DEF 14A 1 d876223ddef14a.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):

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  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    

2020 Notice of Annual Meeting of

Shareholders & Proxy Statement


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LOGO

 

 

April 16, 2020

Dear Fellow Shareholders:

We are pleased to invite you to attend our 2020 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Time, on Friday, May 29, 2020 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 2020 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 2020 Annual Meeting of Shareholders

April 16, 2020

The 2020 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 29, 2020 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 11 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 2019;

 

3.

To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020;

 

4.

To approve an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special shareholder meeting;

 

5.

To approve the Company’s 2020 Employee Stock Purchase Plan;

 

6.

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

 

7.

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, 3, 4 and 5, and a vote “AGAINST” the shareholder proposal in item 6. The persons named as proxies will use their discretion to vote on other matters that may properly arise at the Annual Meeting or any adjournment or postponement thereof.

Only shareholders of record as of the close of business on March 23, 2020 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 29, 2020:

The Notice of 2020 Annual Meeting of Shareholders, Proxy Statement and

2019 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.

 

15%   $6.4 Billion

2019 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 pay if the Company’s 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 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;

 

  10 of 11 Director Nominees are Independent;

 

  Audit, Compensation, Nominating and Governance, Sustainability and Technology Committees Comprised Solely 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 Ability to Call Special Meetings;

 

  Majority Voting for Directors and Declassified Board; and

 

  Prohibition on Hedging and Pledging of Company Common Stock.
 

 

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FISCAL 2019 FINANCIAL AND OPERATIONAL HIGHLIGHTS

 

 

LOGO

 

 

 

$72.1 BILLION IN SALES

+1.2% Sales YOY

 

      

 

$4.3 BILLION CASH FLOW FROM OPERATIONS

       

 

$5.49 DILUTED EARNINGS PER SHARE

+93.1% Diluted Earnings Per Share YOY

       

 

$5.74 ADJUSTED DILUTED

EARNINGS PER SHARE*

+12.3% Adjusted Diluted Earnings Per Share* YOY

 

YOY = Year over Year Comparison

* Adjusted diluted earnings per common share is a non-GAAP financial measure. Refer to Appendix C for a reconciliation of non-GAAP measures. Fiscal 2018 diluted earnings per share was $2.84 and adjusted diluted earnings per share was $5.11.

In fiscal 2019, we made significant progress in transforming our company and building a strong foundation from which to create shareholder value. Our focus on improving in-stocks and customer service coupled with our effort on winning with the Pro supported improved performance.

While we are still in the early stages of a multi-year transformation, 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.

 

2020 PROPOSALS    Board
Recommends
   See Page

 

Proposal 1:   Election of Directors

 

  

 

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8

 

 

 

 

Proposal 2:  Advisory Vote to Approve Named Executive Officer Compensation

 

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56

 

 

 

 

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

 

  

 

LOGO

 

    

 

 

 

 

57

 

 

 

 

Proposal 4:  Approve Amendment to Bylaws Reducing the Ownership Threshold to Call Special Shareholder Meetings to 15% of Outstanding Shares

 

  

 

LOGO

 

    

 

 

 

 

58

 

 

 

 

Proposal 5:  Approve 2020 Employee Stock Purchase Plan

 

  

 

LOGO

 

    

 

 

 

 

59

 

 

 

 

Proposal 6:  Shareholder Proposal to Reduce the Ownership Threshold to Call Special Shareholder Meetings to 10% of Outstanding Shares

 

 

  

 

 

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General Information      1  
Shareholder Engagement      5  
Proposal 1: Election of Directors      8  
Identifying and Evaluating Director Nominees      9  
Director Nominees      11  
Corporate Governance      17  
Corporate Governance Guidelines and Code of Business Conduct and Ethics      17  
Director Independence      17  
Compensation of Directors      18  
Board Meetings, Committees of the Board and Board Leadership Structure      20  
Corporate Responsibility and Political Advocacy and Oversight      26  
Security Ownership of Certain Beneficial Owners and Management      27  
Compensation Discussion and Analysis      28  
Executive Summary      29  
Compensation Philosophy and Elements      33  
Compensation Decision-Making Process      35  
2019 Compensation Actions      37  
Other Compensation Policies      42  
Compensation Committee Report      43  
Compensation Tables      44  
Compensation Committee Interlocks and Insider Participation      51  
Equity Compensation Plan Information      52  
Related Person Transactions      53  
Policy and Procedures for Review, Approval or Ratification of Related Person Transactions      53  
Approved Related Person Transactions      53  
Audit Matters      54  
Report of the Audit Committee      54  
Fees Paid to the Independent Registered Public Accounting Firm      55  
Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation      56  
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm      57  
Proposal 4: Approval of Amendment to Company’s Bylaws      58  
Proposal 5: Approval of Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan      59  
Proposal 6: Shareholder Proposal Regarding Special Shareholder Meetings      61  
Additional Information      63  
Delivery of Proxy Materials      63  
Electronic Delivery of Proxy Materials      63  
Shareholder Proposals for the 2021 Annual Meeting      63  
Annual Report      64  
Appendix A: Categorical Standards for Determination of Director Independence      A-1  
Appendix B: Lowe’s Companies, Inc. 2020 Employee Stock Purchase Plan      B-1  
Appendix C: Reconciliation of Non-GAAP Financial Measures      C-1  
 

 

 

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Proxy Statement

The Board of Directors (the “Board of Directors” or the “Board”) of Lowe’s Companies, Inc. is providing these materials to you in connection with the 2020 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held at 10:00 a.m., Eastern Time, on Friday, May 29, 2020 at the Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte, North Carolina 28277. The Board, upon proper notice to shareholders, may change the Annual Meeting date, time or location due to developments relating to the outbreak of COVID-19. 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 16, 2020, 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 proxy materials?

These materials include:

 

  the Notice of Annual Meeting and Proxy Statement; and

 

  the 2019 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 six proposals scheduled to be voted on at the Annual Meeting:

 

  the election of the 11 director candidates nominated by the Board;

 

  the approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2019;

 

  the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020;

 

  the approval of an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special meeting;

 

  the approval of the Company’s 2020 Employee Stock Purchase Plan; and

 

  a shareholder proposal regarding special shareholder meetings.

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

What are the Board’s voting recommendations?

The Board unanimously recommends that you vote your shares:

 

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

 

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General Information

 

 

  “FOR” the approval, on an advisory basis, of the Company’s named executive officer compensation in fiscal 2019;

 

  “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020;

 

  “FOR” the approval of an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special meeting;

 

  “FOR” the approval of the Company’s 2020 Employee Stock Purchase Plan; and

 

  “AGAINST” the shareholder proposal regarding special shareholder meetings.

Who can attend the Annual Meeting?

Admission to the Annual Meeting is limited to:

 

  shareholders of record as of the close of business on March 23, 2020;

 

  holders of valid proxies for the Annual Meeting; and

 

  invited guests.

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

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

The Board set March 23, 2020 as the record date. As of the record date, 754,948,648 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.

 

 

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General Information

 

 

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

The election of directors, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2019, the approval of the Bylaw amendment, the approval of the 2020 Employee Stock Purchase Plan and the shareholder proposal are non-routine matters. Consequently, without your voting instructions, the organization that holds your shares cannot vote your shares on these proposals. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020 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 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). 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 2020 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

Proposal 4: Approval of Bylaw Amendment. Approval of an amendment to the Company’s Bylaws decreasing the percentage of shares required for shareholders to call a special meeting requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

Proposal 5: Approval of 2020 Employee Stock Purchase Plan. Approval of the Company’s 2020 Employee Stock Purchase Plan requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” such proposal).

Proposal 6: Shareholder Proposal. Approval of the shareholder proposal requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting in person or by proxy (meaning the numbers 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.

 

 

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General Information

 

 

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

With respect to Proposals 2, 3, 4, 5 and 6, the advisory vote to approve the Company’s named executive officer compensation in fiscal 2019, ratifying the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2020, approving an amendment to the Company’s Bylaws, approving the Company’s 2020 Employee Stock Purchase Plan and the shareholder proposal, respectively, abstentions and broker non-votes will not be counted as votes cast and, therefore, will not have any effect on the outcomes of these proposals.

Who pays for solicitation of proxies?

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

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 2020 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 2019, 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 2019, 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, culture, human capital management and other matters. We report to our Nominating and Governance Committee and Board about these meetings and provide feedback from our shareholders.

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

 

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Shareholder Engagement

 

 

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

 

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Shareholder Engagement

 

 

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Proposal 1: Election of Directors

 

 

Proposal 1: Election of Directors

We are asking our shareholders to vote on the election of the 11 candidates nominated by the Board of Directors for election as directors.

The Board has nominated the 11 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 2021 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 and were elected to the Board at the 2019 Annual Meeting of Shareholders. In accordance with the Board’s mandatory retirement policy, Mr. James H. Morgan will retire after 5 years of service on the Board and is not a nominee for re-election at the 2020 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 seven 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-and-a-half 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 11 nominees named in this Proxy Statement.

 

 

 

LOGO    The Board of Directors unanimously recommends a vote “FOR” the election of each of the 11 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 11 nominees named in this proposal.

 

 

 

 

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Table of Contents

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 re-nomination 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 2021 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. Morgan’s retirement and the election of our director nominees, the Board will be reduced to eleven directors and seven of the eleven 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,

 

 

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Table of Contents

Proposal 1: Election of Directors

 

IDENTIFYING AND EVALUATING DIRECTOR NOMINEES

 

directors must offer to resign from the Board as a result of changes to their principal occupation, subject to further consideration by the Nominating and Governance Committee. The Nominating and Governance Committee assesses directors’ time commitment to the Board throughout the year, including through the annual 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.

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;

 

  Diverse individuals with varying perspectives and experience;

 

  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.

 

 

Director Nominees’ Skills and Expertise

 

LOGO

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

DIRECTOR NOMINEES

 

 

RAUL ALVAREZ

    

 

LOGO  

Director Since: 2010

 

Age: 64

 

Lowe’s Board Committees:

•   Compensation

•   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 more than 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: 70

 

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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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

ANGELA F. BRALY

    

 

LOGO  

Director Since: 2013

 

Age: 58

 

Lowe’s Board Committees:

•   Compensation

•   Sustainability, Chair

•   Technology

 

Current Public Company Directorships:

•   Brookfield Asset Management, Inc.

•   Exxon Mobil 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, Chief Executive Officer and director 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

    

 

LOGO  

Director Since: 2016

 

Age: 61

 

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 664 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 more than 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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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

LAURIE Z. DOUGLAS

    

 

LOGO  

Director Since: 2015

 

Age: 56

 

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, omni-channel, 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

    

 

LOGO  

Director Since: 2012

 

Age: 66

 

Current Public Company Directorships:

•   Aramark Corporation

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

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

MARVIN R. ELLISON

    

 

LOGO  

Director Since: 2018

 

Age: 55

 

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 board of the Retail Industry Leaders Association.

 

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.

 

BRIAN C. ROGERS

    

 

LOGO  

Director Since: 2018

 

Age: 64

 

Lowe’s Board Committees:

•  Audit

•  Nominating and Governance, Chair

 

Current Public Company Directorships:

•   United Technologies Corporation

Mr. Rogers retired as the Non-Executive Chairman of T. Rowe Price Group, Inc., a global investment management organization, in April 2019. He served as the Chairman from 2007 to 2017 and as Chief Investment Officer from 2004 to 2017. Mr. Rogers served as a director of the Price Group from 1997 to 2019. 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 held a variety of other senior leadership roles and had been involved in investment management with T. Rowe Price since beginning his career there in 1982. Prior to joining T. Rowe Price, Mr. Rogers worked at Bankers Trust Company.

 

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

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

 

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

BERTRAM L. SCOTT

  

 

        

 

LOGO  

Director Since: 2015

 

Age: 69

 

Lowe’s Board Committees:

•  Audit, Chair

•  Nominating and Governance

 

 

Current Public Company Directorships:

•  AXA Equitable Holdings, Inc.

•   Becton, Dickinson and Company

Mr. Scott retired as Senior Vice President of Population Health and Value Based Care at Novant Health, a leading healthcare provider, in May 2019, after serving in that role since 2015. Prior to that, Mr. Scott was President, Chief Executive Officer and a director of Affinity Health Plan, a provider of New York State-sponsored health coverage, from 2012 to 2014; President, U.S. Commercial of CIGNA Corporation, a global health services organization, from 2010 to 2011; Executive Vice President and Chief Institutional Development and Sales Officer of TIAA-CREF from 2000 to 2010; and President and Chief Executive Officer of TIAA-CREF Life Insurance Company from 2000 to 2007.

Mr. Scott currently serves on the board of AXA Equitable Holdings, Inc. (“EQH”) 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.

 

 

LISA W. WARDELL

    

 

LOGO  

Director Since: 2018

 

Age: 50

 

Lowe’s Board Committees:

•  Audit

•  Sustainability

•  Technology

 

Current Public Company Directorships:

•   Adtalem Global Education, Inc.

Ms. Wardell is the President, Chief Executive Officer and Chairman of Adtalem Global Education, Inc. (formerly DeVry Education Group), a leading global education provider. Ms. Wardell was appointed President and Chief Executive Officer in 2016 and Chairman in July 2019, having previously been a member of Adtalem’s board of directors since 2008.

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

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

 

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

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

 

 

 

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Proposal 1: Election of Directors

 

DIRECTOR NOMINEES

 

 

ERIC C. WISEMAN

  

 

        

 

LOGO  

Director Since: 2011

 

Age: 64

 

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 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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Corporate Governance

 

CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS CONDUCT AND ETHICS

 

Corporate Governance

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 2020, the Board, with the assistance of the Nominating and Governance Committee, conducted an evaluation of director independence based on the Categorical Standards, NYSE rules and 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 and Marshall O. Larsen and Mses. Braly, Cochran, Douglas and Wardell qualifies as an independent director under the Categorical Standards, NYSE rules and 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 is not independent due to his employment by the Company as President and Chief Executive Officer.

 

 

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Corporate Governance

 

COMPENSATION OF DIRECTORS

 

COMPENSATION OF DIRECTORS

 

Compensation Philosophy

The Compensation Committee reviews director compensation 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 2019, 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, Sustainability Committee or Technology Committee received an additional $15,000; the Chair of the Compensation Committee received an additional $20,000; and the Chair of the Audit Committee received an additional $25,000. The Chairman received an additional $70,000. 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 2019, 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, if applicable, 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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COMPENSATION OF DIRECTORS

 

Fiscal 2019 Compensation

The following table shows the compensation paid to each non-employee director who served on the Board in fiscal 2019:

 

Name

  

 

Fees Earned or

Paid in Cash

($)

  

Stock

Awards

($)(1)

  

Total  

($)  

Raul Alvarez

    

 

102,500

    

 

177,232

    

 

279,732

David H. Batchelder

    

 

90,000

    

 

177,232

    

 

267,232

Angela F. Braly

    

 

105,000

    

 

177,232

    

 

282,232

Sandra B. Cochran

    

 

90,000

    

 

177,232

    

 

267,232

Laurie Z. Douglas

    

 

105,000

    

 

177,232

    

 

282,232

Richard W. Dreiling

    

 

160,000

    

 

326,480

    

 

486,480

Marshall O. Larsen(2)

    

 

52,500

    

 

0

    

 

52,500

James H. Morgan

    

 

90,000

    

 

177,232

    

 

267,232

Brian C. Rogers

    

 

101,250

    

 

177,232

    

 

278,482

Bertram L. Scott

    

 

108,750

    

 

177,232

    

 

285,982

Lisa W. Wardell

    

 

90,000

    

 

177,232

    

 

267,232

Eric C. Wiseman

    

 

110,000

    

 

177,232

    

 

287,232

 

(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 1,600 deferred stock units granted to the Chairman of the Board in fiscal 2019. 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 January 31, 2020 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. Larsen retired from the Board on May 31, 2019 and did not receive a grant of deferred share units in 2019.

The following table shows the number of deferred stock units held by each non-employee director as of January 31, 2020:

 

Name

  

Deferred

Stock

Units(#)

 

Raul Alvarez

  

 

31,117

 

David H. Batchelder

  

 

3,876

 

Angela F. Braly

  

 

14,138

 

Sandra B. Cochran

  

 

8,217

 

Laurie Z. Douglas

  

 

10,607

 

Richard W. Dreiling

  

 

27,502

 

James H. Morgan

  

 

10,607

 

Brian C. Rogers

  

 

3,876

 

Bertram L. Scott

  

 

8,217

 

Lisa W. Wardell

  

 

3,876

 

Eric C. Wiseman

  

 

24,340

 

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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Corporate Governance

 

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 2019, the Board held five meetings. Each incumbent director attended 75% or more of the aggregate number of meetings of the Board and committees of the Board on which the director served during fiscal 2019, with the exception of Mr. Larsen who attended 50% 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. Larsen and Alvarez, whose absences were excused due to prior commitments.

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 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 the 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 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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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 Mr. 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, IF APPOINTED

 

The Lead Director, if appointed:

 

   

Presides at all meetingas of the Board at which the Chairman of the Board is not present, including executive sessions of independent 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. With Mr. Dreiling serving as Chairman of the Board, the Company does not currently have a Lead Director.

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

LOGO

 

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 environments when assessing Board composition, director succession, executive compensation, human capital management and other matters of importance.

Board’s Role in the Risk Management Process

The primary responsibility for identifying, evaluating, managing and mitigating the Company’s exposure to risk belongs with management. It is the Board’s responsibility to oversee the Company’s risk management processes and assess whether management has an appropriate framework to manage risks effectively. It is also the Board’s responsibility to challenge management regularly to demonstrate that those processes are effective in operation.

 

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

The Board executes its oversight responsibilities both through active review and discussion of key risks facing the Company and by delegating certain risk oversight responsibilities to its committees, who regularly report back to the Board.

A summary of the allocation of general risk oversight functions among the committees, as delegated by the Board, is as follows:

 

LOGO

For more information on specific areas of risk oversight, each committee has a charter describing its specific responsibilities, which can be found on our website at www.Lowes.com/investor.

The risks periodically reviewed by the various committees are also reviewed by the full Board when a committee or the Board determines that this is appropriate. The role of the Board’s Audit, Compensation, Nominating and Governance, Sustainability 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. Further, the independent Chairman promotes effective considerations of matters presenting significant risks to the Company through his role in advising committee chairs, chairing meetings of the independent directors and working with the President and Chief Executive Officer to develop Board meeting agendas.

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. Following a review of the engagement with its previous independent compensation consultant, Farient Advisors, LLC, the Compensation Committee, in March 2019, decided to retain Semler Brossy Consulting Group, LLC to act as its independent compensation consultant and to provide it with advice and support on executive compensation issues. The compensation consultant assists 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 2019 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 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

 

 

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BOARD MEETINGS, COMMITTEES OF THE BOARD AND BOARD LEADERSHIP STRUCTURE

 

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. 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 as of January 31, 2020 are identified in the following table:

 

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

 

🌑 Member

               
    LOGO   LOGO   LOGO   LOGO   LOGO

Raul Alvarez(1)

      🌑       🌑   🌑

David H. Batchelder

      🌑   🌑        

Angela F. Braly

      🌑       Chair   🌑

Sandra B. Cochran

      🌑            

Laurie Z. Douglas

  🌑       🌑       Chair

Richard W. Dreiling

                   

Marvin R. Ellison

                   

Marshall O. Larsen(2)

                   

James H. Morgan

  🌑       🌑        

Brian C. Rogers(3)

  🌑       Chair        

Bertram L. Scott(4)

  Chair       🌑        

Lisa W. Wardell

  🌑           🌑   🌑

Eric C. Wiseman

    Chair     🌑   🌑
           

Number of Meetings in Fiscal 2019

  7   7   5   3   2

 

(1)

Effective May 31, 2019, Mr. Alvarez ended his tenure as Chair of the Audit Committee and was appointed to the Compensation Committee.

 

(2)

Mr. Larsen served as Chair of the Nominating and Governance Committee until May 31, 2019.

 

(3)

Mr. Rogers was appointed Chair of the Nominating and Governance Committee on May 31, 2019.

 

(4)

Mr. Scott was appointed Chair of the Audit Committee on May 31, 2019.

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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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, Morgan, Rogers 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.

 

 

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.

 

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.

 

 

 

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CORPORATE RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT

 

CORPORATE RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT

Corporate Responsibility

Corporate responsibility is a cornerstone of our Company and fundamental to our success. The Sustainability Committee of the Board oversees Lowe’s corporate responsibility strategies and our Sustainability Council, composed of executives and subject matter experts from across the Company, leads the Company’s efforts to integrate corporate responsibility into our business. The Sustainability Committee receives regular updates related to corporate responsibility strategy and initiatives.

We have built our corporate responsibility strategy around three key areas: Product Sustainability; Our People and Communities; and Operational Excellence. These key areas align with our mission and overall strategic plan.

 

      

 

 

LOGO

 

PRODUCT SUSTAINABILITY

 

We strive to put the customer first in everything we do, stocking our shelves with quality items that people can feel good about buying. As we expand our portfolio of responsibly sourced, innovative and efficient eco-products, we hope to help customers reduce their impact on the environment.

 

      

 

        

 

      

 

 

LOGO

 

OUR PEOPLE & COMMUNITIES

 

The Lowe’s community begins with more than 300,000 employees and extends to their families and the communities where we live and work. Developing our employees is foundational to ensuring Lowe’s success and outstanding customer experiences. Through charitable contributions, employee volunteerism and nonprofit partnerships, we invest in our communities, because when our people and communities are strong, so are we.

 

 

      

 

        

 

      

 

 

LOGO

 

OPERATIONAL EXCELLENCE

 

We are focused on creating long-term value for our shareholders while preserving our shared home, Earth, through sustainable practices and doing the right thing – acting responsibly, ethically, and being transparent.

 

      

 

 

IN 2019,

we had more than 26,000 ENERGY STAR® products available for sale in-store and online.

       

 

IN 2019,

our employees contributed 330,000 hours of community service, and we invested 1.1 million hours of training in front-line leaders.

 

       

 

IN 2019,

we reduced carbon emissions by 12.26% and recycled 102 thousands of metric tons of cardboard.

 

We have adopted a number of policies that highlight the Company’s commitment to social and environmental responsibility and that seek to promote sustainability in the operation of our business. Our commitment to building an industry-leading corporate responsibility program is demonstrated by our inclusion in the Dow Jones Sustainability Index for North America, a benchmark for investors who integrate sustainability considerations into their portfolios. More information about Lowe’s corporate responsibility efforts and initiatives, including the 2018 Corporate Responsibility Report and our sustainability policies, is available at newsroom.Lowes.com/responsibility/.

Political Advocacy and Oversight

The Nominating and Governance Committee has oversight of Lowe’s political advocacy activities, including political contributions, trade association memberships, lobbying activities and the Lowe’s Companies, Inc. Political Action Committee (“LOWPAC”). As part of its oversight role, it reviews our political engagement and contribution policy and monitors our ongoing political strategy as it relates to the overall public policy objectives for the Company. Lowe’s does not make contributions from corporate funds to political campaigns, super political action committees or political parties. Political contributions made by LOWPAC are approved by its board of directors, which consists of members of the senior leadership team spanning corporate and operational roles. All political advocacy is conducted to promote the interests of the Company and is made without regard for the private political preferences of Lowe’s directors or executives.

 

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Security Ownership of Certain Beneficial Owners and Management

 

 

Security Ownership of Certain Beneficial Owners and Management

The following table provides information about the beneficial ownership of Common Stock as of March 23, 2020, 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

    

 

31,257

   

 

*

David H. Batchelder

    

 

25,893

   

 

*

William P. Boltz

    

 

32,444

   

 

*

Angela F. Braly

    

 

14,201

   

 

*

Sandra B. Cochran

    

 

9,754

   

 

*

David M. Denton

    

 

46,734

   

 

*

Laurie Z. Douglas

    

 

10,655

   

 

*

Richard W. Dreiling

    

 

27,626

   

 

*

Marvin R. Ellison

    

 

172,991

   

 

*

Seemantini Godbole

    

 

32,587

   

 

*

Joseph M. McFarland III

    

 

42,298

   

 

*

James H. Morgan

    

 

10,655

   

 

*

Brian C. Rogers

    

 

13,893

   

 

*

Bertram L. Scott

    

 

8,254

   

 

*

Lisa W. Wardell

    

 

4,416

   

 

*

Eric C. Wiseman

    

 

24,450

   

 

*

Current Directors and Executive Officers as a Group (20 total)

       760,874 (2)          *

 

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

       57,618,135       7.6 %(4)

 

The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

       66,108,065       8.8 %(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 – 31,257 shares; Mr. Batchelder – 3,893 shares; Mr. Boltz – 18,984; Ms. Braly – 14,201 shares; Ms. Cochran – 8,254 shares; Mr. Denton – 27,534 shares; Ms. Douglas – 10,655 shares; Mr. Dreiling – 27,626 shares; Mr. Ellison – 82,901 shares; Ms. Godbole – 13,807 shares; Mr. McFarland – 24,668 shares; Mr. Morgan – 10,655 shares; Mr. Rogers – 3,893 shares; Mr. Scott – 8,254 shares; Ms. Wardell – 3,893 shares; Mr. Wiseman – 24,450 shares; and current directors and executive officers as a group (20 total) – 488,753 shares.

 

(2)

Includes 252,766 shares beneficially owned by other current executive officers not individually listed in the table.

 

(3)

Shares held at December 31, 2019, according to a Schedule 13G/A filed with the SEC on February 10, 2020 by BlackRock, Inc. (“BlackRock”). The Schedule 13G/A reports that BlackRock has sole voting power over 49,610,237 shares, shared voting power over no shares, sole investment power over 57,618,135 shares and shared investment power over no shares.

 

(4)

Shares held at December 31, 2019, according to a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group, Inc. (“Vanguard”). The Schedule 13G/A reports that Vanguard has sole voting power over 1,191,366 shares, shared voting power over 214,132 shares, sole investment power over 64,772,877 shares and shared investment power over 1,335,188 shares.

 

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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 2019 fiscal year:

 

Marvin R. Ellison

  

President and Chief Executive Officer

David M. Denton

  

Executive Vice President, Chief Financial Officer

Joseph M. McFarland III

  

Executive Vice President, Stores

William P. Boltz

  

Executive Vice President, Merchandising

Seemantini Godbole

  

Executive Vice President, Chief Information Officer

Our CD&A is organized as follows:

 

I.

Executive Summary

 

II.

Compensation Philosophy and Elements

 

III.

Compensation Decision-Making Process

 

IV.

2019 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 continued dividend growth since 1961.

 

15%   $6.4 Billion

2019 INCREASE IN

ANNUAL DIVIDEND

 

DIVIDENDS PAID IN THE

LAST FIVE YEARS

 

 

In fiscal 2019, we made significant progress in transforming our company and building a strong foundation from which to create increasing shareholder value. Throughout the year, our team executed the requisite steps allowing us to make progress toward a true omni-channel customer experience. We expect to capitalize on the opportunity in front of us by driving operational excellence and better serving our customers by continued execution on our strategic initiatives:

 

LOGO

In fiscal 2019, we began to demonstrate success from executing our retail fundamentals framework. Our focus on improving in-stocks and customer service coupled with our efforts on winning with the Pro supported improved performance. This progress allowed us to achieve solid results from executing our retail fundamentals framework, with total sales growth of 1.2 percent driven by comparable sales growth of 2.6 percent. Additionally, we made strategic investments across our business throughout the year, including in technology, supply chain, eCommerce, customer service, improved category performance, operational efficiency and Pro business, while continuing to return excess cash to our shareholders. We delivered value to shareholders through the payment of $1.6 billion in dividends and the repurchase of nearly $4.3 billion of our common stock.

Our executive compensation program is designed to maximize long-term shareholder value by aligning executive pay with our strategy and shareholder interests, as well as attracting and retaining talented executives to drive long-term value. For fiscal 2019, we altered the incentive metrics to support our retail fundamentals strategy. Our annual incentive plan incorporated a metric for inventory improvement in support of our corporate strategy and to generate cash flow for investing in the business and returning value to shareholders. We also equally weighted the adjusted sales and adjusted operating income metrics within the annual incentive plan in recognition of the importance of growing our top line while maintaining a healthy focus on profitability. Finally, we replaced the metric of return on non-cash average assets with return-on-invested-capital in our long-term incentive plan, which promotes a strong focus on capital allocation that generates returns consistent with shareholder expectations and aligns with how we measure performance internally and how investors are measuring our capital returns.

We are pleased with the foundation we have built. While we are still in the early stages of our multi-year transformation, we are confident we are on the right path to generate long-term profitable growth.

 

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Table of Contents

Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

The CD&A includes disclosure of our incentive compensation performance measures including: adjusted sales, adjusted operating income, return on invested capital (“ROIC”), inventory improvement and return on non-cash average assets (“RONCAA”) for incentive compensation prior to 2019. Many of these performance measures are calculated in accordance with U.S. generally accepted accounting principles, or GAAP. However, there are some non-GAAP performance measures that management uses to assess our year-over-year performance. A reconciliation of these non-GAAP financial measures is included in Appendix C. For fiscal 2019, the Compensation Committee replaced the long-term incentive plan metric of RONCAA with ROIC for the reasons described above. Adjusted operating income for fiscal 2019 as presented in the CD&A includes an adjustment for incentive compensation performance achievement approved by the Compensation Committee as described on pages 38 to 39. Each of these performance measures is further described on pages 37 to 40.

2019 Executive Compensation

Lowe’s has a long-standing commitment to pay for performance that provides a significant portion of compensation opportunities 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 2019 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 CEO’s and 67% of the other NEOs’ annualized target compensation at risk and contingent upon the achievement of performance objectives or share price performance.

 

LOGO   LOGO

 

 

 

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Table of Contents

Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

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 strategic initiatives.

 

 

Annual Incentive Awards: Payout is generally based on the Company’s achievement of financial (adjusted sales and adjusted operating income) and strategic (inventory improvement) goals. Threshold performance objectives must be achieved for payouts to be earned.

 

 

PSUs: Payout is based on the Company’s achievement of (i) a three-year average RONCAA goal for PSUs granted in 2017 and 2018 and a three-year average ROIC goal for PSUs granted in 2019, in each case, established at the beginning of a three-year performance period and (ii) 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. Threshold 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 relative to when it was awarded.

Based on our performance through fiscal 2019 illustrated below, certain executives received the following payouts of performance-based compensation:

 

 

Annual incentive payouts were driven by (i) above threshold, but below target, performance in adjusted sales, (ii) threshold performance in adjusted operating income following the adjustment for incentive compensation performance achievement approved by the Compensation Committee as described on pages 38 to 39 and (iii) below threshold performance for inventory improvement. Overall award payments for the NEOs were at 43.4% of target.

 

 

The NEOs, who all joined the Company in 2018, did not receive the grant of PSUs for the 2017-2019 performance period.

Annual Incentive Plan Achievement

LOGO

 

*

Dollars in billions

 

(1) 

Adjusted operating income was adjusted by the Compansation Committee for incentive compensation performance achievement as described on pages 38 to 39.

 

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Table of Contents

Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY

 

      WHAT WE DO            WHAT WE DO NOT DO

LOGO

 

  

Provide 80% to 90% of total direct compensation opportunity (assuming target performance) for NEOs in the form of annual and long-term incentives.

 

    

 

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, pledging 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, which was updated in January 2020 to incorporate misconduct that may result in significant financial or reputational harm.

 

    

 

 

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 94% advisory approval in 2019. This is consistent with the advisory approval over the past nine 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 2019 apart from replacing certain metrics and adjusting weightings as described on pages 38 to 39. 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 7 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 2019 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 based on the Compensation Committee’s evaluation of market compensation and an assessment of the executive’s performance. Approved adjustments are effective in March following the start of the fiscal year in alignment with all salaried employees

 

 

 

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 January. Performance is certified in February following the completion of the fiscal year

 

 

Long-Term

Incentive

Awards

 

 

PSUs

 

 

PSUs, which cliff vest at the end of the thee-year performance period, are based on (i) the Company’s average ROIC(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 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 granted pursuant to the annual long-term equity grant 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)

ROIC is a comprehensive long-term financial metric that incorporates both operating profit 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. ROIC is computed by dividing the Company’s net operating profit after taxes for the year by the average of the Company’s invested capital 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 ROIC 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 Board at the Board meeting following each Compensation Committee meeting. The Compensation Committee’s responsibilities include approving:

 

  Compensation philosophy and strategy;

 

  Compensation of executive officers;

 

  Annual and long-term incentive targets and performance goals;

 

  Achievement of goals in annual and long-term incentive plans;

 

  Peer groups of companies used for assessing market compensation levels, pay practices and performance; and

 

  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 its independent compensation consultant for ongoing executive compensation matters. In May 2019, the Compensation Committee engaged Semler Brossy Consulting Group, LLC to serve as its independent compensation consultant, replacing Farient Advisors, LLC. 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 fiscal 2019 compensation

consultants 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 consultants from independently representing the Compensation Committee. During the 2019 fiscal year, Semler Brossy Consulting Group, LLC and 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;

 

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

 

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

 

  Assessed the alignment of realizable CEO compensation with corporate performance;

 

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

 

  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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Table of Contents

Compensation Discussion and Analysis

 

COMPENSATION DECISION-MAKING PROCESS

 

Compensation Market Data 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 2019: the Survey Group and the Peer Group.

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

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 2019 were:

 

Amazon.com, Inc.

 

Best Buy Co., Inc.

 

Costco Wholesale Corporation

  

CVS Health Corporation

Kohl’s Corporation

 

Macy’s, Inc.

 

Nike, Inc.

  

Nordstrom, Inc.

Starbucks Corporation

 

Target Corporation

 

The Home Depot, Inc.

  

The Kroger Co.

The TJX Companies, Inc.

 

Walgreens Boots Alliance, Inc.

 

Walmart, Inc.

  

In fiscal 2019, Nike, Inc. and Starbucks Corporation were added to the Peer Group due to their similar size, operations, complexity, store count, omni-channel business model, customer profile and spend and employer brand. Staples, Inc. was removed from the Peer Group since it is no longer a publicly-traded company. The Compensation Committee agreed that the remaining companies in the Peer Group from fiscal 2018 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 2019(1)

                                       
              Market                        TSR       
    

Revenues

(MM)

 

    

Capitalization

(MM)

 

    

Operating

Income

(MM)

 

    

1-year

 

    

3-year

 

    

5-year  

 

75th Percentile

    

$

144,785

      

$

142,470

      

$

8,493

      

 

26.97%

 

      

 

91.84%

 

      

 

131.77%  

50th Percentile

    

$

75,356

      

$

71,036

      

$

4,218

      

 

22.77%

 

      

 

64.37%

 

      

 

77.66%  

25th Percentile

    

$

32,741

      

$

21,710

      

$

2,257

      

 

-8.60%

 

      

 

-4.36%

 

      

 

-18.63%  

Lowe’s Companies, Inc.

    

$

71,309

      

$

89,095

      

$

4,018

      

 

21.99%

 

      

 

67.96%

 

      

 

87.74%  

    Percentile Ranking

    

 

49.10%

 

      

 

57.60%

 

      

 

35.40%

 

      

 

48.30%

 

      

 

51.90%

 

      

 

54.70%  

Source: S&P Capital IQ

 

(1)

Revenues and operating income are as of each company’s latest fiscal year as of January 31, 2020. Market Capitalization and TSR are as of January 31, 2020, which aligns with Lowe’s fiscal year end date.

At its November 2018 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.

 

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Compensation Discussion and Analysis

 

2019 COMPENSATION ACTIONS

 

IV. 2019 COMPENSATION ACTIONS

Base Salary Adjustments

The Compensation Committee reviews and adjusts the NEO base salaries each year after it has considered competitive benchmark and relative compensation positioning, which includes consideration of market adjustments, internal alignment, experience in the role, performance and any changes to roles or responsibilities. As a result of the review, Mr. Boltz received a salary increase of 5.9% in March 2019 based on a review of market competitiveness of similar positions at peer companies, and Ms. Godbole received a 5.7% increase in October 2019 due to quick progress on many critical technology priorities.

In 2019, the Compensation Committee approved the following base salaries for the NEOs:

 

Name and Position

 

  

2018

Base Salary

 

  

2019

Base Salary

 

  

% Increase    

 

Marvin R. Ellison

President and Chief Executive Officer

     $ 1,450,000      $ 1,450,000       

David M. Denton

Executive Vice President, Chief Financial Officer

     $ 925,000      $ 925,000       

Joseph M. McFarland III

Executive Vice President, Stores

     $ 750,000      $ 750,000       

William P. Boltz

Executive Vice President, Merchandising

     $ 675,000      $ 715,000        5.9 %

Seemantini Godbole

Executive Vice President, Chief Technology Officer

     $ 615,000      $ 650,000        5.7 %

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 ranged from 100% to 125% of base salary for the other NEOs. For fiscal 2019, target awards as a percentage of base salary for the CEO remained the same and increased from a range of 90% to 125% for the other NEOs from the prior year based on a review of similar positions at peer companies.

 

(2)

The threshold percentage for the NEOs, including the CEO, was 25% in 2019, which was the same percentage for threshold opportunity as the prior year. The NEOs, including the CEO, pursuant to a maximum plus feature adopted solely for fiscal 2019, had a maximum opportunity of 250% of target for adjusted sales and adjusted operating income in fiscal 2019, which was increased from 200% of target from the prior year, and a maximum opportunity of 200% of target for inventory improvement in fiscal 2019, which remained the same as the maximum for the strategic goal in place in fiscal 2018.

 

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Compensation Discussion and Analysis

 

2019 COMPENSATION ACTIONS

 

The following table describes the financial and strategic goals for the 2019 annual incentive awards and the weighting assigned to each goal, which are the same for all of the NEOs:

 

 

 

Performance

Metric

 

      Metric Weighting 

 

 

Description

 

 

Performance Measured By

 

  LOGO    

 

Adjusted Sales

 

 

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

 

 

 

Company’s adjusted sales

 

 

45%

 

 

Adjusted Operating Income

 

 

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

 

 

 

Company’s adjusted operating income

 

 

45%

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Inventory Improvement

 

 

Rewards NEOs for focusing on improving inventory management, which generates cash flow for investing in the business and returns value to shareholders

 

 

 

Cost of goods sold / average inventory and measured in days improvement over the prior year

 

 

10%

Strategic Goals Financial Goals

 

For 2019, the Compensation Committee replaced the leadership behavior index with inventory improvement as a strategic goal to focus on improving inventory management and changed the weighting of each metric to emphasize top line sales growth. Inventory management is vital to our corporate strategy and is designed to better serve customers and improve free cash flow to support strategic initiatives.

The Compensation Committee, having considered the level of difficulty inherent in the goals, based the 2019 target performance levels on the Company’s annual operating plan and expected growth over prior year performance based on certain non-GAAP financial measures. The target adjusted sales goal for the 2019 annual incentive plan was set slightly below the median growth rate of a majority of the peers’ expected sales growth rate in 2019. The target adjusted operating income goal for the 2019 annual incentive plan was aggressive and set higher than the growth rate of a majority of the peers’ expected operating income growth rates in 2019. For the inventory goal, threshold was based on the prior fiscal year actual results, target was a 1.3 day improvement over the prior fiscal year actual results and maximum was a 3 day improvement over the prior fiscal year results.

The threshold performance target for adjusted sales increased by 200 basis points, and the maximum performance target decreased by 50 basis points. The threshold performance target for adjusted operating income increased by 140 basis points, and the maximum performance target was unchanged.

The Compensation Committee’s objectives in administering our incentive plan are 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 Company performance. For these reasons, the Compensation Committee may make adjustments to the achievement under each performance goal at its discretion.

The Compensation Committee adopted adjustment guidelines in January 2011 and refined the guidelines in November 2019 and March 2020. The adjustment guidelines generally relate to (i) amounts required to be reported separately under applicable accounting standards as extraordinary items, (ii) gains or losses as a result of changes in accounting principles, (iii) impact of changes in tax regulations, (iv) business results from unplanned acquisitions and divestitures, (v) costs and any other non-recurring items related to acquisition and divestiture activity, (vi) unplanned debt restructuring costs or costs associated with change in capital structure, (vii) costs of significant unplanned initiatives or investments, and (viii) significant changes to stock buyback programs or capital restructuring.

The adjustment guidelines include the following specific items as potential adjustments for consideration: (i) impact of foreign currency fluctuations; (ii) impact of tariffs and unanticipated regulatory and policy changes; (iii) asset impairments or write-offs, including store closing costs; (iv) restructuring costs; (v) litigation costs and settlements for historical transactions; (vi) timing impact for items accelerated or delayed near year-end; (vii) acts of God; and (viii) impact of global pandemics and public health emergencies.

In March 2020, the Compensation Committee reviewed the Company’s 2019 performance relative to the adjusted sales, adjusted operating income and inventory goals to determine the annual incentive awards earned under the annual incentive plan for fiscal year 2019. Adjusted sales results of $72.060 billion resulted in a payout above threshold but below target. Adjusted operating income results of $6.579 billion fell below the required payout threshold goal due to the unprecedented impact of tariffs. Throughout the course of the year, the Company was able to take actions to mitigate the majority of this tariff impact on our operating results. However, given the timing of the tariff increases and scale of the impact

 

 

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Table of Contents

Compensation Discussion and Analysis

 

2019 COMPENSATION ACTIONS

 

on our operating results, the Committee determined to provide partial relief and make an adjustment of $74 million for incentive compensation performance achievement. Following the adjustment approved by the Committee, the adjusted

operating income achievement result of $6.653 billion resulted in a minimum payout at threshold. The inventory results fell below the required payout threshold goal, resulting in no payout for the metric under the plan.

 

 

Based on the performance metrics established by the Compensation Committee, the Company’s 2019 performance and the aforementioned adjustments, the Compensation Committee determined that Lowe’s achieved approximately 43.4% of the target incentive opportunities for the NEOs.

 

Performance Metric Payout(1)

 

  

Threshold

25%

 

    

Target

100%

 

    

Maximum

200%

 

    

Maximum Plus(2)

250%

 

    

 

2019 Actual
Performance

 

Adjusted Sales

  

$71.151 billion

    

$72.618 billion

    

$73.707 billion

    

$74.775 billion

    

$72.060 billion

Adjusted Operating Income

  

$  6.653 billion

    

$  6.870 billion

    

$  7.452 billion

    

$  7.865 billion

    

$  6.579 billion(3)

Inventory Improvement

  

0 days

    

1.3 days

    

3 days

    

—  

    

-10.5 days

 

(1)

Payouts for performance that falls between performance levels shall be determined by linear interpolation.

 

(2)

The maximum plus payout target was adopted solely for the fiscal 2019 annual incentive plan to reward executives for superior performance in adjusted sales and adjusted operating income.

 

(3)

The Compensation Committee approved an adjustment to adjusted operating income as described on pages 38 to 39.

Based on results of the performance metrics approved and adjusted by the Compensation Committee, the NEOs earned annual incentive awards for 2019 as follows:

 

Name

 

  

Base Salary(1)

 

    

x

 

  

Target Award %
(% of Base Salary)

 

 

x

 

  

Performance Goal
Achievement Level
(% of Target)

 

 

=

 

  

Actual Award        

Earned        

 

Marvin R. Ellison

    

$

1,450,000

                 

 

200

%

              

 

43.4

%

              

$

1,258,657        

David M. Denton

    

$

925,000

                 

 

125

%

              

 

43.4

%

              

$

501,840        

Joseph M. McFarland III

    

$

750,000

                 

 

100

%

              

 

43.4

%

              

$

325,515        

William P. Boltz

    

$

715,000

                 

 

100

%

              

 

43.4

%

              

$

310,324        

Seemantini Godbole

    

$

615,000

                 

 

100

%

              

 

43.4

%

              

$

266,922        

 

(1)

Base salary considered for annual incentive plan purposes is as of April 1, 2019.

Long-Term Equity Awards

In March each year, the Compensation Committee approves a target long-term equity award for each executive officer, expressed as a percentage of base salary. Target awards are determined based on each executive officer’s position and level of responsibility, the Company’s historical grant practices and market benchmarks reviewed annually by the Compensation Committee. For fiscal 2019, target awards as a percentage of base salary remained the same as the prior year for the NEOs, including the CEO.

In March 2019, 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 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 2019, as well as the actual grant value awarded to each NEO:

 

 

 

Name

 

  

2019 Target Long-Term

% of Base Salary

 

 

Equity Awards  

($000s)  

 

Marvin R. Ellison

    

 

565

%

   

$

8,193

David M. Denton

    

 

450

%

   

$

4,163

Joseph M. McFarland III

    

 

400

%

   

$

3,000

William P. Boltz

    

 

400

%

   

$

2,860

Seemantini Godbole(1)

    

 

300

%

   

$

1,845

 

(1)

Base salary considered for long-term incentive plan purposes is as of April 1, 2019.

 

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Compensation Discussion and Analysis

 

2019 COMPENSATION ACTIONS

 

The Compensation Committee determined that the PSUs awarded in 2019 will be earned based on the Company’s ROIC for the three-year performance period of fiscal years 2019 through 2021 and the relative TSR modifier. ROIC is computed by dividing the Company’s net operating profit after taxes for the year by the average of the Company’s invested capital 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 ROIC measure for the three-year performance period. The Compensation Committee believes strong ROIC performance is aligned with creating long-term value for the Company’s shareholders. Specifically, ROIC is a comprehensive long-term financial metric that incorporates both operating profit 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)(1)   

 

    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 or ROIC is below threshold, there will be no payout.

2017 PSU Awards. The performance period for the PSUs awarded in 2017 (the “2017 PSUs”) ended on January 31, 2020, the last day of the 2019 fiscal year. The 2017 PSUs were eligible to be earned based on the Company’s average RONCAA for fiscal years 2017 through 2019. The NEOs, who all joined the Company in 2018, did not receive the grant of the 2017 PSUs.

Special Incentive Grant

In October 2019, in addition to the base salary increase described above, the Company approved a one-time grant of RSAs valued at approximately $1,000,000 to Ms. Godbole, which vest fully on October 1, 2022. Many of the initiatives in our strategic plan have IT dependencies. Ms. Godbole and her team are vital to the success of these critical technology initiatives necessary to develop and execute business strategies, obtain superior results and build long-term shareholder value, and this grant reflects her critical role in support of these initiatives.

 

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Compensation Discussion and Analysis

 

2019 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 49. Mr. Ellison’s severance entitlements are governed by his offer letter, the terms of which are described on page 49

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 49.

 

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 Novant or Atrium Health Executive Health Programs or concierge physician provider. 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. As set forth in the Summary Compensation Table on page 45, Mr. Ellison’s personal usage of corporate aircraft in 2019 accounted for less than twenty percent of the cap.

 

 

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Compensation Discussion and Analysis

 

OTHER COMPENSATION POLICIES

 

V. OTHER COMPENSATION POLICIES

Compensation Risk Assessment

Each November, the Compensation Committee performs a risk assessment of our compensation programs, which includes a targeted audit and analysis of the risk associated with the Company’s executive compensation program conducted by the Compensation Committee’s independent compensation consultant. In its annual review, the Compensation Committee considers the balance between pay components, measures of performance, magnitude of pay, pay caps, plan time horizons and over-lapping performance cycles, program design and administration and other features that are designed to mitigate risk (e.g., stock ownership guidelines and clawback policy). Following its review, the Compensation Committee has determined that our compensation practices and policies do not incentivize inappropriate or excessive risk taking behavior by Company executives. Management and the Compensation Committee have determined that our compensation practices and policies do not create risks that are reasonably likely to have a material adverse effect on the Company.

Stock Ownership Guidelines

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

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

 

 

Position

 

  

 

Target Ownership

(Multiple of Base Salary)    

 

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 an RSA or PSU vesting event or stock option exercise until the ownership requirement has been satisfied. The CEO is in compliance with the stock ownership guidelines, and the other NEOs are working towards compliance.

Oversight of Stock Ownership, No Hedging or Pledging 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 transactions in the Company’s securities and (ii) a policy to claw back incentive compensation in the event an executive officer engaged in fraud or intentional misconduct resulting in significant financial or reputational harm, or resulting in a significant restatement of the Company’s financial results.

The Company prohibits all its employees, officers and directors 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 (including forward sale contracts, futures, equity swaps, puts, calls, collars and exchange funds) 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 the 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.

 

 

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Compensation Discussion and Analysis

 

COMPENSATION COMMITTEE REPORT

 

The clawback policy, which was expanded in January 2020 to cover material financial or reputational harm, is a part of the Company’s Corporate Governance Guidelines. The policy provides the Board the right to recover for the benefit of the Company any portion of incentive compensation that was provided to any executive officer (whether or not such compensation has already been paid or vested), if the Board, in its sole discretion, determines that (i) the incentive compensation was based on the Company having met or exceeded specific performance targets that were satisfied due to the executive officer engaging in fraud or intentional misconduct, including, but not limited to, conduct resulting in a significant restatement of the Company’s financial results or (ii) the executive officer engaged in any intentional misconduct that results in significant financial or reputational harm to the Company.

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.

Historically, the Compensation Committee had 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 the Company’s corporate objectives and strategies.

 

 

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 January 31, 2020.

Eric C. Wiseman, Chair

Raul Alvarez

David H. Batchelder

Angela F. Braly

Sandra B. Cochran

 

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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

 

 

Year

 

    

Salary

($)

 

    

Bonus
($)

 

    

Stock
Awards
($)(1)(2)

 

    

Option
Awards
($)(1)

 

    

Non-Equity

Incentive Plan
Compensation
($)(3)

 

    

All Other
Compensation
($)(4)

 

    

Total  

($)  

 

 

Marvin R. Ellison

President and Chief Executive

Officer

 

    2019        1,450,000        0        6,410,644        2,074,702        1,258,657        427,366        11,621,369    
   

 

2018

 

 

 

     864,423        1,712,912        7,643,542        3,881,205        0        200,709        14,302,791    

David M. Denton

Executive Vice President, Chief Financial Officer

 

    2019        925,000        0        3,257,042        1,054,208        501,840        39,092        5,777,182    
   

 

2018

 

 

 

     195,673        1,000,000        890,406        879,205        71,815        69,547        3,106,646    

Joseph M. McFarland III

Executive Vice President,

Stores

 

    2019        750,000        0        2,347,848        759,583        325,515        176,225        4,359,171    
   

 

2018

 

 

 

     360,577        875,000        1,225,112        1,222,220        0        52,843        3,735,752    

William P. Boltz

Executive Vice President,

Merchandising

    2019        709,615        0        2,237,661        724,108        310,324        47,063        4,028,771    

Seemantini Godbole

Executive Vice President, Chief Information Officer

    2019        626,442        0        2,443,212        467,223        266,922        209,323        4,013,122    

 

(1)

The value of the stock and option awards presented in the table equals the grant date fair value of the awards for financial reporting purposes (excluding the effect of estimated forfeitures) computed in accordance with FASB ASC Topic 718. For financial reporting purposes, the Company determines the fair value of a stock or option award accounted for as an equity award on the grant date. The Company recognizes an 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 January 31, 2020 for additional information about the Company’s accounting for share-based compensation arrangements, including the assumptions used in calculating the grant date fair values.

 

(2)

The amounts reported in this column include the sum of the grant date fair values of PSUs and RSAs. The 2019 PSUs will be earned based on the Company’s achievement of a three-year average ROIC goal, and a relative TSR modifier. The PSUs are accounted for as equity awards. The 2019 stock award amounts include the following grant date fair values of the PSUs: Mr. Ellison – $4,362,760; Mr. Denton – $2,216,760; Mr. McFarland – $1,597,320; Mr. Boltz – $1,523,080; and Ms. Godbole – $982,520. 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 – $8,703,596; Mr. Denton – $4,422,384; Mr. McFarland – $3,186,636; Mr. Boltz – $3,038,504; and Ms. Godbole – $1,960,052.

 

(3)

The amounts shown in this column reflect payments made under the Company annual incentive plan, which paid out below target based on performance achievement described in more detail on pages 38 to 39.

 

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(4)

Amounts presented consist of the following for the 2019 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)
($)

 

    

Total
($)

 

 

Mr. Ellison

    0        0        0        36,150        3,516        387,700        427,366  

Mr. Denton

    0        0        12,000        0        0        27,092        39,092  

Mr. McFarland III

    0        0        0        4,242        0        171,983        176,225  

Mr. Boltz

    14,238        0        0        13,358        3,266        16,201        47,063  

Ms. Godbole

    3,899        0        2,750        22,057        0        180,617        209,323  

 

  

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.

 

(i)

Messrs. Ellison, Denton, McFarland and Boltz and Ms. Godbole 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 with the exception of an additional $3,156 beyond standard relocation coverage costs for Mr. Ellison’s household goods to remain in storage for an extended period of time. Items in this column include expenses from December 1, 2018 through November 30, 2019 including the following tax gross ups: Mr. Ellison – $172,905; Mr. Denton – $12,384; Mr. McFarland $78,081; Mr. Boltz – $7,404; and Ms. Godbole – $49,946. The remainder of relocation expenses and gross up taxes will be reported on the proxy statement for fiscal 2020.

 

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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 2019, as well as the stock options, RSAs and PSUs awarded to the NEOs in fiscal 2019 and the grant date fair value of those awards.

 

Name

  Grant
Date
    Date of
Committee
Action
    Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)
   

Exercise or
Base

Price of
Option
Awards
($/Sh)

   

Grant
Date Fair
Value of
Stock
and
Option

Awards

($)

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

Mr. Ellison

                       

Annual Incentive

        725,000       2,900,000       7,000,000                

PSUs

    4/1/2019       3/22/2019             12,599       37,610       75,031             4,362,760  

Options

    4/1/2019       3/22/2019                     82,460       108.93       2,074,702  

RSAs

    4/1/2019       3/22/2019                                                       18,800                       2,047,884  

Mr. Denton

                       

Annual Incentive

        289,063       1,156,250       2,832,813                

PSUs

    4/1/2019       3/22/2019             6,401       19,110       38,124             2,216,760  

Options

    4/1/2019       3/22/2019                     41,900       108.93       1,054,208  

RSAs

    4/1/2019       3/22/2019                                                       9,550                       1,040,282  

Mr. McFarland III

                       

Annual Incentive

        187,500       750,000       1,837,500                

PSUs

    4/1/2019       3/22/2019             4,612       13,770       27,471             1,597,320  

Options

    4/1/2019       3/22/2019                     30,190       108.93       759,583  

RSAs

    4/1/2019       3/22/2019                                                       6,890                       750,528  

Mr. Boltz

                       

Annual Incentive

        178,750       715,000       1,751,750                

PSUs

    4/1/2019       3/22/2019             4,398       13,130       26,194             1,523,080  

Options

    4/1/2019       3/22/2019                     28,780       108.93       724,108  

RSAs

    4/1/2019       3/22/2019                                                       6,560                       714,581  

Ms. Godbole

                       

Annual Incentive

        153,750       615,000       1,506,750                

PSUs

    4/1/2019       3/22/2019             2,837       8,470       16,897             982,520  

Options

    4/1/2019       3/22/2019                     18,570       108.93       467,223  

RSAs

    4/1/2019       3/22/2019                   4,230           460,774  

RSAs

    10/1/2019       9/20/2019                                                       9,130                       999,918  

 

(1)

The NEOs are eligible to earn annual incentive compensation under the Company’s annual incentive plan for each fiscal year based on the Company’s achievement of one or more performance measures established at the beginning of the fiscal year by the Compensation Committee. For the 2019 fiscal year ended January 31, 2020, the performance measures selected by the Compensation Committee were the Company’s adjusted sales (weighted 45%), adjusted operating income (weighted 45%) and inventory improvement (weighted 10%). The performance levels for the performance measures, the Company’s actual performance and the amounts earned by the NEOs for the 2019 fiscal year are shown beginning on page 39. Base salary considered for annual incentive plan purposes is as of April 1, 2019. Mr. Ellison’s total payout under the Company’s 2016 Annual Incentive Plan may not exceed $7,000,000. The amounts earned by the NEOs are also reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 44.

 

(2)

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

 

(3)

The time-vested RSAs vest on the third anniversary of the grant date or, if earlier, the date the NEO terminates employment due to death or disability. For the NEOs who meet the retirement provisions of the applicable RSA grant agreements, their awards will vest upon retirement, but will not be transferred to the NEO until the original vesting date of the award. Retirement for this purpose is defined as termination of employment with the approval of the Board on or after the date the NEO has satisfied an age and service requirement, provided the NEO has given the Board advance notice of such retirement. Messrs. Ellison, Denton, McFarland and Boltz and Ms. Godbole will satisfy the age and service requirement for retirement once their age in addition to years of service equals at least 70; provided the NEO is at least 55 years old. Ms. Godbole received an additional 9,130 shares of RSAs as described on page 40. The NEOs receive cash dividends paid with respect to the RSA shares during the vesting period on the same terms as the other shareholders of the Company.

 

(4)

All options have a 10-year term and an exercise price equal to the closing price of the Common Stock on the grant date. The options vest in three annual installments on each of the first three anniversaries of the grant date or, if earlier, the date the NEO terminates employment due to death or disability. The options granted to the NEOs will become exercisable in the event of retirement, as defined in the applicable grant agreement, in accordance with the original three-year vesting schedule and remain exercisable until their expiration dates.

 

46         NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2020   LOGO    


Table of Contents

Compensation Tables

 

 

Outstanding Equity Awards at Fiscal Year-End

This table presents information about unearned or unvested stock and option awards held by the NEOs on January 31, 2020.

 

    Option Awards         Stock Awards

Name

  Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Option
Exercise
Price
($)
  Option
Expiration
Date
          Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1)
  Market Value
of Shares
or Units
of Stock That
Have Not
Vested
($)(2)
  Equity Incentive
Plan Awards;
Number
of Unearned
Shares,
Units or Other
Rights
That Have Not
Vested
(#)(3)
    Equity Incentive
Plan Awards;
Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
($)

Mr. Ellison

    55,414       110,826 (4)      94.87       7/2/2028         70,090       8,147,262       69,166       8,039,856  
            82,460 (5)      108.93       4/1/2029                                          

Mr. Denton

    13,567       27,133 (6)      92.27       1/2/2029         19,200       2,231,808       25,416       2,954,356  
            41,900 (5)      108.93       4/1/2029                                          

Mr. McFarland III

    14,604       29,206 (7)      114.07       10/1/2028         17,630       2,049,311       18,314       2,128,819  
            30,190 (5)      108.93       4/1/2029                                          

Mr. Boltz

    9,390       18,780 (7)      114.07       10/1/2028         13,460       1,564,590       17,462       2,029,783  
            28,780 (5)      108.93       4/1/2029                                          

Ms. Godbole

    7,617       15,233 (6)      92.27       1/2/2029         18,780       2,182,987       11,265       1,309,444  
            18,570 (5)      108.93       4/1/2029                                          

 

(1)

The unvested RSAs vest as follows:

 

    

7/2/2021

    

10/1/2021

    

1/2/2022

    

4/1/2022

    

                 

    

Total  

 

Mr. Ellison

  

 

51,290

 

  

 

 

  

 

 

  

 

18,800

 

  

 

 

  

 

70,090

 

Mr. Denton

  

 

 

  

 

 

  

 

9,650

 

  

 

9,550

 

  

 

 

  

 

19,200

 

Mr. McFarland III

  

 

 

  

 

10,740

 

  

 

 

  

 

6,890

 

  

 

 

  

 

17,630

 

Mr. Boltz

  

 

 

  

 

6,900

 

  

 

 

  

 

6,560

 

  

 

 

  

 

13,460

 

Ms. Godbole

  

 

 

  

 

 

  

 

5,420

 

  

 

4,230

 

  

 

9,130

 

  

 

18,780

 

 

(2)

Amount is based on the closing market price of the Company’s Common Stock on January 31, 2020 of $116.24.

 

(3)

The number of unearned PSUs in this column is calculated in accordance with SEC requirements and equals (i) the minimum number of PSUs that may be earned based on the Company’s RONCAA during the 2018 through 2020 fiscal year period after applying the maximum relative TSR modifier and (ii) the minimum number of PSUs that may be earned based on the Company’s ROIC during the 2019 through 2021 fiscal year period after applying the maximum relative TSR modifier. No NEO received a grant of 2017 PSUs. No dividends are paid or accrued on unearned PSUs.

 

(4)

These options vest in two annual installments on July 2, 2020 and July 2, 2021.

 

(5)

These options vest in three annual installments on April 1, 2020, April 1, 2021 and April 1, 2022.

 

(6)

These options vest in two annual installments on January 2, 2021 and January 2, 2022.

 

(7)

These options vest in two annual installments on October 1, 2020 and October 1, 2021.

 

    LOGO   NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2020         47


Table of Contents

Compensation Tables

 

 

Option Exercises and Stock Vested at Fiscal Year-End

This table presents information about stock options exercised by the NEOs and the number and the value of the NEOs’ stock awards that vested during the 2019 fiscal year.

 

    

Option Awards

           

Stock Awards

    

Number of Shares
Acquired on Exercise

    

Value Realized
on Exercise

           

Number of Shares
Acquired on Vesting

   

Value Realized  

on Vesting

Name

  

(#)

    

($)

           

(#)

   

($)

Mr. Ellison

  

 

 

  

 

 

           

 

 

 

—    

Mr. Denton

  

 

 

  

 

 

           

 

 

 

—    

Mr. McFarland III

  

 

 

  

 

 

           

 

 

 

—    

Mr. Boltz

  

 

 

  

 

 

           

 

 

 

—    

Ms. Godbole

  

 

 

  

 

 

           

 

 

 

—    

 

Nonqualified Deferred Compensation

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

Benefit Restoration Plan

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

Cash Deferral Plan

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

Nonqualified Deferred Compensation Elections

None of the NEOs participate in either of the Company’s two deferred compensation plans.

 

 

48         NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2020   LOGO    


Table of Contents

Compensation Tables

 

 

Potential Payments Upon Termination or Change-in-Control

The Company has entered into Change-in-Control Agreements with each of the current NEOs and certain other senior officers of the Company. The agreements provide for certain benefits if the Company experiences a change-in-control followed by termination of the executive’s employment within 24 months following such change-in-control:

 

 

by the Company’s successor without cause, which means continued and willful failure to perform duties or conduct demonstrably and materially injurious to the Company or its affiliates; or

 

 

by the executive for certain reasons, including a downgrading of the executive’s position.

The following describes the material provisions of the Change-in-Control Agreements that we have entered into with our NEOs. All of the agreements automatically expire on the second anniversary of a change-in-control notwithstanding the length of the terms remaining on the date of the change-in-control.

 

      

Accrued Obligations

  

The NEO receives the sum of (1) the NEO’s annual base salary through date of separation and (2) any accrued vacation pay to the extent not paid.

Severance Benefit

  

The NEO receives 2.99 times the sum of the present value of the NEO’s annual base salary, annual incentive compensation (as calculated pursuant to the agreement) and welfare insurance costs.

No Tax Gross-Up

  

There are no effective provisions for an excise tax gross-up. Instead, change-in-control payments will be subject to a provision, whereby the executives will receive either the original amount of the payment or a reduced amount, depending on which amount will provide them a greater after-tax benefit.

Legal Fees

  

All legal fees and expenses incurred by the executives in enforcing these agreements will be paid by the Company.

Restrictive Covenants

  

The Change-in-Control Agreements include restrictive covenants including, but not limited to, a covenant not to compete against the Company for the longer of (a) two years following termination of employment and (b) the period following the termination of employment during which Company equity awards held by the NEO continue to vest and a covenant not to solicit Company employees or customers for two years following termination of employment.

 

The Company’s long-term incentive plan provides that, if within one year after a change-in-control, an executive’s employment is terminated by the Company without cause or by the executive for Good Reason (as defined in the Change-in-Control Agreement), then all outstanding stock options will become fully exercisable and all outstanding RSAs will become fully vested. In the event of a change-in-control of the Company, the performance periods for all outstanding PSUs will terminate as of the end of the fiscal quarter preceding the change-in-control and the PSUs will be earned based on Company performance through such date. Under the terms of stock option, RSA and PSU award agreements, the executive is subject to a covenant not to compete against the Company for 24 months following termination of employment and, in the event of a breach, will forfeit awards or be required to repay the Company certain amounts with respect to awards.

Executive Vice Presidents covered by the Severance Plan who experience a Qualified Termination (as defined in the Severance Plan) of employment are, subject to the terms of the Severance Plan, eligible to receive a benefit consisting of (i) cash severance equal to two times the sum of their annual base salary and target annual bonus to be paid in installments

over 24 months in accordance with the Company’s normal payroll practices, (ii) continued participation in the employee health care plan maintained by the Company upon the same terms and conditions in effect for active employees until the earlier of the second anniversary of such termination or the date the Executive Vice President becomes covered under another employer’s health care plan and (iii) up to one year of Company-paid outplacement services. Payments made pursuant to the Severance Plan shall be reduced, in whole or in part, by all compensation received by or payable to the Executive Vice President for services rendered in any capacity to any third party during the severance period, with the exception of any compensation received for service on a board of directors or similar arrangement that existed on the termination date.

In the event Mr. Ellison’s employment with the Company is terminated involuntarily other than for Cause (as defined in his offer letter), and subject to the terms of his offer letter, Mr. Ellison is entitled to receive severance payments equal to two times the sum of his annual base salary and target annual bonus to be paid over 24 months in accordance with the Company’s normal payroll practices.

 

 

    LOGO   NOTICE OF ANNUAL MEETING AND PROXY STATEMENT 2020         49


Table of Contents

Compensation Tables

 

 

The following table shows the amounts payable to the NEOs in the event their employment terminated at the end of the 2019 fiscal year due to their resignation, death, disability or retirement and the amounts payable under the Severance Plan, the Change-in-Control Agreements and the long-term incentive plan if a change-in-control of the Company had occurred at the end of the 2019 fiscal year and/or the NEOs’ employment was terminated by the Company without Cause or by the NEO for Good Reason (in each case, as defined in the Change-in-Control Agreements) on January 31, 2020.

 

Name and Benefit

   Voluntary
Resignation
($)
  

Death

($)

   Disability
($)
   Retirement(1)
($)
  

Qualified
Termination

($)(2)

   Change of
Control
($)
  

Change of Control  

and Qualifying  
Termination  

($)  

Mr. Ellison

                                  

Severance(3)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

8,700,000

    

 

0

    

 

12,643,905

 

Stock Options(4)

    

 

0

    

 

2,971,134

    

 

2,971,134

 

    

 

0

    

 

0

    

 

0

    

 

2,971,134

 

Restricted Stock Awards(4)

    

 

0

    

 

8,147,262

    

 

8,147,262

 

    

 

0

    

 

0

    

 

0

    

 

8,147,262

 

Performance Shares Units(5)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

0

    

 

0

    

 

0

 

Welfare Benefits(6)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

0

    

 

0

    

 

65,986

 

Total

    

 

0

    

 

11,118,396

    

 

11,118,396

 

    

 

0

    

 

8,700,000

    

 

0

    

 

23,828,288

 

Mr. Denton

                                  

Severance(3)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

4,162,500

    

 

0

    

 

6,050,101

 

Stock Options(4)

    

 

0

    

 

956,667

    

 

956,667

 

    

 

0

    

 

0

    

 

0

    

 

956,667

 

Restricted Stock Awards(4)

    

 

0

    

 

2,231,808

    

 

2,231,808

 

    

 

0

    

 

0

    

 

0

    

 

2,231,808

 

Performance Shares Units(5)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

0

    

 

0

    

 

0

 

Welfare Benefits(6)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

27,319

    

 

0

    

 

58,587

 

Total

    

 

0

    

 

3,188,475

    

 

3,188,475

 

    

 

0

    

 

4,189,819

    

 

0

    

 

9,297,163

 

Mr. McFarland III

                                  

Severance(3)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

3,000,000

    

 

0

    

 

4,360,666

 

Stock Options(4)

    

 

0

    

 

284,066

    

 

284,066

 

    

 

0

    

 

0

    

 

0

    

 

284,066

 

Restricted Stock Awards(4)

    

 

0

    

 

2,049,311

    

 

2,049,311

 

    

 

0

    

 

0

    

 

0

    

 

2,049,311

 

Performance Shares Units(5)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

0

    

 

0

    

 

0

 

Welfare Benefits(6)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

25,806

    

 

0

    

 

65,986

 

Parachute Payments Reduced(7)

    

 

0

    

 

0

    

 

0

 

    

 

0

    

 

0

    

 

0

    

 

(1,175,321)

 

Total

    

 

0

    

 

2,333,377

    

 

2,333,377

 

    

 

0

    

 

3,025,806

    

 

0

    

 

5,584,709

 

Mr. Boltz

            </