payout

percentage

 

Total

payout

2017-2019 LTI Performance Metrics

PSUs

Market Share

10 of 18

86%

 

103.5%

EPS growth

10 of 18

83%

ROIC

5 of 18

142%

 

 

 

 

Performance

rank relative to

peers

TSR

 

Total

payout

PBRSUs

TSR

 

5 of 17

85.6%

 

125%

(1)

In millions.

(2)

Refer to “Performance highlights” tables and footnotes on page 34 for a description of how Incentive Operating Income is calculated from our financial statements.

Fiscal 2019 Durable Model Award

Strategic context. We are nearing the end of our accelerated investment cycle, and the challenge now facing management is to prove that Target can sustainably and reliably grow sales and profitability in a climate of ever-increasing concentration of digitally originated sales and direct-to-consumer fulfillment. To address that challenge, the Human Resources & Compensation Committee determined that a supplemental award (the “Durable Model Award”) was appropriate to incent senior management to deliver on the durable financial model needed to ensure that Target remains a top tier retailer for years to come.

Challenging absolute performance goals. The number of shares earned under the Durable Model Award will depend on Target’s performance over the next three years based on three absolute financial performance goals that are critical in producing a sustainable long-term model, as follows:

 

  TARGET CORPORATION      2020 Proxy Statement 35

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Durable Model Award metrics

Performance goals

Grow sales,
do it profitably,
while effectively
managing capital

Sales growth (three-year compound annual growth rate (CAGR))

Goal: low-single digit comp growth

Maximum: 6% CAGR

Operating income dollar growth (three-year CAGR)

Goal: mid-single digit operating income growth

Maximum: 10% CAGR

Three-year average ROIC

Goal: mid-teen ROIC

Maximum: 16%

The performance goals are challenging relative to both our and our retail peers’ historical performance. In approving these goals, the Human Resources & Compensation Committee considered a back-testing analysis showing that Target has never met all of the goals at once within the last four three-year periods.

In addition, among our 17 company retail peer group, within the last four three-year periods:

Only three peers had met all of the three goals within any single one of those periods.

No single peer company achieved all of the goals in every period.

Though challenging, goal level performance aligns with our long-term financial expectations.

Actual performance against the absolute performance metrics described above produce a payout of 0% to 200% of goal. The payout is further subject to an incremental additive or subtractive modification based on sales growth compared to Target’s Census addressable market growth over the performance period, for a total maximum opportunity of 250%. Target’s Census addressable market (Census) is comprised of certain categories from the U.S. Census Bureau’s published Retail Trade and Food Services Report. Sales growth outperformance relative to Census implies market share gains for Target while underperformance implies loss in market share. Regardless of how Target performs on the absolute goals, the modifier will serve to reward or penalize participants for performance relative to the macroeconomic environment.

Complements the ongoing LTI program. The Durable Model Award’s absolute performance goals complement the relative performance-based metrics in our ongoing LTI program. In particular, its absolute performance goals are intended to keep management focused on achieving consistent superior results over time in an era where “winners” and “losers” within the retail industry continue to grow further apart. The relative performance-based metrics of our ongoing LTI program are designed to incent outperformance of our retail peer group on key financial metrics in any economic environment.

Unlike our ongoing LTI program, which utilizes customary retirement eligibility vesting provisions, Durable Model Awards are completely forfeited if the executive leaves or retires within the three-year performance period.

Award amounts. In determining the size of the Durable Model Awards, the Human Resources & Compensation Committee considered the rigor of the absolute performance goals, the grant date present value of the annual LTI grants for the most recently completed fiscal year and the projected unvested equity levels (i.e., retentive power) after the vesting events in 2020. The following chart shows the size of the Durable Model Awards relative to the value of the annual LTI:

Executive(1)

Durable Model Award

at-goal value(2)

% of annual LTI grant

for fiscal 2019(2)

Mr. Cornell

$2,500,000

24%

Mr. Fiddelke

$1,250,000

N/A

Mr. Mulligan

$1,250,000

25%

Mr. McNamara

$1,250,000

37%

Mr. Liu

$1,000,000

40%

(1)

Ms. Smith did not receive a Durable Model Award.

(2)

The “Stock Awards” column of the “Summary compensation table” on page 47 includes the grant date fair values for the Durable Model Award grants, as well as annual LTI grants made in March 2019. Mr. Fiddelke was named Executive Vice President & Chief Financial Officer in November 2019; therefore, he did not receive a full fiscal 2019 annual grant as an Executive Officer on the Leadership Team.

 

  TARGET CORPORATION      2020 Proxy Statement 36

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Our framework for executive compensation

Guiding principles

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

Deliver on our pay for performance philosophy in support of our strategy.

Provide a framework that encourages outstanding financial results and shareholder returns over the long-term.

Attract, retain, and motivate a premier management team to sustain our distinctive brand and its competitive advantage in the marketplace.

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.

Elements of Annual TDC(1)

 

Element

Key

characteristics

Link to

shareholder

value

How we

determine

amount

Fixed

Base salary

Fixed compensation component payable in cash, representing less than 20% of Annual TDC for our NEOs. Reviewed annually and adjusted when appropriate.

A means to attract and retain talented executives capable of driving superior performance.

Consider individual contributions to business outcomes, the scope and complexity of each role, future potential, market data, and internal pay equity.

 

 

 

 

 

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:

Sales

Incentive Operating Income

 

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.

Performance share unit awards

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:

Adjusted Sales growth

EPS growth

ROIC

 

Grant award levels based on individual contributions to business outcomes, 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.

Performance-based restricted stock unit awards

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 contributions to business outcomes, potential future contributions, historical grant amounts, retention considerations, and market data.

(1)

See page 33 for a description of how the Human Resources & Compensation Committee uses Annual TDC and how it differs from the “Total” in the “Summary compensation table” on page 47.

 

  TARGET CORPORATION      2020 Proxy Statement 37

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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 Annual TDC.

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: Sales (50%) and Incentive Operating Income (50%). The CEO STIP design is exclusively based on the financial component. See the “Performance highlights” tables and footnotes on page 34 for a description of where Sales are reported in, and how Incentive Operating Income is calculated from, our financial statements.

For our non-CEO NEOs, 67% of their STIP is based on the financial component. The remaining 33% of their STIP is based on a team scorecard, designed to strongly align pay to Target’s strategic agenda. The following table shows financial and scorecard payouts expressed as a percentage of salary.

In March 2019, the Human Resources & Compensation Committee approved increases to STI at-goal pay opportunity for CEO and NEOs from 190% to 200% and from 90% to 100%, respectively, to maintain market competitiveness relative to our retail and general industry peers.

 

 

 

Fiscal 2019 (payout as a % of salary)

 

 

Component

Weight

Threshold

Goal

Maximum

CEO

 

Financial
(Sales 50%, Incentive Operating Income 50%)

100%

75%

200%

400%

 

 

 

 

 

 

 

Other NEOs

 

Financial
(Sales 50%, Incentive Operating Income 50%)

67%

13%

67%

134%

 

Team Scorecard

33%

7%

33%

66%

 

Total

 

20%

100%

200%

Fiscal 2019 financial STIP design, performance goals, and how we performed in comparison to these goals

The fiscal 2019 goals and actual performance were:

 

 

Fiscal 2019 goal(1)

 

Fiscal 2019 actual(1)

Metric

 

$

vs Fiscal

2018

 

$

vs Fiscal

2018

Sales

$

77,692

+4.4%

$

77,130

+3.6%

Incentive Operating Income

$

4,738

+3.1%

$

5,033

+9.6%

(1)

In millions.

 

 

When approving the design and specific goals for fiscal 2019, the Human Resources & Compensation Committee took into account our business strategies, the current economic environment, and how the annual goals align with our longer-term financial expectations for the durable financial model we have been developing over the last several years.

As we near the end of our accelerated investment cycle, our focus continues to center around sustainably and reliably growing sales and profit.

The financial performance level at-goal for Sales was based on achieving overall sales growth of 4.4%. Threshold and maximum performance amounts are -/+2% of the Sales goal, respectively.

The financial performance level at-goal for Incentive Operating Income was based on achieving a 3.1% increase over the prior year, which equates to a 7.0% increase in Operating Income. Threshold and maximum performance amounts are -/+10% of the Incentive Operating Income goal, respectively.

 

  TARGET CORPORATION      2020 Proxy Statement 38

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Fiscal 2019 team scorecard assessment

The team scorecard provides a general structure for discussing and measuring performance of the management team as a group, excluding our CEO. Throughout the year, our CEO provided the Human Resources & Compensation Committee interim assessments of team scorecard performance. The team scorecard portion of the STIP for our non-CEO NEOs in 2019 was focused on continued business momentum and scaling strategic initiatives, while continuing to lead the industry in retail best practices by investing in our core processes.

For fiscal 2019, primary team scorecard progress indicators included: market share gains in Apparel & Accessories, Home, Essentials & Beauty, Food & Beverage, and at the enterprise level; digital channel sales that continue to outpace the industry; advanced brand portfolio management capabilities; and numerous new store openings and remodels.

Our management team drove meaningful progress against these key indicators, including:

Gained market share in every major category and maintained market share at the enterprise level.

Achieved digital sales growth of 29% that continues to outpace the industry.

Improved economics of our digital channel sales, largely driven by same-day fulfillment options: in-store pick up, Drive-Up, and Shipt.

Advanced brand portfolio management capabilities, which resulted in a significant reduction in markdowns.

Completed more than 290 store remodels, delivering an average of over 2% sales lift, and opened 26 new stores.

Taking into consideration the outcomes described above, the CEO recommended, and the Human Resources & Compensation Committee approved, a team scorecard payout of 45% of base salary, out of a maximum opportunity of 66% of base salary, for our non-CEO NEOs.

Fiscal 2019 STIP payout

Given actual financial performance and progress made on the primary team scorecard indicators previously mentioned, the total fiscal 2019 STIP payout for our CEO and other NEOs is detailed below as a percentage of goal:

 

 

 

Components

Actual payout

percentage of goal

 

 

CEO

 

Financial

119%

 

 

 

 

 

 

 

 

Other NEOs

 

Financial + Scorecard

125%

 

Long-term incentives

To align our executive officers’ pay outcomes with long-term performance, 100% of our annual LTI grants feature relative 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 individual contributions to business outcomes 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 are made in March of each year to ensure the full-year financial results for the most recently completed fiscal year may be considered prior to making the grants. Once the total annual grant amount for a NEO is determined, the Human Resources & Compensation Committee grants 60% of that value in PSUs and 40% in PBRSUs. Under this approach, strong long-term performance relative to peers becomes the key driver of compensation realized by executive officers.

The Human Resources & Compensation Committee made two changes to the annual LTI grants versus the prior year. Mr. Cornell’s annual LTI grant was increased by $860,000, to position his Annual TDC at approximately the median of our combined retail and general industry peer groups. In addition, Mr. McNamara’s LTI grant was increased by $100,000 in recognition of driving significant business outcomes and superior leadership.

 

  TARGET CORPORATION      2020 Proxy Statement 39

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PSUs

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

Adjusted Sales growth. The compound annual growth rate in Adjusted Sales over the performance period, relative to our retail peer group.

EPS growth. The compound annual growth rate of our EPS versus the reported EPS of our retail peer group.

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.

See the “Performance highlights” tables and footnotes on page 34 for a description of where EPS and ROIC are reported in, and how Adjusted Sales is calculated from, our financial statements. 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 44-45.

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 objectively, 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.

Historically, adjustments to Target’s results have included items that did not reflect our ongoing core operations or were needed to ensure consistent time frame comparisons over the performance period. These adjustments typically decreased participants’ resulting payouts. The Human Resources & Compensation Committee does not make adjustments that are inconsistent with Target’s performance.

For items known at the time of grant, the Human Resources & Compensation Committee addresses them as part of the grant approval. For items arising after the time of grant, adjustments are typically made before or at the time payouts are determined by the Human Resources & Compensation Committee.

Consistent with those past practices, the Human Resources & Compensation Committee approved the following:

At the time of grant, excluded the 53rd week from our Sales and those of our peers to ensure a consistent time frame comparison.

Prior to the payout, removed Staples from the retail peer group because of its going private transaction and adjusted the percentile rankings to reflect that removal.

 

  TARGET CORPORATION      2020 Proxy Statement 40

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2017-2019 PSU payout

In April 2020, the NEOs received payouts with respect to the PSU awards that were granted in January 2017 for the three-year performance period ended February 1, 2020. These awards were paid at 103.5% of the goal number of shares. The following table summarizes the rankings and payout results for awards granted in fiscal 2017. This outcome is based on comparing our results to those of the retail peer group we disclosed in our proxy statement covering the time of grant. The market share and EPS growth metrics utilize a base year of fiscal 2016 and a final performance year of fiscal 2019, while for ROIC we use an average of 2017, 2018, and 2019.

Metric

Performance rank

relative to peers

Payout percentage

Total payout

Market share

10 of 18

86%

103.5%

EPS growth

10 of 18

83%

ROIC

5 of 18

142%

 

PBRSUs

Our PBRSUs have a three-year performance period with the number of shares based on relative three-year TSR performance versus our retail peer group. 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 performance period.

 

 

2017-2019 PBRSU payout

In March 2020, the NEOs received payouts with respect to the PBRSU awards that were granted in January 2017 for the three-year performance period ended February 1, 2020. With a TSR ranking of 5 out of 17 relative to our retail peers, these awards were paid at 125% of the goal number of shares. This outcome is based on comparing our results to those of the retail peer group we disclosed in our proxy statement covering the time of grant.

Consistent with our PSU adjustment, prior to the payout, the Human Resources & Compensation Committee approved removing Staples from the retail peer group because of its going private transaction and adjusting the performance rankings to reflect that removal.

 

  TARGET CORPORATION      2020 Proxy Statement 41

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Other benefit elements

We offer other benefits designed to encourage retention of key talent:

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 completed 1,000 hours for the company. There is no enhanced benefit for executives.

Deferred compensation plan. For a broad management group we offer a non-qualified, unfunded, individual account deferred compensation plan. The plan has investment options that generally mirror the Target 401(k) Plan, but also includes a fund based on Target common stock.

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. In addition, we provide benefits to our NEOs that we believe serve a business purpose for Target, but which are considered perquisites under SEC disclosure rules. The Human Resources & Compensation Committee reviews perquisites annually to ensure they are consistent with our philosophy and appropriate in magnitude. Mr. Cornell is only eligible for perquisites that serve a business purpose for Target or support his safety, health and well-being, such as home security, parking, executive physical, and personal use of company-owned aircraft for security reasons.

 

Greater detail on these benefits is provided in the footnotes and tables that follow the “Summary compensation table” on page 47.

Income continuation plan

We provide an Income Continuation Plan (ICP) to executive officers who are involuntarily terminated without cause to assist in their occupational transitions. The maximum payment under this plan (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 payments. In addition, any NEO who receives severance payments under our ICP also receives a $30,000 allowance for outplacement services.

 

  TARGET CORPORATION      2020 Proxy Statement 42

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Compensation governance

Target’s executive compensation practices

Practice

Description

More

information

Pay for performance

A significant percentage of the total direct compensation package features performance-based metrics, including 100% of our annual LTI.

33

Robust stock ownership guidelines

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.

27

Annual shareholder
“Say on Pay”

We value our shareholders’ input on our executive compensation programs. Our Board 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.

62

Double trigger change-in-control

We grant equity awards that require both a change-in-control and an involuntary termination or voluntary termination with good reason before vesting.

54

Annual compensation
risk assessment

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.

45

Clawback policy

Our policy allows recovery of incentive cash, equity compensation, and severance payments where a senior executive’s intentional misconduct results in material financial or reputational harm or results in a need for a restatement of our consolidated financial statements.

45

Independent compensation consultant

The Human Resources & Compensation Committee retains an independent compensation consultant to advise on the executive compensation program and practices.

43

No hedging of company
stock

Executive officers and members of the Board may not directly or indirectly engage in transactions intended to hedge or offset the market value of Target common stock owned by them.

46

No pledging of company stock

Executive officers and members of the Board may not directly or indirectly pledge Target common stock as collateral for any obligation.

46

No tax gross-ups

We do not provide tax gross-ups to our executive officers.

 

No dividends on unearned performance awards

We do not pay dividends on unearned performance awards.

51

No repricing or exchange
of underwater stock
options

Our equity incentive plan does not permit repricing or exchange of underwater stock options without shareholder approval.

 

No employment contracts

We do not use employment contracts with our NEOs, except in special circumstances.

 

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 the pay packages for all of our executive officers, including the CEO. The Human Resources & Compensation Committee receives assistance from two sources: (a) an independent compensation consulting firm, Semler Brossy, and (b) our internal executive compensation staff, led by our Executive Vice President & Chief Human Resources Officer. All decisions regarding executive compensation 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 authority for our compensation plans that do not involve the setting of compensation levels for executive officers. In addition, the Human Resources & Compensation Committee has established an Equity Subcommittee comprised of Ms. Austin, Mr. Barrett, Mr. Darden, and Ms. Healey for the purposes of granting equity awards to members of the Board and any officers who are subject to Section 16 of the Exchange Act and to take any action required to be performed by a committee or subcommittee of “non-employee directors” to preserve the exemption available under Rule 16b-3 of the Exchange Act.

Human Resources & Compensation Committee’s independent consultant

Semler Brossy 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 Semler Brossy’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, Semler Brossy provides an independent recommendation to the Human Resources &

 

  TARGET CORPORATION      2020 Proxy Statement 43

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Compensation Committee, in the form of a range of possible outcomes, for the Human Resources & Compensation Committee’s consideration. In developing its recommendation, Semler Brossy relies on its understanding of Target’s business and compensation programs and their own independent research and analysis. Semler Brossy does not meet with our CEO with respect to CEO compensation. Semler Brossy 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 Annual TDC.

The Annual 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 Semler Brossy 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 Annual 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 Semler Brossy and approved by the Human Resources & Compensation Committee. In fiscal 2019, we removed Gap Inc. and Sears Holdings Corporation from the retail peer group and added Nordstrom, Inc. Cigna Corporation replaced Express Scripts Holding Company within the general industry peer group due to its merger with Express Scripts Holding Company.

 

2019 peer groups

 

Retail

Amazon.com, Inc.

Lowe’s Companies, Inc.

 

 

General industry

3M Company

McDonald’s Corporation

Best Buy Co., Inc.

Macy’s Inc.

 

Abbott Laboratories

MetLife, Inc.

Costco

Wholesale Corporation

Nordstrom, Inc.

 

Anthem, Inc.

Mondelez International, Inc.

CVS Health Corporation

Publix Super Markets, Inc.

 

Archer-Daniels-Midland Company

NIKE, Inc.

Dollar General Corporation

Rite Aid Corporation

 

Cigna Corporation

PepsiCo, Inc.

Dollar Tree, Inc.

The TJX Companies, Inc.

 

The Coca-Cola Company

The Procter & Gamble Company

The Home Depot, Inc.

Walgreens Boots Alliance, Inc.

 

FedEx Corporation

Starbucks Corporation

Kohl’s Corporation

Walmart, Inc.

 

General Mills, Inc.

United Parcel Service, Inc.

 

 

The Kroger Co.

 

 

 

Johnson & Johnson

United Technologies Corporation

 

 

 

 

 

 

Johnson Controls International plc

UnitedHealth Group Incorporated

 

 

 

 

 

 

Marriott International, Inc.

 

 

  TARGET CORPORATION      2020 Proxy Statement 44

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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 February 1, 2020:

 

2019 peer group comparison(1)(2)

Retail

General industry

 

Revenues

 

Market cap

Employees

 

Revenues

 

Market cap

Employees

25th Percentile

$

24,971

$

17,128

125,000

$

26,509

$

45,791

73,800

Median

$

42,879

$

42,052

190,000

$

64,656

 $

91,259

103,000

75th Percentile

$

136,866

$

100,563

295,000

$

74,094

 $

161,139

248,150

Target Corporation

$

78,112

$

56,116

368,000

$

78,112

$

56,116

368,000

(1)

All amounts in millions, except employees.

(2)

Data Sources: CapIQ and Equilar.

 

Compensation policies and risk

Compensation risk assessment

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 “top-down” approach by evaluating whether our compensation programs and policies exacerbate top enterprise-wide risks. Next, we take a “bottom-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 if an executive officer’s intentional misconduct results in material financial or reputational harm, or results in a need for a restatement of our consolidated financial statements,

Stock ownership guidelines for executive officers and directors, and

Anti-hedging and anti-pledging policies.

Clawback policy

Our clawback policy, allows for recovery of compensation if a senior executive’s intentional misconduct:

violates the law, our code of ethics, or any significant ethics or compliance policy, and

results in material financial or reputational harm or results in a need for a restatement of our consolidated financial statements.

The compensation elements that are subject to recovery under this policy include all:

amounts paid under the STIP (including any discretionary payments),

awards under our LTI plans whether exercised, vested, unvested, or deferred, and

amounts paid under the ICP.

All recoveries are determined in the discretion of the Human Resources & Compensation Committee.

 

  TARGET CORPORATION      2020 Proxy Statement 45

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Anti-hedging and anti-pledging policy

Executive officers and members of the Board 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 are in compliance with this policy. Target’s anti-hedging and anti-pledging policies do not apply to other employees.

Grant timing practices

The following practices have not been formalized in a written policy, but have been regularly followed:

Our annual LTI grant coincides with a regularly scheduled Board meeting that is scheduled more than one year in advance. Currently, the annual LTI grant is made at the March Board meeting. 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.

We occasionally 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 approach

Consistent with our guiding principles, our annual short-term incentives and long-term equity awards impose performance conditions for our CEO and named executive officers. Prior to the Tax Act passing in fiscal 2017, we were able to deduct most of our performance-based executive compensation under Section 162(m) of the Internal Revenue Code (IRC). While the Tax Act significantly reduced the amount of compensation we can deduct under IRC Section 162(m), our pay-for-performance philosophy remains central to our compensation programs.

 

  TARGET CORPORATION      2020 Proxy Statement 46

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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)(4)
   Option
awards(2)
   Non-equity
incentive plan
compensation(5)
   Change
in pension
value and
nonqualified
deferred
compensation
earnings(6)
   All other
compensation(7)
   Total 
Brian C. Cornell
Chairman & Chief Executive Officer
 2019   $1,400,000   $0      $13,623,153   $0         $3,322,667           $0          $592,543   $18,938,363 
 2018   $1,384,615   $0   $9,995,883   $0   $5,266,195   $0   $557,376   $17,204,069 
 2017   $1,300,000   $0   $0   $2,000,001   $4,836,000   $0   $263,208   $8,399,210 

Michael J. Fiddelke(8)

Executive Vice President & Chief Financial Officer

 2019   $540,192   $138,563   $2,190,598   $0   $348,413   $10,897   $85,817   $3,314,480 
                                           
                                           
John J. Mulligan
Executive Vice President & Chief Operating Officer
 2019   $1,000,000   $450,000   $6,491,932   $0   $795,067   $178,491   $1,576,064   $10,491,554 
 2018   $1,000,000   $350,000   $5,126,087   $0   $1,270,933   $9,396   $819,317   $8,575,733 
 2017   $1,000,000   $540,000   $0   $1,000,004   $1,241,333   $82,067   $545,102   $4,408,506 
Michael E. McNamara
Executive Vice President & Chief Information Officer
 2019   $725,000   $326,250   $4,762,233   $0   $576,423   $0   $203,108   $6,593,014 
 2018   $725,000   $253,750   $3,332,033   $0   $921,427   $0   $123,958   $5,356,168 
 2017   $725,000   $391,500   $0   $1,000,004   $899,967   $0   $56,596   $3,073,067 
Don H. Liu
Executive Vice President & Chief Legal & Risk Officer
 2019   $650,000   $292,500   $3,620,968   $0   $516,793   $0   $120,372   $5,200,633 
 2018   $650,000   $227,500   $2,563,081   $0   $826,107   $0   $64,676   $4,331,364 
 2017   $650,000   $351,000   $0   $1,000,004   $806,867   $0   $85,061   $2,892,932 
Cathy R. Smith(9)
Strategic Advisor and Former Chief Financial Officer
 2019   $800,000   $360,000   $0   $0   $636,053   $0   $154,053   $1,950,106 
 2018   $800,000   $280,000   $3,332,033   $0   $1,016,747   $0   $151,915   $5,580,695 
 2017   $800,000   $432,000   $0   $1,000,004   $993,067   $0   $87,266   $3,312,337 

 

(1)

For NEOs other than our CEO, the “Bonus” amount shows actual payouts earned under our STIP for the team scorecard component. The CEO has no team scorecard component to his STIP payout. Mr. Fiddelke’s “Bonus,” like the other NEOs other than the CEO, includes the team scorecard component attributable to time spent as a NEO upon becoming Executive Vice President & Chief Financial Officer, but also includes the actual payouts made under the discretionary component of STIP applicable to the time he served in his prior role as Senior Vice President, Operations during fiscal 2019.

(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 Notes 21 and 22, Share-Based Compensation, to our consolidated financial statements in our 2019 Annual Report and our 2018 Annual Report, respectively, for a description of our accounting and the assumptions used.

 

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(3)

Represents the aggregate grant date fair value of PSUs, PBRSUs, and Durable Model Awards 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. The Durable Model Awards, which were an off-cycle grant and are described in the CD&A on pages 35-36, cause the amounts for fiscal 2019 to be higher than fiscal 2018 and fiscal 2017. The range of payments for the PSUs and Durable Model Awards granted in fiscal 2019 is as follows:

 

Name

Minimum

amount

Amount

reported

Maximum

amount

 

Mr. Cornell

 

 

 

 

 

 

 

PSU Granted 3/13/19

$

0

$

6,366,011

$

12,732,022

 

Durable Model Award Granted 1/20/20

$

0

$

2,500,100

$

6,250,250

 

Mr. Fiddelke

 

 

 

 

 

 

 

PSU Granted 3/13/19

$

0

$

200,021

$

400,042

 

PSU Granted 11/1/19

$

0

$

252,017

$

504,034

 

Durable Model Award Granted 1/20/20

$

0

$

1,250,109

$

3,125,273

 

Mr. Mulligan

 

 

 

 

 

 

 

PSU Granted 3/13/19

$

0

$

3,000,006

$

6,000,012

 

Durable Model Award Granted 1/20/20

$

0

$

1,250,109

$

3,125,273

 

Mr. McNamara

 

 

 

 

 

 

 

PSU Granted 3/13/19

$

0

$

2,010,068

$

4,020,136

 

Durable Model Award Granted 1/20/20

$

0

$

1,250,109

$

3,125,273

 

Mr. Liu

 

 

 

 

 

 

 

PSU Granted 3/13/19

$

0

$

1,500,042

$

3,000,084

 

Durable Model Award Granted 1/20/20

$

0

$

1,000,017

$

2,500,043

(4)

During fiscal 2017 we shifted the timing of our annual equity grants so that those grants occur in March of each year, instead of our previous practice of granting equity to executive officers in January, which is the last month of our fiscal year. Due to that timing shift, there were no Stock Awards granted in fiscal 2017, and executive officers’ compensation for fiscal 2017 was significantly lower than fiscal 2018 and fiscal 2019.

(5)

The “Non-equity incentive plan compensation” amount shows actual payouts earned under the financial component of our STIP.

(6)

For fiscal 2019, the change in the qualified pension plan amount was $10,897 for Mr. Fiddelke and $178,491 for Mr. Mulligan. Mr. Cornell, Mr. McNamara, Mr. Liu, and Ms. Smith are not eligible for the Target Corporation Pension Plan (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 2019, 2018, and 2017 were 3.13%, 4.28%, and 3.94%, 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.

(7)

The “All other compensation” amounts reported for fiscal 2019 include the elements in the following table.

 

Name

Restored match credits

Life insurance

SPP credits

Perquisites

Total

 

Mr. Cornell

$

333,343

$

23,760

$

0

$