DEF 14A 1 mo3453101-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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

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

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 Under Rule 14a-12

Altria Group, 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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2019
Notice
of Annual Meeting
of Shareholders
and Proxy Statement
         
           
 
                                      


 

                       












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6601 West Broad Street
Richmond, Virginia 23230


Dear Fellow Shareholder:

I am pleased to invite you to join us at the 2019 Annual Meeting of Shareholders of Altria Group, Inc. to be held on Thursday, May 16, 2019 at 9:00 a.m., Eastern Time, at the Greater Richmond Convention Center, 403 North 3rd Street, Richmond, Virginia 23219.

At this year’s meeting, we will vote on the election of 11 directors, the ratification of the selection of PricewaterhouseCoopers LLP as Altria’s independent registered public accounting firm and, if properly presented, two shareholder proposals. We will also conduct a non-binding advisory vote on the compensation of Altria’s named executive officers. We will report on our business, and shareholders will have an opportunity to ask questions.

To attend the meeting, an admission ticket and government-issued photo identification are required. To request an admission ticket, please follow the instructions on page 73 (Question 17). One immediate family member who is 21 years of age or older may accompany a shareholder as a guest.

Under the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their shareholders over the Internet, we mail to many shareholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. We believe this expedites shareholders receiving proxy materials, lowers costs and conserves natural resources. The Notice of Internet Availability explains how to access the proxy materials online, vote online and obtain a paper copy of our proxy materials.
 










           

Your vote is very important. I encourage you to complete, sign and return your proxy card, or use telephone or Internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend.

April 4, 2019

Sincerely,

For further
information about
the 2019 Annual
Meeting, please call
1-804-484-8838

 
 

Howard A. Willard III
Chairman and Chief Executive Officer
 


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Notice of 2019 Annual Meeting of Shareholders of Altria Group, Inc.

    

Date and Time

Thursday, May 16, 2019
at 9:00 a.m., Eastern Time

 
Place

The Greater Richmond
Convention Center
403 North 3rd Street
Richmond, Virginia 23219

 

Who can vote

You are entitled to vote if you were a shareholder of record at the close of business on March 25, 2019.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 16, 2019

Altria’s Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are available, free of charge, at www.altria.com/proxy.

          
Items of Business Board
Recommendation
1)

To elect as directors the 11 nominees named in the accompanying Proxy Statement.

FOR each director nominee

2)

To ratify the selection of PricewaterhouseCoopers LLP as Altria’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

FOR
3)

To hold a non-binding advisory vote to approve the compensation of Altria’s named executive officers.

FOR
4)

To vote on two shareholder proposals, if properly presented at the meeting.

AGAINST each shareholder proposal

Shareholders will also transact other business properly coming before the meeting.

Voting
We strongly encourage you to participate in the meeting, either by attending and voting in person or by voting through other acceptable means as promptly as possible. You may vote by telephone, through the Internet or by mailing your completed and signed proxy card (or voting instruction form, if you hold your shares through a broker, bank or other nominee). Each share is entitled to one vote on each matter to be voted upon at the annual meeting. Your vote is important and we urge you to vote.

Meeting Admission
If you plan to attend the meeting, you must request an admission ticket in advance. To request an admission ticket, please follow the instructions on page 73 (Question 17) of the accompanying Proxy Statement.

2018 Annual Report
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 accompanies this Proxy Statement.

Date of Distribution
This Notice, the Proxy Statement and proxy card are first being made available or mailed to shareholders on or about April 4, 2019.

By Order of the Board of Directors,


W. Hildebrandt Surgner, Jr.
Vice President, Corporate Secretary
and Associate General Counsel
April 4, 2019
Richmond, Virginia



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Proxy Statement – Table of Contents

Proxy Statement Summary i

Board and Governance Matters 1

Audit Committee Matters 22

Executive Compensation 25

Shareholder Proposals 61
 Proposal 4  Shareholder Proposal Regarding Reducing and Disclosing Nicotine Levels in Cigarette Brands 61
   
 Proposal 5  Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices 63
Ownership of Equity Securities of Altria 65

Related Person Transactions and Code of Conduct 67
Questions and Answers about the 2019 Annual Meeting and Voting 68
Questions and Answers about Communications, Altria Documents and Shareholder Proposals 75
Other Business 77
Annex A — Altria Group, Inc. Non-GAAP Financial Measures A-1
Altria Group, Inc. 2019 Annual Meeting of Shareholders Pre-Registration Form

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Proxy Statement Summary

This summary highlights information about Altria Group, Inc. (“Altria,” “we,” “our” or “us”) and certain information contained elsewhere in this proxy statement (“Proxy Statement”) for Altria’s 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting” or the “meeting”). This summary does not contain all the information that you should consider in voting your shares. You should read the entire Proxy Statement carefully before voting.

Voting Matters and Board Recommendations

  

Proposal
1

  

Proposal
2

  

Proposal
3

  

Proposal
4

  

Proposal
5

 
 
 
   Election of Directors Ratification of the Selection of Independent Registered Public Accounting Firm Non-Binding Advisory Vote to Approve the Compensation of Our Named Executive Officers Shareholder Proposal Regarding Reducing and Disclosing Nicotine Levels in Cigarette Brands Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices
                                                      
The Board recommends a vote FOR each nominee. The Board recommends a vote FOR this Proposal. The Board recommends a vote FOR this Proposal. The Board recommends a vote AGAINST this Shareholder Proposal. The Board recommends a vote AGAINST this Shareholder Proposal.
 
See page 16. See page 24. See page 60. See page 61. See page 63.

Casting Your Vote

How to Vote

Internet Mobile Device Telephone Mail In Person

If your shares are registered in your name with Computershare, Altria’s transfer agent (Record Holders), or you are voting shares held through Employee Benefit Plans

Complete, sign and mail your proxy card or voting instruction form in the self-addressed envelope provided.

For instructions on attending the 2019 Annual Meeting in person, please see Question 17 on page 73. Tickets are required for admission.

www.envisionreports.com/altria

Scan the QR Code above to vote using your mobile device.

Within the United States, U.S. Territories and Canada, call toll-free: 1-800-652-VOTE (8683).

If you hold your shares through a broker, bank or other nominee (Street Name Holders)

www.proxyvote.com

Refer to voting instruction form for instructions on how to vote using your mobile device or to vote by telephone.


Altria Group, Inc. – Proxy Statement           i


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PROXY STATEMENT SUMMARY

2018 Business Highlights

Altria had excellent performance in 2018, and we continued to reward shareholders by returning a significant amount of cash through dividends. We also took proactive steps that we believe uniquely position Altria for long-term success through investments in fast-growing, adjacent categories. Highlights from 2018 include the following:

We continued to deliver against our long-term financial goals of growing adjusted diluted earnings per share (“EPS”) (1) at an average annual rate of 7% to 9% and maintaining a dividend payout ratio target of approximately 80% of our adjusted diluted EPS.
Full-year adjusted diluted EPS, which excludes the impact of special items, grew 17.7%.
We paid approximately $5.4 billion in dividends in 2018. Our Board of Directors (“Board of Directors” or “Board”) raised the regular quarterly dividend twice in 2018. Combined, Altria’s dividend per share grew 21.2% last year.
In 2018, we repurchased approximately $1.67 billion of our shares, at an average price of $60.00 per share.

Adjusted Diluted EPS (12/31/15 - 12/31/18)       Dividend Payments ($ millions)       Share Repurchases ($ millions)

Our core tobacco businesses delivered consistent results against their strategies, while making additional investments to strengthen their businesses for the long term.
The strategy for the smokeable products segment is to maximize income while maintaining momentum on Marlboro and Black & Mild over time across key brand metrics, including equity, demographics, profitability and retail share. Philip Morris USA Inc. (“PM USA”) stabilized Marlboro retail share, which remained unchanged compared to fourth quarter 2017.
The smokeless products segment grew adjusted operating companies income (“OCI”) (2) by 7.5%. The smokeable products segment’s adjusted OCI declined slightly by 0.8%.
In wine, Ste. Michelle Wine Estates Ltd.’s (“Ste. Michelle”) adjusted OCI declined by 28.8%, primarily driven by higher costs and lower shipment volumes. Ste. Michelle was impacted by the decline of the premium wine category.

(1) Adjusted diluted EPS is a financial measure not consistent with generally accepted accounting principles in the United States (“GAAP”). See Annex A to this Proxy Statement for information regarding non-GAAP financial measures used in this Proxy Statement and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures.
(2) Adjusted OCI is a financial measure not consistent with GAAP. See Annex A to this Proxy Statement for information regarding non-GAAP financial measures used in this Proxy Statement and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures.

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PROXY STATEMENT SUMMARY

Smokeable Adjusted OCI ($ millions)       Smokeless Adjusted OCI ($ millions)       Wine Adjusted OCI ($ millions)

In e-vapor, we announced in December 2018 the discontinuation of production and distribution of all e-vapor products based upon the current and expected financial performance of these products, coupled with regulatory restrictions that burden its ability to quickly improve these products.
In heat-not-burn, PM USA continued to build its commercialization plans for IQOS, which it will have the exclusive right to sell in the U.S. upon U.S. Food and Drug Administration (“FDA”) authorization.
In December 2018, we announced strategic investments in JUUL Labs, Inc. (“JUUL”), the U.S. leader in e-vapor, and Cronos Group Inc. (“Cronos”), a leading global cannabinoid company, that we expect will give us exposure to new growth opportunities and further diversify our future income streams.

For more information regarding our 2018 performance, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (“2018 Form 10-K”).

(3) As a result of the January 1, 2018 adoption of Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, certain immaterial prior-year OCI amounts have been restated.

Altria Group, Inc. – Proxy Statement           iii


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PROXY STATEMENT SUMMARY

Board Nominees

You are being asked to vote on the following 11 nominees for director. All directors are elected annually by a majority of the votes cast. Information about each director’s experiences, qualifications and skills can be found beginning on page 16.

Board Committee Membership (1)
Name Age Director
Since
Principal Occupation Independent    AC       CC       EC       FC       IC       NC   
John T. Casteen III       75       2010       President Emeritus, University of Virginia       Yes      
Dinyar S. Devitre 71 2008 Former Chief Financial Officer, Altria Group, Inc. Yes Chair
Thomas F. Farrell II (2) 64 2008

Chairman, President and Chief Executive Officer, Dominion Energy, Inc.

Yes
Debra J. Kelly-Ennis 62 2013 Retired President and Chief Executive Officer, Diageo Canada, Inc. Yes
W. Leo Kiely III 72 2011 Retired Chief Executive Officer, MillerCoors LLC Yes Chair
Kathryn B. McQuade 62 2012 Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited Yes Chair
George Muñoz 67 2004 Principal, Muñoz Investment Banking Group, LLC and Partner, Tobin & Muñoz Yes Chair
Mark E. Newman 55 2018 Senior Vice President and Chief Financial Officer, The Chemours Company Yes
Nabil Y. Sakkab 71 2008 Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company Yes Chair
Virginia E. Shanks 58 2017 Strategic Advisor, Penn National Gaming, Inc. Yes
Howard A. Willard III 55 2018 Chairman and Chief Executive Officer, Altria Group, Inc. No Chair
(1) AC Audit Committee       FC Finance Committee
CC Compensation Committee IC Innovation Committee
EC Executive Committee NC Nominating, Corporate Governance and Social Responsibility Committee
Member
(2) Presiding Director

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PROXY STATEMENT SUMMARY

Corporate Governance Highlights

                 
Board Independence
and Composition
10 of our 11 director nominees are independent
Independent presiding director with clearly defined duties, including being available for consultation and communication if requested by major shareholders
All NYSE-required Board committees consist solely of independent directors
Independent Committee Chairs
Regular executive sessions of independent directors
Resignation policy for directors who fail to receive majority support in an uncontested election
Director retirement guidelines
Board diversity from various perspectives
 
 
Board Performance
At least 95% Board and Committee meeting attendance in 2018 by all directors
100% director attendance at our 2018 Annual Meeting of Shareholders (“2018 Annual Meeting”)
Significant Board oversight of strategic plan development and execution
Significant Board oversight of key risk areas and our risk management processes
Board participation in executive succession planning
Updates to the Board on investor perspectives and engagement
Board review of voting results on all shareholder proposals
Annual Board and Committee self-evaluation
Comprehensive new director orientation
Shareholder Rights
Annual election of directors
Directors elected by majority voting except in contested elections
One share, one-vote standard
Proxy access with market terms
No shareholder rights plan or “poison pill”
Policies, Programs
and Guidelines
Comprehensive Code of Conduct and Corporate Governance Guidelines
Robust political activity disclosure and compliance program
Corporate Responsibility Progress Report that addresses our responsibility priorities, progress against our goals and sustainability initiatives
Compensation “clawback” policy
Stock ownership and holding requirements for directors and executive officers
Policies prohibiting hedging and pledging of our shares by directors and executive officers

We believe the foregoing practices are well aligned with the Investor Stewardship Group’s corporate governance framework for U.S. listed companies.
                   

Altria Group, Inc. – Proxy Statement           v


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PROXY STATEMENT SUMMARY

Shareholder Engagement

We value our shareholders’ perspectives on our businesses and each year engage with shareholders through various activities.

2018 shareholder engagement included:

Three investor conferences
Numerous individual investor meetings and calls to engage on a variety of topics such as:
business performance
company strategies
environmental, social and corporate governance matters, including executive compensation
the regulatory environment
Our 2018 Annual Meeting
                   We value the
shareholder
perspectives that
we gain through
these activities.

Shareholders may access investor information about Altria through our website at www.altria.com/investors and through the Altria Investor App. For questions concerning Investor Relations, please call 804-484-8222 or e-mail us from the Contact Us section on our website (www.altria.com/ContactUs).

Executive Compensation Highlights

Executive Compensation Framework

In 2018, the total direct compensation of our executive officers named in the Summary Compensation Table on page 47 (“named executive officers” or “NEOs”) consisted of the following elements:

Element       Description
Base Salary Fixed cash compensation based on role at Altria.
Annual Cash Incentive Cash-based incentive plan based on prior year’s financial and strategic goals and individual performance.
Long-Term Cash Incentive Cash-based incentive plan based on three-year financial and strategic goals and individual performance.
Long-Term Equity Incentive Restricted stock unit (“RSUs”) and performance stock unit (“PSUs”) awards based on prior year’s individual performance and advancement potential. PSU payout amount tied to three-year financial goals.

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PROXY STATEMENT SUMMARY

2018 Program Highlights

Annual incentive awards for our NEOs reflect our business performance in a year of both business and Chief Executive Officer (“CEO”) transition.

NEOs received a mix of 60% RSUs and 40% PSUs. Together, PSUs and our cash Long-Term Incentive Plan (“LTIP”) deliver over 60% of our NEOs’ target long-term incentives in forms that are performance-based.

At the 2018 Annual Meeting, over 94% of the votes cast approved on an advisory basis the compensation of our NEOs, demonstrating strong alignment of shareholder interests with our executive compensation program and philosophy.

Key Governance Features of Our Executive Compensation Program

The following summary highlights our commitment to executive compensation practices that align the interests of our executives and shareholders:

  What We Do
                                           
 
Pay for Performance
A significant portion of our NEOs’ compensation is at-risk variable compensation. Annual and long-term cash incentives and a significant portion of equity compensation are tied to performance measures.
Multiple Performance Metrics
Variable compensation is based on more than one measure to encourage balanced incentives.
Stock Holding and Ownership Requirements
All NEOs exceed our robust stock ownership requirements.
“Clawback” Provisions
Our policy provides for the adjustment or recovery of compensation in certain circumstances.
Award Caps
All our variable compensation plans have caps on plan formulas.
Below Average Share Utilization
We have below average run rates for equity compensation, as compared to S&P 500 companies.
Tally Sheets
We provide our Compensation Committee tally sheets at least annually as part of making individual compensation decisions for our NEOs.
Confidentiality & Non-Compete Agreements
All NEOs are subject to confidentiality and non-compete agreements.
 
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                         
  What We Don’t Do
                                                 
 
No Excessive Perquisites
Perquisites represent less than 2% of our active NEOs’ compensation.
No Single-Trigger Change in Control
Our shareholder-approved 2015 Performance Incentive Plan includes a double-trigger change in control provision.
No Individual Supplemental Executive Retirement Plans
No Hedging or Pledging
We do not permit our executive officers to engage in either hedging or pledging activities with respect to their Altria shares.
No Employment Agreements
All our NEOs are employed at-will.
No Tax Gross-Ups on Compensation
We do not pay tax gross-ups to our executive officers.
No Share Recycling
     
       
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                               


Altria Group, Inc. – Proxy Statement           vii


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Board and Governance Matters

Board and Committee Governance

Board Responsibility

The primary responsibility of our Board is to foster our long-term success. In fulfilling this role, each director must exercise his or her good faith business judgment of the best interests of Altria and our shareholders. Our Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management, which is responsible for our day-to-day operations.

Our Board’s Oversight Role

Strategic Oversight

Our Board actively oversees the development and execution of our strategies. These strategies encompass both financial and operational strategies related to our operating companies and their products, as well as strategies focused on legal and regulatory matters, public policy and engagement, innovation, talent development and executive succession, and strategic investments. Over the course of the year, including during multi-day meetings focused on strategy and long-term planning, management and our Board discuss the development and execution of our strategic plans as well as events that bear upon those plans. Our Board further monitors strategic execution through standing presentations at regular Board and Committee meetings and communications from management in between meetings.

                                              
 
Our Board spends several days each year reviewing our strategies and discussing them with management.
     
   
       
                            

Risk Oversight

Our Board believes it has in place effective processes to identify and oversee the material risks facing Altria and our businesses and that these processes are consistent with, and provide additional support for, the current leadership structure of our Board. Our Board, both acting as a full Board and through its Committees, plays an important oversight role in our risk management processes. Regular Board and Committee meetings cover several days. Management from Altria and our subsidiaries and business functions attend each meeting. These meetings, along with periodic site visits and, as appropriate, communications between Board meetings, allow our Board to discuss with senior and mid-level management the operational risks facing the businesses of our subsidiaries.

Our enterprise risk management process helps us identify, prioritize and manage risks that have the potential to present the most significant obstacles to achieving business objectives. Management reports annually to our Board on this process.

Our Board, directly or through its Committees, also oversees management of the following risk areas:

Legal, Compliance and Regulatory Risk: Our Board, both directly and through the Audit Committee, receives regular updates on various legal, compliance and regulatory matters, such as developments in litigation, compliance risks and our compliance program, and developments related to FDA regulation of certain of our subsidiaries. In addition, regular updates to the Audit Committee by our Chief Compliance Officer and Corporate Audit personnel provide insight into our risk assessment and risk management policies and processes.

Altria Group, Inc. – Proxy Statement           1


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BOARD AND GOVERNANCE MATTERS

Financial and Accounting Risk: The Finance and Audit Committees oversee our management of financial, accounting, internal controls and liquidity risks through interaction at each meeting with the Chief Financial Officer, management from our financial, accounting, auditing and treasury functions (as appropriate) and, for the Audit Committee, representatives from our independent registered public accounting firm.

Reputational and Governance Risk: Through its interaction with business functions responsible for our public policy and societal alignment activities and strategies, the Nominating, Corporate Governance and Social Responsibility Committee oversees the ways in which we manage public policy and reputational risk, including environmental and social risk. The Nominating, Corporate Governance and Social Responsibility Committee also oversees risks related to Board organization, membership and structure and other corporate governance matters.

Executive Compensation Program Risk: The Compensation Committee considers the extent to which the executive compensation program may create risk for us (see page 45 for a more detailed description).

Technology, Intellectual Property and Research and Product Development Risk: The Innovation Committee oversees our management of the risks associated with technology, research and product development, including intellectual property.

Cybersecurity Risk: The Audit Committee oversees our cybersecurity program and management of the associated risks. The Committee receives regular updates from our Chief Information Security Officer on cybersecurity matters and our risk management program.


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BOARD AND GOVERNANCE MATTERS

Corporate Responsibility Oversight

The Nominating, Corporate Governance and Social Responsibility Committee oversees our efforts to identify, evaluate and understand the environmental, social and governance issues that present risks and opportunities for our businesses and our policies and programs designed to address those risks and opportunities.

We approach corporate responsibility by understanding our stakeholders’ perspectives, aligning business practices where appropriate and measuring and communicating our progress. We focus in particular on four corporate responsibility priorities that we believe are important to our stakeholders and key to our continued success.

Reducing the Harm of Tobacco Products Marketing Responsibly Managing Our Supply Chain Responsibility Developing Our Employees and Culture
Develop tobacco products that may offer lower risk for adult tobacco consumers and engage the FDA constructively about them
Support programs that help reduce underage tobacco use
Provide access to expert quitting information for those who have decided to quit
Build relationships between brands and their adult consumer audiences while taking steps designed to limit reach to unintended audiences
Work with diverse, high-quality suppliers to innovate and address societal issues within the supply chain
Develop high-performing and engaged employees who help us continue to deliver superior results in the future

In addition, we have set long-term goals to reduce our environmental impact. Our companies play an active role in protecting our natural resources and reducing our environmental impact. We understand the affect our companies may have on our environment, including changes to water quality and availability and climate change, as well as the effect these changes have on our companies.

We also make significant investments in our communities through cash and in-kind contributions to non-profit organizations, including through employee volunteering. Our goal is to strengthen our communities by helping charitable organizations find long-lasting solutions to common issues that matter most to our businesses, employees and communities.

More information about our priorities and progress against our goals can be found in our most recent Corporate Responsibility Progress Report, which is available on our website at www.altria.com/responsibility.

Talent Development and Culture Oversight

We recognize the importance of doing business the right way. We believe culture influences employee actions and decision-making. This is why we dedicate resources to promote a vibrant, inclusive workplace; attract and develop talented, diverse employees; promote a culture of compliance and integrity; and reward and recognize employees for shaping our future, growing people and teams, delivering winning results and acting consistent with our Values.

Because we operate in highly regulated and dynamic industries that are changing and growing more complex, we seek employees who give us a talent advantage. We equip employees to meet new challenges by fostering a culture that emphasizes diversity and inclusion, thinking and acting innovatively and simplifying work. Through these efforts, we pursue our employee goal of developing high performing and engaged employees who will help us continue to deliver superior results in the future. Our Board, with support of our Compensation Committee, oversees initiatives, programs, policies and processes related to talent development, compensation, and culture and the associated company strategies.

Altria Group, Inc. – Proxy Statement           3


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BOARD AND GOVERNANCE MATTERS

Board Leadership Structure and Governance

Our Board believes that it is important to retain the flexibility to allocate the responsibilities of the Chairman and the CEO in a way that it considers to be in the best interests of Altria and our shareholders. After due consideration by the Nominating, Corporate Governance and Social Responsibility Committee and our Board, our Board has concluded that presently combining the roles of Chairman and CEO is in the best interests of Altria and our shareholders. Our Mission is to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products. Our Board believes that the combination of the roles of Chairman and CEO promotes the pursuit of our Mission by allowing the senior-most executive with accountability for our day-to-day operations and execution of our strategic plan, who also possesses significant business, regulatory and industry knowledge, to set Board meeting agendas (in consultation with the Presiding Director), to lead the related discussions and to communicate with one voice to employees, shareholders and other stakeholders. Our Board considers this an effective and efficient structure that is particularly appropriate for us given the unique challenges that we have faced and continue to face in our businesses, particularly domestic tobacco, and the enhanced regulatory environment. We have a strong and experienced independent Presiding Director, Thomas F. Farrell II. Mr. Farrell promotes dialogue among independent members of our Board and directly, clearly and regularly communicates the views of our Board to management. Moreover, our independent directors convene at each Board meeting in an executive session led by the Presiding Director.

Our Board’s strict adherence to sound corporate governance practices, as reflected in our Corporate Governance Guidelines, has promoted, and continues to promote, the effective and independent exercise of Board leadership for Altria and our shareholders.

                                                 
 
Responsibilities of Our Presiding Director
Preside over executive sessions of the independent directors and at all meetings at which the Chairman is not present
Call meetings of the independent directors as he or she deems necessary
Serve as a liaison between the Chairman and the independent directors
Together with the Chairman, approve agendas and schedules for Board meetings
Advise the Chairman of our Board’s informational needs and, where appropriate, approve information sent to our Board
Together with the Chair of the Compensation Committee, communicate goals and objectives to the CEO and the results of the evaluation of the CEO’s performance
Be available for consultation and communication if requested by major shareholders
     
       
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                               

Committees of Our Board of Directors

Our Board has established various standing Committees to assist it with the performance of its responsibilities. Our Board elects the members of these Committees and the Committee Chairs annually at its organizational meeting following our annual meeting of shareholders, based on the recommendations of the Nominating, Corporate Governance and Social Responsibility Committee. The Chair of each Committee develops the agenda for that Committee and determines the frequency and length of Committee meetings. After each meeting, each Committee provides a full report to our Board.

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BOARD AND GOVERNANCE MATTERS

Our Board has adopted written charters for each of these Committees. These charters are available on our website at www.altria.com/governance. The following table summarizes the primary responsibilities of the Committees:

Audit Committee
2018 Meetings Independent Chair
7 George Muñoz
Report Other Members (all independent)
See page 23. John T. Casteen III Kathryn B. McQuade Virginia E. Shanks
  Debra J. Kelly-Ennis Mark E. Newman
The Audit Committee assists our Board in its oversight of (i) the integrity of our financial statements and financial reporting processes and systems of internal control, (ii) the qualifications, independence and performance of our independent registered public accounting firm, (iii) the internal auditors and the internal audit function, (iv) our risk assessment and risk management policies and practices and (v) our compliance with legal and regulatory requirements. The Audit Committee also prepares the Audit Committee report that the rules of the U.S. Securities and Exchange Commission (“SEC”) require us to include in our proxy statement. See pages 22 to 23 for further matters related to the Audit Committee, including its report for the year ended December 31, 2018.

The Audit Committee consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the New York Stock Exchange (“NYSE”) and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Board has determined that all members of the Audit Committee are financially literate and that Messrs. Muñoz and Newman and Ms. McQuade are “audit committee financial experts” within the meaning set forth in the regulations of the SEC.

Compensation Committee
2018 Meetings Independent Chair
5 W. Leo Kiely III
Report Other Members (all independent)
See page 26. John T. Casteen III Kathryn B. McQuade
  Thomas F. Farrell II Virginia E. Shanks
The Compensation Committee determines and approves CEO compensation and reviews and approves the compensation of our other executive officers, including salary, annual incentive awards and long-term incentive awards. The Compensation Committee also oversees the development of executive succession plans and evaluates and makes recommendations to our Board regarding potential CEO candidates. In addition, the Compensation Committee evaluates the design and effectiveness of our incentive programs and monitors risks related to such design. See pages 26 to 46 for further matters related to the Compensation Committee, including a discussion of its procedures and its report.

The Compensation Committee consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the NYSE and non-employee directors for the purposes of Rule 16b-3 of the Exchange Act.

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Executive Committee
2018 Meetings Chair
0 Howard A. Willard III
  Other Members (all independent)
  Dinyar S. Devitre W. Leo Kiely III George Muñoz
  Thomas F. Farrell II Kathryn B. McQuade Nabil Y. Sakkab
The Executive Committee has authority to act for our Board during intervals between Board meetings to the extent permitted by law.

Finance Committee
2018 Meetings Independent Chair
5 Dinyar S. Devitre
  Other Members (all independent)
  W. Leo Kiely III Mark E. Newman  
  George Muñoz Nabil Y. Sakkab  
The Finance Committee monitors our financial condition, oversees the sources and uses of cash flow and advises our Board with respect to financing needs, dividend policy, share repurchase programs and other financial matters.

Innovation Committee
2018 Meetings Independent Chair
3 Nabil Y. Sakkab
  Other Members (all independent)
  John T. Casteen III Debra J. Kelly-Ennis Virginia E. Shanks
  Dinyar S. Devitre W. Leo Kiely III  
The Innovation Committee assists our Board in its oversight of the strategic goals and objectives of our subsidiaries’ innovation and marketing strategies, consumer/market understanding and brand plans, technological initiatives and research, development and engineering programs.

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Nominating, Corporate Governance and Social Responsibility Committee
2018 Meetings Independent Chair
4 Kathryn B. McQuade
   
Other Members (all independent)
Dinyar S. Devitre Debra J. Kelly-Ennis Nabil Y. Sakkab
Thomas F. Farrell II George Muñoz

The Nominating, Corporate Governance and Social Responsibility Committee identifies individuals qualified to become Board members consistent with the criteria established by our Board and described in our Corporate Governance Guidelines, and recommends a slate of nominees for election at each annual meeting of shareholders; makes recommendations to our Board concerning the appropriate size, function, needs and composition of our Board and its Committees; reviews non-employee director compensation and recommends any changes in compensation to our Board; advises our Board on corporate governance matters; oversees the annual Board and Committee self-evaluation process; and provides oversight of our public affairs, corporate reputation and societal alignment strategies.

The Nominating, Corporate Governance and Social Responsibility Committee consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the NYSE.

Board Meetings and Attendance

8 meetings in 2018 95% attendance

Our Board holds 6 regular meetings a year, with special meetings occurring when necessary.

2018 Regular Board Meetings:

During 2018, all directors attended at least 95% of the aggregate number of meetings of our Board and of all Committees on which they served during their respective terms of service. In addition, all directors attended the 2018 Annual Meeting.
      
       
Our Board’s organizational meeting follows our annual meeting of shareholders. Our Board meets in executive session at every in-person Board meeting, which is followed by a session of only independent directors led by the Presiding Director. Directors are expected to attend Board meetings, meetings of the Committees of our Board on which they serve and our annual meeting of shareholders, with the understanding that on occasion a director may be unable to attend a meeting.

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Board Practices and Policies

Board and Committee Self-Evaluations

Our Board assesses annually its effectiveness and that of its Committees in advancing our Mission. The Nominating, Corporate Governance and Social Responsibility Committee oversees the evaluation process.

Format Topics Presentation of Findings Feedback Incorporated
The Nominating, Corporate Governance and Social Responsibility Committee determines the format of the evaluations, which may include interviews conducted by the Presiding Director, interviews conducted by the Chair of the Nominating, Corporate Governance and Social Responsibility Committee, interviews conducted by an independent third party or written surveys.
Self-evaluation topics generally include, among other matters:
Board composition and structure
Meeting topics and process
Information flow
Board oversight of risk management and strategic planning
Succession planning
Access to management
The Nominating, Corporate Governance and Social Responsibility Committee presents to our Board the results of the self-evaluations. Our Board discusses the results to identify opportunities to enhance effectiveness.
Our Board implements enhancements and other modifications, as appropriate, identified during the self-evaluations.

Examples of actions our Board has taken in recent years in response to the annual evaluation process include enhanced information flow, such as additional pre-meeting materials, and expanded discussions of corporate strategy.

Board Succession Planning

The Nominating, Corporate Governance and Social Responsibility Committee has the primary responsibility for developing a succession plan for our Board. Using tools such as the annual Board and Committee self-evaluations and our Board retirement policy, it periodically reviews our Board composition and, as further discussed on page 12, identifies the appropriate mix of experiences, skills, attributes and tenure for our Board as a whole in light of our strategies and needs with the objective of recommending a group of directors that can best continue our success and represent shareholder interests. The Committee and our Board are committed to developing a diverse pool of potential candidates for future Board service consideration. See “Process for Nominating Directors” and “Board Composition and Board Diversity” on pages 12 and 13 for a further discussion of our Board composition.

In identifying potential candidates for Board membership, the Committee relies on suggestions and recommendations from directors, shareholders, management and others, including from time to time executive search and board advisory firms. The Committee does not distinguish between nominees recommended by shareholders and other nominees. Shareholders wishing to suggest candidates to the Nominating, Corporate Governance and Social Responsibility Committee for consideration as directors must submit a written notice to our Corporate Secretary following the procedures set forth in this Proxy Statement under “Questions and Answers about Communications, Altria Documents and Shareholder Proposals – How do I communicate with our Board of Directors?” on page 75. Our By-Laws set forth the procedures that a shareholder must follow to nominate directors. The procedures are summarized under the same section in response to the question “How can a shareholder nominate a director or submit a proposal for next year’s annual meeting?” on page 75.

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Board Retirement Guidelines

Our Board has adopted retirement guidelines that require a director who will have attained the age of 75 as of the date of the next annual meeting to tender his or her written resignation to our Board at least six months prior to such annual meeting. If our Board determines that continued service by the director is in the best interests of Altria and our shareholders, our Board has the discretion not to accept the resignation. As required under the retirement guidelines, Mr. Casteen tendered his resignation to our Board in October 2018; after due consideration, our Board did not accept his resignation on the basis that his continued service is in the best interests of Altria and our shareholders.

CEO Succession and Advancement Planning

Our Board believes that senior executive advancement and succession is one of its most important responsibilities. The Compensation Committee is responsible for overseeing the development and furtherance of executive succession plans, evaluating and making recommendations to our Board regarding potential candidates to become CEO, and evaluating and approving candidates to fill other senior executive positions.

CEO Succession
Planning
Leadership Succession
Planning
            The succession planning process gives the Board critical insights into our talent pool.

At least annually, the Chairman and CEO meets with the Compensation Committee and our Board to discuss CEO succession planning (including specific candidates).

The Compensation Committee also considers the procedure for the timely and efficient transfer of CEO responsibilities in the event of an emergency or the sudden incapacity, departure or death of the Chairman and CEO.

The Chairman and CEO meets with the Compensation Committee at least annually to discuss the performance of key members of our senior management and their respective succession plans. These matters are regularly communicated to our Board by the Chair of the Compensation Committee. In addition, our Board has exposure to succession candidates (CEO and otherwise) from across our companies through presentations, site visits and other events.

Director Education

Upon election to our Board, new directors participate in a multi-day comprehensive on-boarding process. They are introduced to the operational aspects of our businesses, key issues facing Altria and our Board governance processes. New directors meet individually with various members of management and visit key facilities as part of the on-boarding program.

In addition to regular updates on our strategies and developments in our businesses, we provide our Board with information regarding governance, legal responsibilities and compliance matters through regularly scheduled presentations at Board meetings and, as needed, supplementary reports and materials. Directors also periodically visit our companies’ facilities, allowing our directors to interact with different leaders across our companies.

We make available to our Directors third-party director education programs that provide additional perspective on various topics. We provide a list of programs, updated regularly, to our directors. They are also free to choose self-selected educational programs.

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Governance Guidelines, Policies and Codes

Our Board has adopted Corporate Governance Guidelines. In addition, our Board has adopted a Code of Business Conduct and Ethics for Directors (“Director Code”) that applies to our directors and a policy with regard to reviewing certain transactions in which we are a participant and an officer, director or nominee for director has had or may have a direct or indirect material interest (see page 67 for information about our Policy on Related Person Transactions). These documents are available on our website at www.altria.com/governance. Our Board has also adopted the Altria Code of Conduct (“Code of Conduct”) that applies to all our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of Conduct is available on our website at www.altria.com/codeofconduct.

Director Compensation

Our philosophy is to provide competitive compensation necessary to attract and retain high-quality non-employee directors. Our Board believes that a substantial portion of director compensation should consist of equity-based compensation to assist in aligning directors’ interests with the interests of shareholders. Directors who are employees of Altria receive no additional compensation for service as a director.

The Nominating, Corporate Governance and Social Responsibility Committee periodically reviews the competitiveness of director compensation (taking into account our Compensation Survey Group (“CSG”) described on page 43), considers the appropriateness of the form, mix and amount of director compensation and makes recommendations to our Board concerning such compensation with a view toward attracting and retaining qualified directors.

Components of Compensation

The following table presents the 2018 components of compensation for our non-employee directors:

Type of Compensation       Amount
($)
Annual Cash Board Retainer (1) 110,000
Annual Cash Retainer for Presiding Director 25,000
Annual Cash Retainer for Committee Chairs
Audit 25,000
Compensation 25,000
Finance 15,000
Innovation 15,000
Nominating, Corporate Governance and Social Responsibility 15,000
Annual Cash Committee Membership Retainer 5,000
Annual Equity Award (2) 175,000
(1) Paid in quarterly installments.
(2) The annual equity award is in the form of fully vested shares of Altria common stock.

Deferred Fee Plan

A non-employee director may elect to defer all or part of the award of shares of common stock and all or part of his or her cash retainers. Pursuant to the Deferred Fee Plan for Non-Employee Directors, deferred retainers are credited to an unfunded bookkeeping account and may be “invested” in various “investment choices,” including an Altria common stock equivalent account. These “investment choices” parallel the investment options offered under the Deferred Profit-Sharing Plan for Salaried Employees and determine the “earnings” that are credited for bookkeeping purposes to a non-employee director’s account. The non-employee director will receive deferred awards of common stock and cash distributions of deferred retainers either prior to or following termination of service from our Board, as elected by the non-employee director.

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Matching Gift Program

Non-employee directors are eligible to participate in our Matching Gift Program. This program is available to all employees and non-employee directors. We match eligible donations of a minimum of $25 up to $30,000 per year per employee or non-employee director on a dollar-for-dollar basis to eligible non-profit organizations. In 2018, the following non-employee directors participated in this program: Mr. Casteen, Mr. Devitre, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade, Mr. Muñoz and Mr. Newman. The aggregate amount of matching payments for these directors in 2018 was $160,375.

Other

In addition to cash payments, stock awards and matching gifts, non-employee directors are covered under our Business Travel Accident Insurance Plan, which is available generally to all employees.

The following table presents the compensation received by the non-employee directors for service as directors in fiscal year 2018.

Non-Employee Director Compensation Table
Name Fees Earned
or Paid in
Cash
($)
Stock
Awards
($) (3)
All Other
Compensation
($) (4)
Total
($)
Gerald L. Baliles (1)      41,401      0      0      41,401
John T. Casteen III 125,000 175,025 30,000 330,025
Dinyar S. Devitre 140,000 175,025 28,728 343,753
Thomas F. Farrell II 145,000 175,025 0 320,025
Debra J. Kelly-Ennis 125,000 175,025 11,750 311,775
W. Leo Kiely III 150,000 175,025 30,000 355,025
Kathryn B. McQuade 140,000 175,025 30,000 345,025
George Muñoz 150,000 175,025 1,000 326,025
Mark E. Newman (2) 110,528 175,025 28,897 314,450
Nabil Y. Sakkab 140,000 175,025 0 315,025
Virginia E. Shanks 125,000 175,025 0 300,025
(1) Governor Baliles retired from the Board effective May 16, 2018, at the completion of his term.
(2) Mr. Newman became a director effective February 1, 2018.
(3) Pursuant to the Stock Compensation Plan for Non-Employee Directors, on May 17, 2018, each non-employee director received 3,165 shares of Altria common stock with an aggregate grant date fair market value of $175,025. The dollar value is slightly higher than $175,000 because the grant is made in whole shares. The fair market value of the shares of $55.30 per share was based on the average of the high and low trading prices of Altria common stock on May 17, 2018.
(4) All Other Compensation consists of matching gifts paid in 2018 under our Matching Gift Program.

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Stock Ownership Guidelines for Non-Employee Directors and Prohibition on Hedging and Pledging

Our Board believes that stock ownership guidelines further align the interests of our Board with those of our shareholders. Our non-employee directors are expected to hold shares of our common stock in an amount equal to the lesser of five times the then-current annual cash retainer or 26,000 shares. Directors are expected to reach this ownership level within five years of being elected to Board membership and to hold the requisite number of shares until retirement. The ownership requirement for non-employee directors may be satisfied with all beneficially owned shares, including deferred shares and share equivalents. As of December 31, 2018, all our directors who had served on our Board for five or more years held a sufficient number of shares to satisfy these guidelines.

Our non-employee directors are not permitted to engage in hedging and pledging activities with respect to our stock.

Altria Board of Directors

Our Board currently consists of 11 directors. Directors are elected annually at each annual meeting to serve until the next annual meeting and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. Each of the nominees for director currently serves as a director and was elected by the shareholders at the 2018 Annual Meeting. Biographical information and qualifications of the nominees for director are included under “Proposal 1 – Election of Directors” on page 16.

Process for Nominating Directors

The Nominating, Corporate Governance and Social Responsibility Committee works with our Board to determine the appropriate mix of characteristics, skills and experience for our Board. The Committee evaluates each individual in the context of our Board as a whole, with the objective of recommending a group of directors that can best continue the success of the business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience.

In reviewing nominee candidates, the Committee considers both (i) our Mission to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products and (ii) its four related Mission goals – Invest in People; Drive Positive Change; Deliver Superior Products and Brands; and Create Substantial Value. The Committee has not established any specific minimum qualification standards for nominees to our Board; rather, in evaluating the suitability of individuals for Board membership, the Committee considers the ways in which it believes each individual can assist Altria in pursuing our Mission and advancing one or more Mission goals.

The Committee takes into account many factors, including whether the individual meets requirements for independence and whether the individual will enhance the diversity of views and experiences available to our Board in its operations and oversight of the development and execution of our strategies. In determining whether to recommend a director for re-election, the Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of our Board. In addition, the Committee considers whether our Board has specific needs for certain skills or attributes at a given time (for example, financial or chief executive officer experience). Other criteria for Board membership, such as the extent of an individual’s other commitments, are set forth in our Corporate Governance Guidelines.

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Board Composition and Board Diversity

Our Board is committed to reviewing periodically its composition to ensure that it continues to have the right mix of skills, background and tenure. The current composition of our Board is as follows:

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

                                                        
 
Commitment to Board Diversity

We are committed to diversity, as reflected in our Mission goals, our Code of Conduct and our leadership development system.

The Nominating, Corporate Governance and Social Responsibility Committee has a long-standing commitment to diversity, rather than a formal diversity policy, and is guided by our diversity philosophy in its review and consideration of director nominees. In this regard, our Board and the Committee view diversity holistically. As set forth in our Corporate Governance Guidelines, our Board and the Committee consider, among other factors:

whether the individual meets the requirements for independence;
the individual’s general understanding of the various disciplines relevant to the success of a large publicly traded company in today’s global business environment;
the individual’s understanding of our businesses and markets;
the individual’s skills, professional expertise and educational background; and
other factors that promote diversity of views and experiences such as gender, race, national origin, age and sexual orientation.
     
       
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                                      

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Our Board has a breadth of skills and experiences. As noted in the high level summary below, we believe that our Board has demonstrated leadership in a variety of positions across various professions and industries. The following table is not intended to be an exhaustive list of each of our director’s contributions to our Board as each of them also contributes other important skills, expertise, experience and personal attributes that are not reflected in the chart below.

Skills and Experience
Consumer Products and/or Consumer Marketing
Consumer product leadership is important to Altria because our continued leadership in satisfying evolving adult consumers requires that we market our products effectively and responsibly.
Industry
Experience in our industries and existing markets is important to understanding industry and market dynamics.
Regulated Industries
Altria operates in highly regulated businesses. To enhance Board oversight of regulatory compliance and engagement, we include directors with experience in regulated industries.
Chief Executive Experience
Directors who serve or have served as a chief executive bring leadership experience in various areas such as strategic planning, financial oversight, executive succession, compliance and risk management.
Financial Expertise, including Chief Financial Officer Experience
Proficiency in finance and financial reporting processes helps our Board monitor and assess Altria’s performance and financial reporting.
Public Policy
Directors with public policy experience provide valuable insights as Altria’s businesses are subject to an array of federal, state and local regulations and regularly engage with various external stakeholders.
Public Company Board
Service on other public company Boards promotes efficient and effective Board processes and provides insight into other company corporate governance practices.
Leadership in Innovation
Directors with experience in innovation, product development, and consumer engagement promote effective oversight of product growth opportunities, marketing strategies and capabilities, and other growth strategies.
Information Technology/Cybersecurity
We benefit from directors who can help manage and mitigate key risks, including cybersecurity.

Director Independence Determinations

Under the listing standards of the NYSE, our Board must consist of a majority of independent directors. In making independence determinations, our Board observes NYSE and SEC criteria and considers all relevant facts and circumstances. Our Board has also adopted categorical standards of director independence to further assist it in making these determinations. These standards are set forth in Annex A of our Corporate Governance Guidelines, which are available on our website at www.altria.com/governance.

On the recommendation of the Nominating, Corporate Governance and Social Responsibility Committee, our Board has affirmatively determined that each of the following nominees is independent in that such nominee has no material relationship with us: John T. Casteen III, Dinyar S. Devitre, Thomas F. Farrell II, Debra J. Kelly-Ennis, W. Leo Kiely III, Kathryn B. McQuade, George Muñoz, Mark E. Newman, Nabil Y. Sakkab and Virginia E. Shanks. In making its recommendation to our Board, the Committee considered the following business relationships and transactions:

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Business Relationships and Transactions Considered

Mr. Farrell is the Chief Executive Officer of Dominion Energy, Inc. (“Dominion”). A subsidiary of Dominion is a regulated public utility with which Altria or our subsidiaries has a commercial relationship for energy procurement. Amounts paid by Altria or our subsidiaries are set at rates fixed in accordance with the applicable regulatory authority. One of our subsidiaries has an agreement with the same utility under which the subsidiary receives nominal payments in connection with a solar energy program overseen and approved by the same regulatory authority. The terms of the agreement are comparable to those the utility offers to other third parties. Mr. Farrell is neither responsible for, nor involved in, the utility’s dealings with us or our subsidiaries, nor does Mr. Farrell materially benefit directly or indirectly from this relationship.

Altria or our subsidiaries from time to time do business in the ordinary course on terms comparable to those provided to unrelated third parties with entities where Mr. Devitre, Ms. Kelly-Ennis and Mr. Muñoz serve as non-executive directors or where immediate family members (as defined in our Policy on Related Person Transactions, which is discussed in “Related Person Transactions and Code of Conduct” on page 67) of Mr. Casteen, Mr. Farrell, Mr. Kiely and Dr. Sakkab serve as non-executive directors or are employed in non-executive officer capacities. In each case, neither the director nor the immediate family member is responsible for, or involved in, the entity’s day-to-day dealings with Altria or our subsidiaries, and the respective payments made by Altria or our subsidiaries to the entities in the last three fiscal years were significantly less than the greater of $1 million or 2% of any such entity’s consolidated gross revenues. None of Mr. Casteen, Mr. Devitre, Mr. Farrell, Ms. Kelly-Ennis, Mr. Kiely, Mr. Muñoz or Dr. Sakkab, or their respective immediate family members, materially benefits directly or indirectly from these relationships.

The Committee has determined that the foregoing business relationships and transactions did not affect the independence of any nominee for director.

In making its recommendation to our Board, the Committee also considered the following philanthropic relationships and transactions between Altria and our subsidiaries and various educational and other charitable entities located in or near our locations or facilities of our subsidiaries. We believe that corporate philanthropy furthers our Mission goal of investing in people, which includes investing meaningfully in the communities in which our employees live and work with the objective of making those communities leading environments where our businesses can succeed. In some cases, these relationships date back for many decades.

Philanthropic Relationships and Transactions Considered

Altria and the University of Virginia (the “University”) have a long-standing relationship that has included employment recruiting and charitable donations. In 2018, Altria or our subsidiaries made certain charitable donations to the University in an aggregate amount of $659,750, with the significant majority supporting the University’s Youth-Nex Center that promotes positive youth development. In addition, we made ordinary course trade payments to the University in the aggregate amount of $297,407. The sum of these 2018 contributions and payments represent significantly less than 2% of the University’s consolidated gross revenues. Mr. Casteen is a former President of the University. He now serves as President Emeritus of the University. Mr. Casteen’s son, John T. Casteen IV, joined the University as a lecturer in 2016, and his daughter-in-law, Laura Casteen, is employed by the University as an Associate Dean. Neither Mr. Casteen nor his son or daughter-in-law materially benefits directly or indirectly from this relationship.

In addition, we make various grants and charitable contributions, including matching gifts under our Matching Gift Program, to entities where Mr. Casteen, Mr. Devitre, Mr. Farrell, Ms. Kelly-Ennis and Mr. Muñoz or immediate family members of Mr. Farrell, Mr. Kiely, Ms. McQuade and Mr. Newman serve as non-executive directors or trustees or non-executive employees. A substantial majority of these grants and contributions were made to non-profit entities that serve the communities in which Altria and our subsidiaries operate and to nonprofit educational programs and institutions located in and around these communities. In each case, payments by us in the last three fiscal years were significantly less than the greater of $1 million or 2% of any such entity’s consolidated gross revenues. None of Mr. Casteen, Mr. Devitre, Mr. Farrell, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade, Mr. Muñoz or Mr. Newman, or their respective immediate family members, materially benefits directly or indirectly from these contributions.

The Committee has determined that the foregoing philanthropic relationships and transactions did not affect the independence of any nominee for director.

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Proposal
1
 
                          
Election of Directors
  The Board recommends a vote FOR each nominee.
   
                        

We propose that the 11 individuals named below, 10 of whom are independent directors, be elected as directors to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified, subject to their earlier death, resignation or removal. The Nominating, Corporate Governance and Social Responsibility Committee has recommended to our Board, and our Board has approved, the individuals named below.

We list in the biographies below the particular experiences, qualifications, attributes and skills of each nominee that the Nominating, Corporate Governance and Social Responsibility Committee believes will advance our Mission and one or more Mission goals. The Committee and our Board believe that each of the nominees for election at the 2019 Annual Meeting possesses strong and unique characteristics. The Committee and our Board believe that, as a group, these nominees provide our Board with an optimal balance of experience, leadership, competencies, qualifications and skills.

Although it is not anticipated that any of the individuals named below will be unable or unwilling to stand for election, in the event of such an occurrence, a proxy may be voted for a substitute designated by our Board. In lieu of designating a substitute, our Board may reduce the number of directors.

Our Board recommends a vote FOR each of the nominees for election as directors.

2019 Director Nominee Biographies and Qualifications

                         
     

Position, Principal Occupation and Professional Experience:
President Emeritus, University of Virginia (Charlottesville, VA). Mr. Casteen became President Emeritus of the University of Virginia in August 2010 after having served as President of the University since 1990. He is both University Professor and Professor of English. Previously, Mr. Casteen served as President of the University of Connecticut from 1985 to 1990 and as Secretary of Education for the Commonwealth of Virginia from 1982 to 1985.

Other Current Public Directorships:
Strategic Education, Inc.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
Jamestown-Yorktown Foundation; Leifur Eiríksson Foundation; Institute for Shipboard Education (Semester at Sea); Echo360, Inc. Previously served on the boards of the Chesapeake Bay Foundation, Virginia Foundation for Community College Education and the Woodrow Wilson International Center for Scholars.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Casteen’s extensive professional, business, administrative and leadership experiences, particularly his role as a former chief executive of a university system with top-ranking academic and medical divisions, provide clear support for his nomination for election to our Board.

John T. Casteen III, 75

Director Since: 2010

Board Committees:

Audit
Compensation
Innovation
 
          
 
                                            
     

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Position, Principal Occupation and Professional Experience:
Former Chief Financial Officer, Altria Group, Inc. (New York, NY). Mr. Devitre served as Special Advisor to General Atlantic LLC, a private equity firm, from June 2008 to January 2017. In March 2008, Mr. Devitre retired from his position as Senior Vice President and Chief Financial Officer of Altria Group, Inc. Prior to Mr. Devitre’s appointment to this position in April 2002, he held a number of senior management positions with Altria.

Other Current Public Directorships:
IHS Markit Ltd.

Prior Public Company Directorships (within the last five years):
SABMiller plc (2007 to October 2016); Western Union Company (2006 to May 2015).

Other Directorships, Trusteeships and Memberships:
Pratham USA; Brooklyn Academy of Music. Previously served on the boards of The Lincoln Center for the Performing Arts, Inc., The Asia Society and Kraft Foods Inc. (now known as Mondelēz International, Inc.).

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Devitre’s significant knowledge and understanding of Altria and our businesses, together with his public company board service, his financial acumen, his public company chief financial officer experience and his general business (including international business) knowledge, provide clear support for his nomination for election to our Board.

 
 
           
     

Dinyar S. Devitre, 71

Director Since: 2008

Board Committees:

Executive
Finance (Chair)
Innovation
Nominating, Corporate Governance and Social Responsibility
 
 
 
 
 
       
                                   
         

                  

Position, Principal Occupation and Professional Experience:
Chairman, President and Chief Executive Officer, Dominion Energy, Inc. (Richmond, VA). Mr. Farrell is the Chairman, President and Chief Executive Officer of Dominion Energy, Inc., one of the nation’s largest producers of energy. He became President and Chief Executive Officer of Dominion effective January 2006 and was elected Chairman in April 2007. From January 2004 through December 2005, he served as President and Chief Operating Officer of Dominion and prior to that as Executive Vice President.

Other Current Public Directorships:
Dominion; Dominion Energy Midstream GP, LLC. Mr. Farrell also serves as a director of Dominion Energy Gas Holdings, LLC and Virginia Electric and Power Company, which are wholly owned subsidiaries of Dominion that only issue registered debt.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
Associated Electric & Gas Insurance Services Limited; Edison Electric Institute; Institute of Nuclear Power Operations; Richmond Performing Arts Center L.L.L.P.; The NH Foundation; Virginia Foundation for Independent Colleges. Previously served on the board of trustees of the Virginia Museum of Fine Arts.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Farrell’s extensive business, administrative and leadership experiences, particularly his role as chief executive officer of a large public company in a regulated industry, provide clear support for his nomination for election to our Board.

             
     

Thomas F. Farrell II, 64

Director Since: 2008

Presiding Director

Board Committees:

Compensation
Executive
Nominating, Corporate Governance and Social Responsibility
 
 
 
 
 
       
                                   
         

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BOARD AND GOVERNANCE MATTERS

                         
     

Position, Principal Occupation and Professional Experience:
Retired President and Chief Executive Officer, Diageo Canada, Inc. (Etobicoke, Ontario, Canada). Ms. Kelly-Ennis was President and Chief Executive Officer of Diageo Canada, Inc., a subsidiary of Diageo plc, a global spirits, wine and beer company, from 2008 to June 2012. From 2005 to 2008, she was Chief Marketing Officer for Diageo North America, Inc., another subsidiary of Diageo plc. Ms. Kelly-Ennis has also held marketing, sales and general management positions with RJR/Nabisco, Inc., The Coca-Cola Company, General Motors Corporation and Grand Metropolitan PLC.

Other Current Public Directorships:
Carnival Corporation & plc; TFI International Inc.

Prior Public Company Directorships (within the last five years):
Hertz Global Holdings, Inc. (2013 to October 2015); PulteGroup, Inc. (1997 to September 2016).

Other Directorships, Trusteeships and Memberships:
Dress for Success Worldwide (Director Emeritus); a privately held company.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. Kelly-Ennis’s leadership experiences, particularly her positions as an executive with several large, consumer-focused companies in multiple industries, and her significant marketing, innovation, sales and distribution experience at large publicly held companies, including companies in the consumer packaged goods industry, provide clear support for her nomination for election to our Board.

Debra J. Kelly-Ennis, 62

Director Since: 2013

Board Committees:

Audit
Innovation
Nominating, Corporate Governance and Social Responsibility
 
          
 
                                            
     
                         
     

Position, Principal Occupation and Professional Experience:
Retired Chief Executive Officer, MillerCoors LLC (Golden, CO). Mr. Kiely retired as Chief Executive Officer of MillerCoors LLC, a joint venture combining the U.S. and Puerto Rico operations of SABMiller plc and Molson Coors Brewing Company, in July 2011, a position he had held since July 2009. From February 2005 through July 2009, Mr. Kiely served as President and Chief Executive Officer of Molson Coors Brewing Company. From March 1993 to March 2005, he held a variety of executive positions at Coors Brewing Company, including Chief Executive Officer. Before joining Coors Brewing Company, he held executive positions with Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., and Ventura Coastal Corporation, a division of Seven Up Inc.

Other Current Public Directorships:
HC Government Realty Trust, Inc.

Prior Public Company Directorships (within the last five years):
Medpro Safety Products, Inc. (2009 to March 2014).

Other Directorships, Trusteeships and Memberships:
Previously served on the boards of The Denver Center for the Performing Arts and Helen G. Bonfils Foundation.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Kiely’s extensive business, administrative and leadership experiences, particularly his various executive positions, including the role of chief executive officer, in the consumer packaged goods industry, provide clear support for his nomination for election to our Board.

W. Leo Kiely III, 72

Director Since: 2011

Board Committees:

Compensation (Chair)
Executive
Finance
Innovation
 
          
 
                                            
     
 
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BOARD AND GOVERNANCE MATTERS

                  

Position, Principal Occupation and Professional Experience:
Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited (Calgary, Alberta, Canada). Ms. McQuade served as Senior Advisor of Canadian Pacific Railway Limited (“Canadian Pacific”), a transcontinental railway in Canada and the United States, from November 2012 to May 2013, after previously serving as Executive Vice President and Chief Financial Officer of Canadian Pacific from September 2008 to her retirement in November 2012. Ms. McQuade joined Canadian Pacific in June 2007 as Executive Vice President and Chief Operating Officer. Prior to joining Canadian Pacific, Ms. McQuade served as Executive Vice President – Planning and Chief Information Officer at Norfolk Southern Corporation where she spent 27 years in key information technology, strategic planning and finance leadership positions.

Other Current Public Directorships:
TransAlta Renewables Inc.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
Previously served on the board of The College of William & Mary Foundation.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. McQuade’s significant financial and accounting expertise, particularly her experience as a public company chief financial officer, her information technology expertise, her general business knowledge and her management experience in a regulated industry, provide clear support for her nomination for election to our Board.

 
 
           
     

Kathryn B. McQuade, 62

Director Since: 2012

Board Committees:

Audit
Compensation
Executive
Nominating, Corporate Governance and Social Responsibility (Chair)
 
 
 
 
 
       
                                   
         

                  

Position, Principal Occupation and Professional Experience:
Principal, Muñoz Investment Banking Group, LLC (Washington, D.C.) and Partner, Tobin & Muñoz (Chicago, IL). Mr. Muñoz is a principal of the Washington, D.C.-based firm of Muñoz Investment Banking Group, LLC. He is also a partner in the Chicago-based law firm of Tobin & Muñoz. He served as President and Chief Executive Officer of the Overseas Private Investment Corporation from 1997 to January 2001. From 1993 to 1997, Mr. Muñoz was Chief Financial Officer and Assistant Secretary of the United States Treasury Department.

Other Current Public Directorships:
Marriott International, Inc.; Anixter International, Inc.; Laureate Education, Inc.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
National Geographic Society; Direct Edge, Inc. Previously served on the boards of Esmark Incorporated and Archipelago Holdings, Inc.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Muñoz’s accounting, financial, legal and public policy expertise, along with his background in international business and his significant professional, administrative and leadership experiences in both the private and public sectors, provide clear support for his nomination for election to our Board.

 
 
           
     

George Muñoz, 67

Director Since: 2004

Board Committees:

Audit (Chair)
Executive
Finance
Nominating, Corporate Governance and Social Responsibility
 
 
 
 
 
       
                                   
         

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BOARD AND GOVERNANCE MATTERS

                         
     

Position, Principal Occupation and Professional Experience:
Senior Vice President and Chief Financial Officer, The Chemours Company (Wilmington, DE). Mr. Newman is Senior Vice President and Chief Financial Officer of The Chemours Company (“Chemours”), a global chemical company. He is also the executive sponsor of the Chemours Black Employee Network. Mr. Newman joined Chemours, then a subsidiary of E. I. du Pont de Nemours and Company, in 2014. From 2011 to 2014, he was Senior Vice President and Chief Financial Officer for SunCoke Energy Inc., a supplier of high-quality coke used in the blast furnace production of steel. Prior to 2011, Mr. Newman held financial and operational leadership positions at General Motors Corporation, GMAC Financial Services, LLC and Ally Financial Inc.

Other Current Public Directorships:
None.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
None.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Newman’s significant financial and accounting expertise, particularly his role as a chief financial officer of a large public company in a regulated industry, along with his international business, transactional and operational experience, including at consumer-focused companies, provide clear support for his nomination for election to our Board.

Mark E. Newman, 55

Director Since: 2018

Board Committees:

Audit
Finance
 
          
 
                                            
     

                         
 
 
 
   

Position, Principal Occupation and Professional Experience:
Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company (Cincinnati, OH). Dr. Sakkab held a variety of positions at The Procter & Gamble Company beginning in 1974. He retired in November 2007 as Senior Vice President, Corporate Research and Development.

Other Current Public Directorships:
Pharnext.

Prior Public Company Directorships (within the last five years):
Deinove (2010 to April 2016); Givaudan SA (2008 to March 2015).

Other Directorships, Trusteeships and Memberships:
Several privately held companies.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Dr. Sakkab’s innovation expertise in the consumer packaged goods industry and his extensive overall business knowledge, including knowledge of regulated products, and experiences on boards of directors provide clear support for his nomination for election to our Board.

Nabil Y. Sakkab, 71

Director Since: 2008

Board Committees:

Executive
Finance
Innovation (Chair)
Nominating, Corporate Governance and Social Responsibility
 
          
 
 
                                            
     

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BOARD AND GOVERNANCE MATTERS

                  

Position, Principal Occupation and Professional Experience:
Strategic Advisor, Penn National Gaming, Inc. (Las Vegas, NV). Ms. Shanks is a Strategic Advisor for Penn National Gaming, Inc. (“Penn National”), a casino entertainment company. She previously served as Executive Vice President and Chief Administrative Officer of Pinnacle Entertainment, Inc. (“Pinnacle”), a casino entertainment company, from July 2013 until October 15, 2018 when Pinnacle merged with Penn National. From October 2010 to June 2013, Ms. Shanks served as Executive Vice President and Chief Marketing Officer of Pinnacle. Prior to joining Pinnacle, she was Chief Marketing Officer for Multimedia Games Inc. from 2008 to 2010. Prior to 2008, Ms. Shanks held senior executive positions for more than 25 years at the property, division and corporate levels of Caesars Entertainment Corp., including Senior Vice President of Brand Management.

Other Current Public Directorships:
None.

Prior Public Company Directorships (within the last five years):
None.

Other Directorships, Trusteeships and Memberships:
None.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. Shanks’s significant regulated industry and consumer-oriented marketing expertise, particularly her extensive background in brand positioning and digital and database marketing, as well as her experience in information technology and cybersecurity, provide clear support for her nomination for election to our Board.

             
     

Virginia E. Shanks, 58

Director Since: 2017

Board Committees:

Audit
Compensation
Innovation
 
 
 
 
 
       
                                   
         

                  

Position, Principal Occupation and Professional Experience:
Chairman and Chief Executive Officer, Altria Group, Inc. (Richmond, VA). Mr. Willard serves as Chairman and Chief Executive Officer of Altria Group, Inc. Prior to his election as Chairman and Chief Executive Officer effective May 17, 2018, Mr. Willard served as Executive Vice President and Chief Operating Officer since March 2015. He previously served as Executive Vice President and Chief Financial Officer from January 2011 through February 2015. Since joining the Altria family of companies in 1992, Mr. Willard has held numerous other senior leadership roles.

Other Current Public Directorships:
None.

Prior Public Company Directorships (within the last five years):
SABMiller plc (2009 to July 2015).

Other Directorships, Trusteeships and Memberships:
Catalyst Inc.

Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Willard’s significant knowledge and understanding of Altria, its industries, its businesses and the external environment in which Altria’s businesses operate, together with his significant financial expertise and leadership experiences, provide clear support for his nomination for election to our Board.

 
 
           
     

Howard A. Willard III, 55

Director Since: 2018

Chairman and Chief Executive Officer

Board Committee:

Executive (Chair)
 
 
 
 
 
       
                                   
         

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Audit Committee Matters

Annual Evaluation and Selection of Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) has been Altria’s independent registered public accounting firm since 1998. Prior to 1998, Altria’s independent registered public accounting firm was Coopers & Lybrand L.L.P. (until its merger with Price Waterhouse LLP in 1998). In addition to assuring the rotation of the audit partners every five years as required by law, the Audit Committee is responsible for selecting, reviewing and evaluating the lead partner and senior members of the audit engagement team and considers whether, in order to assure continuing auditor independence, there should be a rotation of the firm.

In selecting PricewaterhouseCoopers as our independent registered public accounting firm, the Audit Committee conducted its annual evaluation of the firm. This evaluation considers various matters such as technical competence, knowledge of our industry and Altria, quality of services, reputation, and communications (with management and the Audit Committee). The Audit Committee also evaluates the firm’s independence program and quality control procedures, the results of Public Company Accounting Oversight Board (“PCAOB”) and peer reviews of the firm’s quality controls and the appropriateness of the firm’s fees. The Audit Committee also considers PricewaterhouseCoopers’s tenure and believes that extended tenure results in higher quality audit work with greater operational efficiencies through the leveraging of PricewaterhouseCoopers’s deep institutional knowledge of our operations and businesses, accounting policies and practices, and internal control over financial reporting. The Audit Committee is also mindful of the advisability and potential impact of selecting a different firm, including the significant time commitment and expense inherent in on-boarding a new independent registered public accounting firm.

The Audit Committee and our Board believe that the continued retention of PricewaterhouseCoopers to serve as our independent registered public accounting firm is in the best interests of Altria and our shareholders.

Independent Registered Public Accounting Firm’s Fees

The Audit Committee has the sole authority to approve all engagement fees and terms associated with the retention of PricewaterhouseCoopers. As noted in the Audit Committee Report on page 23, the Audit Committee pre-approved all fees associated with the services that the firm provided in 2018.

Aggregate fees, including out-of-pocket expenses, for professional services rendered by PricewaterhouseCoopers for fiscal years ended December 31, 2018 and 2017 were comprised of the following (in thousands):

2018
($)
2017
($)
Audit Fees (1)      6,467      6,467
Audit-Related Fees (2) 1,436 670
Tax Fees (3) 440 232
All Other Fees (4) 8 8
TOTAL 8,351 7,377
(1) Fees and expenses associated with professional services rendered by PricewaterhouseCoopers in connection with (a) the audit of our consolidated financial statements and internal control over financial reporting, including statutory audits of the financial statements of our subsidiaries; (b) reviews of our unaudited condensed consolidated interim financial statements; and (c) reviews of documents filed with the SEC.
(2) Fees and expenses for professional services rendered by PricewaterhouseCoopers for audit-related services, which include certain employee benefit plan audits, accounting consultations and procedures relating to various other audit and special reports.
(3) Fees and expenses for professional services rendered by PricewaterhouseCoopers in connection with U.S. and foreign tax compliance and planning, and consultation and advice on tax examinations.
(4) Other fees were related to licenses for technical accounting tools.

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AUDIT COMMITTEE MATTERS

Pre-Approval Policy

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of service and is subject to a specific budget. The Audit Committee requires the independent registered public accounting firm and management to report on the actual fees charged for each category of service at Audit Committee meetings throughout the year.

During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee for those instances when pre-approval is needed prior to a scheduled Audit Committee meeting. The Chair of the Audit Committee must report on such approvals at the next scheduled Audit Committee meeting.

Audit Committee Report for the Year Ended December 31, 2018

Management has the primary responsibility for Altria’s financial statements and the reporting process, including the systems of internal accounting control. The Audit Committee monitors Altria’s financial reporting processes and systems of internal accounting control, the independence and the performance of PricewaterhouseCoopers and the performance of the internal auditors.

The Audit Committee has received representations from management that Altria’s consolidated financial statements were prepared in accordance with GAAP and that Altria maintained effective internal control over financial reporting, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PricewaterhouseCoopers. The Audit Committee has discussed with PricewaterhouseCoopers their evaluation of the accounting principles, practices and judgments applied by management, and the Audit Committee has discussed with PricewaterhouseCoopers the matters required to be discussed by applicable standards adopted by the PCAOB.

The Audit Committee has received from PricewaterhouseCoopers written disclosures and a letter required by applicable requirements of the PCAOB regarding PricewaterhouseCoopers’s communications with the Audit Committee concerning independence and has discussed with PricewaterhouseCoopers its independence from Altria and its management. The Audit Committee pre-approved all fiscal year 2018 audit and permissible non-audit services provided by PricewaterhouseCoopers and the fees for those services included on page 22. As part of this process, the Audit Committee reviewed non-audit services and fees to assure compliance with regulations prohibiting the independent registered public accounting firm from performing specified services that might impair its independence.

The Audit Committee discussed with Altria’s internal auditors and PricewaterhouseCoopers the overall scope of and plans for their respective audits. The Audit Committee has met with the internal auditors and PricewaterhouseCoopers, separately and together, with and without management present, to discuss Altria’s financial reporting processes and internal control over financial reporting. The Audit Committee has reviewed significant audit findings prepared by PricewaterhouseCoopers and those prepared by the internal auditors, together with management’s responses.

Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board the inclusion of the audited consolidated financial statements in Altria’s 2018 Form 10-K.

Audit Committee:

George Muñoz, Chair
John T. Casteen III
Debra J. Kelly-Ennis
Kathryn B. McQuade
Mark E. Newman
Virginia E. Shanks

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AUDIT COMMITTEE MATTERS

Proposal
2
 
                          
Ratification of the Selection of Independent
Registered Public Accounting Firm
  Our Board recommends a vote FOR ratification of the selection of PricewaterhouseCoopers.
   
                        

As reflected in the Audit Committee Charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The Audit Committee has selected PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2019 and has directed that management submit such selection to shareholders for ratification at the 2019 Annual Meeting.

Shareholder ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm is not required by our By-Laws or otherwise. However, we are submitting the selection of PricewaterhouseCoopers to the shareholders for ratification as a matter of good corporate governance. If our shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers. Even if the selection is ratified, the Audit Committee in its discretion may appoint a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of Altria and our shareholders.

Representatives of PricewaterhouseCoopers are expected to be present at the meeting, will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.

Our Board recommends a vote FOR ratification of the selection of PricewaterhouseCoopers.

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Executive Compensation – Table of Contents

Compensation Committee Report 26

Compensation Discussion and Analysis 26

Compensation Tables and Other Matters 47

  Proposal 3   Non-Binding Advisory Vote to Approve the Compensation of Altria’s Named Executive Officers 60

Altria Group, Inc. – Proxy Statement           25


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Executive Compensation

Compensation Committee Report

Compensation Committee Report for the Year Ended December 31, 2018

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained on pages 26 through 46 of this Proxy Statement with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee:

W. Leo Kiely III, Chair
John T. Casteen III
Thomas F. Farrell II
Kathryn B. McQuade
Virginia E. Shanks

Compensation Discussion and Analysis

Introduction

In this section, we provide a detailed description of our executive compensation program, with a focus on the Compensation Committee’s decisions with respect to our NEOs:

Name Position during 2018
Howard A. Willard III       Chairman of the Board and CEO, Altria Group, Inc.
Martin J. Barrington Former Chairman of the Board, CEO and President, Altria Group, Inc.
William F. Gifford, Jr. Vice Chairman and Chief Financial Officer, Altria Group, Inc.
Murray R. Garnick Executive Vice President and General Counsel, Altria Group, Inc.
Craig A. Johnson President and Chief Executive Officer, Altria Group Distribution Company
Kevin C. Crosthwaite, Jr.
(“K.C. Crosthwaite”)
Senior Vice President and Chief Growth Officer, Altria Group, Inc.
James E. Dillard Former Senior Vice President, Research, Development and Sciences, Altria Group, Inc.

Mr. Barrington retired as Chairman of the Board, CEO and President effective May 17, 2018. Mr. Willard was elected Chairman of the Board and CEO effective May 17, 2018. Mr. Dillard retired as Senior Vice President, Research, Development and Sciences effective May 31, 2018.

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EXECUTIVE COMPENSATION

Overview

Compensation Philosophy

Our executive compensation program aligns with our Mission and Values, including the Mission goals to Invest in People and Create Substantial Value. We believe this requires:

clear alignment of the
interests of our executives
and shareholders
    clear articulation of
corporate and individual
performance goals
    a competitive, financially
disciplined executive
compensation program
that rewards past
success and creates the
appropriate incentives for
future conduct
    transparent measurement
against both corporate
and individual
performance goals

Financial Performance

Our business performance is a key factor in determining executive compensation. 2018 was a year of both business and CEO transition. We delivered business performance that met our financial goals and targets. However, the performance of Altria’s stock was below that of our peers and the general market, as reflected in the “2018 Business Highlights” section beginning on page ii. The following graphs summarize our one- and three-year performance against key financial measures:

Adjusted Diluted EPS (12/31/2015 - 12/31/2018) ($)          Dividend Rate (1) (8/25/2016 – 8/23/2018) ($)
(1) Compound annual growth rate (“CAGR”) based on 2015 adjusted diluted EPS of $2.80. (1) Annualized dividend based on quarterly dividend rate per share of Altria common stock declared in August of each year.
(2) CAGR based on the annualized dividend rate per share of Altria common stock of $2.26 that was declared in August 2015, with each August dividend similarly annualized. The dividend rate was also raised in March 2018 to $2.80.
 
2018 TSR (12/31/2017 – 12/31/2018) (%) Three-Year TSR (12/31/2015 - 12/31/2018) (%)
Source: Bloomberg Daily Return (December 31, 2017 – December 31, 2018) Source: Bloomberg Daily Return (December 31, 2015 – December 31, 2018)
Note:     Assumes reinvestment of dividends as of the ex-dividend date. Note:     Assumes reinvestment of dividends as of the ex-dividend date.

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EXECUTIVE COMPENSATION

Pay For Performance

The following graph illustrates the relationship between our CEOs’ total direct compensation (including annualized LTIP compensation) and our indexed TSR:

CEO Pay (1) vs. Indexed TSR (2)

(1) CEO pay is calculated using an annualized allocation of the LTIP award (based on actual payment for 2016 and target for 2017 and 2018). All other pay elements are based on the Summary Compensation Table values.
(2) Indexed TSR reflects a December 31, 2015 starting point (with a nominal value of 100) and represents the total growth (including dividends) from that date through each December 31.
(3) 2016 and 2017 represent Mr. Barrington’s total direct compensation as CEO. 2018 represents Mr. Willard’s total direct compensation, which was a mix of his total direct compensation as Executive Vice President and Chief Operating Officer (January 1 through May 16) and as Chairman and CEO (May 17 through December 31).

Say on Pay and Shareholder Engagement

                          

At the 2018 Annual
Meeting, over
94%
of the votes cast
approved our NEO
compensation on an
advisory basis.

We provide our shareholders with an annual advisory vote (“say on pay”) on the compensation of our NEOs. This vote is not binding on us, our Board or the Compensation Committee.

While the Committee acknowledges the historically strong shareholder support for our executive compensation program, it is also committed to regularly reviewing the program in the context of our compensation philosophy.

 
   
                                  

We periodically engage with large investors to gain their perspectives on our executive compensation program and corporate governance policies. Shareholder feedback has been generally positive, and no significant concerns have been raised.

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EXECUTIVE COMPENSATION

2018 Performance of NEOs

The Compensation Committee considered several factors in approving each element of 2018 compensation. For the 2018 Annual Incentive Award plan, the Committee primarily evaluated our financial and strategic performance, as described beginning on page 27. The Compensation Committee also considered the individual performance of each active NEO for purposes of approving salary increases, annual cash incentive award payments and equity awards. Executives receive variable elements of short- and long-term compensation only after the relevant performance period has ended and the Compensation Committee has assessed Altria’s actual performance and considered executive performance relative to stated goals. In addition, the Compensation Committee considers industry compensation market data and tally sheets for each of the NEOs that include their total cash and long-term compensation for the last three years.

The Compensation Committee concluded that our NEOs’ successes in achieving their performance goals contributed significantly to our overall 2018 performance. We discuss the 2018 performance of each NEO below.

 

Howard A. Willard III, Chairman and CEO
Key Responsibilities
Mr. Willard provided strategic leadership to our Board, the executive team and employees in a dynamic, competitive and highly regulated environment.

                      
2018 Achievements
Mr. Willard:
Drove execution of our strategy to maximize our core tobacco businesses while transforming the organization for future value creation;
Created long-term strategic options for new revenue and income growth through a minority investment in JUUL (the leading e-vapor business in the U.S.) and Cronos (a leading cannabinoid company based in Canada);
As the new Chairman and CEO, launched major initiatives to transform our company’s business, culture and people systems; and
Helped deliver significant earnings growth for Altria, evidenced by a 17.7% increase in adjusted diluted EPS growth over 2017 (bolstered by the effects of the Tax Cuts and Jobs Act of 2017).

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EXECUTIVE COMPENSATION

 

William F. Gifford, Jr., Vice Chairman and Chief Financial Officer
Key Responsibilities
Mr. Gifford led our Finance organization and provided executive oversight of our core tobacco operating companies and Philip Morris Capital Corporation. He also serves as one of our designated directors on the Board of Directors of Anheuser-Busch InBev SA/NV (“AB InBev”).

                      
2018 Achievements
Mr. Gifford:
Effectively managed the balance sheet; helped deliver adjusted diluted EPS growth of 17.7% (bolstered by the effects of the Tax Cuts and Jobs Act of 2017);
Oversaw the strategic investments in JUUL and Cronos;
Provided strategic oversight of PM USA’s initiatives to stabilize Marlboro market share versus fourth quarter 2017;
Oversaw the launch of Nat’s nationally in 2018; and
Led the development of a new cost reduction program expected to deliver approximately $575 million in annualized cost savings by the end of 2019.

 

Murray R. Garnick, Executive Vice President and General Counsel
Key Responsibilities
Mr. Garnick’s responsibilities included managing diverse regulatory and litigation challenges and efficiently deploying the resources of the Law and Regulation Departments to meet legal, regulatory and business requirements.

                      
2018 Achievements
Mr. Garnick:
Oversaw the preparation and filing of numerous applications with the FDA, including filing the modified risk tobacco product application for Copenhagen and numerous successful substantial equivalence applications for a range of our companies’ cigarette and smokeless tobacco products;
Oversaw legal strategy and support in connection with the JUUL and Cronos transactions;
Brought successful litigation against the FDA resulting in the FDA reversing its refusal to grant a marketing order for U.S. Smokeless Tobacco Company LLC’s (“USSTC”) mesh pouch product;
Proactively and efficiently managed Engle-progeny cases and managed other litigation threats, including the successful resolution of a case against USSTC; and
Managed matters, including litigation, related to the Master Settlement Agreement and previously settled state agreements.

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EXECUTIVE COMPENSATION

 

Craig A. Johnson, President and CEO, Altria Group Distribution Company (“AGDC”)
Key Responsibilities
Mr. Johnson’s responsibilities included providing sales and distribution services to our tobacco operating companies. Mr. Johnson retired effective March 1, 2019.

                      
2018 Achievements
Mr. Johnson:
Successfully supported the launch of Marlboro ICE nationally, achieving acceptance in 120,000 stores or 89% of target, and Nat’s in the western U.S., achieving acceptance in approximately 25,000 stores or 84% of target;
Successfully supported the sell-in of Altria’s Innovative Tobacco Products fixture space in approximately 42,000 stores nationally;
Successfully supported the implementation of Marlboro’s Loyalty Program in approximately 32,000 stores or 32% of Marlboro volume;
Enhanced retail visibility and product inventory for USSTC through installation of “Brand Zone” fixtures in approximately 16,000 stores; and
Installed an enhanced recruiting structure in AGDC to achieve greater impact with our talent pipeline and diversity and inclusion efforts.

 

K.C. Crosthwaite, Senior Vice President and Chief Growth Officer
Key Responsibilities
Mr. Crosthwaite’s responsibilities included identifying and pursuing Altria’s strategic and innovative product growth priorities across the entire tobacco landscape and adjacent product categories. He identified marketplace and adult tobacco consumer insights and translated them into strategies for product development, consumer engagement, future of commerce, and business development.

                      
2018 Achievements
Mr. Crosthwaite:
Led Altria in making a transformational strategy shift in our innovative tobacco product efforts to discontinue production and distribution of all Nu Mark LLC e-vapor products;
Led the team that negotiated our $12.8 billion investment in JUUL, representing a 35% economic interest, thereby taking an ownership position in the leading U.S. e-vapor company with significant exposure to international growth plans; and
Led the team that negotiated our agreement to acquire a 45% interest in Cronos, a leading global cannabinoid company, with a path to majority ownership.

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EXECUTIVE COMPENSATION

Executive Compensation Design

Principles

We strategically design our executive compensation program to promote our Mission.

 

Our Mission

Our Values

 
 

To own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products.

In pursuing our Mission, we remain focused on four goals:

Our Values guide our behavior as we pursue our Mission and our business strategies:

Integrity, Trust and Respect
Passion to Succeed
Executing with Quality
Driving Creativity into Everything We Do
Sharing with Others
 

Our executive compensation program includes multiple performance metrics to assess the efforts of all executives in pursuing our Mission and Values. Specifically, our program is designed to satisfy the following objectives:

promote pursuit of business strategies that create substantial growth and long-term value for shareholders and are executed with integrity;
reward quality execution by making a significant portion of our executives’ compensation dependent on the achievement by Altria of key financial and strategic goals and their individual performance;
align the interests of shareholders and executives through equity and cash performance-based long-term incentive awards, stock ownership and retention guidelines and anti-hedging and anti-pledging policies with respect to our stock;
grow our leadership advantage through our people and culture; and
promote internal fairness and a disciplined qualitative and quantitative assessment of performance.

The elements of our executive compensation program serve these objectives with the following design principles (as shown in the chart below):

a mix of fixed and at-risk variable performance-based compensation, with executives at higher levels having a higher proportion of variable compensation;
a mix of short- and long-term compensation to appropriately reward and motivate the achievement of both annual and long-term goals and objectives;
a mix of cash and equity compensation that seeks to discourage actions solely driven by our stock price to the detriment of strategic goals and to minimize the potentially dilutive nature of equity compensation on shareholder value; and
a mix of equity compensation consisting of RSU and PSU awards.

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EXECUTIVE COMPENSATION

2018 CEO and Other NEOs Pay Mix (1)
(1) Includes 2018 actual salary, actual award under the 2018 Annual Incentive Award plan, grant date fair value of long-term equity awards and annualized target cash award under the 2017 – 2019 LTIP.
(2) Represents Mr. Willard’s total direct compensation, which was a mix of his total direct compensation as Executive Vice President and Chief Operating Officer (January 1 through May 16) and as Chairman and CEO (May 17 through December 31).
(3) Includes the other NEOs who were employees as of December 31, 2018 (Messrs. Gifford, Garnick, Johnson and Crosthwaite).

Elements

The table below provides a brief side-by-side comparison of the elements of our 2018 executive compensation program.






Form of
Compensation
Performance
Period
Award Criteria Company Performance Alignment
Cash     

Ongoing

    

Individual performance

    
Cash Annual

Company and individual performance

Adjusted diluted EPS growth
Adjusted discretionary cash flow
Strategic initiatives
Cash

Three years; end-to-end cycles

Company and individual performance

Adjusted diluted EPS growth
Relative TSR
Strategic initiatives

RSUs / PSUs

Annual with rolling three-year vesting periods

Individual performance and advancement potential with additional payment criteria for PSUs based on company performance

Stock price appreciation for RSUs
Company performance (50% relative TSR / 50% adjusted diluted EPS growth) and stock price appreciation for PSUs

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EXECUTIVE COMPENSATION

The table below summarizes the elements and objectives of the 2018 executive compensation program for the NEOs. In addition, the general objective of each element is to attract and retain world-class leaders.

2018 Executive Compensation Program
  Element Summary Description Objective

Annual Compensation

Salary

Fixed cash compensation based on role at Altria.

Provide financial stability
Recognize individual role, experience, responsibility and performance
 

Annual Incentive Awards

Cash-based incentive plan based on prior year’s performance.

Recognize annual financial and strategic performance after it is delivered
Recognize annual individual performance after it is delivered
     

Long-Term Incentive Compensation

Equity Awards

RSU and PSU awards based on prior year’s individual performance and advancement potential, vesting after a three-year period. PSU payout amount tied to achievement of company performance measures.

Align NEOs’ interests with shareholders through company performance and stock ownership
Recognize individual performance after it is delivered and advancement potential
Build stock ownership
Retain talented leaders
 

Long-Term Incentive Plan

Cash-based incentive plan based on three-year financial and strategic goals.

Align NEOs’ interests with shareholders
Recognize long-term financial and strategic performance after it is delivered
Retain talented leaders
   

Post-Termination Benefits and Change in Control Payments

Defined Benefit Plans

Retirement plans providing for the continuation of a portion of compensation upon retirement or separation from service. Generally, employees hired prior to January 1, 2008 are eligible.

Provide opportunity for financial security in retirement
 

Defined Contribution Plans

Annual cash contribution based on a formula related to adjusted diluted EPS growth and, for employees not participating in a defined benefit plan, a supplemental contribution and matching contributions. Includes an Altria stock investment option.

Provide opportunity for financial security in retirement
Provide additional opportunity to build stock ownership

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EXECUTIVE COMPENSATION

   Element      Summary Description      Objective
Post-Termination Benefits and Change in Control Payments Change in Control Payments Payments to executives in connection with a defined change in the ownership of Altria. Change in control provisions are contained in the 2010 and 2015 Performance Incentive Plans.

Allow NEOs to focus on delivering shareholder value in a period of uncertainty
Allow NEOs to receive awards granted for periods of performance before a change in control
 
Termination Payments For certain types of involuntary separations, potential for severance benefits (including continuation of salary and health insurance based on years of service). Our NEOs are eligible for the same severance benefits as our other salaried employees.
Provide opportunity for protection upon an unexpected event
 
Perquisites For all NEOs, an Altria-paid executive physical and a leased vehicle (not accepted by the CEO). For the CEO, a home security system and, subject to an annual allowance, personal use of company aircraft.

Provide comprehensive annual preventive health screening
Provide security
 

Other Benefits Medical coverage, group life insurance and other welfare benefits generally available to all salaried employees.
Promote health and financial security

2018 Executive Compensation Program Decisions

Salary

The Compensation Committee considers a number of factors when reviewing and setting salaries for our NEOs, including each executive’s individual performance, level of responsibility and experience, the relationship between salaries paid to other Altria executives and the position of the executive’s salary within the applicable salary range. Additionally, the Compensation Committee compares the salaries of our NEOs to others holding comparable positions at Compensation Survey Group (“CSG”) companies. The Compensation Committee analyzes all these factors in the aggregate in determining NEO salaries.

Salaries are relevant in establishing annual and long-term incentive award targets and factor into retirement, group life insurance and certain other benefits available to all salaried employees. The Compensation Committee reviews salaries on an annual basis, and any adjustments generally are effective March 1.

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The 2018 salary ranges for our NEOs were as follows:

2018 Salary Range
Band       Minimum
($)
      Maximum
($)
A (Messrs. Barrington (through May 17, 2018) and Willard (from May 17, 2018)) 910,000 2,090,000
B (Messrs. Gifford, Garnick and Johnson) 480,000 1,100,000
C (Mr. Dillard (through May 31, 2018)) 381,700 877,900
D (Mr. Crosthwaite) 297,800 685,000

The Compensation Committee increased the salaries of our NEOs based on the criteria noted above as follows:

2018 Salary Changes
Name       2017
Salary
($)
      2018
Salary
($)
Howard A. Willard III (1) 874,000 1,250,000
Martin J. Barrington (2) 1,480,000 1,480,000
William F. Gifford, Jr. (3) 670,000 850,000
Murray R. Garnick 800,000 850,000
Craig A. Johnson 934,000 962,000
K.C. Crosthwaite (4) 375,000 420,000
James E. Dillard 627,000 642,000
(1) As a result of his election as Chairman and CEO effective May 17, 2018, Mr. Willard became a salary band A employee, and the Compensation Committee increased Mr. Willard’s salary from $900,000 to $1,250,000.
(2) In light of Mr. Barrington’s planned retirement, the Compensation Committee did not increase his salary in 2018.
(3) In connection with his election as Vice Chairman and CFO effective May 17, 2018, the Compensation Committee increased Mr. Gifford’s salary to $850,000, effective March 1, 2018.
(4) In connection with his election as Senior Vice President and Chief Growth Officer effective June 1, 2018, the Compensation Committee increased Mr. Crosthwaite’s salary from $393,000 to $420,000.

Annual Incentives

The Annual Incentive Award plan is a cash-based, pay-for-performance plan for salaried employees, including our NEOs. Participants have an annual award target based on salary band and expressed as a percentage of salary. Our benchmarking process establishes award targets, which are paid only after both business and individual results are assessed against targeted levels of performance. The Compensation Committee reviews and approves the targets annually for salary Band I and above employees. No individual is guaranteed an award.

The Compensation Committee reviews the financial and strategic performance of Altria, as well as the performance of each of our tobacco and wine businesses each year. The Compensation Committee has identified (1) adjusted diluted EPS growth and (2) adjusted discretionary cash flow as the key financial measures in determining awards under our Annual Incentive Award plan because these measures align with our long-term financial goals for Altria to:

grow adjusted diluted EPS at an average annual rate of 7% to 9%; and
maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS.

The Compensation Committee believes that the combination of these financial measures provides the best alignment between Altria’s business strategy and our shareholders’ interests.

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EXECUTIVE COMPENSATION

In determining Altria’s financial performance for 2018, the Compensation Committee considered the following:

Key Financial Measures (millions, except per share data)
      Rating
(from 0% - 130%)
      Weighting       Weighted
Result

Adjusted Diluted EPS Growth
(Rating Range)

75%

75.0%

Adjusted Discretionary Cash Flow (1)
(Rating Range)

25%

24.5%

 Rating for Financial Measures

100% (2)

(1) Adjusted discretionary cash flow is a non-GAAP financial measure. See Annex A to this Proxy Statement for information regarding non-GAAP financial measures and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures.
(2) Final weighted result is rounded to a whole number.

In addition to financial measures, the Compensation Committee evaluates Altria’s performance and the performance of each of our tobacco and wine businesses against key strategic initiatives that are designed to promote our long-term success, as well as any significant events during the year. The key strategic initiatives in 2018 included achievements such as:

brand-building initiatives;
regulatory initiatives;
advancing our innovation and harm reduction strategies; and
enhancing our talent system and our culture to improve diversity and inclusion.

Based on its overall review of financial measures and strategic initiatives, the Compensation Committee assigns an Annual Incentive Award business performance rating for Altria and each of our business segments. Performance at planned levels receives a rating of 100%. Depending on performance, Annual Incentive Award ratings for business performance can range from 0% to 130%. Performance against the financial measures reflected above resulted in a rating of 100% for 2018. After considering Altria’s positive performance against the 2018 strategic measures described above, but also Altria’s stock performance relative to our peer group, the S&P 500 Index and the S&P Food, Beverage & Tobacco Index, the Committee made no further adjustments and assigned an overall Annual Incentive Award business performance rating of 100%. The Committee used this rating, together with individual performance (see “2018 Performance of NEOs” on page 29), in determining the 2018 awards below. These awards are generally lower than 2017 due to the lower business performance rating of 100% as compared to 110% for 2017. The following formula is the basis for determining awards under the 2018 Annual Incentive Award plan:

Salary x

Target
(% of salary)

x Business
Performance
Rating
x Individual
Performance
Factor
= Annual
Incentive
Award

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2018 Annual Incentive Award Target Percentages, Award Ranges and Actual Awards
Name     Band     Salary
($)
    Target
(% of
salary)
    2018
Business
Perf.
Rating
(0 - 130%)
    Individual
Performance
Factor Range (1)
(% of target)
    Award Range
for 2018
Performance
($)
    Actual
Award
for 2018
Performance
($)
Minimum       Maximum
Howard A. Willard III A 1,250,000    150    100 85 175 1,593,750 - 3,281,250 2,250,000
Martin J. Barrington (2) A 1,480,000 150 833,300
William F. Gifford, Jr. B 850,000 95 100 85 155 686,375 - 1,251,625 928,600
Murray R. Garnick B 850,000 95 100 85 155 686,375 - 1,251,625 928,600
Craig A. Johnson B 962,000 95 100 85 155 776,815 - 1,416,545 1,051,000
K.C. Crosthwaite D 420,000 60 100 85 155 214,200 - 390,600 350,000
James E. Dillard (3) C 642,000 80 212,500
(1) The individual performance ranges are stated as a percentage of target and are based on individual performance between the third and fifth level on a five-point scale.
(2) Mr. Barrington received a prorated award (137 of 365 days) based on target business and individual performance in accordance with the terms of the plan.
(3) Mr. Dillard received a prorated award (151 of 365 days) based on target business and individual performance in accordance with the terms of the plan.

Long-Term Incentives

We have historically awarded long-term incentives to executive officers through a combination of equity awards and performance-based long-term cash incentive awards. Executives received a mix of 60% RSUs and 40% PSUs. Together, PSUs and the LTIP deliver over 60% of our NEOs’ target long-term incentives as performance-based, with the remainder comprised of time-based RSUs.

Target Long-Term Incentive Mix

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EXECUTIVE COMPENSATION

Long-Term Incentives: Equity Awards

Equity awards focus executives on increasing long-term shareholder value, enhance executive retention and promote executive stock ownership. Awards recognize prior year performance and advancement potential. The awards generally vest three years after the date of the award, subject to earlier vesting on death, disability or retirement on or after age 65 or in connection with a change in control. This vesting period is intended to retain and motivate executives, while promoting long-term performance. PSUs only pay out if specific company performance measures are met. The number of PSUs granted to an executive represents a target number of shares; the actual share payout can range from 0% to 130% of the target based on company performance against specified measures. For RSUs, recipients receive cash dividend equivalents during the vesting period, but for PSUs, dividends are accrued and paid out at the end of the performance period based on the final number of PSUs that vest, if any. The Compensation Committee annually reviews equity award targets against competitive data.

From time to time, the Compensation Committee grants special equity awards to select executives in key roles or with high advancement potential. These special awards generally have a longer vesting period. For example, in 2018, the Compensation Committee granted special equity awards with a five-year vesting period to Messrs. Willard, Gifford, Garnick and Crosthwaite.

The Compensation Committee grants equity awards to our CEO (salary band A) based on its assessment of Altria’s performance and competitive data, and its review of our CEO’s individual performance. For our NEOs other than our CEO, the Compensation Committee reviews equity award scenarios based on different advancement potential ratings and CSG benchmarking data to establish an appropriate range of awards. The awards are generally granted on the date of Compensation Committee approval. No individual is guaranteed an award.

                                                 
 
2018 Equity Award Highlights
60% RSUs / 40% PSUs
Vesting period of three years (generally)
RSUs: Cash dividend equivalent payments
PSUs: Dividend equivalents accrue until end of performance period
NEO awards based on:
Executive’s individual performance in year prior to the grant;
Executive’s advancement potential;
Company performance for PSUs;
Compensation Committee discretion; and
Competitive benchmarking
Number of RSUs and PSUs awarded is based on fair market value of our stock on the date of the grant
Strong stock holding requirements
     
       
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                               

The targets and actual equity awards for our NEOs were as follows:

2018 Equity Awards

Name Band Equity
Target
($)
Equity
Award Range (1)
($)
Actual Equity
Award (1) (2)
($)
        Special Grant (2)
($)
Howard A. Willard III (3)         B         1,750,000         1,050,000  -  2,625,000         2,250,035 4,500,035
Martin J. Barrington (4) A 5,400,000
William F. Gifford, Jr. B 1,750,000 1,050,000 - 2,625,000 2,250,035 3,500,007
Murray R. Garnick B 1,750,000 1,050,000 - 2,625,000 2,000,068 1,500,047
Craig A. Johnson B 1,750,000 1,050,000 - 2,625,000 1,750,035
K.C. Crosthwaite D 520,000 312,000 - 780,000 650,089 1,500,047
James E. Dillard C 990,000 594,000 - 1,485,000 800,109
(1) Ranges and actual awards are a function of individual performance and, for our NEOs other than our CEO, advancement potential. No executive is guaranteed an award, and all awards are capped under the 2015 Performance Incentive Plan (“2015 PIP”).

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(2) The amount shown is the aggregate grant date fair value of stock awards determined pursuant to Financial Accounting Standards Board (“FASB”) Codification Topic 718. The number of RSUs and PSUs awarded in 2018, together with the grant date values and vesting terms of the RSUs and the PSUs awarded, is disclosed in the Grants of Plan-Based Awards during 2018 table on page 49.
(3) Mr. Willard’s January 2018 annual equity award reflects his position as a salary band B employee at the time of the grant, which was prior to his election as Chairman and CEO (salary band A) effective May 17, 2018. In connection with his election, Mr. Willard also received a special grant of RSUs and PSUs.
(4) In light of Mr. Barrington’s planned retirement, he did not receive an equity award.

Financial Performance Measures for 2018 PSUs

The Compensation Committee designated (1) adjusted diluted EPS growth and (2) relative TSR (vs. the companies that comprise the S&P 500 Food, Beverage & Tobacco Index as of January 1 of the performance period and remain in the Index as of December 31 of the end of the three-year performance period) as the performance measures for the 2018 PSU grants because these measures link to our long-term financial goals of our three-year plan:

growing adjusted diluted EPS over the long term in accordance with our three-year plan; and
maintaining a dividend payout ratio target of approximately 80% of our adjusted diluted EPS.

These measures are intended to focus executives on achieving results that contribute to creating long-term shareholder value. The score for each financial measure determines the number of shares payable under the PSUs and may not exceed 130% of target. The Compensation Committee believes that the combination of these measures provides the best alignment between Altria’s business strategy and our shareholders’ interests.

Long-Term Incentives: 2017 – 2019 Long-Term Incentive Plan Awards

The LTIP is a long-term cash performance plan that uses a three-year, end-to-end performance cycle, an approach consistent with our long-term strategic planning process. At the beginning of each three-year cycle, the Compensation Committee approves long-term financial and strategic performance goals that can only be measured effectively after completion of the cycle. Awards are payable in cash after the end of each three-year cycle, based on an assessment of actual performance during the entire award cycle. Each executive has an award target based on their salary band, expressed as a percentage of each year-end salary over the three-year cycle. The Compensation Committee retains the discretion to adjust awards upward or downward, and no individual is guaranteed an award.
                          
LTIP Highlights
Three-year, end-to-end performance cycle
Awards based on our performance against long-term financial and strategic goals and individual performance
      
      
      
      
               

Although the Compensation Committee considers our executives’ earnings opportunity under the LTIP when setting compensation each year, those opportunities remain at risk until the end of the three-year performance cycle.

The Compensation Committee periodically considers alternative LTIP design approaches, such as overlapping three-year cycles (with a new three-year cycle beginning each year), resulting in annual payouts versus payouts every three years. Although such an approach would result in less fluctuation in the annual compensation of executives, the Compensation Committee believes that reducing fluctuations is outweighed by the clarity of long-term performance incentives and the retention value of end-to-end performance cycles.

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EXECUTIVE COMPENSATION

The 2017 – 2019 LTIP performance cycle will conclude on December 31, 2019. This performance cycle will reward achievement of key financial and strategic performance measures (each weighted 50%) intended to create substantial value for shareholders. The financial measures for 2017 – 2019, which have a combined weighting of 50%, are:

Relative 2017 – 2019 TSR versus the S&P 500 Food, Beverage & Tobacco Index (defined as companies that comprise the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2017 and remain in the Index as of December 31, 2019); and
Three-Year Adjusted Diluted EPS CAGR.

Specific details regarding the strategic performance initiatives were defined for executives, but are not disclosed publicly before the end of the cycle due to their competitively sensitive nature. We will disclose relevant performance metrics for the 2017 – 2019 LTIP performance cycle, as appropriate, after the compensation decisions for the then-current NEOs have been made.

Following the conclusion of the 2017 – 2019 LTIP performance cycle, the Compensation Committee will assess Altria’s performance on each of the financial and strategic measures to determine the final LTIP rating, which can range from 0% to 130%. The Compensation Committee, with respect to the CEO, and the CEO, with respect to the other NEOs, will also assess the individual performance of each executive to determine the executive’s individual performance factor, which can range from 0% - 150%. The final LTIP award is then determined based on the following formula:

Year-end
Salaries for
Each Plan Year
x Award Target
(prorated for
time in
salary band)
x Business
Performance
Rating
x Individual
Performance
Factor
= Three-Year
LTIP Award

The award target percentages, business performance rating range and individual performance factor ranges for executives in salary bands A – D for the 2017 – 2019 LTIP performance cycle are:

Band         Individual
Award
Target
(1)
(%)
        Business
Performance
Rating
(%)
        Individual
Performance
Factor
(%)
A 250 0 - 130 0 - 150
B 140 0 - 130 0 - 150
C 105 0 - 130 0 - 150
D 70 0 - 130 0 - 150
(1) Individual award target percentages are applied to each year-end base salary over the three-year performance cycle.

Perquisites

The Compensation Committee believes that a competitive executive compensation package includes reasonable perquisites that supplement our retention efforts. The perquisites we provided to our NEOs in 2018 are set forth in the All Other Compensation table on page 48. In addition to these perquisites, our NEOs received the same benefits that were available to our salaried employees generally. Mr. Willard is required to use our aircraft for all air travel for purposes of security. The Compensation Committee approved an allowance of $150,000 for the period from May 17, 2018 to December 31, 2018 for Mr. Willard’s personal aircraft usage and an annual allowance of $200,000 thereafter. The allowance and Mr. Willard’s obligation to pay for personal use of the aircraft above the allowance are reflected in a time sharing agreement with Altria. The Compensation Committee considers the potential value of personal aircraft usage in determining the other components of Mr. Willard’s total compensation. Upon Mr. Willard’s election to Chairman and CEO, he ceased accepting as a perquisite the company-paid automobile.

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Post-Termination Benefits and Change in Control Payments

We provide post-termination benefits to our NEOs, including retirement benefits and termination payments if applicable, as well as payments in connection with a change in control.

Retirement Benefits. Our NEOs participate in certain qualified and non-qualified retirement plans, which we believe promote executive retention and provide the opportunity for financial security in retirement. These retirement benefits are discussed in more detail in the narrative following the Pension Benefits table (pages 52 to 53) and the Non-Qualified Deferred Compensation table (page 54).
Change in Control Payments. Our 2015 PIP includes a double-trigger provision for vesting or payment of annual incentive awards, equity awards and long-term incentive cash awards, provided that the successor entity continues or assumes the plans and awards or replaces them with substantially similar awards. In contrast, our 2010 Performance Incentive Plan (“2010 PIP”), under which a small number of 2015 stock awards remained unvested at the end of 2018, provides for the vesting and payment of certain elements of compensation immediately upon a change in control. The details of these provisions are discussed in the “Payments upon Change in Control or Termination of Employment” section (pages 55 to 57).
Termination Payments. The Severance Pay Plan for Salaried Employees, which is generally applicable to all salaried employees, provides an opportunity for financial protection against the unexpected event of an involuntary termination of employment. The details of this plan are discussed in the “Payments upon Change in Control or Termination of Employment” section (pages 55 to 57).

Decision-Making Process

Role of Compensation Committee

                          
The Compensation Committee determines and approves CEO compensation and reviews and approves the compensation of the other executive officers.       
      
      
      
               

Reviews and approves our overall executive compensation philosophy and design.
Reviews and approves corporate goals and objectives relevant to the compensation of our CEO, evaluates the performance of our CEO in light of these goals and objectives and determines and approves the compensation of our CEO based on this evaluation.
Reviews and approves the compensation of all executive officers.
Makes recommendations to our Board with respect to incentive compensation plans and equity-based plans, administers and makes awards under such plans and reviews the cumulative effect of its actions.
Monitors compliance by executives with our stock holding requirement and stock ownership guidelines.
Monitors risks related to the design of our compensation program.
Determines ratings for Altria’s performance for the annual and long-term cash incentive awards formulas.
Reviews survey data provided by our independent compensation consultant relating to our CSG.

Committee Compensation Decisions

Each year, our CEO presents to the Compensation Committee compensation recommendations for our executive officers other than himself. The Committee reviews and discusses these recommendations with our CEO and, exercising its discretion, makes the final decision with respect to the compensation of these individuals.

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Committee Establishment of CEO Performance Goals and CEO Performance Evaluation

At the beginning of each year, our CEO proposes annual performance goals to the Compensation Committee for its consideration. The Committee establishes final goals and reviews them with our Board. Following the end of the year, the Committee discusses with the CEO his performance against the goals established the prior year and then, in its sole discretion, determines the CEO’s compensation. Other than discussing his prior year performance with the Committee, our CEO has no role in setting his own compensation.

Role of Consultants

                          
As part of our annual compensation process, management engages Hewitt Associates, LLC d/b/a Aon Hewitt (“Aon Hewitt”). The Compensation Committee considers data provided from Aon Hewitt in its deliberations.       
      
      
      
               

Conducts a survey of CSG companies. The survey collects compensation data and competitive practices.
Based on parameters developed by management, provides competitive compensation information focused on chief executive officer pay primarily from public filings, including annual proxy filings, by companies within our CSG.
Provides background information on companies as reference for evaluating our CSG.
Reviews our risk assessment process with respect to our executive compensation program.

Aon Hewitt provides neither advice nor recommendations on the form or amount of our executive or director compensation, nor does Aon Hewitt attend any Board or Committee meetings.

Benchmarking

Compensation Strategy

We design our executive compensation program to deliver total compensation (salary, annual and long-term cash awards, equity awards and benefits) upon attainment of performance targets at levels between the 50th and the 75th percentiles of compensation paid to executives in the CSG. We believe that this approach has contributed to our industry leadership position and is important to attract and retain world-class leaders to pursue our Mission, particularly given the unique challenges of our industry. Actual total compensation can exceed the 75th percentile or be below the 50th percentile depending on business and individual performance in relation to performance targets.

Compensation Survey Group

We annually compare our executive compensation program with the programs of the companies in the CSG. The purpose of this annual review is to assure that our executive compensation program supports our ability to attract and retain executive talent. When determining the companies to include in the CSG, the Compensation Committee identifies companies that have all or most of the following characteristics:

revenues generally between $5 to $75 billion;
market capitalization of at least $10 billion;
primarily focused on consumer products;
limited business segments;
businesses generally focused within the United States; and
compete with us for executive talent.

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Based on these criteria, the Compensation Committee included the following companies in the 2018 CSG and used this list for compensation-related decisions for 2018. The list is sorted by market capitalization as of December 31, 2018.

Compensation Survey Group Companies       Market
Capitalization (1)
($B)
The Coca-Cola Company 202
Merck & Co., Inc. 199
PepsiCo, Inc. 156
McDonald’s Corporation 137
Eli Lilly and Company 123
3M Company 111
Philip Morris International Inc. 104
Altria 93
Bristol-Myers Squibb Company 85
Mondelēz International, Inc. 58
The Kraft Heinz Company 52
Median 52
Colgate-Palmolive Company 52
Kimberly-Clark Corporation 39
Keurig Dr Pepper Inc. (2) 36
General Mills, Inc. 23
The Hershey Company 22
Kellogg Company 20
Molson Coors Brewing Company 12
Conagra Brands, Inc. 10
Campbell Soup Company 10
(1) Market capitalization is calculated using shares outstanding as of the most recent public disclosure as of January 2, 2019 per Bloomberg multiplied by the closing stock price as of December 31, 2018.
(2) Keurig Green Mountain merged with Dr Pepper Snapple effective July 9, 2018.

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Risk Assessment

A cross-functional team of executives in the Human Resources & Compliance, Law, Corporate Audit and Finance departments reviewed our compensation program (executive and non-executive) to identify features that could encourage excessive risk-taking by program participants and to assess the potential of such risks to have a material adverse effect on Altria. Management requested that its external compensation consultant, Aon Hewitt, review this risk assessment process to confirm consistency with prevailing best practices. Aon Hewitt’s review focused on features generally recognized as potentially encouraging excessive risk-taking, features of our programs that mitigate risk and management’s assessment of those features.

After reviewing management’s assessment, the Compensation Committee believes that neither the compensation program’s design nor the individual elements of executive compensation encourage employees, including our NEOs, to take unnecessary or excessive risks. The executive compensation program also incorporates risk-mitigating features such as those shown in the chart on the right, which the Compensation Committee considered as part of its assessment. We believe that any risks arising from our compensation policies and practices are not likely to have a material adverse effect on Altria.

                                     
 
Risk-Mitigating Features
Appropriate compensation mix of fixed versus at-risk variable pay, annual versus long-term pay, cash versus equity and performance-based versus non-performance-based pay
Multiple objective performance factors used for annual and long-term cash incentive awards, coupled with the Compensation Committee’s discretion to approve awards at lower than target
Caps on annual and long-term incentive plan formulas
Peer company benchmarking
Significant stock ownership, holding requirements and anti-hedging/anti-pledging policies
A “clawback” policy providing for the adjustment or recovery of executive compensation upon the restatement of our financial statements
Individual performance assessments that emphasize behavior consistent with our Mission and Values
     
       
   
 
 
 
 
   
       
       
                         


Other Considerations

Stock Ownership and Holding Requirements and Prohibition on Hedging and Pledging

The Compensation Committee has established stock ownership requirements under which executives are expected to hold our common stock until their termination of employment in an amount equal to a multiple of salary, as determined by their salary band. If the stock price declines, an executive may satisfy the requirement by holding a fixed number of shares based on the stock price at the beginning of the executive’s acquisition period. The Compensation Committee set the requirements as 12 times base salary for salary band A (CEO), six times base salary for salary band B, five times for salary band C and four times for salary band D employees. In addition, we have a stock holding requirement that prohibits executive officers from selling shares received as compensation until they meet their stock ownership requirement.

Stock ownership includes shares held as RSUs and PSUs (at target amount). We expect executives to meet their ownership requirement within five years of becoming subject to the requirement (or three years from a subsequent promotion date that results in an increased ownership requirement). As of December 31, 2018, all our NEOs exceeded their stock ownership requirements.

We have policies prohibiting our NEOs from engaging in hedging and pledging activities with respect to our shares.

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“Clawback” Policy Regarding the Adjustment or Recovery of Compensation

We have a “clawback” policy providing for the adjustment or recovery of compensation in certain circumstances. If our Board or an appropriate committee of our Board determines that, as a result of a restatement of our financial statements, an executive received more compensation than would have been paid absent the incorrect financial statements, our Board or the Compensation Committee, in its discretion, will take such action as it deems necessary or appropriate to address the events that gave rise to the restatement and to prevent its recurrence. Such action may include, to the extent permitted by applicable law, in appropriate cases, requiring partial or full reimbursement of any bonus or other incentive compensation paid to the executive, causing the partial or full cancellation of RSUs or PSUs, adjusting the future compensation of such executive and dismissing or taking legal action against the executive, in each case as our Board or the Compensation Committee determines to be in the best interests of Altria and our shareholders. Our RSU and PSU award agreements also include “clawback” provisions.

Tax and Accounting Considerations

In addition to our executive compensation objectives and design principles, we consider tax and accounting treatment when designing and administering our compensation programs. One such consideration is Internal Revenue Code Section 162(m), which limits our ability to deduct compensation paid to each covered officer for tax purposes to $1.0 million annually. Section 162(m) was amended and expanded under the federal tax bill enacted at the end of 2017.

For 2018 and subsequent years, covered officers include the principal executive officer, principal financial officer and next three highest paid named executive officers. Compensation paid in 2018 and later years will generally be subject to the deduction limits of Section 162(m), without an exception for performance-based compensation. This includes annual and long-term incentive awards paid and equity awards granted in 2018 and later years.

Although the Compensation Committee considers tax deductibility in making its compensation program decisions, the Compensation Committee’s primary consideration is whether the compensation program promotes our Mission and aligns the interests of executives with those of our shareholders.

Compensation Committee Interlocks and Insider Participation

During 2018, none of our executive officers served on the board of directors or compensation committee of another entity one or more of whose executive officers served as a member of our Board or the Compensation Committee. No member of the Compensation Committee at any time during 2018 or at any other time had any relationship with us that would be required to be disclosed as a related person transaction.

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EXECUTIVE COMPENSATION

Compensation Tables and Other Matters

Summary Compensation Table

The following table provides the compensation information of our NEOs for 2018, 2017 and 2016.

Non-Equity
Incentive Plans
Name and Principal
Position
   Year    Salary
($)
   Stock Awards
Grant Value (1)
($)
   Annual
Incentive
Plan
($)
   Long-Term
Incentive
Plan (2)
($)
   Change in
Pension
Value (3)
($)
   All Other
Compensation (4)
($)
   Total
($)

Howard A. Willard III,
Chairman and Chief
Executive Officer,
Altria Group, Inc.

2018       1,113,201             6,750,070           2,250,000                 1,192,673           267,755       11,573,699
2017 868,333 2,250,078 1,165,000 1,746,506 99,599 6,129,516
2016 833,333 1,700,038 1,300,000 5,572,800 1,400,173 120,080 10,926,424
 

Martin J. Barrington,
Former Chairman,
Chief Executive
Officer and President,
Altria Group, Inc.

2018 684,816 833,300 1,505,621 175,665 3,199,402
2017 1,470,000 6,500,104 3,700,000 3,705,592 327,481 15,703,177
2016 1,408,333 6,500,010 3,900,000 12,060,000 3,363,075 342,148 27,573,566
 
 

William F. Gifford, Jr.,
Vice Chairman and
Chief Financial Officer,
Altria Group, Inc.

2018 820,000 5,750,042 928,600 381 102,662 7,601,685
2017 666,167 2,250,078 910,000 1,379,892 87,482 5,293,619
2016 640,833 1,700,038 950,000 3,700,600 879,815 96,713 7,967,999
 

Murray R. Garnick,
Executive Vice President
and General Counsel,
Altria Group, Inc.

2018 845,833 3,500,115 928,600 150,929 5,425,477
2017 774,133 1,237,603 910,000 259,228 3,180,964
 
 

Craig A. Johnson,
President and
Chief Executive
Officer, Altria Group
Distribution Company

2018 957,333 1,750,035 1,051,000 327,597 126,978 4,212,943
2017 929,500 1,750,037 1,142,000 1,128,270 119,483 5,069,290
2016 901,667 1,275,058 1,219,000 6,331,200 348,405 132,544 10,207,874
 

K.C. Crosthwaite,
Senior Vice President and
Chief Growth Officer,
Altria Group, Inc.

2018 405,750 2,150,136 350,000 48,723 67,038 3,021,647

James E. Dillard,
Former Senior Vice
President, Research,
Development and
Sciences, Altria Group, Inc.

2018 302,038 800,109 212,500 4,075,206 5,389,853
(1) The amount shown is the aggregate grant date fair value of stock awards determined pursuant to FASB Codification Topic 718. The number of RSUs and PSUs awarded in 2018, together with their grant date values and vesting terms, is disclosed in the Grants of Plan-Based Awards during 2018 table on page 49. The assumptions we used in calculating the grant date fair values of the RSUs and the PSUs awarded in 2018 are described in Note 12 “Stock Plans” to our consolidated financial statements in the 2018 Form 10-K. The table below provides the grant date fair value of the PSUs awarded in 2018 for each of our NEOs assuming the maximum performance level is achieved.
   Howard A.
Willard III
($)
      William F.
Gifford, Jr.
($)
      Murray R.
Garnick
($)
      Craig A.
Johnson
($)
      K.C.
Crosthwaite
($)
      James E.
Dillard
($)
3,509,959 1,169,982 1,039,999 909,948 337,983 416,067
   Under the terms of the applicable award agreement, Mr. Dillard forfeited the 2018 equity award reflected above upon his retirement effective May 31, 2018.

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(2) The LTIP uses three-year, end-to-end performance cycles. We pay executives in a lump sum cash award only after the end of the three-year performance cycle, based on an assessment of overall corporate and individual performance during the entire award cycle. End-to-end performance cycles result in LTIP compensation shown in this column for 2016 only, and not for 2017 or 2018.
The table below reflects the target 2017 and 2018 allocation of the 2017 – 2019 LTIP performance cycle, which will conclude on December 31, 2019. The 2018 allocations for Messrs. Barrington and Dillard are prorated as a result of their 2018 retirements. These target amounts will be adjusted based on actual business and individual performance at the end of the three-year performance cycle. There is no guarantee of any payment under the plan.
   Year       Howard A.
Willard III
($)
      Martin J.
Barrington
($)
      William F.
Gifford, Jr.
($)
      Murray R.
Garnick
($)
      Craig A.
Johnson
($)
      K.C.
Crosthwaite
($)
      James E.
Dillard
($)
2018 2,612,700 1,388,800 1,190,000 1,190,000 1,346,800 294,000 278,900
2017 1,223,600 3,700,000 938,000 981,151 1,307,600 221,500 658,400
(3) The amounts show the change in the present value of each NEO’s pension benefits for each year from December 31 of the prior year to December 31 of the applicable year. The amount shown for Mr. Barrington for 2018 represents the change in present value of his pension benefits from December 31, 2017 to May 17, 2018, his date of retirement. The change in 2018 was due to a variety of factors, including growth in benefit due to additional pay and service, passage of time and a change in the discount rate and mortality assumptions. Mr. Garnick was hired after January 1, 2008 and, therefore, is not covered under our pension plans. Mr. Dillard’s pension value decreased $33,419 during 2018.
(4) Details of other compensation for each of our NEOs appear in the All Other Compensation table shown below.

All Other Compensation

Name       Year       Allocation to
Defined
Contribution
Plans (a)
($)
      Personal
Use of
Company
Aircraft (b)
($)
      Car
Expenses (c)
($)
      Executive
Physicals
($)
      Other (d)
($)
      Total
($)
Howard A. Willard III 2018     111,320         150,000         3,055     3,300 80 267,755
2017 86,833 12,766 99,599
2016 100,000 16,780 3,300 120,080
Martin J. Barrington 2018 68,482 82,885 24,298 175,665
2017 147,000 179,903 578 327,481
2016 169,000 172,593 555 342,148
William F. Gifford, Jr. 2018 82,000 17,062 3,600 102,662
2017 66,617 17,565 3,300 87,482
2016 76,900 16,513 3,300 96,713
Murray R. Garnick 2018 130,667 20,262 150,929
2017 124,220 19,742 3,300 111,966 259,228
Craig A. Johnson 2018 95,733 27,945 3,300 126,978
2017 92,950 23,233 3,300 119,483
2016 108,200 21,044 3,300 132,544
K.C. Crosthwaite 2018 40,575 23,163 3,300 67,038
James E. Dillard 2018 54,367 22,975 3,997,864 4,075,206
(a) Amounts represent allocations to tax-qualified and non-qualified supplemental defined contribution plans.
(b) Personal use of our aircraft reflects incremental costs, including trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hourly maintenance contracts, hangar or aircraft parking, fuel (based on the average monthly cost of fuel per hour flown) and other smaller variable costs. For purposes of calculating incremental costs, we include the incremental costs of any deadhead flights, or portions thereof, made in connection with personal travel. Fixed costs incurred in any event to operate our aircraft (e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips and flight crew salaries) are not included. Mr. Willard pays his own taxes on imputed taxable income resulting from personal use of our aircraft, as did Mr. Barrington during his employment with Altria.
(c) Car expenses include the annual cost (except for Mr. Willard who ceased accepting this benefit in May 2018) of providing a leased vehicle and operating expenses, including insurance, maintenance and repairs. Executives pay their own taxes on imputed taxable income resulting from personal use of leased vehicles.
(d) For Mr. Willard, this amount reflects security expenses. For Mr. Barrington, this amount includes security expenses and a tax gross-up of $24,145 related to $29,392 of costs incurred through the use of our aircraft as one of our representatives on the Board of Directors of AB InBev. The amount for Mr. Dillard represents payments made in connection with his mutually agreed-upon retirement, including $374,500 in severance payments and cash payments of $3,623,364 in lieu of forfeited equity awards based on the average of the closing prices of Altria common stock for the 20 trading days ending on May 31, 2018.

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Grants of Plan-Based Awards during 2018

Estimated Possible 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)
(#)
Grant Date
Fair Value
of Stock
Awards
($)
Name Grant Date    Threshold
($)
   Target
($)
   Maximum
($)
   Threshold
(#)
   Target
(#)
   Maximum
(#)
     
Howard A. Willard III 2018     1,875,000     10,000,000                                        
1/30/2018 13,405  (a) 17,426  (a) 900,012  (4)
1/30/2018 19,351  (a) 1,350,023  (5)
5/17/2018 37,106  (b) 48,237  (b) 1,800,012  (4)
5/17/2018 48,825  (b) 2,700,023  (5)
Martin J. Barrington (6) 2018 2,220,000 10,000,000
William F. Gifford, Jr. 2018 807,500 10,000,000
1/30/2018 13,405  (a) 17,426  (a) 900,012  (4)
1/30/2018 19,351  (a) 1,350,023  (5)
1/31/2018 49,847  (c) 3,500,007  (5)
Murray R. Garnick 2018 807,500 10,000,000
1/30/2018 11,916  (a) 15,490  (a) 800,040  (4)
1/30/2018 17,201  (a) 1,200,028  (5)
10/23/2018 24,391  (d) 1,500,047  (5)
Craig A. Johnson 2018 913,900 10,000,000
1/30/2018 10,426  (a) 13,553  (a) 700,002  (4)
1/30/2018 15,051  (a) 1,050,033  (5)
K.C. Crosthwaite 2018 252,000 10,000,000
1/30/2018 3,873  (a) 5,034  (a) 260,033  (4)
1/30/2018 5,591  (a) 390,056  (5)
10/23/2018 24,391  (d) 1,500,047  (5)
James E. Dillard 2018 513,600 10,000,000
1/30/2018 4,767  (c) 6,197  (c) 320,056  (4)
1/30/2018 6,881  (e) 480,053  (5)
(1) Reflects the target and maximum awards under the 2018 Annual Incentive Award plan. Actual awards paid under the 2018 Annual Incentive Award plan are shown in the “Annual Incentive Plan” column of the Summary Compensation Table. The maximum represents the maximum permitted under the 2015 PIP.
(2) Reflects target and maximum PSUs granted to our NEOs. The actual number of units that vest will range between 0% and 130% of target, depending on actual performance during the performance period. Holders of PSUs will accrue dividend equivalents during the performance period, which will be paid at the end of the performance period on PSUs that vest.
a. These grants will vest on February 11, 2021.
   b. This special grant has an additional two-year time-based vesting period ending June 1, 2023.
c. Under the terms of the 2015 PIP, Mr. Dillard forfeited this grant upon his retirement effective May 31, 2018.
(3) Reflects RSUs granted to our NEOs. Holders of RSUs receive cash dividend equivalents paid quarterly during the vesting period.
a. These grants will vest on February 11, 2021.
   b. This special grant will vest on June 1, 2023.
c. This special grant will vest on February 9, 2023.
d. These special grants will vest on October 30, 2023.
e. Under the terms of the 2015 PIP, Mr. Dillard forfeited this grant upon his retirement effective May 31, 2018.
(4) Reflects the grant date fair value of the target PSUs using a grant date fair value of $67.14 for the January 30, 2018 grants and $48.51 for the May 17, 2018 grant. The grant date fair values were determined by adding 50% of the RSU grant date fair value to 50% of the TSR fair value. The TSR fair values were calculated by multiplying the RSU grant date fair value by a Monte Carlo simulation fair value factor of 92.47% for January 30, 2018 grants and 75.43% for the May 17, 2018 grant.
(5) Reflects the grant date fair value of the RSUs using a grant date fair value of $69.765 for the January 30, 2018 grants, $70.215 for the January 31, 2018 grant, $55.30 for the May 17, 2018 grant and $61.50 for the October 23, 2018 grants. The RSU fair values were calculated as the average of the high and low trading prices of Altria common stock on the grant date.
(6) In light of Mr. Barrington’s planned retirement, he did not receive any equity awards in 2018.

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Outstanding Equity Awards as of December 31, 2018

Stock Awards
RSUs    PSUs
Name (1)    Grant
Date
   Vesting
Date
   Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
   Market Value
of Shares or
Units of Stock
That Have Not
Vested (2)
($)
Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Other Rights that
Have Not Vested (3)
(#)
   Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights that
Have Not Vested (2)
($)
Howard A. Willard III 5/17/2018 6/1/2023       48,825             2,411,467               37,106              1,832,665     
1/30/2018 2/11/2021 19,351 955,746 13,405 662,073
1/30/2017 2/11/2020 18,987 937,768 12,786 631,501
1/26/2016 2/7/2019 28,802 1,422,531
1/28/2015 2/11/2020 27,500 1,358,225
William F. Gifford, Jr. 1/31/2018 2/9/2023 49,847 2,461,943
1/30/2018 2/11/2021 19,351 955,746 13,405 662,073
1/30/2017 2/11/2020 18,987 937,768 12,786 631,501
1/26/2016 2/7/2019 28,802 1,422,531
1/28/2015 2/11/2020 27,500 1,358,225
Murray R. Garnick 10/23/2018 10/30/2023 24,391 1,204,671
1/30/2018 2/11/2021 17,201 849,557 11,916 588,531
1/30/2017 2/11/2020 10,443 515,780 7,033 347,360
1/26/2016 2/7/2019 19,492 962,710
1/28/2015 2/11/2020 18,340 905,813
Craig A. Johnson 1/30/2018 2/11/2021 14,433 712,846 9,998 493,801
1/30/2017 2/11/2020 14,132 697,979 9,517 470,045
1/26/2016 2/7/2019 20,673 1,021,039
K.C. Crosthwaite 10/23/2018 10/30/2023 24,391 1,204,671