UNITED STATES
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
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BEST BUY CO., 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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BEST BUY CO., INC. | ||||
7601 Penn Avenue South | ||||
Richfield, Minnesota 55423 | ||||
Time: | |||||||
9:00 a.m., Central Time, on Tuesday, June | |||||||
Place: | Online at www.virtualshareholdermeeting.com/BBY2019 | ||||||
Internet: | Submit pre-meeting questions online by visiting www.proxyvote.com and | ||||||
Items of Business: | 1. | To elect the | |||||
2. | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending | ||||||
3. | To conduct a non-binding advisory vote to approve our named executive officer compensation. | ||||||
4. | To transact such other business as may properly come before the meeting. | ||||||
Record Date: | You may vote if you were a shareholder of Best Buy Co., Inc. as of the close of business on Monday, April | ||||||
Proxy Voting: | Your vote is important. You may vote via proxy as a shareholder of record: | ||||||
1. | By visiting www.proxyvote.comon the internet; | ||||||
2. | By calling (within the U.S. or Canada) toll-free at 1-800-690-6903; or | ||||||
3. | By signing and returning your proxy card if you have received paper materials. |
For shares held through a broker, bank or other nominee, you may vote by submitting voting instructions to your broker, bank or other nominee.
Regardless of whether you expect to attend the meeting, in person, please vote your shares in one of the ways outlined above.
By Order of the Board of Directors | ||
Richfield, Minnesota | Todd G. Hartman | |
May | Secretary |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE REGULAR MEETING OF SHAREHOLDERS TO BE HELD ON JUNE |
11, 2019: This Notice of Form 10-K for the fiscal year ended |
Help us make a difference by eliminating paper proxy mailings to your home or business. As permitted by rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we are furnishing proxy materials to our shareholders primarily via the internet. On or about May 1, 2019, we mailed or made available to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our Annual Report. The Notice of Internet Availability also includes instructions to access your form of proxy to vote via the internet. Certain shareholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote via the internet or have been mailed paper copies of our proxy materials and proxy card.
Internet distribution of our proxy materials is designed to expedite receipt by our shareholders, lower the cost of the Regular Meeting of Shareholders and conserve precious natural resources. If you would prefer to receive paper proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive e-mail notification with instructions to access these materials via the internet unless you elect otherwise.
ATTENDING THE REGULAR MEETING OF SHAREHOLDERS
• | Like last year, we invite you to attend the 2019 Regular Meeting of Shareholders (the “Meeting”) virtually. There will not be a physical meeting at the corporate campus. You will be able to attend the Meeting virtually, vote your shares electronically, and submit your questions during the Meeting by visiting: www.virtualshareholdermeeting.com/BBY2019 and following the instructions on your proxy card. |
• | A replay of the Meeting will be available on www.investors.bestbuy.com. |
Dear Fellow Shareholders,
On behalf of cameras and recording devices is prohibited.
During this past year, your Board has continued its diligent work in its key areas of responsibility. In the meeting in person, you can listensecond year of our Best Buy 2020: Building the New Blue growth strategy, we continued to focus our efforts around our purpose to enrich lives through technology and our philosophy to contribute to the meeting live viacommon good. We are proud of our accomplishments over the internetpast year, including strong financial performance, significant achievements in our Environmental, Social & Governance initiatives, and the addition of three new Board members. We also just announced an evolution of our leadership roles that we believe will support the long-term success of the Company.
Purpose, Culture & Long-term Value Creation
The Board has continued to be active and engaged in the development and oversight of programs that support our purpose, culture and long-term value creation. During fiscal 2019, this resulted in enhanced benefits for our employees, expansion of our In-Home Advisor program, the nation-wide launch of our Total Tech Support offering, and the acquisition of GreatCall, a leading connected health services provider for aging consumers. We are proud of the performance we achieved, including revenue of $42.9 billion and 4.8 percent enterprise comparable sales growth (on top of 5.6 percent in fiscal 2018). Our total shareholder return for 2016 to 2018 is 125.5 percent, while the average of the S&P 500 is 64.5 percent. Concurrently, we maintained high employee engagement scores and further reduced store turnover rates to record lows.
Environmental, Social & Governance
We seek to apply our sense of corporate responsibility and focus on sustainable development to our interactions with all our stakeholders, including our customers, our employees, our vendor partners, our stockholders, the communities in which we operate and the environment. We are proud that we were recently ranked No. 1 on Barron’s Most Sustainable Companies list and were one of two U.S. retailers named to Ethisphere’s World’s Most Ethical Companies list. The Board continues to be actively involved in our various programs, including the expansion of our Teen Tech Centers across the country.
Board Composition
As a company, we believe diversity and inclusion is important to our employees, customers and shareholders. In support of our strategy and this belief, we are proud of the highly relevant and diverse set of skills we have assembled on our Board over the last several years. We note that our Board is now comprised of six women and six men, and that a third of our Board members are people of color, which makes us a leader in gender and ethnic diversity among public company Boards.
CEO Succession
We recently announced an evolution in leadership roles. After seven years of leading the company, Hubert will transition to the role of Executive Chairman of the Board, effective at
Your feedback is important to us, and we encourage you to vote for the proposals set forth in this proxy statement and participate in our upcoming shareholder meeting.
With gratitude for your confidence and support, | |
Hubert Joly, Chairman & CEO | Russ Fradin, Lead Independent Director |
2019 Proxy Statement |
PAGE | ||
CAUTIONARY STATEMENT PURSUANT TO THE
Section 27A of the Securities Act of 1933, as amended (“Securities Act”), INC.
2019 Proxy Statement |
At our 2019 Regular Meeting of Shareholders, (the "Meeting") to be held on Tuesday, June 14, 2016, at 9:00 a.m., Central Time, at the Best Buy Corporate Campus — Convention Center, 7601 Penn Avenue South, Richfield, Minnesota, 55423 or at any postponement or adjournment of the Meeting. The proxy materials, including the proxy statement, our Annual Report and form of proxy or the Notice of Internet Availability, were mailed to you beginning on or about May 3, 2016.
Items of Business for more information regardingVote at our Company, business and performance over the past year.
This year, we are today.
Name | Age | Director Since | Position/Company | Independence | Current Committees | Other For-Profit Directorships (*Public Company) |
Lisa M. Caputo | 52 | 2009 | Executive Vice President, Marketing & Communications The Travelers Companies, Inc. | ü | Nominating, Corporate Governance & Public Policy Compensation & Human Resources | — |
J. Patrick Doyle | 52 | 2014 | President & CEO Domino’s Pizza, Inc. | ü | Audit Finance & Investment Policy | Domino’s Pizza, Inc.* |
Russell P. Fradin | 60 | 2013 | Operating Partner Clayton, Dubilier & Rice | ü | Compensation & Human Resources (Chair) | — |
Kathy J. Higgins Victor | 59 | 1999 | President & Founder Centera Corporation | ü | Compensation & Human Resources Nominating, Corporate Governance & Public Policy (Chair) | — |
Hubert Joly | 56 | 2012 | Chairman & CEO Best Buy Co., Inc. | — | None | Ralph Lauren Corporation* |
David W. Kenny | 54 | 2013 | General Manager IBM Watson, IBM | ü | Audit (Chair) Compensation & Human Resources | SessionM |
Karen A. McLoughlin | 51 | 2015 | Chief Financial Officer Cognizant Technology Solutions Corp. | ü | Audit Finance & Investment Policy | — |
Thomas L. Millner | 62 | 2014 | President & CEO Cabela’s Inc. | ü | Audit Nominating, Corporate Governance & Public Policy | Cabela’s Inc.* Total Wine & More |
Claudia F. Munce | 56 | 2016 | Venture Advisor New Enterprise Associates | ü | Audit Finance & Investment Policy | Bank of the West |
Gérard R. Vittecoq | 67 | 2008 | Group President & Executive Office Member (Retired) Caterpillar, Inc. | ü | Audit Finance & Investment Policy (Chair) | Ariel Compressors Vanguard Logistics Services Mantrac Group |
Independence | Average Tenure | Average Age | Gender Diversity | |||
90% | 4.7 years | 57 years | 40% |
Name and Principal Position | Salary | Stock Awards(1) | Option Awards(1) | Short-Term Incentive Plan Payout | All Other Compensation | Total | |||||||||||||||||||
Hubert Joly Chairman and Chief Executive Officer | $ | 1,175,000 | $ | 8,011,688 | $ | 1,842,715 | $ | 3,814,050 | $ | 29,028 | $ | 14,872,481 | |||||||||||||
Sharon L. McCollam Chief Administrative and Chief Financial Officer | $ | 925,000 | $ | 3,039,724 | $ | 1,397,391 | $ | 2,251,913 | $ | 9,669 | $ | 7,623,697 | |||||||||||||
Shari L. Ballard President, U.S. Retail | $ | 790,385 | $ | 2,672,270 | $ | 1,228,476 | $ | 1,927,311 | $ | 24,641 | $ | 6,643,083 | |||||||||||||
R. Michael Mohan Chief Merchandising Officer | $ | 790,385 | $ | 1,336,135 | $ | 614,238 | $ | 1,927,311 | $ | 10,323 | $ | 4,678,392 | |||||||||||||
Keith Nelsen General Counsel and Secretary | $ | 640,385 | $ | 1,102,314 | $ | 506,742 | $ | 1,027,899 | $ | 10,482 | $ | 3,287,822 |
Election of Directors | FOR Each Nominee | |
We have | ||
2 | Ratification of Appointment of our Independent Registered Public Accounting Firm | FOR |
We are asking our shareholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal | ||
3 | Advisory Vote to Approve our Named Executive Officer Compensation | FOR |
Attending the Meeting
How will the Meeting be conducted?
The Meeting will be conducted online, in a fashion similar to an in-person meeting. All of our board members and executive officers will attend the Meeting and be available for questions. You may attend the Meeting online, vote your shares electronically, and submit your questions during the Meeting by visiting our virtual shareholder forum at: www.virtualshareholdermeeting.com/BBY2019 and following the instructions on your proxy card.
How can I ask questions during the Meeting?
Questions may be submitted prior to the Meeting or you may submit questions in real time during the Meeting through our virtual shareholder forum. We are committed to acknowledging each question we receive. We will allot approximately 15 minutes for questions during the Meeting and submitted questions should follow our Rules of Conduct in order to be addressed during the Meeting. Our Rules of Conduct are posted on the forum.
What can I do if I need technical assistance during the Meeting?
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page.
2019 Proxy Statement | 1 |
If I can’t attend the Meeting, can I vote or listen to it later?
You do not need to attend the online Meeting to vote if you submitted your vote via proxy in advance of the meeting. A replay of the Meeting, including the questions answered during the meeting, will be available on www.investors.bestbuy.com.
Additional information about how to vote your shares and attend our shareholders to oversee our business and affairs. In addition, the Board counsels, advises and oversees managementMeeting can be found in the long-term interests of the Company, our shareholders and other stakeholders regarding a broad range of subjects, including:
Corporate Governance
Our long-standing approach to corporate governance is to develop and implement principles that: (1) enable the success of our strategy and business objectives; (2) are rooted in a robust ongoing dialogue with our shareholders; and (3) are inspired by best practices. Consistent with this approach, we continue to be filled by other directors, allbuild upon a strong framework of whom are independentcorporate governance policies and continue to play an active role in our strategic planning, risk oversight and governance ofpractices, including the Company.
Board Structure | |||
• | Lead Independent Director | • | All Independent Committees |
• | Annual Director Elections | • | No Director Related Party Transactions |
• | Robust Annual Board Evaluation Process | • | Director Overboarding Policy |
• | Majority Vote for Directors | • | Director Retirement Policy |
Shareholder Rights | Compensation | ||
• | No Cumulative Voting Rights | • | Pay for Performance Compensation Programs |
• | No Poison Pill | • | Annual Say-on-Pay Vote |
• | Proxy Access By-laws | • | Anti-hedging and -pledging Policies |
• | No Exclusive Forum/Venue or Fee-Shifting Provisions | • | Clawback Policy for both Cash and Equity Awards |
The Board seeks a wide range of experience and expertise from a variety of industries and professional disciplines in its directors and carefully assesses and plans for the director skill sets, qualifications and diverse perspectives required to support the Company’s long-term strategic goals. Our slate of director nominees reflects the strong results of these efforts.
2 | 2019 Proxy Statement |
Additional information on our Corporate Governance policies and practices can be found in the Corporate Governance at Best Buy section of this proxy statement.
Environment, Social & Governance
Our Board, with oversight by the Nominating, Corporate Governance and Public Policy Committee, is integrally involved in the Company’s environmental, social and governance (“ESG”) initiatives. We are an organization built upon values-driven leadership and we are focused on our purpose to enrich lives through technology. When we began the Renew Blue stage of our transformation strategy in 2012, we identified five strategic pillars focused on the needs and interests of our stakeholders – our customers, employees, vendor partners, shareholders, and communities. These five stakeholders continue to be our motivation today. We are honored that our commitment to and progress in effecting positive change for our stakeholders has been recognized within the corporate community.
Additional information regarding our purpose and programs relating to our ESG efforts can be found in the Corporate Governance at Best Buy — Environment, Social & Governance section of this proxy statement.
2019 Proxy Statement | 3 |
Item 1: Election of Directors
The following individuals are standing for election to our Board. The Board recommends a vote FOR each of the nominees. All nominees, with the exception of Ms. Barry, are current members of the Board. Ms. Barry’s appointment is in conjunction with her appointment as our CEO, which is effective at the end of the Meeting.
Committee Membership(1) | |||||||
Name | Director Since | Most Recent Employer | Independent | AC | CC | FC | NC |
Corie S. Barry | — | Chief Financial Officer & Strategic Transformation Officer; CEO-elect, Best Buy Co., Inc. | No | ||||
Lisa M. Caputo | 2009 | Executive Vice President, Chief Marketing & Communications Officer, The Travelers Companies, Inc. | Yes | √ | √ | ||
J. Patrick Doyle(2) | 2014 | President & CEO (Former), Domino’s Pizza, Inc. | Yes | ||||
Russell P. Fradin(3) | 2013 | Operating Partner, Clayton, Dubilier & Rice | Yes | √ | |||
Kathy J. Higgins Victor | 1999 | President & Founder, Centera Corporation | Yes | √ | C | ||
Hubert Joly | 2012 | Chairman & CEO, Best Buy Co., Inc. | No | ||||
David W. Kenny | 2013 | CEO, Nielsen | Yes | C | √ | ||
Cindy R. Kent | 2018 | President & GM, Infection Prevention Division, (Former) 3M | Yes | √ | |||
Karen A. McLoughlin | 2015 | Chief Financial Officer, Cognizant Technology Solutions Corp. | Yes | √ | C | ||
Thomas L. Millner | 2014 | CEO (Former), Cabela’s Inc. | Yes | C | √ | ||
Claudia F. Munce | 2016 | Venture Advisor, New Enterprise Associates | Yes | √ | √ | ||
Richelle P. Parham | 2018 | General Partner, Camden Partners Holdings, LLC | Yes | √ | |||
Eugene A. Woods | 2018 | CEO, Atrium Health | Yes | √ |
(1) | Reflects committee membership approved in April 2019, effective following the Meeting. |
(2) | Mr. Doyle will serve as Lead Independent Director, effective after the Meeting. |
(3) | Mr. Fradin currently serves as our Lead Independent Director. |
Key: AC = Audit Committee; CC = Compensation & Human Resources Committee; FC = Finance & Investment Policy Committee; NC = Nominating, Corporate Governance & Public Policy Committee √ = Member; C = Chair
Additional information about each of our nominees and director qualification and nomination process can be found in Item of Business No. 1 — Election of Directors.
Item 2: Appointment of Independent Registered Public Accounting Firm
The Board recommends a vote FOR ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2020.
Deloitte & Touche LLP (“D&T”) served as our auditors for fiscal 2019. Our Audit Committee has selected D&T to audit our financial statements for fiscal 2020 and is submitting its selection of our independent registered public accounting firm for ratification by the shareholders in order to ascertain the view of our shareholders on this selection. The following table summarizes the aggregate fees incurred for services rendered by D&T during fiscal 2019 and fiscal 2018. Additional information can be found in Item of Business No. 2 — Ratification of Appointment of our Independent Registered Public Accounting Firm.
Service Type | Fiscal 2019 | Fiscal 2018 | ||||
Audit Fees | $ | 2,912,000 | $ | 2,770,000 | ||
Audit-Related Fees | 654,000 | 334,000 | ||||
Tax Fees | — | — | ||||
Total Fees | $ | 3,566,000 | $ | 3,104,000 |
4 | 2019 Proxy Statement |
Item 3: Say-on-Pay: Advisory Vote to Approve Named Executive Officer Compensation
The Board recommends a vote FOR approval of our named executive officer compensation.
Our shareholders have consistently strongly supported our executive compensation program. For the last five years, our average Say-on-Pay vote has been 96.8%. We believe this support reflects our strong pay-for-performance philosophy, our commitment to sound compensation policies, and our active engagement and open dialogue with our shareholders. The Compensation Committee regularly takes feedback received from shareholders into consideration when making decisions regarding our executive compensation program.
Our executive compensation program contains the following elements:
Compensation Component | Key Characteristics | Purpose |
Base Salary | Cash | Provide competitive, fixed compensation to attract and retain executive talent. |
Short-Term Incentive | Cash award paid based on achievement of various performance metrics | Create a strong financial incentive for achieving or exceeding Company performance goals. |
Long-Term Incentive | Stock options, performance-conditioned time-based restricted shares, and performance share awards | Create a strong financial incentive for increasing shareholder value, encouraging ownership stake, and promote retention. |
Pay is tied to performance. The majority of executive compensation is not guaranteed and is based on performance metrics designed to drive shareholder value.
Additional information can be found in Item of Business No. 3 — Advisory Vote to Approve Named Executive Officer Compensation and the Compensation Discussion and Analysis sections of this proxy statement.
2019 Proxy Statement | 5 |
BEST BUY CO., INC.
7601 Penn Avenue South
Richfield, Minnesota 55423
PROXY STATEMENT
REGULAR MEETING OF SHAREHOLDERS — JUNE 11, 2019
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (“Board”) of Best Buy Co., Inc. (“Best Buy,” “we,” “us,” “our” or the “Company”) to be voted at our 2019 Regular Meeting of Shareholders (the “Meeting”) to be held virtually on Tuesday, June 11, 2019, at 9:00 a.m., Central Time, at www.virtualshareholdermeeting.com/BBY2019 or at any postponement or adjournment of the Meeting. On, or about May 1, 2019, we mailed or made available our proxy materials, including the proxy statement, our Annual Report and form of proxy or the Notice of Internet Availability.
What is the purpose of the Meeting?
At the Meeting, shareholders will vote on the items of business outlined in the Notice of 2019 Regular Meeting of Shareholders (“Meeting Notice”) included as the cover page to this proxy statement. In addition, management will provide a brief update on our business and respond to questions from shareholders.
Why did I receive this proxy statement and a proxy card or the Notice of Internet Availability?
You received this proxy statement and a proxy card or the Notice of Internet Availability because you owned shares of Best Buy common stock as of April 15, 2019, the record date for the Meeting and are entitled to vote on the items of business at the Meeting. This proxy statement describes the items of business that will be voted on at the Meeting and provides information on these items so that you can make an informed decision.
How can I attend the Meeting?
You can attend the meeting online by logging on to www.virtualshareholdermeeting.com/BBY2019 and following the instructions provided on your proxy or notice card.
How will the Meeting be conducted?
The Meeting will be conducted online, in a fashion similar to an in-person meeting. All of our board members and executive officers will attend the Meeting and be available for questions. You will be able to attend the Meeting online, vote your shares electronically, and submit your questions during the Meeting by visiting our virtual shareholder forum at: www.virtualshareholdermeeting.com/BBY2019 and following the instructions on your proxy card.
How can I ask questions during the Meeting?
Questions may be submitted prior to the Meeting through our virtual shareholder forum at www.virtualshareholdermeeting.com/BBY2019, or you may submit questions in real time during the meeting through the forum. We are committed to acknowledging each question we receive. We will allot approximately 15 minutes for questions during the Meeting and submitted questions should follow our Rules of Conduct for the meeting in order to be addressed during the Meeting. Our Rules of Conduct are posted on the forum.
What can I do if I need technical assistance during the Meeting?
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting log-in page.
6 | 2019 Proxy Statement |
If I can’t attend the Meeting, how do I vote or listen to it later?
You do not need to attend the online Meeting to vote if you submitted your vote via proxy in advance of the meeting. A replay of the Meeting, including the questions answered during the meeting, will be available on www.investors.bestbuy.com.
Who may vote?
In order to vote at the Meeting, you must have been a shareholder of record of Best Buy as of April 15, 2019, which is the record date for the Meeting. If your shares are held in “street name” (that is, through a bank, broker or other nominee), you will receive instructions from the bank, broker or nominee that you must follow in order for your shares to be voted as you choose.
When is the record date?
The Board has established April 15, 2019, as the record date for the Meeting.
How many shares of Best Buy common stock are outstanding?
As of the record date, there were 267,916,309 shares of Best Buy common stock outstanding. There are no other classes of capital stock outstanding.
On what items of business am I voting?
1. | The election of the 13 director nominees listed herein for a term of one year expiring in 2020; |
2. | The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2020; |
3. | The non-binding advisory vote to approve our named executive officer compensation; and |
4. | Such other business as may properly come before the Meeting. |
How does the Board recommend that I vote?
Our Board recommends that you vote your shares:
If you are a record holder and you sign and submit your proxy card without indicating your voting instructions, your shares will be voted as indicated above.
How do I vote?
If you are a shareholder of record (that is, if your shares are owned in your name and not in “street name”), you may vote:
• | Via the internet at www.proxyvote.com; |
• | By attending the virtual Meeting and voting online at www.virtualshareholdermeeting.com/BBY2019. |
If your shares are held in a brokerage account by a broker, bank or other nominee, you should follow the voting instructions provided by your broker, bank or other nominee.
2019 Proxy Statement | 7 |
If you wish to vote by telephone or via the internet, you must do so before 11:59 p.m., Eastern Time, on Monday, June 10, 2019. After that time, telephone and internet voting on www.proxyvote.com will not be permitted and any shareholder of record wishing to vote thereafter must vote online during the Meeting. Shareholders of record will be verified online by way of the personal identification number included on your proxy or notice card. Voting by a shareholder during the Meeting will replace any previous votes submitted by proxy.
We have made all proxy materials available via the internet. However, you may opt to receive paper copies of proxy materials, at no cost to you, by following the instructions contained in the Notice of Internet Availability that we have mailed to most shareholders. We encourage you to take advantage of the option to vote your shares electronically through the internet or by telephone. Doing so will result in cost savings for the Company.
How are my voting instructions carried out?
When you vote via proxy, you appoint the Chairman of the Board, Hubert Joly and the Secretary of the Company, Todd G. Hartman (collectively, the “Proxy Agents”), as your representatives to vote at the Meeting. The Proxy Agents will vote your shares at the Meeting, or at any postponement or adjournment of the Meeting, as you have instructed them on the proxy card. If you return a properly executed proxy card without specific voting instructions, the Proxy Agents will vote your shares in accordance with the Board’s recommendations as disclosed in this proxy statement. If you submit a proxy, your shares will be voted regardless of whether you attend the Meeting. Even if you plan to attend the Meeting, it is advisable to vote your shares via proxy in advance of the Meeting in case your plans change.
If an item properly comes up for vote at the Meeting, or at any postponement or adjournment of the Meeting, that is not described in the Meeting Notice, including adjournment of the Meeting and any other matters incident to the conduct of the Meeting, the Proxy Agents will vote the shares subject to your proxy in their discretion. Discretionary authority for them to do so is contained in the proxy.
How many votes do I have?
You have one vote for each share you own, and you can vote those shares for each item of business to be addressed at the Meeting.
How many shares must be present to hold a valid Meeting?
For us to hold a valid Meeting, we must have a quorum. In order to have a quorum, a majority of the outstanding shares of our common stock that are entitled to vote need to be present or represented by proxy at the Meeting. Your shares will be counted as present at the Meeting if you:
Broker non-votes, as defined below, will be included in determining the presence of a quorum at the Meeting so long as there is at least one routine matter which the broker, bank or other nominee can vote on, as is the case with the Meeting. In addition, abstentions on any matter are included in determining the presence of a quorum.
How many votes are required to approve an item of business and what are the effects of abstentions and broker non-votes on the voting results?
Pursuant to our Amended and Restated Articles of Incorporation (“Articles”) and our Amended and Restated By-laws (“By-laws”), each item of business to be voted on by the shareholders at the Meeting, with the exception of Item 1, requires the affirmative vote of the holders of a majority of the voting power of the shares of Best Buy common stock present at a meeting and entitled to vote. Item 1, the election of directors, requires the affirmative vote of a majority of votes cast with respect to the director.
Under the rules of the New York Stock Exchange (“NYSE”), if you are a beneficial owner of shares and you do not provide voting instructions to your broker, bank or nominee, that firm has discretion to vote your shares for certain routine matters. Item 2, the ratification of the appointment of Deloitte & Touche LLP as our independent registered
8 | 2019 Proxy Statement |
public accounting firm, is considered a routine matter under NYSE rules. However, your broker, bank or nominee does not have discretion to vote your shares for non-routine matters. Items 1 and 3, the election of directors and the advisory vote related to named executive officer compensation, respectively, are not considered routine matters under NYSE rules.
When a broker, bank or nominee votes a beneficial owner’s shares on certain but not all of the proposals, because it is unable to vote due to the beneficial owner’s failure to provide voting instructions on a matter as to which the broker, bank or nominee has no discretion to vote otherwise, the missing votes are referred to as “broker non-votes.”
Abstentions will have the same effect as votes against Items 2 and 3 described in this proxy statement, but will have no effect on Item 1. Broker non-votes will have no effect on Items 1 and 3.
What if I change my mind after I vote via proxy?
If you are a shareholder of record, you may revoke your proxy at any time before your shares are voted by:
If your shares are held in a brokerage account by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee.
Who will count the vote?
Representatives of Broadridge will tabulate the vote and act as the inspector of elections.
Where can I find the voting results of the Meeting?
We plan to publish the final voting results in a Current Report on Form 8-K (“Form 8-K”) filed within four business days of the Meeting. If final voting results are not available within the four business day timeframe, we plan to file a Form 8-K disclosing preliminary voting results within the required four business days, to be followed as soon as practicable by an amendment to the Form 8-K containing final voting results.
How are proxies solicited?
We expect to solicit proxies primarily by internet and mail, but our directors, officers, other employees and agents may also solicit proxies in person, by telephone, through electronic communication and by facsimile transmission. We will request that brokerage firms, banks, other custodians, nominees, fiduciaries and other representatives of shareholders forward the Notice of Internet Availability and, as applicable, the proxy materials and Annual Reports themselves, to the beneficial owners of our common stock. Our directors and employees do not receive additional compensation for soliciting shareholder proxies. We have retained Georgeson Inc. as our proxy solicitor for a fee estimated to be $15,000, plus reimbursement of out-of-pocket expenses.
Who will pay for the cost of soliciting proxies?
We pay all of the costs of preparing, printing and distributing our proxy materials. We will reimburse brokerage firms, banks and other representatives of shareholders for reasonable expenses incurred as defined in the NYSE schedule of charges in connection with proxy solicitations.
How can multiple shareholders sharing the same address request to receive only one set of proxy materials and other investor communications?
You may elect to receive future proxy materials, as well as other investor communications, in a single package per address. This practice, known as “householding,” is designed to reduce our paper use and printing and postage costs. To make the election, please indicate on your proxy card under “Householding Election” your consent to receive such communications in a single package per address. Once we receive your consent, we will send a single
2019 Proxy Statement | 9 |
package per household until you revoke your consent or request separate copies of our proxy materials by notifying our Investor Relations Department in writing at 7601 Penn Avenue South, Richfield, MN, 55423, or by telephone at 612-291-6147. We will start sending you individual copies of proxy materials and other investor communications following receipt of your revocation.
Can I receive the proxy materials electronically?
Yes. All shareholders may access our proxy materials electronically via the internet. We encourage our shareholders to access our proxy materials via the internet because it reduces the expenses for, and the environmental impact of, our shareholder meetings. You may opt to receive paper copies of proxy materials, including our Annual Report, proxy statement and proxy card at no cost to you, by following the instructions on your Notice of Internet Availability.
An electronic version of this proxy statement is posted on our website at www.investors.bestbuy.com.
Where can I find additional information about Best Buy?
Our reports on Forms 10-K, 10-Q and 8-K and other publicly available information should be consulted for other important information about Best Buy. You can find these reports and additional information about us on our website at www.investors.bestbuy.com.
10 | 2019 Proxy Statement |
CORPORATE GOVERNANCE AT BEST BUY
Our Board is committed to developing and implementing corporate governance principles that: (1) enable the success of our strategy and business objectives; (2) are rooted in a robust ongoing dialogue with our shareholders; and (3) are inspired by best practices. Consistent with this approach, we continue to build upon a strong framework of corporate governance practices. Shareholder perspectives play an important role in that process. Some key aspects of our current Board and governance structure and practices are as follows:
Board Leadership & Composition | |
• | Our Board has been led by our Chairman and CEO. Our Lead Independent Director |
• | All of our director nominees, other than the CEO- and Executive Chairman-elect, are independent. |
• | Our Board |
• | The average tenure of our director nominees is approximately 5 years, with a balance of skills, new perspectives and historical knowledge. |
• | All Committees are comprised exclusively of independent |
• | Our |
Board Accountability | |
• | We conduct a robust annual Board, individual director and CEO evaluation process, and periodically engage an independent third party to provide independent assessments of Board |
• | None of our directors are |
• | Our directors and officers are prohibited from hedging and pledging Company securities. |
• | Our directors and executive officers are required to comply with |
• | Our Board |
Shareholder Rights & Engagement | |
• | We do not have a |
• | We have proxy access provisions consistent with market practice (3/3/20/20). |
• | We have no exclusive forum/venue or |
• | We have no cumulative voting rights and our only class of |
• | A shareholder(s) must own 10% of the |
• | We regularly engage with shareholders to solicit feedback, address questions and concerns and provide perspective on Company policies and practices. |
In this section of our proxy statement, we provide detail on specific aspects of our Corporate Governance program, policies and practices, as well as additional information on the operations and composition of our Board.
Our Board has been led by our Chairman and CEO, Mr. Joly, and our Lead Independent Director, Mr. Fradin. Our Lead Independent Director complements our Chairman by providing effective, independent leadership on the Board through clearly defined authority. Additional leadership roles continue to be filled by other directors, all of whom are independent and play an active role in our strategic planning, risk oversight and governance. We believe this leadership structure is ideally suited to this stage of our Company. As part of our CEO succession, Mr. Joly will transition to the role of Executive Chairman at the end of the Meeting, with substantially similar responsibilities as those set forth below. The independent directors believe that Mr. Joly’s continued leadership of the Board will provide a valuable resource to the Board and will help facilitate a smooth transition of the CEO role.
2019 Proxy Statement | 11 |
Our Lead Independent Director is nominated by the Nominating, Corporate Governance and Public Policy Committee, and final selection is subject to ratification by the vote of a majority of the independent directors on the Board. The Lead Independent Director serves for an annual term beginning at the Board meeting following the first regular meeting of shareholders at which directors are elected. In April 2019, the Board appointed Mr. Doyle to succeed Mr. Fradin as Lead Independent Director, effective at the Meeting.
The Board leadership duties and responsibilities are outlined below and in our Corporate Governance Principles, which are also posted online at www.investors.bestbuy.com.
Our Chairman is responsible for:
Our Lead Independent Director performs the following duties:
The Board seeks a wide range of experience and expertise from a variety of industries and professional disciplines in its directors. It carefully assesses the director skill sets, qualifications and diverse perspectives required to support the Company’s long-term strategic goals, and for an orderly succession and transition of directors, as evidenced by the composition changes over the past seven years. We believe our Board should be composed of individuals with highly relevant skills, independence, integrity, sound judgment, proven records of accomplishments and diverse genders, ethnicities, ages and geographic locations. In addition, the Board emphasizes independent voices and adding new perspectives to its membership. Eleven of our 13 director nominees are independent, and the average tenure of our director nominees is 5 years. More information regarding our Director Qualification Standards and Director Nomination Process can be found within Item 1 of this proxy statement.
Pursuant to our Corporate Governance Principles, the Board has established independence standards consistent with the requirements of the SEC and NYSE. To be considered independent under the NYSE rules, the Board must affirmatively determine that a director or director nominee does not have a material relationship with us (directly, or as a partner, shareholder or officer of an organization that has a relationship with us). In addition, each member of the Compensation and Human Resources Committee must meet a standard of “enhanced independence” such that the Board must consider the source of compensation of the director and whether the director is affiliated with us or one of our subsidiaries to determine whether there are any factors that would materially affect a director’s ability to be independent, specifically in regard to their duties as a compensation committee member.
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Our Director Independence Guidelines, consistent with the NYSE rules, generally provide that no director or director nominee may be deemed independent if the director or director nominee:
— | has in the past three years: |
— | is: |
Under our director independence standards described above, the Board has determined that each director who served during any part of fiscal 2019 and each director nominee is independent, with the exception of Mr. Joly, our Chairman and CEO, and Ms. Barry, our Chief Financial Officer and Strategic Transformation Officer. Ms. Barry was nominated to stand for election to the Board in connection with her appointment as our new CEO, effective at the Meeting. The Board based these determinations primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, family and other relationships and on discussions with our directors.
As part of its independence analysis, the Board reviewed our relationships with companies with which our directors are affiliated. As part of that review, the Board considered our relationship with Nielsen, a company affiliated with Mr. Kenny. Mr. Kenny, a director since September 2013, serves as CEO and a director of Nielsen. Since 1999, Nielsen has provided us with data analytics services. The amounts we have paid to Nielsen were less than 2% of the annual consolidated gross revenues of Nielsen for each of the past three fiscal years. In addition, Mr. Kenny did not influence or participate in negotiating our agreements with Nielsen. The Board determined that the Company’s relationship with Nielsen was not material and did not impair Mr. Kenny’s independence.
In addition, the Board also considered our relationship with Cognizant Technology Solutions Corp., which has provided us with information technology and business solution services since 2017. Ms. McLoughlin, a director since September 2015, is the Chief Financial Officer of Cognizant. The amounts paid to Cognizant were less than 2% of Cognizant’s annual consolidated gross revenues for the past three fiscal years. Ms. McLoughlin did not influence or participate in negotiating our agreements with Cognizant. The Board determined that the Company’s relationship with Cognizant was not material and did not impair Ms. McLoughlin’s independence.
During fiscal 2019, the Board held four regular meetings and one special meeting. Each incumbent director attended, in person or by telephone, 100 percent of the meetings of both the Board and committees on which he or she served. Directors are required to attend our regular meetings of shareholders, and all of our director nominees that were then directors attended the 2018 Meeting either in-person or telephonically.
Executive Sessions of Independent Directors
Our independent directors, led by Mr. Fradin, meet in executive sessions of independent directors during each regularly scheduled Board meeting. Independent directors use these sessions as a forum for open discussion about the Company, our senior management, and any other matters they deem appropriate.
2019 Proxy Statement | 13 |
The Board has four committees: Audit, Compensation and Human Resources (the “Compensation Committee”), Finance and Investment Policy, and Nominating, Corporate Governance and Public Policy (the “Nominating Committee”). The charters for each committee are posted on our website at www.investors.bestbuy.com. The charters are reviewed annually and include information regarding each committee’s composition, purpose and responsibilities.
The Board has determined that all members of the Audit Committee, Compensation Committee and Nominating Committee are independent as defined under the SEC and NYSE rules, and all members of the Compensation Committee are “outside directors” for purposes of Internal Revenue Code section 162(m). The Board has also determined that, during fiscal 2019, two of the four members of the Audit Committee qualified as audit committee financial experts under SEC rules, and that each of the members of the Audit Committee has accounting and related financial management expertise in accordance with the NYSE listing standards.
The key responsibilities, fiscal 2019 membership and number of meetings held in fiscal 2019 for each committee are set forth below:
Committee | Key Responsibilities | Committee Members | Number of Meetings held in Fiscal 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit | • | Assists the Board in its oversight of: | Thomas L. Millner*† Karen A. McLoughlin† Claudia F. Munce Richelle P. Parham | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | the integrity of our financial statements and financial reporting processes; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | our internal accounting systems and financial and operational controls; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | the qualifications and independence of our independent registered public accounting | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | our | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Is responsible for the preparation of a report | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation & Human Resources | • | Determines executive officer compensation and executive officer and director compensation philosophies, evaluates the performance of our CEO, approves CEO and executive officer compensation, and oversees preparation of a report as required by the SEC to be included in this proxy statement. | Russell P. Fradin* Lisa M. Caputo J. Patrick Doyle Kathy J. Higgins Victor | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Reviews and recommends director compensation for Board approval. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Is responsible for succession planning and compensation-related risk oversight. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Approves and oversees the development and evaluation of equity-based and other incentive compensation and certain other employee benefit plans. |
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Committee | Key Responsibilities | Committee Members | Number of Meetings held in Fiscal 2019 | ||
Finance & Investment Policy | • | Provides oversight of, and advises the Board regarding, our financial policies and financial condition to help enable us to achieve our long-range goals. | J. Patrick Doyle* David W. Kenny Karen A. McLoughlin Claudia F. Munce | 4 | |
• | Oversees, evaluates and monitors the: (i) protection and safety of our cash and investments; (ii) achievement of reasonable returns on financial assets within acceptable risk tolerance; (iii) maintenance of adequate liquidity to support our activities; (iv) assessment of the cost and availability of capital; and (v) alignment of our strategic goals and financial resources. | ||||
• | Is responsible for approving certain significant contractual obligations. | ||||
Nominating, Corporate Governance & Public Policy | • | Identifies and recommends director nominees, reviews and recommends corporate governance principles to the | Kathy J. Higgins Victor* Lisa M. Caputo David W. Kenny Thomas L. Millner | 4 | |
• | Assists the Board | ||||
• | Oversees public policy and corporate responsibility and sustainability matters that affect us. |
* | Chair |
† | Designated as |
In March 2019, Ms. Kent was appointed to the Finance & Investment Policy Committee, and in April 2019, the Board approved several changes to the committee composition, effective following the Meeting. At that time, the committees will be comprised of the following individuals and Mr. Doyle will serve as Lead Independent Director:
Committee | Committee Membership (Eff. June 2019) | |
• Thomas L. Millner*† | • Claudia F. Munce | |
Audit | • Karen A. McLoughlin† | • Richelle P. Parham |
• David W. Kenny* | • Russell P. Fradin | |
Compensation & Human Resources | • Lisa M. Caputo | • Kathy J. Higgins Victor |
• Karen A. McLoughlin* | • Claudia F. Munce | |
Finance & Investment Policy | • Cindy R. Kent | • Eugene A. Woods |
• Kathy J. Higgins Victor* | • David W. Kenny | |
Nominating, Corporate Governance & Public Policy | • Lisa M. Caputo | • Thomas L. Millner |
* | Chair |
† | Designated as an “audit committee financial expert” |
2019 Proxy Statement | 15 |
In addition to its responsibilities as set forth above, the Board and its committees take an active role in the oversight of various risks to the Company. These risk oversight responsibilities are set forth below.
The Audit Committee also oversees management’s processes to identify and quantify the material risks that we face. Our Chief Risk and Compliance Officer is a direct liaison to the Audit Committee on our risk oversight processes and procedures. In connection with its risk oversight role, the Audit Committee meets privately with representatives of our independent registered public accounting firm, the Chief Risk and Compliance Officer, our internal audit staff and our legal staff. Our internal audit staff, which reports directly to the Audit Committee at least quarterly, assist management in identifying, evaluating and implementing controls and procedures to address identified risks.
In connection with their oversight of compensation-related risks, Compensation Committee members annually review the most important enterprise risks to ensure that compensation programs do not encourage risk-taking that is reasonably likely to have a material adverse effect on us. As in past years, the review process in fiscal 2019 identified our existing risk management framework and the key business risks that may materially affect us, reviewed all compensation plans and identified those plans that are most likely to impact these risks or introduce new risks, and balanced these risks against our existing processes and compensation program safeguards. The review process also took into account mitigating features contained within our compensation plan design, which includes elements such as: metric-based pay, time-matching performance periods, payment for outputs, goal diversification, stock ownership guidelines, payment caps, and our clawback policy.
16 | 2019 Proxy Statement |
The Compensation Committee also considered additional controls outside of compensation plan design which contribute to risk mitigation, including the independence of our performance measurement teams and our internal control environment.
Based upon the process we employed, the Compensation Committee determined that our compensation programs do not encourage risk-taking that is reasonably likely to result in a material adverse effect on the Company.
Our Nominating Committee oversees the Board’s composition, effectiveness, accountability and evaluation of the performance of the Board, its committees and individual directors. On an annual basis, members of the Board complete a questionnaire evaluating the performance of the Board as a whole, each member’s respective committee and the performance of the Chairman and Lead Independent Director. Directors are asked about roles and responsibilities, as well as more general performance-related questions. The Nominating Committee reviews the results of these questionnaires and determines whether the results warrant any action. The results and any proposed actions are then shared with the full Board for further discussion and approval of final action plans.
In addition, the Chair of our Nominating Committee, the Board Chairman and the Lead Independent Director review each individual director’s contributions to the Board during the past year and his or her performance against the director qualification standards and Board needs. The Nominating Committee also annually reviews the skills and qualifications of each Board member and the strategic goals of the Company to determine whether the skill sets of the individual directors on the Board continue to support the Company’s long-term strategic goals. This process is utilized by the Nominating Committee to assess whether a director should continue to serve on the Board and stand for re-election at the next Regular Meeting of Shareholders and to otherwise address Board composition needs.
In addition to the process described above, the Nominating Committee engaged an independent third-party consultant in 2016 to conduct individual interviews with each director and certain senior executives and perform a comprehensive analysis of the Board’s overall effectiveness. The Committee anticipates utilizing this approach periodically to obtain independent assessments of the Board’s performance and has engaged an independent third party to conduct an evaluation of the Board’s effectiveness in 2019.
Our Compensation Committee conducts a robust annual CEO evaluation process, consisting of both a performance review and a compensation analysis. The performance evaluation component includes an assessment of the Company’s performance in light of set objectives, personal interviews with the individual Board members and the CEO’s direct reports, and feedback evaluations provided by several individuals who interact with the CEO. Separately, the Compensation Committee’s compensation consultant conducts extensive market research. CEO compensation market data is collected from Fortune 100 companies, our peer group, and a retail-industry focused subset of our peer group, to ensure both market competitiveness and appropriateness of our CEO’s compensation relative to his peers. The Compensation Committee’s independent consultant reviews the market data and provides its recommendations to the Compensation Committee. Once all of the relevant performance and compensation data has been collected, the Compensation Committee meets in executive session to discuss the CEO performance evaluation results and CEO compensation. After reviewing all of the collected data regarding performance, the Compensation Committee makes its decision regarding CEO compensation for the forthcoming year. The Compensation Committee then provides its final assessment on CEO performance and decision regarding CEO compensation to the Board for discussion during executive session. Our Chairman and CEO abstains from participating in all related discussions of the Compensation Committee and Board prior to delivery of the final assessment.
Director Orientation and Continuing Education
Our Nominating Committee oversees the orientation and continuing education of our directors. Director orientation familiarizes directors with our strategic plans, significant financial, accounting and risk management issues, compliance programs, policies, principal officers, internal auditors and our independent registered public accounting firm. The orientation also addresses Board procedures, director responsibilities, our Corporate Governance Principles and our Board committee charters. Each of our new directors attended a director orientation following their appointment.
2019 Proxy Statement | 17 |
We also offer continuing education programs and provide opportunities to attend commercial director education seminars outside of the Company to assist our directors in maintaining their expertise in areas related to the work of the Board and the directors’ committee assignments.
In fiscal 2019, the Board conducted its annual continuing education seminar for the full Board in June 2018, focusing on culture as a corporate asset.
Anti-Hedging and Anti-Pledging Policies
Our executive officers and Board members are prohibited from pledging Company securities as collateral for a loan or from holding Company securities in a margin account. In addition, all employees and Board members are prohibited from hedging Company securities, including by way of forward contracts, equity swaps, collars, exchange funds or otherwise.
Our stock ownership guidelines require each of our non-management directors to own 10,000 shares and to hold 50 percent of their granted equity until that ownership target is met. Directors are required to hold all restricted stock units granted to them during their Board tenure until their service on the Board ends. In fiscal 2019, all of our non-management directors were in compliance with the ownership guidelines. Our stock ownership guidelines for executive officers are discussed in the Executive and Director Compensation — Compensation Discussion and Analysis — Executive Compensation Elements — Other Compensation section.
A key part of our corporate governance program is our annual shareholder engagement process. We regularly engage with our shareholders on a variety of topics throughout the year to ensure we are addressing their questions and concerns, to seek input and to provide perspective on Company policies and practices. Our typical engagement follows a seasonal cycle, as outlined below.
18 | 2019 Proxy Statement |
We have taken several actions in prior years in consideration of shareholder feedback elicited during this process, including: adoption of proxy access, declassification of our Board, the determination to hold the advisory vote on our executive compensation on an annual basis, adjustments to the director appointments on our Board committees, and the development of our corporate social responsibility program and reporting. We also continue to facilitate direct shareholder communication with management and members of our Board and the ability to easily access and obtain information regarding our Company on our website at www.investors.bestbuy.com. Please see the Executive and Director Compensation — Introduction section for more information regarding actions taken as a result of shareholder feedback received regarding our prior year’s executive compensation decisions.
Environment, Social & Governance
We take our role in corporate social responsibility and sustainability seriously, aiming to positively impact people, communities and the environment and contribute to the common good. We believe businesses exist to deliver value to society, not just to shareholders. Simply put, we aim to do well by doing good.
Here are a number of ways that we reflect this approach in the management of the Company’s corporate social responsibility and sustainability initiatives:
Company Strategy. We have anchored our strategy around a clear purpose of enriching people’s lives through technology. We think that having our employees focused on our purpose and matching it to their individual purpose is a key driver of both performance and sustainability.
Employee Engagement & Diversity. We invest in the long-term development and engagement of our employees by aspiring to have an increasingly diverse workforce and inclusive environment, robust training and development programs and a culture where our people can thrive. We ranked third in the world for employee training and development by Training Magazine and our employees completed 22 million online learning modules last year. We also received a perfect score of 100 in the Human Rights Campaign Foundation’s Corporate Equality Index for the fourteenth year.
Vendor Partners. We partner with our private label suppliers to ensure they meet our expectations for safe workplaces where workers are treated fairly. We perform audits, led by either us or third parties, to identify gaps between factory performance and our Supplier Code of Conduct, which is aligned with the code established by the Responsible Business Alliance, where we’ve been a member since 2011. We also provide supplier training and assist in program development to support best practices in relation to conflict minerals, customs and trade anti-terrorism measures and factory working conditions.
Environment. We are reducing our impact on the environment and are proud of our efforts in this area. We have lowered our carbon emissions by more than 51 percent and are on our way to a 60 percent reduction by 2020. In fact, we were recently named the most sustainable company in the United States by Barron’s. Also, we were named to CDP’s Carbon A List, for leadership in carbon reduction and management, for the third time. Recycling is a key part of our sustainability efforts as we operate the most comprehensive recycling service in the U.S. We repair nearly 5 million customer electronic products each year and have collected nearly 2 billion pounds of electronics and appliances for recycling since 2009. We are committed to providing an assortment of sustainable technology, including ENERGY STAR® certified products, and have helped customers realize nearly $800 million in utility savings since 2009.
Community. We are committed to helping prepare teens from underserved communities for tech-reliant jobs. We are accomplishing this through the creation and operation of 29 Best Buy Teen Tech Centers (year-round after school programs), with plans to expand to more than 60 centers by 2020; career mentoring and internship opportunities through our Career Pathways Program; and, the hosting of Geek Squad Academy events (free, interactive technology camps) across the country. Our employees also volunteer more than 100,000 hours each year, and Best Buy was the top fundraiser for St. Jude Children’s Research Hospital during this year’s Thanks and Giving campaign, raising $20.8 million in employee and customer donations. We are proud to have raised more than $80 million in total for St. Jude since 2013.
Our Code of Ethics and additional information regarding these initiatives and our progress towards them can be found in our annual Corporate Responsibility and Sustainability report, available at www.investors.bestbuy.com, and at https://corporate.bestbuy.com under “Sustainability.”
2019 Proxy Statement | 19 |
As a major corporation and corporate citizen, we believe that it is important to work with policymakers on issues impacting our customers, employees, businesses, shareholders and communities. We know that collaboration helps bring about change that better serve our industry and the communities where we live and work. In fiscal 2019, our public policy priorities included: tariffs/fair trade practices; marketplace fairness; competitive workplace; privacy, data security and the internet of things; and fair competition through emerging technologies and innovation. More information about these priorities, as well as our annual political activity reports and related policies, can be found at https://corporate.bestbuy.com under “Government Affairs.”
Shareholders and interested parties who wish to contact the Board, any individual director, or the independent directors as a group, are welcome to do so in writing, addressed to such person(s) in care of:
Mr. Todd G. Hartman
General Counsel, Chief Risk & Compliance Officer and Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423
Mr. Hartman will forward all written shareholder correspondence to the appropriate director(s), except for spam, junk mail, mass mailings, customer complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Mr. Hartman may, at his discretion, forward certain correspondence, such as customer-related inquiries, elsewhere within the Company for review and possible response. Comments or questions regarding our accounting, internal controls or auditing matters will be referred to the Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to the Nominating Committee. Comments or questions regarding executive compensation will be referred to the Compensation Committee.
If you would like additional information about our corporate governance practices, you may view the following documents at www.investors.bestbuy.com under “Corporate Governance” section.
20 | 2019 Proxy Statement |
Our By-laws provide that our Board consist of one or more directors and that the number of directors may be increased or decreased from time to time by the affirmative vote of a majority of the directors serving at the time that the action is taken. The number of directors on our Board is reviewed and set by our Board no less often than annually. In March 2016,April 2019 in connection with our CEO succession announcement, the Board set the number of directors at eleven, based on the number of directors currently serving. After Mr. Anderson's retirementthirteen, effective at the Meeting, the Board intends to reduce the number of directors to ten.Meeting. The Board will continue to evaluate the size of the Board and make adjustments as needed to meet the current and future needs of the Company.
The Nominating Committee is responsible for screening and recommending to the full Board director candidates for nomination. When the Board and its Nominating Committee determines that a director nomination or search is necessary, the process is robust, thorough and deliberate.
Ms. Kent and Mr. Woods, who were appointed by the Board in September and December 2018, respectively, were presented to the Nominating and Governance Committee by a third-party search firm as part of the Nominating Committee’s director search. After reviewing Ms. Kent and Mr. Woods’ qualifications, meeting with them several times and discussing their potential nominations, the Nominating Committee voted unanimously to recommend Ms. Kent and Mr. Woods to the Board, which unanimously approved the appointments.
2019 Proxy Statement | 21 |
The Nominating Committee will consider director candidates nominated by shareholders. Shareholder nominations must be accompanied by a candidate resume that addresses the extent to which the nominee meets the director qualification standards and any additional search criteria posted on our website. Nominations will be considered only if we are then seeking to fill an open director position. All nominations by shareholders should be submitted as follows:
Chair, Nominating, Corporate Governance and Public Policy Committee
c/o Mr. Todd G. Hartman
General Counsel, Chief Risk &Compliance Officer and Secretary
Best Buy Co., Inc.
7601 Penn Avenue South
Richfield, Minnesota 55423
In seeking new board members, we focus on adding new skills and experiences necessary to oversee the Company's business strategy and fulfill the Board's risk oversight obligations. Ourour objective is to identify and retain directors that can effectively develop the Company'sCompany’s strategy and oversee management'smanagement’s execution of that strategy. We only consider director candidates who embody the highest standards of personal and professional integrity and ethics and are committed to a culture of transparency and open communication at the Board level and throughout the Company. Successful candidates are dedicated to accountability and continuous improvement with a belief in innovation as a key business success factor. They are also actively engaged and have an innate intellectual curiosity and entrepreneurial spirit.
As part of its annual evaluation process for director nominees, the Nominating Committee considers other criteria, including the candidate'scandidate’s history of achievement and superior standards, ability to think strategically, willingness to share examples based upon experience, policy-making experience, and ability to articulate a point-of-view,point of view, take tough positions and constructively challenge management. Directors must also be committed to actively engaging in their Board roles, with sufficient time to carry out the duties of Board and Board committee membership. Finally, one or more of our directors must possess the education or experience required to qualify as an "audit“audit committee financial expert"expert” pursuant to SEC rules.
Our Corporate Governance Principles establishdescribe our policy of considering diversity in the director identification and nomination process. When considering Board candidates, the Nominating Committee seeks nominees with a broad range of experience from a variety of industries and professional disciplines, such as finance, academia, lawprofessional services and government,technology, along with a diversity of gender, ethnicity, age and geographic location. The Nominating Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applied to all prospective nominees. As part of its annual review of the Board’s composition and director nominees, the Nominating Committee assesses the effectiveness of its approach to diversity. When the Nominating Committee identifies an area of which the Board may benefit from greater representation, it may focus its candidate search on particular experience, background or diversity characteristics, including gender, ethnic and geographical attributes. The Board believes that diversity in the backgrounds and qualifications of Board members ensures the mix of experience, knowledge and abilities necessary for the Board to fulfill its responsibilities and leads to a more effective oversight and decision-making process.
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The grid below summarizes the key qualifications skills and attributesskills each of our directorsdirector nominees possess that were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director does not possess that qualification or skill; rather a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director’s biography describes these qualifications and relevant experience in more detail.
2019 Proxy Statement | 23 | |||||||||
The Nominating Committee is responsible for screeningbiographies of each of the nominees include information regarding the person’s service as a director, business experience, public company director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings during the last ten years, if any, and recommending to the full Board director candidates for nomination. The Nominating Committee often engages a third-party search firm to assist in identifying appropriate candidates to consider as additions to our Board. When the Board is seeking to fill an open director position,key experiences, qualifications, attributes or skills that led the Nominating Committee will also consider nominations received from our shareholders, provided that proposed candidates meet the requisite director qualification standards discussed within this section of our proxy statement.
There are no family relationships among the nominees or between any nominee and any director, executive officer or person chosen to become an executive officer. There are also no material proceedings to which any director, officer, affiliate of the Company, any 5 percent shareholder or any associate is a party adverse to the Board,Company or its subsidiaries or has a material interest adverse to the Nominating Committee will announce the searchCompany or its subsidiaries.
Corie S. Barry | ||||||
Age: 44 | Committees: | |||||
Director Since: Nominee | None | |||||
Other Public Company Directorships: | ||||||
• | Domino’s Pizza, Inc. | |||||
Current Role:
Prior Roles:
Education:Ms. Barry holds degrees from the College of St. Benedict.
Key Qualifications & Experience:
24 | 2019 Proxy Statement |
Lisa M. Caputo | ||||||
Age: 55 | Committees: | |||||
Director Since: December 2009 | • | Compensation Committee | ||||
✔ | Independent | • | Nominating Committee | |||
Other Public Company Directorships: | ||||||
None |
Current Role:
Prior Roles:
Education:Ms. Caputo holds degrees from Brown University and Northwestern University.
Key Qualifications & Experience:
2019 Proxy Statement | 25 |
J. Patrick Doyle | ||||||
Age: 55 | Committees: | |||||
Director Since: October 2014 | • | Compensation Committee | ||||
✔ | Independent | • | Finance & Investment Policy Committee (Chair) | |||
Other Public Company Directorships: | ||||||
None |
Current Role:
Prior Roles:
Education: Mr. Doyle holds degrees from The University of Chicago Booth School of Business and The University of Michigan.
Key Qualifications & Experience:
26 | 2019 Proxy Statement |
Russell P. Fradin | ||||||
Age: 63 | Committees: | |||||
Director Since: April 2013 | • | Compensation Committee (Chair) | ||||
✔ | Independent | |||||
Other Public Company Directorships: | ||||||
Lead Independent Director | • | TransUnion | ||||
Current Role:
Prior Roles:
Education: Mr. Fradin holds degrees from the Wharton School of the University of Pennsylvania and from Harvard Business School.
Key Qualifications & Experience:
2019 Proxy Statement | 27 |
Kathy J. Higgins Victor | ||||||
Age: 62 | Committees: | |||||
Director Since: November 1999 | • | Compensation Committee | ||||
✔ | Independent | • | Nominating Committee (Chair) | |||
Other Public Company Directorships: | ||||||
None |
Current Role:
Prior Roles:
Education: Ms. Higgins Victor holds a degree from the University of Avila.
Key Qualifications & Experience:
28 | 2019 Proxy Statement |
Hubert Joly | ||||||
Age: 59 | Committees: | |||||
Director Since: September 2012 | None | |||||
Other Public Company Directorships: | ||||||
Appointed Chairman in June 2015 | • | Ralph Lauren Corporation | ||||
Current Role:
Prior Roles:
Education: Mr. Joly holds degrees from the École des Hautes Études Commerciales de Paris (HEC Paris) and the Institut d’Etudes Politiques de Paris.
Key Qualifications & Experience:
2019 Proxy Statement | 29 |
David W. Kenny | ||||||
Age: 57 | Committees: | |||||
Director Since: September 2013 | • | Finance & Investment Policy Committee | ||||
✔ | Independent | • | Nominating Committee | |||
Other Public Company Directorships: | ||||||
• | Nielsen |
Current Role:
Prior Roles:
Education: Mr. Kenny holds degrees from the GM Institute (now Kettering University) and Harvard University.
Key Qualifications & Experience:
30 | 2019 Proxy Statement |
Cindy R. Kent | ||||||
Age: 50 | Committees: | |||||
Director Since: September 2018 | • | Finance & Investment Policy | ||||
✔ | Independent | |||||
Other Public Company Directorships: | ||||||
None | ||||||
Current Role:
Prior Roles:
Education: Ms. Kent holds degrees from Northwestern University and Vanderbilt University.
Key Qualifications & Experience:
2019 Proxy Statement | 31 |
Karen A. McLoughlin | ||||||
Age: 54 | Committees: | |||||
Director Since: September 2015 | • | Audit Committee | ||||
✔ | Independent | • | Finance & Investment Policy Committee | |||
Other Public Company Directorships: | ||||||
None |
Current Role:
Prior Roles:
Education: Ms. McLoughlin holds degrees from Wellesley College and Columbia University.
Key Qualifications & Experience:
32 | 2019 Proxy Statement |
Thomas L. “Tommy” Millner | ||||||
Age: 65 | Committees: | |||||
Director Since: January 2014 | • | Audit Committee (Chair) | ||||
✔ | Independent | • | Nominating Committee | |||
Other Public Company Directorships: | ||||||
None |
Current Role:
Prior Roles:
Education: Mr. Millner holds a degree from Randolph Macon College.
Key Qualifications & Experience:
2019 Proxy Statement | 33 |
Claudia F. Munce | ||||||
Age: 59 | Committees: | |||||
Director Since: March 2016 | • | Audit Committee | ||||
✔ | Independent | • | Finance & Investment Policy Committee | |||
Other Public Company Directorships: | ||||||
• | CoreLogic |
Current Role:
Prior Roles:
Education: Ms. Munce holds degrees from the Santa Clara University School of Engineering and the Stanford University Graduate School of Business.
Key Qualifications & Experience:
34 | 2019 Proxy Statement |
Richelle P. Parham | ||||||
Age: 51 | Committees: | |||||
Director Since: March 2018 | • | Audit | ||||
✔ | Independent | |||||
Other Public Company Directorships: | ||||||
• | E.L.F. | |||||
• | Laboratory Corporation of America Holdings |
Current Role:
Prior Roles:
Education: Ms. Parham holds degrees from Drexel University.
Key Qualifications & Experience:
2019 Proxy Statement | 35 |
Eugene A. Woods | ||||||
Age: 54 | Committees: | |||||
Director Since: December 2018 | • | Finance and Investment Policy (eff. June 2019) | ||||
✔ | Independent | |||||
Other Public Company Directorships: | ||||||
None | ||||||
Current Role:
Prior Roles:
Education: Mr. Woods holds multiple degrees from Pennsylvania State University.
Key Qualifications & Experience:
• | Health Care Expertise - Mr. Woods has more than 25 years of health care experience, having overseen nonprofit and for-profit hospitals, academic and community-based delivery systems and rural and urban facilities. He is currently president and CEO of Atrium Health, a health care system with nearly $10 billion of annual revenue, 55 hospitals and 900 care locations. He ranked No. 25 on Modern Healthcare’s list of the 100 Most Influential People in Healthcare for 2018 and is the former Chair of the American Hospital Association Board. |
36 | 2019 Proxy Statement |
You may vote for all, some or none of the nominees for election to the Board. However, you may not vote for more individuals than the number nominated. Each of the nominees has agreed to continue serving as a director if elected. However, if any nominee becomes unwilling or unable to serve and the Board elects to fill the vacancy, the Proxy Agents named in the proxy will vote for an alternative person nominated by the Board. Our Articles prohibit cumulative voting, which means you can vote only once for any nominee. The affirmative vote of a majority of the votes cast with respect to the director is required to elect a director.
Proxy cards that are properly executed will be voted for the election of all of the nominees unless otherwise specified.
The Board recommends that shareholders vote
FOR the election of Corie S. Barry, Lisa M. Caputo, J. Patrick Doyle, Russell P. Fradin, Kathy J. Higgins Victor, Hubert Joly, David W. Kenny, Cindy R. Kent, Karen A. McLoughlin, Thomas L. Millner, Claudia F. Munce, Richelle P. Parham, and37 | |||||||
The following table provides information about the number of shares of our common stock beneficially owned on April 13, 2016March 31, 2019 (unless otherwise indicated), by each of our CEO, our Chief Financial Officer ("CFO"), and our three other most highly compensatednamed executive officers during the most recent fiscal year.officers. The table provides similar information for each director and director nominee, all directors and executive officers as a group, and each person, or any group that we know who beneficially owns more than 5%5 percent of the outstanding shares of our common stock.
Name and Address(1) | Number of Shares Beneficially Owned | Percent of Shares Beneficially Owned |
Hubert Joly, Chairman and Chief Executive Officer | 1,899,625(2) | * |
Corie S. Barry, Chief Financial Officer & Strategic Transformation Officer | 168,920(3) | * |
R. Michael Mohan, Chief Operating Officer, U.S. | 121,334(4) | * |
Keith J. Nelsen, General Counsel and Secretary (Former) | 92,877(5) | * |
Kamy Scarlett, Chief Human Resources Officer & President, U.S. Retail Stores | 24,776(6) | * |
Shari L. Ballard, President, Multi-Channel Retail (Former) | — | |
Lisa M. Caputo, Director | 52,811(7) | * |
J. Patrick Doyle, Director | 20,933(8) | * |
Russell P. Fradin, Director | 30,311(8) | * |
Kathy J. Higgins Victor, Director | 51,041(9) | * |
David W. Kenny, Director | 26,288(8) | * |
Cindy R. Kent, Director | 983(8) | * |
Karen A. McLoughlin, Director | 16,151(8) | * |
Thomas L. Millner, Director | 24,775(8) | * |
Claudia F. Munce, Director | 13,928(8) | * |
Richelle P. Parham, Director | 2,617(8) | * |
Eugene A. Woods, Director | 608(8) | * |
All current directors and executive officers, as a group (18 individuals) | 2,576,600(10) | 0.95% |
Richard M. Schulze, Founder and Chairman Emeritus 6600 France Avenue South, Suite 550 Minneapolis, MN 55435 | 36,832,529(11) | 13.75% |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 29,170,548(12) | 10.83% |
FMR LLC (“Fidelity”) 245 Summer Street Boston, MA 02210 | 23,545,958(13) | 8.749% |
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 17,111,560(14) | 6.4% |
Name and Address(1) | Number of Shares Beneficially Owned | Percent of Shares Beneficially Owned | |||||||
Hubert Joly, Chairman and Chief Executive Officer | 1,903,088 | (2 | ) | * | |||||
Sharon L. McCollam, Chief Administrative Officer and Chief Financial Officer | 441,803 | (3 | ) | * | |||||
Shari L. Ballard, President, U.S. Retail | 425,730 | (4 | ) | * | |||||
R. Michael Mohan, Chief Merchandising Officer | 401,101 | (5 | ) | * | |||||
Keith J. Nelsen, General Counsel & Secretary | 253,471 | (6 | ) | * | |||||
Bradbury H. Anderson, Director | 154,935 | (7 | ) | * | |||||
Lisa M. Caputo, Director | 40,266 | (8 | ) | * | |||||
J. Patrick Doyle, Director | 8,388 | (9 | ) | * | |||||
Russell P. Fradin, Director | 17,766 | (10 | ) | * | |||||
Kathy J. Higgins Victor, Director | 68,496 | (11 | ) | * | |||||
David W. Kenny, Director | 13,743 | (12 | ) | * | |||||
Karen A. McLoughlin, Director | 2,598 | (13 | ) | * | |||||
Thomas L. Millner, Director | 12,230 | (14 | ) | * | |||||
Claudia F. Munce, Director | 345 | (15 | ) | * | |||||
Gérard R. Vittecoq, Director | 41,450 | (16 | ) | * | |||||
All current directors and executive officers, as a group (19 individuals) | 3,934,777 | (17 | ) | 1.21% | |||||
Richard M. Schulze, Founder and Chairman Emeritus 3033 Excelsior Blvd., Suite 525 Minneapolis, MN 55416 | 44,152,196 | (18 | ) | 13.64 | % | ||||
FMR LLC ("Fidelity") 245 Summer Street Boston, MA 02210 | 40,526,297 | (19 | ) | 11.82 | % | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 28,532,817 | (20 | ) | 8.32 | % | ||||
JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017 | 28,053,911 | (21 | ) | 8.10 | % | ||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 17,977,273 | (22 | ) | 5.20 | % |
* | Less than 1%. |
(1) | The business address for all current directors and executive officers is 7601 Penn Avenue South, Richfield, Minnesota, 55423. |
(2) | The figure represents: (a) |
(3) | The figure represents: (a) 93,540 outstanding shares owned by Ms. Barry; (b) 2,333 outstanding shares held in the name of the Trustee in connection with the Retirement Saving Plan for the benefit of Ms. Barry; and (c) options to purchase 73,047 shares, which Ms. Barry could exercise within 60 days of March 31, 2019. |
(4) | The figure represents: (a) 115,591 outstanding shares owned by Mr. Mohan; and (b) 5,743 restricted shares subject to a time-based vesting schedule, which vest within 60 days of |
38 | 2019 Proxy Statement |
(5) | The figure represents: (a) |
(6) | The figure represents: (a) 20,678 outstanding shares owned by Ms. Scarlett; and |
(7) |
The figure represents: (a) 10,000 outstanding shares owned by Ms. Caputo; (b) |
The figure represents |
The figure represents: (a) 10,730 outstanding shares owned by Ms. Higgins Victor; (b) |
The figure represents: (a) the outstanding shares, restricted stock units and options described in the preceding footnotes (2) |
Mr. Schulze is our Founder and Chairman |
As reported on the |
(13) | As reported on the owner’s most recent Schedule 13G filed with the SEC on February 13, 2019, to report ownership as of December 31, 2018. FMR LLC and certain related entities have sole voting power over |
As reported on the |
Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and shareholders who beneficially own more than 10% of our common stock file initial reports of ownership with the SEC. They must also file reports of changes in ownership with the SEC. In addition, they are required by SEC regulations to provide us copies of all Section 16(a) reports that they file with the SEC. Based solely on a review of such Section 16(a) reports, management and the Board believe our directors, and executive officers who served during any part of fiscal 2019 and shareholders who beneficially own more than 10% of our common stock complied with the Section 16(a) filing requirements during the fiscal year ended January 30, 2016,February 2, 2019, except that one equity award, which was granted to Mathew R. Watson on June 10, 2015March 12, 2018, was reported on a delayed basis due to administrative error (see Mr. Watson’s Form 4 filed on behalf of Bradbury H. Anderson (as later amended on a Form 4/A filed on January 28, 2016) included bona fide gifts that occurred on June 16, 2014, July 24, 2014, November 10, 2014, December 2, 2014 and December 17, 2014.dated March 15, 2018, for additional detail).
2019 Proxy Statement | 39 |
Our Related Party Transactions Policy prohibits "related“related party transactions"transactions” unless approved by the Audit Committee and the Board. For purposes of our policy, a "related“related party transaction"transaction” is a transaction or series of transactions in which (a) the Company or a subsidiary is a participant, (b) the aggregate amount involved exceeds $120,000 and (c) any director, executive officer or shareholder beneficially owning more than 5%5 percent of our common stock, or any of their respective immediate family members has a direct or indirect material interest.
A related party transaction will generally not be approved unless it provides us with a demonstrable incremental benefit and the terms are competitive with those available from unaffiliated third parties. Only Board members who do not have an interest in the transaction are permitted to vote on a related party transaction. In addition, ongoing related party transactions are reviewed annually by the Audit Committee and the Board to ensure that such transactions continue to provide the necessary incremental benefit to us and have competitive terms. Each of the transactions discussed below were approved (or re-approved if ongoing) by the Audit Committee and the Board in March 2016,2019, unless otherwise noted, in accordance with our Related Party Transactions Policy.
Richard M. Schulze
As of the date of this filing, Mr. Schulze owned approximately 13.6%13.75 percent of our common stock. On March 25, 2013, we entered into a letter agreement with Mr. Schulze pursuant to which, among other things, Mr. Schulze was given the lifetime honorary title of "Founder“Founder and Chairman Emeritus"Emeritus” of the Company, although he is not an executive and is no longer a member of our Board. Under this letter agreement, we agreed to compensate Mr. Schulze with an annual base salary of $150,000 through fiscal 2018 for his services as Chairman Emeritus, and to provide lifetime medical benefits for him, his spouse and his eligible dependents in accordance with our plans, practices, programs and policies in effect generally for our executives and their dependents. We also agreed to provide office space and administrative support, and to reimburse Mr. Schulze for his costs and out-of-pocket expenses incurred in the performance of his duties as Chairman Emeritus. Mr. Schulze was also entitled, during the term of the letter agreement, to nominate two directors for appointment to the Board of Directors. Messrs. Anderson and Lenzmeier were nominated and elected to the Board as part of this arrangement. The letter agreement'sagreement’s term expired when Mr. Schulze reached the age of 75 (which occurredwas renewed in January 2016),2018 through the end of fiscal 2020, except as specifically described above.
Ryan Green, Mr. Schulze'sSchulze’s step-son, is employed with us as a Senior Director in our Properties department at our corporate headquarters in Richfield, Minnesota. Mr. Green'sGreen’s total cash compensation forin fiscal 20162019 was approximately $202,000.$271,000. Mr. Green also received an annual long-term incentive award of 1,400 time-based restricted shares and a mid-year long-term incentive award of 2251,075 time-based restricted shares, which vest in one-third increments on each anniversary of the grantsgrant for three years, and which awards areyears. His award is consistent for other employees at his level. Mr. Green is eligible to receive employee benefits generally available to all employees. Mr. Green'sGreen’s employment with us began in August 2012. Mr. Schulze'sSchulze’s family member is compensated at a level comparable to the compensation paid to non-family members in similar positions at Best Buy.
Fidelity
FMR LLC ("Fidelity"(“Fidelity”) filed an amended Schedule 13G in February 2016,2019, stating that it beneficially owns 11.8%8.75 percent of the Company'sCompany’s common stock. As a result of beneficially owning more than 5%5 percent of our common stock, Fidelity is currently considered a “related party” under our Related Party Transactions Policy. Certain affiliates of Fidelity provide services to us in connection with the record keeping and administration of our stock plans (including the Employee Stock Purchase Plan and the Long-Term Incentive Plan). We paid these entities approximately $510,000$354,000 for these services for fiscal 2016.2019. The administrative services contracts were initially entered into prior to Fidelity'sFidelity’s Schedule 13G filing and 5%5 percent holder status. The contracts were negotiated at arm'sarm’s length, and there is no indication that the Company or Fidelity received preferential treatment as a result of the relationship.
40 | 2019 Proxy Statement |
The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilitieskey responsibility of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Committee Meetings
The Audit Committee met eightnine times during fiscal 2019, including threefive times via conference call, during fiscal 2016.call. The Audit Committee schedules its meetings to ensure it has sufficient time to devote appropriate attention to all of its tasks. The Audit Committee meetings include regular executive sessions with our independent registered public accounting firm, Deloitte & Touche LLP ("(“D&T"&T”), our internal auditors and management. The Audit Committee also discusses with our internal auditors and D&T the overall scope and plans for their respective audits.
Fiscal 2019 Audited Financial Statements
The Audit Committee, on behalf of the Board, reviewed and discussed with both management and D&T our annual audited consolidated financial statements for the fiscal year ended January 30, 2016,February 2, 2019, and our quarterly operating results for each quarter in such fiscal year, along with the related significant accounting and disclosure issues. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 "The Auditor's Communication1301 “Communications with Audit Committees."
The Audit Committee reviewed and discussed with D&T its independence from us and our management. As part of that review, the Audit Committee received from D&T the written disclosures and the letter required by applicable rules of the Public Company Accounting Oversight Board (U.S.) regarding the independent accountant'saccountant’s communications with audit committees concerning independence. In addition, the Audit Committee reviewed all services provided by and the amount of fees paid to D&T in fiscal 2016.2019. In reliance on the reviews and discussions with management and D&T, the Audit Committee believes that the services provided by D&T were compatible with, and did not impair, its independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that our annual audited consolidated financial statements be included in our Annual Report on Form 10-K for the period ended January 30, 2016, as filedFebruary 2, 2019, for filing with the SEC.
AUDIT COMMITTEE
Thomas L. Millner (Chair)
2019 Proxy Statement | 41 |
ITEM OF BUSINESS NO. 2 — RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THIS SECTION SHOULD BE READ IN CONJUNCTION WITH THE
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. As part of this oversight, the Audit Committee considers the firm’s independence, qualifications, performance, and whether the independent registered public accounting firm should be rotated, as well as the impact of such a rotation. Deloitte & Touche LLP (“D&T&T”) has been retained as our independent registered public accounting firm since fiscal 2006. In compliance with Sarbanes-Oxley requirements, the Lead Audit Partner from D&T rotates off our account every five years, with oversight in selection by the Audit Committee. The last Lead Audit Partner rotation occurred in March 2016. The Audit Committee has appointed Deloitte & Touche LLP ("D&T")&T as our independent registered public accounting firm for the fiscal year ending January 30, 2016.February 1, 2020. We will ask shareholders to ratify the appointment of D&T as our independent registered public accounting firm at the Meeting. Representatives of D&T are expected to be present atattend the Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The Audit Committee is responsible for the audit fee negotiations associated with the retention of our independent registered public accounting firm. For the fiscal years ended January 30, 2016,February 2, 2019, and January 31, 2015,February 3, 2018, D&T served as our independent registered public accounting firm. The following table presents the aggregate fees incurred for services rendered by D&T during fiscal 20162019 and fiscal 2015,2018, respectively. The fees listed below were pre-approved by our Audit Committee pursuant to the Audit Committee'sCommittee’s pre-approval policy as described below:
Service Type | Fiscal 2019 | Fiscal 2018 | ||||
Audit Fees(1) | $ | 2,912,000 | $ | 2,770,000 | ||
Audit-Related Fees(2) | 654,000 | 334,000 | ||||
Tax Fees | — | — | ||||
Total Fees | $ | 3,566,000 | $ | 3,104,000 |
Service Type | Fiscal 2016 | Fiscal 2015 | ||||||
Audit Fees(1) | $ | 2,740,000 | $ | 3,072,000 | ||||
Audit-Related Fees(2) | 400,000 | 1,133,000 | ||||||
Tax Fees(3) | 50,000 | 45,000 | ||||||
Total Fees | $ | 3,190,000 | $ | 4,250,000 |
(1) | Consists of fees for professional services rendered in connection with the audits of our consolidated financial statements and the effectiveness of our internal control over financial reporting for the fiscal years ended |
(2) | Consists primarily of fees for statutory audit filings, as well as the audits of our retirement savings plans and |
It is our policy that our independent registered public accounting firm be engaged to provide primarily audit and audit-related services. However, pursuant to the policy, in certain circumstances and using stringent standards in its evaluation, the Audit Committee may authorize our independent registered public accounting firm to provide tax services when it determines that D&T is the most efficient and effective tax service provider.
Consistent with SEC rules regarding auditor independence, the Audit Committee is responsible for appointing, setting fees for and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility and in accordance with the Securities Exchange Act of 1934, as amended, it is the policy of the Audit Committee to pre-approve all permissible services provided by our independent registered public accounting firm, except for minor audit-related engagements which in the aggregate do not exceed 5%5 percent of the fees we pay to our independent registered public accounting firm during a fiscal year.
Each year, prior to engaging our independent registered public accounting firm, management submits to the Audit Committee for approval a list of services expected to be provided during that fiscal year within each of the three categories of services described below, as well as related estimated fees, which are generally based on time and materials.
42 | 2019 Proxy Statement |
Audit services include audit work performed on the financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters and discussions surrounding the proper application of financial accounting and/or reporting standards.
Audit-related services include assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, statutory audits, employee benefit plan audits and special procedures required to meet certain regulatory requirements.
Tax services include compliance and other non-advisory services performed by the independent registered public accounting firm when it is most efficient and effective to use such firm as the tax service provider.
As appropriate, the Audit Committee then pre-approves the services and the related estimated fees. The Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the estimate periodically throughout the year by category of service. During the year, circumstances may arise when it becomes necessary to engage our independent registered public accounting firm for additional services not contemplated in the initial annual proposal. In those instances, the Audit Committee pre-approves the additional services and related fees before engaging our independent registered public accounting firm to provide the additional services.
The members of the Audit Committee and the Board believe that the continued retention of D&T to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and our shareholders. The Board recommends that shareholders vote
FOR the proposal to ratify the appointment of D&T as our independent registered public accounting firm for the fiscal year endingThe affirmative vote of a majority of the voting power of the shares present and entitled to vote at the Meeting is required to ratify D&T as our independent registered accounting firm.
Although ratification is not required pursuant to our By-laws or otherwise, the Board is submitting the selection of D&T to our shareholders for ratification because we value our shareholders'shareholders’ views on the Company'sCompany’s independent registered public accounting firm. If the appointment of D&T were not to be ratified by the shareholders, the Audit Committee would not be required to appoint another independent registered public accounting firm, but would give consideration to an unfavorable vote. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.
2019 Proxy Statement | 43 |
ITEM OF BUSINESS NO. 3 — ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are providing our shareholders with an opportunity to cast an advisory vote, a “Say on Pay,” regarding our fiscal 2019 named executive officer (“NEO”) compensation program, as described in the Executive and Director Compensation section of this proxy statement.
Information About the Advisory Vote to Approve Named Executive Officer Compensation
The Compensation Committee establishes, recommends and governs all of the compensation and benefits policies and actions for the Company’s NEOs. While the advisory vote to approve the compensation of our named executive officers is not binding, it provides useful information to our Board and Compensation Committee regarding our shareholders’ views of our executive compensation philosophy, policies and practices. The Compensation Committee values our shareholders’ opinions and will take the results of the vote into consideration when determining the future compensation arrangements for our named executive officers. At the Company’s 2018 Regular Meeting of Shareholders, our shareholders voted to hold the non-binding shareholder vote to approve the compensation of our named executive officers each year. Accordingly, the Company currently intends to hold such votes annually. The next such vote is expected to be held at the Company’s 2020 Regular Meeting of Shareholders.
As detailed in the Executive and Director Compensation — Compensation Discussion and Analysis section, we believe our fiscal 2019 executive compensation program reflects market appropriate practices and balances risk and reward in relation to our overall business strategy. Our executive compensation program is focused on pay-for-performance and seeks to mitigate risks related to compensation in order to further align management’s interests with shareholders’ interests in long-term value creation.
Accordingly, we ask that our shareholders cast an advisory vote to approve the following resolution:
RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the named executive officers for the fiscal year ended February 2, 2019, as described in the Executive and Director Compensation — Compensation Discussion and Analysis section and the compensation tables and related material disclosed in the Company’s proxy statement for its 2019 Regular Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission. |
Our Board recommends an advisory vote FOR approval of the fiscal 2019 compensation of our NEOs as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules.
The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required for advisory approval of our NEO compensation.
It is intended that, unless otherwise instructed, the shares represented by proxy (other than broker non-votes) will be voted “for” the advisory vote on executive compensation.
44 | 2019 Proxy Statement |
The following Compensation Discussion and Analysis describes how the Compensation Committee of the Board decided to compensate our fiscal 2016 NEOs:
Name | Principal Position | |
Hubert Joly | Chairman and Chief Executive | |
Corie S. Barry | Chief | |
Mike Mohan | Chief Operating Officer, Best Buy U.S. | |
Keith J. Nelsen | General Counsel and Secretary (Former) | |
Kamy Scarlett | Chief Human Resources Officer and | |
Shari L. Ballard | ||
President, Multi-Channel Retail (Former) |
In July 2018, Ms. Ballard announced that she would be leaving Best Buy effective March 2019. Ms. Ballard stepped down from her responsibilities as President, Multi-Channel Retail but continued to act in an advisory capacity to assist with the transition of those responsibilities through the end of her tenure with the Company.
Ms. Scarlett took on a new role. While remainingthe responsibilities as President, of U.S. Retail she will also focus on acceleratingStores in January 2019, in addition to her existing role as our efforts around waste and efficiency. A new Chief Human Resources Officer, Paula Baker, was promoted internally effective March 1, 2016.
In April 2019, we announced several additional changes to our 2015leadership team. Following the Meeting 98% ofin June, Ms. Barry will become our shareholders votedCEO. Mr. Joly will continue to serve as an advisor to Ms. Barry and as our Executive Chairman. Mr. Nelsen transitioned to an advisory role through September 2019 in support of his successor, Mr. Todd Hartman, our “Say on Pay” proposal, which was on par with our results in 2014,General Counsel, Chief Risk & Compliance Officer and an increase from the level of support we received in 2013.
The Compensation Discussion and continued commitment to align pay and performance, which we communicated to investors through shareholder outreach prior to each annual meeting. During fiscal 2016, we reached out to all of our top twenty shareholders, representing approximately 70% of our outstanding shares, as well as several of our top fifty shareholders offering to discuss any concerns regarding executive compensation practices and other governance issues. As a result of these outreach efforts, we had in-person meetings and engaged in direct conversations with several shareholders to answer their questions, provide commentary on the compensation decisions made during the year and receive feedback to be considered when making future decisions. Further, as discussed in the
CD&A Section | |
Highlights of our executive compensation program, including our shareholder engagement process and Committee consideration of Say on Pay votes, a summary of our | ||||
Compensation | ||||
Overview of the | ||||
Governance | Summary of the | |||
2019 Proxy Statement | 45 |
Prior “Say on Pay” Votes
At our 2018 Meeting, 96.2 percent of our shareholders voted in support of our “Say on Pay” proposal, which was on par with our results in 2017 and 2016.
We believe the high level of support we received from shareholders for the last several years is driven in part by our performance and in part by our continued commitment to align pay and performance. In the fall of fiscal 2019, following our 2018 Meeting, we reached out to all of our top twenty shareholders, representing approximately 65 percent of our outstanding shares, offering to discuss any questions or concerns regarding executive compensation practices and other governance issues. As a result of these outreach efforts, we engaged in direct conversations with several shareholders to answer questions, provide commentary on the compensation decisions made during the year, and received feedback to be considered when making future decisions. Further, as discussed in the Corporate Governance at Best Buy — Shareholder Engagement section, we regularly engage with our shareholders throughout the year regarding their various priorities, and we welcome their feedback on our practices and policies.
46 | 2019 Proxy Statement |
Summary of Executive Compensation Practices
Pay for Performance
Risk Mitigators
Shareholder Engagement
Key Fiscal 2019 Compensation Decisions
In fiscal 2018, we declared Renew Blue complete and unveiled a new strategy: Best Buy 2020: Building the New Blue. Taking the strong fiscal 2018 results into account, in March 2018, the Compensation Committee made a few adjustments to the NEO compensation for fiscal 2019 compensation. A summary of the changes is included below and explained in further detail within our Compensation Discussion and Analysis:
• | Base Salaries: We increased the base salary rates for five of the NEOs (excluding Mr. Joly) in light of the scope of their roles and responsibilities and market data. |
• | Short-Term Incentives: We made no changes to the |
• | Long-Term Incentives: We |
• | Other Compensation: We |
2019 Proxy Statement | 47 |
Fiscal 2019 Pay and Performance Outcomes
In fiscal 2019, we made significant progress on implementing our Best Buy 2020 strategy to enrich lives through technology and further develop our competitive differentiation. We believe that our fiscal 2019 results confirm that our strategy is working. On a full-year basis in fiscal 2019, we grew our enterprise comparable sales by 4.8 percent on top of 5.6 percent in fiscal 2018, increased GAAP diluted EPS by 59.5 percent to $5.20 and increased our non-GAAP diluted EPS by 20.4 percent to $5.32*. In addition, we recorded annual revenue of $42.9 billion, GAAP operating income of $1.9 billion and non-GAAP operating income of $2.0 billion in fiscal 2019.* With these results, we essentially met our fiscal 2021 targets provided at our Investor Day in 2017 two years earlier than anticipated. From a capital allocation standpoint, we returned $2.0 billion to our shareholder through share repurchases and dividends. In addition to these results, the following performance measures were tied specifically to the compensation of our executives and resulted in the short-term incentive and long-term incentive award payouts shown below.
Enterprise Revenue was added to the Performance Share Award mix in fiscal 2018. The first year of potential payout applying this metric will be in fiscal 2020. These awards and payouts are explained in further detail within theExecutive Compensation Elements section of this proxy statement.
*For GAAP to non-GAAP reconciliations, please refer to the schedule entitled Reconciliation of Non-GAAP Financial Measures.
48 | 2019 Proxy Statement |
Compensation Changes Related to CEO Succession
As part of our recently announced CEO succession plan effective at the end of the Meeting, Mr. Joly’s annual base salary will decrease to $650,000, and his annual short-term incentive award target will decrease to 100% of base salary for the portion of the year he holds the position of Executive Chair. He will continue to participate in all benefit programs available to the Company’s senior executives. Upon her promotion to CEO, Ms. Barry’s base salary will increase to $1.1 million and her annual short-term incentive award target will increase to 175% of base salary for the portion of the year she holds the position of CEO. Upon her promotion, Ms. Barry will also receive a true-up equity award with a target value of $5.475 million comprised of 50% of the value in performance shares, 20% in stock options, and 30% in restricted shares, consistent with the fiscal 2020 annual awards. Upon Mr. Mohan’s promotion to President and Chief Operating Officer, his base salary will increase to $1 million and his short-term incentive award target will increase to 160% of base salary for the portion of the year he holds this role. At the time of this promotion, Mr. Mohan will also receive a true-up equity award with a target value of $2.475 million comprised of 50% of the value in performance shares, 20% in stock options, and 30% in restricted shares, consistent with the fiscal 2020 annual awards. Mr. Mohan will also receive a additional grant of restricted shares valued at $2.5 million that will vest in full on the second anniversary of the grant date. Consistent with the Compensation Committee’s approach in setting annual compensation levels, in determining these compensation adjustments, the Compensation Committee considered each NEO’s prior performance, Company performance, the compensation levels paid to similarly situated executive officers at the Company, the competitive median of the market data to provide a perspective on external practices, and input from the Compensation Committee’s independent compensation consultant. Additional details regarding our CEO succession plan and related compensation was disclosed in a Current Report on Form 8-K filed by the Company on April 15, 2019.
Compensation Philosophy, Objectives and Policies
The Company’s compensation philosophy is to align executive compensation with shareholders’ interests. To that end, the Compensation Committee works to ensure that base salaries are market competitive, and short and long-term incentives are heavily weighted toward Company performance and are within the range of market practice.
We achieve these objectives by using programs that are designed to align employee interests with Company goals and create a common vision of success without undue risk.
We continue to utilize the following executive compensation policies and practices:
• | Pay-for-performance. We tie pay to performance. The majority of |
• | Mitigate undue risk. We |
• | Independent Compensation Committee and compensation consultant. The Compensation Committee is |
• | Shareholder engagement. We routinely engage with shareholders regarding executive compensation and related issues. |
• | Re-pricing of stock options. Stock options may not, without the approval of our |
• | Stock ownership and trading policies. We have stock ownership guidelines for all of our executive |
• | NEO benefits. Our executive officers, including the NEOs, generally receive the same employee benefits as other officers. We do not have an executive retirement plan that provides extra benefits to the NEOs. |
2019 Proxy Statement | 49 |
The following table summarizes the roles of each of the key participants in the executive compensation decision-making process for our NEOs.
Key Participant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation Committee | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Role in Decision-Making Process | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Establishes our compensation objectives. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Determines, approves and oversees executive compensation, including the design, competitiveness and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• The Compensation Committee’s charter is available on our website at www.investors.bestbuy.com. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation Committee’s Independent Compensation Consultant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Role in Decision-Making Process | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Reviews the recommendations of management with the Compensation Committee to ensure that the recommendations are aligned with our objectives and executive and director talent. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
overall compensation mix, the selection of performance metrics and the setting of the performance goals and ranges. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Provides analysis and crafts recommendations for the Compensation Committee in the setting of CEO compensation opportunity. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• Reviews the results of key conclusions. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
connection with compensation-related matters. Frederic W. Cook & Co., Inc. has served as the Compensation Committee’s independent compensation consultant since the fall of 2012. CEO Role in Decision-Making Process • Creates and presents recommendations to the Compensation Committee for our other executive officers and provides his or her own perspective. Does not participate in, or otherwise influence, recommendations regarding his own compensation. Human Resources (“HR”) and Finance Role in Decision-Making Process • HR provides the Compensation Committee with market analytics in support of the CEO’s recommendations for our executive officers, recommendations on CEO compensation. As necessary, HR engages outside consultants to assist with its analytics and support of the |
Compensation Consultant Independence
The Compensation Committee reviewed the independence of Frederic W. Cook & Co., Inc. under NYSE and SEC listing standards. Based on its review and information provided by Frederic W. Cook & Co., Inc. regarding the provision of its services, fees, policies and procedures, presence (if any) of any conflicts of interest, ownership of Best Buy stock, and other relevant factors, the Compensation Committee concluded that the work of Frederic W. Cook & Co., Inc. has not raised any conflicts of interest and deemed them to be an independent advisor to the Compensation Committee.
50 | 2019 Proxy Statement |
Market Competitive Data. For fiscal 2019, each element of compensation and the level of total direct compensation for our NEOs was considered against market benchmarks and views of individual performance. Our Compensation Committee reviewed publicly available compensation data and private surveys for our peer group of companies, Fortune 100 companies and general and retail industry survey data. We used available information and monitored actions taken by our peer group to evaluate market trends and to assess the long-term incentive program and overall competitiveness of our executive compensation levels. We did not, however, seek to establish any specific element of compensation or total direct compensation that falls within a prescribed range relative to our peer group of companies or the Fortune 100 companies.
Change in Peer Group for Fiscal 2019. We review our peer group annually. The Compensation Committee strives to ensure that our peer group is an accurate reflection of our business model, represents the labor market for executive talent and includes external perspectives. For fiscal 2019, the peer group was approved after consideration of the following criteria:
The Compensation Committee considered the Company’s position relative to the peer group on the basis of earnings, revenue and market cap, and made no changes to our peer group for fiscal 2019 from fiscal 2018. For fiscal 2019, our peer group consisted of the following companies:
Alphabet, Inc. | Kohl’s Corporation | Office Depot, Inc. |
Amazon.com, Inc. | Lowe’s Companies Inc. | Staples, Inc. |
Apple Inc. | Macy’s, Inc. | Target Corporation |
Costco Wholesale Corporation | Microsoft Corporation | Wal-Mart, Inc. |
eBay Inc. | Nike, Inc. | Walgreens Boots Alliance, Inc. |
The Home Depot, Inc. | Nordstrom, Inc. |
2019 Proxy Statement | 51 |
Executive Compensation Elements
Overview. Our NEOs’ compensation in fiscal 2019 included the following elements (for additional details on specific awards, see the discussion below and the Compensation of Executive Officers — Summary Compensation Table section):
Compensation Component | Key Characteristics | Purpose | Principal Fiscal 2019 Actions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base Salary | Cash; reviewed annually and adjusted if appropriate. | Provide competitive, fixed compensation to | Base salary increases for | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive (“STI”) | Cash. Variable compensation component. Performance-based award opportunity. Payable based on achievement of | Create a strong financial incentive for achieving or |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Incentive (“LTI”) | Performance share awards, stock options and restricted shares, subject to certain performance-conditions and time-based vesting requirements. | Create a strong financial incentive for increasing shareholder value, encourage ownership stake, and promote retention. | LTI changes included increased targets for Messrs. Joly and Mohan and Msses Barry, Ballard and Scarlett to recognize their performance and market data, and a special award for Ms. Scarlett to reflect her increased responsibilities. The NEOs received a payout equal to 150% of the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health, Retirement and | Eligibility to participate in benefit plans generally available to our employees, including health, retirement, stock purchase, severance, paid time off, life insurance and disability plans. | Plans are part of our broad-based employee benefits program. | The NEOs are eligible to participate in the 2019 enhancements to our benefit plans, which include caregiver leave and back-up childcare support. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits | Annual executive physical exam, supplemental long-term disability insurance, and tax planning/preparation services. | Provide competitive benefits to promote the health, well-being and financial security of our executive officers. | No material changes were made to the NEOs’ benefits in fiscal |
Fiscal 2019 Pay Mix. The Compensation Committee emphasizes variable performance-based pay when setting the target pay mix for our executive officers, but does not establish a set pay mix for them. The target pay mix for fiscal 2019 for our CEO and other NEOs, on average, is shown below. Actual salary levels, STI awards (discussed in further detail in the Short-Term Incentive section) and LTI awards (discussed in further detail in the Long-Term Incentive
52 | 2019 Proxy Statement |
section) vary based on the market analysis described above. Approximately 90 percent of the CEO’s target pay and, on average, approximately 80 percent of the other NEOs’ target pay is variable based on operating performance, changes in our stock price and/or total shareholder return relative to the S&P 500 companies.
Each element in the pay mix is discussed below and shown in the Summary Compensation Table as found in the Compensation of Executive Officers section of this proxy statement.
Base Salary
In March 2018, the Compensation Committee reviewed the total compensation for each NEO, including their base salaries. Based on the stage of the Company’s strategy, its assessment of each officer relative to market data, and distribution of responsibilities, the Compensation Committee approved base salary increases for Msses. Barry, Ballard and Scarlett and Messers. Mohan and Nelsen in light of relative market data, increased responsibilities and in recognition of each of their changing positions or continued growth in their respective roles.
Name | Fiscal 2019 Annual Base Salary | Fiscal 2018 Annual Base Salary | Percent Change | ||||||
Mr. Joly | $ | 1,275,000 | $ | 1,275,000 | 0 | % | |||
Ms. Barry | 850,000 | 750,000 | 13 | % | |||||
Mr. Mohan | 900,000 | 850,000 | 6 | % | |||||
Mr. Nelsen | 750,000 | 690,000 | 9 | % | |||||
Ms. Scarlett(1) | 800,000 | 550,000 | 45 | % | |||||
Ms. Ballard | 900,000 | 850,000 | 6 | % |
(1) | Ms. Scarlett’s salary increased twice during the year: from $550,000 to $700,000 in April 2018, and to $800,000 in January 2019 in connection with her role as President, U.S. Retail Stores. |
Short-Term Incentive
Our executive compensation programs are designed to ensure that a significant percentage of total compensation is linked to Company performance. For fiscal 2019, the NEOs were eligible for performance-based, short-term incentive cash awards pursuant to our fiscal 2019 STI plan.
Fiscal 2019 STI Performance Criteria. In December 2017, the Compensation Committee approved the performance metrics for the fiscal 2019 STI plan. For fiscal 2019, the Compensation Committee approved similar performance metrics as in fiscal 2018, except domestic services productive revenue was replaced with domestic services point of sale revenue. The reason for this change was to align the timing of recognition of services revenue with sales behaviors and customer actions. The other metrics for fiscal 2019 remained consistent with fiscal 2018.
2019 Proxy Statement | 53 | ||||||
Accordingly, financial metrics under the fiscal 2019 STI were: compensable enterprise operating income, enterprise comparable sales growth, U.S. net promoter score, U.S. online revenue growth, U.S. services point of sale revenue, and U.S. cost reduction.
STI Metric | Metric Weighting | Definition | ||
Compensable Enterprise Operating Income | 40%. Served as the minimum threshold for STI awards to be paid | Enterprise non-GAAP operating income, adjusted for foreign exchange rate variances. | ||
In March 2018, the Compensation Committee approved the performance goals for each metric. The minimum, target and maximum goals for each metric were evaluated to ensure they would incent the desired level of performance for each priority. For some metrics, this evaluation resulted in changes to the minimum, target, and maximum goals in light of anticipated year-over-year industry trends, product cycles, and other market factors.
The following chart shows actual fiscal 2019 performance compared to the minimum, target and maximum goals for each metric. Minimum performance against the goal results in a no payout, Target performance results in a 1.00 payout, and Maximum performance results in a 2.00 payout. The final metric score is interpolated as an exact point somewhere between 0.00 and 2.00. The chart also includes the same information from fiscal 2018, if applicable (as presented in last year’s proxy statement) to illustrate how the goals changed and how our actual performance compared to last year.
Metric ($ in millions) | Minimum | Target | Maximum | Actual Result | Metric Score | ||||||||||
Compensable Enterprise Operating Income (40%)(1)(2) | $ | 1,802 | $ | 1,892 | $ | 2,072 | $ | 2,003 | 1.61 | ||||||
Fiscal 2018 Compensable Enterprise Operating Income (40%)(1)(3) | $ | 1,741 | $ | 1,831 | $ | 2,011 | $ | 1,950 | 1.66 | ||||||
Enterprise Comparable Sales Growth (30%) | 1.88 | % | 2.34 | % | 3.26 | % | 4.79 | % | 2.00 | ||||||
Fiscal 2018 Comparable Sales Growth (30%) | 0.50 | % | 2.17 | % | 3.09 | % | 5.60 | % | 2.00 | ||||||
Best Buy 2020 Priorities: | |||||||||||||||
U.S. Net Promoter Score (7.5%)(4) (for purchasers and non-purchasers) | 38.2 | 38.6 | 39.4 | 41.3 | 2.0 | ||||||||||
Fiscal 2018 U.S. Net Promoter Score (7.5%) (for purchasers and non-purchasers) | 35.9 | 36.3 | 37.1 | 38.0 | 2.0 | ||||||||||
U.S. Online Revenue Growth (7.5%) | 9.59 | % | 14.59 | % | 24.59 | % | 10.69 | % | 0.61 | ||||||
Fiscal 2018 U.S. Online Revenue Growth (7.5%) | 11.43 | % | 16.43 | % | 26.43 | % | 23.70 | % | 1.72 | ||||||
U.S. Services POS Revenue (7.5%)(5) | $ | 1,811 | $ | 1,871 | $ | 1,991 | $ | 1,952 | 1.67 | ||||||
Fiscal 2018 U.S. Services Productive Revenue (7.5%)(6) | $ | 1,392 | $ | 1,452 | $ | 1,572 | $ | 1,464 | 1.09 |
Metric ($ in millions) | Minimum | Target | Max | Actual Result | Metric Score | |||||
Compensable Enterprise Operating Income (50%)(1)(2) | $1,408 | $1,498 | $1,678 | $1,610 | 1.62 | |||||
Fiscal 2015 Compensable Enterprise Operating Income (50%)(1)(3) | $1,163 | $1,353 | $1,533 | $1,523 | 1.94 | |||||
Enterprise Comparable Sales (20%)(4) | (0.06)% | 0.4% | 1.32% | 0.9% | 1.54 | |||||
Fiscal 2015 Enterprise Comparable Sales (20%) | (1.0)% | 0.52% | 1.44% | .44% | 0.91 | |||||
Renew Blue Priorities: | ||||||||||
Waste and Efficiency (10%) | $100 | $120 | $160 | $154 | 1.83 | |||||
Fiscal 2015 North America Cost Take Out (10%)(5) | $360 | $410 | $460 | $438 | 1.56 | |||||
U.S. Digital Revenue Growth (10%) | 5.95% | 10.95% | 20.95% | 13.24% | 1.22 | |||||
Fiscal 2015 U.S. Digital Revenue Growth (10%) | 20% | 30% | 40% | 16.5% | — | |||||
U.S. Net Promoter Score(6) (10%) (for purchasers and non-purchasers) | 35.4 | 35.7 | 36.4 | 38.5 | 2.00 | |||||
Fiscal 2015 U.S. Net Promoter Score (10%) (for purchasers and non-purchasers) | 35.5 | 36.5 | 38.5 | 34.8 | — | |||||
Fiscal 2016 Blended Score: | 1.62 | |||||||||
Fiscal 2015 Blended Score: | 1.31 |
54 | 2019 Proxy Statement |
Metric ($ in millions) | Minimum | Target | Maximum | Actual Result | Metric Score | ||||||||||
U.S. Cost Reduction (7.5%)(7) | $ | 200 | $ | 250 | $ | 300 | $ | 265 | 1.30 | ||||||
Fiscal 2018 U.S. Cost Reduction (7.5%) | $ | 175 | $ | 200 | $ | 300 | $ | 286 | 2.72 | ||||||
Fiscal 2019 Blended Score: | 1.663 | ||||||||||||||
Fiscal 2018 Blended Score: | 1.829 |
(1) | Actual performance for this metric had to be above the minimum threshold in order for STI payments to be made. A result lower than the minimum threshold would have resulted in an overall blended score of zero, and no STI payments. |
(2) | Compensable Enterprise Operating Income was determined based on the non-GAAP operating income from continuing operations of $1,988 million in our Annual Report on Form 10-K for fiscal 2019, adjusted for differences from targeted foreign exchange rates. | |
(3) | Compensable Enterprise Operating Income was determined based on the non-GAAP operating income from continuing operations of $1,953 million in our Annual Report on Form 10-K for fiscal 2018, adjusted for differences from targeted foreign exchange rates. |
(4) |
(5) | U.S. Services POS Revenue is the point of |
(6) | U.S. Services Productive Revenue is the |
(7) | U.S. Cost Reduction is the annualized year-over-year cost savings (compared to fiscal |
Determination of Fiscal 2019 STI Target Payout. The Compensation Committee reviewed the target payout percentages for our NEOs under the fiscal 2019 STI plan as part of its review of the NEOs’ total fiscal 2019 target compensation. The Compensation Committee generally applies a tiered approach in determining the potential target payout ranging from 100 percent to 200 percent of annual earnings based on each NEO’s eligible earnings as of the 15th day of each fiscal month. The specific target payout percentage for each NEO is determined based on external market data (including survey and proxy data from the Fortune 100 and our peer group) for equivalent roles, with emphasis placed on job value and internal pay equity among the NEOs.
For fiscal 2019, the tiered target opportunities were 100 percent to 200 percent of salary. The target payout percentages for each NEO remained the same as in fiscal 2018, except for Ms. Scarlett whose STI increased at the same time as her base salary increased. For each of the metrics, the NEOs could earn zero to two times their weighted target payout percentage for that metric.
The following chart shows fiscal 2019 STI opportunities and payments as a dollar value and percent of annual base salary (based on their eligible base salary as of the 15th day of each fiscal month):
Name | Fiscal 2019 Annual Base Salary(1) | Target Payout Percentage | Annual Target Payout Value, based on Annual Earnings | Fiscal 2019 Blended STI Score | Fiscal 2019 STI Payment | Fiscal 2019 STI Payment, as a Percentage of Annual Earnings | ||||||||||||
Mr. Joly | $ | 1,275,000 | 200 | % | $ | 2,550,000 | 1.663 | $ | 4,240,650 | 333 | % | |||||||
Ms. Barry | 833,333 | 150 | % | 1,250,000 | 1.663 | 2,078,750 | 249 | % | ||||||||||
Mr. Mohan | 891,666 | 150 | % | 1,337,500 | 1.663 | 2,224,262 | 249 | % | ||||||||||
Mr. Nelsen | 740,000 | 100 | % | 740,000 | 1.663 | 1,230,620 | 166 | % | ||||||||||
Ms. Scarlett(2) | 683,333 | 102 | % | 693,750 | 1.663 | 1,153,706 | 169 | % | ||||||||||
Ms. Ballard | 891,666 | 150 | % | 1,337,500 | 1.663 | 2,224,262 | 249 | % |
(1) | Annual base salary
|
(2) | Ms. Scarlett’s Annual Base Salary and STI |
Preview — Fiscal 2020 STI Performance Metrics. In December 2018, the Compensation Committee approved the performance criteria in the form of metrics for the fiscal 2020 STI, as follows:
2019 Proxy Statement | 55 |
Long-Term Incentive
Awards of equity-based LTI compensation to our executive officers enhance the alignment of interests of our NEOs and shareholders. All LTI awards for our NEOs and directors must be approved by the Compensation Committee. In March 2018, the Compensation Committee approved long-term incentive awards to our NEOs pursuant to our fiscal 2019 LTI program under our Amended & Restated 2014 Omnibus Incentive Plan.
The fiscal 2019 LTI program featured a mix of performance share awards, performance conditioned time-based restricted shares, and stock options. This results in a balanced portfolio of compensation rewards consisting of, for the CEO, 50 percent performance share awards based on relative total shareholder return (to reward relative performance) and enterprise revenue growth (to reward growth), 30 percent performance-conditioned time-based restricted shares, based on adjusted net earnings (to reward earnings and promote retention), and 20 percent stock options (to reward absolute share price appreciation), as shown below. The mix for the other NEOs was 50 percent performance share awards and 50 percent performance-conditioned time-based restricted shares, both with the same performance metrics as the CEO’s awards.
Form of Fiscal 2019 LTI Award. The NEOs receive an LTI grant once per year at a regularly scheduled Compensation Committee meeting that typically occurs in the first quarter of our fiscal year. In fiscal 2019, the closing price of our common stock on the grant date was used to convert the award dollar value to a number of units.
In March 2018, the Compensation Committee approved the addition of dividend equivalents to restricted stock and performance share awards. These dividend equivalents begin to accrue for each declared dividend following the grant but are not converted into dividends until the restricted shares underlying the grants are earned, vested or payable.
Determination of Fiscal 2019 LTI Target Award Values. The Compensation Committee approved the executive team’s fiscal 2019 compensation, which included increased target award values for Mr. Joly, Ms. Barry, Ms. Ballard, Mr. Mohan and Ms. Scarlett to reflect increased responsibilities, role changes and market adjustments.
56 | 2019 Proxy Statement |
LTI award amounts are determined based upon analysis of external market data, with overall compensation mix and external market data for equivalent roles being key factors in the determination of the award made to each NEO. The fiscal 2019 LTI awards for each NEO are set forth below:
Name | No. of Stock Options | No. of Performance- Conditioned Time- Based Restricted Shares | Target No. of Shares under Performance Share Award(2) | Target Grant Date Value | ||||||||
Mr. Joly | 103,981 | 49,287 | 80,950 | $ | 11,750,000 | |||||||
Ms. Barry | — | 20,819 | 20,517 | 3,000,000 | ||||||||
Mr. Mohan | — | 24,636 | 24,278 | 3,550,000 | ||||||||
Mr. Nelsen | — | 11,451 | 11,285 | 1,650,000 | ||||||||
Ms. Scarlett(1) | 57,109 | 6,246 | 6,155 | 1,250,000 | ||||||||
Ms. Ballard | — | 24,636 | 24,278 | 3,550,000 |
(1) | Ms. Scarlett received her annual LTI grant in March 2018, before her promotion, plus a stock option grant with a 4-year cliff vesting in January 2019 in recognition of her increased responsibilities. The grant date value reflects her annual LTI target effective for fiscal 2020. |
(2) | Performance Share Awards include shares for both the TSR and Revenue performance metrics, as described below. |
Performance Share Awards.The performance share awards are earned based on two metrics: half on total shareholder return (“TSR”) relative to the S&P 500 Index and the other half on enterprise revenue growth, both over a three-year period. TSR was selected as one of the metrics based on its direct link to shareholder value creation. The S&P 500 was used as a proxy for the broad variety of other investment opportunities available to investors. The relative TSR performance goals were as follows:
Relative TSR Percentile Ranking | No. of Shares Earned (as % of Target) | |
Less than Threshold | Less than 30th Percentile | —% |
Threshold | 30th Percentile | 50% |
Target | 50th Percentile | 100% |
Maximum | 70th Percentile | 150% |
The number of performance shares earned are interpolated on a linear basis for performance between Threshold and Target and between Target and Maximum.
The other half of the performance share awards are earned based on the compound annual growth rate of enterprise revenue over the three fiscal years ending on the end of fiscal 2021. The Compensation Committee chose this metric in fiscal 2017 to sharpen our focus on profitable growth and to further align our performance metrics with our Best Buy 2020 growth strategy. The Committee believes this metric is an effective measurement of Company performance, particularly when combined with our TSR based awards. Although the Committee has not specifically assessed the probability of achieving any performance metric, based on the Company’s historical results and its assessment of the Company’s strategy, it believes achieving target performance under this award is reasonably attainable while providing appropriately challenging incentives, and that achieving maximum performance would be difficult. Shares will be earned under this metric as follows:
No. of Shares Earned (as % of Target) | |
Less than Threshold | —% |
Threshold to Target | 50% to 100% |
Target to Maximum | 100% to 150% |
Above Maximum | 150% |
The final number of performance shares earned are interpolated on a linear basis for performance between Threshold and Target and between Target and Maximum.
Performance-conditioned Time-based Restricted Share Awards. The performance-conditioned time-based restricted shares also vest in equal installments of one-third on the three successive anniversaries of the grant date, provided the performance condition has been met in any fiscal year during the term of the award. The performance condition was added to the time-based restricted shares to further align compensation with shareholder interests. The vesting of these shares is conditioned upon the Company’s achievement of positive Adjusted Net Earnings. Adjusted Net Earnings means net earnings determined in accordance with GAAP, adjusted to eliminate the following: (1) the
2019 Proxy Statement | 57 |
cumulative effect of changes in GAAP; (2) gains and losses from discontinued operations; (3) extraordinary gains and losses; and (4) other unusual or nonrecurring gains or losses which are separately identified and quantified, including merger-related charges. Achievement of positive Adjusted Net Earnings may occur in any fiscal year during the term of the award for the award to begin to vest. For example, if the performance condition is not achieved until year two, two-thirds of the award will vest following Compensation Committee approval of achievement of the performance condition, with the remaining one-third to vest in the third year of the award.
Stock Options. The non-qualified stock options granted to Mr. Joly and Ms. Scarlett have a term of ten years and become exercisable over either a three-year period at the rate of one-third per year, beginning one year from the grant date or become fully vested after a four-year period, subject to being employed on the vesting date. The exercise price for such options is equal to the closing price of our common stock on the grant date, as quoted on the NYSE. Under the terms of the Amended and Restated 2014 Omnibus Incentive Plan, we may not grant stock options with a strike price at a discount to fair market value. Unless otherwise determined by the Compensation Committee, “fair market value” as of a given date is the closing price of our common stock as quoted on the NYSE on such date or, if the shares were not traded on that date, the most recent preceding date when the shares were traded.
Performance Share Payout. In March 2015, the Compensation Committee adopted a performance share plan design, based on relative TSR versus the S&P 500 Index over the 36-month period from March 1, 2015 to February 28, 2018. The shares vested (0 to 150%) after the three-year period if the performance criteria was met. Because the Company’s TSR during the performance period exceeded the 70th percentile of all companies in the S&P 500, these shares paid out at the maximum of 150 percent in fiscal 2019 and are reflected in the Compensation of Executive Officers — Option Exercises and Stock Vested section.
Canadian Special Award. In January 2016, the Compensation Committee approved a special cash-based long-term incentive plan for the Best Buy Canada executive team which was tied to the profitability of our Canadian business, specifically the level of Canadian operating income achieved during fiscal 2019. Prior to becoming the Company’s Chief Human Resources Officer in June 2017, Ms. Scarlett was the Senior Vice President of Retail and Chief Human Resources Officer for Best Buy Canada and was, therefore, eligible for a prorated payout under this award for her time in that role. Ms. Scarlett’s payout under this award is reflected in the Compensation of Executive Officers — Summary Compensation Table section.
Preview - Fiscal 2020 LTI Program Design. For fiscal 2020, the Committee aligned the mix of equity vehicles for Ms. Barry, Ms. Scarlett and Mr. Mohan with Mr. Joly’s mix.
Other Compensation
Benefits. Our executive officers, including our NEOs, are generally offered the same employee benefits offered to all U.S.-based officers, except as summarized in the following table:
Benefit | All Full-Time U.S.-Based Employees | Executive Officers | ||||
Accidental Death & Dismemberment | • | • | ||||
Deferred Compensation Plan(1) | • | |||||
Employee Discount | • | • | ||||
Employee Stock Purchase Plan | • | • | ||||
Health Insurance | • | • | ||||
— Executive Physical Exam | • | |||||
Life Insurance | • | • | ||||
Long-Term Disability | • | • | ||||
— Executive Long-Term Disability | • | |||||
Retirement Savings Plan | • | • | ||||
Severance Plan | • | • | ||||
Short-Term Disability | • | • | ||||
Tax Planning and Preparation(2) | • |
(1) | Only officers and directors are eligible to participate in the |
(2) | Only Senior Vice Presidents and above are eligible to receive the |
58 | 2019 Proxy Statement |
We provide the executive benefits noted above to compete for executive talent and to promote the health, well-being and financial security of our NEOs. A description of executive benefits, and the costs associated with providing them for the NEOs, are reflected in the “All Other Compensation” column of the Summary Compensation Table as found in the Compensation of Executive Officers section of this proxy statement.
Private Jet Use Policy. In June 2018, the Audit Committee adopted a Private Jet Use Policy governing the use of private jet services by the CEO. Under the policy, only the CEO is allowed to request private jet services for business or personal travel. When requesting the jet for personal travel, the policy dictates that Mr. Joly pay the jet provider directly for those services. For flights that will be for both business and personal purposes, Mr. Joly is to reimburse the Company for any amounts that do not qualify as business expense, up to any limitations imposed by the Federal Aviation Administration.
Severance Plan. We have a severance plan that complies with the applicable provisions of the Employee Retirement Income Security Act (“ERISA”). The purpose of the severance plan is to provide financial assistance to employees while they seek other employment, in exchange for a release of any claims. Although there are differences in benefits depending on the employee’s job level, the basic elements of the plan are comparable for all eligible employees. The plan generally covers all full-time and part-time U.S. employees of Best Buy Co., Inc. and Best Buy Stores, L.P. and their respective direct and indirect U.S.-domiciled subsidiaries, including the NEOs, except for those subject to a separate severance agreement or specifically excluded.
The plan covers involuntary terminations due to job elimination and discontinuation, office closing, reduction in force, business restructuring and other circumstances as we determine. Eligible terminated employees receive a severance payment based on their role and time with the Company, with basic employee benefits such as medical, dental and life insurance continued for an equivalent period. Except as modified or replaced by individual employment agreements, the NEOs (other than Mr. Joly and Ms. Barry who currently have employment agreements) are eligible for the following severance benefits: Mses. Ballard and Scarlett and Messrs. Mohan and Nelsen, at an enterprise executive vice president level, are eligible for two years of salary, a payment of $25,000 in lieu of outplacement and other tax and financial planning assistance, and a payment of 150% of the cost of 24 months of basic employee benefits such as medical, dental and life insurance.
See Compensation of Executive Officers - Potential Payments Upon Termination or Change-of-Control for more information regarding potential payments following an involuntary termination and for the severance provisions of Mr. Joly’s and Ms. Barry’s employment agreements. Upon her departure, Ms. Ballard did not receive any severance payments.
Executive Stock Ownership Guidelines. The Compensation Committee has established stock ownership guidelines to promote the alignment of officer and shareholder interests and to encourage behaviors that have a positive influence on stock price appreciation and total shareholder return. Under the guidelines, we expect our NEOs to acquire ownership of a fixed number of shares, based on their positions. The stock ownership expectation generally remains effective for as long as the officer holds the position.
In addition to shares personally owned by each officer, the following forms of stock ownership count toward the ownership target:
We require that until the ownership target is met, NEOs will retain: (i) 50% of the net proceeds received from the exercise of a stock option in the form of Best Buy common stock; (ii) 50% of vested time-based restricted shares (net of taxes); and (iii) 50% of all performance share awards (net of taxes) issued. The ownership target does not need to be met within a certain time frame, and our NEOs are considered in compliance with the guidelines as long as progress towards the ownership target is being made consistent with the expectations noted above.
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In fiscal 2019, all NEOs were in compliance with the ownership guidelines. The ownership targets and ownership levels as of the end of fiscal 2019 for our continuing NEOs are shown below.
Name | Ownership Target (in shares) | Ownership as of Fiscal 2019 Year-End Using Guidelines (in shares) | ||||
Mr. Joly | 200,000 | 800,660 | ||||
Ms. Barry | 55,000 | 101,729 | ||||
Mr. Mohan | 55,000 | 99,340 | ||||
Mr. Nelsen | 35,000 | 80,522 | ||||
Ms. Scarlett | 35,000 | 23,538 |
Tax Deductibility of Compensation. Until recently, Section 162(m) of the Internal Revenue Code (“Section 162(m)”) has limited the deductibility of compensation in excess of $1 million paid to the chief executive officer and each of our three most highly compensated executive officers (other than the chief financial officer), unless the compensation qualifies as “performance-based compensation.” The Tax Cuts and Jobs Act of 2017 amended Section 162(m) with respect to fiscal years beginning after December 31, 2017 to remove the performance-based compensation exception and expand the scope of Section 162(m) to apply to our chief financial officer and certain other NEOs, other than in the case of certain arrangements in place as of November 2, 2017, which qualify for transition relief. The Committee has historically attempted to structure its compensation arrangements to achieve deductibility under Section 162(m) of the Internal Revenue Code, unless the benefit of such deductibility was considered by the Committee to be outweighed by the need for flexibility or the attainment of other objectives. As was the case prior to the enactment of the Tax Cuts and Jobs Act, the Committee will continue to monitor issues concerning the deductibility of executive compensation. We do not, however, make compensation decisions based solely on the availability of a deduction under Section 162(m). Accordingly, we expect that at least a portion of the compensation paid to our NEOs in excess of $1 million per officer will be non-deductible.
For purposes of Section 162(m), we created a sub-plan under our Amended & Restated 2014 Omnibus Incentive Plan for our fiscal year ended February 2, 2019. The sub-plan sets the maximum award pool for the CEO and five other NEOs (excluding the CFO) at 7 percent of adjusted net earnings to align compensation with shareholder interests. The maximum potential individual allocations from that pool were set at 2 percent for the CEO and 1 percent for each of the three other NEOs (excluding the CFO). The Committee then used negative discretion to reduce the amounts that were potentially payable under the sub-plan award pool to equal amounts based on achievement of STI plan metrics.
Clawback and Restrictive Covenant Provisions. All STI and LTI awards granted to our NEOs are subject to our clawback policy. The triggers for potential recoupment of such awards include breach of the restrictive covenants in our long-term incentive award agreements, breach of our Code of Business Ethics, and issuance of a financial restatement as a result of fraud or misconduct. We also include confidentiality, non-compete, non-solicitation and, in select situations, non-disparagement provisions in our long-term incentive award agreements.
Prohibition on Hedging and Pledging Company Securities. We prohibit all employees, including NEOs, and members of the Board from hedging Company securities, including by way of forward contracts, equity swaps, collars, exchange funds or otherwise. In addition, our executive officers and Board members are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan.
Compensation and Human Resources Committee Report on Executive Compensation
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, and in this proxy statement.
COMPENSATION AND HUMAN RESOURCES COMMITTEE
Russell P. Fradin (Chair)
Lisa M. Caputo
J. Patrick Doyle
Kathy J. Higgins Victor
60 | 2019 Proxy Statement |
Compensation and Human Resources Committee Interlocks and Insider Participation
The Compensation Committee is comprised entirely of independent directors. At no time during fiscal 2019 was any member of the Compensation Committee a current or former officer or employee of the Company or any of its subsidiaries. During fiscal 2019, no member of the Compensation Committee had a relationship that must be described pursuant to SEC disclosure rules on related party transactions. In fiscal 2019, none of our executive officers served on the board of directors or compensation committee of another company that had one or more executive officers serving on our Board or Compensation Committee.
2019 Proxy Statement | 61 |
Compensation of Executive Officers
The table below summarizes the total compensation earned by each of our NEOs during fiscal 2019 and the two preceding fiscal years (if applicable).
Name and Principal Position | Year | Salary(1) | Stock Awards(2)(3) | Option Awards(2) | Non-Equity Incentive Plan Compensation(4) | All Other Compensation(5) | Total | ||||||||||||||
Hubert Joly(7) Chairman and Chief Executive Officer | 2019 | $ | 1,275,000 | $ | 9,391,513 | $ | 2,267,826 | $ | 4,240,650 | $ | 207,497 | $ | 17,382,486 | ||||||||
2018 | 1,286,058 | 8,644,644 | 2,198,462 | 4,602,983 | 81,558 | (6) | 16,813,704 | ||||||||||||||
2017 | 1,175,000 | 7,689,879 | 1,800,076 | 2,878,750 | 494,275 | 14,037,980 | |||||||||||||||
Corie S. Barry Chief Financial Officer and Strategic Transformation Officer | 2019 | 834,615 | 2,997,563 | — | 2,078,750 | 8,752 | 5,919,680 | ||||||||||||||
2018 | 764,423 | 2,008,397 | — | 2,057,625 | 8,203 | 4,838,648 | |||||||||||||||
2017 | 713,462 | 1,689,495 | — | 1,184,167 | 14,893 | 3,602,017 | |||||||||||||||
R. Michael Mohan Chief Operating Officer, Best Buy U.S. | 2019 | 892,308 | 3,547,097 | — | 2,224,262 | 30,098 | 6,693,765 | ||||||||||||||
2018 | 866,346 | 3,012,512 | — | 2,331,975 | 22,907 | 6,233,740 | |||||||||||||||
2017 | 833,654 | 2,895,073 | — | 1,531,251 | 55,284 | 5,315,262 | |||||||||||||||
Keith J. Nelsen(8) General Counsel and Secretary (Former) | 2019 | 740,769 | 1,651,340 | — | 1,230,620 | 34,602 | 3,657,331 | ||||||||||||||
2018 | 697,885 | 1,656,905 | — | 1,249,817 | 22,507 | 3,627,114 | |||||||||||||||
2017 | 650,000 | 1,592,960 | — | 796,250 | 68,761 | 3,107,971 | |||||||||||||||
Kamy Scarlett Chief Human Resources Officer and President, U.S Retail Stores | 2019 | 684,615 | 899,283 | 1,009,116 | 1,444,451 | 165,029 | 4,202,494 | ||||||||||||||
Shari L. Ballard(9) President, Multi-Channel Retail (Former) | 2019 | 892,308 | 3,547,097 | — | 2,224,262 | 41,430 | 6,705,097 | ||||||||||||||
2018 | 859,616 | 3,012,512 | — | 2,309,113 | 24,367 | 6,205,608 | |||||||||||||||
2017 | 800,000 | 1,930,865 | — | 1,470,000 | 62,737 | 4,263,602 |
(1) | These amounts reflect actual earnings based on |
(2) | These amounts reflect the aggregate grant date fair value for stock-based awards granted to our |
62 | 2019 Proxy Statement |
(3) | The fiscal |
Name | Target Performance Grant (in Shares) | Probable Grant Date Fair Value of Performance Grant (as reflected in Stock Awards Column) | Maximum Performance Grant (in Shares) | Maximum Grant Date Fair Value of Performance Grant | ||||||
Mr. Joly | 80,950 | $ | 5,866,507 | 121,425 | $8,799,760 | |||||
Ms. Barry | 20,517 | 1,497,554 | 30,776 | 2,246,331 | ||||||
Mr. Mohan | 24,278 | 1,772,074 | 36,417 | 2,658,110 | ||||||
Mr. Nelsen | 11,321 | 826,296 | 16,982 | 1,239,444 | ||||||
Ms. Scarlett | 6,155 | 449,259 | 9,233 | 673,888 | ||||||
Ms. Ballard | 24,278 | 1,772,074 | 36,417 | 2,658,110 |
* | Multiple performance share awards for each NEO have been aggregated in the table above. For additional detail, see the Grants of Plan-Based Awards section. |
(4) | These amounts reflect STI payments made for all fiscal years shown, except for Ms. Scarlett’s fiscal 2019 amount which includes her fiscal 2019 STI payment ($1,153,706) as well as her Canadian special award payment ($290,745*). The fiscal 2019 STI plan is described in the section Compensation Discussion and Analysis – Executive Compensation Elements – Short-Term Incentive. The Canadian special award relative to Ms. Scarlett is described in the section Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive. |
* | Ms. Scarlett’s Canadian special award payment is reflected in USD using a rate of 1.3095 CAD per USD, which was |
(5) | The fiscal 2019 amounts reflected in this column include All Other Compensation as described in the following table: |
Name | Retirement Plan Contribution(a) | Life Insurance Premiums(b) | Other | Total | ||||||||
Mr. Joly | $ | 11,000 | $ | 492 | $ | 196,005 | (c) | $ | 207,497 | |||
Ms. Barry | 8,260 | 492 | — | (d) | 8,752 | |||||||
Mr. Mohan | 11,154 | 492 | 18,452 | (e) | 30,098 | |||||||
Mr. Nelsen | 10,077 | 492 | 24,033 | (f) | 34,602 | |||||||
Ms. Scarlett | 11,615 | 345 | 153,069 | (g) | 165,029 | |||||||
Ms. Ballard | 11,481 | 492 | 29,457 | (h) | 41,430 |
(a) | These amounts reflect our matching contributions to the NEOs’ Retirement Savings Plan accounts. |
(b) | These amounts reflect premiums paid by us for group term life insurance coverage. |
(c) | The amount reflects premiums paid by us for supplemental executive long-term disability insurance ($63,215), the cost of an executive physical and the incremental cost of Mr. Joly’s use of private jet services for travel to outside board meetings ($129,763). The Company considers travel to outside board meetings to be business-related as part of Mr. Joly’s professional development as determined by our Board, and therefore, Mr. Joly is not required to reimburse the Company for those flights. Nevertheless, the incremental cost to the Company of those flights is being reported here and includes the lease cost and other variable charges. |
(d) | Any perquisites and other benefits provided to Ms. Barry for fiscal 2019 were less than $10,000 and information regarding any such perquisites or other personal benefits has therefore not been included. |
(e) | The amount reflects premiums paid by us for supplemental executive long-term disability insurance ($16,512) and company-paid tax preparation and planning services ($1,940). |
(f) | The amount reflects premiums paid by us for supplemental executive long-term disability insurance ($20,000) and the cost of an executive physical ($4,033). |
(g) | The amount reflects premiums paid by us for supplemental executive long-term disability insurance and benefits provided as part of Ms. Scarlett’s relocation from Canada to the United States, including company-paid estate planning services, tax gross-ups on |
(h) | The |
(6) | Mr. Joly’s “All Other Compensation” total for fiscal 2018 has been amended to include the incremental cost of Mr. Joly’s use of private jet services for travel to outside board meetings in fiscal 2018 ($53,251), which had been inadvertently excluded. |
(7) | On June 11, 2019, Mr. Joly will step down from his role as |
2019 Proxy Statement | 63 |
(8) | On April 12, 2019, Mr. Nelsen stepped down from his role as General Counsel and Secretary and transitioned into an advisory capacity with the Company. |
(9) | During fiscal 2019, Ms. Ballard stepped down from her role as President, Multi-Channel Retail and transitioned into an advisory capacity with the Company. | ||
The table below summarizes the grants made to each of our NEOs during fiscal 2019 under the 2014 Omnibus Incentive Plan and the Short-Term Incentive Plan:
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||
Mr. Joly(3) | — | $ | 510,000 | $ | 2,550,000 | $ | 5,100,000 | — | — | — | — | $ | — | $ | — | |||||||||||||||
3/12/2018 | (4) | — | — | — | — | — | — | 103,981 | 71.52 | 2,267,826 | ||||||||||||||||||||
3/12/2018 | (5) | — | — | — | — | 49,287 | 49,287 | — | — | 3,525,006 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 19,939 | 39,877 | 59,816 | — | — | 2,928,966 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 20,537 | 41,073 | 61,610 | — | — | 2,937,541 | ||||||||||||||||||||
Ms. Barry | — | 250,000 | 1,250,000 | 2,500,000 | — | — | — | — | — | — | ||||||||||||||||||||
3/12/2018 | (8) | — | — | — | — | 20,819 | 20,819 | — | — | 1,500,009 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 5,054 | 10,107 | 15,161 | — | — | 747,514 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 5,205 | 10,410 | 15,615 | — | — | 750,041 | ||||||||||||||||||||
Mr. Mohan | — | 267,000 | 1,337,500 | 2,675,000 | — | — | — | — | — | — | ||||||||||||||||||||
3/12/2018 | (8) | — | — | — | — | 24,636 | 24,636 | — | — | 1,775,024 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 5,980 | 11,960 | 17,940 | — | — | 884,562 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 6,159 | 12,318 | 18,477 | — | — | 887,512 | ||||||||||||||||||||
Mr. Nelsen | — | 148,000 | 740,000 | 1,480,000 | — | — | — | — | — | — | ||||||||||||||||||||
3/12/2018 | (8) | — | — | — | — | 11,451 | 11,451 | — | — | 825,045 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 2,780 | 5,559 | 8,339 | — | — | 411,144 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 2,881 | 5,762 | 8,643 | — | — | 415,152 | ||||||||||||||||||||
Ms. Scarlett | — | 138,750 | 693,750 | 1,387,500 | — | — | — | — | — | — | ||||||||||||||||||||
3/12/2018 | (8) | — | — | — | — | 6,246 | 6,246 | — | — | 450,024 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 1,516 | 3,032 | 4,548 | — | — | 224,247 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 1,562 | 3,123 | 4,685 | — | — | 225,012 | ||||||||||||||||||||
1/24/2019 | (9) | — | — | — | — | — | — | 57,109 | 57.60 | 1,009,116 | ||||||||||||||||||||
Ms. Ballard | — | 267,500 | 1,337,500 | 2,675,000 | — | — | — | — | — | — | ||||||||||||||||||||
3/12/2018 | (8) | — | — | — | — | 24,636 | 24,636 | — | — | 1,775,024 | ||||||||||||||||||||
3/12/2018 | (6) | — | — | — | 5,980 | 11,960 | 17,940 | — | — | 884,562 | ||||||||||||||||||||
3/12/2018 | (7) | — | — | — | 6,159 | 12,318 | 18,477 | — | — | 887,512 |
(1) | These amounts reflect the potential threshold, target and maximum payout for each NEO under our fiscal 2019 STI, which is described in greater detail under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Short-Term Incentive. The |
(2) | These amounts reflect the aggregate grant date fair value, measured in accordance with ASC Topic 718. The amounts reported have not been adjusted to eliminate service-based forfeiture assumptions. The other assumptions used in calculating these amounts are set forth in Note 7, Shareholders’ Equity, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019. The value reflected for any performance-conditioned award is the value at the grant date based upon the probable outcome of the award – see footnote (3) to the Summary Compensation Table. |
(3) | Mr. Joly will meet the age and service conditions for qualified retirement, as defined in our award agreements, in August 2019, prior to the second scheduled vesting of his fiscal 2019 time-based awards and prior to the end of the performance period for his fiscal 2019 performance share awards. The effect of qualified retirement on all of our |
(4) | The amounts reflect nonqualified stock options, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, that have a term of ten years and become exercisable in three equal installments of one-third on each of the first three anniversaries of the grant date provided the NEO has been continually employed with us through those dates. The option exercise price is equal to the closing price of our common stock on the grant date, |
(5) | The amounts reflect performance-conditioned time-based restricted stock units, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, which will vest in three equal installments of one-third on each of |
64 | 2019 Proxy Statement |
the first three anniversaries of the grant date, provided the NEO has been continually employed with us through those dates and provided that we have achieved positive “adjusted net earnings” as of the end of any fiscal year during the three-year term of the award. The NEO is also entitled to an accrual of dividend equivalents, equal to the cash amount that would have been payable on the number of restricted stock units held by them as of the close of business on the record date for each declared divided, which shall be credited to them as the equivalent amount of shares that could have been purchased as of the close of business on the dividend payment date. The accrued dividend equivalents will be payable when the restricted stock units on which such dividend equivalents were credited have become earned, vested and payable.
(6) | The amounts reflect performance share awards, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, that, if earned, will vest at or between the threshold (50% of target) and maximum (150% of target) levels depending on the performance of our stock’s total shareholder return, relative to |
(7) | The amounts reflect performance share awards, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, that, if earned, will vest at or between the threshold (50% of target) and maximum (150% of target) levels depending on the compound annual growth rate of our enterprise revenue, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. The NEO is also entitled to an accrual of dividend equivalents, equal to the cash amount that would have been payable on the number of performance shares held by them as of the close of business on the record date for each declared divided, which shall be credited to them as the equivalent amount of shares that could have been purchased as of the close of business on the dividend payment date. The accrued dividend equivalents will be payable when the performance shares on which such dividend equivalents were credited have become earned, vested and payable. |
(8) | The amounts reflect performance-conditioned time-based restricted shares, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, which will vest in three equal installments of one-third on each of the first three anniversaries of the grant date, provided the NEO has been continually employed with us through those dates and provided that we have achieved positive “adjusted net earnings” as of the end of any fiscal year during the three-year term of the award. The NEO is also entitled to an accrual of dividend equivalents, equal to the cash amount that would have been payable on the number of restricted shares held by them as of the close of business on the record date for each declared divided, which shall be credited to them as the equivalent amount of shares that could have been purchased as of the close of business on the dividend payment date. The accrued dividend equivalents will be payable when the restricted shares on which such dividend equivalents were credited have become earned, vested and payable. |
(9) | The amounts reflect nonqualified stock options, as discussed under the heading Compensation Discussion and Analysis – Executive Compensation Elements – Long-Term Incentive, that have a term of ten years and become exercisable on the fourth anniversary of the grant date, provided the NEO has been continually employed with us through that date. The option exercise price is equal to the closing price of our common stock on the grant date, as quoted on the NYSE. |
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Outstanding Equity Awards at Fiscal Year-End
The following table provides a summary of the NEO’s equity-based awards outstanding as of the end of fiscal 2019:
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Grant Date(1) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | 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 ($)(2) | ||||||||||||||||||
Mr. Joly(3) | 3/13/2018 | 103,981 | (4) | $ | 71.52 | 3/12/2028 | 50,644 | (5) | $ | 2,961,155 | 21,037 | (6) | $ | 1,230,004 | |||||||||||||
3/13/2018 | 62,742 | (7) | 3,668,496 | ||||||||||||||||||||||||
3/13/2017 | 58,532 | 117,064 | (4) | 44.85 | 3/12/2027 | 50,889 | (8) | 2,975,480 | 97,277 | (9) | 5,687,757 | ||||||||||||||||
3/13/2017 | 98,342 | (10) | 5,750,028 | ||||||||||||||||||||||||
3/15/2016 | 149,260 | 74,630 | (4) | 31.79 | 3/14/2026 | 33,113 | (11) | 1,936,117 | 234,984 | (12) | 13,739,514 | ||||||||||||||||
3/12/2015 | 158,445 | 40.85 | 3/11/2025 | ||||||||||||||||||||||||
8/18/2014 | 183,990 | 29.91 | 8/17/2024 | ||||||||||||||||||||||||
4/16/2013 | 250,358 | 23.66 | 4/15/2023 | ||||||||||||||||||||||||
9/4/2012 | 350,468 | 18.02 | 9/3/2022 | ||||||||||||||||||||||||
Ms. Barry | 3/12/2018 | 21,393 | (13) | 1,250,849 | 5,334 | (14) | 311,850 | ||||||||||||||||||||
3/12/2018 | 15,903 | (15) | 929,848 | ||||||||||||||||||||||||
3/13/2017 | 15,780 | (16) | 922,657 | 18,099 | (9) | 1,058,249 | |||||||||||||||||||||
3/13/2017 | 18,297 | (10) | 1,069,826 | ||||||||||||||||||||||||
3/15/2016 | 9,658 | (11) | 564,703 | 41,123 | (12) | 2,404,433 | |||||||||||||||||||||
10/1/2015 | 33,253 | 37.16 | 9/30/2025 | ||||||||||||||||||||||||
3/12/2015 | 12,293 | 40.85 | 3/11/2025 | ||||||||||||||||||||||||
8/18/2014 | 14,730 | 29.91 | 8/17/2024 | ||||||||||||||||||||||||
6/19/2013 | 3,246 | 27.66 | 6/18/2023 | ||||||||||||||||||||||||
4/16/2013 | 3,243 | 23.66 | 4/15/2023 | ||||||||||||||||||||||||
1/21/2011 | 2,125 | 35.67 | 1/12/2021 | ||||||||||||||||||||||||
9/20/2010 | 2,125 | 38.32 | 9/20/2020 | ||||||||||||||||||||||||
6/23/2010 | 463 | 36.63 | 6/23/2020 | ||||||||||||||||||||||||
4/7/2010 | 523 | 44.20 | 4/7/2020 | ||||||||||||||||||||||||
1/13/2010 | 523 | 39.73 | 1/13/2020 | ||||||||||||||||||||||||
9/17/2009 | 523 | 37.59 | 9/17/2019 | ||||||||||||||||||||||||
Mr. Mohan | 3/12/2018 | 25,316 | (17) | 1,480,227 | 6,311 | (18) | 369,004 | ||||||||||||||||||||
3/12/2018 | 18,817 | (19) | 1,100,230 | ||||||||||||||||||||||||
3/13/2017 | 23,670 | (16) | 1,383,985 | 27,147 | (9) | 1,587,285 | |||||||||||||||||||||
3/13/2017 | 27,444 | (10) | 1,604,651 | ||||||||||||||||||||||||
5/24/2016 | 5,743 | (11) | 335,793 | 24,453 | (12) | 1,429,767 | |||||||||||||||||||||
3/15/2016 | 11,038 | (11) | 645,392 | 46,998 | (12) | 2,747,973 | |||||||||||||||||||||
Mr. Nelsen | 3/12/2018 | 11,769 | (20) | 688,133 | 2,936 | (21) | 171,639 | ||||||||||||||||||||
3/12/2018 | 8,749 | (22) | 511,554 | ||||||||||||||||||||||||
3/13/2017 | 13,018 | (16) | 761,162 | 14,931 | (9) | 873,016 | |||||||||||||||||||||
3/13/2017 | 15,095 | (10) | 882,575 | ||||||||||||||||||||||||
3/15/2016 | 9,106 | (11) | 532,428 | 38,774 | (12) | 2,267,087 | |||||||||||||||||||||
Ms. Scarlett | 1/24/2019 | 57,109 | (23) | 57.60 | 1/23/2029 | ||||||||||||||||||||||
3/12/2018 | 6,420 | (24) | 375,377 | 1,602 | (25) | 93,669 | |||||||||||||||||||||
3/12/2018 | 4,773 | (26) | 279,048 | ||||||||||||||||||||||||
6/1/2017 | 5,481 | (16) | 320,474 | 6,288 | (9) | 367,659 | |||||||||||||||||||||
6/1/2017 | 6,357 | (10) | 371,694 | ||||||||||||||||||||||||
3/13/2017 | 4,546 | (27) | 265,805 | 5,214 | (10) | 304,863 | |||||||||||||||||||||
3/14/2016 | 3,420 | (27) | 199,967 | 7,280 | (12) | 425,632 | |||||||||||||||||||||
3/12/2015 | 4,098 | 40.85 | 3/11/2025 | ||||||||||||||||||||||||
Ms. Ballard | 3/12/2018 | 25,316 | (17) | 1,480,227 | 6,311 | (18) | 369,004 | ||||||||||||||||||||
3/12/2018 | 18,817 | (19) | 1,100,230 | ||||||||||||||||||||||||
3/13/2017 | 23,670 | (16) | 1,383,985 | 27,147 | (9) | 1,587,285 | |||||||||||||||||||||
3/13/2017 | 27,444 | (10) | 1,604,651 | ||||||||||||||||||||||||
3/15/2016 | 11,038 | (11) | 645,392 | 46,998 | (12) | 2,747,973 |
(1) | For a better understanding of the equity-based awards included in this table, we have provided the grant date of each award. |
66 | 2019 Proxy Statement |
(2) | These amounts were determined based on the closing price of Best Buy common stock on the NYSE of $58.47 on February 1, 2019, the last trading day in fiscal 2019. |
(3) | Mr. Joly will meet the age and service conditions for qualified retirement, as defined in our award agreements, in August 2019, which is during the term of his fiscal 2018 and fiscal 2019 time-based awards and prior to the end of the performance period for his fiscal 2018 and fiscal 2019 performance share awards (see awards with March 13, 2017, and March 13, 2018, grant dates). The effect of qualified retirement on all of our outstanding equity awards is discussed in the Potential Payments Upon Termination or Change-of-Control section. |
(4) | The amount reflects nonqualified stock options that become exercisable over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided Mr. Joly has been continually employed with us through those dates. |
(5) | The amount reflects performance-conditioned time-based restricted stock units (49,287 restricted stock units remaining from the original grant and 1,357 restricted stock units accrued as dividend equivalents) that vest over a three-year period at the rate of |
(6) | The amount reflects an outstanding performance share award assuming a threshold payout (50% of the target grant,
|
(7) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the |
(8) | The amount reflects performance-conditioned time-based restricted 2018. |
Name | Ownership Target (in shares) | Ownership as of Fiscal 2016 Year-End Using Guidelines (in shares) | ||
Mr. Joly | 200,000 | 792,194 | ||
Ms. McCollam | 55,000 | 387,814 | ||
Ms. Ballard | 55,000 | 76,353 | ||
Mr. Mohan | 55,000 | 120,982 | ||
Mr. Nelsen | 35,000 | 35,528 |
(9) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the |
(10) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant). The number of shares ultimately earned will be based on the compound annual growth rate of our enterprise revenue, over the 36-month period commencing on January 29, 2017, and |
(11) | The amount reflects performance-conditioned time-based restricted shares that vest over a
|
(12) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant). The number of shares ultimately earned will be based on the performance of our stock’s total shareholder return, relative to the S&P 500 Index, over the 36-month period commencing on March 1, 2016, and ending on February 28, 2019. As of the end of fiscal 2019, performance was at the maximum payout level for these shares. |
(13) | The amount reflects performance-conditioned time-based restricted shares (20,819 restricted shares remaining from the original grant and 574 restricted shares accrued as dividend equivalents) that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided Ms. Barry has been continually employed with us through those dates and provided that we have achieved the Performance Condition. The Performance Condition was achieved as of the end of fiscal 2019. |
(14) | The amount reflects an outstanding performance share award assuming a threshold payout (50% of the target grant, or 5,053 shares) plus accrued dividend equivalents as of fiscal year-end (280 shares). The number of shares ultimately earned will be based on the performance of our stock’s total shareholder return, relative to the S&P 500 Index, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was below the threshold payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(15) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant, or 15,615 shares) plus accrued dividend equivalents as of fiscal year-end (288 shares). The number of shares ultimately earned will be based on the compound annual growth rate of our enterprise revenue, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was at the maximum payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(16) | The amount reflects performance-conditioned time-based restricted shares that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided the NEO has been continually employed with us through those dates and provided that we have achieved the Performance Condition. The Performance Condition was achieved as of the end of fiscal 2018. |
(17) | The amount reflects performance-conditioned time-based restricted shares (24,636 restricted shares remaining from the original grant and 680 restricted shares accrued as dividend equivalents) that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided the NEO has been continually employed with us through those dates and provided that we have achieved the Performance Condition. The Performance Condition was achieved as of the end of fiscal 2019. |
(18) | The amount reflects an outstanding performance share award assuming a threshold payout (50% of the target grant, or 5,980 shares) plus accrued dividend equivalents as of fiscal year-end (331 shares). The number of shares ultimately earned will be based on the performance of our stock’s total shareholder return, relative to the S&P 500 Index, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was below the threshold payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(19) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant, or 18,477 shares) plus accrued dividend equivalents as of fiscal year-end (340 shares). The number of shares ultimately earned will be based on the compound |
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Grant Date(1) | 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 ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | |||||||||||||||
Mr. Joly | 3/12/2015 | 158,445(3) | $ | 40.85 | 3/11/2025 | 77,142(4) | $ | 2,154,576 | 59,187(5) | $ | 1,653,093 | |||||||||||||
8/18/2014 | 61,330(3) | 122,660(3) | 29.91 | 8/17/2024 | 61,588(4) | 1,720,153 | 149,257(6) | 4,168,748 | ||||||||||||||||
4/16/2013 | 166,905(3) | 83,453(3) | 23.66 | 4/15/2023 | 43,554(4) | 1,216,463 | 290,376(7) | 8,110,202 | ||||||||||||||||
9/4/2012 | 350,468(8) | 18.02 | 9/3/2022 | |||||||||||||||||||||
Ms. McCollam | 3/12/2015 | 120,154(3) | 40.85 | 3/11/2025 | 39,000(4) | 1,089,270 | 17,954(5) | 501,455 | ||||||||||||||||
8/18/2014 | 47,311(3) | 94,623(3) | 29.91 | 8/17/2024 | 31,674(4) | 884,655 | 46,056(6) | 1,286,344 | ||||||||||||||||
4/16/2013 | 128,755(3) | 64,378(3) | 23.66 | 4/15/2023 | 22,400(4) | 625,632 | 89,603(7) | 2,502,612 | ||||||||||||||||
12/10/2012 | 383,142(3) | 12.39 | 12/9/2022 | |||||||||||||||||||||
Ms. Ballard | 3/12/2015 | 105,630(3) | 40.85 | 3/11/2025 | 34,286(4) | 957,608 | 15,783(5) | 440,819 | ||||||||||||||||
8/18/2014 | 28,036(3) | 14,018(3) | 29.91 | 8/17/2024 | 9,385(4) | 262,123 | 13,646(6) | 381,133 | ||||||||||||||||
4/16/2013 | 38,150(3) | 19,075(3) | 23.66 | 4/15/2023 | 6,637(4) | 185,372 | 26,549(7) | 741,514 | ||||||||||||||||
1/16/2013 | 11,084(3) | 14.67 | 1/15/2023 | |||||||||||||||||||||
9/19/2012 | 11,084(3) | 17.94 | 9/18/2022 | |||||||||||||||||||||
6/20/2012 | 11,084(3) | 20.31 | 6/19/2022 | |||||||||||||||||||||
4/18/2012 | 8,334(3) | 22.06 | 4/17/2022 | |||||||||||||||||||||
2/1/2012 | 11,250(9) | 3,750(9) | 24.18 | 1/31/2022 | 417(10) | 11,647 | ||||||||||||||||||
9/21/2011 | 15,000(9) | 24.12 | 9/20/2021 | |||||||||||||||||||||
6/20/2011 | 15,000(9) | 31.54 | 6/19/2021 | |||||||||||||||||||||
4/6/2011 | 20,000(9) | 29.75 | 4/5/2021 | |||||||||||||||||||||
1/12/2011 | 20,000(9) | 35.67 | 1/11/2021 | |||||||||||||||||||||
9/20/2010 | 20,000(9) | 38.32 | 9/19/2020 | |||||||||||||||||||||
6/23/2010 | 16,563(9) | 36.63 | 6/22/2020 | |||||||||||||||||||||
4/7/2010 | 16,563(9) | 44.20 | 4/6/2020 | |||||||||||||||||||||
1/13/2010 | 16,563(9) | 39.73 | 1/12/2020 | |||||||||||||||||||||
9/17/2009 | 16,563(9) | 37.59 | 9/16/2019 | |||||||||||||||||||||
6/23/2009 | 33,125(9) | 32.98 | 6/22/2019 | |||||||||||||||||||||
10/31/2008 | 66,250(9) | 26.88 | 10/30/2018 | |||||||||||||||||||||
10/18/2007 | 66,200(9) | 47.84 | 10/17/2017 | |||||||||||||||||||||
10/23/2006 | 66,200(9) | 55.46 | 10/22/2016 | |||||||||||||||||||||
Mr. Mohan | 3/12/2015 | 52,815(3) | 40.85 | 3/11/2025 | 15,783(4) | 440,819 | 7,892(5) | 220,424 | ||||||||||||||||
8/18/2014 | 20,443(3) | 40,886(3) | 29.91 | 8/17/2024 | 13,686(4) | 382,250 | 19,901(6) | 555,835 | ||||||||||||||||
3/12/2014 | 15,128(3) | 30,257(3) | 25.74 | 3/11/2024 | 10,527(4) | 294,019 | ||||||||||||||||||
4/16/2013 | 31,791(3) | 15,896(3) | 23.66 | 4/15/2023 | 5,531(4) | 154,481 | 22,124(7) | 617,923 | ||||||||||||||||
3/11/2013 | 19,970(3) | 35,330(3) | 20.08 | 3/10/2023 | 11,514(4) | 321,586 | ||||||||||||||||||
1/16/2013 | 1,330(3) | 14.67 | 1/15/2023 | |||||||||||||||||||||
9/19/2012 | 1,330(3) | 17.94 | 9/18/2022 | |||||||||||||||||||||
4/18/2012 | 3,000(3) | 22.06 | 4/17/2022 | |||||||||||||||||||||
2/1/2012 | 3,750(9) | 1,250(9) | 24.18 | 1/31/2022 | ||||||||||||||||||||
9/21/2011 | 5,000(9) | 24.12 | 9/20/2021 | |||||||||||||||||||||
6/20/2011 | 5,000(9) | 31.54 | 6/19/2021 | |||||||||||||||||||||
4/6/2011 | 5,000(9) | 29.75 | 4/5/2021 | |||||||||||||||||||||
1/12/2011 | 5,000(9) | 35.67 | 1/11/2021 | |||||||||||||||||||||
9/20/2010 | 5,000(9) | 38.32 | 9/19/2020 | |||||||||||||||||||||
6/23/2010 | 5,000(9) | 36.63 | 6/22/2020 | |||||||||||||||||||||
4/7/2010 | 6,250(9) | 44.20 | 4/6/2020 | |||||||||||||||||||||
1/13/2010 | 6,250(9) | 39.73 | 1/12/2020 | |||||||||||||||||||||
9/17/2009 | 6,250(9) | 37.59 | 9/16/2019 | |||||||||||||||||||||
6/23/2009 | 12,500(9) | 32.98 | 6/22/2019 | |||||||||||||||||||||
10/31/2008 | 18,333(9) | 26.88 | 10/30/2018 | |||||||||||||||||||||
8/5/2008 | 20,000(9) | 41.19 | 8/4/2018 | |||||||||||||||||||||
10/18/2007 | 4,878(9) | 47.84 | 10/17/2017 | |||||||||||||||||||||
10/23/2006 | 5,025(9) | 55.46 | 10/22/2016 | |||||||||||||||||||||
2019 Proxy Statement | 67 |
annual growth rate of our enterprise revenue, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was at the maximum payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance.
(20) | The amount reflects performance-conditioned time-based restricted shares (11,451 restricted shares remaining from the original grant and 318 restricted shares accrued as dividend equivalents) that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided Mr. Nelsen has been continually employed with us through those dates and provided that we have achieved the Performance Condition. The Performance Condition was achieved as of the end of fiscal 2019. |
(21) | The amount reflects an outstanding performance share award assuming a threshold payout (50% of the target grant, or 2,780 shares) plus accrued dividend equivalents as of fiscal year-end (156 shares). The number of shares ultimately earned will be based on the performance of our stock’s total shareholder return, relative to the S&P 500 Index, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was below the threshold payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(22) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant, or 8,589 shares) plus accrued dividend equivalents as of fiscal year-end (160 shares). The number of shares ultimately earned will be based on the compound annual growth rate of our enterprise revenue, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was at the maximum payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(23) | The amount represents nonqualified stock options that will become exercisable on the fourth anniversary of the grant date, provided Ms. Scarlett has been continually employed with us through that date. |
(24) | The amount reflects performance-conditioned time-based restricted shares (6,246 restricted shares remaining from the original grant and 174 restricted shares accrued as dividend equivalents) that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided Ms. Scarlett has been continually employed with us through those dates and provided that we have achieved the Performance Condition. The Performance Condition was achieved as of the end of fiscal 2019. |
(25) | The amount reflects an outstanding performance share award assuming a threshold payout (50% of the target grant, or 1,516 shares) plus accrued dividend equivalents as of fiscal year-end (86 shares). The number of shares ultimately earned will be based on the performance of our stock’s total shareholder return, relative to the S&P 500 Index, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was below the threshold payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(26) | The amount reflects an outstanding performance share award assuming a maximum payout (150% of the target grant, or 4,684 shares) plus accrued dividend equivalents as of fiscal year-end (88 shares). The number of shares ultimately earned will be based on the compound annual growth rate of our enterprise revenue, over the 36-month period commencing on February 4, 2018, and ending on January 30, 2021. As of the end of fiscal 2019, performance was at the maximum payout level for these shares. Dividend equivalent shares accrue assuming a target payout and are adjusted and issued at the end of the performance period based on actual performance. |
(27) | The amount reflects time-based restricted stock units that vest over a three-year period at the rate of one-third per year, beginning one year from the grant date, provided Ms. Scarlett has been continually employed with us through those dates. |
Option Exercises and Stock Vested
The table below provides a summary of the value realized in connection with stock option awards exercised and stock awards vested for our NEOs during fiscal 2019.
Name | Option Awards | Stock Awards | |||||||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | ||||||||||||
Mr. Joly | — | $ | — | 261,832 | (3) | $ | 18,780,319 | ||||||||
Ms. Barry | 3,700 | (4) | 129,093 | 45,775 | (5) | 3,327,187 | |||||||||
Mr. Mohan | 38,048 | (6) | 1,332,746 | 58,006 | (7) | 4,142,724 | |||||||||
Mr. Nelsen | 14,524 | (8) | 573,442 | 39,863 | (9) | 2,849,101 | |||||||||
Ms. Scarlett | — | — | 15,842 | (10) | 1,098,151 | ||||||||||
Ms. Ballard | 35,210 | (11) | 995,355 | 81,653 | (12) | 5,853,094 |
(1) | Value based on market value of Best Buy common stock at the time of exercise, minus the exercise cost. |
(2) | Value based on the closing market price of Best Buy common stock on the vesting date. |
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Grant Date(1) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | 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 ($)(2) | |||||||||||||||
Mr. Nelsen | 3/12/2015 | 43,572(3) | 40.85 | 3/11/2025 | 14,143(4) | $ | 395,014 | 6,511(5) | $ | 181,852 | ||||||||||||||
8/18/2014 | 15,186(3) | 30,373(3) | 29.91 | 8/17/2024 | 10,167(4) | 283,964 | 14,783(6) | 412,889 | ||||||||||||||||
4/16/2013 | 41,328(3) | 20,665(3) | 23.66 | 4/15/2023 | 7,190(4) | 200,817 | 28,761(7) | 803,295 | ||||||||||||||||
1/16/2013 | 3,325(3) | 14.67 | 1/15/2023 | |||||||||||||||||||||
9/19/2012 | 3,325(3) | 17.94 | 9/18/2022 | |||||||||||||||||||||
2/1/2012 | 7,031(9) | 2,344(9) | 24.18 | 1/31/2022 | 261(10) | 7,290 | ||||||||||||||||||
9/21/2011 | 6,875(9) | 24.12 | 9/20/2021 | |||||||||||||||||||||
6/20/2011 | 9,375(9) | 31.54 | 6/19/2021 | |||||||||||||||||||||
4/6/2011 | 5,000(9) | 29.75 | 4/5/2021 | |||||||||||||||||||||
1/12/2011 | 5,000(9) | 35.67 | 1/11/2021 | |||||||||||||||||||||
9/20/2010 | 5,000(9) | 38.32 | 9/19/2020 | |||||||||||||||||||||
6/23/2010 | 5,000(9) | 36.63 | 6/22/2020 | |||||||||||||||||||||
4/7/2010 | 5,250(9) | 44.20 | 4/6/2020 | |||||||||||||||||||||
1/13/2010 | 5,250(9) | 39.73 | 1/12/2020 | |||||||||||||||||||||
9/17/2009 | 5,250(9) | 37.59 | 9/16/2019 | |||||||||||||||||||||
6/23/2009 | 10,500(9) | 32.98 | 6/22/2019 | |||||||||||||||||||||
10/31/2008 | 10,000(9) | 26.88 | 10/30/2018 | |||||||||||||||||||||
8/5/2008 | 20,000(9) | 41.19 | 8/4/2018 | |||||||||||||||||||||
10/18/2007 | 4,403(9) | 47.84 | 10/17/2017 | |||||||||||||||||||||
2/21/2007 | 13,000(9) | 50.39 | 2/20/2017 |
Option Awards | Stock Awards | ||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | |||||||||
Mr. Joly | — | $ | — | 499,688(3) | $ | 18,238,473 | |||||||
Ms. McCollam | — | — | 317,756(4) | 11,460,330 | |||||||||
Ms. Ballard | — | — | 60,203(5) | 2,143,230 | |||||||||
Mr. Mohan | 30,000(6) | 557,658 | 92,857(7) | 3,455,950 | |||||||||
Mr. Nelsen | 14,975(8) | 277,491 | 52,066(9) | 1,244,973 |
(3) | The amount represents: |