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

SCHEDULE 14A

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

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ETHAN ALLEN INTERIORS INC.

Ethan Allen Drive
Danbury, Connecticut 06811

October 8, 20144, 2016

Dear Stockholder:Fellow Stockholders:

You are cordially invited to attend the 2014Ethan Allen Interiors Inc. 2016 Annual Meeting of stockholders of Ethan Allen Interiors Inc.Stockholders. This meeting will be held at 10 a.m. on Wednesday, November 16, 2016, at the Ethan Allen International Corporate Headquarters on Ethan Allen Drive in Danbury, Connecticut 06811 at 10:00 A.M., local time, on Tuesday, November 18, 2014.Connecticut.

I am pleased to advise you that we continue to review our organizational documents and proactively update them to a current level of governance best practices. In connection withpreparation for the meeting, we have prepared a noticeNotice of the meeting, a proxy statement,Meeting, Proxy Statement, and our 2014 annual report2016 Annual Report to stockholders, whichStockholders. These materials provide detailed information relating to our activities and operating performance. On October 8, 2014,

This year, we mailedare once again using the Internet as our primary means of furnishing proxy materials to stockholders. Accordingly, most stockholders will not receive paper copies of our proxy materials. We instead will mail to our stockholders a Notice Regarding the Availability of Proxy Materials containingMaterials. This notice will contain instructions on how to access theseproxy materials online. We believe electronicand vote via the Internet. The Notice Regarding the Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. Electronic delivery will expedite the receipt of materials while lowering costs and reducing the environmental impact of our annual meeting by reducing printing and mailing of full sets of materials.costs.

You will find information about the matters to be voted on at the meeting in the formal Notice Regarding the Availability of Proxy Materials and the Proxy Statement.

You may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. Your vote is very important to us, and we hope you will be able to attend the meeting. To ensure your representation at the meeting, even if you anticipate attending in person, we urge you to vote by proxy. If you attend, you will, of course, be entitled to vote in person.

              Whether or not you plan to attend the annual meetingAnnual Meeting of stockholders,Stockholders, we encourage you to vote your shares.

Sincerely,

M. Farooq Kathwari
Chairman of the Board,
President and PrincipalChief Executive Officer

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ETHAN ALLEN INTERIORS INC.

NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS

Wednesday, November 16, 2016
10:00 AM EST
Ethan Allen International Corporate Headquarters
Ethan Allen Drive
Danbury, Connecticut 06811

NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS

To our Stockholders:

                The 2016 Annual Meeting of stockholdersStockholders of Ethan Allen Interiors Inc. will be held at the Ethan Allen International Corporate Headquarters on Tuesday, November 18, 2014 at 10:00 A.M., local time, for the purpose of considering and acting upon the following:following matters:

1.

The election of seven directors;



2.

The ratification

		Proposal 1.		to elect seven director nominees identified in the following proxy statement to serve until the 2017 Annual Meeting of Stockholders;
		Proposal 2.		to approve by-law amendments related to the procedures for stockholders to nominate directors or propose other matters for consideration at stockholder meetings;
		Proposal 3.		to approve by-law amendments to implement "proxy access";
		Proposal 4.		to approve by-law amendments to implement majority voting in uncontested director elections;
		Proposal 5.		to approve certificate of incorporation and by-law amendments to allow for stockholder removal of directors with or without cause and to delete obsolete provisions from, and effect clarifying changes to, the certificate of incorporation;
		Proposal 6.		to approve by a non-binding advisory vote, executive compensation of the Company's Named Executive Officers;
		Proposal 7.		to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2017 fiscal year; and

                to transact such other business as may properly come before the meeting.

                In accordance with New York Stock Exchange ("NYSE") rules, your broker will not be able to vote your shares with respect to any non-routine matters if you have not given your broker specific instructions to do so. The only routine matter to be voted on at the Annual Meeting is the ratification of the appointment of our independent registered public accounting firm for the 2015 fiscal year;



3.

The ratification of the advisory resolutioncurrent year (Proposal 7). All other matters to approve the compensation to our Named Executive Officers;be voted upon are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and



4.

Such other business as therefore broker non-votes may properly come before the meeting.

        UNLESS YOU PROVIDE SPECIFIC INSTRUCTIONS AS TO HOW TO VOTE, BROKERS MAY NOT VOTE YOUR SHARES OF COMMON STOCK ON THE ELECTION OF DIRECTORS OR THE NON-BINDING ADVISORY RESOLUTION REGARDING THE COMPENSATION TO OUR NAMED EXECUTIVE OFFICERS.exist in connection with such proposals.

                The Board of Directors has fixed September 23, 201421, 2016 as the record date for determining stockholders entitled to notice of, and to vote at, the meeting. It is important that your shares be represented and voted at the meeting. If you received the proxy materials by mail, you can vote your shares by completing, signing, dating, and returning your completed proxy card, or you may vote by telephone or over the Internet. If you received the proxy materials over the Internet, a proxy card was not sent to you, and you may vote your shares by telephone or over the Internet. To vote by telephone or Internet, follow the instructions included in the formal Notice Regarding the Availability of Proxy Materials, the Proxy Statement or on the Internet. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the Proxy Statement.

                These proxy materials are first being made available on the Internet on or around October 4, 2016.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on November 18, 2014.16, 2016. The proxy statement and the annual report are available at http://materials.proxyvote.com/297602

By Order of the Board of Directors,

Eric D. Koster
Corporate Secretary
October 4, 2016

ETHAN ALLEN INTERIORS INC.
Ethan Allen Drive, Danbury, Connecticut 06811

PROXY STATEMENT
for Annual Meeting of Stockholders 2016

i

ii

ETHAN ALLEN INTERIORS INC.
Ethan Allen Drive
Danbury, Connecticut 06811Table of Contents

Questions

                This proxy statement (this "Proxy Statement") and Answers
the accompanying proxy or voting instruction card relate to the 2016 Annual Meeting of Stockholders (the "Annual Meeting") of Ethan Allen Interiors Inc., a Delaware corporation ("Ethan Allen") to be held at the Ethan Allen Corporate Headquarters, Ethan Allen Drive, Danbury, Connecticut 06811 at 10:00 A.M., Eastern Time, on Wednesday, November 16, 2016. The Board of Directors of the Company (the "Board of Directors" or "Board") is soliciting proxies from stockholders in order to provide every stockholder an opportunity to vote on all matters submitted to a vote of stockholders at the Annual Meeting, whether or not such stockholder attends in person. The proxy authorizes a person other than a stockholder, called the "proxyholder," who will be present at the Annual Meeting, to cast the votes that the stockholder would be entitled to cast at the Annual Meeting if the stockholder were present. It is expected that this Proxy Statement and the accompanying proxy or voting instruction card will be first mailed or delivered to our stockholders beginning on or about October 4, 2016. When used in this Proxy Statement, "we," "us," "our," "Ethan Allen" or the "Company" refers to Ethan Allen and its subsidiaries collectively or, if the context so requires, Ethan Allen individually.

Q:

What is the purpose of Annual Meeting?

A:

We will hold the Annual Meeting to enable stockholders to vote on the following matters:

to transact such other business as may properly come before the Annual Meeting.

Stockholders will be asked to vote for nominees for all director seats on the Board of Directors as of the Annual Meeting. The term of office for directors elected at the Annual Meeting will continue until the 2017 Annual Meeting of Stockholders and until their successors are duly elected and qualified or until their earlier removal, resignation or death. The Board of Directors' nominees for election are: M. Farooq Kathwari, James B. Carlson, John J. Dooner, Jr., Domenick J. Esposito, Mary Garrett, James W. Schmotter and Tara I. Stacom.

As of the date of this notice, we have not received notice of any other business that may be properly proposed at the Annual Meeting, but if any other business is properly proposed, the proxyholders named in the proxy or voting instruction card will have authority to vote as recommended by the Board of Directors.

Q:

What is a proxy?

A:

A proxy is a document also referred to as a "proxy card," onby which you authorize someone else to vote for you at the upcoming Annual Meetinga stockholders meeting in the way that you want to vote. That document is called a "proxy" or, if your shares are held in street name and you give instructions to the record holder of your shares, is called a "voting instruction card." You also may choose to abstain from voting.

This Proxy Statement and the accompanying proxy or voting instruction card is furnished in connection with the solicitation by the Board of Directors, (the "Board of Directors") of Ethan Allen Interiors Inc., a Delaware corporation (the "Company"), of proxies for use at the 2014 Annual Meeting of stockholders (the "Annual Meeting") to be held on Tuesday,Wednesday, November 18, 201416, 2016 at the Ethan Allen International Corporate Headquarters, Ethan Allen Drive, Danbury, Connecticut 06811 at 10:00 A.M., local time,Eastern Time, or any adjournment thereof. The Proxy Statement and our Annual Report are first being made available electronically on or about October 8, 2014.

Q:

What are the purposes of this annual meeting?

A:

At the Annual Meeting, stockholders will elect each of the seven Directors to serve until the 2015 Annual Meeting of Stockholders and until their successors are duly elected and qualified. The Board of Directors' nominees for election are: M. Farooq Kathwari, James B. Carlson, Clinton A. Clark, John J. Dooner, Jr., Kristin Gamble, James W. Schmotter, and Frank G. Wisner. Stockholders will be asked to vote for nominees for all of the directors on the Board of Directors each year at the annual meeting of stockholders. Stockholders will also vote on: (i) ratifying our appointment of KPMG LLP ("KPMG") as our independent registered public accounting firm for fiscal year 2015; and (ii) ratifying the advisory resolution to approve the compensation to our Named Executive Officers (as defined below under "Executive Compensation"). Other than routine or procedural matters, we do not expect any other business will be brought up at the meeting, but if any other business is properly brought up, the persons named in the proxy card will have authority to vote as they see fit.

Q:

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

A:

In accordance with rules adopted by the Securities and Exchange Commission ("SEC"), rather than mailing a printed copy of our proxy materials to each stockholder of record, we may now send some or all of our stockholders a Notice Regarding the Availability of Proxy Materials, ("Notice"), which indicates howthis Proxy Statement and our stockholders may:

•

access their proxy materials and vote their proxies over the Internet or by telephone; or

•

request a paper copy of the materials, including a proxy card.

Q:

How can I get electronic access2016 annual report to the proxy materials?

A:

The Notice provides you with instructions regarding how to:

•

view our proxy materials for the Stockholders ("Annual Meeting over the Internet; or

•

instruct usReport") are first being made available to send our future proxy materials to you electronically, by email, instead of sending you printed copies by mail.

Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the adverse impact of our Annual Meeting of stockholders on the environment. If you choose to receive future proxy materials by email, you will receive an email next

year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it. The Annual Report and the Form 10-K accompany the proxy materials but are not considered partTable of the proxy soliciting materials.Contents

Q:

Who is entitled to vote?

A:

Only record holders of our shares of common stockour Common Stock, par value $.01 per share ("Common Stock"), at the close of business on the record date for the meetingAnnual Meeting are entitled to vote at the Annual Meeting. The Board of Directors has fixed the close of business on September 23, 201421, 2016 as the record date (the "Record Date") for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, the Company had outstanding 28,927,23527,758,319 shares of common stock, par value $0.01 per share (the "Common Stock").Common Stock outstanding. The holders of Common Stock as of the Record Date are entitled to notice of, and to vote at, the Annual Meeting. Holders of Common Stock are entitled to one vote per share.

Q:

How can I access the proxy materials on the Internet?

A:

In accordance with the rules of the U.S. Securities and Exchange Commission (the "SEC"), we are using the Internet as the primary means of furnishing proxy materials to stockholders. Accordingly, most stockholders will not receive paper copies of our proxy materials. We instead sent stockholders a Notice Regarding the Availability of Proxy Materials (the "Notice") with instructions for accessing the proxy materials via the Internet and voting via the Internet or by telephone. The Notice was mailed on or about October 4, 2016. The Notice also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. Additionally, and in accordance with SEC rules, you may access our proxy materials at http://materials.proxyvote.com/297602.

The Notice provides you with instructions regarding how to:

•

view the proxy materials for the Annual Meeting on the Internet and execute a proxy; and

•

instruct us to send future proxy materials to you in printed form or electronically by e-mail.

Choosing to receive future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

Q:

How do I vote?

A:

You can vote either in person at the Annual Meeting or by proxy, whether or not you attend the Annual Meeting. You can vote by proxy in three ways:

•

By mail—If you receivedare a stockholder of record, you can submit a proxy by completing, dating, signing and returning your proxy materialsin the postage-paid envelope provided. You should sign your name exactly as it appears on the proxy. If you are signing in a representative capacity (for example, as a guardian, executor, trustee, custodian, attorney or officer of a corporation), please indicate your name and title or capacity. If you are a beneficial owner, you have the right to direct your brokerage firm, bank or other similar organization on how to vote your shares, and the brokerage firm, bank or other similar organization is required to vote your shares in accordance with your instructions. To provide instructions to your brokerage firm, bank or other similar organization by mail, you can vote usingplease complete, date, sign and return your voting instruction card in the proxy card;postage-paid envelope provided by your brokerage firm, bank or other similar organization.

•

By telephone—In the United States and Canada,If you are a stockholder of record, you can votesubmit a proxy by telephone by calling the toll-free number listed on the proxy, entering your control number located on the proxy or voting instruction card and following the prompts. If you are a beneficial owner and if the brokerage firm, bank or other similar organization that holds your shares offers telephone voting, you will receive instructions from the brokerage firm, bank or other similar organization that you must follow in the Notice, on the Internet or on yourorder to submit a proxy card if you received your materials by mail; ortelephone.

•

By Internet—YouIf you are a stockholder of record, you can votesubmit a proxy over the Internet by logging on to the website listed on the proxy, entering your control number located on the proxy or voting instruction card and submitting a proxy by following the on-screen prompts. If you are a beneficial owner, and if the brokerage firm, bank or other similar nominee that holds your shares offers Internet voting, you will receive instructions onfrom the Noticebrokerage firm, bank or onother similar organization that you must follow in order to submit your proxy card if you received your materials by mail.over the Internet.

If you vote by proxy, your shares will be voted at the Annual Meeting in the manner you indicate. If your shares are held in your name (but(i.e., not in nominee name"street name" through a broker) and if you sign your proxy card, but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends.




Your vote is important. The Board urges you to submit a proxy for your shares as soon as possible by following the instructions provided on the enclosed proxy or voting instruction card you receive from your brokerage firm, bank or other similar organization. Internet and telephone submission of proxies is available 24 hours a day, and, if you use one of those methods, you do not need to return a proxy or voting instruction card. Unless you are planning to vote at the Annual Meeting in person, your proxy must be received by 11:59 p.m., Eastern Time, on Tuesday, November 15, 2016. Even if you submit your proxy or voting instructions by one of the methods listed above, you still may vote at the Annual Meeting in person if you are the record holder of



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your shares. If you are a beneficial owner, you must obtain a "legal proxy" from the record holder in order to vote your shares at the Annual Meeting. Your vote at the Annual Meeting will constitute a revocation of your earlier proxy or voting instructions.

Q:

How can I vote my shares of Common Stock that I own through the Ethan Allen 401(k) plan for employees?



A:

If you own Common Stock through the Ethan Allen 401(k) plan for employees, you can direct the trustee to vote the shares held in your account in accordance with your instructions by returning the voting instruction card for your account or by registering your instructions over the Internet or by telephone as directed on the voting instruction card for your account. If you wish to instruct the trustee on the voting of shares held in your account, you should submit those instructions no later than 11:59 p.m., Eastern Time, on Friday, November 11, 2016. The trustee will vote shares for which no voting instructions were received on or before that date as directed by the plan fiduciary.



Q:

Can I change my vote after I have voted?



A:

Prior to the meeting,Annual Meeting, a later vote by any means will cancel any earlier vote. For example, if you vote by telephone and later vote differently on the Internet, the Internet vote will count, and the telephone vote will be canceled. If you wish to change your vote by mail, you should writecontact our Corporate Secretary or proxy solicitor at the addressaddresses set forth at the beginning of the Questions and Answers,below and request a new proxy or voting instruction card. The last vote we receivereceived before the meetingAnnual Meeting will be the one counted. You also may change your vote by voting in person at the meeting.

Annual Meeting.

	Corporate Secretary Eric D. Koster PO BOX 1966 Danbury, CT 06813 (203) 743-8508		Proxy Solicitor Georgeson LLC 1290 Avenue of the Americans, 9th Floor New York, NY 10104 (866) 277-0928

Q:

What does it mean if I get more than one proxy or voting instruction card?



A:

It means that your shares are registered in more than one way. Sign and returnall proxy or voting instruction cards or voteeach group of shares by mail, telephone or over the Internet to ensure that all your shares are voted.



Q:

Who are the proxyholders named Proxiesby the Board for the Annual Meeting?



A:

Eric D. Koster and Corey Whitely were selected by the Board of Directors to serve as Proxiesproxyholders for the Annual Meeting.Meeting of stockholders voting on proxy or voting instruction cards. Each properly executed and returned proxy or voting instruction card will be voted by the Proxiesproxyholders in accordance with the directions indicated thereon or, if no directions are indicated, such proxy will be voted in accordance with the recommendations of the Board of Directors contained in this Proxy Statement.Directors. In voting by proxy with regard to the election of directors, stockholders may vote in favor




of all nominees, vote in favor of one or more specific nominee(s), withhold their vote as to all nominees or withhold their vote as to aone or more specific nominee(s). Each stockholder giving a proxy has the power to revoke it at any time before the shares it represents are voted. Revocation of a proxy is effective upon receipt of a later vote by (i) telephone; (ii) Internet; or (iii)telephone, Internet, receipt by the Corporate Secretary or inspectors of the Companyelection of either: (a)either an instrument revoking the proxy;proxy or (b) a duly executed proxy card bearing a later date. Additionally, a stockholder may change or revoke a previously executed proxy by voting in person at the Annual Meeting.





Q:

What is a Broker Non-Vote?Will my shares be voted if I do not provide my proxy?



A:

New York Stock Exchange (NYSE) Rule 452 prohibits brokers from exercising "discretionary voting"If you hold your shares directly in all director elections. Therefore,your own name, your shares will not be voted if you do not vote them or provide a proxy. If your shares are held in the name of a brokerage firm or other nominee, name byunder rules of the New York Stock Exchange ("NYSE"), your broker andmay vote your shares on "routine" matters even if you do not provide instructionsa proxy. The only routine matter to be voted on at the Annual Meeting is the ratification of the appointment of our independent registered public accounting firm for 2017. If a brokerage firm votes your brokershares on these matters in accordance with these rules, your shares will count as present at the Annual Meeting for purposes of establishing a quorum and will count as "FOR" votes or "AGAINST" votes, as the case may be, depending on how you wantthe broker votes. If a brokerage firm signs and returns a proxy on your behalf that does not contain voting instructions, your shares will count as present at the Annual Meeting for quorum purposes and will be voted in director elections, your broker is prohibited from exercising discretionary voting and voting those shares inconnection with the director elections.selection of KPMG LLP as our independent public accounting firm for the 2017 fiscal year, but will not count as a "FOR" vote for any other matter.



Q:

What is Electronic Access?a broker non-vote?



A:

Our proxy statement and our 2014 annual report are available on an Internet site at http://materials.proxyvote.com/297602. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. If you areA "broker non-vote" means that a registered stockholder, you can choose this option and save the Company the cost of producing and mailing these documents by following the instructions provided on your proxy card or following the prompt if you choosebroker cannot exercise discretion to vote overshares held by it in "street name" for the Internet. If you hold your stock in nominee name (such as through a bank or broker), checkbeneficial owner and has not received voting instructions from the information provided by your nominee for instructionsbeneficial owner and the matter to be voted on how to elect to view future proxy statements and annual reports overis not "routine" under the Internet. If you are a registered stockholder and have chosen to view future proxy statements and annual reports over the Internet, you will receive an email with instructions containing the Internet addressNYSE rules.




Table of those materials.

Contents

Q:

How many shares must be present to hold the Annual Meeting?



A:

In order for the Annual Meeting to be conducted,duly convened, one-third of the outstanding shares of Common Stock as of the Record Date must be present in person or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions, withheld votes and shares held of record by a brokerage firm, bank brokeror similar organization, or its nominee ("broker shares"), pursuant to a signed proxy or voting instruction card that are voted on any matter (including an abstention or withheld vote by broker shares) are included in determining the number of shares present. BrokerIf a brokerage firm signs and returns a proxy on your behalf that does not contain voting instructions, your shares that are not voted on any matter will not be included in determining whether acount as present at the Annual Meeting for quorum is present.purposes.



Q:

What vote is needed to elect Directors?directors?



A:

At the Annual Meeting, the affirmative vote of a majority in interest of the stockholdersshares present, in person or by proxy, and entitled to vote thereon is required to elect or ratify directors.each of the director nominees.



Q:

What vote is needed to ratifyapprove the appointment of KPMG LLP?other Proposals?



A:

At the Annual Meeting, the affirmative vote of a majority in interest of the stockholdersshares present, in person or by proxy, and entitled to vote thereon is required to ratifyapprove Proposal 7: the ratification of the appointment of KPMG LLP as theour independent registered public accounting firm for the 2017 fiscal year, and Proposal 6: the approval, by non-binding advisory vote, of executive compensation of the Company.Company's Named Executive Officers (collectively, the "NEOs").



Q:


WhatEach of Proposals 2, 3, 4, and 5, which request stockholder approval for various amendments to the Company's Certificate of Incorporation and By-Laws, as applicable, require the affirmative vote is neededof the holders of 66²/3% of our outstanding shares of Common Stock.






Abstentions will be counted as present for the purposes of the votes on Proposals 1, 2, 3, 4, 5, 6 and 7, and therefore will have the same effect as a vote against each such proposal. Broker non-votes will not be counted as present and entitled to approve the non-binding resolution regardingvote on Proposals 1, 2, 3, 4, 5 and 6, but will be counted as present and entitled to vote on Proposal 7.






Approval of the compensation of our Named Executive Officers?



A:

At the Annual Meeting, the vote of a majority in interest of the stockholders present, in person or by proxy, and entitled to vote thereon is required to ratify the non-binding resolution regarding the




compensation of our Named Executive Officers. Because your voteNEOs is advisory itand will not be binding on the Board of Directors or the Company. However, the Board of Directors will review the voting results on this resolutionof Proposal 6 and take them into consideration when making future decisions regarding executive compensation.





Q:

How will the votes be tabulated?



A:

The inspectors of election inspectors appointed for the Annual Meeting will tabulate the votes cast, in person or by proxy, at the Annual Meeting and will determine whether or not a quorum is present. The election inspectors will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum but as unvoted for purposes of determining the approval of any matter submitted to the stockholders for a vote. If a broker indicates on the proxy that it does not have discretionary authority to vote on a particular matter, as to certain shares, those shares will not be considered as present and entitled to vote with respect to that matter.



Q:

How will my shares be voted ifdo I do not return my proxy or my voting instruction form?revoke a proxy?



A:

It will depend on how your ownership of shares of Common Stock is registered. If you ownhold your shares as a registered holder, which means that your shares of Common Stock are registered in your name, with Computershare Investor Services LLC ("Computershare"), our transfer agent,you may revoke your shares will only be voted if Computershare receives specific voting instructions from you. Otherwise, your unvoted shares will not be representedproxy by submitting a revised one at any time before the vote to which the proxy relates. You may also revoke it by submitting a ballot at the Annual Meeting and will not count toward the quorum requirement (which is explained under "Questions and Answers—How manymeeting.






If your shares must be present to hold the Annual Meeting") above, unless you attend the Annual Meeting to vote them in person.

If you are a stockholder whose shares of Common Stock are held in street name, which meansthere are special procedures that you must follow to revoke a proxy submitted via the Internet or by telephone or by marking, signing and returning a vote instruction card.



•

Revoking your shares are registered invote and submitting a new vote before the namedeadline of 11:59 p.m., Eastern Time, on November 15, 2016.  If you submit a proxy via the Internet, by telephone or by marking, signing and returning a vote instruction card, you may revoke your proxy at any time and by any method before the deadline.



•

Revoking your vote and submitting a new vote after the deadline of 11:59 p.m., Eastern Time, on November 15, 2016.  If you submit a proxy via the Internet, by telephone or by marking, signing and returning a vote instruction card and wish to revoke it and submit a new proxy after the deadline has passed, you must contact your brokerage firm, bank broker or other nominee,similar organization and follow its requirements. We cannot assure you that you will be able to revoke your bank, broker or other nominee may or may notproxy and vote your shares by any of the methods described above.



•

Revoking your vote and submitting a new vote by ballot at the meeting.  If you submit a proxy via the Internet, by telephone or by marking, signing and returning a vote instruction card and wish to revoke it and vote at the meeting, you must contact your brokerage firm, bank or other similar organization and follow its requirements. We cannot assure you that you will be able to revoke your proxy or attend and vote at the meeting.



•

If you receive more than one proxy or voting instruction card on or about the same time, it generally means you hold shares registered in its discretionmore than one account. In order to vote all of your shares, please sign and return each proxy or voting instruction card or, if you have not provided voting instructions tovote via the bank, brokerinternet or its nominee. Whether the bank, brokertelephone, vote once for each proxy or other nominee may vote your shares depends on the proposals before the Annual Meeting. Under the rules of the NYSE, your bank, broker or other nominee may vote your shares in its discretion on "routine matters." Based on the rules of the NYSE, we believe that the ratification of the appointment of KPMG as our independent registered public accounting firm is a routine matter for which your bank, broker or other nominee may vote in their discretion on behalf of their clients if no voting instructions are provided. Therefore, if you are a stockholder whose shares of Common Stock are held in street name with a bank, broker or other nominee and you do not return your voting instruction form, your bank, broker or other nominee may vote your shares on the ratificationcard you receive.




Table of the appointment of KPMG as our independent registered public accounting firm.Contents

The rules of the NYSE, however, do not permit your bank, broker or other nominee to vote your shares on proposals that are not considered "routine." When a proposal is not a routine matter and your bank, broker or other nominee has not received your voting instructions with respect to that proposal, your bank, broker or other nominee cannot vote your shares on that proposal. This is called a "broker non-vote." Your bank, broker or other nominee may not vote your shares with respect to (i) the election of the nominees for Director or (ii) the non-binding advisory resolution regarding the compensation of our Named Executive Officers, in the absence of your specific instructions as to how to vote with respect to each of these matters because, under the rules of the NYSE, these matters are not considered "routine matters."




Q:

Where can I find the results of the Annual Meeting?



A:

We intend to announce preliminary voting results at the Annual Meeting and publish final results through a Current Report on Form 8-K that we will file with the SEC within four business days of the Annual Meeting.


PROPOSAL 1

ELECTION OF DIRECTORS Annual Meeting Admission


                AtOnly stockholders and certain other permitted attendees may attend the meeting, eachAnnual Meeting. Please note that space limitations make it necessary to limit attendance to stockholders and one guest. Admission to the Annual Meeting will be on a first-come, first-served basis. Proof of Ethan Allen stock ownership as of the seven (7) nomineesrecord date, along with photo identification, will standbe required for electionadmission. Stockholders holding stock in an account at a brokerage firm, bank, broker-dealer or other similar organization ("street name" holders) will need to servebring a copy of a brokerage statement reflecting their stock ownership as directors until the 2015 Annual Meeting of Stockholders and until their successors are duly elected and qualified. It is the intention of the persons namedrecord date. No cameras, recording equipment, electronic devices, use of cell phones or other mobile devices, large bags or packages will be permitted at the Annual Meeting.

Householding


                To reduce the expense of delivering duplicate proxy materials to our stockholders, we are relying on the SEC rules that permit us to deliver only one set of proxy materials to multiple stockholders who share an address unless we receive contrary instructions from any stockholder at that address. This practice, known as proxies in the accompanying proxy card"householding," reduces duplicate mailings, thus saving printing and postage costs as well as natural resources. Each stockholder retains a separate right to vote on all proxies submitted by stockholders FOR the seven nominees listed below unless authority to vote for the nominees or any individual nominee is withheld by a stockholder in such stockholder's proxy. If for any reason any nominee becomes unable or unwilling to servematters presented at the Annual Meeting. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you wish to receive a separate copy of the Annual Meeting, the persons named as proxies will have discretionary authorityReport or other proxy materials, free of charge, or if you wish to vote for a substitute nominee(s). Alternatively, the Boardreceive separate copies of Directors may choosefuture annual reports or proxy materials, please mail your request to reduce the size of the board, as permitted by our Amended and Restated By-laws ("By-laws"). It is not anticipated that any nominee will be unavailable or will decline to serve as director.

        The seven nominees for election as Directors are listed below. All of the nominees are currently members of the Board of Directors. Due to the declassification of the Board of Directors approved by stockholders at the 2013 Annual Meeting of Stockholders held on December 4, 2013 (the "2013 Annual Meeting"), the term of each Director will expire this year. The information set forth below includes, with respect to each nominee for election as Director, his or her age, present principal occupation, specific expertise, qualifications and skills along with other business experience, directorships in other publicly held companies, membership on committees of the Board of Directors and period of service as a director of the Company. Also set forth below is a brief discussion of the specific experience, qualifications, attributes or skills that led to his or her nomination as a Director, in light of the Company's business.

Nominees for Election

M. Farooq Kathwari, 70, is the Chairman, President and Principal Executive Officer of Ethan Allen Interiors, Inc. He has been President of, PO BOX 1966, Danbury CT 06813-1966, attention: Corporate Secretary, or call us at (203) 743-8000.

BOARD OF DIRECTORS

                Ethan Allen Interiors Inc. is a vertically integrated interior design and home furnishings company, serving consumers around the Company since 1985 and Chairman and Principal Executive Officer since 1988. He received his B.A. degree from Kashmir University in English Literature and Political Science and an M.B.A. in International Marketing from New York University. Mr. Kathwari serves on several not-for-profit organizations, including: Director and Chairman Emeritus of Refugees International, Director and former Chairman of American Home Furnishings Alliance, Director and former Chairman of National Retail Federation (NRF) and Member, Board of Overseers and former Director of International Rescue Committee. Mr. Kathwari has received numerous recognitions, including most recently the Honorary Doctor of Public Service Degree awarded by Tufts University President on May 20, 2012, the NRF's highest honor Gold Medal Award, and induction into the Furniture Hall of Fame. Mr. Kathwari served on the President's Advisory Committee on Asian Americans and Pacific Islanders from 2010 to 2014. Mr. Kathwari has extensive experience and knowledge of the history ofworld. To effectively manage our Company and the furniture industryenterprise requires a strong governance foundation, as well as extensiveleadership with an understanding of the diverse needs of our consumers and associates. The composition of the Board reflects an appropriate mix of skill sets, experience, in growing and managing a business. He possesses insight into retailing, marketing, manufacturing, and strategic planning from experience with the Company as well as his broad experience with both for-profit and not-for-profit organizations which has given him perspectives from other industries valuable to his servicequalifications that are relevant to the Company.

James B. Carlson, 59, was elected as a directorbusiness and governance of the Company on June 10, 2013. Mr. Carlson serves as an Adjunct Professor atCompany. Each individual Director epitomizes the New York University School of Law, teaching SecuritiesCompany's Leadership Principles, possesses the highest ethics and Capital Markets Regulation since 1996. From 2009 through 2011, he also taught Derivativesintegrity, and Changing Regulation atdemonstrates commitment to representing the School of Law, and from 2010 through 2012, he taught Microfinance and Access to Finance for the Global Poor as an Adjunct Professor at the NYU Stern School of Business. Mr. Carlson, who has been




practicing law since 1981, currently is a member of the law firm Mayer Brown, LLP, where he has been a partner since 1998. From 1997 through 2004, he was the Partner-in-Charge of the firm's New York Office, and also served as the firm's Global Practice Leader from 2004 through 2008. Mr. Carlson brings extensive knowledge in corporate and financial strategies, and is a highly regarded member of both the legal and business communities. Mr. Carlson is the Chairman of the Compensation Committee and a member of the Audit Committee.

Clinton A. Clark, 72, was elected as a director of the Company on June 30, 1989. He and a partner are sole owners of Clark Quality Construction, LLC, a residential development company. Prior to founding Clark Quality Construction, Mr. Clark was Chairman, President and Chief Executive Officer of Long John Silver's Restaurants, Inc. from 1990 through September 1993 and prior thereto was President and Chief Executive Officer of The Children's Place, a retail children's apparel chain he founded in 1968. Mr. Clark has also been an investor and director of several private companies. Mr. Clark's experience managing publicly traded companies, experience as an executive, and knowledge of the history of the Company has provided the Company with a wealth of knowledge in strategic planning, corporate finance, compensation, and sales and marketing in consumer related industries. He has the necessary skills to fulfill his role as Chairmanlong-term interests of the Company's Audit Committee.

John J. Dooner, Jr., 66, was elected as a director ofstockholders. Each Director also has individual experiences that provide practical wisdom and foster mature judgment in the Company on January 26, 2011. He recently established The Dooner Group, aboardroom. Collectively, the Directors bring business, international, government, technology, marketing, communication consultancy,retail operations, and serves as Chairman Emeritus of McCann Worldgroup ("McCann"), a company he formed in 1997 and of which he had been CEO from its founding until 2010. Under Mr. Dooner's leadership, McCann grewother experiences that are relevant to be one of the world's largest marketing communications organizations, with operations in over 125 countries with a client roster that includes preeminent global marketers and many of the world's most famous brands. Prior to assuming that position, Mr. Dooner was CEO of McCann Erickson Worldwide, a post he assumed in 1992. Mr. Dooner also serves on several not-for-profit organizations; including Chairman of St. Thomas University based in Miami Florida, Immediate past Chairman of Board of Trustees United Way Worldwide, and remains Trustee and Chairman Brand Platform United Way Worldwide based in Washington, DC. He is a member of the Company's Compensation and Nominations/Corporate Governance Committees as well as the Lead independent Director in 2014.

Kristin Gamble, 68, was elected as a director of the Company on July 28, 1992. Since 1984, she has been President of Flood, Gamble Associates, Inc., an investment counseling firm. Ms. Gamble was Senior Vice President responsible for equity strategy and economic research with Manufacturers Hanover Trust Company from 1981 to 1984. Prior to that, she held various management positions with Manufacturers Hanover (1977-1981), Foley, Warendorf & Co., a brokerage firm (1976-1977), Rothschild, Inc. (1971-1976) and Merrill, Lynch, Pierce, Fenner & Smith (1968-1971). Since May 1995, she has served as a member of the Board of Trustees of Federal Realty Investment Trust, in which she serves on both the Compensation Committee and the Nominations and Governance Committee. Through her roles and responsibilities Ms. Gamble has extensive experience and insight relevant to her service to the Company, including that of Trustee of a realty investment trust and her knowledge of real estate markets. Ms. Gamble's knowledge of the history of the Company as well as her significant financial management experience has resulted in strong skills in corporate finance, accounting and compensation. She is a member of the Compensation Committee and the Company's Audit Committee.

James W. Schmotter, 67, was elected as a Director of the Company on April 20, 2010. Dr. Schmotter currently serves as President of Western Connecticut State University. He previously served as Western Michigan University's Dean of the Haworth College of Business, the Dean of the College of Business and Economics at Lehigh University in Pennsylvania, as well as Associate Dean and Director of International Studies at the Johnson Graduate School of Management at Cornell University. Dr. Schmotter has consulted for a variety of organizations including IBM, TRW, the Institute for International Education, the Cleveland Foundation, the Graduate Management Admission Council, the Educational Testing Service, United States Agency for International Development, and a number of universities in the U.S., Asia and




Europe. He has served as Chairman of the Board of Trustees of the Graduate Management Admission Council, was the founding Vice Chair of the Board of the MBA Enterprise Corps, has been a member of many committees of the Association to Advance Collegiate Schools of Business and served as a member of the Executive Committee of the NCAA. Dr. Schmotter is currently Chair of the Board of Directors of the United Way of Western Connecticut, a corporator of the Savings Bank of Danbury, a director of Fairfield County's Community Foundation and a director of the Greater Danbury Chamber of Commerce. Dr. Schmotter's strong leadership, educational and governmental background provides key insight and experience in strategic planning, international/global issues as well as communicating with younger customers which is valuable in his service to the Company. He is a member of the Audit Committee and the Chairman of the Nominations/Corporate Governance Committee.

Frank G. Wisner, 76, was elected as a Director of the Company on July 23, 2001. He is International Affairs Advisor of the law firm Squire Patton Boggs. He is the former Vice Chairman, External Affairs, of American International Group ("AIG"), a United States-based mixed financial services and international insurance organization. Mr. Wisner is also on the Board of Directors of EOG Resources. He is also a member of the Board of Directors of the Commercial International Bank (CIB) in Cairo, Egypt and of Pangea 3, a New York based legal outsourcing company, privately held. Prior to joining AIG, he was the United States Ambassador to India from July 1994 through July 1997. He retired from the United States Government with the rank of Career Ambassador, the highest grade in the Foreign Service. Mr. Wisner joined the State Department as a Foreign Service Officer in 1961 and served in a variety of overseas and Washington positions during his 36-year career. Among his other positions, Mr. Wisner served successively as United States Ambassador to Zambia, Egypt and the Philippines. Before being named United States Ambassador to India, his most recent assignment was as Under Secretary of Defense for Policy. Prior to that, he was Under Secretary of State for International Security Affairs. Ambassador Wisner's global, diplomatic and governmental experience provides insights and perspectives valuable in the operations and strategic planning of the Company. He is a member of the Company's Nominations/Corporate Governance Committee.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED ABOVE, WHICH IS DESIGNATED AS PROPOSAL NO. 1.


NOMINATIONS/CORPORATE GOVERNANCE COMMITTEE


vertical operations. The duties of the Nominations/Corporate Governance Committee ("Nominations Committee") include, but are not limited to, the duty to: (i) develop qualification criteria for the members of the Board of Directors and nominate or recommend to the Board of Directors individuals to serve on the Board of Directors; (ii) review, annually, the qualifications of each member of the Board of Directors; (iii) review and monitor the Company's corporate governance policies and guidelines, including the Company's trading policy for its directors and executive officers; and (iv) make an annual assessment of the Board of Directors' performance and report to the Board of Directors. The Nominations Committee follows the procedure concerning nominations or consideration of director candidates recommended by stockholders set forth in the By-laws. The By-laws of the Company permit stockholders, as of the Record Date, to nominate director candidates at the annual meeting, subject to certain notification requirements. (See "Stockholder Proposals and Nomination of Directors" under "Other Matters" for information on how to submit a proposal or nominate a director.) The Nominations Committee believes that as a result of the provisions in the By-laws, any separate policy relating to stockholder proposals or nominations would be duplicative. Each member of the Nominations Committee is independent within the meaning of the listing standards of the NYSE. The Nominations Committee held two (2) meetings and individual committee members communicated, when necessary, by telephone or other means during fiscal year 2014.




        The Nominations Committee seeks candidates who demonstrate a willingness and ability to prepare for, attend and participate in all Board of Directors and committee meetings and whose experience and skill would complement the then existing mix of directors. The Nominations Committee may consider the diversity of a candidate's background and experience when evaluating a nominee, as well as the diversity of a candidate's perspectives, which may result from diversity in age, gender, ethnicity or national origin. While the Nominations Committee may consider diversity in its evaluation process, the Nominations Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees. The Nominations Committee gathers suggestions as to individuals who may be available to meet the Board of Directors' future needs from a variety of sources, such as past and present directors, stockholders, colleagues and other parties with which a member of the Nominations Committee or the Board of Directors has had business dealings,general oversight responsibility for the Company's affairs pursuant to the Company's Amended and undertakes a preliminary reviewRestated Articles of Incorporation and By-Laws, and the committee charters, corporate governance guidelines and other policies under which the Company operates. The Board is deeply involved in the Company's strategic planning process, leadership development, succession planning, and oversight of risk management. In exercising its fiduciary duties, the Board represents and acts on behalf of the individuals suggested. At such timesCompany's stockholders and is committed to strong corporate governance, as the Nominations Committee determines that a relatively near term need existsreflected through its policies and the Nominations Committee believes that an individual's qualities and skills would complement the then existing mix of directors, the Nominations Committee or its Chair will contact the individual. The Chair will, after such contact, discuss the individual with the Nominations Committee. Based on the Nominations Committee's evaluation of potential nominees and the Company's needs, the Nominations Committee determines whether to nominate the individual for election as a director. While the Nominations Committee has not, in the past, engaged any third party firm or consultant to identify or evaluate nominees, the Nominations Committee, in accordance with its charter, may do so in the future. The Nominations Committee would evaluate nominees for director, recommended by a stockholder, in the same manner it undertakes the Nominations Committee's evaluation.practices.


CORPORATE GOVERNANCE


BOARD OF DIRECTORS – EXPERIENCE AND SKILLS

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James B Carlson

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John J. Dooner, Jr.,

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Table of Contents

BOARD INDEPENDENCE

                The Board of Directors has determined that Clinton A. Clark,nominees James B. Carlson, John J. Dooner, Jr., Kristin Gamble,Domenick J. Esposito, Mary Garrett, James W. Schmotter and Frank G. WisnerTara I. Stacom (six nominees for the Board of Directors), as well as Clinton A. Clark (the director who has announced that he is retiring from the Board of Directors immediately prior to the Annual Meeting), are independent directors within the meaning of the listing standards of the NYSE. In order for a Directordirector to be considered "independent" by the Board of Directors, he or she must (i) be free of any relationship that, applying the rules of the NYSE, would preclude a finding of independence and (ii) not have any material relationship (either directly or as a partner, stockholder or officer of an organization) with us or any of our affiliates of any of our executive officers or any of our affiliates' executive officers. In evaluating the materiality of any such relationship, the Board of Directors takes into consideration whether disclosure of the relationship would be required by the disclosure rules under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If disclosure of the relationship is required, the Board of Directors must make a determination that the relationship is not material as a prerequisite to finding that the Directordirector is independent.

Snapshot of 2016 Independent Director Nominees



BOARD LEADERSHIP STRUCTURE

                The Board of Directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board believes that, given the dynamic and competitive environment in which we operate, the optimal Board leadership structure may vary as circumstances warrant.

                At present, the Board of Directors has chosen to continue combining the two roles of Chairman and Chief Executive Officer. The Board believes that the best interests of the Company are served by Mr. Kathwari serving in both roles taking account of his unique long standing tenure with, and investment in, the Company and also the Board's utilization of a strong Lead Independent Director. The Board of Directors believes that this governance structure provides the basis for clear, efficient executive authority in the Company, especially taking into account the Company's flat management structure, while balancing appropriate oversight by the Board of Directors.

Independent Lead Director

                The Company defined the role of the Lead Independent Director, a position which rotates annually. The Board expresses its intent that one person serving as both Chief Executive Officer and Chairman evidences sound management as it allows the assertion of unambiguous authority over the operations of the Company. There is no need to separate the roles of Chief Executive Officer and Chairman since the Company has a suitably empowered independent director who is expressly authorized to exert de facto control of the Company by asserting independent leadership of the Board, increasing the Board's independence over management. The Board formally designated John J. Dooner Jr., an independent, non-executive director, as its Lead Independent Director through the Annual Meeting. He organizes and chairs meetings of the independent directors and organizes, facilitates and communicates observations of the independent directors to the Chief Executive Officer, although each director is free to communicate directly with the Chief Executive Officer.

BOARD OF DIRECTORS ROLE IN RISK OVERSIGHT

                While risk management is primarily the responsibility of our management, the Board of Directors provides overall risk oversight focusing on the most significant risks. The Board of Directors oversees an enterprise-wide approach to risk management, designed to identify risk areas and provide oversight of the Company's risk management, to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and to enhance stockholder value. A fundamental part of the Board's risk management is to understand the risks the Company faces and what steps management is taking to mitigate those risks.




Table of Contents

The Board of Directors participates in discussions with management concerning the Company's overall level of risk, the Company's business strategy and organizational objectives which are all integral components of its assessment of management's tolerance for risk.

                The Company has implemented a Company-wide enterprise risk management process to identify and assess the major risks and develop strategies for controlling, mitigating and monitoring risk. As part of this process, information is gathered throughout the Company to identify and prioritize these major risks. The identified risks and risk mitigation strategies are validated with management and discussed with the Audit Committee on an ongoing basis.

                The Audit Committee reviews our risk management programs and reports on these items to the full Board. Our Internal Audit group is responsible for monitoring the enterprise risk management process and in that role reports directly to the Audit Committee. Other members of senior management who have responsibility for designing and implementing various aspects of our risk management process also regularly meet with the Audit Committee. The Audit Committee discusses our identified financial and operational risks with our Chief Executive Officer and Chief Financial Officer and receives reports from other members of senior management with regard to our identified risks.

                The Compensation Committee is responsible for overseeing any risks relating to our compensation policies and practices. Specifically, the Compensation Committee oversees the design of incentive compensation arrangements of our executive officers to implement our pay-for-performance philosophy without encouraging or rewarding excessive risk-taking by our executive officers.

                Our management regularly conducts additional reviews of risks, as needed, or as requested by the Board or Audit Committee.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

                During fiscal year 2016, there were four regularly scheduled meetings of the Board of Directors in addition to the 2015 Annual Meeting of Stockholders. Independent directors also met four times in executive session without management present. The Lead Independent Director, currently John J. Dooner Jr., chaired the executive sessions.

                All directors are expected to attend all regularly scheduled and special Board of Directors meetings, independent director meetings and committee meetings, as appropriate. The Board of Directors realizes that scheduling conflicts may arise from time to time which prevent a director from attending a particular meeting. However, it is the Board's explicit policy that each director shall give priority to his or her obligations to the Company. All directors who then held office attended the 2015 Annual Meeting of Stockholders. In fiscal year 2016, there was 100% attendance by each director at each of the four regularly scheduled Board of Directors meetings, six regularly scheduled Audit Committee meetings, two regularly scheduled Compensation Committee meetings, and two regularly scheduled Nominations Committee meetings. Our policy is to expect resignation of any director who is absent from more than twenty-five percent of regularly scheduled Board meetings or committee meetings in a fiscal year. In addition to the regularly scheduled meetings, there were five special Board of Directors meetings, one special Compensation Committee meeting and one special Nominations Committee meeting. There was 100% attendance at each of the special meetings.

                The Board of Directors has established three standing committees: the Audit Committee; the Compensation Committee; and the Nominations/Corporate Governance HighlightsCommittee. Committee memberships of each nominee and continuing or current director are set forth below:

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Clinton A. Clark (1)

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James B. Carlson

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John J. Dooner, Jr

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Domenick J. Esposito

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James W. Schmotter

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(1)

Mr. Clark has been a long-term member of the Board of Directors who made substantial contributions to the success of the Company. He has announced his intention to retire immediately prior to the Annual Meeting and has requested that he not be nominated. To review biographical information for Mr. Clark, please see the Company's Proxy Statement, filed with the SEC on October 26, 2015.

                Additionally, the Board of Directors determined that all of the members of the standing committees are (i) independent within the meaning of the listings standards of the NYSE, (ii) non-employee directors (within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act")) and (iii) outside directors (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")). See "Corporate Governance".




        WeTable of Contents

NOMINATIONS/CORPORATE GOVERNANCE COMMITTEE

                The duties of the Nominations/Corporate Governance Committee include, but are not limited to, the duty to: (i) develop qualification criteria for the members of the Board of Directors and nominate or recommend to the Board of Directors individuals to serve on the Board of Directors; (ii) review, annually, the qualifications of each member of the Board of Directors; (iii) review and monitor the Company's corporate governance policies and guidelines, including the Company's trading policy for its directors and executive officers; and (iv) make an annual assessment of the Board of Directors' performance and report to the Board of Directors. The Nominations/Corporate Governance Committee follows the procedure concerning nominations or consideration of director candidates recommended by stockholders set forth in the By-Laws. The By-Laws of the Company permit stockholders, as of the Record Date, to nominate director candidates at the Annual Meeting, subject to certain notification requirements. (See "Stockholder Proposals and Nomination of Directors" under "Other Matters" for information on how to submit a proposal or nominate a director.) Each member of the Committee is independent within the meaning of the listing standards of the NYSE. The Committee held two meetings and individual Committee members communicated, when necessary, by telephone or other means during fiscal year 2016.

                The Nominations/Corporate Governance Committee seeks candidates who demonstrate a willingness and ability to prepare for, attend and participate in all Board of Directors and committee meetings and whose experience and skill would complement the then existing mix of directors. While the Board has no specific policy on diversity, the Committee considers the diversity of a candidate's background and experience when evaluating a nominee, as well as the diversity of a candidate's perspectives, which may result from diversity in age, gender, ethnicity or national origin. The Committee gathers suggestions as to individuals who may be available to meet the Board of Directors' future needs from a variety of sources, such as past and present directors, stockholders, colleagues and other parties with which a member of the Nominations/Corporate Governance Committee or the Board of Directors has had business dealings, and undertakes a preliminary review of the individuals suggested. Candidates recommended by stockholders will be considered in the same manner as other candidates. At such times as the Committee determines that a relatively near term need exists and the Committee believes that an individual's qualities and skills would complement the then existing mix of directors, the Committee or its Chair will contact the individual. The Chair will, after such contact, discuss the individual with the Committee. Based on the Committee's evaluation of potential nominees and the Company's needs, the Committee determines whether to nominate the individual for election as a director. While the Nominations/Corporate Governance Committee has not, in the past, engaged any third party firm or consultant to identify or evaluate nominees, in accordance with its charter, may do so in the future. The Nominations/Corporate Governance Committee unanimously recommended the nominees named in this Proxy Statement as the individuals with the experience, industry knowledge, integrity, ability to devote time and energy, and commitment to the interests of all stockholders best qualified to execute our strategic plan and create value for all our stockholders.




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PROPOSAL 1:    ELECTION OF DIRECTORS

                At the Annual Meeting, each of the seven nominees described below will stand for election to serve as directors until the 2017 Annual Meeting of Stockholders and until their successors are duly elected and qualified. The seven nominees were nominated by the Board of Directors in accordance with recommendations by our Nominations/Corporate Governance Committee. Each nominee has consented to being named in this Proxy Statement as a nominee for election as a director and agreed to serve if elected. All of the seven nominees described below are currently members of the Board of Directors. The information set forth below includes, with respect to each nominee for election as director, his or her age, present principal occupation, specific expertise, qualifications and skills along with other business experience, directorships in other publicly held companies, membership on committees of the Board of Directors and period of service as a director of the Company. Also set forth below is a brief discussion of the specific experience, qualifications, attributes or skills that led to his or her nomination as a director, in light of the Company's business.

                Under a majority voting standard, each nominee for election to the Board who receives the vote of a majority of the shares present, in person or by proxy and entitled to vote at the Annual Meeting, will be elected as a director. It is the intention of the persons named as proxies in the accompanying proxies submitted by stockholders to vote for the seven nominees described below unless authority to vote for the nominees or any individual nominee is withheld by a stockholder in such stockholder's proxy. If for any reason any nominee becomes unable or unwilling to serve at the time of the Annual Meeting, the persons named as proxies will have discretionary authority to vote for a substitute nominee(s). Alternatively, the Board of Directors may choose to reduce the size of the Board, as permitted by our Amended and Restated By-Laws (the "By-Laws"). It is not anticipated that any nominee will be unavailable or will decline to serve as a director. As a result of Mr. Clark's resignation, the Board has determined to reduce the size of the Board to seven members effective immediately upon Mr. Clark's resignation.

The Board of Directors unanimously recommends to voteFOR each of the Board of Director's seven nominees for director.

DIRECTOR NOMINEES FOR ELECTION

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​		Farooq Kathwari        HOME FURNISHINGS INDUSTRY LEADER								​
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				Mr. Kathwari is the Chairman, President and Principal Executive Officer of Ethan Allen Interiors Inc. He has been President of the Company since 1985 and Chairman and Principal Executive Officer since 1988. He received his B.A. degree from Kashmir University in English Literature and Political Science and an M.B.A. in International Marketing from New York University.				Director since 1985 Age: 72 Board Committees: • Chairman of the Board
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		Specific Qualifications, Attributes, Skills and Experience:
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		From 2010 to 2014, Mr. Kathwari served on the President's Advisory Commission on Asian Americans and Pacific Islanders and is currently affiliated with several not-for-profit organizations, including: as Chairman Emeritus and director of Refugees International, director and former Chairman of American Home Furnishings Alliance, director and former Chairman of National Retail Federation (NRF) and on the Board of Overseers of International Rescue Committee. In addition, Mr. Kathwari currently serves on the Advisory Board of the New York Stock Exchange. Mr. Kathwari has received numerous recognitions, including Honorary Doctor of Public Service awarded by Tufts University President on May 20, 2012, the NRF's highest honor Gold Medal Award, a recognition by the U.S. Government as an Outstanding American by Choice and was an inductee into the Furniture Hall of Fame. Mr. Kathwari has extensive experience and knowledge of the history of the Company and the furniture industry as well as extensive experience in growing and managing a business. Mr. Kathwari possesses insight into retailing, marketing, manufacturing, finance and strategic planning from experience with the Company as well as his broad experience with both for-profit and not-for-profit organizations which has given him perspectives from other industries valuable to his service to the Company.
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​		James B. Carlson        LEADER IN THE LEGAL AND FINANCIAL INDUSTRIES								​
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				Mr. Carlson serves as an Adjunct Professor at the New York University School of Law, teaching Securities and Capital Markets Regulation since 1996. From 2009 through 2011, he also taught Derivatives and Changing Regulation at the School of Law, and from 2010 through 2012, he taught Microfinance and Access to Finance for the Global Poor as an Adjunct Professor at the NYU Stern School of Business.				Director since 2013 Age: 61 Board Committees: • Compensation - Chair • Audit
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		Specific Qualifications, Attributes, Skills and Experience:
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		Mr. Carlson, who has been practicing law since 1981, currently is a member of the law firm Mayer Brown, LLP, where he has been a partner since 1998. From 1997 through 2004, he was the Partner-in-Charge of the firm's New York Office, and also served as the firm's Global Practice Leader from 2004 through 2008. Mr. Carlson brings extensive knowledge in corporate and financial strategies, and is a highly regarded member of both the legal and business communities.
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​		John J. Dooner, Jr.        LEADER IN MARKETING AND STRATEGIC COMMUNICATIONS								​
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				Mr. Dooner recently established The Dooner Group, a marketing communication consultancy, and serves as Chairman Emeritus of McCann Worldgroup ("McCann"), a company he formed in 1997 and of which he had been Chief Executive Officer from its founding until 2010.				Director since 2011 Age: 68 Board Committees: • Lead Independent Director • Nominations • Compensation
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		Specific Qualifications, Attributes, Skills and Experience:
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		Under Mr. Dooner's leadership, McCann grew to be one of the world's largest marketing communications organizations, with operations in over 125 countries with a client roster that includes preeminent global marketers and many of the world's most famous brands. Prior to assuming that position, Mr. Dooner was Chief Executive Officer of McCann Erickson Worldwide, a post he assumed in 1992. Mr. Dooner also serves on several not-for-profit organizations; including Chairman of St. Thomas University based in Miami Florida, Immediate past Chairman of Board of Trustees United Way Worldwide, and remains Trustee and Chairman Brand Platform United Way Worldwide based in Washington, DC. Mr. Dooner brings extensive advertising and branding expertise to the Company.
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​		Domenick J. Esposito        LEADER IN THE FINANCIAL SERVICES INDUSTRY								​
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				Mr. Esposito has been a practicing CPA since 1974, currently is the Chief Executive Officer of ESPOSITO CEO2CEO and a Board member at a privately held valuation services firm. From 2002 to 2016, Mr. Esposito was a senior partner and member of the Executive Board at CohnReznick LLP. From 2001 through 2002, he was Vice Chairman of BDO, and from 1979 through 2001 he served as a member of Grant Thornton, where he became partner in 1981, and the firm's Chief Executive Officer in 1999.				Director since 2015 Age: 69 Board Committees: • Audit • Compensation
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		Specific Qualifications, Attributes, Skills and Experience:
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		Prior to 1979, Mr. Esposito served as a member of Price Waterhouse. He has been a member of the NASDAQ Listing and Qualifications Committee and recently served on the NASDAQ Listing and Qualifications Panel. He formerly served as the leader of the New York State Society of CPA's Committee for Large and Medium Sized Firms Practice Management, and was also an Adjunct Professor at C.W. Post / Long Island University. Mr. Esposito's extensive public accounting background strengthens the oversight of our financial controls and reporting.
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​		Mary Garrett        LEADER IN TECHNOLOGY AND MARKETING								​
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				Ms. Garrett retired from IBM in December 2015 after a distinguished 34-year career where she led the development and execution of unique marketing and communication strategies encompassing the Smarter Planet agenda, Big Data, cloud computing, social business and other growth plays in support of IBM clients across both mature and emerging markets.				Director since 2016 Age: 58 Board Committees: • Nominations
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		Specific Qualifications, Attributes, Skills and Experience:
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		During Ms. Garrett's career, she most recently served as Vice President, Marketing and Communications for IBM Global Sales and Distribution responsible for leading geography marketing teams as well as global marketing for Industries, Enterprise and Midmarket business, Digital Sales and field enablement. In addition, she was secretary for the IBM Board of Advisors, where she drove ongoing dialog with IBM's largest global CIOs, and the CMO Council, where she facilitated best practice exchanges with the world's leading marketers. Previously, Ms. Garrett led worldwide marketing for IBM Global Technology Services. Ms. Garrett serves on the Board of Directors of the American Marketing Association, a global professional association with more than 30,000 members, where she also serves as Vice President Finance and Secretary, and also is an active mentor in W.O.M.E.N. in America, a professional development group aimed at advancing promising professional women. Her significant technology and marketing experience is a valuable addition to our Board.
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​		Dr. James W. Schmotter        LEADER IN HIGHER EDUCATION ADMINISTRATION								​
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				Dr. Schmotter is President Emeritus of Western Connecticut State University from which he retired on June 30, 2015. He previously served as Western Michigan University's Dean of the Haworth College of Business, the Dean of the College of Business and Economics at Lehigh University in Pennsylvania, as well as Associate Dean and Director of International Studies at the Johnson Graduate School of Management at Cornell University.				Director since 2010 Age: 69 Board Committees: • Nominations - Chair • Audit
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		Specific Qualifications, Attributes, Skills and Experience:
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		Dr. Schmotter has consulted for a variety of organizations including IBM, TRW, the Institute for International Education, the Cleveland Foundation, the Graduate Management Admission Council, the Educational Testing Service, United States Agency for International Development, and a number of universities in the U.S., Asia and Europe. He has served as Chairman of the Board of Trustees of the Graduate Management Admission Council, was the founding Vice Chair of the Board of the MBA Enterprise Corps, has been a member of many committees of the Association to Advance Collegiate Schools of Business and has served as a member of the Executive Committee of the NCAA. Since 2011, he has chaired accreditation review teams for three New England universities. Dr. Schmotter served as chair of the board of directors of the United Way of Western Connecticut, as a corporator of the Savings Bank of Danbury, as a director of Fairfield County's Community Foundation and as a director of the Greater Danbury Chamber of Commerce. He is currently a member of the board of directors of the Dunes of Naples II Condominium Association and a member of the Schools Outreach Committee of the Naples Council on World Affairs (both Naples, Florida). Dr. Schmotter's strong leadership, educational and governmental background provides key insight and experience in strategic planning, international/global issues as well as communicating with younger customers which is valuable in his service to the Company.
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​		Tara I. Stacom        LEADER IN REAL ESTATE AND FINANCIAL INDUSTRIES								​
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				Ms. Stacom is an Executive Vice Chairman of Cushman & Wakefield, a worldwide commercial real estate firm with 43,000 employees. During her 35-year career, Ms. Stacom has been responsible for executing in excess of 40 million square feet and some of the largest and most complex leasing, sales, and corporate finance real estate transactions – including, most recently, acting as exclusive leasing agent for One World Trade Center.				Director since 2015 Age: 58 Board Committees: • Nominations
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		Specific Qualifications, Attributes, Skills and Experience:
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		Ms. Stacom has been serving on the Board of Trustees at Lehigh University where she earned her Bachelor of Science degree in Finance. She is a founder of ire@l, a real estate minor in the business college at Lehigh University. In recognition of her commitment and many years of service to Lehigh University, as well as Greenwich Academy, Ms. Stacom has received prestigious Alumni Awards from both organizations. Ms. Stacom serves as a Director of the Realty Foundation of New York, and is a Member of the Real Estate Board of New York serving on its Ethics Committee. Ms. Stacom is a "Director's Circle Member" of Girls, Inc. and a Board Member of Right to Dream. She is the recipient of Crain's New York Business 100 Most Influential Women in New York City Business, and is a Realty Foundation of New York honoree. She was awarded "Woman of the Year" of the New York Executives in Real Estate (WX), and Real Estate New York and Real Estate Forum's Women of Influence. She received Northwood University's Distinguished Women's Award in recognition of the enormous contribution she has made to communities, businesses, volunteer agencies, and public and private sector services worldwide. She has also been honored by the Visiting Nurse Service of New York and the New York Police Athletic League. Ms. Stacom was honored with the Real Estate Board of New York's highest achievement....the 2011 Most Ingenious Deal of the Year (First Place Henry Hart Rice Award) for the leasing of One World Trade Center. Ms. Stacom brings extensive knowledge of commercial real estate and finance to the Board.
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CORPORATE GOVERNANCE

                The Board of Directors believes that good corporate governance is important to ensure that the Company is managed for the long-term benefit of its stockholders and to enhance the creation of long-term stockholder value. The Board has adopted corporate governance guidelines (the "Governance Guidelines") that support this belief and comply with the corporate governance requirements imposed by the SEC and the NYSE,NYSE. At the 2015 Annual Meeting of Stockholders, stockholders approved the Company's proposals to enhance our governance policies as follows:

              Amended and Restated the Stock Incentive Plan.    The Company amended and restated the Company's 1992 Stock Option Plan, and renamed it the Ethan Allen Interiors Inc. Stock Incentive Plan. The plan was modified to remain compliant with the requirements of section 162(m) of the Internal Revenue Code relating to deductibility of performance-based compensation and was updated to reflect changes in doing so,corporate governance best-practices since it was last submitted for stockholder approval.

              Updated By-Laws.    Stockholders approved the Company's amendment to its Amended and Restated Certificate of Incorporation to delete Article Fifth and eliminate the requirement that Business Combinations be approved by a majority of the Continuing Directors.

                Over the past several years, the Company has updated and clarified its corporate governance policies and procedures to conform to emerging trends and best practices. Some of our key policies and practices include the following:

•

A Recoupment / Clawback Provision.  The Company's executives will be required to pay back incentive awards erroneously awarded to them on the basis of restated financial statements, if they participated in fraud or misconduct leading to the restated financial statements.



•

Stock Ownership Requirements.  It is the Company's intention that its directors and executive officers acquire and hold Company stock. The value of the intended holdings is equal to a multiple of the base compensation (three times annual cash compensation for directors, five times salary for the Chief Executive Officer, and two times the annual salary for the other executive officers) to be accumulated over five years. The standards are reviewed and modified periodically or as necessary after a significant increase or decrease in share price.



•

Holding Requirement.  Our directors and executive officers are required to hold any Company stock acquired upon the exercise of stock options or restricted stock issued to them for one year following their exercise or vesting, as applicable, except to the extent necessary to pay income and other taxes assessed upon exercise of the options or vesting of that stock or to fund or pay for the exercise of options.



•

No Hedging / Pledging Policy.  Our directors and executive officers are prohibited from hedging and/or pledging the Company's stock.



•

Insider Trading Policies.  Directors and executive officers will comply in all respects with the Company's insider trading policies.



•

No Repricing or Buyouts.  The Company's Stock Incentive Plan prohibits repricing, extensions or cash buyouts for options.



•

Change in Control Agreements.  The Company has generally restricted, and intends to continue to restrict, any change in control agreements that do not contain a "double trigger" condition for severance payments or that contain excise tax gross-ups and the Company intends to restrict amendments to existing change in control agreements without conforming to these provisions.



•

Employment Agreements with Executives.  The Company will generally restrict entering into employment agreements with executive officers except for the employment agreement with the CEO (as defined below), stock option and other incentive award agreements and severance and protective covenant agreements. The Company does not have employment agreements with any of our NEOs, other than the 2015 Employment Agreement, effective as of July 1, 2015, between the Company and Mr. Kathwari (the "2015 Employment Agreement"), see "Compensation Committee Report", and the Company's Change of Control Severance Plan, see "Compensation Committee Report", which agreements and plan include "double trigger" conditions upon change in control and do not contain excise tax gross-ups.



•

Qualified Performance-Based Compensation.  The Company attempts, whenever possible, to preserve the federal income tax deductibility of compensation paid to executives, and to permit, but not require, the Compensation Committee to award compensation that meets the requirements for deductibility of "qualified performance-based compensation." However, the Compensation Committee reserves the right to authorize the payment of nondeductible compensation when appropriate.




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•

Lead Independent Director.  The Company defined the role of the Lead Independent Director, a position which rotates annually. John J. Dooner Jr., an independent, non-executive director, currently serves as Lead Independent Director.



•

Director Attendance.  Directors are required to attend at least 75% of director and committee meetings. In 2016 there was 100% attendance by each director at all regular and special meetings of the Board of Directors adopted corporate governance guidelines (the "Governance Guidelines"). Many featuresand its committees.



•

Director Tenure.  The Board shall not nominate a director at any time after his 77th birthday (subject to waiver or extension), and mandates resignation of our corporate governance principles are discussed in other sectionsa director upon failure to meet the Company's requirements or failing to attend the requisite number of this proxy statement, but somemeetings of the highlights are:

Board of Directors and its committees. The Company's long-serving director, Clinton A. Clark is retiring from the Board of Directors immediately prior to the Annual Meeting.



•

Term Limits.  The service of a director will continue until: in the case of a director who is also an executive of the Company, his effective termination of employment and services to the Company, and in the case of any director, until either the end of his elected term, unless duly nominated and reelected as a director for a subsequent term, or upon the conclusion of the Nominations Committee that a director no longer satisfies the requirements and standards for service as a director. At the end of their term, a director will resign as a director.



•

Limitation on Service on Other Boards.  A director will not serve on a board of directors of more than three publicly traded companies (including the Company).



•

Limitation on Service to Competitors.  A director will not serve as a director, executive, employee or consultant to any company that is a competitor to the Company, taking account of companies that operate under the same NAICS codes as the Company or are specifically identified as competitors of the Company in the Company's public reports.



•

No Director Loans.  The Company prohibits personal loans or credit advances by the Company to directors except for ordinary travel and expense advances, advance director fee payments, and as required by director indemnification.



•

Published Governance Guidelines.  A copy of the Governance Guidelines as well as our Code of Ethics, Charters for our Audit Committee, Compensation Committee, and Nominations / Nominations/Corporate Governance committees,Committee ("Nominations Committee"), and Directors and Executive Officer Policies, and our Securities Trading and Conflict of interest policy can be found under "Corporate Governance Charters &and Policies" on the Investor Relations page of our website at www.EthanAllen.com.www.ethanallen.com/governance.



•

Independent Board.  All members of our Board are independent directors, with exception of ourthe Chairman of theour Board andwho is also our Chief Executive Officer.






•

Independent Board Committees.  All members of our Audit Committee, Compensation Committee, and Nominating / Corporate Governance committeesNominations Committee are independent directors, and none of such members receives compensation from the Company other than for service on its Board of Directors or its committees.



•

Independent Executive Sessions.  The Board of Directors is required to have executive sessions where independent directors meet without the Chairman and management at the time of each Board of Directors meeting. In addition, periodically throughout the year, the full Board of Directors, including or excluding the Chairman, may meet without management participation.



•

Committee Authority to Retain Independent Advisors.  The Audit Committee, Compensation Committee and Nominations / Corporate Governance committeesCommittee each have the authority to retain independent advisors, with all fees and expenses to be paid by the Company.



•

Audit Committee Policies and Procedures.  Under its charter, the Audit Committee's prior approval is required for all audit services and permitted non-audit services (other than de minimis permitted non-audit services as defined and permitted by the Sarbanes-Oxley Act of 2002) to be provided by our independent registered public accounting firm.



•

Audit Committee Financial Expert.  OurThe Board of Directors has determined that all four members of the Audit Committee are audit committee financial experts within the meaning of the SEC rules and are independent directors within the meaning of the listing standards of the NYSE.



•

No Stockholder Rights Plan (poison pill).  Our previous stockholder rights plan was allowed to expire May 31, 2012.



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No Cumulative Voting.  We do not provide for cumulative voting of directors by our stockholders.



•

Eliminated Classified Board.  At the 2013 Annual Meeting of Stockholders, the Company amended its Amended and Restated Certificate of Incorporation to eliminate the classified structure of our Board of Directors. As such, the Directorsdirectors are subject to annual election.elected annually for one-year terms.



•

Annual Advisory Vote Onon Executive Compensation.  Since 2011, weour stockholders have provided our Stockholders the opportunity to cast an annual non-binding advisory vote on our Executive Compensation Program.

Formal Adoption of Additional Policies

        In 2013, we decided to formalize and clarify our best practices in relation to our Board of Directors and executive officers in a Director Policy and Executive Officer Policy effective as of the 2013 Annual Meeting including the following:

•

A Recoupment / Clawback Provision. The Company's executives will be required to pay back incentive awards erroneously awarded to them on the basis of restated financial statements, if they participated in fraud or misconduct leading to the restated financial statements.



•

Stock Ownership Requirements. It is the Company's intention that its Directors and executive officers acquire ownership of an amount of Company stock. The value of the intended holdings is equal to a multiple of the base compensation (three times annual cash compensation for directors, five times salary for the CEO, and two times the annual salary for the other executive officers) to be accumulated over five years. Pledged shares are not considered when determining compliance with the guidelines. The standards are reviewed and modified annually or as necessary after a significant increase or decrease in share price.



•

Holding Requirement. Our Directors and executive officers are required to hold any Company stock acquired upon the exercise of stock options or restricted stock issued to them for one year following their exercise or vesting, as applicable, except to the extent necessary to pay income and other taxesprograms.




assessed upon exerciseTable of the options or vesting of that stock or to fund or pay for the exercise of options.Contents

•

No Hedging / Pledging Policy.

                The Company's Board of Directors and executive officers are prohibited from hedging and / or pledgingperiodically reviews the Company's stock. Any pledges in place by any director or officer as of the adoption of this policy were to be disclosed to the Company and subject to that prohibition within three years thereafter.



•

Insider Trading Policies. The Company's Board of Directors and executive officers will comply in all respects with the Company's insider trading policies including the Company's Statement of Policy Concerning Trading in the Company's Securities available under "Corporate Governance Charters & Policies" on the Investor Relations page of our website at www.EthanAllen.com.



•

No Repricing or Buyouts. The Company's stock options and plans for Directors and executive officers will prohibit repricing, extensions or cash buy outs for options.



•

Change in Control Agreements. The Company will generally restrict change in control agreements (other than Mr. Kathwari's employment agreement with the Company, dated as of September 30, 2011 (the "2011 Employment Agreement")), and will generally restrict any change in control agreements (including the 2011 Employment Agreement) which contain a "double trigger" condition for severance payments. The Company will generally restrict new change in control agreements that contain excise tax gross-ups, or amend existing change in control agreements without removing these provisions.



•

Employment Agreements with Executives. The Company will generally restrict entering into employment agreements with executive officers, except for the 2011 Employment Agreement with the CEO, for stock option and restricted stock agreements and severance and protective covenant agreements. The Company does not have employment agreements with any of our Named Executive Officers other than the 2011 Employment Agreement with our CEO and stock option and restricted stock agreements.



•

Qualified Performance Based Compensation. The Company may attempt to preserve the Federal income tax deductibility of compensation paid, to permit, but not require, the Compensation Committee to award compensation that meets the requirements for "qualified performance-based compensation." However, the Compensation Committee reserves the right to authorize the payment of nondeductible compensation when appropriate.



•

Lead Independent Director. The Company defined the role of the lead director, a position which rotates annually. Mr. Dooner, an independent, non-executive director, currently serves as lead director.



•

Director Attendance. Directors are required to attend at least 75% of Director and committee meetings. In 2014 there was 100% attendance by each Director at each regularly scheduled meeting of the Board of Directors and its committees.



•

Director Tenure. The Board shall not nominate a director at any time after his 77th birthday (subject to waiver or extension), and mandated resignation of a Director upon failure to meet the Company's requirements or failing to attend the requisite number of meetings of the Board of Directors and its committees.



•

Term Limits. The service of a Director will continue until:



•

in the case of a Director who is also an executive of the Company, their effective termination of employment and services to the Company,



•

and in the case of any Director, until either the end of his elected term, unless duly nominated and re-elected as a Director for a subsequent term, or the conclusion of the Nominations/




Governance Committee that a Director no longer satisfies the requirements and standards of the Director for service as a Director.

•

At the end of his term, a Director will resign as a Director.



•

Limitation on Other Boards. A Director will not serve as a director on the boards of directors of more than three publicly traded companies (including the Company).



•

Limitation on Service to Competitors. A Director will not serve as a director, executive, employee or consultant to any company that is a competitor to the Company, taking account of companies identified as competitors of the Company in the Company's public reports.



•

No Director Loans. The Company prohibits personal loans or credit advances by the Company to directors except for ordinary travel and expense advances, advance Director fee payments,governance polices and as required by Director indemnification.

        Thesesuch these policies may be waived, updated or modified by eitherany of the Nominations / Corporate Governance Committee, Compensation Committee or the Board of Directors, (or the CEO for the Executive Policy), upon notice to the Company and the Board of Directors, as applicable. They are accessible under "Corporate Governance Charters &and Policies" on our website atwww.ethanallen.com/governance. The charter of each of the Investor Relations pagecommittees of the Board is also available on our website atwww.ethanallen.com/governance. You may also request printed copies of the charter(s) by sending a written request to our Corporate Secretary at Ethan Allen Interiors, Inc., PO BOX 1966, Danbury, CT 06813.

ADDITIONAL STOCKHOLDER OUTREACH

                During fiscal years 2015 and 2016, the Board and management made additional outreach to stockholders, investors and stockholder advisory firms and held two investor conferences. This outreach included conversations with stockholders representing 90% of outstanding shares as of June 30, 2016. Based on this outreach and on recent trends and best practices related to good corporate governance, we are proposing further changes to our Certificate of Incorporation and By-Laws at the 2016 Annual Meeting of Stockholders as follows:

•

Enhance advance notice by-law provisions which enable our stockholders to nominate directors or propose other matters for consideration at stockholder meetings.

•

Implement proxy access which would enable our eligible stockholders to use the Company's proxy statement to nominate up to 2 directors or 20% of the board, subject to 3% ownership for 3 years and other customary requirements.

•

Implement majority voting provision in uncontested director elections with a plurality voting provision for contested elections.

•

Clarify that directors may be removed from office by a requisite stockholder vote with or without cause.

PROPOSAL 2:    TO APPROVE BY-LAW AMENDMENTS RELATED TO THE PROCEDURES FOR STOCKHOLDERS TO NOMINATE DIRECTORS OR PROPOSE OTHER MATTERS FOR CONSIDERATION AT STOCKHOLDER MEETINGS

General

                Our by-laws contain provisions governing the ability of stockholders to bring business before any meeting of stockholders of the Company. As part of the Board's ongoing review of corporate governance practices, the Board has adopted, and is recommending that stockholders vote to approve, amendments to Sections 9.1, 9.2, 10 and 13 of Article II of the by-laws relating to the procedures that stockholders must comply with in order to nominate directors and properly bring any business before stockholder meetings, as well as certain related matters. The Board believes that the proposed amendments conform the by-laws, as they have been amended from time to time, to customary standards.

Effect of the Proposed Amendment

                The proposed amendments, among other things, include the following requirements:

•

For any business, including any nomination, to be properly brought before a stockholder meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Company, such notice to be delivered not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting.

•

To be in proper form, the notice must set forth certain enumerated information regarding the proposing stockholder and, in the case of director nominations, the proposed nominee, including information with respect to any agreements, arrangements or understandings by and among any of the proposed nominees, or by and among any proposing stockholders and any other person pertaining to the nomination(s) or business to be brought before the meeting, identifying the parties to such agreements and identifying any persons known by the proposing stockholder to support such nominations or such business to be brought before the meeting, including information regarding such person's beneficial ownership in the Company's shares. The notice must be amended or supplemented should any required information included in the initial notice become incorrect or incomplete.

•

The amendments also clarify that nothing contained in the advance notice by-law provisions shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act.




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                The amendments to Sections 9.1, 9.2, 10 and 13 of Article II of the by-laws pertaining to the procedures for stockholders to nominate directors, propose other matters for consideration at a stockholder meeting and certain related matters will automatically become effective if this Proposal 2 is approved by our stockholders. If, however, our stockholders do not approve this Proposal 2, then the by-law amendment to implement proxy access as set forth in Proposal 3 will not take effect even if Proposal 3 is approved by our stockholders.

                The discussion above is qualified in its entirety by reference to the full text of the Amended and Restated By-laws marked to show all proposed changes (additions are underlined and deletions are struck through), which is attached hereto as Appendix B - AMENDED & RESTATED BY-LAWS.

The Board of Directors unanimously recommends that you voteFOR the
proposal to amend and restate the Company's by-laws to revise procedures for stockholders to nominate directors or propose other matters for consideration at stockholder meetings.

PROPOSAL 3:    TO APPROVE BY-LAW AMENDMENTS TO IMPLEMENT "PROXY ACCESS"

General

                Our Board recognizes that properly structured "proxy access" tailored to our stockholder makeup and crafted to include appropriate safeguards against potential abuse and opportunism would give our stockholders the ability to include their director nominees in our proxy materials for our annual meetings of stockholders, thereby promoting stockholder ability to participate in director elections while potentially increasing the Board's accountability and responsiveness to stockholders.

                Therefore, after careful consideration, the Board has adopted, and is recommending that stockholders vote to approve, amendments to Article II of the by-laws to adopt new Section 9.3 to implement proxy access.

Effect of the Proposed Amendment

                If approved, these provisions would vest eligible stockholders (or a group of up to 20 eligible stockholders) who meet certain conditions, including holding at least 3% of the Company's outstanding capital stock continuously for at least three years, with the right to use the Company's proxy statement to nominate, at each annual meeting, director candidates comprising up to 20% of the Board, but not less than two candidates. The Board believes that this "3/3/20/20" approach is consistent with emerging prevailing market practices regarding proxy access implementation and embodies the most appropriate of proxy access for the Company. For example, the Board believes that a group limitation of up to 20 stockholders will provide reasonable access while limiting the possibility that small stockholders with narrowly defined special interests could become over-represented on the Board. A limitation of 20 stockholders will also prevent the administrative burden and expense that could be incurred in managing and vetting nominations from groups of potentially dozens or hundreds of small stockholders.

                In crafting the particulars of the proxy access approach, the Board sought to balance potential benefits of proxy access with appropriate limitations to avoid abuse by investors who wish to promote special interests that may not be aligned with the interests of our other stockholders, or who lack a meaningful long-term interest in the Company. In designing the provisions of this proposal, the Board has been mindful not to impose any undue impediments that may tend to render our proxy access approach impractical or overly burdensome. The Board believes the amendments set out herein are in the best interests of the Company.

                Implementation of this Proposal 3 is contingent upon the approval of the amendments to Sections 9.1, 9.2, 10 and 13 of Article II of our by-laws related to the procedures for stockholders to nominate directors or propose other matters for consideration at stockholder meetings set forth in Proposal 2. If approved, this Proposal 3 will become effective only if Proposal 2 is approved by our stockholders.

                The discussion above is qualified in its entirety by reference to the full text of the Amended and Restated By-laws marked to show all proposed changes (additions are underlined and deletions are struck through), which is attached hereto as Appendix B - AMENDED & RESTATED BY-LAWS.




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The Board of Directors unanimously recommends that you voteFOR the
proposal to amend and restate the Company's by-laws to implement "proxy access."

PROPOSAL 4:    TO APPROVE BY-LAW AMENDMENT TO IMPLEMENT MAJORITY VOTING IN UNCONTESTED DIRECTOR ELECTIONS

General

                Our Board recognizes that many stockholders believe that a majority voting standard increases a board's accountability to stockholders and that many public companies recently have adopted a majority voting standard in uncontested director elections. A majority voting standard requires that the number of votes cast "FOR" a director nominee's election exceed the number of votes cast "against" that nominee in order for the nominee to be elected. Abstentions and broker non-votes have no effect in determining whether the required majority vote had been obtained. By contrast, under a plurality voting standard, a director nominee who receives the highest number of affirmative votes cast is elected, whether or not such "FOR" votes constitute a majority of all votes (including those withheld).

                The Company currently has a majority voting standard; however, the provision was adopted in 1995 and lacks important features necessary for its smooth functioning. In particular, the majority voting standard should not apply in the case of a contested election in which case a plurality standard is more customary and practice. In addition, the provision currently fails to include a provision requiring a "holdover" candidate, who would otherwise remain in office until his or her successor is elected and qualified, to tender his or her resignation. Accordingly, after careful consideration, the Board has determined the retention of majority voting standard continues to be in the best interests of the Company and its stockholders, but that it should be limited to uncontested director elections. Therefore, the Board has adopted, and is recommending that stockholders vote to approve, amendments to our by-laws to adopt new Section 2 of Article III to implement majority voting in uncontested director elections.

Effect of the Proposed Amendment

                The majority voting standard would only apply in uncontested elections. Uncontested elections are elections where the number of director nominees does not exceed the number of directors to be elected at the meeting. In a contested election, director nominees would continue to be elected by a plurality vote standard. A contested election is an election where the number of director nominees exceeds the number of directors to be elected at the annual meeting, as determined by the secretary of the company.

                Further, the Board shall not nominate for election as director any nominee who has not agreed to offer, promptly following the annual meeting at which he or she is elected as director, an irrevocable resignation that will be effective upon (a) the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which he or she faces reelection, and (b) acceptance of such offer to resign by the Board. If a director nominee fails to receive the required number of votes for reelection, the Board (excluding the director in question) shall, within 90 days after certification of the election results, decide whether to accept such incumbent director's offer to resign through a process overseen by the Nominations/Corporate Governance Committee (and excluding the director in question from all Board and committee deliberations). In making its determination, the Board may consider any factor it deems relevant.

                The amendments to Section 2 Article III of the by-laws to implement majority voting in uncontested director elections will automatically become effective if this Proposal 4 is approved by our stockholders.

                The discussion above is qualified in its entirety by reference to the full text of the Amended and Restated By-laws marked to show all proposed changes (additions are underlined and deletions are struck through), which is attached hereto as Appendix B - AMENDED & RESTATED BY-LAWS.

The Board of Directors unanimously recommends that you voteFOR
proposal to amend and restate the Company's by-laws to implement majority voting in uncontested director elections.




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PROPOSAL 5:    TO APPROVE CERTIFICATE OF INCORPORATION AND BY-LAW AMENDMENTS TO ALLOW FOR STOCKHOLDER REMOVAL OF DIRECTORS WITH OR WITHOUT CAUSE AND TO DELETE OBSOLETE PROVISIONS FROM, AND EFFECT CLARIFYING CHANGES TO, CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION

General

                Article Sixth of the Company's Amended and Restated Certificate of Incorporation and Section 13 of Article III of the Company's Amended and Restated By-laws each currently provides that the Company's stockholders may remove directors from office at any time for cause by the affirmative vote of the holders of not less than a majority of the outstanding shares of stock generally entitled to vote. In a recent bench ruling on a summary judgment motion, the Delaware Court of Chancery held in December 2015 that a provision of a Delaware Corporation's charter or by-laws could not override the default rule under Delaware law that directors serving on a non-classified board and who are not elected pursuant to cumulative voting may be removed with or without cause by vote of holders of a majority of the outstanding shares entitled to vote in director elections. In light of these developments under Delaware corporate law, in January 2016, the Board adopted an amendment to the Company's Certificate of Incorporation, subject to stockholder approval, and believes it is in the best interests of the Company and its stockholders to approve amendments to the Company's certificate of incorporation and by-laws so that they state that directors can be removed by stockholders with or without cause. Further, the Company's certificate of incorporation currently includes a number of obsolete provisions relating to Class B Common Stock. The proposed amendments are intended to remove such obsolete provisions and to make minor clarifying changes, enhance readability and eliminate redundancies. Accordingly, the Board has adopted, subject to stockholder approval, amendments to the Company's certificate of incorporation and the by-laws to permit the removal of directors by stockholders with or without cause, and, with respect to the certificate of incorporation, to remove certain obsolete provisions and to renumber the remaining provisions.

Effect of the Proposed Amendment

                The amendments to the certificate of incorporation, if adopted, would become effective upon the filing of a certificate of amendment with the Secretary of State of the State of Delaware incorporating the amendments, which we would expect to do as soon as practicable after the amendments are adopted. The amendments to Section 13 of Article III of the by-laws related removal of directors by stockholders will automatically become effective if this Proposal 5 is approved by our stockholders. The effectiveness of these amendments will not impact the rights of stockholders since the amendments reflect rights already granted to stockholders under Delaware law.

                The discussion above is qualified in its entirety by reference to the full text of the Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws marked to show all proposed changes (additions are underlined and deletions are struck through), which are attached hereto as Appendix A - AMENDED & RESTATED CERTIFICATE OF INCORPORATION and Appendix B - AMENDED & RESTATED BY-LAWS.

The Board of Directors unanimously recommends that you voteFOR the
proposal to approve amendments to the Company's certificate of incorporation and by-laws to allow for stockholder removal of directors with or without cause and to implement certain clarifying amendments to, and to delete obsolete provisions from, the certificate of incorporation.

CHARTERS, CODE AND GUIDELINES

                The Company's Business Code, Corporate Governance Guidelines and the charters of its Audit Committee, Compensation Committee and Nominations Committee are available on the Company's website at www.EthanAllen.com.www.ethanallen.com/governance. Our Business Code requires that each individual deal fairly, honestly and constructively with governmental and regulatory bodies, customers, suppliers and competitors. It prohibits any individual's taking unfair advantage through manipulation, concealment, abuse of privileged information or misrepresentation of material facts. It imposes an express duty to act in the best interests of the Company and to avoid influences, interests or relationships that could give rise to an actual or apparent conflict of interest. Further, it also prohibits directors, officers and employees from competing with us, using Company property or information, or such employee's position, for personal gain, and taking corporate opportunities for personal gain. Waivers of our Business Code must be explicit. Any waiver of the Business Code for directors or executive




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officers may only be made by the Nominations Committee, and any waivers or amendments will be disclosed promptly by a posting on our website. We granted no waivers under our Code of Business Conduct and Ethics in fiscal 2016. Stockholders may request a copy of any of these documents by writing to: Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, CT 06811, Attention: Office of the Secretary.

Stockholder Communication

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

                Section 16(a) of the Exchange Act requires our executive officers, directors and owners of over 10% of our Common Stock to file reports of ownership and changes in ownership with Directorsthe SEC and the NYSE and furnish us with a copy of each report filed. Based solely on our review of copies of such reports furnished to the Company and written representations that all reports were filed or that no reports were required, we are not aware of any instances of noncompliance with the Section 16(a) filing requirements by any executive officer, director or owner of over 10% of our Common Stock during fiscal year 2016.

DIRECTOR COMPENSATION

                For fiscal year 2016, each independent director received $60,000 per annum and an annual stock option award in whole shares determined by dividing the market price of the Company's stock at the grant date into $100,000. Additional fees are paid quarterly to the chairperson of each of the committees as follows: Audit Committee $4,000; Compensation Committee $2,000; and Nominations Committee $2,000. If a committee holds more than four meetings (either in person or telephonically) on days when the full Board does not meet, committee members will be paid an additional $1,000 for each additional meeting beginning with the fifth such meeting. Employee directors do not receive additional compensation for serving on the Board of Directors. Directors serving on committees for part of a year receive a pro-rata share of fees.

​

​

​

​

​

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​

​

​

​

​

​

​

​

​

​

​

Name

​

Fees Earned or Paid in Cash

​

Option Awards (1)

​

Total

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

James B. Carlson (2)

$        68,000

$        40,128

$        108,128

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clinton A. Clark (3)

​

76,000

​

40,128

​

116,128

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

John J. Dooner, Jr. (4)

60,000

40,128

100,128

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Domenick J. Esposito (5)

​

56,739

​

40,128

​

96,867

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Kristin Gamble (6)

23,901

40,128

64,029

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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Mary Garrett (7)

​

30,000

​

-

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30,000

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​

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​

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​

​

​

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​

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​

​

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James W. Schmotter (8)

68,000

40,128

108,128

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​

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​

​

​

​

​

​

​

​

​

​

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Tara I. Stacom (9)

​

45,326

​

-

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45,326

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​

​

​

​

​

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​

​

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Frank G. Wisner (10)

23,901

40,128

64,029

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(1)

The amounts shown for option and restricted stock awards represent the fair values as of each grant date, computed in accordance with Accounting Standards Codification Topic 718. For financial statement reporting purposes, these fair values are charged to expense over the vesting period of three years. The actual values realized, if any, will not be known until the vesting date and could differ significantly. See footnote 10 to the Company's Form 10-K for fiscal year ended June 30, 2016 for assumptions in the valuation. The option award reflects a grant of 3,841 options for each director who was serving on the grant date.

(2)

Mr. Carlson was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. As of June 30, 2016, Mr. Carlson held 9,762 options, of which 2,238 were vested.

(3)

Mr. Clark was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. As of June 30, 2016, Mr. Clark held an aggregate of 12,762 stock options of which 5,238 were vested.

(4)

Mr. Dooner was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. As of June 30, 2016, Mr. Dooner held 16,071 options, of which 8,547 were vested.

(5)

Mr. Esposito became a board member on July 21, 2015, and received a prorated portion of fees for fiscal 2016. Mr. Esposito was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. As of June 30, 2016, Mr. Esposito held an aggregate of 3,481 stock options of which none were vested.

(6)

Ms. Gamble was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. Ms. Gamble retired from the board immediately prior to the annual meeting on November 24, 2015.

(7)

Ms. Garrett became a board member effective January 5, 2016, and received a prorated portion of fees for fiscal 2016. As of June 30, 2016, Ms. Garrett did not hold any stock options.

(8)

Mr. Schmotter was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. As of June 30, 2016, Mr. Schmotter held 16,071 stock options, of which 8,547 were vested.

(9)

Ms. Stacom became a board member on October 1, 2015, and received a prorated portion of fees for fiscal 2016. As of June 30, 2016, Ms. Stacom did not hold any stock options.

(10)

Mr. Wisner was awarded 3,481 stock options on July 21, 2015 vesting in three equal annual installments. Mr. Wisner retired from the board immediately prior to the annual meeting on November 24, 2015.




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Stockholder Communication With Directors

                Stockholders or interested parties may communicate with the full Board of Directors, a full committee, individual committee members or individual directors by sending communications to the Office of the Secretary, Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, Connecticut 06811 for forwarding to the appropriate director(s). Please specify to whom your correspondence should be directed. The Corporate Secretary has been instructed by the Board of Directors to review and promptly forward all correspondence (except advertising material and ordinary business matters) to the full Board of Directors, full committee, individual director or committee member, as indicated in the correspondence.

Certain Transactions

        The Company is party to indemnification agreements with each of the members of the Board of Directors pursuant to which the Company has agreed to indemnify and hold harmless each member of the Board of Directors from liabilities incurred as a result of such Director's status as a director of the Company, subject to certain limitations.

Certain Relationships and Related Party

Policies And Procedures With Respect To Transactions With Related Persons

                The Company recognizes that transactions between the Company and related persons present a potential for actual or perceived conflicts of interest. The Company's general policies with respect to such transactions are included in its Code of Business Conduct and Ethics ("Business Code"), the administration of which is overseen by the Nominations/Corporate GovernanceNominations Committee. The Company defines "related party" transaction as any transaction or series of related transactions in excess of $120,000 in which the Company is a party and in which a "related person" had, has or will have direct or indirect material interest. Related persons include (i) any person who is, or at any time since the beginning of our last fiscal year, was, a director or executive officer of us or a nominee to become a director, (ii) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities, (iii) any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner and (iv) any firm, corporation or other entity in which any of the foregoing




persons is employed or is a general partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

                The Company collects information about potential related party transactions in its annual questionnaires completed by directors and officers as well as throughout the year at its quarterly Disclosure Control Committee Meetings, comprised of key management responsible for significant business units, departments or divisions. Potential related party transactions are first reviewed and assessed by our General Counsel to consider the materiality of the transactions and then reported to the Nominations/Corporate Governance Committee. The Nominations/Corporate Governance Committee reviews and considers all relevant information available to it about each related party transaction and presents the facts to the members of the Board of Directors not associated with the potential related party transaction. A related party transaction is approved or ratified only if such members of the Board of Directors determine that it is not inconsistent with the best interests of the Company and its stockholders.

Related Party Transactions

                The Board, acting through the Nominations and the Compensation Committees, believes that the following related person transactions are reasonable and fair to the Company.

                Robin van Puyenbroeck, the son in law of Mr. Kathwari, the Company's Chairman, President and Chief Executive Officer is employed by the Company as the Company's Vice President, Business Development. Mr. van Puyenbroeck reports to the Senior Vice President, Business Development. During fiscal year 2016, the Company paid approximately $260,000 in aggregate compensation to Mr. van Puyenbroeck. The compensation was consistent with compensation paid to other employees holding similar positions and was composed of salary and annual bonus. The Compensation Committee and the Board expects periodically and at each fiscal year end to provide an ongoing review of Mr. van Puyenbroeck's employment with the Company, including in relation to his compensation.

                The Company did not have anyis party to indemnification agreements with each of the members of the Board of Directors pursuant to which the Company has agreed to indemnify and hold harmless each member of the Board of Directors from liabilities incurred as a result of such transactions during fiscal year 2014.director's status as a director of the Company, subject to certain limitations.

Compensation Committee Interlocks and Insider Participation

                No member of the Compensation Committee was at any timeis, or has ever been, an officer or employee of the Company nor is any member of the Compensation Committee related to any other member of the Compensation Committee, any other member of the Board of Directors or any executive officer of its subsidiaries. In addition, during the Company. No member of the Board of Directors orlast fiscal year, no executive officer of the Company served as a director or member of the compensation or similar committee of another entity whose director(s) or executive officer(s) serve as a member of the Company'sBoard or the Compensation Committee.

Charters, Code and Guidelines

        The Company's Business Code, Corporate Governance Guidelines and the charters of its Audit Committee, Compensation Committee and Nominations/Corporate Governance Committee are available on the Company's website atwww.ethanallen.com/governance. Any waiver of the Business Code for directors or Named Executive Officers may only be made by the Nominations/Corporate Governance Committee, and any waivers or amendments will be disclosed promptly by a posting on our website. Stockholders may request a copy of any of these documents by writing to: Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, CT 06811, Attn: Office of the Secretary.

Leadership Structure and Board of Directors' Role in Risk Oversight

        The Company defined the role of the lead director, a position which rotates annually. The Board expresses its intent that one person serving as both CEO and Chairman evidences sound management as it allows the assertion of unambiguous authority over the operations of the Company. There is no need to separate the roles of CEO and Chairman since the Company has a suitably empowered independent director who is expressly authorized to exert de facto control of the Company by asserting independent leadership of the Board, increasing the Board's independence over management. The Board formally designated Mr. Dooner, an independent, non-executive director, as its lead director through the Annual Meeting. He organizes and chairs meetings of the independent directors and organizes, facilitates and communicates observations of the independent directors to the CEO, although each director is free to communicate directly with the CEO.

        The Board of Directors believes that the best interests of the Company are served by Mr. Kathwari serving as both Chairman and CEO taking account of his unique long standing stature and investment in the Company and also the Board's utilization of a lead director. The Board of Directors believes that this governance structure provides the basis for clear, efficient executive authority in the Company, especially taking into account the Company's flat management structure, while balancing appropriate oversight by the Board of Directors.




        The Board of Directors oversees an enterprise-wide approach to risk management, designed to identify risk areas and provide oversight of the Company's risk management, to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and to enhance stockholder value. A fundamental part of the Board's risk management is to understand the risks the Company faces and what steps management is taking to manage those risks. The Board of Directors participates in discussions with management concerning the Company's overall level of risk, the Company's business strategy and organizational objectives which are all integral components of its assessment of management's tolerance for risk.

Meetings and Committees of the Board of Directors

        During fiscal year 2014, there were four (4) regularly scheduled meetings of the Board of Directors in addition to the 2013 Annual Meeting of Stockholders. Independent directors also met four (4) times in executive session without management present. The executive sessions were chaired by the lead independent director, currently John J. Dooner, Jr..

        All directors are expected to attend all regularly scheduled and special Board of Directors meetings, independent director meetings and committee meetings, as appropriate. The Board of Directors realizes that scheduling conflicts may arise from time to time which prevent a Director from attending a particular meeting. However, it is the Board's explicit policy that each Director shall give priority to his or her obligations to the Company. All Directors who then held office attended the 2013 Annual Meeting of stockholders. In fiscal year 2014, there was 100% attendance by each Director at each of the four regularly scheduled Board of Directors meetings, five regularly scheduled Audit Committee meetings, three regularly scheduled Compensation Committee meetings, and two regularly scheduled Nominations/Corporate Governance Committee meetings. Our policy is to expect resignation of any Director who is absent from more than twenty-five percent of regularly scheduled Board meetings or committee meetings in a fiscal year. In addition to the regularly scheduled meetings, there were three special Audit Committee meetings.

        The Board of Directors has established three standing committees: the Audit Committee; the Compensation Committee; and the Nominations/Corporate Governance Committee. Committee memberships of each nominee and continuing or current director are set forth below:

Name		Audit Committee		Nominations/Corporate Governance Committee		Compensation Committee		Lead Independent Director
Clinton A. Clark		Chairperson
James B. Carlson		Member				Chairperson
John J. Dooner, Jr.				Member		Member		X
Kristin Gamble		Member				Member
James W. Schmotter		Member		Chairperson
Frank G. Wisner				Member

        Additionally, the Board of Directors determined that all of the members of the standing committees are (i) independent within the meaning of the listings standards of the NYSE, (ii) non-employee directors (within the meaning of Rule 16b-3 under the Exchange Act) and (iii) outside directors (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")). See "Corporate Governance".


AUDIT COMMITTEE REPORT


        The Audit Committee assists the Board in fulfilling its oversight responsibility relating to the Company's financial statements and the financial reporting process, the system of internal accounting and financial controls, the internal audit function, and the annual independent audit of the Company's financial statements. However, management has the primary responsibility for the financial statements and




the reporting process, including the system of internal control. The Company's independent registered public accounting firm, KPMG, has the primary responsibility to independently audit the Company's financial statements and its internal controls in accordance with the auditing standards of the Public Company Accounting Oversight Board. The duties of the Audit Committee include, but are not limited to:

•

appointing and reviewing the performance of the Company's independent registered public accounting firm;



•

assessing the scope and structure of the Company's internal audit function;



•

reviewing the scope of audits to be conducted, as well as the results thereof;



•

pre-approving audit and non-audit services provided to the Company by the independent registered public accounting firm; and



•

reviewing with management and the registered public accountants the Company's quarterly financial filings prior to the filing of its Quarterly Reports on Form 10- Q and the Company's Annual Report on Form 10-K.

        In accordance with SEC regulations, the Audit Committee has approved an Audit Committee Charter, describing the responsibilities of the Audit Committee, (see http://www.ethanallen.com/audit-committee.html). The Board of Directors has concluded that each member of the Audit Committee is independent within the meaning of the listing standards of the NYSE. See "Corporate Governance". The Board of Directors has determined that all Audit Committee members, as required by SEC regulations and NYSE rules, are financially literate with accounting or related finance management expertise, as interpreted by the Board of Directors. The Board of Directors has determined that each member of the Audit Committee is an "audit committee financial expert" as defined under Item 407(d)(5)(ii) of SEC Regulation S-K and as contemplated by Rule 10A-3 of the Exchange Act.

        In fulfilling its oversight responsibilities, the Audit Committee reviewed, with management and KPMG, the audited financial statements contained within the Annual Report on Form 10-K, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures contained in those financial statements. In addition, in compliance with the Sarbanes-Oxley Act of 2002, the Audit Committee reviewed with management and KPMG, the Company's independent registered public accounting firm, the effectiveness of the Company's system of internal control over financial reporting as of June 30, 2014.

        The Audit Committee reviewed with KPMG, who is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgment(s) as to the quality, not just the acceptability, of the Company's accounting principles. The Audit Committee also reviewed such other matters as are required to be discussed under auditing standards of the Public Company Accounting Oversight Board (United States), including Auditing Standards No. 16. In addition, the Audit Committee has received with KPMG the written disclosures required by Independence Standards Board Standard No. 1 and has discussed with KPMG the auditors' independence from management and the Company.

        The Audit Committee discussed with the Company's internal auditors and KPMG the overall scope and plans for their respective audits. The Audit Committee met independently with the internal auditors and KPMG, with and without management present, to discuss the results of their examinations, their evaluations of the Company's system of internal control and the overall quality of the Company's financial reporting practices, which included, but were not limited to, the review of the quarterly Form 10-Q filings and annual Form 10-K filing.




        In reliance on the reviews and discussions referred to above, the Audit Committee approved the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended June 30, 2014 for filing with the SEC.Table of Contents

SECURITY OWNERSHIP OF COMMON STOCK OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		CLINTON A. CLARK, CHAIR JAMES B. CARLSON KRISTIN GAMBLE JAMES W. SCHMOTTER


COMPENSATION COMMITTEE


        The Compensation Committee oversees our compensation program for Named Executive Officers on behalf of the Board of Directors. In fulfilling its oversight responsibilities, the Compensation Committee reviews and discusses with management the Compensation Discussion and Analysis set forth below and recommends to the Board that the Compensation Discussion and Analysis be included in the proxy statements, which are filed with the SEC. For further discussion on the activities of the Compensation Committee see "Compensation Discussion and Analysis"

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Exchange Act requires our executive officers and directors, owners of over 10% of our Common Stock, and some persons who formerly were directors or executive officers, to file reports of ownership and changes in ownership with the SEC and the NYSE and furnish us with a copy of each report filed. Based solely on our review of copies of the reports by some of those persons and written representations from others that all reports were filed or that no reports were required, we believe that during fiscal year 2014 all Section 16(a) filing requirements were complied with in a timely fashion.

Security Ownership of Common Stock of Certain Owners and Management

                The following table sets forth, as of September 23, 2014,21, 2016, except as otherwise noted, information with respect to beneficial ownership of the Common Stock in respect of: (i) each director, director nominee and Named Executive OfficerNEO (as defined herein)above) of the Company; (ii) all directors and Named Executive Officersexecutive officers of the Company as a group; and (iii) based on information available to the Company and a review of statements filed with the SEC pursuant to Section 13(d) and/or 13(g) of the Exchange Act, each person or entity that beneficially owned (directly or together with affiliates) more than 5% of the Common Stock. The Company believes that each individual or entity named has sole investment and voting power with respect to shares of Common Stock indicated as beneficially owned by them, except as otherwise noted. Unless




otherwise noted below, the address for each listed director and Named Executive OfficerNEO is Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, CT 06810.

Name and Address of Beneficial Owner		Shares Beneficially Owned(1)			Common Stock Percentage Ownership(1)
Directors and Executive Officers:
M. Farooq Kathwari(2)			3,388,674			11.4	%
James B. Carlson(3)			5,119			*
Clinton A. Clark(4)			11,235			*
John J. Dooner, Jr.(5)			5,350			*
Kristin Gamble(6)			35,350			*
James W. Schmotter(7)			7,050			*
Frank G. Wisner(8)			16,450			*
Eric D. Koster			0			*
David Moore			0			*
Tracy Paccione(9)			12,020			*
Corey Whitely(10)			32,944			*
Named executive officers and directors as a group (Notes 2 - 10)			3,514,192			11.9	%
Other Principal Stockholders:
Royce & Associates, LLC(11)			3,099,610			10.5	%
BlackRock, Inc.(12)			2,764,543			9.3	%
Odey Asset Management Group Ltd.(13)			2,045,632			6.9	%
T. Rowe Price Associates, Inc.(14)			1,732,146			5.9	%
The Vanguard Group(15)			1,694,110			5.7	%

---

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Name and Address of Beneficial Owner Directors and Executive Officers

​

​

Shares Beneficially Owned (1)

​

Common Stock Percentage Ownership (1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

M. Farooq Kathwari

(2)

2,970,882

10.5%

​

James B. Carlson

​

(3)

​

19,441

​

*

​

Clinton A. Clark

(4)

2,757

*

​

John J. Dooner, Jr.

​

(5)

​

23,388

​

*

​

Domenick J. Esposito

(6)

3,160

*

​

James W. Schmotter

​

(7)

​

14,988

​

*

​

Tara I. Stacom

(8)

3,300

*

​

Corey Whitely

​

(9)

​

34,478

​

*

​

Daniel Grow

(10)

8,409

*

​

Tracy Paccione

​

(11)

​

11,771

​

*

​

Clifford Thorn

(12)

8,367

*

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​

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​

​

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​

​

​

​

​

Named executive officers and directors as a group

​

​

3,100,941

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11.0%

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​

BlackRock, Inc.

(13)

2,973,816

10.5%

​

FMR, LLC

​

(14)

​

2,209,599

​

7.8%

​

Royce & Associates, LLC

(15)

2,791,617

9.9%

​

T. Rowe Price Associates, Inc.

​

(16)

​

1,519,710

​

5.4%

​

The Vanguard Group

(17)

1,934,759

6.9%

​

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​

​

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​

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​

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​

​

​

​

*

Indicates beneficial ownership of less than 1% of shares of Common Stock.

Stock

(1)

Information presented herein for each director and Named Executive OfficerNEO reflects beneficial share ownership and includes stock-based compensation awards and outstanding options (the "Stock Options") granted under the 1992 Stock Option Plan ("Option Plan") which, as of September 23, 2014,21, 2016, are currently exercisable or will become exercisable within sixty (60)60 days by such director or Named Executive Officer,NEO, as applicable. The information provided for other principal stockholders is based solely on the most recently filed statements filed with the SEC pursuant to Section 13(d) and/or 13(g). We have not made any individual determination as to beneficial ownership of any such other principal stockholders.



(2)

Includes (a) 2,137,5912,140,672 shares of Common Stock owned directly by Mr.M. Farooq Kathwari, (b) 494,629295,645 shares owned indirectly, by Mr. Kathwari, (c) 42,0008,565 shares of restricted Common Stock,held in the Ethan Allen Retirement Savings Plan, (d) 126,000 stock units as noted under 2016 Nonqualified Deferred Compensation and (e) options to purchase 580,000400,000 shares of Common Stock, (e) 8,454common stock.

(3)

Includes (a) 14,924 shares held indirectlyowned directly by Mr. KathwariJames B. Carlson and (b) options to purchase 4,517 shares of common stock.

(4)

Includes (a) 2,757 shares owned directly by Clinton A. Clark.

(5)

Includes (a) 11,100 shares owned directly by John J. Dooner, Jr. and (b) options to purchase 12,288 shares of common stock.

(6)

Includes (a) 2,000 shares owned directly by Domenick J. Esposito (b) options to purchase 1,160 shares of common stock.

(7)

Includes (a) 2,700 shares owned directly by James W. Schmotter and (b) options to purchase 12,288 shares of common stock.

(8)

Includes (a) 3,300 shares owned directly by Tara I. Stacom.

(9)

Includes (a) 2,917 shares owned directly by Corey Whitely, (b) 1,561 shares held in the Ethan Allen Retirement Savings Plan and (f) 126,000 stock units awarded under a previous employment agreement.



(3)

Includes (a) 4,000 shares of Common Stock owned directly by Mr. Carlson, and (b) 1,119(c) options to purchase 30,000 shares of Common Stock.

common stock.

(4)(10)

Includes (a) 2,500 shares of Common Stock owned directly by Mr. Clark, and (b) options to purchase 8,735 shares of Common Stock.



(5)

Includes (a) 1,000 shares of Common Stock owned directly by Mr. Dooner, andDaniel Grow, (b) 4,350 options to purchase2,284 shares of Common Stock.




(6)

Includes (a) 10,000 shares of Common Stock owned directly by Ms. Gamble, and (b) options to purchase 25,350 shares of Common Stock.



(7)

Includes (a) 2,700 shares of Common Stock owned directly by Mr. Schmotter, and (b) 4,350 options to purchase shares of Common Stock.



(8)

Includes (a) 6,100 shares of Common Stock owned directly by Mr. Wisner, and (b) options to purchase 10,350 shares of Common Stock.



(9)

Includes (a) 668 shares of Common Stock owned directly by Ms. Paccione, (b) options to purchase 11,250 shares of Common Stock, and (c) 102 shares of Common Stock held indirectly by Ms. Paccione in the Ethan Allen Retirement Savings Plan.

Plan and (c) options to purchase 5,125 shares of common stock.

(10)(11)

Includes (a) 2,917668 shares of Common Stock owned directly by Mr. Whitely,Tracy Paccione, (b) options to purchase 28,500103 shares of Common Stock, and (c) 1,527 shares of Common Stock held indirectly by Mr. Whitely in the Ethan Allen Retirement Savings Plan.

Plan and (c) options to purchase 11,000 shares of common stock.

(11)(12)

Royce & Associates, LLCIncludes (a) 1,109 shares owned directly by Clifford Thorn, (b) 1,183 shares held in the Ethan Allen Retirement Savings Plan and (c) options to purchase 6,075 shares of common stock.

(13)

BlackRock, Inc. ("Royce"BlackRock"), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940,a parent holding company, beneficially owned 3,099,6102,973,816 shares of Common Stock as per their Schedule 13G filing with the SEC on January 9, 2014. The8, 2016. BlackRock's address of Royce is 745 Fifth Avenue,55 East 52nd Street, New York, New York 10151.

NY 10055.

(12)(14)

BlackRock, Inc. ("BlackRock"),FMR, LLC, a parent holding company, or control person in accordance with Rule 13d-1(b)(1)(ii)(G), beneficially owned 2,764,543 shares of Common Stock as per their Schedule 13G filing with the SEC on January 31, 2014. The address of BlackRock is 40 East 52^nd Street, New York, NY 10022.



(13)

Odey Asset Management Group Ltd., an investment advisor in accordance with §240.13d-1(b)(1)(ii)(E), and a parent holding company in accordance with §240.13d-1(b)(1)(ii)(G, beneficially owned 2,045,632 shares of Common Stock as per their Schedule 13G filing with the SEC on January 22, 2014. The address of Odey Asset Management Group Ltd. is 12 Upper Grosvenor Street, London, United Kingdom W1K 2 ND.



(14)

T. Rowe Price Associates, Inc. ("T. Rowe Price"), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, beneficially owned 1,732,146 shares of Common Stock as per their Schedule 13G filing with the SEC on February 11, 2014. The address of T. Rowe Price is 100 E. Pratt Street, Baltimore, Maryland 21202.



(15)

The Vanguard Group, an investment advisor in accordance with §240.13d-1(b)(1)(ii)(E), beneficially owned 1,694,1102,209,599 shares of Common Stock as per their Schedule 13G filing with the SEC on February 12, 2014. The2016. FMR, LLC's address is 245 Summer Street, Boston, MA 02210.

(15)

Royce & Associates, LLC ("Royce"), an investment advisor, beneficially owned 2,791,617 shares of Common Stock as per their Schedule 13G filing with the SEC on February 8, 2016. Royce's address is 745 Fifth Avenue, New York, NY 10151.

(16)

T. Rowe Price Associates, Inc. ("T. Rowe Price"), an investment advisor, beneficially owned 1,519,710 shares of Common Stock as per their Schedule 13G filing with the SEC on February 12, 2016. T. Rowe Price's address is 100 E. Pratt Street, Baltimore, MD 21202.

(17)

The Vanguard Group ("Vanguard"), an investment advisor, beneficially owned 1,934,759 shares of Common Stock as per their Schedule 13G filing with the SEC on February 10, 2016. Vanguard's address is 100 Vanguard Blvd., Malvern, PennsylvaniaPA 19355.




Table of Contents


COMPENSATION COMMITTEE REPORT


PROPOSAL 6:    TO APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION

                Our executive compensation program is designed to facilitate long-term stockholder value creation. Our focus on pay-for-performance and on corporate governance promotes alignment with the interests of the Company's stockholders.

                The Company seeks stockholder approval, on a non-binding basis, of the compensation of our Named Executive Officers, or "NEOs", as disclosed in this Proxy Statement pursuant to Section 14A of the Exchange Act, commonly known as a "Say-on-Pay" vote. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the compensation policies and practices described in this Proxy Statement.

                At the Company's 2015 Annual Meeting of Stockholders, our stockholders were asked to approve the Company's fiscal 2014 executive compensation programs. A substantial majority (80%) of the votes cast on the "Say-on-Pay" proposal at that meeting were voted in favor of the proposal. The Compensation Committee believes that these results reaffirm our stockholders' support of the Company's approach to executive compensation.

                In deciding how to vote on this proposal, the Board encourages you to read the Compensation Discussion and Analysis and Compensation Table sections. The Compensation Committee has made numerous enhancements in recent years to strengthen the link between pay and performance, further link compensation to our business and talent strategies and clearly detail the rationale for pay decisions.

                For the reasons outlined above, we believe that our executive compensation program is well designed, appropriately aligns executive pay with Company performance and incentivizes desirable behavior. Accordingly, we are asking our stockholders to endorse our executive compensation program by voting on the following resolution at the Annual Meeting:

"RESOLVED, that the shareowners approve, on an advisory basis, the compensation of the Company's Named Executive Officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the Compensation Tables and the related narrative."

                This proposal allows our stockholders to express their opinions regarding the decisions of the Compensation Committee on the prior year's annual compensation to the NEOs. Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareowners' opinions and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. Further, this advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to improve the alignment of the Company's executive compensation programs with the interests of Ethan Allen and its stockholders, and is consistent with our commitment to high standards of corporate governance.

The Board of Directors unanimously recommends a voteFOR the approval of the compensation of the Company's Named Executive Officers.

COMPENSATION COMMITTEE REPORT

                The Compensation Committee oversees our compensation program for our Named Executive Officers ("NEOs") on behalf of the Board.Board of Directors. In fulfilling its oversight responsibilities, the Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth below.

        In reliance on the review and discussion referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our fiscal 2014this proxy statement which will be filed withand the SEC.Company's Annual Report.

		JAMES B. CARLSON, CHAIR JOHN J. DOONER, JR. KRISTIN GAMBLEDOMENICK J. ESPOSITO




Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS


COMPENSATION DISCUSSION AND ANALYSIS


Overview

                The purpose of this Compensation Discussion and Analysis is to provide material information about the Company's executive compensation objectives and policies for its Named Executive OfficersNEOs and to put into perspective the tabular disclosures and related narratives. ForThe non-binding advisory proposal regarding compensation of the Company's fiscal 2014NEOs submitted to stockholders at our 2015 Annual Meeting of Stockholders, the Ethan Allen Compensation Committee continues to follow, and refine, the policies and procedures established after the Company's 2012 Annual Meeting. These policies and procedures resulted in markedly favorable responses from the stockholders to each initiative proposed at the 2013 Annual Meeting with the "Say On Pay" vote in 2013 receiving approval of 76%was approved by over 80% of the votes cast. The Committee believes this favorable outcome conveyed our stockholders' support of our executive compensation programs and the Committee's decisions. After considering the stockholder vote and other factors in its annual review of our total executive compensation programs, the Committee made further refinements in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company's say-on-pay votes when conducting its regular evaluations of the program and making future compensation decisions for the NEOs.

Executive Summary

We continue to have strong alignment between our executive compensation and the interests of our stockholders. Fiscal 2016 was a strong year for the Company.

•

Consolidated net sales increased 5.2%

•

Operating income of $89.2 million increased $23.3 million, or 35.3%

•

EPS of $2.00 per diluted share increased 57.5%

•

The Company further enhanced stockholder value during fiscal 2016:

o

paid $16.6 million in dividends

o

repurchased 697.8 million shares for $19.3 million

o

invested $23.1 million in capital expenditures and acquisitions



Alignment Of Pay With Performance

                In 2016, the Compensation Committee continued to focus on the alignment of the interests of the NEOs with those of our Company and stockholders, and the Compensation Committee took the following steps for 2013:fiscal 2016:

•

Detailed the Front Loading Impact on CEO Compensation.  The one-time numerical impacts on the fiscal 2012 Summary Compensation Table driven by the requirement to report inWith Mr. Kathwari's 2011 Employment Agreement expiring within a single year, (2012) the estimated fair value of the long-term equity incentives granted to the Company's CEO under the five year term ofand after evaluating executive compensation and incentive practices that have evolved since the 2011 Employment Agreement. This front loadingAgreement was first put in place, and also considering the views of equity compensation accounted for more than half ofleading stockholder advisory services, the CEO's reported fiscal 2012 total compensationCompensation Committee in 2015 initiated, negotiated and, factorson October 1, 2015, effective July 1, 2015, entered into the sharp reduction in the CEO total2015 Employment Agreement, of which its incentive compensation for both fiscal 2013 and 2014 as compared to 2012.components were subsequently approved by stockholders at our 2015 Annual Meeting of Stockholders.



•

Explained the CEO Voluntary Compensation Reductions.  The actions taken voluntarily by the Company's CEO to place a cap or maximum on future incentive performance bonus payments to the CEO for fiscal periods 2013 through 2016 under the 2011 Employment Agreement. The voluntary reduction in 2013 and 2014 of $533,000 and $622,656, respectively, along with the elimination of the front-end loading of the CEO's equity compensation reduced the CEO's 2013 total compensation by 54% compared to fiscal 2012, and reduced the incentive performance bonus 26% during fiscal 2014 compared to the amount the CEO would have received under the 2011 Employment Agreement.



•

Provided Expanded Background of the 2011 Employment Agreement and Peer Group.  A more thorough explanation of the Compensation Committee's determinations in connection with the approval of the 2011 Employment Agreement in late 2011 and in connection with the 2012 Annual Meeting of Stockholders. In particular, the explanation included the Compensation Committee's reasons for selecting peer group comparables and a discussion of the alignment of the CEO's incentives with stockholder interests.



•

Provided Details of the Go Forward Approach For Performance Based Incentives.  The Compensation Committee, together with the CEO, refined the approach for fiscal 2013 and going forward for formalizing performance-based bonuses and long-term incentives as a prominent compensation component for the Company's Named Executive Officers and other senior executives.



•

Provided Details of the Go Forward Approach For Board Stock and Certain Governance Policies.  The Compensation Committee reviewed and formalized certain board corporate governance matters of the Company that are consistent with its prior and best corporate governance practices.




Compensation Philosophy and Objectives

        The philosophy, objectives, and policies in place in 2013 were further refined to better serve the Company during 2014 and prospectively for 2015.

        During 2014, the Compensation Committee took the following additional steps:

•

Refined Executive Compensation Polices for 2014.In collaboration with the CEOChief Executive Officer and the Board of Directors, the Compensation Committee further refined the executive compensation policies for its CEO and other Named Executive Officers and its Board of Directors policies that formalize the Company's prior and best practices.NEOs with a greater emphasis on incentive-based compensation.



•

ReviewedIn collaboration with the Chief Executive Officer and Approved 2014 Executive Compensation.  Reviewedthe Board of Directors, the Compensation Committee reviewed and approved the compensation determinationsperformance-based incentive bonus payments for fiscal 20142016 for the Company's Named Executive Officers,NEOs.



•

In collaboration with the Board of Directors, the Compensation Committee reviewed and approved performance targets for purposes of incentive bonus payments for the NEOs and performance targets for purposes of fiscal 2016 incentive bonus payments and performance-based equity awards for the NEOs.




Table of Contents

Stock Incentive Plan

                As part of its ongoing review of the Company's compensation programs and consistent with its commitment to reflect best practices in corporate governance standards and compensation practices, the Company's Stock Incentive Plan was amended and restated following the approval of our stockholders at the 2015 Annual Meeting of Stockholders. The Compensation Committee and the Company improved, clarified and updated the Stock Incentive Plan as described below.follows:

•

Clarify Performance Units.      The Stock Incentive Plan was clarified so as to expressly contemplate the issuance of performance restricted stock units.



•

EstablishedRestrict Option Re-Pricing.      The Stock Incentive Plan was modified so as to expressly restrict re-pricing of outstanding stock options at lower than their exercise price, either directly or indirectly.



•

One-Year Service Vesting.      The Stock Incentive Plan was amended so as to generally require service vesting of at least one year from the grant date for stock options under the Stock Incentive Plan.



•

Performance Vesting.      The Stock Incentive Plan provides for performance vesting, and all Options issued to executives reflect performance vesting.



•

Recoupment and Clawback.      The Stock Incentive Plan was amended so as to expressly subject the awards under the Stock Incentive Plan to the Company policies in relation to recoupment or clawback of awards under the Stock Incentive Plan as required by law and Company policy.



•

"Double Trigger" Upon Change of Control.      While existing awards under the Stock Incentive Plan will continue to be subject under their existing agreements as to a vesting acceleration upon a "single trigger" (i.e., a Change of Control), new or replacement grants under the Stock Incentive Plan (including under the 2015 Executive Incentive Compensation.  With the CEO, articulated the Company's future approachEmployment Agreement) will be subject to compensation for its Named Executive Officers.a vesting acceleration upon a "double trigger" (i.e., a Change of Control followed by a termination).

        The Company's executive compensation philosophy is focused on attracting, retaining and motivating a qualified management team and aligning their interests

Chief Executive Officer's Compensation

                In early 2015, the Compensation Committee initiated discussions with the Chief Executive Officer about continuing, modifying or creating a new employment agreement and long-term interests of stockholders. This is accomplished by offering compensation packages which (i) are competitive within the industries in which the Company operates, (ii) are fair and equitable among the executives and (iii) provideperformance incentives for the long-term success and performanceChief Executive Officer. It initiated these discussions despite the 2014 "Say on Pay" vote receiving 95% approval because, under the 2011 Employment Agreement, either the Company or the Chief Executive Officer had the obligation to notify the other by September 30, 2015, if the automatic one year renewal of the employment in the 2011 Employment Agreement would take effect or not as of June 30, 2016. In the view of the Compensation Committee, relying upon this automatic one-year renewal feature was not in the Company's best interests, because an additional one-year term did not provide long-term stability for the Company; during any one-year renewal of the 2011 Employment Agreement, there would be no further long-term equity incentive awards; and during any one-year renewal the previously negotiated voluntary caps on the Chief Executive Officer's annual incentive bonus compensation would have to be revisited and further extended. The Compensation Committee, as well as the Board of Directors, was aware of periodic inquiries from the Company's dealers, distributors, suppliers, business partners and employees about the Chief Executive Officer's long-term commitment to the Company, which the Compensation Committee felt might risk uncertainty and unwarranted disruption in their relationships with the Company. In addition, the Compensation is allocated among base salary, annual discretionary cashCommittee appreciated from its leading stockholders and stockholder advisory firms, as well as public commentary that executive compensation practices have evolved since the time the 2011 Employment Agreement was initiated, especially in the approach to incentive bonus compensation and long-term performance equity incentives,incentives.

                In evaluating and for Named Executive Officers, a non-equity incentive plan compensation component. Cash bonus compensation for managerial employees is discretionary and designed to (i) reward achievement within areas underfinalizing the controlprovisions of the relevant employee, although Company-wide performance is also a significant factor and (ii) retain management for the long-term success and performance of the Company. We consider the cost to the Company when we make decisions regarding total compensation. As the level of responsibility increases, the portion of an executive's compensation tied to the Company's and the executive's personal performance will be proportionately greater. Finally, we endeavor to ensure that the Company's compensation program is perceived as fundamentally fair to all stakeholders.

Background of the 20112015 Employment Agreement,

        The following summarizes the background as to the Compensation Committee's approach to the 2011 Employment Agreement which supplements its discussions and the background provided in the Company's 2011, 2012 and 2013 Proxy Statements and Annual Reports.

        In 2011, the Compensation Committee commenced discussions with its long-serving, respected CEO, because of the impending expiration of the prior employment agreement and the recognition that the advance notice date was approaching, by which time the Compensation Committee believed the CEO's employment with the Company needed to be resolved. The Compensation Committee believeddetermined that the best interests of the Company and its stockholders would be served by cementingestablishing a long-term employment and performance incentive relationship with the CEO. This employment relationship was seen as imperative in viewChief Executive Officer. The Compensation Committee concluded that the compensation and incentive structure of the severe recessionary challenges then confronting2015 Employment Agreement should focus on Company performance measured against targets approved by the Company.Compensation Committee and the Board of Directors, appreciating the evolving views of executive compensation and the views of leading stockholder advisory services.

                Further,The Compensation Committee retained Sibson Consulting, a leading executive compensation advisory firm who had previously worked with the Compensation Committee in connection with the 2011 Employment Agreement. In approaching the 2015 Employment Agreement, the Compensation Committee recognized that:

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The economic turbulence of the recession and global financial crises were very disruptive and threatening to the Company's furniture and home furnishings business. Corporate survival required focused, aggressive restructuring led by the CEO.



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The CEO had initiated and was in the midst of leading a very substantial restructuringMany of the Company's operations.essential business relationships with distributors, dealers, suppliers and business partners, as well as potential future marketing opportunities, depend heavily upon the long-standing personal relationships and connections of the Chief Executive Officer. Most of the Company's store openings outside the United States in the past year have resulted from personal contacts and relationships of the Chief Executive Officer. The Company's relationships are not typically cemented by long-term, tightly bound distributor, dealer and franchise contracts. For the Company, its Chief Executive Officer is closely associated with the Company, its iconic brand and long-standing business relationships. The Company's




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long-serving, widely known Chief Executive Officer and his reputation and relationships through the Company and its retailers and the furniture industry, as well as his linkage to that brand name, is not, in the view of the Compensation Committee, rivaled by companies within the peer group. For the Compensation Committee, these considerations underscore a unique approach for the Company to the 2015 Employment Agreement that may not be applicable to future chief executive officers or comparable chief executive officers in its peer group.

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The Compensation Committee recognized that the Company had withstood many of the recessionary challenges that had ledCompany's executive management and administrative staff is relatively and uniquely flat and lean as compared to bankruptcies within the furniture and home furnishings industry.



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The Compensation Committee believed that the Company's business during the early recession years had held up and performed relatively better than most of its peers in the recession.view of the Compensation Committee, who generally have deeper, higher cost executive staffing. This efficient management structure depends on the Chief Executive Officer acting decisively and knowing all parts of the Company's operations with a company-wide perspective of the center of this flat, lean management structure. For the Compensation Committee, these considerations underscore a unique approach for the Company to the Chief Executive Officer that may not be applicable to future chief executive officers or comparable chief executive officers in its peer group.



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The Company manages and operates using a very flat management infrastructurevertically integrated business, featuring manufacturing, merchandising, distribution, marketing and retailing through Company-owned and independent stores, which places substantial pressureenables the Company to provide a differentiated, customized, high-service, interior design focused approach to customers, as contrasted to many of the Company's furniture industry competitors and multiple responsibilitiespeers that focus mostly on importing standardized products from the CEOFar East and marketing them in connection with directing the strategic and operational activities of merchandising, marketing, advertising, retailing,U.S. For the Compensation Committee, this organizational differentiation from peers requires an executive, like the Chief Executive Officer, who can manage manufacturing and operations.production, in addition to the merchandising and marketing background of executives at many competitors and peers.



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In fiscal 2014 and 2015, the Compensation Committee recognized that the Chief Executive Officer had initiated and led a substantial repositioning of the Company's manufacturing, merchandising and products, as well as the Company's retail footprint and website and technology platform. With these major on-going operational changes, the Compensation Committee believed that the Company and its stockholders would be benefitted by the long-term commitment of the Chief Executive Officer.



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The Compensation Committee recognized that from fiscal 2011 through fiscal 2015 the Company steadily improved operating income, increasing from $31.9 million to $65.9 million (a 20% compound annual growth rate) and made steady debt reduction over such five fiscal years (total debt payments of $210.4 million), which has not been fully reflected in the Company's share price (including relative to total stockholder return). Appreciating that this steady financial performance showed recovery from the great recession, the Compensation Committee believed in approaching the 2015 Employment Agreement that the best interests of the Company's stockholders would be served by a compensation package based on improved operating results and improved per share operating results, as identified annually by the Compensation Committee and the Board, and thus capital efficiency.

Base Compensation Under 2015 Employment Agreement. For the 2015 Employment Agreement, the Compensation Committee determined to continue, without increase or guaranteed adjustment, the base salary under the 2011 Employment Agreement of $1,150,000 per annum, during the five-year term of the 2015 Employment Agreement commencing July 1, 2015.

Non-Equity Incentive Compensation Under 2015 Employment Agreement. For the 2015 Employment Agreement, the Compensation Committee determined to provide that future annual non-equity incentive payments will be based on annual goals set annually by the Company, the Compensation Committee and the Board of Directors based on target earnings results consistent with market practices and the practices after all of the companies in the Company's peer group. More specifically, the annual incentive compensation payments under the 2015 Employment Agreement will provide for a target level of $750,000 (approximately 65% of base salary), based upon an Annual Adjusted Operating Earnings target, set annually by the Compensation Committee or the Board of Directors within 90 days of the beginning of each fiscal year. If the Compensation Committee or the Board of Directors fails to establish a target for a fiscal year, the target will be 5% improvement over the Annual Adjusted Operating Earnings for the preceding fiscal year. Annual Adjusted Operating Income consists of consolidated operating income as set forth in the Company's consolidated statement of comprehensive income, adjusted by (1) nonrecurring, extraordinary or unusual events, (2) annual bonuses, (3) share-based compensation expense and (4) the effects of business combinations. For fiscal 2016 nonrecurring, extraordinary or unusual events consisted of gains and losses on sale




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on real estate, and restructuring charges. Incentive compensation payments will be earned according to performance on a directional payout schedule as follows:

Directional Non-Equity Incentive Compensation Payout Schedule
(Linear/Scaled)

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Achievement Level

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Performance (as Percentage of Adjusted Operating Earnings Target)

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Payout Amount

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Threshold

80 - 85%

$375,000

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Target

100%

$750,000

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Maximum

120 - 130%

$1,700,000

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                The Compensation Committee or Board of Directors has the right to make a discretionary incentive compensation payments in the case of extraordinary economic circumstances, including circumstances when such performance metrics were not satisfied, in the best interests of the Company. In the view of the Compensation Committee, any risk of instability resulting fromthis incentive bonus compensation structure in the departure2015 Employment Agreement aligns the incentive compensation incentives of the Chief Executive Officer with the earnings objectives of the Company, as confirmed by the Compensation Committee and Board of Directors, and is consistent with companies within its peer group.

Long-Term Stock Performance Unit Awards Under the 2015 Employment Agreement. In connection with the 2015 Employment Agreement, the Compensation Committee focused on strong weighting of performance-based equity awards (and not service-based options) that were earned if the Company performed against targets set by the Compensation Committee and Board of Directors and are determined on a per share basis in order to reward capital efficiency.

                Accordingly, for the 2015 Employment Agreement, the Compensation Committee determined to revise the structure of long-term stock incentives, such that all of future long-term incentive value would be delivered through performance-based restricted stock, which the Compensation Committee believes is more performance-based than many peers, who deliver meaningfully less in long-term incentive value through performance-based restricted stock awards. In doing so, the Compensation Committee considered whether the long-term equity incentives should be measured by stock price metrics or operating performance metrics. After deliberating with its consultants, the Compensation Committee determined to utilize operating performance metrics because they focused on internal performance, not extrinsic factors that move stock and stock market prices, and because reviews of peer practices did not reflect a widespread focus on stock market returns to compensate their executives.

                The 2015 Employment Agreement provides as follows:

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Annual awards of 65,000 per annum of performance-vested restricted stock units ("Performance Units") over five years (325,000 total Performance Units, which may increase to 406,250 of Performance Units, based upon performance as described below) granted annually within 90 days of the beginning of the fiscal year.



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Performance vest (not service vest) the Performance Units by reference to performance goals set for each award (within 90 days of grant date) based on Adjusted Operating Earnings Per Share target for each of the upcoming two fiscal years and cumulatively for the upcoming three fiscal years, set annually by the Compensation Committee and the Board of Directors within 90 days of the beginning of each fiscal year. If either the two-year or cumulative three-year target is accomplished, then the percentage of Performance Units vested would be determined by reference to the higher performance accomplishment percentage. Goals for each annual grant are set by the Compensation Committee or the Board within 90 days of the beginning of each fiscal year. The Performance Units would be earned according to performance on a directional payout schedule as follows:


Directional Performance Unit Schedule
(Linear/Scaled)


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Achievement Level

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Performance (as Percentage of 2 or 3 Year Performance Equity Target)

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Percentage of Performance Units Earned

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Amount of Performance Units Earned (Per Annual Grant)

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Threshold

80 - 85%

50%

32,500

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Target

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100%

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100%

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65,000

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Maximum

115 - 120%

125%

81,250

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              Total Compensation Level and Mix.    The portion of total compensation delivered in the form of base salary and benefits is intended to provide a competitive foundation and fixed rate of pay for the work being performed by each named executive officer and the associated level of responsibility and contributions to the Company. The compensation opportunity beyond those pay elements is at risk and must be earned through achievement of annual goals, which represent performance expectations of the Board and management and long-term value creation for stockholder. The Committee believes that the proportion of compensation designed to be delivered in base salary versus variable pay depends on the executive's position and the ability of that position to influence overall Company performance. The more senior the level of the executive, the greater is the percentage of total pay opportunity that is variable. The Compensation Committee believes that the 2015 Employment Agreement does not reflect any increase in total compensation value as compared to the 2011 Employment Agreement, and substantially shifts our Chief Executive Officer's compensation structure to a performance incentive structure, as compared to both the 2011 Employment Agreement and the Company's peers. In considering the overall compensation opportunities provided under the 2015 Employment Agreement, the Compensation Committee recognizes that the targeted total compensation opportunity level places our Chief Executive Officer below the median total compensation level of executives within the Company's peer group, but above the median level of a narrower peer group suggested by the stockholder advisory services. The Compensation Committee believes that this positioning is appropriate given that the median revenue of our peer group is higher than the Company's and the median revenue of the stockholder advisory services' peer group is lower than ours. Also, the Compensation Committee believes that the compensation incentives under the 2015 Employment Agreement are strongly performance-based, so they provide and ensure strong Chief Executive Officer alignment with long-term stockholder interests.


CEO was reasonably likely to haveCompensation Components of the
2015 Employment Agreement
based on Target Values




                Overall, the Compensation Committee believes that the performance-based structure of the 2015 Employment Agreement provides a material adverse effect onstrong alignment with the long-term interests of our Company and its stockholders and a strong statement of confidence by the Chief Executive Officer in our Company's future performance. The Compensation Committee believes that the structure of the 2015 Employment Agreement (especially given the fact that all incentives are performance-based) does not create risks for the Company and was notis in the best interestslong-term interest of the Company and its stockholders.