DEF 14A 1 mo3601841-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)

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2020
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 2020 Annual Meeting of Shareholders of Altria Group, Inc. to be held on Thursday, May 14, 2020 at 9:00 a.m., Eastern Time. We have been actively monitoring the coronavirus (COVID-19) outbreak and have made the decision to hold a virtual meeting this year using a live webcast. This decision was made with the safety and health of our shareholders, employees and the broader community as the top priority and aligns with protocols announced by federal, state and local governments and agencies.

We believe the virtual annual meeting format will facilitate participation of our shareholders worldwide, regardless of their resources or physical location, while reducing the health and safety risks associated with COVID-19. During the virtual annual meeting, shareholders will be able to vote their shares electronically and will be able to ask questions. In addition, a webcast replay will be posted to our Investor Relations website at www.altria.com/investors following the meeting. For more information on our virtual annual meeting, including details on how to attend the meeting, see the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement.

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 and vote on the approval of the 2020 Performance Incentive Plan. We will report on our business, and shareholders will have an opportunity to ask questions.

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, 2019. 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.

   
 

Sincerely,

Howard A. Willard III
Chairman and Chief Executive Officer

For further information
about the 2020 Annual
Meeting, please call
1-804-484-8838





 
                       
 


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Letter from the Board of Directors to Our Shareholders

                   

Dear Fellow Shareholder:

2019 was a transformative year for Altria Group, Inc. and the tobacco industry. Once predictable, the industry has become increasingly dynamic and complex. We continue to believe the evolution of the tobacco industry represents a significant harm reduction opportunity for adult smokers, but recognize the industry faces some challenges, including the youth vaping crisis and an uncertain regulatory and legislative environment.

As the leader in an evolving industry, we see the opportunity to responsibly shape a better future for adult tobacco consumers, our employees and shareholders. In order to provide a clear path forward, Altria has established a new 10-year Vision: “Responsibly lead the transition of adult smokers to a non-combustible future.

Your Board is excited to help guide Altria in achieving this 10-year Vision and making a meaningful impact on tobacco harm reduction.

As stewards of your investment in Altria, the Board’s primary responsibility is to foster Altria’s long-term success by establishing broad corporate policies, setting strategic direction and overseeing management. We also oversee key risk areas and monitor performance against strategic priorities. Because we believe that good corporate governance is a cornerstone of strong business performance, our governance practices are transparent and intended to serve the best interests of Altria and its shareholders. We are proud to be a Board comprised of diverse individuals with extensive leadership experiences. We believe that our collective skillset and diverse perspectives enable highly effective oversight and rigorous decision making.

We thank you for your investment in Altria and your support for the Board.

Sincerely,

Your Board of Directors

           

Your Board of Directors

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

Virginia E. Shanks

Howard A. Willard III

           
       


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Notice of 2020 Virtual Annual Meeting of Shareholders of Altria Group, Inc.

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, 2020. FOR
3 To hold a non-binding advisory vote to approve the compensation of Altria’s named executive officers FOR
4 To approve the 2020 Performance Incentive Plan FOR
5 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 vote as promptly as possible 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). You may also vote during the meeting by following the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement. 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.

Attending the Meeting

To attend the virtual meeting, you will need to enter the 16-digit control number included on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form. See the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement.

2019 Annual Report

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 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 2, 2020.

By Order of the Board of Directors,


W. Hildebrandt Surgner, Jr.
Vice President, Corporate Secretary and Associate General Counsel
April 2, 2020
Richmond, Virginia

Date and Time

Thursday, May 14, 2020 at 9:00 a.m., Eastern Time

Place

There is no physical location for Altria’s 2020 Annual Meeting. Shareholders may instead attend virtually at www.virtualshareholdermeeting.com/ALTRIA2020.

Who can vote

You are entitled to vote if you were a shareholder of record at the close of business on March 23, 2020.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 14, 2020
Altria’s Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2019 are available, free of charge, at www.altria.com/proxy.




Table of Contents

Proxy Statement – Table of Contents

Proxy Statement Summary i

Board and Governance Matters 1

Audit Committee Matters 22

Executive Compensation 25

Shareholder Proposals 72
   
 Proposal 5  Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices 72
   
 Proposal 6  Shareholder Proposal Regarding Report on the Company’s Underage Tobacco Prevention Policies 75
Ownership of Equity Securities of Altria 77

Related Person Transactions and Code of Conduct 79
Prohibition on Hedging and Pledging 80
Instructions for the Virtual Annual Meeting 81
Questions and Answers about the 2020 Annual Meeting and Voting 82
Questions and Answers about Communications, Altria Documents and Shareholder Proposals 88
Other Business 90
Exhibit A – 2020 Performance Incentive Plan A-1
Exhibit B – Altria Group, Inc. Non-GAAP Financial Measures B-1


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Proxy Statement Summary

This proxy statement summary highlights information about Altria Group, Inc. (“Altria,” “we,” “our” or “us”) and certain information contained elsewhere in this proxy statement (“Proxy Statement”), which has been prepared in connection with Altria’s 2020 Virtual Annual Meeting of Shareholders (the “2020 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
   

Election of Directors

The Board recommends a vote FOR each nominee.

See page 16.

Proposal
2

Ratification of the Selection of Independent Registered Public Accounting Firm

The Board recommends a vote FOR this Proposal.

See page 24.

Proposal
3

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

The Board recommends a vote FOR this Proposal.

See page 62.

Proposal
4

Approval of the 2020 Performance Incentive Plan

The Board recommends a vote FOR this Proposal.

See page 63.

Proposal
5

Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices

The Board recommends a vote AGAINST this Shareholder Proposal.

See page 72.

Proposal
6

Shareholder Proposal Regarding Report on the Company’s Underage Tobacco Prevention Policies

The Board recommends a vote AGAINST this Shareholder Proposal.

See page 75.

Casting Your Vote


 

How to Vote

 
      
 

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:

    

Internet
www.proxyvote.com

    

Telephone
In the U.S. or Canada, call toll-free: 1-800-690-6903.

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

Internet
www.proxyvote.com

Telephone
Refer to voting instruction form for instructions on how to vote by telephone.

*   If bank/broker makes these methods available

Both Record Holders and Street Name Holders may also vote:

Mobile Device
Scan the QR Code that appears on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form to vote using your mobile device.

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

During Meeting
There is no physical location for the 2020 Annual Meeting. For instructions on voting remotely during the 2020 Annual Meeting, please see the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement. We encourage you to vote in advance of the meeting using the other methods available.



Altria Group, Inc. – Proxy Statement i


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PROXY STATEMENT SUMMARY

Altria Overview

Our Vision

We are a Fortune 200 company that is proud to call Richmond, Virginia our home. Our people and companies address challenging issues, like reducing the health effects of tobacco and preventing underage tobacco use. We know that businesses that are great over the long term – like ours – must earn today’s success while preparing for tomorrow’s opportunities. And we are doing just that as reflected in our 10-year Vision to “Responsibly lead the transition of adult smokers to a non-combustible future.”

The strategies Altria intends to use to achieve this Vision are to:

lead the industry in operating responsibly and preventing underage use of adult products;
develop and expand our portfolio of FDA-authorized, non-combustible products and actively convert adult smokers to them;
maximize the profitability of our combustible products while appropriately balancing investments in Marlboro with funding growth of our non-combustible portfolio;
invest in our manufacturing employees and facilities to enable them to be the manufacturers of choice for all Altria’s current and future portfolio of tobacco products;
seize leadership in the external environment through communications, engagement and science-based policy and regulatory solutions;
build employee capabilities to accelerate progress against the Vision and further evolve the way they work and behave;
help position Cronos Group, Inc. as a leader in a highly responsible, regulated and legalized U.S. cannabis market; and
maximize the contribution of Altria’s investments to our long-term value.

Our Operating Companies

Altria holds diversified positions across the tobacco, alcohol and cannabis industries. We seek to provide category-leading choices to adult consumers, while returning long-term value to our shareholders, through our subsidiaries, including:

 

     
     
Philip Morris USA Inc. (“PM USA”), the maker of Marlboro cigarettes;
U.S. Smokeless Tobacco Company LLC, the maker of Copenhagen and Skoal;
John Middleton Co., the maker of Black & Mild cigars;
Helix Innovations LLC, maker of on! oral nicotine pouches; and
Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”), a collection of distinctive wine estates.

     
     
 

and strategic investments and agreements with others, including:

 

     
     
35% economic interest in JUUL Labs, Inc. (“JUUL”), the nation’s leading e-vapor company;
10.1% ownership in Anheuser-Busch InBev SA/NV (“ABI”), the world’s largest brewer;
45% ownership in Cronos Group Inc. (“Cronos”), a leading global cannabinoid company; and
Exclusive U.S. license to commercialize Philip Morris International Inc.’s IQOS product, the only heated tobacco product authorized by the U.S. Food and Drug Administration (“FDA”).

     
     
 

ii www.altria.com


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PROXY STATEMENT SUMMARY

2019 Business Highlights

2019 was a dynamic year for the tobacco category. For Altria, while our core tobacco businesses delivered excellent financial performance, the performance from our minority investment in JUUL was disappointing, resulting in impairment charges and reported losses. Nevertheless, we made significant progress in advancing our non-combustible business platform with the launch of the IQOS heat-not-burn product in Atlanta, Georgia and Richmond, Virginia and the completion of the on! transaction, which gives us a product platform in the growing oral nicotine pouch category. Highlights from 2019 include the following:

Our core tobacco businesses were resilient in 2019, delivering excellent performance against their objectives.
The smokeable products segment reported operating companies income (“OCI”) grew by 7.1% and adjusted OCI1 grew by 8.6%.
Marlboro’s retail share remained stable at 43.1%, down 0.1 share point versus 2018.
The smokeless products segment reported OCI grew by 10.4% and adjusted OCI increased by 9.7%.
In wine, Ste. Michelle reported OCI decreased $53 million and adjusted OCI decreased $31 million.

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

Reported diluted earnings per share (“EPS”) decreased more than 100% to $(0.70) while adjusted diluted EPS2, which excludes the impact of special items, grew 5.8% to $4.22.
We achieved $600 million in annualized cost savings, exceeding the target $575 million annualized cost reduction program announced in December 2018.
We paid $6 billion in dividends in 2019. In August 2019, our Board of Directors (“Board of Directors” or “Board”) raised the regular quarterly dividend for the 54th time in the past 50 years. Altria’s dividend per share grew 5% from 2018.
We repurchased approximately $845 million of our shares, at an average price of $51.24 per share.

Adjusted Diluted EPS Dividend Payments Share Repurchases
(12/31/16 - 12/31/19) ($ millions) ($ millions)

For more information regarding our 2019 performance, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Form 10-K”).

(1) Adjusted OCI is a financial measure not consistent with generally accepted accounting principles in the United States (“GAAP”). See Exhibit B 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 diluted EPS is a financial measure not consistent with GAAP. See Exhibit B 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.

Altria Group, Inc. – Proxy Statement iii


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PROXY STATEMENT SUMMARY

Corporate Responsibility

Leading responsibly has been at the foundation of Altria’s strategy for over 20 years. We approach corporate responsibility by seeking our stakeholders’ perspectives, aligning business practices where appropriate and measuring and communicating our progress. We focus in particular on four 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

Offer lower risk tobacco products that will help convert adult smokers 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

As we pursue our Vision to responsibly lead the transition of adult smokers to a non-combustible future, we remain committed to driving positive change for the industry.

Today, the most important issue we face is the rapid rise in youth vaping. This issue threatens the harm-reduction opportunity for adults, which is a goal we have long aspired to achieve. Altria is taking decisive steps to address this issue, including investing an additional $100 million over several years to help reduce youth e-vapor use. We also took the lead in advocating to raise the minimum age to purchase all tobacco products to 21, which is now federal law.

During 2019, Altria also made significant investments in our communities through cash and in-kind contributions to non-profit organizations, including through employee volunteering. These investments help address issues that are important to our businesses, employees and communities. Workforce and economic growth, environment, and inclusive community and culture are three of our giving areas.

Employees and Culture

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, develop and retain talented, diverse employees; promote a culture of compliance and integrity; create a safe workplace; and reward and recognize employees for both the results they deliver and, importantly, how they deliver them.

Because we operate in a highly regulated and dynamic environment that is 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.

We are also committed to pay equity across our companies. Based on the most recent annual analysis conducted at Altria in November 2019, salaries of female employees were 99.7% of those of our male employees and salaries of our non-white employees were 99.5% of those of our white employees after adjusting for factors generally considered to be legitimate differentiators of salary (e.g., performance and salary grade).

Environment

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. To help guide our environmental efforts, we have created an Environmental Management Framework that helps set direction, fosters decision making and promotes continuous improvement through a management structure, policies, programs and measurement. We have also set goals to reduce our environmental impact by the end of 2025 and have formally committed to the Science Based Targets initiative to help keep the rise in global temperature to below 2°C.

More information about our corporate responsibility 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.

iv www.altria.com


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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. More information about each director can be found under “Proposal 1 – Election of Directors” beginning on page 16.

Name and Principal Occupation       Age       Director
Since

     
Independent       Board Committee Membership (1)
AC CC EC FC IC NC

John T. Casteen III
President Emeritus, University of Virginia

76

2010

Dinyar S. Devitre
Former Chief Financial Officer, Altria Group, Inc.

72

2008

Thomas F. Farrell II (2)
Chairman, President and Chief Executive Officer, Dominion Energy, Inc.

65

2008

Debra J. Kelly-Ennis
Retired President and Chief Executive Officer, Diageo Canada, Inc.

63

2013

W. Leo Kiely III
Retired Chief Executive Officer, MillerCoors LLC

73

2011

Kathryn B. McQuade
Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited

63

2012

George Muñoz
Principal, Muñoz Investment Banking Group, LLC and Partner, Tobin & Muñoz

68

2004

Mark E. Newman
Senior Vice President and Chief Operating Officer, The Chemours Company

56

2018

Nabil Y. Sakkab
Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company

72

2008

Virginia E. Shanks
Former Executive Vice President and Chief Administrative Officer, Pinnacle Entertainment, Inc.

59

2017

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

56

2018


(1) AC Audit Committee EC Executive Committee IC Innovation Committee
CC Compensation and Talent
Development Committee
FC Finance Committee NC Nominating, Corporate Governance
and Social Responsibility Committee
 

Chair

Member
 
(2) Presiding Director

Altria Group, Inc. – Proxy Statement v


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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
Executive sessions of independent directors at each meeting
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 86% Board and Committee meeting attendance in 2019 by each director
100% director attendance at our 2019 Annual Meeting of Shareholders (“2019 Annual Meeting”)
Oversight of strategic plan development and execution
Oversight of key risk areas and risk management processes
Oversight of executive compensation programs to align with long-term strategies
Participation in executive succession planning
Updates to the Board on investor perspectives and engagement
Review of voting results on all shareholder proposals
Annual Board and Committee self-evaluations
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, Code of Business Conduct and Ethics for Directors 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 principles for U.S. listed companies, which include (i) accountability to shareholders; (ii) shareholder voting rights proportionate to economic interest; (iii) responsiveness to shareholders; (iv) strong, independent leadership; (v) structures and practices that enhance Board effectiveness; and (vi) management incentive structures aligned with long-term strategy.

 

vi www.altria.com

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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.

2019 shareholder engagement included:

Five investor conferences
Numerous individual investor meetings and calls on a variety of topics such as:
business performance
company strategies
environmental, social and corporate governance matters, including executive compensation
the regulatory environment
Our 2019 Annual Meeting
            

We value the
perspectives
that we gain
through these
engagement
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 2019, the total direct compensation of our executive officers named in the Summary Compensation Table on page 48 (“named executive officers” or “NEOs”) consisted of the following elements:

    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

Restricted Stock Units (“RSUs”) / Performance Stock Units (“PSUs”)

Annual with rolling three-year vesting periods

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

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

Altria Group, Inc. – Proxy Statement vii


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PROXY STATEMENT SUMMARY

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

Key Governance Features of Our Executive Compensation Program

The following summary highlights our commitment to executive compensation practices that align the interests of 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 balance incentives.
Stock Holding and Ownership Requirements
All NEOs exceed robust stock ownership requirements.
“Clawback” Policy
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 and Food, Beverage & Tobacco Indices companies.
Tally Sheets
Our Compensation and Talent Development Committee uses tally sheets 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 CEO’s compensation and less than 1% of our other NEOs’ compensation.
No Single-Trigger Change in Control
Our shareholder-approved 2015 Performance Incentive Plan and our proposed 2020 Performance Incentive Plan both include a double-trigger change in control provision.
No Individual Supplemental Executive Retirement Plans
No Hedging or Pledging
We do not permit our NEOs 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 NEOs.
No Share Recycling
     
       
   
 
 
 
 
 
   
   
   
 
 
   
   
       
       
                               

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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 devotes multi-day meetings 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 risks facing Altria and our businesses, including risks associated with our investments.

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. Our Risk Oversight Committee, comprised of members of senior management, including our Chief Financial Officer, General Counsel and Chief Compliance Officer, meets regularly to oversee this process and efforts undertaken to identify and manage the most significant risks to the Company. 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, enterprise risks, compliance risks and our compliance program (including allegations of non-compliance) 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 management provide insight into our risk assessment and risk management practices, policies and processes.

Altria Group, Inc. – Proxy Statement 1


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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 and Talent Development Committee considers the extent to which the executive compensation program may create risk for us (see “Risk Assessment” on page 46 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 Audit Committee receives regular updates from our Chief Information Security Officer on cybersecurity matters and the related risk management program. Our Board receives an annual update on our cybersecurity program.

Political and Public Policy Oversight

The Nominating, Corporate Governance and Social Responsibility Committee oversees our political and public policy engagement activities, including direct and indirect lobbying activities and contributions to organizations involved in the public policy arena. The Committee also oversees our political activity compliance program.

We share extensive information about our participation in these areas on our website at www.altria.com/About-Altria/Government-Affairs/.

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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. The Committee receives regular updates on our social responsibility initiatives, as well as our relationships with key stakeholders and the issues they raise.

Our corporate responsibility priorities are discussed in the “Proxy Statement Summary” on page iv and additional information 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

The Compensation and Talent Development Committee oversees initiatives, programs and processes related to talent development, compensation and culture and the associated company strategies.

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 Vision is to responsibly lead the transition of adult smokers to a non-combustible future. Our Board believes that the combination of the roles of Chairman and CEO promotes the pursuit of our Vision 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.


 

     
     
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 ƒ
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 and Talent Development 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

     
     
 

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.

Altria Group, Inc. – Proxy Statement 3


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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 meeting agendas for that Committee and determines the frequency and length of Committee meetings. After each meeting, each Committee provides a full report to our Board.

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

Audit Committee 2019 Meetings: 7 Report: See page 23
Chair       Other Members                      
George Muñoz 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 “Audit Committee Matters” beginning on page 22 for further information on the Audit Committee, including its report for the year ended December 31, 2019.

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 Ms. McQuade and Messrs. Muñoz and Newman are “audit committee financial experts” within the meaning set forth in the regulations of the SEC.


Compensation and Talent Development Committee 2019 Meetings: 4 Report: See page 26
Chair       Other Members                      
W. Leo Kiely III John T. Casteen III Kathryn B. McQuade
Thomas F. Farrell II Virginia E. Shanks

The Compensation and Talent Development Committee determines and approves CEO compensation and reviews and approves the compensation of our other executive officers; oversees the development of executive succession plans and evaluates and makes recommendations to our Board regarding potential CEO candidates and candidates for other senior executive positions; evaluates the design and effectiveness of our incentive programs and monitors risks related to such design; and reviews initiatives and programs related to corporate culture and talent development. See “Executive Compensation” beginning on page 25 for further information on the Compensation and Talent Development Committee, including a discussion of its procedures and its report.

The Compensation and Talent Development 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 2019 Meetings: 0
Chair       Other Members                      
Howard A. Willard III 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 2019 Meetings: 5
Chair       Other Members                      
Dinyar S. Devitre 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 2019 Meetings: 4
Chair       Other Members                      
Nabil Y. Sakkab John T. Casteen III Debra J. Kelly-Ennis Mark E. Newman
Dinyar S. Devitre W. Leo Kiely III Virginia E. Shanks
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.

Nominating, Corporate Governance and Social Responsibility Committee 2019 Meetings: 4
Chair       Other Members                      
Kathryn B. McQuade 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.


Altria Group, Inc. – Proxy Statement 5


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Board Meetings and Attendance

7 meetings in 2019  

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

2019 Regular Board Meetings:


  During 2019, each director attended at least 86% of the aggregate number of meetings of our Board and of all Committees on which he or she served during his or her respective term of service. In addition, all directors attended the 2019 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.

Board Practices and Policies

Board and Committee Self-Evaluations

Our Board assesses annually its effectiveness and that of its Committees in advancing our Vision. 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:
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.

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Examples of actions our Board has taken in recent years in response to the annual self-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 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 11 and 12, respectively, 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 88. Our By-Laws include the procedures that a shareholder must follow to nominate directors for election to our Board. 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 88.

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 its 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 2019; 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.

Altria Group, Inc. – Proxy Statement 7


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CEO Succession and Advancement Planning

Our Board believes that senior executive advancement and succession is one of its most important responsibilities. The Compensation and Talent Development 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 and Talent Development Committee and our Board to discuss CEO succession planning (including specific candidates).

The Compensation and Talent Development 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 and Talent Development 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 and Talent Development 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.

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. We also periodically invite outside experts to meet with our Board to review matters relevant to corporate directors, including corporate governance.

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 “Related Person Transactions and Code of Conduct” on page 79 for further information). 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.

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Director Compensation

Compensation Philosophy

Our philosophy is to provide competitive compensation necessary to attract and retain high-quality non-employee directors and appropriately compensate them for the time, expertise and effort required to serve as a director of a large publicly traded company that operates in a dynamic, highly regulated industry. Our Board believes that a substantial portion of director compensation should consist of equity-based compensation, coupled with robust stock ownership guidelines, 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.

Director Compensation Review

The Nominating, Corporate Governance and Social Responsibility Committee reviews and periodically recommends updates to the director compensation program to our Board of Directors for approval. During these reviews, the Committee considers our director compensation philosophy, the competitiveness of director compensation based on an independent benchmarking study (taking into account our Compensation Survey Group (“CSG”) described under “Benchmarking” beginning on page 44 and other large, public companies) and current market practices and also considers the appropriateness of the form, mix and amount of director compensation. The Committee then makes a recommendation to our Board concerning such compensation with a view toward attracting and retaining qualified directors. After reviewing compensation in January 2019, the Committee determined to leave our director compensation unchanged. Our directors’ retainers have not increased since 2016.

Components of Compensation

The following chart presents the 2019 components of compensation for our non-employee directors:

Equity     Annual Cash Retainers
 
Annual Equity Award (1) $175,000 Board Member (2) $110,000
Presiding Director $25,000
Committees Chair Member (3)
Audit
Compensation and Talent Development
$25,000 $5,000
Finance
Innovation
Nominating, Corporate Governance and Social Responsibility
$15,000
(1) The annual full value equity award is in the form of fully vested shares of Altria common stock.
(2) Paid in quarterly installments.
(3) Committee Chairs also receive the Committee Member annual cash retainer.

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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 Fee Plan”), 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.

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 2019, the following non-employee directors participated in this program: Mr. Casteen, Mr. Devitre, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade, Mr. Muñoz, Mr. Newman and Ms. Shanks. The aggregate amount of matching payments for these directors in 2019 was $201,265.

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 2019.

Non-Employee Director Compensation Table 

Name       Fees
Earned or
Paid in
Cash
($)
      Stock
Awards
($)
(1)
      All Other
Compensation
($) (2)
      Total
($)
John T. Casteen III 125,000 175,010      17,250      317,260
Dinyar S. Devitre 140,000 175,010 29,795 344,805
Thomas F. Farrell II 145,000 175,010 0 320,010
Debra J. Kelly-Ennis 125,000 175,010 14,250 314,260
W. Leo Kiely III 150,000 175,010 30,000 355,010
Kathryn B. McQuade 140,000 175,010 30,000 345,010
George Muñoz 150,000 175,010 30,000 355,010
Mark E. Newman 125,000 175,010 30,000 330,010
Nabil Y. Sakkab 140,000 175,010 0 315,010
Virginia E. Shanks 125,000 175,010 19,970 319,980
(1) Pursuant to the 2015 Stock Compensation Plan for Non-Employee Directors (the “2015 Non-Employee Directors Plan”), on May 16, 2019, each non-employee director received 3,345 shares of Altria common stock with an aggregate grant date fair market value of $175,010. 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 $52.32 per share was based on the average of the high and low trading prices of Altria common stock on May 16, 2019.
(2) All Other Compensation consists of matching gifts paid in 2019 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 our Board and to hold the requisite number of shares until retirement. The ownership guidelines for non-employee directors may be satisfied with all beneficially owned shares, including deferred shares and share equivalents. As of December 31, 2019, 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 or pledging activities with respect to our stock. A description of Altria’s hedging and pledging policies is included under “Prohibition on Hedging and Pledging” on page 80.

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 2019 Annual Meeting. Biographical information and qualifications of the nominees for director are included under “Proposal 1 – Election of Directors” beginning 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.

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 Vision and advancing one or more Vision strategies.

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.

Altria Group, Inc. – Proxy Statement 11


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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

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, including self-identified characteristics such as gender, race, national origin, age and sexual orientation.

     
     
 
     
 
     

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Board Skills and Experience

Our Board has a breadth of skills and experiences. As noted in the 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 products 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 planning, 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 the corporate governance practices of other companies.
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 technology risks, including cybersecurity.

Altria Group, Inc. – Proxy Statement 13


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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 adheres to NYSE and SEC requirements 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 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:

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 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 79) of 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 each of 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. Devitre, Mr. Farrell, Mr. Kiely, Mr. Muñoz or Dr. Sakkab, or their respective immediate family members, materially benefits directly or indirectly from these relationships.

The Committee 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 corporate responsibility focus on investing in our communities, 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.

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BOARD AND GOVERNANCE MATTERS

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 2019, Altria or our subsidiaries made certain charitable donations to the University in an aggregate amount of $1,579,500 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 $62,692. The sum of these 2019 contributions and payments represented 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, is an Assistant Professor and Director of Studies at the University. Neither Mr. Casteen nor his son 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 and Ms. Kelly-Ennis 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 non-profit educational programs and institutions located in and around these communities. In each case, payments by us in each of 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 or Mr. Newman, or their respective immediate family members, materially benefits directly or indirectly from these contributions.

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

Altria Group, Inc. – Proxy Statement 15


Table of Contents

BOARD AND GOVERNANCE MATTERS

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

We propose that the 11 individuals named below, 10 of whom the Board has affirmatively determined to be independent, 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 Vision and one or more Vision strategies. The Committee and our Board believe that each of the nominees for election at the 2020 Annual Meeting possesses important 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.

2020 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:
Leifur Eiríksson Foundation; Institute for Shipboard Education (Semester at Sea); Echo360, Inc. Previously served on the boards of the Chesapeake Bay Foundation, Jamestown-Yorktown 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, administrative, public policy and leadership experiences, particularly his role as 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

Age: 76

Director Since: 2010

Board Committees:

Audit
Compensation and Talent Development
Innovation
 
          
 
                                            
     

16 www.altria.com


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BOARD AND GOVERNANCE MATTERS

                  

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

Age: 72

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. Mr. Farrell also serves as a director of Dominion Energy Gas Holdings, LLC, Virginia Electric and Power Company and Dominion Energy South Carolina, Inc., which are wholly owned subsidiaries of Dominion that only issue registered debt.

Prior Public Company Directorships (within the last five years):
Dominion Energy Midstream GP, LLC. (2014 to 2019).

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

Age: 65

Director Since: 2008

Presiding Director

Board Committees:

Compensation and Talent Development
Executive
Nominating, Corporate Governance and Social Responsibility
 
 
 
 
 
       
                                   
         

Altria Group, Inc. – Proxy Statement 17


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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:
TFI International Inc.

Prior Public Company Directorships (within the last five years):
Carnival Corporation & plc (2012 to January 2020); 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).

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

Age: 63

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:
None.

Prior Public Company Directorships (within the last five years):
HC Government Realty Trust, Inc. (2016 to March 2019).

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

Age: 73

Director Since: 2011

Board Committees:

Compensation and Talent Development (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

Age: 63

Director Since: 2012

Board Committees:

Audit
Compensation and Talent Development
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

Age: 68

Director Since: 2004

Board Committees:

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

Altria Group, Inc. – Proxy Statement 19


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BOARD AND GOVERNANCE MATTERS

                         
     

Position, Principal Occupation and Professional Experience:
Senior Vice President and Chief Operating Officer, The Chemours Company (Wilmington, DE). Mr. Newman is Senior Vice President and Chief Operating Officer of The Chemours Company (“Chemours”), a global chemical company. He is also the executive sponsor of the Chemours Black Employee Network. He previously served as Senior Vice President and Chief Financial Officer of Chemours from 2015 to June 2019. 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, accounting and operational expertise, particularly his roles as a chief financial officer and chief operating officer of a large public company in a regulated industry, along with his international business and transactional experience, including at consumer-focused companies, provide clear support for his nomination for election to our Board.

Mark E. Newman

Age: 56

Director Since: 2018

Board Committees:

Audit
Finance
Innovation
 
          
 
                                            
     

                         
 
 
 
   

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

Age: 72

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:
Former Executive Vice President and Chief Administrative Officer, Pinnacle Entertainment, Inc. (Las Vegas, NV). Ms. Shanks 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 Gaming, Inc. (“Penn National”), also a casino entertainment company. After the merger, she served as Strategic Advisor for Penn National until December 31, 2019. Previously, 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:
EPR Properties.

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

Age: 59

Director Since: 2017

Board Committees:

Audit
Compensation and Talent Development
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

Age: 56

Director Since: 2018

Chairman and Chief Executive Officer

Board Committee:

Executive (Chair)
 
 
 
 
 
       
                                   
         

Altria Group, Inc. – Proxy Statement 21


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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 2019.

Aggregate fees, including out-of-pocket expenses, for professional services rendered by PricewaterhouseCoopers for fiscal years ended December 31, 2019 and 2018 were comprised of the following (in thousands):

2019
($)
2018
($)
Audit Fees (1)      6,515      6,467
Audit-Related Fees (2) 1,190 1,436
Tax Fees (3) 1,469 440
All Other Fees (4) 8 8
TOTAL 9,182 8,351
(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, 2019

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 2019 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 2019 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

Altria Group, Inc. – Proxy Statement 23


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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, 2020 and has directed that management submit such selection to shareholders for ratification at the 2020 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.

We expect representatives of PricewaterhouseCoopers to be present at the meeting. The representatives will have an opportunity to make a statement if they so desire and be available to respond to appropriate questions.

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

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Table of Contents

Executive Compensation – Table of Contents

Compensation and Talent Development Committee Report for the Year Ended December 31, 2019 26
Compensation Discussion and Analysis 26
Introduction       26       Post-Termination Benefits and Change in      
Overview 27 Control Payments 42
Compensation Philosophy 27 Executive Transitions 43
Financial Performance 27 Decision Making Process 43
Pay-For-Performance 28 Role of the Compensation and
Say-on-Pay and Shareholder Engagement 28 Talent Development Committee 43
2019 Performance of NEOs 29 Role of Consultants 44
Executive Compensation Design 32 Benchmarking 44
Principles 32 Risk Assessment 46
Elements 33 Other Considerations 46
2019 Executive Compensation Program Decisions 34 Stock Ownership and Holding Requirements
Salary 35 and Prohibition on Hedging and Pledging 46
Annual Incentives 36 “Clawback” Policy Regarding the Adjustment or
Long-Term Incentives 37 Recovery of Compensation 47
Perquisites 42 Tax and Accounting Considerations 47
Compensation and Talent Development Committee
Interlocks and Insider Participation 47
   
Compensation Tables and Other Matters 48
Summary Compensation Table 48 Non-Qualified Deferred Compensation 56
All Other Compensation 50 Defined Contribution Plans 56
Grants of Plan-Based Awards during 2019 51 DPS Plan 56
Outstanding Equity Awards as of December 31, 2019 52 BEP DPS 57
Stock Option Exercises and Stock Vested during 2019 53 Payments upon Change in Control or
Pension Benefits 53 Termination of Employment 57
Defined Benefit Plans 54 Payments upon Change in Control 57
Retirement Plan 54 Termination Payments 59
BEP Pension 55 CEO Pay Ratio 60
    
  Proposal 3   Non-Binding Advisory Vote to Approve the Compensation of Altria’s Named Executive Officers 62
    
  Proposal 4   Approval of the 2020 Performance Incentive Plan 63
Introduction 63 Federal Income Tax Consequences 68
Highlights of the 2020 PIP 64 Other Information 70
Summary of 2020 PIP 65 Equity Compensation Plan Information 71

Altria Group, Inc. – Proxy Statement 25


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Executive Compensation

Compensation and Talent Development Committee Report for the Year Ended December 31, 2019

The Compensation and Talent Development Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this Proxy Statement with management. Based on its review and discussions with management, the Compensation and Talent Development Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation and Talent Development 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 decisions by the Compensation and Talent Development Committee (for purposes of the “Executive Compensation” section, the “Committee”) with respect to our NEOs:

Name         Position during 2019
Howard A. Willard III Chairman of the Board and CEO, 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.
Salvatore Mancuso Senior Vice President, Finance and Procurement, Altria Group, Inc.
Jody L. Begley Senior Vice President, Tobacco Products, Altria Group, Inc.
Kevin C. Crosthwaite, Jr. Former Senior Vice President, Chief Strategy and Growth Officer, Altria Group, Inc.
Craig A. Johnson Former President and Chief Executive Officer, Altria Group Distribution Company

Mr. Crosthwaite resigned effective September 24, 2019 to become the Chief Executive Officer of JUUL. Mr. Johnson retired effective March 1, 2019.

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EXECUTIVE COMPENSATION

Overview

Compensation Philosophy

We design our executive compensation program to align the interests of our executive officers with the interests of our shareholders. We believe this requires:

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. 2019 was a year of industry and business transition. As reflected in the “2019 Business Highlights” section beginning on page iii, Altria’s core tobacco businesses delivered outstanding performance in 2019. Additionally, Altria exceeded its $575 million annualized cost savings target. The strong performance of our core tobacco businesses resulted in us meeting our financial targets. However, we were disappointed in the performance of our JUUL investment during the year, and the performance of Altria’s stock lagged that of our peers and the general market. The following graphs summarize our one- and three-year performance against key financial indicators:

Adjusted Diluted EPS (12/31/2016 - 12/31/2019) ($)           Dividend Rate (1) (8/24/2017 - 8/22/2019) ($)
 
(1) Compound annual growth rate (“CAGR”) based on 2016 adjusted diluted EPS of $3.03.   (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 $2.44 that was declared in August 2016, with each August dividend similarly annualized.
           
   
2019 TSR (12/31/2018 – 12/31/2019) (%)   Three-Year TSR (12/31/2016 - 12/31/2019) (%)
 
Source: Bloomberg Daily Return (December 31, 2018 – December 31, 2019)   Source: Bloomberg Daily Return (December 31, 2016 – December 31, 2019)
Note:     Assumes reinvestment of dividends as of the ex-dividend date.   Note:     Assumes reinvestment of dividends as of the ex-dividend date.


Altria Group, Inc. – Proxy Statement 27


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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 actual 2017 – 2019 LTIP award. All other pay elements are based on the Summary Compensation Table values.
(2) Indexed TSR reflects a December 31, 2016 starting point (with a nominal value of 100) and represents the total growth (including dividends) from that date through each December 31.
(3) 2017 represents the total direct compensation of our former Chairman, CEO and President, Martin J. Barrington.
(4) 2018 represents Mr. Willard’s total direct compensation, calculated as 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 2019 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 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 discuss our executive compensation program. We value the perspectives we gain from these engagement activities.

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EXECUTIVE COMPENSATION

2019 Performance of NEOs

The Committee considered several factors in approving each element of 2019 compensation. For the 2019 Annual Incentive Award plan, the Committee primarily evaluated our financial and strategic performance, as described under “Financial Performance” on page 27. The Committee also considered the individual performance of each active NEO for purposes of approving salary increases, annual cash incentive awards, equity awards and LTIP awards. Executives receive variable elements of short- and long-term compensation only after the relevant performance period has ended and the Committee has assessed Altria’s actual performance and executive performance relative to stated goals established at the beginning of the period. In addition, the 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 Committee evaluated our NEOs’ progress against their performance goals and the relationship of their performance to our overall 2019 results. We discuss the 2019 performance of each NEO below.

 
     

Howard A. Willard III
Chairman of the Board and CEO

Key Responsibilities
Mr. Willard provided strategic leadership to our Board, executive team and employees in a dynamic, competitive and highly regulated environment.

2019 Achievements
Mr. Willard provided solid leadership to our Board, executive team and employees during a dynamic and challenging year in the tobacco industry.

However, our 2018 minority investment in JUUL had a significant negative impact on shareholder value, 2019 reported income and investor sentiment, which the Committee took into account in determining Mr. Willard’s compensation, as discussed below under “2019 Executive Compensation Program Decisions.”

In terms of his leadership over Altria’s business operations, Mr. Willard:

Oversaw delivery of strong financial results despite significant headwinds, including accelerated industry volume declines and a challenging regulatory environment;
Built a compelling portfolio strategy across tobacco categories and advanced Altria’s harm reduction aspiration through the on! transaction and the launch of IQOS in the U.S.;
Oversaw the successful execution of the cost reduction program announced in December 2018, which exceeded target, while simultaneously guiding the organization to execute at a high level following what could have been a disruptive event;
Promoted enhanced efforts to support underage tobacco prevention, including federal legislation to raise the legal age of purchasing all tobacco products (including e-vapor) to 21; and
Implemented a new framework to drive accountability of senior executives to advance diversity, develop their people and promote an inclusive culture.
     
 

Altria Group, Inc. – Proxy Statement 29


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EXECUTIVE COMPENSATION

 
     

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

Key Responsibilities
Mr. Gifford was responsible for Altria’s financial functions as well as its core tobacco businesses, sales and distribution business, and Consumer & Marketplace Insights team. He also serves as one of our designated directors on the Board of Directors of ABI.

2019 Achievements
Mr. Gifford:

Led Altria in achieving its financial targets in 2019 despite significant headwinds in its core tobacco businesses, including delivering 5.8% adjusted diluted EPS growth, within Altria’s 4%-7% adjusted diluted EPS earnings guidance for the year;
Oversaw the expansion of adjusted OCI margins in the smokeable and smokeless product segments with strong price realization, efficient deployment of price and promotional resources and effective controllable cost management;
Oversaw execution of the cost reduction program announced in December 2018, which delivered $600 million in annualized cost savings, exceeding the target of $575 million;
Led the issuance of debt to fund the Cronos and JUUL investments at better than expected interest rates; and
Provided executive sponsorship of Altria’s MOSAIC (LGBTQ+) employee resource group.
     
 
 
     

Murray R. Garnick
Executive Vice President and General Counsel

Key Responsibilities
Mr. Garnick’s responsibilities included leading Altria’s Law and Regulatory Affairs functions and overseeing the development and execution of legal and regulatory strategies.

2019 Achievements
Mr. Garnick:

Worked with regulators and external stakeholders to help shape an environment that supports the commercialization of IQOS in the U.S.;
Oversaw legal strategy and support in connection with the on! transaction, the Cronos investment and the JUUL investment, including negotiations with JUUL to revise the terms of our agreements and antitrust review;
Successfully defended Copenhagen Snuff’s claim as a modified risk tobacco product before the Tobacco Products Scientific Advisory Committee;
Oversaw regulatory strategies to protect Altria’s core tobacco portfolio by reducing the risk of receiving not-substantially equivalent orders from the FDA;
Managed complex litigation matters, including product liability and securities cases and matters related to the Master Settlement Agreement; and
Provided executive sponsorship of Altria’s EAST (Asian employee) employee resource group.
     
 

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EXECUTIVE COMPENSATION

 
     

Salvatore Mancuso
Senior Vice President, Finance and Procurement

Key Responsibilities
Mr. Mancuso’s responsibilities included overseeing Altria’s Tax, Treasury, Audit, Financial Planning & Analysis and Controller functions, while also overseeing Procurement, Real Estate & Security, Information Services and Philip Morris Management Corporation.

2019 Achievements
Mr. Mancuso:

Led the implementation of the cost reduction program announced in December 2018 that reduced headcount-related and third-party costs by $600 million;
Oversaw the issuance of debt to fund the Cronos and JUUL investments;
Provided executive oversight of the de-risking of the Altria pension plan to significantly reduce the value-at-risk;
Improved operating cash flow by almost $500 million compared to the 2019 operating budget;
Oversaw the management of significant tax changes resulting from the Tax Cuts and Jobs Act of 2017;
Led the Procurement department’s improved supply security of the direct materials supply chain for Altria’s core tobacco businesses; and
Provided executive sponsorship of Altria’s UNIFI (black employee) employee resource group.
     
 

 
     

Jody L. Begley
Senior Vice President, Tobacco Products

Key Responsibilities
Mr. Begley led Altria’s core tobacco businesses as well as Engineering, Quality and Product Development support.

2019 Achievements
Mr. Begley:

Led Altria’s core tobacco businesses in delivering outstanding business and financial performance, strong profit growth and brand leadership amid a challenging year with greater-than-expected industry volume declines and increased pressure in the smokeable discount segment;
Led the revenue growth management strategy to allocate our core tobacco businesses’ resources more effectively in geographies, trade classes and specific adult tobacco consumer segments;
Increased adjusted OCI for the core tobacco businesses – 8.6% in the smokeable products segment and 9.7% in the smokeless products segment – while expanding smokeable and smokeless adjusted OCI margins by 3.9 and 3.0 percentage points, respectively;
Oversaw the launch of IQOS in two lead markets with novel retail concepts;
Oversaw the expansion of retail distribution of on!, creation of an e-commerce platform and the development of manufacturing capabilities for oral nicotine pouches; and
Provided executive sponsorship of Altria’s UNIFI (black employee) employee resource group.
     
 

Altria Group, Inc. – Proxy Statement 31


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EXECUTIVE COMPENSATION

Executive Compensation Design

Principles

Our executive compensation program includes multiple performance metrics to assess the efforts of all executives in pursuing our strategies. 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 holding requirements 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 subject to 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.

2019 CEO and Other NEOs Target Pay Mix (1)
(1) Includes 2019 salary, target award under the 2019 Annual Incentive Award plan, target value of 2019 equity awards and target 2019 allocation under the 2017 – 2019 LTIP.
(2) Includes the other NEOs who were employees as of December 31, 2019 (Messrs. Gifford, Garnick, Mancuso and Begley).

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EXECUTIVE COMPENSATION

Elements

The table below summarizes the elements and objectives of the 2019 executive compensation program for the NEOs. The general objective of each element is to attract and retain world-class leaders.

2019 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 performance during the plan year.

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 each of the 2010, 2015 and proposed 2020 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 medical coverage 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 vehicle expenses, which included a leased vehicle and/or a vehicle allowance (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

2019 Executive Compensation Program Decisions

The Committee considered the performance of our investment in JUUL in determining the 2019 compensation for the NEOs involved in that investment decision, including the negative impact on shareholder value, 2019 reported income and investor sentiment. Specifically:

For Mr. Willard, the Committee determined that (i) he should not receive an award under the 2019 Annual Incentive Award plan and (ii) his 2017 – 2019 LTIP award should reflect below target individual performance. In light of his performance in other areas of responsibility, our Board’s confidence in his leadership as we pursue our portfolio strategy into the future and to focus Mr. Willard on increasing long-term shareholder value, the Committee granted Mr. Willard RSU (88,017 units) and PSU (58,221 units) awards in February 2020 with an aggregate grant date fair value of $6,250,027 (versus his target award of $5,400,000), subject to applicable vesting and performance periods. The Committee did not approve a 2020 salary increase for Mr. Willard.
For Messrs. Gifford and Garnick, the Committee approved their awards under the 2019 Annual Incentive Award plan at target individual performance versus higher amounts for which they would have otherwise been eligible based on their 2019 individual performance.

See “Annual Incentives” and “Long-Term Incentives” beginning on pages 36 and 37, respectively.

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EXECUTIVE COMPENSATION

Salary

The Committee considers several 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 Committee periodically compares the salaries of our NEOs to others holding comparable positions at CSG companies. The Committee analyzes all these factors in the aggregate in determining NEO salaries.

Salaries are relevant in establishing annual and cash long-term incentive award targets and factor into retirement, group life insurance and certain other benefits available to all salaried employees. The Committee reviews salaries for our NEOs other than our CEO on an annual basis; effective May 2018, it reviews our CEO’s salary approximately every two years. Generally, any adjustments are effective March 1.

The 2019 salary ranges for our NEOs were as follows:

2019 Salary Range
Band Minimum
($)
Maximum
($)
A Mr. Willard      910,000      2,090,000
B Messrs. Gifford, Garnick and Johnson 480,000 1,100,000
C Messrs. Begley, Crosthwaite and Mancuso (after promotions effective March 1, 2019) 390,500 898,100

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

2019 Salary Changes
 
Name 2018
Salary
($)
2019
Salary
($)
Increase
(%)
Howard A. Willard III (1)       1,250,000       1,250,000      
William F. Gifford, Jr. 850,000 876,000 3.1
Murray R. Garnick 850,000 876,000 3.1
Salvatore Mancuso (2) 489,700 520,000 6.2
Jody L. Begley (3) 420,000 525,000 25.0
Kevin C. Crosthwaite, Jr. (3) 420,000 525,000 25.0
Craig A. Johnson 962,000 983,000 2.2
(1) Mr. Willard did not receive a 2019 salary increase because the Committee reviews Mr. Willard’s salary approximately every two years.
(2) In connection with his promotion from Band D to Band C, the Committee increased Mr. Mancuso’s salary from $489,700 to $520,000, effective March 1, 2019.
(3) In connection with their promotions from Band D to Band C, the Committee increased Messrs. Begley’s and Crosthwaite’s salaries from $420,000 to $525,000, respectively, effective March 1, 2019.

Altria Group, Inc. – Proxy Statement 35


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EXECUTIVE COMPENSATION

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 the Committee reviews and approves annually for salary Band I and above employees. Annual incentive awards are paid only after both business and individual results are assessed against targeted levels of performance. No individual is guaranteed an award.

At the conclusion of each year, the Committee reviews Altria’s financial and strategic performance. The Committee assigns a rating from 0% to 130% based on performance against these measures. The Committee has identified (1) adjusted diluted EPS growth and (2) adjusted discretionary cash flow as the financial measures for determining awards under the Annual Incentive Award plan because these measures align with our financial goals and the interests of our shareholders.

In determining Altria’s financial performance for 2019, the Committee considered the following:

Financial Measures (millions, except per share data)

     Results and Rating
(from 0% - 130%)
     Weighting      Weighted
Result

Adjusted Diluted EPS Growth
(Rating Range)

75%

75%

Adjusted Discretionary Cash Flow (1)
(Rating Range)

25%

27%

Rating for Financial Measures 102%(2)
(1)

Adjusted discretionary cash flow is a non-GAAP financial measure. See Exhibit B 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 Committee evaluated Altria’s performance against the 2019 strategic initiatives that were designed to promote our long-term success. Strategic initiatives in 2019 included:

maximizing the long-term momentum and profitability of Altria’s core tobacco businesses;
advancing Altria’s harm reduction aspiration through non-combustible product platforms;
enhancing our system and capabilities for recruiting, developing and engaging diverse talent;
delivering annualized cost savings through the cost reduction program announced in December 2018; and
overseeing Altria’s strategic investments made in late 2018 and early 2019.

After applying the 102% rating for financial measures and considering Altria’s strong performance in its core tobacco businesses and cost reduction program, while also factoring in the negative impact of the JUUL investment including the impairment charges, the Committee adjusted the rating up by five percentage points and assigned an overall Annual Incentive Award business performance rating of 107%. The Committee used this rating, together with individual performance of the NEOs (see “2019 Performance of NEOs” beginning on page 29), in determining the 2019 awards below. The following formula was the basis for determining awards under the 2019 Annual Incentive Award plan:

Salary

x

Target
(% of salary)

x

Business
Performance
Rating

x

Individual
Performance
Factor

=

Annual
Incentive
Award


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EXECUTIVE COMPENSATION

2019 Annual Incentive Award Target Percentages, Award Ranges and Actual Awards

 
Name Band Salary
($)
Target
(% of
salary)
2019
Business
Perf.
Rating
(0 - 130%)
Individual
Performance
Factor Range (1)
(% of target)
Maximum
Award
for 2019
Performance
($)
Actual
Award
for 2019
Performance
($)
 Minimum  Maximum
Howard A. Willard III (2)      A      1,250,000      150      107      0      175      3,510,938     
William F. Gifford, Jr. B 876,000 95 107 0 155 1,380,204 890,500
Murray R. Garnick B 876,000 95 107 0 155 1,380,204 890,500
Salvatore Mancuso (3) C 520,000 80 107 0 155 689,936 555,300
Jody L. Begley (3) C 525,000 80 107 0 155 696,570 610,000
Kevin C. Crosthwaite, Jr. (4) C 525,000 80 403,000
Craig A. Johnson (5) B 983,000 95 151,000
(1) The individual performance ranges are stated as a percentage of target and are based on individual performance on a five-point scale.
(2) As discussed under “2019 Executive Compensation Program Decisions” above, the Committee did not grant Mr. Willard an award under the 2019 Annual Incentive Award plan.
(3) Messrs. Mancuso and Begley received awards that reflected their time in Band D and Band C on a prorated basis as a result of their promotions effective March 1, 2019.
(4) Mr. Crosthwaite received an award based on target business and individual performance for the full year. His award reflects his time in Band D and Band C on a prorated basis as a result of his promotion effective March 1, 2019.
(5) Mr. Johnson received an award prorated for service from January 1, 2019 to his retirement on March 1, 2019, based on target business and individual performance.

Long-Term Incentives

We award 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 through performance-based elements, 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. Award amounts recognize prior year performance and, for our NEOs other than our CEO, advancement potential. Vesting amounts reflect any stock appreciation and, for PSUs, performance against the financial measures during the vesting period. 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 potentially 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 Committee annually reviews equity award targets against competitive data.

From time to time, the Committee grants special equity awards to select executives in key roles or with high advancement potential. These special equity awards generally have a longer vesting period of five years. No special equity awards were granted to our NEOs in 2019.

 

     
     

2019 Equity Award Highlights

60% RSUs / 40% PSUs
Vesting period of three years (occasionally five years)
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 (other than CEO);
Company performance for PSUs;
Committee discretion; and
Competitive benchmarking
Number of RSUs and PSUs awarded is based on fair market value of our stock on the grant date
Strong stock holding requirements

     
     
 

The Committee grants equity awards to our CEO (salary band A) based on its assessment of his performance, Altria’s performance and competitive data. For our NEOs other than our CEO, the Committee establishes an appropriate range of equity awards based on the NEO’s salary band, advancement potential, individual performance and competitive data. The Committee then determines awards based on advancement potential and individual performance. The awards are generally granted on the date of Committee approval. No individual is guaranteed an award and all awards are capped under the 2015 Performance Incentive Plan (“2015 PIP”).

The targets and actual equity awards for grants made to our NEOs in February 2019 were as follows:

Name Band (1) Equity
Target
($)
Equity
Award Range
($)
Actual Equity
Award(2)(3)
($)
Howard A. Willard III      A      5,400,000           6,000,091
William F. Gifford, Jr. B 1,750,000 1,050,000-2,625,000 2,200,099
Murray R. Garnick B 1,750,000 1,050,000-2,625,000 2,200,099
Salvatore Mancuso D 520,000 312,000-780,000 676,039
Jody L. Begley D 520,000 312,000-780,000 650,089
Kevin C. Crosthwaite, Jr. D 520,000 312,000-780,000 728,042
Craig A. Johnson (4) B 1,750,000 1,050,000-2,625,000
(1) Band at time of grant.
(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 2019, 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 2019 table on page 51.
(3) Equity awards are split 60% RSUs and 40% PSUs.
(4) In light of Mr. Johnson’s retirement, he did not receive an equity award.

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EXECUTIVE COMPENSATION

Financial Performance Measures for 2019 PSUs

At the time the PSUs were granted in February 2019 with a 2019-2021 performance cycle, the Committee designated (1) adjusted diluted EPS growth and (2) relative TSR versus the S&P 500 Food, Beverage & Tobacco Index (defined as the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2019 and remain in the Index as of December 31, 2021) as the performance measures because these measures link to the long-term financial goals of our three-year plan:

growing adjusted diluted EPS over the long term; 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 Committee believes that the combination of these measures provides solid alignment between Altria’s business strategies and our shareholders’ interests.

2017 PSU Performance

The PSUs granted in January 2017 with a 2017–2019 performance cycle (“2017 PSUs”) were likewise measured against adjusted diluted EPS growth and relative TSR versus the S&P 500 Food, Beverage & Tobacco Index. The tables below reflect the performance related to the 2017 PSUs against each measure followed by the final determination of the number of shares of Altria common stock delivered to each NEO at the end of the three-year performance period.

Performance related to the 2017 PSUs was as follows:

Metric Rating %
Financial Metrics
(each 50%)
0 70 80 100 120 130 (1) Result Rating Weighting Weighted
Result
2017–2019 Adjusted
Diluted EPS Growth
   ≤3%       7%    7.9-8.3%     9%    ≥9.5%    11.7%    130    50%    65%
Relative TSR
(vs. the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2017 and remained in the Index as of December 31, 2019) (2)
<25th
percentile
25th
percentile
50th
percentile
≥75th
percentile
11th
percentile
0 50% 0%
Final 2017 PSU Rating 65%
(1)

Rating for each metric cannot exceed 130%.

(2)

Altria’s three-year TSR was -13.9%.


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EXECUTIVE COMPENSATION

The 2017 PSUs granted and number of shares of Altria common stock delivered to our NEOs in February 2020 were as follows:

Name       2017
PSUs
Granted
(#)
      2017 PSU
Performance Rating
(%)
      Altria Shares
Delivered
(#)
Howard A. Willard III 12,786             65             8,311
William F. Gifford, Jr. 12,786 65 8,311
Murray R. Garnick 7,033 65 4,571
Salvatore Mancuso 3,694 65 2,401
Jody L. Begley 2,274 65 1,478
Kevin C. Crosthwaite, Jr. (1) 1,173
Craig A. Johnson (2) 9,945 9,517
(1) Under the terms of the award agreement, Mr. Crosthwaite forfeited his 2017 PSU grant upon his resignation effective September 24, 2019.
(2) After Mr. Johnson turned age 65, 428 shares of Altria common stock associated with the PSUs were accelerated on November 15, 2017 to satisfy tax withholding for FICA taxes. Under the terms of the award agreement, Mr. Johnson received 9,517 shares at target due to his retirement on March 1, 2019.

Long-Term Incentives: 2017 – 2019 LTIP Awards

The 2017 – 2019 LTIP is a long-term performance plan that used a three-year, end-to-end performance cycle (January 1, 2017 to December 31, 2019), an approach consistent with our long-term strategic planning process in 2017. At the beginning of the cycle, the Committee approved long-term financial and strategic performance goals, to be measured after completion of the cycle. Each executive had an award target based on their salary band, expressed as a percentage of each year-end salary over the three-year cycle. Awards were paid in cash after the end of the three-year performance cycle based on the Committee’s assessment of actual performance against the financial and strategic performance goals during the entire award cycle. The Committee retained the discretion to adjust awards upward or downward, and no individual was guaranteed an award.

The Committee considered our executives’ earnings opportunity under the LTIP when setting compensation each year; however, those opportunities remained at risk until the Committee’s final assessment after the end of the three-year performance cycle.

                          
2017 – 2019 LTIP Highlights
Three-year, end-to-end performance cycle
Awards based on our performance against long-term financial and strategic goals and individual performance
      
      
      
      
               

The 2017 – 2019 LTIP performance cycle concluded on December 31, 2019 and rewarded achievement of financial and strategic performance measures (each weighted 50%) intended to create value for shareholders. The Committee assigned ratings from 0% to 130% based on performance against these measures.

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Our performance against the financial measures was as follows:

Metric Rating %
Financial Metrics
(50%)
0 70 80 100 120 130(1) Result Rating Weighting Weighted
Result
2017-2019 Adjusted
Diluted EPS Growth
≤3% 7% 7.9-8.3% 9% ≥9.5% 11.7% 130 50% 65%
Relative TSR (vs. the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2017 and remained in the Index as of December 31, 2019)(2) <25th
percentile
25th
percentile
50th
percentile
≥75th
percentile
11th
percentile
0 50% 0%
2017 – 2019 LTIP Financial Measures Rating 65%
(1) Rating for each metric cannot exceed 130%.
(2) Altria’s three-year TSR was -13.9%.

The Committee also assessed performance against the following strategic measures:

Strategic Measures (50%)       Performance Against Strategic Measures

Improve our operating companies’ key brand positions among adult tobacco consumers, including consumers 21-29.

Maintained or enhanced key brand metrics, including profitability, equity and share performance, and increased Marlboro and Copenhagen share of adult tobacco consumers 21-29.

Manage the core tobacco businesses to meet evolving compliance requirements and pursue product authorization decisions by the FDA.

Protected over 90% of the core tobacco businesses by managing the FDA’s substantial equivalence process to keep products in market or obtain new product authorizations.

Establish Altria as a leader in reduced risk products authorized by U.S. regulators.

Built leading portfolio of non-combustible products, including a leading moist smokeless tobacco business, IQOS in heated tobacco and an 80% ownership interest in on! oral nicotine pouches; offset by the negative impact of the JUUL investment, including the impairment charges.

Successfully navigate the external legislative and regulatory environment to support our business strategies.

Led the effort to urge Congress to enact corporate tax reform. Strongly advocated to raise the legal age to purchase all tobacco products to age 21. Defeated numerous tobacco state excise tax proposals.

Enhance our talent system, including diversity and inclusion, to improve our leadership capability.

Increased accountability for leaders to develop people and culture. Created new and innovative methods to source talent. Increased representation of women in Vice President and above positions to 28%, with less progress on people of color, to 15%.

2017 – 2019 LTIP Strategic Measures Rating 105%
2017 – 2019 LTIP Overall Business Performance Rating 85%

The following formula was the basis for determining the 2017 – 2019 LTIP awards:

Year-end Salaries
for Each Plan Year
x Award Target x Business
Performance
Rating
x Individual
Performance
Factor
= Three-Year
LTIP Award

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The 2017 – 2019 LTIP award target percentages and business and individual performance ratings for our NEOs were:

Name       Band       Individual
Award
Target (1)
(%)
      LTIP
Business
Performance
Rating
(0 - 130%)
      Individual
Performance
Assessment
(0 – 120
%)
      2017 – 2019
Actual
Award (2)
($)
Howard A. Willard III A 250 85        59  (3)        3,478,600
William F. Gifford, Jr. B 140 85 100 2,851,200
Murray R. Garnick B 140 85 100 2,887,900
Salvatore Mancuso C 105 85 100 1,008,500
Jody L. Begley C 105 85 100 821,400
Kevin C. Crosthwaite, Jr. (4) C 105 85 100 881,500
Craig A. Johnson (5) B 140 85 100 2,445,300
(1) Individual award target percentages are applied to each year-end base salary over the three-year performance cycle.
(2) Awards are prorated for time spent in each Band during the three-year performance cycle.
(3) The individual performance assessment for Mr. Willard reflects individual performance at 100% for the portion of his LTIP award covering 2017 and 50% for the portion of the LTIP award covering 2018 and 2019.
(4) Mr. Crosthwaite received an award based on the 85% business performance rating and target individual performance for the full performance cycle. His award also reflects his time in Band D and Band C on a prorated basis as a result of his promotion effective March 1, 2019.
(5) Mr. Johnson received an award prorated for service from January 1, 2019 to his retirement on March 1, 2019, based on the 85% business performance rating and target individual performance.

The 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 for the prior three-year period versus end-to-end cycles with payouts only every three years. With an increasingly difficult and unpredictable business environment, the Committee requested management to propose alternative LTIP design approaches during 2019. Early in 2020, the Committee approved a new LTIP design resulting in overlapping three-year plans starting in 2020 and continuing with a new three-year plan commencing each year.

Perquisites

The Committee believes that a competitive executive compensation package includes reasonable perquisites that supplement our retention efforts. The perquisites we provided to our NEOs in 2019 are set forth in the All Other Compensation table on page 50. 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 Committee approved a 2019 allowance of $200,000 for Mr. Willard’s personal aircraft usage. 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 Committee considers the potential value of personal aircraft usage in determining the other components of Mr. Willard’s total compensation.

The company vehicle perquisite has historically consisted of a car lease and vehicle-related expenses paid by Altria. As of January 1, 2020, all program participants, including our NEOs, transitioned from the company vehicle program to an annual vehicle allowance in the amount of $10,000 per year through 2023. Under this allowance program, there are no company-paid leases, and participants no longer receive company-paid vehicle-related expenses. Upon Mr. Willard’s election to Chairman and CEO, he ceased accepting the company-paid car lease and vehicle-related expenses and has declined the vehicle allowance going forward. Effective February 1, 2020, executive physicals are no longer available as a perquisite.

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

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are discussed in more detail in the narrative following the Pension Benefits table on page 54 and the Non-Qualified Deferred Compensation table on page 56.

Change in Control Payments. Our 2015 PIP, as well as our proposed 2020 Performance Incentive Plan, 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 2019 (all have since vested), provided for the vesting and payment of certain elements of compensation immediately upon a change in control. The details of these provisions are discussed under “Payments upon Change in Control or Termination of Employment” beginning on page 57.

Termination Payments. The Severance Pay Plan for Salaried Employees (“Severance Plan”), which is generally applicable to all salaried employees, provides an opportunity for financial protection against the unexpected event of an involuntary termination of employment. This plan is discussed further under “Payments upon Change in Control or Termination of Employment” beginning on page 57.

Executive Transitions

Kevin C. Crosthwaite, Jr.

Mr. Crosthwaite resigned as Senior Vice President, Chief Strategy and Growth Officer effective September 24, 2019 to become the Chief Executive Officer of JUUL. In connection with his resignation, the Committee approved the Annual Incentive Award plan and 2017 – 2019 LTIP payments described above. In addition, in light of Mr. Crosthwaite’s 22 years of distinguished service, the Committee agreed to pay Mr. Crosthwaite (i) an approximate $2.7 million cash payment in lieu of the outstanding equity awards (49,281 RSUs and 10,742 PSUs) that he forfeited immediately following separation from employment and (ii) a $2.5 million special recognition cash bonus. Mr. Crosthwaite was also entitled to payments and benefits generally available to departing employees under the terms of our benefit plans.

Craig A. Johnson

Mr. Johnson retired as President and Chief Executive Officer, Altria Group Distribution Company effective March 1, 2019. In connection with his retirement, the Committee approved the prorated Annual Incentive Award plan and 2017 – 2019 LTIP payments described above. In addition, upon his retirement, Mr. Johnson entered into a consulting agreement with Altria for the period of March 1, 2019 through December 31, 2019 and was compensated $500,000 for his services to us under the agreement. Mr. Johnson was also entitled to payments and benefits generally available to departing employees under the terms of our benefit plans.

Decision Making Process

Role of the Compensation and Talent Development Committee

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

The Committee:

Reviews and approves our overall executive compensation philosophy and design.
Reviews and approves corporate and individual 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.

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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 incentive award formulas.

Reviews survey data provided by our independent compensation consultant relating to our CSG.

Reviews initiatives and programs related to corporate culture and enterprise-wide talent development.

Committee Compensation Decisions

Early each year, our CEO presents to the 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.

Committee Establishment of CEO Performance Goals and CEO Performance Evaluation

At the beginning of each year, our CEO proposes annual performance goals to the 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 Aon plc (“Aon”). The Committee considers data provided from Aon in its deliberations.

     
 

Aon:

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 provides neither advice nor recommendations on the form or amount of our executive or director compensation, nor does Aon 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) 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, 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.

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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 Committee identifies companies that have all or most of the following characteristics:

revenues generally between $5 and $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.

Based on these criteria, the Committee included the following companies in the 2019 CSG and used this list for compensation-related decisions for 2019. The list is sorted by market capitalization as of December 31, 2019.

Compensation Survey Group Companies       Market
Capitalization (1)
($B)
The Coca-Cola Company             237            
Merck & Co., Inc. 232
PepsiCo, Inc. 191
Bristol-Myers Squibb Company 151
McDonald’s Corporation 149
Philip Morris International Inc. 132
Eli Lilly and Company 126
3M Company 102
Altria 93
Mondelēz International, Inc. 79
Median (2) 59
Colgate-Palmolive Company 59
Kimberly-Clark Corporation 47
Keurig Dr Pepper Inc. 41
The Kraft Heinz Company 39
General Mills, Inc. 32
The Hershey Company 31
Kellogg Company 24
Conagra Brands, Inc. 17
Campbell Soup Company 15
Molson Coors Brewing Company 12
(1) Market capitalization is calculated using shares outstanding as of the most recent public disclosure as of January 2, 2020 per Bloomberg multiplied by the closing stock price as of December 31, 2019.
(2) Median market capitalization excludes Altria.

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Risk Assessment

A cross-functional team of executives in the Human Resources & Compliance, Law, Corporate Audit and Finance departments periodically reviews 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. In 2019, management requested that its external compensation consultant, Aon, review this risk assessment process to confirm consistency with prevailing best practices. Aon’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 in 2019, the 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 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 incentive awards, coupled with the 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 align our interests with the interests of shareholders

     
     
 

Other Considerations

Stock Ownership and Holding Requirements and Prohibition on Hedging and Pledging

The 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 Committee set the requirements as 12 times base salary for salary band A (CEO), six times base salary for salary band B and five times for salary band C 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). 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, 2019, 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. A description of Altria’s policies regarding hedging and pledging can be found under “Prohibition on Hedging and Pledging” on page 80.

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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 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 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 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, subject to an exception for certain compensation granted or accrued before 2018. Covered officers include the principal executive officer, principal financial officer and next three highest-paid officers.

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

Compensation and Talent Development Committee Interlocks and Insider Participation

During 2019, no Altria executive officer served on the board of directors or compensation committee of any company that employs a member of our Board or the Committee. No member of the Committee at any time during 2019 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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Compensation Tables and Other Matters

Summary Compensation Table

The following table provides the compensation information of our NEOs for 2019, 2018 and 2017.

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 of the Board and CEO, Altria Group, Inc.
  2019   1,250,000   6,000,091     3,478,600   4,316,446   372,479   15,417,616
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
William F. Gifford, Jr.,
Vice Chairman and Chief Financial Officer, Altria Group, Inc.
2019 871,667 2,200,099 890,500 2,851,200 2,456,241 104,052 9,373,759
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
Murray R. Garnick,
Executive Vice President and General Counsel, Altria Group, Inc.
2019 871,667 2,200,099 890,500 2,887,900 149,855 7,000,021
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
Salvatore Mancuso,
Senior Vice President, Finance and Procurement, Altria Group, Inc.
2019 514,950 676,039 555,300 1,008,500 1,538,272 74,421 4,367,482
Jody L. Begley,
Senior Vice President, Tobacco Products, Altria Group, Inc.
2019 507,500 650,089 610,000 821,400 1,034,722 79,036 3,702,747
Kevin C. Crosthwaite, Jr.,
Former Senior Vice President, Chief Strategy and Growth Officer, Altria Group, Inc.
2019 408,680 728,042 403,000 881,500 102,312 5,171,833 7,695,367
2018 405,750 2,150,136 350,000 48,723 67,038 3,021,647
                           
Craig A. Johnson,
Former President and Chief Executive Officer, Altria Group Distribution Company
2019 273,756 151,000 2,445,300 1,161,220 532,771 4,564,047
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
(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 February 2019, together with their grant date values and vesting terms, is disclosed in the Grants of Plan-Based Awards during 2019 table on page 51. The assumptions we used in calculating the grant date fair values of the RSUs and the PSUs awarded in 2019 are described in Note 12 “Stock Plans” to our consolidated financial statements in the 2019 Form 10-K. The table below provides the grant date fair value of the PSUs awarded in 2019 for each of our NEOs assuming the maximum performance level is achieved.
Howard A.
Willard III
($)
William F.
Gifford, Jr.
($)
Murray R.
Garnick
($)
Salvatore
Mancuso
($)
Jody L.
Begley
($)
Kevin C.
Crosthwaite, Jr.
(a)
($)
      3,120,055       1,144,034       1,144,034       351,519       338,020       378,567
(a) Under the terms of the award agreement, Mr. Crosthwaite forfeited the 2019 equity award reflected above upon his resignation effective September 24, 2019.

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(2) The 2017 — 2019 LTIP used a three-year, end-to-end performance cycle. We paid executives in a lump sum cash award after the end of the three-year performance cycle, based on an assessment of overall business and individual performance during the entire award cycle. This end-to-end performance cycle significantly increased the NEOs’ 2019 total compensation in the Summary Compensation Table compared to 2018 and 2017, when no LTIP payments were made.
The table below reflects the impact on the Summary Compensation Table if the lump sum value was allocated over the 2017 — 2019 performance period.

          Non-Equity
Incentive Plans
Name 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         2019         1,250,000             6,000,091                     1,328,100         4,316,446         372,479         13,267,116
2018 1,113,201   6,750,070   2,250,000 1,110,400 1,192,673 267,755 12,684,099
2017 868,333   2,250,078   1,165,000 1,040,100 1,746,506 99,599 7,169,616
William F. Gifford, Jr. 2019 871,667   2,200,099   890,500 1,042,400 2,456,241 104,052 7,564,959
2018 820,000   5,750,042   928,600 1,011,500 381 102,662 8,613,185
2017 666,167   2,250,078   910,000 797,300 1,379,892 87,482 6,090,919
Murray R. Garnick 2019 871,667   2,200,099   890,500 1,042,400 149,855 5,154,521
2018 845,833   3,500,115   928,600 1,011,500 150,929 6,436,977
2017 774,133   1,237,603   910,000 834,000 259,228 4,014,964
Salvatore Mancuso 2019 514,950   676,039   555,300 439,100 1,538,272 74,421 3,798,082
                                       
                                       
Jody L. Begley 2019 507,500   650,089   610,000 443,300 1,034,722 79,036 3,324,647
                                       
                                       
Kevin C. Crosthwaite, Jr. 2019 408,680   728,042   403,000 443,300 102,312 5,171,833 7,257,167
2018 405,750   2,150,136   350,000 249,900 48,723 67,038 3,271,547
                                       
Craig A. Johnson 2019 273,756     151,000 189,000 1,161,220 532,771 2,307,747
2018 957,333   1,750,035   1,051,000 1,144,800 327,597 126,978 5,357,743
2017 929,500   1,750,037   1,142,000 1,111,500 1,128,270 119,483 6,180,790
(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 (or date of termination for Messrs. Crosthwaite and Johnson). The change in 2019 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.
(4) Details of other compensation for each of our NEOs appear in the All Other Compensation table shown below.

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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       2019       125,000       200,000             3,600       43,879       372,479
2018 111,320 150,000 3,055 3,300 80 267,755
2017 86,833 12,766 99,599
William F. Gifford, Jr. 2019 87,167 13,285 3,600 104,052
2018 82,000 17,062 3,600 102,662
2017 66,617 17,565 3,300 87,482
Murray R. Garnick 2019 130,750 15,505 3,600 149,855
2018 130,667 20,262 150,929
2017 124,220 19,742 3,300 111,966 259,228
Salvatore Mancuso 2019 51,495 19,326 3,600 74,421
 
 
Jody L. Begley 2019 50,750 24,686 3,600 79,036
 
 
Kevin C. Crosthwaite, Jr. 2019 17,016 5,154,817 5,171,833
2018 40,575 23,163 3,300 67,038
 
Craig A. Johnson 2019 27,376 1,795 3,600 500,000 532,771
2018 95,733 27,945 3,300 126,978
2017 92,950 23,233 3,300 119,483
(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.
(c) Car expenses include the annual cost of providing a vehicle allowance and/or a leased vehicle and operating expenses, including insurance, maintenance and repairs. Mr. Gifford was the only NEO who received a vehicle allowance in 2019. 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. Crosthwaite, this amount reflects cash payments of $2,654,817 in lieu of forfeited equity awards, based on the average of the closing prices of Altria common stock for the 20 trading days preceding and including September 18, 2019, and $2,500,000 for a special recognition bonus, in each case, made in connection with his resignation from Altria. For Mr. Johnson, this amount reflects aggregate payments in connection with the consulting agreement under which Mr. Johnson provided consulting services to Altria following his retirement (effective March 1, 2019) until December 31, 2019.

50 www.altria.com


Table of Contents

EXECUTIVE COMPENSATION

Grants of Plan-Based Awards during 2019

Name Grant Date



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
($)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
   
Howard A. Willard III    2019       1,875,000    10,000,000                             
2/26/2019 46,940 61,022     2,400,042  (4)
2/26/2019   69,132   3,600,049  (5)
William F. Gifford, Jr. 2019 832,200 10,000,000      
2/26/2019 17,212 22,375     880,050  (4)
2/26/2019   25,349   1,320,049  (5)
Murray R. Garnick 2019 832,200 10,000,000      
2/26/2019 17,212 22,375     880,050  (4)
2/26/2019   25,349   1,320,049  (5)
Salvatore Mancuso 2019 416,000 10,000,000      
2/26/2019 5,289 6,875     270,427  (4)
2/26/2019   7,789   405,612  (5)
Jody L. Begley 2019 420,000 10,000,000      
2/26/2019 5,086 6,611     260,047  (4)
2/26/2019   7,490   390,042  (5)
Kevin C. Crosthwaite, Jr. (6) 2019 420,000 10,000,000      
2/26/2019 5,696 7,404     291,236  (4)
2/26/2019   8,388   436,805  (5)
Craig A. Johnson (7) 2019 933,900 10,000,000      
(1) Reflects the target and maximum awards under the 2019 Annual Incentive Award plan. Actual awards paid under the 2019 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 on February 26, 2019. 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. These grants will vest on February 28, 2022.
(3) Reflects RSUs granted to our NEOs on February 26, 2019. Holders of RSUs receive cash dividend equivalents paid quarterly during the vesting period. These grants will vest on February 28, 2022.
(4) Reflects the grant date fair value of the target PSUs using a grant date fair value of $51.13. The grant date fair value was 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 96.38%.
(5) Reflects the grant date fair value of the RSUs using a grant date fair value of $52.075. 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) Under the terms of the award agreement, Mr. Crosthwaite forfeited his 2019 equity awards upon his resignation effective September 24, 2019.
(7) In light of Mr. Johnson’s retirement, he did not receive an equity award in 2019.

Altria Group, Inc. – Proxy Statement 51


Table of Contents

EXECUTIVE COMPENSATION

Outstanding Equity Awards as of December 31, 2019

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 2/26/2019 2/28/2022 69,132 3,450,378 46,940 2,342,775
5/17/2018 6/1/2023 48,825 2,436,856 37,106 1,851,960
1/30/2018 2/11/2021