| ☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
| ☒ | No fee required. |
Fee paid previously with preliminary materials. | ||||||
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and | ||||||
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Section III 2023 Notice and Proxy Statement Avery Dennison Corporation | 2023 Proxy Statement SECTION III 
Table of ContentsNOTICE OF ANNUAL
Notice of 2018 Annual Meeting of Stockholders
To Our Stockholders:MEETING OF STOCKHOLDERS
We cordially invite you to attend our 2018 Annual Meeting of Stockholders at the Embassy Suites, 800 North Central Avenue, Glendale, California 91203 on Thursday, April 26, 2018, at 1:30 p.m. Pacific Time. At the meeting, we will conduct the following items of business:
 | February 27, 2023 | ||
| MEETING DATE | April 27, 2023 | ||
| MEETING TIME | 1:30 p.m. Pacific Time | ||
| MEETING FORMAT | Virtual at www.virtualshareholdermeeting.com/AVY2023 | ||
MEETING AGENDA
| 1 | Elect the | ||
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| 2 | Approve, on an advisory basis, our executive | ||
 | Determine, on an advisory basis, the frequency (whether every one, two or three years) with which we will hold advisory votes to approve executive compensation | ||
| 4 | Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year | ||
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| 5 | Conduct any other business properly brought before the meeting or any adjournment or postponement | ||
Our Board recommends that you voteFOR each of theour 10 director nominees in Item 1, andFOR Items 2 and 3. After Dean Scarborough, our Chairman, conducts these items of business at the meeting, Mitch Butier, our President4, and Chief Executive Officer, will discuss our 2017 performance and answer your questions.FOR one year in Item 3.
Stockholders of record as of February 26, 201827, 2023 are entitled to notice of, and to vote at,in connection with, the meeting and any adjournment or postponement thereof. This notice and our proxy materials are being mailed or made available to stockholders on or about March 15, 2023.
We want your shares to be represented and voted. We encourage you to vote promptly as this will save us the time and expense of additional proxy solicitation. As shown on the right, you can vote online, by telephone, by mail or, in certain circumstances, during the meeting.
On behalf of our Board of Directors, management and team members worldwide, thank you for your investment in our company. We look forward to engaging with you during the virtual Annual Meeting.
Vikas Arora
Vice President, Associate General Counsel and
Corporate Secretary
March 9, 2023
Online
You can vote online at www.proxyvote.com by 11:59 p.m. Eastern Time on April 26, 2023. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Telephone
In the U.S. and Canada, you can vote by calling 1.800.690.6903 by 11:59 p.m. Eastern Time on April 26, 2023. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Mail
You can vote by mail by completing, dating and signing your proxy card and returning it in the postage-paid envelope or otherwise to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.
During Meeting
Unless your shares are held through our Employee Savings Plan, registered holders can vote during the Annual Meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting.
TABLE OF CONTENTS
Avery Dennison Corporation | 2023 Proxy Statement | Table of Contents |
PROXY SUMMARY
This proxy summary includes key messages related to this proxy statement and does not contain all the information you should consider before voting. We strongly encourage you to read the entire proxy statement before voting.
INFORMATION REGARDING ANNUAL MEETING
Distribution of Proxy Materials
We will be mailingmail our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials on the Internet,online, on or beforeabout March 15, 2018.2023. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will mail you our 2018 proxy statement; 2017 annual2022 integrated report, which includes a letter to stockholders from our ChairmanChairman/Chief Executive Officer (CEO) and President/CEO;Chief Operating Officer (COO); our 2022 annual report; our notice and proxy statement for the 2023 Annual Meeting of Stockholders (the “Annual Meeting”); highlights of our strategies, businesses, financial performance and continued progress as it relates to environmental, social and governance (ESG) matters; and a proxy card on or about March 16, 2018.card.
We want your shares to be representedTime, Date and voted. You can vote as shown in the chart below.
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On behalfFormat of the Board of Directors, management and employees of Avery Dennison, thank you for your continued support.
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Avery Dennison Corporation| 2018 Proxy Statement |Table of Contents
This section summarizes information described in greater detail in other parts of this proxy statement and does not contain all the information you should consider before voting. We encourage you to read the entire proxy statement before voting.
TIME AND LOCATION OF ANNUAL MEETING
The Annual Meeting will take place at 1:30 p.m. Pacific Time on April 26, 201827, 2023. To allow more stockholders to attend without the time and expense of doing so in person, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2023 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials or proxy card.
Online access to the live audio webcast of the Annual Meeting will open at 1:15 p.m. Pacific Time to allow time for you to log in and test your device’s audio system. We encourage you to access the Embassy Suites, 800 North Central Avenue, Glendale, California 91203.meeting in advance of its designated start time as we plan to begin the meeting promptly. For additional instructions on how to attend the virtual Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
ITEMS BEING VOTED ON AT ANNUAL MEETING
Items Being Voted on During Annual Meeting
You are being asked to vote on the items of business shown below atduring the Annual Meeting. Our Board of Directors (our "Board"“Board”) recommends that you vote FOR all 11each of our 10 director nominees, FOR Items 2 and 4, and FOR one year in Item 3.
Item | Board Recommendation | Vote Required | Discretionary Broker Voting | Page Reference | ||||||||
| 1 | Election of directors |  | FOR each nominee | Majority of votes cast |
No |
39 | ||||||
| 2 | Advisory vote to approve executive compensation | | FOR |
Majority of shares represented and entitled to vote |
No |
50 | ||||||
| 3 | Determination, on an advisory basis, of the frequency (whether every one, two or three years) with which we will hold advisory votes to approve executive compensation | | FOR 1 year | Plurality of shares represented and entitled to vote | No | 51 | ||||||
| 4 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for FY 2023 | | FOR | Majority of shares represented and entitled to vote | Yes | 92 | ||||||
Voting Prior to or During Annual Meeting
You may vote your shares by submitting a proxy in advance of the twoAnnual Meeting or, in certain circumstances, voting during the meeting. You may not vote during the meeting if your shares are held through our Employee Savings Plan. Beneficial holders may only vote during the meeting if they properly request and receive a legal proxy in their name from the broker, bank or other nominee that holds their shares. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy promptly by following the instructions on your Notice of Internet Availability of Proxy Materials or proxy card.
Avery Dennison Corporation | 2023 Proxy Statement | 1 |
Asking Questions During Annual Meeting
We have designed the virtual Annual Meeting to ensure that you have the same rights and opportunities to participate as you would at an in-person meeting, with an easy-to-use online platform that allows you to attend, vote and ask questions. After the business portion of the Annual Meeting concludes and the meeting is adjourned, our Chairman/CEO will lead a Q&A session during which we intend to answer all questions submitted during the meeting that are pertinent to our company and the items being brought before the stockholder vote. Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. For information on how to submit questions during the Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
OUR COMPANY
We are a global materials science and digital identification solutions company that provides branding and information labeling solutions, including pressure-sensitive materials, radio-frequency identification (RFID) inlays and tags, and a variety of converted products and solutions. We design and manufacture a wide range of labeling and functional materials that enhance branded packaging, carry or display information that connects the physical and the digital, and improve customers’ product performance. We serve an array of industries worldwide, including home and personal care, apparel, e-commerce, logistics, food and grocery, pharmaceuticals and automotive. We employ ~36K employees in more than 50 countries.
During 2022, our company was composed of the following reportable segments: Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS) and Industrial and Healthcare Materials (IHM).
As reflected in our Annual Report on Form 10-K for the fiscal year ending December 31, 2022 (our “2022 Annual Report”), we reorganized our company in the fourth quarter of 2022. We are now composed of two reportable segments: Materials Group, which comprises what was formerly LGM and IHM and reflects our efforts in recent years to leverage their combined operational capabilities and technologies to enhance our ability to win in their respective marketplaces, and Solutions Group, a name change to the former RBIS to better reflect the reach and ambitions of our solutions beyond retail.
STRATEGY OVERVIEW
We are committed to ensuring the long-term success of all our stakeholders – our customers, investors, employees and communities. In 2022, we focused on managing pandemic-driven challenges in China, the Russian war in Ukraine and supply chain disruptions to deliver for our customers; minimizing the impact of significant inflation and sizable currency movements for our investors by implementing pricing and productivity measures and preparing to take additional actions in a recessionary environment; engaging and increasing the diversity, equity and inclusion (DEI) of our workforce; and continuing to support the communities where our team members live and work.
Over the past five years, we have managed through volatility while evolving our aspirations, with a focus on:
Driving outsized growth in high-value product categories to accelerate growth, increase product and solution differentiation, and upgrade our portfolio mix
Growing profitability in our base business to protect and increase our advantageous cost/scale position and drive the profitable growth of our portfolio
Focusing relentlessly on productivity to enhance competitiveness in our base businesses and enable greater investment in high-value product categories, particularly our Intelligent Labels platform
Allocating capital effectively to ensure stockholder returns above our cost of capital and expand economic value added (EVA)
Leading in an environmentally and socially responsible manner to be a force for good in the world, increase the engagement and DEI of our teams, and advance the sustainability of our company
A key aspect of our vision is to leverage our fast-growing Intelligent Labels platform to lead at the intersection of the physical and digital worlds. We plan to realize this vision through segmentation and industry leadership, market-driven innovation, and advancement of digitization and related solutions. These evolved areas of focus reflect key megatrends that present both risks and opportunities for our company as we seek to operate more sustainability by using fewer resources to satisfy demand and become a leader in the emerging digital world in which we believe every item will have a digital identity.
2 | 2023 Proxy Statement | Avery Dennison Corporation |
Our strategies prioritize using our market insights, driving long-term innovation and enhancing the digital capability of our teams, while continuing to execute well in our core businesses that have been key to our success. Our strategic pillars and 2022 achievements are shown below.
STRATEGIC PILLARS
1 | ||||
Drive outsized growth in high-value categories
We aim to increase, both organically and through acquisitions, the proportion of our portfolio in high-value products and solutions that serve markets that are growing faster than GDP, represent large pools of potential profit and leverage our core capabilities. These products and solutions include our Intelligent Labels that use RFID tags and inlays, specialty and durable label materials, graphics and reflective solutions, industrial tapes, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions.
| • | In 2022, we achieved organic sales growth in high-value product categories that outpaced that of our base businesses, with strong growth in external embellishments, specialty labels and Intelligent Labels, and expanded our position in high-value product categories by acquiring two companies and making venture investments in two other companies to advance our capabilities. Over the past five years, we have more than tripled the size of our Intelligent Labels platform, reaching net sales of $0.8 billion in 2022. |
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We strive to create superior long-term, sustainable value for our customers, employees, and investors and improve the communities in which we operate. To realize the business aspects of this vision, we are focused on executing the following key strategies:
•Driving outsized growth in high value categories with higher growth and margin potential (e.g., specialty labels, graphics, industrial tapes and radio-frequency identification (RFID));•GrowingGrow profitably in our basebusiness through tailoredbusinessesWe strive to grow profitability in our base businesses by carefully balancing volume, price and mix; reducing complexity; and tailoring our go-to-market strategies
In 2022, we continued our product reengineering efforts to drive productivity and
disciplined execution;•Maintaining our relentless focusmitigate the impact of rising input costs3
Focus relentlessly on productivity
through continued operational excellenceWe employ product reengineering and enterprise lean
sigma;sigma to expand our margins, enhance our competitiveness (particularly in our base businesses) and•Deployingprovide a funding source for reinvestment to decrease our costs as a percentage of sales• In 2022, we delivered ~$26 million in pre-tax savings from restructuring actions, net of transition costs
4
Effectively allocate capital
effectively by balancingWe balance our investments in organic growth, productivity, and acquisitions and venture investments, while
returningcontinuing to return cash tostockholders.stockholders through dividends and share repurchases and ensure that we maintain ample capacity to investFINANCIAL PERFORMANCE HIGHLIGHTS• In 2022, leveraging our strong balance sheet, we invested $298.5 million in fixed and information technology (IT) capital expenditures to support future growth; completed two acquisitions and made two venture investments for a total of $39.5 million; increased our quarterly dividend rate by ~10%; and repurchased $379.5 million in shares of our common stock
5
Lead in an environmentally and socially responsible manner
Strong Financial PerformanceWe aim to deliver innovations that advance the circular economy, reduce the environmental impact of our operations and
Executionsupply chain, and offer value-creation opportunities. We also seek to make a positive social impact by building a more diverse workforce and inclusive and equitable culture, maintaining operations that promote health and safety, and supporting our communities.• In 2022, we made further progress toward our 2025 sustainability goals and activated plans and began measuring our progress toward our more ambitious 2030 sustainability goals; reduced the environmental impact of our operations and invested in our strategic innovation platforms focused on digital solutions, material circularity and waste reduction/elimination; drove sustainable change in DEI; and leveraged the $10 million we contributed to the Avery Dennison Foundation (ADF) in 2020 to provide meaningful support for our communities
Avery Dennison Corporation | 2023 Proxy Statement
3
With these strategies in mind, our near-term business priorities are to further accelerate the adoption of Strategic Priorities. Fiscal year 2017 marked our sixth consecutive year ofIntelligent Labels, with strong top-line growth, margin expansion and double-digit adjusted earnings per share (EPS) growth. We exceededexecution in new programs; deliver our financial goalsobjectives even in a recessionary environment; advance our sustainable innovation initiatives; and accelerate our digital journey.
PERFORMANCE HIGHLIGHTS
Strong 2022 Performance
In 2022, we delivered impressive results in the face of an extraordinarily challenging environment, reflecting our consistent ability to deliver year-over-year earnings growth despite the concurrent and compounding challenges. Demand volatility increased during the year, which led to customer inventory stocking in the first three quarters and subsequent destocking in the fourth quarter. Our performance reflects our rigorous scenario planning, which allows us to quickly implement actions to address a wide range of financial situations.
Our fiscal year 2022 performance reflects the consistent execution of our strategies, as well as the strength of our markets, our industry-leading positions, the strategic foundations we have laid and our talented team. Our key financial results for the year with the accomplishmentsare shown below and on the following page.below.
•Achieved net sales of approximately $6.6 billion, an increase of 8.7% over the prior year, through a balance of organic growth and acquisitions.•• Reported net sales of $9.0 billion, up 7.5% from $8.4 billion in 2021
Excluding the impact of currency, sales grew by
8.2%; on an organic basis, sales grew by 4.2%13.1%, driven bygrowth in high value product categorieshigher prices andbusinesses serving emerging markets.Avery Dennison Corporation|2018 Proxy Statement|i•Although reported EPS decreased from $3.54 in 2016 to $3.13 in 2017 due to a substantial increase in our provision for income taxes to reflecttheprovisional estimatedimpact ofthe Tax Cuts and Jobs Act (TCJA),acquisitions
• Reported earnings per share (EPS) increased 4.3% from $8.83 in 2021 to $9.21 in 2022
Adjusted EPS increased 2.7% from $8.91 to $9.15; adjusted EPS
increased from $4.02 to $5.00, significantly exceedingfor thehighyear was below the low end of the$4.30-$4.50$9.35 to $9.75 annual guidance range wegaveprovided to investors in February2017.•With net cash provided by operating activities of $650.1 million, delivered free cash flow of $421.7 million.•On reported net income of $281.8 million, achieved return on total capital (ROTC) of 12.9%; adjusted to exclude2022, primarily reflecting significant currency movements during the year• With reported net cash provided by operating activities of $961.0 million, delivered free cash flow of $667.3 million, which was the second highest level in our history but lower than both the record free cash flow of $797.7 million we achieved in 2021 and our 2022 plan of $700+ million, reflecting the impact of supply chain disruptions on inventory
• On reported net income of $757.1 million, achieved return on total capital (ROTC) of 17.4%
Sales change excluding the impact of
the TCJA, ROTC increased to 18.8%.•Continued our disciplined approach to capital allocation by investing $226.1 million in capital expenditures to supportcurrency (sales change ex. currency), organicgrowth and $319.3 million in acquisitions and equity investments, while allocating $155.5 million to dividends and $129.7 million to share repurchases.
Organic sales growth,change, adjusted EPS, free cash flow and ROTC – as well as adjusted EBITDA and adjusted ROTCEBITDA margin, which are used later in this proxy statement – are supplemental non-GAAP financial measures that we provide to investors to assist theminvestors in assessing our performance, and operating trends and defineliquidity. These measures are defined, qualified and reconciled from generally accepted accounting principles in theCompensation Discussion and Analysis United States of America (GAAP) in the last section of this proxy statement. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to the comparable financial measures under generally accepted accounting principles in the United States of America (GAAP) and are reconciled to GAAP inAppendix A of this proxy statement.GAAP.
4 | 2023 Proxy Statement | Avery Dennison Corporation |
On Track to Deliver 2025 Financial Targets. Our 2014-2018Targets
In March 2021, we announced financial goals included an organic sales growth target of 4% to 5%, reflecting confidence in the trajectory of our two largest businesses. We also targeted double-digit adjusted EPS growth. For the first time, we externally communicated a target for ROTC, which has long been a key internal financial metric for our company. We believe that the combination of our growth and ROTC targets captures our value creation objectives, which together are a proxy for economic value added (EVA), one of the performance objectives used in our long-term incentive (LTI) compensation program.through 2025. As shown below, based on our results for the first fourtwo years of this five-year period, we are on track to achieve or exceed our 2018deliver these commitments to our investors.
In 2021-2022, on a two-year compound annual basis (with 2020 as the base period), GAAP reported net sales, operating income, net income and EPS increased by 13.9%, 15.2%, 16.7% and 18.0%, respectively. GAAP reported operating margin in 2022 was 11.9%.
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| 2021-2025 Targets | 2021-2022 Results(1) | ||
Sales Growth Ex. Currency(2) | 5%+ | 15.8% | ||
Adjusted EBITDA Growth(2)(3) | 6.5% | 13% | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.1% in 2022 | ||
Adjusted EPS Growth(2) | 10% | 13.5% | ||
ROTC | 18%+ | 17.4% in 2022 | ||
| ON TRACK TO ACHIEVE 2025 FINANCIAL TARGETS | ||||
(1) | Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. | ||||||
Percentages for | |||||||
Avery Dennison Corporation| 2018 Proxy Statement |ii
In March 2017, we announced our 2017-2021 goals, targeting continued solid organic sales growth and double-digit growth in adjusted EPS on a compound annual basis. While we are only one year into this five-year period, we are on pace to deliver these targets, as shown below.
Percentages for | ||||||||
| (3) | Although adjusted EBITDA growth was not one of |
Reported results for these periods are disclosed in theCompensation Discussion and Analysis section of this proxy statement.Effective Capital Allocation
Disciplined Capital Allocation. Effectively deploying capital is one of our key strategies, and we have been consistently disciplined in our execution by investing in organic growth and productivity and acquiring targeted companies, while continuing to return cash to stockholders through dividends and share repurchases.
We have paid quarterly dividends for decades and raised our quarterly dividend rate by 125% since 2010. As shown in the graph below, over the last five years, we have allocated nearly $2 billion to dividends and share repurchases. Given our increased use of available capital for acquisitions and equity investments, we repurchased fewer shares in 2017 compared to prior years.
We have also allocated capital to investinginvested in our businesses to support organic growth and pursuing targeted acquisitionsacquired companies that supportexpand our strategycapabilities in high-value product categories, increase our pace of increasinginnovation and advance our exposure to high value product categories.sustainability initiatives. Our fixed and IT capital spending in 2022 was ~10% higher than in 2021, primarily reflecting our continued investment in high-value categories, particularly our fast-growing Intelligent Labels platform. During 2017,the year, we successfully completed and integrated the acquisitions of (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturer of specialty films and laminates; (ii) Yongle Tape Ltd.acquired TexTrace AG (“TexTrace”), a China-based manufacturerSwitzerland-based technology developer specializing in custom-made woven and knitted RFID products that can be sewn onto or inserted into garments, as well as Rietveld Serigrafie B.V. and Rietveld Screenprinting Serigrafi Baski Matbaa Tekstil Ithalat Ihracat Sanayi ve Ticaret Limited Sirketi (collectively, “Rietveld”), a Netherlands-based provider of specialty tapesexternal embellishment solutions and related products usedapplication and printing methods for performance brands and team sports in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare products used in the management of wound care and skin conditions.Europe. We also made equitytwo venture investments in two other companies.companies developing technological solutions that we believe have the potential to advance our strategies.
Capital Allocated to Dividends,Share RepurchasesIn 2022, we paid $238.9 million in dividends of $2.93 per share and Acquisitions*
repurchased 2.2 million shares of our common stock. We raised our quarterly dividend rate by ~10% in April 2022.
* Amounts for acquisitions include equity investments in other companies.
Avery Dennison Corporation| 2018 Proxy Statement |iii
Three- and Five-Year Cumulative TSR Outperformance.As shown below, over the last five years, we have deployed nearly $2 billion to acquisitions and venture investments and over $2 billion to dividends and share repurchases.
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*Includes venture investments |
Avery Dennison Corporation | 2023 Proxy Statement | 5 |
Total Stockholder Return (TSR) Outperformance
Our TSR in 2022 was negative, reflecting the broad financial market downturn and consistent with total stockholder return (TSR)the TSR of over 66% in 2017, we delivered cumulative TSR for the 2015-2017 three-year period and the 2013-2017 five-year period that significantly outperformedboth the S&P 500®500 and the median of the S&P 500 Industrials and Materials subsets, (wetwo comparator groups we use to assess our relative performance. We believe that our longer-term TSR is a more meaningful measure than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our performance. Both our three- and five-year TSR outperformed these two comparator groups. We are a member of the Materials subset, butand also share many characteristics with members of the Industrials subset; investors have informed usindicated that they also look at both subsets in evaluating our performance relative performance,to that of our peers.
5-Year Cumulative TSR
1-, 3- and 5-Year TSR
| AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2018 | (20)% | (4)% | (15)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
2021 | 41% | 29% | 24% | |||
2022 | (15)% | (18)% | (11)% | |||
3-Year TSR | 45% | 25% | 32% | |||
5-Year TSR | 72% | 57% | 64% | |||
| * | Based on median of companies in both subsets as of December 31, 2022 |
ESG ADVANCEMENT
We have been consistently focused on advancing our ESG profile, establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustained progress reflects the leadership of our management team and the extensive engagement and oversight of our Board, as well as the commitment and passion of our team members worldwide.
ESG Governance
We believe that strong ESG data governance ensures consistency and accuracy of information we do internally). TSR measures the return we have provideduse to provide transparency to our stockholders, including stock price appreciationstakeholders. We achieve strong governance using the multilayered approach shown on the following page.
6 | 2023 Proxy Statement | Avery Dennison Corporation |
ESG GOVERNANCE STRUCTURE
ESG Data and dividends paid (assuming reinvestment thereof).Reporting
1-, 3- and 5-YEAR TSR | ||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 3-Year TSR | 5-Year TSR | ||||||||
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AVY | 47.5% | 6.2% | 23.8% | 14.6% | 66.7% | 136.4% | 270.3% | |||||||
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S&P 500 | 32.4% | 13.7% | 1.4% | 12.0% | 21.8% | 38.3% | 108.1% | |||||||
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S&P 500 Indus. & Mats.* (median) | 41.0% | 11.7% | (4.7)% | 19.0% | 27.5% | 49.2% | 134.8% | |||||||
*Based on companies in subsets as of December 31, 2017.
Avery Dennison Corporation| 2018 Proxy Statement |iv
We continuedOur ESG data is indexed to the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) frameworks to facilitate comparability with other companies. In 2022, we partnered with a third-party expert to assess our longstanding practice of ongoing engagement and open dialogue with stockholders in 2017. Our engagement program takes place throughoutcurrent disclosures against the year, generally as shown below.
ENGAGEMENT PROCESS
In advancerecommendations of the 2017 Annual Meeting,Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) regarding the information that companies should disclose to allow their stakeholders to assess and price their climate-related risks. We are establishing our plan to enable timely TCFD compliance.
We have also reported to Carbon Disclosure Project (CDP) Climate, Water and Forests since 2010, 2015 and 2016, respectively. We continue to expand the volume of ESG information we contacteddisclose, which has resulted in our 25 largest institutional stockholders, representing almost 50%scores from ESG rating agencies, including CDP, continuing to improve.
Our ESG Program Management Office assesses our reporting in accordance with the external frameworks; engages with ESG rating agencies; manages our data collection and reporting processes; creates assurance guidance and controls; and approves reports, data and information prior to their publication. In addition, we engage an independent third party to validate our energy and GHG emissions data with our Internal Audit team performing walkthroughs of key metrics and providing advisory engagement. After aligning with our Board’s Audit and Finance Committee (the “Audit Committee”) to ensure Board oversight, we formalized our processes for data owner sign-off, ESG Disclosure Committee review and senior management approval.
Our March 2023 ESG Download, published concurrently with this proxy statement on our ESG website at esg.averydennison.com, reflects our focus on these matters. It includes ~140 metrics covering our policies, goals, strategies, risks, outcomes and certifications. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Avery Dennison Corporation | 2023 Proxy Statement | 7 |
ESG Progress
Sustainability is one of our then-outstanding shares. Board members, including our Lead Independent Director,core values and management were made available to answer questions and address concerns regarding our executive compensation and governance programs and the items being brought to stockholder vote at the Annual Meeting. While we received responses from stockholders representing 25% of our then-outstanding shares, none of them felt that there was a need to substantively engage during that busy time.
In the fall, without the time pressures associated with proxy season, we reached outhas long been integral to our 30 largest institutional stockholders, representing nearly 55%way of doing business. To create value for all our then-outstanding shares. Proposed topics for these meetings includedstakeholders, we are advancing our business strategystrategic innovation platforms on digital solutions, material circularity and financial performance, executive compensation matters, Board compositionwaste reduction/elimination, building a more diverse workforce and succession planning,inclusive and progress towards achievingequitable culture, maintaining operations that promote health and safety, and supporting our sustainability goals. We received responses from stockholders representing over 30% of our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
Avery Dennison Corporation| 2018 Proxy Statement |v
The graphics below show the results of our 2017 engagement.
STOCKHOLDER FEEDBACK DURING 2017 ENGAGEMENT
Governance Matters
With respect to matters related to governance, we discussed several topics related to our Board's processes, including succession planning and refreshment, diversity, and evaluations. We also discussed the integration ofcommunities. Integrating sustainability into our business strategies and our Board's oversight of our cybersecurity preparedness. Our stockholders expressed interest in the anticipated completion of our CEO transition and our Board's views on proxy access; both of these matters were subsequently addressed with our December 2017 announcement of Dean Scarborough's retirement as our Executive Chairman at the end of that year and our adoption of proxy access.
Executive Compensation Matters
With respect to matters related to executive compensation, our stockholders expressed support for our program generally and appreciated the more graphical disclosure in our 2017 proxy statement. In addition, we discussed our approach to human capital management, in particular our diversity and inclusion efforts, as well as the linkage between our executive incentive compensation and business strategies. We also provided additional clarification on the market-leveraged stock units (MSUs) included in our LTI program.
Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of investors' evolving expectations on compensation and governance matters. We look forward to maintaining our longstanding practice of connecting with stockholders to ensure our programs continue to align with best practices.
Avery Dennison Corporation| 2018 Proxy Statement |vi
Sustainability is one of our values and has long been part of our approach to doing business. Our aim is to improve the sustainability of our products and processes while helping to create shared value for all of our stakeholders. Key to ourhelped us deliver continued progress has been integrating sustainability into our underlying business strategies andby engaging employees at all levels.
We report onIn the first seven years of the 10-year horizon for our sustainability progress every two years. In September 2017, we issued our 2014-2016 Sustainability Report, summarizing our key achievements during the period and progress towards reaching the 2025 sustainability goals, we sethave made substantial progress, as shown in 2015. We encourage you to review the reportscorecard below. You can find additional information on our website atwww.averydennison.com/sustainability. OurESG progress in our 2022 integrated sustainability goals are shown below and our progress is described underSustainability inannual report being furnished to theGovernance, Sustainability Securities and Social Responsibility sectionExchange Commission (SEC) prior to the distribution of this proxy statement.statement, as well as in our March 2023 ESG Download.
| 2022 SCORECARD OF PROGRESS TOWARD 2025 SUSTAINABILITY GOALS | |||||||||||
 | Focus Area | Goal(s) | Baseline Year | Highlights of Progress | |||||||
Greenhouse Gas Emissions
| Achieve at least 3% absolute reduction | 2015 | Reduced absolute GHG emissions by ~6% in 12 months through Q3 2022 compared to same period in prior year; reduced GHG emissions by ~54% compared to baseline year | ||||||||
 Paper
| Source 100% certified paper, of which at least 70% | 2015 | Of total volume of paper procured in 2022, ~94% was certified, with ~81% of face stock Forest Stewardship Council®-certified | ||||||||
 Films
| Ensure that 70% of | N/A | ~97% of 2022 film volume conformed to Materials Group’s restricted substance list (RSL) | ||||||||
 Chemicals
| Ensure that 70% of | N/A | ~96% of 2022 chemical volume conformed to Materials Group’s RSL | ||||||||
 | Products and Solutions
| Through innovation, deliver above-average growth in sales from sustainability-driven products and Ensure that 70% of our products and solutions conform to, or enable end products to conform to, our environmental and social guiding | 2015 | ~63% of Materials Group (LGM only) and ~62% of Solutions Group (Apparel Solutions only) sales in 2022 came from sustainability-driven products that are responsibly sourced, enable recyclability, contain recycled content or use less material | |||||||
 Waste
| Be 95% landfill-free, with at least 75% of our waste reused, repurposed or Eliminate 70% of the matrix and liner waste from our value | 2015 | Diverted ~93% of solid waste from landfills and recycled ~64% of waste as of Q3 2022, our most recently available data | ||||||||
 People
| Continue to cultivate diverse (40%+ female at level of manager and above), engaged, safe (recordable incident rate (RIR) of <0.25), productive and healthy workforce Maintain world-class safety and employee engagement scores | 2015 | Increased female representation at level of manager and above by ~4% from baseline year, reaching ~36% at YE 2022 Continued world-class safety record, with RIR of 0.23 in 2022, substantially better than manufacturing industry average of 3.3 in 2021 (most recently available data) Employee engagement of 84.5% in 2022 | ||||||||
Transparency
| Commit to goals publicly and be transparent in reporting progress | N/A | Continued enhanced transparency with more frequent and comprehensive ESG disclosures, including on our | ||||||||
 8 | 2023 Proxy Statement | Avery Dennison Corporation |
After completing our biannual materiality assessment in 2020 to prioritize the most relevant environmental and social sustainability challenges then facing our company and our stakeholders, we established new goals and targets related to environmental and social sustainability that we are aiming to achieve by 2030. Within these goals, we have specific targets. Our progress against these targets is shown below.
2022 SCORECARD OF PROGRESS TOWARD 2030 SUSTAINABILITY GOALS
Goals | Targets | Baseline Year | Highlights of Progress | |||
Deliver innovations that | Satisfy the recycling, composting or reuse requirements of | |||||
Solutions Group: 100% within core product categories (printed fabric labels, woven labels, paper, interior heat-transfer labels, packaging and RFID) will meet our third-party verified Sustainable ADvantage Standard | N/A | ~69% (based only on Apparel business) | ||||
Materials Group: 100% of
| N/A | ~60% (based on volume) | ||||
Reduce the environmental | Reduce our scope 1 and 2 GHG emissions by 70% from our 2015 baseline. Work with our supply chain to reduce our 2018 baseline scope 3 GHG emissions by 30%, with an ambition of net zero by 2050 | N/A | Scope 1 and 2: ~54%; as of Q3 2022 Scope 3: Tracking in development | |||
Source 100% of paper fiber from certified sources focused on a deforestation-free future | 2015 | ~94% certified | ||||
Divert 95% of our waste away from landfills, with a minimum of 80% of our waste recycled and the remainder either reused, composted or sent to energy recovery | 2015 | ~89% landfill-free* ~64% recycled | ||||
Deliver a 15% increase in water efficiency at our sites that are located in high or extremely high risk countries as identified in the World Resources Institute Aqueduct Tool | N/A | ~12% | ||||
Make a positive social | Foster an engaged team and an inclusive workplace. • Inclusion Index: 85% • Employee Engagement: 82% • Females in manager level or above positions: 40% • Safety: 0.2 RIR | 2015 | ~85% (N/A in 2015) 84.5% (from 80%) ~36% (from 32%) 0.23 RIR (from 0.31) | |||
Support the participation of employees in Avery Dennison Foundation grants and foster the well-being of the communities in which we | N/A | ~68% of countries in which we operate received a grant |
| * | In 2022, we began to measure our waste diverted from landfill both (i) including direct incineration and (ii) excluding direct incineration to better align our tracking with our 2025 and 2030 goals, respectively. Prior to 2022, we only reported waste including direct incineration. |
Avery Dennison Corporation | 2023 Proxy Statement | 9 |
Avery Dennison Corporation| 2018 Proxy Statement |vii
PEOPLE AND CULTURE
TableOur team’s collective employee experience is driven by our culture, technology and work environment, whether physical or digital. To enhance this experience, we have improved our professional-level onboarding and expanded digital access for our manufacturing and remote employees; enabled the continuous growth of Contentsour employee resource groups (ERGs); enhanced our flexible work arrangements; enhanced and expanded our annual pay equity review process; provided targeted talent development programming; and matured our enterprise leader development program.
2018We have continued our practice of evaluating pay equity, making adjustments where appropriate. Our pay equity review considers total base and bonus compensation. In 2022, we reviewed pay equity with respect to gender for all non-manufacturing employees globally, as well as manufacturing employees in the U.S., and with respect to race/ethnicity for all U.S. employees. We also enhanced pay transparency to reflect evolving laws and regulations.
Diversity is one of our core values, reflecting our commitment to ensuring an inclusive and equitable environment for people of all backgrounds and orientations and our belief that we gain strength from diverse ideas and teams. We hold ourselves accountable for our DEI progress, with quantitative targets for employee engagement, inclusion and global gender diversity in our 2030 sustainability goals. Over the past several years, we have made consistent progress in our DEI journey, as shown below. Our 2022 EEO-1 statistics, which reflect the voluntary self-identification by our U.S. employees, can be found in our March 2023 ESG Download.
| HIGHLIGHTS OF DEI JOURNEY | ||
2015
| • Established goal of 40%+ female at manager level and above • Employees established first ERG (Northeast Ohio Chinese) | |
2016-2020
| • Added Diversity as one of our company values • Established Regional DEI Councils • Launched and expanded gender pay equity review and began evaluating U.S. racial/ethnic pay equity, in each case making adjustments where appropriate • Began requiring gender diverse hiring slate goals globally • Launched unconscious bias training for managers globally • Added inclusion index to employee engagement survey • Expanded flexible work arrangements • Began significantly increasing DEI transparency • Initiated Women.Empowered development program • Joined CEO Action for Diversity & Inclusion • Employees established several new ERGs, including for women and Black/African American, LGBTQ+ and Latinx employees | |
2021
| • Formalized DEI strategy with four global pillars and supporting regional focus areas • Established DEI infrastructure with global leader and dedicated regional resources • Further enhanced pay equity review by engaging third-party expert to analyze U.S. racial/ethnic data • Began annually publishing EEO-1 data • Reached milestone of 20+ ERGs • Implemented more equitable benefits for LGBTQ+ employees and their families | |
2022
| • Made additional progress in female manager+ representation; now on track to achieve 2030 goal of 40% by 2026 • Maintained rate of female departures in manager+ positions despite competitive talent market • Grew ERG membership globally by 30%+ • Improved global female employee engagement score • Launched AD Advocate, pairing select executives to sponsor and mentor top diverse talent • Held listening sessions with manufacturing and female employees to better understand their views | |
10 | 2023 Proxy Statement | Avery Dennison Corporation |
STOCKHOLDER ENGAGEMENT
In addition to our ongoing investor relations program through which our CEO, President/COO, Chief Financial Officer (CFO), business leaders and Investor Relations team engage with our investors throughout the year, for the last 10 years, we have semiannually engaged with stockholders to discuss and solicit their feedback on our strategies, executive compensation and ESG matters.
Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of our investors’ evolving expectations on ESG matters and helps us ensure we continue to reflect best practices. The objectives of our stockholder engagement program are to discuss our company strategies, Board, executive compensation and ESG progress; strengthen our relationships with our top investors; address any concerns raised in prior engagements; and ensure we meet evolving investor expectations.
2022 Engagement Results
In 2022, we contacted our top 30 investors in the spring and the fall. Board members, in particular our Lead Independent Director, and management were made available to answer questions and address concerns. We engaged with every stockholder who accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements.
The results of our 2022 stockholder engagement, based on percentage of shares outstanding, are shown below.
| 2022 ENGAGEMENT RESULTS | ||||
 |  |  |
2022 Engagement Feedback
We discussed the results and feedback from our 2022 engagement with the Talent and Compensation Committee (the “Compensation Committee”) and the Governance Committee of our Board, and also shared highlights with the full Board to supplement the reports from those Committee Chairs.
Governance Feedback
Our 2022 engagements provided feedback on the governance matters described below.
| • | Board composition, including the appropriateness of the balance of skills, qualifications and demographic backgrounds on our Board given our company’s evolving strategies, including our aim to lead at the intersection of the physical and digital worlds and continually advance our sustainability initiatives |
| • | Board refreshment and diversity, including our search for new directors to enhance our tenure distribution and the diversity of skills and demographic backgrounds on our Board |
| • | Board leadership structure, including our rationale for our currently combined Chairman/CEO with a robust Lead Independent Director role |
| • | Our shareholder rights profile as it compares to the governance expectations of our investors |
Environmental Sustainability Feedback
Investors uniformly commended our ESG transparency with the disclosures contained in our integrated annual and sustainability reports, proxy statements and ESG Downloads and on our ESG website at esg.averydennison.com. Environmental sustainability was the primary area of focus for the investors with which we engaged in the fall of 2022. During our conversations, we primarily discussed the matters described below and on the following page.
| • | The strong linkage between environmental sustainability and our company strategies, as well as the ways in which it provides competitive advantage and creates value-creation opportunities, including how we are advancing our Sustainable ADvantage portfolio of solutions that enable recyclability, reduce waste and/or extend product life |
Avery Dennison Corporation | 2023 Proxy Statement | 11 |
| • | The activation of our new 2030 sustainability goals, including our collaboration with CDP to engage our supply chain to begin tracking our scope 3 GHG emissions reduction target |
| • | Climate change and our initial roadmap to achieve net zero GHG emissions by 2050, focusing on the challenges we are facing, including managing supply chain constraints and ensuring energy resiliency, as well as our actions to deliver innovative solutions that enable circularity |
| • | Our engagement with customers, suppliers, regulators and peer companies on reducing the manufacture and use of single-use plastics |
| • | Our water-related efforts with the paper supply chain |
Executive Compensation Feedback
The stockholders with whom we spoke in 2022 expressed support for our executive compensation program, noting that the program aligns with our strategies. In 2021, the consideration of ESG matters in our executive compensation program had been a significant area of investor interest. As a result of those conversations, in our 2022 proxy statement, we disclosed our approach of establishing annual incentive performance objectives based on quantitative financial measures, supplemented by a qualitative assessment of individual performance that includes consideration of ESG-related goals and results. We also explained our Board’s view that our financial success in recent years reflects our ESG progress, noting that we have made substantial ESG progress as part of our commitment to deliver for all our stakeholders. The Compensation Committee appreciated the positive feedback received on its approach, refining the related disclosures contained in the Compensation Discussion and Analysis section of this proxy statement.
Social Sustainability and Talent Management Feedback
Social sustainability and talent management remained areas of investor interest in 2022. In addition to the general feedback on our ESG program noted above, discussions related to these topics included the following matters:
| • | Our Board’s enhanced focus on leadership succession planning, with discussions taking place at multiple 2022 meetings |
| • | The activation of our DEI goals, including our increased investment in Regional DEI Councils and internal infrastructure; advancement in employee engagement through our ERGs; adoption of more inclusive health and welfare benefits; bottom-up approach to regional goal-setting, with actions tailored to the needs of our diverse communities; and aim to be an employer of choice |
| • | Our focus groups across the globe with our manufacturing employees led by company leaders to obtain feedback from our core team members |
| • | The programs we offer to make our company an attractive place to work and challenges recruiting and retaining talent in a tight labor market and generating consistent workforce data from across our global population |
DEI continued to be a significant topic in our engagements. The matters described below were areas of DEI focus.
| • | The ways in which DEI aligns with our business strategies, allowing us to recruit and retain an engaged workforce committed to advancing their success and ours |
| • | The Compensation Committee’s discussion of our DEI initiatives and progress, including pay equity and transparency, at multiple meetings in 2022, with supplemental engagement on these matters by our full Board with our CEO, Chief Human Resources Officer (CHRO), business leaders and DEI leaders |
| • | Our planned launch in 2023 of pulse engagement surveys to supplement our annual employee engagement survey and explore more discrete topics impacting the employee experience of targeted populations |
| • | Our disclosed EEO-1 data, with investors expressing continued interest in learning about the demographics of our workforce, what we believe drives employee engagement, and how our company plans to ensure the continued success of our global teams |
Broadening our talent pool to potentially include skilled workers that may not have a college degree
12 | 2023 Proxy Statement | Avery Dennison Corporation |
Engagement Process
Our stockholder engagement process, shown below, runs throughout the year.
| ENGAGEMENT PROCESS | ||||
2023 DIRECTOR NOMINEES (ITEM 1)
OurMatrix of Board has overseen our strong recent performance, including the following:
•Successful execution of our Board-aligned business strategies, which has driven our strong TSR performance over the most recent three-Skills, Qualifications andfive-year periods of over 136% and 270%, respectively, in each case substantially outperforming the S&P 500;•The closing and integration of five acquisitions and the completion of equity investments in three other companies in the last two years, demonstrating our disciplined approach to acquisitions through which we target companies that can enhance our existing capabilities and increase our exposure to high value product categories; and•Seamless execution of our Board's executive succession planning with the 2016 election of Mitch Butier as our Chief Executive Officer (CEO), after serving as Chief Operating Officer under our previous CEO, Dean Scarborough (who then became our Executive Chairman), as well as the 2017 election of Greg Lovins as our Chief Financial Officer (CFO).
APPOINTMENT OF NEW DIRECTORDemographic Backgrounds
Upon the recommendation of our Governance and Social Responsibility Committee, our Board appointed Andres Lopez as an independent director on our Board, effective February 1, 2017. Mr. Lopez brings deep packaging industry expertise as President and CEO of Owens-Illinois, Inc., after having served in leadership roles of increasing responsibility at the glass container manufacturing company (as described in greater detail in his biography on page 28 of this proxy statement). Mr. Lopez was subsequently elected to our Board by our stockholders at the 2017 Annual Meeting.
RETIREMENT OF EXECUTIVE CHAIRMAN
In December 2017, Mr. Scarborough, then Executive Chairman, notified the Board that he would be retiring from our company at the end of the year. He was our employee through December 31, 2017 and continues to serve as non-executive Chairman.
DIRECTOR NOMINEES
Our director nominees have demonstrated their commitment to diligently executing their fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect each of the nominees shown in the chart below at the Annual Meeting.
| NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bradley A. Alford | 61 | 2010 | Retired Chairman & CEO, Nestlé USA |  | M | M | ||||||||
| Anthony K. Anderson | 62 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | | M | M | ||||||||
| Peter K. Barker | 69 | 2003 | Retired Chairman of California, JPMorgan Chase & Co. | | M | | C | |||||||
| Mitchell R. Butier | 46 | 2016 | President & CEO, Avery Dennison Corporation |  | ||||||||||
| Ken C. Hicks | 65 | 2007 | Retired Chairman, Foot Locker, Inc. | | M | M | | |||||||
| Andres A. Lopez | 55 | 2017 | President & CEO, Owens-Illinois, Inc. | | M | |||||||||
| David E. I. Pyott (LID) | 64 | 1999 | Retired Chairman & CEO, Allergan, Inc. | | M | M | ||||||||
| Dean A. Scarborough | 62 | 2000 | Retired Executive Chairman, Avery Dennison Corporation | | ||||||||||
| Patrick T. Siewert | 62 | 2005 | Managing Director & Partner, The Carlyle Group | | C | | | |||||||
| Julia A. Stewart | 62 | 2003 | Former Chairman & CEO, DineEquity, Inc. | | C | M | ||||||||
| Martha N. Sullivan | 61 | 2013 | President & CEO, Sensata Technologies Holding N.V. | | M | M | |
AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chair LID = Lead Independent Director
Avery Dennison Corporation| 2018 Proxy Statement |viii
Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeingto their roles of providing oversight of our company, as highlighted belowshown by individual in the matrix on the following page. This matrix reflects information received from each of our directors in their responses to our annual director questionnaire. We plan to expand the skills and qualifications shown in greater detailfuture Board matrices.
In 2022, in conjunction with its new director search process, the Governance Committee regularly evaluated and reported to our Board on the skills, qualifications and demographic backgrounds desirable for our Board to best advance our evolving business strategies and serve the interests of all our stakeholders, leading to the recent appointments of Mr. Wagner and Ms. Reverberi to our Board.
Avery Dennison Corporation | 2023 Proxy Statement | 13 |
BOARD MATRIX
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| Governance Guidelines Criteria | ||||||||||||||||||||
Independent | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ||||||||||
Senior Leadership Experience(1) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ||||||||||
Industry Experience(2) | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Global Exposure(3) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Board Experience(4) | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ |
| ✓ | ✓ | ||||||||||
Financial Expertise(5) |
| ✓ |
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| ✓ | ✓ |
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| Industry Expertise | ||||||||||||||||||||
Digital/Technology/Cybersecurity |
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| ✓ | ||||||||||
Retail/Dining |
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| ✓ | ✓ |
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Packaging | ✓ |
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| ✓ |
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| ✓ |
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Consumer Goods |
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| ✓ |
| ✓ | ✓ |
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| ✓ |
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Industrial Goods |
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| ✓ | ✓ |
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Materials Science |
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| ✓ |
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| ✓ |
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| Demographic Background | ||||||||||||||||||||
Tenure (years) | ~6 | ~10 | ~13 | <1 | ~20 | ~15 | ~10 | ~7 | ~18 | <1 | ||||||||||
Gender |
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Woman |
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| ✓ |
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Man | ✓ | ✓ | ✓ |
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| ✓ |
| ✓ | ✓ | ✓ | ||||||||||
Non-Binary |
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Age | 60 | 67 | 66 | 51 | 67 | 70 | 66 | 51 | 67 | 56 | ||||||||||
Mandatory Retirement Year | 2035 | 2028 | 2029 | 2043 | 2028 | 2025 | 2029 | 2044 | 2028 | 2039 | ||||||||||
Race/Ethnicity |
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Black or African American |
| ✓ |
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Hispanic or Latino | ✓ |
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White | ✓ |
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Asian (including South Asian) |
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Native Hawaiian or Pacific Islander |
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Native American or Alaska Native |
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| ✓ |
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LGBTQ+ | ||||||||||||||||||||
Veteran |
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| ✓ |
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Lives/Has Lived Abroad | ✓ |
| ✓ | ✓ |
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| ✓ | ✓ |
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| (1) | Service as president, chief executive officer or in similar senior executive positions. |
| (2) | Experience in the digital/technology, retail/dining, packaging, consumer goods, industrial goods or materials science industries. |
| (3) | Seniority in a global enterprise or significant experience in international markets. |
| (4) | Prior or concurrent service on other U.S. public company boards. |
| (5) | Expertise in accounting, auditing, tax, banking, insurance or investments. |
14 | 2023 Proxy Statement | Avery Dennison Corporation |
Board Performance Highlights
Our Board provides strong oversight of our management team and company, with highlights of its accomplishments in recent years described below.
Supported management in navigating our response to COVID-19, including related labor, freight and inflationary challenges, in 2020 and 2021 and challenges related to COVID-19 in China, the Russian war in Ukraine, supply chain disruptions, sizable currency movements and rising inflation in 2022
Oversaw management’s consistent execution of our business strategies, which delivered performance that exceeded our 2021 financial targets and put us on track to achieving our 2025 financial targets, as well as 2018-2022 TSR of 72%, outperforming the S&P 500 and the median of the S&P 500 Materials and Industrials subsets
Supported management in evaluating potential targets, resulting in the acquisition of 12 companies that added new capabilities, expanded our position in high-value product categories and enhanced our opportunities in the marketplace
Implemented thoughtful Board Matrix includedrefreshment and director succession planning to mitigate the potential impact of concentrated retirements given the closeness inItem 1 — Election age of Directorsa majority of this proxy statement.our directors and further enhance overall Board diversity, resulting in the addition of two new directors in the last year, one of whom increased the gender diversity on our Board
Conducted regular executive leadership development and succession planning, resulting in several experienced leaders promoted to senior executive positions, including our President/COO and President of our newly-formed Materials Group
Increased Board and management focus on advancing our ESG priorities, with consistent progress toward achieving our 2025 sustainability goals and more ambitious 2030 goals, as well as enhanced transparency, resulting in improved scores with key ESG rating agencies
Board Governance Highlights
Our governance program reflects our values and facilitates our Board'sensures independent Board oversight of our company. The highlightsHighlights of our program, which we believe is generally consistent and aligned with the Investor Stewardship Group’s Corporate Governance Principles for U.S. Listed Companies, are shown below.
Stockholder Rights | ✓ Market-standard proxy access ✓ No supermajority voting requirements ✓ No poison pill ✓ No exclusive forum or fee-shifting bylaws | |
Board Governance | ✓ Annual election of directors ✓ Majority voting in director elections ✓ Single class of outstanding voting stock ✓ Directors 90% independent. ✓ Robust Lead Independent Director role ✓ Regular director succession planning and Board refreshment ✓ Continuous executive succession planning and leadership development ✓ Annual Board evaluations ✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted ✓ Best Practice Governance Guidelines ✓ Strong Board and Committee governance ✓ Direct access to management and experts |
✓82% Independent✓Robust Lead Independent Director Role✓Ongoing Director Succession Planning and Board Refreshment✓Executive Succession Planning and Leadership Development✓Annual Board Evaluations✓Mandatory Director Retirement Policy✓Governance Guidelines✓Strong Committee Governance✓Direct Board Access to Management and Experts
ADOPTION OF PROXY ACCESSEngagement
In December 2017, responding to feedback from our largest stockholders, our Board amended our bylaws to permit a stockholder, or a group of no more than 20 stockholders, owning at least 3%Bringing their expertise, certain of our company's stock continuously for at least three yearsdirectors – together with third-party experts – are providing guidance to submit director nominees (up to 20%management in its execution of our Board) for inclusionstrategic initiatives related to digital solutions and food. Mr. Alford serves as chair of our Food Advisory Council; Mr. Wagner and former director Mark Barrenechea are members of our Digital Advisory Council. We are planning to form an Environmental Sustainability Advisory Council in early 2023 to help advance our proxy materials, subjectsustainability initiatives, on which we plan to the terms and conditions described in our bylaws.ask Ms. Reverberi to be a member.
Avery Dennison Corporation | 2023 Proxy Statement | 15 |
APPROVAL OF EXECUTIVE COMPENSATION (ITEM 2)
COMPENSATION DESIGN
Our Board'sThe Compensation and Executive Personnel Committee (the "Compensation Committee") designsoversees our executive compensation program, which is designed to motivate our executives to execute our business strategies and deliver long-term stockholder value. The program delivers pay for performance, with realized compensation dependent on our company achieving challenging annual and long-term financial performancetargets and value creation objectives that advance the interests of our stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |ix
Table of ContentsPerformance-Based Compensation
PERFORMANCE-BASED COMPENSATION
TargetThe Compensation Committee approves the target total direct compensation (TDC) to our executives is comprised of the following three components:
•Base salary;•Performance-based cash incentive under our Annual Incentive Plan (AIP); and•Long-term incentives delivered in performance-based equity awards, consisting 50% of performance units (PUs) and 50% of MSUs.
The Compensation Committee establishes the target TDC of our Named Executive Officers (NEOs) to incent economicstrong operational and financial performance and stockholder value creation, giving consideration to creation. As shown below, the market median, role responsibilities, individual performance, tenure, retention and succession. Thesubstantial majority of this compensation is performance-based,in 2022 was performance based, meaning that our executives ultimately may ultimately not realize some or allthe value of theseat-risk TDC components of compensation if we fail to achieve our financial objectives. In 2017, approximately 84% and 67%
The elements of the TDC offor our CEO and average of our other current NEOs respectively, was performance-based.are shown below.
2017 Target Total Direct Compensation Mix
ELEMENTS OF NEO TARGET TDC
 16 | ||
2023 Proxy Statement | Avery Dennison Corporation |
PAY-FOR-PERFORMANCE
Pay for Performance
Over the past five years, our cumulative TSR has increased over 270% while the total compensation of our CEO has increased by only 13%. InAs shown in the graph below, CEO pay reflectsour CEO’s compensation, as reported in the compensationTotal column in the Summary Compensation Tables for the last four years, generally reflected our cumulative TSR. See the Compensation Discussion and Analysis section of our former CEO, Mr. Scarborough, from 2013 to 2015 and the compensation of our current CEO, Mr. Butier,this proxy statement for 2016 and 2017.more information.
Five-Year CEO Pay and Cumulative TSR
Avery Dennison Corporation| 2018 Proxy Statement |x
COMPENSATION BEST PRACTICES
Executive Compensation Best Practices
As summarized below and described in further detail in theCompensation Discussion and Analysissection of this proxy statement, our executive compensation program aligns with our financial goals and business strategies and reflects best practices.
| Pay-for-Performance | ✓ 88% of CEO’s 2022 target TDC tied to company performance ✓ 71% of CEO’s 2022 target TDC equity-based to incent delivery of long-term stockholder value ✓ Rigorous stock ownership policy; requires CEO to own 6x base salary, 50%+ of which must be vested shares; does not count unvested PUs and only counts 50% of unvested MSUs at target | |
Compensation Best Practices | ✓ Double-trigger equity vesting requires termination of employment after change of control ✓ YE 2022 three-year average burn rate of 0.51%, in line with 50th percentile of S&P 500 companies ✓ Compensation clawback in event of accounting restatement ✓ Independent compensation consultant retained and serving at direction of Compensation Committee ✓ Annual Compensation Committee evaluation and charter review ✓ Periodic formal risk assessment of compensation policies and practices ✓ Releases from liability and restrictive covenants for departing executives ✓ Compensation Committee review of NEO tally sheets reflecting all compensation components | |
✓ No NEO employment contracts ✓ No guaranteed AIP awards; 2022 NEO AIP awards based solely on company financial performance ✓ No excise tax gross-ups on change of control severance benefits ✓ No tax gross-ups on perquisites ✓ No above-market interest rates for deferred compensation ✓ No re-pricing of stock options without stockholder approval ✓ No payout of MSU dividend equivalents unless or until awards vest ✓ No grant of stock options below fair market value ✓ No supplemental retirement benefits |
Avery Dennison Corporation | 2023 Proxy Statement | 17 |
What We Do
DETERMINATION OF FREQUENCY OF ADVISORY VOTES
✓PayTO APPROVE EXECUTIVE COMPENSATION (ITEM 3)
The advisory vote on the frequency of executive compensation votes informs our Board’s determination of whether the vote should occur every one, two or three years. You may also abstain from this vote. In determining to recommend that stockholders vote for
performance — 84%a frequency of every one year, ourCEO's 2017 target TDC was tied to company performance✓Emphasize long-term performance — 66%Board noted that this frequency most closely aligns not only with prevailing market practices, but also with our process of annually engaging with investors on ourCEO's 2017 target TDC was equity-based and tied to delivering long-term stockholder value✓Use double-trigger change of control vesting provisions — vesting requires qualifying termination of employment within 24 months✓Manage share usage conservatively — our three-year average burn rate atexecutive compensation program. Upon theend of fiscal year 2017 of 0.8% was at the 50thpercentile of companies in the S&P 500✓Maintain rigorous stock ownership guidelines — 6x base salary for our CEO (an increase for 2017 from the previous 5x) and 3x base salary for our other NEOs; require holding 50% of ownership level in vested shares✓Able to clawback compensation✓Use an independent compensation consultant retained directly by, and serving at the directionrecommendation of the Compensation Committee,✓Annually evaluateour Board determined that theCompensation Committee and reviewadvisory vote should continue to take place annually, as reflected in itscharter✓Periodically assess risks related to our compensation policies and practices✓Following termination, obtain releases from liability from and impose restrictive covenantsrecommendation that stockholders vote for every one year.This advisory vote is not binding on our
departing executives✓Review tally sheets reflecting allBoard. However, our Board will consider the preliminary results of the vote in determining the frequency of future advisory votes to approve executive compensation,components for our NEOs
What We Don't Do
✗No employment contractsreporting its decision in a Form 8-K filed withour NEOs✗No guaranteed AIP awards✗No excise tax gross-upsthe Securities and Exchange Commission (SEC) onchange of control severance benefits✗No hedgingorpledging of company stock by directors and officers✗No tax gross-ups on perquisites✗No above-market interest rates in our only deferred compensation plan currently open for deferrals✗No re-pricing of stock options without stockholder approval✗No payout of accrued dividendsbeforeperformance conditions are met and underlying equity awards vest✗No granting of stock options below fair market value✗No NEOs with supplemental retirement benefits
RATIFICATION OF APPOINTMENT OF PwC (ITEM 3)
4)
Our Board'sThe Audit and Finance Committee has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 2018,2023 and our Board is seeking stockholder ratification of the appointment. PwC is very well qualifiedwell-qualified to actcontinue serving as our independent registered public accounting firm, and has a deep understanding of our operations and accounting practices. practices, and maintains rigorous procedures to ensure auditor independence, which are overseen by the Audit Committee.
The Audit and Finance Committee considered the qualifications, performance and independence of PwC, the quality of its discussions with PwC, and the fees charged by PwC for the levelscope and quality of services provided during 2017,– as well as considerations to the firm’s tenure as our independent auditor, the committee’s deliberations in 2022 regarding whether to conduct a request for proposal process to consider the selection of a new independent auditor, and its decision instead to benchmark the firm’s fees in 2023 – and determined that the reappointment of PwC isfor 2023 was in the best interest of our company and stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |xi
| 2023 Proxy Statement | Avery Dennison Corporation |
GOVERNANCE
We produce pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. Some pressure-sensitive materials are sold to printers and converters that convert the materials into labels and other products through embossing, printing, stamping and die-cutting. We sell materials in converted form as tapes and reflective sheeting. We also manufacture and sell a variety of other converted products and items not involving pressure-sensitive components, such as fasteners, tickets, tags, radio-frequency identification inlays and tags, and imprinting equipment and related services, which we market to retailers, apparel manufacturers, and brand owners.
Under theWith oversight offrom our Board, of Directors (our "Board"), we have designed our governance program to comply with applicable laws and regulations — including the rules of the Securities and Exchange Commission (SEC)SEC and the listing standards of the New York Stock Exchange (NYSE) — and, as well as reflect best practices as informed by the practices of other large public companies, recommendations from our outside advisors, the voting guidelines of our stockholders and the policies of proxy advisory firms.practices. The key features of our program andare shown in the related benefits to our stockholders are described in theBoard Governance Highlights section of our Proxy Summary.the proxy summary.
We encourage you to visit the Corporate Governanceinvestors section of our website atwww.averydennison.com/corporategovernance,under Corporate Governance, where you can reviewview and download current versions of the following documents:
•Amended and Restated Certificate of Incorporation;•Amended and Restated Bylaws ("Bylaws");•Corporate Governance Guidelines (our "Governance Guidelines");•Charters for our Board's Audit and Finance Committee (the "Audit Committee"), Compensation and Executive Personnel Committee (the "Compensation Committee"), and Governance and Social Responsibility Committee (the "Governance Committee");•Code of Conduct;•Code of Ethics for the Chief Executive Officer (CEO) and Senior Financial Officers; and•Audit Committee Complaint Procedures for Accounting and Auditing Matters.
You can access these documents on our website using the links contained in this proxy statement, but should note that informationshown below. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws (our “Bylaws”)
Corporate Governance Guidelines (our “Governance Guidelines”)
Charters for our Board’s Audit and Finance Committee (the “Audit Committee”), Talent and Compensation Committee (the “Compensation Committee”) and Governance Committee
Code of Conduct
Code of Ethics for the CEO and Senior Financial Officers
Audit Committee Complaint Procedures for Accounting and Auditing Matters
You can also receiverequest copies of these documents, without charge, by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Avery Dennison Corporation| 2018 Proxy Statement |1VALUES AND ETHICS
TableCode of ContentsConduct, Talkabout Toolkits and Supplier Standards
CODE OF ETHICSOur Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. The Code includes messages from our CEO and Chief Compliance Officer; detailed information regarding higher risk areas such as anti-corruption/bribery, antitrust, conflicts of interest, insider trading, anti-harassment, and compliance with laws and regulations; and case studies that provide guidance on situations that raise complex ethical questions. It is available in 33 languages and our leaders affirm their commitment to complying with it when they first join our company and regularly thereafter as part of our compliance certification process described in the Related Person Transactions section of this proxy statement.
We regularly train employees on Code topics in instructor-led sessions held in person or virtually; in 2022, we held ~250 such sessions globally. We also deploy mandatory online training for our computer-based employees; in 2022 we launched one enterprise and five regional online courses using a targeted risk-based approach, with an average completion rate of ~98%. Our three “Talkabout” Toolkits (also available in 33 languages) that we develop and launch each year empower managers to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, which are supplemented by internal social media campaigns that bridge connections among our team members and allow them to engage with their colleagues across the globe around our values and ethics.
Our global supplier standards extend our commitment to our third-party service providers, establishing our expectation that they do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may be reached by (i) calling 800.461.9330 toll-free in the U.S., toll-free outside of the U.S. using the country-specific numbers found in our Code of Conduct, or +1.720.514.4400 direct with applicable charges from any location or (ii) visiting www.averydennison.com/guidelinereport (www.averydennison.com/guidelinereport-eu in Europe).
Avery Dennison Corporation | 2023 Proxy Statement | 19 |
The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We have adopted aprohibit retaliation for good-faith reporting.
Code of Ethics
Our Code of Ethics requires that requires our CEO, Chief Financial Officer (CFO)CFO and Controller/Chief Accounting Officer (CAO) to act professionally and ethically in fulfilling their responsibilities.
•Our CEO, CFO and CAO mustavoid actual or apparent conflicts of interestand disclose any material transaction or relationship that could reasonably be expected to raise a conflict of interest to the Governance Committee.•In addition, they must:•Ensure that our SEC filings are complete and accurateand contain understandable information;•Respect the confidentiality of informationacquired in the course of the performance of their responsibilities;•Employ corporate assets responsibly; and•Report violationsof our Code of Ethics to the Chair of eitherOnly the Audit Committee or theGovernance Committee.
Supporting the principles reflected in our Code of Ethics, our controllership and internal audit functions ensure that we maintain a robust internal control environment, with the leaders of these functions regularly reporting to, and periodically meeting in executive session with, the Audit Committee.
Our Code of Ethics is available on our website atwww.averydennison.com/codeofethics. Only the Audit Committee or Governance Committee can amend or waive the provisions of theour Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014.
CODE OF CONDUCT2014 and have made no exemptions or granted any waivers since its inception.
Our
Code of Ethics Responsibilities |
• Avoid actual or apparent conflicts of interest • Ensure complete and accurate SEC filings • Respect confidentiality of financial and other information • Employ corporate assets responsibly • Report Code of Ethics violations to Chair of Audit or Governance Committees |
Supporting fulfillment of Conduct applies to all ofthese responsibilities, our directors, officerscontrollership and employees. It has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and annually thereafter. We train employees on the Code of Conduct at least bi-annually, in addition to our online training program consisting of four courses per year covering specific risk areas from the Code of Conduct that designated computer-based employees are required to complete. Tointernal audit functions ensure that we maintain a robust internal control environment, with the policies and principles encompassed in our Code of Conduct reach all our employees globally, we also develop and launch three "Talkabout" toolkits (also in over 30 languages) each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, a leader discussion guide and an introductory subtitled video, which includes messages from company leadership.
Recent Code Updates
In 2017, we refreshed our Code of Conduct, which is available on our website atwww.averydennison.com/codeofconduct, with updated leadership messages, additional guidance on certain higher risk areas, and case studies to provide additional guidance on more complex ethical situations. We introduced the updated Code of Conduct with manager and employee communications and created a pocket version for distribution to all employees.
In 2018, we are further updating our Code of Conduct to reflect our recently updated values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. In an effort to reinforce our strengths and bring focus to areas in which we have opportunities to further develop, we streamlined and consolidated our previous values and leadership principles into a single set of eight simplified, more memorable values. Moving forward, these values will help shape our culture and guide our behavior as we continue to grow. Later this year, our "Values in Action" campaign will give our employees around the world an opportunity to demonstrate how they are living these values and helping maintain our collective values-based culture.
Avery Dennison Corporation| 2018 Proxy Statement |2
Ethics-Based Policies
The ethics-based policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to manyleaders of these principlesfunctions regularly reporting to, our third party service providers, establishing our expectation that they also do businessand periodically meeting in an ethical manner.executive session with, the Audit Committee.
Business Conduct GuideLine
Our Business Conduct GuideLine is a hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct, anonymously if they so choose.
The GuideLine may be reached by (i) calling 888.567.4387 toll-free in the United States; 704.731.0166 collect from outside the United States; 10.800.711.0729 toll-free in North China; or 10.800.110.0672 toll-free in South China or (ii) visitingwww.integrity-helpline.com/AveryDennison.jsp (www.financial-integrity.com/AveryDennison.jsp in Europe).
Avery Dennison Corporation| 2018 Proxy Statement |3
The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. All reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.
COMPLAINT PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
The Audit Committee has adopted procedures for the confidential, anonymous submission of complaints related to accounting, accounting standards, internal accounting controls and audit practices.
These procedures relate to complaintsreports of (i) fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements or other financial reports; (ii) fraud or deliberate error in the recording or maintenance of our financial records; (iii) deficiencies in, or noncompliance with, our internal accounting controls; (iv) misrepresentation or false statement to or by a senior officer or accountant regarding any matter contained in our financial records, statements or other reports; or (v) deviation from full and fair reporting of our financial condition. Any person, including third parties, may submit a good faithgood-faith complaint regarding accounting and auditing matters and employees may do so without fear of dismissal or other retaliation. The Audit Committee oversees these procedures, which are available on our website atwww.averydennison.com/auditprocedures. Investigations arewith investigations conducted under the direction of our internal audit department in consultation with our Corporate Secretary, Chief ComplianceLegal Officer law department(CLO) and other members of senior management to the extent appropriate under the circumstances.
Stockholders and other interested parties interested in communicating regarding these matters may make a confidential, anonymous report by contacting the Business Conduct GuideLine as described on the previous page or writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
STOCK OWNERSHIP GUIDELINESPOLICY
2017 Changes to Guidelines
In the fourth quarter of 2016, the Compensation Committee evaluated the effectiveness and market consistency of our executiveOur stock ownership guidelines to ensurepolicy requires that they effectively encourage our Named Executive Officers (NEOs) and other leaders to maintain meaningful ownership of our common stock.
At the Compensation Committee's request, Willis Towers Watson reviewed market practices for stock ownership guidelines at companies with $3 billion to $10 billion in annual revenue. Based on this data, Willis Towers Watson recommended the following changes to our guidelines to make them more stringent and better reflect market practices. Upon the advice of its independent compensation consultant, the Compensation Committee approved the changes shown below to our stock ownership guidelines for NEOs and other executives, effective January 1, 2017.
•Eliminated the share guidelines, maintaining only the salary-multiple guidelines, which effectivelyincreased the minimum number of shares required to achieve compliance.•Increased our CEO's minimum ownership level from 5x to 6xhis annual base salary.•Discontinued counting unexercised stock option gains and began counting only 50% of unvested value of market-leveraged stock units (MSUs)(rather than 100%) for purposes of measuring compliance.•Required holding 50% of the ownership level in vested shares.
In February 2017, upon the advice of Willis Towers Watson, the Compensation Committee also approved the following changes to our non-employee director stock ownership guidelines, effective as of the 2017 Annual Meeting: (i) eliminated the share guideline, maintaining only the dollar guideline, and (ii) discontinued counting unexercised stock option gains towards measuring compliance, counting only shares owned, deferred stock units (DSUs) and unvested restricted stock units (RSUs), consistent with our revised executive stock ownership guidelines. Non-employee directors are also required to hold 50% of their ownership level in vested shares, which includes DSUs.
Avery Dennison Corporation| 2018 Proxy Statement |4
2017 Guidelines
Our revised stock ownership guidelines require that non-employee directors acquire and maintain a minimum equityownership interest in our company equal toof $500,000 and our CEO, Level 2 executives and other NEOsLevel 3 executives acquire and maintain a minimum equityownership interest in our company equal to 6x, 3x and 3x2x their annual base salary, respectively.respectively, at least 50% of which must be held in vested shares.
The values of the following shares/units are considered in measuring compliance with our stock ownership policy: shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federal securities laws; for officers, shares or units held in qualified and non-qualified employee benefit plans, and 50% of the value of unvested MSUs at the target payout level; for non-employee directors, deferred stock units (DSUs); and, for officers and non-employee directors, unvested restricted stock units (RSUs) subject to time-based vesting. Neither stock options nor unvested PUs are considered in measuring compliance.
20 | 2023 Proxy Statement | Avery Dennison Corporation |
IfUntil a director or NEO fails to achieve or make reasonable progress towards achievingofficer achieves his or her minimumrespective ownership level,requirement, he or she is required to retain shares acquired, net of taxes, from the exercise of stock options or vesting of stock awards until such levelthe requirement is met. ExecutivesThey are not allowed to transact in company stock until they certify theirthat they will remain in compliance with our stock ownership guidelinespolicy after giving effect to the transaction they plan to effectuate.
The following shares/unitsCompensation Committee and their related values are considered in measuring compliance with our stock ownership guidelines: (i) shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federal securities laws; (ii) shares or units held in qualified and non-qualified employee benefit plans; (iii) unvested RSUs subject only to time-based vesting; and (iv) 50% of the value of unvested MSUs at the target payout level. Neither unvested PUs nor stock options are considered in measuring compliance.
The Governance Committee reviewed the stock ownership of our non-employee directors in November 2022 and February 2018, noting2023, respectively. Both committees determined that all– excluding our two directors appointed within the last year – our other non-employee directors had average ownership of them had exceeded~11x the minimum ownership level required by the guidelines, except for Mr. Lopez who became a director in February 2017 and has five years to reach the minimum ownership level. The Committee noted that because Mr. Lopez had made reasonable progress towards meeting the applicable level, he was also in compliance. On average, the ownership level of our non-employee directors was approximately 7x the minimum ownership level, requirement, aligning their interests with those of our stockholders and further incenting their focus on creating long-term stockholder value.value creation. All of our non-employee directors have exceeded the minimum ownership level required by the policy, except for Mr. Wagner and Ms. Reverberi, who have five years from the date of their respective appointments to our Board to reach that level. The ownership levels of our non-employee directors in part reflects the inclusion of DSUs for purposes of our stock ownership policy; DSUs represent annual cash retainers deferred at a director’s election. DSUs are included as owned under the policy because they are earned upon receipt and would be paid out to a director who has participated in the deferral program upon his or her separation from our Board.
The Compensation Committee reviewed NEOexecutive stock ownership in October 2017November 2022 and determined that all of our Currentexecutive officers, including all NEOs (with Ms. Baker-Nel having made the required progress toward achieving her minimum ownership level), were in compliance with our stock ownership guidelines, except for Mr. Gravanis.policy. The compliance of our non-employee directors and NEOs with our stock ownership policy as of year-end 2022 is shown below.
| STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||||
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| Minimum Requirement(1) | Shares(2) as of 2022 FYE (#) | Requirement Achieved | Minimum Requirement Achieved | ||||||||||||
Non-Employee Directors | $ | 500,000 |
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Bradley Alford |
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| 45,043 | 16x | ✓ | ||||||||||
Anthony Anderson |
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| 14,945 | 5x | ✓ | ||||||||||
Ken Hicks |
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| 44,995 | 16x | ✓ | ||||||||||
Andres Lopez |
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| 9,504 | 3x | ✓ | ||||||||||
Francesca Reverberi(3) |
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| – | – | – | ||||||||||
Patrick Siewert |
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| 17,534 | 6x | ✓ | ||||||||||
Julia Stewart |
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| 59,442 | 21x | ✓ | ||||||||||
Martha Sullivan |
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| 30,541 | 10x | ✓ | ||||||||||
William Wagner(3) |
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| – | – | – | ||||||||||
Chairman/CEO |
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Mitchell Butier | $ | 7,200,000 | 304,908 | 8x | ✓ | |||||||||||
Level 2 NEOs |
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Deon Stander | $ | 2,100,000 | 53,464 | 5x | ✓ | |||||||||||
Gregory Lovins | $ | 2,100,000 | 59,393 | 5x | ✓ | |||||||||||
Level 3 NEOs |
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Deena Baker-Nel(4) | $ | 915,200 | 7,295 | 1x | – | |||||||||||
Ignacio Walker | $ | 935,826 | 10,551 | 2x | ✓ | |||||||||||
| (1) | Minimum requirements for CEO, Level 2 NEOs and Level 3 NEOs reflect 6x, 3x and 2x, respectively, of year-end 2022 base salary. |
| (2) | Reflects shares/units considered in measuring compliance with our stock ownership policy rather than vested shares, based on the average closing price of our common stock from October 1 to December 31, 2022. |
| (3) | Ms. Reverberi and Mr. Wagner were appointed to our Board in February 2023 and October 2022, respectively, and have five years from their respective date of appointment to achieve the minimum ownership requirement. |
| (4) | Ms. Baker-Nel has five years from her September 2021 promotion to a Level 2 NEO to achieve the minimum ownership requirement. She has made consistent progress toward achieving her requirement. |
Avery Dennison Corporation | 2023 Proxy Statement | 21 |
| COMPLIANCE WITH STOCK OWNERSHIP GUIDELINES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |
| | SHARES AS OF 2017 FYE (#) | GUIDELINE | % OF GUIDELINE | COMPLIANCE | ||||||||
NON-EMPLOYEE DIRECTORS | | | $500,000 | | | | | |||||
Bradley Alford | 32,159 | 695% |  | |||||||||
Anthony Anderson | 13,021 | 281% | | |||||||||
Peter Barker | 55,635 | 1203% | | |||||||||
Ken Hicks | 36,522 | 790% | | |||||||||
Andres Lopez | 2,408 | 52% | | |||||||||
David Pyott | 63,576 | 1374% | | |||||||||
Dean Scarborough | 51,095 | 1105% | | |||||||||
Patrick Siewert | 14,226 | 308% | | |||||||||
Julia Stewart | 52,125 | 1127% | | |||||||||
Martha Sullivan | 19,635 | 425% | | |||||||||
PRESIDENT & CEO | | | 6x Base Salary | | | | | |||||
Mitchell Butier | 149,394 | $6,798,000 | 238% | | ||||||||
OTHER CURRENT NEOs | | | 3x Base Salary | | | | | |||||
Gregory Lovins | 19,818 | $1,650,000 | 130% | | ||||||||
Georges Gravanis | 15,943 | $1,885,785 | 91% |  | ||||||||
Anne Hill | 48,110 | $1,596,135 | 326% | | ||||||||
Susan Miller | 22,078 | $1,643,082 | 145% | | ||||||||
Avery Dennison Corporation| 2018 Proxy Statement |5
INSIDER TRADING POLICY
Our insider trading policy prohibits our directors,Board members, officers and employees from (i) engaging in transactions in our company'scompany’s stock while in the possession of material non-public information; (ii) engaging in transactions in the stock of other companies while in possession of material non-public information that they become aware of in performing their duties; and (iii) disclosing material non-public information to unauthorized persons outside our company.
Limited Trading Windows
In addition, ourOur insider trading policy restricts trading for directors andby Board members, officers (including allour NEOs) and director-level employees during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the releaseissuance of our earnings release for the quarter. Additional blackout periods may be imposed with or without notice, as the circumstances require.
ProhibitionProhibitions on Hedging and Pledging
Our insider trading policy expressly prohibits our directors, officers (including our NEOs) and executive officersemployees from (i) purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of shares of our common stock they hold, directly or indirectly, or (ii)indirectly. In addition, directors and officers are expressly prohibited from – and our non-officer employees are strongly discouraged from – pledging anyshares of their shares ofour common stock to secure personal loans or other obligations, including by holding suchtheir shares in a margin account.account, or making short-sale transactions in shares of our common stock.
To our knowledge based on our review of their written representations in our annual director and officer questionnaire, all of our directorsBoard members and executive officers complied with our insider trading policy during 2017.2022, and none of them has hedged or pledged shares of our common stock.
22 | 2023 Proxy Statement | Avery Dennison Corporation |
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability is oneand Diversity are two of our core values, and has long been part of our approach to doing business, driving us to work collaborativelywithin our company and across our entire value chain to address the environmental and social impacts of our products. Ourproducts and practices.
We aim is to continually improve the environmental sustainability of our products and processes, build a more diverse, equitable and inclusive workforce, and provide meaningful support for our communities.
BOARD OVERSIGHT AND MANAGEMENT RESPONSIBILITY
Board oversight over environmental sustainability and community investment is primarily conducted by the Governance Committee, which receives a report from management on each of these topics at least once a year. In addition, our full Board engages with business leaders on their sustainability initiatives during its regular review of their business strategies. In early 2023, our full Board reviewed our 2022 integrated financial and sustainability report that shows our progress against our 2025 and 2030 sustainability goals, having met with our business leaders throughout 2022 on our innovation efforts to create shared valueaddress the increasing need and demand for allmore sustainable products; our strategic innovation platforms focused on digital solutions, waste reduction/elimination and material circularity; and our business and enterprise ESG priorities.
Board oversight over social sustainability is conducted primarily through the Compensation Committee, which reviewed DEI, including pay equity and transparency, at multiple meetings in 2022 and regularly discusses other matters related to talent management, including the impact of executive promotions, role changes and exits on U.S. racial/ethnic diversity and global gender and generational representation. In late 2022, our full Board engaged with, and challenged, management on, our DEI progress, including by reviewing the results of our stakeholders. In 2017, management led the execution of2022 employee engagement survey; our sustainability strategy throughglobal and regional DEI strategies, improvements and opportunities; and global female and U.S. racial/ethnic representation and inclusion progress. They also discussed our Sustainability Council, chairedpeople-related focus areas for 2023.
With strategic guidance and direction provided by Mitch Butier, our President/Chairman/CEO, management responsibility over ensuring that we continue to make progress toward achieving our sustainability goals resides with our enterprise Sustainability Council led by a senior sustainability leader from our Solutions Group, who serves as Chair and comprisedreports in this capacity to our President/COO, who is accountable for our progress. The council is composed of other corporatea cross-divisional and business leaders, with Board oversight through the Governance Committee.
Avery Dennison Corporation| 2018 Proxy Statement |6
Tablecross-functional group of Contentsmanagement to continually accelerate our progress, and met regularly during 2022 to ensure we achieve our 2025 sustainability goals, activate roadmaps to achieve our 2030 sustainability goals and targets, and continually refine our ESG strategies. Our Sustainability Council leader participated in substantially all of our fall 2022 stockholder engagements to provide his perspective on our ESG progress and answer questions from investors.
ENGAGINGENGAGEMENT OF OUR STAKEHOLDERS
We seek to ensure that our sustainability efforts are consistent with stakeholder expectations.the expectations of our stakeholders. We regularly communicate with individuals and organizations interested in how we do business generally and our sustainability efforts in particular, and also conduct stakeholder interviews as part of our regular sustainabilitybiennial materiality assessments. These activities allowassessments help advance our sustainability agenda, focusing us to focus on the areas in which we can have the most impact.
SUSTAINABILITY STRATEGY
The foundation of In 2022, we engaged Environmental Resources Management to help us refresh our materiality assessment and reprioritize the sustainability strategy is a science-based sustainability framework developed by The Natural Step, an international NGO. The Natural Step framework servestopics most important to our industries, customers and brand owners, stakeholders, investors, suppliers and communities, as the basis ofwell as policymakers, non-governmental organizations (NGOs) and regulators. In 2022, we updated our environmental and social guiding principles, listed below.
•Create shared value formateriality assessment, through which we mapped ourcustomers, their value chains and the communities we serve.•Do not pollute with manufactured materials.•Discover and capture lost value at every stage ofESG priorities throughout the value chain.•Do not polluteThe following eight topics, which also offer our company the most value-creation opportunities, were ranked highest by our stakeholders: transition to a circular economy; advanced technologies and innovation; climate change; GHG emissions and reductions; supply chain; fair and inclusive workplace; materials management; and operational waste. The sustainability feedback we received engaging withextracted materials.•Empowerinvestors during 2022 can be found in the proxy summary.PROGRESS TOWARD ACHIEVING OUR 2025 AND 2030 GOALS
We present our
people to innovate2022 scorecards showing progress against our 2025 andcreate value.•Do not impede people's wellness, influence, competence, equity2030 sustainability goals in the proxy summary. You can find additional information in our 2022 integrated annual andmeaning.•Do not over-harvest or over-encroach on living systems.•Embrace the collaboration that is inherent to sustainability.
ADVANCEMENTS TOWARDS 2025 SUSTAINABILITY GOALS
Wesustainability report, as well as our ESG Downloads available on our sustainability progress every two years. In September 2017, we issued our 2014-2016 Sustainability Report, summarizing our achievements towards reaching the 2025 sustainability goals we set in 2015. In the first two years of the 10-year goal horizon, we made significant progress, the key to which has been integrating sustainability into our underlying business strategies and engaging employeesESG website at all levels. We encourage you to review the report, which contains more information on our progress summarized on the following page,esg.averydennison.com. Information on our website atwww.averydennison.com/sustainability.
Avery Dennison Corporation| 2018 Proxy Statement |7
Tableis not and should not be considered part of, Contentsnor is it incorporated by reference into, this proxy statement.
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We disclose our ESG metrics using the SASB and GRI frameworks and annually report to Climate, Water and Forests. We are a member of the United Nations Global Compact and have made commitments to the UN Sustainable Development Goals and the Science Based Targets initiative (SBTi), with our scope 1, 2 and 3 GHG emissions reduction targets having been approved by SBTi as consistent with levels required to meet the goals of the Paris Agreement.
DIVERSITY, EQUITY AND INCLUSION (DEI)
Diversity is one of our core values, reflecting our desire to ensure an equitable and inclusive environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams. The importance of DEI to our company is evidenced by the engagement, inclusion and global gender diversity targets included in our 2030 sustainability goals. Highlights of our DEI journey are shown in the proxy summary, with additional information regarding our efforts in recent years described below.
Beginning in 2020, we redoubled our efforts on DEI, engaging with our employees across the globe to gather information on areas where we most needed to focus. After listening and learning from our employees, our leaders regularly met to discuss areas of focus, and each of our businesses began setting quantitative DEI targets, with their leaders evaluated on the progress they make.
In 2021, we engaged a third-party expert to help us perform an enterprise inclusion assessment, provide external benchmarking and obtain anonymous survey and focus group feedback from our team members worldwide. With this information, we identified our key priorities and formalized our DEI strategy, which includes the four global pillars shown below. These pillars, as well as the supporting regional focus areas, have been communicated to our employees worldwide.
Increasing the number of women who hold leadership positions
Enhancing the experience of our manufacturing employees
Increasing representation and inclusion for underrepresented groups, with priority populations and actions determined by each region
Making merit and transparency even more foundational to our employee experience
In 2022, we improved women representation in manager+ positions and were named one of Forbes America’s Best Employers for Women; launched AD Advocate, a program pairing select executives to sponsor and mentor diverse top talent across the globe; and piloted “Manufacturing Week” in North America.
Each of our global DEI pillars is sponsored by one or more company leaders. To ensure we achieve our goals, we have bolstered our internal DEI capability, with a Global DEI Director and additional resources in each of our regions, together forming an enterprise infrastructure of fully dedicated resources that advise and support our Regional DEI Councils. We have continually enhanced transparency into our DEI journey through regular reporting to, and engagement with, our stakeholders so they can assess our progress and provide feedback to help us achieve our goals.
OTHER TALENT MANAGEMENT MATTERS
Succession Planning
The Compensation Committee conducts senior executive succession planning at least semiannually, reviewing succession plans for our members of our Company Leadership Team. In the spring of 2022, the Compensation Committee reviewed leadership team changes, assessed our enterprise talent pipeline and discussed potential successors to the members of our Company Leadership Team, which includes the leaders of our businesses and corporate functions (strategy/business development, finance, R&D, law, operations/supply chain, IT and HR). In the fall of 2022, the Compensation Committee again reviewed leadership changes and the talent that is ready – or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready – to fill senior executive positions in the event of a vacancy; they also discussed with management our continued focus on leadership development for diverse talent and key succession planning focus areas for 2023. Our Compensation
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TableCommittee Chair discussed these reviews with our full Board. Recognizing that we have had several leadership changes in the past few years, including the appointment of Contentsa new President/COO and other senior business leaders, our full Board conducted leadership succession planning at multiple meetings during 2022.
SOCIAL RESPONSIBILITY
The Compensation Committee regularly receives reports on executive new hires, promotions and role changes, departures and open positions – as well as the impact of these developments on U.S. racial/ethnic and global gender and generational representation – to assist with succession planning.
AVERY DENNISON FOUNDATIONLeadership Development
The Compensation Committee oversees our company’s talent management program to assist with identifying and developing our future leaders. We maintain a robust performance review process and develop leadership development plans for our top talent, while also providing development opportunities to our employees more broadly. Senior management reports to the Compensation Committee on leadership at executive levels of our organization by identifying high-potential talent, cultivating the skills and capabilities to allow identified individuals to become our future leaders, and ensuring that they have appropriate development plans in place to progress them toward roles with greater responsibility. Through regular reports from, and social interactions with, management, our Board has the opportunity to actively engage with our business leaders and functional leaders in law, finance, IT and HR. In addition, Board members have freedom to directly contact any of our employees, and periodically visit our facilities to meet with local management.
COMMUNITY INVESTMENT
With Board oversight from the Governance Committee, our social responsibilitycommunity investment efforts promote our spirit of community and help strengthen the placescommunities around the world in which we do business.operate. We make most of our community investments through the Avery Dennison Foundation (the "Foundation")(ADF), which annually investsdistributes at least 5% of its assets from the prior year to advance women's empowerment, education and sustainability inyear. ADF’s grantmaking is aided by our team members worldwide who help identify deserving nonprofit organizations serving the communities wherein which our employees live and workwork.
In recent years, ADF has given to organizations advancing education, women’s empowerment and encourages employee engagementsustainability. It has also provided funding in response to the COVID-19 pandemic, natural disasters and the call for greater DEI worldwide. In 2022, our company and ADF also funded efforts to reduce food insecurity, support persons impacted by the Russian war in Ukraine and promote DEI in the regions in which we operate.
After undertaking a strategic review process led by its board of trustees in consultation with a spiritthird-party expert, ADF revised its vision, mission and giving areas in 2022 to better respond to the evolving needs of inventionour communities. ADF now seeks to address inequities by funding efforts that increase education access, advance environmental sustainability, and innovation. secure livelihoods.
ADF and our company collectively made $5.1 million in grants and other financial contributions during 2022, highlights of which are described below and on the following page.
Continuing to Make Grants
ADF’s grants to nonprofit organizations in 2022 included the following:
~$750K to increase education access, including grants to:
Vitensenteret i Sogn og Fjordane AS for youth science programming in Norway
HOLA Ohio to support its Stabilizing Latino Workers, Families and Children program serving Northeast Ohio
Avery Dennison Corporation | 2023 Proxy Statement | 25 |
~$400K to advance environmental sustainability, including grants to:
Beijing Roots & Shoots Community Youth Service Center to support the Jane Goodall Institute’s Young Compassionate Conservation Leader Development Project in Beijing, China
Impact Hub Trust for its Youth Sustainable Packaging program in Shanghai, China
Global Fund for Children to support youth-led climate justice in Southeast Asia
~$480K to secure livelihoods, including grants to:
AAROHAN to support education and health programs for girls in India
UNICEF Bangladesh to strengthen a program for working mothers
Women Win to support female economic resilience in Africa, Asia, Latin America, the Middle East and the Caribbean
Evolving the Employee Assistance Fund
In 2020, ADF launched an Employee Assistance Fund (EAF) to support our employees around the world who had been significantly impacted by COVID-19. Through year-end 2022, the EAF distributed ~$4.6 million to 4K+ individuals across 27 countries. ADF, in a joint effort with our company, also provided funding to support pandemic-relief efforts by nonprofit organizations in India, Brazil, Vietnam and Sri Lanka between 2020 and 2022.
Given the reduced global impact of COVID-19 in most of our communities and its success in supporting employees in need, ADF recently converted the EAF to an Employee Crisis Fund to provide assistance for employees impacted by natural disasters and other humanitarian crises.
Addressing Food Insecurity
ADF made the following $200K grants in 2022 through Global Impact to address food insecurity:
Action Against Hunger to alleviate hunger in the Horn of Africa by improving access to clean water, food, community training and healthcare
Islamic Relief USA to support programs in Sri Lanka, South Sudan, Sudan and Afghanistan that provide aid to disaster survivors
The Foundation investsGlobal Foodbanking Network to support food banks and disaster response in Latin America and the Asia Pacific region
Supporting Those Affected by the War in Ukraine
In 2022, ADF identified a Ukraine Crisis Relief Fund to which our employees could donate, with their donations matched dollar for dollar, for a total contribution of $108K to NGOs serving affected communities in Ukraine and communities in surrounding countries aiding Ukrainian refugees. ADF supplemented our employee-led efforts by making $1 million in grants to community-basedhumanitarian relief efforts. Guided by input from employees, ADF focused on giving directly to relief efforts, supporting three globally recognized organizations providing aid to the people in Ukraine and refugees in neighboring countries.
Promoting DEI
ADF supported organizations promoting employee volunteerismDEI globally, with grants totaling $435K in 2022. ADF continued to work with our company’s Regional DEI Councils and engagement,ERGs to ensure that it supported organizations making a difference in the communities in which our team members live or work. Grants were made to the following organizations:
Campaign Against Homophobia to support LGBTQ+ programming in Poland, including workshops and awarding scholarships.training for parents of LGBTQ+ individuals
GLOBAL GRANTMAKING
The Foundation's global grantmaking initiative is its primary means of giving. Grantmaking is also aided by our employees worldwide who help identify qualified nongovernmental organizations (NGOs). Grant decisions are guided
Olimpiadas Especiales Latinoamerica to provide athletic training and competition for children and adults in Latin America with intellectual disabilities
Ascendance, a program in Malaysia working to foster an entrepreneurial mindset in teenagers
Beijing Qingyou Social Work Development Center to support wellness programs for youth in China
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International Rescue Committee to support individuals impacted by the following priorities:crisis in Afghanistan
Aviard Inspires to develop an internet-based learning platform for Black youth in London
Leonard Cheshire to support a disability employment program in the United Kingdom
Cohesion de Diversidades para la Sustenabilidad to provide health education to the LGBTQ+ population in Mexico
Itacolomi Instituto de Apoio Social de Vinhedo to support job readiness for minority youth in Brazil
The Haven Home to support a shelter in Cleveland, Ohio
LGBT Lake County to expand programs for LGBTQ+ youth in the county in which we are headquartered
Women in Manufacturing Education Foundation to support programs that advance women in manufacturing
The Coalition for Humane Immigrant Rights to support immigrant student college access in Los Angeles, California
Supporting Disaster Relief Efforts
EMPLOYEE ENGAGEMENTEngaging Employees
As the handsheart and hearthands of our company, our employees are critical to advancing the Foundation's efforts. Because they often have the best understanding of the needs ofadvance our community investment efforts through their communities, more than 110 employee-organized Community Investment Teams coordinate volunteerism locally at our global locations. Nearly 50% of the Foundation's grants are enhanced with volunteer time from our employees.
The Foundation also engages employees through theown giving and volunteerism. ADF’s signature program is Granting Wishes, program, which allowsenables employees in the U.S., Europe and Latin America to recommend one-time grants to, and volunteer with, local NGOs. Employees often have a connection to the organizations they nominateIn 2022, ADF made $800K in grants in five continents through volunteerism or service on the organization's board. In the seven years since the Foundation launched Granting Wishes, more than 700 of our employees have taken part, enabling grants of over $1.1 million to more than 200 organizations, including Doctors Without Borders, UNICEF, the American Red Cross and Habitat for Humanity.Wishes.
SCHOLARSHIPSProviding College Scholarships
The FoundationADF provides college scholarships to the children of ourU.S. employees through Scholarship America. To date, 680+ scholarships have been awarded. In 2022, in partnership with the Institute of International Education, ADF began providing scholarships to the children of employees in Vietnam and Mexico, and intends to further expand the U.S., Chinaprogram to other countries in future years.
In 2022, ADF concluded its Spirit of Invention (InvEnt) program in India. Over the course of ten years, the program provided tuition assistance and India. Since 1977, more than 600 scholarships totaling over $2.2 million have been awarded to students entering their first yearprofessional development opportunities for 105 talented scholars in the fields of college.
In China and India, the Foundation's InvEnt Scholarships have for more than a decade supported the next generation of innovators in science, technology, engineering and mathematics. By providing undergraduates with tuition assistance, an invention competition and professional development opportunities, the Foundation inspires the spirit of innovation in tomorrow's engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year. Scholarships are awardedmathematics who demonstrated a commitment to students who demonstrate outstanding innovative spirit and excellent practical competence.
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solving real-world problems.
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OUR BOARD OF DIRECTORS
OVERVIEW
Our Board oversees, counsels and ensures management is serving the best interests of our company and stockholders, with the goal of maximizing the performance of our businesses to createand delivering long-term value.value for all our stakeholders.
PRIMARY BOARD RESPONSIBILITES
| • | Establish strong governance, with Board/Committee composition, structure and duties providing independent oversight |
| • | Conduct ongoing director succession planning to maintain engaged and diverse Board with balance of skills, qualifications and demographic backgrounds to help us deliver on our strategies |
| • | Oversee businesses, strategy execution, ESG progress and ongoing risk mitigation |
| • | Approve annual operating plan and strategic decisions, including significant fixed and IT capital expenditures and acquisitions |
| • | Maintain integrity of financial statements |
| • | Evaluate performance of senior leaders and determine executive compensation |
| • | Conduct executive succession planning and help us develop leaders that ensure high-performing teams, diverse talent and inclusive culture |
Our Board's primary responsibilities include the following:
•Establishing astrong governanceprogram, with a Board and Committee structure that ensures independent oversight;•Overseeing ourbusinesses, strategies and risks;•Maintaining theintegrity of our financial statements;•Evaluating the performance of our senior leaders and determiningexecutive compensation;•Conductingsuccession planningBoard’s top priorities in 2022 were overseeing management in delivering for ourCEOcustomers despite the impacts of COVID-19 in China, the Russian war in Ukraine andother senior executives, including ensuring we have ahuman capital managementprogram that is developingsupply chain disruptions; minimizing the impact of rising inflation and sizable currency movements on ourfuture leaders;investors; engaging, protecting and•Approvingdiversifying ourannual operating planglobal team; andsignificant strategic and operational actions, includingsignificant capital expenditures and acquisitions.
BOARD COMPOSITION2023 Director Nominees
Our Bylaws provide that our Board be comprised ofcomprise between eight8 and 12 directors, with the exact number fixed from time to time by Board resolution. Our Board currently has fixed the current number of directors at 11. The10.
Our 2023 director nominees for election at the Annual Meeting — and the year of their initial appointment or election, current or most recent principal occupation, independence status, and committee memberships — are shown in the chart below. Together they bring a balance of skills, qualifications and demographic backgrounds in overseeing our company in advancing our strategies and achieving our financial and sustainability goals, as shown by individual in the Board matrix included in the proxy summary.
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Bradley A. Alford | 66 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
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Anthony K. Anderson | 67 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ✓ | ● |
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Mitchell R. Butier | 51 | 2016 | Chairman & CEO, Avery Dennison Corporation | – |
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Ken C. Hicks | 70 | 2007 | Chairman, President & CEO, Academy Sports + Outdoors | ✓ |
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Andres A. Lopez | 60 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ● |
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Francesca Reverberi^ | 51 | 2023 | SVP, Sustainable Plastics & CSO, Trinseo PLC | ✓ |
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Patrick T. Siewert | 67 | 2005 | Managing Director & Partner, The Carlyle Group | ✓ | ● |
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Julia A. Stewart | 67 | 2003 | Chair & CEO, Alurx, Inc. | ✓ |
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Martha N. Sullivan | 66 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ● |
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William R. Wagner^ | 56 | 2022 | Retired President & CEO, GoTo Group, Inc. | ✓ |
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AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chair LID
= Lead Independent Director● = Chair ● = Member ^ = New Director
The ages of our director nominees range from 4651 to 69,70, with an average age of 61.~62. Their lengths of service range from less than one to 1820 years, with an average tenure on our Board of ten~10 years. None of our directors serves on more than two other boards of SEC-reporting companies, except for Messrs. Anderson and Pyott, who are both retired and serve on three such other boards.
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APPOINTMENT OF NEW INDEPENDENT DIRECTOR
During the second half of 2016, the Governance Committee oversaw our Board's search for a new independent director. The Committee engaged Korn Ferry, an executive search firm, to assist with the search. Korn Ferry identified a number of potential candidates (including Andres Lopez) who were initially evaluated by the Governance Committee
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Board Meetings and our Chairman, with input from other Board members and senior management. The Governance Committee and other members of our Board interviewed Mr. Lopez, unanimously supporting his candidacy based on his extensive packaging industry expertise and the end customer insights he could bring to our Board. Upon the recommendation of the Governance Committee, our Board appointed Mr. Lopez to our Board effective February 1, 2017, recognizing his packaging industry experience, public company board experience and global exposure. Also upon the recommendation of the Governance Committee, our Board subsequently appointed Mr. Lopez to the Audit Committee, effective immediately after the 2017 Annual Meeting, at which he was first elected to our Board by our stockholders.Attendance
RETIREMENT OF EXECUTIVE CHAIRMAN
In December 2017, Mr. Scarborough, then Executive Chairman, notified the Board that he would be retiring from our company at the end of the year. He was our employee through December 31, 2017 and continues to serve as non-executive Chairman.
BOARD MEETINGS AND ATTENDANCE
Our Board met five times and acted three times by unanimous written consent during 2017.2022. There were 1621 Board Committee meetings during the year. All of our directors attended the100% of their respective Board and Committee meetings. In addition, our directors regularly discussed strategic and business matters with our Chairman/CEO and President/COO outside of meetings, heldincluding the challenges we faced during 2017 of which he or she was a member.the year and potential acquisitions. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines and all then-serving directors attended the virtual 2022 Annual Meeting.
Additional Board Engagement
Bringing their expertise, certain of our directors attended the 2017 Annual Meeting.
Board– together with third-party experts – are providing guidance to management in its execution of our strategic initiatives related to digital solutions and Committee meeting2017 attendance = 100%
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Tablefood. Mr. Alford serves as chair of Contentsour Food Advisory Council; Mr. Wagner and former director Mark Barrenechea are members of our Digital Advisory Council. We are planning to form an Environmental Sustainability Advisory Council in early 2023 to help advance our sustainability initiatives, on which we plan to ask Ms. Reverberi to be a member.
Our Governance Guidelines provide the governance framework for our company and reflect the values of our Board, as highlighted below. They are reviewed at least annually and amended from time to time to reflect changes in regulatory requirements, evolving market practices, recommendations from our advisors and feedback from our stockholders.investors. Our Governance Guidelines were most recently amended in February 2017.December 2021.
BOARD GOVERNANCE HIGHLIGHTS | ||
Board Composition | ✓ Reasonable Board size of 10 directors ✓ Mandatory retirement after age 72 with no exemptions or waivers allowed or granted ✓ On average, director age of ~62 years and tenure of ~10 years ✓ 60% of directors are women or from other underrepresented communities | |
Director Independence | ✓ Directors 90% independent ✓ Executive sessions of independent directors held at all five 2022 Board meetings | |
Board Leadership Structure | ✓ Annual review of Board leadership structure ✓ Robust Lead Independent Director role and independent Committee Chairs | |
Board Committees | ✓ Annual composition review and periodic structural review and Chair/member rotation ✓ Act under annually reviewed charters reflecting best practices and stakeholder expectations ✓ Directors required to attend Board/Committee and stockholder meetings | |
Board Duties | ✓ Regular leadership succession planning ✓ Ongoing review of long-term strategic plans, including key risks and mitigating strategies ✓ Directors entitled to rely on independent legal, financial or other advisors at our expense | |
Continuous Board Improvement | ✓ New directors receive orientation materials and engage with members of management to familiarize themselves with our Board and company, as well as undergo additional orientation after joining Board committees to understand responsibilities ✓ Continuing education through meetings with management, visits to our facilities and participation in director education programs ✓ Annual evaluation process ensures Board, Committees, Chairman, Lead Independent Director and Committee Chairs are functioning effectively; includes soliciting feedback on other directors | |
Director Qualifications | ✓ Regular review of Board composition (skills; qualifications; demographic backgrounds, including with respect to gender, race and ethnicity; and board commitments) and ongoing director succession planning | |
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Governance Guidelines Highlights
Board Composition
✓Reasonable Board size of 11 directors✓No over-boarded directors✓Mandatory retirement after age 72, with no term limits
Director Independence
✓82% independent✓Executive sessions of independent directors at every 2017 Board meeting
Board Leadership Structure
✓Annual review of Board leadership structure by the Governance Committee✓Robust Lead Independent Director role and independent Committee Chairs
Board Committees
✓100% independent✓Act under charters delineating Committee responsibilities✓Directors required to attend Board and Committee meetings
Board Duties
✓Directors entitled to rely on independent legal, financial or other advisors at our expense✓Regular review of long-term strategic plans, including major risks and mitigating strategies✓Regular succession planning for our CEO and other executive officers through the Compensation Committee
Continuous Board Improvement
✓All new directors participate in an initial orientation to familiarize themselves with our company and after joining a Committee to understand its responsibilities✓Directors continue their education through meetings with management, visits to our facilities and attendance at accredited director education programs✓The Governance Committee oversees an annual evaluation process to ensure our Board, Committees, Chairman and Lead Independent Director are functioning effectively
Director Qualifications
✓The Governance Committee reviews the skills and characteristics of our Board members and recommends director nominees
Avery Dennison Corporation| 2018 Proxy Statement |12
Our Governance Guidelines require that our Board be comprised ofcomprise a majority of directors who satisfy the criteria for independence under NYSE listing standards. These standards also requireand that our audit, compensation and nominating committees be comprisedcomposed entirely of independent directors. An independent director is one who meets the independence requirements of the NYSE and who our Board affirmatively determines has no material relationship with our company, directly or indirectly as a partner, stockholder or officer of an entity with which we have a business relationship.
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annualour Board’s independence determination, including all relevant relationships they have with our company, directly or indirectly through our company'scompany’s sale or purchase of products or services to or from theany companies or firms by which they are employed. The Governance Committee reviews any relevant disclosures made in the questionnaires relevant to its independence assessment with our General Counsel/Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2018, the Governance Committee reviewed the relationships impacting the independence of our director nominees referenced below.
•Mr. Butier.Mr. Butier serves as our President and CEO.•Mr. Scarborough.Mr. Scarborough formerly served as our Executive Chairman and was an employee of our company through December 31, 2017.•Mr. Lopez.Although there were no sales in 2016 or 2017, in 2015 we sold products to Owens-Illinois, Inc., for which Mr. Lopez serves as President and CEO. The payments we received from the company were on competitive terms, in the ordinary course of business, and less than $1 million, the lower2023, after review of thetwo applicable thresholds set forth in the NYSE's independence standards.
After review and discussion of the relevant facts and circumstances relevant to each director nominee, the Governance Committee concluded that only Messrs.Mr. Butier and Scarborough had relationshipsa relationship that werewas disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon the recommendation of the Governance Committee, our Board affirmatively determined the nine director nominees9 directors named below, representing 90% of our Board, to be independent, representing 82% of our nominees.independent.
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Independent Directors Bradley Alford Anthony Anderson Ken Hicks Andres Lopez Francesca Reverberi Patrick Siewert Julia Stewart Martha Sullivan William Wagner | Director Independence
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For a discussion of the potential impact of tenure on director independence, see theBoard Refreshment and Director Succession Planning section of this proxy statement.
Avery Dennison Corporation| 2018 Proxy Statement |13
Our Board currently has a Chairman, who as a recent former employee is not independent, a separate CEO and a Lead Independent Director. Our Governance Guidelines give our Board —– acting through its independent directors —– the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time; totime. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following yearone-year term to our independent directors. Our independent directors do not view any particular Board leadership structure as necessarily preferable, rather they make an informed annual determination taking into account,giving consideration to, among other things, our financial position, business strategies, ESG priorities and any feedback received from our stockholders.investors and other stakeholders.
OurRobust Lead Independent Director Role
Our robust Lead Independent Director role balances our non-independent Chairman and combined Chairman/CEO roles,role, exercising critical duties to ensure independent decision-making in the boardroom to ensure effectiveboardroom. Mr. Siewert began serving as our Lead Independent Director in April 2020 and was most recently reelected by our independent Board decision-making.directors for a one-year term in April 2022. Our Governance Guidelines clearly delineate thesedefine his primary responsibilities, which are shown below. Mr. Pyott currently serves as our Lead Independent Director.
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Designee: Patrick Siewert | • Preside over executive sessions of independent directors and Board meetings
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• Call meetings of independent directors
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In addition to these responsibilities,
Mr. PyottSiewert also performed the following activities described below as Lead Independent Director in 2017:2022.
•Regularly consulted with each of the ChairmanOversaw our new director search process, including interviewing high-potential candidates and
CEO to help guide management's ongoing engagementengaging in director succession planning discussions with the Governance Committee he chairs, as well as with our Chairman/CEO and other Board membersLed majority of our fall stockholder engagement discussions
Led our Board/Committee evaluation process, interviewing each Board member and providing them feedback on their performance
Consulted frequently with our
strategic direction, including reviewing our business strategiesindependent directors andassessing acquisition opportunities;•Providedprovided feedback to Chairman/CEO based on these discussions, including giving him ourChairmanBoard’s evaluation of his 2022 performance with the Compensation Committee ChairMet regularly with Chairman/CEO and
our CEO after executive sessions of independent directors;•Consulted on an ad hoc basisPresident/COO, as well as periodically with otherindependent directors; and•Met withmembers of senior managementother than our CEO.Supplementing our Lead Independent Director in providing independent Board leadership are our Committee Chairs, all of whom are independent.
TheBoard Leadership Assessment and Evaluation
In light of our recent appointment of two new directors, the Governance Committee
evaluatedplans to assess and make its recommendation to our Board on theperformance ofpost-Annual Meeting leadership structure in April 2023.During our
Chairman and Lead Independent Director during theBoard evaluation process conductedinduring the fourth quarter of2017. Based on these evaluations, we believe2021, Messrs. Butier and Siewert each received uniformly positive feedback from ourcurrent Board leadership structure is providing effectiveindependentoversight of our company.directors in their respective roles as Chairman/CEO and Lead Independent Director. During our ongoing engagement withourstockholders,on governance matters, nonefew investors have expressed a desire that we consider separating the positions ofthem has expressed concerns with our current Board leadership structure,Chairman and CEO, which we believe reflects support for our robust and clearly delineated Lead Independent Directorrole.role and Mr. Siewert’s strong engagement in many of those meetings.In February
2018,2022, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr.ScarboroughButier be elected to continue serving as Chairman, noting thathis mentorship duringhe had successfully led our company as CEOtransition has continuedfor the preceding six years and remained best positioned toassist managementlead our Board inexecutingoverseeing ourBoard-alignedstrategies todrivedeliver long-termstockholdervaluecreationfor our employees, customers, investors and communities. The committee further noted that Mr. Butier had articulated and worked to realize a long-term vision for our company that delivered top quartile TSR performance and exceeded our 2017-2021 financial targets and thathe received positive feedback on his performance fromwe could best continue to advance ourindependent directors duringstrategies and ESG progress – as well as achieve our 2021-2025 financial targets and more ambitious 2030 sustainability goals – continuing with combined leadership in the2017 Board evaluation process.boardroom. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr.ScarboroughButier (with him abstaining) tocontinue servingserve as our Chairmaneffective immediately afterfor a one-year term ending at the AnnualMeeting subject to his re-election. TheMeeting.At that time, the Governance Committee also recommended that Mr.
PyottSiewert (with himabstaining)not participating in the discussion) continue serving as Lead Independent Director. Having a long-serving director with financial expertise and substantial international experience serve as Lead Independent Director had provided Mr.Pyott has significantly contributed toButier valuable mentorship and guidance while ensuring robust independent Board oversight of management. The committee also recognized Mr. Siewert’s support and substantial effort with ourexecutive compensationstockholder engagement program. The Governance Committee determined that, in light of his demonstrated commitment, engagement andgovernance programs through his strong,leadership then in the second year in which he served in this capacity, Mr. Siewert should continue ensuring independentand strategic leadershipstewardship of ourBoard.Board in its oversight of our strategies to deliver long-term value for all our stakeholders. The committee’s decision took into account his significant contributions as a member of the Audit Committee since joining our Board and as its Chair for five years and as the current Chair of the Governance Committee, as well as his extensive international experience in Asia, a region from which ~35% of our sales originated and ~58% of our employees were located in 2021. Upon the recommendation of the Governance Committee, our independent directors unanimously selected Mr.PyottSiewert (with him abstaining) tocontinue servingserve asourLead Independent Directoreffective immediately afterfor a one-year term ending at the AnnualMeeting subject to his re-election.Avery Dennison Corporation|2018 Proxy Statement|14Table of ContentsMeeting.Given our recent addition of two new directors, the Governance Committee plans to assess and make its recommendation to the Board on the post-Annual Meeting Committee structure and appointments in April 2023, having preliminarily discussed these matters in February 2023.
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Each of our Board committeesCommittees has a written charter that describes its purposes,purpose, membership and meeting structure, and responsibilities. These charters which may be found on the investors section of our website atwww.averydennison.com/corporategovernance,under Corporate Governance and are reviewed by the respective committee at least annually, with any recommended changes adopted upon approval by our Board. Amended charters are promptly posted on our website. The Charters forcharters of the Audit Compensation and GovernanceCompensation Committees were lastmost recently amended in February 2017, December 20152022 and December 2016, respectively.the charter of the Governance Committee was most recently amended in October 2021.
Each of our Board committeesCommittees has the ability to form and delegate authority to subcommittees and may obtain advice and assistance from internal or external consultants, legal counsel or other advisors at our expense. In addition, each committee annually evaluates its performance. The primary responsibilities, membership and 2022 meeting and attendance information for the three standing committees of our Board are summarized below and on the following page.
AUDIT FINANCE COMMITTEE | PRIMARY RESPONSIBILITIES | ||
Members: Martha Sullivan (Chair) Anthony Anderson Andres Lopez Patrick Siewert 2022 meetings: 8 2022 average attendance: 100% Audit committee financial experts: Anderson
All members satisfy
| • Oversee financial statement and disclosure matters, including
• Appoint and oversee
• Oversee
• Perform compliance oversight responsibilities, including overseeing
• Conduct finance oversight responsibilities, including reviewing
• Approve | ||
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| TALENT AND COMPENSATION | PRIMARY RESPONSIBILITIES | ||
Members: Julia Stewart (Chair) Bradley Alford Ken Hicks
2022 meetings: 5 2022 average attendance: 100% All members satisfy
| • Review and approve corporate goals and
• Review andapprove senior executive compensation, including base salaries and incentive compensation
• Oversee appropriate compensation strategy, incentive plans, equity-based plans and benefit programs
• Review and provide oversight of policies and strategies related to talent management, including DEI; leadership compensation plans, benefit programs, recruiting and retention strategies, and development programs; and employee engagement • Review stockholder engagement process, results and feedback related to executive compensation and talent management • Approve
• Oversee stockholder approval of executive compensation matters, including • Ensure our compensation
• Recommend non-employee director compensation
| ||
GOVERNANCE COMMITTEE | PRIMARY RESPONSIBILITIES | ||
Members: Patrick Siewert (Chair) Bradley Alford Anthony Anderson Julia Stewart
2022 meetings: 8 2022 average attendance: 100% All members satisfy NYSE independence standards | •
• Recommend Board and Committee structure,
• Recommend
• Review andapprove related person transactions
• Oversee
• Review
• Review stockholder engagement process, results and feedback related to governance, environmental sustainability and community investment • Review stockholder proposals • Oversee | ||
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Our Board believes it is important to have separate executive sessions with our Chairman/CEO, with our President/COO, with both of them and without our CEO, non-independent Chairman or other memberseither of management present,them, each of which werewas held at every regularall Board meeting during 2017.meetings held after Mr. Stander’s
Avery Dennison Corporation | 2023 Proxy Statement | 33 |
promotion to President/COO in March 2022. Our independent directors have robust and candid discussions at thesethe executive sessions that exclude Messrs. Butier and Stander during which they critically evaluate the performance of them, our company Chairman, CEO and management. management as a whole. As Lead Independent Director, Mr. PyottSiewert presided over the five executive sessions of independent directors held during 2017.2022.
In addition,
Implementing previously received feedback from our Board evaluation process, our Board generally started its 2022 meetings with one of two executive sessions werewith our Chairman/CEO to discuss key focus areas and frame meeting discussions; the second such session at the end of the meeting provided time for the Board to reflect and align on key priorities, after which our independent directors met in executive session without our Chairman/CEO.
Executive sessions are also generally scheduled for each regular meetingmeetings of the Audit, Compensation and Governance Committees held.Committees. These executive sessions generally excluded Mr. Scarborough, Mr. Butier and otherexclude members of management, unless the Committee requested the presencerequests one or more of a member of management for a portion of the sessionthem to attend to provide additional information or perspective.perspective, in which case the Committee generally meets independently thereafter.
Management is responsible for managing the day-to-day risks confronting our businesses, butand our Board has responsibility for overseeingoversees enterprise risk management (ERM).In performing its oversight role, our Board ensures that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making. The teams leading our businesses have incorporated ERM into developingrisk-adjusted decision-making in refining and executing strategy,their strategies, assessing the risks and mitigating strategies impacting their businesses, and identifying and implementing appropriate mitigating actions on an ongoing basis. In addition, in consultation with our Chief Compliance Officerrisk management team and senior management, these teamsthey semiannually prepare a risk profile consisting of a heat map and a summary of their key risks and mitigating strategies, which are used to prepare a company risk profile based on identified business-specific risks as well as enterprise-wide risks. enterprise risks, including risks related to ESG matters such as climate change, GHG emissions and energy use; materials management; the circular economy; DEI; waste; and employee health and safety.
We also have robust global processes that support aour strong internal control environment toand promote the early identification and continued managementongoing mitigation of risks by our company's leadership.risks. Our legal and compliance functions, including our Chief Compliance Officer, report into our General CounselCLO to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit reports to the Audit Committee in the conduct of his operational responsibilities, ensuring hishelping ensure he maintains independence from management.
In performing its oversight role,2022, we further enhanced our Board is responsible for ensuringERM program by expanding the time that we spent engaging with functional leaders in our RBIS and IHM businesses and each of the regions within our LGM business. Designated members of our law department became fully ingrained into the process, partnering with our risk management processes designedteam to facilitate these discussions. We also devoted more time to our standalone compliance and implementedinformation technology risk profiles to ensure heightened focus on these critical risk areas. These advancements, as well as the expansion of our ERM Steering Committee, have embedded ERM deeper into our organization, allowing us to benefit from the critical thinking of a broad cross-section of company and business leaders. We plan to continue advancing our ERM program, with leadership from our ERM Steering Committee composed of members of senior management and oversight by management are functioning effectively, and that our culture fosters risk-adjusted decision-making.Board.
Our Board as a whole oversees risks related to our company and business strategies and operations,five-year strategic plan horizon, exercising this responsibility by considering the risks related to its decisions. Each year, ourOur Board annually receives reports on the ERM process and the resulting risk profiles, engaging throughout the year with management on the strategic plans and risks facing each of our businesses and our company as a whole. Thesewhole; these risks may include financial risks, politicalgeopolitical risks, legal and regulatory risks, supply chain risks, competitive risks, compliance risks, ESG risks, information technology risks and other risks related to the wayways in which we do business. Employees who lead various risk areas —– such as law, information technology; environmental, healthtechnology, tax, compliance, sustainability, DEI and safety; tax; sustainability; and social responsibility —community investment – report periodically to Board Committees and occasionally to our full Board.
OurAs shown on the following page, our Board has delegated to its Committees elements of its risk oversight functionresponsibility to betterits Committees to more efficiently coordinate with management to servein serving the long-term interests of all our company and stockholders.stakeholders. Our Board receives reports from the Committee Chairs regarding topics discussed at every Committee meeting, which includescommittee meetings, including the areas of risk overseenthey primarily byoversee, and engages with our leaders on these risk areas during its Committees.
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Risk Oversight | ||||
| ||||
• Business strategies • Annual operating plan and significant fixed and IT capital expenditures • Corporate governance • Acquisitions, divestitures and other significant transactions • Enterprise risk management | ||||
Board of Directors
| |
| ||
• Financial reporting processes and statements, and internal controls • Capital structure • Financing, including debt, liquidity, capital allocation and pension plan funding • Stockholder distributions (dividends and stock repurchases) • Information technology and cybersecurity • Certain legal, compliance and regulatory matters | • Executive compensation and CEO/senior executive succession planning • Annual and long-term incentive plans • Compensation plans and benefit programs • Non-employee director compensation • Social sustainability and talent management, including DEI; leadership compensation plans, benefit programs, recruiting and retention strategies and development progress; and employee engagement | • Board and Committee structure and composition • Director succession planning • Values and Ethics/Code of Conduct • Conflicts of interest and related person transactions • Governance, environmental sustainability and community investment • Certain legal, compliance and regulatory matters | ||
Audit Committee
Compensation Committee
Governance Committee
| ||||
• Day-to-day management of risks facing our businesses | ||||
ManagementThe Audit Committee oversees our internal control environment and evaluates the effectiveness of our internal controls at least annually. Supplementing these processes, the Audit Committee periodicallyregularly meets in executive session with each of our CEO, CFO, Controller/CAO, General Counsel, Vice President of Internal Audit and representatives of our independent registered public accounting firm.firm and as needed with other members of management such as our CEO, COO and CLO. The Governance Committee also meets semiannually with our Chief Compliance Officer to discuss, among other things, discusssignificant internal investigations.
During 2022, our investigation of allegations reported to our Business Conduct GuideLine.
During 2017,Board was particularly focused on the following risk areas were of particular Boarddescribed below.
2022 Risk Focus Areas | ||||
| • | Executing amidst continued uncertainty to deliver for customers – Managing raw material and labor constraints and elevated lead times to provide high-quality service to customers, while also enhancing supply chain and energy resiliency |
| • | Inflation management – Leveraging our rigorous scenario planning to offset the impact of rising inflation and prepare for a recessionary environment, identifying productivity and restructuring actions to mitigate the impact of slower demand and higher costs |
| • | Intelligent Labels – Advancing digital solutions, developing the food and logistics markets and continuing to drive cross-business collaboration to deliver on the inflection point in this high-value growth platform |
| • | Innovation – Reinforcing strategy and deployment focused on materials in our Label and Packaging Materials business and digital solutions across our company |
| • | M&A – Expanding our M&A pipeline and deal conversion, as well as assessing and redirecting our IHM business |
| • | ESG/Sustainability – Investing in sustainability-driven innovation and driving our enterprise digital journey with our newly-formed digital strategic innovation platform and Digital Advisory Council, as well as disruptively reducing GHG intensity and continuing to enable circularity |
| • | Cybersecurity – Addressing the challenging threat landscape elevated by our digital business transformation, hybrid/remote workers and interconnected supply chains, as well as improving preparedness against ransomware attacks |
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Risks Associated with Compensation Policies and Committee focus:
•The global economic environment;•Changes in tax laws and regulations, in particular in the U.S.;•Our U.S. pension plan liabilities;•Cybersecurity and information technology, including the implementation of an enterprise resource planning system in our Label and Graphic Materials North America business; and•Risks associated with our restructuring actions, acquisitions and integration activities.
RISKS ASSOCIATED WITH COMPENSATION POLICIES AND PRACTICESPractices
As described in theCompensation Discussion and Analysis section of this proxy statement, we maintain best practices in compensation that collectively encourage ongoing risk assessment and mitigation. The Compensation Committee annually discusses with management and its independent compensation consultant, WTW, whether our executive compensation programs are meeting the committee’s objectives. In addition, the Compensation Committee periodically reviewsengages WTW to undertake a more formal assessment of our compensation programs to ensure that they do not provide incentives that encourage our employees to take excessive risks in managing their respective businesses or functional areas andareas. The committee most recently conducted its most recent reviewthis evaluation in February 2018.2022.
Based on the advice of its independent compensation consultant, Willis Towers Watson, theThe Compensation Committee noted the risk-mitigating features of our compensation policies and practices shown on the following page.program described below.
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Risk-Mitigating Compensation Features | ||||
Governance and Oversight | ✓ Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants to penalize potentially risky actions ✓ Clawback policy deters fraud or other misconduct that results in financial restatement, providing means to recoup inappropriately received AIP and LTI awards ✓ Incentive compensation plan structure and targets are reviewed within context of market practices, tied to operating business plans and corporate goals, and approved by Compensation Committee ✓ Compensation Committee annually evaluates CEO/senior executive performance against challenging strategic, financial and ESG goals ✓ Rigorous stock ownership policy consistent with best practices, with minimum ownership level of 6x for CEO; requires net shares acquired to be retained until compliance is achieved ✓ Officers prohibited from hedging or pledging company stock and required to engage in stock transactions only during limited trading windows | |
Pay Philosophy and Structure | ✓ Focus on incenting stockholder value creation, balanced by retention and other considerations ✓ Substantial majority of leadership compensation delivered in long-term equity or cash-based awards to motivate pursuit of superior performance and sustainable growth ✓ Executive severance plans consistent with market practices, with double-trigger change of control benefits and only for most senior NEOs ✓ Incentive compensation designed to incent strong annual financial performance and long-term economic and stockholder value creation, balance growth and efficient capital deployment, and consider ESG progress and individual NEO contributions thereto | |
Incentive Program Design | ✓ AIP and LTI awards incent annual profitable growth and long-term financial value creation, using multiple performance objectives ✓ AIP awards not guaranteed, with below-threshold performance resulting in zero payout, payments subject to overall cap of 200%, and NEO individual modifiers generally capped at 100% ✓ Equity awards use multiple performance objectives, vest over multiple time horizons and are subject to threshold and maximum payout opportunities • Performance units (PUs) cliff vest at end of three years with payout for relative total stockholder return (TSR) component capped at 100% of target if absolute TSR is negative • Market-leveraged stock units (MSUs) vest over one-, two-, three- and four-year performance periods (average performance period of 2.5 years), with threshold performance at absolute TSR of (15)% and target performance at absolute TSR of 10% |
TableGiven its assessed low risk in each of Contents
Governance and Oversight
•The Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants based on individual performance, including as a result of excessive risk-taking.•Our clawback policy serves as a deterrent to fraud or other misconduct in connection with our financial statements.•The Compensation Committee annually evaluates the performance of our CEO and other executives in the context of our company and business goals and their individual contributions.•Our stock ownership guidelines are rigorous and consistent with best practices, with a minimum ownership level of 6x base salary for our CEO and a requirement that 50% of the ownership level be held in vested shares.•We prohibit our officers from hedging or pledging company stock and require them to engage in stock transactions only during limited trading windows.
Pay Philosophy and Structure
•Our programs prioritize incenting stockholder value creation, balanced by retention and other considerations.•The substantial majority of executive compensation is delivered in equity to motivate the pursuit of strong long-term performance and sustainable growth.•Our change of control and executive severance plans are reasonable and consistent with market practices, with change of control benefits provided on a double-trigger basis to mitigate the risk that such a transaction be pursued to advance personal interests rather than the best interests of our stockholders.•Our incentive compensation consists of short- and long-term performance objectives that cover different time periods and is balanced with objectives for annual financial performance and long-term economic and stockholder value creation, as well as between growth and efficient capital deployment.
Incentive Program Design
•Our AIP and LTI awards incent annual profitable growth balanced with long-term financial value creation, using multiple performance objectives and providing realized compensation based primarily on our company's performance.•AIP awards are not guaranteed, with below-threshold performance potentially resulting in zero payout and payments subject to an overall cap of 200%.•Our equity award vehicles are performance-based, use multiple performance objectives, are subject to threshold and maximum payout opportunities, and have the following additional features that limit potential risk-taking:•Our performance units (PUs) cliff vest at the end of three years with the payout for the relative total stockholder return (TSR) components capped at 100% of target for any three-year performance period in which absolute TSR is negative to prevent management from being unduly enriched when stockholders experience loss, while still incenting executives to deliver relatively strong performance during challenging economic periods; and•Our market-leveraged stock units (MSUs) vest over one-, two-, three- and four-year performance periods (with an average performance period of 2.5 years), with challenging performance objectives, including a threshold performance level of absolute TSR of -15% and a target performance level of absolute TSR of 10%.
Based on these categories and other factors, Willis Towers Watson determinedWTW advised the Compensation Committee that, in its view, our compensation program strikes an appropriate pay-risk balance.balance and presents no risk-related concerns.
The Compensation Committee has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company.
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LEADERSHIP DEVELOPMENT
Our Board is actively involved in human capital management to identify and develop our future leaders. We maintain a robust performance review process and leadership development program for our employees. Management develops leadership at lower levels of our organization by identifying high potential talent and critical experts, cultivating the skills and capabilities to allow identified individuals to become our future leaders and providing them with developmental opportunities. Through regular reports from management, our Board has the opportunity to meet business leaders and functional leaders in law, finance, information technology, compliance, and human resources. In addition, Board members have freedom of access to all employees, and are encouraged to visit our facilities to meet local management and attend company events.
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SUCCESSION PLANNING
The Compensation Committee and/or our Board conducts executive succession planning semiannually, developing and refining succession plans for our CEO and key executive officers. Consistent with this practice, in April and October 2017, the Compensation Committee discussed talent that is currently ready — or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready — to fill executive officer positions in the event of a vacancy. Those discussions were then summarized and reported to our Board. In addition, the Compensation Committee reviews executive new hires, promotions and departures at its regularly-scheduled meetings.
INITIAL ORIENTATIONInitial Orientation
Our initial director orientation materials and discussions with management generally coverscover our (i) our strategies, performance and leadership; (ii) investor messaging; (iii) the strategies, risks and risksmitigating actions, and ESG priorities of our businesses; (iv) Board composition and director succession planning process, as well as recent Board focus areas; (v) finance matters, including our financial reporting policies and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure; (v)allocation; (vi) legal and compliance matters, including our Board and governance policies, Values and procedures, values and ethics, compliance,Ethics program, and ERM; (vi) human resources(vii) executive compensation and talent management matters, including executive compensation,leadership succession planning and non-employee director compensation;development, DEI and (vii)community investment; and (viii) information technology and cybersecurity.
In connection with his initial appointment to our Board in early 2017,October 2022, we provided Mr. LopezWagner with information regarding our businesses, strategic plans and risk-mitigating actions, competitors, non-employee director compensation policies and other matters. Our CEO thenand other members of management met with Mr. LopezWagner to discuss these matters. We conducted further orientation for Mr. Lopez in the spring of 2017 in connection withmatters and ensure a smooth onboarding process. After his appointment, Mr. Wagner joined as an observer in select Board Committee meetings to the Audit Committee.better understand their respective responsibilities. We have begun to using this same process to onboard Ms. Reverberi, who joined our Board in February 2023.
Continuing Education
CONTINUING EDUCATION
Our continuingongoing director education program consists of periodic visits to our facilities and regular interactions with and presentations from members of management presentations regarding our business operations, performance, strategies risks and values and ethics.risk mitigation activities. We provide updates on relevantthese topics of interest to our Board atduring its meetings and between meetingsas needed throughout the year, andyear. Our Board visited our Solutions Group’s North American innovation center in Miamisburg, Ohio in the spring of 2022. We also provide access to a boardroom news resource platform for them to keep informed of emerging best practices. We alsopractices, and reimburse directors who attend accreditedcontinuing director education programs for program fees and related expenses.
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BOARD AND COMMITTEE EVALUATIONS
The Governance Committee oversees and conducts an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees, including the Committee Chairs. Our Board views the evaluation process as integral to assesingassessing its effectiveness and identifying improvement opportunities in the pursuit of continued excellence. Many of the improvements inWe have continually improved our governance practices and Board processes were identified and implemented as a result of thethis annual evaluation process.process, as shown on the following page.
In response to feedback received in recent years during the evaluationAs part of this process, our Board madedirectors have the following enhancementsopportunity to its processes:
•Identifiedprovide our Lead Independent Director candid feedback on other directors to enable continuous boardroom improvement and assist with director succession planning. In 2023, theneedGovernance Committee plans to develop a more formal process foranindependentindividual directorin the packaging industry, culminating in the appointmentself-assessments or evaluations.BOARD AND COMMITTEE EVALUATIONS
1
Process
Written evaluations of
Mr. LopezBoard/CommitteeComposition, including diversity of skills, qualifications and demographic backgrounds
Meeting materials
Meeting mechanics and structure
Fulfillment of responsibilities
Meeting content and conduct
Overall performance
Effectiveness of Chairman, Lead Independent Director and Committee Chairs
One-on-one discussions with Governance Committee Chair to
our Board;•Given our increased strategic focus on acquisitions,enhanced discussionprovide additional perspective and discuss written feedbackSolicitation of
M&Apipelineany feedback regarding individual directors to identify potential improvement opportunities andtargets actively under consideration, as well as the integration and performance of recently acquired companies;•Continued its focus onexecutive succession planning and leadership developmentassist withmore frequent discussions ondirector succession planningAvery Dennison Corporation | 2023 Proxy Statement
37
2 | ||||
2022 Review of Results
Discussion of evaluation results and the desired profile of future candidates;
Chairman/CEO, Lead Independent Director/Governance Committee Chair, Corporate Secretary, and the Audit Committee's review and discussion of ourcybersecurity preparedness and exposures related to pension liabilities;
Governance Committee
Board in executive session with management below the executive officer level; and
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3 | ||||
Table of ContentsRecent Improvement Actions
| • | Advanced strategic and risk oversight, expanding mentorships between individual directors and key business leaders, and ensuring meeting discussions prioritize debate of challenges and opportunities rather than presentation of information |
| • | Heightened focus on supply chain resiliency, cybersecurity preparedness, and ESG priorities and progress |
| • | Continuous discussion of M&A pipeline and potential targets, as well as performance of acquired companies and integration learnings |
| • | Enhanced director succession planning, focusing on candidates with digital, retail/consumer product goods and applied science/technology expertise that could also increase gender or racial/ethnic diversity on our Board, resulting in appointment of two new directors to refresh our Board and mitigate impact of upcoming concentrated retirements |
| �� | Reviewed potential CEO successors and their development plans to ensure ready-now successors over multiple time horizons and increased engagement with leaders below NEO level to enhance executive succession planning and leadership development |
| • | Increased Chairman/CEO engagement with directors between meetings, with more frequent updates and one-on-one discussions between him and each director, which were important in 2022 as we worked to address sizable currency movements, pandemic-driven challenges in China, the Russian war in Ukraine, rising inflation and supply chain disruptions, and continue advancing our ESG progress |
| • | Refined Board schedule and meeting process, implementing executive sessions with both our Chairman/CEO and President/COO, as well as one only with our President/COO, and holding certain Committee meetings and one Board meeting per year virtually to maximize efficiency given equally high level of engagement and discussion in both formats |
STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS
We value stockholder feedback on our governance program and we actively solicit input through stockholder engagement to ensure that we reflect not only our program reflectsevolving business strategies but also the changing business environment and stockholder expectations.
STOCKHOLDER ENGAGEMENT ON GOVERNANCE MATTERS IN 2017
We continued our longstanding practice of open dialogue with stockholders in 2017. In advance of the 2017 Annual Meeting, we contacted our 25 largest institutional stockholders, representing almost 50%expectations of our then-outstanding shares. Boardstakeholders. In addition to our extensive investor relations program through which members includingof management engage with our Lead Independent Director, and management were made available to answer questions and address concerns regarding our executive compensation and governance programsinvestors throughout the year, this supplemental engagement program is depicted – and the items being brought to stockholder vote at the Annual Meeting. Whilefeedback we received responses from stockholders representing 25% of our then-outstanding shares, none of them felt that there was a need to substantively engage during that busy time.
In the fall, we reached out to our 30 largest institutional stockholders, representing nearly 55% of our then outstanding shares, to learn what issues are important to them without the time pressures associated with proxy season. As a result of these efforts, we received responses from stockholders representing over 30% of our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
During our 2017 engagement program, with respect toon governance matters related to governance, we discussed several topics related to our Board's processes, including succession planning and refreshment, diversity, and evaluations. We also discussed the integration of sustainability into our business strategies, and our Board's oversight of our cybersecurity preparedness. Our stockholders expressed interestis described – in the anticipated completion of our CEO transition and our Board's views on proxy access; both of these matters were subsequently addressed with our December 2017 announcement of Mr. Scarborough's retirement as our Executive Chairman at the end of that year and our adoption of proxy access.summary.
CONTACTING OUR BOARD
We welcome ongoingOur Board welcomes feedback from all our stockholders. We review every correspondence submitted byreceived from stockholders, discussing the feedback received with senior management and/or our Board as appropriate.
Stockholders and other interested parties may contact our Board, Chairman, Lead Independent Director, any Committee or Committee Chair, or any other individual director concerning business matters by writing to:to Board of Directors (or a particular Board subgroup or individual director), c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.
Avery Dennison Corporation| 2018 Proxy Statement |22
8080 Norton Parkway, Mentor, Ohio 44060.
| 2023 Proxy Statement | Avery Dennison Corporation |
ITEM 1 – ELECTION OF DIRECTORS
Our Bylaws provide for a Board of between eight8 and 12 directors, with the exact number fixed by a resolution of our Board. Effective February 1, 2017, in conjunction with Mr. Lopez's appointment and uponOur Board has fixed the recommendation of the Governance Committee, our Board fixed thecurrent number of directors at 11. All nominees are standing for election at the Annual Meeting for a one-year term.10.
Each of the 11our nominees is presently serving on our Board and has consented to being named in this proxy statement and serving if elected by our stockholders. All nominees are standing for election for a one-year term ending at the 2024 Annual Meeting.
MAJORITY VOTING STANDARD; UNELECTED DIRECTOR RESIGNATION REQUIREMENTMajority Voting Standard; Unelected Director Resignation Requirement
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting. Our Bylaws provide for the approval by a majority of votes cast for the election of directors in uncontested elections like this one and require that an incumbent director who is not re-electedreelected tender his or her resignation from our Board. Our Board, excluding the tendering director, is required to determine whether to accept the resignation —– taking into account the recommendation of the Governance Committee and any other factors it considers appropriate —– and publicly disclose its decision regarding the tendered resignation, including itsthe rationale for theits decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for election of directors.
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting.Board Recommendation
RECOMMENDATION OF BOARD OF DIRECTORS
Our Board of Directors recommends that you vote FOR each of theour 10 director nominees.The persons named as proxies will vote for thetheir election, of each of the 11 nominees, unless you specify otherwise. If any director nominee were to become unavailable prior to the Annual Meeting, your proxy would be voted for a substitute nominee designated by our Board or we would decrease the size of our Board.
SELECTION OF DIRECTOR NOMINEES
Director nominees are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nominees may also be recommended by the Governance Committee for appointment to our Board, with their election by stockholders taking place at the next Annual Meeting; Mr. Wagner and Ms. Reverberi were appointed to our Board in October 2022 and February 2023, respectively, and are first being voted on by stockholders at the Annual Meeting. OurAs shown in the Board believes thatmatrix contained in the proxy summary, our directors reflectbring a balance and diversity of skills, qualifications and demographicsdemographic backgrounds that allows them to effectively discharge their oversight responsibilities.
•Ability to qualify as independent, to ensure that a majority of our Board remains independent;•Business and leadership experience, considering factors such as size, industry, scope, complexity and global operations;•Experience as a board member of another public company;•Experience in finance, accounting and/or executive compensation;•Time commitments, including other boards onGuidelines, whichthe nominee serves;•Potential conflicts of interest;•Ability to contribute to the oversight and governance of our company; and•Ability to represent the balanced interests of stockholders as a whole, rather than those of any special interest group.
In consideringevaluating whether to recommend a candidate as anew or incumbent director nominee, the Governance Committee usesprimarily considers the following criteria set forth in our Governance Guidelines:
Avery Dennison Corporation| 2018 Proxy Statement |23
Table of Contentsare summarized below.
For incumbent directors, the Governance Committee also evaluates contributions to our Board and Committees, attendance at Board and Committee meetings, compliance with our stock ownership guidelines, and mandatory retirement date to assist with director succession planning. The Governance Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all nominees.
| • | Independence, to ensure substantial majority of Board is independent |
| • | Business and leadership experience, including industry experience and global exposure and considering factors such as size, scope and complexity |
| • | Board service at other U.S. publicly traded companies |
| • | Experience in finance, accounting and/or executive compensation |
| • | For incumbent directors, previous Board/committee contributions, meeting attendance, compliance with our stock ownership policy and mandatory retirement date |
| • | Time commitments, including service on other boards; directors joining our Board after 2021 who are public company executive officers may not serve on more than one other public company Board |
| • | Potential conflicts of interest |
| • | Demographic backgrounds (including, without limitation, gender, race and ethnicity); when evaluating nominees, the committee only considers (and asks any search firm engaged to provide) candidate slates that include highly qualified women and individuals from other underrepresented communities |
| • | Ability to contribute to our company’s governance and sustainability |
| • | Ability to represent balanced interests of all stockholders, as well as the interests of our other stakeholders, rather than those of any special interest group |
Avery Dennison Corporation | 2023 Proxy Statement
| 39 |
The Governance Committee reviews the skills, qualifications and demographic background of any candidate with those of our current directors in assessing howto ensure our Board can mosthas the diversity to effectively fulfill its oversight responsibilities. Sources for identifying potential nominees include current Board members, senior management, executive search firms and our stockholders.investors.
STOCKHOLDER SUBMISSION OF DIRECTOR NOMINEES
Advance Notice Nominees
Stockholders may recommend director candidates by submitting the candidate's name, together with his or her biographical information, professional experience and written consent to nomination, to Governance and Social Responsibility Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203. To be considered at the 2019 Annual Meeting, advance notice stockholder nominations must comply with the requirements referenced in the last section of this proxy statement underStockholder Submission of Stockholder Items for 2019 Annual Meeting. Director Nominees
The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
Proxy AccessAdvance Notice Nominees
Our Board recently amendedStockholders may recommend director candidates by submitting the candidate’s name, together with his or her biographical information, professional experience, written consent to nomination and the additional information required by our Bylaws, to permit aGovernance Committee Chair, c/o Corporate Secretary, 8080 Norton Parkway, Mentor, Ohio 44060. To be considered at the 2024 Annual Meeting, advance notice stockholder nominations must comply with the requirements described in the Voting and Meeting Q&A section of this proxy statement.
Proxy Access Nominees
A stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company'scompany’s stock continuously for at least three years is permitted to submit director nominees (up to 20% of the Board) for inclusion in our proxy materials, subject to the requirements specifieddescribed in our Bylaws. For further information on submitting proxy access nominees pleasefor the 2024 Annual Meeting, refer toSubmission the Voting and Meeting Q&A section of Stockholder Items for 2019 Annual Meeting.
Avery Dennison Corporation| 2018 Proxy Statement |24
Table of Contentsthis proxy statement.
Our directors bring abalance of skills, qualifications and demographic backgrounds in overseeing our company, as shown in the matrix below. The Governance Committee regularly evaluates the skills and qualifications desirable for our Board to best meet the changing needs of our business.
BOARD REFRESHMENT AND DIRECTOR SUCCESSION PLANNING
Our Board'sBoard’s ongoing director succession planning is designed to ensure an independent, well-qualified Board, with diversity in experienceskills, qualifications and background to effectively provide strong oversight.demographic backgrounds that enables effective independent oversight and aligns with our business strategies and ESG priorities.
Tenure
NO TERM LIMITS
Our Governance Guidelines reflect our Board's beliefcurrently provide that directors shouldare not be subject to termtenure limits. While termtenure limits could help ensure Board refreshment and thereby facilitate fresh ideas andnew viewpoints being brought to the Board, our Board believesboardroom, they are counter-balanced bycould also result in the disadvantage of causing thepremature loss of a director who over a period of time has become well-versedgained valuable experience and is continuing to significantly contribute to our Board’s oversight of our business.
Our Board determines its refreshment policies in light of our strategies operations and risks and is providing valuable contributions to Board deliberations. We believe that our Board's decision not to establish term limits is consistent with the prevailing practice among companies in the S&P 500.
We recognize that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity; however, we believe that arbitrarily removing knowledgeable directors and losing the oversight consistency they bring — particularly during periods of executive management change similar to our recent CEO and CFO transitions — weighs against implementing term limits. Ultimately, it is our Board's responsibility to establish appropriate board refreshment policies, usingfinancial position at any particular time, exercising its discretion in the best interest of our company and stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |25
POLICIES SUPPORTING BOARD REFRESHMENTour stakeholders have suggested that longer-tenured directors may have decreased independence and objectivity. However, the removal of knowledgeable directors and loss of oversight consistency they bring, particularly during periods of executive management change, such as the recent appointments of our President/COO and President of our newly-formed Materials Group, are important counterbalancing considerations. In connection with its new director search process, the Governance Committee regularly reviewed during 2022 the skills, qualifications, demographic backgrounds, age, tenure and scheduled mandatory retirement of our Board members and conducted director succession planning to ensure that our Board continues to meet the needs of our businesses, help us advance our strategies and serve the interests of all our stakeholders.
40 | 2023 Proxy Statement | Avery Dennison Corporation |
Policies and Events Supporting Regular Board Refreshment
Our Board has adopted the policies described below to facilitate regular refreshment of our Board and ensure that it continues to independently oversee and challenge our management with refreshed points of view.team.
| Description | Events Occurring at or Since 2022 Annual Meeting | |||
Mandatory Resignation Policy | Incumbent directors | All incumbent directors then standing for election were elected at the | ||
Mandatory Retirement Policy | Directors must retire on | No directors retired under this policy in | ||
Resignation Tendered Principal Employment | Directors who change | No directors changed their principal employment since the | ||
Prior Notice Requirement | Directors must give prior notice before accepting another U.S. public company directorship so that | No directors joined another U.S. public company board since the | ||
OverUpon the past eight years, five directors retired fromrecommendation of the Governance Committee, Ms. Reverberi and Mr. Wagner were appointed to our Board as a result ofin February 2023 and October 2022, respectively. Mark Barrenechea left our mandatory retirement policy and two directors resigned from our Board in April 2022 (not due to any disagreement with our company). Upon the recommendation of the Governance Committee, Mr. Lopez was appointed to and Peter Barker retired from our Board as an independent directorunder our mandatory retirement policy in February 2017. In connection with our CEO transition, Mr. Butier joined our Board as a non-independent director in May 2016.April 2021. We believe that this recent experience — coming after four new independentwith joining and departing directors were appointed to our Board between 2009 and 2013 — demonstrates our Board'sBoard’s commitment to ongoingregular refreshment.
AGE AND TENURE
The average age of our director nominees is 61, which we believe is comparable to the average board age in the S&P 500 and within the 60-63 year band in which the plurality of these companies fall. The average tenure of our director nominees is ten years, which we believe is comparable to the average tenure for companies in the S&P 500 and within the six-to-ten year band in which the majority of these companies fall. The charts on the following page show the age and tenure of our director nominees, which we believe is balanced between new directors who bring new ideas and insights and longer-serving directors with deep institutional knowledge of our Board and company.
Avery Dennison Corporation| 2018 Proxy Statement |26
Although our Board does not have a formal policy regarding the consideration of diversity in selecting director nominees,Both the Governance Committee seeksand our full Board discussed director succession planning at every meeting held in 2022 to recommend individuals withmitigate the impact of upcoming concentrated retirements, conduct a broad diversity of experience, profession, skill, geographic representationsearch for new directors that would both complement and background, which may include consideration of an individual's demographic background, including characteristics such as race, genderadvance the skills and national origin. While diversity is a consideration, nominees are not chosen or excluded solely or primarilyqualifications currently represented on that basis; rather, the Governance Committee focusesour Board – focusing on skills, experiencecandidates from digital, retail/consumer packaged goods and background that can complement our existingapplied science/technology backgrounds – and further enhance Board in light of the diverse and global nature of our businesses and operations.diversity.
BOARD COMPOSITION
Our Board recognizessupports and reflects our values, recognizing the benefits of racial, ethnic and gender diversity in the boardroom, including better reflecting our global customer base and the healthy debate that results from different viewpoints that may stem from diverse backgrounds.
Age and Tenure
The racial, ethnic and gender diversityaverage age of our 2018 director nominees is shown~62, which we believe is slightly lower than the average director age in the chart below.S&P 500. The average tenure of our director nominees is ~10 years, which we believe is modestly higher than the average tenure for companies in the S&P 500. Our director nominees reflect a balance between newer directors bringing fresh ideas and insights into the boardroom and longer-serving directors with deep institutional knowledge of our Board and company.
2018Our Governance Guidelines reflect that the Governance Committee’s assessment of director candidates includes consideration of their demographic backgrounds, including, without limitation, race, gender and ethnicity. The Governance Committee seeks to recommend individuals with a broad diversity of experience, skill, geographic representation and demographic background. While diversity is a consideration and area of focus, no nominee would be chosen or excluded solely on that basis; rather, the Governance Committee focuses on a candidate’s overall profile to complement the existing members of our Board. When evaluating director candidates, the Governance Committee considers (and asks any search firm engaged to provide) candidates that include highly qualified women and individuals from other underrepresented communities; two of our four most recently appointed and currently serving independent directors increased the gender or racial/ethnic diversity on our Board.
Avery Dennison Corporation | 2023 Proxy Statement | 41 |
| Director Age, Tenure and Diversity | ||||
2023 DIRECTOR NOMINEES
The following pages provide information on the directors nominated for election at the Annual Meeting,our 2023 director nominees, including his or hertheir age, board leadershiplength of service, independence, current Board roles and business experience during at least the past five years. We also indicate the name of any other U.S. public company board on which each nominee currently serves or has served during the past five years; for these purposes, "public company" means one that is required to file reports with the SEC.years.
In addition to the information presented regardingWe present each nominee's experiencenominee’s skills and qualifications that led our Board to conclude that he or she should serve as a director, — which includes senior leadership experience, industry experience,expertise, global exposure, financial sophistication, andU.S. public company board experience — we believe that eachand/or financial expertise as defined in the Board matrix shown in the proxy summary. All of them has integrity and adheres to our high ethical standards. Each nominee also hasnominees have demonstrated the ability to exercise sound judgment, fulfill the time commitments necessary to serve on our Board and is committed to servingadvance the long-term interests of our stockholders.
Avery Dennison Corporation| 2018 Proxy Statement |27
stockholders, as well as those of our other stakeholders.
42 | 2023 Proxy Statement | Avery Dennison Corporation |
| ANDRES A. LOPEZ | ||||
Director since February 2017 Independent | RECENT BUSINESS EXPERIENCE
• President & •
• President, O-I Americas, from July 2014 to January 2015 • President, O-I Latin America, from April 2009 to July 2014
| |||
Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Oversees Industry • Leads
• Led Latin America and Americas divisions, after having worked in positions of increasing responsibility throughout the region
U.S. public company board experience • Concurrent service on one other
|
Audit Committee Member
| ANTHONY K. ANDERSON | ||||
Age 67 Director since December 2012 Independent |
Ernst & Young LLP, an assurance, tax, transaction and advisory services firm • Vice Chair, Managing Partner and Member of
| |||
Governance Committee Member
Current: AAR Corporation Exelon Corporation Marsh & McLennan Companies, Inc. Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Served on Financial expertise •
• Substantial experience advising audit committees of large multinational corporations • Certified public accountant (now inactive)
U.S. public company board experience • Concurrent service on three other
|
Audit Committee Member
Governance Committee Member
| BRADLEY A. ALFORD | ||||
 Age 66 Director since April 2010 Independent |
Nestlé USA, a nutrition, health and wellness company • Chairman & Nestlé Brands Company, an operating unit of Nestlé USA • President & | |||
BOARD ROLES
Governance Committee Member
Current:
Perrigo Company Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led Industry •
• Knowledge of
•
| |||
• Concurrent service on one other board and prior service on other boards |
Avery Dennison Corporation| 2018 Proxy Statement |28
Avery Dennison Corporation | 2023 Proxy Statement |
|
| FRANCESCA REVERBERI | ||||
Age Director since Independent |
Trinseo PLC, a specialty materials solutions provider • SVP, Sustainable Plastics & Chief Sustainability Officer since July 2021 • SVP, Engineered Materials & Synthetic Rubber, from March 2020 to December 2021 • General Manager, Engineered Materials, from October 2019 to May 2021 • Global Senior Business Director, Basic Plastics, from December 2017 to October 2019 BOARD ROLES None OTHER PUBLIC COMPANY BOARDS Current:
Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry expertise • Substantial materials science and packaging expertise • Deep understanding of applied science in plastics, key focus of our environmental sustainability initiatives Global exposure • Lives and •
|
Lead Independent Director
Compensation Committee Member
Governance Committee Member
|
| |||
Age Director since
|
Alurx, Inc., a health and wellness company • Founder, Chair & CEO since January 2020
Dine Brands Global,
| |||
|
Inc. (formerly DineEquity, Inc.), owner, operator and franchisor of IHOP and • Chairman &
| |||
Current:
Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Leads private consumer-direct retail company and led company then with $600+ million in annual revenues and ~1K employees
• Substantial operational and marketing experience in • Expertise in brand positioning, risk assessment, financial reporting and governance
U.S. public company board experience •
| |||
Avery Dennison Corporation| 2018 Proxy Statement |29
 Age 70 Director since July 2007 Independent |
Academy Sports + Outdoors, a sports and recreation retailer • Chairman, President & CEO since May 2018 Foot Locker, Inc., a specialty athletic retailer • Executive Chairman from December 2014 to May 2015 • Chairman, President & • President
| |||
Current:
Past Five Years:
Whole Foods Corporation |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry •
U.S. public company board experience •
|
| 2023 Proxy Statement | Avery Dennison Corporation |
| MARTHA N. SULLIVAN | ||||
Director since February 2013 Independent | RECENT BUSINESS EXPERIENCE Sensata Technologies Holding • President & • President & COO from September 2010 to December 2012 •
Texas Instruments, Inc., • Vice President of Sensor Products from 1997 to 2006 | |||
BOARD ROLES
Current: Sensata Technologies Holding Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry expertise and global exposure •
• Strong technology background, including experience overseeing
U.S. public company board experience • Concurrent service on one other
|
Audit Committee Member
Compensation Committee Member
| MITCHELL R. BUTIER | ||||
Age 51 Director since April 2016 Not Independent |
Avery Dennison Corporation • Chairman & CEO since March 2022 • Chairman, President & • President & CEO from May 2016 to April 2019 • President & • Senior Vice President & • Vice President, Global Finance
| |||
Current: None Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience •
Industry • Served in Financial • Served as our CAO for 3 years and CFO for
| |||
Avery Dennison Corporation| 2018 Proxy Statement |30
Avery Dennison Corporation | 2023 Proxy Statement | 45 |
| PATRICK T. SIEWERT | ||||
Director since April 2005 Independent | RECENT BUSINESS EXPERIENCE The Carlyle Group, a global alternative investment firm • Managing Director and Partner since April 2007 The Coca-Cola Company, a beverage company •
Executive Committee member and Group President, Asia, from August 2001 to
| |||
Governance Committee Chair
Current:
Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS Industry • Led • Work experience, citizenship and residency in Asia, region in which we generate substantial amount of sales and majority of our employees is located Financial expertise • Advises on investments in consumer goods businesses globally, particularly in Asia
U.S. public company board experience •
Concurrent service on one other
|
Audit Committee Chair
| WILLIAM R. WAGNER | ||||
 Age 55 Director since October 2022 Independent |
RECENT BUSINESS EXPERIENCE
•
• President & COO from May 2013 to December 2015
| |||
None
Current:
Past Five Years:
|
SELECT SKILLS AND QUALIFICATIONS Senior leadership experience • Led
Industry expertise • Substantial software and IT/technology expertise
U.S. public company board experience • Concurrent service on two other
|
Governance Committee Chair
Audit Committee Member
46 | 2023 Proxy Statement | Avery Dennison Corporation |
Avery Dennison Corporation| 2018 Proxy Statement |31
In recommending non-employee director compensation to our Board, the Compensation Committee seeks to target compensation at the median of similarly sized companies similar in size, global scope and complexity with which we compete for director talent. The majority of compensation is delivered in equity to align director interests with those of our stockholders. Because he retired from our company at the end of 2017, Mr. Scarborough will be compensated pursuant to our non-employee compensation program beginning in 2018.
Median Target Compensation
MEDIAN TOTAL REMUNERATION
After having been unchanged for three years, non-employee director compensation was increased in 2016 based upon the advice of Willis Towers Watson that our previous overall compensation was below the market median. To maintain the program's market-competitiveness and attract and retain qualified directors, upon the recommendation of the Compensation Committee, our Board approved changes to target total non-employee director remuneration at the market median through 2017. The primary components of our annual non-employee director compensation program are summarized in the charts below and described thereafter.
 ANNUAL NON-EMPLOYEE DIRECTOR COMPENSATION |  |  | ||||
Target Grant Date Fair Value of Restricted Stock Units (RSUs) | $ | 170K | ||||
Retainer | $ | 100K | ||||
Match of Charitable/Educational Contributions | $ | 10K | ||||
Additional Retainer for Lead Independent Director | $ | 30K | ||||
Additional Retainer for Audit Committee Chair | $ | 25K | ||||
Additional Retainer for Compensation Committee Chair | $ | 20K | ||||
Additional Retainer for Governance Committee Chair | $ | 20K | ||||
Based onOur 2017 Incentive Award Plan limits the sum of the grant date fair value of equity awards and the cash compensation provided to any non-employee director during any calendar year to $600K. In 2022, all then-serving non-employee directors except for our Lead Independent Director/Governance Committee Chair and our Audit Committee Chair received less than half this maximum compensation amount.
Compensation Setting
Non-employee director compensation is generally reviewed by the Compensation Committee every three years. In February 2021, at the Compensation Committee’s request, its independent compensation consultant analyzed trends in non-employee director compensation and assessed the market competitiveness of our program.
Using benchmark data from public filings of companies ranked in the Fortune 350-500, WTW recommended that the additional retainers for our Audit, Compensation and Governance Committee Chairs each increase by $5K and the target grant date fair value of our annual equity award to non-employee directors increase by $15K. These modest increases would bring total direct compensation for regular Board service to $270K (or $280K with the charitable match), the projected median of Fortune 350-500 companies in 2024, the next time the Compensation Committee plans to review non-employee director compensation. Giving consideration to, among other things, the advice of Willis Towers Watson,WTW, the Compensation Committee recommended to our Board that the supplemental Lead Independent Director retaineradditional retainers for our Audit, Compensation and Governance Committee Chairs be increased to $25K, $20K and $20K, respectively, and the target grant date fair value of the annual award of RSUs be increased to $170K.
Based on the recommendation of the Compensation Committee and further increased from $25,000 to $30,000 to more closely align with market practices. Ourdiscussion, our Board approved the increase effective May 1, 2017.revised non-employee director compensation program, beginning as of the date of the 2021 Annual Meeting.
STOCK OWNERSHIP GUIDELINESStock Ownership Policy
Our stock ownership guidelines requirepolicy requires non-employee directors to own $500,000 in$500K of our company stock, 50% of which must be held in vested shares. In February 2017, upon the advice of Willis Towers Watson, the Compensation Committee discontinued considering stock option gains towards measuring guideline compliance, counting onlyOnly shares owned directly or in a trust, deferred stock units (DSUs) and RSUs. These changes,unvested RSUs, which made the guidelines more stringent, were consistent with the changes madeare subject only to our executive stock ownership guidelines effective 2017.
Directorstime-based vesting, count for these purposes. Our non-employee directors are prohibited from hedging or pledging our common stock.
Except forAll our newest director who has five years to reach hisnon-employee directors have achieved the minimum ownership level, all of our directors satisfy the holding requirements ofrequired by our stock ownership guidelines. Nonepolicy other than Mr. Wagner and Ms. Reverberi who were appointed to our Board in October 2022 and February 2023, respectively. The average ownership of all other non-employee directors was ~11x the minimum required level at year-end 2022. Based on our review of their written representations in our 2022 director questionnaire, none of our non-employee directors has hedged or pledged our common stock.
Avery Dennison Corporation | 2023 Proxy Statement | 47 |
Avery Dennison Corporation| 2018 Proxy Statement |32
Table of ContentsEquity Compensation
EQUITY COMPENSATION
The 2017annual equity grantaward to non-employee directors was made in the formconsisted of RSUs that vest in one year,on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected; however, unvestedwere elected. Unvested RSUs (i) fully vest upon a director'sdirector’s death, disability, retirement from our Board after reaching age 72 or termination of service within 24 months after a change of control. Unvested RSUscontrol and (ii) are generally cancelled in the event a director voluntarily resigns, is not re-electedreelected by stockholders or isleaves our Board, unless otherwise asked to leave our Board.determined by the Compensation Committee. On May 1, 2017,2022, each of our then-serving non-employee directors was granted 1,678awarded 930 RSUs with a grant date fair value of approximately $140,000 based on the fair market value of our common stock on that date.$167,232.
On February 1, 2017, the date ofOctober 27, 2022, in connection with his appointment to our Board on that date, Mr. LopezWagner received aan award prorated equity grant for the remainderhis months of service during the term expiringending at the 2017 Annual Meeting consisting of 445510 RSUs with a grant date fair value of approximately $35,000$83,470. On February 22, 2023, in connection with her appointment to our Board on that date, Ms. Reverberi received an award of 155 RSUs based on the fair marketa prorated value of $28,333.
In connection with his departure from our common stockBoard on the date of the 2022 Annual Meeting and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined (with him abstaining) to accelerate the vesting of the RSUs granted to former director Mark Barrenechea in May 2021 that date.were scheduled to vest a few days after his separation from our Board. In making its determination, the Compensation Committee noted that Mr. Barrenechea had served nearly the entire one-year term for which he had been elected by our stockholders.
DEFERRABLE CASH COMPENSATIONDeferrable Cash Compensation
CashAnnual retainers are paid semiannually and prorated for any director'sdirector’s partial service during the year. Directors are also reimbursed for travel expenses incurred to attend Board meetings and continuing director education events.
Non-employeeOur non-employee directors may choose to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Plan,Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by an insurance company;a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation PlanProgram (DDECP); or (iii) a combination of cash and DSUs. NoneDirectors are able annually to enroll in these programs for the following year; for 2022, none of our current non-employee directors participatesparticipated in the DVDCP and eightfive of our non-employee directors participatethem participated in the DDECP. Dividend equivalents, representing the value of dividends paid on shares of our common stock calculated based on the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs credited to director DDECP accounts.
When a director participatingparticipant in the DDECP retires or otherwise ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director'sdirector’s service, with the resulting number of shares of our common stock issued to the director. Dividend equivalents, representing the value of dividends per shareMr. Barrenechea’s DDECP account was paid onout to him in shares of our common stock calculatedafter his departure from our Board in April 2022 in accordance with reference to the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP.program terms.
MATCHING GIFT PROGRAMCharitable Match
We match up to $10,000$10K per year of aeach non-employee director'sdirector’s documented contributions to charitable organizations or educational institutions.
Avery Dennison Corporation| 2018 Proxy Statement |33
48 | 2023 Proxy Statement | Avery Dennison Corporation |
| NAME | | FEES EARNED OR PAID IN CASH(1) | | STOCK AWARDS(2) | | CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS(3) | | ALL OTHER COMPENSATION(4) | | TOTAL | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||||||||||
Bradley A. Alford | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | $ | 7,000 | | | $ | 243,973 | | |||
Anthony A. Anderson | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | | | — | | | $ | 236,973 | | ||
Peter K. Barker | | | $ | 115,000 | | | | $ | 136,973 | | | | — | | $ | 10,000 | | | $ | 261,973 | | |||
Ken C. Hicks | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | | | $ | 10,000 | | | $ | 246,973 | | |
Andres A. Lopez | | | $ | 91,667 | | | | $ | 170,721 | | | | — | | — | $ | 262,388 | | ||||||
David E.I. Pyott | | | $ | 128,333 | | | | $ | 136,973 | | | | $ | 8,336 | | | | $ | 10,000 | | | $ | 283,642 | |
Patrick T. Siewert | | | $ | 120,000 | | | | $ | 136,973 | | | | — | | — | $ | 256,973 | | ||||||
Julia A. Stewart | | | $ | 115,000 | | | | $ | 136,973 | | | | — | | | | $ | 10,000 | | | $ | 261,973 | | |
Martha N. Sullivan | | | $ | 100,000 | | | | $ | 136,973 | | | | — | | $ | — | $ | 236,973 | | |||||
(1)Messrs. Butier and Scarborough do not appear in the table because they were employed by our company in 2017 and did not receive any additional compensation to serve as directors. Amounts represent retainers earned as shown in the table below. At their election, the following directors deferred their cash compensation through the DDECP, with the following balances of DSUs in their accounts as of December 30, 2017, the last day of our 2017 fiscal year: Alford — 16,154; Anderson — 8,070; Barker — 27,225; Hicks — 12,512; Lopez — 285; Pyott — 47,642; Stewart — 35,475; and Sullivan — 7,967.
| DIRECTOR | | BOARD LEADERSHIP ROLES | | BOARD RETAINER | | COMMITTEE CHAIR RETAINER | | LEAD DIRECTOR RETAINER | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |||||||||
| Alford | | | | | $ | 100,000 | | | | — | | — | | | ||||
| Anderson | | | | $ | 100,000 | | | | — | | | | — | | | |||
| Barker | | Governance Committee Chair | | | $ | 100,000 | | | | $ | 15,000 | | | | — | | | |
| Hicks | | | | $ | 100,000 | | | | — | | | | — | | | |||
| Lopez | | | | | $ | 91,667 | | | | — | | — | | | ||||
| Pyott | | Lead Independent Director | | | $ | 100,000 | | | | — | | | | $ | 28,333 | | | |
| Siewert | | Audit Committee Chair | | | $ | 100,000 | | | | $ | 20,000 | | | | — | | | |
| Stewart | | Compensation Committee Chair | | | $ | 100,000 | | | | $ | 15,000 | | | | — | | | |
| Sullivan | | | | | $ | 100,000 | | | | — | | — | | | ||||
(2)Amounts reflect the grant date fair value, without adjustment for forfeitures, of 1,678 RSUs granted on May 1, 2017. Amount for Mr. Lopez also reflects the grant date fair value, without adjustment for forfeitures, of 445 RSUs granted on February 1, 2017 in connection with his appointment to our Board. The fair value of RSUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends. Each non-employee director serving as of December 30, 2017 held 3,707 unvested RSUs, except for Mr. Lopez, who held 2,123 unvested RSUs.(3)We do not currently have a retirement benefit program for non-employee directors. Amount for Mr. Pyott reflects the change in present value of his accumulated benefits under a director retirement plan the accrual of benefits under which was frozen in 2002, based on an interest rate of 3.03% as of December 30, 2017.(4)Amounts reflect our matching gifts for contributions made to charitable organizations or educational institutions.
Avery Dennison Corporation| 2018 Proxy Statement |34
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||||||||||
Bradley A. Alford | $ | 100,000 | $ | 167,232 | $ | 10,000 | $ | 277,232 | ||||||||||||
Anthony A. Anderson | $ | 100,000 | $ | 167,232 | — | $ | 267,232 | |||||||||||||
Mark J. Barrenechea(4) | — | — | $ | 10,000 | $ | 10,000 | ||||||||||||||
Ken C. Hicks | $ | 100,000 | $ | 167,232 | $ | 10,000 | $ | 277,232 | ||||||||||||
Andres A. Lopez | $ | 100,000 | $ | 167,232 | — | $ | 267,232 | |||||||||||||
Patrick T. Siewert | $ | 150,000 | $ | 167,232 | $ | 10,000 | $ | 327,232 | ||||||||||||
Julia A. Stewart | $ | 120,000 | $ | 167,232 | $ | 10,000 | $ | 297,232 | ||||||||||||
Martha N. Sullivan | $ | 125,000 | $ | 167,232 | $ | 10,000 | $ | 302,232 | ||||||||||||
William R. Wagner | $ | 50,000 | $ | 83,470 | $ | 10,000 | $ | 143,470 | ||||||||||||
| (1) |
|
| Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | |||||||||||||
Alford |
| $ | 100,000 | — | — | ||||||||||||
Anderson |
| $ | 100,000 | — | — | ||||||||||||
Hicks |
| $ | 100,000 | — | — | ||||||||||||
Lopez |
| $ | 100,000 | — | — | ||||||||||||
Siewert | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 20,000 | $ | 30,000 | ||||||||||
Stewart | Compensation Committee Chair | $ | 100,000 | $ | 20,000 | — | |||||||||||
Sullivan | Audit Committee Chair | $ | 100,000 | $ | 25,000 | — | |||||||||||
Wagner |
| $ | 50,000 | — | — | ||||||||||||
| (2) | Amounts reflect the grant date fair value of RSUs in accordance with Accounting Standards Codification Topic 718, Compensation, Stock Compensation) (ASC 718). Fair value was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends. Each non-employee director serving at year-end 2022 held 930 unvested RSUs, except that Mr. Wagner held 510 unvested RSUs. |
| (3) | Amounts reflect our match of documented contributions made to charitable organizations or educational institutions. |
| (4) | Mr. Barrenechea left our Board on the date of the 2022 Annual Meeting. Although he served as a non-employee director for four months of the year, he received no cash fees during this time since fees for the second half of a non-employee director’s term are paid in December of the previous year. In addition, he received no stock awards during the year, which are granted after the date of the Annual Meeting. However, in connection with his departure from our Board on the date of the 2022 Annual Meeting and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to accelerate Mr. Barrenechea’s RSUs granted in May 2021 that were scheduled to vest a few days after his separation from our Board. In accelerating the vesting, the Compensation Committee noted that he had served nearly the entire one-year term for which he had been elected by stockholders. |
Avery Dennison Corporation | 2023 Proxy Statement | 49 |
ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
After considering the preliminary voting results of the advisory vote on the frequency of our say-on-pay votevotes at ourthe 2017 Annual Meeting, our Board determined to holdcontinue holding say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (expected to occurvotes taking place at our 2023the Annual Meeting)Meeting (see Item3).
In this Item 2, our stockholders are being asked to vote on the following resolution:
RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's Named Executive Officers (NEOs), as described in theCompensation Discussion and Analysis andExecutive Compensation Tables sections of the Company's 2018 proxy statement.
RECOMMENDATION OF BOARD OF DIRECTORS
We remain committed to ongoing engagement with our stockholders to solicit their viewpoints and discuss why we believe our executive compensation program properly aligns with our strategies by encouraging our leaders to deliver strong financial performance and create superior long-term, sustainable value for our customers, employees, investors and communities.Our Board of Directors recommends that you vote FOR approval, on an advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.
The advisory vote is a vote to approve the compensation of our NEOs, as described in theCompensation Discussion and Analysis (CD&A) andExecutive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the compensation of our non-employee directors, our CEO pay ratio or pay vs. performance disclosures, or the features of our compensation program designed to prevent excessive risk-taking as described in the Risks Associated with Compensation Policies and Practices. section of this proxy statement.
The results of the advisory vote are not binding on our Board. However, in accordance with SEC regulations, the Compensation Committee will disclose the extent to which it takes into accountits consideration of the results of the vote in the CD&A of our 2019 proxy statement.
Avery Dennison Corporation| 2018 Proxy Statement |35
|
The Compensation and Executive Personnel Committee (referred to in this report as the "Committee") of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) section of Regulation S-Kour 2024 proxy statement.
Board Recommendation
We are committed to maintaining ongoing engagement with managementour stockholders to seek their feedback and baseddiscuss why we believe our executive compensation program aligns with our strategies and incents our leaders to deliver strong financial performance and consistent ESG progress, creating superior long-term, sustainable value for our customers, investors, employees and communities. Our Board recommends that you vote FOR approval, on itsan advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.
50 | 2023 Proxy Statement | Avery Dennison Corporation |
ITEM 3 — ADVISORY VOTE TO APPROVE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
Stockholders are given an advisory vote on the frequency with which we will hold advisory votes to approve executive compensation at least once every six years. This is a non-binding vote as to whether the executive compensation vote should occur every one, two or three years. Stockholders may also abstain from this vote.
Our stockholders last voted on the frequency of executive compensation votes at the 2017 Annual Meeting. At a meeting held immediately before that meeting, our Board reviewed the preliminary voting results from stockholders. Based on that review and those discussions, has recommended tothe Compensation Committee’s recommendation, our Board determined to hold advisory stockholder votes to approve executive compensation every one year. In determining to recommend that stockholders again vote for a frequency of Directorsevery one year, our Board noted that this frequency reflects the prevailing market practice and most closely aligns with our processes that annually establish performance objectives, evaluate executive performance and grant LTI awards, as well as engage with stockholders on our executive compensation program.
Stockholders are being asked to vote on the following resolution:
RESOLVED, that the CD&A be includedCompany’s stockholders determine, on an advisory basis, the frequency with which we will hold advisory votes to approve the compensation of the Company’s Named Executive Officers, among the following choices:
Choice 1 – every one year;
Choice 2 – every two years;
Choice 3 – every three years; or
Choice 4 – abstain from voting.
The advisory vote on the frequency of executive compensation votes is not binding on our Board. However, our Board will take into account the voting results in determining the frequency of future executive compensation votes. We will disclose the number of votes cast for each of the above choices and our 2018 proxy statement and incorporated by reference into our 2017 Annualfrequency determination in a Current Report on Form 10-K.8-K filed with the SEC on or before May 3, 2023. We will also state the determined frequency in future proxy statements.
The Committee welcomes feedback regardingBoard Recommendation
Consistent with our existing practice, our Board recommends a vote FOR a frequency of ONE year for advisory votes to approve executive compensation program.compensation. Properly dated and signed proxies will be so voted unless stockholders specify otherwise. Stockholders may communicate withchoose among the Committee by writingfour choices, none of which may receive a majority of the votes cast. The choice that receives the plurality of the votes cast will be deemed to represent the Compensation and Executive Personnel Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.non-binding vote of our stockholders.
Julia A. Stewart, ChairBradley A. AlfordKen C. HicksDavid E. I. PyottMartha N. Sullivan
Avery Dennison Corporation| 2018 Proxy Statement |36
| 51 |
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This Compensation Discussion and Analysis (CD&A)CD&A* describes the principles and practices underlying our executive compensation program and the decisions made byof the Compensation and Executive Personnel Committee (referred to in this CD&A as the "Committee"“Committee”) related to 2017on 2022 executive compensation. This CD&A containsIt includes the sections shown below.
•Executive Summary–EXECUTIVE SUMMARY
Business Strategy Overview
–On Track to Deliver Financial Targets–2017 Financial Performance–Disciplined Capital Allocation–Three- and Five-Year Cumulative TSR Outperformance–2017 Say-on-Pay Vote and Stockholder Feedback During 2017 Engagement–2017 NEOs–Overview of Pay Philosophy and Executive Compensation Components–Continuous Evolution of Compensation Program–Strong Compensation Governance Practices
•Summary of Compensation Decisions for 2017•Discussion of Compensation Components and Decisions Impacting 2017 Compensation–Base Salary–2017 AIP Awards–2017 Grants of LTI Awards–2017 Vesting of Previously Granted LTI Awards–Perquisites–Relocation and Other Temporary Benefits–General Benefits–Severance Benefits
•Compensation-Setting Tools•Independent Oversight and Expertise•Other Considerations
BUSINESS STRATEGY OVERVIEW
Over the last several years, weWe have been successfully executingconsistently executed our business strategies, which are designed to createdelivering long-term, sustainable value for our customers, investors and employees and investors and improveimproving the communities in which we operate. From We believe that this value for our stockholders' perspective, that valueinvestors is best measured by our total stockholder return (TSR)TSR and economic value added (EVA),cumulative EVA, both of which are performance objectives used in our LTI program and inform how we set our goals for sales growth, operating margin improvement, asset efficiency, ROTC and capital allocation.
We communicated long-term goals in 2014 for the organic sales growth, adjusted earnings per share (EPS) growthOur strategic pillars and return on total capital (ROTC) we planned to achieve by 2018, raising the bar over the five-year goals we established in 2012 and substantially achieved through 2015. With only one year remaining in the 2014-2018 period, we2022 achievements are on track to achieve or exceed our targets.
In late 2016, we changed our operating structure to align with our overall business strategy. As a result, our results are now basedshown on the following segments: Labelpage. Our overriding focus remains on ensuring the long-term success of all of our stakeholders, and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS), and Industrial and Healthcare Materials (IHM). In March 2017, we announced new long-term goals for 2021 for these new segments, as well as for our company as a whole, targeting continued solid organic sales growth and double-digit growth in adjusted EPS on a compound annual basis.
*This CD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a. "Risk Factors" and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2017 Annual Report on Form 10-K, filed on February 21, 2018 with the SEC (our "2017 Annual Report"). Stockholders should note that statements contained in this CD&A regarding our company and business performance targets and goals should not be interpreted as management's expectations, estimates of results or other guidance.
Avery Dennison Corporation| 2018 Proxy Statement |37
To achieve our targets, we have been consistently executing four key strategies. First, we are focused on drivinga clear set of strategies to deliver for them.
| * | This CD&A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the expected results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2022 Annual Report on Form 10-K, filed on February 22, 2023 with the SEC (our “2022 Annual Report”). Stockholders should note that statements contained in this CD&A regarding our company and business performance targets and goals should not be interpreted as management’s expectations, estimates of results or other guidance. |
52 | 2023 Proxy Statement | Avery Dennison Corporation |
STRATEGIC PILLARS
1 | ||||
Drive outsized growth in high value producthigh-value categories (organically
We aim to increase, both organically and through acquisitions) to improveacquisitions, the proportion of our portfolio mix over time. Product categories are defined as high value when theyin high-value products and solutions that serve markets that are growing faster than gross domestic product (GDP),GDP, represent large pools of potential profit and leverage our core capabilities. ExamplesThese products and solutions include our Intelligent Labels that use RFID tags and inlays, specialty and durable label materials, graphicgraphics and reflective materials,solutions, industrial tapes, external embellishments, and radio-frequency identification (RFID) inlaysshelf-edge pricing, productivity and tags. In 2017, we delivered above-average growth in these categories, while also increasing our exposure to them through acquisitions.consumer engagement solutions.
Second, we are focused on delivering solid
| • | In 2022, we achieved organic sales growth in high-value product categories that outpaced that of our base businesses, with strong growth in external embellishments, specialty labels and Intelligent Labels, and expanded our position in high-value product categories by acquiring two companies and making venture investments in two other companies to advance our capabilities. Over the past five years, we have more than tripled the size of our Intelligent Labels platform, reaching net sales of $0.8 billion in 2022. |
2 | ||||
Grow profitably in our base businessbusinesses
We strive to grow profitability in our base businesses by carefully balancing volume, price and mix; reducing complexity; and tailoring our go-to-market strategies.strategies
In 2022, we continued our product reengineering efforts to drive productivity and mitigate the impact of rising input costs
3 | ||||
Focus relentlessly on productivity
Third, we remain highly focused on continuously improving productivity
We employ product reengineering and enterprise lean sigma to expand our margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment. Product reengineering and lean operating principles are among the levers we use in executing this strategy.reinvestment to decrease our costs as a percentage of sales
| • | In 2022, we delivered ~$26 million in pre-tax savings from restructuring actions, net of transition costs |
4 | ||||
Effectively allocate capital
Our final key strategy is to be a highly disciplined allocator of capital. This applies to
We balance our acquisition criteria and how we deploy capital forinvestments in organic growth, productivity, and productivity, as well as our approachacquisitions and venture investments, while continuing to stockholder distributions.return cash to stockholders through dividends and share repurchases and ensure that we maintain ample capacity to invest
ON TRACK TO DELIVER FINANCIAL TARGETS
| • | In 2022, leveraging our strong balance sheet, we invested $298.5 million in fixed and IT capital expenditures to support future growth; completed two acquisitions and made two venture investments for a total of $39.5 million; increased our quarterly dividend rate by ~10%; and repurchased $379.5 million in shares of our common stock |
5 | ||||
Lead in an environmentally and socially responsible manner
Our 2014-2018 financial goals included an organic sales growth target of 4%
We aim to 5%, reflecting confidence indeliver innovations that advance the trajectorycircular economy, reduce the environmental impact of our two largest businesses.operations and supply chain, and offer value-creation opportunities. We also targeted double-digit adjusted EPS growth. For the first time,seek to make a positive social impact by building a more diverse workforce and inclusive and equitable culture, maintaining operations that promote health and safety, and supporting our communities.
| • | In 2022, we made further progress toward our 2025 sustainability goals and activated plans and began measuring our progress toward our more ambitious 2030 sustainability goals; reduced the environmental impact of our operations and invested in our strategic innovation platforms focused on digital solutions, material circularity and waste reduction/elimination; drove sustainable change in DEI; and leveraged the $10 million we contributed to ADF in 2020 to provide meaningful support for our communities |
Avery Dennison Corporation | 2023 Proxy Statement | 53 |
On Track to Deliver 2025 Financial Targets
In March 2021, we externally communicated a target for return on total capital (ROTC), which has long been a key internalannounced financial metric for our company. We believe that the combination of our growth and ROTC targets effectively communicates our value creation objectives, which together are a proxy for EVA, one of the performance objectives used in our LTI program.through 2025. As shown on the following page,below, based on our results for the first fourtwo years of this five-year period, we are on track to achieve or exceed our 2018deliver these commitments to our investors. For the 2014-2017 period,
In 2021-2022, on a two-year compound annual basis reported sales grew by 2%(with 2020 as the base period), reported EPS grew by 10% andGAAP reported net sales, operating income, grewnet income and EPS increased by 7%13.9%, 15.2%, 16.7% and 18.0%, respectively. GAAP reported operating margin in 2022 was 11.9%.
Organic sales growth, adjusted EPS, ROTC and adjusted ROTC — as well as free cash flow, which is described on page 40 — are non-GAAP financial measures that we provide to investors to assist them in assessing our performance and operating trends. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable financial measures under generally accepted accounting principles in the United States of America (GAAP) and are reconciled to GAAP inAppendix A of this proxy statement.
Avery Dennison Corporation| 2018 Proxy Statement |38
|
| 2021-2025 Targets | 2021-2022 Results(1) | ||
Sales Growth Ex. Currency(2) |
5%+ |
15.8% | ||
Adjusted EBITDA Growth(2)(3) | 6.5% | 13% | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.1% in 2022 | ||
Adjusted EPS Growth(2) | 10% | 13.5% | ||
ROTC | 18%+ | 17.4% in 2022 | ||
| (1) | Results for non-GAAP measures are reconciled from GAAP in the last section of this proxy statement. |
| (2) | Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect two-year compound annual growth rates, with 2020 as the base period. |
| (3) | Although adjusted EBITDA growth was not one of our original financial targets, it was implied by our sales growth ex. currency and adjusted EBITDA margin targets. |
2022 Financial Performance
In 2022, we achieved impressive results despite the extremely challenging environment we faced during the year. Highlights of our financial performance are shown below.
NET SALES $9.0B Reported sales increased by 7.5% from $8.4 billion in 2021; sales ex. currency grew by 13.1%, driven by higher prices and the impact of acquisitions | EPS $9.21 Reported EPS increased by 4.3%; adjusted EPS increased by 2.7% to $9.15, which was below the low end of the $9.35 to $9.75 annual guidance range we provided to investors in February 2022, primarily reflecting significant currency movements during the year | |||||||||||
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| |
|
| |
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|
In March 2017, we announced 2017-2021 goals, targeting continued solid organic sales growth and double-digit growth in adjusted EPS on a compound annual basis. While we are only one year into this five-year period, we are on pace to deliver these targets, as shown below. Compared to 2016, in 2017, reported sales grew by 9% and — driven by the provisional estimated impact of the Tax Cuts and Job Act (TCJA) — reported EPS and reported net income each declined by 12%.
CASH FROM OPERATING ACTIVITIES $961.0M We used free cash flow of $667.3 million to acquire two companies, make two venture investments, pay dividends of $238+ million and repurchase 2.2 million shares of our common stock | NET INCOME $757.1M Achieved ROTC of |
Avery Dennison Corporation| 2018 Proxy Statement |39
Table of ContentsEffective Capital Allocation
2017 FINANCIAL PERFORMANCE†
Fiscal year 2017 marked our sixth consecutive year of strong top-line growth, margin expansion and double-digit adjusted EPS growth. We exceeded our financial goals for the year, with the accomplishments shown below.
•Achieved net sales of approximately $6.6 billion, an increase of 8.7% over the prior year, through a balance of organic growth and acquisitions.•Excluding the impact of currency, sales grew by 8.2%; on an organic basis, sales grew by 4.2%, driven by growth in high value product categories and businesses serving emerging markets.•Although reported EPS decreased from $3.54 in 2016 to $3.13 in 2017 due to a substantial increase in our provision for income taxes to reflect the provisional estimated impact of the TCJA, adjusted EPS increased from $4.02 to $5.00, significantly exceeding the high end of the $4.30-$4.50 guidance range we gave in February 2017.•With net cash provided by operating activities of $650.1 million, delivered free cash flow of $421.7 million. Free cash flow refers to cash flow from operations, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from sales (purchases) of investments.•On reported net income of $281.8 million, achieved return on total capital (ROTC) of 12.9%; adjusted to exclude the net impact of the TCJA, ROTC increased to 18.8%.•Continued our disciplined approach to capital allocation by investing $226.1 million in capital expenditures to support organic growth and $319.3 million in acquisitions and equity investments, while allocating $155.5 million to dividends and $129.7 million to share repurchases.
DISCIPLINED CAPITAL ALLOCATION
We achieved these results while maintaining a healthy balance sheet and continuing the disciplined execution of our capital allocation strategy. Over the last five years, we have allocated nearly $2 billion to dividends and repurchases. In 2017, we deployed approximately $285 million to (i) repurchase 1.5 million shares at an aggregate cost of nearly $130 million and (ii) pay an annual dividend of $1.76 per share for an aggregate amount of over $155 million. We have paid quarterly dividends for decades and raised our quarterly dividend rate by 125% since 2010; most recently, we raised the quarterly dividend rate by 10% in April 2017. Given our increased use of available capital for acquisitions and equity investments, we repurchased fewer shares in 2017 compared to prior years.
†For complete information regarding our 2017 performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" — in particular the information contained under the heading "Non-GAAP Financial Measures" — and our audited consolidated financial statements and notes thereto contained in our 2017 Annual Report.
Avery Dennison Corporation| 2018 Proxy Statement |40
We have also allocated capital to investinginvested in our businesses to support organic growth and pursuing targeted acquisitionsacquired companies that support our strategy of increasing our exposure to high value product categories. In 2017, we increased our spending on capital expenditures by approximately 9% over the prior year to grow our business and continued to take actions to improve our profitability and expand our margins. In addition,capabilities in high-value product categories, increase our pace of innovation and advance our sustainability initiatives. Our fixed and IT capital spending in 2022 was ~10% higher than in 2021, primarily reflecting our continued investment in high-value
54 | 2023 Proxy Statement | Avery Dennison Corporation |
categories, particularly our fast-growing Intelligent Labels platform. During the year, we successfully completedacquired TexTrace and integrated the acquisitions of (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturer of specialty films and laminates; (ii) Yongle Tape Ltd., a China-based manufacturer of specialty tapes and related products usedRietveld, adding capabilities in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare products used in the management of wound care and skin conditions.high-value product categories. We also made equitytwo venture investments in two other companies.companies developing technological solutions that we believe have the potential to advance our strategies.
THREE- AND FIVE-YEAR CUMULATIVE TSR OUTPERFORMANCEIn 2022, we paid $238.9 million in dividends of $2.93 per share and repurchased 2.2 million shares of our common stock. We raised our quarterly dividend rate by ~10% in April 2022.
As shown below, over the last five years, we have deployed nearly $2 billion to acquisitions and venture investments and over $2 billion to dividends and share repurchases.
TSR Outperformance
Our TSR in 2022 was negative, reflecting the broad financial market downturn and consistent with the TSR of nearly 67% in 2017, we delivered cumulative TSR for the 2015-2017 three-year period and the 2013-2017 five-year period that significantly outperformedboth the S&P 500®500 and the median of the S&P 500 Industrials and Materials subsets (we are a membersubsets. More important, both our three- and five-year TSR outperformed these two comparator groups.
5-Year Cumulative TSR
1-, 3- and 5-Year TSR
| AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2018 | (20)% | (4)% | (15)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
2021 | 41% | 29% | 24% | |||
2022 | (15)% | (18)% | (11)% | |||
3-Year TSR | 45% | 25% | 32% | |||
5-Year TSR | 72% | 57% | 64% |
| * | Based on median of companies in both subsets as of December 31, 2022 |
2022 Say-on-Pay Vote and Feedback During Stockholder Engagement
At the Materials subset, but also share many characteristics with members of the Industrials subset; investors have informed us that they look at both subsets in evaluating our relative performance, as we do internally). TSR measures the return we have provided to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment thereof).
1-, 3- and 5-YEAR TSR | ||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 3-Year TSR | 5-Year TSR | ||||||||
| | | | | | | | | | | | | | | |
AVY | 47.5% | 6.2% | 23.8% | 14.6% | 66.7% | 136.4% | 270.3% | |||||||
| | | | | | | | | | | | | | | |
S&P 500 | 32.4% | 13.7% | 1.4% | 12.0% | 21.8% | 38.3% | 108.1% | |||||||
| | | | | | | | | | | | | | | |
S&P 500 Indus. & Mats.* (median) | 41.0% | 11.7% | (4.7)% | 19.0% | 27.5% | 49.2% | 134.8% | |||||||
*Based on companies in subsets as of December 31, 2017.
Avery Dennison Corporation| 2018 Proxy Statement |41
2017 SAY-ON-PAY VOTE AND STOCKHOLDER FEEDBACK DURING 2017 ENGAGEMENT
We continued our practice of maintaining ongoing dialogue with stockholders in 2017. The Committee made significant changes to2022 Annual Meeting, our executive compensation program in recent years to address direct feedback from our stockholders and more closely align our LTI program with our financial profile and business strategies, demonstrating the Committee's commitment to paying for performance and being responsive to stockholder feedback. SeeContinuous Evolution of Compensation Program later in this CD&A. In 2017, during our ongoing stockholder engagement program, we discussed our executive compensation program with some of our stockholders, who expressed support for its current structure.
Results and Analysis of 2017 Vote
At the 2017 Annual Meeting, approximately 94% of our stockholderswas approved, on an advisory basis, our executive compensation.by ~95% of the shares represented and entitled to vote. The level of support we received was consistent with the high approval rates for the last twowe have received in recent years. The Committee believes that our consistently high approval rate, along withthese strong say-on-pay vote results, as well as the positive feedback we received during our 2022 engagement with stockholders, reflects stronginvestor support of the changes to our executive compensation program made in recent years, as well asand our consistently improving CD&A disclosure.
Stockholder Engagement Process
We value stockholder feedback on
Avery Dennison Corporation | 2023 Proxy Statement | 55 |
In 2022, we continued our active engagement with stockholders regarding executive compensation and talent management. The Committee makes changes to our executive compensation policiesprogram when appropriate to address feedback from our stockholders or more closely align the program with our financial profile, business strategies and ESG priorities. We believe this ongoing review and the actions taken over time demonstrate the Committee’s commitment to paying for performance and being responsive to investor feedback.
Strong ESG-Executive Compensation Linkage
In recent years, in part due to investor interest, the Committee has engaged in frequent discussions with its compensation consultant, WTW, and management and reviewed market practices regarding ESG-executive compensation linkage. The Committee noted that our strategic pillars include leading in an environmentally and socially responsible manner, and it aims to approve executive compensation that reflects our strategies and incents achievement of company goals.
The Committee has determined that our existing compensation practices and talent management priorities reflect our ESG strategies, hold our leaders accountable and reward results. The Committee has made, among other things, the observations described below.
| • | Approximately one-third of the measures on our 2022 business group scorecards related to ESG, incenting our leaders to achieve these objectives and providing visibility and accountability to ensure continuous improvement. These scorecards help surface any ESG underperformance relative to our goals and offer an assessment tool in year-end performance discussions. |
| • | Our senior leadership, including our NEOs and Vice Presidents, have accountability for driving our ESG progress. In making their compensation decisions, our managers consider not only financial or business achievements, but also an individual’s success in advancing our ESG priorities, consistent with our company’s values and strategies. |
| • | Although the AIP financial modifier does not include ESG metrics, our financial performance in part reflects our ESG progress and a key component in determining an AIP award is the individual modifier, which reflects an overall qualitative assessment of performance. In determining their 2022 AIP awards, the Committee discussed the ESG achievements of our NEOs in assessing their performance and determining their individual modifiers. |
| • | Diversity and Sustainability are two of our company’s values. Our annual Leadership Excellence Awards are granted to individuals and teams globally in each of these categories, with awardees receiving at least a 120% individual modifier on their AIP award, subject to the overall AIP award cap of 200%. In 2022, 68 employees received awards for either diversity or sustainability, with 17 additional individuals recognized for their work in their communities. |
The Committee recognizes that our financial success in recent years has been inextricably linked to our substantial ESG progress. We have consistently innovated more sustainable solutions, which have provided significant competitive advantage, helping fuel our success in the marketplace and deliver strong performance for all our stakeholders. While our compensation programs have had a role in advancing our ESG progress, we actively solicit input throughare working to advance our journey primarily because we believe that our company can have a long-term positive impact on people and our planet.
After discussing benchmark data on market practices with management and WTW, the Committee noted that the majority of S&P 500 companies report considering ESG performance in their executive compensation programs, with most doing so in ways similar to the way in which we do. The Committee has committed to regularly reviewing evolving stakeholder expectations and market practices, and reevaluating the continued appropriateness of its approach. In the fourth quarter of 2022, reflecting on the results of our stockholder engagement program. Our ongoing engagement program takes place throughoutand market practices, the year, generally as shown inCommittee determined for the graphic below.
Feedback During 2017 Engagement
We continued our longstanding practice of open dialogue with stockholders in 2017. In advance of the 2017 Annual Meeting, we contacted our 25 largest institutional stockholders, representing almost 50% of our then-outstanding shares. Board members, including our Lead Independent Director, and management were made availabletime-being to answer questions and address concerns regarding our executive compensation and governance programs and the items being brought to stockholder vote at the Annual Meeting. While we received responses from stockholders representing 25% of our then-outstanding shares, none of them felt that there was a need to substantively engage during that busy time.
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In the fall, we reached out to our 30 largest institutional stockholders, representing nearly 55% of our then-outstanding shares, to learn what issues are important to them without the time pressures associated with proxy season. As a result of these efforts, we received responses from stockholders representing over 30% of our then-outstanding shares and spoke with stockholders representing approximately 11% of those shares. We substantively engaged with every stockholder who requested to do so.
During our 2017 engagement, with respect to matters related to executive compensation, our stockholders expressed support for our program generally and appreciated the increased graphical disclosure in our 2017 proxy statement. In addition, we discussed ourmaintain its current approach to human capital management,the consideration of ESG matters in particular our diversity and inclusion efforts, as well as the linkage between ourapproving executive incentive compensation and business strategies. We also provided additional clarification on the market-leveraged stock units (MSUs) included in our LTI program.compensation.
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2017 NAMED EXECUTIVE OFFICERS
2022 Named Executive Officers (NEOs)
In this CD&A and theExecutive Compensation Tables section of this proxy statement, we provide compensation information for our 20172022 NEOs, who are identified in the chart below. Mr. Stander began serving as President/COO, effective March 1, 2022; in connection with Mr. Stander’s promotion, Mr. Butier ceased serving in the capacity of President. References in this CD&A to Level 2 NEOs are to Messrs. Stander and Lovins and references to Level 3 NEOs are to Ms. Baker-Nel and Mr. Walker.
| Name | Title at YE 2022 | ||||
Mitchell R. Butier | Chairman & Chief Executive Officer | ||||
Deon M. Stander | President & Chief | ||||
Gregory S. Lovins | Senior Vice President & Chief Financial Officer | ||||
Deena Baker-Nel | Senior Vice President & Chief Human Resources Officer | ||||
Ignacio J. Walker | Senior Vice President | ||||
The NEOs who served at the endOverview of our 2017 fiscal year (which excludes Ms. Bramman) are collectively referred to in this CD&A as our "Current NEOs."Pay Philosophy and Executive Compensation Components
OVERVIEW OF PAY PHILOSOPHY AND EXECUTIVE COMPENSATION COMPONENTS
The Committee has designed ourOur executive compensation program to reflect itsreflects the Committee’s philosophy that a substantial majority of compensation should be tied to our success in meetingachieving our performancefinancial objectives and creating stockholder value, providing higher realized compensation when we deliver superior, sustained performance. The objectiveobjectives of this strategy isare to motivate our executives to achieve our annual and long-term financial goals, giving consideration to their achievement of their objectives and recognize their contributions to delivering strongindividual performance.
The Committee implements its pay-for-performance philosophy primarily through the following:
•Establishing total direct compensation (TDC) to incent economic and stockholder value creation,giving consideration to the market median of companies similar in size, scope and complexity with which we compete for executive talent, role responsibilities, individual performance, tenure, retention, and succession;•Aligning our annual incentives with our annual operating planand key financial and strategic goals; and•Rewarding long-term performance using absolute and relative TSR,aswell as cumulative EVA, to focus our executives on consistent and sustainable stockholder value creation.
| • | Establishing target TDC to incent strong operational and financial performance and stockholder value creation, giving consideration to median pay at similarly sized companies, role responsibilities, individual performance, tenure, retention and succession |
| • | Aligning our annual incentives for executives with our company’s annual operating plan and financial goals for the year |
| • | Rewarding long-term performance using absolute and relative TSR, as well as our company’s cumulative EVA, to focus our executives on delivering consistent and sustainable stockholder value creation |
Incentive compensation for the year consistedconsists of a target award opportunityopportunities under our Annual Incentive Plan (AIP)AIP and long-term incentive (LTI) programs,our LTI compensation program, with payouts determined based on our performance against goalsobjectives established by the Committee in February 2017.Committee. The Committee structures annual incentive compensation to reward NEOs primarily based on corporate or businesscompany performance to motivate them and align their compensation with stockholder interests, while also giving consideration to their individual contributionscontributions. With respect to the AIP, our adjusted EPS target was established above the midpoint of the annual guidance we gave to our investors and our top-line and cash flow targets were set consistent with our goals for the year; in achievingeach case, they were consistent with achievement of our long-term financial results.goals. Our LTI awards provide upside opportunityhigher realized compensation for exceeding performance targets and downside risk up(up to and including cancellation,cancellation) for failing to achieve threshold performance, with EVA targets generallythat are consistent with our externally communicated long-term financial goals for earnings growth and ROTC. AIP targetsThe elements of 2022 TDC for our NEOs are generally established at or aboveshown on the midpoint of our annual guidance and consistent with our long-term financial goals.
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Elements of Total Direct Compensation for Corporate NEOs
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ELEMENTS OF TARGET TDC FOR NEOs
As shown in the graph below, the substantial majority of our Current NEOs' 20172022 NEO target TDC was performance-based.performance-based, meaning that they may not ultimately realize the value of at-risk TDC components if we fail to achieve the designated performance objectives.
2017 Target Total Direct Compensation
 | * Excludes special one-time award of RSUs with a grant date fair value of $1,429,469 made in connection with Mr. Stander’s promotion to President/COO. |
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Over the past five years, our cumulative TSR has increased over 270% while the total compensation of our CEO has increased by only 13%. InAs shown in the graph below, CEO pay reflectsour CEO’s compensation, as reported in the compensation ofTotal column in the Summary Compensation Tables for the last four years, generally reflected our former CEO, Mr. Scarborough, from 2013 to 2015 and the compensation of our current CEO, Mr. Butier, for 2016 and 2017.
Five-Year CEO Pay and Cumulative TSR
CONTINUOUS EVOLUTION OF COMPENSATION PROGRAMcumulative TSR.
Over the past several years, the Committee has discussed the views expressed by our stockholders and proxy advisory firms with management and Willis Towers Watson, the Committee's independent compensation consultant, and has taken several actions in light of this feedback. Highlights of these changes are shown on the timeline on the following page; together they demonstrate the Committee's ongoing evaluation of our executive compensation program and efforts undertaken to continuously evolve the program to reflect market practices and changes in our financial profile and strategic focus, as well as address feedback from our stockholders.
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Executive Compensation Changes Made in Recent Years
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STRONG COMPENSATION GOVERNANCE PRACTICES
Strong Compensation Governance Practices
Our executive compensation program incorporates the best practices shown below and on the following page, which the Committee believes ensure that it serves the long-term interests of our stockholders.
| PAY FOR PERFORMANCE | ||||
Compensation Primarily Performance-Based | ✓ 88% of | |||
Capped Annual Incentive Long-Term Targets | ✓AIP award | |||
| Majority Long-Term Equity Incentive Compensation | ✓ LTI awards | |||
| Strategic Targeting | ✓TDC (base salary + | |||
| No Annual Stock Options | ✓ Last made | |||
| COMPENSATION BEST PRACTICES | ||||
| No Employment Contracts | ||||
✓ NEOs employed at-will | ||||
Rigorous Stock Ownership Policy | ✓ CEO | |||
| No Hedging or Pledging | ✓ Insider trading policy prohibits | |||
| Limited Trading Windows | ✓ NEOs may only transact in our common stock during approved trading windows after | |||
| Median Burn Rate | ✓ Three-year average burn rate of 0.51% at | |||
| Clawback Policy | ✓ Incentive compensation | |||
| No Excise Tax Gross Ups | ✓ No gross-up payments | |||
Double Trigger Equity Vesting | ✓Equity awards | |||
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| Policy or Best Practice | Description | |||
No Repricing/Exchange of Stock Options | ✓ No repricing or exchange of underwater options without stockholder | |||
| Limited Perquisites | ✓Other than | |||
| Reasonable Severance Benefits | ✓Severance CEO : 2x (annual salary + | |||
All other NEOs: 1x (annual salary + | ||||
Limited Change of Control Benefits | ✓ Enhanced severance for qualifying termination within 24 months following a change of control: CEO: 3x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium) + prorated target AIP award for year of termination Level 2 NEOs only: 2x (annual salary + target AIP award for year of termination + cash value of annual health insurance premium) + prorated target AIP award for year of termination | |||
| Independent Oversight | ✓ Committee | |||
Expert Consultant | ✓ WTW is independent, | |||
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SUMMARY OF COMPENSATION DECISIONS FOR 2017
2022
The Committee designsapproves executive compensation to pay for performance, with the target TDC of NEOs established to incent economicstrong financial performance and stockholder value creation, giving consideration to the market median of companies similar in size, scope and complexity with which we compete for executive talent, role responsibilities, individualcreation. Compensation is predominantly performance tenure, retention and succession. The majority of this compensation is performance-based,based, meaning that our executives may not ultimately not realize some or all of thesethe at-risk components of compensationTDC if we fail to achieve our financial objectives. In 2017, approximately 84%2022, ~88% and 67%~73% of the target TDC of our CEO and the average of our other Current NEOs, respectively, was performance-based.performance based.
In determining 20172022 NEO compensation – in addition to navigating the challenging environment, including currency movements, supply chain disruptions and rising inflation – the Committee considered the following:factors described below.
•Company/Business Performance— Our company's overall financial performance, including our 2017 adjusted sales growth, adjusted EPS, and free cash flow for our corporate NEOs, and, for our business NEO, the performance of our LGM business;•Stockholder Returns— Our TSR on an absolute basis, as well as relative to a designated group of peer group companies;•Annual Individual Performance— Our CEO's performance against the predetermined and objectively measurable strategic objectives established for him at the beginning of the year and the individual contributions of our other Current NEOs;•Competitiveness— Market pay practices and company performance relative to peers; and•Responsiveness to Investors— The results of our 2017 say-on-pay vote and feedback on our executive compensation received during our ongoing stockholder engagement program.
| • | Annual Company Performance – Our company’s 2022 adjusted sales growth, adjusted EPS and free cash flow |
| • | Stockholder Returns – Our TSR on an absolute basis, as well as relative to a designated group of peer companies |
| • | Individual Performance – Their performance against the predetermined strategic objectives established at the beginning of the year for our CEO and COO and the individual contributions of our other NEOs |
| • | Market Competitiveness – Pay practices and company performance relative to the market |
| • | Investor Feedback – The results of our 2022 say-on-pay vote and any feedback on executive compensation received during our stockholder engagement program |
The key elements of 20172022 NEO target TDC are showndescribed in the table shown on the following table. page. While we provide consistent, market-competitive target TDC opportunities for our NEOs, the actual compensation they realize each year varies year-to-year based primarily on company and business performance; for 2017, the incentive compensation realized by our NEOs was based solely on performance.financial performance.
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| 2022 EXECUTIVE COMPENSATION SUMMARY | |||||
| Component | Decisions Impacting 2022 Compensation | ||||
12% of TDC for CEO; Avg. Other | As planned, Mr. Butier received no base salary | ||||
17% of Avg. 18% of TDC for Other | In connection with his promotion to President/COO, Mr. Stander’s target AIP opportunity | Company performance resulted in | |||
TARGET LTI AWARD (50% PUs, 50% MSUs) 71% of TDC for CEO; Avg. 55% of TDC for Other NEOs | LTI Awards Granted in 2022 • In connection with his promotion to
| ||||
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|
|
salary. There were • 50% in PUs that cliff-vest at the end of | ||
|
• 50% in MSUs that vest based on | |||
|
| |||
LTI Awards Vesting | ||||
|
• 2020-2022 PUs:Our | |||
| • MSUs Vesting at YE 2022
| |||
| • 4th Tranche | ||||
2019-2022 Absolute TSR of 113% Paid out at 200% of target | ||||
• 3rd Tranche | ||||
2020-2022 Absolute TSR of 52% Paid out at | ||||
• 2nd Tranche | ||||
2021-2022 Absolute TSR of 24% Paid out at | ||||
• 1st Tranche | ||||
2022 Absolute TSR of (7)% Paid out at | ||||
In addition to these primarythe elements of our executive compensation program described above, we also provide our NEOs with limited perquisites and benefits that the Committee believes are comparable to those offered by other multinational public companies.
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DISCUSSION OF COMPENSATION COMPONENTS AND
DECISIONS IMPACTING 20172022 EXECUTIVE COMPENSATION
The Committee aims to have base salaries at the marketor around median pay at similarly sized companies, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Committee's pay-for-performance philosophy, drivingthat delivers higher realized compensation when our financial performance is stronger and lower realized compensation when our financial performance is weaker. In addition, it provides the Committee with the flexibility to respond to changing business conditions, manage compensation to reflect career progression, and adjust compensation to reflect differences in executive experience and performance.
BASE SALARYBase Salary
Increases in base salary for NEOs are generally driven by the average percentage merit increase given to our U.S. employees, subject to marginal increase or decrease based on the NEO's performance and the market mediancomparisons for positions with similar scope and responsibility. In February 2017, the Committee approvedAs planned, Mr. Butier’s base salary increases of 3% for our then-serving NEOs consistentdid not increase in 2022. In connection with the average increase for U.S. employees, except forhis promotion to President/COO, Mr. Gravanis, whoseStander’s base salary increased by 5%23% in 2022 and Mr. Lovins received an increase of 6% to reflectbe more consistent with the sizemarket. After having served more than a full year in their respective positions, the base salaries of Ms. Baker-Nel and scope of his role.
2017 AIP AWARDSMr. Walker increased by 10% to be more consistent with the market salaries for their global functional roles.
| NEO BASE SALARIES | ||||
| NEO | 2022 YE Base Salary | |||
Butier | $ | 1,200,000 | ||
Stander | $ | 700,000 | ||
Lovins | $ | 700,000 | ||
Baker-Nel | $ | 457,600 | ||
Walker | $ | 467,913 | ||
2022 AIP Awards
The 20172022 AIP was designed to incent management to create long-term stockholder value. NEOs are not eligible for guaranteed AIP awards. AIP awards are determined for each fiscal year using the formula below. Individual modifiers for NEOs are generally capped at 100% although the Committee retains the discretion to determine higher individual modifiers to reward individual performance, including for their ESG-related achievements, up to 150%.
Target AIP Opportunities
As a percentage of 2017 year-end base salary, theThere were no changes to NEO target AIP opportunities, for 2017 were 125% forexcept that Mr. Butier; 75% for Ms. Bramman and Mr. Gravanis; 60% for Mses. Hill and Miller; and 50% for Mr. Lovins. Mr. Lovins' 2017 AIP award was prorated to reflect hisStander’s target AIP opportunity of 40% of base salary for the first six months of the year and his target AIP opportunity ofincreased from 60% of base salary to 75% of base salary in connection with his promotion to President/COO, consistent with market practices for the second six months of the year.similar roles.
| NEO TARGET AIP OPPORTUNITIES | ||||
| NEO | AIP Opportunity (% of YE Base Salary) | |||
Butier | 140% | |||
Stander | 75% | |||
Lovins | 75% | |||
Baker-Nel | 50% | |||
Walker | 50% | |||
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AIP Performance Objectives and Weightings; Target-Setting Principles
The following performance objectives and weightings shown below for the 20172022 AIP were established and weighted by the Committee, which were consistent with the approach used in consultation with Willis Towers Watson.2021 to continue incenting our NEOs to grow sales, improve profitability and generate strong cash flow. Our CEO, Chief Human Resources OfficerCFO, CHRO and then-serving CFOother members of management participated during portionsthe portion of the meetingsmeeting during which the Committee reviewed and recommended performance objectives for ourthe AIP and analyzedassessed our performance against these objectives.
For our business participants (including Mr. Gravanis),
2022 AIP PERFORMANCE OBJECTIVES | ||
Objective | Description | |
Adjusted Sales Growth (20%) | Focuses management on top-line growth, a key contributor to sustained long-term value creation | |
Adjusted EPS (60%) | Primary driver of stockholder value creation and measure we use to provide annual guidance to investors; focuses management on profitable growth and expense control | |
Free Cash Flow (20%) | Cash available after investment in our business, which we can deploy for acquisitions, venture investments, dividends and share repurchases; focuses management on improving capital efficiency, including working capital | |
Consistent with prior year, the Committee determined to link 75% ofthreshold payout levels for the AIP financial modifier to their respective business' resultsadjusted sales growth and 25% to corporate results. Businessfree cash flow performance objectives were designed to be achievable only ifset at 50% and the relevant business substantially improved upon its 2016threshold payout level for the adjusted EPS performance objective was set at 0%. For all performance objectives, the target payout level is 100% and delivered results consistent with the achievement of our 2014-2018 financial targets.
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2017 AIP TARGETS
maximum payout level is 200%. In setting the2022 AIP targets, for these objectives, the Committee aimed to ensure consistency with our long-term2021-2025 financial targets, and require adjusted sales growth and adjusted EPS improvement fromconsidering the results achieved in the prior year. These were the same objectives and weightings used for purposes of the 2016 AIP to continue incenting our NEOs to increase sales on an organic basis, improve profitability, and generate strong free cash flow.factors described below.
Target adjusted sales growth, reflecting sales growth ex. currency excluding the impact of acquisitions included in our annual operation plan, of 12.8% ($9,229M) was set atconsistent with our 2021-2025 sales growth ex. currency target of 5%+ but below our 2021 sales growth ex. currency result of 18.6% due to the low endextraordinary impact of our long-term target, reflecting top-line challengesCOVID-19 in the retail apparel market served by our RBIS business; however, the target required improvement from the prior year. 2020, which resulted in year-over-year comparisons that were substantially greater than what they otherwise would have been.
Target adjusted EPS of $9.60 was establishedset above the midpoint of the annual guidance we announcedprovided to investors in February 20172022, consistent with our 2021-2025 compound annual growth target of 10%, and represented a 11% increase (a 16% increase on a currency neutral basis) from8% higher than our 2016 results for this measure. 2021 result of $8.91.
Although we did not externally communicate a free cash flow target as part of our 20182021-2025 financial goals, we continueour plan at the beginning of 2022 was to expect our businesses to generate strongdeliver free cash flow an important metric used internally and by our investors in evaluating our performance. Although lower than our 2016 result, our 2017 targetof $700+ million. Target for free cash flow reflected increased capital expenditureswas set below the record free cash flow we achieved in 2021, primarily reflecting our planned for 2017 to support futureinvestment in high-value product categories and innovation growth and achieve our 2017-2021 financial targets.platforms, particularly Intelligent Labels.
| CORPORATE 2017 AIP TARGETS VS. 2014-2018 TARGETS AND 2016 RESULTS | ||||||
| 2014-2018 Target | 2016 Results | 2017 AIP Target | ||||
| Adjusted Sales Growth | 4%-5% | 3.9% | 4.0% | |||
| Adjusted EPS | 12%-15%+ Growth | $4.02 | $4.45 (up 11% from 2016*) | |||
| Free Cash Flow | N/A | $387M | $355M | |||
2022 AIP TARGETS VS. LONG-TERM TARGETS AND 2021 RESULTS
| ||||||
2021-2025 Long-Term Target | 2021 Results | 2022 AIP Target | ||||
Sales Growth Ex. Currency
Organic Sales Growth | 5%+
— | 18.6%
15.6% | 12.8% ($9.229M)*
9.5% | |||
Adjusted EPS Growth | 10% | $8.91 | $9.60 (8% over 2021 results) | |||
Free Cash Flow | N/A | $797.7M | $725M | |||
* Represents AIP target for adjusted sales growth | ||||||
Financial Modifiers
FinancialAIP financial modifiers are capped at 200%. Consistent with prior years, in In evaluating our achievement of these performance objectives, the Committee has the discretion to exclude the impact, positive or negative, of extraordinary items such as acquisitions and divestitures; restructuring and integration actions not included in our annual net income plan; currency translation fluctuations; changes in accounting principles, tax codes or related regulations and rulings; extraordinary events such as natural disasters, outbreaks of epidemiological disease, terrorism and war; costs related to the early extinguishment of debt;debt and pension plan terminations; costs of litigation outside the normal course of business; and non-cash charges associated with the impairment of long-lived assets.
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| 63 |
The table below shows the 2022 AIP financial modifiersmodifier for our NEOs for 2017. NEOs. As shown, we exceeded the target level establishedof 100% was exceeded for allthe adjusted sales growth performance objective, the threshold level of 0% was exceeded for the adjusted EPS performance objectives established for our corporate NEOsobjective, and twothe threshold level of the performance objectives established for our business NEO. Our corporate and business performance resulted in an AIP financial modifier of 170% for our corporate Current NEOs and 127% for our business NEO. Because she50% was not employed at the end of 2017, Ms. Bramman was not eligible for a 2017 AIP award.
| 2017 AIP FINANCIAL MODIFIERS | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | |
| | NEO | PERFORMANCE OBJECTIVE | WEIGHTING | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (200%) | 2017 ACTUAL | MODIFIER | WEIGHTED AVERAGE MODIFIER | | ||||||||||||
| Butier Lovins | Total Company Adjusted Sales Growth(1) | 20% | 1.9% | 4.0% | 8.1% | 4.2% | | 105 | % | | 21 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Hill Miller | Total Company Adjusted EPS(2) | 60% | $4.20 | $4.45 | $4.95 | $4.96 | | 200 | % | | 120 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Total Company Free Cash Flow(3) | 20% | $280M | $355M | $505M | $423M | | 143 | % | | 29 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Corporate NEO Financial Modifier | 170 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Gravanis | Total Company Adjusted EPS(2) | 25% | $4.20 | $4.45 | $4.95 | $4.96 | | 200 | % | | 50 | % | ||||||||||
| | | | | | ||||||||||||||||||
| Label and Graphic Materials (LGM) | LGM Adjusted Sales Growth(4) | 20% | 2.9% | 5.0% | 8.4% | 4.2% | | 78 | % | | 16 | % | ||||||||||
| | | | | | ||||||||||||||||||
| LGM Adjusted Net Income(4)(5) | 35% | $366M | $385M | $424M | $384M | | 96 | % | | 33 | % | |||||||||||
| | | | | | ||||||||||||||||||
| LGM Free Cash Flow(4) | 20% | $251M | $291M | $371M | $322M | | 140 | % | | 28 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| Business NEO Financial Modifier | 127 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
(1)Total Company Adjusted Sales Growth refers to reported sales growth of 8.7%, adjustedachieved for theimpact of currency translation of (0.5)% and the net impact of acquisitions and product line divestitures of (3.9)%. Total does not sum due to rounding.(2)Total Company Adjusted EPS refers to reported net income per common share, assuming dilution, of $3.13, adjusted for tax-effected restructuring costs, impact of the TCJA and other items of $1.87 and excluding the $.04 positive impact of the three acquisitions completed in 2017.(3)Total Company Free Cash Flow refers to cash flow from operations of $650.1 million,minuspurchases of property, plant and equipment of $190.5 million and software and other deferred charges of $35.6 million,plusproceeds from sales of property, plant and equipment of $6.0 million,minuspurchases of investments of $(8.3) million,pluscash flow of $1.3 million from the negative impact of the three acquisitions in 2017. Free cash flow is measured quarterly to ensure consistent management of working capital throughout the year, subject to adjustment if the full-year target is not achieved. While total companyfree cash flowwas 119% of target, our average quarterlyperformanceresulted in a modifier of 143% for thatobjective.(4)Adjusted sales growth, adjusted net income and free cash flow measures at the segment level are internal metrics. These metrics either exclude or make simplifying assumptions for items that cannot be allocated precisely by segment, such as interest and income tax expenses, and related balance sheet accounts, such as deferred tax assets and liabilities, income tax payables and receivables, and short- and long-term debt. Certain balance sheet accounts such as pension and other postretirement benefits and insurance that are generally managed at the corporate level, as well as the impact of foreign currency translation, are also excluded from the calculation of these metrics for the segments. In certain limited circumstances, one-time items may be excluded from segment adjusted net income. The impact of intercompany sales is included in segment metrics. While LGM's free cash flow was 111% of target, its average quarterly performance resulted in a modifier of 140% for that objective.(5)Adjusted net income refers to reported net income adjusted for tax-effected restructuring costs, the impact of the TCJA and other items.
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| 2022 AIP FINANCIAL MODIFIER | ||||||||||||||||||||||||||
| Performance Objective | Weighting | Threshold(1) | Target (100%) | Maximum (200%) | 2022 Actual | Modifier | Weighted Average Modifier | |||||||||||||||||||
| Adjusted Sales Growth(2) | 20% | $9,087M | $9,229M | $9,528M | $9,408M | 149% | 30% | |||||||||||||||||||
| Adjusted EPS(3) | 60% | $8.95 | $9.60 | $10.56 | $9.24 | 46% | 28% | |||||||||||||||||||
| Free Cash Flow(4) | 20% | $700M | $725M | $845M | $667M | 0% | 0% | |||||||||||||||||||
Financial Modifier
|
58%
| |||||||||||||||||||||||||
| (1) | Threshold for adjusted sales growth and free cash flow set at 50%; threshold for adjusted EPS set at 0%. |
| (2) | Reflects reported net sales of $9,039.3 million, adjusted for the impact of currency translation since the target was set, removing the impact of new acquisitions, and excluding the impact of reduced sales due to the Russian war in Ukraine. |
| (3) | Reflects reported net income per common share, assuming dilution, of $9.21, adjusted for restructuring charges and other items of $0.06, removing the combined ($0.09) impact of acquisitions completed after the targets were set and the Russian war in Ukraine. |
| (4) | Reflects net cash provided by operating activites of $961.0 million, minus purchases of property, plant and equipment of $278.1 million and software and other deferred charges of $20.4 million, plus proceeds from sales of property, plant and equipment of $2.3 million, plus proceeds from insurance and sales (purchases) of investments, net, of $1.9 million, plus payments for certain acquisition-related transaction costs of $0.6 million. |
NEO Performance Evaluations &and Individual Modifiers
Our NEOs are evaluated on their individual performance for the year, withyear. The Committee approved the Committee approvingstrategic objectives of our CEO's goals for the yearCEO and COO, and our CEO approvingapproved the goals of our other NEOs. The NEOs' performance is assessedNEOs, in each case in February of2022. In February 2023, the following year. ForCommittee evaluated the NEOs other thanperformance of our CEO and COO against their strategic objectives; for our other NEOs, this assessment considersconsidered the totality of their performance rather than assigning weightings to their performance goals. performance.
Individual modifiers for all participants are capped at 150%, subject to the total cap on AIP awards of 200%.
In February 2017, our CEO recommended and Although it retains the discretion to determine individual modifiers of up to 150%, the Committee agreedhas determined that the individual modifiers for 2017 his individual modifier and that of theour NEOs reporting to himshould generally be capped at 100%. All of the 2017 NEO individual modifiers were capped at 100%.
The Committee reviewedevaluated the 2022 performance of our CEO and evaluatedCOO, giving consideration to their leadership navigating sizable currency movements, pandemic-driven challenges in China, the Russian war in Ukraine, rising inflation and supply chain disruptions; our CEO's 2017 performance, taking into account hisfinancial results for the year; their performance against the predetermined and objectively measurabletheir strategic objectives established in February 2017, his2022; and their performance self-assessment of his performance, and market reference and other data provided by Willis Towers Watson. Our CEO is not involved in the decisions regarding his compensation, which are determined bydiscussed with the Committee meeting in executive session with Willis Towers Watson.February 2023. The Committee determined the individual modifiermodifiers for our CEO and COO based on its assessment of his performance, within the context of the cap described above.their respective performance.
For 2017,2022, the Committee evaluateddetermined that – although we did not achieve target adjusted EPS or threshold free cash flow – our CEO and COO successfully steered our company through the performancechallenging environment described above. Our shortcoming in achieving our adjusted EPS objective was entirely due to currency translation (which lowered the value of our results from international operations as measured in U.S. dollars) and the impact of lower demand due to COVID-related lockdowns in China – both of which were outside management’s control – and our decision to exit the Russia market after the invasion of Ukraine. Overall, our CEO determining that he substantially achieved orand COO exceeded each of histheir strategic objectives forby meeting or surpassing the year, assubstantial majority of their individual strategic objectives. These strategic objectives did not have assigned weightings, reflecting the Committee’s expectation that our CEO and COO deliver on all fronts. Our CEO’s performance evaluation is shown inon the chart below.following page.
64 | 2023 Proxy Statement | Avery Dennison Corporation |
2022 CEO PERFORMANCE EVALUATION
| Strategic Objective | Evaluation | ||||||||||
Drive outsized growth in high-value categories – Achieve targeted percentage of growth in Intelligent Labels, assuming continued recovery in its end markets | Exceeded objective for organic sales growth in high-value-categories; secured supply of integrated circuits crucial to our RFID-enabled Intelligent Labels platform and oversaw key commercial programs that position our company for accelerated Intelligent Labels growth in 2023; formed Food Advisory Council and Digital Advisory Council – in each case including current directors and third-party experts – to provide industry expertise and guidance to management as we seek to expand our capabilities and accelerate our push to drive outsized growth in high-value categories | ||||||||||
Grow profitably in our base businesses – Minimize supply chain disruptions and adjust prices to reflect inflation | Achieved overall growth and profitability objectives in base businesses, although volumes were below expectations due to market conditions; managed and overcame impact of supply chain disruptions to ensure we were able to meet surging demand in mid-2022; and oversaw strategies and implementation of pricing actions to mitigate impact of rising inflation | ||||||||||
Focus relentlessly on productivity – Deploy product reengineering and enterprise lean sigma to expand margins, enhance competiveness and provide a funding source for reinvestment | Exceeded targeted amount of savings from restructuring actions and, as inventory destocking in Q4 significantly impacted volumes, activated scenario plans to reduce costs in a recessionary environment | ||||||||||
Allocate capital effectively – Invest targeted amount in accelerated growth platforms of Intelligent Labels, innovation and digital infrastructure, and continue to build M&A pipeline and integrate acquisitions | Invested targeted amount in high-value growth platforms and continued to build M&A pipeline, completing two acquisitions in 2022, agreeing to make additional acquisition in early 2023, and expanded pipeline of potential acquisition targets that can improve our capabilities in high-value categories, increase our pace of innovation and advance our sustainability initiatives | ||||||||||
Lead in an environmentally and socially responsible manner – Progress innovation strategy and deployment program with emphasis on digital solutions and environmental sustainability; continue to reduce GHG emissions and formalize plan to reduce scope 3 emissions; progress cybersecurity strategy and deployment program to achieve targeted maturity level; further increase leadership diversity; and continue enhancing ESG reporting/transparency and integrate TCFD framework into enterprise ERM program | Reduced absolute GHG emissions by ~6% in 12 months through Q3 2022 and engaged CDP to formalize plan to further reduce scope 3 GHG emissions; enhanced cybersecurity preparedness; significantly increased percentage of women executives and, in the U.S., racially/ethnically diverse executives; continued enhancing ESG transparency, with improved scores from key ESG rating agencies, and completed benchmarking to develop plans to ensure timely TCFD compliance; and developed plans to form Environmental Sustainability Advisory Council to provide guidance to management in advancing our sustainability initiatives | ||||||||||
Refine/Execute leadership succession plans – Progress leadership succession strategy to ensure ready-now CEO successors over multiple time horizons; provide targeted support and development for President/COO in new role; and refine/execute executive leadership development plans with focus on newly appointed leaders within our Materials and Solutions businesses | Progressed CEO succession strategy, identifying ready-now successors over multiple time horizons; mentored President/COO and provided development opportunities to key leaders within each segment; and refined and executed development plans for leadership, promoting senior leader to serve as Materials Group President and advancing Company Leadership Team complementarity | ||||||||||
Individual Modifier Based on Evaluation | 100% | ||||||||||
Avery Dennison Corporation | 2023 Proxy Statement | 65 |
Our COO’s performance evaluation is shown below.
2022 PRESIDENT/COO PERFORMANCE EVALUATION
| Evaluation | |||||||||
Drive outsized growth in | Achieved GDP+ organic sales growth in graphics and | ||||||||
Grow profitably in our base | Successfully managed significant supply chain disruptions to deliver service-level commitments; implemented pricing actions to mitigate impact of inflation; maintained share position in LGM North America, Asia Pacific and Latin America regions, but unable to stabilize share in LGM EMENA (excluding impact of Russian war in Ukraine); maintained share in base RBIS categories; and delivered positive 2022 EVA in IHM, despite below-target EBIT margin | ||||||||
Focus relentlessly on productivity – Deliver targeted amount of savings from restructuring actions; execute key cost-saving projects in RBIS; and achieve LGM North America operational productivity targets | Exceeded targeted level of savings from restructuring actions; achieved goals for key RBIS cost-saving projects; and delivered material reengineering productivity objectives to help offset impact of significant inflation in LGM North America although supply chain disruptions impacted ability to achieve operational productivity targets | ||||||||
Allocate capital effectively – Invest within targeted range in capital expenditures; continue to drive operating working capital productivity and invest targeted amount in accelerated growth | Intentionally and appropriately underspent targeted level of capital expenditures in base | ||||||||
Lead in an environmentally and socially responsible manner – Progress innovation strategy and deployment program with emphasis on environmental sustainability and digital solutions; continue to reduce GHG emissions and formalize plan to reduce scope 3 emissions; deploy accelerated roadmap to enable greater recyclability of | Exercised accountability to deliver progress in | goal well before 2030 target | |||||||
Refine/Execute leadership succession/development plans – Refine/execute executive leadership development | Mentored and promoted key leaders, resulting in appointments of Materials Group President and new leader of Materials Group EMENA; immersed himself into Materials businesses, helping shape go-forward strategies and innovation plans, engaging in monthly and quarterly business | team members more broadly | |||||||
Individual Modifier Based on | 100% | ||||||||
The Committee Chair, together with our Lead Independent Director, discussed with our CEO the feedback from discussions of the Committee and our full Board regarding his 2022 performance. Our Chairman/CEO provided his feedback, as well as that of the Committee and our full Board, to our COO.
66 | ||||||||
2023 Proxy Statement | Avery Dennison Corporation |
BASED ON PERFORMANCE AGAINST PREDETERMINED AND MEASURABLE STRATEGIC OBJECTIVES
Avery Dennison Corporation| 2018 Proxy Statement |53
Our CEO recommended to the Committee the individual modifiers for our other Current NEOs based on his assessment of their 20172022 performance. The Committee considered our CEO'sCEO’s recommendations, and challenged his assessments as needed, while retaining the discretion to approve individual modifiers for our other Current NEOs lowerthem different than what theour CEO had recommended. Other than discussing with our CEO their performance against their individual performance, plans, our other Current NEOs played no role in their compensation determinations.
In determining the individual modifiers for our other Current NEOs, and recognizing that the cap of 100% eliminated the potential upside from the individual modifier on their AIP awards, the Committee highlightednoted the following regarding the 2017highlights of their 2022 performance of the other Current NEOs:described below.
•Mr. Lovins— Transitioned from Treasurer to Chief Financial Officer; led our finance function, delivering results that exceeded our 2017 goals for organic sales growth, adjusted EPS and free cash flow; and continued disciplined execution of capital allocation.•Mr. Gravanis— Led our LGM business, delivering strong performance on key financial metrics; improved productivity, service and quality; integrated two acquisitions while expanding organizational capability to better serve high value product categories.•Ms. Hill— Led our human resource and communications functions with particular focus on executive succession planning; diversity and inclusion initiatives; employee engagement; and the development and communication of our evolved values to support our business strategies.•Ms. Miller— Led our legal function with particular focus on acquisitions and other investments; business transformation initiatives; and enhancements to our Values and Ethics program, including our updated Code of Conduct.
| • | Mr. Lovins – Led our global finance function, including overseeing our controllership, tax, treasury, financial planning and operational finance teams; ensuring we delivered strong results in 2022 despite the challenging environment caused by rising inflation, supply chain disruptions and impacts from COVID-19 in China; driving productivity and enhanced controllership by expanding our finance shared service organization and implementing advanced planning tools in 2022; leveraging scenario planning to ensure we remain on track to deliver our long-term financial targets and sustainability goals; overseeing the continued expansion of our ESG disclosures; ensuring our balance sheet remained strong, with capacity to continue to invest in our businesses, both organically and through acquisitions, while also returning cash to stockholders; and ensuring we are allocating capital effectively across our portfolio to deliver strong returns and EVA growth over the long term. Mr. Lovins also served as a member of the Board of Trustees of the Avery Dennison Foundation. |
| • | Ms. Baker-Nel – Led our enterprise human resources, communications and community investment functions, prioritizing the safety, health and well-being of our teams in a challenging environment; guiding senior leadership succession and transitions, including the recent appointment of our Materials Group President, and bolstering leadership in other senior roles; building on our DEI progress with increasingly diverse representation, as well as enhanced leadership development and sponsorship programs for diverse top talent; enabling continued workplace flexibility; improving employee engagement; and enhancing dialogue at all levels related to our future capability needs, DEI and employee well-being. Ms. Baker-Nel also served as a member of the Board of Trustees of ADF. |
| • | Mr. Walker – Led our global legal function, advising our Board and management on M&A transactions, our investments in new and expanding markets, intellectual property and footprint optimization projects, with a particular focus on managing litigation; overseeing our Values & Ethics/compliance and risk management functions, securities and corporate governance matters and government relations efforts; focusing on organizational development to advance the function to further accelerate productivity, standardize processes and deploy best practices to help enable our digital solutions strategy; implementing strategic priorities related to business risk optimization, people and culture, operational efficiency and sustainability; and developing and engaging his team. |
Based on the abovethese assessments and after giving consideration to the recommendations of our CEO (other than with respect to himself), the Committee approved individual modifiers of 100% for all Current NEOs.
AIP Awards
Our NEOs received the AIP awards shown in the table below for 2017,2022, based on their respective year-end base salary, AIP opportunity, financial modifier and individual modifier.
| 2022 AIP AWARDS | ||||||||||||||||||||||||||||||
| NEO | 2022 YE Base Salary | AIP Opportunity | Target AIP Award | Financial Modifier | Individual Modifier | AIP Award | ||||||||||||||||||||||||
Butier | $ | 1,200,000 |
| 140 | % | $ | 1,680,000 |
| 58% |
|
| 100% |
| $ | 974,400 | |||||||||||||||
Stander | $ | 700,000 |
| 75 | % | $ | 525,000 |
| 58% |
|
| 100% |
| $ | 304,500 | |||||||||||||||
Lovins | $ | 700,000 |
| 75 | % | $ | 525,000 |
| 58% |
|
| 100% |
| $ | 304,500 | |||||||||||||||
Baker-Nel | $ | 457,600 |
| 50 | % | $ | 228,800 |
| 58% |
|
| 100% |
| $ | 132,704 | |||||||||||||||
Walker | $ | 467,913 |
| 50 | % | $ | 233,957 |
| 58% |
|
| 100% |
| $ | 135,695 | |||||||||||||||
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2017 AIP AWARDS | ||||||||||||
| | | | | | | | | | | | | |
| 2017 YE BASE SALARY | AIP OPPORTUNITY | TARGET AIP AWARD | FINANCIAL MODIFIER | INDIVIDUAL MODIFIER | AIP AWARD | ||||||
Butier | $1,133,000 | 125% | $1,416,250 | 170% | 100% | $2,407,625 | ||||||
Lovins* | $550,000 | 50% | $275,000 | 170% | 100% | $467,500 | ||||||
Gravanis* | $628,595 | 75% | $471,446 | 127% | 100% | $598,737 | ||||||
Hill | $532,045 | 60% | $319,227 | 170% | 100% | $542,686 | ||||||
Miller | $547,694 | 60% | $328,616 | 170% | 100% | $558,647 | ||||||
Bramman** | $575,025 | 75% | $431,269 | — | — | — | ||||||
*Mr. Lovins' AIP award was prorated based on his AIP opportunity of 40% of base salary for the first half of the year and his AIP opportunity of 60% of base salary for the second half of the year. Amounts for Mr. Gravanis were converted from euros using the exchange rate as of our fiscal year-end.**Ms. Bramman did not receive an AIP award since she was not employed at the end of 2017.
Avery Dennison Corporation| 2018 Proxy Statement |54
20172022 GRANTS OF LTI AWARDS
Our LTI program provides variable incentive compensation to enhance alignment of executive interests with stockholder interests and drive long-term value creation. The annual LTI awards granted to NEOs in 20172022 were fully performance-basedperformance based and delivered through the following equity vehicles:vehicles described below.
•50% in PUs that cliff-vest at the end of a three-year period subject to
ourthe achievement of the cumulative EVA and relative TSR performance objectives established for theaward; and•- award
50% in MSUs that vest at the end of the one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years, based
solelyon our absoluteTSR.TSRAnnual LTI awards were granted on
February 23, 2017,March 1, 2022. Actual amounts, if any, realized by our NEOs from thedayvesting of these awards will be based on ourBoard held its regularly-scheduled meeting.performance, as well as our stock price at the time of vesting.The Committee does not offset the loss or gain of prior year grants in determining current year grants, as doing so would compromise the intended risk/reward nature of these incentives.
Actual amounts realized from the vesting of these awards will be based on our performance, as well as our stock price, at the time of vesting.Although we have suspended the regular grant of stock options and time-vesting RSUs to our executives, specialSpecial LTI awards may be granted by the Committee for hiring, promotion, retention and/or other incentive purposes, with the awards granted on the first day of the last month of thecalendarquarter following the event or decision to makesucha grant.InAfter evaluating market data for similar promotions, in connection with hispromotion to CFO,appointment as President/COO, Mr.LovinsStander was granted a special one-time award of RSUs with a grant date fair value ofapproximately $550,000 on September 1, 2017,$1,429,469, whichvest in equal installmentscliff-vests on thefirst, second,thirdand fourth anniversariesanniversary of the March 1, 2022 grantdate, subject to his continued service.date.Target LTI Opportunity
As a percentage of base salary, theThere were no changes to target LTI award opportunities,for our NEOs were 425% forexcept that Mr.Butier; 120% for Mr. Lovins; 180% for Mr. Gravanis and Mses. Hill and Miller; and 200% for Ms. Bramman. In 2017, (i) Mr. Butier'sStander’s targetLTIAIP opportunity increased from400% to 425%180% of base salary tobring his LTI opportunity closer to the market median and (ii) Mr. Lovins' target LTI opportunity increased from 120% to 180%300% of base salary in connection with his promotion toCFO; however, his 2017 annualPresident/COO, consistent with market practices for similar roles. LTIawardsopportunities weregrantedbased on year-end 2021 base salary except that Mr. Stander’s award was based on hispreviousincreased base salary and LTI targetLTI opportunity.opportunity effective March 1, 2022. Target LTI award opportunities representedapproximately 66%71% and47%53%, respectively, of ourCEO's,CEO’s and otherCurrent NEOs'NEOs’ averagetotalperformance-based incentive compensation.NEO TARGET LTI OPPORTUNITIES NEO LTI
OpportunityButier
585% Stander
300% Lovins
250% Baker-Nel
120% Walker
120% Performance Units (PUs)
Awarded under our 2017-2019 Mid-Term Incentive Plan (MTIP),PUs cliff-vest in shares of our common stock after the end of a three-year period at threshold (50% payout), target (100% payout) and maximum (200% payout) levels based on our achievement of the performance objectives established for the award. PUs do not accrue dividend equivalents and are not countedtowards measuring compliance withfor purposes of our stock ownershipguidelines.policy.Consistent with the 2016-2018 MTIP, theThe Committeeselectedestablished the following performance objectives for the2017-2019 MTIP.2022-2024 PUs. The Committee believes that these objectivescontinue to appropriatelyalign executive compensation with the long-term interests of our stockholders because delivering cumulative EVA and strong TSR relative to peer companiesdirectly impacts both the number of shares executives may receive at vesting andreflects the valuecreationweprovide to our stockholders.•Cumulative EVA, weighted 50%create for ourcorporate NEOs (based on our total company EVA) and 75% for our business NEO (based on LGM's cumulative EVA). EVA is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from our after-tax operating profit. The Committee established corporate EVA goals consistent with our 2014-2018 targets and our key financial objective of delivering superior TSR, with the target payout at the low end of these targets and the maximum payout at the high end of these targets. Targets for our businesses focused on EVA change compared to the prior three-year period, with the target payout for executives linked to our LGM business (including Mr. Gravanis) requiring positive EVA and significant change in EVA, with the cost of capital being fixed over the performance period, but reassessed annually for new cycles. Average invested capital is targeted to increase at a rate substantially below our targeted rate of organic sales growth. Unlike under the AIP, cash restructuring charges — which include severance and related costs and exclude asset impairment charges and lease and other contract cancellation costs — are included in EVA calculations as it is expected that these investments will generate a return over the MTIP's longer performance period (in contrast to the AIP). Whether linked to corporate or business results, the 2017-2019 EVA targets require continued improvement in our performance.
investors.Avery Dennison Corporation|2018 Proxy Statement|55• Cumulative EVA, weighted 50%. EVA is calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit, with the cost of capital fixed over the performance period. The Committee established cumulative EVA targets consistent with our 2021-2025 financial goals for earnings growth and ROTC and our primary objective of delivering superior TSR, with the target payout set near the high end of these goals and the maximum payout exceeding the high end of these goals. The 2022-2024 cumulative EVA targets require continued improvement in financial performance.
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2023 Proxy Statement | Avery Dennison Corporation
| • | Relative TSR compared to an objectively determined peer group of companies, weighted 50%. Consistent with its pay-for-performance philosophy, the Committee designed the TSR objective to provide realized compensation only if our stockholder value creation compares favorably relative to the designated peer group. The Committee set the threshold payout at TSR at the 40th percentile, target payout at TSR at the 50th percentile, and maximum payout at TSR at the 80th percentile, which were the same levels used for the 2021-2023 PUs. Payouts for the relative TSR component of PUs are capped at 100% of target if our absolute TSR is negative for the 2022-2024 performance period. In assessing the rigor of the TSR objectives, the Committee noted that performing at the median relative to our peers over the 2022-2024 period would represent solid performance in light of anticipated headwinds from currency movements, inflationary pressures and supply chain challenges. |
•Relative TSR compared to an objectively determined peer group of companies, weighted 50% for our corporate NEOs and 25% for our business NEO. TSR measures the return that we have provided our stockholders, including stock price appreciation and dividends paid (assuming reinvestment thereof), expressed as a percentage. Consistent with its pay-for-performance philosophy, the Committee designed the TSR objective to provide realized compensation only if our stockholder value creation compares favorably relative to the designated peer group. The Committee set the threshold payout level at TSR at the 40thpercentile, the target payout level at TSR at the 50thpercentile and maximum payout level at TSR at the 80thpercentile, which were the same levels used for the 2016-2018 MTIP. Reflecting previously received stockholder feedback, payouts for the relative TSR component of these PUs is capped at 100% of target if our absolute TSR is negative for the 2017-2019 performance period. In assessing the rigor of the TSR objectives, the Committee noted that our stock price and TSR had substantially increased in the last few years; as a result, performing at the median relative to our peers over the 2017-2019 performance period would represent solid performance, particularly in light of our relatively high exposure to foreign currency translation risk and the end market challenges in the apparel industry served by our RBIS business.
Consistent with the 2016-2018 MTIP2021-2023 PUs and uponwith the recommendationadvice of Willis Towers Watson,WTW, to benchmark TSR, the Committee continued utilizingutilized a peer group(‡) comprisedgroup† composed of U.S. companies (i) in similar industries based on their classification in one of five GICS groups (diversified chemicals, specialty chemicals, metal and glass containers, paper packaging, and paper products) and (ii) with revenues during the last twelve12 months of $1 billion to $20 billion. Based on the formulaic application of the sameApplying this objective criteria, the peer group changed from the prior year as follows: (i) GCP Applied Technologies(A) Ferro Corporation was added because its last 12 months’ revenues were more than $1 billion; (B) Sylvamo Corporation was added because it became a standalone public companycompany; and met the other criteria; (ii)(C) Domtar Corp. was added because its GICS code was reclassified; (iii) Olin Corp. wasCorporation and W.R. Grace & Co. were deleted because its GICS code was reclassified; (iv) AEP Industries Inc. was deleted because it was acquired; and (v) Innospec Inc. was deleted because its last twelve months' revenues fell below $1 billion.they had been acquired by other companies.
| Performance Objectives | ||||||
| Cumulative EVA | ||||||
| 50% | ||||||
Market-leveraged Stock Units (MSUs)
In 2013, based on the expert advice and recommendation of Willis Towers Watson, the Committee began granting our NEOs MSUs which are performance-based LTI awards that:
•Are fully performance-based because they aretied to our absoluteTSR performance, which represents appreciation in our stock price and dividends paid; and•Have one-, two-, three- and four-year performance periods, with an average performance period of 2.5 years.
(‡)The following companies comprise the peer group for purposes of the 2017-2019 MTIP: A. Schulman, Inc.; Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings; Axalta Coating Systems Ltd.; Ball Corporation; Bemis Company, Inc.; Berry Plastics Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Domtar Corporation; Eastman Chemical Company; Ecolab Inc.; Ferro Corporation; GCP Applied Technologies Inc., Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; International Flavors & Fragrances Inc.; KapStone Paper and Packaging Corporation; Kraton Corporation; Minerals Technologies Inc.; NewMarket Corporation; Owens-Illinois Inc.; Packaging Corporation of America; P.H. Glatfelter Company; Platform Specialty Products Corporation; PolyOne Corporation; PPG Industries Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Chemours Company; The Sherwin-Williams Company; Valhi Inc.; W.R. Grace & Co.; and WestRock Company.
Avery Dennison Corporation| 2018 Proxy Statement |56
The Committee wanted to use an equity vehicle that has one-, two-, three- and four-year performance periods because TSR. MSUs replaced stock options and RSUs, both of which vested ratably over four years. The transition to granting MSUs was made to address burn rate concerns raised by our stockholders and increase the performance linkage of our LTI program. MSUs wereare designed to achieve the Committee’s combined objectives of our previous equity vehicles, including retention (similar to RSUs) and the provision of meaningful upside opportunity tied tohigher incentive compensation driven by stock price appreciation (similar to stock options, but more limited due to fewer shares earned for target performance and a cap on the number of shares that can be earned above target), while making the LTI program fully performance-based. The Committee continues to believe that retention is an important objective of our executive compensation program.appreciation.
MSUs vest based on our performance over periods as shown onin the graph below, with the number of shares paid out at vesting based solely on our absolute TSR and the value realized reflecting both the number of shares paid out as well as our stock price at the time of vesting. Although dividend equivalents accrue on MSUs during the performance period, they are earned and paid only at vesting; as such, if the threshold level of performance wereis not achieved, any dividend equivalents accrued during the performance period would be cancelled.are cancelled with the tranche of awards subject to vesting.
The number of shares paid out at vesting for the MSUs granted in 2014 reflected the performance criteria for MSUs are shown onin the left below, resulting in every 1% increase in TSR increasing the payout by 1%. The Committee significantly changed the MSU program beginning in 2015, making the threshold and target performance criteria more challenging to reflect stockholder feedback and our improved financial profile, as shown on the rightchart below. To help mitigate the effect on participants of more challenging threshold and target hurdles, the Committee also proportionally increased the number of shares paid out for achieving threshold performance from 70% to 85% and decreased the TSR required for a maximum payout from 100% to 75%. As a result, every 1% increase in TSR above 10% increases the payout by 1.54%. The Committee determined to maintain the same MSU programperformance objectives for 2017 to continue observing payout experience to ensure that the program's revised structure is2022 because they are achieving the Committee's goals.Committee’s goal of incenting strong performance and value creation.
| MSU PERFORMANCE CRITERIA
| |||||||||
Absolute TSR | Unit Payout | |||||||||
Cancelled | <(15)% | 0% | ||||||||
Threshold | (15)% | 85% | ||||||||
Target | 10% | 100% | ||||||||
Above Target | >10% | >100% | ||||||||
Maximum | 75% | 200% | ||||||||
| † | The peer group for the 2022-2024 PUs at the end of fiscal year 2022 is composed of the following companies: Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings Inc.; Axalta Coating Systems Ltd.; Avient Corporation (formerly known as PolyOne Corporation); Ball Corporation; Berry Global Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings, Inc.; Eastman Chemical Company; Ecolab Inc.; Ecovyst Inc. (formerly PQ Group Holdings Inc.); Element Solutions Inc.; Graphic Packaging Holding Company; Greif, Inc.; H.B. Fuller Company; Huntsman Corporation; Ingevity Corporation; Innospec Inc.; International Flavors & Fragrances Inc.; Minerals Technologies Inc.; NewMarket Corporation; O-I Glass Inc.; Packaging Corporation of America; Pactive Evergreen; PPG Industries, Inc.; Quaker Chemical Corporation; Rayonier Advanced Materials Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; Sylvamo Corporation; The Chemours Company; The Sherwin-Williams Company; Valhi, Inc.; and WestRock Company. |
Avery Dennison Corporation | 2023 Proxy Statement | 69 |
2013/2014 MSUs | 2015/2016/2017 MSUs | |||||||||
| | | | | | | | | | | |
| ABSOLUTE TSR | UNIT PAYOUT | ABSOLUTE TSR | UNIT PAYOUT | |||||||
Cancelled | <-30% | 0% | Cancelled | <-15% | 0% | |||||
Threshold | -30% | 70% | Threshold | -15% | 85% | |||||
Target | 0% | 100% | Target | 10% | 100% | |||||
Above Target | >0% | >100% | Above Target | >10% | >100% | |||||
Maximum | 100% | 200% | Maximum | 75% | 200% | |||||
Avery Dennison Corporation| 2018 Proxy Statement |57
Annual LTI Awards
Our NEOs were granted the annual LTI awards shown in the table below in February 2017. The2022. Unless otherwise noted, the number of awards granted was based on the NEO's (i)respective NEO’s base salary at year-end 20162021 and (ii) target LTI opportunity, with theopportunity. The number of PUs granted for the EVA component was based on a grant date fair value equal to the average closing price for shares of our common stock during the first ten10 trading days of February 20172022; the numbers of PUs granted for the relative TSR component and the number of MSUs granted was based on a grant date fair value determined by ausing the Monte-Carlo simulation usingmethod described in footnote (2) of the trading days of January 2017. As a result of these methodologies used to determine grant date fair value, awarded LTI values slightly exceeded target LTI values.2022 Summary Compensation Table.
2017 ANNUAL LTI AWARDS | ||||||||||||||
| | | | | | | | | | | | | | | |
| 2016 YE BASE SALARY | TARGET LTI OPPORTUNITY | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI VALUE | |||||||
Butier | $1,100,000 | 425% | 29,452 | $2,526,940 | 25,574 | $2,337,476 | $4,864,416 | |||||||
Lovins(1) | $412,000 | 120% | 3,114 | $267,177 | 2,705 | $247,243 | $514,420 | |||||||
Gravanis(2) | $542,034 | 180% | 6,147 | $496,547 | 5,337 | $487,807 | $984,354 | |||||||
Hill | $516,548 | 180% | 5,858 | $502,608 | 5,086 | $464,872 | $967,480 | |||||||
Miller | $531,742 | 180% | 6,030 | $517,366 | 5,236 | $478,570 | $995,936 | |||||||
Bramman(3) | $575,025 | 200% | 7,246 | $621,697 | 6,291 | $575,015 | $1,196,712 | |||||||
(1)Mr. Lovins' target LTI opportunity reflects his previous opportunity since his promotion to CFO occurred after the February 2017 grant date.(2)Mr. Gravanis' base salary was converted from euros using the exchange rate as of our fiscal year end.(3)The LTI awards granted to Ms. Bramman were cancelled upon the termination of her employment before our fiscal year-end.
2017
| 2022 ANNUAL LTI AWARDS | |||||||||||||||||||||||||||||||||||
| NEO | 2021 YE Base Salary | Target LTI Opportunity | PUs (#) | PUs ($) | MSUs (#) | MSUs ($) | LTI Value | ||||||||||||||||||||||||||||
Butier | $ | 1,200,000 |
| 585% |
|
| 19,866 | $ | 3,259,534 |
| 24,753 | $ | 3,510,007 | $ | 6,769,541 | ||||||||||||||||||||
Stander(1) | $ | 700,000 |
| 300% |
|
| 5,943 | $ | 975,103 |
| 7,405 | $ | 1,050,061 | $ | 2,025,164 | ||||||||||||||||||||
Lovins | $ | 661,260 |
| 250% |
|
| 3,936 | $ | 767,711 |
| 5,829 | $ | 826,584 | $ | 1,594,295 | ||||||||||||||||||||
Baker-Nel | $ | 416,000 |
| 120% |
|
| 1,413 | $ | 231,840 |
| 1,760 | $ | 249,568 | $ | 481,408 | ||||||||||||||||||||
Walker | $ | 425,375 |
| 120% |
|
| 1,445 | $ | 237,090 |
| 1,800 | $ | 255,240 | $ | 492,330 | ||||||||||||||||||||
| (1) | In connection with his promotion to President/COO in March 2022, Mr. Stander’s base salary was increased from $569,007 to $700,000 and his target LTI opportunity increased from 180% to 300%. The Committee determined to grant his annual LTI awards based on his increased base salary and target LTI opportunity given that the awards incent his future performance, during which he would be serving in his new role. Amounts exclude Mr. Stander’s special one-time award of 8,793 RSUs with a grant date fair value of $1,429,469. |
2022 VESTING OF PREVIOUSLY GRANTED LTI AWARDS
2015-2017 MTIP2020-2022 PUs Eligible Forfor Vesting
The PUs granted to our NEOs in February 20152020 were eligible to vest for vesting at the end of 2017three-year period ending in 2022 based (i) for our corporate NEOs (excludingother than Mr. Lovins, who was an LGM employee in February 2015 and received PUs with the same performance criteria as our business NEO),Stander, 50% on our total company'scompany’s cumulative three-year EVA and 50% on our three-year relative TSR compared to a peer group§group† of companies determined using the same objective criteria used for the 2017-2019 MTIP2021-2023 PUs; and (ii) for Mr. Lovins and our business NEO,Stander, who was leading RBIS at the time of grant, 75% on LGM'sRBIS’ cumulative three-year EVA and 25% on our three-year relative TSR. The key goal-setting principle in setting cumulative EVA targets was to be consistentconsistency with our long-term2017-2021 financial goalstargets for earnings growth and ROTC, which the Committee believes translatetranslates into delivering above-average TSR.
The target for corporate EVA —company cumulative EVA target of $446$1,126 million —for our NEOs other than Mr. Stander was consistent with our 2014-2018 targets2017-2021 financial goals for organic sales growth and operating margin expansion and recognized that increasing sales and operating margin, together with balance sheet efficiency, are key drivers of EVA improvement. TheOur company cumulative EVA target was nearly three times~32% higher than ourthe cumulative EVA we achieved for the three-year period ending in 2014.2019. EVA required for maximum payout —– company cumulative EVA of $497$1,196 million —– was consistent with the high end of our long-term growth and operating margin targets. As shown on the following page, below, we delivered total company cumulative EVA of over $601$1,217 million duringfor the 2015-20172020-2022 performance period, resulting in a payout of 200% for the EVA component for our corporate NEOs (excludingthese NEOs.
2020-2022 PUs: COMPANY CUMULATIVE EVA | ||||||||||||||||
($M) | 2020 | 2021 | 2022 | Cumulative EVA | ||||||||||||
Adjusted EBIT(1) | $ | 813.6 |
| $ | 1,025.3 |
| $ | 983.9 |
| |||||||
Taxes(2) |
| (196.1 | ) |
| (256.3 | ) |
| (243.0 | ) | |||||||
Equity method investment net losses |
| (3.7 | ) |
| (3.9 | ) |
| – |
| |||||||
|
|
|
|
|
| |||||||||||
| 613.8 |
|
| 765.1 |
|
| 740.9 |
| ||||||||
Capital charge(3) |
| (301.1 | ) |
| (301.0 | ) |
| (300.5 | ) | |||||||
|
|
|
|
|
| |||||||||||
EVA | $ | 312.7 |
| $ | 464.1 |
| $ | 440.4 |
|
| $1,217.2 |
| ||||
| (1) | Adjusted EBIT is a non-GAAP financial measure defined and reconciled from GAAP in the last section of this proxy statement. |
| (2) | The GAAP tax rates for 2020, 2021 and 2022 were 24.1%, 25.0% and 24.2%, respectively. Taxes shown are based on adjusted tax rates of 24.1%, 25.0% and 24.7% for 2020, 2021 and 2022, respectively. The adjusted tax rate represents the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact the rate, such as effects of certain discrete tax planning actions, impacts related to enactments of comprehensive tax law changes, and other items. |
| (3) | 8.5% of average invested capital of $3.54 billion in each of 2020, 2021 and 2022, using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity, adjusted to exclude the impact of acquisitions completed since the target was set. |
70 | 2023 Proxy Statement | Avery Dennison Corporation |
Cumulative EVA for RBIS exceeded the maximum level of performance, resulting in a payout of 200% on that performance objective for Mr. Lovins).Stander, whose PUs were tied to the RBIS business he led at the time of grant. EVA targets or results at the segment level are not disclosed due to their competitively sensitive nature.
§The following companies comprised the peer group at vesting for purposes of the 2015-2017 MTIP: A. Schulman, Inc.; Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holding; Axalta Coating Systems Ltd.; Ball Corporation; Bemis Company, Inc.; Berry Plastics Group, Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Eastman Chemical Company; Ecolab Inc.; Ferro Corporation; FMC Corp; Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; International Flavors & Fragrances Inc.; KapStone Paper and Packaging Corporation; Kraton Performance Polymers Inc.; Minerals Technologies Inc.; NewMarket Corporation; Olin Corp.; Owens-Illinois Inc.; Packaging Corporation of America; P.H. Glatfelter Company; PolyOne Corporation; PPG Industries Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Sherwin-Williams Company; Valhi Inc.; Verso Paper Corporation; and W.R. Grace & Co.
Avery Dennison Corporation| 2018 Proxy Statement |58
| 2015-2017 MTIP: CORPORATE CUMULATIVE EVA | |||||||||||||
| | | | | | | | | | | | | | |
| (In millions) | 2015 | 2016 | 2017 | CUMULATIVE | |||||||||
| Adjusted EBIT(1) | $ | 483.6 | $ | 586.4 | $ | 656.6 | | | |||||
| Taxes(2) | $ | (159.1 | ) | $ | (192.3 | ) | $ | (183.8 | ) | ||||
| | | | | | | | | | | | | | |
| | $ | 324.5 | $ | 394.1 | $ | 472.8 | | | |||||
| Capital charge(3) | $ | (182.8 | ) | $ | (185.3 | ) | $ | (221.9 | ) | ||||
| | | | | | | | | | | | | | |
| EVA | $ | 141.7 | $ | 208.8 | $ | 250.9 | $ | 601.4 | |||||
(1)Adjusted EBIT refers to earnings before interest expense and taxes, excluding non-cash restructuring costs and other items. Adjusted EBIT is a non-GAAP financial measure and is reconciled to GAAP inAppendix Aof this proxy statement.(2)Based on an effective tax rate of 32.9%, 32.8% and 28.0% for fiscal years 2015, 2016 and 2017, respectively. The effective tax rate for 2017 represents the full-year GAAP rate, adjusted to include the impact of previously planned repatriation of foreign earningsRelative TSR for thefourth quarter of 2017 and exclude the impact of the TCJA.(3)8.5% of average invested capital of $2.15 billion, $2.18 billion and $2.61 billion for fiscal years 2015, 2016 and 2017, respectively, using an annual five-point average (December of prior year and March, June, September and December of current year) of short- and long-term debt plus equity.
The cumulative EVA generated by our LGM business also exceeded the target established by the Committee. The payout for the EVA component for Mr. Lovins and our business NEO was 200%. Due to the competitively sensitive nature of information on business-level EVA, targets and actual results are not disclosed. Information regarding the goal-setting process and rigor of the EVA2020-2022 performance objectives has been included in the discussion of the 2017-2019 MTIP on the previous page.
TSR for the period was at the 9781thst percentile of the designated peer group§, resulting in a 200% payout for this component for all Current NEOs.
Avery Dennison Corporation| 2018 Proxy Statement |59
TablePUs for the 2020-2022 performance period paid out at 200% for Mr. Stander, whose PUs were primarily tied to the performance of ContentsRBIS, and 200% for all other NEOs, whose PUs were solely tied to company performance.
MSUs Eligible for Vesting at YE 2022
Four tranches of MSUs were eligible for vesting at the end of 20172022 based on our absolute TSR for the four-, three-, two-, and one-year performance periods shown below, with the number of shares paid out at vesting determined in accordance with the following formula:formula shown below.
Stock price at settlement (avg. closing price for trading days of January 2022) + reinvested dividends during period | Stock price at grant (avg. closing price for trading days of January of year of grant) | Payout at vesting | ||||||||||||||
| ÷ | = | |||||||||||||||
4TH TRANCHE OF MSUs GRANTED IN 2019 | 3RD TRANCHE OF MSUs GRANTED IN 2020 | |||
Performance period of 4 years | Performance period of 3 years | |||
2019-2022 Absolute TSR of 113% | 2020-2022 Absolute TSR of 52% | |||
Paid out at 200% of target | Paid out at 164% of target | |||
2ND TRANCHE OF MSUs GRANTED IN 2021 | 1ST TRANCHE OF MSUs GRANTED IN 2022 | |||
Performance period of 2 years | Performance period of 1 year | |||
2021-2022 Absolute TSR of 24% | 2022 Absolute TSR of (7)% | |||
Paid out at 121% of target | Paid out at 90% of target | |||
| § | The peer group for the 2020-2022 PUs at the time of payout is composed of the following companies: Albermarle Corporation; AptarGroup, Inc.; Ashland Global Holdings Inc.; Axalta Coating Systems Ltd.; Avient Corporation (formerly known as PolyOne Corporation); Ball Corporation; Berry Global Corp., Inc.; Celanese Corporation; Clearwater Paper Corporation; Crown Holdings Inc.; Eastman Chemical Company; Ecolab Inc.; Ecovyst Inc. (formerly PQ Group Holdings Inc.); Element Solutions Inc.; Graphic Packaging Holding Company; Greif Inc.; H.B. Fuller Company; Huntsman Corporation; Ingevity Corporation; Innospec Inc.; International Flavors & Fragrances Inc.; Minerals Technologies Inc.; NewMarket Corporation; O-I Glass, Inc.; Packaging Corporation of America; PPG Industries Inc.; Rayonier Advanced Materials Inc.; RPM International Inc.; Sealed Air Corporation; Sensient Technologies Corporation; Silgan Holdings Inc.; Sonoco Products Company; Stepan Company; The Chemours Company; The Sherwin-Williams Company; Valhi Inc.; and WestRock Company. |
Avery Dennison Corporation | 2023 Proxy Statement | ||
71 |
PERQUISITES
Consistent with market practices, our corporateOur NEOs receive the perquisites shown in the chart below. We do not reimburse our NEOs for the tax consequences of their receipt of these perquisites.
| LIMITED PERQUISITES | ||||
Executive Benefit Allowance | $70,000 for CEO, amounts taxable | Flat allowance reduces expense of administering | ||
Financial Planning | Annual reimbursement of up to $25,000 for | Allows most senior executives to focus on job duties | ||
Annual Physical Examination | Paid directly to the service provider only to the extent | Helps ensure leaders maintain good overall health | ||
Mr. Gravanis receives an automobile allowance consistent with customary executive benefit programs in the Netherlands. He also receives taxable dependent tuition assistance. For more information, see footnote (5) of the2017 Summary Compensation Table.
RELOCATION AND OTHER TEMPORARY BENEFITS
We provide relocation assistance to some of our senior level employees, which may include our NEOs. Mr. Lovins received a one-time taxable lump-sum payment of $100,000 as compensation for the expenses associated with traveling from his home to our headquarters; provided, however, that if Mr. Lovins leaves within 12 or 24 months of his appointment date, he is required to repay 100% or 50%, respectively, of this lump-sum payment. If Mr. Lovins in the future utilizes our relocation assistance services on terms and conditions substantially similar to our other relocating executives, this lump-sum amount will be deducted from any benefits provided at that time. In addition, Mr. Lovins received an interim monthly cash stipend and temporary housing assistance during his service as our Interim CFO. For more information, see footnote (5) of the2017 Summary Compensation Table.
Avery Dennison Corporation| 2018 Proxy Statement |60
GENERAL BENEFITS
Nonqualified Deferred Compensation Benefits
Our U.S. NEOs are eligible to participate in our nonqualified deferred compensation plan, which allows eligible U.S. employees to defer up to 75% of their base salary and up to 90% of their AIP award. Although we previously allowed deferral of LTI awards, we suspended this plan feature in 2015. The plan provides NEOs and other eligible employees with a long-term capital accumulation opportunity because deferred amounts accumulate on a pre-tax basis. Participating executives may select from a number of investment options.options. Our only deferred compensation plan currently open for deferrals does not offer above-market interest rates. Deferrals are 100% vested.
We made an annual contribution in early 2017effective as of the first business day of 2022 to the deferred compensation accounts of our U.S. NEOs of up to 6% offor 401(k) eligible earnings and deferred compensation in 2021 in excess of the Internal Revenue Code of 1986, as amended (the "Code"“Code”) compensation limit. This annual contribution provided an automatic contribution of 3% of pay and a matching contribution of up to 50% of the first 7% of pay above the Code compensation limit. This benefit wasis designed to supplement 401(k) contributions that are limited under the Code.
For additional information regarding our deferred compensation plan and accrued NEO benefits thereunder, see 20172022 Nonqualified Deferred Compensation inExecutive Compensation Tables.
Retirement Benefits
Our U.S.Messrs. Butier and Lovins are our only NEOs are eligible for retirement benefits under our U.S. pension plan and our benefit restoration plan, a nonqualified excess benefit plan, in each case subject to the same terms and conditions as our other eligible U.S. employees. Because we froze the accrual of benefits under these plansthe benefit restoration plan was frozen as of December 31,year-end 2010, none of our eligible NEOs accrued additional retirement benefits during 2017.2022. For additional information regarding these plansthe benefit restoration plan and accrued NEO benefits thereunder, see20172022 Pension Benefits inExecutive Compensation Tables. Mr. Gravanis has legally mandated retirement benefits in his previous work location of France and his current work location of the Netherlands.
Defined Contribution Benefits
Our U.S. NEOs are eligible to participate in our employee savings plan, a qualified 401(k) plan that permits U.S. employees to defer up to 100% of their eligible earnings less payroll deductions to the plan on a pre-tax basis and 25% of their eligible earnings on an after-tax basis, subject to the annual limit prescribed by the Internal Revenue Service (IRS) for the aggregate of company contributions and employee pre- and post-tax contributions. Employee deferrals are immediately vested upon contribution and in 2017contribution. In 2022, we contributed up to 6%6.5% of an employee'semployee’s eligible compensation, 3% of which was an automatic contribution and up to 3%3.5% of which was a matching contribution of 50% of the employee'semployee’s contributions up to 6%,7% of pay, subject to Code limits. For 2018, we increased our matching contribution to 50% of the employee's contributions up to 7%, subject to Code limits.federal compensation limit. Participants vest in companyour contributions to their savings plan account after two years of service.service and all NEOs are vested.
Employees are immediately eligible to participateAll NEOs participated in the savings plan and all our Current NEOs participated in the plan during fiscal year 2017, except for Mr. Gravanis who is not a U.S. employee and was therefore ineligible. Our U.S. NEOs participate in these plans2022, subject to the same eligibility and benefit terms and conditions as our other U.S. employees.
Life Insurance Benefits
In addition to the $50,000 in life insurance benefits we provide to all U.S. employees, our U.S. NEOs are provided with supplemental life insurance benefits equal to three times the NEO'sNEO’s base salary less $50,000, up to a maximum coverage amount of $1 million.
72 | 2023 Proxy Statement | Avery Dennison Corporation |
Executive Long-Term Disability Insurance Benefits
If our NEOs elect to enroll in executive long-term disability coverage, their long-term disability benefit is equal to 65% of their eligible pre-disability monthly earnings up to a maximum of $25,000 per month. Coverage is available only for the NEO; their dependents are not covered.
Personal Excess Liability Insurance Benefits
We provide $3 million of personal excess liability insurance coverage to our U.S. NEOs. Personal excess liability coverage provides an additional layer of liability coverage that supplements the coverage provided by the individual'sindividual’s personal liability insurance. To receive any benefit from this excess liability insurance, the NEO must maintain certain minimum coverage requirements under his or her personal liability policy.
Avery Dennison Corporation| 2018 Proxy Statement |61Charitable Match Benefits
TableWe match up to $10,000 of Contentsour CEO’s and $5,000 of our other NEOs’ annual documented contributions to charitable organizations or educational institutions.
SEVERANCE BENEFITS
None of our NEOs has an employment contract. The absence of employment contractscontract, and each is employed at-will, which reflects our pay-for-performance philosophy; if an NEO is no longer performing at the expected level, he or she can be terminated immediately without receiving a contractually-guaranteedcontractually guaranteed payment. However, consistent with market practices, the Committee believes that providing our executives with severance benefits helps ensure that they act in the best interests of our company and stockholders, even if doing so may be contrary to their personal interests, such as where it could lead to the termination of their employment or a change of control of our company.
The Committee believes the amount of these benefits and the terms and conditions upon which they are provided are consistent with market practices. Unvested equity awards outstanding on the date of termination are generally cancelled, except for employees who qualify as retirement eligible under the terms of our equity incentive plans, whose awards are accelerated upon termination of service. Mr. Gravanis and Mses. Hill and Miller qualified as retirement eligible as of the end of fiscal year 2017. SeeEquity Incentive Plans following thePayments Upon Termination as of December 30, 2017 table for further information.
The rightscompensation of our NEOs in the event of termination not for cause areis governed by our Amended and Restated Executive Severance Plan (the "Severance Plan"“Severance Plan”) and, as applicable, our Amended and Restated Key Employee Change of Control Severance Plan (the "COC“COC Severance Plan"Plan”). We use these plans rather than individually negotiated agreements to provide us with the flexibility to change the severance benefits for which ourapplicable NEOs are eligible to reflect market practices without the need to obtain their individual consent. In addition, this plan-based approach eliminates the time and expense it would require to individually negotiate separation paymentsseverance arrangements and ensures that oureligible NEOs are eligible forreceive benefits on the same terms and conditions as employees with similar levels of responsibility. Receipt of benefits under these plans is conditioned on the executive signing a waiver and general release of most claims against our company, as well as agreeing to non-competition, non-solicitation, and non-disclosurecertain restrictive covenants in favor of our company. Any violation of these covenants could result in our company seeking to recover some or all severance benefits previously paid or pursuing any other claims that may be appropriate under the circumstances.
Mr. Gravanis' severance benefits would also be subject to applicable Dutch labor laws and regulations in effectUnvested equity awards outstanding on the date of termination are generally cancelled, except for employees who qualify as retirement eligible under the terms of our equity incentive plans, whose awards are accelerated upon termination of service. None of our NEOs qualified as retirement eligible at the time of his separation, and he would receive the greater of the amount provided under our plans and the amount required by those laws and regulations.year-end 2022.
For additional information regarding potential NEO benefits under these plans, including the treatment of equity awards under various termination scenarios, seePayments Upon Termination as of December 30, 201731, 2022 inExecutive Compensation Tables.
Severance Following Involuntary Termination Not for Cause
OurAll of our NEOs are eligible to receive severance benefits upon involuntary termination not for "cause,"“cause,” in accordance with the terms and conditions of the Severance Plan. In the event of a qualifying termination, our CEO would be eligible to receive two times the sum of his annual salary, his highesttarget AIP award received infor the preceding three yearsyear of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our other NEOs would be eligible to receive one times his or hertheir respective sum of these amounts. All NEOs would also be eligible to receive up to $25,000 in outplacement services for up to one year following termination of employment. Any payments made under the Severance Plan would be offset by any payments received by the NEO under any statutory, legislative and regulatory requirement or, if applicable, the COC Severance Plan.
In connection with her separation fromSeverance Following Change of Control
Messrs. Butier, Stander and Lovins are our only NEOs eligible for enhanced severance payments upon termination not for “cause” or by the executive for “good reason” within 24 months of a “change of control” of our company, and in
Avery Dennison Corporation | 2023 Proxy Statement | 73 |
accordance with the terms and conditions of the Severance Plan, Ms. Bramman received severance benefits of $1,223,313 in 2017, which included (i) $575,025, her annual base salary as of her termination date; (ii) $633,965, her highest AIP award in the last three years; and (iii) $14,323, the cash value of twelve months of premiums for qualified medical and dental plans in which she participated as of her termination date. In consideration of her receipt of these benefits, Ms. Bramman agreed to a waiver and release of any claims against our company and to non-competition, non-solicitation and non-disclosure covenants in favor of our company. All unvested equity awards held by Ms. Bramman on the date of her termination of employment were cancelled.
Severance Following Change of Control
Our NEOs are eligible for severance payments upon termination not for "cause" or by the executive for "good reason" within 24 months of a "change of control" of our company, in accordance with the terms and conditions of the
Avery Dennison Corporation| 2018 Proxy Statement |62
COC Severance Plan. In the event of a qualifying termination following a change of control, our CEO would be eligible to receive three times the sum of his annual salary, highesttarget AIP award received infor the preceding three yearsyear of termination and the cash value of 12 months of his qualified medical and dental insurance premiums; our otherLevel 2 NEOs would be eligible to receive two times his or hertheir respective sum of these amounts. Ouramounts. These NEOs would also be eligible to receive a pro-rataprorated AIP award for the year of termination and up to $25,000 in outplacement services for up to one year following termination of employment. Any payments under the COC Severance Plan would be offset by any payments received by the NEO under the Severance Plan and any other statutory, legislative and regulatory requirement. In the event of termination following a change of control, our Level 3 NEOs would be entitled to receive benefits under the Severance Plan described above.
Under our equity incentive plans, unvested equity awards granted to our NEOs would generally vest only if thean eligible NEO is terminated without "cause"cause or resigns for "good reason"good reason within 24 months after the change of control. Outstanding PUs and MSUs vest based on actual performance, if determinable, and otherwise based on target performance.
OurParticipating NEOs are not eligible to receive any excise tax gross-up on amounts payable under the COC Severance Plan. However, if anIf the NEO would otherwise incur excise taxes under Section 4999 of the Code, payments under the COC Severance Plan maywould be reduced at the participating NEO's election so that no excise taxes would be due.due if the reduction results in a greater after-tax benefit to the NEO.
MARKET SURVEY DATAMarket Survey Data
The Committee annually considers market survey data to target TDC, looking at a cross sectioncompanies of U.S. companiessimilar size based on annual revenues that span all industries to reflect the broad talent market across which we seek our executives. The Committee reviews results from surveys prepared by third partiesa third-party survey to understand market compensation practices and assess our competitiveness, narrowing the scope of the results to account for variations caused by company size.
In February 2017,2022, the Committee was presented with industry-wide data from the following published compensation surveys,most recent WTW U.S. Compensation General Industry Database, which was narrowed in scope to focus on data of the 67 companies with $6 billion to $10 billion in annual revenue. The Committee reviewed the data with executive matches based on job and functional responsibility: (i) the most recent Willis Towers Watson U.S. Compensation General Industry Database, comprised of data, including annual revenues, from 360 participants and (ii) the most recent Hewitt Total Compensation Measurement Survey, which was narrowed in scope to focus on the data of the 63 participants with $5 billion to $10 billion in annual revenues. The Committee reviewed the data from each surveyresponsibility on an aggregated basis, with no consideration of either survey's respectivethe survey’s component companies, which were not determined or known by the Committee.
The Committee uses the survey data as a reference point to target TDC and the components thereof, at the market median, giving consideration to median pay at similarly sized companies, responsibilities, individual performance, tenure, retention and succession.
PEER GROUPSPeer Groups
For determining our relative TSR for purposes of vestingour PUs, granted under the 2015-2017 MTIP and 2017-2019 MTIP, the Committee useduses a peer group comprisedcomposed of U.S. companies satisfying objective criteria for industry classification and revenue size, thesize. The names of which have beenthese peer group companies are disclosed earlier in this CD&A. The Committee does not utilize a peer group for any other purpose.
TALLY SHEETSTally Sheets
The Committee annually reviews tally sheets that reflect the components of each NEO'sNEO’s compensation. The tally sheets reviewed in 2017February 2022 included the following information shown below for 2015, 2016 and 2017:each of the most recent three fiscal years.
•Compensation history, including annual cash compensation (base salary and AIP awards), LTI awards, value of vested LTI awards, and annualized cost of benefits and
perquisites;•The expected valueperquisitesValue of annual compensation,
for the year,including base salary, AIP award andthegrant date fair value of LTIawards;•- awards
Accumulated value of compensation, including
total accumulated value ofoutstanding LTI awards and accumulated benefit values underourretirement and deferred compensationplans;•- plans
Potential payments under various termination
scenarios; and•- scenarios
Compliance with our stock ownership
guidelines.policyAvery Dennison Corporation|2018 Proxy Statement|63The Committee believes that reviewing tally sheets is useful in determining executive compensation because they provide a historical perspective on NEO compensation and include information that will be contained in our proxy statement.
74
2023 Proxy Statement | Avery Dennison Corporation
INDEPENDENT OVERSIGHT AND EXPERTISE
Our Board believes that hiring and retaining effectiveour executives and providing them with market-competitive compensation are essential to the success of our company and advanceadvancing the interests of our stockholders. The Committee, which is comprisedcomposed solely of independent directors, is responsible for overseeing ourapproving executive compensation program.compensation. The Committee may delegate authority to subcommittees or, in certain limited circumstances not related to the compensation of our executive officers, to our CEO.
Under its charter, the Committee has the authority, in its sole discretion and at our expense, to obtain advice and assistance from external advisors. The Committee may retain and terminate any compensation consultant or other external advisor at our expense and has sole authority to approve the advisor'sadvisor’s fees and other terms and conditions of the retention. In retainingengaging its advisors, the Committee must considerconsiders each advisor'sadvisor’s independence from management, as required by NYSE listing standards.
During 2017, theThe Committee has retained Willis Towers WatsonWTW as its independent compensation consultant, andwith the firm performedperforming the following services described below for or at the Committee:request of the Committee in 2022.
• Assisted with | ||
• Assessed the market consistency of our stock ownership policy | ||
• Conducted an assessment of the potential for excessive risk-taking in our executive compensation program | ||
• Advised on executive compensation trends and talent market dynamics | ||
• Evaluated a proxy advisory | ||
• Commented on our | ||
• Provided incentive compensation advice (including recommending relative TSR peer group for the | ||
• Conducted analyses of | ||
• Prepared for, attended and reviewed documentation for Committee meetings | ||
In 2017, Willis Towers Watson2022, WTW received $139,873$243,358 in compensation from our company for professional services directly performed for or at the request of the Committee. We also reimbursed the firm for its reasonable out-of-pocket expenses.
The Committee conducted its annual assessment of Willis Towers Watson'sWTW’s performance in December 2017,October 2022, which included a reviewan evaluation of the services it had provided during the year, as well as the fees paid therefor and the following additional evaluation criteria:criteria described below.
•Experience— The firm's depth and breadth of executive compensation knowledge and experience; quality of staff, data, and other resources; and understanding of our business strategy and issues, industry, performance drivers and human capital considerations;•Independence —The firm's objectivity in giving advice and making recommendations, and its willingness to provide candid feedback regarding management and Committee proposals, questions and concerns;•Preparation— The quality and timeliness of the firm's reports and its review and feedback on management proposals, and the firm's preparation with the Committee Chair and our management, as appropriate; and•Committee Relationship —The accessibility and availability of members of the engagement team; the firm's relationship with the Committee Chair and our human resources staff; and the effectiveness of its communication.
| • | Experience – The firm’s depth and breadth of executive compensation and board advisory knowledge and experience; qualifications as a board-level consultant; quality of resources available, including staff and data; and understanding of our business strategy, challenges, industry, performance drivers and talent considerations |
| • | Independence – The firm’s objectivity in giving advice and making recommendations, and its candid feedback regarding management and Committee proposals, questions and concerns |
| • | Preparation – The quality and timeliness of the firm’s reports, including accuracy, type and amount of information, and responsiveness to issues); its review and feedback on management proposals; and the firm’s preparation with the Committee Chair and our management, as appropriate |
| • | Committee Relationship – The accessibility and availability and communication effectiveness of members of the engagement team and the firm’s reporting relationship with the Committee Chair and working relationship with clear communication and management |
Based on this assessment,evaluation, the Committee determined that itexpressed its continued to be satisfiedsatisfaction with the performance of Willis Towers WatsonWTW and the individual members of the engagementadvisory team serving the Committee.
Avery Dennison Corporation| 2018 Proxy Statement |64
Avery Dennison Corporation | 2023 Proxy Statement | 75 |
Table of ContentsAdvisor Independence
ADVISOR INDEPENDENCE
Willis Towers WatsonWTW and the Committee have had the following protocols in place since the engagement commenced to ensure the firm'sfirm’s independence from management: the Committee has the sole authority to select, retain and terminate Willis Towers Watson, as well asWTW and, acting through its Chair, authorize the firm'sfirm’s fees, and determine the other terms and conditions that govern the engagement; the Committee directs Willis Towers Watsonengagement and direct WTW on the process for delivery and communication of its work product, including its analyses, findings, conclusions and recommendations; product; in the performance and evaluation of its duties, Willis Towers WatsonWTW is accountable, and reports directly, to the Committee;Committee; and members of the Committee may consult with Willis Towers WatsonWTW at any time, with or without members of management present, at the Committee'stheir sole discretion.
As required by SEC regulations and NYSE listing standards, the Committee considered the independence of its advisors – including WTW and the law firms providing executive compensation counsel to the Committee and/or our company – in December 2017.October 2022. The Committee reviewed information provided by Willis Towers Watson, membershas noted the factors described below in making its independence assessments of the Committee and our executive officers related to the following factors:WTW.
•Other services provided to our company —During fiscal year 2017, Willis Towers WatsonWTW performed
no servicesonly one discrete project for our companyother thanin 2022 outside of the executive compensationconsulting services;•Fees paid by our company as a percentageservices it performed at the request of thefirm's total revenue —CommitteeFees from our company reflected approximately
0.002%0.003% ofWillis Towers Watson'sWTW’s revenue for its fiscal year ended December 31,2017;•Policies2022WTW has several policies and procedures
maintainedtoprevent or mitigate conflicts of interest —Willis Towers Watson has multiple such policiesensure its advice is objective andprocedures,independent, including a comprehensive code of conduct and ethics and quality policies that mandate rigorous work reviews and periodic compliance reviews, which the firm has represented to the Committee are highlyeffective;•Business or personal relationships with members of the Committee —effectiveBased on disclosures from
Willis Towers WatsonWTW and members of the Committee,wethere areaware ofnosuchbusiness or personalrelationships;•Company stock owned by Willis Towers Watson firm representatives —relationships between themNo members of the
Willis Towers WatsonWTW team serving the Committee ownanystock in our company, other thanperhapspotentially through investments in mutual or other funds managed without themember's input; and•Business or personal relationships with any executive officer of our company—member’s inputBased on disclosures from the firm and our executive officers,
wethere areaware ofno business or personal relationshipswith Willis Towers Watsonbetween WTW or the members of the engagement team advising theCommittee.TheCommitteeaffirmatively determined Willis Towers Watson to be independent and both the firm and the memberswith any executive officer ofthe engagement team advising the Committee to be free of any conflicts of interest.our companyCLAWBACK POLICYClawback PolicyIn the event of fraud or other intentional misconduct on the part of an NEO that necessitates a restatement of our financial results (including, without limitation, any accounting restatement due to material noncompliance with any financial reporting requirement), under our current clawback policy, the NEO would be required to reimburse our company for any AIP or LTI awards paid or granted in excess of the amount that would have been paid or granted based on the restated financial results. These remedies would be in addition to, not instead of, any other actions taken by our company (through the imposition of any discipline up to and including termination), law enforcement agencies, regulators or other authorities. This clawback policy
has beenis contractually acknowledged by our NEOsupon the execution ofin their annual LTI awardagreements since 2010.agreements.The Committee approved ourOur clawback policyin 2009is designed to subject incentive compensation to forfeiture if our financial results are not achieved consistent with our high ethical standards. This policy is expressly incorporated into our AIP and LTI plans. The Committeeanticipates that it willplans to revise the policyif andas may be necessary to comply withfinalrecently issued rulesissuedby theSEC.SEC upon their effectiveness.Avery Dennison Corporation|2018 Proxy Statement|65TableTax Implications ofContentsExecutive CompensationTAX IMPLICATIONS OF EXECUTIVE COMPENSATIONThe Committee aims to compensate our NEOs in a manner that is tax effective for our company. However, the Committee may, in its discretion, adopt or implement compensation programs and/or practices that are not fully tax deductible
to the extentif it believes that doing so is in the best interests of our company and stockholders.Section 162(m) of the Code
UnderFollowing the enactment of the Tax Cuts and Jobs Act (TCJA), for taxable years beginning on or after January 1, 2018, compensation in excess of $1 million paid to executive officers covered by Section 162(m) of the Code("(“Section 162(m)"”)as in effect for fiscal year 2017, our federal income tax deductions for executive compensation in fiscal year 2017 were limited to the extent total compensation for certain executive officers exceeded $1 million in any one year, unless it qualified as "performance-based." To qualify as performance-based under Section 162(m) as in effect for fiscal year 2017, compensation must, among other things, be based solely upon the achievement of objective performance goals and made under a plan thatgenerally isadministered by a compensation committee comprised solely of "outside directors." In addition, the material terms of the plan must be disclosed to and approved by our stockholders and the Committee must certify that the performance goals were achieved before payments can be made.Our Senior Executive Annual Incentive Plan is designed in a manner intended to comply with the provisions of Section 162(m) as in effect for fiscal year 2017 and was last approved by our stockholders in 2014, which constituted approval of the performance-based criteria contained therein. Under the plan, our NEOs are eligible to receive a maximum annual cash incentive award based on a specified percentage of our gross profit less marketing, general and administrative expenses, in each case as reported on our consolidated statement of operations for the applicable fiscal year. The Committee annually reviews the maximum plan awards and may exercise its discretion to decrease, butnotincrease, such awards. The AIP awards granted to our NEOs in 2017 were substantially below the maximum amounts calculated under the Senior Executive Annual Incentive Plan. In addition to the Senior Executive Annual Incentive Plan, we have designed certain of our other compensation programs in a manner intended to comply with Section 162(m) as in effect for fiscal year 2017 so that total compensation paid to any employee covered by Section 162(m) generally should not, unless otherwise determined appropriate, exceed $1 million in any one year, except for compensation payments that qualify as "performance-based."Tax law changes resulting from the TCJA could impact our future pay practices, as executive compensation paid to certain executive officers (including our CFO, whose compensation was not previously subject to Section 162(m)) exceeding $1 million in any tax year beginning after December 31, 2017 is generally no longer deductible under Section 162(m). Pursuant to the TCJA, the exception for "performance-based" compensation described above was repealed effective for tax years beginning after December 31, 2017 and, therefore, compensation previously intended to be "performance-based" may not bedeductible, unless it qualifies for limited transition reliefapplicable to certain remunerationunder the TCJA. To qualify for transition relief, compensation must, among other things, have been payable pursuant to a written binding contract that was in effect on November 2,2017.2017 and not subsequently modified in any material respect.Due76
2023 Proxy Statement | Avery Dennison Corporation
While in the past we have structured certain of our incentive compensation in a manner intended to be tax-deductible for purposes of Section 162(m), due to the TCJA and the uncertainties in the applicationsapplication of Section 162(m), as amended by the TCJA, and the TCJA,regulations thereunder, there is no guarantee that any deductions claimed under Section 162(m) will not be challenged or disallowed by the IRS and our ability to deduct compensation under Section 162(m) may be restricted. Furthermore, although the Committee believes that the deductibility of executive compensation is an importanta relevant consideration and may continue to consider the effects of Section 162(m) on our future pay practices, it reserves the right to approve and pay executiveincentive compensation arrangements that areis not fully tax deductible, and/or modify executive compensation programs and practices without regard forto tax deductibility, if we believeit believes that doing so is in the best interests of our company and stockholders.
Section 409A of the Code
Nonqualified deferred compensation must be deferred and paid under plans or arrangements that satisfy the requirements of Section 409A of the Code with respect to the timing of deferral elections and payments and certain other matters. Failure to satisfy these requirements could expose individuals to accelerated income tax liabilities, penalty taxes and interest on their compensation deferred under these plans. As a general matter, we design and administer our compensation and benefit plans and arrangements in a manner intended to cause such plans and arrangementsthem to be either exempt from, or satisfy the requirements of, Section 409A of the Code.
Avery Dennison Corporation| 2018 Proxy Statement |66
| 77 |
TALENT AND COMPENSATION COMMITTEE REPORT
The Talent and Compensation Committee (referred to in this report as the “Committee”) of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) of Regulation S-K with management and, based on its review and those discussions, has recommended to our Board of Directors that the CD&A be included in our 2023 proxy statement and incorporated by reference into our 2022 Annual Report on Form 10-K.
The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with the Committee by writing to the Compensation Committee Chair, c/o Corporate Secretary, 8080 Norton Parkway, Mentor, Ohio 44060.
| Julia A. Stewart, Chair | Bradley A. Alford | Ken C. Hicks | ||
 |  |  | ||
78 | 2023 Proxy Statement | Avery Dennison Corporation |
EXECUTIVE COMPENSATION TABLES
2022 SUMMARY COMPENSATION TABLE
The table below shows the compensation earned by or awarded toof our NEOs during fiscal years 2017, 2016 and 2015 in accordance with SEC regulations. Compensation as shown in the tableregulations; it does not reflect the compensation actually realized by our NEOs for these years. For example, the amounts set forth under "Stock Awards" do not represent amounts realized by our NEOs; rather, they represent the aggregate grant date fair value for financial reporting purposes of PUs (which are subject to our achievement of cumulative EVA and relative TSR performance objectives measured at the end of a three-year period and may result in no such compensation ultimately being realized by our NEOs) and MSUs (which are subject to cancellation in the event our absolute TSR declines more than 15% over one-, two-, three- and four-year performance periods).
| Name and Principal Position | Year | Salary(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change In Pension Value and NQDC Earnings(4) | All Other Compensation(5) | Total | ||||||||||||||||||||||||||||
Mitchell R. Butier | |||||||||||||||||||||||||||||||||||
Chairman & |
| 2022 | $ | 1,176,923 | $ | 6,769,541 | $ | 974,400 |
| – | $ | 186,875 | $ | 9,107,739 | |||||||||||||||||||||
Chief Executive Officer |
| 2021 | $ | 1,183,250 | $ | 7,047,669 | $ | 3,360,000 | $ | 662,480 | $ | 180,322 | $ | 12,433,721 | |||||||||||||||||||||
| 2020 | $ | 1,133,000 | $ | 5,598,133 | $ | 1,331,275 | $ | 464,100 | $ | 182,840 | $ | 8,709,348 | ||||||||||||||||||||||
Deon M. Stander | |||||||||||||||||||||||||||||||||||
President & |
| 2022 | $ | 664,706 | $ | 3,454,633 | $ | 304,500 |
| – | $ | 125,982 | $ | 4,549,821 | |||||||||||||||||||||
Chief Operating Officer |
| 2021 | $ | 565,537 | $ | 1,508,802 | $ | 635,012 | $ | 142,139 | $ | 124,331 | $ | 2,975,821 | |||||||||||||||||||||
| 2020 | $ | 555,129 | $ | 791,699 | $ | 379,708 | $ | 120,727 | $ | 122,642 | $ | 1,969,906 | ||||||||||||||||||||||
Gregory S. Lovins | |||||||||||||||||||||||||||||||||||
Senior Vice President & |
| 2022 | $ | 690,315 | $ | 1,594,295 | $ | 304,500 |
| – | $ | 136,184 | $ | 2,725,295 | |||||||||||||||||||||
Chief Financial Officer |
| 2021 | $ | 650,445 | $ | 1,550,961 | $ | 991,890 | $ | 133,115 | $ | 126,497 | $ | 3,452,908 | |||||||||||||||||||||
| 2020 | $ | 618,000 | $ | 1,232,041 | $ | 653,535 | $ | 76,327 | $ | 125,223 | $ | 2,705,126 | ||||||||||||||||||||||
Deena Baker-Nel | |||||||||||||||||||||||||||||||||||
Senior Vice President & |
| 2022 | $ | 447,200 | $ | 481,408 | $ | 132,704 | $ | 13 | $ | 104,697 | $ | 1,166,022 | |||||||||||||||||||||
Chief Human Resources Officer |
| 2021 | $ | 412,000 | $ | 481,950 | $ | 416,000 | $ | 87,340 | $ | 104,164 | $ | 1,501,454 | |||||||||||||||||||||
Ignacio J. Walker | |||||||||||||||||||||||||||||||||||
Senior Vice President & |
| 2022 | $ | 457,278 | $ | 492,330 | $ | 135,695 |
| – | $ | 94,665 | $ | 1,179,969 | |||||||||||||||||||||
Chief Legal Officer |
| 2021 | $ | 422,781 | $ | 499,927 | $ | 425,375 | $ | 320 | $ | 91,282 | $ | 1,439,685 | |||||||||||||||||||||
| (1) | Amounts include any portions of salary contributed to our employee savings plan or deferred under our deferred compensation plan. Changes in base salary, if any, generally become effective in April. |
| (2) | Amounts in 2022 include the grant date fair value of PUs, which are eligible for vesting at the end of a three-year period provided that the designated performance objectives are achieved as of the end of the period. The number of shares vesting can range from 0% to 200% of the target units at the time of grant. The performance objectives that determine the number of shares that may be earned for the PUs granted in 2022 are (i) cumulative EVA (weighted 50%), which is a performance condition under Accounting Standards Codification Topic 718, Compensation-Stock Compensation (ASC 718), and (ii) relative TSR (weighted 50%), compared to a peer group of companies determined based on GICS code and revenue size, which is a market condition under ASC 718, in each case computed over the 2022-2024 performance period. The fair value of the performance condition component was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends during the performance period. The maximum grant date fair values of the performance condition component of PUs were $3,009,161, $900,310, $708,803 and $218,819 for Messrs. Butier, Stander, Lovins and Walker, respectively, and $213,941 for Ms. Baker-Nel. The fair value of the market condition component was determined using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objectives established for the award, including the expected volatility of our stock price relative to the group of peer companies listed on page 69 of this proxy statement at the end of the three-year performance period and a risk-free interest rate of 1.73% derived from linear interpolation of the term structure of Treasury Constant Maturities yield rates for the period. Based on the Monte-Carlo simulation method, the grant date fair value of the market condition component of PUs was 96.22% of our average stock price on the grant date. The target grant date fair values of the market condition component of PUs were $1,754,953, $524,948, $413,310 and $127,681 for Messrs. Butier, Stander, Lovins and Walker, respectively, and $124,869 for Ms. Baker-Nel. Their maximum grant date fair values were the same as their target grant date fair values. |
Amounts in 2022 also include the grant date fair value of MSUs, which are eligible for vesting over one-, two-, three- and four-year performance periods provided that the designated performance objective is achieved as of the end of each period. The number of shares vesting can range from 0% to 200% of one-quarter of the target units on the grant date. The sole performance objective that determines the number of units that may be paid out for MSUs is absolute TSR, which is a market condition under ASC 718. The grant date fair value was 82.49% of our average stock price on the grant date and determined using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objective established for the award, including the expected volatility of our stock price and risk-free interest rates of 1.10%, 1.52%, 1.72% and 1.78% for the first, second, third and fourth MSU tranches, respectively, derived from linear interpolation of the term structure of Treasury Constant Maturities yield rates for the respective performance periods. The target grant date fair values of MSUs were $3,510,007, $1,429,469, $826,584 and $255,240 for Messrs. Butier, Stander, Lovins and Walker, respectively, and $249,568 for Ms. Baker-Nel. Their maximum grant date fair values were the same as their target grant date fair values. |
Amount in 2022 for Mr. Stander also includes grant date fair value of RSUs, without adjustment for forfeitures, awarded in connection with his promotion to President/COO, which cliff-vest on the third anniversary of the grant date, subject to his continued service. The fair value of these RSUs was determined based on the closing price of our common stock on the grant date, adjusted for foregone dividends. The grant date fair value of these RSUs was $1,429,469. |
| (3) | Amounts reflect AIP awards for the applicable year, which are determined in February and paid in March of the following year. |
| (4) | The change in the actuarial present value of accumulated benefits under the Benefit Restoration Plan for 2022 was $(138,171) for Mr. Butier and $(19,304) for Mr. Lovins. No other NEOs have accumulated benefits under the Benefit Restoration Plan. |
| (5) | The table shown below shows the components of these amounts for 2022. |
Avery Dennison Corporation | 2023 Proxy Statement | 79 |
| NAME AND PRINCIPAL POSITION | | YEAR | | SALARY(1) | | BONUS | | STOCK AWARDS(2) | | OPTION AWARDS | | NON-EQUITY INCENTIVE PLAN COMPENSATION(3) | | CHANGE IN PENSION VALUE AND NQDC EARNINGS(4) | | ALL OTHER COMPENSATION(5) | | TOTAL | | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | |||||||||||||||||
| Mitchell R. Butier | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
President & | | | 2017 | | | $ | 1,124,750 | | — | | $ | 4,864,416 | | — | | | $ | 2,407,625 | | | | $ | 344,240 | | | | $ | 218,437 | | | $ | 8,959,468 | | |||
Chief Executive Officer | | | 2016 | | | $ | 988,333 | | — | | $ | 4,694,582 | | $ | 2,000,008 | | | $ | 1,832,620 | | | | $ | 170,266 | | | | $ | 152,978 | | | $ | 9,838,787 | | ||
| | | 2015 | | | $ | 761,250 | | — | | $ | 4,579,014 | | — | | | $ | 1,058,569 | | | | — | | | | $ | 160,240 | | | $ | 6,559,073 | | |||||
| Gregory S. Lovins(6) | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Senior Vice President & | | | 2017 | | | $ | 480,949 | | $ | 100,000 | | $ | 1,038,782 | | — | | | $ | 467,500 | | | | $ | 89,626 | | | | $ | 283,905 | | | $ | 2,460,762 | | ||
Chief Financial Officer | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| Georges Gravanis(7) | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
President, | | | 2017 | | | $ | 618,551 | | — | | $ | 984,354 | | — | | | $ | 598,737 | | | | — | | | | $ | 50,267 | | | $ | 2,251,909 | | ||||
Label and Graphic | | | 2016 | | | $ | 523,775 | | — | | $ | 925,850 | | — | | | $ | 682,964 | | | | — | | | | $ | 403,353 | | | $ | 2,535,942 | | ||||
Materials | | | 2015 | | | $ | 440,528 | | — | | $ | 1,420,555 | | — | | | $ | 413,304 | | | | — | | | | $ | 461,401 | | | $ | 2,735,788 | | ||||
| Anne Hill | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Senior Vice President & | | | 2017 | | | $ | 528,171 | | — | | $ | 967,480 | | — | | | $ | 542,686 | | | | $ | 34,654 | | | | $ | 141,413 | | | $ | 2,214,404 | | |||
Chief Human Resources | | | 2016 | | | $ | 512,787 | | — | | $ | 963,150 | | — | | | $ | 455,596 | | | | $ | 39,999 | | | | $ | 131,318 | | | $ | 2,102,850 | | |||
Officer | | | 2015 | | | $ | 499,045 | | — | | $ | 1,215,025 | | — | | | $ | 425,626 | | | | — | | | | $ | 141,937 | | | $ | 2,281,633 | | ||||
| Susan C. Miller | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Senior Vice President, | | | 2017 | | | $ | 543,706 | | — | | $ | 995,936 | | — | | | $ | 558,647 | | | | $ | 1,307,825 | | | | $ | 141,896 | | | $ | 3,548,010 | | |||
General Counsel & | | | 2016 | | | $ | 527,870 | | — | | $ | 991,532 | | — | | | $ | 468,996 | | | | $ | 331,781 | | | | $ | 126,461 | | | $ | 2,446,640 | | |||
Secretary | | | 2015 | | | $ | 513,723 | | — | | $ | 1,058,267 | | — | | | $ | 419,095 | | | | $ | 74,010 | | | | $ | 137,574 | | | $ | 2,202,669 | | |||
| Anne L. Bramman | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Former Senior Vice | | | 2017 | | | $ | 241,772 | | — | | $ | 1,196,712 | | — | | | — | | | | $ | 65,236 | | | | $ | 1,322,136 | | | $ | 2,825,856 | | ||||
President & | | | 2016 | | | $ | 568,769 | | — | | $ | 1,173,635 | | — | | | $ | 633,965 | | | | $ | 3,656 | | | | $ | 120, 421 | | | $ | 2,500,446 | | |||
Chief Financial Officer | | | 2015 | | | $ | 425,868 | | $ | 200,000 | | $ | 1,426,135 | | — | | | $ | 405,900 | | | | — | | | | $ | 329,572 | | | $ | 2,787,475 | | |||
(1)Amounts include any portions of salary contributed to our employee savings plan or deferred under our deferred compensation plan. Changes in base salary approved by the Compensation Committee become effective on April 1st. Mr. Lovins' base salary also increased in connection with his promotion to CFO effective July 2017.(2)Amounts reflect the aggregate grant date fair value of stock awards, without adjustment for forfeitures, and do not reflect compensation actually realized by our NEOs. For values actually realized by our NEOs during the year, see the "Value Realized on Vesting" column of the2017 Option Exercises and Stock Vestedtable.Perquisites Benefits Name Executive
Benefit
AllowanceExecutive
PhysicalCompany
Contribution/
Match,
Savings
PlanCompany
Contributions,
Deferred
Comp. PlanCompany
Match,
Charitable
ContributionExcess
Life
InsuranceExecutive
Long-Term
Disability
InsuranceExecutive
Group
Term Life
InsuranceExcess
Executive
Liability
InsuranceTotal Butier
$
68,654
$3,936
$
19,825
$
76,171
$
10,000
$
2,572
$
1,944
$
2,619
$
1,154
$
186,875
Stander
$
63,750
–
$
20,213
$
33,730
–
$
2,572
$
1,944
$
2,619
$
1,154
$
125,982
Lovins
$
63,750
–
$
19,825
$
39,868
$
5,000
$
2,024
$
1,944
$
2,619
$
1,154
$
136,184
Baker-Nel
$
49,039
–
$
19,825
$
22,566
$
5,000
$
2,572
$
1,944
$
2,597
$
1,154
$
104,697
Walker
$
49,039
–
$
19,825
$
21,026
–
$
1,677
$
1,944
–
$
1,154
$
94,665
Amounts in 2017 include the grant date fair value of PUs, without adjustment for forfeitures, which are payable in shares of our common stock at the end of a three-year period provided that the performance objectives. The actual number of shares issued can range from 0% to 200% of the target shares at the time of grant. The performance objectives that determine the number of shares that may be earned for the PUs granted in 2017 were (i) cumulative EVA (weighted 50% based on our total company for our corporate NEOs and 75% based on our LGM business for our business NEO), which is a performance condition under Accounting Standards Codification Topic 718,Compensation-Stock Compensation(ASC 718), and (ii) relative TSR (weighted 50% for our corporate NEOs and 25% for our business NEO), which is a market condition under ASC 718, compared to the TSR of a peer group of companies objectively determined based on GICS code and revenue size, in each case computed over the three-year (2017-2019) performance period. The performance condition component of the fair value of PUs was determined based on the fair market value of our common stock on the date of grant, adjusted for foregone dividends. The maximum grant date fair value of the performance condition component of PUs was $2,231,201, $235,908 and $698,481 for Messrs. Butier, Lovins and Gravanis, respectively, and $443,786, $456,816 and $548,937 for Mses. Hill, Miller and Bramman, respectively. The market condition component of the fair value of PUs was determined as of the date of grant using the Monte-Carlo simulation method, which utilizes multiple input variables to estimate the probability of meeting the performance objectives established for the award, including the expected volatility of our stock price and other assumptions appropriate for determining fair value; as such, their maximum grant date fair values are the same as their target grant date fair values shown in the table. The grant date fair value of the market condition component of the PUs was $1,411,340, $149,223 and $147,306 for Messrs. Butier, Lovins and Gravanis, respectively, and $280,715, $288,958 and $347,228 for Mses. Hill, Miller and Bramman, respectively. The PUs granted to Ms. Bramman were cancelled upon the termination of her employment before the end of our 2017 fiscal year.Amounts in 2017 also include the grant date fair value of MSUs, without adjustment for forfeitures, which are payable in shares of our common stock over one-, two-, three- and four-year performance periods provided that the performance objective is achieved as of the end of each period. The actual number of shares issued can range from 0% to 200% of the target shares at the time of grant. The single performance objective that determines the number of units that may be earned for MSUs was our absolute TSR, which is a market condition under ASC 718; as such, their maximum grant date fair values are the same as their target grant date fair values shown in the table. The fair value of MSUs was determined as of the grant date using the Monte-Carlo simulation method described above. The grant date fair value of the 2017 MSUs was $91.40 per share for all NEOs. The MSUs granted to Ms. Bramman were cancelled upon the termination of her employment before the end of our 2017 fiscal year.Amount in 2017 for Mr. Lovins also includes the grant date fair value of RSUs, without adjustment for forfeitures, granted to him in connection with his promotion to CFO, which vest ratably over four years, subject to his continued service. The fair value of these RSUs was determined based on the closing price of our common stock on the grant date, adjusted for foregone dividends. The grant date fair value of these RSUs was $90.22 per share.
Avery Dennison Corporation| 2018 Proxy Statement |67
(3)Amounts reflect awards under our AIP for the applicable year, which are determined in February and paid in March of the following year.(4)Accumulated retirement benefits under our pension plan and benefit restoration plan, as applicable, were frozen effective December 31, 2010. Changes in pension values are based primarily on changes in the actuarial assumptions used to calculate pension amounts in accordance with SEC regulations, rather than changes in benefits or the amount the individual will actually receive upon retirement. Mr. Gravanis and Ms. Bramman were not eligible to participate in these plans.(5)The table below shows the components of the amounts for 2017.
| | | | PERQUISITES | | BENEFITS | | | | ||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | NAME | | EXECUTIVE BENEFIT ALLOWANCE | | FINANCIAL PLANNING | | OTHER* | | COMPANY CONTRIBUTION AND MATCH, EMPLOYEE SAVINGS PLAN | | COMPANY CONTRIBUTIONS, DEFERRED COMP. PLAN | | EXCESS LIFE INSURANCE | | EXECUTIVE LONG-TERM DISABILITY INSURANCE | | EXECUTIVE LIABILITY INSURANCE | | EXECUTIVE SEVERANCE PLAN** | | TOTAL | | ||||||||||||||||||||||||||
| | Butier | | | $ | 70,000 | | | | $ | 20,515 | | | — | | $ | 16,200 | | | | $ | 106,974 | | | | $ | 1,944 | | | | $ | 2,331 | | | | $ | 473 | | | | — | $ | 218,437 | | |||||
| | Lovins | | | $ | 51,458 | | | | — | | | $ | 166,735 | | | $ | 16,200 | | | | $ | 44,764 | | | | $ | 1,944 | | | | $ | 2,331 | | | | $ | 473 | | | | — | | | $ | 283,905 | | ||
| | Gravanis | | | — | | — | $ | 50,267 | | | — | | — | | — | | — | | — | | — | $ | 50,267 | | ||||||||||||||||||||||||
| | Hill | | | $ | 65,000 | | | | $ | 15,000 | | | — | | | $ | 16,200 | | | | $ | 40,465 | | | | $ | 1,944 | | | | $ | 2,331 | | | | $ | 473 | | | | — | | | $ | 141,413 | | ||
| | Miller | | | $ | 65,000 | | | | $ | 15,000 | | | — | | $ | 16,200 | | | | $ | 40,948 | | | | $ | 1,944 | | | | $ | 2,331 | | | | $ | 473 | | | | — | $ | 141,896 | | |||||
| | Bramman | | | $ | 29,792 | | | | $ | 8,068 | | | — | | | $ | 16,381 | | | | $ | 42,604 | | | | $ | 810 | | | | $ | 971 | | | | $ | 197 | | | | $ | 1,223,313 | | | $ | 1,322,136 | | |
*Amount for Mr. Lovins reflects (i) a one-time taxable lump-sum payment of $100,000 as compensation for the expenses associated with traveling from his home in Ohio to our headquarters; provided, however, that if Mr. Lovins leaves within 12 or 24 months of his appointment date, he is required to repay 100% or 50%, respectively, of this lump-sum payment; (ii) $38,000 for the interim cash stipend of $10,000 per month he received during his service as our Interim CFO; and (iii) $28,735 in temporary housing assistance during his service as our Interim CFO and as our Treasurer. If Mr. Lovins in the future utilizes our relocation assistance services on the terms and conditions offered to our relocating executives, the lump-sum payment he received will be deducted from any benefits provided at that time. Amount for Mr. Gravanis reflects (i) $22,199 for an automobile allowance and (ii) $28,068 for taxable dependent tuition assistance, in each case converted from euros using the exchange rates as of each month-end during 2017.**Amount for Ms. Bramman reflects severance benefits related to her separation from our company in accordance with the terms and conditions of our Executive Severance Plan, representing the sum of (i) $575,025, her annual base salary as of her termination date; (ii) $633,965, her highest AIP award in the last three years; and (iii) $14,323, the cash value of twelve months of premiums for qualified medical and dental plans in which she participated as of her termination date. In consideration of her receipt of these benefits, Ms. Bramman agreed to a waiver and release of any claims against our company and to non-competition, non-solicitation and non-disclosure covenants in favor of our company.
(6)Mr. Lovins first became an NEO in 2017. As permitted by SEC rules, the table shows his compensation beginning in the year in which he became an NEO.(7)Amounts for Mr. Gravanis were converted from euros using the exchange rate as of our fiscal year-end (1.1738467), except for amounts forAll Other Compensationdescribed in footnote (5) above.
Avery Dennison Corporation| 2018 Proxy Statement |68
20172022 GRANTS OF PLAN-BASED AWARDS
The table below provides information regarding grants of plan-based incentive awards madegranted to our NEOs during 2017.2022.
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock | Grant Date and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Award Type | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 03/01/22 | – | – | – | 21,040 | 24,753 | 49,506 | – | $ | 3,510,007 | |||||||||||||||||||||||||||||||||||||||||||||
| PUs | 03/01/22 | – | – | – | 9,933 | 19,866 | 39,732 | – | $ | 3,259,534 | |||||||||||||||||||||||||||||||||||||||||||||
| AIP Award | – | $ | 336,000 | $ | 1,680,000 | $ | 3,360,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Deon M. Stander | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 03/01/22 | 8,793 | $ | 1,429,469 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 03/01/22 | – | – | – | 6,294 | 7,405 | 14,810 | – | $ | 1,050,061 | |||||||||||||||||||||||||||||||||||||||||||||
| PUs | 03/01/22 | – | – | – | 2,972 | 5,943 | 11,886 | – | $ | 975,103 | |||||||||||||||||||||||||||||||||||||||||||||
| AIP Award | – | $ | 105,000 | $ | 525,000 | $ | 1,050,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Gregory S. Lovins | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 03/01/22 | – | – | – | 4,955 | 5,829 | 11,658 | – | $ | 826,584 | |||||||||||||||||||||||||||||||||||||||||||||
| PUs | 03/01/22 | – | – | – | 1,968 | 3,936 | 7,872 | – | $ | 767,711 | |||||||||||||||||||||||||||||||||||||||||||||
| AIP Award | – | $ | 105,000 | $ | 525,000 | $ | 1,050,000 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Deena Baker-Nel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 03/01/22 | – | – | – | 1,496 | 1,760 | 3,520 | – | $ | 249,568 | |||||||||||||||||||||||||||||||||||||||||||||
| PUs | 03/01/22 | – | – | – | 707 | 1,413 | 2,826 | – | $ | 231,840 | |||||||||||||||||||||||||||||||||||||||||||||
| AIP Award | – | $ | 45,760 | $ | 228,800 | $ | 457,600 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
Ignacio J. Walker | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSUs | 03/01/22 | – | – | – | 1,530 | 1,800 | 3,600 | – | $ | 255,240 | |||||||||||||||||||||||||||||||||||||||||||||
| PUs | 03/01/22 | – | – | – | 723 | 1,445 | 2,890 | – | $ | 237,090 | |||||||||||||||||||||||||||||||||||||||||||||
| AIP Award | – | $ | 46,791 | $ | 233,957 | $ | 467,913 | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||
| (1) | Amounts represent threshold, target and maximum opportunities under the 2022 AIP. Target AIP awards are established by multiplying each NEO’s base salary at the end of 2022 by the following target opportunities: 140% for Mr. Butier; 75% for Messrs. Stander and Lovins; and 50% for Ms. Baker-Nel and Mr. Walker. The actual number of shares eligible for vesting ranges from zero for below-threshold performance; 20% for threshold performance based on threshold of 0% for the adjusted EPS performance objective and threshold of 50% for the adjusted sales growth and free cash flow performance objectives; 100% for target performance with respect to each of the performance objectives; and 200% for maximum performance with respect to each of the performance objectives. |
| (2) | Amounts for MSUs represent threshold, target and maximum opportunities, which are paid out in shares of our common stock over one-, two-, three- and four-year performance periods provided that the absolute TSR performance objective is achieved as of the end of each period. The actual number of shares eligible for vesting at each vesting date ranges from 0% to 200% of one quarter of the target number of units on the grant date, with a threshold payout of 85%. MSUs accrue dividend equivalents during the performance period, which are earned and paid only at vesting. |
Amounts for PUs represent threshold, target and maximum opportunities for the 2022-2024 PUs, which are eligible for vesting at the end of the three-year performance period provided that the cumulative EVA and relative TSR performance objectives are achieved at the end of the period. The actual number of shares eligible for vesting ranges from 0% to 200% of the target number of units on the grant date, with a payout of 50% if threshold performance is achieved with respect to each of the performance objectives. |
| (3) | The grant date fair value of MSUs was determined using the Monte-Carlo simulation method, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award. |
The grant date fair value for the performance condition component of PUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends during the performance period. The grant date fair value for the market condition component of PUs was determined using the Monte-Carlo simulation method described above. |
The grant date fair value of RSUs was determined based on the fair market value of our common stock on the grant date, adjusted for foregone dividends. |
For information on the inputs to the Monte-Carlo simulation method, see footnote (2) of the 2022 Summary Compensation Table. For additional information regarding the assumptions we use for our stock-based compensation, see Note 12, “Long-Term Incentive Compensation,” to the consolidated financial statements contained in our 2022 Annual Report. |
80 | 2023 Proxy Statement | Avery Dennison Corporation |
| | | | | | | | | | | | | | | | | | | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK UNITS(#) | | | | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS ($)(1) | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS (#)(2) | | | | |||||||||||||||||||||||||||||||
| | | | | | | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($)(3) | | |||||||||||||||||||||||||||||||||||
| NAME | | AWARD TYPE | | GRANT DATE | | THRESHOLD | | TARGET | | MAXIMUM | | THRESHOLD | | TARGET | | MAXIMUM | | |||||||||||||||||||||||||
Mitchell R. Butier | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 21,738 | | | | 25,574 | | | | 51,148 | | | | — | | | | $ | 2,337,476 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 14,726 | | | | 29,452 | | | | 58,904 | | | | — | | | | $ | 2,526,940 | | | |||||||||
| | AIP Award | | — | | | $ | 708,125 | | | $ | 1,416,250 | | $ | 2,832,500 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Gregory S. Lovins(1) | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 2,299 | | | | 2,705 | | | | 5,410 | | | | — | | | | $ | 247,243 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 1,557 | | | | 3,114 | | | | 6,228 | | | | — | | | | $ | 267,177 | | | |||||||||
| | RSUs | | 09/01/17 | | | — | | | — | | — | | | — | | | | — | | | | — | | | | 5,812 | | | | $ | 524,363 | | | |||||||||
| | AIP Award | | — | | | $ | 137,500 | | | $ | 275,000 | | $ | 550,000 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Georges Gravanis | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 4,536 | | | | 5,337 | | | | 10,674 | | | | — | | | | $ | 487,807 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 3,074 | | | | 6,147 | | | | 12,294 | | | | — | | | | $ | 496,547 | | | |||||||||
| | AIP Award | | — | | | $ | 235,723 | | | $ | 471,446 | | $ | 942,892 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Anne Hill | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 4,323 | | | | 5,086 | | | | 10,172 | | | | — | | | | $ | 464,872 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 2,929 | | | | 5,858 | | | | 11,716 | | | | — | | | | $ | 502,608 | | | |||||||||
| | AIP Award | | — | | | $ | 159,614 | | | $ | 319,227 | | $ | 638,454 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Susan C. Miller | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 4,451 | | | | 5,236 | | | | 10,472 | | | | — | | | | $ | 478,570 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 3,015 | | | | 6,030 | | | | 12,060 | | | | — | | | | $ | 517,366 | | | |||||||||
| | AIP Award | | — | | | $ | 164,308 | | | $ | 328,616 | | $ | 657,232 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
Anne L. Bramman | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | MSUs | | 02/23/17 | | | — | | | — | | — | | | 5,347 | | | | 6,291 | | | | 12,582 | | | | — | | | | $ | 575,015 | | | |||||||||
| | PUs | | 02/23/17 | | | — | | | — | | — | | | 3,623 | | | | 7,246 | | | | 14,492 | | | | — | | | | $ | 621,697 | | | |||||||||
| | AIP Award | | — | | | $ | 215,635 | | | $ | 431,269 | | $ | 862,538 | | | — | | | | — | | | | — | | | | — | | | | — | | | |||||||
(1)Amounts represent threshold, target and maximum amounts under the 2017 AIP. Target awards were established by multiplying each NEO's base salary at the end of 2017 by the following target AIP opportunities: 125% for Mr. Butier; 50% for Mr. Lovins; 75% for Mr. Gravanis and Ms. Bramman; and 60% for Mses. Hill and Miller. Payout levels range from 50% if the target amounts for threshold performance are achieved with respect to the performance objectives to 200% if the amounts for maximum performance are achieved with respect to the performance objectives. Amounts for Mr. Lovins reflect his fiscal year-end AIP opportunity of 60% and his previous AIP opportunity of 40%, in each case prorated for the months of his service in his respective roles during the year. Because Ms. Bramman was not employed on the last day of our fiscal year, she did not receive a 2017 AIP award.(2)Amounts for MSUs represent threshold, target and maximum payout opportunities, which are payable in shares of our common stock over one-, two-, three- and four-year performance periods provided that the absolute TSR performance objective is achieved as of the end of each period. The actual number of shares issued can range from 0% to 200% of the target number of shares at the time of grant, with a threshold payout opportunity of 85%. MSUs accrue dividend equivalents during the performance period, which are earned and paid only at vesting. The MSUs granted to Ms. Bramman were cancelled upon the termination of her employment before the end of our 2017 fiscal year.Amounts for PUs represent threshold, target and maximum payout opportunities granted under the 2017-2019 MTIP, which are payable in shares of our common stock at the end of a three-year performance period provided that the cumulative EVA and relative TSR performance objectives are achieved as of the end of the period. The actual number of shares issued can range from 0% to 200% of the target number of shares at the time of grant, with a threshold payout opportunity of 50% if threshold performance is achieved with respect to each of the performance objectives. The PUs granted to Ms. Bramman were cancelled upon the termination of her employment before the end of our 2017 fiscal year.(3)The grant date fair value of MSUs was determined using the Monte-Carlo simulation method, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award.The grant date fair value for the performance condition component of PUs was determined based on the fair market value of our common stock on the date of grant, adjusted for foregone dividends. The grant date fair value for the market condition component of PUs was determined as of the date of grant using the Monte-Carlo simulation method described above.The grant date fair value of RSUs was determined based on the fair market value of our common stock on the date of grant, adjusted for foregone dividends.For information regarding the assumptions we use for our stock-based compensation, see Note 12, "Long-Term Incentive Compensation," to the consolidated financial statements contained in our 2017 Annual Report.
Avery Dennison Corporation| 2018 Proxy Statement |69
20172022 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below shows NEO equity awards outstanding as of December 30, 2017,31, 2022, the end of our 20172022 fiscal year. Ms. Bramman has not been included in the table because she had no equity awards outstanding at fiscal year end.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options – Exercisable (#) | Number of Securities Underlying Unexercised Options – Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||||||||||||||||
Mitchell R. Butier | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 06/01/16 |
| 141,108 |
| – | $ | 73.96 |
| 06/01/26 |
| – |
| – |
| – |
| – | |||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 10,258 | (2) | $ | 1,856,698 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 38,182 | (3) | $ | 6,910,942 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 26,548 | (2) | $ | 4,805,188 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 35,772 | (3) | $ | 6,474,732 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 21,530 | (2) | $ | 3,896,930 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 39,732 | (3) | $ | 7,191,492 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 24,561 | (2) | $ | 4,445,541 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| 141,108 | – | – | – |
|
|
| – | – |
| 196,583 | $ | 35,581,523 | |||||||||||||||||||||||||||||||||||
Deon M. Stander | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 1,851 | (2) | $ | 335,031 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 7,174 | (3) | $ | 1,298,494 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 3,802 | (2) | $ | 688,162 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,500 | (3) | $ | 995,500 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 5,094 | (3) | $ | 922,014 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 3,064 | (2) | $ | 554,584 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 7,347 | (2) | $ | 1,329,807 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 11,886 | (2) | $ | 2,151,366 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| 8,793 | $ | 1,591,533 | (4) | – | $ | 1,591,533 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| – |
| – |
| – |
| – |
| 8,793 | $ | 1.591.533 |
| 45,718 | $ | 9,866,491 | |||||||||||||||||||||||||||||||||||
Gregory S. Lovins | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 2,859 | (2) | $ | 517,479 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 10,960 | (3) | $ | 1,983,760 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 5,878 | (2) | $ | 1,063,918 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 7,872 | (3) | $ | 1,424,832 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 4,739 | (2) | $ | 857,759 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 9,358 | (3) | $ | 1,693,798 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 5,784 | (2) | $ | 1,046,904 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| – |
| – |
| – |
| – |
|
|
|
| – |
| – |
| 47,450 | $ | 8,588,450 | |||||||||||||||||||||||||||||
Deena Baker-Nel | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 686 | (2) | $ | 124,166 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,864 | (3) | $ | 518,384 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 1,535 | (2) | $ | 277,835 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,446 | (3) | $ | 442,726 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 1,473 | (2) | $ | 266,613 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 2,826 | (3) | $ | 511,506 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 1,739 | (2) | $ | 314,759 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| – |
| – |
| – |
| – |
|
|
|
| – |
| – |
| 13,569 | $ | 2,455,989 | |||||||||||||||||||||||||||||
Ignacio J. Walker | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/28/19 |
| – |
| – |
| – |
| – |
| – |
| – | 706 | (2) | $ | 127,786 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 2,698 | (3) | $ | 488,338 | |||||||||||||||||||||||||||||||||
| 02/27/20 |
| – |
| – |
| – |
| – |
| – |
| – | 1,448 | (2) | $ | 262,088 | |||||||||||||||||||||||||||||||||
| 09/01/20 |
| – |
| – |
| – |
| – |
| 867 | $ | 156,927 | (4) | – | $ | 156,927 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 2,538 | (3) | $ | 459,378 | |||||||||||||||||||||||||||||||||
| 03/01/21 |
| – |
| – |
| – |
| – |
| – |
| – | 1,527 | (2) | $ | 276,387 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 2,890 | (3) | $ | 523,090 | |||||||||||||||||||||||||||||||||
| 03/01/22 |
| – |
| – |
| – |
| – |
| – |
| – | 1,786 | (2) | $ | 323,266 | |||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| – |
| – |
| – |
| – |
|
|
|
| 867 | $ | 156,927 |
| 13,593 | $ | 2,617,260 | |||||||||||||||||||||||||||||
| (1) | Market value calculated based on the closing price of our common stock of $181.00 on December 30, 2022, the last trading day of our 2022 fiscal year. |
| (2) | MSUs are eligible for vesting over one-, two-, three- and four-year performance periods, subject to achievement of the absolute TSR performance objective. Amounts are shown at (i) 200%, 164%, 121% and 90% of target for the vesting tranches of the MSUs granted in 2019, 2020, 2021 and 2022, respectively, the payouts based on our actual performance for the respective performance period as determined by the Compensation Committee in February 2023; (ii) the maximum level of performance for the remaining tranches of the MSUs granted in 2020 and 2021, as actual performance through December 31, 2022 would result in above-target payouts; and (iii) at target for the remaining tranches of the MSUs granted in 2022, as actual performance through December 31, 2022 would result in below-target payouts. |
| (3) | PUs are eligible for vesting at the end of a three-year performance period, subject to achievement of cumulative EVA and relative TSR performance objectives. Amounts are shown at (i) 200% of target for the 2020-2022 PUs, which were the payouts based on our actual performance for the period as determined by the Compensation Committee in February 2023 and (ii) the maximum level of performance for the 2021-2023 PUs and 2022-2024 PUs for all NEOs, as actual performance through December 31, 2022 would result in above-target payouts. The special one-time award of PUs granted to Mr. Stander in 2021 is shown at the maximum level of performance, as actual performance through December 31, 2022 would result in an above-target payout. |
| (4) | RSUs awarded to Mr. Stander cliff-vest on the third anniversary of the grant date and RSUs awarded to Mr. Walker vest ratably on the first, second and third anniversaries of the grant date, in each case subject to their continued service. |
Avery Dennison Corporation | 2023 Proxy Statement | 81 |
| NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS — EXERCISABLE (#) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS — UNEXERCISABLE (#) | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(1) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED ($)(1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | |
Mitchell R. Butier | | ||||||||||||||||||
| 02/27/14 | — | — | — | — | — | — | 8,166(5) | $937,947 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 46,696(4) | $5,363,503 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 26,829(5) | $3,081,579 | |||||||||||
| 03/02/15 | — | — | — | — | 3,809(3) | $437,502 | — | — | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 70,320(4) | $8,076,955 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 47,117(5) | $5,411,859 | |||||||||||
| 06/01/16 | — | 141,108(2) | $73.96 | 06/01/26 | — | — | — | — | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 58,904(4) | $6,765,713 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 51,326(5) | $5,895,304 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | — | 141,108 | 3,809 | $437,502 | 309,358 | $35,532,860 | |||||||||||||
Gregory S. Lovins | | ||||||||||||||||||
| 02/27/14 | — | — | — | — | — | — | 2,100(5) | $241,206 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 10,054(4) | $1,154,802 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 5,777(5) | $663,546 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 7,672(4) | $881,206 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 5,141(5) | $590,495 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 6,228(4) | $715,348 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 5,429(5) | $623,575 | |||||||||||
| 09/01/17 | — | — | — | — | 5,812(3) | $667,566 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | — | — | 5,812 | $667,566 | 42,401 | $4,870,178 | |||||||||||||
Georges Gravanis | | ||||||||||||||||||
| 02/27/14 | — | — | — | — | — | — | 3,336(5) | $383,173 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 12,922(4) | $1,484,221 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 7,427(5) | $853,065 | |||||||||||
| 06/01/15 | — | — | — | — | 6,086(3) | $699,038 | — | — | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 14,390(4) | $1,652,835 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 9,641(5) | $1,107,365 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 12,294(4) | $1,412,089 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 10,711(5) | $1,230,265 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | — | — | 6,086 | $699,038 | 70,721 | $8,123,013 | |||||||||||||
Anne Hill | | ||||||||||||||||||
| 02/27/14 | — | — | — | — | — | — | 5,583(5) | $641,263 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 21,908(4) | $2,516,353 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 12,589(5) | $1,445,973 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 14,428(4) | $1,657,200 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 9,666(5) | $1,110,237 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 11,716(4) | $1,345,700 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 10,207(5) | $1,172,376 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | — | — | — | — | 86,097 | $9,889,102 | |||||||||||||
Susan C. Miller | | ||||||||||||||||||
| 02/27/14 | — | — | — | — | — | — | 4,790(5) | $550,179 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 19,080(4) | $2,191,529 | |||||||||||
| 02/26/15 | — | — | — | — | — | — | 10,965(5) | $1,259,440 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 14,852(4) | $1,705,901 | |||||||||||
| 02/25/16 | — | — | — | — | — | — | 9,951(5) | $1,142,972 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 12,060(4) | $1,385,212 | |||||||||||
| 02/23/17 | — | — | — | — | — | — | 10,508(5) | $1,206,949 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | — | — | — | — | 82,206 | $9,442,182 | |||||||||||||
(1)Market value calculated based on a stock price of $114.86, the closing price of our common stock on December 29, 2017, the last trading day of our 2017 fiscal year.
Avery Dennison Corporation| 2018 Proxy Statement |70
(2)Stock options granted to Mr. Butier on June 1, 2016 vest 50% on each of the third and fourth anniversaries of the grant date, subject to his continued service.(3)RSUs granted to (i) Mr. Butier on March 2, 2015 vest 50% on the grant date, 40% on December 1, 2016 and 10% on the third anniversary of the grant date; (ii) Mr. Lovins on September 1, 2017 vest in equal installments on the first, second, third and fourth anniversaries of the grant date; and (iii) Mr. Gravanis on June 1, 2015 vest in equal installments on the first, second, third and fourth anniversaries of the grant date, in each case subject to his continued service.(4)PUs are eligible for vesting at the end of a three-year performance period, subject to achievement of the cumulative EVA and relative TSR performance objectives established for the award. Amounts are listed at (i) 200% of target for the PUs granted under the 2015-2017 MTIP, which was the payout based on actual performance during the period as determined by the Compensation Committee in February 2018, and (ii) the maximum level of performance for the PUs granted under the 2016-2018 MTIP and 2017-2019 MTIP as actual performance through December 30, 2017 would result in above-target payouts.(5)MSUs are eligible for vesting as of the end of the period over one-, two-, three- and four-year performance periods, subject to achievement of the absolute TSR performance objective established for the award. Amounts are listed at (i) 200% of target for the vesting tranches of the MSUs granted in 2014, 2015, and 2016 and 188% of target for the vesting tranche of the MSUs granted in 2017, the payouts based on actual performance for the respective performance periods as determined by the Compensation Committee in February 2018, and (ii) the maximum level of performance for the remaining tranches of these grants (as actual performance through December 30, 2017 would result in above-target payouts), in each case including dividend equivalents accrued as of December 30, 2017.
Avery Dennison Corporation| 2018 Proxy Statement |71
20172022 OPTION EXERCISES AND STOCK VESTED
The table below provides information regarding the number of shares acquired and the value realized by our NEOs upon the exercise of stock options and the vesting of stockequity awards during 2017. Amounts under stock awards reflect the vesting of (i) the PUs granted in 2014 for the 2014-2016 performance period, which paid out at 200% of target based on our relative TSR for all NEOs and at 200% of target based on our cumulative EVA for our corporate NEOs (excluding Mr. Lovins) and 185% of target based on our LGM business' cumulative EVA for Mr. Lovins and our business NEO; (ii) the fourth tranche of MSUs granted in 2013 that paid out at 200% of target based on our 2013-2016 absolute TSR; (iii) the third tranche of MSUs granted in 2014 that paid out at 156% of target based on our 2014-2016 absolute TSR; (iv) the second tranche of MSUs granted in 2015 that paid out at 153% of target based on our 2015-2016 absolute TSR; (v) the first tranche of MSUs granted in 2016 that paid out at 123% of target based on our 2016 absolute TSR; and (vi) RSUs granted in 2015 that vested in 2017. MSU amounts include accrued dividend equivalents paid out at vesting.2022.
| | OPTION AWARDS | STOCK AWARDS | ||||||
|---|---|---|---|---|---|---|---|---|
| NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($)(1) | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($)(2) | ||||
Mitchell R. Butier | 77,551 | $5,046,850 | 63,247 | $5,073,042 | ||||
Gregory S. Lovins | — | — | 14,726 | $1,181,172 | ||||
Georges Gravanis | — | — | 25,267 | $2,041,120 | ||||
Anne Hill | — | — | 37,056 | $2,972,262 | ||||
Susan C. Miller | 104,065 | $4,315,635 | 28,048 | $2,249,730 | ||||
Anne L. Bramman | — | — | 7,063 | $ 576,802 | ||||
| Option Awards | Stock Awards | ||||||||||||||||||||||||
| Name | Number of Shares on Exercise (#) | Value Realized on Exercise ($) |
| Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||
Mitchell R. Butier | – | – | 83,660 | $ | 14,272,396 | ||||||||||||||||||||
Deon M. Stander | – | – | 11,650 | $ | 1,987,490 | ||||||||||||||||||||
Gregory S. Lovins | – | – | 22,169 | $ | 3,782,031 | ||||||||||||||||||||
Deena Baker-Nel | – | – | 5,844 | $ | 996,986 | ||||||||||||||||||||
Ignacio J. Walker | – | – | 6,616 | $ | 1,140,255 | ||||||||||||||||||||
| (1) | |||||||||||||||
Amounts reflect the number of shares acquired on | accrued dividend equivalents. | ||||||||||||||
| NAME | GRANT DATE | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | EXERCISE PRICE ($) | FAIR MARKET VALUE ON EXERCISE DATE ($) | VALUE REALIZED ON EXERCISE ($) | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |
Butier | ||||||||||
| 02/28/08 | 20,580 | $52.12 | $105.87 | $1,106,247 | ||||||
| 09/02/08 | 15,000 | $49.44 | $105.78 | $845,169 | ||||||
| 02/26/10 | 13,971 | $31.67 | $106.42 | $1,044,361 | ||||||
| 06/01/10 | 28,000 | $33.61 | $106.86 | $2,051,073 | ||||||
Miller | ||||||||||
| 02/28/08 | 13,035 | $52.12 | $79.17 | $352,679 | ||||||
| 02/24/11 | 52,920 | $39.32 | $79.16 | $2,108,158 | ||||||
| 02/23/12 | 38,110 | $30.50 | $79.17 | $1,854,798 |
Avery Dennison Corporation| 2018 Proxy Statement |72
(2)Amounts reflect the number of shares acquired on vesting multiplied by the fair market value of our common stock on the vesting date, and include the vesting of the following stock awards. Numbers of shares acquired on vesting for MSUs includes payouts of accrued dividend equivalents.
| NAME | AWARD TYPE | GRANT DATE | NUMBER OF UNITS SUBJECT TO VESTING (#) | PERFORMANCE MODIFIER (%) | NUMBER OF SHARES ACQUIRED ON VESTING (#)* | FAIR MARKET VALUE ON VESTING DATE ($) | VALUE REALIZED ON VESTING ($) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | |
Butier | | ||||||||||||||
| MSUs | 02/28/13 | 3,151 | 200% | 6,301 | $80.21 | $505,403 | |||||||||
| MSUs | 02/27/14 | 4,008 | 156% | 6,252 | $80.21 | $501,473 | |||||||||
| MSUs | 02/26/15 | 6,584 | 153% | 10,073 | $80.21 | $807,955 | |||||||||
| MSUs | 02/25/16 | 7,708 | 123% | 9,481 | $80.21 | $760,471 | |||||||||
| PUs | 02/27/14 | 15,570 | 200% | 31,140 | $80.21 | $2,497,740 | |||||||||
Lovins | | ||||||||||||||
| MSUs | 02/28/13 | 1,180 | 200% | 2,359 | $80.21 | $189,215 | |||||||||
| MSUs | 02/27/14 | 1,031 | 156% | 1,608 | $80.21 | $128,978 | |||||||||
| MSUs | 02/26/15 | 1,417 | 153% | 2,168 | $80.21 | $173,895 | |||||||||
| MSUs | 02/25/16 | 840 | 123% | 1,033 | $80.21 | $82,857 | |||||||||
| PUs | 02/27/14 | 3,779 | 200% | 7,558 | $80.21 | $606,227 | |||||||||
Gravanis | | ||||||||||||||
| RSUs | 06/01/15 | 3,043 | — | 3,043 | $84.96 | $258,533 | |||||||||
| MSUs | 02/28/13 | 1,470 | 200% | 2,939 | $80.21 | $235,737 | |||||||||
| MSUs | 02/27/14 | 1,637 | 156% | 2,553 | $80.21 | $204,776 | |||||||||
| MSUs | 02/26/15 | 1,822 | 153% | 2,787 | $80.21 | $223,545 | |||||||||
| MSUs | 02/25/16 | 1,577 | 123% | 1,940 | $80.21 | $155,608 | |||||||||
| PUs | 02/27/14 | 6,352 | 189% | 12,005 | $80.21 | $962,921 | |||||||||
Hill | | ||||||||||||||
| MSUs | 02/28/13 | 2,411 | 200% | 4,822 | $80.21 | $386,773 | |||||||||
| MSUs | 02/27/14 | 2,740 | 156% | 4,275 | $80.21 | $342,898 | |||||||||
| MSUs | 02/26/15 | 3,088 | 153% | 4,724 | $80.21 | $378,912 | |||||||||
| MSUs | 02/25/16 | 1,581 | 123% | 1,945 | $80.21 | $156,008 | |||||||||
| PUs | 02/27/14 | 10,645 | 200% | 21,290 | $80.21 | $1,707,671 | |||||||||
Miller* | | ||||||||||||||
| MSUs | 02/27/14 | 2,351 | 156% | 3,667 | $80.21 | $294,130 | |||||||||
| MSUs | 02/26/15 | 2,690 | 153% | 4,115 | $80.21 | $330,064 | |||||||||
| MSUs | 02/25/16 | 1,628 | 123% | 2,002 | $80.21 | $160,580 | |||||||||
| PUs | 02/27/14 | 9,132 | 200% | 18,264 | $80.21 | $1,464,956 | |||||||||
Bramman | | ||||||||||||||
| RSUs | 06/01/15 | 2,164 | — | 2,164 | $84.96 | $183,853 | |||||||||
| MSUs | 06/01/15 | 1,653 | 153% | 2,529 | $80.21 | $202,851 | |||||||||
| MSUs | 02/25/16 | 1,927 | 123% | 2,370 | $80.21 | $190,098 | |||||||||
Avery Dennison Corporation| 2018 Proxy Statement |73
The present valuesvalue of accumulated pension benefits shown in the table below havehas been calculated based on the assumptions we used to calculate our fiscal year-end pension benefit obligations forin the auditedconsolidated financial statements contained in our 20172022 Annual Report. SinceAmounts shown reflect the accrual of additional amounts under these plans has been frozen since December 31, 2010, the fluctuations in pension values from year to year are based primarily on changes in the assumptions used to determine thelump-sum present value of participants'the pension benefits accumulated benefitsas of December 31, 2022, the last day of our fiscal year. Ms. Baker-Nel and secondarily on the passage of time. For example, weMessrs. Stander and Walker are required to calculate the present value of future pension liabilities using a discount rate based on corporate bond yields, and as discount rates decrease (as they did during 2017), the present values of accumulated benefits can increase significantly. Ms. Bramman and Mr. Gravanis have not been included in the table because they have no accrued benefits under these plans. No payments from these plans were made to any of our 2017 NEOs.
| NAME | | PLAN NAME | NUMBER OF YEARS OF CREDITED SERVICE (#) | PRESENT VALUE OF ACCUMULATED BENEFIT(1) ($) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | |
Mitchell R. Butier | | | |||||||||
| Pension Plan | 9.33 | $ | 295,325 | ||||||||
| Benefit Restoration Plan | 9.33 | $ | 246,063 | ||||||||
| | | | | | | | | | | | |
| Total | $ | 541,388 | |||||||||
Gregory S. Lovins | | | |||||||||
| Pension Plan | 15.58 | $ | 295,522 | ||||||||
| Benefit Restoration Plan | 15.58 | $ | 32,960 | ||||||||
| | | | | | | | | | | | |
| Total | $ | 328,482 | |||||||||
Anne Hill | | | |||||||||
| Pension Plan | 5.50 | $ | 172,579 | ||||||||
| Benefit Restoration Plan | 5.50 | $ | 215,723 | ||||||||
| | | | | | | | | | | | |
| Total | $ | 388,302 | |||||||||
Susan C. Miller | | | |||||||||
| Pension Plan | 21.00 | $ | 881,458 | ||||||||
| Benefit Restoration Plan | 21.00 | $ | 427,302 | ||||||||
| | | | | | | | | | | | |
| Total | $ | 1,308,760 | |||||||||
(1)Amounts reflect the lump-sum value of the applicableaccumulated pensionbenefit accrued as of December 30, 2017. Whilebenefits.Name Plan Name Number of Years of
Credited Service(#)
Present Value of
Accumulated
Benefit($)(1)Payments During
Last Fiscal
Year($)(1)Mitchell R. Butier
Benefit Restoration Plan 9.33 $ 224,263 – Gregory S. Lovins
Benefit Restoration Plan 15.58 $ 29,633 – (1) The Benefit Restoration Plan allows for lump-sum payment. For information regarding the assumptions we use to determine the present value of accumulated benefits for our pension plans, see Note 6, “Pension and Other Postretirement Benefits,” to the consolidated financial statements contained in our 2022 Annual Report.
Benefit Restoration Plan
Our Benefit Restoration Plan
allows(BRP) is a nonqualified excess benefit plan that provides forlump-sumthe paymentthe Pension Plan requires that distributions take the formofa monthly annuity, exceptsupplemental retirement benefits to eligible participants inspecial circumstances. For information regarding the assumptions we use to determine the present value of accumulated benefits for our pension plans, see Note 6, "Pension and Other Postretirement Benefits,"an amount equal to theconsolidated financial statements contained inamount by which their benefits payable under our2017 Annual Report.
PENSION PLAN
We provide qualified retirement benefits for eligiblenow terminated U.S. employeespension plan would have been reduced under the Avery Dennison Pension Plan (the "Pension Plan"). AllCode. Messrs. Butier and Lovins are our only NEOs — except for Ms. Bramman, who joined our company after the Pension Plan was closed to new participants, and Mr. Gravanis, who is not employed in the U.S. — are eligible to receive benefits under the Pension Plan, including reduced benefits in the event of early retirement. The accrual of additional benefits under the Pension Plan was frozen as of December 31, 2010; as a result, no additionalBRP. No accruals were made during 2017.2022 as the plan was frozen in 2010.
Compensation covered by the Pension PlanBRP includes base salary and AIP awards through the date the plan was frozen, up to the applicable statutory limitations each plan year. Employees vestvested in the Pension PlanBRP after five years of service, or at age 55 upon termination of employment. The annual pension benefit payable in 2017 was limited to $215,000 under the Code.
Avery Dennison Corporation| 2018 Proxy Statement |74
Benefits under the Pension PlanBRP are based on pensionable earnings, length of service, when benefits commence and how they are paid. Benefits are calculated separately for each year of applicable service using a formula equal to 1.25% times compensation up to the breakpoint (which for each year prior to our freezing the accrual of additional benefits was the average of the Social Security wage bases for the preceding 35 years) plus 1.75% times compensation in excess of the breakpoint. The results of the calculation for each year of service are added together to determine the annual single life annuity benefit under the Pension PlanBRP for an employee at normal retirement (generallyat age 65),65, which is not subject to reduction for Social Security payments.
Eligible participants may elect to receive their benefits Payments are made in one of several payment forms that are all payable in monthly installments. Benefits are generally paid in annuity form over the lifetime of the participant and/or a beneficiary. By default, single participants are eligible for a single life annuity, and they can choose from alternate payment forms that may include benefits payable to a beneficiary. By default, married participants are eligible for a joint and survivor annuity that is payable over the participant's lifetime, and, if survived by a spouse, over the spouse's lifetime. Married participants can choose alternate payment forms, with the consent of the spouse. The monthly benefit each eligible participant may receive is adjusted based on the plan's definition of actuarial equivalence.
Benefits are generally payable without reduction after participants reach age 65; however, certain participants — including our participating NEOs — may be eligible to receive an unreduced benefit at age 62. Prior to age 62, a participant's benefits are reduced by 15% for commencement of benefits at age 61 and an additional 5% for each additional year early the participant elects to receive benefits, provided that no benefit may commence before a participant reaches age 55.
BENEFIT RESTORATION PLAN
Our Benefit Restoration Plan (BRP) is a nonqualified excess benefit plan that provides for the payment of supplemental retirement benefits to eligible participants in an amount equal to the amount by which their benefits otherwise payable under the Pension Plan would be reduced under the Code. All NEOs — except for Ms. Bramman, who joined our company after the BRP was closed to new participants, and Mr. Gravanis, who is not employed in the U.S. — are eligible to receive benefits under the BRP. The accrual of additional benefits under the BRP was frozen as of December 31, 2010; as a result, no additional accruals were made during 2017.
Because the BRP is designed to mirror the Pension Plan, the information concerning the compensation covered, benefit formula, early retirement provisions, and payment forms the same as that of the Pension Plan except that (i) the BRP provides for payment in the form of a lump-sum distribution, unless a timely election is made for monthly payments over the lifetime of the participant and, if applicable, a designated beneficiary, and (ii) BRP benefits are generally payable upon the later of separation from service and age 55.
Avery Dennison Corporation| 2018 Proxy Statement |75
82 | 2023 Proxy Statement | Avery Dennison Corporation |
20172022 NONQUALIFIED DEFERRED COMPENSATION(1)
The table below provides information regarding NEO and company contributions to nonqualified deferred compensation plans in fiscal year 2017. Mr. Gravanis has not been included in the table because, as a non-U.S. employee, he is not eligible to participate in the only plan currently open for deferrals.
| NAME | EXECUTIVE CONTRIBUTIONS IN LAST FY ($) | REGISTRANT CONTRIBUTIONS IN LAST FY ($)(2) | AGGREGATE EARNINGS IN LAST FY ($)(3) | AGGREGATE WITHDRAWALS/ DISTRIBUTIONS ($) | AGGREGATE BALANCE AT LAST FYE ($) | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |
Mitchell R. Butier | — | $106,974 | $275,313 | — | $1,494,862 | |||||
Gregory S. Lovins | — | $44,764 | $34,287 | — | $192,676 | |||||
Anne Hill | — | $40,465 | $7,019 | — | $743,406 | |||||
Susan C. Miller | — | $40,948 | $2,984,419 | — | $5,403,442 | |||||
Anne L. Bramman | $23,959 | $42,604 | $65,236 | — | $258,889 |
(1)Amounts reflect the NEOs' participation in theour Executive Variable Deferred Retirement Plan (EVDRP). Under the EVDRP, participants may choose among publicly available funds ranging from money market and bond funds to index and other equity/mutual funds.TheTheir rate of return depends on the funds selected by theparticipant, who may make changes via an online database provided by the plan administrator. The funds available for investment under the EVDRP during 2017, and their respective rate of return for the year or such shorter portion of the year during which the fund was available, are set forth in the table below.
| NAME OF FUND | 2017 RATE OF RETURN | NAME OF FUND | 2017 RATE OF RETURN | |||||
|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |
| Advisor Managed Portfolio, Conservative Allocation | | 7.21 | % | MFS Growth | 32.14% | |||
| Advisor Managed Portfolio, Moderate Allocation | 9.94 | % | American Century VP Mid Cap Value, Class 2 | 11.89% | ||||
| Advisor Managed Portfolio, Moderate Growth Allocation | | 13.49 | % | Janus Henderson VIT Enterprise- Service Shares | 27.56% | |||
| Advisor Managed Portfolio, Growth Allocation | 16.04 | % | BlackRock Small Cap Index | 14.49% | ||||
| Advisor Managed Portfolio, Aggressive Allocation | | 18.87 | % | Templeton Foreign VIP Class 2 | 17.13% | |||
| Avery EVDRP Survivor-Fixed | 7.00 | % | MFS International Large Cap | 27.99% | ||||
| Avery Fixed Rate | | 3.39 | % | Invesco V.I. International Growth Series II Shares | 23.19% | |||
| Fidelity VIP Government Money Market Service Class | 0.95 | % | Oppenheimer Emerging Markets | 35.02% | ||||
| PIMCO Inflation Managed | | 4.07 | % | MFS VIT Utilities, Service Class | 14.92% | |||
| Western Asset Diversified Bond | 7.28 | % | Van Eck VIP Global Hard Assets | (1.33)% | ||||
| BlackRock Equity Index | | 21.94 | % | |||||
(2)Company contributions to the EVDRP are included in theAll Other Compensationcolumn of the2017 Summary Compensation Table.(3)Amounts reflect EVDRP vested account balances as of December 30, 2017, the last day of our 2017 fiscal year. Ms. Miller elected to defer the MSUs granted to her in 2013, including related dividend equivalents, under the EVDRP. The following amounts were reported under the "All Other Compensation" column of the2017 Summary Compensation Tablein previous proxy statements:
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance At Last FYE ($) | ||||||||||||||||||||
Mitchell R. Butier | – | $ | 76,171 | $ | (628,880 | ) | – | $ | 2,820,490 | ||||||||||||||||
Deon M. Stander | $ | 193,473 | $ | 33,730 | $ | (208,327 | ) | – | $ | 1,197,797 | |||||||||||||||
Gregory S. Lovins | – | $ | 39,868 | $ | (114,316 | ) | – | $ | 522,167 | ||||||||||||||||
Deena Baker-Nel | $ | 8,320 | $ | 22,566 | $ | (135,152 | ) | – | $ | 656,663 | |||||||||||||||
Ignacio J. Walker | – | $ | 21,026 | $ | 1,885 | – | $ | 111,988 | |||||||||||||||||
| Company contributions to the EVDRP are included in the All Other Compensation column of the 2022 Summary Compensation Table. |
| ||
| ||
| ||
|
Avery Dennison Corporation| 2018 Proxy Statement |76
EXECUTIVE VARIABLE DEFERRED RETIREMENT PLAN
Our
| Name | Aggregate Company Contributions Previously Reported ($) | ||||
Butier | $ | 756,247 | |||
Stander | $ | 111,777 | |||
Lovins | $ | 147,788 | |||
Baker-Nel | $ | 18,783 | |||
Walker | $ | 14,446 | |||
Executive Variable Deferred Retirement Plan (EVDRP) is
Under the only active deferred compensation plan availableEVDRP, eligible employees can defer up to our eligible U.S. employees.75% of their salary and 90% of their AIP award. Deferrals are immediately vested. Earnings are based on a fixed rate and/or the performance of variable bond and equity funds selected by the participant from available options. options under the EVDRP. The EVDRP does not offer investment options that provide above-market interest rates.
Eligible employees are able to defer U.S. taxes until their investment is withdrawn, providing an opportunity for them to accumulate savings on a pre-tax basis. We also benefit from this arrangement because we do not have to expend cash to pay amounts individuals have elected to defer. As a result, we can use this cash for other corporate purposes until a deferred compensation account is paid to thea participant at the time the participant electedbased on his or her election to receive withdrawals either in-service withdrawals or after termination of employment.
All deferred compensation accounts are unfunded obligations of our company and subject to the same risks as any of our general debts and obligations. As a result, these accounts help mitigate risk-seeking behavior by management that could be detrimental to the long-term health of our company.
Employee Contributions
UnderAs of the EVDRP, eligible employees can defer up to 75%first business day of their salary and 90% of their AIP award.
Company Contributions
In early 2017,our 2022 fiscal year, we made a contribution to the deferred compensation accounts of eligible employees of up to 6% of an eligible employee's annualbased on 401(k) eligible earnings in excess of the federal compensation limit and deferred compensation in excess2021. This annual contribution provided an automatic contribution of 3% of pay plus a matching contribution of 50% on the Code compensation limit. Ourfirst 7% of pay not covered by company contributions to our 401(k) Plan. This contribution was added to the deferred compensation accounts of eligible employees who wereparticipants employed at year-end 2016,2021, which included all our participating NEOs. This benefit is designed to supplement 401(k) contributions that are limited under federal law.
Withdrawals/Distributions
Contributions to deferred compensation accounts are required to be distributed following an eligible employee'semployee’s separation from service. Subject to Section 409A of the Code, eligible employees may elect to receive separation from service withdrawals in the form of a lump-sum payment or monthly installments over two to 20 years. Eligible employees may change the method in which payments are distributed provided that they do so at least 12 months before the date of distribution; however, any such change would resultresults in the distribution occurring or beginning five years later than it would have otherwise. All of our NEOs are "key employees"“specified employees” under Section 409A of the Code. Distributions to key employees409A; as a result, their distributions cannot be made until at least the seventh month after separation from service, except in the event of death.
Avery Dennison Corporation| 2018 Proxy Statement |77
Avery Dennison Corporation | 2023 Proxy Statement | 83 |
PAYMENTS UPON TERMINATION AS OF DECEMBER 30, 2017
31, 2022
The table below shows the potential benefits that would have been payable to our Current NEOs in the event of terminationhad they been terminated on December 30, 2017,31, 2022, the last day of our 2017 fiscal year. Amounts paid or distributed upon actual termination may differ from amounts shown due to timing and any future changes to our benefit plans. Because she was no longer employed at our fiscal year-end, Ms. Bramman has not been included in the table. The severance payments and benefits Ms. Bramman received in connection with her termination earlier in the year are disclosed underExecutive Severance Plan.
|
|
|
| Termination Scenarios as of End of Fiscal Year 2022 | |||||||||||||||||
| Name |
| Benefit | Death | Qualifying Disability | Involuntary Termination Not for Cause | Termination within 24 Mos. of Change of Control | ||||||||||||||
Mitchell R. Butier |
| |||||||||||||||||||
Severance Payment | – | – | $ | 5,811,498 | $ | 8,717,246 | ||||||||||||||
Unvested PUs(1) | $ | 2,158,244 | $ | 2,158,244 | – | $ | 6,833,112 | |||||||||||||
Unvested MSUs(1) | $ | 1,663,951 | $ | 1,663,951 | – | $ | 5,973,456 | |||||||||||||
Outplacement | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 3,822,195 | $ | 3,822,195 | $ | 5,836,498 | $ | 21,548,814 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
| Forfeited Equity(1) | $ | (8,984,372 | ) | $ | (8,984,372 | ) | $ | (12,806,568 | ) | – | ||||||||
Deon M. Stander |
| |||||||||||||||||||
Severance Payment | – | – | $ | 1,250,749 | $ | 2,501,498 | ||||||||||||||
Unvested RSUs(1) | – | – | – | $ | 1,591,533 | |||||||||||||||
Unvested PUs(1) | $ | 639,171 | $ | 639,171 | – | $ | 2,034,440 | |||||||||||||
Unvested MSUs(1) | $ | 270,944 | $ | 270,944 | – | $ | 1,431,764 | |||||||||||||
Outplacement | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 910,115 | $ | 910,115 | $ | 1,275,749 | $ | 7,584,235 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
| Forfeited Equity(1) | $ | (4,147,623 | ) | $ | (4,147,623 | ) | $ | (5,057,737 | ) | – | ||||||||
Gregory S. Lovins |
| |||||||||||||||||||
Severance Payment | – | – | $ | 1,250,749 | $ | 2,501,498 | ||||||||||||||
Unvested PUs(1) | $ | 474,944 | $ | 474,944 | – | $ | 1,559,315 | |||||||||||||
Unvested MSUs(1) | $ | 418,913 | $ | 418,913 | – | $ | 1,437,728 | |||||||||||||
Outplacement | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 893,857 | $ | 893,857 | $ | 1,275,749 | $ | 5,523,541 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Forfeited Equity(1) | $ | (2,103,185 | ) | $ | (2,103,185 | ) | $ | (2,997,043 | ) | – | ||||||||||
Deena Baker-Nel |
| |||||||||||||||||||
Severance Payment | – | – | $ | 712,149 | $ | 712,149 | ||||||||||||||
Unvested PUs(1) | $ | 147,575 | $ | 147,575 | – | $ | 477,116 | |||||||||||||
Unvested MSUs(1) | $ | 119,165 | $ | 119,165 | – | $ | 424,095 | |||||||||||||
Outplacement | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 266,740 | $ | 266,740 | $ | 737,149 | $ | 1,638,360 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
| Forfeited Equity(1) | $ | (643,471 | ) | $ | (643,471 | ) | $ | (901,211 | ) | – | ||||||||
Ignacio J. Walker |
| |||||||||||||||||||
Severance Payment | – | – | $ | 727,618 | $ | 727,618 | ||||||||||||||
Unvested RSUs(1) | $ | 156,927 | $ | 156,927 | – | $ | 156,927 | |||||||||||||
Unvested PUs(1) | $ | 153,126 | $ | 153,126 | – | $ | 491,234 | |||||||||||||
Unvested MSUs(1) | $ | 118,142 | $ | 118,142 | – | $ | 429,956 | |||||||||||||
Outplacement | – | – | $ | 25,000 | $ | 25,000 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 428,195 | $ | 428,195 | $ | 752,618 | $ | 1,830,735 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
| Forfeited Equity(1) | $ | (649,922 | ) | $ | (649,922 | ) | $ | (1,078,117 | ) | – | ||||||||
(1) Values for PUs, MSUs and RSUs determined based on the number of shares that would have been acquired or forfeited on vesting multiplied by the fair market value of our common stock of $181.00 on December 30, 2022; the last trading day of our 2022 fiscal year. |
| |||||||||||||||||||
84 | 2023 Proxy Statement | Avery Dennison Corporation |
| | | TERMINATION SCENARIOS AS OF THE END OF FISCAL YEAR 2017 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | |
| NAME | BENEFIT | DEATH | QUALIFYING DISABILITY | QUALIFYING RETIREMENT(2) | INVOLUNTARY TERMINATION NOT FOR CAUSE | TERMINATION WITHIN 24 MOS. OF CHANGE OF CONTROL | ||||||||||||
| Mitchell R. Butier | | | | | | |||||||||||||
| Severance Payment | — | — | — | $ | 5,973,348 | $ | 8,960,023 | |||||||||||
| Unvested Stock Options(1) | — | — | — | — | $ | 5,771,882 | ||||||||||||
| Unvested RSUs(1) | $ | 437,502 | $ | 437,502 | — | — | $ | 437,502 | ||||||||||
| Unvested PUs(1) | $ | 6,501,689 | $ | 6,501,689 | — | — | $ | 10,103,086 | ||||||||||
| Unvested MSUs(1) | $ | 5,329,923 | $ | 5,329,923 | — | — | $ | 7,708,127 | ||||||||||
| Outplacement | — | — | — | $ | 25,000 | $ | 25,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 12,269,114 | $ | 12,269,114 | — | $ | 5,998,348 | $ | 33,005,620 | |||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Elimination of Excise Tax Liability | — | — | — | — | $ | (3,537,226 | ) | |||||||||||
| Value of Forfeited Equity(1) | $ | (11,751,482 | ) | $ | (11,751,482 | ) | $ | (24,020,596 | ) | $ | (24,020,596 | ) | — | |||||
| Gregory S. Lovins | | | | | | |||||||||||||
| Severance Payment | — | — | — | $ | 865,733 | $ | 1,731,465 | |||||||||||
| Unvested Stock Options(1) | — | — | — | — | — | |||||||||||||
| Unvested RSUs(1) | $ | 667,566 | $ | 667,566 | — | — | $ | 667,566 | ||||||||||
| Unvested PUs(1) | $ | 990,361 | $ | 990,361 | — | — | $ | 1,375,678 | ||||||||||
| Unvested MSUs(1) | $ | 788,997 | $ | 788,997 | — | — | $ | 1,064,265 | ||||||||||
| Outplacement | — | — | — | $ | 25,000 | $ | 25,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 2,446,924 | $ | 2,446,924 | — | $ | 890,733 | $ | 4,863,974 | |||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Value of Forfeited Equity(1) | $ | (660,585 | ) | $ | (660,585 | ) | $ | (3,107,510 | ) | $ | (3,107,510 | ) | — | |||||
| Georges Gravanis | | | | | | |||||||||||||
| Severance Payment | — | — | — | $ | 1,388,449 | $ | 2,776,899 | |||||||||||
| Unvested Stock Options(1) | — | — | — | — | — | |||||||||||||
| Unvested RSUs(1) | $ | 699,038 | $ | 699,038 | $ | 699,038 | $ | 699,038 | $ | 699,038 | ||||||||
| Unvested PUs(1) | $ | 1,528,404 | $ | 1,528,404 | $ | 2,270,514 | $ | 2,270,514 | $ | 2,274,573 | ||||||||
| Unvested MSUs(1) | $ | 1,290,013 | $ | 1,290,013 | $ | 2,016,493 | $ | 2,016,493 | $ | 1,796,427 | ||||||||
| Outplacement | — | — | — | $ | 25,000 | $ | 25,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 3,517,455 | $ | 3,517,455 | $ | 4,986,045 | $ | 6,399,494 | $ | 7,571,937 | ||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Elimination of Excise Tax Liability | — | — | — | — | $ | (995,695 | ) | |||||||||||
| Value of Forfeited Equity(1) | $ | (1,252,583 | ) | $ | (1,252,583 | ) | $ | 216,119 | $ | 216,119 | — | |||||||
| Anne Hill | | | | | | |||||||||||||
| Severance Payment | — | — | — | $ | 1,008,696 | $ | 2,017,392 | |||||||||||
| Unvested Stock Options(1) | — | — | — | — | — | |||||||||||||
| Unvested RSUs(1) | — | — | — | — | — | |||||||||||||
| Unvested PUs(1) | $ | 2,034,860 | $ | 2,034,860 | $ | 3,293,036 | $ | 3,293,036 | $ | 2,759,626 | ||||||||
| Unvested MSUs(1) | $ | 1,664,254 | $ | 1,664,254 | $ | 2,661,839 | $ | 2,661,839 | $ | 2,194,106 | ||||||||
| Outplacement | — | — | — | $ | 25,000 | $ | 25,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 3,699,114 | $ | 3,699,114 | $ | 5,954,875 | $ | 6,988,571 | $ | 6,996,124 | ||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Value of Forfeited Equity(1) | $ | (1,254,618 | ) | $ | (1,254,618 | ) | $ | 1,001,361 | $ | 1,001,361 | — | |||||||
| Susan C. Miller | | | | | | |||||||||||||
| Severance Payment | — | — | — | $ | 1,023,687 | $ | 2,047,375 | |||||||||||
| Unvested Stock Options(1) | — | — | — | — | — | |||||||||||||
| Unvested RSUs(1) | — | — | — | — | — | |||||||||||||
| Unvested PUs(1) | $ | 1,895,267 | $ | 1,895,267 | $ | 2,991,031 | $ | 2,991,031 | $ | 2,641,321 | ||||||||
| Unvested MSUs(1) | $ | 1,557,876 | $ | 1,557,876 | $ | 2,473,007 | $ | 2,473,007 | $ | 2,088,988 | ||||||||
| Outplacement | — | — | — | $ | 25,000 | $ | 25,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 3,453,143 | $ | 3,453,143 | $ | 5,464,038 | $ | 6,512,725 | $ | 6,802,684 | ||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Value of Forfeited Equity(1) | $ | (1,277,166 | ) | $ | (1,277,166 | ) | $ | 733,733 | $ | 733,733 | — | |||||||
(1)Values for equity awards were determined as follows: (i) for stock options, the number of shares that would have been exercisable multiplied by the difference between the fair market value of our common stock on December 29, 2017, the last trading day of our 2017 fiscal year, and the applicable exercise price; (ii) for RSUs, PUs and MSUs, the number of shares that would have been acquired or forfeited on vesting multiplied by the fair market value of our common stock on December 29, 2017.(2)Mr. Gravanis and Mses. Hill and Miller qualified as retirement eligible at the end of fiscal year 2017 because they had reached the age of 55 and had over ten years of service with our company. As a result, in every termination scenario, all of their unvested equity awards would vest, with unvested PUs and MSUs vesting on a prorated basis after the end of their respective performance period based on our actual performance.
Avery Dennison Corporation| 2018 Proxy Statement |78
In addition to the amounts shown in the table on the previous page, in the event of termination, our Current NEOs would be entitled to receive their accrued and vested benefitsbalance under any pension and deferred compensation plans in which they participate.the EVDRP. These amounts would be determined and paiddistributed in accordance with the participant’s distribution election and the terms and conditions of the applicable plans,plan, and are not included in the table. See2017 Pension Benefits and20172022 Nonqualified Deferred Compensation for information on these benefits.more information.
NoneAll of our Current NEOs has an employment contract;are employed at-will; if an NEO iswere no longer performing at the expected level, he or she cancould be terminated for cause immediately without receiving a contractually-guaranteedcontractually guaranteed payment. The other potential payments upon termination or a change of control are described below.below and on the following page.
EXECUTIVE SEVERANCE PLANExecutive Severance Plan
Each of our CurrentAll NEOs is a participant inare eligible participants under the Severance Plan. Upon involuntary termination not for cause, they would be entitled to the following benefits:benefits shown below.
Lump-sum payment equal to annual base salary | 2For CEO | Outplacement services of up to $25,000 for up to one year | ||||||||||||||
| × | + | |||||||||||||||
1For all other NEOs |
Benefits Not Subject to Gross up.Gross-up. Benefits are subject to withholding for all applicable taxes and not grossed-up for taxes.
Trigger for Benefits. Involuntary termination, whichexcludes termination for cause;cause or due to disability; due to death; due todisability, death, voluntary resignation;resignation, or due to an executive declining simultaneous or continuing employment in a comparable position.
Definition of Cause. Cause is defined as (i) commission of a crime or other act that could materially damage the reputation of our company or its subsidiaries; (ii) theft, misappropriation, or embezzlement of company or subsidiary property; (iii) falsification of company or subsidiary records; (iii)(iv) substantial failure to comply with written policies and procedures; (iv)(v) misconduct; or (v)(vi) substantial failure to perform material job duties not cured within 30 days after written notice.
Mr. Gravanis' severance benefits would be subject to applicable Dutch labor laws and regulations in effect at the timeKey Executive Change of his separation, and he would receive the greater of the amount provided under theControl Severance Plan and the amount required by those laws and regulations.
In connection with her separation from our company and in accordance with the terms and conditions of the Severance Plan, Ms. Bramman received severance benefits of $1,223,313, which included (i) $575,025, her annual base salary as of her termination date; (ii) $633,965, her highest AIP award in the last three years; and (iii) $14,323, the cash value of twelve months of premiums for qualified medical and dental plans in which she participated as of her termination date. In consideration of her receipt of these benefits, Ms. Bramman agreed to a waiver and release of any claims against our company and to non-competition, non-solicitation and non-disclosure covenants in favor of our company.
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KEY EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
Each of our Current NEOs is also a participant in theThe COC Severance Plan which is designedprovides enhanced severance benefits to retain certain key executives to incent their retention during a period in which a change of control transaction is being negotiated or a hostile takeover is being attempted. ParticipantsMessrs. Butier, Stander and Lovins are the only entitledNEOs eligible to participate in the COC Severance Plan, entitling them to benefits only if they are terminated not for "cause"“cause” or terminate employment for "good reason"“good reason” within 24 months of the change of control (a "double trigger"“double trigger”).In suchthese circumstances, theythese NEOs would be entitled to the benefits shown below. In the event of termination following benefits:a change of control, our Level 3 NEOs would be entitled to receive benefits under the Severance Plan described above.
Lump-sum payment equal to annual | × | 3For CEO | + | Prorated target AIP award for year in which termination occurs | + | Outplacement services of up to $25,000 for up to one year | ||||||||||||||||||
2For Level 2 NEOs |
Benefits Not Subject to Gross-up. Benefits are subject to withholding for all applicable taxes and not grossed-up for excise or other taxes. However, if the payment would trigger an excise tax, for a particular NEO, the participating NEO can elect to receive (i) his or her full benefits, with him or her responsibleretaining responsibility for paying any applicable excise taxes, or (ii) reduced benefits to an amount sufficient to eliminate any excise tax liability. In the 2022 termination payments table, COC payments would not have triggered an excise tax for any of the eligible participants.
Definition of Change of Control. Change of control is defined as (i) replacement of a majority of our Board during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of our Board; or (ii) acquisition by any person, group or corporation that has entered into a merger, acquisition, consolidation, purchase, stock acquisition, asset acquisition or similar business transaction with our company, of (A) together with any of our company'scompany’s stock previously held, more than 50% of the total fair market value or the total voting power of our company'scompany’s stock; (B) 30% or more of the total voting power of our company'scompany’s stock during any 12-month period; or (C) assets of our company having a total gross fair market value of 40% or more of the total gross fair market value of all of our company'scompany’s assets during any 12-month period.
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Definition of cause.Cause. Cause is defined as it is under the Severance Plan.
Definition of good reason.Good Reason. Good reason is defined as (i) material diminution in base compensation; (ii) material diminution in authority, duties or responsibilities or supervisor'ssupervisor’s authority, duties or responsibilities; (iii) material change in geographic job location; or (iv) any other action or inaction that constitutes a material breach by our company.
Mr. Gravanis' severance benefits would be subject to applicable Dutch labor laws and regulations in effect at the time of his separation, and he would receive the greater of the amount provided under the COC Severance Plan and the amount required by those laws and regulations.Equity Incentive Plans
EQUITY INCENTIVE PLANS
Under both our previous Amended and Restated Stock Option and Incentive Plan last approved by our stockholders in April 2012 and our 2017 Incentive Award Plan, approved by stockholders in April 2017, unvested equity awards held by our Current NEOs on the date of termination would be treatedvest as set forthshown in the table onbelow, subject to the following page. Mr. Gravanis and Mses. Hill and Millerplan’s one-year minimum vesting requirement. None of our NEOs qualified as retirement eligible at the endas of our 2017 fiscal year because they had reached the age of 55 and had over ten years of service with our company.year-end 2022.
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| VESTING OF EQUITY AWARDS ON TERMINATION EVENTS | |||||||||||||||||
Resignation/Involuntary Termination, | Cancelled | Cancelled | Cancelled | Cancelled | |||||||||||||
Death | Vest at time of event on | Vest at time of event on | Vest | Cancelled | |||||||||||||
Qualifying Disability | Same as death | Same as death | Vest | Cancelled | |||||||||||||
Qualifying Retirement | |||||||||||||||||
Vest after | Vest after | Vest | Vest and exercisable | ||||||||||||||
Change of Control | Vest based on actual, if determinable, and otherwise target performance only in | Vest based on actual, if determinable, and otherwise target performance only in | Vest only in | Vest only in | |||||||||||||
*Unvested stock options granted prior to April 26, 2012 would vest on change of control consistent with terms and conditions of previous stockholder-approved version of an Amended and Restated Stock Options and Incentive Plan.
All unvested MSUs, PUs and RSUs held by Ms. Bramman on the date of her termination of employment were cancelled in accordance with the provisions described above. She held no stock options as of the date of her termination.
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EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 30, 2017
31, 2022
| Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | ||||||||||||
Equity compensation plans approved by security holders |
| ||||||||||||||
Amended and Restated Stock Option and Incentive Plan(1) | 141,108 | $ | 73.96 | – | |||||||||||
2017 Incentive Award Plan(2) | 1,265,827 | – | 3,082,755 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total |
| 1,406,935 | $ | 73.96 |
| 3,082,755 | |||||||||
| (1) | Our Amended and Restated Stock Option and Incentive Plan was last approved by stockholders in April 2012. We ceased issuing awards under this plan in March 2017. Under this plan, shares issuable under outstanding equity awards only include stock options for officers. Amount in column (A) reflects 141,108 stock options. |
| (2) | Our 2017 Incentive Award Plan was approved by our stockholders in April 2017. We began issuing awards under this plan in May 2017. Shares issuable under outstanding equity awards granted under this plan include (i) RSUs and DSUs for non-employee directors and (ii) restricted stock awards (RSAs), RSUs, PUs and MSUs for officers and other eligible employees. Amount in column (A) includes 62,273 RSAs, 59,841 RSUs, 106,137 DSUs, 307,228 MSUs (including accrued dividend equivalents and reflecting the tranches granted in 2020, 2021 and 2022) and 730,347 PUs (reflecting the tranches granted in 2020, 2021 and 2022). For awards subject to vesting as of December 31, 2022, payouts were based on actual performance. For unvested awards as of December 31, 2022, awards with projected performance at or below target were calculated using the target payout and awards with actual performance above target were calculated using the maximum payout. Amount in column (C) represents the aggregate number of shares available for future issuance, with each full-value award decreasing the number of shares available for future issuance by 1.5 shares |
86 | 2023 Proxy Statement | Avery Dennison Corporation |
| PLAN CATEGORY | NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (A) | WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (B) | NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A)) (C) | |||
|---|---|---|---|---|---|---|
| | | | | | | |
Equity compensation plans approved by security holders | ||||||
Amended and Restated Stock Option and Incentive Plan(1) | 2,514,362 | $44.39 | — | |||
Amended and Restated Director Equity Plan(2) | 4,000 | $20.64 | — | |||
2017 Incentive Award Plan(3) | 69,772 | — | 5,295,342 | |||
| | | | | | | |
Total | 2,588,134 | $44.22 | 5,295,342 |
VS.
(1)Our AmendedDISCLOSURE
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Year | Summary Compensation Table Total for CEO ($) (1) | Compensation Actually Paid to CEO ($) (2) | Average SummaryCompensation Table Total for Non-CEO NEOs ($) (1) | Average Compensation Actually Paid to Non-CEO NEOs ($) (2) | Value of Initial Fixed $100 Investments Based on: | Net Income ($) | A djusted EPS ($) (4) | |||||||||||||||||||||||||||||||||
Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) (3) | |||||||||||||||||||||||||||||||||||||||
2022 | $ | 9,107,739 | $ | 7,588,568 | $ | 2,405,277 | $ | 2,220,289 | $ | 145.18 | $ | 129.34 | $ | 757,092,000 | $ | 9.15 | ||||||||||||||||||||||||
2021 | $ | 12,433,721 | $ | 31,508,041 | $ | 2,342,467 | $ | 5,263,092 | $ | 170.92 | $ | 138.82 | $ | 740,087,000 | $ | 8.91 | ||||||||||||||||||||||||
2020 | $ | 8,709,348 | $ | 13,337,289 | $ | 2,248,966 | $ | 2,725,777 | $ | 120.86 | $ | 113.66 | $ | 555,863,000 | $ | 7.10 | ||||||||||||||||||||||||
| (1) | For each fiscal year, represents amount reported for our CEO and average amount reported for our non-CEO NEOS, in each case in the Total column of the Summary Compensation Table |
Year | CEO | Non-CEO NEOs | ||
| 2022 | Mitchell Butier | Deon Stander, Gregory Lovins, Deena Baker-Nel and Ignacio Walker | ||
| 2021 | Mitchell Butier | Deon Stander, Gregory Lovins, Deena Baker-Nel and Ignacio Walker | ||
| 2020 | Mitchell Butier | Deon Stander, Gregory Lovins, Anne Hill and Susan Miller |
| (2) | Amounts represent Compensation Actually Paid to our CEO and the average Compensation Actually Paid to our non-CEO NEOs for the relevant fiscal year. Compensation Actually Paid represents the amount reported in the Total column of the Summary Compensation Table Monte-Carlo simulation method, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objectives established for the respective award. For information on the inputs to our Monte-Carlo simulations, see footnote (2) of ourSummary Compensation Tables |
2022 | 2021 | 2020 | ||||||||||||||||||||||||||||
Adjustments | CEO | Average Non-CEO NEOs | CEO | Average Non-CEO NEOs | CEO | Average Non-CEO NEOs | ||||||||||||||||||||||||
| Deduction for amounts reported under Stock Awards and Option Awards columns in Summary Compensation Table for applicable FY | $ | (6,769,541 | ) | $ | (1,505,667 | ) | $ | (7,047,669 | ) | $ | (1,010,410 | ) | $ | (5,598,133 | ) | $ | (911,123 | ) | ||||||||||||
| Increase based on ASC 718 fair value of awards granted during applicable FY that remain unvested as of applicable FY-end, determined as of applicable FY-end | 8,129,671 | 1,759,513 | 10,778,535 | 1,629,157 | 7,438,091 | 1,099,351 | ||||||||||||||||||||||||
| Increase based on ASC 718 fair value of awards granted during applicable FY that vested during applicable FY, determined as of vesting date | 1,025,415 | 173,855 | 1,202,830 | 150,733 | 1,038,151 | 220,605 | ||||||||||||||||||||||||
| Increase/Deduction for awards granted during prior FYs that were outstanding and unvested as of applicable FY-end, determined based on change in ASC 718 fair value from prior FY-end to applicable FY-end | (2,070,799 | ) | (321,514 | ) | 6,376,386 | 1,070,390 | 1,060,708 | (168,217 | ) | |||||||||||||||||||||
| Increase/Deduction for awards granted during prior FYs that vested during applicable FY, determined based on change in ASC 718 fair value from prior FY-end to vesting date | (1,833,917 | ) | (291,175 | ) | 7,764,238 | 1,080,755 | 760,280 | 260,825 | ||||||||||||||||||||||
| Deduction for change in the actuarial present values reported under the change in pension value and nonqualified deferred compensation earnings column of the summary compensation table for applicable FY | – | – | – | – | (71,156 | ) | (24,630 | ) | ||||||||||||||||||||||
| Increase for service cost and, if applicable, prior service cost for pension plans | – | – | – | – | – | – | ||||||||||||||||||||||||
Total Adjustments | $ | (1,519,171 | ) | $ | (184,988 | ) | $ | 19,074,320 | $ | 2,920,625 | $ | 4,627,941 | $ | 476,811 | ||||||||||||||||
| (3) | For the relevant fiscal year, represents the cumulative TSR (the “Peer Group TSR”) of the average return (weighted by market capitalization) of the S&P 500 Industrial and Materials subsets (the “Peer Group”). |
| (4) | Adjusted EPS is a non-GAAP financial measure reconciled from GAAP in the last section of this proxy statement. |
Avery Dennison Corporation | 2023 Proxy Statement | 87 |
CEO PAY RATIO
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing this disclosure about the relationship between the median annual total compensation
With ~72% of our employees to the annual total compensation of our CEO. To understand this disclosure, we think it is important to give context about our operations. We are located in places around the world to best serve our customers, with approximately 76% of our2022 revenues generatedoriginating outside the U.S. and approximately 48%~40% of our revenues generatedoriginating in emerging markets (Asia, Latin America, Eastern Europe and Middle East/Northern Africa). As a global organization with, our employees are located in over 50 countries approximately 87%to best serve our customers. At year-end 2022, ~83% of our employees arewere located outside the U.S. and approximately 71% are~67% were located in emerging markets. markets, where median compensation is substantially lower than it is in the U.S.
The charts below show the demographics of our global workforce by region and function. At year-end 2022, 20,613 of our ~36K employees, representing ~57% of our global workforce, were in Asia, serving customers in that region. In addition, ~66% of our global workforce was working in the operations of our manufacturing facilities or in positions directly supporting them from other locations.
We offer market-based, competitive wages and benefits in all the markets where we compete for talent — 99%talent. All of our employees arewere paid in excessat least the applicable legal minimum wage, and ~98% of our employees were paid abovethe applicable legal minimum wage.wage, at year-end 2022. Our CEO'sCEO’s compensation is substantially driven by pay for performance, in-linepay-for-performance incentive compensation, consistent with our peers and commensurate with that provided by companies of similar size, scale and performance.U.S. market practices.
2022 PAY RATIO FOR 2017
•The annual total compensation of our median employee (among all employees except for our CEO) was
approximately $12,016.•Our CEO's annual total compensation, as reported in theTotalcolumn of the2017 Summary Compensation Table, was $8,959,468.•- $13,688.
• Our CEO’s annual total compensation, as reported in the Total column of the 2022 Summary Compensation Table, was $9,107,739.
Based on this information, a reasonable estimate of the 2022 ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was approximately
746665 to 1.We calculated this ratio based on
theSEC rules and guidance,provided by the SEC. SEC ruleswhich allowfor varying methodologiesfor companies to usein identifyingvarying methodologies to identify their medianemployee; otheremployee. Other companies may have different workforce demographics and employment and compensation practices and may utilize different methodologies, exclusions, estimates andassumptions in calculating their CEO pay ratios. Consequently,assumptions. As a result, the CEO pay ratios reported by other companiesare unlikely tomay not be meaningfulfor purposes of comparisoncomparisons to our CEO pay ratio.IDENTIFICATION OF MEDIAN EMPLOYEE
For purposesGiven that there were no significant changes in the composition or compensation arrangements ofidentifyingour global workforce from 2021 to 2022, as allowed by SEC rules, we used the same median employee in 2022 as we did in 2021.To identify our median employee in 2021, we considered annual base compensation, which is the most common pay element for all our employees, as reflected in our global human resources information system. We selected this compensation element because it represents the principal broad-based compensation element for the vast majority of our employees globally. We measured compensation for purposes of determining the median employee using the 12-month period
endingended December 31,2017. No2021, making no cost-of-livingadjustments were made.adjustments.We selected
NovemberJanuary 1,20172022, the last day of our 2021 fiscal year, as the date on which to determine our median employee. As of that date, we had30,25635,971 employees,26,23130,320 of which were located outside of theUnited StatesU.S. andapproximately 21,00024,571 of which were located in emerging markets. We utilized the de minimis exemption to eliminate those countries representing90
2023 Proxy Statement | Avery Dennison Corporation
no more than 5% of our global population in the aggregate. The countries excluded were Mauritius (19 employees), the Dominican Republic (120 employees), Pakistan (353 employees), Indonesia Pakistan(527 employees) and Sri Lanka with 542, 202 and 646 employees, respectively, in the aggregate(669 employees), representing approximately 4.6%0.1%, 0.3%, 1.0%, 1.5% and 1.9%, respectively, of our global population. Weworkforce at that time.
To determine our medianable group, we used a statistical sampling approach known as stratified sampling to concentrate on medianable employees, which were those within a narrow range of the estimated median salary of $9,524,$10,645, because these employees were all reasonably likely to be our median employee. As a result of this statistical sampling process, we identified 647819 employees with a salary within $500 of this amount. Employees from China represented 51%approximately 58% of the medianable group; as a result, we narrowed the medianable group to those 329478 employees. Finally, we identified the nine5 employees who were potentially our median employee by analyzing additional qualitative and quantitative characteristics, including pay volatility.
Using this methodology, we determined that ourMEDIAN EMPLOYEE COMPENSATION
Our median employee was a full-time, salaried employee working at a manufacturing facility in China, with annual base compensation of approximately $10,498.$10,572. For purposes of this disclosure, we converted the employee'semployee’s base compensation from Chinese Yuan to U.S. dollars using the average monthly exchange rate asduring 2022 of December 1, 2017 of 0.15074998.0.1489384269.
CALCULATION OF MEDIAN EMPLOYEE'S COMPENSATION
InAs required by SEC rules, in determining the annual total compensation of approximately $12,016$13,688 for our median employee, as required by SEC rules, we calculated the employee'semployee’s compensation in accordance with Item 402(c)(2)(x) of Regulation S-K, consistent with how we determinedetermined our CEO'sCEO’s total compensation for the20172022 Summary Compensation Table.
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ITEM 4 – RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee —– which is directly responsible for the appointment, compensation (including approval of audit and non-audit fees) and evaluation of the independent registered public accounting firm that audits our financial statements and internal control over financial reporting —– has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 2018,2023 and our Board is seeking stockholder ratification of the appointment.
Stockholder ratification is not required by our Bylaws or applicable laws and regulations. However, our Board annually submits thisthe appointment for stockholder ratification as an element of our strong governance program. If stockholders were not to ratify the appointment, the Audit Committee would reconsider whether or not to retain PwC, but could determine to do so in the committee'sat its discretion. In addition, even if the appointment is ratified, the Audit Committee could subsequently appoint a different independent registered public accounting firm without stockholder approvalratification if the committee were to determine that doing so would bewas in the best interests of our company and stockholders.
Although no formal statement fromRepresentatives of PwC is planned, representatives of the firm will be present atavailable during the Annual Meeting to answer questions from stockholders.
AUDIT COMMITTEE EVALUATION
Audit Committee Evaluation
In determining whether to reappoint PwC, the Audit Committee considered the firm’s qualifications, performance, independence and independencetenure, as well as the performance of the firm and the audit engagement team servicing our company; the quality of its discussions with PwC,PwC; and the fees charged by PwC for the quality and breadthscope of services provided. In connection with the 20182023 appointment, the Audit Committee considered, among other things, the following:factors described below.
•Audit Quality— The quality of PwC's audit and non-audit work, based on its oversight of the firm's work product, as well as its discussions with management in executive session without PwC present and its discussions with PwC in executive session without management present;•Performance— PwC's reports on its quality controls and its performance during our 2017 and prior-year audits;•Qualitative Review—• Audit Quality – The quality of PwC’s audit and non-audit work based on its oversight of the firm’s work product, considering the firm’s (i) compliance with accounting, auditing and regulatory requirements; (ii) understanding of our businesses and the financial environments in which we operate; (iii) use of its experience to identify and resolve issues in a timely manner; and (iv) exercise of integrity, objectivity and professional skepticism when performing our audits, as reflected in its Audit Quality Report provided to the Audit Committee in November 2022
• Performance – PwC’s performance during our 2022 and prior-year audits, noting the firm’s agility and strong performance in 2022 despite the continued impact of COVID-19 in certain countries in which we operate, as well as its actions to address the impacts of remote/hybrid work environments and engage subject matter experts from the firm to deliver additional value
• Qualitative Review – The results of our
globalsurvey of members of management and the Audit Committee evaluating PwC’s (i) expertise and resources; (ii) quality and timeliness of audit planning; (iii) communication and interaction; (iv) independence, objectivity and professional skepticism; and (v) value from fees, noting identified areas of strength and improvement opportunities• Self-Assessment – PwC’s self-assessment of its performance during the 2022 audit and its satisfaction of the service needs and expectations of the Audit Committee and management
• Regulatory Reviews – External data on the firm’s audit quality and performance, including the most recent Public Company Accounting Oversight Board (PCAOB) report on PwC
• Fees – The reasonableness of PwC’s fees for audit and non-audit services, both on an absolute basis and relative to peer firms; the Audit Committee is benchmarking independent auditor fees in 2023
• Independence – PwC’s processes to ensure it maintains independence, written disclosures from the firm and the independence letter required by the PCAOB
• Tenure – PwC’s tenure as our independent auditor, reflecting on feedback from certain of our investors counterbalanced against the benefits of having a longer-tenured auditor, as well as the controls we and PwC have in place to mitigate any potential independence risk. In 2022, the Audit Committee deliberated on conducting a request for proposal process to consider the selection of a new independent auditor, determining not to do so given its continued overall satisfaction with PwC’s performance; our engagement of other large auditing firms for non-audit services to our company, which could impair their independence and limit their ability to serve as our independent registered public accounting firm; the Committee’s adherence to regular rotation of PwC’s lead engagement partner and lead relationship partner; and potential risks to audit quality and timeliness.
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The Audit Committee evaluating PwC's (i) expertise and resources, (ii) audit planning, (iii) communication and interaction, (iv) independence, objectivity and professional skepticism and (v) value for fees;
The Audit Committeehas determined that the appointment of PwC is in the best interest of our company and stockholders. The Audit Committee has appointed subject to stockholder ratification, PwC as our independent registered public accounting firm for fiscal year 20182023 and our Board recommends that stockholders ratify the appointment at the Annual Meeting.appointment.
Board Recommendation
RECOMMENDATION OF BOARD OF DIRECTORS
Our Board recommends that you vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for fiscal year 2018.2023. Properly dated and signed proxies will be so voted unless you specify otherwise.
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AUDIT MATTERS
AUDITOR TENURE
PwC has been our independent registered public accounting firm since 1998 and served in that capacity during fiscal year 2017.2022. Through its predecessor entities, we believe that the firm has served as our independent auditor since at least 1960, which was the first year our financial statements were subject1954 based on records we have been able to SEC reporting requirements.locate. We have not determinedbeen unable to determine the exact year PwC began serving as the independent auditor for our company. PwC is very well qualifiedwell-qualified to actcontinue serving as our independent registered public accounting firm, and has a deep understanding ofunderstands our operations and accounting practices. Some governance stakeholderspractices, and maintains rigorous procedures to ensure auditor independence, which are discussed with and evaluated by the Audit Committee. A few of our investors have suggested that, longbecause longer tenure poses a risk to auditor independence. Theindependence, the Audit Committee believes, however,should consider the appointment of a new firm. After giving these views due consideration, the Audit Committee determined not to undertake a request for proposal process at this time, and to reappoint PwC because it continues to believe that PwC's years of experience auditing our company confers significant benefits, includingPwC provides independent, high-quality audit services on the following:
•Higher Audit Quality— PwC has deep institutional knowledge regarding our operations, businesses,scale andaccounting policies and practices;•Economies of Scale —PwC has a global presencewithresources in virtually all ofthecountries in which we do business, enablingefficiency thefirmCommittee requires, giving consideration tocost-effectively perform statutory audit work on our subsidiary accounts; and•Cost Efficiency— Having familiarity with our business allows PwC to perform its services and ensure audit quality more cost-competitively than other firms.
| • | Audit Quality and Performance – PwC has deep institutional knowledge regarding our operations, businesses, and accounting policies and practices, and optimizes its people and technology to deliver quality assurance services, consistently performing well |
| • | Scale – PwC has a global presence with resources in virtually all of the countries in which we do business, enabling the firm to cost-effectively perform statutory audit work on our subsidiary accounts |
| • | Capability – PwC’s capability and experience handling the breadth and complexity of our global operations |
| • | Efficiency – PwC brings customized knowledge using judgment tailored to our audits, allowing for significant time savings |
| • | Cost – PwC’s ability to cost-effectively perform audit, audit-related, tax compliance, tax planning and other services |
In conducting its periodicregular review of whether to appoint a new independent registered public accounting firm, among other things, the Audit Committee considers the fact that onboarding a new firm would require a significant time commitment on the part of management, potentially distracting from the paramount focus on financial reporting and internal controls, without necessarily increasing audit quality.
The Audit Committee recognized PwC’s investment of significant time and resources to maintain and continually enhance audit quality; provide its people with greater flexibility in how and where they work; and identify new ways for them to work with one another and our company to improve the audit experience.
PwC continuously provides the Audit Committee and management with accounting/financial reporting insights and best practices relevant to our business, as well as advance notice of legislative and regulatory developments that have the potential to significantly impact our company.
The Audit Committee has several controls in place to mitigate any potential independence risk related to auditor tenure, including those described below and on the following:following page.
•Limits on Non-Audit Services— The Audit Committee assesses the impact providing non-audit services may have on PwC's independence each time it approves the firm's provision of these services, as well as during its annual assessment of the firm's independence;•Periodic Consideration of Auditor Rotation— The Audit Committee periodically considers whether to change the independent registered public accounting firm based on its assessment of PwC's audit quality, performance, compensation and independence;•Executive Sessions— The Audit Committee meets regularly both with PwC without management present and with management without PwC present; and•Lead Audit Partner Selection— The Audit Committee selects any new lead audit partner, in consultation with members of senior management and representatives of PwC.
In order to regularly bring a fresh perspective to the engagement, a new lead audit partner is designated at least every five years, and a new partner was last designated for the 2014 audit. The then-serving Audit Committee Chair and other members of the committee interviewed the partner prior to his designation, and the Audit Committee as a whole was directly responsible for making the selection, in consultation with members of senior management and representatives from PwC. During 2017, the entire Audit Committee met with the candidate proposed to be the next lead audit partner, who is expected to be designated by the Committee for the 2019 audit.
| • | Annual Review of Performance and Independence – In addition to its ongoing assessment and feedback provided to PwC, the Audit Committee formally evaluates both performance and independence, as well as other factors such as tenure, in determining whether or not to reappoint the firm for the following year |
| • | Limits on Non-Audit Services – The Audit Committee assesses the impact providing non-audit services may have on PwC’s independence each time it approves the firm’s provision of these services, as well as during its annual assessment of the firm’s independence; our company regularly uses other independent registered public accounting firms to provide non-audit services, engaging PwC only where such services are permissible and where doing so confers significant benefits given its role as our independent auditor |
| • | Regular Consideration of Auditor Rotation – The Audit Committee regularly considers whether to change the independent registered public accounting firm based on its assessment of PwC’s audit quality, performance, compensation, independence and tenure, having most recently done so in 2022, deliberating on whether to undertake a request for proposal process and ultimately determining instead to benchmark the firm’s fees in 2023 |
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| • | Executive Sessions – The Audit Committee meets regularly both with PwC without management present and with management without PwC present |
| • | Lead Engagement Partner Rotation and Selection – To regularly bring a fresh perspective to the audit, a new lead engagement partner is designated at least every five years; a new lead engagement partner was most recently designated in advance of the 2019 audit. The Audit Committee interviewed the partner prior to his designation, and the Audit Committee was directly responsible for making the selection, in consultation with management and representatives from PwC. The Audit Committee began discussions with the firm regarding the next lead engagement partner in mid-2022, who would lead audits conducted by PwC beginning in 2024. |
| • | Oversight by Lead Relationship Partner – PwC designates a separate lead relationship partner to provide additional assurance and objective oversight; this partner meets at least annually with the Audit Committee and is available as needed to resolve any issues that may arise. A new lead relationship partner was designated in 2022, having been selected by the Audit Committee in consultation with leadership from PwC. This additional oversight and escalation point to address issues that may arise strengthens the independence of the audit engagement team and helps ensure continuous improvement in service quality. |
AUDITOR INDEPENDENCE
PwC has advised us that neither the firm nor any member thereof has any financial interest, direct or indirect, in any capacity in our company or our subsidiaries. As a result, PwC has confirmedsubsidiaries, confirming to the Audit Committee that it is in compliance with allthe rules, standards and policies of the PCAOB and the regulations of the SEC governing auditor independence.
The Audit Committee considers the impact providing non-audit services may have on PwC's independence each time it approves the firm's provision of such services, as well as during its annual assessment of the firm's independence. In February 2018,2023, the Audit Committee reviewed the non-audit services approvedpre-approved by the Committeecommittee and provided by PwC during 2017,2022, including the related fees associated with previously pre-approved services, and determined thatin assessing whether the firm'sfirm’s provision of these services did notwould impair PwC'sPwC’s independence.
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Table of ContentsThe Audit Committee discussed with PwC its independence from our company, Board and management and concluded that PwC was independent during 2022.
In negotiatingapproving PwC’s services and approving PwC's fees, and services, the Audit Committee considers whether PwC is best positioned to provide the services effectively and efficiently due to its familiarity with our operations, businesses, accounting policies and practices, internal controls, and financial and information technology systems, as well as whether the services enhance our ability to manage or control risks and maintain audit quality. The Audit Committee monitorsregularly receives updates on the services renderedprovided by, and fees paid to, PwC to ensure that the servicesthey are within the parameters approved by the Audit Committee.
COMMITTEE APPROVAL OF SERVICES AND FEES
The Audit Committee has adopted procedures for the pre-approval of all audit and non-audit services and fees provided by the independent registered public accounting firm. In the fourth quarter of 2021, the Audit Committee approved the (i) audit, audit-related and other services PwC would perform in the 2022 audit and (ii) permissible tax services the firm andcould provide during the fees paid to PwC in 2017 were pre-approved.year. The Audit Committee pre-approved 2017PwC’s budgeted fees for audit, feesaudit-related, tax compliance, tax planning and other services in February 2022, received updates on year-to-date fees incurred in July and November of that year, received a mid-year update in July and assessed the final fees in connection with its review of the results of the audit in February 2018.2023. These procedures include reviewing and approving a plan for audit and permitted non-audit services, which includes a description of, and estimated fees for, each category of audit services and non-audit services. Additional Audit Committee approval is required for non-audit services not included in the initial plan or substantially in excess of the budgeted amount for the particular category of services. The Audit Committee has delegated interim pre-approval authority to its Chair for services not included in the audit plan; these services are reviewed withpresented for approval to the entire Audit Committee at a subsequent meeting.
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AUDIT FEES
ForIn fiscal years 20172022 and 2016,2021, PwC provided the services shown below for our company —– all of which were approved by the Audit Committee usingunder the procedures described above —– for which we paid the firm the fees indicated.
| | | 2017 | | 2016 | | ||||
|---|---|---|---|---|---|---|---|---|---|
| | | | | | | ||||
Audit Fees(1) | | | $ | 8,025,000 | | | $ | 6,957,000 | |
Audit-Related Fees(2) | | | 448,000 | | | 788,000 | | ||
Tax Fees: | | | | | | ||||
Tax Compliance(3) | | | 1,949,000 | | | 2,214,000 | | ||
Tax Planning(4) | | | 1,369,000 | | | 1,843,000 | | ||
All Other Fees(5) | | | 55,000 | | | 13,000 | | ||
| | | | | | | ||||
Total Fees | | | $ | 11,846,000 | | | $ | 11,815,000 | |
(1)Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to audits of our income tax provisions and related reserves, consents and review of our SEC filings.(2)Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures; accounting consultations; consultations concerning financial accounting and reporting standards; general advice on implementation of SEC and Sarbanes-Oxley requirements; and audit services not required by statute or regulation. This category also includes audits of pension and other employee benefit plans, as well as the review of financial or information technology systems and internal controls unrelated to the audit of the financial statements.(3)Includes fees associated with tax compliance such as preparation of tax returns, tax audits and transfer pricing.(4)Includes fees for domestic and international tax planning, and tax planning related to restructurings, acquisitions and divestitures.(5)Includes fees for any services other than those described in the above categories. Included an information technology license in both years, and a research and development study in Israel and a trade compliance project in Malaysia in 2017.
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| 2022 | 2021 | |||||||
Audit Fees(1) | $ | 9,158,000 | $ | 8,690,000 | ||||
Audit-Related Fees(2) | 203,000 | 236,000 | ||||||
Tax Fees: | ||||||||
Tax Compliance(3) | 2,212,000 | 2,610,000 | ||||||
Tax Planning(4) | 2,062,000 | 1,647,000 | ||||||
All Other Fees(5) | 15,000 | 16,000 | ||||||
|
|
|
| |||||
Total | $ | 13,650,000 | $ | 13,199,000 | ||||
(1) Includes fees for services performed to comply with the standards established by the PCAOB, including the audit of our financial statements and the effectiveness of our internal control over financial reporting; audits in connection with statutory filings; and other services that the principal independent registered public accounting firm most effectively and efficiently can provide, such as procedures related to comfort letters, consents and review of our SEC filings.
(2) Includes fees associated with assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, including assistance in financial due diligence related to acquisitions and divestitures and the audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans, as well as the audit or review of information technology systems and internal controls unrelated to the audit of the financial statements. As required by revised proxy rules, amount in 2022 excludes $31,000 of audit-related fees for PwC’s audit of our pension plan in the Netherlands, which had been approved by the Committee but were ultimately paid by the plan rather than our company.
(3) Includes fees associated with tax compliance such as preparation of tax returns in foreign jurisdictions, tax audits and transfer pricing documentation.
(4) Includes fees for domestic and international tax planning, and tax planning related to restructuring actions, acquisitions and divestitures.
(5) Includes fees for any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources and other permissible services. |
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AUDIT AND FINANCE COMMITTEE REPORT
COMPOSITION AND QUALIFICATIONS
The Audit and Finance Committee (referred to in this report as the "Committee"“Committee”) of our Board of Directors (our “Board”) is comprisedcomposed of the directors named below,and pictured at the end of this report, each of whom meets the enhanced independence and experience standards for audit committee members set forth inrequired by Securities and Exchange Commission (SEC) rules and New York Stock Exchange (NYSE) listing standards. Our Board of Directors has determined all members to be financially literate and designated each of Messrs.Anthony Anderson Barker and Patrick Siewert as an "audit“audit committee financial expert"expert” under applicable SEC regulations. Members of the Committee are prohibited from sitting on the audit committee of more than two other public companies, and all members are in compliance with this restriction.
The Committee has a written charter adopted by our Board, of Directors, which is available onunder Corporate Governance in the investors section of our website atwww.averydennison.com/auditcharter.website. The Committee annually reviews the charter and recommends changes to the Board for approval. The charter was lastmost recently amended in February 2017.December 2022.
During fiscal year 2017,2022, the Committee primarily performed the following activities described below on behalf of our Board of Directors:Board.
•Reviewed and discussed with management and the independent registered public accounting firm our quarterly and annual financial results, earnings release documentation and the related reports
filedwe file with theSEC;•- SEC
Reviewed and discussed with management,
theour Vice President of Internal Audit and the independent registered public accounting firm our internal controls report and the independent registered public accountingfirm'sfirm’s attestationthereof;•- thereof
Evaluated the qualifications, performance and independence of the independent registered public accounting firm and met with representatives of the firm to discuss the scope, budget, staffing and progress of
the firm's audit;•- its audit
Supervised
theour Vice President of Internal Audit with respect to the scope, budget, staffing and progress of the internal audit and evaluated his personal performance, as well as the performance ofthe internal audit function; and•- his function
Discussed significant financial risk exposures, including our cybersecurity risk management program and risks related to our company’s information technology controls and security, and the steps taken by management to monitor and control these
exposures.exposuresOVERSIGHT OF CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for our consolidated financial statements, accounting and financial reporting policies, internal control over financial reporting, and disclosure controls and procedures. The Committee appointed the independent registered public accounting firm of PricewaterhouseCoopers LLP (PwC) to provide audit, audit-related and tax compliance services, with limited tax planning and other services to the extent approved by the Committee. PwC
was responsible for performingperformed an independent audit of our 2022 consolidated financial statements and our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)and, issuing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America (GAAP). TheCommittee'sCommittee’s responsibility is to monitor and oversee our accounting and financial reporting processes and theauditaudits of our consolidated financial statements andourinternal control over financial reporting. The members of the Committee are not professionally engaged in the practice of auditing or accounting and rely without independent verification on the information provided to them and the representations made by management and PwC.Avery Dennison Corporation|2018 Proxy Statement|87The Committee reviewed and discussed our consolidated financial statements and related footnotes for the fiscal year ended December
30, 2017 —31, 2022 – including ourcompany'scompany’s critical accounting policies andmanagement'smanagement’s significant estimates and judgments—– with management and PwC, as well asPwC'sPwC’s report and unqualified opinion onthe audit.its audits. Management represented to the Committee and PwC that our consolidated financial statements were prepared in accordance with GAAP. PwC presented the matters required to be discussed by Auditing Standard No. 1301,Communications with Audit Committeesas adopted by the PCAOB and currently in effect.. The Committee receivedthethese written disclosures and the letters from PwC required by the applicable requirements of the PCAOB regarding communications concerning independence – includingEthics and Independence Rule 3526,Communications with Audit Committees Concerning Independence,andRule 3524,Audit Committee Pre-approval of Certain Tax Services, and Rule 3526, Communication with Audit Committees Concerning Independence – and discussed with PwC its independence from our company, Board and management.Avery Dennison Corporation | 2023 Proxy Statement
97
Based on the Committee'sCommittee’s review and discussions with management and PwC described above, as well as the Committee'sCommittee’s review of the representations of management and the audit report and unqualified opinion of PwC, the Committee recommended that our Board of Directors approve the inclusion of the audited consolidated financial statements for theour fiscal year ended December 30, 201731, 2022 in our Annual Report on Form 10-K filed with the SEC.
OVERSIGHT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Committee's responsibilityCommittee is to appointresponsible for appointing the independent registered public accounting firm, and monitormonitoring and overseeoverseeing the firm'sfirm’s qualifications, compensation, performance and independence. In this capacity, the Committee reviewed with PwC the overall scope of services and fees for its audit, and monitored the progress of PwC'sPwC’s audit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the firm'sfirm’s findings and required resources.
PwC provided to the Committee the written disclosures and independence letter required by the PCAOB. The Committee discussed with PwC its independence from our company and management and concluded that PwC was independent during fiscal year 2017.2022. The Committee has a policy requiring pre-approval of fees for audit, audit-related, tax compliance, tax planning and other services and has concluded for 2017 that PwC'sPwC’s provision of limited non-audit services to our company in 2022 was compatible with maintaining its independence.
Under its charter, the Committee is required to periodicallyregularly consider whether it is appropriate to change the independent registered public accounting firm, and the Committeehaving most recently formally evaluated with management and PwC regarding whether it may be appropriate to do so in 2015,2022 with a view to ensuring that audit quality would continue to be paramount. Recognizing that – aided by the regular rotation of both the lead engagement partner and the lead relationship partner – PwC has continued to exercise independence in challenging management, the Committee determined to retain PwC, noting the firm’s strong performance and consistently improving service delivery with top talent assigned to our audit. The Committee determined at that time to retain PwC.is benchmarking PwC’s fees against those of other large auditing firms in 2023.
The Committee has determined that the appointment of PwC as our independent registered public accounting firm for fiscal year 20182023 is in the best interest of our company and stockholders. The Committee has appointed PwC in this capacity and recommends that stockholders ratify the appointment at the Annual Meeting.appointment.
The Committee'sCommittee’s responsibility is to monitor and oversee our internal audit function, reviewing the significant audit results reported to management and management'smanagement’s responses thereto. In this capacity, the Committee reviews with theour Vice President of Internal Audit the overall scope and budget for the internal audit, and regularly monitors the progress of the internal audit's progressaudit in assessing our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the Vice President of Internal Audit'skey findings and required resources. The Committee directly supervises theour Vice President of Internal Audit in the conduct of his operational responsibilities and evaluates his individual performance as well as that of the entire internal audit function.
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The Committee regularly meets separately in executive session without management present with each of theour Vice President of Internal Audit and PwC to review and discuss their evaluations of the overall quality of our accounting and financial reporting and internal control. The Committee also periodicallyregularly meets, without PwC or theour Vice President of Internal Audit present, with management, our CFO and our Controller/CAO, and meets as wellneeded with other members of management such as occasionally with only our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer,CEO, COO and General CounselCLO, to discuss, among other things, significant risk exposures impacting our financial statements and accounting policies.
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STOCKHOLDER FEEDBACK
The Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints regarding our accounting, internal controls and auditing matters. SeeComplaint Procedures for Accounting and Auditing Matters in theGovernance Sustainability and Social Responsibilitysection of this proxy statement. The Committee welcomes feedback regarding its oversight of our audit and finance programs. Stockholders may communicate with the Committee by writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
Patrick T. Siewert, ChairAnthony K. AndersonPeter K. BarkerKen C. HicksAndres A. LopezMartha N. Sullivan
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| Anthony K. Anderson | Andres A. Lopez | Patrick T. Siewert | |||
|  |  |  |
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SECURITY OWNERSHIP INFORMATION
SECURITY OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS
The table below shows the number of shares of our common stock beneficially owned by our (i) directors; (ii) NEOs; (iii) current directors and executive officers as a group; and (iv) greater-than-five-percent, or "significant,"“significant,” stockholders, in each case as of the February 26, 201827, 2023 record date for the Annual Meeting. "Beneficial ownership" means that the individual, group or entity, directly or indirectly, has or shares with others the power to vote (or direct the voting of) or the power to dispose of (or direct the disposition of) the shares; the individual, group or entity may or may not have any economic interest in the shares. The reporting of information in the table does not constitute an admission that the individual, group or entity is, for the purpose of Section 13 or 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the beneficial owner of the shares shown.
| NAME OF BENEFICIAL OWNER | | COMMON STOCK(1) | | NUMBER OF SHARES SUBJECT TO DSUS, OPTIONS EXERCISABLE, AND RSUS VESTING WITHIN 60 DAYS(2) | | NUMBER OF SHARES BENEFICIALLY OWNED | | PERCENT OF CLASS(3) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |||||||
Directors | | | | | | | | | |||||||
Dean A. Scarborough | | 194,109 | | | 250,962 | | | | 445,071 | | | * | |||
Bradley A. Alford | | 12,298 | | | 32,163 | | | | 44,461 | | | * | |||
Anthony K. Anderson | | 1,244 | | | 8,070 | | | | 9,314 | | | * | |||
Peter K. Barker | | 24,703 | | | 45,234 | | | | 69,937 | | | * | |||
Mitchell R. Butier | | 155,610 | | | 3,809 | | | | 159,419 | | | * | |||
Ken C. Hicks | | 20,303 | | | 28,521 | | | | 48,824 | | | * | |||
Andres A. Lopez | | 148 | | | 285 | | | | 433 | | | * | |||
David E. I. Pyott | | 12,227 | | | 65,651 | | | | 77,878 | | | * | |||
Patrick T. Siewert | | 10,519 | | | — | | | | 10,519 | | | * | |||
Julia A. Stewart | | 12,943 | | | 51,484 | | | | 64,427 | | | * | |||
Martha N. Sullivan | | 7,961 | | | 8,791 | | | | 16,752 | | | * | |||
Non-Director NEOs | | | | | | | | | |||||||
Gregory S. Lovins | | 15,185 | | | — | | | | 15,185 | | | * | |||
Georges Gravanis | | 22,552 | | | — | | | | 22,552 | | | * | |||
Anne Hill | | 39,022 | | | — | | | | 39,022 | | | * | |||
Susan C. Miller | | 49,178 | | | — | | | | 49,178 | | | * | |||
Anne L. Bramman | | 6,203 | | | — | | | | 6,203 | | | * | |||
All current directors and executive officers as a group (18 persons) | | 580,685 | | | 517,952 | | | | 1,098,637 | | | 1.3% | |||
Significant stockholders | | | | | | | | | |||||||
The Vanguard Group(4) | | 10,102,916 | | | — | | | | 10,102,916 | | | 11.5% | |||
BlackRock, Inc.(5) | | 6,761,758 | | | — | | | | 6,761,758 | | | 7.7% | |||
State Street Corporation(6) | | 4,793,642 | | | — | | | | 4,793,642 | | | 5.4% | |||
(1)Except as otherwise noted herein, each director, NEO and executive officer has sole voting and investment power with respect to the shares indicated and no shares have been pledged as security by any such person. Includes for the following beneficial owners the following amounts of shares held in various employee savings plans as of February 26, 2018: Mr. Scarborough — 43,673; Mr. Butier — 3,742; Mr. Lovins — 1,944; Ms. Hill — 2,742; Ms. Miller — 684; and all current directors and executive officers as a group — 58,106. For Mr. Scarborough, also includes 3,315 shares held in the Capital Accumulation Plan, a legacy deferred compensation plan that last received deferrals in 2005; and 148 and 20 shares held by his wife and one of his children, respectively, as to which he disclaims beneficial ownership. For Ms. Miller, also includes 16,106 shares held in the EVDRP.(2)Numbers reported in this column are not entitled to vote at the Annual Meeting. Includes the following number of DSUs deferred through the DDECP by the following directors as of February 26, 2018, as to which they have no voting or investment power: Mr. Alford — 16,154; Mr. Anderson — 8,070; Mr. Barker — 27,225; Mr. Hicks — 12,512; Mr. Lopez — 285; Mr. Pyott — 47,642; Ms. Stewart — 35,475; and Ms. Sullivan — 7,967. DSUs are included as beneficially owned because, if any of these directors were to resign or retire from our Board, their DDECP account would be valued as of the date of separation and the equivalent number of shares of our common stock would be issued to the separating director.(3)Percent of class based on 88,101,594 shares of our common stock outstanding as of February 26, 2018. Individuals with an (*) beneficially own less than 1% of our outstanding common stock.(4)Number of shares beneficially owned based on information as of December 31, 2017 contained in Amendment No. 7 to Schedule 13G filed with the SEC on February 12, 2018. The Vanguard Group has sole voting power with respect to 125,625 shares; shared voting power with respect to 15,065 shares; sole dispositive power with respect to 9,966,739 shares; and shared dispositive power with respect to 136,177 shares. The Vanguard Group is an investment adviser, in accordance with Rule 13d-1(b)(1)(ii)(E) of the Exchange Act, with a business address of 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
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(5)Number of shares beneficially owned based on information as of December 31, 2017 contained in Amendment No. 9 to Schedule 13G filed with the SEC on January 29, 2018. BlackRock, Inc. has sole voting power with respect to 5,880,306 shares and sole dispositive power with respect to all 6,761,758 shares. BlackRock, Inc. is a parent holding company or control person, in accordance with Rule 13d-1(b)(1)(ii)(G) of the Exchange Act, with a business address of 55 East 52ndStreet, New York, New York 10055.(6)Number of shares beneficially owned based on information as of December 31, 2017 contained in Schedule 13G filed with the SEC on February 14, 2018. State Street Corporation has shared voting power and shared dispositive power with respect to all 4,793,642 shares. State Street Corporation is a parent holding company or control person, in accordance with Rule 13d-1(b)(1)(ii)(G) of the Exchange Act, with a business address of State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers, and owners of greater than 10% our equity securities (collectively, our "Insiders") to timely file initial reports of ownership and reports of changes in ownership with the SEC. Due to the complexity of SEC reporting rules, we undertake to file these reports on behalf of our directors and executive officers and have instituted procedures to assist them with complying with their reporting obligations. We reviewed our records, SEC filings and written representations from our directors and executive officers that no other reports were required to have been filed.
| Name of Beneficial Owner | Common Stock(1) | Number of Rights Exercisable and Vesting within 60 Days(2) | Number of Shares Beneficially Owned | Percent of Class(3) | ||||||||||||||||
Directors | ||||||||||||||||||||
Bradley A. Alford | 22,642 | 21,471 | 44,113 | * | ||||||||||||||||
Anthony K. Anderson | 558 | 12,641 | 13,199 | * | ||||||||||||||||
Mitchell R. Butier | 278,792 | 201,118 | 479,910 | * | ||||||||||||||||
Ken C. Hicks | 29,002 | 15,063 | 44,065 | * | ||||||||||||||||
Andres A. Lopez | 7,115 | 1,459 | 8,574 | * | ||||||||||||||||
Francesca Reverberi | – | – | – | * | ||||||||||||||||
Patrick T. Siewert | 16,604 | – | 16,604 | * | ||||||||||||||||
Julia A. Stewart | 21,642 | 42,550 | 64,192 | * | ||||||||||||||||
Martha N. Sullivan | 16,660 | 12,951 | 29,611 | * | ||||||||||||||||
William R. Wagner | – | – | – | * | ||||||||||||||||
Non-Director NEOs | ||||||||||||||||||||
Deon M. Stander | 38,639 | 11,339 | 49,978 | * | ||||||||||||||||
Gregory S. Lovins | 52,877 | 16,112 | 68,989 | * | ||||||||||||||||
Deena Baker-Nel | 5,422 | 4,316 | 9,738 | * | ||||||||||||||||
Ignacio J. Walker | 7,795 | 4,134 | 11,929 | * | ||||||||||||||||
All current directors and executive officers | 536,307 | 352,488 | 888,795 | 1.1 | % | |||||||||||||||
Significant stockholders | ||||||||||||||||||||
The Vanguard Group(4) | 9,856,108 | – | 9,856,108 | 12.2 | % | |||||||||||||||
BlackRock, Inc.(5) | 6,514,175 | – | 6,514,175 | 8.0 | % | |||||||||||||||
| (1) | Except as otherwise noted herein, each director, NEO and current executive officer has sole voting and investment power with respect to the shares indicated and no shares have been pledged as security by any such person. Includes for the following beneficial owners the following amounts of shares held in our employee savings plan as of February 27, 2023: Butier – 4,083, Lovins – 2,124, Baker-Nel – 1,307, Walker – 555, and all current directors and executive officers as a group – 10,535. |
| (2) | Numbers reported in this column are not entitled to vote during the Annual Meeting. Includes the following number of DSUs deferred through the DDECP by the following directors as of February 27, 2023, as to which they have no voting or investment power: Alford – 21,471; Anderson – 12,641; Hicks – 15,063; Lopez – 1,459; Stewart – 42,550; and Sullivan – 12,951. DSUs are included as beneficially owned because, if the director were to resign or retire from our Board, his or her DDECP account would be valued as of the date of separation and the equivalent number of shares of our common stock would be issued to the separating director. For Mr. Butier and all non-director NEOs, includes PUs and MSUs vesting within 60 days of February 27, 2023. |
| (3) | Percent of class based on 81,108,975 shares of our common stock outstanding as of February 27, 2023. Individuals with an (*) beneficially own less than 1% of our outstanding common stock. |
| (4) | Number of shares beneficially owned based on information as of December 31, 2022 contained in Amendment No. 12 to Schedule 13G filed with the SEC on February 9, 2023. The Vanguard Group has sole voting power with respect to no shares; shared voting power with respect to 118,071 shares; sole dispositive power with respect to 9,519,827 shares; and shared dispositive power with respect to 336,281 shares. The Vanguard Group is an investment adviser, in accordance with Rule 13d-1(b)(1)(ii)(E) of the Exchange Act, with a business address of 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. |
| (5) | Number of shares beneficially owned based on information as of December 31, 2022 contained in Amendment No. 14 to Schedule 13G filed with the SEC on February 3, 2023. BlackRock, Inc. has sole voting power with respect to 5,747,686 shares; shared voting power with respect to no shares; sole dispositive power with respect to all 6,514,175 shares; and shared dispositive power with respect to no shares. BlackRock, Inc. is a parent holding company or control person, in accordance with Rule 13d-1(b)(1)(ii)(G) of the Exchange Act, with a business address of 55 East 52nd Street, New York, New York 10055. |
100 | 2023 Proxy Statement | Avery Dennison Corporation |
All of our Insiders complied with the Section 16(a) filing requirements on a timely basis during 2017.
Both our Code of Conduct and our Conflict of Interest Policy (our "COI Policy"(“COI Policy”) provide that conflicts of interest should be avoided. Under our Governance Guidelines, directorsBoard members are expected to comply with theour Code of Conduct and avoid any action, position or interest that conflicts with the intereststhose of our company, or gives the appearance of a conflict. OurThe Governance Committee oversees our COI Policy, which proscribes any of our officers (including our executive officers) or employees – or any of their immediate family members – from directly or indirectly doing business, seeking to do business or owning an interest in an entity that does business or seeks to do business with our company without approval in writing from the Governance Committee. Under our COI Policy, anyhaving received prior written approval. Any officer or employee who has a question as to the interpretation of the policy or its application to a specific activity, transaction or situation may submit the question in writing to our General Counsel/Secretarylaw department for any further necessary review by the Governance Committee.
On an annual basis, all of ourAll employees at the level of manager and above and all non-supervisory professionals are regularly required to complete a compliance certification in which they must (i) disclose, among other things, whether they or any of their immediate family members have a job, contract or other position with an entity that has commercial dealings with our company and (ii) certify their compliancethat they have complied with our COI Policy and Code of Conduct. Non-supervisory professionals in our sales, marketing, customer serviceConduct and purchasing functions complete this certification in even years, and non-supervisory professionals in our technology, finance, supply chain, technical services, environmental, health and safety, legal and risk functions do so in odd years.company policies. All disclosures are reviewed by our compliance departmentand law departments in consultation with our law department and senior management to determine whether the activity has the potential to significantly influence our business. The Governance Committee receives a report from our Chief Compliance Officer on the disclosures elicited in the annualcompliance certification and, in the event that aan unresolved disclosure potentially gives rise to a significant conflict of interest, determines whether a conflict of interest exists or whether there is a reasonable likelihood that the activity, transaction or situation would influence the individual'sindividual’s judgment or actions in performing his or her duties for our company.In 2022, we relaunched the compliance certification process after suspending it in 2021 to implement improvement opportunities recommended by an independent third-party expert we engaged to benchmark our compliance program, as well as improve the overall efficiency of the process.
In addition, each of our directors and executive officers annually completes a questionnaire designed to solicit information about any potential related person transactions. Transactions involving directors are reviewed with the Governance Committee by the General Counsel/our Corporate Secretary in connection with the annual assessment of director independence and review of related person transactions.independence. Responses from executive officers are reviewed by the Office of the General Counselour Corporate Secretary with oversight by the Governance Committee in the event any such transactions are identified.
We review internal financial records to identify transactions with security holders known by us from information contained in Schedules 13D or 13G filed with the SEC to be beneficial owners of more than five percent5% of our common stock to determine whether we have any relationships with the security holders that might constitute related person transactions under Item 404(a) of Regulation S-K. Findings are then discussedOur Corporate Secretary discusses any such findings with the Governance Committee.
During fiscal year 2017,2022, there were no related person transactions requiring disclosure under Item 404 of Regulation S-K.SEC rules and regulations. To our knowledge, all related person transactions were subject to reviewreviewed under our policies and procedures.
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| 101 |
VOTING AND MEETING Q&A
ANNUAL REPORT AND PROXY MATERIALS
WHEN WILL I RECEIVE THE 20172022 ANNUAL REPORT?
We willexpect to mail or make available our 20172022 Annual Report to Stockholders to all stockholders of record on or about March 15, 2018.2023.
HOW DO I ACCESS THE 20182023 PROXY MATERIALS?
We have elected to provide access to our proxy materials on the Internet.internet. Accordingly, we are sending the Notice of Internet Availability of Proxy Materials (the "Notice"“Notice”) to our stockholders of record. Brokers, banks and other nominees (collectively, "nominees"“nominees”) who hold shares on behalf of beneficial owners (also called "street name"“street name” holders) will send a similar notice. You will have the ability to access our proxy materials on the website referred to in the Notice. Instructions on how to request printed proxy materials by mail, including an option to receive paper copies in the future, may be found in the Notice and on the website referred to in the Notice.
On or about March 15, 2018,2023, we intend to make this proxy statement available on the Internetonline and mail the Notice to all stockholders entitled to vote. WeOn or about the same date, we intend to mail this proxy statement, together with a proxy card, to stockholders entitled to vote atduring the Annual Meeting who have previously requested paper copies on or about March 16, 2018.copies. In addition, if you request paper copies of these materials for the first time, they will be mailed within three business days of your request. If you hold your shares in street name, you may request paper copies of the proxy statement and proxy card from your nominee by following the instructions on the notice your nominee provides to you.
Stockholders of record may obtain a copy of this proxy statement without charge by writing to our Corporate Secretary Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.at 8080 Norton Parkway, Mentor, Ohio 44060.
WHAT IS HOUSEHOLDING?
We have adopted a procedure approved by the SEC called householding. Under this procedure, we are permitted towill deliver a singleone copy of our proxy statement2022 integrated sustainability and annual report, which includes our 2023 notice and proxy statement, to stockholders sharing the same address. Householding allows us to reduce our printing and postage costs, and prevents duplicative information from being received at your household. Householding affectshousehold and impacts only the delivery of proxy materials; it has nodoes not impact on the delivery of dividend checks.
For holders who share a singlean address, we are sending only one annualintegrated report and proxy statement to that address unless we have received instructions to the contrary from any stockholder at that address. If you wish to receive an additional copy of our annualintegrated report, or proxy statement, or if you receive multiple copies of our annualintegrated report or proxy statement and wish to receive a single copy in the future, you may make your request by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
If you are a street namebeneficial holder and wish to revoke your consent to householding and receive separate copies of our proxy statement and annual report in future years, you may call Broadridge Investor Communications Services toll-free at 800.542.1061866.540.7095 in the U.S. and Canada or write to them c/o Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
HOW CAN I ACCESS THE ANNUAL REPORT AND PROXY MATERIALS ELECTRONICALLY?
Instead of receiving paper copies of proxy statements and annual reports by mail in the future, you can elect to receive an email that will provide a link to these documents on the Internet.internet. By electing to access proxy materials via the Internet,online, you will be able tocan access them more quickly, save us the cost of printing and mailing them to you, reduce the amount of mail you receive from us, and help us preserve environmental resources.
You may enroll to access proxy materials and annual reports electronically for future Annual Meetings by registering online at the following website:https://enroll.icsdelivery.com/avy.avy. If you vote on the Internet, simplyare voting online, you can follow the promptslinks on the voting website to link toreach the electronic enrollment website.
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102 | 2023 Proxy Statement | Avery Dennison Corporation |
Table of ContentsVOTING
WHO IS ENTITLED TO VOTE?
Stockholders of record as of the close of business on February 26, 201827, 2023 are entitled to notice of, and to vote at, the Annual Meeting. Our common stock is the only class of shares outstanding, and there were 88,101,59481,108,975 shares of common stock outstanding on February 26, 2018. A27, 2023. The list of stockholders entitled to vote will be available for inspection atduring the virtual Annual Meeting, as well as starting 10 days before the Annual Meeting during regular business hours at our company headquarters.headquarters in Mentor, Ohio. You are entitled to one vote for each share of common stock you held on the record date.
HOW DO I VOTE?
You may vote by submitting a proxy or voting in person atduring the Annual Meeting.Meeting at www.virtualshareholdermeeting.com/AVY2023. If you hold your shares in street name,are a beneficial holder, you may only vote in person atduring the meeting if you properly request and receive a legal proxy in your name from the nominee that holds your shares.
The method of voting by proxy differs depending on whether you are viewing this proxy statement on the Internetonline or reviewing a paper copy, as follows:copy.
•If you are viewing this proxy statement
on the Internet,online, you may vote your shares by (i) submitting a proxyon the Internetby telephone or online by following the instructions on the website or (ii) requesting a paper copy of the proxy materials and following one of the methods describedbelow; and•- below.
If you are reviewing a paper copy of this proxy statement, you may vote your shares by (i) submitting a proxy by telephone or
on the Internetonline by following the instructions on the proxy card or (ii) completing, dating and signing the proxy card included with the proxy statement and returning it in the preaddressed,postage paidpostage-paid envelope provided.Whether or not you plan to attend the Annual Meeting, we urge you to vote promptly using one of the methods described in the proxy materials. We encourage you to vote by
proxy bytelephone oron the Internetonline since these methods immediately record your vote and allow you to confirm that your votes have been properly recorded. Telephone andInternet voting facilities close atonline votes must be received by 11:59 p.m. Eastern Time on April25, 2018.26, 2023.WHAT IF MY SHARES WERE ACQUIRED THROUGH THE DIRECT SHARE PURCHASE AND SALE PROGRAM?
Shares acquired through our Direct Share Purchase and Sale Program may be voted by following the procedures described above.
WHAT IF MY SHARES ARE HELD IN THE EMPLOYEE SAVINGS PLAN?
If you hold shares as a participant in our Employee Savings (401(k)) Plan, your vote serves as a voting instruction to Fidelity Management Trust Company, the trustee of the plan, on how to vote
the shares you hold through the plan.your shares. Your voting instruction must be received by the trustee by 11:59 p.m. Eastern Time on April23, 2018.24, 2023.If the trustee does not receive your instruction in a timely manner, your shares will be voted in the same proportion as the shares voted by participants in the plan who timely furnish instructions. Shares of our common stock that have not been allocated to participant accounts will also be voted by the trustee in the same proportion as the shares voted by participants in the plan who timely furnish instructions.
HOW DO I REVOKE MY PROXY OR CHANGE MY VOTE AFTER I HAVE VOTED?
If you give a proxy pursuant to this solicitation, you may revoke it at any time before it is acted upon
atduring the Annual Meeting by (i) submitting another proxy by telephone oron the Internetonline (only your last voting instructions will be counted); (ii) sending a later dated paper proxy; or (iii)deliveringif you are entitled toour Corporate Secretary a written notice of revocation prior to thedo so, votingof the proxy at the Annual Meeting; or (iv) voting in person atduring the Annual Meeting. Simply attending the Annual Meeting will not revoke your proxy.If your shares are held in street name, you may only change your vote by submitting new voting instructions to your nominee. You must contact your nominee to find out how
you canto change your vote. Shares held in our Employee Savings Plan cannot be changed or revoked after 11:59 p.m. Eastern Time on April23, 2018,24, 2023, nor can they be votedin person atduring the Annual Meeting.Avery Dennison Corporation|2018 Proxy Statement|93Avery Dennison Corporation | 2023 Proxy Statement
103
IS MY VOTE CONFIDENTIAL?
Except in contested proxy solicitations, when required by law or as expressly authorized by you (such as by making a written comment on your proxy card, in which case the comment, but not your vote, willmay be shared with our company), your vote or voting instruction is confidential and will not be disclosed to any other person other than to the broker, trustee, agent or other entity tabulating your vote. Our directors, officers or employees will not be able to learn how you voted.
HOW WILL VOTES BE COUNTED?
Votes cast by proxy or in person atduring the Annual Meeting will be tabulated by a representative from Broadridge Financial Solutions, Inc., the independent inspector of election appointed by our Board. The inspector of election will also determine whether a quorum is present. AtDuring the Annual Meeting, shares represented by proxies that reflect abstentions or "broker non-votes"broker non-votes (which are shares held by a nominee that are represented atduring the meeting, but with respect to which the nominee neither has non-discretionarydiscretionary authority to vote nor has been given actual authority to vote on a particular item) will be counted as shares that are present and entitled to vote atduring the Annual Meeting for purposes of determining the presence of a quorum. Items 1, 2 and 23 are "non-routine"non-routine under the rules of the NYSE and Item 34 is routine. Nominees are prohibited from voting on non-routine items in the absence of instructions from the beneficial owners of the shares; as a result, if you hold your shares in street name and do not submit voting instructions to your nominee, your shares willnot be voted on Item 1, election of directors, ordirectors; Item 2, approval, on an advisory basis, of our executive compensation; or Item 3, approval, on an advisory basis, of the frequency of votes to approve executive compensation. We urge you to promptly provide voting instructions to your nominee so that your vote is counted.
The vote required to approve each of the Annual Meeting items, as well as the impact of abstentions and broker non-votes, is shown in the chart below.
 Item | Vote Required | Impact of Abstentions | Impact of Broker Non-Votes | |||||
| 1 | Election of directors | Majority of votes cast | Not counted as votes cast; no impact on outcome | Not counted as votes cast; no impact on outcome | ||||
 | ||||||||
| 2 | Advisory vote to approve | Majority of shares represented and entitled to vote | Negative impact on outcome | Not counted as represented and entitled to vote; no impact on outcome | ||||
 | ||||||||
| 3 | Determine, on an advisory basis, the frequency (whether every one, two or three years) with which our stockholders will have advisory votes to approve executive compensation | Plurality of shares represented and entitled to vote | No impact on outcome | Not counted as represented and entitled to vote; no impact on outcome | ||||
| 4 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year | Majority of shares represented and entitled to vote | Negative impact on outcome | Not applicable | ||||
WHAT IF THERE IS ADDITIONAL BUSINESS TO BE VOTED ON?
As of the date of this proxy statement, we know of no other business to be presented for consideration atduring the meeting. However, ifIf any other business properly comes before the meeting, your vote will be cast on any such other business in accordance with the best judgment of the individuals acting pursuant to your proxy.
HOW DO I FIND VOTE RESULTS?
We expect to announce preliminary voting results atduring the Annual Meeting and report final voting results in a Current Report on Form 8-K filed with the SEC on or before May 2, 2018.3, 2023.
WHAT IS THE TIME, DATE AND LOCATIONFORMAT OF THE ANNUAL MEETING?
The Annual Meeting will take place at 1:30 p.m. Pacific Time on April 26, 2018 at27, 2023. To allow more stockholders to attend without the Embassy Suites, 800 North Central Avenue, Glendale, California 91203.
Avery Dennison Corporation| 2018time and expense of doing so in person, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2023 using the 16-digit control number on your Notice of Internet Availability of Proxy Statement |94Materials or proxy card.
104 | 2023 Proxy Statement | Avery Dennison Corporation |
HOW CAN I ATTEND THE VIRTUAL MEETING?
IfTo attend the virtual Annual Meeting, you would likewill need to attendlog in to www.virtualshareholdermeeting.com/AVY2023 using the 16-digit control number on the Notice or proxy card mailed or made available to you on or about March 15, 2023. Online access to the live audio webcast of the Annual Meeting please bring photo identification. If you are a stockholder of record, you may bring the top half of your proxy card or your Notice to serve as your admission ticket. If you hold your shares in street name, you will be required to present proof of ownership to be admitted into the meeting. Acceptable documentation includes your Notice, a recent brokerage statement or a letter from your nominee evidencing your beneficial ownership of shares of our common stock as of February 26, 2018. If you would like to secure admission in advance, you may send a written request with proof of ownership to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.
Stockholders will be admitted into the Annual Meeting beginningopen at 1:0015 p.m. Pacific Time to allow time for you to log in and seating will be on a first-come basis. For safety and security reasons, cameras, recording equipment, computers, or large bags or other packages will not be permitted intotest your device’s audio system. We encourage you to access the meeting.meeting in advance of its designated start time as we plan to begin conducting the meeting promptly.
MAYHOW DO I ASK QUESTIONS ATDURING THE MEETING?
Our Chairman will conductWe have designed the virtual Annual Meeting into ensure that you have the same rights and opportunities to participate as you would at an orderlyin-person meeting, using easy-to-use online tools that allow you to attend, vote and timely manner in accordance with our Bylaws and Delaware law. To assist him in fulfilling his responsibilities, we have established rules for stockholders wishing to address the meeting, which will be available at the meeting.ask questions. Only stockholders as of the record date or their properly-appointedproperly appointed proxies may ask questions atduring the meeting, and they may do so only after recognized by our Chairman who may limit the length of discussion on any particular matter. During the Annual Meeting, you can view our Ground Rules for Conduct of Meeting and submit questions on www.virtualshareholdermeeting.com/AVY2023.
After the business portion of the Annual Meeting concludes and the meeting is adjourned, we will hold a Q&A session during which we intend to answer all questions submitted before or during the meeting that are pertinent to our company and the items being brought before stockholder vote during the Annual Meeting, as time permits and in accordance with our Ground Rules for Conduct of Meeting. Questions and answers will be grouped by topic and substantially similar questions will be answered only once. To promote fairness and ensure all stockholder questions are able to be addressed, we will respond to no more than three questions from any single stockholder. Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website.
As a result of time constraints and other considerations, we cannot assure you that every stockholder wishing to address the meeting will have the opportunity to do so. However, all stockholders are invited to direct inquiries or comments regarding business matters to our Investor Relations department by email toinvestorcom@averydennison.com or by mail to Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060. In addition, stockholders wishing to address matters to our Board or any of its members may do so as described underContacting Our Board in theOur Board of Directors section of this proxy statement.
OTHER MATTERS
WHAT DO I DO IF I AM HAVING TECHNICAL ISSUES ACCESSING OR PARTICIPATING IN THE MEETING?
Beginning 15 minutes prior to, and during, the Annual Meeting, we will have support available to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulty accessing, or during, the virtual meeting, please call the support team at 1.844.986.0822 (toll-free in the U.S. and Canada) or +1.303.562.9302 (for international participants).
HOW ARE PROXIES BEING SOLICITED?
We have retained D. F.D.F. King & Co., Inc. to assist in soliciting proxies for a fee of $12,000, plus reimbursement of out-of-pocket expenses incident to preparing and mailing our proxy materials. SomeCertain of our employees may solicit proxies in person, by telephone or by email; these employees will not receive any additional compensation for their proxy solicitation efforts. We will bear all costs related to this solicitation of proxies and we will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses they incur in forwarding our proxy materials to beneficial stockholders. You can help reduce these costs by electingconsenting to access our proxy materials electronically.
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MATTERS RELATED TO 2024 ANNUAL MEETING
HOW DO I SUBMIT ITEMS FOR POTENTIAL CONSIDERATION AT THE 20192024 ANNUAL MEETING?
To propose business otherwise satisfying the eligibility requirements of SEC Rule 14a-8 to be considered for inclusion in our proxy statement for the 20192024 Annual Meeting, you must mailprovide notice of proposed items so they are received at our principal executive offices on or before November 15, 2018.16, 2023. If you wish to nominate persons for election to our Board or bring any other business before an annual meeting under the advanced notice provisions or our Bylaws, you must notify our Corporate Secretary at our principal executive offices in writing 90 to 120 days prior to the first anniversary of the preceding year'syear’s annual meeting (with respect to the 20192024 Annual Meeting, no earlier than December 27, 201829, 2023 and no later than January 26, 2019).
Avery Dennison Corporation| 2018 Proxy Statement |95
Table of Contents28, 2024) and comply with the other requirements set forth in the Bylaws.
Your notice must include, among other things, the following information:information described below and in greater detail in Article II, Section 14 of our Bylaws, which are available under Corporate Governance in the investors section of our website.
•As to each person who you propose to nominate for election or
re-electionreelection as a director:•
- All information relating to the person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or is otherwise required pursuant to Regulation 14 under the Exchange
Act;- Act
•
- The
person'sperson’s written consent to be named in our proxy statement and accompanying proxy card as a nominee and serve as a director ifelected; and- elected for a full term until the next meeting at which such nominee would face reelection
•
- All information with respect to such person that would be required to be set forth in a stockholder’s notice pursuant to our Bylaws if such person were a stockholder
• A description of any material relationships between you (and your associates and affiliates) and the nominee (and his or her associates and affiliates), as more particularly set forth in our
Bylaws;- All information relating to the person that is required to be disclosed in solicitations of proxies for election of directors in an election contest or is otherwise required pursuant to Regulation 14 under the Exchange
•- Bylaws
As to any other item of business you propose to bring before the meeting, a brief description of the business, the reasons for conducting the business
atduring the meeting, a reasonably detailed description of all agreements, arrangements and understandings between or among any stockholders and between or among any stockholder and other person or entity in connection with the proposal of such business by such stockholder and anymaterial interest you haveother information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the businessbeing proposed; and•- proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act
Your name and address, and the class and number of shares you own beneficially and as of record, as well as information relating to your security ownership in our
company, as described in greater detail in Article II, Section 14company.Stockholder items of
our Bylaws, a copy of which is available on our website atwww.averydennison.com/bylaws.
We will not permit stockholder itemsbusiness that do not fully comply with the advance notice and other requirements contained in our Bylaws will not be permitted to be brought before the 20192024 Annual Meeting. In addition to satisfying the foregoing requirements under our Bylaws, to comply with the SEC’s universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than our company’s nominees must provide written notice to our Corporate Secretary at our principal executive offices that includes the information required by Rule 14a-19 under the Exchange Act no later than February 27, 2024.
We intend to file a proxy statement and a white proxy card with the SEC in connection with our solicitation of proxies for the 2024 Annual Meeting.
HOW DO I NOMINATE DIRECTORS FOR INCLUSION IN THE 20192024 PROXY STATEMENT?
Our Board recently amended our Bylaws to permit a stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company'scompany’s outstanding shares of common stock continuously for at least three years to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two nominees or 20% of our Board, subject to the requirements specifiedcontained in Article II, Section 17 of our Bylaws, a copywhich are available under Corporate Governance in the investors section of which is available on our website atwww.averydennison.com/bylaws.website. Notice of proxy access director nominees for the 20192024 Annual Meeting must be delivered to our Corporate Secretary at our principal executive offices no earlier than October 16, 201817, 2023 and no later than November 15, 201816, 2023 and must otherwise comply with our Bylaws.
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| 2023 Proxy Statement | Avery Dennison Corporation |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FROM GAAP
We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of our financial results that are prepared in accordance with GAAP. Based uponon feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are useful to their assessmentsassessment of our performance and operating trends, as well as liquidity.
Our non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it more difficult to assess our underlying performance in a single period. By excluding the accounting effects, both positive andor negative, of certain items (e.g.,(such as restructuring charges, outcomes of certain legal settlements,proceedings, certain effects of strategic transactions and related costs, losses from debt extinguishments, gains andor losses from curtailment andor settlement of pension obligations, gains or losses on sales of certain assets, gains or losses on venture investments and other items), we believe that we are providing meaningful supplemental information that facilitates an understanding of our core operating results and liquidity measures. These non-GAAP financial measures are used internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for a single period. While some of the items we exclude from GAAP financial measures recur, they tend to be disparate in amount, frequency or timing.
We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for quarters and year-to-date periods, as applicable.
We use the following non-GAAP financial measures in this proxy statement:
•Sales change ex. currencyrefers to the increase or decrease in sales excluding the estimated impact of foreign currency translation. The estimated impact of foreign currency translation is calculated on a constant currency basis, with prior period results translated at current period average exchange rates to exclude the effect of foreign currency fluctuations.•Organic sales changerefers to the increase or decrease in sales excluding the estimated impact of foreign currency translation, product line exits, acquisitions and divestitures, and, where applicable, an extra week in our fiscal year.
•Adjusted net income per common share, assuming dilution (adjusted EPS), refers to adjusted net income divided by weighted average number of common shares outstanding, assuming dilution. Adjusted net income is income from continuing operations before taxes tax-effected at the full-year GAAP tax rate and adjusted for tax-effected restructuring charges and other items. Adjusted tax rate is the full-year GAAP tax rate adjusted to include the impact of previously planned repatriation of foreign earnings for the fourth quarter of 2017 and exclude the reasonable estimate ("provisional amount") of the impact of the ("TCJA"). We believe that adjusted EPS assists investors in understanding our core operating trends and comparing our results with those of our competitors.•Free cash flowrefers to cash flow from operations, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from sales (purchases) of investments. We believe that free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases, and acquisitions.•Return on total capital (ROTC)refers to income from continuing operations excluding the expense and tax benefit of debt financing divided by the average of beginning and ending invested capital. Adjusted ROTC refers to ROTC adjusted for the impact of the TCJA. We believe that ROTC and adjusted ROTC assist investors in understanding our ability to generate returns from our capital.•Adjusted EBITrefers to earnings before interest expense and taxes, excluding non-cash restructuring costs and other items. We believe that adjusted EBIT assists investors in understanding our core operating trends and comparing our results with those of our competitors. We use adjusted EBIT to calculate economic value added (EVA).
We believe that sales change ex. currency and organic sales change assist investors in evaluating the sales growth from the ongoing activities of our businesses and provide greater ability to evaluate our results from period to period.
| • | Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation and the reclassification of sales between segments, and, where applicable, an extra week in our fiscal year and the calendar shift resulting from the extra week in the prior fiscal year, and currency adjustment for transitional reporting of highly inflationary economies. The estimated impact of foreign currency translation is calculated on a constant currency basis, with prior period results translated at current period average exchange rates to exclude the effect of currency fluctuations. |
Avery Dennison Corporation| 2018 Proxy Statement |A-1
| • | Organic sales change refers to sales change ex. currency, excluding the estimated impact of acquisitions and product line divestitures. |
We believe that sales change ex. currency and organic sales change assist investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period. |
| • | Adjusted EBITDA refers to adjusted operating income before depreciation and amortization. Adjusted operating income is income before taxes; interest expense; other non-operating expense (income), net; and other expense (income), net. |
| • | Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net sales. |
| • | Adjusted net income per common share, assuming dilution (adjusted EPS), refers to adjusted net income divided by the weighted average number of common shares outstanding, assuming dilution. Adjusted net income is income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges and other items. Adjusted tax rate is the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as effects of certain discrete tax planning actions, impacts related to enactments of comprehensive tax law changes, and other items. |
We believe that adjusted EBITDA, adjusted EBITDA margin and adjusted EPS assist investors in understanding our core operating trends and comparing our results with those of our competitors. |
| • | Free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments. Free cash flow is also adjusted for, where applicable, certain acquisition-related transaction costs. We believe that free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases and acquisitions. |
Avery Dennison Corporation | 2023 Proxy Statement | 107 |
| • | Return on total capital (ROTC) refers to net income excluding interest expense and amortization of intangible assets from acquisitions, net of tax benefit, divided by the average of beginning and ending invested capital. We believe that ROTC assists investors in understanding our ability to generate returns from our capital. |
| • | Adjusted earnings before interest and taxes (EBIT) refers to earnings before interest expense, other non-operating expense (income), taxes and equity method investment losses, excluding non-cash restructuring costs, acquisitions completed since the targets were set, and other items. We believe that adjusted EBIT assists investors in understanding our core operating trends and comparing our results with those of our competitors. We use adjusted EBIT to calculate economic value added (EVA), one of the performance objectives used in our long-term incentive compensation program. |
SALES CHANGE EX. CURRENCY AND ORGANIC SALES CHANGE
| ($ in millions) | 2020 | 2021 | 2022 | 2021-2022 2-YR CAGR(1) | ||||||||||
Net sales | $ | 6,971.5 | $ | 8,408.3 | $ | 9,039.3 | 13.9% | |||||||
Reported net sales change | (1.4)% | 20.6% | 7.5% |
| ||||||||||
Foreign currency translation | 0.9% | (3.4)% | 5.6% |
| ||||||||||
Extra week impact | (1.3)% | 1.4% | – |
| ||||||||||
Sales change ex. currency (non-GAAP)(2) | (1.7)% | 18.6% | 13.1% | 15.8% | ||||||||||
Acquisitions and product line divestiture | (1.7)% | (3.1)% | (3.6)% |
| ||||||||||
Organic sales change (non-GAAP)(2) | (3.4)% | 15.6% | 9.5% | 12.5% | ||||||||||
| (1) | Reflects two-year compound annual growth rates, with 2020 as the base period. |
| (2) | Totals may not sum due to rounding. |
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
| ($ in millions) | 2020 | 2021 | 2022 | 2021-2022 2-YR CAGR(1) | ||||||||||
Net sales | $ | 6,971.5 | $ | 8,408.3 | $ | 9,039.3 | ||||||||
Operating income before interest expense, other non-operating expense (income) and taxes, as reported | $ | 809.2 | $ | 1,058.7 | $ | 1,074.0 | 15.2% | |||||||
Operating margins, as reported | 11.6% | 12.6% | 11.9% | |||||||||||
Non-GAAP adjustments: | ||||||||||||||
Restructuring charges: | ||||||||||||||
Severance and related costs | $ | 49.1 | $ | 10.5 | $ | 7.6 | ||||||||
Asset impairment and lease cancellation charges | 6.2 | 3.1 | 0.1 | |||||||||||
Other items(2) | (1.7) | (8.0) | (8.3) | |||||||||||
Adjusted operating income (non-GAAP) | $ | 862.8 | $ | 1,064.3 | $ | 1,073.4 | ||||||||
Adjusted operating margins (non-GAAP) | 12.4% | 12.7% | 11.9% | |||||||||||
Depreciation and amortization | $ | 205.3 | $ | 244.1 | $ | 290.7 | ||||||||
Adjusted EBITDA (non-GAAP) | $ | 1,068.1 | $ | 1,308.4 | $ | 1,364.1 | 13.0% | |||||||
Adjusted EBITDA margins (non-GAAP) | 15.3% | 15.6% | 15.1% |
| ||||||||||
| (1) | Reflects two-year compound annual growth rates, with 2020 as the base period. |
| (2) | Includes pre-tax gain/loss on venture investments, gain on sale of product line, gain/loss on sales of assets, outcomes of legal proceedings, and transaction and related costs. |
108 | 2023 Proxy Statement | Avery Dennison Corporation |
| ($ in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | 4-YR CAGR(1) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |
Net sales | $6,140.0 | $6,330.3 | $5,966.9 | $6,086.5 | $6,613.8 | |||||||
Reported sales change | 3.1% | (5.7)% | 2.0% | 8.7% | ||||||||
Foreign currency translation | 1.1% | 8.6% | 2.6% | (0.5)% | ||||||||
| | | | | | | | | | | | | |
Sales change ex. currency (non-GAAP) | 4.2% | 2.9% | 4.6% | 8.2% | ||||||||
| | | | | | | | | | | | | |
Extra week impact | ~(1.2)% | ~1.2% | — | — | ||||||||
Acquisitions/divestiture | — | 0.6% | (0.7)% | (3.9)% | ||||||||
| | | | | | | | | | | | | |
Organic sales change (non-GAAP)(2) | 3.1% | 4.6% | 3.9% | 4.2% | 4.0% |
(1)Compound Annual Growth Rate(2)Totals may not sum due to rounding and other factors.
ADJUSTED EARNINGS PER SHARE (EPS)EPS
| | 2013 | 2014 | 2015 | 2016 | 2017 | 4-YR CAGR(1) | 2017 Growth | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | |
As reported net income per common share from continuing operations, assuming dilution | $ | 2.41 | $ | 2.58 | $ | 2.95 | $ | 3.54 | $ | 3.13 | ||||||||||||
Adjustments(2) | $ | 0.03 | $ | 0.04 | — | — | — | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Previously reported net income per common share from continuing operations, assuming dilution | $ | 2.44 | $ | 2.62 | $ | 2.95 | $ | 3.54 | $ | 3.13 | ||||||||||||
Non-GAAP adjustments per common share, net of tax: | ||||||||||||||||||||||
Restructuring charges and other items | $ | 0.24 | $ | 0.49 | $ | 0.49 | $ | 0.48 | $ | 0.29 | ||||||||||||
Estimated tax provision impact resulting from the TCJA(3) | — | — | — | — | $ | 1.91 | ||||||||||||||||
Impact of previously planned repatriation of foreign earnings for Q4 2017 | — | — | — | — | $ | (0.33 | ) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Adjusted net income per common share from continuing operations, assuming dilution (non-GAAP) | $ | 2.68 | $ | 3.11 | $ | 3.44 | $ | 4.02 | $ | 5.00 | 16.9 | % | 24.4 | % | ||||||||
(1)Compound Annual Growth Rate(2)GAAP adjustments for 2013-2015 reflect the previously disclosed impact of the third quarter of 2015 revision to certain benefit plan balances, which had an immaterial impact on the non-GAAP amounts.(3)Our income tax provision for fiscal year 2017 includes the provisional estimated impact of the TCJA.($ in millions, except per share amounts) 2020 2021 2022 2021-2022
2-YR CAGR(1)As reported net income
$ 555.9 $ 740.1 $ 757.1 16.7% As reported net income per common share, assuming dilution
$ 6.61 $ 8.83 $ 9.21 18.0% Non-GAAP adjustments per common share, net of tax:
Restructuring charges and other items(2)
0.48 0.05 (0.06) Pension plan settlement and curtailment losses
0.01 0.03 – Adjusted net income per common share, assuming dilution (non-GAAP)
$ 7.10 $ 8.91 $ 9.15 13.5% The
TCJA significantly revises U.S. corporate income taxation, among other changes, lowering corporate incomeadjusted tax ratesimplementing a territorial tax regime,were 24.1%, 25% andimposing a one-time transition tax through a deemed repatriation of accumulated untaxed earnings24.7% for 2020, 2021 andprofits of foreign subsidiaries. This provision includes a reasonable estimate ("provisional amount") of the impact of the TCJA on our tax provision following the guidance of SEC Staff Accounting Bulletin No. 118 (SAB 118).
Avery Dennison Corporation| 2018 Proxy Statement |A-2
Table of Contents2022, respectively.
| (1) | Reflects two-year compound annual growth rates, with 2020 as the base period. |
| (2) | Other items include gain/loss on venture investments, gain on sale of product line, gain/loss on sales of assets, outcomes of legal proceedings, and transaction and related costs. |
FREE CASH FLOW
| ($ in millions) | 2015 | 2016 | 2017 | |||
|---|---|---|---|---|---|---|
| | | | | | | |
Net cash provided by operating activities | $473.7 | $585.3 | $650.1 | |||
—Purchases of property, plant and equipment | (135.8) | (176.9) | (190.5) | |||
—Purchases of software and other deferred charges | (15.7) | (29.7) | (35.6) | |||
—Proceeds from sales of property, plant and equipment | 7.6 | 8.5 | 6.0 | |||
—Purchases of investments, net | (0.5) | (0.1) | (8.3) | |||
Free cash outflow from discontinued operations | .1 | — | — | |||
| | | | | | | |
Free cash flow (non-GAAP) | $329.4 | $387.1 | $421.7 |
| ($ in millions) | 2020 | 2021 | 2022 | |||||||||
Net cash provided by operating activities | $ | 751.3 | $ | 1,046.8 | $ | 961.0 | ||||||
Purchases of property, plant and equipment | (201.4) | (255.0) | (278.1) | |||||||||
Purchases of software and other deferred charges | (17.2) | (17.1) | (20.4) | |||||||||
Proceeds from sales of property, plant and equipment | 9.2 | 1.1 | 2.3 | |||||||||
Proceeds from insurance and sales (purchases) of investments, net | 5.6 | 3.1 | 1.9 | |||||||||
Payments for certain acquisition-related transaction costs | – | 18.8 | 0.6 | |||||||||
Free cash flow (non-GAAP) | $ | 547.5 | $ | 797.7 | $ | 667.3 | ||||||
RETURN ON TOTAL CAPITAL (ROTC)
| ($ in millions) | 2021 | 2022 | ||||||
As reported net income | $ | 740.1 | $ | 757.1 | ||||
Interest expense, net of tax benefit | 52.7 | 63.7 | ||||||
Intangible amortization, net of tax benefit | 33.5 | 62.0 | ||||||
Effective tax rate | 25.0% | 24.2% | ||||||
Net income, excluding interest expense and intangible amortization, net of tax benefit | $ | 826.3 | $ | 882.8 | ||||
Total debt | $ | 3,104.7 | $ | 3,102.1 | ||||
Shareholders’ equity | $ | 1,924.4 | $ | 2,032.2 | ||||
Total debt and shareholders’ equity | $ | 5,029.1 | $ | 5,134.3 | ||||
ROTC (non-GAAP) | 19.1% | 17.4% | ||||||
Avery Dennison Corporation | 2023 Proxy Statement | 109 |
| ($ in millions) | 2016 | 2017 | Adjusted 2017 ROTC | |||
|---|---|---|---|---|---|---|
| | | | | | | |
As reported net income | $320.7 | $281.8 | $281.8 | |||
Estimated tax provision impact resulting from the TCJA(1) | — | — | $172.0 | |||
Impact of previously planned repatriation of foreign earnings for Q4 2017 | — | — | $(29.4) | |||
Interest expense, net of tax benefit | 40.3 | 30.1 | 45.4 | |||
Effective tax rate(1) | 32.8% | 52.2% | 28.0% | |||
Income from operations, excluding expense and tax benefit of debt financing (non-GAAP) | $361.0 | $311.9 | $469.8 | |||
Total debt | $1,292.5 | $1,581.7 | $1,581.7 | |||
Shareholders' equity | $925.5 | $1,046.3 | $1,046.3 | |||
Estimated tax provision impact resulting from the TCJA(1) | — | — | $172.0 | |||
Impact of previously planned repatriation of foreign earnings for Q4 2017 | — | — | $(29.4) | |||
Total debt and shareholders' equity | $2,218.0 | $2,628.0 | $2,770.6 | |||
| | | | | | | |
Return on Total Capital (ROTC) (non-GAAP) | 17.0% | 12.9% | 18.8% |
(1)Our income tax provision for fiscal year 2017 includes the provisional estimated impact of the TCJA. The TCJA significantly revises U.S. corporate income taxation, among other changes, lowering corporate income tax rates, implementing a territorial tax regime, and imposing a one-time transition tax through a deemed repatriation of accumulated untaxed earnings and profits of foreign subsidiaries. This provision includes a reasonable estimate ("provisional amount") of the impact of the TCJA on our tax provision following the guidance of SEC Staff Accounting Bulletin No. 118 (SAB 118).
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES (EBIT)
| ($ in millions) | 2014 | 2015 | 2016 | 2017 | ||||
|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |
As reported income from continuing operations before taxes | $360.8 | $408.9 | $477.1 | $589.5 | ||||
Adjustments(1) | 3.6 | (1.0) | — | — | ||||
| | | | | | | | | |
Previously reported income from continuing operations before taxes Adjustments: | $364.4 | $407.9 | $477.1 | $589.5 | ||||
Non-cash restructuring costs | 10.7 | 6.4 | 4.1 | 1.0 | ||||
Other items(2) | 2.1 | 8.8 | 45.3 | 3.1 | ||||
Interest expense | 63.3 | 60.5 | 59.9 | 63.0 | ||||
| | | | | | | | | |
Adjusted operating income before interest expense, taxes, non-cash restructuring costs and other items (non-GAAP) | $440.5 | $483.6 | $586.4 | $656.6 |
(1)GAAP adjustments for 2014 and 2015 reflect the previously disclosed impact of the third quarter of 2015 revision to certain benefit plan balances, which had an immaterial impact on the non-GAAP amounts.(2)($ in millions) 2020 2021 2022 As reported net income
$ 555.9 $ 740.1 $ 757.1 Adjustments:
Interest expense
70.0 70.2 84.1 Other non-operating expense (income), net
1.9 (4.1) (9.4) Provision for income taxes
177.7 248.6 242.2 Equity method investment losses
3.7 3.9 – Operating income before interest expense, other non-operating expense (income), taxes, and equity method investment losses
$ 809.2 $ 1,058.7 $ 1,074.0 Reconciling items:
Non-cash restructuring costs
6.2 2.4 0.1 Other items(1)
(1.8) (35.8) (90.2) Adjusted earnings before interest expense, other non-operating expense (income), taxes, equity method investment losses, non-cash restructuring costs, acquisitions completed since the targets were set, and other items (non-GAAP)
$ 813.6 $ 1,025.3 $ 983.9 (1) Includes impact of acquisitions completed after targets were set, gain/loss on venture investments, gain on sale of product line, gain/loss
from settlement of pension obligations, transaction costs, net gainson sales of assets, outcomes of legal proceedings, transaction and related costs, and other items.Avery Dennison Corporation|2018 Proxy Statement|A-3
AVERY DENNISON CORPORATIONC/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.P.O. BOX 1342BRENTWOOD, NY 11717VOTEBY INTERNET -www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.VOTEBY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTEBY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.110
2023 Proxy Statement | Avery Dennison Corporation
AVERY DENNISON CORPORATION
C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.
P.O. BOX 1342
BRENTWOOD, NY 11717
VOTE BY INTERNET
Before The Meeting - Go towww.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on April 26, 2023 for shares held directly and by 11:59 p.m. Eastern Time on April 24, 2023 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go towww.virtualshareholdermeeting.com/AVY2023
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on April 26, 2023 for shares held directly and by 11:59 p.m. Eastern Time on April 24, 2023 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E35648-P00674D97033-P83575 KEEP THIS PORTION FOR YOUR RECORDS — — — — — — — — — — — — — — — — —— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
AVERY DENNISON CORPORATION
AVERY DENNISON CORPORATIONThe Board of Directors recommends you vote FOR the
following nominees:following:1.
Election of Directors
ForAgainstAbstainThe Board of Directors recommends you vote FOR proposals 2 and 3.ForAgainstAbstainNominees:
For Against Abstain 1a.
Bradley Alford
o
☐oo☐ 2.Approval, on an advisory basis, of our executive compensation.ooo☐ 1b.
Anthony Anderson
o
☐oo☐ 3.Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2018.ooo☐ 1c.
Peter Barkerooo1d.Mitchell Butier
o
☐oo☐ NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof.☐ 1e.1d. Ken Hicks
o
☐oo☐ ☐ 1f.1e. Andres Lopez
o
☐oo☐ ☐ 1f. Francesca Reverberi
☐ ☐ ☐ 1g.
David Pyottooo1h.Dean Scarboroughooo1i.Patrick Siewert
o
☐oo☐ ☐ 1j.1h. Julia Stewart
o
☐oo☐ ☐ 1k.1i. Martha Sullivan
o
☐oo☐ For address change/comments, mark here.o☐ (see reverse for instructions)1j. William Wagner
☐ ☐ ☐ Please indicate if you plan to attend this meeting.ooYesNoPlease sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
The Board of Directors recommends you vote FOR proposals 2.
For Against Abstain 2. Approval, on an advisory basis, of our executive compensation.
☐ ☐ ☐ The Board of Directors recommends you vote for 1 YEAR on proposal 3.
1 Year 2 Years 3 Years Abstain 3. Approval, on an advisory basis, of the frequency of advisory votes to approve executive compensation.
☐ ☐ ☐ ☐ The Board of Directors recommends you vote FOR proposals 4.
For Against Abstain 4. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2023.
Signature [PLEASE SIGN WITHIN BOX]
☐Date☐ ☐ Signature (Joint Owners)DateNOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.www.proxyvote.com.— — — — — — — — — — — — — — — — —— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
D97034-P83575
E35649-P00674AVERY DENNISON CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
APRIL
26, 201827, 2023 AT 1:30 P.M. PTTHIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints
Susan MillerIgnacio Walker and Vikas Arora, or each of them, with full power of substitution, proxies for the undersigned to act and vote at the20182023 Annual Meeting of Stockholders of Avery Dennison Corporation and at any adjournment or postponement thereof as indicated upon the matters set forth on the reverse side and described in the proxy statement for the meeting, and, in their discretion, upon any other matters that may properly come before the meeting. This card provides voting instructions, as applicable, to (i) the appointed proxies for shares held of record by the undersigned, including those held under theCompany'sCompany’s Direct Share Purchase and Sale Program, and (ii) the Trustee for shares held on behalf of the undersigned in theCompany'sCompany’s Employee Savings Plan.IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALLWILL VOTE FOR THE ELECTION OF ALL DIRECTOR NOMINEES,ANDFOR PROPOSALS 2 AND 4, AND FOR 1 YEAR FOR PROPOSAL 3.Consistent with its fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended, Fidelity Management Trust Company, as Trustee of the Avery Dennison Corporation Employee Savings Plan, will vote shares of Company stock for which timely instructions are not received and shares of Company stock that have not been allocated to the account of any participant in the same proportion in which allocated shares of Company stock are voted by participants who timely furnish voting instructions. The proxy card must be received no later than 5:00 p.m. Eastern Time on April
23, 2018,24, 2023, and telephone and Internet votes must be completed by 11:59 p.m. on the same day.Your voting instructions are confidential and may not be revealed to anyone, except as required by law.
Address change/comments:(If you noted any address changes and/or comments above, please mark corresponding box on the reverse side.)Continued and to be signed on reverse side