DEF 14A 1 d687530ddef14a.htm DEF 14A DEF 14A
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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

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  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)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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LOGO

 

2019

NOTICE OF ANNUAL MEETING

OF SHAREHOLDERS & PROXY STATEMENT


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LOGO

 

 

April 18, 2019

Dear Fellow Shareholders:

We are pleased to invite you to attend our 2019 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Time, on Friday, May 31, 2019 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 2019 Annual Meeting of Shareholders and Proxy Statement.

Your vote is important. Regardless of whether you plan to attend the meeting, we 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, and thank you for your investment in Lowe’s.

Sincerely,

 

LOGO   LOGO

Richard W. Dreiling

Chairman of the Board

 

Marvin R. Ellison

President and Chief Executive Officer

 

 

 


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LOWE’S COMPANIES, INC.

1000 Lowes Boulevard

Mooresville, North Carolina 28117

(704) 758-1000

Notice of 2019 Annual Meeting of Shareholders

April 18, 2019

The 2019 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, May 31, 2019 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 12 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 2018;

 

3.

To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2019; and

 

4.

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. 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 22, 2019 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

Executive Vice President, General Counsel and Corporate Secretary

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Shareholders To Be Held on May 31, 2019:

The Notice of 2019 Annual Meeting of Shareholders, Proxy Statement and

2018 Annual Report to Shareholders are available at www.proxyvote.com.


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PROXY SUMMARY

 

 

 


 

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

 

$17.3 Billion   17%   $5.6 Billion

SHARES REPURCHASED UNDER OUR SHARE

REPURCHASE PROGRAM IN THE LAST FIVE YEARS

 

2018 INCREASE IN

ANNUAL DIVIDEND

 

DIVIDENDS PAID IN THE

LAST FIVE YEARS

 

 

 

LOGO

 

This summary includes certain financial, 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, which are focused on driving operational excellence and better service to our customers; 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;

 

  11 of 12 Director Nominees are Independent;

 

  Audit, Compensation, Nominating and Governance, Sustainability and Technology Committees are comprised only of Independent Directors;

 

  Regular Executive Sessions of Independent Directors;

 

  Annual Board, Committee, Individual Director and CEO Evaluations;

 

  Stock Ownership Guidelines for Executive Officers and Non-Employee Directors;

 

  Shareholders may call Special Meetings; and

 

  Majority Voting for Directors and Declassified Board.
 

 

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FISCAL 2018 FINANCIAL AND OPERATIONAL HIGHLIGHTS

$6.2

Billion

  $1.5

Billion

  $3.0

Billion

CASH FLOW FROM OPERATIONS   DIVIDENDS PAID   REPURCHASED UNDER

THE SHARE REPURCHASE PROGRAM

 

 

 

Fiscal 2018 was a rebalancing year in which we took the necessary steps to begin building a sustainable foundation from which to drive long-term value creation. We have a great opportunity to capitalize on a healthy home improvement sector and a tremendous brand by focusing on retail fundamentals and simplifying our business.

We are focused on generating long-term profitable growth and substantial returns for our shareholders. This means taking a balanced approach to capital allocation with a focus on making strategic investments to grow our business while returning excess value to shareholders in the form of dividends and share repurchases. Given our strong cash generation capabilities and improving outlook for the Company, our Board of Directors authorized an incremental $10 billion in share repurchases.

                      
     $71 BILLION IN SALES            
    

+3.9% SALES YOY*

+5.2% AVERAGE TICKET YOY*

-1.3% TRANSACTIONS YOY*

 

        
    

$1.85 DIVIDENDS/
SHARE

+17.1% DIVIDENDS YOY

 

      
    

$2.84 DILUTED EPS

-30.5% DILUTED EPS

YOY

  

$5.11 ADJUSTED EPS*

+16.4% ADJUSTED EPS* 

YOY

 
   
    

YOY = Year over Year Comparison

 

* Adjusted diluted earnings per common share is a non-GAAP financial measure. Refer to Appendix B for a reconciliation of non-GAAP measures. Fiscal 2017 diluted earnings per share was $4.09 and adjusted diluted earnings per share was $4.39.

 

        
                      
 

 

2019 PROPOSALS    Board
Recommends
     

 

Proposal 1: Election of Directors

 

    

 

 

 

 

LOGO

 

 

 

          

 

Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation

 

    

 

 

 

 

LOGO

 

 

 

          

 

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

 

    

 

 

 

 

LOGO

 

 

 

          

 

LOGO

 

 

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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      16  
Corporate Governance Guidelines and Code of Business Conduct and Ethics      16  
Director Independence      16  
Compensation of Directors      17  
Board Meetings, Committees of the Board and Board Leadership Structure      19  
Security Ownership of Certain Beneficial Owners and Management      25  
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  
2018 Compensation Actions      37  
Other Compensation Policies      43  
Compensation Committee Report      44  
Compensation Tables      45  
Compensation Committee Interlocks and Insider Participation      58  
Equity Compensation Plan Information      59  
Related Person Transactions      60  
Policy and Procedures for Review, Approval or Ratification of Related Person Transactions      60  
Approved Related Person Transactions      60  
Audit Matters      61  
Report of the Audit Committee      61  
Fees Paid to the Independent Registered Public Accounting Firm      62  
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation      63  
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm      64  
Additional Information      65  
Delivery of Proxy Materials      65  
Electronic Delivery of Proxy Materials      65  
Shareholder Proposals for the 2020 Annual Meeting      65  
Annual Report      66  
Appendix A: Categorical Standards for Determination of Director Independence      A-1  
Appendix B: Reconciliation of Non-GAAP Financial Measures      B-1  
 

 

 

    LOGO    


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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 2019 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held at 10:00 a.m., Eastern Time, on Friday, May 31, 2019 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 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 18, 2019, 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 2018 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 three proposals scheduled to be voted on at the Annual Meeting:

 

  the election of the 12 director candidates nominated by the Board;

 

  the approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2018; and

 

  the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2019.

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 2018; and
 

 

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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 2019.

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 22, 2019;

 

  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 22, 2019 as the record date. As of the record date, 796,325,174 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, General Counsel and Corporate Secretary, at Lowe’s Companies, Inc., 1000 Lowes 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.

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

 

 

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General Information

 

 

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 and the advisory vote to approve the Company’s named executive officer compensation in fiscal 2018 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 2019 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 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). The results of the advisory vote will not be binding on the Company, the Compensation Committee or the Board. 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 2019 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 and 3, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2018 and the proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2019, 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 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 2019 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.

 

 

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Shareholder Engagement

 

 

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 2018, 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 2018, 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:

 

LOGO

 

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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.

 

LOGO

 

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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 12 candidates nominated by the Board of Directors for election as directors.

The Board has nominated the 12 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 2020 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. Mr. Marvin R. Ellison was appointed to the Board effective in July 2018. The other current directors were elected to the Board at the 2018 Annual Meeting of Shareholders. Mr. Marshall O. Larsen will retire after 15 years of service on the Board and will not stand for re-election at the 2019 Annual Meeting of Shareholders.

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 longer tenured directors, including our Chairman, 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 12 nominees named in this Proxy Statement.

 

 

 

LOGO    The Board of Directors unanimously recommends a vote “FOR” the election of each of the 12 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 12 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, 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 2020 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.

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.

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. Larson’s retirement and the election of our director nominees, the Board will be reduced to twelve directors and two-thirds of the directors will 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 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 consideration by

 

 

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Table of Contents

Proposal 1: Election of Directors

 

IDENTIFYING AND EVALUATING DIRECTOR NOMINEES

 

 

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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 independent directors may serve from five to four, effective June 2018, and limited management directors to service on two public company boards, effective August 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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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

DIRECTOR NOMINEES

 

 

RAUL ALVAREZ

    

 

LOGO  

Director Since: 2010

 

Age: 63

 

Lowe’s Board Committees:

•   Audit, Chair

•   Sustainability

•   Technology

 

Current Public Company Directorships:

•   Dunkin’ Brands Group, Inc.

•   Eli Lilly and Company

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.

Mr. Alvarez served on the board of Realogy Holdings Corp. from August 2013 to May 2018.

 

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, multi-national operations and strategic planning.

 

DAVID H. BATCHELDER

  

 

        

 

LOGO  

Director Since: 2018

 

Age: 69

 

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. Prior to working at Mesa, 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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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

ANGELA F. BRALY

    

 

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Director Since: 2013

 

Age: 57

 

Lowe’s Board Committees:

•   Compensation

•   Sustainability, Chair

•   Technology

 

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: 60

 

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 25 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 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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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

LAURIE Z. DOUGLAS

    

 

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Director Since: 2015

 

Age: 55

 

Lowe’s Board Committees:

•   Audit

•   Nominating and Governance

•   Technology, Chair

 

Ms. Douglas has served as Senior Vice President, Chief Information Officer and Chief Digital 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 2019. From 2006 through 2018, she was Senior Vice President, Chief Information Officer and Chief Security Officer of Publix Super Markets. 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

Ms. Douglas brings to Lowe’s Board many years of setting the enterprise technology, digital and security visions and driving the related implementations for two Fortune 500 companies. Ms. Douglas’ expertise spans broad IT disciplines, including application development and infrastructure, digital and mobile, omnichannel, data security and regulatory compliance. Ms. Douglas is a highly respected technology leader focused on driving shareholder value with technology solutions that foster premier customer service, operational excellence and profitable growth and who has financial management responsibility for IT investments. Ms. Douglas also has relevant experience with emerging technologies to ensure ongoing relevance as technology changes at an unprecedented rate.

 

RICHARD W. DREILING

    

 

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Director Since: 2012

 

Age: 65

 

Current Public Company Directorships:

•   Aramark

•   Kellogg Company

•   PulteGroup, Inc.

Mr. Dreiling serves as the independent Chairman of the Board of Directors of Lowe’s. 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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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

MARVIN R. ELLISON

    

 

LOGO  

Director Since: 2018

 

Age: 54

 

Current Public Company Directorships:

•   FedEx Corporation

Mr. Ellison has served as President and Chief Executive Officer of Lowe’s since July 2018. Mr. Ellison previously served as Chief Executive Officer of J. C. Penney Company, Inc., a department store retailer, from August 2015 to May 2018 and Chairman of the Board from August 2016 to May 2018. He served as President of J. C. Penney from November 2014 to July 2015. Mr. Ellison served as Executive Vice President-U.S. Stores of The Home Depot, Inc., a home improvement retailer, from August 2008 to October 2014. He also served in a variety of operations roles at The Home Depot, including as President-Northern Division from 2006 to 2008, Senior Vice President-Logistics from 2005 to 2006, Vice President-Logistics from 2004 to 2005, and Vice President-Loss Prevention from 2002 to 2004. From 1987 to 2002, Mr. Ellison served in a variety of operational roles with Target Corporation. Mr. Ellison served as a director of H&R Block, Inc. from 2011 to 2014 and a director of J. C. Penney Company, Inc. from 2014 to 2018. Mr. Ellison also serves on the boards of the Retail Industry Leaders Association and the National Retail Federation.

 

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

Mr. Ellison has more than 30 years of leadership and operational experience in the retail industry, including expertise in managing a large network of stores and employees as well as global logistics networks. He brings extensive experience in the home improvement industry, having spent 12 years in senior-level operations roles with The Home Depot, where he oversaw U.S. sales, operations, install services and pro strategic initiatives, and improved customer service and efficiency across the organization to serve both do-it-yourself and pro customers.

 

JAMES H. MORGAN

    

 

LOGO  

Director Since: 2015

 

Age: 71

 

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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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

BRIAN C. ROGERS

    

 

LOGO  

Director Since: 2018

 

Age: 63

 

Lowe’s Board Committees:

•  Compensation

•  Nominating and Governance

 

Current Public Company Directorships:

•   United Technologies Corporation

•   T. Rowe Price Group, Inc. (until April 2019)

 

Mr. Rogers is currently the Non-Executive Chairman of T. Rowe Price Group, Inc., a global investment management organization and will retire from that position and the board on April 25, 2019. 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.

 

BERTRAM L. SCOTT

  

 

        

 

LOGO  

Director Since: 2015

 

Age: 68

 

Lowe’s Board Committees:

•  Audit

•  Nominating and Governance

 

 

Current Public Company Directorships:

•  AXA Equitable Holdings, Inc. (effective March 2019)

•   Becton, Dickinson and Company

 

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 was appointed to the board of AXA Equitable Holdings, Inc. (“EQH”) effective March 2019 and continues to serve on the boards of AXA Equitable Life Insurance Company and MONY Life Insurance Company of America, which are wholly-owned subsidiaries of EQH.

 

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.

 

 

 

 

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Table of Contents

Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

 

LISA W. WARDELL

    

 

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Director Since: 2018

 

Age: 49

 

Lowe’s Board Committees:

•  Audit

•  Sustainability

•  Technology

 

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.

 

ERIC C. WISEMAN

  

 

        

 

LOGO  

Director Since: 2011

 

Age: 63

 

Lowe’s Board Committees:

•  Compensation, Chair

•  Sustainability

•  Technology

 

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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Table of Contents

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 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 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 substantial 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 2019, the Board, 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 nominees 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. Ellison’s), the Board determined that they all fall well below the thresholds in the Categorical Standards. Consequently, the Board determined that each of Messrs. Alvarez, Batchelder, Dreiling, Morgan, Rogers, Scott, Wiseman, Larsen and Robert L. Johnson and Mses. 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, Sustainability and Technology 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. Mr. Ellison, the Company’s 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

 

Compensation Philosophy

The Compensation Committee reviews director compensation at least bi-annually and recommends changes to the Board for approval. The Compensation Committee assesses director compensation to align with Board and committee requirements and for market competitiveness against the Company’s Peer Group and Survey Group as described on page 36.

Lowe’s philosophy 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. To implement this philosophy, we target a split of one-third cash and two-thirds equity, with total target compensation at the median of the market. 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, conducting store visits and participating in other corporate functions. No perquisites are provided to our non-employee directors.

Annual Retainer Fees

For fiscal 2018, each non-employee director was paid an annual retainer of $90,000. Our directors do not receive any meetings fees and do not receive any additional compensation for committee service other than for serving as a committee chair. 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. For fiscal 2019, the Chairs of the Sustainability Committee and Technology Committee will each receive an additional $15,000. The former Lead Director received an additional $30,000, prorated for his time served in this position. The Chairman received an additional $70,000, prorated for his time served in this position. All annual retainer and chair fees are paid quarterly.

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 2018, each non-employee director received an annual equity award of $175,000. The Chairman received an additional equity award of $140,000. In accordance with the Company’s long-term incentive plan, the value of all equity awards granted to a non-employee director in any fiscal year 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, Chairman 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 2018 Compensation

The following table shows the compensation paid to each non-employee director who served on the Board in fiscal 2018:

 

Name

  

 

Fees Earned or

Paid in Cash

($)

  

Stock

Awards

($)(1)

  

Total  

($)  

Raul Alvarez

    

 

115,000

    

 

182,077

    

 

297,077  

David H. Batchelder

    

 

90,000

    

 

182,077

    

 

272,077  

Angela F. Braly

    

 

105,000

    

 

182,077

    

 

287,077  

Sandra B. Cochran

    

 

90,000

    

 

182,077

    

 

272,077  

Laurie Z. Douglas

    

 

90,000

    

 

182,077

    

 

272,077  

Richard W. Dreiling

    

 

130,833

    

 

325,822

    

 

456,655  

Robert L. Johnson(2)

    

 

45,000

    

 

0

    

 

45,000  

Marshall O. Larsen

    

 

117,583

    

 

182,077

    

 

299,660  

James H. Morgan

    

 

90,000

    

 

182,077

    

 

272,077  

Brian C. Rogers

    

 

67,500

    

 

182,077

    

 

249,577  

Bertram L. Scott

    

 

90,000

    

 

182,077

    

 

272,077  

Lisa W. Wardell

    

 

90,000

    

 

182,077

    

 

272,077  

Eric C. Wiseman

    

 

110,000

    

 

182,077

    

 

292,077  

 

(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 1,900 deferred stock units granted to each non-employee director and an additional 1,500 deferred stock units granted to the Chairman of the Board in fiscal 2018. See Note 12, “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 1, 2019 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.

 

(2)

Mr. Johnson retired from the Board on June 1, 2018 and did not receive a grant of deferred share units in 2018.

The following table shows the number of deferred stock units held by each non-employee director as of February 1, 2019:

 

Name

  

Deferred

Stock

Units(#)

 

Raul Alvarez

  

 

28,628

 

David H. Batchelder

  

 

1,918

 

Angela F. Braly

  

 

11,980

 

Sandra B. Cochran

  

 

6,175

 

Laurie Z. Douglas

  

 

8,518

 

Richard W. Dreiling

  

 

23,499

 

Marshall O. Larsen

  

 

59,921

 

James H. Morgan

  

 

8,518

 

Brian C. Rogers

  

 

1,918

 

Bertram L. Scott

  

 

6,175

 

Lisa W. Wardell

  

 

1,918

 

Eric C. Wiseman

  

 

21,984

 

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 is counted for purposes of determining a director’s compliance with the stock ownership requirement. 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 2018, the Board held seven 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 2018, with the exception of Mr. Johnson who attended 73% of the meetings of the Board and committees during the time he served.

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 Chairman or, if applicable, the Lead Director presides over these executive sessions and, in the Chairman’s or, if applicable, 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 except Messrs. Johnson and Wiseman, whose absences were excused.

Annual Evaluation of the Board, Committees and Individual Directors

The Board 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 Chairman of the Board discusses the results of the individual evaluations with each director. 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, or if the Chairman is not an independent director, then a Lead Director, who must be an independent director, will be elected by the independent directors annually at the meeting of the Board 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 separate Chairman and Chief Executive Officer affords Mr. Ellison, as the newly appointed Chief Executive Officer, the opportunity to focus his time and energy on managing our business and allows Mr. Dreiling, our Chairman, to devote his time and attention to matters of Board oversight and governance. The Board, however, recognizes that no single leadership model is right for all companies and at all times, and the Board will review its leadership structure as appropriate (at least on an annual basis) to ensure it continues to be in the best interests of the Company and our shareholders.

 

 

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Table of Contents

Information About the Board of Directors and Committees of the Board

 

BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

 

ROLE OF THE INDEPENDENT CHAIRMAN

 

The independent Chairman of the Board:

 

   

Presides at all meetings of the Board, including executive sessions of the independent directors;

 

   

Presides at all shareholder meetings;

 

   

Sets the agenda for executive sessions of independent directors;

 

   

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

 

   

Has the authority to call meetings of the Board and independent directors;

 

   

Facilitates effective communication between the Board and shareholders and shall be available for consultation and direct communication with major shareholders;

 

   

Leads the evaluation process for individual directors, committees and the Board;

 

   

Works with the Chair of the Nominating and Governance Committee in an annual performance review of the CEO; and

 

   

Serves as the contact person for interested parties to communicate directly with the Independent Directors.

Lowe’s independent directors appointed Richard W. Dreiling to serve as Chairman of the Board effective July 2, 2018. Mr. Dreiling joined the Board in 2012 and brings more than 40 years of retail industry experience at all operating levels. As Chairman and Chief Executive Officer of a publicly traded retail company prior to his retirement, Mr. Dreiling developed strong executive leadership and strategic management skills in the retail industry, and he has a track record of enhancing operational effectiveness to yield value for shareholders.

 

ROLE OF THE LEAD DIRECTOR

 

The Lead Director, if appointed:

 

   

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

 

   

Serves as a liaison between the Chairman and independent directors;

 

   

Approves meeting agendas for the Board;

 

   

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

 

   

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

 

   

Will be available for consultation and direct communication with major shareholders.

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

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. Upon the appointment of Mr. Ellison as President and Chief Executive Officer and Mr. Dreiling as Chairman of the Board, both effective July 2, 2018, Marshall O. Larsen ceased serving as Lead Director.

 

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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

 

 

LOGO

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 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

 

 

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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

 

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’s 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 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. The 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 mitigating them. During the presentation, the directors actively discuss with the Chief Financial Officer 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 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.

Although management has primary responsibility for managing risk, the Board 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 General Counsel and Chief Compliance Officer. The Sustainability Committee identifies, evaluates and monitors the sustainability, environmental and corporate responsibility trends, issues, risks and concerns that could affect the Company’s business activities and performance, including reputational risk. 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 role of the Board’s Audit, Sustainability, Nominating and Governance, Compensation and Technology 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 2018 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 by sending a written communication addressed to the Board or to any member individually in care

 

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

of Lowe’s Companies, Inc., 1000 Lowes Boulevard, Mooresville, North Carolina 28117. Shareholders and other interested parties wishing to communicate with Mr. Dreiling, as Chairman, or with the independent directors as a group may do so by sending a written communication addressed to Mr. Dreiling, 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 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, to the Chairman or to the Chair of the committee of the Board 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 current standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Sustainability Committee and the Technology Committee. In May 2018, the Board dissolved the Executive Committee. In November 2018, the Board approved the creation of the Sustainability Committee and Technology Committee and the dissolution of 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:

 

Audit Committee Compensation Committee Nominating and Governance Committee Public Policy Committee Executive Committee Sustainability Committee Technology Committee

 

🌑  Member

             

Pre November 2018

 

Post November 2018

    LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Raul Alvarez

  Chair           🌑   🌑   🌑   🌑

David H. Batchelder

      🌑   🌑                

Angela F. Braly

      🌑       Chair   🌑   Chair   🌑

Sandra B. Cochran

      🌑                    

Laurie Z. Douglas

  🌑       🌑               Chair

Richard W. Dreiling

                           

Robert L. Johnson

  🌑       🌑                

Marshall O. Larsen

  🌑       Chair       🌑        

James H. Morgan

  🌑       🌑                

Robert A. Niblock

                  Chair        

Brian C. Rogers

      🌑   🌑                

Bertram L. Scott

  🌑       🌑                

Lisa W. Wardell

  🌑           🌑       🌑   🌑

Eric C. Wiseman

    Chair     🌑   🌑   🌑   🌑
               

Number of Meetings in Fiscal 2018

  7   11   5   3   1   0   1

Each of the current committees act pursuant to a written charter adopted by the Board. A copy of each committee charter and the Corporate Governance Guidelines are available on the Company’s website at www.Lowes.com/investor.

 

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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

 

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

 

Committee

  

Key Functions and Additional Information

 

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, including data protection, cybersecurity, business continuity and operational risks, and the steps management has taken to identify, assess, monitor, control, remediate and report such exposures.

 

•  Reviews with the Company’s General Counsel 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, Messrs. 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.

 

 

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.

 

 

Technology

Committee

 

LOGO

 

  

 

•  Oversees matters of technology, eCommerce and innovation.

 

•  Makes recommendations to the Board relating to the Company’s technology, eCommerce and innovation strategy in support of the Company’s objectives.

 

•  Monitors and provides guidance on issues relating to significant emerging technology, eCommerce and innovation trends and issues that may affect the Company strategy.

 

•  Reports regularly to the Board.

 

 

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.

 

 

Sustainability

Committee

 

LOGO

 

  

 

•  Oversees sustainability and environmental matters.

 

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

 

•  Reviews the Company’s compliance with policies, programs and practices with regard to sustainability, environmental and related social responsibility issues and impacts to support the sustainable growth of the Company.

 

•  Monitors the Company’s performance against relevant external sustainability indices and reviews the Company’s annual Corporate Social Responsibility Report.

 

•  Reviews and makes recommendations to the Board regarding responses to stockholder proposals encompassing matters overseen by the Committee.

 

•  Reports regularly to the Board.

 

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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 22, 2019, 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 Lowes Boulevard, Mooresville, North Carolina 28117.

 

Name or Number of Persons in Group

   Number of Shares(1)   

  Percent of  

Class

Raul Alvarez

    

 

28,778

   

 

*

David H. Batchelder

    

 

23,928

   

 

*

Angela F. Braly

    

 

12,043

   

 

*

Sandra B. Cochran

    

 

7,707

   

 

*

Marshall A. Croom

    

 

93,269

   

 

*

David M. Denton

    

 

9,650

   

 

*

Laurie Z. Douglas

    

 

8,563

   

 

*

Richard W. Dreiling

    

 

23,622

   

 

*

Marvin R. Ellison

    

 

51,290

   

 

*

Marshall O. Larsen

    

 

62,234

   

 

*

Richard D. Maltsbarger

    

 

3,237

   

 

*

Tiffany L. Mason

    

 

20,893

   

 

*

Ross W. McCanless

    

 

94,157

   

 

*

Michael P. McDermott

    

 

0

   

 

*

Joseph M. McFarland III

    

 

10,740

   

 

*

James H. Morgan

    

 

8,563

   

 

*

Robert A. Niblock

    

 

1,539,597

(2)

 
   

 

*

Brian C. Rogers

    

 

11,928

   

 

*

Bertram L. Scott

    

 

6,207

   

 

*

Lisa W. Wardell

    

 

2,201

   

 

*

Jennifer L. Weber

    

 

85,277

   

 

*

Eric C. Wiseman

    

 

22,099

   

 

*

Current Directors and Executive Officers as a Group (21 total)

       525,498 (3)          *

 

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

       53,503,078       6.7 %(4)

 

The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

       64,799,441       8.1 %(5)

 

*

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: Mr. Alvarez — 28,778 shares; Mr. Batchelder — 1,928 shares; Ms. Braly — 12,043 shares; Ms. Cochran — 6,207 shares; Mr. Croom — 61,219 shares; Mr. Denton — 0 shares; Ms. Douglas — 8,563 shares; Mr. Dreiling — 23,622 shares; Mr. Ellison — 0 shares; Mr. Larsen — 60,234 shares; Mr. Maltsbarger — 0 shares; Ms. Mason — 12,790 shares; Mr. McCanless — 67,799 shares; Mr. McDermott — 0 shares; Mr. McFarland — 0 shares; Mr. Morgan — 8,563 shares; Mr. Niblock — 685,031 shares; Mr. Rogers — 1,928 shares; Mr. Scott — 6,207 shares; Ms. Wardell — 1,928 shares; Ms. Weber — 60,129 shares; Mr. Wiseman — 22,099 shares; and current directors and executive officers as a group (21 total) — 323,029 shares.

 

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Table of Contents

Security Ownership of Certain Beneficial Owners and Management

 

 

 

(2)

Includes 93,882 shares with voting and investment power shared with spouse and 4,000 shares where Mr. Niblock’s spouse has sole voting power.

 

(3)

Includes 56,511 shares beneficially owned by other current executive officers not individually listed in the table.

 

(4)

Shares held at December 31, 2018, according to a Schedule 13G/A filed with the SEC on February 6, 2019 by BlackRock, Inc. (“BlackRock”). The Schedule 13G/A reports that BlackRock has sole voting power over 46,139,502 shares, shared voting power over no shares, sole investment power over 53,503,078 shares and shared investment power over no shares.

 

(5)

Shares held at December 31, 2018, according to a Schedule 13G/A filed with the SEC on February 11, 2019 by The Vanguard Group, Inc. (“Vanguard”). The Schedule 13G/A reports that Vanguard has sole voting power over 996,377 shares, shared voting power over 197,857 shares, sole investment power over 63,622,211 shares and shared investment power over 1,177,230 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 2018.

 

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Table of Contents

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 2018 fiscal year:

 

Marvin R. Ellison

  

President and Chief Executive Officer(1)

Robert A. Niblock

  

Former Chairman of the Board, President and Chief Executive Officer(1)

David M. Denton

  

Executive Vice President, Chief Financial Officer(2)

Tiffany L. Mason

  

Former Interim Chief Financial Officer(2)

Current Senior Vice President, Corporate Finance and Treasurer

Marshall A. Croom

  

Former Chief Financial Officer(2)

Joseph M. McFarland III

  

Executive Vice President, Stores(3)

Jennifer L. Weber

  

Executive Vice President, Human Resources

Ross W. McCanless

  

Executive Vice President, General Counsel and Corporate Secretary

Michael P. McDermott

  

Former Chief Customer Officer(4)

Richard D. Maltsbarger

  

Former Chief Operating Officer(4)

 

(1)

Effective July 2, 2018, Mr. Ellison was appointed President and Chief Executive Officer, and Mr. Niblock retired as Chairman of the Board, President and Chief Executive Officer.

 

(2)

Effective October 5, 2018, Mr. Croom retired from the Company and Ms. Mason was appointed to serve as Interim Chief Financial Officer. On November 19, 2018, Mr. Denton joined the Company as Executive Vice President, Chief Financial Officer, and Ms. Mason resumed her role as Senior Vice President, Corporate Finance and Treasurer.

 

(3)

Mr. McFarland joined the Company effective August 15, 2018.

 

(4)

As part of the Company’s new leadership structure, the Chief Operating Officer and Chief Customer Officer positions were eliminated. As such, Mr. Maltsbarger and Mr. McDermott exited the Company on July 6, 2018 and November 6, 2018, respectively.

Our CD&A is organized as follows:

 

I.

Executive Summary

 

II.

Compensation Philosophy and Elements

 

III.

Compensation Decision-Making Process

 

IV.

2018 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.

 

$17.3 Billion   17%   $5.6 Billion
SHARES REPURCHASED UNDER OUR SHARE REPURCHASE PROGRAM IN THE LAST FIVE YEARS  

2018 INCREASE IN

ANNUAL DIVIDEND

  DIVIDENDS PAID IN THE
LAST FIVE YEARS

 

 

In fiscal 2018, we delivered solid results, with total sales growth of 3.9 percent driven by comparable sales growth of 2.4 percent. We are committed to investing in the business while also returning excess cash to shareholders through dividends and share repurchases. We delivered value to shareholders through the payment of $1.5 billion in dividends and the repurchase of nearly $3.0 billion of our common stock.

Fiscal 2018 was a rebalancing year in which we took the necessary steps to begin building a sustainable foundation from which to drive long-term value creation. During the year, we realigned our leadership to improve our focus, execution and decision making. We assembled a talented team with proven retail and technical experience, which includes appointing Mr. Marvin R. Ellison as President and Chief Executive Officer, who will facilitate the creation of a seamless omni-channel environment for our customers. The new leadership structure will allow Lowe’s to drive operational excellence by:

 

 

Simplifying the organizational structure;

 

 

Enhancing opportunities for more effective and focused execution; and

 

 

Establishing a structure that allows for improved and accelerated decision-making.

As part of the new leadership structure, the Chief Operating Officer, Chief Customer Officer, Corporate Administration Executive and Chief Development Officer positions were eliminated and responsibilities formerly under those roles were assumed by other senior leadership roles that report directly to Mr. Ellison. As part of the realignment, new roles reporting directly to Mr. Ellison were created including:

 

 

Executive Vice President, Merchandising. Mr. William P. Boltz was hired into this role effective August 15, 2018. This role is responsible for merchandising, marketing and Lowe’s digital businesses, including Lowes.com and Lowesforpros.com.

 

 

Executive Vice President, Stores. Mr. Joseph M. McFarland was hired into this role effective August 15, 2018. This role oversees store operations for the North, South, and West Divisions, operations engineering, pro and services businesses, asset protection and contact centers.

 

 

Executive Vice President, Supply Chain. Mr. Donald E. Frieson was hired into this role effective August 8, 2018. This role oversees distribution centers, logistics, global sourcing, transportation and delivery services.

Also as part of the new leadership structure and transition:

 

 

A new Executive Vice President, Chief Financial Officer was hired, Mr. David M. Denton, effective November 19, 2018. This role also oversees real estate, strategic planning and enterprise risk management.

 

 

Ms. Tiffany L. Mason was appointed interim Chief Financial Officer from October 5, 2018 until the effective date of Mr. Denton’s hire.

 

 

Expanded responsibilities were given to Ms. Jennifer L. Weber, Executive Vice President, Human Resources, including communications and community relations. She also assumed various interim responsibilities during the transition.

 

 

Mr. Ross W. McCanless remains in the role of Executive Vice President, General Counsel and Corporate Secretary and assumed various interim responsibilities during the transition.

 

 

Ms. Seemantini Godbole was hired as Executive Vice President, Chief Information Officer effective November 12, 2018.

 

 

Mr. Sylvain Prud’homme remains in the role of President and CEO of Lowe’s Canada.

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

We also established a go-forward strategy focused on driving operational excellence and better serving our customers. We plan to achieve this by winning in four key areas:

 

 

Merchandising excellence;

 

 

Supply chain transformation;

 

 

Operational efficiency; and

 

 

Customer engagement.

We have a significant opportunity to capitalize on a healthy home improvement sector and a tremendous brand by focusing on retail fundamentals and simplifying our business.

The CD&A includes disclosure of our incentive compensation performance measures including: operating income, earnings before interest and taxes (“EBIT”) for incentive compensation prior to 2018, sales and return on non-cash average assets (“RONCAA”). For fiscal 2018, the Compensation Committee replaced the annual incentive plan metric of EBIT with operating income to focus on profit generated from operations and better align with the external reporting on our income statement. Sales for fiscal 2018 as presented in this Proxy Statement includes adjustments described on page 39 and is referred to as “Adjusted Sales.” Three-Year Average RONCAA for PSUs granted in 2016 relating to fiscal years 2016-2018 includes adjustments described on page 41, and this adjusted measure is referred to as “Adjusted Average RONCAA.” Each of these performance measures is further described on pages 38 to 41.

 

LOGO

 

5-YEAR OPERATING INCOME ACHIEVEMENT ($ in Billions) 3-YEAR AVERAGE RONCAA ACHIEVEMENT Incentive Compensation Performance Highlights 5-YEAR SALES ACHIEVEMENT ($ in Billions) ANNUALIZED TOTAL SHAREHOLDER RETURN ("TSR") OUTPACES PEERS AND S&P 500 INDEX OVER LONG-TERM (a)Fiscal 2016 included 53 weeks. (b)Sales for fiscal 2016 have been adjusted to exclude the impact of $2.193 billion due to RONA, Inc. sales during the year of acquisition. Fiscal 2016 included 53 weeks. (c)Adjusted sales. See page 40 for a description of adjustments. (d)Average RONCAA for fiscal years 2014-2016 has been adjusted to exclude the 19 basis point impact due to the acquisition of RONA, inc. in fiscal 2016. Fiscal 2016 included 53 weeks. (e)Average RONCAA for fiscal years 2015-2017 has been adjusted 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. (f)Adjusted Average RONCAA. See page 42 for a description of adjustments. (g)Includes companies in the Peer Group identified on page 37.

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

2018 Executive Compensation

Lowe’s has a long-standing commitment to pay for performance that provides 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 2018 executive compensation program consisted of the following elements:

 

 

Base salary

 

 

Annual incentive awards

 

 

Performance share unit awards (“PSUs”)

 

 

Stock options

 

 

Restricted stock awards (“RSAs”)

 

 

Retirement, health and severance benefits

 

 

Limited perquisites

Lowe’s mix is heavily performance-based with 72% of the current CEO’s and 67% of the other current NEOs’(¹) annualized target compensation at risk and contingent upon the achievement of performance objectives or share price performance.

 

LOGO   LOGO

 

CEO Other NEOs(1)

(1)

Messrs. Niblock, Croom, Maltsbarger and McDermott are not included in the NEO data due to their departures from the Company. Ms. Mason is not included in the NEO data due to her interim role.

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 generally based on the Company’s achievement of financial (operating income and sales) and Leadership Effectiveness goals. Minimum payout is generally zero if performance objectives are not achieved. For 2018, Mr. Ellison’s payout was based solely on his development of certain strategic plans approved by the Board, and certain other new executives received guaranteed bonuses to compensate for bonus compensation they forfeited in 2018 in order to join the Company.

 

 

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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Table of Contents

Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

Based on our performance through fiscal 2018 illustrated below, certain of our executives received the following payouts of performance-based compensation:

 

 

Annual incentive payouts were driven by below threshold performance in operating income, and above threshold, but below target, performance in sales and at target performance for leadership effectiveness. Overall award payments for current NEOs not eligible for guaranteed bonuses as discussed on page 39 were at 30% of target.

 

 

PSUs paid out at 90.10% of target based on Adjusted Average RONCAA achievement for the 2016-18 performance period.

 

LOGO

 

 

2018 ANNUAL INCENTIVE PERFORMANCE VS. TARGET 2016-2018 PSU PERFORMANCE VS. TARGET

 

      WHAT WE DO            WHAT WE DO NOT DO

LOGO

 

  

Provide 79% to 88% 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.

 

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 and alignment of our incentive plans in relation to performance goals, business strategy, organizational priorities and shareholder interests.

 

    

 

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 as a percentage of target awards.

 

             

LOGO

 

  

Require significant stock ownership by all senior executives.

 

             

LOGO

 

  

Provide limited perquisites.

 

             

 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

Annual Say-on-Pay Advisory Vote

The Board carefully considers the results of our shareholders’ annual 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 2018. This is consistent with the advisory approval over the past eight years. In consideration of this continued support, the Compensation Committee of the Board maintained the principal features and performance-based elements of the executive compensation program in 2018 apart from replacing the annual incentive plan metric of EBIT with operating income. 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 mission, 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 and operating priorities. 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, which are focused on driving operational excellence and better serving our customers; 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 performance-based and at-risk based upon the Company’s financial and strategic performance objectives.

The Board 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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Table of Contents

Compensation Discussion and Analysis

 

COMPENSATION PHILOSOPHY AND ELEMENTS

 

The following table lists the key elements of the Company’s 2018 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 effective 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; and 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 term  
  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 limited personal use of corporate aircraft

 

 

 

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

 

 

Severance

Plan for

Senior

Officers

 

 

Severance Plan

 

 

Provides severance payments, continuation of healthcare benefits and company-paid outplacement services

 

 

 

Provides a program to help attract and compete for top talent

 

 

Program was approved by the Compensation Committee in August 2018.

 

 

(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 employment with 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 five 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 2018 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

 

  Recommended the pay package for our new CEO and recommended the pay actions taken related to the former CEO

 

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

 

  Assessed the alignment of realizable executive compensation with corporate performance

 

  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 Executive Vice President, Human Resources 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 Compensation Committee reviews the peer group companies used to assess compensation and performance with the advice of the independent compensation consultant. The Compensation Committee approved the use of data from two sources for fiscal 2018: the Survey Group and the Peer Group.

The Survey 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 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 operating income and TSR growth.

The companies in the Peer Group for fiscal 2018 were:

 

Amazon.com, Inc.

 

Best Buy Co., Inc.

  

Costco Wholesale Corporation

  

CVS Health Corporation

Kohl’s Corporation

 

Macy’s, Inc.

  

Nordstrom, Inc.

  

Staples, Inc.

Target Corporation

 

The Home Depot, Inc.

  

The Kroger Co.

  

The TJX Companies, Inc.

Walgreens Boots Alliance, Inc.

 

Wal-Mart Stores, Inc.

     

In fiscal 2018, Sears Holding Corporation was removed from the Peer Group due to its significantly smaller size, pay practices and ongoing viability. The Compensation Committee agreed that the remaining companies in the Peer Group from fiscal 2017 were relevant given our peer selection criteria and that the size of the Peer Group remained appropriate based on market practices.

 

 

PEER GROUP DATA FOR FISCAL 2018(1)

                             
            Market                  TSR     
    

Revenues (MM)

 

  

Capitalization (MM)

 

  

Operating
Income (MM)

 

  

1-year

 

  

3-year

 

  

5-year

 

75th Percentile

    

$

141,576

    

 

$93,023

    

$

9,517

    

 

8.8%

 

    

 

52.9%

 

    

 

112.7%

 

50th Percentile

    

$

100,904

    

 

$60,412

    

$

4,312

    

 

0.0%

 

    

 

43.7%

 

    

 

59.5%

 

25th Percentile

    

$

35,865

    

 

$15,934

    

$

1,843

    

 

-2.8%

 

    

 

-4.1%

 

    

 

38.2%

 

Lowe’s Companies, Inc.

    

$

68,619

    

 

$78,585

    

$

6,586

    

 

-2.4%

 

    

 

43.3%

 

    

 

129.0%

 

    Percentile Ranking

    

 

40.7%

 

    

 

63.5%

 

    

 

67.1%

 

    

 

42.0%

 

    

 

49.9%

 

    

 

77.4%

 

Source: S&P Capital IQ

 

(1)

Revenues and operating income are as of each company’s latest fiscal year as of February 1, 2019. Market Capitalization and TSR are as of February 1, 2019, which aligns with Lowe’s fiscal year end date. Data for Staples, Inc. is not included as it was no longer a publicly-traded company as of the end of Lowe’s latest fiscal year.

At its November 2017 meeting, the Compensation Committee reviewed thorough compensation benchmarks based on the two groups described above. The Compensation Committee concluded that the benchmarks 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 compensation benchmarking analysis for Mr. Ellison was based on an analysis of the Peer Group and was provided to the Compensation Committee by its independent compensation consultant. The compensation evaluation and analysis for Messrs. Denton and McFarland, made subsequent to the November 2017 meeting, included benchmarking using the two groups described above.

 

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Table of Contents

Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

IV. 2018 COMPENSATION ACTIONS

President and Chief Executive Officer Compensation

In May 2018, the Compensation Committee and the Board approved the terms of the offer letter dated May 20, 2018 to Mr. Ellison to serve as President and Chief Executive Officer effective July 2, 2018 (the “Ellison Offer Letter”). Mr. Ellison’s target total compensation package includes a base salary of $1,450,000, target annual incentive opportunity of 200% of base salary and long-term incentive target of 565% of base salary. The Ellison Offer Letter also entitled him to a sign-on equity award with a grant value of $6,000,000 consisting of $3,500,000 in time-based restricted shares and $2,500,000 in nonqualified stock options. Subject to development by Mr. Ellison of strategic plans approved by the Board, Mr. Ellison was provided an opportunity to earn a target bonus of 200% of base salary prorated based on the number of days worked for the Company during fiscal 2018.

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, which includes consideration of market adjustments, internal alignment, experience in the role and any changes to roles or responsibilities. As a result of the review, Messrs. Niblock, Croom, McCanless, and McDermott and Mses. Weber and Mason received salary increases of between 3.0%-9.6%, and Mr. Maltsbarger received a 36.8% increase due to his promotion to Chief Operating Officer from Chief Development Officer and President, International effective February 3, 2018. For Messrs. Denton and McFarland, who joined the Company in 2018, the Compensation Committee evaluated base salaries and compensation packages considering the benchmarking analysis discussed on page 36.

In 2018, the Compensation Committee approved the following base salaries for the NEOs:

 

 

Current NEOS

              

Name and Position

 

  

2017

Base Salary

 

  

2018

Base Salary

 

  

% Increase    

 

 

Marvin R. Ellison

President and Chief Executive Officer

    

 

 

 

 

    

 

$

 

1,450,000

 

    

 

 

 

 

 

David M. Denton

Executive Vice President, Chief Financial Officer

    

 

 

 

 

    

 

$

 

925,000

 

    

 

 

 

 

 

Joseph M. McFarland III

Executive Vice President, Stores

    

 

 

 

 

    

 

$

 

750,000

 

    

 

 

 

 

 

Jennifer L. Weber

Executive Vice President, Human Resources

    

 

$

 

561,000

 

    

 

$

 

615,000

 

    

 

 

 

9.6

 

%

 

Ross W. McCanless

Executive Vice President, General Counsel and Corporate Secretary

    

 

$

 

561,000

 

    

 

$

 

615,000

 

    

 

 

 

9.6

 

%

 

 

Former and Interim NEOs

              

Name and Position

 

  

2017

Base Salary

 

  

2018

Base Salary

 

  

% Increase    

 

 

Robert A. Niblock

Former Chairman of the Board, President and Chief Executive Officer

    

 

$

 

1,300,000

 

    

 

$

 

1,340,000

 

    

 

 

 

3.0

 

%    

 

Tiffany L. Mason

Former Interim Chief Financial Officer

Current Senior Vice President, Corporate Finance and Treasurer

    

 

$

 

342,000

 

    

 

$

 

352,000

 

    

 

 

 

3.0

 

%    

 

Marshall A. Croom

Former Chief Financial Officer

    

 

$

 

675,000

 

    

 

$

 

715,000

 

    

 

 

 

5.9

 

%    

 

Michael P. McDermott

Former Chief Customer Officer

    

 

$

 

675,000

 

    

 

$

 

725,000

 

    

 

 

 

7.4

 

%    

 

Richard D. Maltsbarger

Former Chief Operating Officer

    

 

$

 

530,000

 

    

 

$

 

725,000

 

    

 

 

 

36.8

 

%    

 

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Table of Contents

Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

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 75% to 125% of base salary for the other NEOs. For fiscal 2018, target awards as a percentage of base salary remained the same as the prior year.

 

(2)

Mr. Niblock had a threshold opportunity of 18% of target in 2017, which was increased to 25% in 2018 to better align his pay to market. Mr. Ellison’s threshold was 25% for 2018. The other NEOs had a threshold that ranged from 35%-39% in 2017, which was decreased to 25% in 2018 to align with the CEO threshold. Notwithstanding the foregoing, the threshold percentage for Ms. Mason increased from 47% in 2017 to 50% in 2018 to better align with market norms. The CEO and the other NEOs had a maximum opportunity of 200% in fiscal 2018, which was the same percentage of target as the prior year.

The following table describes the financial and strategic goals for the 2018 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    

 

Operating Income

 

 

Rewards NEOs for profitability of Company operations and focuses management on operational efficiency and expense management

 

 

 

Company’s operating income

 

 

60%

 

 

Sales

 

 

Rewards NEOs 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

 

 

Rewards NEOs 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 categories of effectiveness

 

 

15%

Strategic Goals Financial Goals

 

The Compensation Committee had for several years used EBIT and sales as the performance metrics for annual incentive awards. For 2018, the Compensation Committee replaced EBIT with operating income to focus on profit generated from operations alone and to align directly with our external financial reporting on the income statement. 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 2018 target performance levels on the Company’s annual operating plan and expected growth over prior year performance. The target operating income and sales goals for the 2018 annual incentive plan were aggressive and set higher than the growth rate of a majority of the peers’ expected operating income and sales growth rates in 2018.

In setting the performance ranges for the financial metrics in 2018, the Compensation Committee determined it was appropriate to expand the performance ranges of the financial metrics. The threshold and maximum performance targets for operating income each increased by 300 basis points to enhance the performance orientation around earnings, and the performance range for sales broadened with maximum performance increasing by 100 basis points and threshold performance decreasing by 100 basis points.

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,

 

 

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Table of Contents

Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

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 2019, the Compensation Committee reviewed the Company’s 2018 performance relative to the operating income, sales and leadership effectiveness goals to determine the annual incentive awards earned under the annual incentive plan for fiscal year 2018. The operating income results of $4.018 billion fell below the required payout threshold goal. The Compensation Committee adjusted fiscal 2018 sales to reduce sales by $723 million due to changes in the accounting standards for revenue recognition. The adjusted sales result of $70.586 billion resulted in a payout above threshold but below target. The leadership effectiveness performance achievement was numerically and objectively calculated and resulted in a target payout level.

 

 

Based on the performance metrics established by the Compensation Committee, the Company’s 2018 performance and the aforementioned adjustments, the Compensation Committee determined that Lowe’s achieved approximately 30% of the target incentive opportunities for the NEOs.

 

Performance Metric(1)

     Threshold      Target      Maximum     

 

2018 Actual        

Performance        

Operating Income

    

$6.544 billion

    

$6.889 billion

    

$7.440 billion

    

$4.018 billion

Sales

    

$69.217 billion

    

$72.102 billion

    

$73.544 billion

    

$70.586 billion(2)

 

(1)

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

 

(2)

The Compensation Committee adjusted fiscal 2018 sales as described on page 39.

With the realignment of the Company’s executive leadership team, the performance goal achievement level differs among some of the NEOs. The Ellison Offer Letter guaranteed a payout of his annual bonus target prorated based on the number of days worked for the Company during fiscal 2018 subject to the development by Mr. Ellison of strategic plans approved by the Board. Mr. McFarland’s offer letter dated July 18, 2018 guaranteed a payout of 50% of his annual bonus target to replace bonus compensation from his former employer forfeited in 2018 to join the Company. In addition to Mr. Ellison, the actual awards earned for Messrs. Niblock, Denton, Croom, McDermott and Maltsbarger were prorated based on the number of days worked during fiscal 2018. Based on these factors and the results of the performance metrics approved and adjusted by the Compensation Committee, the NEOs earned annual incentive awards for 2018 as follows:

 

 

Current NEOs

                                  

Name

 

  

Base Salary

 

    

x

 

  

Target Award %
(% of Base Salary)

 

 

x

 

  

Performance Goal
Achievement Level
(% of Target)

 

 

=

 

  

Actual Award        

Earned        

 

Marvin R. Ellison

    

$

1,450,000

                 

 

200

%

              

 

100

%

              

$

1,712,912        

David M. Denton

    

$

925,000

                 

 

125

%

              

 

30

%

              

$

71,815        

Joseph M. McFarland III

    

$

750,000

                 

 

100

%

              

 

50

%

              

$

375,000        

Jennifer L. Weber

    

$

615,000

                 

 

90

%

              

 

30

%

              

$

166,850        

Ross W. McCanless

    

$

615,000

                 

 

90

%

              

 

30

%

              

$

166,850        

 

 

Former and Interim NEOs

                                  

Name

 

  

Base Salary

 

    

x

 

  

Target Award %
(% of Base Salary)

 

 

x

 

  

Performance Goal
Achievement Level
(% of Target)

 

 

=

 

  

Actual Award        

Earned        

 

Robert A. Niblock

    

$

1,340,000

                 

 

200

%

              

 

30

%

              

$

332,909        

Tiffany L. Mason

    

$

352,000

                 

 

75

%

              

 

33

%

              

$

88,253        

Marshall A. Croom

    

$

715,000

                 

 

90

%

              

 

30

%

              

$

130,563        

Michael P. McDermott

    

$

725,000

                 

 

100

%

              

 

30

%

              

$

168,111        

Richard D. Maltsbarger

    

$

725,000

                 

 

100

%

              

 

30

%

              

$

94,004        

 

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Table of Contents

Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

Discretionary Bonus Awards

 

In March 2019, the Company approved the payment of a bonus in the amount of $200,000 each to Ms. Weber and Mr. McCanless in recognition of their superior performance during a critical period of leadership transition, above and

beyond each executive’s normal responsibilities. In addition, Ms. Mason, who filled a critical role as the Interim Chief Financial Officer, was paid a bonus of $50,000 in consideration for her contributions in the interim role.

 

 

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. In addition, for Messrs. Ellison, Denton and McFarland, who joined the Company in 2018, the Compensation Committee approved target long-term equity awards considering the benchmarking analysis discussed on page 36.

In 2018, 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 approved annual grants in March 2018. 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 2018, as well as the actual grant value awarded to each NEO, which includes annual grants or prorated annual grants to newly hired NEOs based on dates of hire and additional grants to replace some of the value of equity awards forfeited from their previous employers:

 

 

 

Current NEOs

             
     2018 Target Long-Term     Equity Awards      Equity Award 

Name

 

  

% of Base Salary    

 

 

Target ($000s)  

 

  

Granted ($000s) 

 

Marvin R. Ellison(1)

    

 

565

%

   

$

8,192

    

$

11,462

David M. Denton(2)

    

 

450

%

   

$

4,162

    

$

1,781

Joseph M. McFarland III(3)

    

 

400

%

   

$

3,000

    

$

2,450

Jennifer L. Weber

    

 

300

%

   

$

1,845

    

$

1,845

Ross W. McCanless

    

 

300

%

   

$

1,845

    

$

1,845

 

(1)

The Ellison Offer Letter entitled him to a $5,462,000 annual equity award for 2018 consisting of 50% performance shares, 25% time-based restricted stock and 25% nonqualified stock options. The Ellison Offer Letter also entitled him to a $6,000,000 sign-on award granted consisting of $3,500,000 in time-based restricted shares and $2,500,000 in nonqualified stock options.

 

(2)

Mr. Denton’s offer letter, dated August 20, 2018, entitled him to a prorated annual equity award for 2018 of $1,781,000 consisting of 50% time-based restricted stock and 50% nonqualified stock options.

 

(3)

Mr. McFarland’s offer letter, dated July 16, 2018, entitled him to a $1,700,000 annual equity award for 2018 consisting of 50% time-based restricted stock and 50% nonqualified stock options. The offer letter also entitled him to a $750,000 sign-on award consisting of 50% time-based restricted stock and 50% nonqualified stock options to replace some of the value of equity awards he forfeited from his previous employer.

 

 

Former and Interim NEOs

             
     2018 Target Long-Term     Equity Awards      Equity Award 

Name

 

  

% of Base Salary    

 

 

Target ($000s)  

 

  

Granted ($000s) 

 

Robert A. Niblock

    

 

725

%

   

$

9,715

    

$

9,715

Tiffany L. Mason

    

 

n/a

   

$

350

    

$

350

Marshall A. Croom

    

 

300

%

   

$

2,145

    

$

2,145

Michael P. McDermott(1)

    

 

450

%

   

$

3,262

    

$

3,262

Richard D. Maltsbarger(2)

    

 

450

%

   

$

3,262

    

$

3,262

 

(1)

Mr. McDermott’s equity target increased from 400% to 450% for 2018 to align with market norms.

 

(2)

Mr. Maltsbarger’s equity target increased from 300% to 450% for 2018 due to his promotion to Chief Operating Officer effective February 3, 2018 and to align with market norms.

 

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Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

 

The Compensation Committee decided that the PSUs awarded in 2018 will be earned based on the Company’s RONCAA for the three-year performance period from fiscal 2018 to fiscal 2020 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 or higher than 1.33x; if RONCAA is below threshold, there will be no payout.

 

2016 PSU Awards. The performance period for the PSUs awarded in 2016 (the “2016 PSUs”) ended on February 1, 2019, the last day of the 2018 fiscal year. The 2016 PSU awards were eligible to be earned based on the Company’s average RONCAA for fiscal years 2016 through 2018.

The target RONCAA goal for the PSUs awarded in 2016 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 2016-2018 performance period, 90.10% of the 2016 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 the (i) 120 basis point impact related to the 2016 acquisition of RONA, Inc., (ii) 45 basis point impact related to the $464 million loss on extinguishment of debt, (iii) 6 basis point impact from a one-time cash bonus pool for hourly associates of $65.8 million made in connection with the Tax Cuts and Jobs Act, (iv) 106 basis point impact from adjustments to Goodwill related to the RONA acquisition and (v) 85 basis point impact from impairments related to the divestitures of Orchard and Mexico and the wind-down of the Iris smart home platform, none of which were contemplated when the 2016 performance goals were set.

 

 

Performance Metric

 

  

Threshold

 

    

Target

 

    

Maximum

 

    

2016–2018
Adjusted
Performance

 

    

TSR
Modifier

 

    

 

Performance  

Goal  

Achievement  

(% of Target)  

 

RONCAA

  

17.60%

    

20.10%

    

23.60%

    

19.57%

    

1.01

    

90.10%

 

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Table of Contents

Compensation Discussion and Analysis

 

2018 COMPENSATION ACTIONS

 

 

Benefit Restoration Plan

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.

Severance Arrangements

The Compensation Committee approved a severance plan for senior executives (the “Severance Plan”) in August 2018, that covers all current NEOs other than Mr. Ellison. The terms of the Severance Plan are described on page 54. Mr. Ellison’s severance entitlements are governed by the Ellison Offer Letter, the terms of which are described on page 54.

All NEOs are also parties to agreements that provide severance benefits in the context of a change-in-control of the Company (the “Change-in-Control Agreements”). The Change-in-Control Agreements are described on page 53.

Perquisites

Since 2010, NEOs and other qualifying executives have been eligible for an annual executive physical to assess 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 and to allow limited personal travel for certain executives. 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 personal usage of the corporate aircraft by the President and Chief Executive Officer is currently capped at $200,000 of incremental cost per year.

 

 

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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.

In November 2018, the Compensation Committee adopted revised stock ownership and retention guidelines for all senior executives in the Company based on peer benchmark data. Under the revised guidelines, (i) the multiple for the President and Chief Executive Officer was reduced from ten times to six times base salary to align with peer and market practice and (ii) the separate ownership guidelines for the Chief Operating Officer and Chief Customer Officer were removed due to the elimination of those positions under the new leadership structure. The ownership targets for Executive Vice Presidents and Senior Vice Presidents remained unchanged. The ownership targets under the new guidelines are as follows:

 

 

Position

 

  

 

Target Ownership

(Multiple of Base Salary)    

 

President and Chief Executive Officer

  

6.0x

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 and outstanding 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. Mr. McCanless and Mses. Weber and Mason are currently in compliance with the stock ownership guidelines, and all of the other current NEOs are working towards compliance.

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

The Compensation Committee has always supported transparent governance and compliance practices and protecting 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 requiring the Company to clawback incentive compensation in the event of a significant restatement of the Company’s financial results caused or substantially caused by the applicable executive officer’s fraud or intentional misconduct.

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 General Counsel. In addition, all transactions by an executive involving Common Stock must be pre-cleared by the General Counsel.

The clawback policy is a part of the Company’s Corporate Governance Guidelines and requires the Board to review any incentive compensation that was provided to executive officers on the basis of the Company having met or exceeded specific

 

 

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Compensation Discussion and Analysis

 

COMPENSATION COMMITTEE REPORT

 

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 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 1, 2019.

Eric C. Wiseman, Chair

David H. Batchelder

Angela F. Braly

Sandra B. Cochran

Brian C. Rogers

 

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Table of Contents

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(1)

 

 

Year

 

    

Salary

($)

 

    

Bonus
($)(2)

 

    

Stock
Awards
($)(3)(4)

 

    

Option
Awards
($)(3)

 

    

Non-Equity

Incentive Plan
Compensation
($)(5)

 

    

All Other
Compensation
($)(6)

 

    

Total

($)

 

 
   Current NEOs                                                       

Marvin R. Ellison

President and Chief Executive Officer

   

 

2018

 

 

 

    

 

864,423

 

 

 

    

 

1,712,912

 

 

 

    

 

7,643,542

 

 

 

    

 

3,881,205

 

 

 

    

 

0

 

 

 

    

 

200,709

 

 

 

    

 

14,302,791

 

 

 

David R. Denton

Executive Vice President,

Chief Financial Officer

   

 

2018

 

 

 

    

 

195,673

 

 

 

    

 

1,000,000

 

 

 

    

 

890,406

 

 

 

    

 

879,205

 

 

 

    

 

71,815

 

 

 

    

 

69,547

 

 

 

    

 

3,106,646

 

 

 

Joseph McFarland III

Executive Vice President, Stores

   

 

2018

 

 

 

    

 

360,577

 

 

 

    

 

875,000

 

 

 

    

 

1,225,112

 

 

 

    

 

1,222,220

 

 

 

    

 

0

 

 

 

    

 

52,843

 

 

 

    

 

3,735,752

 

 

 

Jennifer L. Weber

Executive Vice President,
Human Resources

   

 

2018

 

 

 

    

 

615,000

 

 

 

    

 

200,000

 

 

 

    

 

1,342,653

 

 

 

    

 

459,309

 

 

 

    

 

166,850

 

 

 

    

 

60,567

 

 

 

    

 

2,844,379

 

 

 

   

 

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

 

 

 

Ross W. McCanless

Executive Vice President,
General Counsel and Corporate Secretary

   

 

2018

 

 

 

    

 

615,000

 

 

 

    

 

200,000

 

 

 

    

 

1,342,653

 

 

 

    

 

459,309

 

 

 

    

 

166,850

 

 

 

    

 

47,002

 

 

 

    

 

2,830,814

 

 

 

   

 

2017

 

 

 

    

 

 

561,000

 

 

 

 

 

    

 

0

 

 

 

    

 

1,147,418

 

 

 

    

 

210,604

 

 

 

    

 

456,087

 

 

 

    

 

41,871

 

 

 

    

 

2,416,979

 

 

 

   

 

2016

 

 

 

    

 

545,000

 

 

 

    

 

0

 

 

 

    

 

1,243,923

 

 

 

    

 

416,656

 

 

 

    

 

396,275

 

 

 

    

 

48,270

 

 

 

    

 

2,650,124

 

 

 

   Former and Interim NEOs

                                                              

Robert A. Niblock

Former Chairman of the Board,

President and Chief Executive Officer

   

 

2018

 

 

 

    

 

552,724

 

 

 

    

 

0

 

 

 

    

 

7,068,689

 

 

 

    

 

2,418,281

 

 

 

    

 

332,909

 

 

 

    

 

165,889

 

 

 

    

 

10,538,492

 

 

 

   

 

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

 

 

 

Marshall A. Croom

Former Chief Financial Officer

   

 

2018

 

 

 

    

 

500,947

 

 

 

    

 

0

 

 

 

    

 

1,560,971

 

 

 

    

 

533,896

 

 

 

    

 

130,563

 

 

 

    

 

57,464

 

 

 

    

 

2,783,841

 

 

 

   

 

2017

 

 

 

    

 

675,000

 

 

 

    

 

0

 

 

 

    

 

1,544,907

 

 

 

    

 

417,717

 

 

 

    

 

548,768

 

 

 

    

 

44,508

 

 

 

    

 

3,230,900

 

 

 

Tiffany L. Mason

Former Interim Chief Financial Officer

Current Senior Vice President, Corporate Finance & Treasurer

   

 

2018

 

 

 

    

 

352,000

 

 

 

    

 

50,000

 

 

 

    

 

254,404

 

 

 

    

 

79,622

 

 

 

    

 

88,253

 

 

 

    

 

34,252

 

 

 

    

 

858,531

 

 

 

Michael P. McDermott

Former Chief Customer Officer

   

 

2018

 

 

 

    

 

581,318

 

 

 

    

 

0

 

 

 

    

 

2,373,464

 

 

 

    

 

812,123

 

 

 

    

 

168,111

 

 

 

    

 

233,979

 

 

 

    

 

4,168,995

 

 

 

   

 

2017

 

 

 

    

 

675,000

 

 

 

    

 

0

 

 

 

    

 

2,107,496

 

 

 

    

 

605,243

 

 

 

    

 

595,701

 

 

 

    

 

46,662

 

 

 

    

 

4,030,102

 

 

 

Richard D. Maltsbarger

Former Chief Operating Officer

   

 

2018

 

 

 

    

 

320,276

 

 

 

    

 

0

 

 

 

    

 

2,373,464

 

 

 

    

 

812,123

 

 

 

    

 

94,004

 

 

 

    

 

406,857

 

 

 

    

 

4,006,724

 

 

 

 

(1)

Mr. Ellison joined the Company as President and Chief Executive Officer, and Mr. Niblock retired as Chairman of the Board, President & Chief Executive Officer, in each case on July 2, 2018. Mr. Croom retired as Chief Financial Officer on October 5, 2018. As part of the CFO transition, Ms. Mason was appointed as Interim Chief Financial Officer, effective from October 5, 2018 until Mr. Denton joined the Company as Executive Vice President, Chief Financial Officer on November 19, 2018, at which point Ms. Mason resumed her role as Senior Vice President, Corporate Finance and Treasurer. Mr. McFarland joined the Company as Executive Vice President, Stores on August 15, 2018. Mr. Maltsbarger left the Company on July 6, 2018 and Mr. McDermott left the Company on November 6, 2018. Because Mr. Maltsbarger and Ms. Mason were only NEOs in fiscal 2018 (and not in the prior fiscal years), no disclosure is included for fiscal 2017 or fiscal 2016.

 

(2)

The amount reported in this column for Mr. Ellison represents the guaranteed payout of his annual bonus target, which was subject to the development and approval by the Board of certain strategic plans, prorated based on the number of days worked for the Company during fiscal 2018, as discussed on page 39. The amount reported in this column for Mr. McFarland represents a guaranteed annual bonus amount of $375,000 and a sign-on bonus of $500,000 provided under his respective offer letter. The amount reported for Mr. Denton represents a sign-on

 

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Compensation Tables

 

 

  bonus of $1,000,000 provided under his respective offer letter. The amount reported in this column for Ms. Mason represents a discretionary bonus paid in consideration for her critical role as the Interim Chief Financial Officer. The amounts reported for Ms. Weber and Mr. McCanless represent discretionary bonuses paid in recognition of their performance during a critical period of leadership transition.

 

(3)

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. NEOs receive dividends on unvested shares of time-vested 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 12, “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 1, 2019 for additional information about the Company’s accounting for share-based compensation arrangements, including the assumptions used in calculating the grant date fair values.

 

(4)

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 a relative TSR modifier. The PSUs are accounted for as equity awards. The 2018 stock awards amounts include the following grant date fair values of the PSUs: Mr. Ellison — $2,777,659; Mr. Niblock — $4,640,110; Mr. Croom — $1,024,671; Ms. Mason — $167,277; Mr. McDermott — $1,558,017; Mr. Maltsbarger — $1,558,017; Ms. Weber — $881,637; and Mr. McCanless — $881,637. The grant date fair values of the PSUs, assuming the maximum number of shares would be earned at the end of the three-year performance period, would have been: Mr. Ellison — $5,541,425; Mr. Niblock — $9,256,947; Mr. Croom — $2,044,170; Ms. Mason — $333,664; Mr. McDermott — $3,108,195; Mr. Maltsbarger — $3,108,195; Ms. Weber — $1,758,830; and Mr. McCanless — $1,758,830. Mr. Denton and Mr. McFarland were not granted any PSUs in 2018.

 

(5)

The amounts shown in this column reflect payments made under the Lowe’s Annual Incentive Award plan which paid out below target based on performance achievement described in more detail on pages 38-39. Payouts for Mr. Denton as well as for former executives Messrs. Niblock, Croom, McDermott and Maltsbarger were also prorated based on the number of days of employment during the 2018 fiscal year.

 

(6)

Amounts presented consist of the following for the 2018 fiscal year:

 

   

Company Matching
Contributions to:

 

                                           

  Name

 

 

401(k)
Plan
($)

 

    

Benefit Restoration
Plan

($)

 

    

Reimbursement

of Tax
and Financial
Planning
Costs

($)

 

    

Personal

Use of
Corporate

Aircraft
($)

 

    

Cost of
Company

Required
Physical
Exam

($)

 

    

Relocation(i)
($)

 

    

Severance(ii)
($)

 

    

Total
($)

 

 

  Mr. Ellison

 

   

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

111,467

 

 

 

    

 

0

 

 

 

    

 

89,242

 

 

 

    

 

0

 

 

 

    

 

200,709

 

 

 

  Mr. Denton

 

   

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

69,547

 

 

 

    

 

0

 

 

 

    

 

69,547

 

 

 

  Mr. McFarland III

 

   

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

7,065

 

 

 

    

 

0

 

 

 

    

 

45,778

 

 

 

    

 

0

 

 

 

    

 

52,843

 

 

 

  Ms. Weber

 

   

 

9,942

 

 

 

    

 

35,535

 

 

 

    

 

12,000

 

 

 

    

 

0

 

 

 

    

 

3,090

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

60,567

 

 

 

  Mr. McCanless

 

   

 

2,171

 

 

 

    

 

43,306

 

 

 

    

 

1,525

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

47,002

 

 

 

  Mr. Niblock

 

   

 

5,312

 

 

 

    

 

106,435

 

 

 

    

 

12,000

 

 

 

    

 

35,626

 

 

 

    

 

6,516

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

165,889

 

 

 

  Mr. Croom

 

   

 

979

 

 

 

    

 

44,185

 

 

 

    

 

10,200

 

 

 

    

 

0

 

 

 

    

 

2,100

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

57,464

 

 

 

  Ms. Mason

 

   

 

2,200

 

 

 

    

 

23,052

 

 

 

    

 

7,500

 

 

 

    

 

0

 

 

 

    

 

1,500

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

34,252

 

 

 

  Mr. McDermott

 

   

 

8,377

 

 

 

    

 

42,198

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

2,100

 

 

 

    

 

0

 

 

 

    

 

181,304

 

 

 

    

 

233,979

 

 

 

  Mr. Maltsbarger

 

   

 

9,088

 

 

 

    

 

23,269

 

 

 

    

 

12,000

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

0

 

 

 

    

 

362,500

 

 

 

    

 

406,857

 

 

 

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. Relocation amounts for Messrs. Ellison, Denton and McFarland include expenses and gross up for taxes through November 31, 2018.

 

  (i)

Messrs. Ellison, Denton and McFarland were provided relocation assistance in connection with their hiring. The relocation assistance provided is generally comparable to the relocation program provided as a benefit to other executives who relocate. Items in this column include expenses through November 31, 2018 including the following tax gross ups: Mr. Ellison — $39,619; Mr. Denton — $34,162; and — Mr. McFarland $20,120. The remainder of relocation expenses and gross up taxes will be reported on the 2019 Proxy Statement.

 

  (ii)

Amounts in this column represent the severance amounts that were paid during fiscal year 2018 to Mr. McDermott under his Retention Agreement dated July 9, 2018 and to Mr. Maltsbarger under his Release and Separation Agreement dated July 20, 2018.

 

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Table of Contents

Compensation Tables

 

 

Grants of Plan-Based Awards

This table presents the potential annual incentive awards the NEOs were eligible to earn in fiscal 2018, the stock options, RSAs and PSUs awarded to the NEOs in fiscal 2018 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
(#)
 
  Current NEOs                                                                                    

  Mr. Ellison

       

 

1,712,912

 

 

 

   

 

1,712,912

 

 

 

   

 

3,425,824

 

 

 

             
   

 

7/2/2018

 

 

 

   

 

5/20/2018

 

 

 

         

 

9,644

 

 

 

   

 

28,790

 

 

 

   

 

57,436

 

 

 

         

 

2,777,659

 

 

 

   

 

7/2/2018

 

 

 

   

 

5/20/2018

 

 

 

                 

 

166,240

 

 

 

   

 

94.87

 

 

 

   

 

3,881,205

 

 

 

     

 

7/2/2018

 

 

 

   

 

5/20/2018

 

 

 

                                                   

 

51,290

 

 

 

                   

 

4,865,882

 

 

 

  Mr. Denton

       

 

59,560

 

 

 

   

 

238,238

 

 

 

   

 

476,477

 

 

 

             
   

 

1/2/2019

 

 

 

   

 

11/8/2018

 

 

 

                 

 

40,700

 

 

 

   

 

92.27

 

 

 

   

 

879,205

 

 

 

     

 

1/2/2019

 

 

 

   

 

11/8/2018

 

 

 

                                                   

 

9,650

 

 

 

                   

 

890,406

 

 

 

  Mr. McFarland III

       

 

375,000

 

 

 

   

 

375,000

 

 

 

   

 

712,912

 

 

 

             
   

 

10/1/2018

 

 

 

   

 

8/16/2018

 

 

 

                 

 

43,810

 

 

 

   

 

114.07

 

 

 

   

 

1,222,220

 

 

 

     

 

10/1/2018

 

 

 

   

 

8/16/2018

 

 

 

                                                   

 

10,740

 

 

 

                   

 

1,225,112

 

 

 

  Ms. Weber

       

 

138,375

 

 

 

   

 

553,500

 

 

 

   

 

1,107,000

 

 

 

             
   

 

4/2/2018

 

 

 

   

 

3/22/2018

 

 

 

         

 

3,654

 

 

 

   

 

10,910

 

 

 

   

 

21,765

 

 

 

         

 

881,637

 

 

 

   

 

4/2/2018

 

 

 

   

 

3/22/2018

 

 

 

                 

 

22,600

 

 

 

   

 

84.59

 

 

 

   

 

459,309

 

 

 

     

 

4/2/2018

 

 

 

   

 

3/22/2018

 

 

 

                                                   

 

5,450

 

 

 

                   

 

461,016

 

 

 

  Mr. McCanless

       

 

138,375

 

 

 

   

 

553,500

 

 

 

   

 

1,107,000

 

 

 

             
   

 

4/2/2018

 

 

 

   

 

3/22/2018

 

 

 

         

 

3,654

 

 

 

   

 

10,910

 

 

 

   

 

21,765