DEF 14A 1 d506121ddef14a.htm DEF 14A DEF 14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

 

 

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Filed by a Party other than the Registrant  ☐

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  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

LOWE’S COMPANIES, INC.

 

(Name of Registrant as Specified In Its Charter)

 

          

 

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

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LOGO

Notice of 2018 Annual Meeting & Proxy Statement
Lowe’s


LOGO

 

 

April 20, 2018

Dear Fellow Shareholders:

I am pleased to invite you to attend our 2018 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Time, on Friday, June 1, 2018 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. Details regarding admission to the meeting and the business to be conducted are described in the accompanying Notice of 2018 Annual Meeting of Shareholders and Proxy Statement.

Your vote is important. Regardless of whether you plan to attend the meeting, I strongly encourage you to vote as soon as possible to ensure that your shares are represented at the meeting. The accompanying Proxy Statement explains more about voting. Please read it carefully.

Sincerely,

 

LOGO

Robert A. Niblock

Chairman of the Board, President

and Chief Executive Officer

 

 

 


 

 

 

 

LOWE’S COMPANIES, INC.

1000 Lowe’s Boulevard

Mooresville, North Carolina 28117

(704) 758-1000

Notice of 2018 Annual Meeting of Shareholders

April 20, 2018

The 2018 Annual Meeting of Shareholders (the “Annual Meeting”) of Lowe’s Companies, Inc. (the “Company”) will be held at 10:00 a.m., Eastern Time, on Friday, June 1, 2018 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277, for the purpose of voting on the following matters:

 

1. To elect the 13 candidates nominated by the Board of Directors for election as directors;

 

2. To approve, on an advisory basis, the Company’s named executive officer compensation in fiscal 2017;

 

3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018;

 

4. To consider and vote upon the shareholder proposal set forth in the accompanying Proxy Statement, if properly presented at the Annual Meeting; and

 

5. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

The Board of Directors unanimously recommends a vote “FOR” items 1, 2 and 3, and a vote “AGAINST” the shareholder proposal in item 4. The persons named as proxies will use their discretion to vote on other matters that may properly arise at the Annual Meeting or any adjournment or postponement thereof.

Only shareholders of record as of the close of business on March 23, 2018 will be entitled to notice of, and to vote at, the Annual Meeting.

Your vote is important. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote as soon as possible to ensure that your shares are represented at the meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy using one of the following methods: (i) vote via the Internet; (ii) vote by telephone; or (iii) complete, sign, date and return your proxy card in the postage-paid envelope provided. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares at the Internet site address listed on your notice. If you hold your shares through an account with a bank, broker or similar organization, please follow the instructions you receive from the holder of record to vote your shares.

Sincerely,

 

LOGO

Ross W. McCanless

Chief Legal Officer and Secretary

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Shareholders To Be Held on June 1, 2018:

The Notice of 2018 Annual Meeting of Shareholders, Proxy Statement and

2017 Annual Report to Shareholders are available at www.proxyvote.com.


PROXY SUMMARY

 

 

 


 

We have demonstrated a strong commitment to returning capital to our shareholders and have had continued dividend growth since 1961.

 

$18.1 Billion   19%   $4.9 Billion

SHARES REPURCHASED UNDER OUR SHARE

REPURCHASE PROGRAM IN THE LAST FIVE YEARS

 

2017 INCREASE IN

ANNUAL DIVIDEND

 

DIVIDENDS PAID IN THE

LAST FIVE YEARS

 

 

 

LOGO

 

This summary includes certain financial and operational, governance and executive compensation highlights. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Executive Compensation Highlights

Our executive compensation program is designed to hold our executives accountable for business results and reward them for consistently strong financial performance and the creation of value for our shareholders. To that end, the primary objectives of our executive compensation program are to:

 

  Attract and retain talented executives to support the Company’s culture and strategic growth priorities;

 

  Maximize long-term shareholder value through alignment of executive and shareholder interests;

 

  Align executive compensation with the Company’s business strategies, including expanding home improvement reach, developing capabilities to anticipate and support customer needs and generating profitable growth and substantial returns; and

 

  Target executive total compensation at the market median with an opportunity to earn above market pay when the Company’s results exceed performance targets or below market median if results fall short of targets.

Governance Highlights

Our Board of Directors is committed to sound and effective corporate governance practices. The following are highlights of our corporate governance practices:

 

  Active Board Oversight of Lowe’s Strategy, Business Initiatives and Industry Positioning

 

  Active Board Oversight of Enterprise Risk Management including Cybersecurity

 

  Enhanced Shareholder Engagement Program

 

  Demonstrated Commitment to Board Refreshment

 

  Active Board Engagement in Succession Planning of Executive Officers

 

  Commitment to Sustainability and Social Responsibility Matters

 

  Adoption of Proxy Access

 

  Empowered Independent Lead Director

 

  12 of 13 Director Nominees are Independent

 

  Audit, Compensation, Nominating and Governance and Public Policy Committees are comprised only of Independent Directors

 

  Regular Executive Sessions of Independent Directors

 

  Annual Board, Committee and Individual Director and CEO Evaluations

 

  Stock Ownership Guidelines for Executive Officers and Non-Employee Directors

 

  Shareholders may call Special Meetings

 

  Majority Voting for Directors and Declassified Board
 

 


 

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FISCAL 2017 FINANCIAL AND OPERATIONAL HIGHLIGHTS

$4.4

Billion

  39

Million Shares

  $1.3
Billion
  $5.1
Billion
IN CAPITAL RETURNED
TO SHAREHOLDERS
  REPURCHASED UNDER

THE SHARE REPURCHASE PROGRAM

  DIVIDENDS PAID   CASH FLOW FROM OPERATIONS

 

 

 

We made meaningful progress executing our strategy to expand our home improvement reach and further invest in omni-channel capabilities to support customers’ evolving needs. We are proud of our success in growing sales with the Pro customer, enhancing our in-home selling program, strengthening our market position in Canada and advancing our online shopping experience.

Our financial results and consistent capital allocation priorities demonstrate our commitment to creating and returning value to our shareholders. Further underscoring this commitment, our Board of Directors authorized an incremental $5 billion in share repurchases.

                          
       $69 BILLION IN SALES              
      

+5.5% SALES YOY*

+4.6% AVERAGE TICKET YOY*

+0.9% TRANSACTIONS YOY*

 

        
      

$1.58 DIVIDENDS/
SHARE

+18.8% DIVIDENDS YOY

    

$4.09 DILUTED EPS

+17.9% DILUTED EPS

YOY*

 
   
      

YOY = Year over Year Comparison

 

* 52 weeks in 2017 compared to 53 weeks in 2016

 

        
                          
 

 

2018 PROPOSALS    Board
Recommends
     

 

Proposal 1: Election of Directors

 

    

 

 

 

 

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Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation

 

    

 

 

 

 

LOGO

 

 

 

          

 

Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm

 

    

 

 

 

 

LOGO

 

 

 

          

 

Proposal 4: Shareholder Proposal to Reduce the Threshold to Call Special Shareholder Meetings to 10% of Outstanding Shares

 

    

 

 

 

 

LOGO

 

 

 

          

 

 

LOGO

 


 

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Table of Contents

 

General Information      1  
Shareholder Engagement      4  
Proposal 1: Election of Directors      7  
Identifying and Evaluating Director Nominees      8  
Director Nominees      10  
Information About the Board of Directors and Committees of the Board      17  
Corporate Governance Guidelines and Code of Business Conduct and Ethics      17  
Director Independence      17  
Compensation of Directors      18  
Board Meetings, Committees of the Board and Board Leadership Structure      20  
Security Ownership of Certain Beneficial Owners and Management      26  
Section 16(a) Beneficial Ownership Reporting Compliance      27  
Compensation Discussion and Analysis      28  
Executive Summary      29  
Compensation Philosophy and Elements      33  
Compensation Decision-Making Process      35  
2017 Compensation Actions      37  
Other Compensation Policies      42  
Compensation Committee Report      43  
Compensation Tables      44  
Compensation Committee Interlocks and Insider Participation      53  
Equity Compensation Plan Information      54  
Related Person Transactions      55  
Policy and Procedures for Review, Approval or Ratification of Related Person Transactions      55  
Approved Related Person Transactions      55  
Audit Matters      56  
Report of the Audit Committee      56  
Fees Paid to the Independent Registered Public Accounting Firm      57  
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation      58  
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm      59  
Proposal 4: Shareholder Proposal Regarding Special Shareholder Meetings      60  
Additional Information      63  
Delivery of Proxy Materials      63  
Electronic Delivery of Proxy Materials      63  
Shareholder Proposals for the 2019 Annual Meeting      63  
Annual Report      64  
Appendix A: Categorical Standards for Determination of Director Independence      A-1  
 

 

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Proxy Statement

The Board of Directors (the “Board of Directors” or the “Board”) of Lowe’s Companies, Inc. is providing these materials to you in connection with the 2018 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held at 10:00 a.m., Eastern Time, on Friday, June 1, 2018 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. References in this Proxy Statement to “Lowe’s,” the “Company,” “we,” “us,” “our” and similar terms refer to Lowe’s Companies, Inc.

General Information

 

Why am I receiving these materials?

You have received these materials because the Board is soliciting your proxy to vote your shares at the Annual Meeting. This Proxy Statement includes information that the Company is required to provide you under the Securities and Exchange Commission rules and regulations (the “SEC rules”) and is designed to assist you in voting your shares.

What is a proxy?

The Board of Directors is asking for your proxy. This means you authorize the individuals selected by the Company to vote your shares at the Annual Meeting in the way that you instruct. All shares represented by valid proxies received and not revoked before the Annual Meeting will be voted in accordance with the shareholder’s specific voting instructions.

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

The SEC rules allow companies to choose the method for delivery of proxy materials to shareholders. For most shareholders, the Company has elected to mail a notice regarding the availability of proxy materials on the Internet (the “Notice of Internet Availability of Proxy Materials” or the “Notice”), rather than sending a full set of these materials in the mail. The Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement and form of proxy), as applicable, was sent to shareholders beginning April 20, 2018, and the proxy materials were posted on the investor relations portion of the Company’s website, www.Lowes.com/investor, and on the website referenced in the Notice on the same day. Utilizing this method of proxy delivery expedites receipt of proxy materials by the Company’s shareholders and lowers the cost of the Annual Meeting. If you would like to receive a paper or e-mail copy of the proxy materials, you should follow the instructions in the Notice for requesting a copy.

What is included in these materials?

These materials include:

 

  the Notice of Annual Meeting and Proxy Statement; and

 

  the 2017 Annual Report to Shareholders, which contains the Company’s audited consolidated financial statements.

If you received a printed copy of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.

What items will be voted on at the Annual Meeting?

There are four proposals scheduled to be voted on at the Annual Meeting:

 

  the election of the 13 director candidates nominated by the Board;

 

  the approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2017;

 

  the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018; and

 

  a shareholder proposal regarding special shareholder meetings.

The Board is not aware of any other matters to be brought before the Annual Meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by proxy in their discretion.

What are the Board’s voting recommendations?

The Board unanimously recommends that you vote your shares:

 

  “FOR” the election of each of the director nominees named in this Proxy Statement to the Board;

 

  “FOR” the approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2017;
 

 

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General Information

 

 

  “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018; and

 

  “AGAINST” the shareholder proposal regarding special shareholder meetings.

Who can attend the Annual Meeting?

Admission to the Annual Meeting is limited to:

 

  shareholders of record as of the close of business on March 23, 2018;

 

  holders of valid proxies for the Annual Meeting; and

 

  invited guests.

Admission to the meeting will be on a first-come, first-served basis. Each shareholder may be asked to present valid photo identification, such as a driver’s license or passport, and proof of stock ownership as of the record date for admittance.

When is the record date and who is entitled to vote?

The Board set March 23, 2018 as the record date. As of the record date, 826,350,593 shares of common stock, $0.50 par value per share, of the Company (“Common Stock”) were issued and outstanding. Shareholders are entitled to one vote per share of Common Stock outstanding on the record date on any matter presented at the Annual Meeting.

What is a shareholder of record?

A shareholder of record or registered shareholder is a shareholder whose ownership of Common Stock is reflected directly on the books and records of the Company’s transfer agent, Computershare Trust Company, N.A. If you hold Common Stock through an account with a bank, broker or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a shareholder of record. For shares held in street name, the shareholder of record is your bank, broker or similar organization. The Company only has access to ownership records for the registered shares. If you are not a shareholder of record and you wish to attend the Annual Meeting, the Company will require additional documentation to evidence your stock ownership as of the record date, such as a copy of your brokerage account statement, a letter from your bank, broker or other nominee, or a copy of your voting instruction form or Notice.

How do I vote?

You may vote by proxy or in person at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you

may vote your shares by proxy using one of the following methods: (i) vote via the Internet; (ii) vote by telephone; or (iii) complete, sign, date and return your proxy card in the postage-paid envelope provided. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares at the Internet site address listed on your Notice. If you hold your shares through an account with a bank, broker or similar organization, please follow the instructions you receive from the holder of record to vote your shares. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote as described in the following Q&A.

How can I revoke my proxy or change my vote?

You may revoke your proxy or change your vote as follows:

 

  Shareholders of record. You may revoke your proxy or change your vote at any time prior to the taking of the vote at the Annual Meeting by (i) submitting a written notice of revocation to Ross W. McCanless, Chief Legal Officer and Secretary, at Lowe’s Companies, Inc., 1000 Lowe’s Boulevard, Mooresville, North Carolina 28117; (ii) delivering a proxy bearing a later date using any of the voting methods described in the immediately preceding Q&A, including via the Internet or by telephone, and until the applicable deadline for each method specified in the accompanying proxy card or voting instruction form or Notice of Internet Availability of Proxy Materials; or (iii) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically make that request or vote in person at the meeting. For all methods of voting, the last vote cast will supersede all previous votes.

 

  Beneficial owners of shares held in “street name.” You may change or revoke your voting instructions by following the specific directions provided to you by the holder of record, or, if you have obtained a legal proxy from your bank, broker or other nominee, by attending the Annual Meeting and voting in person.

What happens if I vote by proxy and do not give specific voting instructions?

Shareholders of record. If you are a shareholder of record and you vote by proxy, via the Internet, by telephone or by signing, dating and returning a proxy card, without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion for any other matters properly presented for a vote at the Annual Meeting.

 

 

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General Information

 

 

Beneficial owners of shares held in “street name.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on that matter with respect to your shares. This is referred to as a “broker non-vote.”

The election of directors, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2017 and the shareholder proposal are non-routine matters. Consequently, without your voting instructions, the organization that holds your shares cannot vote your shares on these proposals. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018 is considered a routine matter.

What is the voting requirement to approve each of the proposals?

Proposal 1: Election of Directors. In uncontested elections, directors are elected by the affirmative vote of a majority of the outstanding shares of the Company’s voting securities voted at the meeting in person or by proxy, including those shares for which votes are cast as “withheld.” In the event that a director nominee fails to receive the required majority vote, the Board may decrease the number of directors, fill any vacancy, or take other appropriate action. If the number of nominees exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast by the holders of voting securities entitled to vote in the election.

Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation. Approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2017 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal). The results of the advisory vote will not be binding on the Company, the Compensation Committee or the Board of Directors. The Compensation Committee and the Board will, however, review the voting result and take it into consideration when making future decisions regarding executive compensation.

Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

Proposal 4: Shareholder Proposal. Approval of the shareholder proposal requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

Other Items. Approval of any other matters requires the affirmative vote of a majority of the votes cast on the item at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the item must exceed the number of shares voted “against” such item).

What is the quorum for the Annual Meeting? How are withhold votes, abstentions and broker non-votes treated?

The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast by the holders of Common Stock is necessary for the transaction of business at the Annual Meeting. Your shares are counted as being present if you vote in person at the Annual Meeting, via the Internet, by telephone or by submitting a properly executed proxy card or voting instruction form by mail. Abstentions and broker non-votes are counted as present or represented for the purpose of determining a quorum for the Annual Meeting.

With respect to Proposal 1, the election of directors, only “for” and “withhold” votes may be cast. Broker non-votes will not be counted as votes cast and, therefore, will not have any effect on the election of director nominees.

With respect to Proposals 2, 3 and 4, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2017, the proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2018 and the shareholder proposal, respectively, abstentions and broker non-votes will not be counted as votes cast and, therefore, will not have any effect on the outcomes of these proposals.

Who pays for solicitation of proxies?

The Company is paying the cost of soliciting proxies and will reimburse brokerage firms and other custodians, nominees

 

 

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General Information

 

 

and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to shareholders and obtaining their proxies. In addition to soliciting the proxies by mail and the Internet, certain of the Company’s directors, officers and employees, without compensation, may solicit proxies personally or by telephone, facsimile and e-mail. The Company has engaged Innisfree M&A Incorporated to assist in distributing proxy materials and soliciting proxies for the Annual Meeting for a fee of approximately $25,000.

Where can I find the voting results of the Annual Meeting?

The Company will publish final voting results in the Company’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 or in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) within four business days of the Annual Meeting.

 

 

Shareholder Engagement

Understanding the issues that are important to our shareholders is critical in ensuring that we address their interests in a meaningful and effective way. Lowe’s recognizes the value of and is committed to engaging with our shareholders and soliciting their views and input. In fiscal 2017, members of Lowe’s management and the Board continued this long-standing practice of shareholder engagement, reinforcing our commitment to building long-term relationships with our shareholders. We conduct shareholder outreach throughout the year to ensure that we understand and consider the issues of importance to our shareholders and are able to address them appropriately. During fiscal 2017, we engaged with representatives of many of our top institutional shareholders to discuss performance, strategy, board composition, refreshment and tenure, cybersecurity and risk management, climate change and sustainability efforts, governance practices, executive compensation and other matters. We report to our Nominating and Governance Committee and Board about these meetings and provide feedback from our shareholders.

The following diagram provides an overview of Lowe’s shareholder engagement practice:

 

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Shareholder Engagement

 

 

We have a proven track record of responsiveness to shareholders and are committed to continued engagement. The following diagrams illustrate changes we have made to our governance and executive compensation practices over the years in response to shareholder feedback as well as our commitment to ongoing improvement.

 

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Shareholder Engagement

 

 

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Proposal 1: Election of Directors

 

 

Proposal 1: Election of Directors

We are asking our shareholders to vote on the election of the 13 candidates nominated by the Board of Directors for election as directors.

The Board has nominated the 13 candidates named in this proposal for election as directors at the Annual Meeting. If elected, each nominee will serve until his or her term expires at the 2019 Annual Meeting of Shareholders or until his or her successor is duly elected and qualified. Each nominee has agreed to be named in this Proxy Statement and to serve if elected.

All of the nominees are currently serving as directors except Mr. Brian C. Rogers, whose Board service would commence upon his election at the 2018 Annual Meeting of Shareholders. Mr. David H. Batchelder and Ms. Lisa W. Wardell were appointed to the Board effective in March 2018. The other current directors were elected to the Board at the 2017 Annual Meeting of Shareholders. In accordance with the Board’s mandatory retirement policy, Mr. Robert L. Johnson will not stand for re-election at the 2018 Annual Meeting of Shareholders.

While Robert A. Niblock is nominated for re-election, on March 26, 2018, the Company announced that Mr. Niblock plans to retire as Chairman of the Board, President and Chief Executive Officer after a 25-year career with the Company. The Board has initiated a search for his successor, and in the interim Mr. Niblock will remain in his current role.

The Nominating and Governance Committee identifies, considers and recommends to the Board director candidates who have expertise that would complement and enhance the current Board’s skills and experience. It also reviews the existing time commitments of director candidates to ensure that they do not have any obligations that would conflict with the time commitments of a director of the Company. The Nominating and Governance Committee also looks to recruit candidates with different perspectives so that they can contribute to the cognitive diversity on the Board, while also recognizing the importance of having diversity of age, gender, race and ethnicity on the Board. Generally, the Nominating and Governance Committee identifies candidates through third-party search firms and, from time to time, through business and organizational contacts of the directors and management.

In the past five years, the Company has refreshed more than half of its Board by adding eight new independent directors. At the same time, the Company also believes that it benefits from having several seasoned directors, including our Lead Director, on the Board who are familiar with the Company’s business and can help facilitate the transfer of institutional knowledge. We believe the average tenure for our independent directors of less than five years reflects the balance the Board seeks between different perspectives brought by longer-serving and new directors.

Although the Company knows of no reason why any of the nominees would not be able to serve, if any nominee is unavailable for election, the proxy holders intend to vote your shares for any substitute nominee proposed by the Board. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the 13 nominees named in this Proxy Statement.

 

 

 

LOGO    The Board of Directors unanimously recommends a vote “FOR” the election of each of the 13 nominees named in this proposal. Unless authority to vote in the election of directors is withheld, it is the intention of the persons named as proxies to vote “FOR” the election of each of the 13 nominees named in this proposal.

 

 

 

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Proposal 1: Election of Directors

 

IDENTIFYING AND EVALUATING DIRECTOR NOMINEES

 

IDENTIFYING AND EVALUATING DIRECTOR NOMINEES

 

LOGO

 

Board Nomination Process

The Nominating and Governance Committee, in consultation with the Chairman of the Board and Chief Executive Officer, reviews each director’s continuation on the Board prior to his or her renomination to serve on the Board. The Nominating and Governance Committee evaluates whether or not the director, based upon his or her skills, background, expertise and contribution to the Board, is capable of supporting Lowe’s present and future needs. After the evaluation of a director, the Chair of the Nominating and Governance Committee and the Chairman of the Board inform each director under consideration of the Committee’s decision.

Additionally, with the assistance of an independent search firm, the Nominating and Governance Committee conducts targeted searches to identify well-qualified candidates who may have different skills or backgrounds needed for the Company to execute its strategic vision. If an independent search firm is used, the Nominating and Governance Committee retains the search firm and approves payment of its fees.

The Nominating and Governance Committee will consider nominees recommended by shareholders, and its process for doing so is no different than its process for screening and evaluating candidates suggested by directors, management of the Company or third parties. See “Shareholder Proposals for the 2019 Annual Meeting” elsewhere in this Proxy Statement for the timeframe for shareholders to provide notice of any nominations of persons for election to the Board of Directors.

Ms. Wardell and Mr. Rogers were recommended to the Nominating and Governance Committee by a third-party search firm and an independent director, respectively. Mr. Batchelder was recommended by a shareholder.

Board Composition and Refreshment

At least annually, the Board seeks input from each of its directors with respect to the current composition of the Board in light of changes in our current and future business

strategies, as well as our operating environment, as a means to identify any backgrounds or skill sets that may be helpful in maintaining or improving alignment between our Board composition and our business. In addition, we seek feedback from our shareholders regarding the backgrounds and skill sets that they would like to see represented on our Board. The Nominating and Governance Committee considers this feedback in its director search process.

Given the size of the Company and the diversity and complexity of the businesses and markets in which the Company operates, the Board recently determined that it would be appropriate to increase the size of the Board to 13 directors and added new directors as discussed elsewhere in this Proxy Statement. The Board also prioritizes having robust director orientation and on-boarding programs to ensure that new directors are rapidly integrated into boardroom discussions and their contributions are maximized.

Following Mr. Johnson’s retirement and the election of our director nominees, we will have eight directors who have joined the Board within the past five years.

Board Commitment

The Board understands the significant time commitment involved with serving on the Board and its committees, and it takes steps to assess that all directors and director nominees have the time necessary to fulfill their duties. Our Nominating and Governance Committee and Board only nominate candidates who they believe are capable of devoting the necessary time to successfully meet their duties, taking into account principal occupations, memberships on other boards and other responsibilities. Directors must advise our Chairman of the Board and Lead Director prior to joining the board of another public company, or any assignment to the audit or compensation committee of the board of directors of any public company of which such director is a member. In addition, directors must offer to resign from the Board as a result of changes to their principal occupation, subject to further

 

 

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Proposal 1: Election of Directors

 

IDENTIFYING AND EVALUATING DIRECTOR NOMINEES

 

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consideration by the Nominating and Governance Committee. The Nominating and Governance Committee assesses directors’ time commitment to the Board throughout the year, including through the annual self-evaluation process, and it determined that all of the director nominees clearly demonstrated the necessary time commitment involved in serving on our Board and its committees.

 

Further, the Nominating and Governance Committee regularly assesses and closely monitors shareholders’ views on the appropriate number of public company boards on which directors may serve. In connection with its review in 2017, the Nominating and Governance Committee considered input from our shareholders during our engagement discussions; voting policies of the major proxy advisory firms; corporate governance guidelines adopted by other public companies; board trends at peer companies; and advice from outside advisors. As a result, the Board amended the Company’s Corporate Governance Guidelines to reduce the number of public company boards on which our directors may serve from five to four, effective in June 2018.

 

Board Diversity

 

The Board is committed to having diverse individuals from different backgrounds with varying perspectives, professional experience, education and skills serving as members of the Board. The Board believes that a diverse membership with a variety of perspectives and experiences is an important feature of a well-functioning board, and the composition of the Board reflects the Board’s commitment to diversity.

 

Board Criteria

 

Candidates nominated for election or re-election to the Board should possess the following qualifications:

 

•  high personal and professional ethics, integrity, practical wisdom and mature judgment;

 

•  broad training and experience at the policy-making level in business, government, education or technology;

 

•  expertise that is useful to the Company and complementary to the background and experience of other Board members;

 

•  willingness to devote the required amount of time to carrying out duties and responsibilities of Board membership;

 

•  commitment to serve on the Board over a period of several years to develop knowledge about the Company’s principal operations; and

 

•  willingness to represent the best interests of all shareholders and objectively appraise management performance.

 

When determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers the evaluation results of the Board, committees and individual directors and the attendance and overall engagement of the director in Board activities.

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

DIRECTOR NOMINEES

 

 

RAUL ALVAREZ

    

 

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Director Since: 2010

 

Age: 62

 

Lowe’s Board Committees:

•   Audit, Chair

•   Executive

•   Public Policy

 

Current Public Company Directorships:

•   Dunkin’ Brands Group, Inc.

•   Eli Lilly and Company

•  Realogy Holdings Corp. (until May 2018)

Mr. Alvarez is an Operating Partner of Advent International Corporation, a private equity firm. He retired as a director and the Chairman of Skylark Co., Ltd., a public Japanese holding company operating more than 3,000 restaurants, in March 2018. Mr. Alvarez served as President and Chief Operating Officer of McDonald’s Corporation, which franchises and operates over 32,000 McDonald’s restaurants in the global restaurant industry, from August 2006 until his retirement in December 2009. Previously, he served as President of McDonald’s North America from January 2005 to August 2006 and as President of McDonald’s USA from July 2004 to January 2005. Mr. Alvarez joined McDonald’s in 1994 and held a variety of leadership positions during his tenure with the company, including Chief Operations Officer and President of the Central Division, both with McDonald’s USA, and President of McDonald’s Mexico. Before joining McDonald’s, Mr. Alvarez served as a Corporate Vice President and as Division Vice President-Florida for Wendy’s International, Inc. from 1990 to 1994. Prior to that, he was with Burger King Corporation from 1977 to 1989 where he held a variety of positions, including Managing Director of Burger King Spain, President of Burger King Canada and Regional Vice President for the Florida Region.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Alvarez brings to the Lowe’s Board 40 years of experience in the retail industry as well as extensive executive leadership experience in managing some of the world’s best known brands. As a senior executive of the leading global foodservice retailer and other global restaurant businesses, Mr. Alvarez developed in-depth knowledge of consumer marketing, brand management, global expansion, multi-national operations and strategic planning.

 

DAVID H. BATCHELDER

    

 

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Director Since: March 2018

 

Age: 68

 

Lowe’s Board Committees:

•   Compensation

•   Nominating and Governance

 

Mr. Batchelder was a founder, principal and member of the investment committee at Relational Investors, which managed over $6.5 billion for some of the largest pension funds in the world, from 1996 to 2015. He has over 30 years of financial management and mergers and acquisitions experience. Mr. Batchelder has served as a director of both large public and private companies in a wide range of industries (including retail, pharmaceuticals, waste disposal, healthcare, technology, energy and construction), including his service as a director on the board of The Home Depot, Inc. from 2007 to 2011.

From 1988 to 2005, Mr. Batchelder was also a Principal of Relational Advisors LLC, a financial advisory and investment banking firm. Prior to founding Relational Investors, Mr. Batchelder held various executive positions at Mesa Petroleum Company, including Chief Financial Officer and President and Chief Operating Officer, and served on Mesa’s board of directors. Mr. Batchelder was an Audit Manager with Deloitte & Touche LLP.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Batchelder’s experience as a board member of several public and private companies provides him with valuable perspectives on corporate governance and board dynamics. In addition, his experience from Relational Investors provides our Board invaluable insights into the views of institutional investors and perspectives on Company performance and opportunities. Having served in a number of senior executive positions at Mesa, Mr. Batchelder contributes to the operational management and strategic business development skills of our Board.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

ANGELA F. BRALY

    

 

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Director Since: 2013

 

Age: 56

 

Lowe’s Board Committees:

•   Compensation

•   Executive

•   Public Policy, Chair

 

Current Public Company Directorships:

•   Brookfield Asset Management, Inc.

•   ExxonMobil Corporation

•   The Procter & Gamble Company

Ms. Braly is the former Chair, President and Chief Executive Officer of WellPoint, Inc. (now Anthem, Inc.), a health benefits company. She served as Chair of the board from March 2010 until August 2012 and President and Chief Executive Officer from June 2007 through August 2012. Prior to that, Ms. Braly served as Executive Vice President, General Counsel and Chief Public Affairs Officer of WellPoint from 2005 to 2007, and President and Chief Executive Officer of Blue Cross Blue Shield of Missouri from 2003 to 2005.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

As Chair and Chief Executive Officer of a publicly traded company, Ms. Braly developed strong executive leadership and strategic management skills while leading a Fortune 50 company in a highly regulated industry. Ms. Braly also brings extensive legal experience as a former partner of an NLJ 500 law firm and General Counsel of RightCHOICE Managed Care, Inc. and WellPoint, Inc. As Chief Public Affairs Officer for WellPoint, Ms. Braly was also responsible for the company’s public policy development, government relations, legal affairs, corporate communications, marketing and social responsibility initiatives.

 

SANDRA B. COCHRAN

    

 

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Director Since: 2016

 

Age: 59

 

Lowe’s Board Committees:

•   Compensation

 

Current Public Company Directorships:

•   Cracker Barrel Old Country Store, Inc.

•   Dollar General Corporation

 

Ms. Cochran has served as a director and as President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc., which operates over 649 old country stores and restaurants across 45 states, since September 2011. Ms. Cochran joined Cracker Barrel in April 2009 as Executive Vice President and Chief Financial Officer and was named President and Chief Operating Officer in November 2010. She was previously Chief Executive Officer at book retailer Books-A-Million, Inc. from February 2004 to April 2009 and also served as that company’s President from August 1999 to February 2004, Chief Financial Officer from September 1993 to August 1999 and Vice President of Finance from August 1992 to September 1993.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Ms. Cochran brings to Lowe’s Board over 20 years of retail experience as well as expertise in a number of critical areas, including marketing, risk management and strategic planning. Ms. Cochran also has significant executive-level financial experience, which she developed while serving in multiple leadership finance positions, including Vice President, Corporate Finance at SunTrust Bank and Chief Financial Officer of both Cracker Barrel Old Country Store, Inc. and Books-A-Million, Inc. Her financial expertise will continue to be a tremendous asset as the Company continues to develop as an omni-channel home improvement company.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

LAURIE Z. DOUGLAS

    

 

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Director Since: 2015

 

Age: 54

 

Lowe’s Board Committees:

•   Audit

•   Public Policy

 

Ms. Douglas has served as Senior Vice President, Chief Information Officer and Chief Security Officer of Publix Super Markets, Inc., an operator of retail food and pharmacy in Florida, Georgia, Alabama, South Carolina, Tennessee, North Carolina and Virginia, since 2006. Before joining Publix Super Markets, Ms. Douglas served as Senior Vice President and Chief Information Officer of FedEx Kinko’s Office and Print Services, Inc. from 2004 to 2005. From 2003 to 2004, she was Senior Vice President and Chief Information Officer of Kinko’s, Inc.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

As Chief Information Officer of several different retail enterprises, Ms. Douglas brings to Lowe’s Board many years of experience in driving the IT and data security vision for two Fortune 500 companies. Ms. Douglas has compliance expertise of data security regulations and is a highly respected technology leader who has financial management responsibility for IT investments. Ms. Douglas also has significant experience with developing and delivering innovative IT solutions that support business goals, position companies to secure a competitive advantage and enhance the shopping experience for customers.

 

RICHARD W. DREILING

    

 

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Director Since: 2012

 

Age: 63

 

Lowe’s Board Committees:

•   Compensation

•   Public Policy

 

Current Public Company Directorships:

•   Aramark

•   Kellogg Company

•   PulteGroup, Inc.

Mr. Dreiling retired in June 2015 from Dollar General Corporation, the nation’s largest small-box discount retailer, as Chief Executive Officer, a position he held since January 2008. Mr. Dreiling served as Chairman of Dollar General Corporation from December 2008 until January 2016 and as Senior Advisor from June 2015 until January 2016. Before joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., the largest drugstore chain in New York City, from November 2005 until January 2008, and as Chairman of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President-Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug stores on the West Coast and Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President-Marketing, Manufacturing and Distribution at Safeway, Inc., a food and drug retailer. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a southern California food and drug division of Safeway.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Dreiling brings to Lowe’s Board over 40 years of retail industry experience at all operating levels and a unique perspective as a result of his experience progressing through the ranks within various retail companies. Over the course of his career, Mr. Dreiling has developed deep insight into all key areas of a retail business as a result of his experience overseeing the operations, marketing, manufacturing and distribution functions of a number of retail companies. Mr. Dreiling also has strong business development expertise in expanding the footprint and offerings provided by several retailers into new regions.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

MARSHALL O. LARSEN

    

 

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Director Since: 2004

 

Age: 69

 

Lowe’s Board Committees:

•   Audit

•   Executive

•   Nominating and Governance, Chair

 

Current Public Company Directorships:

•   Air Lease Corporation

•   Becton, Dickinson and Company

•   United Technologies Corporation

Mr. Larsen retired in July 2012 as Chairman, President and Chief Executive Officer of Goodrich Corporation, a supplier of systems and services to the aerospace and defense industry. Mr. Larsen had served as Chairman of Goodrich since October 2003, and President and Chief Executive Officer since February 2002 and April 2003, respectively. Prior to that, Mr. Larsen was Executive Vice President and President and Chief Operating Officer of the Aerospace division of Goodrich from 1995 to 2002. Mr. Larsen is a former director of the Federal Reserve Bank of Richmond. Mr. Larsen serves as Lowe’s Lead Director.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

As Chairman, President and Chief Executive Officer of a publicly traded company, Mr. Larsen developed strong executive leadership and strategic management skills. Mr. Larsen also brings to Lowe’s Board over 30 years of domestic and international business experience, including expertise in a number of critical areas, such as technology, accounting and finance, retail sales and marketing. Mr. Larsen also has extensive financial expertise in cost management, value creation and resource allocation and in oversight of complex financial transactions developed during prior operations and leadership roles at Goodrich Corporation.

 

JAMES H. MORGAN

    

 

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Director Since: 2015

 

Age: 70

 

Lowe’s Board Committees:

•   Audit

•   Nominating and Governance

 

Current Public Company Directorships:

•   Coca-Cola Bottling Co. Consolidated

 

Mr. Morgan has served as Chairman of Covenant Capital LLC, an investment management firm, since February 2015, after previously serving in that capacity from 2001 to 2008. Mr. Morgan served as Chairman of Krispy Kreme Doughnuts, Inc., a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, from January 2005 to August 2016. He served as Executive Chairman of Krispy Kreme from June 2014 to January 2015, as Chief Executive Officer from January 2008 to June 2014 and as President from April 2012 to June 2014. Mr. Morgan also previously served as President of Krispy Kreme from January 2008 to November 2011. Mr. Morgan served as Vice Chairman of Krispy Kreme from March 2004 to January 2005. Previously, Mr. Morgan served as a consultant for Wachovia Securities, Inc., a securities and investment banking firm, from January 2000 to May 2001. From April 1999 to December 1999, Mr. Morgan was Chairman and Chief Executive Officer of Wachovia Securities, Inc. Mr. Morgan was employed by Interstate/Johnson Lane, an investment banking and brokerage firm, from 1990 to 1999 in various capacities, including as Chairman and Chief Executive Officer.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

As Chairman and Chief Executive Officer of both major public and private companies, Mr. Morgan has developed strong executive leadership and strategic management skills. Mr. Morgan also brings to Lowe’s Board more than 10 years of experience in the retail industry as well as valuable expertise and insights into the complex financial and operational issues facing large companies. As Chairman of Covenant Capital LLC and Chairman and Chief Executive Officer of Wachovia Securities, Inc. and Interstate/Johnson Lane, Mr. Morgan developed a deep understanding of financial functions as well as enterprise risk management.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

ROBERT A. NIBLOCK

    

 

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Director Since: 2004

 

Age: 55

 

Lowe’s Board Committees:

•  Executive, Chair

 

Current Public Company Directorships:

•   ConocoPhillips

 

Mr. Niblock has served as Chairman and Chief Executive Officer of Lowe’s since January 2005. In May 2011, he reassumed the title of President, after having served in that role from 2003 to 2006. Mr. Niblock joined Lowe’s in 1993, and during his career with the Company, has served as Vice President and Treasurer, Senior Vice President-Finance, and Executive Vice President and Chief Financial Officer. As announced by the Company on March 26, 2018, Mr. Niblock plans to retire as Chairman of the Board, President and Chief Executive Officer after a 25-year career with the Company. The Board has initiated a search for his successor, and in the interim Mr. Niblock will remain in his current role.

Before joining Lowe’s, Mr. Niblock had a nine-year career with the accounting firm Ernst & Young LLP. Mr. Niblock has been a member of the board of directors of the Retail Industry Leaders Association (RILA) since 2004 and has served as Secretary since 2012. He previously served as its Chairman in 2008 and 2009 and Vice Chairman in 2006 and 2007. Mr. Niblock is also a member of the North Carolina Business Council of Management and Development, Inc.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Niblock has broad experience in the home improvement retail industry, having spent his career spanning over 25 years with Lowe’s. He has held a number of different positions with the Company, gaining a deep understanding of Lowe’s operations and its purpose and values and playing a significant role as architect of Lowe’s strategic plans. With a background in accounting and over two decades of financial experience, including serving as Lowe’s Chief Financial Officer, Mr. Niblock brings accounting and related financial management experience to Lowe’s Board. Mr. Niblock also has extensive knowledge of international markets and international retailing in connection with his roles at Lowe’s and as a director of an international oil and gas company.

 

BRIAN C. ROGERS

    

 

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Age: 62

 

Current Public Company Directorships:

•   United Technologies Corporation

•   T. Rowe Price Group, Inc.

 

Mr. Rogers is the Non-Executive Chairman of T. Rowe Price Group, Inc., a global investment management organization. He served as the Chairman from 2007 to 2017 and as Chief Investment Officer from 2004 to 2017. Mr. Rogers has served as a director of the Price Group since 1997. In addition, Mr. Rogers was portfolio manager of one of the firm’s largest funds, the T. Rowe Price Equity Income Fund, from its inception until October 2015. Mr. Rogers has held a variety of other senior leadership roles and has been involved in investment management with T. Rowe Price since beginning his career there in 1982. Prior to joining T. Rowe Price, Mr. Rogers worked at Bankers Trust Company.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Through his extensive investment and management roles, including Chief Investment Officer of a large investment management firm, Mr. Rogers provides the Board with financial, investment and risk management expertise. In addition, Mr. Rogers’ experience at T. Rowe Price provides our Board invaluable insights into the views of institutional investors and perspectives on Company performance and opportunities.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

BERTRAM L. SCOTT

    

 

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Director Since: 2015

 

Age: 67

 

Lowe’s Board Committees:

•  Audit

•  Nominating and Governance

 

Current Public Company Directorships:

•   AXA Equitable Life Insurance Company

•   Becton, Dickinson and Company

•   MONY Life Insurance Company of America

Mr. Scott has served as Senior Vice President of Population Health and Value Based Care at Novant Health, a leading healthcare provider, since 2015. Prior to that, Mr. Scott was President, Chief Executive Officer and a director of Affinity Health Plan, a provider of New York State-sponsored health coverage, from 2012 to 2014; President, U.S. Commercial of CIGNA Corporation, a global health services organization, from 2010 to 2011; Executive Vice President and Chief Institutional Development and Sales Officer of TIAA-CREF from 2000 to 2010; and President and Chief Executive Officer of TIAA-CREF Life Insurance Company from 2000 to 2007.

Mr. Scott currently serves on the board of AXA Equitable Life Insurance Company (“AXA”); Becton, Dickinson and Company; and MONY Life Insurance Company of America (“MONY”). AXA and MONY, which are affiliates of AXA Group, file reports with the SEC but they do not have securities listed on an exchange.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Scott has served in a variety of senior leadership positions in organizations that are in highly regulated industries and brings invaluable experience to Lowe’s Board in the areas of development and implementation of strategy, mergers and acquisitions and integration. Mr. Scott also brings significant experience and responsibility in the areas of sales and marketing in his roles as Executive Vice President and Chief Institutional Development and Sales Officer of TIAA-CREF and President and Chief Executive Officer of TIAA-CREF Life Insurance Company.

 

LISA W. WARDELL

    

 

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Director Since: March 2018

 

Age: 48

 

Lowe’s Board Committees:

•  Audit

•  Public Policy

 

Current Public Company Directorships:

•   Adtalem Global Education, Inc.

Ms. Wardell is the President and Chief Executive Officer of Adtalem Global Education, Inc. (formerly DeVry Education Group), a leading global education provider. Ms. Wardell was appointed President and CEO in 2016 and has been a member of Adtalem’s board of directors since 2008.

Prior to her current position with Adtalem, Ms. Wardell was Executive Vice President and Chief Operating Officer for 12 years for The RLJ Companies, a diversified holding company with portfolio companies in the financial services, asset management, real estate, hospitality, professional sports, film production and gaming industries. Prior to joining The RLJ Companies, Ms. Wardell was a Principal at Katalyst Venture Partners, a private equity firm that invested in start-up technology companies in the media and communications industries from 2000 to 2003. She was a senior consultant for Accenture from 1998 to 2000, in the organization’s communications and technology strategic services practice, and an attorney with the Federal Communications Commission from 1994 to 1996.

Ms. Wardell served on the Board of Directors of Christopher and Banks, Inc. from July 2011 to January 2017 and served as the Chair of the Board from November 2015 to January 2017. Ms. Wardell also served as a director of RLJ Entertainment, Inc. from 2012 to 2015.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Ms. Wardell brings extensive experience to the Board as a senior business executive in private equity, operations and strategy and financial analysis, including mergers and acquisitions. Her previous experience in a legal capacity with a federal regulatory agency gives her valuable perspective on the issues that come before the Board, including business, legal, financial and regulatory matters.

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

ERIC C. WISEMAN

    

 

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Director Since: 2011

 

Age: 62

 

Lowe’s Board Committees:

•  Compensation, Chair

•  Executive

•  Public Policy

 

Current Public Company Directorships:

•   CIGNA Corporation

Mr. Wiseman retired as the Chairman of V.F. Corporation, a global leader in the design, production, procurement, marketing and distribution of branded lifestyle apparel, footwear and related products, in October 2017. Mr. Wiseman served as the Chairman from 2008 to October 2017; Chief Executive Officer from 2008 to January 2017; and President from March 2006 to June 2015. Prior to that, he served as Chief Operating Officer of V.F. from March 2006 to January 2008. Mr. Wiseman served as a director of V.F. from 2006 to October 2017. Mr. Wiseman joined V.F. in 1995 and has held a variety of leadership positions during his tenure with the company.

 

Specific Experience, Qualifications, Attributes and Skills Relevant to Lowe’s

Mr. Wiseman has developed valuable strategic management skills and brings to Lowe’s Board expertise and insights in a number of critical areas, including consumer marketing, brand management, multi-national operations and strategic planning. Mr. Wiseman is responsible for transforming V.F. into an industry leader by creating innovative marketing initiatives and building powerful brands and for creating an oversight system to guide the sustainability and responsibility efforts and goals for one of the largest apparel and footwear companies in the world.

 

 

 

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Information About the Board of Directors and Committees of the Board

 

CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT AND ETHICS

 

Information About the Board of Directors and Committees of the Board

CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT AND ETHICS

The Board of Directors has adopted Corporate Governance Guidelines setting forth guidelines and standards with respect to the role and composition of the Board, the functioning of the Board and its committees, the compensation of directors, succession planning and management development, the Board’s and its committees’ access to independent advisors and other matters. The Nominating and Governance Committee of the Board of Directors regularly reviews and assesses corporate governance developments and recommends to the Board modifications to the Corporate Governance Guidelines as warranted. The Company has also adopted a Code of Business Conduct and Ethics for its directors, officers and employees. The Corporate Governance Guidelines and the Code of Business Conduct and Ethics are posted on the Company’s website at www.Lowes.com/investor.

DIRECTOR INDEPENDENCE

The Company’s Corporate Governance Guidelines provide that, in accordance with Lowe’s long-standing policy, a majority of the members of the Board must qualify as independent directors. The rules and regulations of the New York Stock Exchange (the “NYSE rules”) provide that a director does not qualify as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The NYSE rules recommend that a board of directors consider all of the relevant facts and circumstances in determining the materiality of a director’s relationship with a company. The Board has adopted Categorical Standards for Determination of Director Independence (the “Categorical Standards”), which incorporate the independence standards of the NYSE rules, to assist the Board in determining whether a particular relationship a director has with the Company is a material relationship that would impair the director’s independence. The Categorical Standards establish thresholds at which directors’ relationships with the Company are deemed to be not material and, therefore, shall not disqualify any director or nominee from being considered “independent.” A copy of the Categorical Standards is attached as Appendix A to this Proxy Statement.

In March 2018, the Board of Directors, with the assistance of the Nominating and Governance Committee, conducted an evaluation of director independence based on the Categorical Standards, the

NYSE rules and the SEC rules. The Board considered all relevant transactions, relationships or arrangements between each director or director nominee (and such individual’s immediate family members and affiliates) and each of Lowe’s, its management and its independent registered public accounting firm in each of the most recent three completed fiscal years. In determining the independence of each director or director nominee, the Board considered and deemed immaterial to such individual’s independence any transactions involving the purchase or sale of products and services in the ordinary course of business between the Company, on the one hand, and, on the other, companies or organizations at which some of our directors, director nominee or their immediate family members were officers, employees or directors in each of the most recent three completed fiscal years. In each case, the amount paid to or received from these companies or organizations was well below 2% of total revenue of such companies or organizations and consequently below the threshold set forth in our Categorical Standards.

In addition, the Board considered the amount of Lowe’s discretionary charitable contributions in each of the most recent three completed fiscal years to charitable organizations where a director, director nominee or a member of such individual’s immediate family, serves as a director or trustee. The Company has not made any payments to such organizations in the last three fiscal years.

As a result of the evaluation of the transactions, relationships or arrangements that do exist or did exist within the most recent three completed fiscal years (except for Mr. Niblock’s), the Board determined that they all fall well below the thresholds in the Categorical Standards. Consequently, the Board of Directors determined that each of Messrs. Alvarez, Batchelder, Dreiling, Larsen, Morgan, Rogers, Scott and Wiseman and Mss. Braly, Cochran, Douglas and Wardell qualifies as an independent director under the Categorical Standards, the NYSE rules and the SEC rules. The Board also determined that each member of the Audit, Compensation, Nominating and Governance and Public Policy Committees (see membership information below under “Board Meetings, Committees of the Board and Board Leadership Structure—Board Committees”) is independent, including that each member of the Audit Committee is “independent” as that term is defined under Rule 10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that each member of the Compensation Committee is an “outside director” as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and a “non-employee director” as defined under Rule 16b-3(b)(3)(i) of the Exchange Act. Robert A. Niblock, the Company’s Chairman, President and Chief Executive Officer, is not independent due to his employment by the Company.

 

 

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Information About the Board of Directors and Committees of the Board

 

COMPENSATION OF DIRECTORS

 

COMPENSATION OF DIRECTORS

 

General

Lowe’s policy on compensating directors who are not employees (“non-employee directors”) is to use a mix of cash and equity that will align the interests of our directors with the long-term interests of Lowe’s shareholders and compensate our directors fairly and competitively for the obligations and responsibilities of serving as a director at a company of Lowe’s size and scope. A director who is an employee of the Company receives no additional compensation for his or her services as a director. A non-employee director receives compensation for his or her services as described in the following paragraphs. All directors are reimbursed for reasonable expenses incurred in connection with attendance at Board and committee meetings.

Annual Retainer Fees

For fiscal 2017, each non-employee director was paid an annual retainer of $90,000. Our directors do not receive any meetings fees. Non-employee directors who served as the Chair of the Nominating and Governance Committee or the Public Policy Committee received an additional $15,000; the Chair of the Compensation Committee received an additional $20,000; and the Chair of the Audit Committee received an additional $25,000. The Lead Director received an additional $30,000.

Stock Awards

The Board believes that director stock ownership is a hallmark of enlightened corporate governance and provides greater alignment of interests between directors and shareholders. The compensation plan adopted by the Board for non-employee directors adheres to this principle by providing a substantial portion of such director’s compensation in deferred stock units, which are credited to a deferral account during the term of such director’s service and are payable to the director (or to the director’s estate if the director should die while serving on the Board) in one share of Common Stock of the Company per deferred stock unit only upon the director’s termination of service as a director.

Non-employee directors receive grants of deferred stock units at the first Board meeting following the Annual Meeting of Shareholders each year (the “Award Date”). The annual grant of deferred stock units for each of the Company’s non-employee directors is determined by taking the annual grant amount and dividing it by the closing price of a share of Common Stock as reported on the New York Stock Exchange (the “NYSE”) on the Award Date, which amount is then rounded up to the next 100 units. The deferred stock units receive dividend equivalent credits, in the form of additional units, for any cash dividends subsequently paid with respect to Common Stock. All units credited to a director are fully vested and payable in the form of Common Stock after the termination of the director’s service.

For fiscal 2017, each non-employee director received an annual equity award of $175,000. In accordance with the Company’s long-term incentive plan, the value of a non-employee director’s annual equity award may not exceed $500,000.

Deferral of Annual Retainer Fees

Each non-employee director may elect to defer receipt of all, but not less than all, of the annual retainer and any committee Chair or Lead Director fees otherwise payable to the director in cash. Deferrals are credited to a bookkeeping account and account values are adjusted based on the investment alternative selected by the director. One investment alternative adjusts the account value based on interest calculated in the same manner and at the same rate as interest on amounts invested in the short-term interest fund option available to employees participating in the Lowe’s 401(k) Plan, a tax-qualified, defined contribution plan sponsored by the Company. The other investment alternative assumes that the deferrals are invested in Common Stock with reinvestment of all dividends. At the end of each year, a director participating in the plan makes an election to allocate the fees deferred for the following year between the two investment alternatives in 25% multiples. Account balances may not be reallocated between the investment alternatives. Account balances are paid in cash in a single sum payment following the termination of a director’s service.

 

 

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Information About the Board of Directors and Committees of the Board

 

COMPENSATION OF DIRECTORS

 

Fiscal 2017 Compensation

The following table shows the compensation paid to each non-employee director who served on the Board in fiscal 2017:

 

  Name

Fees Earned or
Paid in Cash

($)

Stock
Awards
($)(1)
Total
($)

  Raul Alvarez

  115,000   176,484   291,484

  Angela F. Braly

  105,000   176,484   281,484

  Sandra B. Cochran

  90,000   176,484   266,484

  Laurie Z. Douglas

  90,000   176,484   266,484

  Richard W. Dreiling

  90,000   176,484   266,484

  Robert L. Johnson

  90,000   176,484   266,484

  Marshall O. Larsen

  135,000   176,484   311,484

  James H. Morgan

  90,000   176,484   266,484

  Bertram L. Scott

  90,000   176,484   266,484

  Eric C. Wiseman

  110,000   176,484   286,484

The following table shows the number of deferred stock units held by each non-employee director as of February 2, 2018:

 

  Name

Deferred

Stock

Units(#)

 

  Raul Alvarez

  26,217

  Angela F. Braly

  9,876

  Sandra B. Cochran

  4,178

  Laurie Z. Douglas

  6,478

  Richard W. Dreiling

  19,695

  Robert L. Johnson

  56,931

  Marshall O. Larsen

  56,931

  James H. Morgan

  6,478

  Bertram L. Scott

  4,178

  Eric C. Wiseman

  19,695

 

(1) The dollar amount shown for these stock awards represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation—Stock Compensation” (“FASB ASC Topic 718”) for 2,200 deferred stock units granted to each non-employee director in fiscal 2017. See Note 9, “Accounting for Share-Based Payments” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended February 2, 2018 for additional information about the Company’s accounting for share-based compensation arrangements, including the assumptions used for calculating the grant date value of the deferred stock units. These amounts do not correspond to the actual value that may be recognized by a director with respect to these awards when they are paid in the form of Common Stock after the termination of the director’s service.

Director Stock Ownership Guidelines

To ensure that our directors become and remain meaningfully invested in Common Stock, non-employee directors are required to own shares of Common Stock having a market value equal to five times the annual retainer fee payable to them. A non-employee director must meet the stock ownership requirement within five years of becoming a member of the Board. In addition to shares owned by non-employee directors, the full value of deferred stock units are counted for purposes of determining a director’s compliance with the stock ownership requirement. Except for Ms. Wardell, who joined the Board in March 2018, all of our directors have met or are on track to meet their objectives within the five-year time requirement.

 

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Information About the Board of Directors and Committees of the Board

 

BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

Attendance at Board and Committee Meetings

During fiscal 2017, the Board of Directors held five meetings. Each incumbent director attended 75% or more of the aggregate number of meetings of the Board and committees of the Board on which the director served during fiscal 2017.

Executive Sessions of the Independent Directors

The independent directors meet in executive session at each of the regularly scheduled Board meetings and as necessary at other Board meetings. The Company’s Lead Director presides over these executive sessions and, in the Lead Director’s absence, the independent directors will select another independent director present to preside.

Annual Meetings of Lowe’s Shareholders

Directors are expected to attend the Annual Meeting of Shareholders. All of the directors in office at the time attended last year’s Annual Meeting of Shareholders, with Mr. Dreiling and Ms. Douglas participating by teleconference due to personal conflicts.

Annual Evaluation of the Board, Committees and Individual Directors

The Board of Directors evaluates the performance of the Board, the committees of the Board and individual directors on an annual basis. The data to evaluate the quality and impact of an individual director’s service is gathered by having each director complete a questionnaire assessing the performance of all other directors and the committees of the Board of which the director completing the evaluation is a member. The Chair of the Nominating and Governance Committee provides each director with a summary of the results. Each committee and the full Board review and discuss the results of the committee and Board evaluations. The goal is to use the results of the assessment process to enhance the Board’s functioning as a strategic partner with management as well as the Board’s ability to carry out its traditional monitoring and oversight function. The ways in which our self-evaluation processes inform Board composition, refreshment, director nomination, shareholder engagement and other matters are further discussed elsewhere in this Proxy Statement.

Board Leadership Structure

Lowe’s Board is responsible for ensuring that its leadership structure provides independent oversight of senior management and discusses the appropriate structure for Lowe’s on an annual basis. When evaluating the optimal structure, the Board reviews a variety of criteria, including shareholder feedback, Lowe’s strategic goals, the current operating and governance environment, the skill set of the independent directors, the dynamics of Lowe’s Board, and the strengths and talents of Lowe’s senior management at any given point in time. The Board does not believe that there is one leadership structure that is preferred and regularly discusses what the optimal leadership structure is for Lowe’s at that time.

Lowe’s Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. The Corporate Governance Guidelines further provide that if the Board determines the roles of Chairman and Chief Executive Officer are filled by the same individual, then a Lead Director, who must be an independent director, will be elected by the independent directors annually at the meeting of the Board of Directors held in conjunction with the Annual Meeting of Shareholders. The duties of the Lead Director are consistent with the responsibilities held by lead directors at other public companies and are further described below.

The Nominating and Governance Committee analyzed the considerations noted above, and after careful consideration, the independent directors of the Board determined that having a strong, independent Lead Director along with the strong leadership of a combined Chairman and Chief Executive Officer in Mr. Niblock is in the best interest of Lowe’s at this time. The independent directors believe that Mr. Niblock has extensive knowledge of Lowe’s and the home improvement retail industry; effectively led the Board and the Company during a challenging macroeconomic environment; and has served as an effective bridge between the Board and management. Further, the independent directors believe that as the Company continues to develop its omni-channel capabilities, differentiate itself through better customer experiences and improve its product and service offering for the Pro customer, Lowe’s is best served by having the leader and architect of the strategies as Chairman of the Board. Accordingly, Marshall A. Larsen currently holds the position of Lead Director and Robert A. Niblock currently holds the positions of Chairman of the Board, President and Chief Executive Officer of the Company. As announced by the Company on March 26, 2018, Mr. Niblock plans to retire as Chairman of the Board, President and Chief Executive Officer after a 25-year career with the Company. The Board has initiated a search for his successor, and in the interim Mr. Niblock will remain in his current role.

 

 

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Information About the Board of Directors and Committees of the Board

 

BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

ROLE OF THE LEAD DIRECTOR

 

The Company’s Corporate Governance Guidelines provide that the Lead Director will:

 

    preside at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the non-management directors;

 

    serve as a liaison between the Chairman and the independent directors;

 

    approve meeting agendas for the Board;

 

    approve meeting schedules to assure that there is sufficient time for discussion of all agenda items;

 

    have the authority to call meetings of the independent directors; and

 

    be available for consultation and direct communication with major shareholders.

The Lead Director also serves as the Chair of the Nominating and Governance Committee of the Board of Directors, which is comprised entirely of independent directors.

 

Lowe’s independent directors appointed Marshall A. Larsen to serve as Lead Director of the Company in May 2015 and have re-appointed him for the role in each subsequent year. As Chairman and Chief Executive Officer of a publicly traded company for almost 10 years, Mr. Larsen developed strong executive leadership and strategic management skills. Mr. Larsen also brings to Lowe’s Board over 30 years of domestic and international business experience, including expertise in a number of critical areas, such as technology, accounting and finance, retail sales and marketing. Beyond his responsibilities as set forth above, Mr. Larsen also:

 

  regularly meets with the Chairman and Chief Executive Officer before and after Board meetings to discuss matters of concern;
  leads the Nominating and Governance Committee in an annual performance review of the Chief Executive Officer and communicates the results to the Chief Executive Officer;

 

  leads the Board evaluation process and provides each continuing director with a review of his or her performance, as determined by the other directors; and

 

  meets with members of senior management, other than the Chairman and Chief Executive Officer, on a regular basis.

The Board believes that having an independent Lead Director whose responsibilities closely parallel those of an independent Chairman ensures that the appropriate level of independent oversight is applied to all Board decisions.

 

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

In addition to requiring an independent Lead Director if the roles of Chairman and Chief Executive Officer are served by the same individual, Lowe’s Board has implemented additional practices to ensure that there is independent oversight of management.

 

 

         BOARD REFRESHMENT          OVERSIGHT PRACTICES   
 

 

 

8

 

 

 

 

 

DIRECTOR NOMINEES JOINED

LOWE’S BOARD WITHIN THE

LAST 5 YEARS

   

 

100%

 

 

OF NON-MANAGEMENT

DIRECTORS ARE

INDEPENDENT

  
 

 

<5

 

  THE BOARD IS REFRESHED ON A REGULAR BASIS AND THE AVERAGE CURRENT TENURE OF THE INDEPENDENT DIRECTORS IS LESS THAN FIVE YEARS.    

100%

 

OF ALL DIRECTORS ON THE AUDIT,

COMPENSATION, NOMINATING AND GOVERNANCE AND PUBLIC POLICY COMMITTEES ARE INDEPENDENT

  
       

INDEPENDENT DIRECTORS MEET IN EXECUTIVE SESSION AT EACH

OF THE REGULARLY SCHEDULED BOARD MEETINGS AND AS NECESSARY

AT OTHER BOARD MEETINGS.

  

 

      

ENHANCED BOARD RECRUITMENT

 

The Board is committed to having diverse individuals from different backgrounds with varying perspectives, professional experience, education and skills serving as members of the Board and believes that a diverse membership with a variety of perspectives and experiences is an important feature of a well-functioning board. Currently, our Board has the following expertise and characteristics in addition to the skills outlined on page 9 of this Proxy Statement:

  
  1   2   4   7   4   2   1   
 

DIRECTOR

NOMINEE

IS A CHIEF INFORMATION AND SECURITY

OFFICER

 

DIRECTOR

NOMINEES

BRING

INVESTOR

PERSPECTIVES

  DIRECTOR
NOMINEES ARE CURRENT OR FORMER CHIEF FINANCIAL OFFICERS
 

DIRECTOR

NOMINEES

HAVE

RETAIL

EXPERIENCE

 

DIRECTOR

NOMINEES

ARE WOMEN

 

DIRECTOR

NOMINEES

ARE

AFRICAN-AMERICAN

 

DIRECTOR

NOMINEE

IS HISPANIC

  

Lowe’s independent directors remain committed to evaluating Lowe’s Board leadership structure at least annually. Under Lowe’s Corporate Governance Guidelines, the Board can and will change its leadership structure if it determines that doing so is in the best interest of Lowe’s shareholders.

 

Board’s Role in Corporate Strategy

Our Board of Directors is actively involved in overseeing, reviewing and guiding our corporate strategy. Our Board formally reviews our Company’s business strategy, including the risks and opportunities facing the Company and its businesses, at an annual strategic planning session. In addition, long-range strategic issues, including the performance and strategic fit of our businesses, are discussed as a matter of course at regular Board meetings. Our Board regularly discusses corporate strategy throughout the year with management formally as well as informally and during executive sessions of the Board as appropriate. As discussed in “Board’s Role in the Risk Management Process” below, our Board views risk management and oversight as an integral part of our strategic planning process, including mapping key risks to our corporate strategy and seeking to manage and mitigate risk. Our Board also views its own composition as a critical component to effective strategic oversight. Accordingly,

our Board and relevant Board committees consider our business strategy and the Company’s regulatory, geographic and market environments when assessing Board composition, director succession, executive compensation and other matters of importance.

Board’s Role in the Risk Management Process

Management must take a wide variety of risks to enhance shareholder value. It is the Board of Directors’ responsibility to ensure that management has established and adequately resourced processes for identifying and preparing the Company to manage those risks effectively. It is also the Board’s responsibility to challenge management regularly to demonstrate that those processes are effective in operation.

Lowe’s has adopted an enterprise risk management (“ERM”) framework for identifying, assessing and mitigating key risks. The Company’s Chief Financial Officer provides centralized

 

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

oversight of and is responsible for implementing the Company’s ERM framework. At least annually, the Chief Financial Officer presents to the Board a comprehensive review of the Company’s ERM framework. His presentation includes an update on existing and any significant new risks that have been identified and assessed during the year and the strategies management has developed for managing them. During his presentation, the directors actively discuss with him and other members of management the risks that have been identified to gain a deeper understanding of the risks the Company faces and establish a mutual understanding between the Board and management regarding the Company’s willingness to take risks and the strategies to be used to manage them.

The Company’s Chief Financial Officer also presents updates on the Company’s ERM processes and specific potential risks and trends at other meetings of the Board during the year. In addition, as necessary at the regularly scheduled Board meetings, the Chairman, President and Chief Executive Officer addresses matters of particular importance or concern to the Company, including any significant areas of risk requiring Board attention. In the course of reviewing the Company’s strategic initiatives throughout the year, the Board considers the types and nature of risks associated with those initiatives, their potential impact on the Company and the steps that have or could be taken by management to mitigate them.

While management has primary responsibility for managing risk, the Board of Directors believes that oversight of the Company’s ERM processes is the responsibility of the full Board. Board committees review specific risk areas, as enumerated below, and report their deliberations to the Board. The Audit Committee of the Board addresses at each of its regular meetings risk oversight of the Company’s major financial exposures and the steps management has taken to identify, assess, monitor, control, remediate and report such exposures. The Audit Committee also reviews legal matters that may have a material adverse impact on the Company’s financial statements, data privacy and cybersecurity matters, compliance with laws and any material reports received from regulatory agencies with the Company’s Chief Legal Officer and Chief Compliance Officer. The Public Policy Committee identifies, evaluates and monitors the social, political and environmental trends, issues, risks and concerns that could affect the Company’s business activities and performance, including reputational risk. The Nominating and Governance Committee is responsible for overseeing the management of risks related to senior management succession planning. And finally, as noted in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation Committee reviews the risks associated with the Company’s executive compensation program.

The Board believes that its oversight of the Company’s ERM processes benefits from having one person serve as the Chairman of the Board and Chief Executive Officer. The role of the Board’s Audit, Public Policy, Nominating and Governance and Compensation Committees, each of which consists solely of independent directors, in the oversight of the Company’s major financial exposures and other enumerated risks, preserves the benefit of independent risk oversight along with full Board responsibility and review.

Compensation Committee Advisors

The Compensation Committee has sole authority under its charter to retain compensation consultants and other advisors and to approve such consultants’ and advisors’ fees and retention terms. In May 2010, the Compensation Committee retained Farient Advisors LLC to act as its independent compensation consultant and to provide it with advice and support on executive compensation issues. The Compensation Committee has renewed this engagement each year since 2010. Since its engagement, the compensation consultant has assisted with peer group identification and benchmarking, design of the Company’s executive compensation program and conduct of annual risk assessment related thereto, review of compensation-related disclosures and related services. A more detailed description of the services performed by the Compensation Committee’s compensation consultant in fiscal 2017 is included in the “Compensation Discussion and Analysis” section of this Proxy Statement.

The Compensation Committee has reviewed and confirmed the independence of its compensation consultant. Neither the compensation consultant nor any of its affiliates provide any services to the Company except for services provided to the Compensation Committee. In addition to its compensation consultant, the Compensation Committee has reviewed the independence of outside counsel engaged by the Compensation Committee in advance of receiving advice from counsel.

How to Communicate with the Board of Directors and Non-Management Directors

Shareholders and other interested parties can communicate directly with the Board of Directors by sending a written communication addressed to the Board or to any member individually in care of Lowe’s Companies, Inc., 1000 Lowe’s Boulevard, Mooresville, North Carolina 28117. Shareholders and other interested parties wishing to communicate with Mr. Larsen, as Lead Director, or with the independent directors as a group may do so by sending a written communication addressed to Mr. Larsen, in care of Lowe’s Companies, Inc. at the above address. Any communication addressed to a director that is received at Lowe’s principal executive offices will be

 

 

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Information About the Board of Directors and Committees of the Board

 

BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

delivered or forwarded to the individual director as soon as practicable. Lowe’s will forward all communications received from its shareholders or other interested parties that are addressed simply to the Board of Directors to the Lead Director or to the Chair of the committee of the Board of Directors whose purpose and function is most closely related to the subject matter of the communication. All such

communications are promptly reviewed before being forwarded to the addressee. Lowe’s generally will not forward to directors a shareholder communication that it determines to be primarily commercial in nature, relates to an improper or irrelevant topic or requests general information about the Company.

 

 

Board Committees

The Board has five standing committees: the Audit Committee, the Compensation Committee, the Executive Committee, the Nominating and Governance Committee and the Public Policy Committee. The Board may also establish other committees from time to time as it deems necessary. Committee members and committee chairs are appointed by the Board. The members of these committees are identified in the following table:

 

  🌑 Member

 

 
 

LOGO  

  LOGO  

  LOGO  

  LOGO  

  LOGO  

 

  Raul Alvarez

 

 

Chair

 

🌑

 

 

🌑

 

 

  David H. Batchelder

 

🌑

 

🌑

 

 

  Angela F. Braly

 

 

🌑

 

 

Chair

 

 

🌑

 

  Sandra B. Cochran

 

🌑

 

  Laurie Z. Douglas

 

🌑

 

 

🌑

 

  Richard W. Dreiling

 

🌑

 

🌑

 

  Robert L. Johnson

 

 

 

 

🌑

 

 

🌑

 

  Marshall O. Larsen

 

🌑

 

Chair

 

🌑

 

  James H. Morgan

 

🌑

 

🌑

 

  Robert A. Niblock

 

Chair

 

  Bertram L. Scott

 

🌑

 

🌑

 

  Lisa W. Wardell

 

🌑

 

🌑

 

 

 

  Eric C. Wiseman

 

 

Chair

 

🌑

 

🌑

Each of these committees, with the exception of the Executive Committee, acts pursuant to a written charter adopted by the Board of Directors. The Executive Committee operates in accordance with the Company’s Bylaws and Corporate Governance Guidelines. A copy of each written committee charter and the Corporate Governance Guidelines are available on the Company’s website at www.Lowes.com/investor.

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

The following table provides information about the operation and key functions of each of the standing Board committees:

 

  Committee Key Functions and Additional Information Number of
Meetings in
Fiscal 2017

 

  Audit

  Committee

 

   LOGO

 

•  Oversees the Company’s accounting and financial reporting processes, internal controls and internal audit functions.

 

•  Reviews and discusses with management and the independent registered public accounting firm the annual and quarterly financial statements and earnings press releases.

 

•  Reviews and discusses the Company’s major financial risk exposures and the steps management has taken to identify, assess, monitor, control, remediate and report such exposures.

 

•  Reviews with the Company’s Chief Legal Officer and Chief Compliance Officer legal matters and the program of monitoring compliance with the Company’s Code of Business Conduct and Ethics.

 

•  Reviews and pre-approves all audit and non-audit services proposed to be performed by the independent registered public accounting firm.

 

•  Reports regularly to the Board.

 

•  The Board has determined that five of the six members of the Audit Committee, Mssrs. Alvarez, Larsen, Morgan and Scott and Ms. Wardell, are each “audit committee financial experts” within the meaning of the SEC rules and that each of the members of the Audit Committee has accounting and related financial management expertise in accordance with the NYSE rules.

 

 

7

 

  Compensation

  Committee

   LOGO

 

•  Reviews and approves on an annual basis the corporate goals and objectives relevant to the compensation for the executive officers, evaluates at least once a year the Chief Executive Officer’s performance in light of these established goals and objectives and, based upon this evaluation, determines and approves the Chief Executive Officer’s compensation, which it forwards to the Board for ratification by the independent directors.

 

•  Reviews and approves the compensation for the other executive officers.

 

•  Makes recommendations to the Board with respect to incentive compensation and equity-based plans that are subject to Board approval.

 

•  Reviews and approves all annual incentive plans for executives and all awards to executives under multi-year incentive plans, including equity-based incentive arrangements authorized under the Company’s equity incentive compensation plans.

 

•  Oversees regulatory compliance and risk regarding compensation matters.

 

•  Reports regularly to the Board.

 

 

6

 

  Executive

  Committee

 

 

   LOGO

 

•  Has authority to exercise all powers of the Board of Directors, except those reserved to the Board of Directors by the North Carolina Business Corporation Act or the Company’s Bylaws.

 

•  Considers at least annually succession planning for the Chairman and Chief Executive Officer and provides a report on such succession planning to the Nominating and Governance Committee on a regular basis.

 

•  Reviews and recommends to the Board for approval the form and amount of director compensation.

 

•  Reports regularly to the Board.

 

 

5

 

  Nominating

  and

  Governance

  Committee

 

   LOGO

 

•  Develops criteria for evaluation of potential candidates for the Board and its committees.

 

•  Makes recommendations to the Board concerning committee appointments.

 

•  Makes recommendations to the Board with respect to determinations of director independence.

 

•  Identifies, evaluates and recommends director candidates to the Board.

 

•  Oversees annual evaluation of the Board, the committees of the Board and each individual director.

 

•  Develops and recommends to the Board the Corporate Governance Guidelines applicable to the Company.

 

•  Reviews and approves, ratifies or disapproves related person transactions.

 

•  Considers and recommends to the Board other actions relating to corporate governance.

 

•  Reports regularly to the Board.

 

 

5

 

  Public Policy

  Committee

 

   LOGO

 

•  Oversees the Company’s overall corporate social responsibility.

 

•  Monitors the Company’s reputation generally.

 

•  Assists the Board with the Company’s enterprise risk management system by identifying, evaluating and monitoring social, political and environmental trends, issues, risks and concerns.

 

•  Reviews the Company’s compliance with policies, programs and practices with regard to environmental protection and sustainability, government relations, privacy and social media, consumer product safety, responsible sourcing and employee safety.

 

•  Reviews and monitors the Company’s positions and responses to significant public policy issues including sustainability.

 

•  Reviews and monitors the Company’s policies and practices with respect to political contributions, lobbying priorities, trade association memberships and political action committees.

 

•  Reports regularly to the Board.

 

 

5

 

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Security Ownership of Certain Beneficial Owners and Management

 

 

Security Ownership of Certain Beneficial Owners and Management

The following table provides information about the beneficial ownership of Common Stock as of March 23, 2018, except as otherwise noted, by each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock as well as each director, nominee for director, named executive officer and all current directors and executive officers as a group. Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the securities indicated as beneficially owned by such person, subject to community property laws where applicable. Unless otherwise indicated, the address for each of the beneficial owners is c/o Lowe’s Companies, Inc., 1000 Lowe’s Boulevard, Mooresville, North Carolina 28117.

 

  Name or Number of Persons in Group    Number of Shares(1)      Percent of  
Class

  Raul Alvarez

       26,317       *

  David H. Batchelder

       22,000       *

  Angela F. Braly

       9,914       *

  Sandra B. Cochran

       5,694       *

  Marshall A. Croom

       120,770       *

  Rick D. Damron

       224,327       *

  Laurie Z. Douglas

       6,503       *

  Richard W. Dreiling

       19,771       *

  Robert F. Hull, Jr.

       72,848       *

  Robert L. Johnson

       57,150       *

  Marshall O. Larsen

       59,150       *

  Michael P. McDermott

       94,463       *

  James H. Morgan

       6,503       *

  Robert A. Niblock

       1,769,758 (2)       *

  Brian C. Rogers

       0       *

  Bertram L. Scott

       4,194       *

  Lisa W. Wardell

       0       *

  Jennifer L. Weber

       43,843       *

  Eric C. Wiseman

       19,771       *

  Directors and Executive Officers as a Group (21 total)

       2,518,410       *

  BlackRock, Inc.

       58,358,961       7.1 %(3)

  The Vanguard Group

       65,105,267       7.9 %(4)

 

* Represents holdings of less than 1%.

 

(1) Includes shares that may be acquired or issued within 60 days through exercise of stock options, settlement of PSUs upon vesting or settlement of deferred stock units upon termination of employment or board service under the Company’s stock plans as follows: Raul Alvarez 26,317 shares; David H. Batchelder 0 shares; Angela F. Braly 9,914 shares; Sandra B. Cochran 4,194 shares; Marshall A. Croom 69,308 shares; Rick D. Damron 129,257 shares; Laurie Z. Douglas 6,503 shares; Richard W. Dreiling 19,771 shares; Robert F. Hull, Jr. 0 shares; Robert L. Johnson 57,150 shares; Marshall O. Larsen 57,150 shares; Michael P. McDermott 61,908 shares; James H. Morgan 6,503 shares; Robert A. Niblock 1,019,238 shares; Brian C. Rogers 0 shares; Bertram L. Scott 4,194 shares; Lisa W. Wardell 0 shares; Jennifer L. Weber 24,497 shares; Eric C. Wiseman 19,771 shares; and directors and executive officers as a group (21 total) 1,532,353 shares.

 

(2) Includes 93,883 shares with voting and investment power shared with spouse.

 

(3) Shares held at December 31, 2017, according to a Schedule 13G/A filed with the SEC on January 25, 2018 by BlackRock, Inc. (“BlackRock”), whose address is 55 East 52nd Street, New York, New York 10055. The Schedule 13G/A reports that BlackRock has sole voting power over 49,696,185 shares, shared voting power over no shares, sole investment power over 58,358,962 shares and shared investment power over no shares.

 

(4) Shares held at December 31, 2017, according to a Schedule 13G/A filed with the SEC on February 9, 2018 by The Vanguard Group, Inc. (“Vanguard”) whose address is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The Schedule 13G/A reports that Vanguard has sole voting power over 1,194,413 shares, shared voting power over 194,525 shares, sole investment power over 63,745,883 shares and shared investment power over 1,359,384 shares.

 

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Section 16(a) Beneficial Ownership Reporting Compliance

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires Lowe’s directors, executive officers and persons who beneficially own more than 10% of Lowe’s outstanding Common Stock (collectively, the “reporting persons”) to file with the SEC initial reports of their beneficial ownership and reports of changes in their beneficial ownership of Common Stock. Based solely on a review of such reports and written representations made by Lowe’s directors and executive officers that no other reports were required, the Company believes that the reporting persons complied with all applicable filing requirements on a timely basis during fiscal 2017.

 

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Compensation Discussion and Analysis

 

 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and compensation decisions as they relate to the following named executive officers (“NEOs”) of the Company in the 2017 fiscal year:

 

Robert A. Niblock

   Chairman of the Board, President and Chief Executive Officer

Robert F. Hull, Jr.

   Chief Financial Officer(1)

Marshall A. Croom

   Chief Financial Officer(2)

Rick D. Damron

   Chief Operating Officer(3)

Michael P. McDermott

   Chief Customer Officer

Jennifer L. Weber

   Chief Human Resources Officer

 

(1) Mr. Hull retired as Chief Financial Officer on March 3, 2017.

 

(2) Mr. Croom was promoted to Chief Financial Officer upon Mr. Hull’s retirement on March 3, 2017.

 

(3) Mr. Damron retired from the position of Chief Operating Officer on February 3, 2018.

Our CD&A is organized as follows:

 

I. Executive Summary

 

II. Compensation Philosophy and Elements

 

III. Compensation Decision-Making Process

 

IV. 2017 Compensation Actions

 

V. Other Compensation Policies

 

VI. Compensation Committee Report

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

I. EXECUTIVE SUMMARY

 

 

We have demonstrated a strong commitment to returning capital to our shareholders and have had continued dividend growth since 1961.

 

$18.1 Billion   19%   $4.9 Billion
SHARES REPURCHASED UNDER OUR SHARE REPURCHASE PROGRAM IN THE LAST FIVE YEARS  

FY2017 INCREASE IN

ANNUAL DIVIDEND

  DIVIDENDS PAID IN THE
LAST FIVE YEARS

 

 

In Fiscal 2017, we delivered top line results above our expectations with positive comparable store sales in the U.S., Canada and Mexico. Total sales grew 5.5% to a record $68.6 billion, driven by comparable sales growth of 4.0%. Supported by our financial results and consistent capital allocation policies, we created and returned value to shareholders through the payment of $1.3 billion in dividends and the repurchase of $3.1 billion of our common stock.

We also made meaningful progress executing our strategy to expand our home improvement reach and further invest in omni-channel capabilities to support customers’ evolving needs. We are proud of our success in growing sales with the Pro customer, enhancing our in-home selling program, strengthening our market position in Canada and advancing our online shopping experience. In addition, we were pleased to announce a one-time $60 million aggregate cash bonus for hourly U.S. employees and reinvestments in employees through enhanced employee benefit offerings and training programs.

We remain focused on investing in and building the capabilities most relevant to the customer to further strengthen our competitiveness and enhance our position as the omni-channel home improvement project authority.

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

The CD&A includes disclosure of our incentive compensation performance measures including: earnings before interest and taxes (“EBIT”), sales and return on non-cash average assets (“RONCAA”). EBIT for fiscal 2017 as presented in this Proxy Statement includes adjustments described on page 38, and this adjusted measure is referred to as “Adjusted EBIT” in this Proxy Statement. Three-Year Average RONCAA for fiscal 2017 includes adjustments described on page 40, and this adjusted measure is referred to as “Adjusted Average RONCAA.” Each of these performance measures is further described on pages 38 to 40.

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

2017 Executive Compensation

Lowe’s has a long-standing commitment to pay for performance that we implement by providing a significant portion of compensation through variable pay arrangements. These arrangements are designed to hold our executive officers accountable for business results and reward them for consistently strong financial performance and the creation of value for our shareholders.

Our 2017 executive compensation program consisted of the following elements:

 

  Base salary

 

  Annual incentive awards

 

  Performance share unit awards (“PSUs”)

 

  Grants of stock options

 

  Grants of restricted stock awards (“RSAs”)

 

  Retirement and health benefits

 

  Limited perquisites

Lowe’s mix is heavily performance-based with 72% of the CEO’s and 65% of the other NEOs’(¹) target compensation at risk and contingent upon the achievement of performance objectives or share price performance.

 

LOGO   LOGO

 

(1) Mr. Hull is not included in the NEO data due to his retirement in March 2017.

How Our Executive Compensation Is Tied to Performance

A significant portion of our executive compensation program is performance-based with a balanced focus on top- and bottom-line growth and leadership effectiveness.

 

  Annual Incentive Awards: Payout is based on the Company’s achievement of financial (EBIT and sales) and Leadership Effectiveness goals. Minimum payout is zero if performance objectives are not achieved.

 

  PSUs: Payout is based on the Company’s achievement of a three-year average RONCAA goal established at the beginning of a three-year performance period and, since 2016, a relative total shareholder return (TSR) modifier which compares the Company’s TSR to the median TSR of companies listed in the S&P 500 Index over a three-year period. Minimum performance objectives must be achieved for awards to be earned.

 

  Stock Options: Value realized is based on the increase in the market value of Common Stock.

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

Based on our performance through fiscal 2017 illustrated below, our executives received the following payouts of performance- based compensation:

 

  Annual incentive payouts were driven by below target performance in Adjusted EBIT and above target performance in Sales and Leadership Effectiveness, resulting in below target overall award payments.

 

  PSUs paid out at 83.5% of target based on Adjusted Average RONCAA achievement for the 2015-17 performance period.

 

 

LOGO

 

      WHAT WE DO            WHAT WE DO NOT DO

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Provide 81% to 90% of total direct compensation opportunity (assuming target performance) for NEOs in the form of at-risk compensation.

 

    

 

LOGO

 

 

 

  

Provide single-trigger severance or tax gross-ups following change-in-control in any management continuity agreements executed after 2012.

 

LOGO

 

  

Annually assess peer group composition, financial and stock price performance, and competitive compensation practices.

 

  

 

 

LOGO

 

 

 

  

Permit hedging or unauthorized trading of the Company’s securities by our employees or directors.

 

LOGO

 

  

Annually assess compensation-related risks associated with regulatory, shareholder and market changes.

 

    

 

LOGO

 

 

 

  

Grant discounted stock options, extend the original option term, reprice or exchange underwater options without shareholder approval.

 

LOGO

 

  

Annually assess the design, alignment and achievability of our incentive plans in relation to performance goals, business strategy and organizational priorities.

 

    

 

LOGO

 

 

 

  

Provide an evergreen provision in our Long-Term Incentive Plan.

 

LOGO

 

  

Link incentive compensation to a clawback policy.

 

    

 

LOGO

 

 

 

  

Provide employment agreements to executives.

 

LOGO

 

  

Limit incentive payouts to 200% of target awards.

 

             

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Require significant stock ownership by all senior executives.

 

             

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Annually conduct a say-on-pay vote.

 

             

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Provide limited perquisites.

 

             

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

Say-on-Pay Advisory Vote

The Board of Directors carefully considers the results of our shareholders’ advisory “say-on-pay” vote. Lowe’s shareholders continue to express strong support for the Company’s executive compensation program with the Company receiving approximately 96% advisory approval in 2017. This is consistent with the advisory approval over the past seven years. In consideration of this continued support, the Compensation Committee of the Board of Directors maintained the principal features and performance-based elements of the executive compensation program in 2017. At the Annual Meeting, the Company’s shareholders will again have the opportunity to approve Lowe’s executive compensation program through the advisory say-on-pay vote included as Proposal 2 in this Proxy Statement.

Shareholder Engagement

We believe in continued shareholder discussions and engagement. We solicit and respond to feedback regarding our compensation program to better understand our shareholders’ concerns and the topics of interest. See page 6 in this Proxy Statement for additional information on changes we have made over time to enhance our compensation program as part of our ongoing shareholder engagement.

II. COMPENSATION PHILOSOPHY AND ELEMENTS

Compensation Philosophy and Objectives

Our long-term success depends on our ability to attract and retain highly talented leaders who are committed to our purpose, growth and strategy. Our executive compensation program is designed to reward executives for growth in the Company’s sales, earnings and shareholder value, and the effective execution of our business strategies. The primary objectives of our program are to:

 

  Attract and retain executives who have the requisite leadership skills to support the Company’s culture and strategic growth priorities;

 

  Maximize long-term shareholder value through alignment of executive and shareholder interests;

 

  Align executive compensation with the Company’s business strategies, including expanding home improvement reach, developing capabilities to anticipate and support customer needs and generating profitable growth and substantial returns; and

 

  Provide market competitive total compensation with an opportunity to earn above market median pay when the Company delivers results that exceed performance targets, and below median pay when the Company falls short of performance targets.

Key Components

To support these objectives, the Compensation Committee has designed the executive compensation program with an appropriate balance between annual and long-term compensation, as well as between fixed and at-risk pay. The largest portion of our executive compensation program is at-risk and performance-based, and can only be earned when the Company satisfies financial and strategic performance objectives.

The Board of Directors places significant emphasis on the long-term success of the Company and strong alignment with the interests of all stakeholders, including shareholders, customers, employees and the communities in which we operate. Accordingly, long-term incentive award opportunities, as a percentage of total compensation, are greater than annual incentive award opportunities.

 

 

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Compensation Discussion and Analysis

 

COMPENSATION PHILOSOPHY AND ELEMENTS

 

The following table lists the key elements of the Company’s 2017 executive compensation program:

 

 

    KEY ELEMENTS OF EXECUTIVE COMPENSATION

 

           

 

    Element

 

 

 

Form

 

 

 

Key Characteristics

 

 

 

Link to Shareholder Value

 

 

 

Key Decisions

 

   
    Base Salary   Cash  

Fixed cash compensation tied to the scope and responsibilities of each executive’s position and the performance and effectiveness of the executive

 

  Provide a foundation of fixed income to the executive; encourage retention and attraction of top talent; and recognize collaborative, purpose-driven leadership  

Base salaries are reviewed annually each January based on the Compensation Committee’s evaluation of market compensation and an assessment of the executive’s performance. Approved adjustments are effective at the start of the fiscal year

 

 

    Annual

    Incentive

    Awards

  Cash  

At-risk cash compensation tied to the achievement of annual strategic and financial performance goals established by the Compensation Committee for each fiscal year

 

  Promote the achievement of the Company’s annual strategic and financial goals; incent and reward financial and operating performance  

Annual incentive plan design is reviewed and approved each March. Performance is certified in March following the completion of the fiscal year

 

 

    Long-Term

    Incentive

    Awards

  PSUs  

PSUs are based on (i) the Company’s average RONCAA(1) relative to pre-determined threshold, target and maximum levels of performance for the three-year performance period, and (ii) a relative TSR modifier

 

  Promote the achievement of efficient long-term growth and, starting in 2016, total shareholder return performance  

Long-term incentive plan design is reviewed and approved each March

 

Performance is certified in March following the completion of the performance period

 
  Stock Options  

Stock options vest ratably over three-years(2)

 

 

Promote the value-creating actions necessary to increase the market value of Common Stock

 

 

Awards are approved in March with a 10-year life

 

 
  RSAs   RSAs cliff vest on the third anniversary of the grant date(2)  

Promote executive retention, stock ownership and alignment of interests with shareholders

 

 

Executive stock ownership guidelines and actual stock holdings are reviewed annually

 

 

    Retirement

    And Other

    Benefit Plans

 

401(k) Plan

 

Group Insurance Plan

 

Employee Stock Purchase Plan

 

Benefit Restoration Plan

 

Cash Deferral Plan

 

 

Broad-based retirement and welfare plans sponsored by the Company on the same terms and conditions applicable to all eligible employees, including supplemental 401(k) and deferred compensation benefits

 

  Promote financial and physical wellness to enhance productivity and encourage the retention and attraction of top talent   Reviewed periodically to align with market practice  

    Executive

    Benefits

  Other Benefits  

Reimbursement of costs associated with tax and financial planning, physical examination, and personal use of corporate aircraft (CEO only)

 

  Promote financial and physical wellness to enhance productivity and safety and to encourage the retention and attraction of top talent   Utilization is reviewed annually; programs are reviewed periodically to align with market practice  

 

(1) RONCAA is a comprehensive long-term financial metric that incorporates both operating income and balance sheet performance in the calculation. This metric motivates management to generate sustained profitable growth over time while balancing the Company’s effectiveness at allocating capital to drive future investment and growth. RONCAA is computed by dividing the Company’s EBIT for the year by the average of the Company’s non-cash assets as of the beginning and end of the fiscal year. The return percentages for each fiscal year in the performance period are averaged to yield a RONCAA measure for the three-year performance period.

 

(2) Executives must maintain employment with the Company during the three-year period, or terminate from the Company due to death, disability or qualified retirement (as defined in the grant agreement), to earn the awards.

 

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Compensation Discussion and Analysis

 

COMPENSATION DECISION-MAKING PROCESS

 

III. COMPENSATION DECISION-MAKING PROCESS

Role of the Compensation Committee

The Compensation Committee, which currently consists of six independent directors, is responsible for developing and administering our executive compensation program. The Compensation Committee works closely with its independent compensation consultant and meets regularly, approximately six times each year, to make decisions related to our executive compensation programs and the compensation of our CEO (with the ratification of the independent directors of the Board) and the Company’s executive officers. The Compensation Committee reports its actions to the full Board at the Board meeting following each Compensation Committee meeting. The Compensation Committee’s responsibilities include:

 

  Approving our compensation philosophy and strategy

 

  Approving compensation of executive officers

 

  Approving annual and long-term incentive targets and performance goals

 

  Approving achievement of goals in annual and long-term incentive plans

 

  Approving the peer groups of companies used for assessing market compensation levels, pay practices and performance

 

  Approving CD&A disclosure in the annual proxy statement

The full description of the Compensation Committee’s authority and responsibilities is provided in the Compensation Committee Charter, which is available on our Company website: www.Lowes.com/investor.

Role of the Independent Compensation Consultant

The Compensation Committee directly engages and regularly consults with Farient Advisors LLC, its independent compensation consultant, for ongoing executive compensation matters. The Compensation Committee’s compensation consultant reports directly to the Compensation Committee and does not provide any services to the Company other than the Compensation Committee consulting services. The Compensation Committee has assessed the independence of its compensation consultant pursuant to the independence factors specified by the SEC rules (as incorporated into the NYSE listing standards) and concluded that no conflict of interest exists that would prevent its compensation consultant from independently representing the Compensation Committee. During the 2017 fiscal year, Farient Advisors LLC performed the following services:

 

  Attended all Compensation Committee meetings

 

  Advised the Compensation Committee on the design of the Company’s annual and long-term incentive plans (including the selection of the performance metrics and assessment of performance goals)

 

  Provided the Compensation Committee with an external perspective on the reasonableness and competitiveness of our executive compensation program

 

  Assisted with the selection of the peer groups of companies used for assessing market compensation levels, pay practices and performance

 

  Performed an assessment of the relationship between our CEO pay and performance over the past several years

 

  Provided periodic updates and guidance on regulatory and governance trends impacting compensation

 

  Assisted the Compensation Committee in conducting its annual risk assessment of our executive compensation programs

 

  Reviewed compensation-related proxy disclosures

Role of Management

When making decisions on executive compensation, the Compensation Committee considers input from the Company’s Chief Human Resources Officer who works most closely with the Compensation Committee, both in providing information and analysis for review and in advising the Compensation Committee concerning compensation decisions (except as it relates specifically to her compensation and the compensation of our CEO). Our CEO reviews the performance of the NEOs (other than himself) and other executive officers and provides recommendations on executive officer compensation for the Compensation Committee’s consideration. The Compensation Committee reviews and discusses pay decisions related to the CEO in executive sessions without the CEO or any other members of management present.

 

 

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Compensation Discussion and Analysis

 

COMPENSATION DECISION-MAKING PROCESS

 

Compensation Benchmarking and Peer Group

Each year, the independent compensation consultant provides the Compensation Committee a review and analysis of the peer group companies used to assess compensation and performance. The Compensation Committee approved the use of data from two sources for fiscal 2017: the Survey Data Group and the Select Peer Group.

The Survey Data Group is comprised of a broad group of retail and general industry companies with which Lowe’s competes for executive talent, generally with over $15 billion in annual revenue, available in compensation surveys.

The Select Peer Group is comprised of retail and customer service companies selected for direct relevance to Lowe’s business using the following criteria:

 

  Headquartered in the United States with publicly-traded securities listed on a major United States exchange;

 

  Operating in the Consumer Discretionary or Food & Staples retail sectors;

 

  Annual revenue greater than $15 billion; and

 

  Retail or customer service based business model focused on producing strong EBIT and TSR growth.

The companies in the Select Peer Group for fiscal 2017 were:

 

Amazon.com, Inc.    Best Buy Co., Inc.    Costco Wholesale Corporation
CVS Health Corporation    Kohl’s Corporation    Macy’s, Inc.
Nordstrom, Inc.    Sears Holdings Corporation    Staples, Inc.
Target Corporation    The Home Depot, Inc.    The Kroger Co.
The TJX Companies, Inc.    Walgreen Co.    Wal-Mart Stores, Inc.

The Select Peer Group was the same in fiscal 2017 as the prior year. The Compensation Committee agreed that these companies were relevant given our peer selection criteria and that the size of the Select Peer Group remained appropriate based on market practices.

 

 

  SELECT PEER GROUP DATA FOR FISCAL 2017(1)

                             
            Market                  TSR     
    

Revenues (MM)

 

  

Capitalization (MM)

 

  

EBIT (MM)

 

  

 

1-year

 

  

3-year

 

  

 

5-year  

 

  75th Percentile

     $ 123,620        $84,043      $ 6,104        52.49%          53.11%          156.39%    

  50th Percentile

     $ 69,495        $49,617      $ 4,106        19.26%          20.90%          84.48%    

  25th Percentile

     $ 29,481        $15,744      $ 1,884        -1.43%          -14.33%          50.76%    

  Lowe’s Companies, Inc.

     $ 65,017        $84,221      $ 5,936        41.08%          57.69%          186.15%    

      Percentile Ranking

       43%          79%          71%          64%          79%          79%    

Source: S&P Capital IQ

 

(1) Revenues and EBIT are as of each company’s latest fiscal year. Market Capitalization and TSR are as of February 2, 2018, which was Lowe’s fiscal year end date.

At the November 2016 meeting and prior to promoting Mr. McDermott & Mr. Croom, the Compensation Committee reviewed a thorough compensation benchmark based on the two peer groups described above. The Compensation Committee concluded that the benchmark indicated that the NEOs’ target total direct compensation (“TDC”) approximated market median, with an opportunity to earn above market pay when the Company delivers results that exceed performance targets and below market pay when the company performance falls short of performance targets. The following chart summarizes Lowe’s pay positioning versus the market median and the results of the compensation benchmarking report used for the Compensation Committee’s 2017 compensation actions:

 

 

  % DEVIATION FROM MARKET MEDIAN

 

        
  

 

Salary

 

  

 

Target STI

 

  

 

Target LTI

 

  

 

Target TDC

 

  CEO

   -3%    7%    -5%    -5%

  Other NEOs

  

-11%

  

-9%

  

-11%

   -10%

 

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Compensation Discussion and Analysis

 

2017 COMPENSATION ACTIONS

 

IV. 2017 COMPENSATION ACTIONS

Base Salary Adjustments

The Compensation Committee reviews and adjusts the NEO base salaries in January each year after it has considered competitive benchmark and relative compensation positioning. In 2017, the Compensation Committee approved the following base salaries for the NEOs:

 

       Name and Position

 

  

2016

Base Salary

 

  

2017

Base Salary

 

  

% Increase(1)    

 

 

       Robert A. Niblock

       Chairman of the Board, President and Chief Executive Officer

 

    

 

$

 

1,300,000

 

    

 

$

 

1,300,000

 

    

 

 

 

0.0%    

 

 

       Robert F. Hull(2)

       Former Chief Financial Officer

    

 

$

 

769,000

 

    

 

$

 

118,307

 

    

 

 

 

—       

 

 

 

       Marshall A. Croom(2)

       Chief Financial Officer

    

 

 

 

 

    

 

$

 

675,000

 

    

 

 

 

—       

 

 

 

       Rick D. Damron

       Chief Operating Officer

    

 

$

 

790,000

 

    

 

$

 

806,000

 

    

 

 

 

2.0%    

 

 

 

       Michael P. McDermott

       Chief Customer Officer

    

 

$

 

650,000

 

 

    

 

$

 

675,000

 

    

 

 

 

3.8%    

 

 

 

       Jennifer L. Weber

       Chief Human Resources Officer

    

 

$

 

545,000

 

 

    

 

$

 

561,000

 

    

 

 

 

2.9%    

 

 

 

(1) The general Company-wide base salary adjustments averaged approximately 3% for all employees in 2017, and the average Company-wide base salary adjustments averaged approximately 3% for all employees who were Senior Vice Presidents and above.

 

(2) Mr. Croom became the Chief Financial Officer upon Mr. Hull’s retirement on March 3, 2017.

Annual Incentive Awards

Our annual incentive plan provides each NEO the opportunity to receive an annual cash award based on the Company’s achievement of predetermined financial and strategic goals. The formula for computing annual incentive payouts is as follows:

 

BASE SALARY       X      

TARGET AWARD

PERCENTAGE(1)

(% of Base Salary)

      X      

 

 

PERFORMANCE GOAL

ACHIEVEMENT LEVEL(2)

(% of Target Level)

 

      =      

ANNUAL INCENTIVE

AWARD EARNED

 

(1) The target award percentage was 200% of base salary for the CEO and 90% to 100% of base salary for the other NEOs. For fiscal 2017, target awards as a percentage of base salary remained the same as the prior year.

 

(2) The CEO had a maximum opportunity of 200% of target which was increased from 175% in the prior year, and the other NEOs had a maximum opportunity of 200% in fiscal 2017, which was the same percentage of target as the prior year.

 

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Compensation Discussion and Analysis

 

2017 COMPENSATION ACTIONS

 

The following table describes the financial and strategic goals for the 2017 annual incentive awards and the weighting assigned to each goal, which is the same for all of the NEOs:

 

 

  Performance

  Metric

 

      Metric Weighting 

 

   

Description

 

 

Performance Measured By

 

 
  LOGO    

 

  EBIT

 

 

Rewards executives for profitability of over-all Company operations and focuses management on operational efficiency and expense management

 

 

 

Company’s EBIT

 

 

60%

 

 

  Sales

 

 

Focuses executives on effective merchandising, driving market share gains, and the enhancement of the Company’s omni-channel sales and marketing

 

 

 

Company’s net sales

 

 

25%

  LOGO    

 

  Leadership

  Effectiveness

 

 

Provides incentive compensation for leadership behavior that has the greatest positive impact on employee motivation, engagement and commitment to executing the Company’s long-term strategy

 

 

 

Percentage of responses to the Lowe’s Employee Opinion Survey that rate leadership in the top two categories of effectiveness

 

 

15%

 

The Compensation Committee has for several years used EBIT and sales as the performance metrics for annual incentive awards. The Compensation Committee added leadership effectiveness in 2014 as a strategic goal to better enable execution of the Company’s strategic objectives. The Compensation Committee, having considered the level of difficulty inherent in the goals, based the 2017 target performance levels on the Company’s annual operating plan and expected growth over prior year performance. The target EBIT and sales goals for the 2017 annual incentive plan were aggressive and were set higher than a majority of the peers’ expected EBIT and sales growth rates in 2017. Lowe’s met the aggressive sales goal by increasing focus on growing the omni-channel business and providing enhanced product and service offerings to the Pro customer.

The Compensation Committee’s objective in administering our incentive plan is to cause incentive awards to be calculated on a comparable basis from year-to-year, and to ensure that plan participants are incentivized and rewarded appropriately. For these reasons, the Compensation Committee may make adjustments to the actual levels of achievement under each performance goal at its discretion. The Compensation Committee adopted adjustment guidelines in January 2011, which in general, relate to (i) changes in applicable laws or regulations, (ii) items of gain, loss or expense that are related to the disposal or acquisition of a business or change in accounting principles, (iii) unusual or non-recurring

transactions that were not anticipated, or (iv) other unusual, non-recurring or unexpected items similar in nature as determined by the Compensation Committee. The adjustment guidelines include the following specific items as potential adjustments for consideration: extraordinary items, accounting principles or assumptions changes, acquisitions and divestitures (and related charges), litigation, regulatory claims and insurance claims, write-downs, store closing costs and restructuring charges.

In March 2018, the Compensation Committee reviewed the Company’s 2017 performance relative to the EBIT and sales goals and the leadership effectiveness goal to determine the annual incentive awards earned under the annual incentive plan for fiscal year 2017. The Compensation Committee adjusted fiscal 2017 EBIT to exclude the impact of (i) $96 million gain from the sale of the Company’s interest in its joint venture in Australia, (ii) $464 million loss related to the early settlement of debt and (iii) $65.8 million one-time bonus payment including related payroll taxes made in connection with the Tax Cuts and Jobs Act of 2017. The Compensation Committee concluded, in accordance with the Compensation Committee’s adjustment guidelines, the above described charges were unusual, non-recurring items that were not anticipated when the 2017 performance metrics were adopted and should not be considered for purposes of measuring Company performance and determining the 2017 annual incentive awards.

 

 

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Compensation Discussion and Analysis

 

2017 COMPENSATION ACTIONS

 

Based on the performance metrics established by the Compensation Committee and the Company’s 2017 performance, the Compensation Committee determined that Lowe’s achieved approximately 79% and approximately 89% of the target incentive opportunities for the CEO and the other NEOs, respectively.

 

      Performance Metric(1)

 

    

Threshold

 

    

Target

 

    

Maximum

 

    

2017 Actual        

Performance        

 

      EBIT

 

     $6.496 billion

 

     $7.043 billion

 

     $7.408 billion

 

     $6.556 billion(2)

 

      Sales

 

     $66.416 billion

 

     $68.335 billion

 

     $69.227 billion

 

     $68.619 billion

 

 

(1) The performance goal achievement for the strategic goal of Leadership Effectiveness is disclosed on page 32.

 

(2) The Compensation Committee adjusted fiscal 2017 EBIT as described on page 38.

Based on the Compensation Committee’s determination of the results above, the NEOs earned annual incentive awards for 2017 as follows:

 

      Name

 

  

Base Salary

 

    

x

 

  

Target Award %
(% of Base Salary)

 

 

x

 

  

Performance Goal
Achievement Level
(% of Target)

 

  

=

 

  

Actual Award        

Earned        

 

      Robert A. Niblock

 

     $ 1,300,000                     200 %                  79                 $ 2,051,621

      Robert F. Hull(1)

 

     $ 769,000                     90 %                                   

      Marshall A. Croom

 

     $ 675,000                     90 %                  90                 $ 548,768

      Rick D. Damron

 

     $ 806,000                     100 %                  88                 $ 711,311

      Michael P. McDermott

 

     $ 675,000                     100 %                  88                 $ 595,701

      Jennifer L. Weber

 

     $ 561,000                     90 %                  90                 $ 456,087

 

(1) Mr. Hull was not eligible for the annual incentive award due to his retirement from the Company in March 2017.

Long-Term Equity Awards

 

In March each year, the Compensation Committee approves a target long-term equity award for each executive officer, expressed as a percentage of base salary. Target awards are determined based on each executive officer’s position and level of responsibility, the Company’s historical grant practices and market benchmarks reviewed annually by the Compensation Committee. For fiscal 2017, target awards as a percentage of base salary remained the same as the prior year.

In 2017, the Compensation Committee approved equity awards for the NEOs granted as a mix of 50% PSUs, 25% stock options and 25% time-vested RSAs. The award mix did not change from the prior year. The Compensation Committee did approve a change in the timing of the annual awards of restricted stock and nonqualified stock options from September to April. The

grant value of these two award vehicles was reduced by 50% since the grant was made in April rather than September. As a result, the total value of the annual long-term incentives granted to each NEO was 25% lower than the target award value. The Compensation Committee believes the mix of equity award types reflects an appropriate balance between providing incentive compensation for the achievement of Company-specific performance measures (PSUs), increases in the market value of the Common Stock (stock options) and retention (RSAs).

The following table reflects the target award value for 2017, as well as the actual grant value awarded to each NEO in 2017 reflecting the adjustment due to the change in timing of a portion of the award:

 

 

    

2017 Target Long-Term  

 

  Equity Awards      Equity Award

      Name

 

  

% of Base Salary    

 

 

Target ($000s)  

 

  

Granted ($000s)

 

      Robert A. Niblock(1)

 

      

 

725

 

%

 

    $

 

9,425

 

 

     $

 

7,068

 

 

      Robert F. Hull(2)

 

      

 

 

 

     

 

 

 

      

 

 

 

      Marshall A. Croom(3)

 

      

 

300

 

%

 

    $

 

2,025

 

 

     $

 

1,847

 

 

      Rick D. Damron(4)

 

      

 

400

 

%

 

    $

 

3,224

 

 

     $

 

2,418

 

 

      Michael P. McDermott(3)

 

      

 

400

 

%

 

    $

 

2,700

 

 

     $

 

2,559

 

 

      Jennifer L. Weber(5)

 

      

 

300

 

%

 

    $

 

1,683

 

 

     $

 

1,683

 

 

 

(1) Mr. Niblock’s equity target increased from 700% to 725% for 2017.

 

(2) Mr. Hull was not eligible for the long-term incentive due to his retirement from the Company in March 2017.

 

(3) Mr. Croom and Mr. McDermott were granted additional equity related to their promotions as detailed in the Grants of Plan-Based Awards Table.

 

(4) Mr. Damron’s 2017 equity awards will vest and be released based on his eligibility for “retirement” as set forth in his equity award agreements.

 

(5) Ms. Weber was granted a $1.262 million annual award as well as a $420,000 restricted stock award to replace the value of shares she forfeited at her prior employer per her offer letter dated December 31, 2015.

 

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Compensation Discussion and Analysis

 

2017 COMPENSATION ACTIONS

 

 

The Compensation Committee decided that the PSUs awarded in 2017 will be earned based on the Company’s RONCAA for the three-year performance period from fiscal 2017 to fiscal 2019 and the relative TSR modifier. RONCAA is computed by dividing the Company’s EBIT for the year by the average of the Company’s non-cash assets as of the beginning and end of the fiscal year. The return percentages for each fiscal year in the performance period will be averaged to yield a RONCAA measure for the three-year performance period. The

Compensation Committee believes strong RONCAA performance is aligned with creating long-term value for the Company’s shareholders. Specifically, RONCAA is a comprehensive long-term financial metric that incorporates both operating income and balance sheet performance in the calculation, incenting management to generate sustained profitable growth over time. This metric also incentivizes the effective allocation of capital toward future growth investments.

 

 

The chart below illustrates how the relative TSR modifier expands the PSU performance award to range from 34% of target at threshold performance to 200% of target at maximum performance:

 

    PSU   

Performance   

Level   

 

  Payout Percentage   

(% of Target   

Award)   

 

    Lowe’s 3-Year TSR   

Percentage Spread   

from S&P 500 Index   

 

  Modifier(1)   
    PSU   

Performance   

Level   

 

  Final Payout   

Opportunity   

(% of Target Award)(1)   

 

PSUs

    Maximum   

 

  150%   

 

    ³+20%   

 

  1.33x   

 

    Maximum   

 

  200%   

 

 Granted 

 

LOGO

  Target   

 

  100%   

 

    x     0%   

 

  1.00x   

 

    =     Target   

 

  100%   

 

    Threshold   

 

  50%   

 

    £ (20)%   

 

  0.67x   

 

    Threshold   

 

  34%   

 

    <Threshold   

 

  0%   

 

          <Threshold   

 

  0%   

 

 

(1) Performance between discrete points will be interpolated; TSR modifier cannot be lower than 0.67x; if RONCAA is below threshold, there will be no payout.

 

2015 PSU Awards. The performance period for the PSUs awarded in 2015 (the “2015 PSUs”) ended on February 2, 2018, the last day of the 2017 fiscal year. The 2015 PSU awards were eligible to be earned based on the Company’s average RONCAA for fiscal years 2015 through 2017.

The target RONCAA goal for the PSUs awarded in 2015 was set higher than a majority of the peers’ historical RONCAA performance for each of the five preceding fiscal years. Based on the performance measures established by the Compensation Committee and the Company’s adjusted

performance for the 2015-2017 performance period, 83.5% of the 2015 PSUs, as calculated below, were earned and converted to shares of Common Stock. For purposes of determining the Company’s RONCAA performance and the number of PSUs earned, the Compensation Committee made adjustments to exclude (i) the 76 basis point impact of the 2016 acquisition of RONA, inc., (ii) the 50 basis point impact of the loss related to the early settlement of debt and (iii) the 7 basis point impact of a one-time bonus payment including related payroll taxes made in connection with the Tax Cuts and Jobs Act of 2017.

 

 

      Performance Metric

 

  

Threshold

 

    

Target

 

    

Maximum

 

    

2015–2017
Adjusted
Performance

 

    

  Performance  
  Goal  
  Achievement  
  (% of Target)  

 

      RONCAA

   17.40%      19.40%      21.40%      18.74%      83.5

Benefit Restoration Plan and Perquisites

 

The Benefit Restoration Plan, adopted by the Company in August 2002, is intended to provide NEOs and other qualifying executives with benefits lost due to qualified plan limitations imposed by the Code that are equivalent to those received by all other employees under the Company’s qualified retirement plans. The Company makes matching contributions to each executive officer’s Benefit Restoration Plan account under the same matching contribution formula based on the executive’s elective contribution to the 401(k) Plan, regardless of the Code limitations.

Since 2010, NEOs and other qualifying executives have been eligible for an annual executive physical assessment of overall health, screening and risk reviews for chronic diseases and other specialty consultations, which helps protect the investment we make in these key individuals, at either the

Mayo Clinic Executive Health Program or Duke Executive Health Program. In addition, these executives are eligible for a reimbursement of up to $12,000 for financial and tax planning services.

The Company owns and operates business aircraft to allow employees to safely and efficiently travel for business purposes. The corporate aircraft allows executive officers to be far more productive than commercial flights since the corporate aircraft provides a confidential, safe and productive environment in which to conduct business. The independent members of the Board of Directors require the Chairman, President and Chief Executive Officer to use the corporate aircraft for all business and personal travel needs to protect his safety and enhance productivity.

 

 

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Compensation Discussion and Analysis

 

2017 COMPENSATION ACTIONS

 

Pay-for-Performance Alignment

 

Each year, the Compensation Committee assesses the relationship between our CEO’s pay and the Company’s performance over time. To conduct this assessment, the Compensation Committee uses its independent compensation consultant’s proprietary alignment model to test whether our CEO’s Performance-Adjusted Compensation (“PAC”) was (i) reasonable, taking into account the Company’s revenue size and Select Peer Group described on page 36, and (ii) sensitive to the Company’s TSR over time. PAC includes our

CEO’s salary, actual annual incentive compensation and the performance-adjusted value of long-term incentives, averaged over 3-year rolling periods. Performance is TSR, averaged over the same 3-year rolling periods. Each data point on the chart below, which is adjusted for inflation and the Company’s size, represents PAC over a three-year period and TSR for the same period. The Compensation Committee concluded that our CEO’s PAC is strongly aligned with the Company’s performance and shareholder interests.

 

 

 

 

LOGO

 

(1) PAC measures realizable total direct compensation for 3-year periods ending in the years shown taking 3-year TSR performance delivered into account.

 

    LOGO   NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2018         41


Compensation Discussion and Analysis

 

OTHER COMPENSATION POLICIES

 

V. OTHER COMPENSATION POLICIES

Compensation Risk Assessment

Each November, the Compensation Committee reviews an audit and analysis of the risk associated with the Company’s executive compensation program. In this review, the Compensation Committee considers the balance between pay components, measures of performance, plan caps, plan time horizons and over-lapping performance cycles, program design and other features that are designed to mitigate risk (e.g., stock ownership guidelines and clawback policy). The Compensation Committee believes the Company’s pay practices, stock ownership and holding requirements and clawback policies all discourage inappropriate risk taking by Company executives.

Stock Ownership Guidelines

The Compensation Committee strongly believes that executive officers should own appropriate amounts of Common Stock to align their interests with those of the Company’s shareholders. The Company’s 401(k) Plan, employee stock purchase plan and long-term incentive plan provide ample opportunity for executives to acquire Common Stock.

The Compensation Committee has adopted stock ownership and retention guidelines for all senior executives in the Company. The ownership targets under the current guidelines are as follows:

 

 

     Position

 

  

 

Target Ownership

(Multiple of Base Salary)    

 

    Chairman, President and Chief Executive Officer

 

   10.0x

 

    Chief Operating Officer and Chief Customer Officer

 

   5.0x

 

    Executive Vice Presidents

 

   4.0x

 

    Senior Vice Presidents

 

   2.0x

 

The Compensation Committee reviews compliance with the guidelines annually at its March meeting. The Company determines the number of shares of Common Stock required to be held by each senior officer by dividing the ownership requirement (expressed as a dollar amount) by the average closing price of the Common Stock for the preceding fiscal year. Shares of Common Stock are counted towards ownership as follows:

 

  All shares held or credited to a senior officer’s accounts under the Lowe’s 401(k), benefit restoration, deferred compensation and employee stock purchase plans;

 

  All shares owned directly by the senior officer and his or her immediate family members residing in the same household;
  50% of the number of vested stock options; and

 

  50% of the number of shares of unvested RSAs.

Senior officers may not sell the net shares resulting from a restricted stock or PSU vesting event or stock option exercise until the ownership requirement has been satisfied. With the exception of Ms. Weber, who joined the Company in 2016, all of the NEOs were in compliance with this policy for fiscal 2017.

Oversight of Executive Stock Ownership, No Hedging and Clawback of Incentive Compensation

The Compensation Committee has always supported governance and compliance practices that are transparent and protect the interests of the Company’s shareholders. To strengthen the Company’s practices in these areas, the Company has (i) controls over executive equity awards and ownership and (ii) a policy on the clawback of incentive compensation in the event of a significant restatement of the Company’s financial results.

The Company prohibits any executive from:

 

  Using Common Stock as collateral for any purpose, including in a margin account;

 

  Engaging in short sales of Common Stock;

 

  Engaging in any transaction involving the use of a financial instrument or other investment designed to hedge or offset any decrease in the market value of the Company’s securities or to leverage the potential return of a predicted price movement (up or down) in the Company’s securities; or

 

  Entering standing purchase or sell orders for Common Stock except for a brief period of time during open window trading periods.

Trading in Common Stock, including stock held in an account under Lowe’s 401(k) Plan, by an executive and the executive’s immediate family members who reside with the executive or whose transactions are subject to the executive’s influence or control, is limited to open window trading periods designated by the Company’s Chief Legal Officer. In addition, all transactions by an executive involving Common Stock must be pre-cleared by the Chief Legal Officer.

The clawback policy is a part of the Company’s Corporate Governance Guidelines and requires the Board of Directors to review any incentive compensation that was provided to executive officers on the basis of the Company having met or exceeded specific performance goals during a performance period that is subject to a significant restatement of Company financial results. If (i) the incentive compensation would have been lower had it been based on the restated financial results

 

 

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Compensation Discussion and Analysis

 

COMPENSATION COMMITTEE REPORT

 

and (ii) the Board determines that an executive officer engaged in fraud or intentional misconduct that caused or substantially caused the need for the restatement, then the Board is required, to the extent practicable, to seek to recover, for the benefit of the Company, the portion of such compensation that would not have been earned had the incentive compensation been based on the financial results as restated.

Tax Deductibility of Compensation

Section 162(m) of the Code limits the amount of compensation paid to the NEOs that may be deducted by the Company for federal income tax purposes in any fiscal year to $1 million. Prior to the Tax Cuts and Jobs Act of 2017, certain performance-based compensation approved by the Company’s shareholders and administered by a committee composed entirely of outside directors was not subject to the $1 million deduction limit. The Tax Cuts and Jobs Act removed the performance-based compensation exception for any agreements entered into after November 2, 2017. A large portion of our executive

compensation, including our annual incentives and long-term incentive awards in the form of stock options and PSUs, were intended to qualify as performance-based compensation under Section 162(m) of the Code. Grants made after November 2, 2017, however, will no longer be subject to the performance based exception for the $1 million deduction limit under the Tax Cuts and Jobs Act of 2017.

Although the Compensation Committee has not adopted a formal policy that requires all compensation paid to the NEOs to be deductible, historically, the Compensation Committee has structured, whenever practical, compensation programs to make the compensation paid thereunder fully deductible. However, the Compensation Committee has always reserved the right to grant awards or enter into compensation arrangements under which payments were not deductible in order to promote corporate objectives and strategies that did not necessarily align with the requirements of Section 162(m) of the Code.

 

 

VI. COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management of the Company. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2018.

Eric C. Wiseman, Chair

David H. Batchelder

Angela F. Braly

Sandra B. Cochran

Richard W. Dreiling

Robert L. Johnson

 

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Compensation Tables

 

 

Compensation Tables

Summary Compensation Table

This table shows the base salary, annual incentive compensation and all other compensation paid to the NEOs. The table also shows the grant date fair value of the stock and option awards made to the NEOs.

 

Name and Principal Position

 

  

Year

 

    

Salary

($)

 

    

Bonus
($)

 

    

Stock
Awards
($)
(1)(2)

 

    

Option
Awards
($)
(1)

 

    

Non-Equity
Incentive Plan
Compensation
($)

 

    

All Other
Compensation
($)
(3)

 

    

Total

($)

 

 

Robert A. Niblock

Chairman of the Board, President

and Chief Executive Officer

    

 

2017

 

 

 

    

 

1,300,000

 

 

 

    

 

0

 

 

 

    

 

6,422,849

 

 

 

    

 

1,179,070

 

 

 

    

 

2,051,621

 

 

 

    

 

255,118

 

 

 

    

 

11,208,658

 

 

 

    

 

2016

 

 

 

    

 

1,300,000

 

 

 

    

 

0

 

 

 

    

 

6,922,556

 

 

 

    

 

2,319,098

 

 

 

    

 

1,925,716

 

 

 

    

 

202,649

 

 

 

    

 

12,670,019

 

 

 

    

 

2015

 

 

 

    

 

1,300,000

 

 

 

    

 

0

 

 

 

    

 

5,955,842

 

 

 

    

 

2,988,878

 

 

 

    

 

2,657,993

 

 

 

    

 

252,451

 

 

 

    

 

13,155,164

 

 

 

Robert F. Hull, Jr.*

Former Chief Financial Officer

    

 

2017

 

 

 

    

 

118,307

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

29,883

 

 

 

    

 

148,190

 

 

 

    

 

2016

 

 

 

    

 

769,000

 

 

 

    

 

0

 

 

 

    

 

1,755,249

 

 

 

    

 

587,887

 

 

 

    

 

559,148

 

 

 

    

 

62,774

 

 

 

    

 

3,734,058

 

 

 

     2015        748,000        0        1,468,869        736,931        801,123        74,144        3,829,067  

Marshall A. Croom**

Chief Financial Officer

    
2017
 
    
675,000
 
    
0
 
    
1,544,907
 
    
417,717
 
    
548,768
 
    
44,508
 
    
3,230,900
 

Rick D. Damron***

Chief Operating Officer

    

 

2017

 

 

 

    

 

806,000

 

 

 

    

 

0

 

 

 

    

 

2,197,144

 

 

 

    

 

403,366

 

 

 

    

 

711,311

 

 

 

    

 

70,879

 

 

 

    

 

4,188,700

 

 

 

    

 

2016

 

 

 

    

 

790,000

 

 

 

    

 

0

 

 

 

    

 

2,403,706

 

 

 

    

 

805,273

 

 

 

    

 

628,579

 

 

 

    

 

73,101

 

 

 

    

 

4,700,659

 

 

 

    

 

2015

 

 

 

    

 

790,000

 

 

 

    

 

0

 

 

 

    

 

2,068,252

 

 

 

    

 

1,037,785

 

 

 

    

 

939,073

 

 

 

    

 

80,572

 

 

 

    

 

4,915,682

 

 

 

Michael P. McDermott****

Chief Customer Officer

    
2017
 
    
675,000
 
    
0
 
    
2,107,496
 
    
605,243
 
    
595,701
 
    
46,662
 
    
4,030,102
 

Jennifer L. Weber

Chief Human Resources Officer

    

 

2017

 

 

 

    

 

561,000

 

 

 

    

 

0

 

 

 

    

 

1,567,511

 

 

 

    

 

210,604

 

 

 

    

 

456,087

 

 

 

    

 

34,884

 

 

 

    

 

2,830,086

 

 

 

    

 

2016

 

 

 

    

 

500,930

 

 

 

    

 

0

 

 

 

    

 

1,653,963

 

 

 

    

 

743,969

 

 

 

    

 

364,231

 

 

 

    

 

26,384

 

 

 

    

 

3,289,477

 

 

 

 

* Mr. Hull retired as Chief Financial Officer on March 3, 2017.

 

** Mr. Croom was promoted to Chief Financial Officer upon Mr. Hull’s retirement on March 3, 2017.

 

*** Mr. Damron retired from the position of Chief Operating Officer on February 3, 2018.

 

**** Mr. McDermott was promoted to Chief Customer Officer on October 26, 2016.

 

(1) The value of the stock and option awards presented in the table equals the grant date fair value of the awards for financial reporting purposes (excluding the effect of estimated forfeitures) computed in accordance with FASB ASC Topic 718. For financial reporting purposes, the Company determines the fair value of a stock or option award accounted for as an equity award on the grant date. The Company recognizes expense for a stock or option award over the vesting period of the award. PSUs are expensed over the vesting period based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment in the period of the change. Executives receive dividends on unvested shares of RSAs during the vesting period. Dividends are not paid or accrued on unearned PSUs. The right to receive dividends has been factored into the determination of the fair values used in the amounts presented above.

 

   See Note 9, “Accounting for Share-Based Payments,” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended February 2, 2018 for additional information about the Company’s accounting for share-based compensation arrangements, including assumptions used in calculating the grant date fair values.

 

(2) The amounts reported in this column include the sum of the grant date fair values of PSU awards and RSAs. The PSUs will be earned based on the Company’s RONCAA over a three-year performance period, and for the 2016 and 2017 PSUs, a relative TSR modifier. The PSUs are accounted for as equity awards. The 2017 stock awards amounts include the following grant date fair values of the PSUs: Mr. Niblock $5,244,780, Mr. Croom $1,127,280, Mr. Damron $1,794,315, Mr. McDermott $1,502,430 and Ms. Weber $936,960. The maximum value of the PSUs as of the grant date assuming the highest level of performance at the end of the three-year performance period would have been: Mr. Niblock $10,463,300, Mr. Croom $2,248,887, Mr. Damron $3,579,572, Mr. McDermott $2,997,266 and Ms. Weber $1,869,162.

 

 

 

44         NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2018   LOGO    


Compensation Tables

 

 

 

(3) Amounts presented consist of the following for the 2017 fiscal year:

 

   

Company Matching
Contributions to:

 

            

Cost of
Company Required
Physical Exam

($)

 

    

  Name

 

 

401(k)
Plan
($)

 

  

Benefit Restoration
Plan

($)

 

  

Reimbursement of Tax
and Financial Planning
Costs

($)

 

  

Personal Use of
Corporate Aircraft
($)

 

     

  Total  
($)

 

  Mr. Niblock

 

     

 

7,225

 

 

      

 

129,867

 

 

      

 

9,304

 

 

      

 

103,908

 

 

      

 

4,814

 

 

      

 

255,118

 

 

  Mr. Hull

 

     

 

7,704

 

 

      

 

22,179

 

 

      

 

0

 

 

      

 

0

 

 

      

 

0

 

 

      

 

29,883

 

 

  Mr. Croom

 

     

 

2,362

 

 

      

 

38,846

 

 

      

 

1,200

 

 

      

 

0

 

 

      

 

2,100

 

 

      

 

44,508

 

 

  Mr. Damron

 

     

 

8,918

 

 

      

 

52,039

 

 

      

 

750

 

 

      

 

0

 

 

      

 

9,172

 

 

      

 

70,879

 

 

  Mr. McDermott

 

     

 

9,391

 

 

      

 

23,171

 

 

      

 

12,000

 

 

      

 

0

 

 

      

 

2,100

 

 

      

 

46,662

 

 

  Ms. Weber

 

     

 

9,578

 

 

      

 

19,257

 

 

      

 

6,049

 

 

      

 

0

 

 

      

 

0

 

 

      

 

34,884

 

 

All amounts presented above, other than the amount for personal use of corporate aircraft, equal the actual cost to the Company of the particular benefit or perquisite provided. The amount presented for personal use of corporate aircraft is equal to the incremental cost to the Company of such use. Incremental cost includes fuel, landing and ramp fees and other variable costs directly attributable to personal use. Incremental cost does not include an allocable share of the fixed costs associated with the Company’s ownership of the aircraft.

 

    LOGO   NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2018         45


Compensation Tables

 

 

Grants of Plan-Based Awards

This table presents the potential annual incentive awards the NEOs were eligible to earn in fiscal 2017, the stock options, RSAs and PSUs awarded to the executives in fiscal 2017 and the grant date fair value of those awards.

 

 Name   Grant
Date
    Date of
Committee
Action
    Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
   

Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)

    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)
    Exercise or
Base Price of
Option
Awards
($/Sh)
   

Grant
Date Fair
Value of
Stock
and
Option

Awards

($)

 
      Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

 Mr. Niblock

 

       

 

455,000

 

 

 

   

 

2,600,000

 

 

 

   

 

5,200,000

 

 

 

             
 

 

 

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

 

         

 

19,202

 

 

 

   

 

57,320

 

 

 

   

 

114,353

 

 

 

         

 

5,244,780

 

 

 

   

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

                 

 

60,800

 

 

 

   

 

82.21

 

 

 

   

 

1,179,070

 

 

 

     

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

                                                   

 

14,330

 

 

 

                   

 

1,178,069

 

 

 

 Mr. Hull(5)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 Mr. Croom

 

       

 

236,250

 

 

 

   

 

607,500

 

 

 

   

 

1,215,000

 

 

 

             
 

 

 

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

         

 

4,127

 

 

 

   

 

12,320

 

 

 

   

 

24,578

 

 

 

         

 

1,127,280

 

 

 

 

 

 

 

 

4/1/2017

 

 

 

 

   

 

3/23/2017

 

 

 

                 

 

21,540

 

 

 

   

 

82.21

 

 

 

   

 

417,717

 

 

 

     

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

                                                   

 

5,080

 

 

 

                   

 

417,627

 

 

 

 Mr. Damron

 

       

 

282,100

 

 

 

   

 

806,000

 

 

 

   

 

1,612,000

 

 

 

             
 

 

 

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

 

         

 

6,569

 

 

 

   

 

19,610

 

 

 

   

 

39,121

 

 

 

         

 

1,794,315

 

 

 

   

 

4/1/2017

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

                 

 

20,800

 

 

 

   

 

82.21

 

 

 

   

 

403,366

 

 

 

   

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

                                                   

 

4,900

 

 

 

                   

 

402,829

 

 

 

 Mr. McDermott

 

       

 

236,250

 

 

 

   

 

675,000

 

 

 

   

 

1,350,000

 

 

 

             
 

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

         

 

5,500

 

 

 

   

 

16,420

 

 

 

   

 

32,757

 

 

 

         

 

1,502,430

 

 

 

 

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

                 

 

31,210

 

 

 

   

 

82.21

 

 

 

   

 

605,243

 

 

 

   

 

 

 

 

4/1/2017

 

 

 

 

 

 

 

 

 

3/23/2017

 

 

 

 

                                                   

 

7,360

 

 

 

                   

 

605,066

 

 

 

 Ms. Weber

 

       

 

196,350

 

 

 

   

 

504,900

 

 

 

   

 

1,009,800

 

 

 

             
   

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

         

 

3,430

 

 

 

   

 

10,240

 

 

 

   

 

20,428

 

 

 

         

 

936,960

 

 

 

   

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

                 

 

10,860

 

 

 

   

 

82.21

 

 

 

   

 

210,604

 

 

 

   

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

               

 

5,110

 

 

 

       

 

420,093

 

 

 

     

 

4/1/2017

 

 

 

   

 

3/23/2017

 

 

 

                                                   

 

2,560

 

 

 

                   

 

210,458

 

 

 

 

(1) The executives are eligible to earn annual incentive compensation under the Company’s annual incentive plan for each fiscal year based on the Company’s achievement of one or more performance measures established at the beginning of the fiscal year by the Compensation Committee. For the 2017 fiscal year ended February 2, 2018, the performance measures selected by the Compensation Committee were the Company’s EBIT (weighted 60% for the CEO and all other NEOs), sales (weighted 25% for the CEO and all other NEOs) and strategic initiatives (weighted 15% for the CEO and all other NEOs). The performance levels for the performance measures, the Company’s actual performance and the amounts earned by the NEOs for the 2017 fiscal year are shown on page 39. The amounts earned by the executives are also reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 44.

 

(2) The PSUs reported in this column are earned based on the Company’s RONCAA over a three-year performance period and includes a relative TSR modifier. No dividends will accrue or be paid on the PSUs during the three-year performance period. The terms of the PSUs are described in more detail on page 40.

 

(3) The RSAs vest on the third anniversary of the grant date or, if earlier, the date the executive terminates employment due to death or disability or, in the case of Mr. Niblock, in the event of retirement with the approval of the Board. For other executives who meet the retirement provisions of the RSA grant agreements, their awards will vest upon retirement but will not be available to the executive until the original vesting date of the award. Retirement for this purpose is defined as termination of employment with the approval of the Board on or after the date the executive has satisfied an age and service requirement, provided the executive has given the Board advance notice of such retirement. Messrs. Niblock and Croom have satisfied the age and service requirement for retirement specified in their award agreements. Mr. Damron satisfied the age, service and notification requirement for retirement specified in his award agreements and his retirement was approved by the Board, therefore his unvested awards vested upon his retirement and the shares will be available to him on the original vesting dates of his awards. Mr. McDermott and Ms. Weber will satisfy the age and service requirement for retirement once the executive’s age in addition to years of service equals at least 70; provided the executive is at least 55 years old. Ms. Weber received an additional 5,110 shares of RSAs to replace some of the equity value she forfeited at her previous employer. Mr. Croom received 6,540 PSUs, 3,640 RSAs and 15,410 options related to his promotion to Chief Financial Officer. Mr. McDermott received 10,640 PSUs, 5,920 RSAs and 25,080 options related to his promotion to Chief Customer Officer.

 

46         NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2018   LOGO    


Compensation Tables

 

 

 

(4) All options have a 10-year term and an exercise price equal to the closing price of the Common Stock on the grant date. The options vest in three annual installments on each of the first three anniversaries of the grant date or, if earlier, the date the executive terminates employment due to death or disability or, in the case of Mr. Niblock, in the event of retirement with approval of the Board, and remain exercisable until their expiration dates. The options granted to Messrs. Croom and McDermott and Ms. Weber will become exercisable in the event of retirement in accordance with the original three-year vesting schedule and remain exercisable until their expiration dates. Mr. Damron satisfied the retirement requirements under his option agreement.

 

(5) Mr. Hull retired as Chief Financial Officer on March 3, 2017.

Outstanding Equity Awards at Fiscal Year-End

This table presents information about unearned or unvested stock and option awards held by the NEOs on February 2, 2018.

 

    Option Awards           Stock Awards  

  Name

   





Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
 
 
 

 
 
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
   


Option
Exercise
Price
($)
 
 

 
   

Option
Expiration
Date
 
 
 
     





Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1)
 
 
 
 
 
 
 
   





Market Value
of Shares
or Units
of Stock That
Have Not
Vested
($)(2)
 
 
 
 
 

 
   








Equity Incentive
Plan Awards;
Number
of Unearned
Shares,
Units or Other
Rights
That Have Not
Vested
(#)(3)
 
 
 
 
 
 
 
 

 
   







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

 

  Mr. Niblock

    327,000             —     38.38           3/1/2023         89,910           9,125,865           206,235               20,932,853      
    257,000             —     53.13           9/15/2024            
    98,287         49,143(4)     69.44           9/15/2025            
    49,074         98,146(5)     71.31           9/15/2026            
      —         60,800(6)     82.21           4/1/2027                                          

  Mr. Hull(7)

    —             —     —                   —           —           —               —      
    —             —     —                      
    —             —     —                      
    —             —     —                      
      —             —     —                                                    

  Mr. Croom

    27,000             —     38.38           3/1/2023         12,040           1,222,060           29,090               2,952,635      
    19,000             —     53.13           9/15/2024            
    8,174           4,086(4)     69.44           9/15/2025            
    5,124         10,246(5)     71.31           9/15/2026            
      —         21,540(6)     82.21           4/1/2027                                          

  Mr. Damron

    59,333             —     53.13           9/15/2024         31,150           3,161,725           71,216               7,228,424      
    34,127         17,063(4)     69.44           9/15/2025            
    17,040         34,080(5)     71.31           9/15/2026            
      —         20,800(6)     82.21           4/1/2027                                          

  Mr. McDermott

    30,000             —     53.13           9/15/2024         16,710           1,696,065           35,413               3,594,420      
    11,287           5,643(4)     69.44           9/15/2025            
    6,660         13,320(5)     71.31           9/15/2026            
      —         31,210(6)     82.21           4/1/2027                                          

  Ms. Weber

    6,030         12,060(8)     76.50           4/1/2026         18,760           1,904,140           29,654               3,009,881      
    8,817         17,633(5)     71.31           9/15/2026            
      —         10,860(6)     82.21           4/1/2027                                          

 

(1) The unvested stock awards vest as follows:

 

     9/15/2018      4/1/2019      9/15/2019      4/1/2020      Total  

  Mr. Niblock

     43,680               31,900        14,330        89,910  

  Mr. Hull

                                  

  Mr. Croom

     3,630               3,330        5,080        12,040  

  Mr. Damron

     15,170               11,080        4,900        31,150  

  Mr. McDermott

     5,020               4,330        7,360        16,710  

  Ms. Weber

            5,360        5,730        7,670        18,760  

 

(2) Amount is based on the closing market price of the Company’s Common Stock on February 2, 2018 of $101.50.

 

(3)

The number of unearned PSUs in this column is based on the Company’s performance during the 2015, 2016 and 2017 fiscal years and equals (i) the target number of PSUs that may be earned based on the Company’s RONCAA during the 2015 through 2017 fiscal year period, (ii) the

 

    LOGO   NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2018         47


Compensation Tables

 

 

  maximum number of PSUs that may be earned based on the Company’s RONCAA during the 2016 through 2018 fiscal year period after applying the target relative TSR modifier and (iii) the target number of PSUs that may be earned based on the Company’s RONCAA during the 2017 through 2019 fiscal year period after applying the maximum relative TSR modifier. No dividends are paid or accrued on unearned PSUs.

 

(4) These options vest on September 15, 2018.

 

(5) These options vest in two annual installments on September 15, 2018 and September 15, 2019.

 

(6) These options vest in three annual installments on April 1, 2018, April 1, 2019 and April 1, 2020.

 

(7) Mr. Hull‘s unvested equity awards were canceled upon his retirement and he exercised all vested options prior to February 2, 2018.

 

(8) These options vest in two annual installments on April 1, 2018 and April 1, 2019.

Option Exercises and Stock Vested at Fiscal Year-End

This table presents information about stock options exercised by the named executive officers and the number and the value of the named executive officers’ stock awards that vested during the 2017 fiscal year.

 

     Option Awards             Stock Awards  
     Number of Shares
Acquired on Exercise
     Value Realized
on Exercise
            Number of Shares
Acquired on Vesting
     Value Realized
on Vesting
 
  Name    (#)      ($)             (#)      ($)  

  Mr. Niblock

     447,000        23,551,052                 146,000        11,766,340  

  Mr. Hull

     345,451        16,316,620                 22,500        1,849,725  

  Mr. Croom

     12,700        682,752                 10,000        805,220  

  Mr. Damron

                            51,500        4,149,415  

  Mr. McDermott

                            11,500        915,875  

  Ms. Weber

                                    

Nonqualified Deferred Compensation

The Company sponsors three non-qualified deferred compensation plans for the benefit of senior management employees: the Benefit Restoration Plan (the “BRP”), the Cash Deferral Plan (the “CDP”) and the Deferred Compensation Program (the “DCP”).

 

Benefit Restoration Plan

The BRP allows a senior management employee to defer receipt of the difference between (i) 6% of the sum of base salary and annual incentive plan compensation and (ii) the amount the employee is allowed to contribute to the Company’s tax-qualified 401(k) Plan. The deferred amounts are credited to the employee’s BRP account. The Company makes matching contributions to the employee’s BRP account under the same matching contribution formula that applies to employee contributions to the 401(k) Plan. An employee’s account under the BRP is deemed to be invested in accordance with the employee’s election in one or more of the investment options available under the 401(k) Plan, except an employee may not elect to have any amounts deferred under the BRP after February 1, 2003 to be deemed to be invested in Common Stock. An employee may elect to change the investment of the employee’s BRP account as frequently as each business day. An employee’s account under the BRP is paid to the employee in cash after the end of the plan year in which the employee terminates employment but no earlier than 180 days after the employee’s termination of employment.

 

Cash Deferral Plan

The CDP allows a senior management employee to elect to defer receipt of up to 80% of his or her base salary, annual incentive plan compensation and certain other bonuses. The deferred amounts are credited to the employee’s CDP account. The Company does not make any contributions to the CDP. An employee’s CDP account is deemed to be invested in accordance with the employee’s election in one or more of the investment options available under the 401(k) Plan, except an employee may not elect to have any amounts deferred under the CDP to be deemed to be invested in Common Stock. An employee may elect to change the investment of the employee’s CDP account as frequently as each business day. An employee’s account under the CDP is paid to the employee in cash after the end of the plan year in which the employee terminates employment but no earlier than 180 days after the employee’s termination of employment. In addition, an employee may elect to have a portion of the employee’s deferrals segregated into a separate sub-account that is paid at a date elected by the employee so long as the date is at least five years from the date of the employee’s deferral election.

 

 

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Compensation Tables

 

 

 

Deferred Compensation Program

Prior to January 1, 2009, the DCP required the deferral of any long-term incentive compensation payable to a NEO to the extent the compensation would not be deductible for federal income tax purposes under Section 162(m) of the Code. The DCP also allowed executives to elect prior to January 1, 2005 to defer receipt of stock awards and gains from the exercise of stock options. The Company does not make any contributions to the DCP invested in shares of Common Stock. Any dividends that would have been paid on shares of Common Stock credited to an executive’s DCP account are deemed to be reinvested in additional shares of Common Stock. The

aggregate earnings on an executive’s DCP account shown in the table below are attributable solely to fluctuations in the value of Common Stock and dividends paid with respect to Common Stock. Shares of Common Stock credited to an executive’s DCP account that are attributable to mandatory deferrals are paid to the executive when the distribution is fully deductible by the Company for federal income tax purposes. Shares of Common Stock credited to an executive’s DCP account that are attributable to pre-2005 elective deferrals are paid in accordance with the executive’s election in a lump sum or five annual installments after the executive’s termination of employment or attainment of a specified age.

 

 

The following table presents information about the amounts deferred by the NEOs under the Company’s three deferred compensation plans.

 

  Name

 

  

Plan
Name

 

  

Executive
Contributions in
Last FY

($)(1)

 

    

Company
Contributions in
Last FY

($)(2)

 

    

 

Aggregate
Earnings in
Last FY

($)(3)

 

    

Aggregate
Withdrawals/
Distributions
($)

 

    

Aggregate  
Balance at  
Last FYE
($)(4)

 

 

Mr. Niblock

   BRP

 

    

 

183,143

 

 

 

    

 

129,868

 

 

 

    

 

1,489,539

 

 

 

    

 

0

 

 

 

    

 

9,845,864

 

 

 

   CDP

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

     DCP

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

9,944,519

 

 

 

    

 

0

 

 

 

    

 

34,074,011

 

 

 

Mr. Hull

   BRP

 

    

 

31,311

 

 

 

    

 

22,179

 

 

 

    

 

330,644

 

 

 

    

 

3,132,772

 

 

 

    

 

0

 

 

 

   CDP

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

     DCP

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

467,510

 

 

 

    

 

0

 

 

 

    

 

1,601,889

 

 

 

Mr. Croom

   BRP