DEF 14A 1 d673038ddef14a.htm NOTICE & PROXY STATEMENT Notice & Proxy Statement

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

SCHEDULE 14A

SCHEDULE 14A INFORMATION

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 Pursuant to §240.14a-12.

Avon Products, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO

A V O N

 

 


April 2, 2019

Dear Shareholders:

It is my pleasure to invite you to join me, the Board of Directors, senior leaders, and current and former employees at the 2019 Annual Meeting of Shareholders in New York, New York. Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.

We hope that you will join us in person, but whether or not you plan to attend the Annual Meeting, your vote is important. I encourage you to vote by telephone, by internet or by signing, dating, and returning your proxy card by mail. Voting instructions are found on page 6 of the Proxy Statement.

On behalf of the Board of Directors and Avon management, thank you for your investment and interest in Avon.

 

           Sincerely yours,  
  LOGO  
           Jan Zijderveld  
           Chief Executive Officer  


AVON PRODUCTS, INC.

Building 6, Chiswick Park

London W4 5HR

United Kingdom

YOUR VOTE IS IMPORTANT – YOU CAN VOTE IN ONE OF FOUR WAYS:

 

LOGO   LOGO   LOGO   LOGO

 

VIA THE INTERNET

Visit the website listed on your

proxy card

 

 

BY TELEPHONE

Call the telephone

number on your proxy card

 

 

BY MAIL

Sign, date and return your proxy

card in the enclosed envelope

 

 

IN PERSON

Attend the Annual Meeting

 

If your shares are held in a stock brokerage account or by a bank or other record holder, follow the voting instructions on the form that you receive from them. The availability of telephone and internet voting will depend on their voting process.

    Meeting Agenda

 

 

 

1   Elect as directors the eight nominees named in the Proxy Statement;

 

 

 

2   Hold a non-binding, advisory vote to approve compensation of our named executive officers;

 

 

3   Approve the Amended and Restated 2016 Omnibus Incentive Plan;

 

 

4   Ratify the appointment of PricewaterhouseCoopers LLP, United Kingdom, as our independent registered public accounting firm for 2019; and

 

 

5   Transact such other business as may properly come before the meeting.

 

 

 

           

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

Thursday, May 16, 2019

 

 

9:00 a.m.

 

 

Convene

810 Seventh Ave

22nd Floor

New York, NY 10019

    

 

How to Attend the Meeting

 

  

If you plan to attend the meeting in person, please see page 6 for admission requirements.

 

  

The record date for the meeting is March 27, 2019. This means that you are entitled to receive notice of meeting and vote your shares at the meeting if you were a shareholder of record as of the close of business on March 27, 2019.

 

   By order of the Board of Directors,
  

 

LOGO

  

Ginny Edwards

Vice President & Corporate Secretary

 

  

April 2, 2019

 

  

Important notice regarding the availability of proxy materials for the shareholder meeting to be held on May 16, 2019:

 

Our Proxy Statement and Annual Report to Shareholders are available at www.edocumentview.com/avp.

 


TABLE OF CONTENTS

 

PROXY SUMMARY

     1    

VOTING AND MEETING INFORMATION

     6    

PROPOSAL 1 – ELECTION OF DIRECTORS

     10    
INFORMATION CONCERNING THE BOARD OF DIRECTORS      16    

2018 Board Meetings

     16    

Board Leadership Structure

     16    

Risk Oversight

     16    

Board Committees

     17    

Director Independence

     18    

Board Policy Regarding Voting for Directors

     19    

Board & Committee Self-Evaluations

     19    

Director Nomination Process  &

Shareholder Nominations

     19    

Communications with Directors

     20    

Certain Legal Proceedings

     20    
Compensation and Management Development Committee Interlocks and Insider Participation      20    

DIRECTOR COMPENSATION

     21    

EXECUTIVE OFFICERS

     23    

OWNERSHIP OF SHARES

     25    

TRANSACTIONS WITH RELATED PERSONS

     27    

SECTION 16(a) BENEFICIAL OWNERSHIP

     29    

EXECUTIVE COMPENSATION

     30    

Letter from the Committee Chair

     31    

Compensation Discussion and Analysis

     33    

Compensation and Risk Management

     55    
Compensation and Management Development Committee Report      56    

Executive Compensation Tables

     57    
PROPOSAL 2 – ANNUAL ADVISORY VOTE TO
APPROVE EXECUTIVE COMPENSATION
     71    
PROPOSAL 3 – APPROVAL OF THE AMENDED AND RESTATED 2016 OMNIBUS INCENTIVE PLAN      73    
EQUITY COMPENSATION PLAN INFORMATION      83    
AUDIT COMMITTEE REPORT      84    
PROPOSAL 4 – RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
     86    
SOLICITING MATERIAL      88    
SOLICITATION OF PROXIES      88    

SHAREHOLDER PROPOSALS FOR

2020 ANNUAL MEETING

     88    
INFORMATION REQUESTS      88    

Appendix A

     A-1    
 


PROXY SUMMARY

This summary highlights information contained elsewhere in the Proxy Statement and in Avon Products, Inc.’s (“Avon,” the “Company,” “we,” “us,” or “our”) Annual Report on Form 10-K for the year ended December 31, 2018. This summary is not a complete description and you should read the entire Proxy Statement carefully before voting. Proxy materials were first sent to shareholders on or about April 2, 2019.

Meeting Agenda

 

  Matter

 

Board Vote

Recommendation

 

Page Reference  

(for more detail)  

  PROPOSAL 1

 

Election of the eight Director Nominees named in this  Proxy Statement

 

 

FOR EACH NOMINEE

 

 

10

 

  PROPOSAL 2

 

Annual Non-Binding, Advisory Vote to Approve Compensation of our Named Executive Officers

 

 

FOR

 

 

71

 

  PROPOSAL 3

 

Approval of the Amended and Restated 2016 Omnibus Incentive Plan

 

 

FOR

 

 

73

 

  PROPOSAL 4

 

Ratification of PricewaterhouseCoopers LLP, United Kingdom, as Independent Registered Public Accounting Firm for 2019

 

FOR

 

86

Board and Governance Highlights

 

 

The Company has adopted many leading governance practices that establish strong independent leadership in our boardroom and provide our shareholders with meaningful rights. Highlights include:

 

    Since 2016, over 60% Board member refreshment including new Chief Executive Officer (“CEO”) in 2018

 

    Annual election of directors

 

    Non-executive Chairman of the Board and Lead Independent Director

 

    All directors are independent other than CEO

 

    Proxy Access

 

    Majority vote standard with resignation policy for election of directors in uncontested elections

 

    Directors may serve on limited number of other public boards

 

    Regular Executive Sessions of independent directors

 

    Annual board and committee evaluations

 

    No supermajority voting with respect to common stock, except as provided under New York Business Corporation law

 

    Compensation: Many compensation best practices, including double-trigger change-in-control benefits, no excise tax reimbursements for change-in-control payments, prohibition against hedging and pledging common stock, claw-back policy, stock ownership guidelines and certain holding period requirements

  

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

 

TENURE AVERAGE: 4 Years

AVERAGE AGE:         61

 

 

   AVON 2019 Proxy Statement    1


Board Nominees and Designees

The following table provides summary information about each director nominated for election by our Board of Directors (the “Board”) to the Board at the 2019 Annual Meeting (collectively, the “Director Nominees”) and each director elected to the Board by holders of our Series C Preferred Stock (collectively, the “Series C Designees”). Director Nominees are elected annually by a majority of the votes cast by our shareholders, voting together as a single class. The Series C Designees have been elected by the holders of our Series C Preferred Stock, voting separately as a class.

 

    Nominees and Designees

 

 

Committee Membership

 

Names  

Director

Since

  Independent1  

Other

Public

Boards

 

Audit

Committee

 

Compensation

and

Management

Development

Committee

 

 

Finance

Committee

 

Nominating  

and  

Corporate  

Governance  

Committee  

 

 

Jose Armario

 

 

 

2016

 

 

 

I

 

 

 

1

 

 

 

LOGO

 

 

 

LOGO

 

   

 

W. Don Cornwell2

 

 

 

2002

 

 

 

I

 

 

 

2

 

 

 

LOGO   LOGO

 

   

 

LOGO

 

 

 

LOGO   

 

 

Chan W. Galbato3,4

 

 

 

2016

 

 

 

I

 

 

 

2

 

 

 

LOGO

 

     

 

LOGO   

 

 

Nancy Killefer

 

 

 

2013

 

 

 

I

 

 

 

2

 

   

 

LOGO

 

   

 

LOGO   

 

 

Susan J. Kropf

 

 

 

2015

 

 

 

I

 

 

 

3

 

      LOGO

 

 

 

Helen McCluskey

 

 

 

2014

 

 

 

I

 

 

 

3

 

   

 

LOGO

 

   

 

Andrew G. McMaster, Jr.

 

 

 

2018

 

 

 

I

 

 

 

0

 

 

 

LOGO   LOGO

 

     

 

James A. Mitarotonda

 

 

 

2018

 

 

 

I

 

 

 

2

 

     

 

LOGO

 

 

 

Michael F. Sanford4

 

 

 

2016

 

 

 

I

 

 

 

0

 

   

 

LOGO

 

 

 

LOGO

 

 

 

Lenard B. Tessler4

 

 

 

2018

 

 

 

I

 

 

 

1

 

       

 

Jan Zijderveld5

 

 

2018

     

 

0

               

1  Independent in accordance with NYSE listing standards, SEC regulations, and our Corporate Governance Guidelines

 

2  Lead Independent Director

 

3  Non-executive Chairman of the Board

 

4  Series C Designee

 

5  CEO

    

    LOGO  - Committee Chair

 

    LOGO   - Member

 

 

   LOGO  - Financial Expert

 

LOGO - Non-Voting Observer

 

Attendance

Each Director Nominee and each Series C Designee on the Board in 2018 attended at least 75% of the aggregate number of 2018 meetings of the Board and each Board Committee on which he or she served.

 

2    AVON 2019 Proxy Statement   


Business and Strategy Highlights

Few companies have the brand recognition, extensive global reach or market-leading positions in beauty and direct selling that Avon has. In a world where trust in companies is becoming a scarcer commodity, a Representative’s strong relationship with her consumers continues to be highly relevant.

Avon is an organization with a clear and compelling purpose, operating in the beauty and personal care categories across the globe with a focus on developing and growing markets. Through our millions of direct selling Representatives, we empower micro-entrepreneurs across the globe. Avon’s core purpose to provide part-time earnings to families and offer amazing products at great prices is as relevant today, if not more, than it was 130 years ago at the Company’s founding. Avon’s ongoing progress to unlock e-commerce, make Avon available to anyone, anywhere and enable our Representatives to be more competitive is powerful, and is at the heart of Avon’s value proposition. In 2018, Avon introduced digital mobile brochures in 60 countries, on-line stores for Representatives in 20 markets and relaunched our e-commerce positioning in China thereby driving significant early growth in the e-commerce channel.

Overall 2018 operating results were disappointing, total revenue from reportable segments was down 2% compared to the prior year, driven by declines in Brazil, Russia and the United Kingdom. The 2018 full year results reinforced the urgent need to execute Avon’s new strategic direction and we have made good progress.

In 2018 we made critical progress in addressing the key concerns of leadership and strategic direction. Throughout the year we continued to strengthen Avon’s leadership team, further recruiting seasoned and skilled senior executives. The process of putting in place a leadership team to accelerate change and to increase sustainable profit continued with the recruitment by the Board of a new CEO, Jan Zijderveld, who joined Avon in February 2018. Before joining Avon, Mr. Zijderveld was a senior executive and 30-year veteran of Unilever N.V./PLC with a track record as a proven global leader driving profitable growth in large, multi-channel, complex consumer businesses across emerging, developing and developed markets. We also made other critical appointments in key markets resulting in Avon now having new leadership in markets that account for more than 50% of total revenue. We are confident that Avon has an energized, highly motivated leadership team in place with the skillset required to deliver our new Open Up Strategy and the experience needed to restore Avon to growth in key emerging and developing markets.

Avon is operating in a dramatically changing and competitive environment, where business as usual is not an option for Avon. A year ago, the Board gave Mr. Zijderveld a clear mandate to lead a deep and comprehensive strategic and operating review of all facets of the business and evaluate ways to significantly accelerate Avon’s path to profitable growth. This review led to the development and launch of Avon’s new Open Up Strategy, which was communicated to shareholders in September 2018. Our Open Up Strategy is simple and clear, and we made important progress during Q3 and Q4 of 2018, including in the following areas: Reboot Direct Selling; Open Up Mindset; Deliver Fuel for Growth; Refresh and Strengthen the Brand. (See page 34 for a more detailed discussion.)

In 2018, we faced the reality of our situation and acted with focus and intent to launch a comprehensive corporate turn-around strategy, addressing all key areas of our business and achieved good early-stage progress. We laid the groundwork, strengthened the executive leadership team and put the right plan in place. We’ve started to fix the core and we’re moving in the right direction, but we need to do more. In 2019 we need to execute our Open Up Strategy with pace and drive, build momentum to see our financial results grow quarter over quarter and start delivering key strategic milestones necessary to achieve our business plan and implementing our strategy.

Shareholder Engagement & 2018 Compensation Highlights

At our 2018 annual meeting, shareholders representing approximately 85% of votes cast approved our “say-on-pay” proposal in support of our executive compensation program. While the vast majority of our shareholders are in favor of our executive compensation programs, we remain committed to shareholder engagement and value insights provided from our fellow shareholders.

During 2018, we continued our practice of engaging with our shareholders and soliciting feedback. Having received strong support for our 2018 say-on-pay proposal, in 2018 our shareholder engagement focused particularly on gaining feedback and input from shareholders who did not support our say-on-pay proposal in 2018. As in recent years, the Chair of the Compensation and Management Development Committee (the “Committee”) conducted shareholder outreach to ensure shareholder perspectives and concerns were heard and well understood. Shareholder outreach meetings were conducted as the 2019 incentive programs design was developing, which enabled the Committee to directly incorporate feedback and suggestions into the 2019 program design. The feedback received from our shareholders continues to be tremendously valuable. While shareholders raised different challenges and concerns, they consistently agreed that the performance metrics for both the short and long-term programs should be directly tied to Avon’s strategy. This feedback has been incorporated into our program design.

The 2018 executive compensation program was highly performance-based and provided incentive opportunities that align with our shareholders’ interests and our strategic and financial goals. Performance goals were selected to fully align with our commitment to our shareholders. The Committee took the following specific actions with respect to the compensation of the NEOs for 2018:

 

   

Base Salary: No increase to base salaries

 

   AVON 2019 Proxy Statement    3


   

Annual Cash Incentive: Even though our Open Up Strategy resulted in important progress during Q3 and Q4 of 2018, we were unable to achieve annual incentive plan threshold performance given the challenging macro environment and the robust nature of our goal setting process. Consistent with the formulaic nature of the program and the avoidance of positive discretion, there were no annual cash incentive award payouts to the NEOs with respect to 2018 performance (other than to Mr. Zijderveld, who was guaranteed a minimum annual incentive payout of 50% of target in his employment contract, solely for 2018; the rationale for this was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited).

 

   

Long-Term Incentive Awards:

 

     

Our CEO’s 2018 long-term incentive award has a target value of $3.25 million and is 100% performance-based with the following mix:

 

   

40% premium-priced stock options (“Premium Options”) with exercise price equal to 125% of the closing price of a share of Avon stock as of the grant date, and

 

   

60% performance-based restricted stock units (“Performance RSUs”) with a three-year performance period.

 

     

Additionally, our CEO received one-time sign-on inducement awards in 2018, 50% of which were performance-based and in the form of Performance RSUs and the other 50% were service-based restricted stock units (“Service-based RSUs”). These performance-based inducement awards have three separate tranches, all of which are eligible to vest only after completion of the 2020 performance year. The Committee will establish at the beginning of each year (i.e., 2018, 2019 and 2020) the performance objectives required to earn the award – ensuring that the Committee can tailor the measures and their rigor to the business circumstances. The non-performance based restricted stock units were granted as a replacement of a portion of his prior employer forfeited equity awards, and to promote shareholder alignment and retention over the three-year vesting period. These inducement awards cliff vest after three years.

 

     

For other NEOs, 2018 long-term incentive awards consisted of Performance RSUs, Service-based RSUs, and Premium Options, each representing one-third of the overall target award.

Our Say on Pay Proposal is found on page 71 and our Board recommends that our shareholders vote “For” this proposal. The following factors support this recommendation:

 

   

Our programs are designed to support and drive short- and long-term, externally communicated business objectives. Further, an analysis of our programs demonstrates a strong and direct link between realizable pay and performance.

 

   

Our program design incorporates shareholder feedback received during outreach campaigns.

 

   

Our long-term incentive plan design is aligned with shareholder value, requiring significant stock price appreciation before target awards are realized. As a result, we have delivered long-term incentive compensation for our NEOs well below target.

 

   

We have also maintained a focus on limiting shareholder dilution.

 

   

We benchmark our executives’ pay against a peer group that better reflects Avon’s business following the separation of our North America business.

2019 Compensation Highlights

We are committed to ensuring that Avon’s pay framework, particularly our incentive programs, are aligned with and reflect the most important task of our executive team – returning our business to profitable growth. Following the introduction of the Open Up Strategy the Committee undertook a detailed, thorough and holistic review of Avon’s incentive arrangements (fixed, short and long-term) to determine if our pay arrangements are aligned with Avon’s new strategic direction, key priorities and timelines.

Following this thorough review, the Committee believes that many elements of the current incentive program remain appropriate, as it has strong performance elements that support our externally communicated business goals and requires significant stock price appreciation for executives to realize target compensation. However, for 2019 the Committee made a number of adjustments to the incentive arrangements, to further strengthen their alignment with Avon’s strategic direction and focus on delivering the turnaround strategy with urgency. For example, the 2019 long-term incentive program places a greater focus on one-year performance than our historical practice in order to explicitly reflect our shareholders’ feedback, which stressed the urgency of delivering the turnaround strategy as well as enabling the retention of critical staff needed to deliver the turnaround.

 

4    AVON 2019 Proxy Statement   


Governance and Related Materials

The Company has established strong policies, practices and procedures which provide a framework for effective governance. Our Corporate Governance Guidelines describe our Board’s governance policies and practices, including standards for director independence, qualifications for Board and Board Committee membership, Board and Board Committee responsibilities, and Board and CEO evaluations. Highlighted below are some of our key governance and related materials:

 

   

Corporate Governance Guidelines

   

Charters of Each Board Committee

   

Code of Conduct

   

Corporate Responsibility Report

The Corporate Governance Guidelines, charters of each Board Committee, and Corporate Responsibility Report are available on our investor website (investor.avonworldwide.com) and may be accessed by clicking on “Corporate Governance”. Both the Code of Conduct and Corporate Responsibility Report are available at www.avonworldwide.com and may be accessed by clicking on “Our Values” and “Responsible Business”, respectively.

 

   AVON 2019 Proxy Statement    5


VOTING AND MEETING INFORMATION

 

 

Purpose of Materials

 

  

 

We are providing these proxy materials in connection with the solicitation by the Board of Directors of Avon Products, Inc. (“Avon,” the “Company,” “we,” “us,” or “our”) of proxies to be voted at our Annual Meeting of Shareholders, which will take place on Thursday, May 16, 2019.

  

This Proxy Statement describes the matters to be voted on at the Annual Meeting and contains other required information.

 

Distribution of Proxy Materials

 

  

 

We are providing access to our proxy materials over the internet. Accordingly, on or about April 2, 2019, we mailed our shareholders a Notice of Internet Availability of Proxy Materials (“proxy notice”), which contains instructions on how to access our proxy materials over the internet and vote online. If you received a proxy notice, you will not receive a printed copy of our proxy materials by mail unless you request one by following the instructions provided on the proxy notice. We mailed the proxy materials to participants in our Avon Personal Savings Account Plan (“the PSA Plan”).

 

Shareholders Entitled to Vote

 

  

 

Shareholders of our common stock and of our Series C Preferred Stock as of the close of business on March 27, 2019, the record date, are entitled to vote. There were approximately 442,504,364 shares of our common stock outstanding on March 27, 2019 for an aggregate vote of approximately 442,504,364 (or one vote per share) and 435,000 shares of our Series C Preferred Stock outstanding on March 27, 2019 for an aggregate vote of 87,051,524 (on an as-converted basis). Shareholders of our common stock and of our Series C Preferred Stock will vote together as a single class on all matters being presented in this Proxy Statement, for up to an aggregate 529,555,888 votes. We refer to the holders of shares of our common stock and of shares of our Series C Preferred Stock (which are convertible into shares of our common stock) as “shareholders” throughout this Proxy Statement.

 

How to Vote

 

  

 

Shareholders can vote in one of several ways:

  

•    Via the Internet—Visit the website on the proxy notice or proxy card

  

•    By Telephone—Call the telephone number on the proxy card

  

•    By Mail—Sign, date and return your proxy card in the enclosed envelope

  

•    In Person—Attend the Annual Meeting (follow instructions below)

  

 

If your shares are held in a stock brokerage account or by a bank or other record holder, follow the voting instructions on the form that you receive from them. The availability of telephone and internet voting will depend on their voting process. If you do not give instructions to the broker, bank or other record holder holding your shares, it will not be authorized to vote with respect to Proposals 1, 2 or 3. We therefore urge you to provide instructions so that your shares may be voted.

 

Attending the Annual Meeting

 

  

 

Shareholders who would like to attend the Annual Meeting in person are asked to follow the guidelines below. Anyone who arrives without an admission ticket or pre-registration will not be admitted to the Annual Meeting unless it can be verified that the individual was a shareholder as of March 27, 2019.

 

6    AVON 2019 Proxy Statement   


   Shareholders of Record (shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A.)
  

•    Please bring the admission ticket that is attached to your proxy notice and/or proxy card and photo identification. If you vote in advance of the Annual Meeting, please keep a copy of your admission ticket and bring it with you.

  

•    If you do not have your admission ticket at the Annual Meeting, you must bring other proof of your Avon share ownership as of March 27, 2019 and photo identification.

   Beneficial Owners (shares are held in a stock brokerage account, in the PSA Plan, or by a bank or other record holder)
  

•    We recommend that you pre-register to attend the meeting by sending a written request, along with proof of ownership (such as a current brokerage statement), to our Investor Relations Department, Avon Products, Inc., 1 Avon Place Suffern, New York 10901, by mail, by email at investor.relations@avon.com or by fax 203-724-1610. We must receive your request at least one week prior to the Annual Meeting to have time to process your request. In addition, please bring photo identification to the Annual Meeting.

  

•    You may attend without pre-registration; however, you must bring proof of your Avon share ownership as of March 27, 2019 and photo identification.

  

Shares held in a stock brokerage account or by a bank or other record holder may be voted in person at the Annual Meeting only if you obtain a legal proxy from such broker, bank or other record holder giving you the right to vote the shares. Shares held through the PSA Plan must be voted through the PSA Plan Trustee as described below.

 

Voting Instructions

 

    
  

 

Your proxy, when properly signed and returned to us, or processed by telephone or via the internet, and not revoked, will be voted in accordance with your instructions. We are not aware of any other matter that may be properly presented at the meeting. If any other matter is properly presented, the persons named as proxies on the proxy card will have discretion to vote in their best judgment.

  

 

Unless you give other instructions on your proxy card, or unless you give other instructions when you cast your vote by telephone or via the internet, the persons named as proxies will vote in accordance with the recommendations of Avon’s Board as follows: for the election of each Director Nominee, for the approval of the compensation of our named executive officers, for the approval of the Amended and Restated 2016 Omnibus Incentive Plan and for the ratification of the appointment of our independent registered public accounting firm.

 

Revoking Your Proxy or

Changing Your Vote

 

  

 

Shareholders are entitled to revoke their Proxies at any time before their shares are voted at the Annual Meeting. To revoke a Proxy, you must file a written notice of revocation with the Company’s Corporate Secretary at 1 Avon Place Suffern, NY 10901, deliver a duly executed Proxy bearing a later date than the original submitted Proxy, submit voting instructions again by telephone or via the Internet, or attend the Annual Meeting and vote in person. Attendance at the Annual Meeting will not, by itself, revoke your Proxy.

  

 

If your shares are held in a stock brokerage account or by a bank or other record holder, you may submit new voting instructions by contacting your broker, bank or other record holder or, if you have obtained a legal proxy from your broker, bank or other record holder giving you the right to vote your shares, by attending the meeting and voting in person.

 

   AVON 2019 Proxy Statement    7


 

Quorum Requirements

 

    
  

 

The presence at the meeting, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote at the Annual Meeting will constitute a quorum, permitting the meeting to conduct its business.

  

Abstentions and “broker non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker non-vote occurs when a broker or other record holder holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power and has not received instructions from the beneficial owner. If you do not give instructions to the broker, bank or other record holder holding your shares, it will not be authorized to vote your shares with respect to Proposals 1, 2, or 3. We therefore urge you to provide instructions so that your shares held in a stock brokerage account or by a bank or other record holder may be voted.

 

 

Approval of a Proposal

 

    
  

 

Each of the Proposals requires the affirmative vote of a majority of the votes cast at the Annual Meeting. “Votes cast” means the votes actually cast “for” or “against” a particular proposal, whether in person or by proxy.

 

 

Avon Associates—Personal

Savings Account Plan

 

 

  

 

The trustee of the PSA Plan, as record holder of the shares held in the PSA Plan, will vote the shares allocated to your account in accordance with your instructions. Unless your vote is received by 11:59 P.M. (New York time) on May 10, 2019 and unless you have specified your instructions, your shares cannot be voted by the trustee.

 

 

Voting Deadline

 

    
  

 

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., and if you vote by telephone or the internet, your vote must be received by 1:00 A.M. (New York time) on May 16, 2019. If you prefer not to vote by telephone or internet, you should complete and return the proxy card as soon as possible, so that it is received no later than the closing of the polls at the Annual Meeting.

   If your shares are held in a stock brokerage account or by a bank or other record holder, you should return your voting instructions in accordance with the instructions provided by the broker, bank or other record holder who holds the shares on your behalf.
  

If you hold shares in the PSA Plan, your voting instructions must be received by 11:59 P.M. (New York time) on May 10, 2019.

 

 

Tabulation of Votes

 

    
  

 

Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of election.

 

 

Vote Results

 

    
  

 

We intend to announce preliminary voting results at the Annual Meeting and to publish final results in a Current Report on Form 8-K within four business days of the Annual Meeting.

  

 

All proxies, ballots and voting materials that identify the votes of specific shareholders will generally be kept confidential, except as necessary to meet applicable legal requirements, to allow for the tabulation and certification of votes, and to facilitate a successful proxy solicitation.

 

8    AVON 2019 Proxy Statement   


 

Householding

 

    
  

 

Beneficial owners who share a single address may receive only one copy of the proxy notice or the proxy materials, as the case may be, unless their broker, bank or other nominee has received contrary instructions from any beneficial owner at that address. This practice, known as “householding,” is designed to reduce printing and mailing costs. If any beneficial owner(s) sharing a single address wish to discontinue householding and/or receive a separate copy of the proxy notice or the proxy materials, as the case may be, or wish to enroll in householding, they should contact their broker, bank or other nominee directly. Alternatively, if any such beneficial owners wish to receive a separate copy of the proxy materials, we will deliver them promptly upon written or oral request to Investor Relations Department, Avon Products, Inc., 1 Avon Place Suffern, New York 10901, by mail, email at investor.relations@avon.com or fax 203-724-1610 (telephone number 212-282-5320). We currently do not “household” for our registered shareholders.

 

   AVON 2019 Proxy Statement    9


PROPOSAL 1—ELECTION OF DIRECTORS

The Board of Directors has fixed the number of directors at 11. The Board has nominated Jose Armario, W. Don Cornwell, Nancy Killefer, Susan J. Kropf, Helen McCluskey, Andrew G. McMaster, Jr., James A. Mitarotonda, and Jan Zijderveld (the “Director Nominees”) for election to the Board, and Cerberus Investor, as the holder of the Company’s Series C Preferred Stock, has elected Chan W. Galbato, Michael F. Sanford and Lenard B. Tessler, (the “Series C Designees”) to serve as directors commencing immediately upon the conclusion of the 2019 Annual Meeting. All nominees are current members of our Board. There are no family relationships among our directors or executive officers.

As set forth in further detail on page 20, on March 26, 2018, the Company entered into an agreement with certain shareholders (the “Nomination Agreement”), pursuant to which the Company agreed to nominate Mr. Mitarotonda for election to the Board at the 2018 Annual Meeting. With Mr. Mitarotonda’s re-nomination for election to the Board at the 2019 Annual Meeting, certain terms of the Nomination Agreement remain in effect.

Each of the Series C Designees will hold office until the next succeeding Annual Meeting or until his successor is elected and qualified. Each of the Director Nominees, if elected as a director at the 2019 Annual Meeting, will generally hold office until the next succeeding Annual Meeting or until his or her successor is elected and qualified. As set forth in further detail on page 29, Cerberus Investor is required to vote its shares in favor of each Director Nominee. Each Director Nominee has consented to being named as a nominee in our proxy materials and to serve as a director, if elected. We have no reason to believe that any of the Director Nominees will be unable or unwilling to serve as a director.

Each Director Nominee who receives a majority of the votes cast will be elected to the Board. If a Director Nominee is an incumbent director and he or she receives a greater number of votes “withheld” from his or her election than votes “for” such election, he or she is required to tender his or her resignation in accordance with our Corporate Governance Guidelines, as described under “Information Concerning The Board Of Directors—Board Policy Regarding Voting for Directors” on page 19.

 

THE BOARD OF DIRECTORS RECOMMENDS

that you vote FOR the election of each of the Director Nominees listed below.

 

 

JOSE ARMARIO

 

 

Director Nominee

 

LOGO

 

  Jose Armario is the Chief Executive Officer of Bojangles’ Restaurants, Inc. Prior to joining Bojangles’ Restaurants, Inc. in January 2019, he served as Corporate Executive Vice President of Worldwide Supply Chain, Development, and Franchising of McDonald’s Corporation from August 2011 until his retirement in October 2015. He served as Group President, McDonald’s Canada and Latin America of McDonald’s Corporation from February 2008 to August 2011. Prior to this, Mr. Armario was President, McDonald’s Latin America from 2004 to July 2008. Earlier in his career, Mr. Armario held operating roles of increasing responsibility at Lenscrafters, Inc. and Burger King Corporation. Mr. Armario is currently a director of USG Corporation. He also serves on the President’s Council of the University of Miami, Florida and the Governing Council of Advocate Good Samaritan Hospital, and as a director of Golden State Foods and Receptions for Research: The Greg Olsen Foundation.  

Director since: 2016

 

Age: 59

 

COMMITTEES

Audit Committee

Compensation and
Management
Development Committee

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Having served in a variety of key leadership positions in nearly two decades with McDonald’s Corporation, Mr. Armario brings to the Board substantial experience leading large complex operations in global marketing, branding, supply chain, franchising and strategic planning. His first-hand consumer experience and global responsibilities with McDonald’s Corporation, particularly in Latin America, provide him with valuable insights to guide Avon in its key geographies.

 

10    AVON 2019 Proxy Statement   


 

W. DON CORNWELL

 

 

Director Nominee

 

LOGO

 

  Mr. Cornwell was Chairman and Chief Executive Officer of Granite Broadcasting Corporation from 1988 until his retirement in August 2009, and served as Vice Chairman until December 2009. Previously, Mr. Cornwell was Chief Operating Officer for the Corporate Finance Department at Goldman, Sachs & Co. from 1980 to 1988 and Vice President of the Investment Banking Division of Goldman Sachs from 1976 to 1988. He is a trustee of Big Brothers Big Sisters of New York and a director of Blue Meridian Partners, a partnership of philanthropists. Mr. Cornwell is a director of Pfizer, Inc. and American International Group, Inc.  

Director since: 2002

 

Age: 71

 

COMMITTEES

Audit Committee

Finance Committee (Chair)

Nominating and Corporate Governance Committee

 

Lead Independent Director

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Through Mr. Cornwell’s career as an entrepreneur driving the growth of a consumer focused-media company, an executive in the investment banking industry and as a director of several significant consumer product and health care companies, he has accumulated valuable business, leadership, and management experience and brings important perspectives on the issues facing the Company. Mr. Cornwell founded and built Granite Broadcasting Corporation, a consumer-focused media company, through acquisitions and operating growth, enabling him to provide insight and guidance on the Company’s strategic direction and growth. Mr. Cornwell’s strong financial background, including his work at Goldman Sachs prior to co-founding Granite and his service on the audit and investment committees of other companies’ boards, also provides financial expertise to the Board, including an understanding of financial statements, corporate finance, accounting, and capital markets.

 

 

NANCY KILLEFER

 

 

Director Nominee

 

LOGO

 

  Ms. Killefer served as a Senior Partner at McKinsey & Company, an international management consulting firm, until her retirement in August 2013. She joined McKinsey in 1979 and held a number of leadership roles, including as a member of the firm’s governing board. Ms. Killefer led the firm’s recruiting and chaired several of the firm’s personnel committees. From 2000 to 2007, she ran McKinsey’s Washington, D.C. office. From 1997 to 2000, Ms. Killefer served as Assistant Secretary for Management, Chief Financial Officer and Chief Operating Officer at the U.S. Department of Treasury. In 2000, she returned to McKinsey to establish and lead the firm’s Public Sector Practice. She also served as a member of the IRS Oversight Board from 2000 to 2005 and as chair of that body from 2002 to 2004. Ms. Killefer is currently a director of Cardinal Health and Taubman Centers, Inc. She also served as a chairman and director of CSRA until 2018 and director of The Advisory Board until 2017.  

Director since: 2013

 

Age: 65

 

COMMITTEES

Compensation and Management Development Committee

Nominating and Corporate Governance Committee (Chair)

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Having served in key leadership positions in both the public and private sectors and having provided strategic counsel to consumer-based companies during her 30 years with McKinsey & Company, Ms. Killefer brings to the Board substantial experience in the areas of strategic planning, including sales, marketing and brand building. Her experience as a partner of a global management consulting firm and as Chief Financial Officer and Chief Operating Officer of a government agency provides valuable expertise in the areas of executive leadership and finance. Ms. Killefer’s corporate governance experience as a director of other public companies, including as the former chairman of the board of directors of CSRA, is also highly valuable to the Board.

 

   AVON 2019 Proxy Statement    11


 

SUSAN J. KROPF

 

 

Director Nominee

 

LOGO

 

  Ms. Kropf served as President and Chief Operating Officer of Avon Products, Inc. from January 2001 until her retirement in 2006. She also served as Avon’s Executive Vice President and Chief Operating Officer, North America and Global Business Operations from 1999 to 2001 and Executive Vice President and President, North America from 1998 to 1999. Ms. Kropf was a member of Avon’s Board of Directors from 1998 to 2006. Ms. Kropf is currently a director of Tapestry (formerly Coach, Inc.), The Kroger Co., New Avon LLC and The Sherwin-Williams Company. Ms. Kropf also served as a director of Mead Westvaco Inc. until 2015.  

Director since: 2015

 

Age: 70

 

COMMITTEES

Finance Committee

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Having held various senior management positions during the course of her 37-year career at Avon, including full profit-and-loss responsibility for all of Avon’s worldwide operations as its President and Chief Operating Officer, Ms. Kropf has extensive operational skills, a deep understanding of direct selling, and significant experience in marketing, research and development, product development, customer service, supply chain operations and manufacturing. Ms. Kropf has a strong financial background gained through her career at Avon and from her service on the boards of various public companies, including their compensation, audit, and corporate governance committees.

 

 

HELEN MCCLUSKEY

 

 

Director Nominee

 

LOGO

 

  Ms. McCluskey was President, Chief Executive Officer and a member of the Board of Directors of The Warnaco Group, Inc. from February 2012 to February 2013, when it was acquired by PVH Corp., and she then served on the board of directors of PVH Corp. until June 2014. Ms. McCluskey also served in other leadership roles at Warnaco, including Chief Operating Officer from September 2010 to February 2012 and Group President from July 2004 to September 2010. Prior to joining Warnaco, Ms. McCluskey held positions of increasing responsibility at Liz Claiborne, Inc. from August 2001 to June 2004. Prior to that, she spent 18 years in Sara Lee Corporation’s intimate apparel units, where she held executive positions in marketing, operations and general management, including President of Playtex Apparel from 1999 to 2001. Ms. McCluskey is currently a director of Abercrombie & Fitch Co., Dean Foods Company and Signet Jewelers Limited.  

Director since: 2014

 

Age: 64

 

COMMITTEES

Compensation and Management Development Committee (Chair)

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Ms. McCluskey has a broad background in strategy, business planning and operations derived from a career spanning over 30 years with leading consumer goods companies. Having built women’s brands globally for sale through all channels of distribution worldwide, she brings a valuable blend of branding, merchandising, marketing and international expertise to the Board. Ms. McCluskey’s experience as a Chief Executive Officer of a global public company provides her with significant expertise in global business matters, corporate leadership and management which enables her to make important contributions to the oversight of the Company’s strategic direction and growth, and management development.

 

12    AVON 2019 Proxy Statement   


 

ANDREW G. MCMASTER, JR.

 

 

Director Nominee

 

LOGO

 

  Mr. McMaster served as Deputy Chief Executive Officer and Vice Chairman at Deloitte & Touche LLP (“Deloitte”) from 2002 until his retirement in May 2015. He joined Deloitte in 1976 and held a number of leadership roles, including National Managing Partner of Deloitte’s Office of the CEO client programs and of Deloitte’s U.S. and Global Forensic and Dispute Consulting practice. Mr. McMaster is currently a director of Black & Veatch Holding Company and UBS Americas Holding LLC, a subsidiary of UBS AG. Mr. McMaster also currently serves as Chairman of the Financial Accounting Standards Advisory Council (FASAC), an advisory body to the Financial Accounting Standards Board (FASB), and as Vice Chair of the Hobart and William Smith Colleges Board of Trustees.  

Director since: 2018

 

Age: 66

 

COMMITTEES

Audit Committee (Chair)

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Mr. McMaster has substantial experience in the areas of finance, audit and accounting, having served as a senior executive during a 39-year career with Deloitte, as the current Chair of the audit committees of Black & Veatch Holding Company and UBS Americas Holding LLC, and as the current Chairman of the Financial Accounting Standards Advisory Council. He also gained experience in a variety of operational, client service and firm leadership roles at Deloitte, serving many of the firm’s largest, most complex global clients as both a Lead Engagement partner and an Advisory Partner across diverse industries.

 

 

JAMES A. MITAROTONDA

 

 

Director Nominee

 

LOGO

 

  Mr. Mitarotonda has served as the Chairman of the Board, President and Chief Executive Officer of Barington Capital Group, L.P. (“Barington Capital”), an investment firm that he co-founded, since 1991. He has also served as the Chairman of the Board, President and Chief Executive Officer of Barington Companies Investors, LLC, the general partner of a value-added activist investment fund, since 1999. Mr. Mitarotonda is currently a director of OMNOVA Solutions Inc. and The Eastern Company, where he is the Chairman of its Board of Directors. He also serves as a member of the Board of Trustees for Queens College. Mr. Mitarotonda previously served as a director of A. Schulman until 2018, The Pep Boys-Manny, Moe & Jack until 2016, Ebix, Inc. until 2015, and The Jones Group Inc. until 2014. He also served as a director of Barington/Hilco Acquisition Corp. until January 2018, as its Chief Executive Officer until 2015, and as its Chairman until 2017.  

Director since: 2018

 

Age: 64

 

COMMITTEES

Finance Committee

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Through his over 25 years as Chairman of the Board of Directors, President and Chief Executive Officer of Barington Capital, Mr. Mitarotonda brings to the Board extensive financial, investment banking and executive leadership experience. He also has significant board of director and corporate governance experience through his service on numerous public company boards across diverse industries, including consumer-focused companies such as The Jones Group and The Pep Boys-Manny, Moe & Jack.

 

   AVON 2019 Proxy Statement    13


 

JAN ZIJDERVELD

 

 

Director Nominee

 

 

LOGO

 

  Mr. Zijderveld joined Avon as Chief Executive Officer and was appointed to the Board of Directors in February 2018. He joined Avon after 30 years with Unilever N.V./PLC (“Unilever”), where he rose to serve as a member of the Executive Committee and President of Unilever’s European business in 2011. In this position, Mr. Zijderveld oversaw 25,000 employees and operations in 34 countries. Prior to that, he served in a number of leadership roles, including Executive Vice President of Unilever, South East Asia & Australasia from 2008 to 2011, while also acting as Non-Executive Chairman of Unilever’s listed Indonesian business, and CEO of Unilever, Middle East and North Africa (MENA) from 2005 to 2008. Earlier in his career, he served in numerous leadership positions across Europe, Australia and New Zealand in general management, marketing, sales and distribution. Mr. Zijderveld currently sits on the Board of Directors of HEMA.  

Director since: 2018

 

Age: 54

 

CEO

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Having spent 30 years with Unilever, a transnational consumer goods company, during which time he lived and worked in seven countries across three continents, Mr. Zijderveld possesses deep operating experience in multi-channel, complex consumer businesses across emerging, developing and developed markets. His particular experience in Europe, the Middle East and Asia enable him to provide insights and understanding into these areas and help guide the Company’s strategic decisions in these markets. His leadership positions at Unilever provide him with vast experience in marketing, sales and distribution, and make him uniquely qualified in making necessary decisions for the Company’s long-term growth, business goals and managing challenging market conditions.

 

 

 

 

 

CHAN W. GALBATO

 

 

Series C Designee

 

 

LOGO

 

 

Mr. Galbato was appointed non-executive Chairman of Avon’s Board of Directors in March 2016. Mr. Galbato is Chief Executive Officer of Cerberus Operations and Advisory Company, LLC. Prior to joining Cerberus in 2009, he owned and managed CWG Hillside Investments LLC, a consulting business, from 2007 to 2009. From 2005 to 2007, he served as President and CEO of the Controls Group of businesses for Invensys plc. Mr. Galbato previously served as President and Chief Executive Officer of Armstrong Floor Products, President of Services for The Home Depot and Chief Executive Officer of Choice Parts. He spent 14 years with General Electric Company, holding several operating and finance leadership positions within its various industrial divisions as well as holding the role of President and CEO of Coregis Insurance Company, a G.E. Capital company. Mr. Galbato currently serves on the Board of Directors of AutoWeb, Inc., Blue Bird Corporation, DynCorp International, Electrical Components International, FirstKey Homes LLC, Staples Solutions B.V. and Steward Health Care, LLC, and on the Board of Managers of New Avon LLC. Mr. Galbato had previously served as lead director of the Brady Corporation, director of Tower International until 2014 and Chairman of YP Holdings, LLC until 2017.

 

Mr. Galbato was re-elected to the Board of Directors commencing immediately upon the conclusion of the 2019 Annual Meeting by the holders of our Series C Preferred Stock, voting separately as a single class, and is not up for election by our shareholders at the 2019 Annual Meeting.

 

Director since: 2016

 

Age: 56

 

COMMITTEES

Audit Committee (non-voting Observer)

Nominating and Corporate Governance Committee

 

Non-executive Chairman of the Board

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Through his 30 years of experience as an executive at public and private companies across a range of industries, including consumer products, Mr. Galbato has broad operational and business strategy expertise and significant skills in corporate leadership including as a Chief Executive Officer. Mr. Galbato is recognized for his experience in corporate turnarounds, which enables him to help guide the Company’s strategic direction and growth.

 

14    AVON 2019 Proxy Statement   


 

MICHAEL F. SANFORD

 

 

Series C Designee

 

 

LOGO

 

 

Mr. Sanford is a Senior Managing Director, Co-Head of Private Equity, and a member of the Global Private Equity Investment Committee at private investment firm Cerberus Capital Management, L.P. Prior to joining Cerberus in 2006, Mr. Sanford was at The Blackstone Group (“Blackstone”) in its Restructuring and Reorganization Advisory Group from 2004 to 2006, where he advised companies and creditors on a variety of restructuring transactions. Prior to joining Blackstone, from 2003 to 2004, Mr. Sanford worked at Bank of America Securities in its Consumer and Retail Investment Banking Group, where he executed various financing, M&A and leveraged recapitalization transactions. He serves on the Board of Directors of DynCorp International Inc., Electrical Components International, Subcom, Navistar Defense and Tier 1 Group LLC and on the Board of Managers of New Avon LLC.

 

Mr. Sanford was re-elected to the Board of Directors commencing immediately upon the conclusion of the 2019 Annual Meeting by the holders of our Series C Preferred Stock, voting separately as a single class, and is not up for election by our shareholders at the 2019 Annual Meeting.

 

Director since: 2016

 

Age: 38

 

COMMITTEES

Compensation and Management Development Committee

Finance Committee

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Through his career in various roles with finance and private equity firms, Mr. Sanford has extensive experience in financing matters and private equity investments. Mr. Sanford’s insights into capital management, restructuring, and capital markets are highly valuable to the Board.

 

 

LENARD B. TESSLER

 

 

Series C Designee

 

LOGO

 

 

Mr. Tessler is currently Vice Chairman and Senior Managing Director of private investment firm Cerberus Capital Management, L.P., where he is a member of the Cerberus Capital Management Investment Committee. Prior to joining Cerberus in 2001, Mr. Tessler served as Managing Partner of TGV Partners from 1990 to 2001, a private equity firm which he founded. Earlier in his career, he was a founding partner of Levine, Tessler, Leichtman & Co., and a founder, Director and Executive Vice President of Walker Energy Partners. Mr. Tessler is currently Lead Director of Albertsons Companies, and a director of Keane Group, Inc. He is also a Trustee of the New York-Presbyterian Hospital where he is a member of the Investment Committee and the Budget and Finance Committee.

 

Mr. Tessler was re-elected to the Board of Directors commencing immediately upon the conclusion of the 2019 Annual Meeting by the holders of our Series C Preferred Stock, voting separately as a single class, and is not up for election by our shareholders at the 2019 Annual Meeting.

 

Director since: 2018

 

Age: 66

SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:

Through his senior executive positions held during the course of over 30 years at private investment firms and his service on boards of directors of operating companies, Mr. Tessler has an extensive background in financing and private equity investments, which provides critical skills to the Board in its oversight of strategic planning and operations.

 

   AVON 2019 Proxy Statement    15


INFORMATION CONCERNING THE BOARD OF DIRECTORS

2018 Board Meetings

Our Board of Directors held seven meetings in 2018. Directors are expected to attend all meetings of the Board and the Board Committees on which they serve and to attend the Annual Meeting of Shareholders. In 2018, all directors then serving on the Board attended at least 75% of the aggregate number of 2018 meetings of the Board and of each Board Committee on which he or she served. All directors then serving on the Board attended the 2018 Annual Meeting. In addition to participation at Board and Committee meetings and the Annual Meeting of Shareholders, our directors discharge their duties throughout the year through communications with senior management.

Non-employee directors meet in regularly scheduled executive sessions, as needed, without the CEO or other members of management.

Board Leadership Structure

The Board currently separates the positions of Chairman, Lead Independent Director and CEO. Mr. Galbato serves as our non-executive Chairman of the Board, Mr. Cornwell serves as our Lead Independent Director and Mr. Zijderveld serves as our CEO.

The Board evaluates its leadership structure periodically and believes that separating the Chairman, Lead Independent Director and CEO roles is important as the Company focuses on its transformation and growth efforts. Per the Company’s By-Laws, the Chairman presides at all meetings of the Board, including executive sessions, at which the Chairman is present, and the Lead Independent Director presides at all meetings of the Board at which the Chairman is not present. Additional rights, duties and responsibilities of the Chairman and the Lead Independent Director are set forth in the By-Laws and the Corporate Governance Guidelines. Pursuant to the Investor Rights Agreement, so long as Cerberus Investor maintains a certain ownership level in the Company (as described in more detail on page 29 of this Proxy Statement), Cerberus Investor has the right to select the director to be appointed as our Chairman.

Risk Oversight

The Board administers its risk oversight function primarily through the Audit Committee, which oversees the Company’s risk management practices. The Audit Committee is responsible for, among other things, discussing with management on a regular basis the Company’s guidelines and policies that govern the process for risk assessment and risk management. Management is responsible for assessing and managing the Company’s various risk exposures on a day-to-day basis. In connection with this, the Audit Committee has oversight of the Company’s enterprise risk management (“ERM”) program, which includes a risk management committee composed of certain key executives. The cross-functional group of key executives who comprise the risk management committee identify, on a periodic basis, the top current and future risks facing the Company, including, but not limited to, strategic, operational, financial and compliance risks, and the associated risk owners are responsible for managing and mitigating these risks. The Board may assign certain ERM risks to a specific Board Committee to examine in detail if such Board Committee is in the best position to review and assess the risk. In line with this, the Company provides regular ERM updates to the Audit Committee on several risks, including cybersecurity and data privacy, and to other Board Committees, as appropriate. The Audit Committee also periodically reports to the full Board on the Company’s ERM program.

While the Board has overall responsibility for overseeing risk management, Board Committees oversee risk within their areas of responsibility, as appropriate. For example, as set forth in further detail on page 55, our Compensation and Management Development Committee, with support and advice from its independent consultant, reviews the risk and reward structure of executive compensation plans, policies and practices at least annually to confirm that there are no compensation-related risks that are reasonably likely to have a material adverse effect on the Company. As set forth in its charter, the Finance Committee is responsible for, among other things, reviewing periodically the Company’s strategy for and use of derivatives for hedging risks such as interest rate and foreign exchange risks.

For certain risks, oversight is conducted by the full Board, such as during the Board’s annual review of the Company’s strategic goals and initiatives and other significant issues that are expected to affect the Company in the future. We believe that the Chairman, Lead Independent Director, CEO, and roles of the Board and the Board Committees provide the appropriate leadership to help ensure effective risk oversight.

 

16    AVON 2019 Proxy Statement   


Board Committees

The Board has the following regular standing committees: Audit Committee, Compensation and Management Development Committee, Nominating and Corporate Governance Committee, and Finance Committee. The charters of each Committee and our Corporate Governance Guidelines are available on the Corporate Governance tab of our investor website (investor.avonworldwide.com). Our Code of Conduct (which applies to the Company’s directors, officers and employees) is available on the “Our Values” tab of www.avonworldwide.com.

 

   

 

Audit Committee

 

 

 

Primary Responsibilities

 

  

 

2018 Meetings: 12    

 

 

 

Andrew G. McMaster, Jr. (Chair)

Jose Armario

W. Don Cornwell

 

Chan W. Galbato*

*non-voting Observer

 

 

    Assists the Board in fulfilling its responsibility to oversee the integrity of our financial statements, controls and disclosures, our compliance with legal and regulatory requirements, the qualifications and independence of our independent registered public accounting firm, and the performance of our internal audit function and independent registered public accounting firm. The Committee has the authority to conduct any investigation appropriate to fulfilling its purpose and responsibilities.

 

   

    The Board has determined that Messrs. McMaster and Cornwell are “audit committee financial experts” under the rules of the Securities and Exchange Commission (the “SEC”) and that all of the Committee members are independent and financially literate under the listing standards of the New York Stock Exchange (the “NYSE”).

 

   

    A further description of the role of the Audit Committee is set forth on pages 84 through 87 under “Audit Committee Report” and “Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm.”

 

   

 

Compensation and

Management Development

Committee

 

 

 

Primary Responsibilities

  

 

2018 Meetings: 9    

 

 

Helen McCluskey (Chair)

Jose Armario

Nancy Killefer

Michael F. Sanford

 

 

    Discharges the responsibilities of the Board relating to executive compensation, including reviewing and establishing our overall executive compensation and benefits philosophy, including review of the risk and reward structure of executive compensation plans, policies and practices, as appropriate. In addition, the Committee, in consultation with the independent members of the Board, reviews and approves the goals and objectives relevant to the compensation of the CEO and determines the compensation of the CEO. It also determines the compensation of all senior officers and oversees incentive compensation plans, including establishing performance measures and evaluating and approving any incentive payouts thereunder.

 

   

    Reviews and evaluates the Company’s talent management and succession planning approach, philosophy, and key processes, and is responsible for development and succession plans for members of the Company’s Executive Management Committee, and provides oversight of development plans for their potential successors.

 

   

    The Committee may delegate responsibilities to a subcommittee composed of one or more members of the Committee, provided that any action taken shall be reported to the full Committee as soon as practicable, but in no event later than at the Committee’s next meeting. In addition, the Committee may delegate certain other responsibilities, as described in the Committee charter. For example, the Committee has delegated to Mr. Zijderveld, in his capacity as a director, the authority to approve annual and off-cycle equity awards to employees who are not senior officers.

 

   

    A description of the role of the compensation consultant engaged by the Committee, scope of authority of the Committee and the role of executive officers in determining executive compensation is set forth on page 51 under “Compensation Discussion and Analysis—Roles in Executive Compensation.”

 

   AVON 2019 Proxy Statement    17


   

 

Nominating and Corporate

Governance Committee

 

 

 

Primary Responsibilities

  

 

2018 Meetings: 6    

 

 

Nancy Killefer (Chair)

W. Don Cornwell

Chan W. Galbato

 

 

   Identifies individuals qualified to become Board members, consistent with criteria approved by the Board, and recommends to the Board the candidates for directorships to be filled by the Board. A description of the Committee’s process for identifying and evaluating nominees for directorships is set forth on page 19 under “Director Nomination Process & Shareholder Nominations.”

 

   

   Develops and recommends to the Board corporate governance principles, monitors developments in corporate governance, and makes recommendations to the Board regarding changes in governance policies and practices.

 

   

   Oversees the evaluation of the Board, including conducting an annual evaluation of the performance of the Board and Board committees.

 

   

   Reviews and recommends to the Board policies regarding the compensation of non-employee directors.

 

   

   A description of the compensation of non-employee directors and the Committee’s scope of authority with respect to such matters is set forth on page 22 under “Director Compensation—Role of Nominating and Corporate Governance Committee.”

 

   

 

Finance Committee

 

 

 

Primary Responsibilities

 

  

 

2018 Meetings: 5    

 

 

 

W. Don Cornwell (Chair)

Susan J. Kropf

James A. Mitarotonda

Michael F. Sanford

 

 

   Assists the Board in fulfilling its responsibilities to oversee our financial management, including oversight of our capital structure and financial strategies, investment strategies, banking relationships, and funding of the employee benefit plans.

 

 

   Responsible for the oversight of the deployment and management of our capital, including the oversight of certain key business initiatives.

Director Independence

The Board has concluded that each non-employee director, Director Nominee and Series C Designee is independent.

The Board assesses the independence of its non-employee members at least annually in accordance with the listing standards of the NYSE, the regulations of the SEC, and our Corporate Governance Guidelines. As part of its assessment, the Board determines whether or not any such director has a material relationship with the Company, either directly or indirectly as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board broadly considers all relevant facts and circumstances and considers this issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. This consideration includes:

 

   

the nature of the relationship;

 

   

the significance of the relationship to Avon, the other organization and the individual director;

 

   

whether or not the relationship is solely a business relationship in the ordinary course of Avon’s and the other organization’s businesses and does not afford the director any special benefits; and

 

   

any commercial, industrial, banking, consulting, legal, accounting, charitable, familial and other relationships; provided, that ownership of a significant amount of our stock is not, by itself, a bar to independence.

In assessing the independence of directors and the materiality of any relationship with Avon and the other organization, the Board has determined that a relationship in the ordinary course of business involving the sale, purchase or leasing of property or services will not be deemed material if the amounts involved, on an annual basis, do not exceed the greater of (i) $1,000,000 or (ii) one percent (1%) of Avon’s revenues or one percent (1%) of the revenues of the other organization involved.

In the ordinary course of business, the Company has business relationships with certain companies on which Avon directors also serve on the board of directors, including for example, advertising arrangements, software services, and insurance coverage. The Company also has ongoing business relationships with affiliates of Cerberus Investor, of which the Series C Designees serve as directors, officers or employees, as described in “Transactions with Related Persons” on page 27. Based on the standards described above, the Board has determined that none of these transactions or relationships, nor the associated amounts paid to the parties, was material such that it would impede the exercise of independent judgment.

 

18    AVON 2019 Proxy Statement   


Board Policy Regarding Voting for Directors

Our Corporate Governance Guidelines provide that any incumbent director who receives a greater number of votes “withheld” than votes “for” his or her election in an uncontested election of directors will promptly tender his or her resignation. The Nominating and Corporate Governance Committee (the “Nominating Committee”) will recommend to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. The Nominating Committee will consider any factors or other information that it considers appropriate or relevant. The Board, taking into account the Nominating Committee’s recommendation, will act on the tendered resignation and publicly disclose its decision and the rationale within 90 days from the date of the certification of the election results.

Board and Committee Self-Evaluations

Pursuant to the Company’s Corporate Governance Guidelines and each committee’s charter, the Board and each of its committees annually conducts a self-assessment. The Nominating Committee oversees the process. In recent years, the Board has used the Corporate Secretary or a third-party facilitator to interview each Director to obtain his or her feedback regarding the Board’s and each committee’s effectiveness, as well as feedback on each individual Director and the Chairman, Lead Independent Director and each committee chair in their respective roles. Self-evaluation topics generally include, among other matters, Board and committee composition and structure; effectiveness of the Board and committees; meeting topics and process; and Board interaction with management. The Board discusses the results of each annual self-evaluation and, based on the results, implements enhancements and other modifications as appropriate. Similarly, the results of each committee evaluation are generally discussed at subsequent committee meetings for the relevant committee. Individual feedback is provided to Directors by the Chairman and the Lead Independent Director.

Director Nomination Process & Shareholder Nominations

The Nominating Committee is responsible for identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and for making recommendations to the Board regarding: (i) nominees for Board membership to fill vacancies and newly created positions, and (ii) the persons to be nominated by the Board for election at the Company’s annual meeting of shareholders. The Nominating Committee actively considers potential director candidates on an ongoing basis as part of its director succession planning efforts.

The Nominating Committee’s process for considering all candidates for election as directors, including shareholder-recommended candidates, is designed to ensure that the Nominating Committee fulfills its responsibility to recommend candidates that are properly qualified and are not serving any special interest groups, but rather the best interest of all of the shareholders.

In making its recommendations, the Nominating Committee evaluates each candidate based on the independence standards described above and other qualification standards described below. For example, our Corporate Governance Guidelines and the charter of the Nominating Committee require that our directors possess the highest standards of personal and professional ethics, character and integrity and meet the standards set forth in our Corporate Governance Guidelines. In identifying candidates for membership on the Board, the Nominating Committee takes into account all factors it considers appropriate, consistent with criteria approved by the Board, which may include professional experience, knowledge, independence, diversity of backgrounds, and the extent to which the candidate would fill a present or evolving need on the Board. There is not a formal diversity policy; however, the Board values diversity in its broadest sense, including differences of viewpoint, personal and professional experience, skill, gender, race, ethnicity, geography, and other individual characteristics, and the Nominating Committee endeavors to include women, minority, and geographically diverse candidates in the qualified pool from which Board candidates are chosen.

The Board takes an active and thoughtful approach to refreshment and strives to maintain a balance of longer-tenured directors and newer directors with fresh ideas and viewpoints to achieve an appropriate balance of continuity and refreshment. The Board does not believe in limiting the number of terms that a director may serve, as term limits could deprive the Company and its shareholders of valuable director experience and familiarity with the Company and its operations; however, the re-nomination of incumbent directors is not automatic. In accordance with the Company’s Corporate Governance Guidelines, all directors serve one-year terms and any non-employee director who will be age 72 or older at the time of the election may not stand for reelection unless requested by the Board. The composition of our Board, as contemplated by our current slate of nominees, includes six new independent directors since 2016. In addition, in 2018, Jan Zijderveld joined the Board in connection with his appointment as the Company’s Chief Executive Officer. As a result of these Board changes, tenure on the Board currently ranges from less than one year to 17 years, with an average Board tenure of 4 years.

The Nominating Committee has retained a third-party search firm to locate candidates who may meet the needs of the Board at that time. The firm typically provides information on a number of candidates for review and discussion by the Nominating Committee. As appropriate, the Nominating Committee chair and other members of the Nominating Committee and the Board interview potential candidates. If the Nominating Committee determines that a potential candidate meets the needs of the Board, possesses the relevant qualifications, and meets the standards set forth in our Corporate Governance Guidelines, the Nominating Committee will vote to recommend to the Board the election of the candidate as a director.

 

   AVON 2019 Proxy Statement    19


On March 26, 2018, the Company and certain of its shareholders entered into the Nomination Agreement, pursuant to which the Company agreed to nominate Mr. Mitarotonda for election to the Board at the 2018 Annual Meeting. The shareholders party to the Nomination Agreement consist of Shah Capital Management, Inc., NuOrion Advisors, LLC, and Barington Capital and certain of their respective affiliates (collectively, the “Barington Group”). In connection with the Nomination Agreement, the Barington Group withdrew its notice of nomination for the 2018 Annual Meeting. The Nomination Agreement requires each member of the Barington Group to abide by certain customary voting and standstill provisions, subject to certain exceptions, through Mr. Mitarotonda’s service on the Board, including that at the 2019 Annual Meeting it will vote all of its shares of the Company’s common stock that it or its affiliates have the right to vote in favor of the election of directors nominated by the Board and refrain from soliciting proxies or participating in any “withhold” or similar campaign. The foregoing is not a complete description of the terms of the Nomination Agreement and the associated Confidentiality Agreement. For copies of, and more information concerning, the Nomination Agreement and the Confidentiality Agreement, please see the Company’s Current Report on Form 8-K filed with the SEC on March 26, 2018 and Exhibits 10.1 and 10.2 thereto.

The Nominating Committee will consider director candidates recommended by shareholders if properly submitted to the Nominating Committee in accordance with our By-Laws and our Corporate Governance Guidelines. Shareholders wishing to recommend persons for consideration by the Nominating Committee as nominees for election to the Board can do so by writing to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Avon Products, Inc., 1 Avon Place, Suffern, NY 10901. Recommendations must include the proposed nominee’s name, detailed biographical data, work history, qualifications and corporate and charitable affiliations. A written statement from the proposed nominee consenting to be named as a nominee and, if nominated and elected, to serve as a director is also required. The Nominating Committee will then consider the candidate and the candidate’s qualifications using the criteria as set forth above. The Nominating Committee may discuss with the shareholder the reasons for making the nomination and the qualifications of the candidate. The Nominating Committee may then interview the candidate and may also use the services of a search firm to provide additional information about the candidate prior to making a recommendation to the Board.

Shareholders of record may also nominate candidates for election to the Board by following the procedures set forth in our By-Laws. The Company’s By-laws include proxy access provisions whereby a shareholder, or a group of up to 20 shareholders, who owns 3% or more of the Company’s common stock continuously for at least three years, may nominate and include in the Company’s proxy materials candidates for election as directors of the Company. Such shareholder(s) or group(s) of shareholders may nominate up to the greater of two individuals or 20% of the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in the By-Laws and comply with the other procedural requirements of our Corporate Governance Guidelines. Please also see Section 14(a) of Article 3 of our By-Laws for details regarding the nomination of a Director candidate through the Advance Notice Process which is separate from a proxy access nomination. Information regarding these procedures for nominations by shareholders will be provided upon request to our Corporate Secretary.

Communications with Directors

A shareholder or other interested person who wishes to contact the Chairman, the Lead Independent Director or the non-employee or independent directors as a group may do so by addressing his or her correspondence to the Chairman, the Lead Independent Director or such directors, c/o Corporate Secretary, Avon Products, Inc., 1 Avon Place, Suffern, NY 10901. All correspondence addressed to a director or group of directors will be forwarded to that director or group of directors.

Certain Legal Proceedings

There are no material legal proceedings to which any of our directors, executive officers, or beneficial owners of more than 5% of the outstanding shares of Avon common stock, or any affiliate thereof, is a party adverse to us or has a material interest adverse to us.

Compensation and Management Development Committee Interlocks and Insider Participation

No member of our Board’s Compensation and Management Development Committee has served as one of our officers or employees at any time. None of our executive officers served during 2018 as a member of the board of directors or as a member of a compensation committee of any other company that has an executive officer serving as a member of our Board of Directors or Compensation and Management Development Committee.

 

20    AVON 2019 Proxy Statement   


DIRECTOR COMPENSATION

The following table discloses compensation received by our non-employee directors during 2018.

 

Director

 

  

 

Fees Earned or
Paid in Cash

($)1

 

  

 

Stock

Awards

($)2

 

  

 

All Other

Compensation

($)3

 

  

Total        

($)        

 

 

Jose Armario

 

  

 

91,000

 

  

 

115,000

 

  

 

61

 

  

 

206,061

 

 

W. Don Cornwell6

 

  

 

203,000

 

  

 

115,000

 

  

 

15,561

 

  

 

333,561

 

 

Chan W. Galbato4,6

 

  

 

231,000

 

  

 

115,000

 

  

 

61

 

  

 

346,061

 

 

Nancy Killefer

 

  

 

93,000

 

  

 

115,000

 

  

 

61

 

  

 

208,061

 

 

Susan J. Kropf

 

  

 

81,000

 

  

 

115,000

 

  

 

61

 

  

 

196,061

 

 

Steven F. Mayer4,5

 

  

 

18,750

 

  

 

-

 

  

 

15

 

  

 

18,765

 

 

Helen McCluskey

 

  

 

90,000

 

  

 

115,000

 

  

 

61

 

  

 

205,061

 

 

Andrew G. McMaster, Jr.

 

  

 

90,000

 

  

 

115,000

 

  

 

41

 

  

 

205,041

 

 

James A. Mitarotonda

 

  

 

56,000

 

  

 

115,000

 

  

 

41

 

  

 

171,041

 

 

Charles H. Noski5

 

  

 

25,000

 

  

 

-

 

  

 

15,526

 

  

 

40,526

 

 

Cathy D. Ross5

 

  

 

25,000

 

  

 

-

 

  

 

26

 

  

 

25,026

 

 

Michael F. Sanford4

 

  

 

87,000

 

  

 

115,000

 

  

 

61

 

  

 

202,061

 

 

Lenard Tessler4

 

  

 

56,250

 

  

 

125,178

 

  

 

51

 

  

 

181,479

 

 

1

This column represents the amount of cash compensation earned in 2018 (including any deferred amounts) for Board and Board Committee service. For 2018, only Mr. Armario and Ms. Ross elected to defer any such amounts. See “Annual Retainer Fees” below for details.

 

2

For non-employee directors (other than the Cerberus-appointed directors) who were elected to the Board of Directors at the 2018 Annual Meeting to serve until the next Annual Meeting, stock awards consist of 61,170 service-based restricted stock units (“Service-based RSUs” or “RSUs”), which were granted on May 16, 2018 as part of the annual retainer for non-employee directors. The aggregate grant date fair value of the RSUs is shown in the column and was determined based on the grant date fair value in accordance with FASB ASC Topic 718. See also Note 13 in the Notes to the Consolidated Financial Statements contained in our Form 10-K for 2018 for a description of our share-based awards. In lieu of the annual RSU awards that other non-employee directors received on May 16, 2018, each of the Cerberus-appointed directors was granted 61,170 phantom stock units (i.e., a contractual right to cash of the value of such units as of the date of vesting) as part of their annual retainers. Mr. Tessler also received an additional pro-rata award of 5,414 phantom stock units on May 16, 2018 for commencing service during the prior term (i.e., March and April 2018). Directors whose service ended prior to the 2018 Annual Meeting were not awarded any stock awards in 2018.

 

3

This column includes payments of life and business travel accident insurance premiums and matching contributions made pursuant to the Avon Foundation Matching Gift Program. Non-employee directors were eligible to participate in the Avon Foundation’s U.S. Associate Matching Gift Program on the same terms as Avon Products, Inc. employees. Under this program, the Avon Foundation matched a non-employee director’s contribution to a charitable organization up to $15,500 attributable to each calendar year. This program ceased in May 2018. This column includes the following amounts for matches to charitable organizations: Mr. Cornwell $15,500 and Mr. Noski $15,500.

 

4

All annual retainer fees payable to Messrs. Galbato, Mayer, Sanford, and Tessler were paid by the Company directly to Cerberus Capital Management, L.P. at the direction of these directors.

 

5

Mr. Mayer resigned from the Board in March 2018. Mr. Noski and Ms. Ross chose not to stand for re-election at the 2018 Annual Meeting of Shareholders, and therefore their service as board members ended in May 2018.

 

6

A fee of $150,000 payable to Mr. Galbato for his service as non-executive Chairman of the Board was paid in accordance with note 4 above. Mr. Cornwell received a fee of $100,000 for his service as Lead Independent Director.

 

   AVON 2019 Proxy Statement    21


Annual Retainer Fees

Directors who are employees of Avon Products, Inc., or any of our subsidiaries, receive no additional remuneration for services as a director. As in prior years, in 2018 each non-employee director was entitled to an annual retainer of $190,000, consisting of $75,000 in cash plus an annual grant of RSUs having a market value as of the date of grant of approximately $115,000 based on the closing price of our common stock on the date of grant. Pursuant to the Avon Products, Inc. Compensation Plan for Non-Employee Directors (the “Non-Employee Director Compensation Plan”), annual RSU awards are granted on the same date as the Annual Meeting of Shareholders and vest on the date of the next Annual Meeting of Shareholders, provided that such non-employee director has served as a member of the Board for the entirety of his or her annual term, and provided further that the Non-Employee Director Compensation Plan provides that the Board may accelerate vesting of the annual RSU grant in the event a non-employee director’s Board service ceases involuntarily and without cause or in the event of a similar cessation of Board service. Vested RSUs are settled upon a director’s departure from the Board. A non-employee director is entitled to receive dividend equivalent payments (to the extent any dividends on common stock are declared and paid) on RSUs but does not have the right to vote RSUs until settlement.

Additionally, directors elected by Cerberus Investor pursuant to the terms of the Series C Preferred Stock and the Investor Rights Agreement are entitled to be compensated for their services in the same amounts described above. However, each of these directors’ compensation that would otherwise be in the form of an annual RSU award is instead in the form of phantom stock units (i.e., a contractual right to receive an amount in cash equal to the value of such units as of the date of vesting) in an amount equal to the value of the other non-employee directors’ RSU awards as of the date of vesting, and is paid upon vesting.

In addition to the annual Board retainer, during 2018 the non-executive Chairman and Lead Independent Director received additional fees of $150,000 and $100,000, respectively. Furthermore, the Company paid an additional $10,000 retainer for service on the Audit Committee and an additional $6,000 retainer for service on each of the other Board committees. In 2018, the chair of the Audit Committee received an additional fee of $30,000, the chair of the Compensation and Management Development Committee received an additional fee of $9,000, and the chair of each other Committee received an additional fee of $6,000. At certain times, we provide directors with complimentary Avon products, such as samples of new product launches.

Pursuant to the Board of Directors of Avon Products, Inc. Deferred Compensation Plan, non-employee directors may elect to defer all or a portion of their cash retainer fees into a stock account or cash account. The amounts deferred into the stock account increase or decrease in value proportionately with the price of Avon’s common stock. In line with this, the amounts deferred into the cash account, inclusive of accumulated interest, earn interest equal to the prime rate.

Stock Ownership Guideline

The Board of Directors has adopted a stock ownership guideline which requires non-employee directors to own shares of our common stock having a value equal to or greater than $350,000 within five years from the date of their election to the Board. The Board may waive this stock ownership guideline for any director if the receipt of equity awards or the ownership of Company common stock by such director would violate any policies or procedures to which such director is subject in connection with his or her employment. In line with this, the stock ownership guideline has been waived for Messrs. Galbato, Sanford, and Tessler. All other current directors are working toward attaining the required ownership level.

Role of the Nominating and Corporate Governance Committee

The Nominating Committee is responsible for periodically reviewing and making recommendations to the full Board regarding the compensation of non-employee directors. In making its recommendations, the Nominating Committee typically considers:

 

   

the form and amount of compensation necessary to attract and retain individuals who are qualified to serve on the Board and to align the interests of the directors with those of shareholders;

 

   

the non-employee director compensation practices of other companies to assist it in the development of the compensation program and practices for our non-employee directors;

 

   

the impact on the perceived independence of the directors of compensation in excess of customary amounts and of indirect compensation; and

 

   

the advice of independent consultants retained from time to time by the Nominating Committee (whom the Nominating Committee did not retain in 2018).

During 2017, Pay Governance LLC (“Pay Governance”) provided independent compensation consulting services to the Nominating Committee on various director compensation matters including, but not limited to, retainers, chair fees, equity-based compensation, non-employee chairperson and lead director compensation, and stock ownership guidelines. Pay Governance conducted analysis and delivered presentations to the Nominating Committee regarding current and prospective director compensation matters. Pay Governance is engaged by and reports directly to the Nominating Committee for the services regarding director compensation and consults directly with the Chair of the Nominating Committee. The Nominating Committee has the sole authority to retain and terminate Pay Governance for these services and to review and approve Pay Governance’s fees for these services and other terms of the engagement. See page 51 for information regarding Pay Governance’s independence. The Nominating Committee did not retain Pay Governance’s services in 2018.

 

22    AVON 2019 Proxy Statement   


EXECUTIVE OFFICERS

The executive officers of the Company as of the date hereof are listed below. Executive officers are generally designated by the Board at its first meeting following the Annual Meeting of Shareholders or in connection with the appointment to his or her role. Each executive officer holds office until the first meeting of the Board of Directors following the next Annual Meeting of Shareholders or until his or her successor is elected, except in the event of death, resignation, removal or the earlier termination of his or her term of office.

 

Name

 

  

Title

 

  

Age

 

  

 

Year Designated     

Executive Officer     

 

 

Jan Zijderveld

 

  

 

Chief Executive Officer

 

  

 

54

 

  

 

2018

 

 

Gustavo Arnal*

 

  

 

Executive Vice President, Chief Financial Officer

 

  

 

49

 

  

 

2019

 

 

Miguel Fernandez

 

  

 

Executive Vice President, Global President

 

  

 

47

 

  

 

2017

 

 

Jonathan Myers

 

  

 

Executive Vice President, Chief Operating Officer

 

  

 

49

 

  

 

2017

 

 

James E. Thompson**

 

  

 

Senior Vice President, General Counsel

 

  

 

58

 

  

 

2017

 

 

Vikram Agarwal

 

  

 

Senior Vice President & Chief Supply Chain Officer

 

  

 

54

 

  

 

2019

 

 

Kay Yukako Nemoto

 

  

 

Senior Vice President, Chief Strategy and HR Officer

 

  

 

47

 

  

 

2019

 

 

Laura Barbrook

 

  

 

Vice President, Corporate Controller (Principal Accounting Officer)

 

  

 

45

 

  

 

2018

 

* On December 13, 2018 the Company announced that Gustavo Arnal was appointed Executive Vice President and Chief Financial Officer (“CFO”), effective during Spring 2019. Mr. Arnal is expected to begin his employment and service as CFO on May 1, 2019.

**James E. Thompson’s last day of employment is expected to be effective no later than April 2019.

Jan Zijderveld joined Avon as Chief Executive Officer and was appointed to the Board of Directors in February 2018. He joined Avon after 30 years with Unilever N.V./PLC, where he rose to serve as a member of the Executive Committee and President of Unilever’s European business in 2011. In this position, Mr. Zijderveld oversaw 25,000 employees and operations in 34 countries. Prior to that, he served in a number of leadership roles, including Executive Vice President of Unilever, South East Asia & Australasia from 2008 to 2011 while also acting as Non-Executive Chairman of Unilever’s listed Indonesian business, and CEO of Unilever, Middle East and North Africa (MENA) from 2005 to 2008. Earlier in his career, he served in numerous leadership positions across Europe, Australia and New Zealand in general management, marketing, sales and distribution.

Gustavo Arnal is expected to begin his employment and service as Avon’s Executive Vice President, Chief Financial Officer on May 1, 2019. Prior to joining Avon, he served as Senior Vice President, CFO of International Divisions and Global Functions for Walgreens Boots Alliance (WBA) since July 2017. Prior to joining WBA, Mr. Arnal worked for over twenty years at Procter & Gamble (P&G), holding multiple executive roles including Vice President and CFO of the India, Middle East and Africa region from 2014 to 2017.

Miguel Fernandez has been Avon’s Global President since August 2017. Prior to joining Avon, Mr. Fernandez spent nearly 10 years at Herbalife, Ltd., where he advanced through a series of senior operating positions with increasing responsibility. He served as Executive Vice President for the Americas and Worldwide Member Operations from December 2013 to June 2017. From July 2009 to November 2013, he was Senior Vice President and Managing Director Mexico and prior to that he was Vice President Finance and Distributor Operations. Prior to joining Herbalife, Mr. Fernandez was Chief Financial Officer at OCC Mundial and also served as Business Controller and Business Development for Microsoft in Mexico. His earlier career included roles in investment banking at JPMorgan Chase and financial management at Procter & Gamble (P&G).

Jonathan Myers has been Avon’s Executive Vice President, Chief Operating Officer since September 2017. Prior to joining Avon, Mr. Myers served as Vice President, Western European Markets and Managing Director, UK and Ireland for Kellogg Company from January 2012 to July 2016. Prior to joining Kellogg, Mr. Myers spent twenty years at Procter & Gamble (P&G) serving in various leadership roles for businesses spanning Europe, Asia and Latin America, including General Manager, Oral Care and Feminine Care, Greater China.

James E. Thompson has been Avon’s Senior Vice President, General Counsel since August 2017 and also served as Chief Ethics & Compliance Officer until February 2019. Prior to joining Avon, Mr. Thompson spent nine years at Chiquita Brands International, Inc. as Executive Vice President, General Counsel and Secretary from 2006 to 2015. Prior to that, he was Group Vice President and General Counsel to McLeodUSA from 2003 to 2006 and prior to that he served as Director, International Legal to Alticor Inc., the parent company of Amway Corporation from 1995 to 2002. Mr. Thompson began his career as an attorney at Jones Day where he gained significant experience working on U.S. and international antitrust and corporate law matters.

 

   AVON 2019 Proxy Statement    23


Vikram Agarwal has been Avon’s Senior Vice President & Chief Supply Chain Officer since February 2019. Prior to joining Avon, Mr. Agarwal spent thirty years at Unilever, where he advanced through a series of senior positions in operations and supply chain in various roles around the world. His last role was as Executive Vice President, Supply Chain Unilever from August 2016 to January 2019, and prior to that from August 2013 to August 2016 he was the Group Vice President, Global Home Care Supply Chain.

Kay Yukako Nemoto has been Avon’s Senior Vice President, Chief Strategy and HR Officer since February 2019. Prior to that, Ms. Nemoto served on secondment with Avon from Cerberus Operations & Advisory Company (COAC) as part of strategic partnership since July 2017. Prior to joining Avon, Ms. Nemoto served as Operating Executive, for COAC since February 2015. Earlier in her career, Ms. Nemoto spent over 23 years in banking, consultancy and advisory roles at companies including Ernst & Young and Alix Partners, including as Director, Operational Transaction Services with Ernst & Young from July 2011 to June 2014.

Laura Barbrook has been Avon’s Vice President, Corporate Controller since September 2017 and was elected the Company’s Principal Accounting Officer in January 2018. Prior to joining Avon, Dr. Barbrook was Group Financial Controller at Travelex beginning in 2013. Earlier in her career, she worked for Rio Tinto and Ernst & Young in finance and control roles.

 

24    AVON 2019 Proxy Statement   


OWNERSHIP OF SHARES

The following table shows information for beneficial owners of more than 5% of the outstanding shares of Avon common stock, as set forth in recent filings with the SEC. Beneficial ownership is determined in accordance with SEC rules. In computing a person’s percentage ownership of common stock, shares of common stock into which shares of Avon’s Series C Preferred Stock are convertible are deemed to be outstanding and beneficially owned only with respect to the person exercising voting and dispositive power over such shares of Series C Preferred Stock, as described in more detail in footnote 1 to the following table.

 

Name and Address   

Amount and Nature of

Beneficial Ownership

Of Common Stock

  

Percent of

Class

   

Stephen Feinberg, Cerberus Investor and Avatar GP, LLC1

875 Third Avenue, 11th Floor

New York, New York 10022

 

   87,051,524    16.44%  

BlackRock, Inc. 2

55 East 52nd Street

New York, NY 10055

 

   44,642,763    10.09%  

Miller Value Partners, LLC, William H. Miller III Living Trusts3

One South Street, Suite 2550

Baltimore, MD 21202

   35,578,463    8.04%  

 

1

In its Schedule 13D filed on March 11, 2016 with the SEC, each of Stephen Feinberg, Cerberus Investor and Avatar GP, LLC reported that each may be deemed to beneficially own 435,000 shares of the Company’s Series C Preferred Stock, which represents 100% of the outstanding Series C Preferred Stock and was convertible into 87,000,000 shares of the Company’s common stock as of March 1, 2016. Such shares are held by Cerberus Investor. Mr. Feinberg exercises sole voting and sole dispositive power over all securities held by Cerberus Investor. The percentage of class noted in the table is on an as-converted basis. Stephen Feinberg is the president, sole director and sole shareholder of Craig Court, Inc., the managing member of Craig Court GP, LLC, which is the general partner of Cerberus Capital Management, L.P. As set forth in further detail on page 29, Cerberus Investor is required to vote its shares of Series C Preferred Stock and common stock in favor of (i) each director nominated to the Board, (ii) the Company’s “say-on-pay” proposal and any other approved equity compensation proposals and (iii) the ratification of the Company’s independent registered public accounting firm. In its Form 4 filed on March 4, 2016 with the SEC, each of Mr. Feinberg, Cerberus Investor and Avatar GP, LLC reported that each may be deemed to own an additional 51,524 shares of the Company’s common stock as of March 31, 2016 as a result of accrued and unpaid dividends on such date.

 

2

In its Schedule 13G/A filed March 8, 2019 with the SEC, BlackRock, Inc. (“BlackRock”) reported the beneficial ownership of 44,642,763 shares on behalf of itself and the following subsidiaries: BlackRock (Netherlands) B.V.; BlackRock Asset Management Canada Limited; BlackRock Asset Management Ireland Limited; BlackRock Asset Management Schweiz AG; BlackRock Fund Advisors; BlackRock Institutional Trust Company, National Association; BlackRock Investment Management (Australia) Limited; BlackRock Investment Management (UK) Limited; BlackRock Investment Management, LLC; and BlackRock Life Limited. BlackRock reported that it had sole voting power with respect to 44,357,033 shares, shared voting power with respect to no shares, sole dispositive power with respect to 44,642,763 shares, and shared dispositive power with respect to no shares.

 

3

In its Schedule 13G filed on February 11, 2019 with the SEC, William H. Miller III Living Trust reported the beneficial ownership of 35,578,463 shares, sole voting power with respect to 7,166,850 shares, shared voting power with respect to 28,411,613 shares, sole dispositive power with respect to 7,166,850 shares, and shared dispositive power with respect to 28,411,613 shares. Miller Value Partners, LLC, reported the beneficial ownership of 28,411,613 shares, sole voting power with respect to no shares, shared voting power with respect to 28,411,613 shares, sole dispositive power with respect to no shares, and shared dispositive power with respect to 28,411,613 shares.

 

   AVON 2019 Proxy Statement    25


The following table sets forth certain information as of March 1, 2019 regarding the beneficial ownership of our common stock by each director, named executive officer (“NEO”—those officers listed in the Summary Compensation Table), and all of our directors and executive officers as a group. Total shares beneficially owned by directors, NEOs and executive officers individually represent less than 1% of Avon’s outstanding shares of common stock. Total shares beneficially owned by directors, NEOs and executive officers as a group represent 1.95% of Avon’s shares of common stock.

 

Name   

Shares of

Common

Stock1

 

Stock Options

Currently Exercisable

or Exercisable

within 60 Days

  

Total Number

of Shares

Beneficially

Owned

  

Restricted

Stock Units2

   Total

Jose Armario

   18,215   0    18,215    113,621    131,836

W. Don Cornwell

   14,4834   0    14,483    173,847    188,330

Miguel Fernandez

   100,000   202,612    302,612    243,134    545,746

Chan W. Galbato7

   0   0    0    0    0

Nancy Killefer

   0   0    0    154,270    154,270

Susan J. Kropf

   169,861   0    169,861    139,870    309,731

Helen McCluskey

   0   0    0    153,425    153,425

Sheri McCoy3

   658,687   2,310,000    2,968,687    0    2,968,687

Andrew G. McMaster, Jr.

   0   0    0    61,170    61,170

James A. Mitarotonda

   4,167,2595   0    4,167,259    61,170    4,228,429

Jonathan Myers

   0   141,189    141,189    169,427    310,616

Michael F. Sanford7

   0   0    0    0    0

Lenard B. Tessler7

   0   0    0    0    0

James E. Thompson

   0   129,684    129,684    155,620    285,304

James Wilson

   0   266,017    266,017    216,113    482,130

Jan Zijderveld

   250,000   227,800    477,800    600,000    1,077,800

19 directors, NEOs and

executive officers as a group

   5,378,5056   3,292,563    8,671,068    2,346,416    11,017,484

 

1

Shares reflect sole voting and investment power except as otherwise noted.

 

2

The numbers in this column include unvested Service-based RSUs and Service-based RSUs that have become vested but are not yet settled, and which therefore do not afford the holder voting or investment power. Performance RSUs held by executive officers, which will vest only if certain financial goals are met, have not been included and do not afford the holder voting or investment power.

 

3

Shares reflect amount of common stock ownership upon the date of Ms. McCoy’s departure from the Company.

 

4

Includes 9,563 restricted shares for which the director has sole voting but no investment power and 600 shares held in the name of a family member.

 

5

Amount includes 4,057,105 shares beneficially owned by Barington Companies Equity Partners, L.P. (“Barington Companies”), 101,821 shares beneficially owned by Barington Companies Investors, LLC (“Barington Investors”) and 8,333 shares held directly. Each of Barington Companies and Barington Investors may be deemed to have sole power to vote and dispose of the shares it beneficially owns. Mr. Mitarotonda is the sole stockholder and director of LNA Capital Corp. (“LNA”), which is the general partner of Barington Capital Group, L.P. (“Barington Capital”), which is the majority member of Barington Investors. Barington Investors is the general partner of Barington Companies. Barington Investors may be deemed to have sole power to vote and dispose of the shares owned by Barington Companies. In addition, Mr. Mitarotonda, LNA and Barington Capital each may be deemed to have sole power to vote and dispose of the shares owned by Barington Companies and Barington Investors. Mr. Mitarotonda disclaims beneficial ownership of any such shares except to the extent of his pecuniary interest therein.

 

6

Includes shares as to which beneficial ownership is shared with others.

 

7

Cerberus policy prohibits its employees from personally owning stock in the companies of which they are board members.

 

26    AVON 2019 Proxy Statement   


TRANSACTIONS WITH RELATED PERSONS

Policies and Procedures

We have policies and procedures for the review, approval and ratification of “related person” transactions as defined under the rules and regulations of the Securities Exchange Act of 1934, as amended.

Under the written charter of the Audit Committee, related person transactions are subject to the review, evaluation and, as appropriate, approval or ratification of the transaction, by the Committee. The Committee considers any such related person transactions in a manner that best serves the interests of the Company and the interests of our shareholders.

In addition, our Code of Conduct (the “Code”), which is available on our Company website (www.avonworldwide.com) under “Our Values”, prohibits all conflicts of interest. Under the Code, conflicts of interest occur when personal, private or family interests interfere in any way, or even appear to interfere, with the interests of the Company. The Company also has a written global conflicts of interest policy for employees, including executive officers, which provides procedures and guidelines for addressing such matters. Under the policy, actual conflicts of interest are prohibited, and the appearance of a conflict necessitates the review and prior approval, as appropriate, by certain members of management.

We have multiple processes for identifying related person transactions and conflicts of interest. We annually distribute a questionnaire to our executive officers and members of the Board requesting certain information regarding, among other things, their immediate family members and employment and beneficial ownership interests, which information is then reviewed for any related person transactions and conflicts of interest. In addition, we periodically survey our global finance function, including accounts payable, for any amounts paid to any of our directors, executive officers or 5% shareholders, and certain of such persons’ affiliates. The global ethics & compliance function undertakes a regular survey of employees, including executive officers, which asks specific questions regarding conflicts of interest, and requires certification of compliance with the Code.

We also have other policies and procedures regarding related person transactions and conflicts of interest. For example, our Corporate Governance Guidelines, which are available on the Corporate Governance tab of our investor website (investor.avonworldwide.com), require that the Board assess the independence of its non-employee directors at least annually, including a requirement that it determine whether or not any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described under “Information Concerning the Board of Directors—Director Independence” on page 18. In addition, we maintain a number of controls and procedures, including a written global policy, for the proper review and approval of contracts and other financial commitments.

Transactions with Related Persons

Upon the completion of the Series C Preferred Stock investment in Avon on March 1, 2016 (as further described below), Cerberus Investor, an affiliate of Cerberus Capital Management, L.P., became a related person by virtue of obtaining beneficial ownership of approximately 16.6% of the voting rights of the Company’s common stock on an as-converted basis at the time of the investment. In connection with the Series C Preferred Stock investment, we participated in several other transactions with Cerberus Investor and one or more of Cerberus’ affiliates, all of which were reviewed and approved by the Board as in the best interests of the Company and its shareholders. The Audit Committee determined that no further action was required by it with respect to these transactions under its written charter, since these transactions were previously reviewed and approved by the Board prior to the completion of such transactions and prior to the time any of the Cerberus Investor-designated directors joined the Board. Since March 1, 2016, the Audit Committee has reviewed, evaluated and, as appropriate, approved or ratified any new related party transactions or modifications to previously disclosed related party transactions between the Company and Cerberus Investor or one or more of its affiliates. The Company may participate in additional transactions with Cerberus Investor or one or more of Cerberus’s affiliates in the future, which would be subject to the policies and procedures described above, as appropriate.

Separation of North America Business

On March 1, 2016, Cleveland NA Investor LLC (an affiliate of Cerberus) contributed $170 million of cash into New Avon LLC (“New Avon”) in exchange for 80.1% of its membership interests, and we contributed (i) assets primarily related to our North America business (including approximately $100 million of cash, subject to certain adjustments), (ii) certain assumed liabilities of our North America business and (iii) the employees of our North America business into New Avon and retained 19.9% of New Avon’s membership interests. The Company and certain of its subsidiaries entered into the following agreements with New Avon in connection with the closing of the Series C Preferred Stock investment and the separation of our North America business on March 1, 2016 and the establishment of New Avon as a standalone North America operating entity.

 

   

Transition Services Agreements. The Company and New Avon entered into both a Transition Services Agreement and a Reverse Transition Services Agreement pursuant to which the Company and New Avon provide each other with certain services, including related to sourcing and supply chain, treasury and financial shared services, human resources, technology, sales, legal and global packaging, for initial service periods of up to 24 months. In connection with these agreements, the Company received approximately $3.1 million from New Avon and paid New Avon approximately $0.2 million, in each case, in fiscal year 2018. These agreements have expired.

 

   AVON 2019 Proxy Statement    27


   

Intellectual Property Agreements. The Company, certain of its subsidiaries and New Avon entered into an Intellectual Property License Agreement pursuant to which the Company and certain of its subsidiaries licensed to New Avon certain intellectual property rights that the Company and certain of its subsidiaries used in the conduct of the North America business prior to the separation. The Company and New Avon also entered into a Technical Support and Innovation Agreement pursuant to which the Company provided New Avon with certain beauty product development services through December 31, 2018. In connection with these agreements, the Company received approximately $2.5 million from New Avon in fiscal year 2018. The Company and New Avon are in the process of negotiating a new Technical Support and Innovation Agreement. The Company expects to receive a minimum of approximately $0.5 million from New Avon in fiscal year 2019.

 

   

Supply Agreements. The Company, certain of its subsidiaries and New Avon entered into a Manufacturing and Supply Agreement (“MSA”) pursuant to which the Company and certain of its subsidiaries, on the one hand, and New Avon, on the other hand, manufacture and supply certain products to each other for an initial term through December 31, 2018. In connection with this agreement, the Company received approximately $25.7 million from New Avon and paid New Avon approximately $2.8 million, in each case in fiscal year 2018. To date, the parties have not entered into a new agreement but have continued to operate under the MSA. For fiscal year 2019, the Company expects to receive approximately $24.4 million from New Avon and to pay New Avon approximately $2.7 million.

 

   

Real Estate Agreements. The Company and New Avon entered into a Real Estate License Agreement pursuant to which the Company provided New Avon space at the Company’s offices in Rye, NY. In connection with this agreement, the Company received approximately $0.5 million from New Avon in fiscal year 2018. As the Real Estate License Agreement expired in 2018, the Company will receive no additional revenue under this agreement.

Preferred Stock Investment

On March 1, 2016, we issued and sold to Cerberus Investor 435,000 shares of newly issued Series C Preferred Stock for an aggregate purchase price of $435 million pursuant to an Investment Agreement among the Company, New Avon and Cerberus Investor. The Series C Preferred Stock ranks senior to the shares of our common stock with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of our affairs. The Series C Preferred Stock has a liquidation preference of $1,000 per share, representing an aggregate liquidation preference of $435 million upon issuance. Holders of Series C Preferred Stock are entitled to participate on an as-converted basis in any cash dividends paid to the holders of shares of the Company’s common stock. In addition, cumulative preferred dividends accrue daily on the Series C Preferred Stock and are payable at a rate of 1.25% per quarter (net of any dividends on the Company’s common stock and subject to increase up to a maximum rate of 5.00% per quarter if the Company breaches certain obligations). Except to the extent not otherwise previously paid by the Company, preferred dividends are payable on the seventh anniversary of the issuance date of the Series C Preferred Stock as and when declared by the Board of Directors and at the end of each quarter thereafter. Accrued and unpaid preferred dividends may be paid, at the Company’s option, (i) in cash, (ii) subject to certain conditions, in shares of the Company’s common stock or (iii) upon conversion of shares of Series C Preferred Stock, in shares of the Company’s non-voting, non-convertible Series D Preferred Stock, par value $1.00 per share (the “Series D Preferred Stock”). Any such shares of Series D Preferred Stock issued would have similar preferential rights.

Series C Preferred Stock is convertible at the option of the holders at any time into shares of the Company’s common stock at an initial conversion price of $5.00 per share, which equals an initial conversion rate of 200 shares of the Company’s common stock per share of Series C Preferred Stock, subject to certain anti-dilution adjustments. If at any time the volume weighted average price of the common stock exceeds $10.00 per share (subject to certain anti-dilution adjustments) for a period of 30 consecutive trading days, the Company may cause all of the Series C Preferred Stock to be converted into shares of common stock based on the then applicable conversion price.

Holders of Series C Preferred Stock are entitled to vote generally with the holders of common stock on an as-converted basis. Holders of Series C Preferred Stock will also be entitled to a separate class vote with respect to (i) amendments to the Company’s organizational documents that have an adverse effect on the Series C Preferred Stock, (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series C Preferred Stock or (iii) the delisting of the Company’s common stock, other than in connection with a change of control event.

Upon certain change of control events involving the Company, holders of Series C Preferred Stock can require the Company to repurchase the Series C Preferred Stock for an amount equal to the greater of (i) an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends or (ii) the consideration the holders would have received if they had converted their shares of Series C Preferred Stock into common stock immediately prior to the change of control event.

 

28    AVON 2019 Proxy Statement   


Pursuant to an Investor Rights Agreement between the Company and Cerberus Investor, the Company reduced the size of the Board from twelve directors to eleven directors and granted Cerberus Investor certain minority rights relating to Board representation and other matters. Pursuant to the amendment to the Company’s Certificate of Incorporation classifying the Series C Preferred Stock and the Investor Rights Agreement, Cerberus Investor will continue to be entitled to elect: (i) three directors to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or shares of common stock that represent, on an as-converted basis, at least 75% of Cerberus Investor’s initial shares of Series C Preferred Stock on an as-converted basis, (ii) two directors to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or common stock that represent, on an as-converted basis, at least 50% but less than 75% of Cerberus Investor’s initial shares of Series C Preferred Stock on an as-converted basis (the “50% Ownership Requirement”) and (iii) one director to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or common stock that represent, on an as-converted basis, at least 25% but less than 50% of Cerberus Investor’s initial shares of Series C Preferred Stock on an as-converted basis (the “25% Ownership Requirement”). Until Cerberus Investor no longer meets the 50% Ownership Requirement, Cerberus Investor has the right to select the director to be appointed as the Chairman of the Board. Until Cerberus Investor no longer meets the 25% Ownership Requirement, subject to certain exceptions and to satisfaction by such director designees of independence and other customary qualifications, Cerberus Investor has the right to have one of its director designees serve on each committee of the Board. The Investor Rights Agreement also contemplated the creation of the new Lead Independent Director of the Board, which role has certain customary rights and responsibilities identified in our By-Laws.

Subject to maintaining certain levels of beneficial ownership of Series C Preferred Stock and/or common stock, Cerberus Investor has consent rights over certain actions taken by the Company, including increasing the size of the Board, reinstating the Company’s quarterly common stock dividend and incurring indebtedness in excess of certain thresholds. Subject to maintaining certain levels of beneficial ownership of Series C Preferred Stock and/or common stock and certain other factors, Cerberus Investor is required to vote its shares in favor of (i) each director nominated to the Board by the Board, (ii) the Company’s “say-on-pay” proposal and any other equity compensation proposals approved by the Compensation and Management Development Committee of the Board and (iii) ratification of the Company’s independent registered public accounting firm.

Cerberus Investor and its affiliates are subject to certain standstill restrictions, including that Cerberus Investor and its affiliates are restricted from acquiring additional securities of the Company in excess of a certain percentage, subject to certain exceptions. The standstill restrictions will terminate upon the occurrence of certain events, including upon the earlier of the date on which (i) Cerberus Investor no longer meets the 25% Ownership Requirement and (ii) the 25% Ownership Requirement remains satisfied (and the 50% Ownership Requirement is not satisfied), no Cerberus Investor designee serves on the Board and Cerberus Investor has irrevocably waived its director nomination and consent rights.

Pursuant to the Investor Rights Agreement, Cerberus Investor and its affiliates have (i) certain customary registration rights with respect to Series C Preferred Stock, Series D Preferred Stock, Conversion Common Stock and shares of common stock issued pursuant to the terms of the Series C Preferred Stock, Series D Preferred Stock or the Investor Rights Agreement and (ii) certain customary preemptive rights with respect to the issuance of equity securities by the Company. On October 11, 2016, the Company filed a registration statement on Form S-3ASR with the SEC registering for sale by Cerberus Investor 435,000 shares of Series C Preferred Stock, 142,800 shares of Series D Preferred Stock and 113,311,940 shares (plus an additional unspecified number) of common stock. As of the date of this filing, Cerberus Investor had not made any sales in reliance on such Form S-3ASR. In accordance with the Company’s policies, due to potential conflicts of interest, the Series C Designees recused themselves from Board and committee votes concerning this Form S-3ASR.

Other Agreements

Since 2016, the Company has entered into agreements with an affiliate of Cerberus Investor, which provide for the secondment of Cerberus Investor affiliate personnel to the Company’s project management team responsible for assisting with the execution of the Transformation Plan announced in January 2016 and the Open Up Avon Strategy announced in September 2018. For fiscal year 2018, the Company paid approximately $1.2 million under these agreements to an affiliate of Cerberus Investor and for fiscal year 2019, the Company expects to pay approximately $1.2 million.

As part of the separation of our North America business in 2016, the Company was required to issue credit support, in the form of letters of credit, for New Avon’s payment obligations under an equipment lease for assets that were transferred to New Avon. On January 31, 2019, the Audit Committee approved the extension of such letters of credit (from September 2020 through June 2022), in support of New Avon’s payment obligations under its expected refinanced equipment lease for those assets. The expected amount to maintain the letters of credit during 2019 is approximately $360,000.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and greater than 10% shareholders to file certain reports with respect to beneficial ownership of our equity securities. Based solely on a review of copies of reports furnished to us, or written representations that no reports were required, we believe that during 2018 all Section 16 reports that were required to be filed were filed on a timely basis.

 

   AVON 2019 Proxy Statement    29


EXECUTIVE COMPENSATION

The Executive Compensation Section is organized as follows:

 

    

 

Page

 

LETTER FROM THE COMMITTEE CHAIR

 

   31

 

COMPENSATION DISCUSSION AND ANALYSIS

 

   33

 

EXECUTIVE SUMMARY

   33

– BUSINESS AND STRATEGY UPDATE

   33

– KEY 2018 COMPENSATION HIGHLIGHTS

   35

– SHAREHOLDER ENGAGEMENT AND RESPONSIVENESS

   37

– 2019 COMPENSATION HIGHLIGHTS

   38

– STRONG COMPENSATION GOVERNANCE PRACTICES

   40

PAY-FOR-PERFORMANCE

   41

COMPETITIVE POSITIONING AND PEER GROUP

   45

ELEMENTS OF OUR COMPENSATION PROGRAM

   46

ROLES IN EXECUTIVE COMPENSATION

   51

COMPENSATION GOVERNANCE BEST PRACTICES

   52

ADDITIONAL INFORMATION

   53

COMPENSATION AND RISK MANAGEMENT

 

   55

 

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

 

   56

 

EXECUTIVE COMPENSATION TABLES

 

   57

 

 

30    AVON 2019 Proxy Statement   


LETTER FROM THE COMMITTEE CHAIR

Dear Fellow Shareholders:

We are eager to realize the benefits of the many significant efforts we have undertaken over the past year, including the hiring of a new Chief Executive Officer (“CEO”) and several other members of our senior team, the development of our Open Up Strategy and the ongoing review of options to reposition Avon for profitable growth.

The Compensation and Management Development Committee (the “Committee”) continues to work with the Board of Directors (the “Board”) to ensure compensation plans are motivational for our executives while driving business objectives and creating alignment with shareholder return. In our discussions with shareholders, the feedback on our executive compensation programs was supportive. The primary concern of our shareholders is the lack of operational, financial and stock price performance improvements.

Over the course of 2018 and early in 2019, we made important organizational steps to address these challenges, including:

 

   

Hiring Jan Zijderveld as our CEO; and

 

   

Making a number of changes to the senior leadership team to focus our investment in talent on key functions and operations.

Despite a very productive 2018, including the development of our Open Up Strategy, senior leadership reorganization, and ongoing transformation, our financial, operating and stock price results for 2018 were disappointing and not reflective of the performance objectives the Committee and the Board established.

The Committee reviewed the Company’s compensation programs during 2018 and affirmed their alignment with shareholders, through many factors, including:

 

   

Our CEO’s target annual compensation opportunity is below the median of our peer group, which is consistent with our performance and our share usage. We redefined our peer group in 2017 to better reflect our smaller revenue scope

 

   

Our CEO’s annual and long-term incentive opportunity is entirely performance-based and at-risk

 

   

Our named executive officers (“NEOs”) have, on average, approximately 75% of their total compensation tied to performance and at-risk

 

   

None of our executives earned a cash annual incentive award for 2018 as a result of the Company not meeting our performance goals (other than an employment inducement award to our new CEO of a one-time minimum 2018 annual incentive of 50% of target)

 

   

66% of the performance-based restricted stock units (”Performance RSUs”) awards granted in 2016 that were eligible to vest in early 2019 based on our relative total shareholder return (“TSR”) performance were forfeited due to underperformance.

For 2019, we continue our commitment to improved financial and operating performance and tying executive compensation opportunities to the achievement of our goals. The Committee is also mindful that retention and attraction of key talent is challenging in light of significant headwinds and several years of low – and for 2018, zero – annual bonus payouts. For 2019:

 

   

The annual incentive opportunity will continue to be tied to four objective measures of performance, equally weighted: revenue growth, adjusted operating profit, cash flow from operations and Representative health.

 

   

Our long-term incentive program will measure annual relative TSR performance but only provide for vesting upon completion of the full three years of performance. We made other changes to our equity incentive awards to make them even more motivational and shareholder aligned, including creating immediate focus on 2019 share price improvement and limiting the number of shares delivered until share price recovers. (See pages 38 through 40)

 

   

Recognizing the urgency of improving our operating results in 2019, we will provide additional long-term incentive (“LTI”) opportunity within our 2019 LTI program through the addition of “turnaround LTI performance awards”, which will provide additional emphasis on achieving our business plan and implementing our strategy. We awarded these Performance RSUs that are only eligible for vesting upon attainment of specific performance objectives during 2019. Any provisionally earned shares must be held for an additional two years to align executives with shareholders as we continue to transform the business.

Finally, we are requesting your approval of an increase to the share reserve under the Amended and Restated 2016 Omnibus Incentive Plan. Equity comprises the majority of our senior executives’ compensation opportunity and is granted to leaders across our organization. While much of the equity we have granted in recent years has been forfeited, equity remains an important tool to align management with shareholders. A larger share request at this time would be more consistent with typical practice, but as the Committee continues to closely monitor the alignment between management incentives and shareholder value with a desire to minimize unnecessary shareholder dilution, we made the decision to request an annual allotment. We anticipate reverting to a normalized approach next year.

 

   AVON 2019 Proxy Statement    31


Our Say on Pay Proposal and our proposal related to the Amended and Restated 2016 Omnibus Incentive Plan are found on pages 71 and 73 respectively of this proxy statement, and the Board recommends that you vote ‘FOR’ both of these proposals. We also invite you to consider additional information on our compensation philosophy and decisions in the Compensation Discussion and Analysis which can be found on the following pages. I am encouraged by the strategic changes initiated and confident that our programs are designed to motivate our executives and pay for performance that is aligned with shareholder interests.

Sincerely,

 

 

LOGO

Helen McCluskey

Chair, Compensation and Management Development Committee

 

32    AVON 2019 Proxy Statement   


COMPENSATION DISCUSSION AND ANALYSIS

In this section, we describe our executive compensation program for Named Executive Officers (“NEOs”). Our NEOs for 2018 were the following individuals:

 

  Name

  

Title

   

  Jan Zijderveld*

  

Chief Executive Officer

 

  James Wilson**

  

Former Executive Vice President, Chief Financial Officer

 

  Miguel Fernandez

  

Executive Vice President, Global President

 

  Jonathan Myers

  

Executive Vice President, Chief Operating Officer

 

  James E. Thompson***

  

Senior Vice President, General Counsel

 

  Sheri McCoy*

  

Former Chief Executive Officer

 
   

*Ms. McCoy ceased to be Chief Executive Officer effective February 4, 2018, and her last day of employment with the Company was March 31, 2018. Mr. Zijderveld assumed the role of Chief Executive Officer effective February 5, 2018.

**James Wilson served as our Chief Financial Officer from January 1, 2017 through March 2019. Gustavo Arnal is expected to begin his employment and service as Avon’s Executive Vice President, Chief Financial Officer on May 1, 2019.

***James E. Thompson’s last day of employment is expected to be effective no later than April 2019.

This Compensation Discussion and Analysis (“CD&A”) is divided into the following sections:

 

   

Executive Summary (page 33)

 

   

Pay-for-Performance (page 41)

 

   

Competitive Positioning and Peer Group (page 45)

 

   

Elements of our Compensation Program (page 46)

 

   

Roles in Executive Compensation (page 51)

 

   

Compensation Governance Best Practices (page 52)

 

   

Additional Information (page 53)

EXECUTIVE SUMMARY

BUSINESS AND STRATEGY UPDATE

Few companies have the brand recognition, extensive global reach or market-leading positions in beauty and direct selling that Avon has. In a world where trust in companies is becoming a scarcer commodity, a Representative’s strong relationship with her consumers continues to be highly relevant.

Avon is an organization with a clear and compelling purpose, operating in the beauty and personal care categories across the globe with a focus on developing and growing markets. Through our millions of direct selling Representatives, we empower micro-entrepreneurs across the globe. Avon’s core purpose to provide part-time earnings to families and offer amazing products at great prices is as relevant today, if not more, than it was 130 years ago at the Company’s founding. Avon’s ongoing progress to unlock e-commerce, make Avon available to anyone, anywhere and enable our Representatives to be more competitive is powerful, and is at the heart of Avon’s value proposition. In 2018, Avon introduced digital mobile brochures in 60 countries, on-line stores for Representatives in 20 markets and relaunched our e-commerce positioning in China thereby driving significant early growth in the e-commerce channel.

Overall 2018 operating results were disappointing, total revenue from reportable segments was down 2% compared to the prior year, driven by declines in Brazil, Russia and the UK. The 2018 full year results reinforced the urgent need to execute Avon’s new strategic direction and we have made good progress.

In 2018 we made critical progress in addressing the key concerns of leadership and strategic direction. Throughout the year we continued to strengthen Avon’s leadership team, further recruiting seasoned and skilled senior executives. The process of putting in place a leadership team to accelerate change and to increase sustainable profit continued with the recruitment by the Board of Directors

 

   AVON 2019 Proxy Statement    33


(the “Board”) of a new Chief Executive Office (“CEO”), Jan Zijderveld, who joined Avon in February 2018. Before joining Avon, Mr. Zijderveld was a senior executive and 30-year veteran of Unilever N.V./PLC with a track record as a proven global leader driving profitable growth in large, multi-channel, complex consumer businesses across emerging, developing and developed markets.

Other key appointments include:

 

  -

Brazil, José Vicente Marino – Direct selling, local and transformation experience

 

  -

Asia Pacific, Bill Rahn – Seasoned direct selling Asia Pacific executive

 

  -

Italy & Mediterranean, Marco Brandolini – Significant direct selling and local experience

 

  -

India, Dronacharya Chakraborty – Track record in driving growth in direct selling

 

  -

Central America and Dominican Republic, Leonardo Palomera Ruiz – Seasoned direct selling executive

 

  -

Chief Financial Officer, Gustavo Arnal – Seasoned finance executive, strong international experience

 

  -

Digital & IT, Benedetto Conversano – Strong track record in leading digital strategy

 

  -

Beauty & Brand Marketing, James E.M. Thompson – Strong international, turnaround and digital marketing experience

As a result of these critical appointments, combined with other senior leadership appointments in key markets, Avon now has new leadership in markets that account for more than 50% of total revenue. We are confident that Avon has an energized, highly motivated leadership team in place with the skillset required to deliver our new Open Up Strategy and the experience needed to restore Avon to growth in key emerging and developing markets.

Avon is operating in a dramatically changing and competitive environment, where business as usual is not an option for Avon. A year ago the Board gave Mr. Zijderveld a clear mandate to lead a deep and comprehensive strategic and operating review of all facets of the business and evaluate ways to significantly accelerate Avon’s path to profitable growth.

This review led to the development and launch of Avon’s new Open Up Strategy, which was communicated to shareholders in September 2018. Our Open Up Strategy is simple and clear, and we made important progress during Q3 and Q4 of 2018, including the following:

 

  -

Reboot Direct Selling - re-establish a trusted relationship with our millions of Representatives, whom we consider our bosses. In 2018 we spoke with over 60,000 of our bosses, we moved quickly to fix some of the core issues by improving box and product damage and we launched our segmented service models to ensure we provide tailored and targeted services and support to our bosses. We continue to identify repeatable models in recruiting and training that can be globalized to maximize reach and impact. These were critical steps necessary to ensure we recruit, train and retain quality Representatives and enable them to increase her earnings.

 

  -

Open Up Mindset – unlocking e-commerce is critical to achieving sustainable growth. We need to make it easier for our bosses to earn money by providing them with the tools, skills and products they need to grow her business. In 2018 we launched on-line stores in 20 markets, giving our bosses the capability to sell online to anyone, anywhere. We also launched our e-brochure which is now live in 60 countries, allowing our bosses to quickly and effectively connect with their customer via social media. These are just some of the critical steps taken in 2018 to enable Avon to unlock our e-commerce potential. Open Up Avon is broader than e-commerce. It includes unleashing the power of data and analytics, as Avon becomes a more data and analytics driven company; opening up Avon’s eco-system, utilizing outside resources, creating more external innovation and partnerships; and opening up assets and infrastructure including optimizing manufacturing and distribution.

 

  -

Deliver Fuel for Growth – we need to deliver savings to allow us to invest to grow. In 2018, we completed the previously announced Transformation Plan and launched the $400 million Fuel for Growth plan. In 2018 we recognized $20 million in early stage savings under the Fuel for Growth plan. In early 2019, we announced an incremental 10% reduction in overall head count and a 25% reduction in our global SKU count. We expect to recognize additional savings through Supply Chain and procurement over the course of 2019.

 

  -

Refresh and Strengthen the Brand – we need to leverage Avon’s 98% brand awareness and become a contemporary brand to rebuild our customer base. Focusing on becoming more accessible and relevant through technology and through faster, more on-trend product innovations can continue to help increase purchase intent of Avon brands. In 2018 we started changing how we work and focused on getting to market faster with innovative on-trend products. By leveraging external development expertise, we launched Lip Tattoo in the UK in under 23 weeks, approximately half of the historical time to market. We are also leveraging external relationships to introduce high end, premium products in select markets, such as the Mission Y line in Central Europe.

In 2018, we faced the reality of our situation and acted with focus and intent to launch a comprehensive corporate turn-around strategy, addressing all key areas of our business and achieved good early-stage progress. We laid the groundwork, strengthened the executive leadership team and put the right plan in place. We’ve started to fix the core and we’re moving in the right direction, but we need to do more. In 2019 we need to execute our Open Up Strategy with pace and drive, build momentum to see our financial results grow quarter over quarter and start delivering key strategic milestones necessary to achieve our business plan and implementing our strategy.

 

34    AVON 2019 Proxy Statement   


KEY 2018 COMPENSATION HIGHLIGHTS

CEO Compensation Aligns with Performance

The chart below shows the differences in Mr. Zijderveld’s annual target compensation, grant-date compensation and realizable pay at December 31, 2018, as a result of the payout of the cash incentive awards at less than target and the stock price at year end.

 

 

LOGO

 

 

The value of our CEO’s performance-based awards continues to remain significantly below target.

 

 

  1.

‘Value at Target’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) target value of short-term cash incentives and (iii) the target value of the CEOs 2018 long-term Incentive (“LTI”) awards, exclusive of any one-time sign on inducement awards.

 

  2.

‘Value @ Grant’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) target value of short-term cash incentives and (iii) the grant date fair value of the CEOs 2018 LTI incentive awards, exclusive of any one-time sign on inducement awards.

 

  3.

‘Value @ 31 December 18’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) actual value of 2018 short-term cash incentives (as reported in the Summary Compensation Table on page 57) and (iii) the face value of the CEOs 2018 LTI awards, exclusive of any one-time sign on inducement awards, based on the closing share price at December 31, 2018.

Summary of 2018 Compensation Actions

The Compensation and Management Development Committee (the “Committee”) took the following specific actions with respect to the compensation of the NEOs for 2018:

 

   

Base Salary: No increase to base salaries

 

   

Annual Cash Incentive: Even though our Open Up Strategy resulted in important progress during Q3 and Q4 of 2018, we were unable to achieve annual incentive plan threshold performance given the challenging macro environment and the robust nature of our goal setting process. Consistent with the formulaic nature of the program and the avoidance of positive discretion, there were no annual cash incentive award payouts to the NEOs with respect to 2018 performance (other than to Mr. Zijderveld, who was guaranteed a minimum annual incentive payout of 50% of target in his employment contract, solely for 2018; the rationale for this was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited).

 

   AVON 2019 Proxy Statement    35


   

Long-Term Incentive Awards:

 

     

Our CEO’s 2018 long-term incentive award has a target value of $3.25 million and is 100% performance-based with the following mix:

 

   

40% premium-priced stock options (“Premium Options”) with exercise price equal to 125% of the closing price of a share of Avon stock as of the grant date, and

   

60% performance-based restricted stock units (“Performance RSUs”) with a three-year performance period.

 

     

Additionally, our CEO received one-time sign-on inducement awards in 2018, 50% of which were performance-based and in the form of Performance RSUs and the other 50% were service-based restricted stock units (“Service-based RSUs”).

   

These performance-based inducement awards have three separate trances, all of which are eligible to vest only after completion of the 2020 performance year. The Committee will establish at the beginning of each year (i.e., 2018, 2019 and 2020) the performance objectives required to earn the award – ensuring that the Committee can tailor the measures and their rigor to the business circumstances.

   

The non-performance based restricted stock units were granted as a replacement of a portion of his prior employer forfeited equity awards, and to promote shareholder alignment and retention over the three-year vesting period. These inducement awards cliff vest after three years.

 

     

For other NEOs, 2018 long-term incentive awards consisted of Performance RSUs, Service-based RSUs, and Premium Options, each representing one-third of the overall target award.

The table below sets out the key focus areas for our 2018 compensation program for our senior executives and the primary rationales.

 

 

Annual Incentive Program

 

   

 

Focus Areas

 

     

 

Rationale

 

   

Increased weighting of the Representative Improvement metric

 

  Increased this strategic metric to 25% weighting with equal emphasis on both attracting and retaining Representatives

 

  Determined with a formulaic calculation

 

   

  Attracting and retaining quality Representatives is essential to achieving long-term sustainable growth

 

  Funded via a formula that is consistent with our financial performance and less subjective

   

 

Long-Term Incentive Program

 

   

 

Focus Areas

 

     

 

Rationale

 

   

Continued to incorporate other executive compensation best practices

 

  Used a $5.00 divisor rather than the stock price at grant ($2.79 for March 2018 grants) to determine the number of shares. Resulted in a 44% reduction in grant date fair value

 

  Set Premium Option exercise price well above stock price at grant

 

  Maintained relative total shareholder return (TSR) as a performance metric for Performance RSUs with threshold and target set above median compared to the S&P 400 Index

 

   

  Responsive to shareholder feedback

 

  Enhances shareholder alignment as significant stock price improvement required to receive target LTI opportunity

 

  Enhances link to long-term performance

   

 

Peer Group

 

   

 

Focus Areas

 

     

 

Rationale

 

   

Eliminated companies with minimal international focus and outsized revenue for 2018 to better tailor the peer group

 

  Removed Colgate-Palmolive and General Mills due to their high revenue sizes

 

    Added Church & Dwight and Spectrum Brands Holdings, Inc. to bring Avon closer to the peer group median for revenue

 

   

 

  Responsive to shareholder feedback

 

  Better aligns peer group with Avon’s business profile and size

As a result of the changes described above, grant date fair value for NEOs, including our CEO, decreased, requiring significant stock price improvement to realize target value under the compensation plans.

 

36    AVON 2019 Proxy Statement   


SHAREHOLDER ENGAGEMENT AND RESPONSIVENESS

At our 2018 annual meeting, shareholders representing approximately 85% of votes cast approved our “say-on-pay” proposal in support of our executive compensation program. While the vast majority of our shareholders are in favor of our executive compensation programs, we remain committed to shareholder engagement and value insights provided from our fellow shareholders.

During 2018, we continued our practice of engaging with our shareholders and soliciting feedback. Having received strong support for our 2018 say-on-pay proposal, in 2018 our shareholder engagement focused particularly on gaining feedback and input from shareholders who did not support our say-on-pay proposal in 2018. As in recent years, the Chair of the Committee conducted shareholder outreach to ensure shareholder perspectives and concerns were heard and well understood. Shareholder outreach meetings were conducted as the 2019 incentive programs design was developing, which enabled the Committee to directly incorporate feedback and suggestions into the 2019 program design. The feedback received from our shareholders continues to be tremendously valuable. While shareholders raised different challenges and concerns, they consistently agreed that the performance metrics for both the short and long-term programs should be directly tied to Avon’s strategy. As you will see on the following pages, this feedback has been incorporated into our program design.

Highlights of the feedback we received from shareholders are as follows:

 

What We Heard

  

What We Did

Ensure incentive metrics drive the turnaround   

  In 2018 and continuing in 2019, increased weighting on the Representative Improvement metric in the annual incentive plan to 25% with equal emphasis on both attracting and retaining Representatives

 

  In 2019, aligned performance measurement period of Performance RSUs with our strategic and financial goals

 

  In 2019, introduced a supplementary LTI Award (the “2019 LTI Turnaround Performance Awards” or “Turnaround LTI Performance Awards”), directly aligned with Open Up strategy and short-term financial milestones

 

Drive urgency and focus on delivering 2019 performance and building momentum   

  In 2019, reassessed the incentive metrics and confirmed that the metrics (Revenue, Operating Profit, Cash Flow from Operations and Representative Improvement) continue to be the best short-term indicator of our turnaround success

 

  Retained relative TSR for 2019 LTI Awards, but performance will be measured over three one-year periods to create stronger alignment with our key goals and focus management on delivering year on year growth. One-year measures of rTSR will focus our team on constant year-over-year improvement in share price, which is imperative to our turnaround.

 

Continue to provide strong pay-for-performance alignment and significant proportion of pay at-risk   

  For 2018, over 83% of CEO compensation is variable, performance-based compensation

 

  In 2018 and continuing in 2019, used Premium Option exercise price 25% above stock price at grant

 

  In 2018 and continuing in 2019, maintained relative TSR as a performance metric for Performance RSUs with target set above median compared to the S&P 400 Index

 

Enable the retention of critical staff needed to deliver the turnaround   

  In 2019, reintroduced equity (rather than cash) below senior officer levels to better align all management level incentives with shareholder interests, with above median performance targets relative to the S&P 400 Index peer group

 

 

   AVON 2019 Proxy Statement    37


 

  

 

  in 2019, granted one-time Turnaround LTI Performance Awards to select members of the management team to create enhanced focus on the critical 2019 financial goals. The performance goals for these awards are set to be more challenging than the business plan and are capped at target.

 

Positive feedback about our rigorous management of shareholder dilution   

  In 2018 we continued to use a $5.00 divisor, rather than stock price at grant, to determine number of shares to grant. Share awards for 2019 were granted in the same number of shares as in 2018 to recognize remaining need for share price appreciation.

 

In 2019, we will continue to ensure the alignment of our compensation programs with our shareholders’ interests with a strong pay for performance alignment and payouts of incentive plans based on business performance and stock price appreciation.

2019 COMPENSATION HIGHLIGHTS

We are committed to ensuring that Avon’s pay framework, particularly our incentive programs, are aligned with and reflect the most important task of our executive team – returning our business to profitable growth. Following the introduction of the Open Up Strategy the Committee undertook a detailed, thorough and holistic review of Avon’s incentive arrangements (fixed, short and long-term) to determine if our pay arrangements are aligned with Avon’s new strategic direction, key priorities and timelines.

Our shareholder outreach reinforced our belief that our 2019 incentive programs should:

 

   

Incorporate metrics that drive the turnaround

 

   

Drive urgency and focus on delivering 2019 targets and building momentum

 

   

Continue to provide strong pay-for-performance alignment and significant proportion of pay at-risk; and

 

   

Enable the retention of critical staff needed to deliver the turnaround.

Following this thorough review, the Committee believes that many elements of the current incentive program remain appropriate, as it has strong performance elements that support our externally communicated business goals and requires significant stock price appreciation for executives to realize target compensation. However, for 2019 the Committee made a number of adjustments to the incentive arrangements, to further strengthen their alignment with Avon’s strategic direction and focus on delivering the turnaround strategy with urgency. For example, the 2019 Long-Term Incentive Program places a greater focus on one-year performance than our historical practice in order to explicitly reflect our shareholders’ feedback, which stressed the urgency of delivering the turnaround strategy as well as enabling the retention of critical staff needed to deliver the turnaround. Details of our compensation programs for 2019 are as follows:

2019 Annual Incentive Program

 

   

For our annual incentive plan, the same key financial metrics and strategic goals used in 2018 that link to our externally communicated business goals remain appropriate and are fully formulaic.

2019 Long-Term Incentive Program (“LTIP”)

 

   

For our 2019 LTI, the number of shares granted to executives were fixed to align with those granted in recent years, rather than the stock price at grant ($2.75). The fixed 2019 LTI grant resulted in a 43% reduction in grant date fair value. When combined with the Turnaround LTI Performance Awards, the combined value of NEO’s 2019 LTI award was, on average, 76% of target. 2019 Performance RSUs will be measured based on relative TSR goals compared with the S&P 400 peer group, where performance above median will be required to achieve target pay out.

 

   

Performance for the 2019 Performance RSUs will be measured over three one-year performance periods, to increase focus and emphasis on delivering immediate results and achieving year-on-year improvements in line with our turnaround plan. One-year measures of rTSR will focus our team on constant year-over-year improvement in share price, which is imperative to our turnaround.

 

   

Equity awards were reintroduced into LTI award mix in lieu of certain LTI cash awards for business leaders below the NEO level, to enhance alignment with shareholder interests while continuing to focus on minimizing shareholder dilution.

2019 Long-Term Incentive Turnaround Awards

 

   

The Committee approved the one-time grant of Turnaround LTI Performance Awards for 2019 to select members of the management team. The purpose of this award is (i) to increase focus on delivering key 2019 operational results and building momentum to deliver the turnaround and (ii) to bridge some, but not all, of the significant gap in value between actual LTI awards and target LTI awards.

 

38    AVON 2019 Proxy Statement   


   

2019 LTI Turnaround Performance Awards will be delivered in the form of Performance RSUs. Performance for these awards will be measured against operational metrics over a one-year performance period (2019) with a two-year holding period.

 

   

These one-time Turnaround LTI Performance Awards are not additive as the combined value of participants’ regular 2019 LTIP and the Turnaround LTI Performance Awards will not exceed 80% of their target 2019 LTI opportunity. The shortfall reflects the performance-based nature of the LTIP and requires a significant stock price improvement to realize target value under the compensation plans. The performance goals for these Turnaround LTI Performance Awards are set to be more challenging than the business plan and are capped at target.

Highlights of our 2019 compensation programs and the rationale are described below:

 

 

Annual Incentive Program

 

   

 

Focus Areas

 

     

 

Rationale

 

   

No Change

 

  The Committee determined that the current program, including the performance metrics (Revenue, Operating Profit, Cash Flow from Operations and Representative Improvement) continues to be the best short-term indicator of our turnaround success and should be retained for 2019

 

   

  Current program is directly aligned with Open Up Strategy and provides appropriate pay-for-performance alignment, as illustrated by the lack of payout for 2018

   

 

Long-Term Incentive Program

 

   

 

Focus Areas

 

     

 

Rationale

 

   

Strengthened shareholder alignment by reintroducing equity below the senior officer level

 

  CEO and NEO award mix remains unchanged (CEO 40% Premium Options and 60% Performance RSUs. NEO 33% Performance RSUs, 33% Premium Options and 33% Service-based RSUs)

 

  Introduced more stock-based awards (in lieu of cash) for below senior officer level so award mix now more closely mirrors NEO.

 

   

  Responsive to shareholder feedback

  25% premium price on Premium Options “raises the bar” versus standard stock options or 10% premium priced options

  Better aligns all management level incentives with shareholder interests and above median performance targets relative to the S&P 400 Index peer group

  Enhances link to long-term performance

   
   

Aligned performance measurement period of Performance RSUs with our strategic and financial goals

 

  Relative TSR retained for LTI Awards, but performance measured over three 1-year periods.

 

Introduced fixed share awards for Performance RSUs, to simplify plan

 

  Used fixed share awards (same fixed number of awards as 2018, accomplished by continuing to apply the $5 stock price divisor) rather than stock price at grant, to determine number of shares to grant in 2019.

 

  The value of fixed shares, including the one-time Turnaround LTI Performance Awards, awarded to NEOs in 2019 was equal to, on average, 76% of their target LTI award opportunity.

 

   

  Creates stronger alignment with our key goals and focuses management on delivering year on year growth

  Addresses uncertainty, particularly regarding target setting during turnaround

 

  Requires a significant increase in stock price to earn target long-term incentive award value

  Reduces shareholder dilution

  Fixed share awards simplify the LTIP, particularly during extended period of share price volatility

 

(continued on next page)

 

   AVON 2019 Proxy Statement    39


Introduced Turnaround LTI Performance Awards, directly aligned with Open Up strategy and medium-term financial milestones

 

  For 2019, NEOs and other executives, were granted Turnaround LTI Performance Awards in the form of Performance RSUs with a one-year performance period and two-year holding period

 

  Performance measured against operational metrics directly aligned with the turnaround strategy and reflect performance goals that are more challenging than the business plan and are capped at target.

 

  Turnaround LTI Performance Awards granted to NEOs and other senior executives, as the value of this population’s fixed LTI awards for 2019 (excluding Turnaround LTI Performance Awards) was 45% less than their target opportunity

 

  For the CEO, the value of his Turnaround LTI Performance Awards reduced the gap between the actual value of his fixed 2019 LTI awards and target LTI opportunity to 28%. For other NEOs and other senior executives, the value of Turnaround LTI Performance Awards is, on average, 40% of the 55% gap between the actual value of the fixed 2019 LTI awards and the target LTI opportunity

 

   

  Reflects shareholder feedback to create strong alignment with our key turnaround goals and milestones, focusing on urgency in delivering the turnaround

  Creates alignment between long-term incentives and delivering shareholder value

  Facilitates retention of critical staff needed to deliver the turnaround, while maintaining strong alignment between executive pay and shareholder interests and retaining the requirement for significant increase in stock price in order for target LTI to be achieved

    As the combined value of participants’ regular 2019 LTIP and Turnaround LTI Performance Awards will not exceed 80% of their target 2019 LTI opportunity, the awards are not additive but rather still below the target 2019 LTIP opportunity. The shortfall reflects the performance-based nature of the LTIP and requires a significant stock price improvement to realize target value under the compensation plans.

STRONG COMPENSATION GOVERNANCE PRACTICES

We maintain several best practices in compensation governance. A more detailed discussion of these practices is on page 52.

 

What We Do

 

    

 

What We Don’t Do

 

 

LOGO  Comprehensive Clawback Policy

 

LOGO  Double-Trigger Vesting for Change-in-Control Benefits

 

LOGO  Multiple Performance Metrics for Various Incentive Plans

 

LOGO  Multi-Year Vesting Equity Awards

 

LOGO  Stock Ownership Guidelines and Holding Requirements for Senior Executives

 

LOGO  Limited Perquisites

 

LOGO  Active Shareholder Engagement

 

LOGO  Independent Compensation Consultant

 

LOGO  Compensation Risk Review

 

LOGO  Regular review of compensation, especially incentive design, to ensure continued alignment with evolving company strategy and shareholder interests

 

 

   

LOGO    No Excise Tax Gross-Ups on Change in Control

 

LOGO    No Hedging Transactions, Short Sales or Pledging

 

LOGO    No Repricing of Stock Options

 

LOGO    No Dividend Equivalents Paid on Unvested Performance RSUs

 

40    AVON 2019 Proxy Statement   


PAY-FOR-PERFORMANCE

Our strategic and financial goals influenced the design and development of our 2018 compensation programs. The Committee believes that aligning payouts with our performance outcomes is critical for shareholders, as is securing the right talent to lead our business. Accordingly, the targets under our annual and long-term incentive programs represent rigorous performance expectations and are aligned with our immediate and long-term financial and strategic goals.

We seek to promote the following in our incentive compensation program design:

 

   

Align with Avon’s externally communicated business goals

 

   

Maintain focus on financial and strategic results and year-over-year improvement

 

   

Strengthen leadership behaviors including ownership, accountability and execution

 

   

Attract, motivate and retain talent

 

   

Balance and align business and shareholder interests

Compensation Elements. The 2018 executive compensation program was highly performance-based and provided incentive opportunities that align with our shareholders’ interests and our strategic and financial goals. Performance goals were selected to fully align with our commitment to our shareholders. The following table provides a summary of the three primary components of the executive compensation program:

 

 

LOGO

Component Form Performance Link CEO and NEO Pay Mix Base Salary Cash Fixed compensation to attract and retain NEOs For CEO and NEOs Annual Incentives Cash 100% Based on Avon Performance Revenue Growth Operating Profit Operating Cash Flow-Active Representative Growth-Transformation Savings For CEO and NEOs Long-Term Incentives Performance-Based RSUs Premium Stock Options Service-Based RSUs Relative Total Shareholder Return Target set above median compared to peer group (S&P 400 Index) TSR Regulator (applied if absolute TSR is negative) Value also tied to stock price performance Stock price performance; Premium-priced stock options exercise price set at 25% Above stock price at grant Stock price performance 60% for CEO 33% for NEOs 40% for CEO 33% for NEOs 0% for CEO 33% for NEOs

Performance-based orientation. Target total compensation for our CEO in 2018 was 83% “at risk”, meaning that it is contingent upon and based on Company performance and stock price performance, and target total compensation for our other NEOs was on average 75% “at risk”.

 

   AVON 2019 Proxy Statement    41


 

Significant Majority of 2018 Target Total Compensation Tied to Avon Performance*

 

 

 

LOGO

83% At Risk 17% Base Salary 33% Annual Incentive 50% Long-Term Incentive 60% Performance-based RSUs 40% Premium-priced Stock Options CEO Pay Elements 75% At Risk 25% Base Salary 20% Annual Incentive 55% Long-Term Incentive 1/3 Performance-based RSUs 1/3 Premium-priced Stock Options 1/3 Service-based RSUs Other NEOs Pay Elements (Average)

 

 

83% of CEO target pay is “at risk” and an average of 75% of target pay for all other NEOs is “at risk”.

 

*Incentive compensation for these purposes is based on “at target” compensation, which reflects approximate compensation that would be realized if we achieve the financial and strategic goals set within our incentive plans.

Our Committee continues to believe that despite external challenges to achieving our goals, a high percentage of our executives’ compensation should remain “at risk” and based on Company and stock price performance.

Demonstrated rigor of incentive plans. Despite our management team’s focus on key strategic and financial goals, our financial results have fallen short of the performance targets set by the Committee over the past several years and our executives’ incentive pay has been reflective of these results.

The tables below illustrate the strong link between our financial performance and incentive value realized by our executives. The funding score continues to be strongly aligned with our financial and stock price performance.

 

 

Annual Incentive Plan

 

 

Plan Year

      

 

Financial Performance Measures*

LOGO = Funding Achieved          LOGO = Not Achieved

 

       

 

Plan Funding Score**

(% of Target)

2018

      

 

LOGO  Cash flow from operations

LOGO  Adjusted Operating Profit

LOGO  Revenue Growth

LOGO  Representative Improvement

 

        LOGO

2017

      

 

LOGO  Cash flow from operations

LOGO  Adjusted Operating Profit

LOGO  Revenue Growth

LOGO  Active Representative Growth

LOGO  Transformation Savings

 

        LOGO

2016

    

 

LOGO  Cash flow from operations

LOGO  Adjusted Operating Profit

LOGO  Revenue Growth

LOGO  Active Representative Growth

LOGO  Transformation Savings

 

      LOGO

* Measured in constant dollars. For details on how constant dollars and other adjusted metrics are calculated, please see the Annual Incentive Compensation Section below and the “Non-GAAP Financial Measures” paragraph of the Management’s Discussion and Analysis section of our Annual Report filed on Form 10-K.

** See page 48 for actual 2018 annual incentive plan payouts for NEOs.

 

42    AVON 2019 Proxy Statement   


 

Performance-Based Long-Term Incentive Plan

 

 

Performance Period

   

 

Financial Perf. Measures

 

LOGO = Funding          LOGO = Not

Achieved         Achieved

 

     

 

Actual Financial Score

     

 

Average Realized Value*

    2016-2019**      

 

LOGO  rTSR 2016-2019 (50%)

LOGO  rTSR 2016–2017 (16.6%)

LOGO  rTSR 2017–2018 (16.6%)

LOGO  rTSR 2018–2019 (16.6%)

     

 

 

 

 

LOGO

 

     

 

 

 

 

LOGO

•  Stock Price: 59% of Grant Date Price

 

    2015-2017      

 

LOGO  Revenue growth

LOGO  Operating margin in 2016

     

 

 

 

 

LOGO

     

 

 

 

 

LOGO

•  Stock Price: 26% of Grant Date Price

 

    2014-2016    

 

LOGO  Revenue growth

LOGO  Operating margin in 2016

   

 

 

 

LOGO

   

 

 

 

LOGO

•  Stock Price: 34% of Grant Date Price

 

* The realized value shown is a percentage of target and reflects the closing stock price on the last trading day of the performance period for each respective LTI award.

** rTSR Performance for the 2016 LTIP is measured over the three-year period (i.e. March 10, 2016 to March 10, 2019).

New CEO’s Key Compensation Elements

 

   

Our new CEO’s annual target direct compensation is aligned with the median of our new peer group (see page 45) and is intended to be: (i) predominantly variable, at-risk compensation that is tied to Company performance, (ii) 100% performance-based with respect to the annual LTI awards, and (iii) 40% lower than the former CEO’s target direct compensation consistent with our reduced scale.

 

   

Mr. Zijderveld’s compensation terms reflect the Board’s focus on performance and his annual total direct compensation opportunity is summarized below.

 

 

Compensation Element for New CEO

 

  

 

Shareholder Alignment

 

  

  Annual Base Salary: £850,000

 

  

 Serves as fixed compensation

 

  Annual Cash Incentive: 200% of base salary

  

 Formulaic financial metrics and strategic goals linked to our externally communicated business goals

 

  Long-Term Incentive (LTI): 300% of base salary

  

 2018 LTI is 100% performance-based with the following mix:

 

–  40% Premium Options with exercise price equal to 125% of the closing price of a share of Avon stock as of the grant date; annual vesting over three years

 

–  60% Performance RSUs; cliff vesting at completion of three-year performance period in line with the 2018 LTI program described on page 48

 

 Our methodology to determine the number of LTI shares granted conserves shares and limits dilution for our shareholders, and resulted in accounting grant date fair value for our new CEO’s 2018 LTI awards of $1,942,410 – See discussion above under “Key 2018 Compensation Highlights” of the methodology used to determine number of LTI shares granted

 

 

   AVON 2019 Proxy Statement    43


 

Compensation Element for New CEO

 

  

 

Shareholder Alignment

 

 

  Target Total Compensation: Approx. £4,000,000 (approx. $5,400,000). This is based on the grant date accounting value of the LTI following the application of the methodology used to determine the number of shares granted.

 

  

 

            This value is 22% less than the target total compensation based on the grant date accounting value of the LTI following the application of the methodology used to determine the number of shares granted for our former CEO

 

  Employment Inducement Provisions

  

            Solely for 2018 (the initial year of employment), minimum annual incentive of 50% of target. The rationale for this was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited

 

             Sign-on equity awards consisting of:

 

–600,000 Service-based RSUs (with a grant date fair value of $1,350,000), which will cliff-vest on the third anniversary of the date of grant, subject to continued employment. These Service-based RSUs were granted as a replacement for a portion of his prior employer forfeited equity awards, and to promote shareholder alignment and retention over the three-year vesting period.

 

–            600,000 Performance RSUs, which will vest based on service and performance conditions over a three-year period (with the first third of the award having a grant date fair value of $558,000). These awards have three separate trances, all of which are eligible to vest only after completion of the 2020 performance year. The Committee will establish at the beginning of each year (i.e., 2018, 2019 and 2020) the performance objectives required to earn the award – ensuring that the Committee can tailor the measures and their rigor to the business circumstances.

 

–            No cash-based retention awards were granted.

 

 

44    AVON 2019 Proxy Statement   


COMPETITIVE POSITIONING AND PEER GROUP

We seek to deliver competitive compensation packages and programs and use our peer group for compensation benchmarking and relative pay and performance comparisons. We periodically assess pay ranges, pay levels, and our program design against our peer group. The peer group for 2018 was made up of the following companies:

 

2018 Peer Group

    

    Campbell Soup

   

      Estee Lauder

   

      Nu Skin Enterprises

    

    Church & Dwight

   

      Herbalife

   

      Revlon

    

    Clorox

   

      Hershey Foods

   

      Spectrum Brands Holdings, Inc.

    

    Coty

   

      Kellogg

   

      Tupperware Brands

    

    Edgewell Personal Care

               

The Committee, with input from its independent compensation consultant, continued to review the peer group during 2017 to ensure the size and international scope of the companies we use as a comparison accurately reflect Avon’s current revenue and international focus. The Committee made a number of changes to the peer group for 2018 that resulted in a reduction in the median revenue of the peer group to $5.1 billion, while retaining a composition of relevant consumer products companies that are internationally and operationally complex; at median, peers earn half of sales from international markets and operate in 100 countries. Following a thorough re-assessment of the peer group, the Committee believes the current peer group, with its reduced median revenue and market capitalization, appropriately reflects Avon’s current size and the international complexity of our business. As such, the Committee determined not to make any changes to the peer group for 2019.

We generally target the market median for target total direct compensation and each of base salary, target total cash compensation, and long-term incentives for senior officers, including NEOs, although we allow flexibility to pay above or below the median depending on other factors, including adjusting for specific individual circumstances and personal achievement (e.g. sustained performance over a length of time in a given role, and potential to take on expanded roles within Avon), the evolving business environment, and executive recruitment efforts. We determine “market” for these purposes based on analysis provided to the Committee by its independent compensation consultant with respect to the peer group of companies described above.

In 2018, actual cash payouts and value of long-term incentive awards as compared to the market median of target compensation for our peers, on average, for our NEOs is aligned with market on base salary, below market on total cash compensation (i.e. base salary plus actual bonus payout), below market on long-term incentives (i.e. 2018 long-term incentive awards) and below market for 2018 total direct compensation (i.e., base salary, actual bonus payout and long-term incentive opportunity).

 

   AVON 2019 Proxy Statement    45


ELEMENTS OF OUR COMPENSATION PROGRAM

Key elements of compensation include base salary, annual incentive compensation, long-term incentive compensation, retirement benefits, and other benefits, including health and limited perquisites.

BASE SALARY

 

   

 

Purpose: To attract and retain key executive talent and compensates for achievements based on job responsibilities and individual performance

 

 

Annual salary increases are based on our overall salary increase budget, individual performance, and internal and external market comparisons. In keeping pay aligned with performance, no NEOs received salary increases in 2018.

ANNUAL INCENTIVE COMPENSATION

 

   

 

Purpose: Encourages and rewards achievement of annual/short-term Company financial goals and strategic initiatives; attracts, motivates, and retains key executive talent

 

As in previous years, the aggregate amount available for payment under the annual incentive program for 2018 was based solely on our global financial and strategic results, which supports our culture of collaboration and objective to focus on “Winning as One Team”. The Committee then may use negative discretion to reduce the actual payout for senior officers. For 2018, the Committee selected three global financial performance measures of equal weight: revenue growth, adjusted operating profit, and operating cash flow; and one global strategic objective: Representative Improvement. These metrics were chosen to focus execution on top-line growth, profit, and cash flow generation. Individual payouts to senior officers are fully funded based on pre-set global financial and strategic performance measures.

Calculation of award payments for each senior executive was based fully on Company performance and fully formulaic. Individual performance was not a component for our senior executives:

 

Funding Entirely Based on Avon’s Financial Performance

 

LOGO

Financial Score 0% - 150% Revenue Growth Operating Profit Operating Cash Flow Representative Improvement Each equally weighted 25% Target Award Funding Score Annual Incentive Award

The calculation of the funding results is purely formulaic, and no discretion has been applied in determining the score. The table below summarizes the results of each metric. In recognition of (1) the challenging operating environment that we expected to face during 2018 (2) the below target results in 2017, which were reflected in the payout of 37.5% of target, and (3) the importance of retaining and motivating executives with realistic, but challenging, goals that have some probability of being achieved, threshold for each of the 2018 financial goals was set at a lower performance level than actual 2017 results.

 

46    AVON 2019 Proxy Statement   


There was notable progress achieved on the Representative Improvement metric in 2018 (we spoke to over 60,000 Representatives, launched on-line stores in 20 markets, launched the new Representative segmentation, e-brochure launched and now live in 60 countries). However, to ensure the total bonus results are calculated based on a quantitative assessment, funding for the Representative Improvement metric is determined based on the average score of the financial metrics, which resulted in 0% payout for Representative Improvement metric.

The table below summarizes the results of each metric

 

   

 

Preset Performance Goals

 

 

   

Achievement

 

   

Weighted Funding

Result

 

   

 

Threshold

(25% of Target)

 

  

 

Target

(100% of Target)

 

  

 

Maximum

(150% of Target)

 

   
                 

 

Revenue

Growth

(Constant $)1

 

   

-1.50%

 

  

1.20%

 

  

2.00%

 

   

-3.30%

 

   

0%

 

                 

 

Operating Profit

Growth

(Constant $)2

 

   

320M

 

  

400M

 

  

450M

 

   

269M

 

   

0%

 

                 

 

Operating Cash

Flow Growth

(Constant $)3

 

   

160M

 

  

243M

 

  

274M

 

   

120M

 

   

0%

 

                 

 

Representative

Improvement4

 

   

Funding calculated based on average of three financial metrics

 

   

N/A

 

   

0%

 

                   
                 
             

 

Total

 

     

 

0%

 

 

  1.

Revenue growth (in constant dollars) was below the minimum performance threshold, and therefore contributed zero toward the overall funding score.

 

  2.

Adjusted operating profit (in constant dollars) was below the minimum performance threshold, and therefore contributed zero toward the overall funding score.

 

  3.

Operating cash flow (in constant dollars) was below the minimum performance threshold, and therefore contributed zero toward the overall funding score. Adjustments were made for costs related to restructuring implementation and the Brazilian IPI tax deposit refund collected following successful legal challenge, which reduced the cash flow funding result from above threshold to below threshold.

 

  4.

Representative Improvement is calculated based on the average score from the financial metrics. The Committee can then vary the weighted funding for this metric up or down by up to 25%. Given the average of financial metrics score was zero, the Committee determined not to make any adjustments.

 

  5.

Constant dollars measures have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars. For further details on how constant dollars and other adjusted metrics are calculated, please see the “Non-GAAP Financial Measures” paragraph of the Management’s Discussion and Analysis section of our Annual Report filed on Form 10-K.

In light of these results, the overall funding score for 2018 was 0%. Based on these results, the Committee approved no payouts to our NEOs for the 2018 annual incentive plan year, other than for Mr. Zijderveld whose payout is based on his previously agreed to employment contract as an inducement to join the Company, which provides for payout of the 2018 annual bonus at 50% of target. The rationale for this guarantee was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited.

 

   AVON 2019 Proxy Statement    47


Target award and actual payout under the 2018 annual incentive program for each NEO are summarized below:

 

     
    NEO       2018 Target Annual Incentive Program Amount           2018 Actual Payout Amount    
 

    Mr. Zijderveld

 

$2,169,236

 

$1,084,618

    Ms. McCoy*

 

$0

 

$0

    Mr. Wilson

 

$596,540

 

$0

    Mr. Fernandez

 

$541,033

 

$0

    Mr. Myers

 

$479,784

 

$0

    Mr. Thompson

 

$437,675

 

$0

* In line with Ms McCoy’s separation agreement with the Company, she was not entitled to receive an annual incentive award for 2018.

In addition, in connection with his commencement of employment in 2017, Mr. Fernandez received in March 2018 payment of a deferred cash award in the amount of $1,373,951 in recognition of his forfeiture of a significant amount of value in unvested equity and other benefits from his prior employer.

LONG-TERM INCENTIVE COMPENSATION

 

 

Purpose: Encourages long-term focus and promotes decision making consistent with our long-term strategic and financial goals and the interests of our shareholders; attracts, motivates and retains key executive talent

 

For 2018, the Committee constructed a long-term incentive program that encourages and rewards key executives for meeting objectives associated with total shareholder return relative to a defined peer group. As in prior years, our long-term incentive award program consisted of overlapping cycles, with a new equity award each year. In general, each participant received a grant at the beginning of each three-year cycle. In 2018:

 

   

100% of Mr. Zijderveld’s 2018 long-term compensation was granted in the form of performance-based equity; 60% was delivered in the form of Performance RSUs, and 40% was delivered in the form of Premium Options with a strike price set 25% above the closing stock price on the grant date.

 

   

For other senior officers, including the NEOs other than the CEO, 2018 long-term incentive awards consisted of Performance RSUs, Service-based RSUs, and Premium Options, each representing one-third of the overall target award.

Service-based RSUs were included as part of the long-term incentive award program for NEOs, other than the CEO, to provide stability, encourage share ownership by our senior officers and to attract and retain key talent. Service-based RSUs were also used to connect the realized pay of our senior officers to Avon’s stock, thereby aligning their pay to shareholder interests. These awards will vest on the third anniversary of the grant date, subject to continued employment. Dividend equivalents are generally paid on Service-based RSUs. However, because the Company suspended its dividend to shareholders effective in the first quarter of 2016, dividend equivalents have been similarly suspended for Service-based RSUs effective in the first quarter of 2016.

Premium Options were also included as part of the long-term incentive award program for NEOs in 2018. The exercise price on the Premium Options was set 25% above the actual stock price on the date of grant, requiring significant stock price appreciation for executives to realize target award value. The Committee determined to set the premium at 25% in order to incentivize performance and achieve alignment with shareholder interests, while noting that the 25% premium is significantly higher than the 10% premium generally supported by investors and the leading proxy advisory firms. These awards will vest ratably over three years following the grant date, subject to continued employment, in order to encourage share ownership of our senior officers and to attract and retain key talent.

2018 Performance RSUs

Long-term Performance RSU awards granted in 2018 were formulaic and tied solely to relative TSR which strongly aligns with previous 2018 commitments to shareholders. The target relative TSR for the 2018 program was set at the 55th percentile compared to the S&P 400 Index over a three-year period.

While relative TSR is the primary metric that drives payout for 2018 Performance RSU awards, the Committee maintained another governance feature to ensure that even if the relative TSR metric performance results in funding which is above target, payouts cannot exceed target unless absolute TSR is positive at the end of the three-year vesting period. Awards vest at the end of the three-year vesting period and payouts can range from 0% to 150% of target. There is no discretion in determining the payout. If performance measures are met, the Performance RSUs will generally be settled in shares of Avon common stock. However, Performance RSUs may be settled in cash rather than shares as necessary to comply with applicable limits under our stock incentive plan. Dividend equivalents are not paid on Performance RSUs.

 

48    AVON 2019 Proxy Statement   


Grants to the NEOs under the 2018 long-term incentive program were as follows:

 

  NEO

 

 

Grant Date Value of

Performance

RSUs

 

 

Grant Date Value of Service-
Based

RSUs

 

 

Grant Date Value of Premium
Options

 

 

Total Grant Date Value***

 

  Mr. Zijderveld*

   

 

$1,759,417

   

 

$1,350,000

   

 

$738,072

   

 

$3,847,489

  Ms. McCoy**

   

 

-

   

 

-

   

 

-

   

 

-

  Mr. Wilson

   

 

$331,111

   

 

$315,290

   

 

$305,119

   

 

$951,519

  Mr. Fernandez

   

 

$360,686

   

 

$343,452

   

 

$332,373

   

 

$1,036,511

  Mr. Myers

   

 

$282,947

   

 

$269,428

   

 

$260,737

   

 

$813,112

  Mr. Thompson

   

 

$230,861

   

 

$219,830

   

 

$212,738

   

 

$663,429

*Mr Zijderveld’s award includes annual LTI award plus 600,000 sign-on Performance RSUs, and 600,000 sign-on RSUs, as agreed under his contract, however, because as of December 31, 2018 the metrics for two-thirds of these sign-on Performance RSUs were not yet determined, only one-third (i.e., 200,000) of the sign-on Performance RSUs is included (the remaining two-thirds will be tied to the achievement of goals for the 2019 and 2020 performance periods respectively).

**Given her separation from service in March 2018, Ms. McCoy was not granted any long-term incentive awards in 2018.

***For all NEOs, the Total Grant Date Value shown is based on our LTI methodology to determine the number of shares and the option conversion ratio of 2.5:1.

2016-2019 Performance RSU Awards

In order for there to be any payout with respect to the 2016-2019 Performance RSUs granted in 2016, minimum thresholds had to be achieved. The table below summarizes the results of each financial metric, which resulted in a 34% funding score. However, the value realized upon vesting, which reflects the March 8, 2019 (last trading day of the performance period) closing stock price, was only 21% of the original value awarded. Ms. McCoy is the only current NEO who participated in the 2016-2019 LTI plan,

The 2016 Performance RSU awards are the first tranche of LTI awards where performance was based 100% on TSR rather than long-term operating metrics. The Board determined it was appropriate to introduce relative TSR for the LTI Performance RSU awards to create greater alignment between shareholder values and the value of executive LTI awards. As the table below demonstrates, the outcomes of the 2016 PRSU awards are consistent with and reflective of shareholder experiences over the three-year period.

 

 

 

   

 

Preset Performance Goals

 

 

   

Achievement

 

   

Weighted Funding

Result

 

   

 

Threshold

(30th Percentile)

 

  

 

Target

(55th Percentile)

 

  

 

Maximum

(75th Percentile)

 

   
                 

 

2016-2019

3 year relative TSR

(50% Weighting)

 

   

50%

 

  

100%

 

  

150%

 

   

0%

 

   

0.0%

 

                 

 

2016-2017

1 year relative TSR

(16% Weighting)

 

   

50%

 

  

100%

 

  

150%

 

   

89%

 

   

14.5%

 

                 

 

2017-2018

1 year relative TSR

(16% Weighting)

 

   

50%

 

  

100%

 

  

150%

 

   

0%

 

   

0%

 

                 

 

2018-2019

1 year relative TSR

(16% Weighting)

 

   

50%

 

  

100%

 

  

150%

 

   

117%

 

   

19.5%

 

                   
                 
             

 

Total Vesting

 

     

 

34%

 

 

   AVON 2019 Proxy Statement    49


OTHER COMPENSATION

Retirement Benefits

 

   

 

Purpose: Offers market-based retirement opportunities and promotes retention

 

Avon offers retirement benefits to the NEOs consistent with the retirement programs generally available to all employees of the applicable employing entity meeting the qualifications required by each benefit plan. Because the amount of an employee’s compensation and the number of years of service are key components in determining retirement benefits, an employee’s performance and service over time will influence the level of his or her retirement benefits. For each NEO, the Committee reviews accrued and projected retirement benefits and deferred compensation account balances, as applicable, as part of its annual total compensation review. Our U.S. plans, which are further described in the applicable executive compensation tables, include a cash balance pension plan (that is closed to new hires after December 31, 2014), a 401(k) plan (that includes an employer match contribution and, solely for individuals hired on or after January 1, 2015 who are not eligible to participate in the pension plan, an additional nonelective employer contribution), a benefit restoration plan to restore benefits that may not be provided under the cash balance plan due to Internal Revenue Service (“IRS”) limitations, and a nonqualified deferred compensation plan, which provides alternative tax-deferred savings opportunities and restores benefits that may not be provided under the 401(k) plan. For our U.K-based NEOs, given that the U.K. defined benefit program is closed to new hires, they are eligible to participate only in a U.K.-tax qualified defined contribution arrangement to which they may contribute, which includes an employer match contribution that is capped in accordance with applicable law. The U.K. defined contribution scheme includes a lifetime allowance, and therefore if a participant is going to exceed this amount they will cease contributing to the scheme (or opt to never commence participation) and in lieu of continued contributions to the plan, the Company makes additional cash payments to them via regular payroll.

Other Benefits and Perquisites

 

   

 

Purpose: Offers health and financial protection programs to support well-being and healthy lifestyles

 

The Committee has established and periodically reviews the perquisites and benefits available to our NEOs in light of our compensation philosophy and competitive market practices.

 

   

Broad-Based Benefits: Our NEOs are eligible to participate in the benefit plans generally available to all employees of their employing entity. These generally include medical, dental and vision coverage, life insurance and disability benefits, and for U.K.-based NEOs, a flexible benefits scheme. International allowances are also provided when our employees, including our NEOs, work abroad in accordance with our international assignment policies and procedures.

 

   

Limited Perquisites: As part of our overall compensation program, we provide some limited perquisites to our NEOs that are not available to employees generally. These additional benefits are generally limited to financial planning and tax preparation services allowances. For our U.K.-based NEOs, they are also eligible for a company car at the benchmark level for their grade or an annual cash equivalent of approximately $19,462.

 

50    AVON 2019 Proxy Statement   


ROLES IN EXECUTIVE COMPENSATION

The following parties are responsible for the development and oversight of our executive compensation program for our NEOs:

 

 

Compensation and Management Development Committee

 

 

   

Oversees our executive compensation program; responsibilities include review of strategic objectives, design, and risk and reward structure

 

   

Determines and approves the compensation of our NEOs, other officers at or above the level of senior vice president, and any officers covered by Section 16 under the Securities Exchange Act of 1934, as amended

 

   

Consults with the independent members of the Board in establishing and evaluating performance objectives for the CEO each year, in part to determine the CEO’s incentive compensation payout

 

   

Sets annual and long-term incentive performance measures and goals that align with our pay-for-performance philosophy

 

   

Reviews and evaluates our talent management and succession planning approach, philosophy, and key processes; responsible for development and succession plans for members of the Executive Committee and oversight of development plans for their potential successors

 

   

Has sole authority to engage, continue to engage or terminate its relationship with outside advisors, including its independent compensation consultant

 

   

Requires that the compensation consultant be independent, and reviews such independence at least annually

 

 

Under the Committee’s charter, a compensation consultant is not considered independent if it provides significant services to the business apart from work performed for the Committee (services in excess of $50,000 or, if less, 1% of the consulting firm’s gross revenues for the most recent fiscal year). In 2018, Pay Governance LLC (“Pay Governance”) provided no services to us apart from work performed for the Committee, and the Committee has determined that Pay Governance is independent. The Committee also reviews the relationship with the compensation consultant to identify conflicts of interest pursuant to Securities and Exchange Commission and New York Stock Exchange (the “NYSE”) rules and, in 2018, did not identify any such conflicts

See “Information Concerning the Board of Directors—Compensation and Management Development Committee” on page 17 for additional Committee responsibilities.

 

 

Independent Compensation Consultant to the Committee

(Pay Governance Since September 2016)

 

 

   

Advises the Committee on various executive compensation matters, including proposed changes to our annual and long-term incentive programs, share utilization, compensation levels, peer group constituents and pay mix

 

   

Attends Committee meetings

 

   

Provides periodic reports, analyses and presentations to the Committee, and reviews all Committee meeting materials regarding current and prospective compensation plans and programs

 

   

Conducts analyses related to the employment arrangements for new senior officers

 

   

Provides assistance with the Committee’s review of the risk and reward structure of executive compensation plans, policies and practices

 

   

Pay Governance is engaged by and reports directly to the Committee and consults directly with its Chair; the Committee has the sole authority to retain and terminate Pay Governance and to review and approve Pay Governance’s fees and other terms of the engagement

 

 

Chief Executive Officer

 

 

   

Makes individual compensation recommendations for senior officers (other than herself or himself), including the other NEOs, to the Committee for its review and approval, after considering market data and relative individual achievements

 

   

Provides input on the design of the executive compensation program, with a focus on alignment with strategic priorities and the desired Company culture

 

 

Management

 

 

   

Supports the Committee by making recommendations and providing analyses with respect to competitive practices and pay ranges, compensation and benefit plans, policies and procedures related to equity awards, perquisites, and general compensation and benefits philosophy

 

   

Senior human resources and legal executives attend Committee meetings to provide perspective and expertise relevant to the meeting agenda

 

   

Does not recommend, determine or participate in Committee discussions relating to their individual compensation arrangements

 

   AVON 2019 Proxy Statement    51


COMPENSATION GOVERNANCE BEST PRACTICES

 

 

What We Do

 

 

   

Comprehensive Clawback Policy. We have a robust clawback policy that applies to annual and long-term incentive payments. This policy applies to certain executives, including all of our NEOs, in the event of a financial restatement, a material miscalculation of performance achievement, misconduct, serious violations of our Code of Conduct or violations of law within the scope of company employment.

 

   

Double-Trigger Vesting. Change in control benefits under our Change in Control Policy, long-term incentive cash programs, and equity awards granted to our senior executives since 2011 are subject to double-trigger vesting following a change in control event.

 

   

Multiple Performance Metrics. We mitigate compensation-related risk in a number of ways, including by using multiple performance measures across our various incentive plans.

 

   

Multi-Year Vesting Equity Awards. The on-cycle RSU awards granted to our NEOs in 2018 vest at the end of a three-year period subject to continued employment and, in the case of Performance RSUs, only in the event that underlying performance goals are met. Premium Options vest ratably one-third each year over three years.

 

   

Stock Ownership Guidelines and Holding Requirements. We have clear stock ownership guidelines and we monitor compliance with those guidelines regularly. At this time, all of our applicable NEOs are on track to satisfy these guidelines. Our CEO’s ownership guideline provides for ownership of stock equal to 6 times base salary and, like for all other NEOs, a stock holding retention ratio is in place until the ownership guideline is satisfied.

 

   

Limited Perquisites. We offer only limited perquisites for our NEOs, in line with competitive market practice, and continually review the perquisites available.

 

   

Active Shareholder Engagement. We communicate proactively with our shareholders regarding executive compensation, governance, and business matters.

 

   

Independent Compensation Consultant. The Committee has retained Pay Governance to advise on our executive compensation programs. Aside from services to the Committee (and other Board committees when applicable), Pay Governance performs no other services for us.

 

   

Risk Review. The Committee, with support and advice from its independent compensation consultant, reviews the risk and reward structure of executive compensation plans, policies and practices to determine whether there are compensation-related risks that are reasonably likely to have a material adverse effect on the business.

 

   

Regular Review of Compensation to Ensure Alignment. The Committee, with support and advice from its independent compensation consultant, regularly reviews its compensation programs for executives, especially the incentive design, to ensure continued alignment with evolving company strategy.

 

 

What We Don’t Do

 

 

   

No Excise Tax Gross-Ups on Change in Control. We do not have any excise tax gross-ups with respect to any change in control payments.

 

   

No Hedging Transactions, Short Sales or Pledging. We do not permit our directors and employees to engage in any transaction in publicly traded options on Company common stock or any other transaction to hedge a position in, or engage in short sales of, Company common stock. In addition, pledging Company common stock as collateral for a loan is prohibited.

 

   

No Repricing of Stock Options. Our equity plans prohibit repricing or the buyout of underwater stock options without shareholder approval.

 

   

No Dividend Equivalents on Unvested Performance RSUs. To the extent we declare any dividends on our common stock, we pay dividend equivalents only on certain Service-based RSUs. (Because the Company suspended its dividend to shareholders effective in the first quarter of 2016, dividend equivalents have been similarly suspended for Service-based RSUs effective in the first quarter of 2016.). As proposed to be amended and restated effective as of our 2019 annual meeting (and as summarized in greater detail beginning on page 73, under the heading, “Proposal 3: Approval of the Amended and Restated 2016 Omnibus Incentive Plan”), the 2016 Omnibus Incentive Plan now provides that no dividends or dividend equivalents may be paid out currently on any unearned awards thereunder, whether time- or performance-vested.

 

52    AVON 2019 Proxy Statement   


ADDITIONAL INFORMATION

EQUITY AWARD GRANTING PROCESS

The Committee generally approves annual equity grants to senior officers, including NEOs, at its regularly scheduled meeting in March of each year and approves off-cycle equity grants that may be made to senior officers, including NEOs, from time to time (for example, to new hires or for promotions). For employees who are not senior officers, grants are made on pre-established dates determined by the Committee. The Committee establishes the aggregate number of shares that may be subject to annual and off-cycle equity grants and the terms and conditions of such awards, but has delegated to the CEO, as a director, the authority to determine the grantees of such awards and the number of shares subject to each award for grantees other than senior officers. We do not time the release of non-public information for the purpose of affecting the value of equity awards.

CLAWBACK POLICIES

In 2010, the Board adopted a “clawback” policy that applies to any annual and long-term incentive payments (cash and equity) awarded to certain executives, including our NEOs, and which we believe supports our pay-for-performance philosophy. Under the policy, in the event of a financial restatement, material incorrect calculations of performance metrics, or misconduct, the Committee is authorized to recover compensation based on its analysis of the relevant facts and circumstances. In January 2013, the policy was updated to provide an expanded definition of misconduct to include serious violations of the Code of Conduct and violations of law within the scope of Avon employment. In addition, the three-year discovery limit for misconduct was eliminated. The scope of coverage was also expanded to include additional key finance executives below the executive officer level.

In addition to the policy described above, our shareholder-approved 2016 Omnibus Incentive Plan and the Amended and Restated 2013 Stock Incentive Plan, as well as other compensation arrangements, include the misconduct provisions described above for all participants (including individuals who are not senior officers) and also provide for forfeiture of awards if a participant breaches certain non-compete, non-solicitation or non-disclosure obligations. Further, as part of our annual Code of Conduct certification, where permitted by local law, certifying employees acknowledge our right of recoupment of incentive compensation in the event of serious violations of the Code of Conduct and violations of law within the scope of company employment.

EXECUTIVE STOCK OWNERSHIP GUIDELINES

To further support our goal of achieving a strong link between shareholder and executive interests, we maintain stock ownership guidelines to expect executive share ownership as follows:

 

   

Chief Executive Officer: 6 times base salary

 

   

Executive Vice President (EVP): 3 times base salary

 

   

Senior Vice President (SVP): 2 times base salary

Our CEO is expected to hold 75% of the net shares acquired upon the vesting of the equity awards until satisfying the ownership target. EVPs and SVPs are expected to hold 50% of the net shares acquired upon vesting of equity awards until their ownership target has been satisfied. All applicable NEOs are on track to satisfy the guidelines.

Stock ownership for U.S. executives includes unvested RSUs, deferred RSUs, Company stock units in the 401(k) plan, Company stock fund units in the deferred compensation plan and Company stock held in the executive’s spouse’s name. Stock ownership for non-U.S. executives includes only unvested RSUs and Company stock held in the executive’s spouse’s name. Stock ownership does not include stock options or unvested Performance RSUs.

TRADING POLICIES

Under our Trading in Avon Securities policy, no employee or director may engage in any transaction in publicly traded options on Avon common stock or any other transaction to hedge a position in, or engage in short sales of, Avon common stock.

EXCISE TAX GROSS-UPS

No NEO or senior officer is entitled to an excise tax gross-up, which we believe reflects current best practices.

 

   AVON 2019 Proxy Statement    53


POST-TERMINATION PAYMENTS

We have a change in control policy for senior officers at or above the senior vice president level who serve on our Executive Committee. We designed this policy based on competitive practice, shareholder input and considerations to attract senior level executives and to motivate and retain them in the event of a potential change in control. Generally, we believe that having change in control provisions will help ensure that, in the event of a potential change in control, members of senior management can act in the best interests of shareholders without the uncertainty and distraction that could result from the effects a change in control could have on their personal situations.

Our policy provides for payments to be made to covered executives upon a “double trigger,” i.e., in the event of an involuntary termination without cause or termination of a covered executive for good reason within two years of a change in control. A covered executive is generally entitled to receive two times the sum of base salary and target annual incentive bonus, and continued participation in our medical and welfare benefit plans for two years, plus two additional years of service and age credits under our nonqualified defined benefit plan, as applicable.

In addition, our employees, including NEOs, are generally eligible for post-termination benefits in the event of death, disability or an involuntary termination. We periodically review the level of post-termination benefits that we offer to ensure that it is competitive and necessary for the attraction, motivation, and retention of superior executive talent. Please refer to the narrative discussion under “Potential Payments Upon Termination of Employment, Including After a Change in Control” beginning on page 66 for a further description.

TAX CONSIDERATIONS

The Committee recognizes tax factors that may impact executive compensation, including:

 

   

Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that we may deduct in any one year with respect to certain of our executive officers. The Committee considers tax implications in determining executive pay, and generally endeavors to provide compensation that is tax deductible under Section 162(m) of the Internal Revenue Code; however, we reserve the right to forgo any or all of the tax deduction if we believe it to be in the best long-term interests of Avon and its shareholders. In addition, the Committee will consider the passage of the Tax Cuts and Jobs Act in December 2018 (the “Tax Cuts and Jobs Act”), and the change to Section 162(m) thereunder.

Our compensation program was designed to allow the Committee to grant certain incentive awards that were intended to be fully deductible for federal income tax purposes pursuant to the performance-based compensation exemption to the limit on deductibility under Section 162(m). However, the Section 162(m) exemption from the deduction limit for performance-based compensation has been repealed by the Tax Cuts and Jobs Act, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exception to the deduction limit for performance-based compensation, no assurance can be given that compensation intended to satisfy the requirements for exception from the Section 162(m) deduction limit will in fact satisfy the exception. Further, the Committee reserves the right to modify compensation that was initially intended to be exempt (including compensation granted during 2018) from Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.

 

   

Section 409A of the Internal Revenue Code sets forth limitations on the deferral and payment of certain benefits. The Committee considers the impact of and designs its programs to comply with or be exempt from, Section 409A and considers generally the evolving tax and regulatory landscape in which its compensation decisions are made.

ACCOUNTING CONSIDERATIONS

The Committee recognizes accounting implications that may impact executive compensation. For example, we record salaries and performance-based compensation in the amount paid or expected to be paid to our NEOs in our financial statements. Also, generally accepted accounting principles require us to record an expense in our financial statements for equity awards, even though equity awards are not paid as cash to employees and may not vest or be earned by such employees.

 

54    AVON 2019 Proxy Statement   


COMPENSATION AND RISK MANAGEMENT

A multi-disciplinary management team comprised of senior executives in human resources, legal, internal audit, enterprise risk, sales, and finance discusses our compensation programs and risk management at least annually and considers many factors, including governance and oversight of compensation plans and program designs and global and local compensation policies and programs, together with potential business risks relating thereto.

The Compensation and Management Development Committee, with support and advice from its independent compensation consultant, reviews the risk and reward structure of executive compensation plans, policies and practices at least annually to confirm that there are no compensation-related risks that are reasonably likely to have a material adverse effect on the Company. We consider in this review program attributes to help mitigate risk, including:

 

   

The use of multiple performance measures, balanced between short- and long-term objectives

 

   

Overlapping long-term incentive programs

 

   

Individual payout caps under plans and programs

 

   

The ability to clawback compensation, including pursuant to our stock incentive plans and the compensation recoupment policy

 

   

Our stock ownership guidelines for senior executives to further align executive interests with those of shareholders

 

   AVON 2019 Proxy Statement    55


 

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

 

 

The Compensation and Management Development Committee has reviewed and discussed with management the Compensation Discussion and Analysis for the year ended December 31, 2018. Based upon such review and discussion, the Compensation and Management Development Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and be incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2018.

 

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE

Helen McCluskey, Chair

Jose Armario

Nancy Killefer

Michael Sanford

 

 

56    AVON 2019 Proxy Statement   


EXECUTIVE COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

The following table provides information regarding the compensation of (i) each person who served as our CEO in 2018, (ii) our CFO in 2018, and (iii) the three other most highly compensated officers who were serving as executive officers as of December 31, 2018 (collectively, the “named executive officers” or “NEOs”).

 

Name   Year  

Salary

($)

 

Bonus

($)1

  Stock
Awards ($)
2
  Option
Awards ($)
3
  Non-Equity
Incentive Plan
Compensation
($)
4
 

 

Change in Pension
Value and Non-
Qualified Deferred
Compensation
Earnings ($)
5

 

   All Other
Compensation
($)
6
  

Total

($)

                   

Jan Zijderveld*

  2018      977,642   1,084,618   3,109,417   738,072   —       —        182,309    6,092,058   
                   

Chief Executive Officer

 

                                     

 

Sheri McCoy**

 

 

2018   

 

 

295,890

 

 

—    

 

 

—    

 

 

—    

 

 

—    

 

 

—    

  

 

1,035,209

  

 

1,331,099   

                   

Former Chief Executive Officer

  2017      1,200,000   —       3,758,832   2,222,220   900,000   238,302    1,568,240    9,887,594   
 

 

2016   

 

 

 

1,200,000

 

 

 

—    

 

 

 

3,675,672

 

 

 

1,880,340

 

 

 

946,800

 

 

 

259,928

 

  

 

103,097

 

  

 

8,065,837   

 

 

Jamie Wilson***

 

 

2018   

 

 

701,811

 

 

—    

 

 

646,400

 

 

305,119

 

 

—    

 

 

—    

  

 

51,589

  

 

1,704,919   

                   

Former Executive Vice President,

Chief Financial Officer

 

  2017      742,660   —       922,799   413,283   236,723   —        47,982    2,363,447   
                   

 

Miguel Fernandez

 

 

2018   

 

 

676,291

 

 

1,373,951

 

 

704,138

 

 

332,373

 

 

—    

 

 

—    

  

 

375,111

  

 

3,461,865   

                   

Executive Vice President,

Global President

 

  2017      259,523   —       565,355   293,081   77,857   —        115,511    1,311,327   

 

 

Jonathan Myers

 

 

2018   

 

 

599,730

 

 

—    

 

 

552,375

 

 

260,737

 

 

—    

 

 

—    

  

 

166,810

  

 

1,579,651   

                   

Executive Vice President, Chief

Operating Officer

 

                                     

 

 

James Thompson****

 

 

2018   

 

 

625,250

 

 

—    

 

 

450,690

 

 

212,738

 

 

—    

 

 

—    

  

 

183,412

  

 

1,472,091   

                   

Senior Vice President,

General Counsel

 

  2017      276,290   —       520,125   250,971   72,526   —        96,350    1,216,262   

* Mr. Zijderveld began serving as our Chief Executive Officer on February 5, 2018.

** Ms. McCoy served as our Chief Executive Officer until February 4, 2018 and terminated employment with the Company on March 31, 2018.

*** Mr. Wilson served as our Chief Financial Officer from January 1, 2017 through March 2019.

**** Mr. Thompson’s last day of employment is expected to be effective no later than April 2019.

 

1

In connection with his commencement of employment in 2017, Mr. Fernandez received a deferred cash award in the amount of $1,373,951, in recognition of a significant amount of value in unvested equity and other benefits from his prior employer that he forfeited. This amount was paid to Mr. Fernandez in March 2018. For Mr. Zijderveld, the amount reported in this column represents payout of his minimum guaranteed annual incentive amount for 2018 (£850,000), pursuant to the terms of his employment contract.

 

2

For each of the named executive officers (other than Ms. McCoy), the amounts reported in the stock awards column for 2018 consist of performance-based restricted stock units (“Performance RSUs”) and service-based restricted stock units (“Service-based RSUs”) as follows:

 

       Name

 

Performance RSUs
Grant Date Fair Value($)

 

Service-based RSUs
Grant Date Fair Value($)

 

    Mr. Zijderveld

 

1,759,417

 

1,350,000

    Ms. McCoy

-

-

    Mr. Wilson

331,111

315,290

    Mr. Fernandez

360,686

343,452

    Mr. Myers

282,947

269,428

    Mr. Thompson

230,861

219,830

 

   AVON 2019 Proxy Statement    57


The aggregate grant date fair value of the awards was determined based on the grant date fair value in accordance with FASB ASC Topic 718. For NEOs other than Mr. Zijderveld, this column (Stock Awards) reflects the Performance RSUs and the Service-based RSUs granted under our 2018-2021 long-term incentive program. For Mr. Zijderveld, this column (Stock Awards) reflects the Performance RSUs granted under our 2018-2021 long-term incentive program as well as sign-on Performance RSUs granted in connection with his employment commencement; 600,000 sign-on Performance RSUs were granted at that time, however as of December 31, 2018 the performance metrics for two-thirds of the award were not yet determined and as a result the value of only one-third of such award is included (the remaining two-thirds will be tied to the achievement of goals for the 2019 and 2020 performance periods respectively). Amounts reported for Performance RSUs are based on the probable outcome of relevant performance conditions as of the grant date. See Note 13 to the Notes to the Consolidated Financial Statements contained in our Form 10-K for 2018 for a description of the assumptions used in valuing the Performance RSUs awards. The value of the Performance RSU awards at the grant date assuming the highest level of performance conditions achieved would be $2,639,126 for Mr. Zijderveld, $496,666 for Mr. Wilson, $541,029 for Mr. Fernandez, $424,421 for Mr. Myers and $346,291 for Mr. Thompson. Performance RSUs will be settled in cash rather than shares as necessary to comply with applicable limits under our stock incentive plan(s). Please refer to the “Compensation Discussion and Analysis” for additional information.

 

3

The grant date fair value of the stock option awards was determined in accordance with FASB ASC Topic 718. See Note 13 to the Notes to the Consolidated Financial Statements contained in our Form 10-K for 2018 for a description of the assumptions used in valuing stock option awards.

 

4

This column reflects amounts earned under our annual incentive program. No named executive officer received a payout under the annual incentive program for 2018 (Mr. Zijderveld received solely his minimum guaranteed payout, as reported in the “Bonus” column and described in footnote 1 above).

 

5

This column for 2018 includes the change in pension value reported, which is the aggregate change in the actuarial present value of the applicable named executive officers’ accumulated benefits under our Personal Retirement Account Plan (“PRA”) and Benefit Restoration Pension Plan (“BRP”). Only Ms. McCoy was eligible to participate in qualified and non-qualified defined benefit pension plans.

 

6

“All Other Compensation” generally includes perquisites, 401(k) employer contributions, excess 401(k) employer contributions, New Money Purchase Section of the Avon Cosmetics Pension Plan (UK) (“UK Defined Contribution Plan”) employer contributions (including opt out payments), relocation/assignment-related tax benefits, and for Ms. McCoy, severance, which are set forth in the table below for 2018:

 

             

Name

 

Perquisites
($)
a

 

401(k) Employer
        Contributions ($)        

 

Excess 401(k)
Employer
Contributions ($)

 

UK Defined Contributions
Plan (Employer
Contributions) 
h

 

Severance

 

Relocation/Assignment
Related Tax Benefits
i

 

 

Mr. Zijderveld b

 

105,219

 

N/A

 

N/A

 

26,939

 

N/A

 

50,151

 

Ms. McCoy c

120,599

10,500

N/A

904,110

Mr. Wilson d

19,462

N/A

N/A

32,127

N/A

Mr. Fernandez e

 

170,734

 

N/A

 

N/A

 

37,406

 

N/A

 

166,971

 

Mr. Myers f

80,711

N/A

N/A

32,127

N/A

53,972

Mr. Thompson g

106,480

N/A

N/A

37,062

N/A

39,871

 

  a

The amounts disclosed are the actual costs incurred by us. The actual and incremental cost for any complimentary Avon products is nominal.

 

  b

For Mr. Zijderveld, perquisites includes annual transportation allowance, car service, medical insurance, and international relocation allowances in the amount of $78,135 associated with his relocation to the United Kingdom.

 

  c

For Ms. McCoy, perquisites include financial planning and tax preparation services, and international assignment allowances in the amount of $116,099 associated with her assignment in the United Kingdom and repatriation to the United States. The amounts reported in this table for Ms. McCoy also include an entitlement to $904,110 in severance paid in 2018 in connection with her termination of employment with the Company on March 31, 2018.

 

  d

For Mr. Wilson, perquisites include annual transportation allowance.

 

  e

For Mr. Fernandez, perquisites include transportation allowance, and international relocation allowances in the amount of $151,272 associated with his relocation to the United Kingdom.

 

  f

For Mr. Myers, perquisites include transportation allowance, and relocation allowances in the amount of $61,249 associated with his relocation within the United Kingdom.

 

  g

For Mr. Thompson, perquisites include transportation allowance, and international relocation allowances in the amount of $61,249 associated with his relocation to the United Kingdom.

 

58    AVON 2019 Proxy Statement   


  h

As U.K.-based employees, Messrs. Zijderveld, Wilson, Fernandez, Myers and Thompson are not eligible to participate in our 401(k) plan (or excess 401(k) plan) but instead are eligible to participate in the UK Defined Contribution Plan, which is a tax-qualified defined contribution plan similar to our 401(k) plan. The amount listed under the UK Defined Contribution Plan is the cash payment made to Messrs. Zijderveld, Wilson and Myers in lieu of contributions to the UK Defined Contribution Plan. For a description of the UK Defined Contribution Plan, see page 50.

 

  i

In accordance with our international relocation and assignment policies and the terms of the individual relocation/assignment agreements, the amounts shown for Messrs. Zijderveld, Fernandez, Myers and Thompson include tax benefits provided in connection with expenses associated with relocation to London, United Kingdom.

 

7

Compensation for Messrs. Zijderveld, Wilson, Fernandez, Myers and Thompson is generally delivered in GBP. In calculating the dollar equivalent for such amounts reported for Messrs. Zijderveld, Fernandez, Myers and Thompson, amounts have been converted to U.S. dollars based on the currency exchange rate on December 31, 2018.

 

   AVON 2019 Proxy Statement    59


GRANTS OF PLAN-BASED AWARDS

The following table presents information regarding grants of equity and non-equity plan-based awards to our named executive officers during 2018.

 

  Name

 

 

 

Grant  
Date  

 

 

 

Approval   

    Date   

 

 

 

 

Estimated Future Payouts Under   
Non-Equity Incentive Plan   
Awards
1   

 

 

 

Estimated Future Payouts Under Equity   
             Incentive Plan Awards
2   

 

 

 

All   

Other   

Stock   

Awards   

# of   

shares   

of stock   

or units   

(#)3   

 

 

 

 

All other   

option   

awards # of   

securities   

underlying   

options   

(#)4   

 

 

 

 

Exercise   

or Base   

Price of   

Option   

Awards   

($/Sh)5   

 

 

 

 

Grant   

Date   

FMV of   

Stock &   

Option   

Awards   

($)6   

 

 

 

Target

($)

 

 

 

Maximum

($)

 

 

 

Threshold
(#)

 

 

 

Target
(#)

 

 

 

Maximum
(#)

 

 

Mr. Zijderveld7

         

 

1,767,791

 

 

2,651,686

                           
 

 

3/14/2018   

 

 

3/14/2018   

         

 

205,020

 

 

410,040

 

 

615,060

             

 

1,201,417   

 

 

3/27/2018   

 

 

3/27/2018   

         

 

300,000

 

 

600,000

 

 

850,000

             

 

558,000   

 

 

2/5/2018   

 

 

2/5/2018   

                     

 

600,000

         

 

1,350,000   

 

 

3/14/2018   

 

 

3/14/2018   

                         

 

683,400

 

 

$3.49

 

 

738,072   

 

Ms. McCoy

 

 

—   

 

 

—   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—   

 

Mr. Wilson

         

 

596,540

 

 

894,810

                           
 

 

3/14/2018   

 

 

3/14/2018   

         

 

56,504

 

 

113,007

 

 

169,511

             

 

331,111   

 

 

3/14/2018   

 

 

3/14/2018   

                     

 

113,007

         

 

315,290   

 

 

3/14/2018   

 

 

3/14/2018   

                         

 

282,518

 

 

$3.49

 

 

305,119   

                       

 

Mr. Fernandez

         

 

541,033

 

 

811,549

                           
 

 

3/14/2018   

 

 

3/14/2018   

         

 

61,551

 

 

123,101

 

 

184,652

             

 

360,686   

 

 

3/14/2018   

 

 

3/14/2018   

                     

 

123,101

         

 

343,452   

 

 

3/14/2018   

 

 

3/14/2018   

                         

 

307,753

 

 

$3.49

 

 

332,373   

 

Mr. Myers

         

 

479,784

 

 

719,676

                           
 

 

3/14/2018   

 

 

3/14/2018   

         

 

48,285

 

 

96,569

 

 

144,854

             

 

282,947   

 

 

3/14/2018   

 

 

3/14/2018   

                     

 

96,569

         

 

269,428   

 

 

3/14/2018   

 

 

3/14/2018   

                         

 

241,423

 

 

$3.49

 

 

260,737   

 

Mr. Thompson

         

 

479,784

 

 

719,676

                           
 

 

3/14/2018   

 

 

3/14/2018   

         

 

39,396

 

 

78,792

 

 

118,188

             

 

230,861   

 

 

3/14/2018   

 

 

3/14/2018   

                     

 

78,792

         

 

219,830   

 

 

3/14/2018   

 

 

3/14/2018   

                         

 

196,980

 

 

$3.49

 

 

212,738   

 

1

Amounts represent possible cash payouts under the 2018 annual incentive program, for which there is no threshold payout. Amounts shown for Messrs. Zijderveld, Wilson, Fernandez, Myers and Thompson have been converted from GBP to U.S. dollars based on the December 31, 2018 currency exchange rate.

 

2

This column reflects the Performance RSUs granted under our 2018-2021 long-term incentive program (including, for Mr. Zijderveld, an additional sign-on Performance RSU award). Performance RSUs will be settled in cash rather than shares as necessary to comply with applicable limits under our stock incentive plan(s). Please refer to the “Compensation Discussion and Analysis” for additional information. Mr. Zijderveld was granted 600,000 sign-on Performance RSUs under the terms of his employment contract, however as of December 31, 2018 the performance metrics for two-thirds of the award were not yet determined, and as a result the value of only one-third of such award is included. The remaining two thirds will be tied to the achievement of goals for the 2019 and 2020 performance periods respectively.

 

3

These Service-based RSUs vest 100% on the third anniversary of the grant date.

 

60    AVON 2019 Proxy Statement   


4

This column shows the number of stock option awards granted under our 2018-2021 LTIP. All of the stock options listed above vest one-third per year over a three-year period.

 

5

This column shows the exercise price of stock option awards granted under our 2018-2021 LTIP, which is equal to 125% of the closing price of our common stock on the NYSE on the date of grant.

 

6

Please refer to Footnotes 2 and 3 under the Summary Compensation Table for additional information.

 

7

All of Mr. Zijderveld’s 2018 equity grants were made outside of our 2016 Omnibus Incentive Plan using the NYSE inducement grant exception.

 

   AVON 2019 Proxy Statement    61


The material factors necessary for an understanding of the compensation for our named executive officers are described under the “Compensation Discussion and Analysis” and “Potential Payments Upon Termination of Employment, Including After a Change in Control” sections and the corresponding footnotes to the tables. In addition, most of our named executive officers have an employment agreement that identifies, where applicable, his or her position and generally provides, among other things, for (i) an annual base salary, (ii) eligibility to receive annual cash bonuses and long-term incentive awards, (iii) sign-on compensation, and (iv) eligibility to receive perquisites and to participate in benefit plans generally available to similarly situated senior executives. During 2018, Ms. McCoy was entitled to international assignment benefits, such as repatriation support, together with related tax equalization benefits, under our relocation policies and the terms of her international assignment and retirement agreements. Messrs. Zijderveld, Fernandez, Myers and Thompson were entitled to relocation support under our relocation policies and the terms of their employment contracts. Ms. McCoy became entitled to severance pay and benefits under the terms of our applicable severance programs and her severance agreement in connection with her termination of employment on March 31, 2018, as described under “Potential Payments Upon Termination of Employment, Including after Change in Control” and as disclosed in the Summary Compensation Table.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table presents information regarding outstanding equity awards as of December 31, 2018 for the named executive officers. All dollar values are based on $1.52, the closing price of our common stock on the NYSE on December 31, 2018.

 

 

  Name

 

 

Option Awards

 

 

 

Stock Awards

 

 

 

Number of   

securities   

underlying   

unexercised   

options (#)   

exercisable   

 

 

 

 

Number of   

securities   

underlying   

unexercised   

options   

(#) unexercisable   

 

 

 

 

Option   

exercise   

price ($)   

 

 

Option   

Expiration   

date   

 

 

Number of   

Shares or   

Units of   

Stock That   

Have   

Not Vested (#)   

 

 

 

Market Value of   

Shares or Units   

of Stock That   

Have Not   

Vested ($)   

 

 

Equity Incentive Plan   

Awards: Number of   

Unearned Shares, Units   

or Other Rights That   

Have Not Vested (#)   

 

 

Equity Incentive Plan   

Awards: Market or Payout   

Value of Unearned   

Shares, Units or Other   

Rights That Have Not   

Vested ($)   

 

Mr. Zijderveld

 

-          

 

683,4001   

 

3.49   

 

3/14/2028   

 

    


600,0007   

 

  912,000   

 

  -   

 

  -       

 

                          205,02013    

 

  623,261   

 

                          300,00014    

 

  456,000   

 

Ms. McCoy

 

924,000   

 

 

462,0002   

 

 

5.49   

 

 

3/10/2026   

 

         

277,20015   

 

 

842,688   

 

  462,000   

 

  924,0003    

 

  5.54   

 

  3/17/2027   

 

          138,60016    

 

  421,344   

 

Mr. Wilson

 

85,922   

 

 

171,8433   

 

 

5.54   

 

 

3/17/2027   

 

 

103,1068   

 

 

156,721   

 

 

51,55316   

 

 

156,721   

 

  -       

 

  282,5181    

 

  3.49   

 

  3/14/2028   

 

  113,0079    

 

  171,771   

 

  56,50413    

 

  171,771   

 

Mr. Fernandez

 

100,028   

 

 

200,0554   

 

 

3.30   

 

 

8/21/2027   

 

 

120,03310   

 

 

182,450   

 

 

60,01716   

 

 

182,450   

 

  -       

 

  307,7531    

 

  3.49   

 

  3/14/2028   

 

  123,1019    

 

  187,114   

 

  61,55113    

 

  187,114   

 

Mr. Myers

 

60,715   

 

 

121,4305   

 

 

3.09   

 

 

9/1/2027   

 

 

72,85811   

 

 

110,744   

 

 

36,42916   

 

 

110,744   

 

  -       

 

  241,4231    

 

  3.49   

 

  3/14/2028   

 

  96,5699    

 

  146,785   

 

  48,28513    

 

  146,785   

 

Mr. Thompson

 

64,024   

 

 

128,0466   

 

 

4.44   

 

 

8/1/2027   

 

 

76,82812   

 

 

116,779   

 

 

38,41416   

 

 

116,779   

 

  -       

 

  196,9801    

 

  3.49   

 

  3/14/2028   

 

  78,7929    

 

  119,764   

 

  39,39613    

 

  119,764   

 

 

1

These stock options vest in equal installments on March 14, 2019, March 14, 2020 and March 14, 2021. Dividend equivalents are not paid on stock options.

 

2

These stock options vest on March 10, 2019. Dividend equivalents are not paid on stock options.

 

3

These stock options vest in equal installments on March 17, 2019 and March 17, 2020. Dividend equivalents are not paid on stock options.

 

4

These stock options vest in equal installments on August 21, 2019 and August 21, 2020. Dividend equivalents are not paid on stock options.

 

5

These stock options vest in equal installments on September 1, 2019 and September 1, 2020. Dividend equivalents are not paid on stock options.

 

6

These stock options vest in equal installments on August 1, 2019 and August 1, 2020. Dividend equivalents are not paid on stock options.

 

7

These Service-based RSUs were granted in respect of Mr. Zijderveld’s sign on award and vest 100% on February 5, 2021. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

62    AVON 2019 Proxy Statement   


8

These Service-based RSUs vest 100% on March 17, 2020. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

9

These Service-based RSUs vest 100% on March 14, 2021. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

10

These Service-based RSUs vest 100% on August 21, 2020. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

11

These Service-based RSUs vest 100% on September 1, 2020. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

12

These Service-based RSUs vest 100% on August 1, 2020. Dividend equivalents are paid in cash on these Service-based RSUs annually to the extent the Company pays any dividends on its common stock.

 

13

These Performance RSUs are tied to the achievement of goals for the 2018-2021 performance period. Amounts reflect the threshold number of shares that could be earned as of the end of the performance period. Assuming the performance conditions are satisfied, Performance RSUs vest and settle on March 14, 2021. Dividend equivalents are not paid on Performance RSUs.

 

14

These Performance RSUs were granted in respect of Mr. Zijderveld’s sign-on award and are tied to the achievement of goals for the 2018 performance period. Amounts reflect the threshold number of shares that could be earned with respect to the performance period. Assuming the performance conditions are satisfied, Performance RSUs vest and settle on March 27, 2021. Mr. Zijderveld was granted 600,000 sign-on Performance RSUs under the terms of his employment contract, however as of December 31, 2018 the performance metrics for two-thirds of the award were not yet determined, and as a result the value of only one-third of such award is included. The remaining two thirds will be tied to the achievement of goals for the 2019 and 2020 performance periods respectively.

 

15

These Performance RSUs are tied to the achievement of goals for the 2016-2019 performance period. Amounts reflect the threshold number of shares that could be earned as of the end of the performance period. Assuming the performance conditions are satisfied, Performance RSUs vest and settle on March 10, 2019. Dividend equivalents are not paid on Performance RSUs.

 

16

These Performance RSUs are tied to the achievement of goals for the 2017-2020 performance period. Amounts reflect the threshold number of shares that could be earned as of the end of the performance period. Assuming the performance conditions are satisfied, Performance RSUs vest and settle on March 17, 2020. For Messrs. Fernandez, Myers and Thompson, as their employment commenced after the beginning of the performance period, under the terms of the plan they must continue to hold any vested shares until three years from the date of their respective grants, this is August 21, 2020, September 1, 2020 and August 1, 2020 respectively for Messrs. Fernandez, Myers and Thompson. Dividend equivalents are not paid on Performance RSUs.

OPTION EXERCISES AND STOCK VESTED

The following table presents information regarding stock option exercises and the vesting of restricted stock unit awards during 2018 for our NEOs.

 

    

 

 

Option Awards

 

 

 

 

Stock Awards

 

 Name

 

 

 

Number of Shares     

Acquired on Exercise     

(#)     

 

 

Value Realized on     

Exercise ($)     

 

 

 

Number of Shares     

Acquired on Vesting     

(#)     

 

 

Value Realized on     

Vesting ($)     

 

Mr. Zijderveld

 

 

—     

 

 

—     

 

 

—     

 

 

—     

 

Ms. McCoy

 

 

—     

 

 

—     

 

 

229,745         

 

 

654,773         

 

Mr. Wilson

 

 

—     

 

 

—     

 

 

—     

 

 

—     

 

Mr. Fernandez   

 

 

—     

 

 

—     

 

 

—     

 

 

—     

 

Mr. Myers

 

 

—     

 

 

—     

 

 

—     

 

 

—     

 

Mr. Thompson

 

 

—     

 

 

—     

 

 

—     

 

 

—     

 

 

   AVON 2019 Proxy Statement    63


PENSION BENEFITS

The following table presents information on our defined benefit pension plans and supplemental benefit restoration plan as of December 31, 2018 for our named executive officers.

 

Name

 

 

Plan Name

 

 

Number of Years            

Credited Service            

(#)            

 

  

Present Value of            

Accumulated Benefit            

($)1             

 

  

Payments During Last            

Fiscal Year            

($)            

 

 

Mr. Zijderveld

 

 

N/A

 

 

N/A            

  

 

N/A            

  

 

N/A            

 

Ms. McCoy

 

 

Avon Products, Inc.

Personal Retirement

Account Plan (“PRA”)2

  6.000                129,252                0            
 

 

Benefit Restoration

Pension Plan (“BRP”)2

  6.000            

 

   203,483            

 

   0            

 

 

Mr. Wilson3

 

 

N/A

 

 

N/A            

  

 

N/A            

  

 

N/A            

 

Mr. Fernandez3

 

 

N/A

 

 

N/A            

  

 

N/A            

  

 

N/A            

 

Mr. Myers3

 

 

N/A

 

 

N/A            

  

 

N/A            

  

 

N/A            

 

Mr. Thompson3

 

 

N/A

 

 

N/A            

  

 

N/A            

  

 

N/A            

 

1

The amounts in this column represent the present values of the accumulated benefits based on an assumed retirement age equal to the earliest date the named executive officer may retire without any benefit reductions. The named executive officers listed as participants in the PRA and BRP are subject to the cash balance benefit formula, which have no actuarial reductions for early retirement. Therefore, the assumed retirement age is 65 for these participants.

 

2

For Ms. McCoy, the only participating NEO, the present value of the accrued cash balance benefits is equal to the cash balance benefits as of December 31, 2018, projected to the normal retirement age of 65, based on an interest crediting rate of 5.00% per annum for the PRA and BRP for the portion of the balance attributable to pay credits earned before December 31, 2014, and on an interest crediting rate of 3.36% per annum for the PRA and an interest crediting rate of 3.36% per annum for the BRP, in each case for the portion of the balance attributable to pay credits earned after December 31, 2014. Amounts are then discounted back to December 31, 2018 at a rate of 4.27% per annum for the PRA and 3.96% per annum for the BRP. Due to the difference between the assumed interest crediting rates and the relevant accounting discount rates, the December 31, 2018 actual cash balance accounts are less than the amounts disclosed in the table above.

On December 31, 2018, the actual cash balance account balances were as follows:

 

     
    

            PRA             

 

 

            BRP             

 

 

Mr. Zijderveld

 

 

 

 

N/A

 

 

 

N/A

 

 

Ms. McCoy

 

 

 

129,707

 

 

 

0

 

 

Mr. Wilson

 

 

 

N/A

 

 

 

N/A

 

 

Mr. Fernandez

 

 

 

N/A

 

 

 

N/A

 

 

Mr. Myers

 

 

 

N/A

 

 

N/A