UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
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| Preliminary Proxy Statement | |||
| Confidential, For Use of the Commission | |||
☑ | Definitive Proxy Statement | |||
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Soliciting Material Under Rule 14a-12 |
Altria Group, Inc.
(Name of Registrant as Specified inIn Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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6601 West Broad Street
Richmond, Virginia 23230
2020 Notice of Annual Meeting of Shareholders and Proxy Statement | ||||
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6601 West Broad Street Richmond, Virginia 23230 | |||||||
Dear Fellow Shareholder: | |||||||
We believe the virtual annual meeting format will facilitate participation of our shareholders worldwide, regardless of their resources or physical location, while reducing the health and safety risks associated with COVID-19. During the virtual annual meeting, shareholders will be able to vote their shares electronically and will be able to ask questions. In addition, a webcast replay will be posted to our Investor Relations website at www.altria.com/investors following the meeting. For more information on our virtual annual meeting, including details on how to attend the meeting, see the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement. At this year’s meeting, we will vote on the election of 11 directors, the ratification of the selection of PricewaterhouseCoopers LLP as
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Your vote is very important. I encourage you to complete, sign and return your proxy card, or use telephone or Internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend. | |||||||
Sincerely, Howard A. Willard III | For further information | ||||||
Letter from the Board of Directors to Our Shareholders
Dear Fellow Shareholder:
As the leader in an evolving industry, we see the opportunity to responsibly shape a better future for adult tobacco consumers, our employees and shareholders. In order to provide a clear path forward, Altria has established a new 10-year Vision: “Responsibly lead the transition of adult smokers to a non-combustible future.” Your Board is excited to help guide Altria in achieving this 10-year Vision and making a meaningful impact on tobacco harm reduction. As stewards of your investment in Altria, the Board’s primary responsibility is to foster Altria’s long-term success by establishing broad corporate policies, setting strategic direction and overseeing management. We also oversee key risk areas and monitor performance against strategic priorities. Because we believe that good corporate governance is a cornerstone of strong business performance, our governance practices are transparent and intended to serve the best interests of Altria and its shareholders. We are proud to be a Board comprised of diverse individuals with extensive leadership experiences. We believe that our collective skillset and diverse perspectives enable highly effective oversight and rigorous decision making. We thank you for your investment in Altria and your support for the Board. Sincerely,
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Your Board of Directors
Thomas F. Farrell II Debra J. Kelly-Ennis W. Leo Kiely III Kathryn B. McQuade George Muñoz Mark E. Newman Nabil Y. Sakkab Virginia E. Shanks Howard A. Willard III | |||
Notice of 2020 Virtual Annual Meeting of Shareholders of Altria Group, Inc.
NOTICE OF 2016 ANNUAL MEETING OF
SHAREHOLDERS OF ALTRIA GROUP, INC.
| Board Recommendation |
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403 North 3rd Street
Richmond, Virginia 23219
| To elect as directors the 11 nominees named in the accompanying Proxy Statement. |
2 | To ratify the selection of PricewaterhouseCoopers LLP as | FOR |
3 | To hold a non-binding advisory vote to approve the compensation of | FOR |
4 | To approve the 2020 Performance Incentive Plan | FOR | ||
5 | To vote on two shareholder proposals, if properly presented at the meeting. |
Shareholders will also transact other business properly coming before the meeting.
Voting
We strongly encourage you to vote as promptly as possible by telephone, through the Internet or by mailing your completed and signed proxy card (or voting instruction form, if you hold your shares through a broker, bank or other nominee). You may also vote during the meeting by following the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement. Each share is entitled to one vote on each matter to be voted upon at the annual meeting. Your vote is important, and we urge you to vote.
Attending the Meeting
To attend the virtual meeting, you will need to enter the 16-digit control number included on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form. See the instructions under “Instructions for the Virtual Annual Meeting” on page 81 of this Proxy Statement.
2019 Annual Report
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 accompanies this Proxy Statement.
Date of Distribution
This Notice, the Proxy Statement and proxy card are first being made available or mailed to shareholders on or about April 2, 2020.
By Order of the Board of Directors,
W. Hildebrandt Surgner, Jr.
Vice President, Corporate Secretary and Associate General Counsel
April 2, 2020
Richmond, Virginia
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Thursday, May 14, 2020 at 9:00 a.m., Eastern Time |
Place |
There is no physical location for Altria’s 2020 Annual Meeting. Shareholders may instead attend virtually at www.virtualshareholdermeeting.com/ALTRIA2020. |
Who can vote |
You are entitled to vote if you were a shareholder of record at the close of business on |
| Altria’s Notice of Annual Meeting, Proxy Statement and |
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Proxy Statement – Table of Contents
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Voting Matters and Board Recommendations | i | |
Casting Your Vote | i | |
Altria Overview | ||
2019 Business Highlights | iii | |
Corporate Responsibility | iv | |
Board Nominees | v |
Corporate Governance Highlights | vi |
Shareholder Engagement | vii |
Executive Compensation Highlights | vii |
Executive Compensation Framework | vii |
Key Governance Features of | viii |
Board and Governance Matters | 1 |
Altria Board of Directors | 11 | |
Proposal 1 Election of Directors | ||
2020 Director Nominee Biographies and Qualifications | 16 |
Audit Committee Matters |
Annual Evaluation and Selection of Independent Registered Public Accounting Firm | 22 | |
Independent Registered Public Accounting Firm’s Fees |
April 7, 2016
Richmond, Virginia
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS22
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 19, 2016
The Company’s Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K
for the fiscal year ended December 31, 2015 are available, free of charge, at www.altria.com/proxy.
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Executive Compensation | 25 |
ALTRIA GROUP, INC. – Proxy Statement i
PROXY STATEMENT – TABLE OF CONTENTS
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Shareholder | 72 | |||
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Ownership of Equity Securities of Altria | 77 |
ii ALTRIA GROUP, INC. – Proxy Statement Summary
This proxy statement summary highlights information about Altria Group, Inc. (the “Company,” “Altria,(“Altria,” “we,” “our” or “us”) and certain information contained elsewhere in this proxy statement (“Proxy Statement”) for, which has been prepared in connection with Altria’s 20162020 Virtual Annual Meeting of Shareholders (the “2016“2020 Annual Meeting” or the “meeting”). This summary does not contain all of the information that you should consider in voting your shares. You should read the entire Proxy Statement carefully before voting.
VOTING MATTERS AND BOARD RECOMMENDATIONS
Proposal | 1 | Election of Directors The Board
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Proposal 2 |
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| Ratification of the Selection of Independent Registered Public Accounting Firm | The Board recommends a voteFORthis Proposal.
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Proposal 3 | Non-Binding Advisory Vote to Approve the Compensation of | The Board recommends a voteFORthis Proposal.
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Proposal 4 | Approval of the 2020 Performance Incentive Plan The Board recommends a voteFORthis Proposal. ►See page 63. | |||||
Proposal 5 | Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices The Board recommends a |
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Proposal 6 | Shareholder Proposal Regarding The Board recommends a voteAGAINSTthis Shareholder Proposal. ►See page 75. |
How to Vote | ||
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If your shares are registered in your name with Computershare, Altria’s transfer agent (Record Holders), or you are voting shares held through Employee Benefit Plans:
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CASTING YOUR VOTE
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Altria Group, Inc. – Proxy Statement | i |
ALTRIA GROUP, INC. – Proxy Statement 1
PROXY STATEMENT SUMMARY
Altria Overview |
Our Vision
We are a Fortune 200 company that is proud to call Richmond, Virginia our home. Our people and companies address challenging issues, like reducing the health effects of tobacco and preventing underage tobacco use. We know that businesses that are great over the long term – like ours – must earn today’s success while preparing for tomorrow’s opportunities. And we are doing just that as reflected in our 10-year Vision to “Responsibly lead the transition of adult smokers to a non-combustible future.”
BOARD NOMINEESThe strategies Altria intends to use to achieve this Vision are to:
■ | lead the industry in operating responsibly and preventing underage use of adult products; |
■ | develop and expand our portfolio of FDA-authorized, non-combustible products and actively convert adult smokers to them; |
■ | maximize the profitability of our combustible products while appropriately balancing investments inMarlborowith funding growth of our non-combustible portfolio; |
■ | invest in our manufacturing employees and facilities to enable them to be the manufacturers of choice for all Altria’s current and future portfolio of tobacco products; |
■ | seize leadership in the external environment through communications, engagement and science-based policy and regulatory solutions; |
■ | build employee capabilities to accelerate progress against the Vision and further evolve the way they work and behave; |
■ | help position Cronos Group, Inc. as a leader in a highly responsible, regulated and legalized U.S. cannabis market; and |
■ | maximize the contribution of Altria’s investments to our long-term value. |
Our Operating Companies
You are being askedAltria holds diversified positions across the tobacco, alcohol and cannabis industries. We seek to vote on the following 11 nominees for director. All directors are elected annually by a majority of the votes cast. Information about each director’s experiences, qualifications and skills can be found beginning on page 56.
Name | Age | Director Since | Principal Occupation | Independent | Board Committee Membership* | |||||
Gerald L. Baliles
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75
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2008
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Retired Director and Chief Executive Officer, Miller Center of Public Affairs
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Yes
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CC, EC, IC, NC
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Martin J. Barrington
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62
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2012
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Chairman, Chief Executive Officer and President, Altria Group, Inc.
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No
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EC
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John T. Casteen III
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72
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2010
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President Emeritus, University of Virginia
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Yes
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AC, IC, NC
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Dinyar S. Devitre
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68
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2008
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Special Advisor, General Atlantic LLC
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Yes
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FC, IC
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Thomas F. Farrell II
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61
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2008
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Chairman, President and Chief Executive Officer, Dominion Resources, Inc.
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Yes
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CC, EC, NC
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Thomas W. Jones
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66
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2002
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Senior Partner, TWJ Capital LLC
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Yes
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AC, CC, EC, FC
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Debra J. Kelly-Ennis
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59
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2013
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Retired President and Chief Executive Officer, Diageo Canada, Inc.
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Yes
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AC, IC, NC
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W. Leo Kiely III
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69
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2011
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Retired Chief Executive Officer, MillerCoors LLC
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Yes
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CC, EC, FC, IC
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Kathryn B. McQuade
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59
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2012
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Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited
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Yes
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AC, CC, FC
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George Muñoz
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64
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2004
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Principal, Muñoz Investment Banking Group, LLC and Partner, Tobin & Muñoz
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Yes
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AC, EC, FC, NC
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Nabil Y. Sakkab
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68
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2008
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Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company
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Yes
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EC, FC, IC, NC
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provide category-leading choices to adult consumers, while returning long-term value to our shareholders, through our subsidiaries, including:
■Philip Morris USA Inc. (“PM USA”), the maker ofMarlborocigarettes; ■U.S. Smokeless Tobacco Company LLC, the maker ofCopenhagenandSkoal; ■John Middleton Co., the maker ofBlack & Mildcigars; ■Helix Innovations LLC, maker ofon!oral nicotine pouches; and ■Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”), a collection of distinctive wine estates. | ||
and strategic investments and agreements with others, including:
■35% economic interest in JUUL Labs, Inc. (“JUUL”), the nation’s leading e-vapor company; ■10.1% ownership in Anheuser-Busch InBev SA/NV (“ABI”), the world’s largest brewer; ■45% ownership in Cronos Group Inc. (“Cronos”), a leading global cannabinoid company; and ■Exclusive U.S. license to commercialize Philip Morris International Inc.’sIQOSproduct, the only heated tobacco product authorized by the U.S. Food and Drug Administration (“FDA”). | ||
ii | www.altria.com |
PROXY STATEMENT SUMMARY
2019 Business Highlights |
2019 was a dynamic year for the tobacco category. For Altria, while our core tobacco businesses delivered excellent financial performance, the performance from our minority investment in JUUL was disappointing, resulting in impairment charges and reported losses. Nevertheless, we made significant progress in advancing our non-combustible business platform with the launch of theIQOSheat-not-burn product in Atlanta, Georgia and Richmond, Virginia and the completion of theon!transaction, which gives us a product platform in the growing oral nicotine pouch category. Highlights from 2019 include the following:
■ | Our core tobacco businesses were resilient in 2019, delivering excellent performance against their objectives. |
■ | The smokeable products segment reported operating companies income (“OCI”) grew by 7.1% and adjusted OCI1grew by 8.6%. |
■ | Marlboro’s retail share remained stable at 43.1%, down 0.1 share point versus 2018. |
■ | The smokeless products segment reported OCI grew by 10.4% and adjusted OCI increased by 9.7%. |
■ | In wine, Ste. Michelle reported OCI decreased $53 million and adjusted OCI decreased $31 million. |
Smokeable Adjusted OCI | Smokeless Adjusted OCI | Wine Adjusted OCI | ||||||
($ millions) | ($ millions) | ($ millions) | ||||||
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CORPORATE GOVERNANCE HIGHLIGHTS
2 ALTRIA GROUP, INC. – Proxy Statement
PROXY STATEMENT SUMMARY
PROXY ACCESS
Understanding that many shareholders view proxy access as an important issue, we conducted outreach with various stakeholders as we thoughtfully considered the issue. In December 2015, our Board adopted a proxy access bylaw reflecting its commitment to strong corporate governance and acknowledging the important role our shareholders play in Altria’s corporate governance process. The bylaw allows a shareholder or group of shareholders to include in our annual meeting proxy materials director candidates that they have nominated. The proxy access bylaw provides, among other things, that a shareholder or group of up to 20 shareholders owning 3% or more of our outstanding common stock continuously for at least the previous three years may seek to include director candidates in our annual meeting proxy materials. These shareholders may nominate the greater of two or up to 20% of the number of directors then serving on the Board. Please refer to our By-Laws for additional requirements relating to proxy access.
SHAREHOLDER ENGAGEMENT
We value our shareholders’ perspective on our businesses and each year interact with shareholders through numerous engagement activities. In 2015, these included our investor day, three investor road shows, five investor conferences, individual investor meetings and our 2015 Annual Meeting of Shareholders (“2015 Annual Meeting”). Our Investor Relations department is the contact point for shareholder interaction with the Company. Shareholders may also access investor information about the Company through our website at www.altria.com/investors. For questions concerning Investor Relations, pleasecall 804-484-8222 or e-mail us from the Contact Us section available on our website (www.altria.com/ContactUs).
2015 BUSINESS HIGHLIGHTS
Altria delivered yet another year of excellent business results and outstanding returns for its shareholders in 2015. Highlights from 2015 include the following:
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■ | We achieved $600 million in annualized cost savings, exceeding the target $575 million annualized cost reduction program announced in December 2018. | |
■ | We paid $6 billion in dividends in 2019. In August 2019, our Board of Directors (“Board of Directors” or “Board”) raised the regular quarterly dividend for the 54th time in the past 50 years. Altria’s dividend per share grew 5% from 2018. | |
■ | We repurchased approximately $845 million of our shares, at an average |
Adjusted Diluted EPS | Dividend Payments | Share Repurchases | ||||
(12/31/16 - 12/31/19) | ($ millions) | ($ millions) | ||||
For more information regarding our 2019 performance, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Form 10-K”).
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Adjusted |
ALTRIA GROUP, INC. – Proxy Statement 3
PROXY STATEMENT SUMMARY
(2) |
4 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
PROXY STATEMENT SUMMARY
For more information regardingLeading responsibly has been at the foundation of Altria’s 2015 performance, please reviewstrategy for over 20 years. We approach corporate responsibility by seeking our Annual Reportstakeholders’ perspectives, aligning business practices where appropriate and measuring and communicating our progress. We focus in particular on Form 10-Kfour responsibility priorities that we believe are important to our stakeholders and key to our continued success.
Reducing the Harm of Tobacco Products | Marketing Responsibly | Managing Our Supply Chain Responsibility | Developing Our Employees and Culture |
Offer lower risk tobacco products that will help convert adult smokers and engage the FDA constructively about them Support programs that help reduce underage tobacco use Provide access to expert quitting information for those who have decided to quit | Build relationships between brands and their adult consumer audiences while taking steps designed to limit reach to unintended audiences | Work with diverse, high-quality suppliers to innovate and address societal issues within the supply chain | Develop high-performing and engaged employees who help us continue to deliver superior results in the future |
As we pursue our Vision to responsibly lead the transition of adult smokers to a non-combustible future, we remain committed to driving positive change for the fiscal year ended December 31, 2015 (“2015 Annualindustry.
Today, the most important issue we face is the rapid rise in youth vaping. This issue threatens the harm-reduction opportunity for adults, which is a goal we have long aspired to achieve. Altria is taking decisive steps to address this issue, including investing an additional $100 million over several years to help reduce youth e-vapor use. We also took the lead in advocating to raise the minimum age to purchase all tobacco products to 21, which is now federal law.
During 2019, Altria also made significant investments in our communities through cash and in-kind contributions to non-profit organizations, including through employee volunteering. These investments help address issues that are important to our businesses, employees and communities. Workforce and economic growth, environment, and inclusive community and culture are three of our giving areas.
Employees and Culture
We recognize the importance of doing business the right way. We believe culture influences employee actions and decision making. This is why we dedicate resources to promote a vibrant, inclusive workplace; attract, develop and retain talented, diverse employees; promote a culture of compliance and integrity; create a safe workplace; and reward and recognize employees for both the results they deliver and, importantly, how they deliver them.
Because we operate in a highly regulated and dynamic environment that is changing and growing more complex, we seek employees who give us a talent advantage. We equip employees to meet new challenges by fostering a culture that emphasizes diversity and inclusion, thinking and acting innovatively and simplifying work. Through these efforts, we pursue our employee goal of developing high-performing and engaged employees who will help us continue to deliver superior results in the future.
We are also committed to pay equity across our companies. Based on the most recent annual analysis conducted at Altria in November 2019, salaries of female employees were 99.7% of those of our male employees and salaries of our non-white employees were 99.5% of those of our white employees after adjusting for factors generally considered to be legitimate differentiators of salary (e.g.,performance and salary grade).
Environment
Our companies play an active role in protecting our natural resources and reducing our environmental impact. We understand the affect our companies may have on our environment, including changes to water quality and availability and climate change, as well as the effect these changes have on our companies. To help guide our environmental efforts, we have created an Environmental Management Framework that helps set direction, fosters decision making and promotes continuous improvement through a management structure, policies, programs and measurement. We have also set goals to reduce our environmental impact by the end of 2025 and have formally committed to the Science Based Targets initiative to help keep the rise in global temperature to below 2°C.
More information about our corporate responsibility priorities and progress against our goals can be found in our most recent Corporate Responsibility Progress Report, which is available on Form 10-K”).
COMPENSATION PROGRAM HIGHLIGHTS
our website at www.altria.com/responsibility.
www.altria.com |
PROXY STATEMENT SUMMARY
You are being asked to vote on the following 11 nominees for director. All directors are elected annually by a majority of the votes cast. More information about each director can be found under “Proposal 1 – Election of Directors” beginning on page 16.
Name and Principal Occupation | Age | Director Since | Independent | Board Committee Membership(1) | |||||||||
AC | CC | EC | FC | IC | NC | ||||||||
John T. Casteen III | 76 | 2010 | ✓ | ■ | ■ | ■ | |||||||
Dinyar S. Devitre | 72 | 2008 | ✓ | ■ | ■ | ■ | ■ | ||||||
Thomas F. Farrell II(2) | 65 | 2008 | ✓ | ■ | ■ | ■ | |||||||
Debra J. Kelly-Ennis | 63 | 2013 | ✓ | ■ | ■ | ■ | |||||||
W. Leo Kiely III | 73 | 2011 | ✓ | ■ | ■ | ■ | ■ | ||||||
Kathryn B. McQuade | 63 | 2012 | ✓ | ■ | ■ | ■ | ■ | ||||||
George Muñoz | 68 | 2004 | ✓ | ■ | ■ | ■ | ■ | ||||||
Mark E. Newman | 56 | 2018 | ✓ | ■ | ■ | ■ | |||||||
Nabil Y. Sakkab | 72 | 2008 | ✓ | ■ | ■ | ■ | ■ | ||||||
Virginia E. Shanks | 59 | 2017 | ✓ | ■ | ■ | ■ | |||||||
Howard A. Willard III | 56 | 2018 | ■ |
(1) | AC | Audit Committee | EC | Executive Committee | IC | Innovation Committee |
CC | Compensation and Talent Development Committee | FC | Finance Committee | NC | Nominating, Corporate Governance and Social Responsibility Committee | |
■ | Chair | ■ | Member | |||
(2) | Presiding Director |
Altria Group, Inc. – Proxy Statement | v |
PROXY STATEMENT SUMMARY
Board Independence and Composition ■10 of our ■Independent presiding director with clearly defined duties, including being available for consultation and communication if requested by major shareholders ■All NYSE-required Board committees consist solely of ■Independent Committee Chairs ■Executive sessions of independent directors at each meeting ■Resignation policy for directors who fail to receive majority support in an uncontested election ■Director retirement guidelines ■Board diversity from various perspectives | Board Performance ■At least 86% Board and Committee meeting attendance in 2019 by each director ■100% director attendance at our 2019 Annual Meeting of Shareholders (“2019 Annual Meeting”) ■Oversight of strategic plan development and execution ■Oversight of key risk areas and risk management processes ■Oversight of executive compensation ■Participation in executive succession planning ■Updates to the Board on investor perspectives and ■Review of voting results on all shareholder proposals ■Annual Board and Committee self-evaluations ■Comprehensive new director orientation | |||
Shareholder Rights ■Annual election of directors ■Directors elected by majority voting except in contested elections ■One share, one-vote standard ■Proxy access with market terms ■No shareholder rights plan or “poison pill” | Policies, Programs and Guidelines ■Comprehensive Code of Conduct, Code of Business Conduct and Ethics for Directors and Corporate Governance Guidelines ■Robust political activity disclosure and compliance program ■Corporate Responsibility Progress Report that addresses our responsibility priorities, progress against our goals and sustainability initiatives ■Compensation “clawback” policy ■Stock ownership and holding requirements for directors and executive officers ■Policies prohibiting hedging and pledging of our shares by directors and executive officers | |||
We believe the foregoing practices are well aligned with the Investor Stewardship Group’s corporate governance principles for U.S. listed companies, which include (i) accountability to shareholders; (ii) shareholder voting rights proportionate to economic interest; (iii) responsiveness to shareholders; (iv) strong, independent leadership; (v) structures and practices that enhance Board effectiveness; and (vi) management incentive structures aligned with long-term strategy. | ||||
vi | www.altria.com |
PROXY STATEMENT SUMMARY
We value our shareholders’ perspectives on our businesses and each year engage with shareholders through various activities.
2019 shareholder engagement included: ■Five investor conferences ■Numerous individual investor meetings and calls on a variety of topics such as: ■business performance ■company strategies ■environmental, social and corporate governance matters, including executive compensation ■the regulatory environment ■Our 2019 Annual Meeting | We value the |
Shareholders may access investor information about Altria through our website at www.altria.com/investors and through the Altria Investor App. For questions concerning Investor Relations, please call 804-484-8222 or e-mail us from the Contact Us section on our website (www.altria.com/ContactUs).
Executive Compensation Framework
In 2019, the total direct compensation of our executive officers named in the Summary Compensation Table on page 48 (“named executive officers” or “NEOs”) consisted of the following elements:
Compensation | Performance | Award Criteria | Company Performance | |||
Cash | Ongoing | Individual performance | ||||
Cash | Annual | Company and | ■Adjusted diluted EPS growth ■Adjusted discretionary cash flow ■Strategic initiatives | |||
Cash | Three years; end-to-end cycles | Company and individual performance | ■Adjusted diluted EPS growth ■Relative TSR ■Strategic initiatives | |||
Restricted Stock Units (“RSUs”) / Performance Stock Units (“PSUs”) | Annual with | Individual performance and advancement potential with additional payment criteria for PSUs based on | ■RSUs: Stock price appreciation ■PSUs: Company performance (50% relative TSR / 50% adjusted diluted EPS growth) and stock price appreciation |
Altria Group, Inc. – Proxy Statement | vii |
PROXY STATEMENT SUMMARY
Together, PSUs and our cash Long-Term Incentive Plan (“LTIP”) deliver over 60% of our NEOs’ target long-term incentives in performance-based forms.
Key Governance Features of Our Executive Compensation Program
The following summary highlights our commitment to executive compensation practices that align the interests of our executives and shareholders:
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ALTRIA GROUP, INC. – Proxy Statement 5
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
Our Board of Directors (“Board of Directors” or “Board”) is furnishing to you this Proxy Statement to solicit proxies on its behalf to be voted at the 2016 Annual Meeting on May 19, 2016 at 9:00 a.m., Eastern Time, at the Greater Richmond Convention Center, 403 North 3rd Street, Richmond, Virginia 23219. The proxies also may be voted at any adjournments or postponements of the meeting.
All properly executed written proxies, and all properly completed proxies submitted by telephone or by the Internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy, unless the proxy is revoked before the completion of voting at the meeting.
It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card.
The Board of Directors has designated Martin J. Barrington and Denise F. Keane as proxies for the 2016 Annual Meeting.
The record date for the 2016 Annual Meeting is March 28, 2016 (the “record date”). The record date was established by the Board of Directors as required by Virginia law. Only shareholders of record at the close of business on the record date are entitled to:
No Excessive Perquisites Perquisites represent less than 2% of our CEO’s compensation and No Single-Trigger Change in Control Our shareholder-approved 2015 Performance Incentive Plan and our proposed 2020 Performance Incentive Plan both include a double-trigger change in control provision. No Individual Supplemental Executive Retirement Plans No Hedging or We do not permit our NEOs to engage in either hedging or pledging activities with respect to their Altria shares. No Employment Agreements All our NEOs are employed at-will. No Tax Gross-Ups on Compensation We do not pay tax gross-ups to our NEOs. No Share Recycling |
Each shareholder of record on the record date is entitled to one vote for each share of common stock held. On the record date, there were 1,956,882,046 shares of common stock outstanding.
If your shares of stock are registered in your name on the books and records of our transfer agent, Computershare Trust Company, N.A., you are a shareholder of record.
If your shares of stock are held for you in the name of your broker, bank or other nominee, your shares are held in street name. The answer to Question 12 describes brokers’ discretionary voting authority and when your broker, bank or
other nominee is permitted to vote your shares of stock without instructions from you.
It is important that you vote your shares if you are a shareholder of record and, if you hold shares in street name, that you provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 12.
By Telephone or Internet: All shareholders of record may vote their shares of common stock by telephone (within the United States, U.S. territories and Canada, there is no charge for the call) or by the Internet, using the procedures and instructions described on the proxy card and other enclosures. Street name holders may vote by telephone or the Internet if their brokers, banks or other nominees make those methods available. If that is the case, each broker, bank or other nominee will enclose instructions with the Proxy Statement. The telephone and Internet voting procedures, including the use of control numbers, are designed toauthenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.
In Writing: All shareholders also may vote by mailing their completed and signed proxy card (in the case of shareholders of record) or their completed and signed voting instruction form (in the case of street name holders).
In Person: All shareholders of record may vote in person at the meeting. Street name holders must obtain a legal proxy from their broker, bank or other nominee and bring the legal proxy to the meeting in order to vote in person at the meeting.
See also “Proxy Statement Summary – Casting Your Vote” on page 1.
6 ALTRIA GROUP, INC. – Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
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ALTRIA GROUP, INC. – Proxy Statement 7
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
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Voting Choices
• Vote for the proposal;
• Vote against the proposal; or
• Abstain from voting.
It is our long-standing practice to hold the votes of each shareholder in confidence from directors, officers and employees, except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in the case of a contested proxy solicitation;
(c) if a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to the Company; or (d) to allow the independent inspectors of election to certify the results of the vote.
As we have for many years, we retain an independent tabulator to receive and tabulate the proxies and appoint
independent inspectors of election to certify the results.
Shareholders should specify their voting choice for each matter on the accompanying proxy. If you sign and return your proxy, yet you do not make a specific choice for one or more matters, unvoted matters will be voted “FOR” the election of each of the nominees for director, “FOR” the proposal to ratify the selection of PricewaterhouseCoopers
LLP (“PricewaterhouseCoopers”), “FOR” the non-binding advisory vote to approve the compensation of the Company’s named executive officers and “AGAINST” each of the two shareholder proposals, as applicable.
The proxy card includes your dividend reinvestment plan shares.
The answer to Question 5 above explains how you can vote.
It means that you have multiple accounts with brokers and/or our transfer agent.Please voteall of these shares represented by each proxy card.We recommend that you contact your broker or our transfer agent to consolidate as many accounts as possible under the same name and address.
Our transfer agent is Computershare Trust Company, N.A. Computershare’s address is P.O. Box 43078, Providence, Rhode Island 02940-3078; you can reach Computershare at1-800-442-0077 (from within the United States or Canada) or 1-781-575-3572 (from outside the United States or Canada).
8 ALTRIA GROUP, INC. – Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
Shareholders of Record: If you are a shareholder of record (see Question 4), your shares will not be voted if you do not provide your proxy unless you vote in person at the meeting.It is, therefore, important that you vote your shares.
Street Name Holders: If your shares are held in street name (see Question 4) and you do not provide your voting instructions to your bank, broker or other nominee, your shares may be voted by your broker, bank or other nominee butonlyunder certain circumstances. Specifically, under the New York Stock Exchange (“NYSE”) rules, shares held in the name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain“routine” matters if you do not provide voting instructions.
Only the ratification of the selection of PricewaterhouseCoopers as the Company’s independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at the meeting arenotconsidered “routine” under NYSE rules, so the broker, bank or other nominee cannot vote your shares onanyof these other proposals unless you provide to the broker, bank or other nominee voting instructions for each of these matters. If you do not provide voting instructions on a non-routine matter, your shares will not be voted on that matter, which is referred to as a “broker non-vote.”It is, therefore, important that you vote your shares.
Abstentions and broker non-votes on one or more matters will not be considered votes cast and, therefore, will not affect the outcome of the vote on those matters at the 2016
Annual Meeting. Broker non-votes are described more particularly in Question 12 above.
If you are a shareholder of record, you can revoke a proxy or change your vote before the completion of voting at the meeting by:
If your shares are held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions.
The cost of this solicitation of proxies will be paid by the Company. In addition to the use of the mail, some of the officers and regular employees of the Company or its subsidiaries may solicit proxies by telephone or e-mail and will request brokerage houses, banks and other custodians, nominees and fiduciaries to forward soliciting material to the beneficial owners of common stock held of record by such persons. The Company will reimburse such persons for
expenses incurred in forwarding such soliciting material. It is contemplated that additional solicitation of proxies will be made in the same manner under the engagement and direction of our proxy solicitor, D.F. King & Co., Inc., 48 Wall Street, New York, New York 10005, at an anticipated cost of $24,000, plus reimbursement of out-of-pocket expenses.
If you plan to attend the meeting,you must request an admission ticket in advance.
Please submit your request for an admission ticket by completing the Pre-Registration Form located on the last page of this Proxy Statement and submitting it, along with your proof of ownership as of the record date for the meeting (March 28, 2016), no later than May 13, 2016, using one of the means identified on the Pre-Registration Form.
If your shares are held for you in the name of your broker, bank or other nominee, please provide evidence of your stock ownership as of the record date for the meeting (such
as your voting instruction form, a current letter from your broker, bank or other nominee or a photocopy of a brokerage or other account statement).
If you are a duly appointed proxy for a shareholder, you must provide proof of your appointment and proof of share ownership for the shareholder for whom you are a proxy.
You may bring only one immediate family member as a guest. All immediate family member guests must be 21 years of age or older. If you are a duly appointed proxy for a shareholder, you may not bring a guest.
ALTRIA GROUP, INC. – Proxy Statement 9
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
All meeting attendees must present government-issued photo identification, such as a driver’s license or passport, at the meeting.
The meeting facilities will open at 8:00 a.m., Eastern Time, to facilitate your registration and security clearance. For your security, you will not be permitted to bring any packages,
briefcases, large pocketbooks or bags into the meeting. Also, cellular and digital phones, audio tape recorders, video and still cameras, pagers, laptops and other portable electronic devices will not be permitted into the meeting. We thank you in advance for your patience and cooperation with these rules.
Yes. The Chairman will answer shareholders’ questions during the question and answer period of the meeting. In order to provide an opportunity for everyone who wishes to ask a question, each shareholder will be limited to two minutes. Shareholders may ask a second question if all
others have first had their turn and if time allows. When speaking, shareholders must direct questions to the Chairman and confine their questions to matters that relate directly to the business of the meeting.
In order for us to conduct the meeting, a majority of our outstanding shares of common stock as of the record date for the meeting (March 28, 2016), must be present in person or by proxy at the meeting. This is referred to as a quorum.
Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail.
Abstentions and shares of record held by a broker, bank or other nominee (“broker shares”) that are voted on any matter are also included in determining the number of shares present. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
10 ALTRIA GROUP, INC. – Proxy Statement
BOARD AND GOVERNANCE MATTERS
The primary responsibility of theour Board of Directors is to foster theour long-term success of the Company.success. In fulfilling this role, each director must exercise his or her good faith business judgment of the best interests of the Company. TheAltria and our shareholders. Our Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management, which is responsible for our day-to-day operations.
Our Board’s Oversight Role
Strategic Oversight
Our Board actively oversees the day-to-day operationsdevelopment and execution of our strategies. These strategies encompass both financial and operational strategies related to our operating companies and their products, as well as strategies focused on legal and regulatory matters, public policy and engagement, innovation, talent development and executive succession, and strategic investments. Over the course of the Company.year, including during multi-day meetings focused on strategy and long-term planning, management and our Board discuss the development and execution of our strategic plans as well as events that bear upon those plans. Our Board further monitors strategic execution through standing presentations at regular Board and Committee meetings and communications from management in between meetings.
Our Board devotes multi-day meetings each year reviewing our strategies and discussing them with management. | ||
Board Meetings and AttendanceRisk Oversight
TheOur Board holds regularbelieves it has in place effective processes to identify and oversee the material risks facing Altria and our businesses and that these processes are consistent with, and provide additional support for, the current leadership structure of our Board. Our Board, both acting as a full Board and through its Committees, plays an important oversight role in our risk management processes. Regular Board and Committee meetings typically duringcover several days. Management from Altria and our subsidiaries and business functions attend each meeting. These meetings, along with periodic site visits and, as appropriate, communications between Board meetings, allow our Board to discuss with senior and mid-level management the monthsrisks facing Altria and our businesses, including risks associated with our investments.
Our enterprise risk management process helps us identify, prioritize and manage risks that have the potential to present the most significant obstacles to achieving business objectives. Our Risk Oversight Committee, comprised of January, February, May, August, Octobermembers of senior management, including our Chief Financial Officer, General Counsel and December,Chief Compliance Officer, meets regularly to oversee this process and holds special meetings when necessary. The Board’s organizational meeting followsefforts undertaken to identify and manage the annual meeting of shareholders. Onemost significant risks to the Company. Management reports annually to our Board on this process.
Our Board, directly or through its Committees, also oversees management of the meetings focuses significantly on reviewing the Company’s strategic plan. The Board held nine meetings in 2015. The Board meets in executive session at every in-person Board meeting, which is followed by a sessionfollowing risk areas:
■ | Legal, Compliance and Regulatory Risk:Our Board, both directly and through the Audit Committee, receives regular updates on various legal, compliance and regulatory matters, such as developments in litigation, enterprise risks, compliance risks and our compliance program (including allegations of non-compliance) and developments related to FDA regulation of certain of our subsidiaries. In addition, regular updates to the Audit Committee by our Chief Compliance Officer and Corporate Audit management provide insight into our risk assessment and risk management practices, policies and processes. |
Altria Group, Inc. – Proxy Statement | 1 |
As of the date of this Proxy Statement, our Board consists of 11 directors. Directors are elected annually at each annual meeting to serve until the next annual meeting and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. The Board has adopted retirement guidelines that require a director who will have attained the age of 75 as of the date of the next annual meeting to tender his or her written resignation to the Board at least six months prior to such annual meeting. If the Board determines that continued service by the director is in the best interests of the Company, the Board has the discretion not to accept the resignation. As required under the retirement guidelines, Governor Baliles tendered his resignation to the Board in October 2015; after due consideration, the Board did not accept his resignation.
Each of the nominees currently serves as a director and was elected by the shareholders at the 2015 Annual Meeting. Biographical information and qualifications of the nominees for director are included under “Proposal 1 – Election of Directors” on page 56.
We are committed to reviewing periodically our Board’s composition to ensure that we continue to have the right mix of skills, background and tenure. The current composition of our Board is as follows:
ALTRIA GROUP, INC. – Proxy Statement 11
BOARD AND GOVERNANCE MATTERS
Our Board has a breadth of skills and experience. As detailed under “Proposal 1 – Election of Directors,” we believe that our Board has demonstrated leadership in a variety of positions across various professions and industries. Our directors’ professional skills and experience include:
■ | Financial and Accounting Risk:The Finance and Audit Committees oversee our management of financial, accounting, internal controls and liquidity risks through interaction at each meeting with the Chief Financial Officer, management from our financial, accounting, auditing and treasury functions (as appropriate) and, for the Audit Committee, representatives from our independent registered public accounting firm. | |
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■ | Executive Compensation Program Risk:The Compensation and Talent Development Committee considers the extent to which the executive compensation program may create risk for us (see “Risk Assessment” on page 46 for a more detailed description). | |||||
■ | Technology, Intellectual Property and Research and Product Development Risk:The Innovation Committee oversees our management of the risks associated with technology, research and product development, including intellectual property. | |||||
■ | Cybersecurity Risk:The Audit Committee oversees our cybersecurity program and management of the associated risks. The Audit Committee receives regular updates from our Chief Information Security Officer on cybersecurity matters and the related risk management program. Our Board
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Political and Public Policy Oversight
The Nominating, Corporate Governance and Social Responsibility Committee oversees our political and public policy engagement activities, including direct and indirect lobbying activities and contributions to organizations involved in the public policy arena. The Committee also oversees our political activity compliance program.
We share extensive information about our participation in these areas on our website at www.altria.com/About-Altria/Government-Affairs/.
2 | www.altria.com |
BOARD AND GOVERNANCE MATTERS
Corporate Responsibility Oversight
The Nominating, Corporate Governance and Social Responsibility Committee oversees our efforts to identify, evaluate and understand the environmental, social and governance issues that present risks and opportunities for our businesses and our policies and programs designed to address those risks and opportunities. The Committee receives regular updates on our social responsibility initiatives, as well as our relationships with key stakeholders and the issues they raise.
Our corporate responsibility priorities are discussed in the “Proxy Statement Summary” on page iv and additional information can be found in our most recent Corporate Responsibility Progress Report, which is available on our website at www.altria.com/responsibility.
Talent Development and Culture Oversight
The Compensation and Talent Development Committee oversees initiatives, programs and processes related to talent development, compensation and culture and the associated company strategies.
Board Leadership Structure and Governance
Our Board believes that it is important to retain the flexibility to allocate the responsibilities of the Chairman and the CEO in a way that it considers to be in the best interests of Altria and our shareholders. After due consideration by the Nominating, Corporate Governance and Social Responsibility Committee and our Board, our Board has concluded that presently combining the roles of Chairman and CEO is in the best interests of Altria and our shareholders. Our Vision is to responsibly lead the transition of adult smokers to a non-combustible future. Our Board believes that the combination of the roles of Chairman and CEO promotes the pursuit of our Vision by allowing the senior-most executive with accountability for our day-to-day operations and execution of our strategic plan, who also possesses significant business, regulatory and industry knowledge, to set Board meeting agendas (in consultation with the Presiding Director), to lead the related discussions and to communicate with one voice to employees, shareholders and other stakeholders. Our Board considers this an effective and efficient structure that is particularly appropriate for us given the unique challenges that we have faced and continue to face in our businesses, particularly domestic tobacco, and the enhanced regulatory environment. We have a strong and experienced independent Presiding Director, Thomas F. Farrell II. Mr. Farrell promotes dialogue among independent members of our Board and directly, clearly and regularly communicates the views of our Board to management. Moreover, our independent directors convene at each Board meeting in an executive session led by the Presiding Director.
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Board and Committee Self-Evaluations
The Board assesses annually the effectiveness of the Board and its Committees (“Committees”)Our Board’s strict adherence to sound corporate governance practices, as reflected in advancing our Mission. The method for conducting the annual Board and Committee self-evaluations has consisted of interviews conducted by the Presiding Director, interviews conducted by the Chair of the Nominating, Corporate Governance Guidelines, has promoted, and Social Responsibility Committee, third-party interviewscontinues to promote, the effective and written surveys. More recently, theindependent exercise of Board has determined that interviews by the Presiding Director or the Chairleadership for Altria and our shareholders.
Altria Group, Inc. – Proxy Statement | 3 |
12 ALTRIA GROUP, INC. – Proxy StatementContents
BOARD AND GOVERNANCE MATTERS
Advancement Planning and CEO Succession
The Board believes that senior executive advancement and succession is one of its most important responsibilities. The Compensation Committee is responsible for overseeing the development of executive succession plans and reviewing such plans, evaluating and making recommendations to the Board regarding potential candidates to become CEO, and evaluating and approving candidates to fill other senior executive positions. At least annually, the Chairman and CEO meets with the Compensation Committee and the Board to discuss CEO succession planning (including specific candidates). The Compensation Committee also considers the procedure for the timely and efficient transfer of CEO responsibilities in the event of an emergency or the sudden incapacitation, departure or death of the Chairman and CEO. The Chairman and CEO meets with the Compensation Committee at least annually to discuss the performance of key members of the Company’s senior management. These matters are regularly communicated to the Board by the Chair of the Compensation Committee.
Governance Guidelines, Policies and Codes
The Board has adopted Corporate Governance Guidelines. In addition, the Board has adopted a Code of Business Conduct and Ethics for Directors (“Director Code”) that applies to our directors and a policy with regard to reviewing certain transactions in which the Company is a participant and an officer, director or nominee for director has had or may have a direct or indirect material interest. These documents are available on the Company’s website at www.altria.com/governance. The Company has also adopted the Altria Code of Conduct (“Code of Conduct”) that applies to all of its employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of Conduct is available on the Company’s website at www.altria.com/codeofconduct.
Information on, or that can be accessed through, the Company’s website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings the Company makes with the U.S. Securities and Exchange Commission (“SEC”).
Committees of theOur Board of Directors
TheOur Board has established various standing Committees to assist it with the performance of its responsibilities. TheOur Board designateselects the members of these Committees and the Committee Chairs annually at its organizational meeting following theour annual meeting of shareholders, based on the recommendations of the Nominating, Corporate Governance and Social Responsibility Committee. The Chair of each Committee develops the agendameeting agendas for that Committee and determines the frequency and length of Committee meetings. After each meeting, each Committee provides a full report to theour Board.
TheOur Board has adopted written charters for each of theseits Committees. These charters are available on the Company’sour website at www.altria.com/governance. The following table summarizescharts summarize the primary responsibilities of each of the Committees:
Audit Committee | 2019 Meetings:7 | Report:See page 23 | ||||||||||
Chair | Other Members | |||||||||||
George Muñoz | John T. Casteen III | Kathryn B. McQuade | Virginia E. Shanks | |||||||||
Mark E. Newman | ||||||||||||
| The Audit Committee assists The Audit Committee consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the New York Stock Exchange (“NYSE”) and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Board has determined that all members of the Audit Committee are financially literate and that Ms. McQuade and Messrs. Muñoz and Newman are “audit committee financial experts” within the meaning set forth in the regulations of the SEC. |
Compensation and Talent Development Committee | 2019 Meetings:4 | Report:See page 26 | ||||||||||
Chair | Other Members | |||||||||||
W. Leo Kiely III | John T. Casteen III | Kathryn B. McQuade | ||||||||||
Thomas F. Farrell II | Virginia E. Shanks | |||||||||||
The Compensation |
The Compensation and Talent Development Committee consists entirely of non-management directors all of whom our Board has determined are independent within the |
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BOARD AND GOVERNANCE MATTERS
Executive Committee | 2019 Meetings:0 | |||||||||
| Other Members | |||||||||
Howard A. Willard III | Dinyar S. Devitre | W. Leo Kiely III | George Muñoz | |||||||
Thomas F. Farrell II | Kathryn B. McQuade | Nabil Y. Sakkab | ||||||||
The Executive Committee has authority to act for |
ALTRIA GROUP, INC. – Proxy Statement 13
BOARD AND GOVERNANCE MATTERS
Finance Committee | 2019 Meetings:5 | |||||||||||
Chair | Other Members | |||||||||||
Dinyar S. Devitre | W. Leo Kiely III | Mark E. Newman | ||||||||||
Nabil Y. Sakkab | ||||||||||||
| The Finance Committee monitors |
Innovation Committee | 2019 Meetings:4 | |||||||||
| Other Members | |||||||||
Nabil Y. Sakkab | John T. Casteen III | Debra J. Kelly-Ennis | Mark E. Newman | |||||||
Dinyar S. Devitre | W. Leo Kiely III | Virginia E. Shanks | ||||||||
The Innovation Committee assists |
Nominating, Corporate Governance and | 2019 Meetings:4 | |||||||||
| Other Members | |||||||||
Kathryn B. McQuade | Dinyar S. Devitre | Debra J. Kelly-Ennis | Nabil Y. Sakkab | |||||||
Thomas F. Farrell II | George Muñoz | |||||||||
The Nominating, Corporate Governance and Social Responsibility Committee identifies individuals qualified to become Board members consistent with the criteria established by |
The following table sets forth the current members of each of the Committees and the number of meetings held during 2015:
Name | Audit(1) | Compensation (2) | Executive | Finance | Innovation | Nominating, Corporate Governance and Social Responsibility (3) | ||||||
Gerald L. Baliles*
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2015 Meetings
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The Nominating, Corporate Governance and Social Responsibility Committee consists entirely of non-management directors all of whom |
14 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
BOARD AND GOVERNANCE MATTERS
The Board’s Risk Oversight RoleBoard Meetings and Attendance
The Board believes it has in place effective processes to identify and oversee the material risks facing the Company and its businesses and that these processes are consistent with, and provide additional support for, the current leadership structure of the Board. The Board, both acting as a full Board and through its Committees, plays an important oversight role in the Company’s risk management processes.
7meetings in 2019 | ||
Our Board holds 6 regular meetings a year, with special meetings occurring when necessary. 2019 Regular Board Meetings: | During 2019, each director attended at least 86% of the aggregate number of meetings of our Board and of all Committees on which he or she served during his or her respective term of service. In addition, all directors attended the 2019 Annual Meeting. | |
Our Board’s organizational meeting follows our annual meeting of shareholders. Our Board meets in executive session at every in-person Board meeting, which is followed by a session of only independent directors led by the Presiding Director. Directors are expected to attend Board meetings, meetings of the Committees of our Board on which they serve and our annual meeting of shareholders, with the understanding that on occasion a director may be unable to attend a meeting. |
Board Practices and Policies |
Board and Committee meetings cover multiple days. Management from the CompanySelf-Evaluations
Our Board assesses annually its effectiveness and different Company subsidiaries and business functions attend each meeting. Board members also conduct periodic site visits to Company subsidiary locations both in and outside the Company’s Richmond, Virginia headquarters. These meetings and site visits and, as appropriate, communications between Board meetings, allow the Board to discuss with management the operational risks facing the businessesthat of the Company’s subsidiaries.
The Company conducts an enterprise risk management process to identify, prioritize and manage risks that have the potential to present the most significant obstacles to achieving business objectives. Management reports annually to the Board on this process.
The Board, directly or through its Committees alsoin advancing our Vision. The Nominating, Corporate Governance and Social Responsibility Committee oversees management of the following risk areas:evaluation process.
Topics | Feedback Incorporated | ||
The Nominating, Corporate Governance and |
Self-evaluation topics generally include: ■Board composition and ■Meeting topics and process ■Information flow ■Board oversight of risk management and strategic planning ■Succession planning ■Access to management | The Nominating, Corporate Governance and Social Responsibility Committee | Our Board implements enhancements and other |
ALTRIA GROUP, INC. – Proxy Statement 15Table of Contents
BOARD AND GOVERNANCE MATTERS
Examples of actions our Board has taken in recent years in response to the annual self-evaluation process include enhanced information flow, such as additional pre-meeting materials, and expanded discussions of corporate strategy.
DirectorsBoard Succession Planning
Process for Nominating Directors
The Nominating, Corporate Governance and Social Responsibility Committee is responsiblehas the primary responsibility for identifying and evaluating nomineesdeveloping a succession plan for director and for recommending to the Board a slate of nominees for election atour Board. Using tools such as the annual meetingBoard and Committee self-evaluations and our Board retirement policy, it periodically reviews our Board composition and identifies the appropriate mix of shareholders.experiences, skills, attributes and tenure for our Board as a whole in light of our strategies and needs with the objective of recommending a group of directors that can best continue our success and represent shareholder interests. The Committee and our Board are committed to developing a diverse pool of potential candidates for future Board service consideration. See “Process for Nominating Directors” and “Board Composition and Board Diversity” on pages 11 and 12, respectively, for a further discussion of our Board composition.
In identifying potential candidates for Board membership, the Committee relies on suggestions and recommendations from directors, shareholders, management and others, including from time to time executive search and board advisory firms. The Committee does not distinguish between nominees recommended by shareholders and other nominees. Shareholders wishing to suggest candidates to the Nominating, Corporate Governance and Social Responsibility Committee for consideration as directors must submit a written notice to theour Corporate Secretary of the Company following the procedures set forth in this Proxy Statement under “Questions and Answers about Communications, CompanyAltria Documents and Shareholder Proposals– How Dodo I Communicatecommunicate with theour Board of Directors?” on page 71. The Company’s88. Our By-Laws set forthinclude the procedures that a shareholder must follow to nominate directors.directors for election to our Board. The procedures are summarized under the same section in response to the question “How Cancan a Shareholder Nominateshareholder nominate a Directordirector or Submitsubmit a Proposalproposal for Next Year’s Annual Meeting?next year’s annual meeting?” on page 71.88.
Director QualificationsBoard Retirement Guidelines
Our Board has adopted retirement guidelines that require a director who will have attained the age of 75 as of the date of the next annual meeting to tender his or her written resignation to our Board at least six months prior to such annual meeting. If our Board determines that continued service by the director is in the best interests of Altria and its shareholders, our Board Diversity
has the discretion not to accept the resignation. As required under the retirement guidelines, Mr. Casteen tendered his resignation to our Board in October 2019; after due consideration, our Board did not accept his resignation on the basis that his continued service is in the best interests of Altria and our shareholders.
Altria Group, Inc. – Proxy Statement | 7 |
BOARD AND GOVERNANCE MATTERS
CEO Succession and Advancement Planning
Our Board believes that senior executive advancement and succession is one of its most important responsibilities. The Compensation and Talent Development Committee is responsible for overseeing the development and furtherance of executive succession plans, evaluating and making recommendations to our Board regarding potential candidates to become CEO, and evaluating and approving candidates to fill other senior executive positions.
CEO Succession Planning | Leadership Succession Planning | The succession planning process gives the Board critical insights into our talent pool. | |||
candidates). The | The Chairman and CEO meets with the Compensation and Talent Development Committee at least annually to discuss the performance of key members of our senior management and their respective succession plans. These matters are regularly communicated to our Board by the Chair of the Compensation and Talent Development Committee. In addition,
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Director Education
16 ALTRIA GROUP, INC. – Proxy Statement
BOARD AND GOVERNANCE MATTERS
Director Independence Determinations
UnderUpon election to our Board, new directors participate in a multi-day comprehensive on-boarding process. They are introduced to the listing standardsoperational aspects of our businesses, key issues facing Altria and our Board governance processes. New directors meet individually with various members of management and visit key facilities as part of the NYSE, theon-boarding program.
We make available to our directors third-party director education programs that provide additional perspective on various topics. We provide a list of programs, updated regularly, to our directors. They are also free to choose self-selected educational programs. We also periodically invite outside experts to meet with our Board must consistto review matters relevant to corporate directors, including corporate governance.
Governance Guidelines, Policies and Codes
Our Board has adopted Corporate Governance Guidelines. In addition, our Board has adopted a Code of Business Conduct and Ethics for Directors (“Director Code”) that applies to our directors and a majoritypolicy with regard to reviewing certain transactions in which we are a participant and an officer, director or nominee for director has had or may have a direct or indirect material interest (see “Related Person Transactions and Code of independent directors. In making independence determinations, the Board observes NYSE and SEC criteria and considers all relevant facts and circumstances. TheConduct” on page 79 for further information). These documents are available on our website at www.altria.com/governance. Our Board has also adopted categorical standardsthe Altria Code of director independenceConduct (“Code of Conduct”) that applies to further assist it in making these determinations. These standards are set forth in Annex Aall our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of the Company’s Corporate Governance Guidelines, which areConduct is available on the Company’sour website at www.altria.com/governance.
On the recommendation of the Nominating, Corporate Governance and Social Responsibility Committee, the Board has affirmatively determined that each of the following nominees is independent in that such nominee has no material relationship with the Company: Gerald L. Baliles, John T. Casteen III, Dinyar S. Devitre, Thomas F. Farrell II, Thomas W. Jones, Debra J. Kelly-Ennis, W. Leo Kiely III, Kathryn B. McQuade, George Muñoz and Nabil Y. Sakkab. In making its recommendation to the Board, the Committee considered the following business relationships and transactions:
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The Committee has determined that the foregoing business relationships and transactions did not affect the independenceTable of any nominee for director.
ALTRIA GROUP, INC. – Proxy Statement 17Contents
BOARD AND GOVERNANCE MATTERS
In making its recommendation to the Board, the Committee also considered the following philanthropic relationships and transactions between the Company and its subsidiaries and various educational and other charitable entities located in or near the locations of Company or Company subsidiary facilities. The Company believes that corporate philanthropy furthers its Mission goal of investing in leadership, which includes investing meaningfully in the communities in which our employees live and work with the objective of making those communities leading environments where our businesses can succeed. In some cases, these relationships date back for many decades.
The Committee has determined that the foregoing philanthropic relationships and transactions did not affect the independence of any nominee for director.Compensation Philosophy
18 ALTRIA GROUP, INC. – Proxy Statement
BOARD AND GOVERNANCE MATTERS
The Company’sOur philosophy is to provide competitive compensation necessary to attract and retain high-quality non-employee directors. Thedirectors and appropriately compensate them for the time, expertise and effort required to serve as a director of a large publicly traded company that operates in a dynamic, highly regulated industry. Our Board believes that a substantial portion of director compensation should consist of equity-based compensation, coupled with robust stock ownership guidelines, to assist in aligning directors’ interests with the interests of shareholders. Directors who are employees of the Company (currently, only Mr. Barrington)Altria receive no additional compensation for service as a director.
Director Compensation Review
The Nominating, Corporate Governance and Social Responsibility Committee reviews and periodically recommends updates to the director compensation program to our Board of Directors for approval. During these reviews, the Committee considers our director compensation philosophy, the competitiveness of director compensation based on an independent benchmarking study (taking into account the Company’sour Compensation Survey Group (“CSG”) described under “Benchmarking” beginning on page 35),44 and other large, public companies) and current market practices and also considers the appropriateness of the form, mix and amount of director compensation andcompensation. The Committee then makes recommendationsa recommendation to theour Board concerning such compensation with a view toward attracting and retaining qualified directors. After reviewing compensation in January 2019, the Committee determined to leave our director compensation unchanged. Our directors’ retainers have not increased since 2016.
In 2015, the non-employee directors’ compensation consistedComponents of cash retainers and an equity award in the form of fully vested shares of Altria common stock. Compensation
The following tablechart presents the 20152019 components of compensation for our non-employee directors:
Equity | Annual Cash Retainers | ||||
Annual Equity Award(1) | $175,000 | Board Member(2) | $110,000 | ||
Presiding Director | $25,000 | ||||
Committees | Chair | Member(3) | |||
■Audit ■Compensation and Talent Development | $25,000 | $5,000 | |||
■Finance ■Innovation ■Nominating, Corporate Governance and Social Responsibility | $15,000 |
(1) | The annual full value equity award is in the form of fully vested shares of Altria common stock. | ||||
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(3) | Committee Chairs also receive the Committee Member annual cash retainer. |
Altria Group, Inc. – Proxy Statement | 9 |
BOARD AND GOVERNANCE MATTERS
Deferred Fee Plan
A non-employee director may elect to defer all or part of the award of shares of common stock and all or part of his or her cash retainers. Pursuant to the Deferred Fee Plan for Non-Employee Directors (“Deferred Fee Plan”), deferred retainers are credited to an unfunded bookkeeping account and may be “invested” in various “investment choices,” including an Altria common stock equivalent account. These “investment choices” parallel the investment options offered under the Deferred Profit-Sharing Plan for Salaried Employees and determine the “earnings” that are credited for bookkeeping purposes to a non-employee director’s account. The non-employee director will receive deferred awards of common stock and cash distributions of deferred retainers either prior to or following termination of service from theour Board, as elected by the non-employee director.
In addition to cash payments and stock awards, non-employee directors are covered under the Company’s Business Travel Accident Insurance Plan, which is available generally to all employees of the Company.Matching Gift Program
Non-employee directors may alsoare eligible to participate in the Company’sour Matching Gift Program. This program is available to all employees and non-employee directors. The Company willWe match eligible donations of a minimum of $25 up to $30,000 per year per employee or non-employee director on a dollar-for-dollar basis to eligible non-profit organizations. In 2015,2019, the following non-employee directors participated in this program: Governor Baliles, Mr. Casteen, Mr. Devitre, Mr. Jones, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade, and Mr. Muñoz.oz, Mr. Newman and Ms. Shanks. The aggregate amount of matching payments for these eight directors in 20152019 was $177,879.$201,265.
Other
ALTRIA GROUP, INC. – Proxy Statement 19
BOARD AND GOVERNANCE MATTERS
In addition to cash payments, stock awards and matching gifts, non-employee directors are covered under our Business Travel Accident Insurance Plan, which is available generally to all employees.
The following table presents the compensation received by the non-employee directors for service as directors in fiscal year 2015:
Non-Employee Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) (2) | All Other Compensation ($) (3) | Total ($) | ||||||||||||||||
Gerald L. Baliles
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125,000
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175,029
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12,544
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312,573
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John T. Casteen III
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115,000
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175,029
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18,000
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308,029
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Dinyar S. Devitre
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110,000
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175,029
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30,000
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315,029
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Thomas F. Farrell II
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130,000
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175,029
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0
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305,029
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Thomas W. Jones
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125,000
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175,029
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29,335
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329,364
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Debra J. Kelly-Ennis
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115,000
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175,029
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10,000
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300,029
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W. Leo Kiely III
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135,000
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175,029
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30,000
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340,029
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Kathryn B. McQuade
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115,000
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175,029
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47,000
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337,029
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George Muñoz
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135,000
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175,029
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1,000
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311,029
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Nabil Y. Sakkab
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125,000
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175,029
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0
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300,029
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2019.
Non-Employee Director Compensation Table |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||
John T. Casteen III | 125,000 | 175,010 | 17,250 | 317,260 | ||||||
Dinyar S. Devitre | 140,000 | 175,010 | 29,795 | 344,805 | ||||||
Thomas F. Farrell II | 145,000 | 175,010 | 0 | 320,010 | ||||||
Debra J. Kelly-Ennis | 125,000 | 175,010 | 14,250 | 314,260 | ||||||
W. Leo Kiely III | 150,000 | 175,010 | 30,000 | 355,010 | ||||||
Kathryn B. McQuade | 140,000 | 175,010 | 30,000 | 345,010 | ||||||
George Muñoz | 150,000 | 175,010 | 30,000 | 355,010 | ||||||
Mark E. Newman | 125,000 | 175,010 | 30,000 | 330,010 | ||||||
Nabil Y. Sakkab | 140,000 | 175,010 | 0 | 315,010 | ||||||
Virginia E. Shanks | 125,000 | 175,010 | 19,970 | 319,980 |
(1) | Pursuant to the 2015 Stock Compensation Plan for Non-Employee Directors (the “2015 Non-Employee Directors Plan”), on May |
(2) |
All Other Compensation consists of matching gifts paid in |
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BOARD AND GOVERNANCE MATTERS
Stock Ownership Guidelines for Non-Employee Directors and Prohibition on Hedging and Pledging
TheOur Board believes that stock ownership guidelines further align the interests of theour Board with those of the Company’sour shareholders. The Company’sOur non-employee directors are expected to hold the Company’sshares of our common stock in an amount equal to the lesser of five times the then-current annual cash retainer or 26,000 shares. Directors are expected to reach this ownership level within five years of being elected to our Board membership and to hold the requisite number of shares until retirement. The ownership requirementguidelines for non-employee directors may be satisfied with all beneficially owned shares, including deferred shares and share equivalents. As of December 31, 2015,2019, all of our directors who had served on theour Board for five or more years since their election held a sufficient number of shares to satisfy these guidelines.
The Company’sOur non-employee directors are not permitted to engage in hedging or pledging activities with respect to our stock. Furthermore,A description of Altria’s hedging and pledging policies is included under “Prohibition on Hedging and Pledging” on page 80.
Altria Board of Directors |
Our Board currently consists of 11 directors. Directors are elected annually at each annual meeting to serve until the next annual meeting and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. Each of the nominees for director currently serves as a director and was elected by the shareholders at the 2019 Annual Meeting. Biographical information and qualifications of the nominees for director are included under “Proposal 1 – Election of Directors” beginning on page 16.
Process for Nominating Directors
The Nominating, Corporate Governance and Social Responsibility Committee works with our non-employeeBoard to determine the appropriate mix of characteristics, skills and experience for our Board. The Committee evaluates each individual in the context of our Board as a whole, with the objective of recommending a group of directors dothat can best continue the success of the business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience.
The Committee has not pledgeestablished any specific minimum qualification standards for nominees to our Board; rather, in evaluating the suitability of individuals for Board membership, the Committee considers the ways in which it believes each individual can assist Altria in pursuing our Vision and advancing one or more Vision strategies.
The Committee takes into account many factors, including whether the individual meets requirements for independence and whether the individual will enhance the diversity of views and experiences available to our Board in its operations and oversight of the development and execution of our strategies. In determining whether to recommend a director for re-election, the Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of our Board. In addition, the Committee considers whether our Board has specific needs for certain skills or attributes at a given time (for example, financial or chief executive officer experience). Other criteria for Board membership, such as the extent of an individual’s other commitments, are set forth in our Corporate Governance Guidelines.
Altria Group, Inc. – Proxy Statement | 11 |
BOARD AND GOVERNANCE MATTERS
Board Composition and Board Diversity
Our Board is committed to reviewing periodically its composition to ensure that it continues to have the right mix of skills, background and tenure. The current composition of our Board is as follows:
Our Board’s composition represents a balanced approach to director tenure, allowing our Board to benefit from the experience of longer-serving directors combined with the perspectives of newer directors.
Commitment to Board Diversity The Nominating, Corporate Governance and Social Responsibility Committee has a long-standing commitment to diversity, rather than a formal diversity policy, and is guided by our diversity philosophy in its review and consideration of director nominees. In this regard, our Board and the Committee view diversity holistically. As set forth in our Corporate Governance Guidelines, our Board and the Committee consider, among other factors: ■whether the individual meets the requirements for independence; ■the individual’s general understanding of the various disciplines relevant to the success of a large publicly traded company in today’s global business environment; ■the individual’s understanding of our businesses and markets; ■the individual’s skills, professional expertise and educational background; and ■other factors that promote diversity of views and experiences, including self-identified characteristics such as gender, race, national origin, age and sexual orientation. | ||
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BOARD AND GOVERNANCE MATTERS
Board Skills and Experience
Our Board has a breadth of skills and experiences. As noted in the summary below, we believe that our Board has demonstrated leadership in a variety of positions across various professions and industries. The following table is not intended to be an exhaustive list of each of our director’s contributions to our Board as each of them also contributes other important skills, expertise, experience and personal attributes that are not reflected in the chart below.
Skills and Experience | |||||||||||
Consumer Products and/or Consumer Marketing Consumer products leadership is important to Altria because our continued leadership in satisfying evolving adult consumers requires that we market our products effectively and responsibly. | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ||||
Industry Experience in our industries and existing markets is important to understanding industry and market dynamics. | ■ | ■ | |||||||||
Regulated Industries Altria operates in highly regulated businesses. To enhance Board oversight of regulatory compliance and engagement, we include directors with experience in regulated industries. | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ||
Chief Executive Experience Directors who serve or have served as a chief executive bring leadership experience in various areas such as strategic planning, financial oversight, executive succession planning, compliance and risk management. | ■ | ■ | ■ | ■ | ■ | ■ | |||||
Financial Expertise, including Chief Financial Officer Experience Proficiency in finance and financial reporting processes helps our Board monitor and assess Altria’s performance and financial reporting. | ■ | ■ | ■ | ■ | ■ | ||||||
Public Policy Directors with public policy experience provide valuable insights as Altria’s businesses are subject to an array of federal, state and local regulations and regularly engage with various external stakeholders. | ■ | ■ | ■ | ■ | |||||||
Public Company Board Service on other public company boards promotes efficient and effective Board processes and provides insight into the corporate governance practices of other companies. | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | ■ | |
Leadership in Innovation Directors with experience in innovation, product development and consumer engagement promote effective oversight of product growth opportunities, marketing strategies and capabilities, and other growth strategies. | ■ | ■ | ■ | ■ | ■ | ■ | |||||
Information Technology/Cybersecurity We benefit from directors who can help manage and mitigate key technology risks, including cybersecurity. | ■ | ■ | ■ | ■ |
Altria Group, Inc. – Proxy Statement | 13 |
BOARD AND GOVERNANCE MATTERS
Director Independence Determinations
Under the listing standards of the NYSE, our Board must consist of a majority of independent directors. In making independence determinations, our Board adheres to NYSE and SEC requirements and considers all relevant facts and circumstances. Our Board has also adopted categorical standards of director independence to further assist it in making these determinations. These standards are set forth in Annex A of our Corporate Governance Guidelines, which are available on our website at www.altria.com/governance.
On the recommendation of the Nominating, Corporate Governance and Social Responsibility Committee, our Board affirmatively determined that each of the following nominees is independent in that such nominee has no material relationship with us: John T. Casteen III, Dinyar S. Devitre, Thomas F. Farrell II, Debra J. Kelly-Ennis, W. Leo Kiely III, Kathryn B. McQuade, George Muñoz, Mark E. Newman, Nabil Y. Sakkab and Virginia E. Shanks. In making its recommendation to our Board, the Committee considered the following business relationships and transactions:
Business Relationships and Transactions Considered |
Mr. Farrell is the Chief Executive Officer of Dominion Energy, Inc. (“Dominion”). A subsidiary of Dominion is a regulated public utility with which Altria or our subsidiaries has a commercial relationship for energy procurement. Amounts paid by Altria or our subsidiaries are set at rates fixed in accordance with the applicable regulatory authority. One of our subsidiaries has an agreement with the same utility under which the subsidiary receives nominal payments in connection with a solar energy program overseen and approved by the same regulatory authority. The terms of the agreement are comparable to those the utility offers to other third parties. Mr. Farrell is neither responsible for, nor involved in, the utility’s dealings with us or our subsidiaries, nor does Mr. Farrell materially benefit directly or indirectly from this relationship. |
Altria or our subsidiaries from time to time do business in the ordinary course on terms comparable to those provided to unrelated third parties with entities where Mr. Devitre and Mr. Muñoz serve as non-executive directors or where immediate family members (as defined in our Policy on Related Person Transactions, which is discussed in “Related Person Transactions and Code of Conduct” on page 79) of Mr. Farrell, Mr. Kiely and Dr. Sakkab serve as non-executive directors or are employed in non-executive officer capacities. In each case, neither the director nor the immediate family member is responsible for, or involved in, the entity’s day-to-day dealings with Altria or our subsidiaries, and the respective payments made by Altria or our subsidiaries to the entities in each of the last three fiscal years were significantly less than the greater of $1 million or 2% of any such entity’s consolidated gross revenues. None of Mr. Devitre, Mr. Farrell, Mr. Kiely, Mr. Muñoz or Dr. Sakkab, or their respective immediate family members, materially benefits directly or indirectly from these relationships. |
The Committee determined that the foregoing business relationships and transactions did not affect the independence of any nominee for director.
In making its recommendation to our Board, the Committee also considered the following philanthropic relationships and transactions between Altria and our subsidiaries and various educational and other charitable entities located in or near our locations or facilities of our subsidiaries. We believe that corporate philanthropy furthers our corporate responsibility focus on investing in our communities, which includes investing meaningfully in the communities in which our employees live and work with the objective of making those communities leading environments where our businesses can succeed. In some cases, these relationships date back for many decades.
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BOARD AND GOVERNANCE MATTERS
Philanthropic Relationships and Transactions Considered |
Altria and the University of Virginia (the “University”) have a long-standing relationship that has included employment recruiting and charitable donations. In 2019, Altria or our subsidiaries made certain charitable donations to the University in an aggregate amount of $1,579,500 with the significant majority supporting the University’s Youth-Nex Center that promotes positive youth development. In addition, we made ordinary course trade payments to the University in the aggregate amount of $62,692. The sum of these 2019 contributions and payments represented significantly less than 2% of the University’s consolidated gross revenues. Mr. Casteen is a former President of the University. He now serves as President Emeritus of the University. Mr. Casteen’s son, John T. Casteen IV, is an Assistant Professor and Director of Studies at the University. Neither Mr. Casteen nor his son materially benefits directly or indirectly from this relationship. |
In addition, we make various grants and charitable contributions, including matching gifts under our Matching Gift Program, to entities where Mr. Casteen, Mr. Devitre, Mr. Farrell and Ms. Kelly-Ennis or immediate family members of Mr. Farrell, Mr. Kiely, Ms. McQuade and Mr. Newman serve as non-executive directors or trustees or non-executive employees. A substantial majority of these grants and contributions were made to non-profit entities that serve the communities in which Altria and our subsidiaries operate and to non-profit educational programs and institutions located in and around these communities. In each case, payments by us in each of the last three fiscal years were significantly less than the greater of $1 million or 2% of any such entity’s consolidated gross revenues. None of Mr. Casteen, Mr. Devitre, Mr. Farrell, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade or Mr. Newman, or their respective immediate family members, materially benefits directly or indirectly from these contributions. |
The Committee determined that the foregoing philanthropic relationships and transactions did not affect the independence of any nominee for director.
Altria Group, Inc. – Proxy Statement | 15 |
BOARD AND GOVERNANCE MATTERS
Proposal 1 | ||||||
Election of Directors | ||||||
The Board recommends a voteFOReach nominee. | ||||||
We propose that the 11 individuals named below, 10 of whom the Board has affirmatively determined to be independent, be elected as directors to hold office until the next annual meeting of shareholders and until their Altria shares.successors have been elected and qualified, subject to their earlier death, resignation or removal. The Nominating, Corporate Governance and Social Responsibility Committee has recommended to our Board, and our Board has approved, the individuals named below.
We list in the biographies below the particular experiences, qualifications, attributes and skills of each nominee that the Nominating, Corporate Governance and Social Responsibility Committee believes will advance our Vision and one or more Vision strategies. The Committee and our Board believe that each of the nominees for election at the 2020 Annual Meeting possesses important and unique characteristics. The Committee and our Board believe that, as a group, these nominees provide our Board with an optimal balance of experience, leadership, competencies, qualifications and skills.
Although it is not anticipated that any of the individuals named below will be unable or unwilling to stand for election, in the event of such an occurrence, a proxy may be voted for a substitute designated by our Board. In lieu of designating a substitute, our Board may reduce the number of directors.
Our Board recommends a voteFOReach of the nominees for election as directors. |
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
John T. Casteen III Age:76 Director Since:2010 Board Committees: ■Audit ■Compensation and Talent Development ■Innovation | ||||||
16 | www.altria.com |
ALTRIA GROUP, INC. – Proxy StatementTable of Contents
BOARD AND GOVERNANCE MATTERS
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Dinyar S. Devitre Age:72 Director Since:2008 Board Committees: ■Executive ■Finance(Chair) ■Innovation ■Nominating, Corporate Governance and Social Responsibility | ||||||
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Thomas F. Farrell II Age:65 Director Since:2008 Presiding Director Board Committees: ■Compensation and Talent Development ■Executive ■Nominating, Corporate Governance and Social Responsibility | ||||||
Altria Group, Inc. – Proxy Statement | 17 |
AUDIT COMMITTEE MATTERSTable of Contents
BOARD AND GOVERNANCE MATTERS
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Debra J. Kelly-Ennis Age:63 Director Since:2013 Board Committees: ■Audit ■Innovation ■Nominating, Corporate Governance and Social Responsibility | ||||||
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
W. Leo Kiely III Age:73 Director Since:2011 Board Committees: ■Compensation and Talent Development(Chair) ■Executive ■Finance ■Innovation | ||||||
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BOARD AND GOVERNANCE MATTERS
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Kathryn B. McQuade Age:63 Director Since:2012 Board Committees: ■Audit ■Compensation and Talent Development ■Executive ■Nominating, Corporate Governance and Social Responsibility(Chair) | ||||||
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
George Muñoz Age:68 Director Since:2004 Board Committees: ■Audit(Chair) ■Executive ■Finance ■Nominating, Corporate Governance and Social Responsibility | ||||||
Altria Group, Inc. – Proxy Statement | 19 |
BOARD AND GOVERNANCE MATTERS
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Mark E. Newman Age:56 Director Since:2018 Board Committees: ■Audit ■Finance ■Innovation | ||||||
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Nabil Y. Sakkab Age:72 Director Since:2008 Board Committees: ■Executive ■Finance ■Innovation(Chair) ■Nominating, Corporate Governance and Social Responsibility | ||||||
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BOARD AND GOVERNANCE MATTERS
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Virginia E. Shanks Age:59 Director Since:2017 Board Committees: ■Audit ■Compensation and Talent Development ■Innovation | ||||||
Position, Principal Occupation and Professional Experience: Other Current Public Directorships: Prior Public Company Directorships (within the last five years): Other Directorships, Trusteeships and Memberships: Director Qualifications: | ||||||
Howard A. Willard III Age:56 Director Since:2018 Chairman and Chief Executive Officer Board Committee: ■Executive(Chair) | ||||||
Altria Group, Inc. – Proxy Statement | 21 |
Audit Committee Report for the Year Ended December 31, 2015Matters
Annual Evaluation and Selection of Independent Registered Public Accounting Firm |
ManagementPricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) has the primary responsibility for the Company’s financial statements and the reporting process, including the systems of internal accounting control. The Audit Committee monitors the Company’s financial reporting processes and systems of internal accounting control, the independence and the performance of thebeen Altria’s independent registered public accounting firm and the performance of the internal auditors.
The Audit Committee has received representations from management that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and that the Company maintained effective internal control over financial reporting, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee has discussed with thesince 1998. Prior to 1998, Altria’s independent registered public accounting firm their evaluationwas Coopers & Lybrand L.L.P. (until its merger with Price Waterhouse LLP in 1998). In addition to assuring the rotation of the accounting principles, practices and judgments appliedaudit partners every five years as required by management, andlaw, the Audit Committee has discussed withis responsible for selecting, reviewing and evaluating the lead partner and senior members of the audit engagement team and considers whether, in order to assure continuing auditor independence, there should be a rotation of the firm.
In selecting PricewaterhouseCoopers as our independent registered public accounting firm, the Audit Committee conducted its annual evaluation of the firm. This evaluation considers various matters required to be discussed by applicable standards adopted bysuch as technical competence, knowledge of our industry and Altria, quality of services, reputation and communications with management and the Audit Committee. The Audit Committee also evaluates the firm’s independence program and quality control procedures, the results of Public Company Accounting Oversight Board (“PCAOB”).
and peer reviews of the firm’s quality controls and the appropriateness of the firm’s fees. The Audit Committee has received fromalso considers PricewaterhouseCoopers’s tenure and believes that extended tenure results in higher quality audit work with greater operational efficiencies through the independent registered publicleveraging of PricewaterhouseCoopers’s deep institutional knowledge of our operations and businesses, accounting firm written disclosurespolicies and a letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence from the Company and its management. The Audit Committee pre-approved all fiscal year 2015 audit and permissible non-audit services provided by the independent registered public accounting firm and the fees for those services included on page 22. As part of this process, the Audit Committee reviewed non-audit services and fees to assure compliance with regulations prohibiting the independent registered public accounting firm from performing specified services that might impair their independence.
The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope of and plans for their respective audits. The Audit Committee has met with the internal auditors and the independent registered public accounting firm, separately and together, with and without management present, to discuss the Company’s financial reporting processespractices, and internal control over financial reporting. The Audit Committee has reviewedis also mindful of the advisability and potential impact of selecting a different firm, including the significant audit findings prepared bytime commitment and expense inherent in on-boarding a new independent registered public accounting firm.
The Audit Committee and our Board believe that the continued retention of PricewaterhouseCoopers to serve as our independent registered public accounting firm is in the best interests of Altria and those prepared byour shareholders.
Independent Registered Public Accounting Firm’s Fees |
The Audit Committee has the internal auditors, togethersole authority to approve all engagement fees and terms associated with management’s responses.
Based on the reviews and discussions referred to above,retention of PricewaterhouseCoopers. As noted in the Audit Committee recommended to the Board the inclusion of the audited consolidated financial statements in the Company’s 2015 Annual Report on Form 10-K.
page 23, the Audit Committee:
George Muñoz, Chair
John T. Casteen III
Thomas W. Jones
Debra J. Kelly-Ennis
Kathryn B. McQuade
ALTRIA GROUP, INC. – Proxy Statement 21
AUDIT COMMITTEE MATTERS
Independent Registered Public Accounting Firm’s FeesCommittee pre-approved all fees associated with the services that the firm provided in 2019.
Aggregate fees, including out-of-pocket expenses, for professional services rendered by our independent registered public accounting firm, PricewaterhouseCoopers for fiscal years ended December 31, 20152019 and 20142018 were comprised of the following (in thousands):
2015 ($) | 2014 ($) | |||||||||
Audit Fees(1)
|
6,289
|
5,965
| ||||||||
Audit-Related Fees(2)
|
735
|
765
| ||||||||
Tax Fees(3)
|
960
|
1,143
| ||||||||
All Other Fees(4)
|
36
|
0
| ||||||||
TOTAL
|
8,020
|
7,873
|
2019 ($) | 2018 ($) | |||
Audit Fees(1) | 6,515 | 6,467 | ||
Audit-Related Fees(2) | 1,190 | 1,436 | ||
Tax Fees(3) | 1,469 | 440 | ||
All Other Fees(4) | 8 | 8 | ||
TOTAL | 9,182 | 8,351 |
(1) | Fees and expenses associated with professional services rendered by PricewaterhouseCoopers in connection with (a) the audit of |
(2) | Fees and expenses for professional services rendered by PricewaterhouseCoopers for audit-related services, which include certain employee benefit plan audits, accounting consultations and procedures relating to various other audit and special reports. |
(3) | Fees and expenses for professional services rendered by PricewaterhouseCoopers in connection with U.S. and foreign tax compliance and planning, and consultation and advice on tax examinations. |
(4) | Other fees |
22 | www.altria.com |
Pre-Approval PolicyAUDIT COMMITTEE MATTERS
Pre-Approval Policy |
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of service and is subject to a specific budget. The Audit Committee requires the independent registered public accounting firm and management to report on the actual fees charged for each category of service at Audit Committee meetings throughout the year.
During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee for those instances when pre-approval is needed prior to a scheduled Audit Committee meeting. The Chair of the Audit Committee must report on such approvals at the next scheduled Audit Committee meeting.
Audit Committee Report for the Year Ended December 31, 2019 |
Management has the primary responsibility for Altria’s financial statements and the reporting process, including the systems of internal accounting control. The Audit Committee monitors Altria’s financial reporting processes and systems of internal accounting control, the independence and the performance of PricewaterhouseCoopers and the performance of the internal auditors.
The Audit Committee has received representations from management that Altria’s consolidated financial statements were prepared in accordance with GAAP and that Altria maintained effective internal control over financial reporting, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PricewaterhouseCoopers. The Audit Committee has discussed with PricewaterhouseCoopers their evaluation of the accounting principles, practices and judgments applied by management, and the Audit Committee has discussed with PricewaterhouseCoopers the matters required to be discussed by applicable standards adopted by the PCAOB.
The Audit Committee has received from PricewaterhouseCoopers written disclosures and a letter required by applicable requirements of the PCAOB regarding PricewaterhouseCoopers’s communications with the Audit Committee concerning independence and has discussed with PricewaterhouseCoopers its independence from Altria and its management. The Audit Committee pre-approved all fiscal year 2019 audit and permissible non-audit services provided by PricewaterhouseCoopers and the fees for those services included on page 22. As part of this process, the Audit Committee reviewed non-audit services and fees to assure compliance with regulations prohibiting the independent registered public accounting firm from performing specified services that might impair its independence.
The Audit Committee discussed with Altria’s internal auditors and PricewaterhouseCoopers the overall scope of and plans for their respective audits. The Audit Committee has met with the internal auditors and PricewaterhouseCoopers, separately and together, with and without management present, to discuss Altria’s financial reporting processes and internal control over financial reporting. The Audit Committee has reviewed significant audit findings prepared by PricewaterhouseCoopers and those prepared by the internal auditors, together with management’s responses.
Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board the inclusion of the audited consolidated financial statements in Altria’s 2019 Form 10-K.
Audit Committee:
George Muñoz, Chair
John T. Casteen III
Debra J. Kelly-Ennis
Kathryn B. McQuade
Mark E. Newman
Virginia E. Shanks
Altria Group, Inc. – Proxy Statement | 23 |
AUDIT COMMITTEE MATTERS
Proposal 2 | ||||||
Ratification of the Selection of Independent Registered Public Accounting Firm | ||||||
Our Board recommends a voteFORratification of the selection of PricewaterhouseCoopers. | ||||||
As reflected in the Audit Committee Charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The Audit Committee has selected PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2020 and has directed that management submit such selection to shareholders for ratification at the 2020 Annual Meeting.
Shareholder ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm is not required by our By-Laws or otherwise. However, we are submitting the selection of PricewaterhouseCoopers to the shareholders for ratification as a matter of good corporate governance. If our shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers. Even if the selection is ratified, the Audit Committee in its discretion may appoint a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of Altria and our shareholders.
We expect representatives of PricewaterhouseCoopers to be present at the meeting. The representatives will have an opportunity to make a statement if they so desire and be available to respond to appropriate questions.
22 Our Board recommends a voteALTRIA GROUP, INC.FORratification of the selection of PricewaterhouseCoopers.
24 | www.altria.com |
Executive Compensation – Proxy StatementTable of Contents
Altria Group, Inc. – Proxy Statement | 25 |
COMPENSATION COMMITTEE MATTERSExecutive Compensation
Compensation and Talent Development Committee Report for the Year Ended December 31, 2019 |
The Compensation and Talent Development Committee consists entirelyhas reviewed and discussed the “Compensation Discussion and Analysis” section of non-management directors all of whomthis Proxy Statement with management. Based on its review and discussions with management, the Compensation and Talent Development Committee recommended to our Board has determined are independent withinthat the meaning of the listing standards of the NYSE. The current members of the Committee are: Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation and Talent Development Committee:
W. Leo Kiely III, (Chair); Gerald L. Baliles; Chair
John T. Casteen III
Thomas F. Farrell II; Thomas W. Jones; and II
Kathryn B. McQuade.McQuade
Virginia E. Shanks
Compensation Discussion and Analysis |
In this section, we provide a detailed description of our executive compensation program, with a focus on decisions by the Compensation and Talent Development Committee (for purposes of the “Executive Compensation” section, the “Committee”) with respect to our NEOs:
Name | Position during 2019 | |
Howard A. Willard III | Chairman of the Board and CEO, Altria Group, Inc. | |
William F. Gifford, Jr. | Vice Chairman and Chief Financial Officer, Altria Group, Inc. | |
Murray R. Garnick | Executive Vice President and General Counsel, Altria Group, Inc. | |
Salvatore Mancuso | Senior Vice President, Finance and Procurement, Altria Group, Inc. | |
Jody L. Begley | Senior Vice President, Tobacco Products, Altria Group, Inc. | |
Kevin C. Crosthwaite, Jr. | Former Senior Vice President, Chief Strategy and Growth Officer, Altria Group, Inc. | |
Craig A. Johnson | Former President and Chief Executive Officer, Altria Group Distribution Company |
Mr. Crosthwaite resigned effective September 24, 2019 to become the Chief Executive Officer of JUUL. Mr. Johnson retired effective March 1, 2019.
26 | www.altria.com |
EXECUTIVE COMPENSATION
We design our executive compensation program to align the interests of our executive officers with the interests of our shareholders. We believe this requires:
clear articulation of corporate and individual performance goals | a competitive, financially disciplined executive compensation program that rewards past success and creates the appropriate incentives for future conduct | transparent measurement against both corporate and individual performance goals |
Our business performance is a key factor in determining executive compensation. 2019 was a year of industry and business transition. As reflected in the “2019 Business Highlights” section beginning on page iii, Altria’s core tobacco businesses delivered outstanding performance in 2019. Additionally, Altria exceeded its $575 million annualized cost savings target. The strong performance of our core tobacco businesses resulted in us meeting our financial targets. However, we were disappointed in the performance of our JUUL investment during the year, and the performance of Altria’s stock lagged that of our peers and the general market. The following graphs summarize our one- and three-year performance against key financial indicators:
Adjusted Diluted EPS(12/31/2016 - 12/31/2019) ($) | Dividend Rate(1)(8/24/2017 - 8/22/2019) ($) | ||||
(1) | Compound annual growth rate (“CAGR”) based on 2016 adjusted diluted EPS of $3.03. | (1) | Annualized dividend based on quarterly dividend rate per share of Altria common stock declared in August of each year. | ||
(2) | CAGR based on the annualized dividend rate per share of Altria common stock of $2.44 that was declared in August 2016, with each August dividend similarly annualized. | ||||
2019 TSR(12/31/2018 – 12/31/2019) (%) | Three-Year TSR(12/31/2016 - 12/31/2019) (%) | ||||
Source: Bloomberg Daily Return (December 31, 2018 – December 31, 2019) | Source: Bloomberg Daily Return (December 31, 2016 – December 31, 2019) | ||||
Note: Assumes reinvestment of dividends as of the ex-dividend date. | Note: Assumes reinvestment of dividends as of the ex-dividend date. |
Altria Group, Inc. – Proxy Statement | 27 |
EXECUTIVE COMPENSATION
The following graph illustrates the relationship between our CEOs’ total direct compensation (including annualized LTIP compensation) and our indexed TSR:
CEO Pay(1)vs. Indexed TSR(2) |
(1) | CEO pay is calculated using an annualized allocation of the actual 2017 – 2019 LTIP award. All other pay elements are based on the Summary Compensation Table values. |
(2) | Indexed TSR reflects a December 31, 2016 starting point (with a nominal value of 100) and represents the total growth (including dividends) from that date through each December 31. |
(3) | 2017 represents the total direct compensation of our former Chairman, CEO and President, Martin J. Barrington. |
(4) | 2018 represents Mr. Willard’s total direct compensation, calculated as a mix of his total direct compensation as Executive Vice President and Chief Operating Officer (January 1 through May 16) and as Chairman and CEO (May 17 through December 31). |
Say-on-Pay and Shareholder Engagement
At the 2019 Annual Meeting, over | We provide our shareholders with an annual advisory vote (“say on pay”) on the compensation of our NEOs. This vote is not binding on us, our Board or the Committee. While the Committee acknowledges the historically strong shareholder support for our executive compensation program, it is also committed to regularly reviewing the program in the context of our compensation philosophy. | ||
We periodically engage with large investors to discuss our executive compensation program. We value the perspectives we gain from these engagement activities.
28 | www.altria.com |
EXECUTIVE COMPENSATION
The Committee considered several factors in approving each element of 2019 compensation. For the 2019 Annual Incentive Award plan, the Committee primarily evaluated our financial and strategic performance, as described under “Financial Performance” on page 27. The Committee also considered the individual performance of each active NEO for purposes of approving salary increases, annual cash incentive awards, equity awards and LTIP awards. Executives receive variable elements of short- and long-term compensation only after the relevant performance period has ended and the Committee has assessed Altria’s actual performance and executive performance relative to stated goals established at the beginning of the period. In addition, the Committee considers industry compensation market data and tally sheets for each of the NEOs that include their total cash and long-term compensation for the last three years.
The Committee evaluated our NEOs’ progress against their performance goals and the relationship of their performance to our overall 2019 results. We discuss the 2019 performance of each NEO below.
Howard A. Willard III Key Responsibilities | 2019 Achievements However, our 2018 minority investment in JUUL had a significant negative impact on shareholder value, 2019 reported income and investor sentiment, which the Committee took into account in determining Mr. Willard’s compensation, as discussed below under “2019 Executive Compensation Program Decisions.” In terms of his leadership over Altria’s business operations, Mr. Willard: ■Oversaw delivery of strong financial results despite significant headwinds, including accelerated industry volume declines and a challenging regulatory environment; ■Built a compelling portfolio strategy across tobacco categories and advanced Altria’s harm reduction aspiration through theon!transaction and the launch ofIQOSin the U.S.; ■Oversaw the successful execution of the cost reduction program announced in December 2018, which exceeded target, while simultaneously guiding the organization to execute at a high level following what could have been a disruptive event; ■Promoted enhanced efforts to support underage tobacco prevention, including federal legislation to raise the legal age of purchasing all tobacco products (including e-vapor) to 21; and ■Implemented a new framework to drive accountability of senior executives to advance diversity, develop their people and promote an inclusive culture. | ||
Altria Group, Inc. – Proxy Statement | 29 |
EXECUTIVE COMPENSATION
William F. Gifford, Jr. Key Responsibilities | 2019 Achievements ■Led Altria in achieving its financial targets in 2019 despite significant headwinds in its core tobacco businesses, including delivering 5.8% adjusted diluted EPS growth, within Altria’s 4%-7% adjusted diluted EPS earnings guidance for the year; ■Oversaw the expansion of adjusted OCI margins in the smokeable and smokeless product segments with strong price realization, efficient deployment of price and promotional resources and effective controllable cost management; ■Oversaw execution of the cost reduction program announced in December 2018, which delivered $600 million in annualized cost savings, exceeding the target of $575 million; ■Led the issuance of debt to fund the Cronos and JUUL investments at better than expected interest rates; and ■Provided executive sponsorship of Altria’s MOSAIC (LGBTQ+) employee resource group. | ||
Murray R. Garnick Key Responsibilities | 2019 Achievements ■Worked with regulators and external stakeholders to help shape an environment that supports the commercialization ofIQOSin the U.S.; ■Oversaw legal strategy and support in connection with theon!transaction, the Cronos investment and the JUUL investment, including negotiations with JUUL to revise the terms of our agreements and antitrust review; ■Successfully defendedCopenhagenSnuff’s claim as a modified risk tobacco product before the Tobacco Products Scientific Advisory Committee; ■Oversaw regulatory strategies to protect Altria’s core tobacco portfolio by reducing the risk of receiving not-substantially equivalent orders from the FDA; ■Managed complex litigation matters, including product liability and securities cases and matters related to the Master Settlement Agreement; and ■Provided executive sponsorship of Altria’s EAST (Asian employee) employee resource group. | ||
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EXECUTIVE COMPENSATION
Salvatore Mancuso Key Responsibilities | 2019 Achievements ■Led the implementation of the cost reduction program announced in December 2018 that reduced headcount-related and third-party costs by $600 million; ■Oversaw the issuance of debt to fund the Cronos and JUUL investments; ■Provided executive oversight of the de-risking of the Altria pension plan to significantly reduce the value-at-risk; ■Improved operating cash flow by almost $500 million compared to the 2019 operating budget; ■Oversaw the management of significant tax changes resulting from the Tax Cuts and Jobs Act of 2017; ■Led the Procurement department’s improved supply security of the direct materials supply chain for Altria’s core tobacco businesses; and ■Provided executive sponsorship of Altria’s UNIFI (black employee) employee resource group. | ||
Jody L. Begley Key Responsibilities | 2019 Achievements ■Led Altria’s core tobacco businesses in delivering outstanding business and financial performance, strong profit growth and brand leadership amid a challenging year with greater-than-expected industry volume declines and increased pressure in the smokeable discount segment; ■Led the revenue growth management strategy to allocate our core tobacco businesses’ resources more effectively in geographies, trade classes and specific adult tobacco consumer segments; ■Increased adjusted OCI for the core tobacco businesses – 8.6% in the smokeable products segment and 9.7% in the smokeless products segment – while expanding smokeable and smokeless adjusted OCI margins by 3.9 and 3.0 percentage points, respectively; ■Oversaw the launch ofIQOSin two lead markets with novel retail concepts; ■Oversaw the expansion of retail distribution ofon!, creation of an e-commerce platform and the development of manufacturing capabilities for oral nicotine pouches; and ■Provided executive sponsorship of Altria’s UNIFI (black employee) employee resource group. | ||
Altria Group, Inc. – Proxy Statement | 31 |
EXECUTIVE COMPENSATION
Our executive compensation program includes multiple performance metrics to assess the efforts of all executives in pursuing our strategies. Specifically, our program is designed to satisfy the following objectives:
■ | promote pursuit of business strategies that create substantial growth and long-term value for shareholders and are executed with integrity; |
■ | reward quality execution by making a significant portion of our executives’ compensation dependent on the achievement by Altria of key financial and strategic goals and their individual performance; |
■ | align the interests of shareholders and executives through equity and cash performance-based long-term incentive awards, stock ownership and holding requirements and anti-hedging and anti-pledging policies with respect to our stock; |
■ | grow our leadership advantage through our people and culture; and |
■ | promote internal fairness and a disciplined qualitative and quantitative assessment of performance. |
The elements of our executive compensation program serve these objectives with the following design principles (as shown in the chart below):
■ | a mix of fixed and at-risk variable performance-based compensation, with executives at higher levels subject to a higher proportion of variable compensation; |
■ | a mix of short- and long-term compensation to appropriately reward and motivate the achievement of both annual and long-term goals and objectives; |
■ | a mix of cash and equity compensation that seeks to discourage actions solely driven by our stock price to the detriment of strategic goals and to minimize the potentially dilutive nature of equity compensation on shareholder value; and |
■ | a mix of equity compensation consisting of RSU and PSU awards. |
2019 CEO and Other NEOs Target Pay Mix(1) |
(1) | Includes 2019 salary, target award under the 2019 Annual Incentive Award plan, target value of 2019 equity awards and target 2019 allocation under the 2017 – 2019 LTIP. |
(2) | Includes the other NEOs who were employees as of December 31, 2019 (Messrs. Gifford, Garnick, Mancuso and Begley). |
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EXECUTIVE COMPENSATION
The table below summarizes the elements and objectives of the 2019 executive compensation program for the NEOs. The general objective of each element is to attract and retain world-class leaders.
2019 Executive Compensation Program | ||||||
Element | Summary Description | Objective | ||||
Annual Compensation | Salary | Fixed cash compensation based on role at Altria. | ■Provide financial stability ■Recognize individual role, experience, responsibility and performance | |||
Annual Incentive Awards | Cash-based incentive plan based on performance during the plan year. | ■Recognize annual financial and strategic performance after it is delivered ■Recognize annual individual performance after it is delivered | ||||
Long-Term Incentive Compensation | Equity Awards | RSU and PSU awards based on prior year’s individual performance and advancement potential, vesting after a three-year period.PSU payout amount tied to achievement of company performance measures. | ■Align NEOs’ interests with shareholders through company performance and stock ownership ■Recognize individual performance after it is delivered and advancement potential ■Build stock ownership ■Retain talented leaders | |||
Long-Term Incentive Plan | Cash-based incentive plan based on three-year financial and strategic goals. | ■Align NEOs’ interests with shareholders ■Recognize long-term financial and strategic performance after it is delivered ■Retain talented leaders | ||||
Post-Termination Benefits and Change in Control Payments | Defined Benefit Plans | Retirement plans providing for the continuation of a portion of compensation upon retirement or separation from service. Generally, employees hired prior to January 1, 2008 are eligible. | ■Provide opportunity for financial security in retirement | |||
Defined Contribution Plans | Annual cash contribution based on a formula related to adjusted diluted EPS growth and, for employees not participating in a defined benefit plan, a supplemental contribution and matching contributions. Includes an Altria stock investment option. | ■Provide opportunity for financial security in retirement ■Provide additional opportunity to build stock ownership |
Altria Group, Inc. – Proxy Statement | 33 |
EXECUTIVE COMPENSATION
Element | Summary Description | Objective | ||||
Post-Termination Benefits and Change in Control Payments | Change in Control Payments | Payments to executives in connection with a defined change in the ownership of Altria. Change in control provisions are contained in each of the 2010, 2015 and proposed 2020 Performance Incentive Plans. | ■Allow NEOs to focus on delivering shareholder value in a period of uncertainty ■Allow NEOs to receive awards granted for periods of performance before a change in control | |||
Termination Payments | For certain types of involuntary separations, potential for severance benefits (including continuation of salary and medical coverage based on years of service). Our NEOs are eligible for the same severance benefits as our other salaried employees. | ■Provide opportunity for protection upon an unexpected event | ||||
Perquisites | For all NEOs, an Altria-paid executive physical and vehicle expenses, which included a leased vehicle and/or a vehicle allowance (not accepted by the CEO). For the CEO, a home security system and, subject to an annual allowance, personal use of company aircraft. | ■Provide comprehensive annual preventive health screening ■Provide security | ||||
Other Benefits | Medical coverage, group life insurance and other welfare benefits generally available to all salaried employees. | ■Promote health and financial security |
2019 Executive Compensation Program Decisions
The Committee considered the performance of our investment in JUUL in determining the 2019 compensation for the NEOs involved in that investment decision, including the negative impact on shareholder value, 2019 reported income and investor sentiment. Specifically:
■ | For Mr. Willard, the Committee determined that (i) he should not receive an award under the 2019 Annual Incentive Award plan and (ii) his 2017 – 2019 LTIP award should reflect below target individual performance. In light of his performance in other areas of responsibility, our Board’s confidence in his leadership as we pursue our portfolio strategy into the future and to focus Mr. Willard on increasing long-term shareholder value, the Committee granted Mr. Willard RSU (88,017 units) and PSU (58,221 units) awards in February 2020 with an aggregate grant date fair value of $6,250,027 (versus his target award of $5,400,000), subject to applicable vesting and performance periods. The Committee did not approve a 2020 salary increase for Mr. Willard. |
■ | For Messrs. Gifford and Garnick, the Committee approved their awards under the 2019 Annual Incentive Award plan at target individual performance versus higher amounts for which they would have otherwise been eligible based on their 2019 individual performance. |
See “Annual Incentives” and “Long-Term Incentives” beginning on pages 36 and 37, respectively.
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EXECUTIVE COMPENSATION
The Committee considers several factors when reviewing and setting salaries for our NEOs, including each executive’s individual performance, level of responsibility and experience, the relationship between salaries paid to other Altria executives and the position of the executive’s salary within the applicable salary range. Additionally, the Committee periodically compares the salaries of our NEOs to others holding comparable positions at CSG companies. The Committee analyzes all these factors in the aggregate in determining NEO salaries.
Salaries are relevant in establishing annual and cash long-term incentive award targets and factor into retirement, group life insurance and certain other benefits available to all salaried employees. The Committee reviews salaries for our NEOs other than our CEO on an annual basis; effective May 2018, it reviews our CEO’s salary approximately every two years. Generally, any adjustments are effective March 1.
The 2019 salary ranges for our NEOs were as follows:
2019 Salary Range | |||||
Band | Minimum ($) | Maximum ($) | |||
A | Mr. Willard | 910,000 | 2,090,000 | ||
B | Messrs. Gifford, Garnick and Johnson | 480,000 | 1,100,000 | ||
C | Messrs. Begley, Crosthwaite and Mancuso (after promotions effective March 1, 2019) | 390,500 | 898,100 |
The Committee increased the salaries of our NEOs based on the criteria noted above as follows:
2019 Salary Changes | ||||||
Name | 2018 Salary ($) | 2019 Salary ($) | Increase (%) | |||
Howard A. Willard III(1) | 1,250,000 | 1,250,000 | — | |||
William F. Gifford, Jr. | 850,000 | 876,000 | 3.1 | |||
Murray R. Garnick | 850,000 | 876,000 | 3.1 | |||
Salvatore Mancuso(2) | 489,700 | 520,000 | 6.2 | |||
Jody L. Begley(3) | 420,000 | 525,000 | 25.0 | |||
Kevin C. Crosthwaite, Jr.(3) | 420,000 | 525,000 | 25.0 | |||
Craig A. Johnson | 962,000 | 983,000 | 2.2 |
(1) | Mr. Willard did not receive a 2019 salary increase because the Committee reviews Mr. Willard’s salary approximately every two years. |
(2) | In connection with his promotion from Band D to Band C, the Committee increased Mr. Mancuso’s salary from $489,700 to $520,000, effective March 1, 2019. |
(3) | In connection with their promotions from Band D to Band C, the Committee increased Messrs. Begley’s and Crosthwaite’s salaries from $420,000 to $525,000, respectively, effective March 1, 2019. |
Altria Group, Inc. – Proxy Statement | 35 |
EXECUTIVE COMPENSATION
The Annual Incentive Award plan is a cash-based, pay-for-performance plan for salaried employees, including our NEOs. Participants have an annual award target based on salary band and expressed as a percentage of salary. Our benchmarking process establishes award targets, which the Committee reviews and approves annually for salary Band I and above employees. Annual incentive awards are paid only after both business and individual results are assessed against targeted levels of performance. No individual is guaranteed an award.
At the conclusion of each year, the Committee reviews Altria’s financial and strategic performance. The Committee assigns a rating from 0% to 130% based on performance against these measures. The Committee has identified (1) adjusted diluted EPS growth and (2) adjusted discretionary cash flow as the financial measures for determining awards under the Annual Incentive Award plan because these measures align with our financial goals and the interests of our shareholders.
In determining Altria’s financial performance for 2019, the Committee considered the following:
Financial Measures (millions, except per share data) |
Results and Rating (from 0% - 130%) | Weighting | Weighted Result | ||||
Adjusted Diluted EPS Growth | 75% | 75% | ||||
Adjusted Discretionary Cash Flow(1) | 25% | 27% | ||||
Rating for Financial Measures | 102%(2) |
(1) | Adjusted discretionary cash flow is a non-GAAP financial measure. See Exhibit B to this Proxy Statement for information regarding non-GAAP financial measures and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures. |
(2) | Final weighted result is rounded to a whole number. |
In addition to financial measures, the Committee evaluated Altria’s performance against the 2019 strategic initiatives that were designed to promote our long-term success. Strategic initiatives in 2019 included:
■ | maximizing the long-term momentum and profitability of Altria’s core tobacco businesses; |
■ | advancing Altria’s harm reduction aspiration through non-combustible product platforms; |
■ | enhancing our system and capabilities for recruiting, developing and engaging diverse talent; |
■ | delivering annualized cost savings through the cost reduction program announced in December 2018; and |
■ | overseeing Altria’s strategic investments made in late 2018 and early 2019. |
After applying the 102% rating for financial measures and considering Altria’s strong performance in its core tobacco businesses and cost reduction program, while also factoring in the negative impact of the JUUL investment including the impairment charges, the Committee adjusted the rating up by five percentage points and assigned an overall Annual Incentive Award business performance rating of 107%. The Committee used this rating, together with individual performance of the NEOs (see “2019 Performance of NEOs” beginning on page 29), in determining the 2019 awards below. The following formula was the basis for determining awards under the 2019 Annual Incentive Award plan:
Salary | x | Target | x | Business | x | Individual | = | Annual |
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EXECUTIVE COMPENSATION
2019 Annual Incentive Award Target Percentages, Award Ranges and Actual Awards |
Name | Band | Salary ($) | Target (% of salary) | 2019 Business Perf. Rating (0 - 130%) | Individual Performance Factor Range(1) (% of target) | Maximum Award for 2019 Performance ($) | Actual Award for 2019 Performance ($) | |||||||||
Minimum | Maximum | |||||||||||||||
Howard A. Willard III(2) | A | 1,250,000 | 150 | 107 | 0 | 175 | 3,510,938 | — | ||||||||
William F. Gifford, Jr. | B | 876,000 | 95 | 107 | 0 | 155 | 1,380,204 | 890,500 | ||||||||
Murray R. Garnick | B | 876,000 | 95 | 107 | 0 | 155 | 1,380,204 | 890,500 | ||||||||
Salvatore Mancuso(3) | C | 520,000 | 80 | 107 | 0 | 155 | 689,936 | 555,300 | ||||||||
Jody L. Begley(3) | C | 525,000 | 80 | 107 | 0 | 155 | 696,570 | 610,000 | ||||||||
Kevin C. Crosthwaite, Jr.(4) | C | 525,000 | 80 | — | — | — | — | 403,000 | ||||||||
Craig A. Johnson(5) | B | 983,000 | 95 | — | — | — | — | 151,000 |
(1) | The individual performance ranges are stated as a percentage of target and are based on individual performance on a five-point scale. |
(2) | As discussed under “2019 Executive Compensation Program Decisions” above, the Committee did not grant Mr. Willard an award under the 2019 Annual Incentive Award plan. |
(3) | Messrs. Mancuso and Begley received awards that reflected their time in Band D and Band C on a prorated basis as a result of their promotions effective March 1, 2019. |
(4) | Mr. Crosthwaite received an award based on target business and individual performance for the full year. His award reflects his time in Band D and Band C on a prorated basis as a result of his promotion effective March 1, 2019. |
(5) | Mr. Johnson received an award prorated for service from January 1, 2019 to his retirement on March 1, 2019, based on target business and individual performance. |
We award long-term incentives to executive officers through a combination of equity awards and performance-based long-term cash incentive awards. Executives received a mix of 60% RSUs and 40% PSUs. Together, PSUs and the LTIP deliver over 60% of our NEOs’ target long-term incentives through performance-based elements, with the remainder comprised of time-based RSUs.
Target Long-Term Incentive Mix |
Altria Group, Inc. – Proxy Statement | 37 |
EXECUTIVE COMPENSATION
Long-Term Incentives: Equity Awards
Equity awards focus executives on increasing long-term shareholder value, enhance executive retention and promote executive stock ownership. Award amounts recognize prior year performance and, for our NEOs other than our CEO, advancement potential. Vesting amounts reflect any stock appreciation and, for PSUs, performance against the financial measures during the vesting period. The awards generally vest three years after the date of the award, subject to earlier vesting on death, disability or retirement on or after age 65 or potentially in connection with a change in control. This vesting period is intended to retain and motivate executives, while promoting long-term performance. PSUs only pay out if specific company performance measures are met. The number of PSUs granted to an executive represents a target number of shares; the actual share payout can range from 0% to 130% of the target based on company performance against specified measures. For RSUs, recipients receive cash dividend equivalents during the vesting period, but for PSUs, dividends are accrued and paid out at the end of the performance period based on the final number of PSUs that vest, if any. The Committee annually reviews equity award targets against competitive data.
From time to time, the Committee grants special equity awards to select executives in key roles or with high advancement potential. These special equity awards generally have a longer vesting period of five years.No special equity awards were granted to our NEOs in 2019.
2019 Equity Award Highlights ■60% RSUs / 40% PSUs ■Vesting period of three years (occasionally five years) ■RSUs: Cash dividend equivalent payments ■PSUs: Dividend equivalents accrue until end of performance period ■NEO awards based on: ■Executive’s individual performance in year prior to the grant; ■Executive’s advancement potential (other than CEO); ■Company performance for PSUs; ■Committee discretion; and ■Competitive benchmarking ■Number of RSUs and PSUs awarded is based on fair market value of our stock on the grant date ■Strong stock holding requirements | ||
The Committee grants equity awards to our CEO (salary band A) based on its assessment of his performance, Altria’s performance and competitive data. For our NEOs other than our CEO, the Committee establishes an appropriate range of equity awards based on the NEO’s salary band, advancement potential, individual performance and competitive data. The Committee then determines awards based on advancement potential and individual performance. The awards are generally granted on the date of Committee approval. No individual is guaranteed an award and all awards are capped under the 2015 Performance Incentive Plan (“2015 PIP”).
The targets and actual equity awards for grants made to our NEOs in February 2019 were as follows:
Name | Band(1) | Equity Target ($) | Equity Award Range ($) | Actual Equity Award(2)(3) ($) | ||||
Howard A. Willard III | A | 5,400,000 | — | 6,000,091 | ||||
William F. Gifford, Jr. | B | 1,750,000 | 1,050,000-2,625,000 | 2,200,099 | ||||
Murray R. Garnick | B | 1,750,000 | 1,050,000-2,625,000 | 2,200,099 | ||||
Salvatore Mancuso | D | 520,000 | 312,000-780,000 | 676,039 | ||||
Jody L. Begley | D | 520,000 | 312,000-780,000 | 650,089 | ||||
Kevin C. Crosthwaite, Jr. | D | 520,000 | 312,000-780,000 | 728,042 | ||||
Craig A. Johnson(4) | B | 1,750,000 | 1,050,000-2,625,000 | — |
(1) | Band at time of grant. |
(2) | The amount shown is the aggregate grant date fair value of stock awards determined pursuant to Financial Accounting Standards Board (“FASB”) Codification Topic 718. The number of RSUs and PSUs awarded in 2019, together with the grant date values and vesting terms of the RSUs and the PSUs awarded, is disclosed in the Grants of Plan-Based Awards during 2019 table on page 51. |
(3) | Equity awards are split 60% RSUs and 40% PSUs. |
(4) | In light of Mr. Johnson’s retirement, he did not receive an equity award. |
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Financial Performance Measures for 2019 PSUs
At the time the PSUs were granted in February 2019 with a 2019-2021 performance cycle, the Committee designated (1) adjusted diluted EPS growth and (2) relative TSR versus the S&P 500 Food, Beverage & Tobacco Index (defined as the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2019 and remain in the Index as of December 31, 2021) as the performance measures because these measures link to the long-term financial goals of our three-year plan:
■ | growing adjusted diluted EPS over the long term; and |
■ | maintaining a dividend payout ratio target of approximately 80% of our adjusted diluted EPS. |
These measures are intended to focus executives on achieving results that contribute to creating long-term shareholder value. The score for each financial measure determines the number of shares payable under the PSUs and may not exceed 130% of target. The Committee believes that the combination of these measures provides solid alignment between Altria’s business strategies and our shareholders’ interests.
2017 PSU Performance
The PSUs granted in January 2017 with a 2017–2019 performance cycle (“2017 PSUs”) were likewise measured against adjusted diluted EPS growth and relative TSR versus the S&P 500 Food, Beverage & Tobacco Index. The tables below reflect the performance related to the 2017 PSUs against each measure followed by the final determination of the number of shares of Altria common stock delivered to each NEO at the end of the three-year performance period.
Performance related to the 2017 PSUs was as follows:
Metric Rating % | ||||||||||||||||||||
Financial Metrics (each 50%) | 0 | 70 | 80 | 100 | 120 | 130(1) | Result | Rating | Weighting | Weighted Result | ||||||||||
2017–2019 Adjusted Diluted EPS Growth | ≤3% | 7% | 7.9-8.3% | 9% | ≥9.5% | 11.7% | 130 | 50% | 65% | |||||||||||
Relative TSR (vs. the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2017 and remained in the Index as of December 31, 2019)(2) | <25th percentile | 25th percentile | 50th percentile | ≥75th percentile | 11th percentile | 0 | 50% | 0% | ||||||||||||
Final 2017 PSU Rating | 65% |
(1) | Rating for each metric cannot exceed 130%. |
(2) | Altria’s three-year TSR was -13.9%. |
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EXECUTIVE COMPENSATION
The 2017 PSUs granted and number of shares of Altria common stock delivered to our NEOs in February 2020 were as follows:
Name | 2017 PSUs Granted (#) | 2017 PSU Performance Rating (%) | Altria Shares Delivered (#) | |||||
Howard A. Willard III | 12,786 | 65 | 8,311 | |||||
William F. Gifford, Jr. | 12,786 | 65 | 8,311 | |||||
Murray R. Garnick | 7,033 | 65 | 4,571 | |||||
Salvatore Mancuso | 3,694 | 65 | 2,401 | |||||
Jody L. Begley | 2,274 | 65 | 1,478 | |||||
Kevin C. Crosthwaite, Jr.(1) | 1,173 | — | — | |||||
Craig A. Johnson(2) | 9,945 | — | 9,517 |
(1) | Under the terms of the award agreement, Mr. Crosthwaite forfeited his 2017 PSU grant upon his resignation effective September 24, 2019. |
(2) | After Mr. Johnson turned age 65, 428 shares of Altria common stock associated with the PSUs were accelerated on November 15, 2017 to satisfy tax withholding for FICA taxes. Under the terms of the award agreement, Mr. Johnson received 9,517 shares at target due to his retirement on March 1, 2019. |
Long-Term Incentives: 2017 – 2019 LTIP Awards
The 2017 – 2019 LTIP is a long-term performance plan that used a three-year, end-to-end performance cycle (January 1, 2017 to December 31, 2019), an approach consistent with our long-term strategic planning process in 2017. At the beginning of the cycle, the Committee approved long-term financial and strategic performance goals, to be measured after completion of the cycle. Each executive had an award target based on their salary band, expressed as a percentage of each year-end salary over the three-year cycle. Awards were paid in cash after the end of the three-year performance cycle based on the Committee’s responsibilitiesassessment of actual performance against the financial and strategic performance goals during the entire award cycle. The Committee retained the discretion to adjust awards upward or downward, and no individual was guaranteed an award.
The Committee considered our executives’ earnings opportunity under the LTIP when setting compensation each year; however, those opportunities remained at risk until the Committee’s final assessment after the end of the three-year performance cycle.
2017 – 2019 LTIP Highlights ■Three-year, end-to-end performance cycle ■Awards based on our performance against long-term financial and strategic goals and individual performance | ||||||
The 2017 – 2019 LTIP performance cycle concluded on December 31, 2019 and rewarded achievement of financial and strategic performance measures (each weighted 50%) intended to create value for shareholders. The Committee assigned ratings from 0% to 130% based on performance against these measures.
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Our performance against the financial measures was as follows:
Metric Rating % | ||||||||||
Financial Metrics (50%) | 0 | 70 | 80 | 100 | 120 | 130(1) | Result | Rating | Weighting | Weighted Result |
2017-2019 Adjusted Diluted EPS Growth | ≤3% | 7% | 7.9-8.3% | 9% | ≥9.5% | 11.7% | 130 | 50% | 65% | |
Relative TSR (vs. the companies that comprised the S&P 500 Food, Beverage & Tobacco Index as of January 1, 2017 and remained in the Index as of December 31, 2019)(2) | <25th percentile | 25th percentile | 50th percentile | ≥75th percentile | 11th percentile | 0 | 50% | 0% | ||
2017 – 2019 LTIP Financial Measures Rating | 65% |
(1) | Rating for each metric cannot exceed 130%. |
(2) | Altria’s three-year TSR was -13.9%. |
The Committee also assessed performance against the following strategic measures:
Strategic Measures (50%) | Performance Against Strategic Measures | |
Improve our operating companies’ key brand positions among adult tobacco consumers, including consumers 21-29. | Maintained or enhanced key brand metrics, including profitability, equity and share performance, and increasedMarlboroandCopenhagenshare of adult tobacco consumers 21-29. | |
Manage the core tobacco businesses to meet evolving compliance requirements and pursue product authorization decisions by the FDA. | Protected over 90% of the core tobacco businesses by managing the FDA’s substantial equivalence process to keep products in market or obtain new product authorizations. | |
Establish Altria as a leader in reduced risk products authorized by U.S. regulators. | Built leading portfolio of non-combustible products, including a leading moist smokeless tobacco business,IQOSin heated tobacco and an 80% ownership interest inon!oral nicotine pouches; offset by the negative impact of the JUUL investment, including the impairment charges. | |
Successfully navigate the external legislative and regulatory environment to support our business strategies. | Led the effort to urge Congress to enact corporate tax reform. Strongly advocated to raise the legal age to purchase all tobacco products to age 21. Defeated numerous tobacco state excise tax proposals. | |
Enhance our talent system, including diversity and inclusion, to improve our leadership capability. | Increased accountability for leaders to develop people and culture. Created new and innovative methods to source talent. Increased representation of women in Vice President and above positions to 28%, with less progress on people of color, to 15%. |
2017 – 2019 LTIP Strategic Measures Rating | 105% |
2017 – 2019 LTIP Overall Business Performance Rating | 85% |
The following formula was the basis for determining the 2017 – 2019 LTIP awards:
Year-end Salaries for Each Plan Year | x | Award Target | x | Business Performance Rating | x | Individual Performance Factor | = | Three-Year LTIP Award |
Altria Group, Inc. – Proxy Statement | 41 |
EXECUTIVE COMPENSATION
The 2017 – 2019 LTIP award target percentages and business and individual performance ratings for our NEOs were:
Name | Band | Individual Award Target(1) (%) | LTIP Business Performance Rating (0 - 130%) | Individual Performance Assessment (0 – 120%) | 2017 – 2019 Actual Award(2) ($) | ||||||||
Howard A. Willard III | A | 250 | 85 | 59 | (3) | 3,478,600 | |||||||
William F. Gifford, Jr. | B | 140 | 85 | 100 | 2,851,200 | ||||||||
Murray R. Garnick | B | 140 | 85 | 100 | 2,887,900 | ||||||||
Salvatore Mancuso | C | 105 | 85 | 100 | 1,008,500 | ||||||||
Jody L. Begley | C | 105 | 85 | 100 | 821,400 | ||||||||
Kevin C. Crosthwaite, Jr.(4) | C | 105 | 85 | 100 | 881,500 | ||||||||
Craig A. Johnson(5) | B | 140 | 85 | 100 | 2,445,300 |
(1) | Individual award target percentages are applied to each year-end base salary over the three-year performance cycle. |
(2) | Awards are prorated for time spent in each Band during the three-year performance cycle. |
(3) | The individual performance assessment for Mr. Willard reflects individual performance at 100% for the portion of his LTIP award covering 2017 and 50% for the portion of the LTIP award covering 2018 and 2019. |
(4) | Mr. Crosthwaite received an award based on the 85% business performance rating and target individual performance for the full performance cycle. His award also reflects his time in Band D and Band C on a prorated basis as a result of his promotion effective March 1, 2019. |
(5) | Mr. Johnson received an award prorated for service from January 1, 2019 to his retirement on March 1, 2019, based on the 85% business performance rating and target individual performance. |
The Committee periodically considers alternative LTIP design approaches, such as overlapping three-year cycles (with a new three-year cycle beginning each year), resulting in annual payouts for the prior three-year period versus end-to-end cycles with payouts only every three years. With an increasingly difficult and unpredictable business environment, the Committee requested management to propose alternative LTIP design approaches during 2019. Early in 2020, the Committee approved a new LTIP design resulting in overlapping three-year plans starting in 2020 and continuing with a new three-year plan commencing each year.
The Committee believes that a competitive executive compensation package includes reasonable perquisites that supplement our retention efforts. The perquisites we provided to our NEOs in 2019 are described below and set forth in the All Other Compensation table on page 50. In addition to these perquisites, our NEOs received the same benefits that were available to our salaried employees generally. Mr. Willard is required to use our aircraft for all air travel for purposes of security. The Committee Charter, which isapproved a 2019 allowance of $200,000 for Mr. Willard’s personal aircraft usage. The allowance and Mr. Willard’s obligation to pay for personal use of the aircraft above the allowance are reflected in a time-sharing agreement with Altria. The Committee considers the potential value of personal aircraft usage in determining the other components of Mr. Willard’s total compensation.
The company vehicle perquisite has historically consisted of a car lease and vehicle-related expenses paid by Altria. As of January 1, 2020, all program participants, including our NEOs, transitioned from the company vehicle program to an annual vehicle allowance in the amount of $10,000 per year through 2023. Under this allowance program, there are no company-paid leases, and participants no longer receive company-paid vehicle-related expenses. Upon Mr. Willard’s election to Chairman and CEO, he ceased accepting the company-paid car lease and vehicle-related expenses and has declined the vehicle allowance going forward. Effective February 1, 2020, executive physicals are no longer available as a perquisite.
Post-Termination Benefits and Change in Control Payments
We provide post-termination benefits to our NEOs, including retirement benefits and termination payments if applicable, as well as payments in connection with a change in control.
■ | Retirement Benefits.Our NEOs participate in certain qualified and non-qualified retirement plans, which we believe promote executive retention and provide the opportunity for financial security in retirement. These retirement benefits |
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are discussed in more detail in the narrative following the Pension Benefits table on page 54 and the Non-Qualified Deferred Compensation table on page 56. | |
■ | Change in Control Payments.Our 2015 PIP, as well as our proposed 2020 Performance Incentive Plan, includes a double-trigger provision for vesting or payment of annual incentive awards, equity awards and long-term incentive cash awards, provided that the successor entity continues or assumes the plans and awards or replaces them with substantially similar awards. In contrast, our 2010 Performance Incentive Plan (“2010 PIP”), under which a small number of 2015 stock awards remained unvested at the end of 2019 (all have since vested), provided for the vesting and payment of certain elements of compensation immediately upon a change in control. The details of these provisions are discussed under “Payments upon Change in Control or Termination of Employment” beginning on page 57. |
■ | Termination Payments.The Severance Pay Plan for Salaried Employees (“Severance Plan”), which is generally applicable to all salaried employees, provides an opportunity for financial protection against the unexpected event of an involuntary termination of employment. This plan is discussed further under “Payments upon Change in Control or Termination of Employment” beginning on page 57. |
Kevin C. Crosthwaite, Jr.
Mr. Crosthwaite resigned as Senior Vice President, Chief Strategy and Growth Officer effective September 24, 2019 to become the Company’s website at www.altria.com/governance.Chief Executive Officer of JUUL. In connection with his resignation, the Committee approved the Annual Incentive Award plan and 2017 – 2019 LTIP payments described above. In addition, in light of Mr. Crosthwaite’s 22 years of distinguished service, the Committee agreed to pay Mr. Crosthwaite (i) an approximate $2.7 million cash payment in lieu of the outstanding equity awards (49,281 RSUs and 10,742 PSUs) that he forfeited immediately following separation from employment and (ii) a $2.5 million special recognition cash bonus. Mr. Crosthwaite was also entitled to payments and benefits generally available to departing employees under the terms of our benefit plans.
Craig A. Johnson
Mr. Johnson retired as President and Chief Executive Officer, Altria Group Distribution Company effective March 1, 2019. In connection with his retirement, the Committee approved the prorated Annual Incentive Award plan and 2017 – 2019 LTIP payments described above. In addition, upon his retirement, Mr. Johnson entered into a consulting agreement with Altria for the period of March 1, 2019 through December 31, 2019 and was compensated $500,000 for his services to us under the agreement. Mr. Johnson was also entitled to payments and benefits generally available to departing employees under the terms of our benefit plans.
Compensation Committee Interlocks and Insider ParticipationDecision Making Process
During 2015, no executive officer of the Company served on the board of directors or compensation committee of another entity one or more of whose executive officers served as a member of the Board or the Compensation Committee. No memberRole of the Compensation and Talent Development Committee at any time during 2015 or at any other time had any relationship with us that would be required to be disclosed as a related person transaction.
The Committee determines and approves CEO compensation and reviews and approves the compensation of the other executive officers. | ||
The Committee:
■ | Reviews and approves our overall executive compensation philosophy and design. |
■ | Reviews and approves corporate and individual goals and objectives relevant to the compensation of our CEO, evaluates the performance of our CEO in light of these goals and objectives and determines and approves the compensation of our CEO based on this evaluation. |
■ | Reviews and approves the compensation of all executive officers. |
Altria Group, Inc. – Proxy Statement | 43 |
■ | Makes recommendations to our Board with respect to incentive compensation plans and equity-based plans, administers and makes awards under such plans and reviews the cumulative effect of its actions. |
■ | Monitors compliance by executives with our stock holding requirement and stock ownership guidelines. |
■ | Monitors risks related to the design of our compensation program. |
■ | Determines ratings for Altria’s performance for the annual and long-term incentive award formulas. |
■ | Reviews survey data provided by our independent compensation consultant relating to our CSG. |
■ | Reviews initiatives and programs related to corporate culture and enterprise-wide talent development. |
Committee Compensation Committee ProceduresDecisions
Scope of Authority
The responsibilities of the Compensation Committee are set forth in its charter and include, among other duties, the responsibility to:
In addition, the Compensation Committee determines ratings for Company performance for the annual and long-term cash incentive awards formulas.
In accordance with its charter, the Compensation Committee may delegate its authority to subcommittees or the Chair of the Committee when it deems appropriate, unless prohibited by law, regulation or NYSE listing standards.
Processes and Procedures for Establishing Executive Compensation
The primary processes and procedures for establishing and overseeing executive compensation include:
Compensation Committee Meetings. The Compensation Committee meets several timesEarly each year, including five times in 2015. The Chair of the Committee, in consultation with management and the other members, sets meeting agendas. The Committee reports its actions and recommendations to the Board.
ALTRIA GROUP, INC. – Proxy Statement 23
COMPENSATION COMMITTEE MATTERS
Role of Consultants. As part of our annual compensation process, management engages Hewitt Associates, LLC d/b/a Aon Hewitt (“Aon Hewitt”).
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Aon Hewitt also reviews the Company’s risk assessment process with respect to its executive compensation program as described on page 35. Aon Hewitt provides neither advice nor recommendations on the form or amount of Altria’s executive or director compensation, nor does Aon Hewitt attend any Board or Committee meetings.
Role of Management.
Committee Establishment of CEO Performance Goals and CEO Performance Evaluation
At the beginning of each year, our CEO proposes annual performance goals to the Committee for its consideration. The Committee establishes final goals and reviews them with our Board. Following the end of the year, the Committee discusses with the CEO his performance against the goals established the prior year and then, in its sole discretion, determines the CEO’s compensation. Other than discussing his prior year performance with the Committee, our CEO has no role in setting his own compensation.
Compensation Committee Report for the Year Ended December 31, 2015
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained on pages 26 through 42Role of this Proxy Statement with management. Based on its review and discussions with management, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee:
W. Leo Kiely III, Chair
Gerald L. Baliles
Thomas F. Farrell II
Thomas W. Jones
Kathryn B. McQuade
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide a detailed description of Altria’s executive compensation program, with a focus on the Compensation Committee’s decisions with respect to our NEOs:
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Mr. Beran retired as President and Chief Operating Officer (“COO”) effective March 1, 2015. Please see “Retirement of President and COO” on page 42 of our 2015 Proxy Statement for more information. Also, Mr. Dillard was appointed Senior Vice President, Research, Development and Regulatory Affairs, Altria Group, Inc. effective January 1, 2016.
Altria’s executive compensation program aligns with Altria’s Mission, Mission goals and Values, including Invest in Leadership. We believe that such an investment requires:
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provides shareholders with an advisory vote (“Say on Pay”) on the compensation of a company’s named executive officers, as such compensation is disclosed in the company’s annual proxy statement. Altria holds the vote, which is non-binding, annually and at the 2015 Annual Meeting, 96% of the votes cast approved our NEO compensation on an advisory basis. Upon consideration of the strong support shown in 2015 by the vote results, feedback from discussions with shareholders and other factors described in this Proxy Statement, the Compensation Committee decided that no significant changes to the executive compensation program were necessary for 2015.
From time to time we engage with institutional investors to gain their perspectives on our programs and corporate governance practices. Shareholders’ feedback has been generally positive and no significant concerns have been raised.
The Company’s business performance is a key factor in determining executive compensation. The Company delivered excellent business performance in 2015, as reflected in the “2015 Business Highlights” beginning on page 3. The following graphs summarize the Company’s one and three-year performance against key financial measures:
26 ALTRIA GROUP, INC. – Proxy Statement
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2015 Total Shareholder Return
Three-Year Total Shareholder Return
(2013 – 2015)
ALTRIA GROUP, INC. – Proxy Statement 27
EXECUTIVE COMPENSATION
Altria’s Adjusted Diluted EPS
Altria’s Dividend(1)
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The following graph illustrates the relationship between Mr. Barrington’s total pay (including annualized long-term incentive plan (“LTIP”) compensation) and Altria’s indexed total shareholder return:
CEO Pay(1) vs. Indexed TSR(2)
The Compensation Committee considered several factors in approving each element of compensation. For example, the Compensation Committee evaluated the Company’s financial and strategic performance, as described above and beginning on page 26, in the context of the 2015 Annual Incentive Award program (discussed under “2015 Executive Compensation Program Decisions – Annual Incentives” on page 37). The Compensation Committee also considered the individual performance of each NEO for purposes of approving salary increases, annual cash incentive awards and equity awards. Each executive, including our NEOs, is evaluated on a five-point scale of “Extraordinary,” “Outstanding,” “Valued,” “More Expected” or “Unacceptable.” Executives receive variable elements of compensation only after the relevant performance period – whether short- or long-term – has ended and the Compensation Committee has assessed actual Company performance and considered executive performance relative to stated goals.
The Compensation Committee concluded that our NEOs’ successes in achieving their performance goals contributed significantly to the Company’s strong overall 2015 performance. We discuss the performance of each NEO below. Based on
ALTRIA GROUP, INC. – Proxy Statement 29
EXECUTIVE COMPENSATION
this assessment and the plan designs described in “2015 Executive Compensation Program Decisions” on page 37, the Compensation Committee approved the compensation paid or awarded to our NEOs as detailed in the compensation tables.
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After 38 years of exceptional service, Mr. Beran retired on March 1, 2015. Therefore, his 2015 individual performance is not discussed.
In addition to assessing Company and individual performance against stated goals to determine incentive compensation, the Compensation Committee looks at comprehensive contextual information, including industry compensation market data and tally sheets for each of the NEOs that include their total cash and long-term compensation, total defined benefit and defined contribution retirement plan accruals and perquisites for the last three years.
We strategically design our executive compensation program to promote our Mission, which is to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products. In pursuing our Mission, we remain focused on four goals: Invest in Leadership, Align with Society, Satisfy Adult Consumers and Create Substantial Value for Shareholders.
Our Values guide our behavior as we pursue our Mission and our goals. Our Values are Integrity, Trust and Respect; Passion to Succeed; Executing with Quality; Driving Creativity into Everything We Do; and Sharing with Others.
Our executive compensation program includes multiple performance metrics to assess the efforts of all executives in pursuing our Mission and goals, while assuring that such efforts are guided by our Values. Specifically, our program is designed to satisfy the following objectives:
ALTRIA GROUP, INC. – Proxy Statement 31
EXECUTIVE COMPENSATION
The elements of our executive compensation program serve these objectives with the following design principles (as shown in the chart below):
2015 CEO and NEO Pay Mix (1)
The table below provides a brief side-by-side comparison of the elements of our 2015 executive compensation program.
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The table below summarizes the elements and objectives of the 2015 executive compensation program for the NEOs. In addition, the general objective of each element is to attract and retain world-class leaders.
2015 Executive Compensation Program
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For information on the various participants and their key decision-making responsibilities, please see the “Compensation Committee Matters” section on pages 23 to 24.
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Aon provides neither advice nor recommendations on the form or amount of our executive or director compensation, nor does Aon attend any Board or Committee meetings.
Compensation Strategy
We design our executive compensation program to deliver total compensation (salary, annual and long-term cash awards, equity awards and benefits) upon attainment of performance targets at levels between the 50thand the 75thpercentiles of compensation paid to executives in the Compensation Survey Group (“CSG”), discussed below.CSG. We believe that this approach has contributed to our industry leadership position and is criticalimportant to attractingattract and retainingretain world-class leaders, to pursue our Mission goals, particularly given the unique challenges of our industry. We also believe this approach contributes to low executive turnover across all of our businesses. Actual total compensation can exceed the 75thpercentile or be below the 50thpercentile depending on business and individual performance in relation to performance targets.performance.
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Compensation Survey Group and Altria Peer Group
We annually compare our executive compensation program with the programs of the companies in the CSG. The purpose of this annual review is to assure that our executive compensation program supports our ability to attract and retain executive talent. When determining the companies to include in the CSG, the Compensation Committee identifies companies that compete with us for talent and:
ALTRIA GROUP, INC. – Proxy Statement 35
EXECUTIVE COMPENSATION
The Altria Peer Group is a subset most of the CSG that we use, along with major external indices, to assess financial performance for purposes of determining variable compensation payments. The Altria Peer Group consists of U.S.-headquartered consumer product companies that compete with our tobacco operating subsidiaries or that the Company believes otherwise provide useful financial performance comparisons on the basis of market capitalization or reported revenue.following characteristics:
■ | revenues generally between $5 and $75 billion; |
■ | market capitalization of at least $10 billion; |
■ | primarily focused on consumer products; |
■ | limited business segments; |
■ | businesses generally focused within the United States; and |
■ | compete with us for executive talent. |
Based on these criteria, the Compensation Committee included the following companies in the 20152019 CSG and the 2015 Altria Peer Group and used this list for compensation-related decisions during 2015.for 2019. The list is sorted by market capitalization as of December 31, 2015.
2019.
Compensation Survey Group Companies | Market Capitalization (1) ($B) | ||||
The Coca-Cola Company |
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PepsiCo, Inc. |
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McDonald’s Corporation | 149 | ||||
Philip Morris International Inc. |
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Altria | 93 | ||||
Mondelēz International, Inc. |
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Kimberly-Clark Corporation |
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Keurig Dr Pepper Inc. | 41 | ||||
The Kraft Heinz Company | 39 | ||||
General Mills, Inc. |
| 32 |
| ||
|
|
| |||
The Hershey Company |
| 31 |
| ||
|
| 24 |
| ||
Conagra Brands, Inc. | 17 | ||||
Campbell Soup Company |
| 15 |
| ||
|
| 12 |
| ||
|
|
|
(1) | Market capitalization is calculated using shares outstanding as of the most recent public disclosure as of January 2, |
(2) | Median market capitalization excludes Altria. |
Lorillard, Inc.Table of Contents
EXECUTIVE COMPENSATION
A cross-functional team of executives in the Human Resources & Compliance, Law, Corporate Audit and Kraft Foods Group, Inc. were acquiredFinance departments periodically reviews our compensation program (executive and non-executive) to identify features that could encourage excessive risk-taking by program participants and to assess the potential of such risks to have a material adverse effect on Altria. In 2019, management requested that its external compensation consultant, Aon, review this risk assessment process to confirm consistency with prevailing best practices. Aon’s review focused on features generally recognized as potentially encouraging excessive risk-taking, features of our programs that mitigate risk and management’s assessment of those features.
36 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
2015 Executive Compensation Program Decisions
The Compensation Committee considers a numberindividual elements of factors when reviewing and setting salaries for our NEOs,executive compensation encourage employees, including each executive’s individual performance, level of responsibility, experience, the relationship between salaries paid to other Company executives and the position of the executive’s salary within the applicable salary range. Additionally, as appropriate, the Compensation Committee compares the salaries of our NEOs, to others holding comparable positions at CSG companies.take unnecessary or excessive risks. The Compensation Committee analyzes all these factorsexecutive compensation program also incorporates risk-mitigating features such as those shown in the aggregate in determining NEO salaries.
Salaries are relevant in establishing annual and long-term incentive target awards and factor into retirement, group life insurance and certain other benefits available to all salaried employees. The Compensation Committee typically reviews salaries on an annual basis and any increases generally are effective March 1.
The 2015 salary ranges for our NEOs were as follows:
2015 Salary Range | ||||
Band
| Minimum ($)
| Maximum ($)
| ||
A (Mr. Barrington)
|
910,000
|
2,090,000
| ||
B (Other NEOs, excluding Mr. Dillard)
|
480,000
|
1,100,000
| ||
D (Mr. Dillard) (1)
|
278,500
|
640,500
|
The Compensation Committee increased the salaries of our NEOs (other than Mr. Beran) basedchart on the criteria noted above as follows, effective March 1, 2015:
2015 Salary Increases
Name
| 2014 Salary ($)
| 2015 Salary ($)
| ||
Martin J. Barrington
|
1,250,000
|
1,350,000
| ||
William F. Gifford, Jr.(1)
|
515,000
|
610,000
| ||
Howard A. Willard(1)
|
682,000
|
800,000
| ||
Denise F. Keane
|
896,000
|
916,000
| ||
Craig A. Johnson
|
856,000
|
875,000
| ||
James E. Dillard
|
510,000
|
535,000
| ||
David R. Beran(2)
|
929,000
|
929,000
|
The Annual Incentive Award program is a cash-based, pay-for-performance plan for management employees, including our NEOs. Participants have an annual award target based on salary band and expressed as a percentage of salary. Our benchmarking process establishes award targets,right, which are paid only after both business and individual results are assessed against targeted levels of performance. The Compensation Committee reviews and approves the targets annually. However, no individual is guaranteed an award.
ALTRIA GROUP, INC. – Proxy Statement 37
EXECUTIVE COMPENSATION
Each December, the Compensation Committee reviews the financial and strategic performance of Altria as well as the performance of each of our tobacco and wine businesses for that year. In determining Altria’s financial performance for 2015, the Compensation Committee considered the following:
Key Financial Measures
(millions, except per share data)
Target Range
| 2015 Results
| Weighting
| ||||
Adjusted Diluted EPS Growth |
$2.75 - $2.80 |
$2.80 |
75% | |||
(Rating Range)
| (90% - 110%)
| |||||
Adjusted Discretionary Cash Flow(1) |
$4,533 - $5,011 |
$5,610 |
25% | |||
(Rating Range)
| (90% - 110%)
|
The Compensation Committee uses adjusted diluted EPS growth and adjusted discretionary cash flow as the key financial measures in determining annual incentive awards because these measures link to the Company’s long-term financial goals to:
The Compensation Committee believes that the combination of these metrics provides the best alignment between our Company’s business strategy and our shareholders’ interests: our executives are rewarded when our shareholders are rewarded.
In 2015, Altria delivered another year of excellent business results and outstanding shareholder returns on the strengthpart of its diverse business modelassessment. We believe that any risks arising from our compensation policies and solid performance by its core tobacco businesses.
The Compensation Committee also considers TSR in its evaluation of overall performance. Altria’s 2015 TSR of 23.1% far exceeded the 16.6% TSR of the 2015 Altria Peer Group (including The Kraft Heinz Company), the 14.7% TSR of the S&P Food, Beverage & Tobacco Index and the 1.4% TSR of the S&P 500 Index.
In additionpractices are not likely to financial metrics, the Compensation Committee evaluates the performance of Altria and each tobacco and wine business against key strategic initiatives that are designed to promote the Company’s long-term success, as well as any significant events during the year. The key strategic initiatives in 2015 included:
Basedhave a material adverse effect on its overall review of financial measures and strategic initiatives, the Compensation Committee assigns an Annual Incentive Award rating for Altria and each business segment. Performance at planned levels receives a rating of 100%. Depending on performance, Annual Incentive Award ratings for business performance can range from 0% to 130%. After reviewing 2015 financial and strategic performance, the Compensation Committee assigned an Annual Incentive Award business performance rating for Altria of 121%. The Committee used this rating together with individual performance (see “2015 Performance of NEOs” on page 29) in determining the 2015 awards below. The following formula is the basis for determining Annual Incentive awards:
|
|
|
|
|
|
|
38 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
2015 Annual Incentive Award Target Percentages, Award Ranges and Actual Awards
Name
| Band
| Salary ($)
| 2015 Performance Factor (0 - 130%)
| Individual Performance Factor Range (1) (%) | Award Range for 2015 Performance ($)
| Actual Award Performance ($)
| ||||||||||
Minimum
| Target
| Maximum
| ||||||||||||||
Martin J. Barrington
|
A
|
1,350,000
|
121
|
128
|
150
|
263
|
2,090,880 - 4,296,105
|
3,500,000
| ||||||||
William F. Gifford, Jr.
|
B
|
610,000
|
121
|
81
|
95
|
147
|
597,861 - 1,085,007
|
900,000
| ||||||||
Howard A. Willard
|
B
|
800,000
|
121
|
81
|
95
|
147
|
784,080 - 1,422,960
|
1,200,000
| ||||||||
Denise F. Keane
|
B
|
916,000
|
121
|
81
|
95
|
147
|
897,772 - 1,629,289
|
1,350,000
| ||||||||
Craig A. Johnson
|
B
|
875,000
|
121
|
81
|
95
|
147
|
857,588 - 1,556,362
|
1,100,000
| ||||||||
James E. Dillard
|
D
|
535,000
|
121
|
51
|
60
|
93
|
330,149 - 602,035
|
475,000
| ||||||||
David R. Beran(2)
|
B
|
929,000
|
–
|
–
|
–
|
–
|
–
|
142,700
|
Risk-Mitigating Features ■Appropriate compensation mix of fixed versus at-risk variable pay, annual versus long-term pay, cash versus equity and performance-based versus non-performance-based pay ■Multiple objective performance |
Altria awards long-term incentives to senior executives through a combination of RSU awards and performance-based long-term cash incentive awards. The mix of these awards focuses executives on TSR, adjusted diluted EPS growth, long-term operational performance and progress against strategic and societal alignment objectives, while minimizing shareholder dilution.
Long-Term Incentives: Equity Awards
|
Effective with the January 2015 grant, the Compensation Committee selected RSUs (instead of restricted stock) as the form of equity awards because RSUs are administratively simpler for the Company.
The Compensation Committee exercises discretion in making equity awards to the Chairman, CEO and President (salary band A) based on its assessment of competitive data and its review of the Chairman, CEO and President’s individual performance. The Compensation Committee reviews various equity award scenarios, including past practices of those companies within the 2015 CSG, to establish an appropriate range of awards.
ALTRIA GROUP, INC. – Proxy Statement 39
EXECUTIVE COMPENSATION
The equity awards granted to our NEOs in 2015 were as follows:
2015 Equity Awards
Name | Band | Equity Target ($) | Equity Award Range (1) ($) | Actual Equity Award (1) (2) ($) | ||||||||||||||||
Martin J. Barrington
|
A
|
–
|
–
|
5,600,071
| ||||||||||||||||
William F. Gifford, Jr.
|
B
|
1,275,000
|
765,000 - 1,912,500
|
1,150,019 1,500,263 (3)
| ||||||||||||||||
Howard A. Willard
|
B
|
1,275,000
|
765,000 - 1,912,500
|
1,650,289 1,500,263 (3)
| ||||||||||||||||
Denise F. Keane
|
B
|
1,275,000
|
765,000 - 1,912,500
|
1,650,289
| ||||||||||||||||
Craig A. Johnson
|
B
|
1,275,000
|
765,000 - 1,912,500
|
1,275,496
| ||||||||||||||||
James E. Dillard
|
D
|
505,000
|
303,000 - 757,500
|
710,306 1,000,539 (3)
| ||||||||||||||||
David R. Beran(4)
|
B
|
1,275,000
|
765,000 - 1,912,500
|
–
|
Long-Term Incentives: 2014 – 2016 Long-Term Incentive Plan Awards
|
Although the Compensation Committee takes our executives’ earnings opportunity under the LTIP into account when setting their compensation each year, those opportunities remain at risk until the end of the three-year performance cycle.
The Compensation Committee has previously considered alternative LTIP design approaches, such as overlapping three-year cycles (with a new three-year cycle beginning each year), resulting in annual payouts versus payouts every three years. Although such an approach would result in less fluctuation of annual compensation to executives, the Compensation Committee has concluded that reducing fluctuations is outweighed by the clarity of long-term performance incentives and the retention value of end-to-end performance cycles.
The 2014 – 2016 LTIP performance cycle will conclude on December 31, 2016 and will reward achievement of key financial performance measures and strategic performance initiatives intended to create substantial value for shareholders. The financial measures for 2014 – 2016, which have a combined weighting of 50%, are shown below:
|
|
40 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
The remaining 50% will be based on performance against long-term strategic initiatives, which reflect the Company’s strategies to (i) maximize income from our core tobacco businesses, (ii) grow new income streams with innovative tobacco products and (iii) manage diverse income streams and a strong balance sheet to deliver consistent financial performance. Specific details regarding the financial performance measures and strategic performance initiatives were defined for the executives, but will not be disclosed publicly before the end of the cycle due to their competitively sensitive nature. The Company will disclose relevant performance metrics for the 2014 – 2016 performance cycle, as appropriate, after the associated compensation decisions for the then-current NEOs have been made.
Following the conclusion of the 2014 – 2016 LTIP cycle, the Compensation Committee will assess the Company’s performance on each of the financial and strategic measures to determine the final LTIP business performance rating, which could range from 0% to 130%. The Compensation Committee, with respect to the CEO, and the CEO, with respect to the other NEOs, will also assess the individual performance of each executive to determine the executive’s individual performance rating, which could range from 0% to 150%. The final LTIP award is then determined by multiplying the target award by the business performance rating and the individual performance rating.
The LTIP award target percentages and performance factor ranges for executives in salary bands A, B and D for the 2014 – 2016 performance cycle are:
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
The Compensation Committee believes that a competitive executive compensation package includes reasonable perquisites that supplement the Company’s retention efforts. The perquisites provided by the Company to its NEOs in 2015 are set forth in the All Other Compensation table on page 44. In addition to these perquisites, our NEOs received the same benefits that were available to our salaried employees generally. Mr. Barrington is required to use Company aircraft for all air travel for reasons of security and to maximize the efficiency of his time. Before 2015, the Company provided an aggregate allowance for personal use of Company aircraft of $300,000 per year. The allowance was allocated to Messrs. Barrington and Beran in the amounts of $200,000 and $100,000, respectively. Upon Mr. Beran’s retirement, the aggregate allowance was reduced to $250,000, which is allocated to Mr. Barrington. For Mr. Barrington, the Compensation Committee considers the potential value of personal aircraft usage in determining the other components of his total compensation. Mr. Barrington did not accept the company-paid auto, financial counseling services and executive physical in 2015. Effective January 1, 2016, the Company discontinued reimbursement for financial counseling services.
Post-Termination Benefits and Change in Control Payments
The Company provides post-termination benefits to the NEOs, including retirement benefits and termination payments if applicable, as well as payments upon a change in control.
■Caps on annual and long-term incentive plan formulas ■Peer company benchmarking ■Significant stock ownership, holding requirements and anti-hedging/anti-pledging policies ■A “clawback” policy providing for the adjustment or recovery of executive compensation upon the restatement of our financial statements ■Individual performance assessments that align our interests with the |
ALTRIA GROUP, INC. – Proxy Statement 41
EXECUTIVE COMPENSATION
Stock Ownership Guidelinesand Holding Requirements and Prohibition on Hedging and Pledging
The Compensation Committee has established stock ownership guidelinesrequirements under which executives are expected to hold our common stock until their termination of employment in an amount equal to a multiple of salary, as determined by their position.salary band. If the stock price declines, executivesan executive may holdsatisfy the requirement by holding a fixed number of shares based on the stock price at program commencement.the beginning of the executive’s acquisition period. The Compensation Committee set the guidelinesrequirements as 12 times base salary for salary band A (CEO), six times base salary for salary band B and fourfive times base salary for salary band D.C employees. In addition, we have a stock holding requirement that prohibits executive officers from selling shares received as compensation until they meet their stock ownership requirement.
Stock ownership includes shares over which the executive has direct or indirect ownership or control, includingheld as RSUs and restricted stock.PSUs (at target). We expect executives to meet their ownership guidelinesrequirement within five years of becoming subject to the guidelinesrequirement (or three years from a subsequent promotion date and resulting increasethat results in an increased ownership requirements)requirement). As of December 31, 2015,2019, all of our NEOs substantially exceeded their stock ownership requirements.
We do not permithave policies prohibiting our NEOs to engagefrom engaging in hedging and pledging activities with respect to our shares. Further, our NEOs do not pledge their Altria shares.A description of Altria’s policies regarding hedging and pledging can be found under “Prohibition on Hedging and Pledging” on page 80.
46 | www.altria.com |
EXECUTIVE COMPENSATION
“Clawback” Policy Regarding the Adjustment or Recovery of Compensation
We have a “clawback” policy providing for the adjustment or recovery of compensation in certain circumstances. If theour Board or an appropriate committee of theour Board determines that, as a result of a restatement of our financial statements, an executive received more compensation than would have been paid absent the incorrect financial statements, theour Board or its committee,the Committee, in its discretion, will take such action as it deems necessary or appropriate to address the events that gave rise to the restatement and to prevent its recurrence. Such action may include, to the extent permitted by applicable law, in appropriate cases, requiring partial or full reimbursement of any bonus or other incentive compensation paid to the executive, causing the partial or full cancellation of RSUs or restricted stock awards,PSUs, adjusting the future compensation of such executive and dismissing or taking legal action against the executive, in each case as theour Board or its committeethe Committee determines to be in the best interests of the CompanyAltria and our shareholders. Our RSUsRSU and restricted stockPSU award agreements also include “clawback” provisions.
Tax and Accounting Considerations
In addition to our executive compensation objectives and design principles, we consider tax and accounting treatment when designing and administering our program. An important taxcompensation programs. One consideration is Internal Revenue Code Section 162(m), which limits our ability to deduct compensation paid to each covered officer for tax purposes to $1.0 million annually.annually, subject to an exception for certain compensation granted or accrued before 2018. Covered officers include the principal executive officer, principal financial officer and the Company’s next three highest paid executive officers,highest-paid officers.
Although the Committee considers tax deductibility and other thantax and accounting treatment in making its compensation program decisions, the Company’s principal financial officer.
However, this limitation does not apply to performance-basedCommittee’s primary consideration is whether the compensation provided we satisfy certain conditions. We have taken appropriate actions, toprogram promotes our Vision and aligns the extent feasible, to preserve the deductibility of annual and long-term cash incentive awards and equity awards. The Annual Incentive Awards and grants of RSUs that the Compensation Committee awarded to our covered officers in 2015 were subject to, and made in accordance with, previously implemented performance-based compensation arrangements that were intended to qualify as tax-deductible.
The Compensation Committee does not believe compensation decisions should be necessarily constrained by how much compensation is deductible for federal income tax purposes. As a result, the Compensation Committee has authorized, and retains the discretion to authorize, other payments that may not be deductible if it believes that they are in the best interests of the Company andexecutives with those of our shareholders. Such determinations include, for example, payment of a salary to an officer that exceeds $1.0 million, with the result that a portion of such officer’s salary exceeds the deductibility limit. Similarly, a covered officer’s compensation may exceed the $1.0 million deductibility limit due to other elements of annual compensation, such as vesting of certain stock grants, dividends or dividend equivalents paid on certain stock and perquisites.
42 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
Compensation Tablesand Talent Development Committee Interlocks and Insider Participation
During 2019, no Altria executive officer served on the board of directors or compensation committee of any company that employs a member of our Board or the Committee. No member of the Committee at any time during 2019 or at any other time had any relationship with us that would be required to be disclosed as a Related Person Transaction.
Altria Group, Inc. – Proxy Statement | 47 |
EXECUTIVE COMPENSATION
Compensation Tables and Other Matters |
The following table provides the compensation information of our NEOs for 2015, 20142019, 2018 and 2013. The table does not show compensation information for Messrs. Gifford and Dillard prior to 2015 because they were not NEOs in those years.2017.
Non-Equity Incentive Plans | |||||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Stock Awards Grant Value (1) ($) | Annual Incentive Plan ($) | Long-Term Incentive Plan (2) ($) | Change in Pension Value (3) ($) | All Other Compensation (4) ($) | Total ($) | |||||||||||||||||||||||||||||||||||||
Martin J. Barrington,
| 2015 | 1,333,333 | 5,600,071 | 3,500,000 | – | 2,606,735 | 256,229 | 13,296,368 | |||||||||||||||||||||||||||||||||||||
Chairman, Chief Executive Officer and
| 2014 | 1,241,667 | 5,250,206 | 2,950,000 | – | 2,629,203 | 249,914 | 12,320,990 | |||||||||||||||||||||||||||||||||||||
President, Altria Group, Inc.
| 2013 | 1,191,667 | 5,398,800 | 2,500,000 | 8,092,500 | 2,659,445 | 297,555 | 20,139,967 | |||||||||||||||||||||||||||||||||||||
William F. Gifford, Jr.,
Executive Vice President and Chief
Financial Officer, Altria Group, Inc.
| 2015 | 594,167 | 2,650,282 | 900,000 | – | 650,130 | 76,596 | 4,871,175 | |||||||||||||||||||||||||||||||||||||
Howard A. Willard,
| 2015 | 780,333 | 3,150,551 | 1,200,000 | – | 998,455 | 106,113 | 6,235,452 | |||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief
| 2014 | 676,833 | 1,650,054 | 908,000 | – | 1,190,965 | 99,460 | 4,525,312 | |||||||||||||||||||||||||||||||||||||
Operating Officer, Altria Group, Inc.
| 2013 | 646,700 | 1,650,008 | 825,000 | 4,202,700 | 370,599 | 95,332 | 7,790,339 | |||||||||||||||||||||||||||||||||||||
Denise F. Keane,
| 2015 | 912,667 | 1,650,289 | 1,350,000 | – | 390,030 | 125,311 | 4,428,297 | |||||||||||||||||||||||||||||||||||||
Executive Vice President and General
| 2014 | 890,500 | 1,650,054 | 1,137,000 | – | 854,996 | 125,805 | 4,658,355 | |||||||||||||||||||||||||||||||||||||
Counsel, Altria Group, Inc.
| 2013 | 858,333 | 1,650,008 | 1,050,000 | 5,573,100 | 537,596 | 116,371 | 9,785,408 | |||||||||||||||||||||||||||||||||||||
Craig A. Johnson,
| 2015 | 871,833 | 1,275,496 | 1,100,000 | – | 660,369 | 111,585 | 4,019,283 | |||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer,
| 2014 | 850,833 | 1,275,092 | 960,000 | – | 1,283,591 | 117,879 | 4,487,395 | |||||||||||||||||||||||||||||||||||||
Altria Group Distribution Company
| 2013 | 822,267 | 1,275,129 | 900,000 | 5,417,700 | 296,127 | 113,109 | 8,824,332 | |||||||||||||||||||||||||||||||||||||
James E. Dillard,
Senior Vice President, Regulatory
Affairs and Chief Innovation Officer,
Altria Client Services LLC
| 2015 | 530,833 | 1,710,845 | 475,000 | – | – | 115,458 | 2,832,136 | |||||||||||||||||||||||||||||||||||||
David R. Beran,
| 2015 | 154,833 | – | 142,700 | – | 1,276,400 | 2,942,398 | 4,516,331 | |||||||||||||||||||||||||||||||||||||
Former President and Chief Operating
| 2014 | 925,500 | 1,700,000 | 1,300,000 | – | 1,672,612 | 177,430 | 5,775,542 | |||||||||||||||||||||||||||||||||||||
Officer, Altria Group, Inc.
| 2013 | 901,683 | 1,900,040 | 1,200,000 | 5,853,300 | – | 189,359 | 10,044,382 |
Non-Equity Incentive Plans | ||||||||||||||||
Name and Principal Position | Year | Salary ($) | Stock Awards Grant Value(1) ($) | Annual Incentive Plan ($) | Long-Term Incentive Plan(2) ($) | Change in Pension Value(3) ($) | All Other Compensation(4) ($) | Total ($) | ||||||||
Howard A. Willard III, Chairman of the Board and CEO, Altria Group, Inc. | 2019 | 1,250,000 | 6,000,091 | — | 3,478,600 | 4,316,446 | 372,479 | 15,417,616 | ||||||||
2018 | 1,113,201 | 6,750,070 | 2,250,000 | — | 1,192,673 | 267,755 | 11,573,699 | |||||||||
2017 | 868,333 | 2,250,078 | 1,165,000 | — | 1,746,506 | 99,599 | 6,129,516 | |||||||||
William F. Gifford, Jr., Vice Chairman and Chief Financial Officer, Altria Group, Inc. | 2019 | 871,667 | 2,200,099 | 890,500 | 2,851,200 | 2,456,241 | 104,052 | 9,373,759 | ||||||||
2018 | 820,000 | 5,750,042 | 928,600 | — | 381 | 102,662 | 7,601,685 | |||||||||
2017 | 666,167 | 2,250,078 | 910,000 | — | 1,379,892 | 87,482 | 5,293,619 | |||||||||
Murray R. Garnick, Executive Vice President and General Counsel, Altria Group, Inc. | 2019 | 871,667 | 2,200,099 | 890,500 | 2,887,900 | — | 149,855 | 7,000,021 | ||||||||
2018 | 845,833 | 3,500,115 | 928,600 | — | — | 150,929 | 5,425,477 | |||||||||
2017 | 774,133 | 1,237,603 | 910,000 | — | — | 259,228 | 3,180,964 | |||||||||
Salvatore Mancuso, Senior Vice President, Finance and Procurement, Altria Group, Inc. | 2019 | 514,950 | 676,039 | 555,300 | 1,008,500 | 1,538,272 | 74,421 | 4,367,482 | ||||||||
Jody L. Begley, Senior Vice President, Tobacco Products, Altria Group, Inc. | 2019 | 507,500 | 650,089 | 610,000 | 821,400 | 1,034,722 | 79,036 | 3,702,747 | ||||||||
Kevin C. Crosthwaite, Jr., Former Senior Vice President, Chief Strategy and Growth Officer, Altria Group, Inc. | 2019 | 408,680 | 728,042 | 403,000 | 881,500 | 102,312 | 5,171,833 | 7,695,367 | ||||||||
2018 | 405,750 | 2,150,136 | 350,000 | — | 48,723 | 67,038 | 3,021,647 | |||||||||
Craig A. Johnson, Former President and Chief Executive Officer, Altria Group Distribution Company | 2019 | 273,756 | — | 151,000 | 2,445,300 | 1,161,220 | 532,771 | 4,564,047 | ||||||||
2018 | 957,333 | 1,750,035 | 1,051,000 | — | 327,597 | 126,978 | 4,212,943 | |||||||||
2017 | 929,500 | 1,750,037 | 1,142,000 | — | 1,128,270 | 119,483 | 5,069,290 |
(1) | The amount shown is the aggregate grant date fair value of stock awards determined pursuant to FASB Codification Topic 718. The number of RSUs and PSUs awarded in February 2019, together with their grant date values and vesting terms, is disclosed in the Grants of Plan-Based Awards during 2019 table on page 51. The assumptions we used |
Howard A. Willard III ($) | William F. Gifford, Jr. ($) | Murray R. Garnick ($) | Salvatore Mancuso ($) | Jody L. Begley ($) | Kevin C. Crosthwaite, Jr.(a) ($) | ||||||
3,120,055 | 1,144,034 | 1,144,034 | 351,519 | 338,020 | 378,567 |
(a) | Under the terms of the award agreement, Mr. Crosthwaite forfeited the 2019 equity award reflected above upon his resignation effective September 24, 2019. |
48 | www.altria.com |
EXECUTIVE COMPENSATION
(2) | The 2017 — 2019 LTIP |
The table below reflects the |
Year | Martin J. Barrington ($) | William F. Gifford, Jr. ($) | Howard A. ($) | Denise F. ($) | Craig A. ($) | James E. Dillard ($) | David R. ($) | |||||||
2015
|
3,375,000
|
1,146,048
|
1,600,000
|
1,832,000
|
1,750,000
|
401,250
|
300,334
| |||||||
2014
|
3,125,000
|
643,750
|
1,364,000
|
1,792,000
|
1,712,000
|
382,500
|
1,858,000
|
Non-Equity Incentive Plans | |||||||||||||||||||
Name | Year | Salary ($) | Stock Awards Grant Value(1) ($) | Annual Incentive Plan ($) | Long-Term Incentive Plan(2) ($) | Change in Pension Value(3) ($) | All Other | Total ($) | |||||||||||
Howard A. Willard III | 2019 | 1,250,000 | 6,000,091 | — | 1,328,100 | 4,316,446 | 372,479 | 13,267,116 | |||||||||||
2018 | 1,113,201 | 6,750,070 | 2,250,000 | 1,110,400 | 1,192,673 | 267,755 | 12,684,099 | ||||||||||||
2017 | 868,333 | 2,250,078 | 1,165,000 | 1,040,100 | 1,746,506 | 99,599 | 7,169,616 | ||||||||||||
William F. Gifford, Jr. | 2019 | 871,667 | 2,200,099 | 890,500 | 1,042,400 | 2,456,241 | 104,052 | 7,564,959 | |||||||||||
2018 | 820,000 | 5,750,042 | 928,600 | 1,011,500 | 381 | 102,662 | 8,613,185 | ||||||||||||
2017 | 666,167 | 2,250,078 | 910,000 | 797,300 | 1,379,892 | 87,482 | 6,090,919 | ||||||||||||
Murray R. Garnick | 2019 | 871,667 | 2,200,099 | 890,500 | 1,042,400 | — | 149,855 | 5,154,521 | |||||||||||
2018 | 845,833 | 3,500,115 | 928,600 | 1,011,500 | — | 150,929 | 6,436,977 | ||||||||||||
2017 | 774,133 | 1,237,603 | 910,000 | 834,000 | — | 259,228 | 4,014,964 | ||||||||||||
Salvatore Mancuso | 2019 | 514,950 | 676,039 | 555,300 | 439,100 | 1,538,272 | 74,421 | 3,798,082 | |||||||||||
Jody L. Begley | 2019 | 507,500 | 650,089 | 610,000 | 443,300 | 1,034,722 | 79,036 | 3,324,647 | |||||||||||
Kevin C. Crosthwaite, Jr. | 2019 | 408,680 | 728,042 | 403,000 | 443,300 | 102,312 | 5,171,833 | 7,257,167 | |||||||||||
2018 | 405,750 | 2,150,136 | 350,000 | 249,900 | 48,723 | 67,038 | 3,271,547 | ||||||||||||
Craig A. Johnson | 2019 | 273,756 | — | 151,000 | 189,000 | 1,161,220 | 532,771 | 2,307,747 | |||||||||||
2018 | 957,333 | 1,750,035 | 1,051,000 | 1,144,800 | 327,597 | 126,978 | 5,357,743 | ||||||||||||
2017 | 929,500 | 1,750,037 | 1,142,000 | 1,111,500 | 1,128,270 | 119,483 | 6,180,790 |
(3) | The amounts show the change in the present value of each NEO’s pension benefits for each year from December 31 |
(4) | Details of other compensation for each of |
Altria Group, Inc. – Proxy Statement | 49 |
ALTRIA GROUP, INC. – Proxy Statement 43Table of Contents
EXECUTIVE COMPENSATION
Name | Year | Allocation to Defined Contribution Plans (a) ($) | Personal Use of Company Aircraft (b) ($) | Car Expenses (c) ($) | Financial Counseling Services (d) ($) | Security ($) | Executive Physicals ($) | Payments in Employment (e) ($) | Total ($) | |||||||||||||
Martin J. Barrington | 2015 | 133,333 | 122,278 | – | – | 618 | – | – | 256,229 | |||||||||||||
2014 | 124,167 | 125,287 | – | – | 460 | – | – | 249,914 | ||||||||||||||
2013 | 119,167 | 177,833 | – | – | 555 | – | – | 297,555 | ||||||||||||||
William F. Gifford, Jr.
| 2015 | 59,417 | – | 17,179 | – | – | – | – | 76,596 | |||||||||||||
Howard A. Willard | 2015 | 78,033 | – | 18,016 | 6,764 | – | 3,300 | – | 106,113 | |||||||||||||
2014 | 67,683 | – | 18,477 | 10,000 | – | 3,300 | – | 99,460 | ||||||||||||||
2013 | 64,670 | – | 17,362 | 10,000 | – | 3,300 | – | 95,332 | ||||||||||||||
Denise F. Keane | 2015 | 91,267 | – | 20,744 | 10,000 | – | 3,300 | – | 125,311 | |||||||||||||
2014 | 89,050 | – | 23,455 | 10,000 | – | 3,300 | – | 125,805 | ||||||||||||||
2013 | 85,833 | – | 17,238 | 10,000 | – | 3,300 | – | 116,371 | ||||||||||||||
Craig A. Johnson | 2015 | 87,183 | – | 19,417 | 4,985 | – | – | – | 111,585 | |||||||||||||
2014 | 85,083 | – | 23,921 | 5,575 | – | 3,300 | – | 117,879 | ||||||||||||||
2013 | 82,227 | – | 24,747 | 2,835 | – | 3,300 | – | 113,109 | ||||||||||||||
James E. Dillard
| 2015 | 87,575 | – | 22,063 | 2,520 | – | 3,300 | – | 115,458 | |||||||||||||
David R. Beran | 2015 | 26,203 | 13,008 | 3,326 | – | – | – | 2,899,861 | 2,942,398 | |||||||||||||
2014 | 92,550 | 64,937 | 16,643 | – | – | 3,300 | – | 177,430 | ||||||||||||||
2013 | 90,168 | 75,824 | 20,067 | – | – | 3,300 | – | 189,359 |
Name | Year | Allocation to Defined Contribution Plans(a) ($) | Personal Use of Company Aircraft(b) ($) | Car Expenses(c) ($) | Executive Physicals ($) | Other(d) ($) | Total ($) | |||||||
Howard A. Willard III | 2019 | 125,000 | 200,000 | — | 3,600 | 43,879 | 372,479 | |||||||
2018 | 111,320 | 150,000 | 3,055 | 3,300 | 80 | 267,755 | ||||||||
2017 | 86,833 | — | 12,766 | — | — | 99,599 | ||||||||
William F. Gifford, Jr. | 2019 | 87,167 | — | 13,285 | 3,600 | — | 104,052 | |||||||
2018 | 82,000 | — | 17,062 | 3,600 | — | 102,662 | ||||||||
2017 | 66,617 | — | 17,565 | 3,300 | — | 87,482 | ||||||||
Murray R. Garnick | 2019 | 130,750 | — | 15,505 | 3,600 | — | 149,855 | |||||||
2018 | 130,667 | — | 20,262 | — | — | 150,929 | ||||||||
2017 | 124,220 | — | 19,742 | 3,300 | 111,966 | 259,228 | ||||||||
Salvatore Mancuso | 2019 | 51,495 | — | 19,326 | 3,600 | — | 74,421 | |||||||
Jody L. Begley | 2019 | 50,750 | — | 24,686 | 3,600 | — | 79,036 | |||||||
Kevin C. Crosthwaite, Jr. | 2019 | — | — | 17,016 | — | 5,154,817 | 5,171,833 | |||||||
2018 | 40,575 | — | 23,163 | 3,300 | — | 67,038 | ||||||||
Craig A. Johnson | 2019 | 27,376 | — | 1,795 | 3,600 | 500,000 | 532,771 | |||||||
2018 | 95,733 | — | 27,945 | 3,300 | — | 126,978 | ||||||||
2017 | 92,950 | — | 23,233 | 3,300 | — | 119,483 |
(a) | Amounts represent |
(b) |
Personal use of |
(c) | Car expenses include the annual cost of providing a vehicle allowance and/or a leased vehicle and operating expenses, including insurance, maintenance and repairs. Mr. Gifford was the only NEO who received a vehicle allowance in 2019. Executives pay their own taxes on imputed taxable income resulting from personal use of |
(d) | For Mr. |
50 | www.altria.com |
44 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
EXECUTIVE COMPENSATION
Grants of Plan-Based Awards during 20152019
Name
|
Grant Date
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | All Other Number of Shares of Stock (#)
| Grant Date Fair Awards (2) ($)
| ||||||||||
Threshold ($)
| Target ($)
| Maximum ($)
| ||||||||||||
Martin J. Barrington
| 2015
| –
|
| 2,025,000
|
| 10,000,000
| ||||||||
1/28/2015
| 102,650 | 5,600,071 | ||||||||||||
2015
| –
|
| 579,500
|
| 10,000,000
| |||||||||
William F. Gifford, Jr.
| 1/28/2015
| 27,500 (a)
| 1,500,263
| |||||||||||
1/28/2015
| 21,080
| 1,150,019
| ||||||||||||
2015
| –
|
| 760,000
|
| 10,000,000
| |||||||||
Howard A. Willard
| 1/28/2015
| 27,500 (a)
| 1,500,263
| |||||||||||
1/28/2015
| 30,250
| 1,650,289
| ||||||||||||
Denise F. Keane
| 2015
| –
|
| 870,200
|
| 10,000,000
| ||||||||
1/28/2015
| 30,250 | 1,650,289 | ||||||||||||
Craig A. Johnson
| 2015
| –
|
| 831,250
|
| 10,000,000
| ||||||||
1/28/2015
| 23,380
| 1,275,496
| ||||||||||||
2015
| –
|
| 321,000
|
| 10,000,000
| |||||||||
James E. Dillard
| 1/28/2015
| 18,340 (a)
| 1,000,539
| |||||||||||
1/28/2015
| 13,020
| 710,306
| ||||||||||||
David R. Beran(3)
| 2015
| – | 882,550 | 10,000,000 |
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | Grant Date Fair Value of Stock Awards ($) | ||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||
Howard A. Willard III | 2019 | — | 1,875,000 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 46,940 | 61,022 | 2,400,042 | (4) | ||||||||||||||||
2/26/2019 | 69,132 | 3,600,049 | (5) | ||||||||||||||||||
William F. Gifford, Jr. | 2019 | — | 832,200 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 17,212 | 22,375 | 880,050 | (4) | ||||||||||||||||
2/26/2019 | 25,349 | 1,320,049 | (5) | ||||||||||||||||||
Murray R. Garnick | 2019 | — | 832,200 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 17,212 | 22,375 | 880,050 | (4) | ||||||||||||||||
2/26/2019 | 25,349 | 1,320,049 | (5) | ||||||||||||||||||
Salvatore Mancuso | 2019 | — | 416,000 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 5,289 | 6,875 | 270,427 | (4) | ||||||||||||||||
2/26/2019 | 7,789 | 405,612 | (5) | ||||||||||||||||||
Jody L. Begley | 2019 | — | 420,000 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 5,086 | 6,611 | 260,047 | (4) | ||||||||||||||||
2/26/2019 | 7,490 | 390,042 | (5) | ||||||||||||||||||
Kevin C. Crosthwaite, Jr.(6) | 2019 | — | 420,000 | 10,000,000 | |||||||||||||||||
2/26/2019 | — | 5,696 | 7,404 | 291,236 | (4) | ||||||||||||||||
2/26/2019 | 8,388 | 436,805 | (5) | ||||||||||||||||||
Craig A. Johnson(7) | 2019 | — | 933,900 | 10,000,000 |
(1) | Reflects the target and maximum |
(2) | Reflects target and maximum PSUs granted to |
Reflects RSUs granted to our NEOs on | |
(4) | Reflects the grant date fair value of the target PSUs using a grant date fair value of $51.13. The grant date fair value was determined by adding 50% of the RSU grant date fair value to 50% of the TSR fair value. The TSR fair values were calculated by multiplying the RSU grant date fair value by a Monte Carlo simulation fair value factor of 96.38%. |
(5) | Reflects the grant date fair value of the RSUs using a |
(6) | Under the terms of the award agreement, Mr. Crosthwaite forfeited his 2019 equity awards |
(7) | In light of |
Mr. |
Altria Group, Inc. – Proxy Statement | 51 |
ALTRIA GROUP, INC. – Proxy Statement 45Table of Contents
EXECUTIVE COMPENSATION
Outstanding Equity Awards as of December 31, 20152019
Option Awards | Stock Awards | |||||||||||||
Name | Number of Securities Underlying Unexercised Options: Exercisable (#) | Option Exercise Price ($) | Option Expiration Date | Stock Award Grant Date (1) | Number of Shares or Units of Stock That Have Not (#) | Market Value of Shares or Units of Stock That Have Not Vested (2) ($) | ||||||||
Martin J. Barrington | – | – | – | 1/28/2015 | 102,650 | 5,975,257 | ||||||||
1/28/2014 | 142,960 | 8,321,702 | ||||||||||||
1/29/2013 | 160,000 | 9,313,600 | ||||||||||||
5/16/2012 (a) | 150,000 | 8,731,500 | ||||||||||||
William F. Gifford, Jr. | – | – | – | 1/28/2015 | 21,080 | 1,227,067 | ||||||||
1/28/2015 (a) | 27,500 | 1,600,775 | ||||||||||||
1/28/2014 | 31,320 | 1,823,137 | ||||||||||||
1/29/2013 | 32,600 | 1,897,646 | ||||||||||||
Howard A. Willard | – | – | – | 1/28/2015 | 30,250 | 1,760,853 | ||||||||
1/28/2015 (a) | 27,500 | 1,600,775 | ||||||||||||
1/28/2014 | 44,930 | 2,615,375 | ||||||||||||
1/29/2013 | 48,900 | 2,846,469 | ||||||||||||
Denise F. Keane | – | – | – | 1/28/2015 | 30,250 | 1,760,853 | ||||||||
1/28/2014 | 44,930 | 2,615,375 | ||||||||||||
1/29/2013 | 48,900 | 2,846,469 | ||||||||||||
Craig A. Johnson | – | – | – | 1/28/2015 | 23,380 | 1,360,950 | ||||||||
1/28/2014 | 34,720 | 2,021,051 | ||||||||||||
1/29/2013 | 37,790 | 2,199,756 | ||||||||||||
James E. Dillard | – | – | – | 1/28/2015 | 13,020 | 757,894 | ||||||||
1/28/2015 (a) | 18,340 | 1,067,571 | ||||||||||||
1/28/2014 | 17,700 | 1,030,317 | ||||||||||||
1/29/2013 | 19,270 | 1,121,707 | ||||||||||||
David R. Beran
| – | – | – | – | – | – |
Stock Awards | ||||||||||||
RSUs | PSUs | |||||||||||
Name(1) | Grant Date | Vesting Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(3) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(2) ($) | ||||||
Howard A. Willard III | 2/26/2019 | 2/28/2022 | 69,132 | 3,450,378 | 46,940 | 2,342,775 | ||||||
5/17/2018 | 6/1/2023 | 48,825 | 2,436,856 | 37,106 | 1,851,960 | |||||||
1/30/2018 | 2/11/2021 | 19,351 | 965,808 | 13,405 | 669,044 | |||||||
1/30/2017 | 2/11/2020 | 18,987 | 947,641 | 12,786 | 638,149 | |||||||
1/28/2015 | 2/11/2020 | 27,500 | 1,372,525 | |||||||||
William F. Gifford, Jr. | 2/26/2019 | 2/28/2022 | 25,349 | 1,265,169 | 17,212 | 859,051 | ||||||
1/31/2018 | 2/9/2023 | 49,847 | 2,487,864 | |||||||||
1/30/2018 | 2/11/2021 | 19,351 | 965,808 | 13,405 | 669,044 | |||||||
1/30/2017 | 2/11/2020 | 18,987 | 947,641 | 12,786 | 638,149 | |||||||
1/28/2015 | 2/11/2020 | 27,500 | 1,372,525 | |||||||||
Murray R. Garnick | 2/26/2019 | 2/28/2022 | 25,349 | 1,265,169 | 17,212 | 859,051 | ||||||
10/23/2018 | 10/30/2023 | 24,391 | 1,217,355 | |||||||||
1/30/2018 | 2/11/2021 | 17,201 | 858,502 | 11,916 | 594,728 | |||||||
1/30/2017 | 2/11/2020 | 10,443 | 521,210 | 7,033 | 351,017 | |||||||
1/28/2015 | 2/11/2020 | 18,340 | 915,349 | |||||||||
Salvatore Mancuso | 2/26/2019 | 2/28/2022 | 7,789 | 388,749 | 5,289 | 263,974 | ||||||
1/30/2018 | 2/11/2021 | 5,814 | 290,177 | 4,028 | 201,037 | |||||||
1/30/2017 | 2/11/2020 | 5,485 | 273,756 | 3,694 | 184,368 | |||||||
Jody L. Begley | 2/26/2019 | 2/28/2022 | 7,490 | 373,826 | 5,086 | 253,842 | ||||||
10/23/2018 | 10/30/2023 | 24,391 | 1,217,355 | |||||||||
1/30/2018 | 2/11/2021 | 3,217 | 160,560 | 2,229 | 111,249 | |||||||
1/30/2017 | 2/11/2020 | 3,376 | 168,496 | 2,274 | 113,495 | |||||||
1/28/2015 | 2/11/2020 | 9,170 | 457,675 |
(1) |
Mr. Crosthwaite resigned and Mr. Johnson retired during 2019. Neither had any outstanding equity awards as of December 31, 2019.
Market values are based on | |
(3) | Amount assumes target performance goals are achieved. The actual number of units that vest will range between 0% and 130% of target, depending on actual performance during the performance cycle. |
52 | www.altria.com |
Dividends and dividend equivalents earned in 2015 on outstanding restricted stock awards and RSUs for eachTable of our NEOs were: Mr. Barrington, $1,205,674; Mr. Gifford, $244,125; Mr. Willard, $328,929; Ms. Keane, $269,254; Mr. Johnson, $208,081; Mr. Dillard, $148,276; and Mr. Beran, $0.
46 ALTRIA GROUP, INC. – Proxy StatementContents
EXECUTIVE COMPENSATION
Stock Option Exercises and Stock Vested during 20152019
Option Awards | Stock Awards | |||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||
Martin J. Barrington
| – | – | 65,000 | 3,530,475 | ||||||||||
William F. Gifford, Jr.
| – | – | 29,870 | 1,622,389 | ||||||||||
Howard A. Willard
| – | – | 56,210 | 3,053,046 | ||||||||||
Denise F. Keane
| – | – | 61,480 | 3,339,286 | ||||||||||
Craig A. Johnson
| – | – | 47,430 | 2,576,160 | ||||||||||
James E. Dillard
| – | – | 22,890 | 1,243,270 | ||||||||||
David R. Beran
| – | – | 165,000 | 8,945,975 |
ALTRIA GROUP, INC. – Proxy Statement 47
EXECUTIVE COMPENSATION
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value | ||||
Howard A. Willard III | — | — | 28,802 | 1,406,546 | ||||
William F. Gifford, Jr. | — | — | 28,802 | 1,406,546 | ||||
Murray R. Garnick | — | — | 19,492 | 951,892 | ||||
Salvatore Mancuso | — | — | 11,978 | 584,946 | ||||
Jody L. Begley | — | — | 5,930 | 289,592 | ||||
Kevin C. Crosthwaite, Jr. | — | — | 2,745 | 134,052 | ||||
Craig A. Johnson | — | — | 68,753 | 3,136,866 |
The Pension Benefits table and the Non-Qualified Deferred Compensation table below generally reflect amounts accumulated as a result of service over the NEO’s full career with the CompanyAltria and itsour affiliates. The increments related to 20152019 are reflected in the “Change in Pension Value” column of the Summary Compensation Table or, in the case of defined contribution plans, the “Allocation to Defined Contribution Plans” column of the All Other Compensation table. Mr. Garnick was hired after January 1, 2008 and, therefore, is not covered under our pension plans.
Name | Plan Name | Number of Years of Credited Service (1) (#) | Present Value of Accumulated Benefits (2) ($) | Payments During Last Fiscal Year ($) | ||||||
Martin J. Barrington | Altria Retirement Plan
| 22.67
| 1,322,429
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| 11.67
| 1,709,532
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| 22.67
| 12,287,117
|
| –
|
| |||||
William F. Gifford, Jr.
| Altria Retirement Plan
| 21.25
| 703,435
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| –
| –
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| 21.25
| 2,151,273
|
| –
|
| |||||
Howard A. Willard
| Altria Retirement Plan
| 23.17
| 1,039,510
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| 12.17
| 510,663
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| 23.17
| 4,536,007
|
| –
|
| |||||
Denise F. Keane
| Altria Retirement Plan
| 39.00
| 2,299,910
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| 28.00
| 4,197,507
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| 35.00
| 8,212,552
|
| –
|
| |||||
Craig A. Johnson
| Altria Retirement Plan
| 24.75
| 1,395,677
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| 13.75
| 2,189,845
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| 24.75
| 8,164,026
|
| –
|
| |||||
James E. Dillard
| Altria Retirement Plan
| 7.50
| 318,309
|
| –
|
| ||||
Benefit Equalization Plan – Pre-2005
| –
| –
|
| –
|
| |||||
Benefit Equalization Plan – Post-2004
| –
| –
|
| –
|
| |||||
David R. Beran
| Altria Retirement Plan
| 38.75
| 2,369,406
|
| 105,209
| (3)
| ||||
Benefit Equalization Plan – Pre-2005
| 28.58
| –
|
| 2,545,939
| (3)
| |||||
Benefit Equalization Plan – Post-2004
| 35.00
| –
|
| 11,310,074
| (3)
|
Name | Plan Name | Number of Years of Credited Service(1) (#) | Present Value of Accumulated Benefits(2) ($) | Payments During Last Fiscal Year(3) ($) | ||||
Howard A. Willard III | Altria Retirement Plan | 27.17 | 1,793,293 | — | ||||
Benefit Equalization Plan - Pre-2005 | 12.17 | 679,455 | — | |||||
Benefit Equalization Plan - Post-2004 | 27.17 | 12,269,230 | — | |||||
William F. Gifford, Jr. | Altria Retirement Plan | 25.25 | 1,323,100 | — | ||||
Benefit Equalization Plan - Pre-2005 | — | — | — | |||||
Benefit Equalization Plan - Post-2004 | 25.25 | 6,247,937 | — | |||||
Salvatore Mancuso | Altria Retirement Plan | 29.25 | 1,811,118 | — | ||||
Benefit Equalization Plan - Pre-2005 | — | — | — | |||||
Benefit Equalization Plan - Post-2004 | 29.25 | 4,123,488 | — | |||||
Jody L. Begley | Altria Retirement Plan | 24.50 | 1,253,359 | — | ||||
Benefit Equalization Plan - Pre-2005 | — | — | — | |||||
Benefit Equalization Plan - Post-2004 | 24.50 | 1,998,876 | — | |||||
Kevin C. Crosthwaite, Jr. | Altria Retirement Plan | 22.33 | 750,418 | — | ||||
Benefit Equalization Plan - Pre-2005 | — | — | — | |||||
Benefit Equalization Plan - Post-2004 | 22.33 | 757,652 | — | |||||
Craig A. Johnson | Altria Retirement Plan | 27.92 | 1,875,337 | 57,646 | ||||
Benefit Equalization Plan - Pre-2005 | 13.75 | — | 1,604,202 | |||||
Benefit Equalization Plan - Post-2004 | 27.92 | — | 6,916,945 |
(1) | As of December 31, |
Altria Group, Inc. – | 53 |
EXECUTIVE COMPENSATION
(2) | The amounts shown in this column are based on a single life annuity (other than |
48 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
(3) | In connection with his retirement |
Our NEOs, along with the other salaried employees (except those hired after certain dates, including Mr. Garnick, and those who cease to accrue further benefit service), participate in the Retirement Plan, a tax-qualified defined benefit pension plan. Mr. Dillard has an accrued benefit under the Retirement Plan based on his prior service with USSTC and its predecessors. He is not eligible for ongoing accruals under the plan, although his benefit may increase based on increases to his compensation. In addition, our NEOs, other than Mr. Dillard,Garnick, and other executivessalaried employees above the IRS statutory limits, participate in the BEP, which is an unfunded supplemental plan providing benefits in excess of those provided under the Retirement Plan. Additional information regarding the plans follows.
The majority of our salaried employees are covered by the Retirement Plan, a funded, tax-qualified, non-contributory pension plan. Generally, salaried employees hired prior to January 1, 2008 with at least five years of service are eligible for an annual, lifetime pension benefit.benefit from the Retirement Plan, a funded, tax-qualified, non-contributory pension plan. The benefit for the majority of those plan participants, including all of our NEOs, other than Mr. Dillard,Garnick, is based on the following formula and terms:
Pension Benefit | |||||||||||||
| 1.45% of five-year average compensation (including certain incentive compensation plan payments) up to the applicable Social Security covered compensation amount | + | 1.75% of five-year average compensation (including certain incentive compensation plan payments) in excess of the applicable Social Security covered compensation amount | Years of credited service
except in limited circumstances) |
Under the terms of the Retirement Plan, credited service is limited to 35 years if incentive compensation is included in the determination of the five-year average compensation. Five-year average compensation is the highest average annual compensation (annual base salary plus incentive compensation) during a period of 60 consecutive months within the last 120 months of employment. If incentive compensation is not included in the determination of the five-year average compensation, then credited service is not limited to 35 years and the benefit for credited service over 35 years is 1.45% of the employee’s five-year average compensation. Social Security covered compensation is generally an amount equal to the average of the Social Security taxable wage bases for the 35-year period that ends in the year the participant reaches Social Security Full Retirement Age.
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EXECUTIVE COMPENSATION
Pension benefit amounts are expressed as a single life annuity payable commencing at age 65, the Retirement Plan’s normal retirement age. The amount may be reduced as a result of permitted elections of continued payments to beneficiaries in the event of the retiree’s death and/or for commencement of payments before attaining normal retirement age. Employees who terminate employment before age 5550 with vested benefits may elect to commence payment of their accrued pensions after attaining age 55. For such employees, the election to commence payments before age 65 results in a reduction in the annual amount payable at a rate of 6% per year multiplied by the number of full and partial years by which benefit commencement precedes attainment of age 65. For employees who continue in employment until age 5550 or older and have completed five years or more of credited service, the reduction for early commencement is 6% for each year and partial year by which the benefit commencement precedes age 60.60, with a maximum reduction of 30%.
If upon termination, an employee is at least age 5550 with 30 years of service or age 60 or older with five years of service, the annuity immediately payable upon early retirement is 100% of that payable at normal retirement age. The result of becoming eligible for such an early retirement benefit is a substantialan increase in the present value of the pension. Messrs. Barrington and
ALTRIA GROUP, INC. – Proxy Statement 49
EXECUTIVE COMPENSATION
Johnson and Ms. Keane currently are eligible for such unreduced early retirement benefits. Mr. BeranJohnson was eligible for, and received, an unreduced earlynormal retirement benefit upon his retirement in 2015. Mr.2019. Messrs. Willard and Mancuso are currently eligible for reduced early retirement benefits. Messrs. Gifford, Begley and Mr. WillardCrosthwaite are not currently eligible for either reduced or unreduced early retirement benefits.
As noted above, Mr. Dillard has an accrued benefit under the Retirement Plan based on his prior service with USSTC and its predecessors. His pension benefit is equal to 2.2% multiplied by his final average earnings multiplied by his years of credited service through December 31, 2009, minus 1.25% multiplied by an estimated annual Social Security benefit multiplied by his years of credited service through December 31, 2009. Final average earnings is the highest average annual compensation (annual base salary plus 25% of incentive compensation) during a period of 36 consecutive months within the last 120 months of employment.
Mr. Dillard’s pension benefits are expressed as a single life annuity payable commencing at age 65, the Retirement Plan’s normal retirement age. The amount may be reduced as a result of permitted elections of continued payments to beneficiaries in the event of Mr. Dillard’s death and/or for commencement of payments before attaining normal retirement age. After Mr. Dillard terminates employment, he may elect to commence payment of his accrued pension after attaining age 55 with a reduction of 4% per year multiplied by the number of full and partial years by which benefit commencement precedes attainment of age 65. Alternatively, once Mr. Dillard’s age plus years of vesting service reaches 80 (estimated to be age 59 and 5 months), he can elect to retire and commence payment with a reduction of 2% per year that the sum of his age plus service is less than 90 (e.g., a 20% reduction if the sum is 80).
Tax laws applicable to the Retirement Plan limit the annual compensation that can be taken into account under that plan. As a result of these and/or certain other tax requirements, only a portion of the benefits calculated under the Retirement Plan described above can be paid to theour eligible NEOs and a number of other affected employees from the Retirement Plan. To compensate for benefits that would be lost by the application of these tax limits, all of theour NEOs, other than Mr. Garnick, accrue supplemental pension benefits under the BEP (“BEP Pension”). BEP Pension accruals relating to periods after 2004 are paid in a lump sum following retirement. Distribution of the pre-2005 supplemental plan benefits are subject to the BEP Pension terms applicable on December 31, 2004.
During 2006, the Compensation Committee decided to limit pension benefits for executives in salary bands A and B as follows: theThe annual cash incentive compensation considered for purposes of pension determinations as described above wasfor executives in salary bands A and B is limited to the lesser of either (a) actual annual cash incentive or (b) annual cash incentive at an Annual Incentive Award rating of 100% and individual performance rating of “Outstanding.” The NEOs, except Mr. Dillard,the fourth highest level on a five point scale. As of December 31, 2019, Messrs. Willard and Gifford are subject to this limit. The 2015 Annual Incentive Awards paid in early 2016 (in March 2015 in the case of Mr. Beran) and the amount recognized for future pension calculations for the eligible NEOs arelimit as follows:
Name | 2015 Annual Incentive Award ($) | Amount of 2015 Award Recognized for Future Pension Calculations ($) | ||
Martin J. Barrington
| 3,500,000
| 2,328,750
| ||
William F. Gifford, Jr.
| 900,000
| 649,416
| ||
Howard A. Willard
| 1,200,000
| 874,000
| ||
Denise F. Keane
| 1,350,000
| 1,000,730
| ||
Craig A. Johnson
| 1,100,000
| 955,938
| ||
David R. Beran
| 142,700
| 142,700
|
Name | 2019 Annual Incentive Award ($) | Amount of 2019 Award Recognized for Future Pension Calculations ($) | ||
Howard A. Willard III | — | — | ||
William F. Gifford, Jr. | 890,500 | 890,500 |
The amounts payable by Altria under the BEP Pension are determined takingtake into account certain payments made to the executives before 2008, in order to prevent duplicative benefit payments.
■ | From 1996 through 2007, several employees, including Mr. Willard, received Funding Payments with respect to pre-2005 vested benefits that were made either to individual trusts established by the employee or directly to the employees themselves. |
■ | From 2005 through 2007, accruals under the BEP Pension ceased for several employees, including Mr. Willard, and these employees received annual Target Payments, calculated to approximate (after paying taxes on the payments) the after-tax value of the additional benefits they would have earned had they remained covered by the BEP Pension. Accruals under the BEP Pension commenced again effective January 1, 2008. |
Altria Group, Inc. – Proxy Statement | 55 |
50 ALTRIA GROUP, INC. – Proxy StatementContents
EXECUTIVE COMPENSATION
Non-Qualified Deferred Compensation
Name | Plan Name | Executive Contributions in 2015 ($) | Registrant Contributions in 2015 (1) ($) | Aggregate Earnings in 2015 (2) ($) | Aggregate Withdrawals / Distributions (3) ($) | Aggregate Balance as of December 31, 2015 (4) ($) | ||||||||
Martin J. Barrington | Benefit Equalization Plan
| – | 106,833 | 29,369 | – | 1,242,551 | ||||||||
William F. Gifford, Jr. | Benefit Equalization Plan
| – | 32,917 | 2,380 | – | 118,662 | ||||||||
Howard A. Willard | Benefit Equalization Plan
| – | 51,533 | 14,238 | – | 584,096 | ||||||||
Denise F. Keane | Benefit Plan
| – | 64,767 | 28,583 | – | 1,205,204 | ||||||||
Craig A. Johnson | Benefit Plan
| – | 60,683 | 30,881 | – | 1,293,655 | ||||||||
James E. Dillard | Benefit Plan
| – | 52,575 | 4,732 | – | 234,814 | ||||||||
David R. Beran | Benefit Plan
| – | – | 4,501 | 575,507 | – |
Name | Plan Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year(1) ($) | Aggregate Earnings in Last Fiscal Year(2) ($) | Aggregate Withdrawals / Distributions in Last Fiscal Year(3) ($) | Aggregate Balance at Last Fiscal Year-End(4) ($) | ||||||||||
Howard A. Willard III | Benefit Equalization Plan | — | 97,000 | 27,448 | — | 931,114 | ||||||||||
William F. Gifford, Jr. | Benefit Equalization Plan | — | 59,167 | 8,112 | — | 312,209 | ||||||||||
Murray R. Garnick | Benefit Equalization Plan | — | 88,750 | 22,390 | — | 851,235 | ||||||||||
Salvatore Mancuso | Benefit Equalization Plan | — | 23,495 | 4,029 | — | 154,089 | ||||||||||
Jody L. Begley | Benefit Equalization Plan | — | 22,750 | 2,625 | — | 100,228 | ||||||||||
Kevin C. Crosthwaite, Jr. | Benefit Equalization Plan | — | — | 422 | — | 24,453 | ||||||||||
Craig A. Johnson | Benefit Equalization Plan | — | — | 8,031 | 1,686,599 | — |
(1) | The amounts in this column reflect |
(2) | The values in this column consist of amounts credited as earnings for |
(3) | In connection with his |
(4) | The aggregate balances shown include allocations reported in the Summary Compensation Table for previous years for Mr. |
TheOur NEOs participate in the Deferred Profit-Sharing Plan for Salaried Employees (“DPS Plan”), which is a broad-based tax-qualified defined contribution plan, and the deferred profit-sharing portion of the BEP (“BEP DPS”), which is an unfunded, non-qualified supplemental plan.
ALTRIA GROUP, INC. – Proxy Statement 51
EXECUTIVE COMPENSATION
DPS Plan
The majority of our salaried employees are eligible for the DPS Plan. Under the DPS Plan, the Company makeswe make a contribution (the “Company“Altria Contribution”) on behalf of each eligible participant for each year. Participants may also defer up to 35% of their eligible compensation on a pre-tax or after-tax basis into the DPS Plan, subject to DPS Plan and tax-qualification limits. For 2015, the Company2019, we determined itsour contribution using a formula based on Altria’s annual growth in adjusted diluted EPS, but capped at 12% of each eligible DPS Plan participant’s eligible compensation. The formula resulted in a Companyan Altria Contribution for each eligible participant for 20152019 equal to 10% of eligible compensation. Salaried employees who are eligible for an Altria Contribution but who are not eligible for ongoing accruals in the Retirement Plan are generally entitled to a supplemental CompanyAltria Contribution of 5% and matching contributions up to 3% on employee contributions. For 2015, all of the NEOs were2019, Mr. Garnick was our only NEO who was eligible for ongoing accruals in the Retirement Plan except Mr. Dillard and, therefore, are ineligible for the supplemental CompanyAltria Contribution orand matching contributions. For purposes of the DPS Plan, eligible compensation for our NEOs is the amount reported as salary in the Summary Compensation Table. Participants may receive the balance in their account under the DPS Plan upon termination of employment in a lump sum, as a deferred lump sum payment or in installments over a period of years not to exceed their life expectancy.years.
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EXECUTIVE COMPENSATION
The BEP DPS provides benefits that cannot be provided under the DPS Plan because of one or more statutory limits. For example, the tax laws limit the amount of compensation that can be taken into accountconsidered under the DPS Plan for any year and impose other limits on the amounts that can be allocated to individuals’ accounts. A salaried participant whose salary exceeds the compensation limit or was otherwise affected by a tax law limit is entitled to an amount generally equal to the additional benefit the participant would have received under the DPS Plan but for the application of the tax law limits. Accordingly, bookkeeping accounts reflecting this additional amount have been maintained under the BEP DPS for theour NEOs and other affected participants. A further notional allocation is made annually to reflect the amount credited to the participant’s account under the BEP DPS assuming the account was invested in the Interest Income Fund maintained under the DPS Plan. The Interest Income Fund is invested in a variety of high-quality fixed-income instruments with strong credit ratings and, for 2015,2019, produced earnings at a rate of 2.12%2.75%. BEP DPS allocations relating to periods after 2004 are paid in a lump sum following separation from service. Distribution of thea pre-2005 account is subject to the BEP DPS terms applicable on December 31, 2004.
As with the BEP Pension benefit, between 1996 and 2007, our NEOs (except Messrs. GiffordWillard and Dillard)Johnson and certain other individuals who were executive officers at that time received payments that were made directly to them or to individual trusts and that offset the pre-2005 BEP DPS allocations. When BEP (Pension and DPS) accruals ceased for 2005 through 2007, the NEOsMessrs. Willard and Johnson and certain other executive officers received Target Payments for 2005 through 2007 in lieu of BEP DPS allocations. The reinstated BEP that was effective January 1, 2008 also included reinstatement of the BEP DPS. As is noted above, the amounts payable by Altria under the BEP DPS are determined taking into accountconsidering Target Payments made to executives before 2008 in order to prevent duplicative benefitsbenefit payments.
Payments upon Change in Control or Termination of Employment
We do not have individual employment, severance or change in control agreements with any of our NEOs. The following arrangements apply in the event of a change in control or certain terminations of employment.
Payments upon Change in Control
Under the terms of our shareholder-approvedThe 2015 Performance Incentive Plan that applyPIP applies to all equity awards granted in 2017 and later, the 2019 Annual Incentive Award plan and the 2017 — 2019 LTIP. It covers all participants in these programs, including our NEOs,NEOs. Upon a change in control of the CompanyAltria, payment of awards will not trigger the payment of awardsbe triggered unless the successor entity either (i) fails to assume outstanding awards or replace outstandingthem with substantially similar awards or (ii) assumes or replaces outstanding awards, but the participant’s employment is terminated by the successor entity for any reason other than “cause” or by the participant with “good reason” within a specified time period.
If the payment of awards areis triggered, it would have the following consequences:
■ | the restrictions on outstanding RSUs, PSUs or restricted stock awards would lapse; |
■ | any stock options and stock appreciation rights would become fully vested and exercisable; |
■ | awards of the types described in the above two bullets would be cashed out at the change in control price or the fair market value on the date of termination of employment, as applicable; |
■ | fully earned but unpaid annual and long-term incentive awards would become payable; and |
■ | annual and long-term incentive awards for performance cycles not yet completed as of the change in control date would become payable, but only on a prorated basis (the number of full or partial months divided by the total number of months in the performance cycle) applied as follows: |
■ | annual incentive awards at the greater of the target award amount or the average of the participant’s actual last three years’ awards; and |
■ | long-term incentive cash awards at target. |
Altria Group, Inc. – Proxy Statement | 57 |
EXECUTIVE COMPENSATION
Certain equity awards that were made in 2015 remained unvested as of December 31, 2019 and were governed by the 2010 PIP. Under the terms of that plan, upon a change in control of Altria the restrictions on outstanding RSUs would have lapsed, and the RSUs would have been cashed out at the change in control price, unless the Compensation Committee determines to treat the awards in a different manner as permitted by our 2015 Performance Incentive Plan;
52 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
The 2015 annual incentive award, 2015 stock award and the 2014 – 2016 LTIP are still governed by the 2010 Performance Incentive Plan. Under the terms of that plan, a change in control of the Company would have the following consequences:
For these purposes, for both the 2010 and 2015 PIP, a change in control occurs: (a) upon an acquisition of 20% or more of either our outstanding common stock or the voting power of our outstanding voting securities by an individual or entity, excluding certain acquisitions involving us or our affiliates or where our beneficial owners continue to meet certain ownership thresholds, coupled with the election to theour Board of at least one individual determined in good faith by a majority of the then-serving members of theour Board to be a representative or associate of such individual or entity; (b) when members of our Board, or members thereafter nominated or elected by such members, cease to constitute a majority of our Board; (c) upon certain reorganizations, mergers, share exchanges and consolidations involving us; or (d) upon our liquidation or dissolution, or sale of substantially all of our assets, with limited exceptions.
The amounts that would have become payable to our NEOs on a change in control of the Company,Altria, as of December 31, 2015,2019, were as follows:
Name | Unvested RSUs and Restricted Stock (1) ($) | Completed 2015 Annual Incentive Cycle (2) ($) | 2014 – 2016 LTIP Cycle (3) ($) | Total ($) | ||||||
Martin J. Barrington
| 32,342,059
| 4,615,650
| 12,675,000
| 49,632,709
| ||||||
William F. Gifford, Jr.
| 6,548,625
| 1,136,228
| 3,490,106
| 11,174,959
| ||||||
Howard A. Willard
| 8,823,472
| 1,528,800
| 5,779,800
| 16,132,072
| ||||||
Denise F. Keane
| 7,222,697
| 1,750,476
| 7,066,800
| 16,039,973
| ||||||
Craig A. Johnson
| 5,581,757
| 1,672,125
| 6,750,900
| 14,004,782
| ||||||
James E. Dillard
| 3,977,489
| 646,815
| 1,528,313
| 6,152,617
| ||||||
David R. Beran
| –
| –
| 4,208,752 (4)
| 4,208,752
|
follows (other than Messrs. Crosthwaite and Johnson who resigned and retired, respectively, in 2019):
Change in Control Only (Successor Assumes/Replaces Awards and No Termination of Employment) |
Name | Unvested Restricted Stock Units(1) ($) | Unvested Performance Stock Units ($) | Completed 2019 Annual Incentive Cycle ($) | Completed 2017 — 2019 LTIP Cycle ($) | Total ($) | |||||
Howard A. Willard III | 1,372,525 | — | — | — | 1,372,525 | |||||
William F. Gifford, Jr. | 1,372,525 | — | — | — | 1,372,525 | |||||
Murray R. Garnick | 915,349 | — | — | — | 915,349 | |||||
Salvatore Mancuso | — | — | — | — | — | |||||
Jody L. Begley | 457,675 | — | — | — | 457,675 |
(1) | Assumes a change in control price of |
Change in Control and Either (1) Successor Fails to Assume/Replace Awards or (2) Qualifying Termination of Employment |
Name | Unvested Restricted Stock Units(1) ($) | Unvested Performance Stock Units(1) ($) | Completed 2019 Annual Incentive Cycle(2) ($) | Completed 2017 — 2019 LTIP Cycle(3) ($) | Total ($) | |||||||||||||
Howard A. Willard III | 9,173,208 | 5,501,928 | 1,875,000 | 6,961,271 | 23,511,407 | |||||||||||||
William F. Gifford, Jr. | 7,039,007 | 2,166,244 | 929,533 | 3,354,400 | 13,489,184 | |||||||||||||
Murray R. Garnick | 4,777,585 | 1,804,796 | 889,567 | 3,397,551 | 10,869,499 | |||||||||||||
Salvatore Mancuso | 952,682 | 649,379 | 416,000 | 1,186,481 | 3,204,542 | |||||||||||||
Jody L. Begley | 2,377,912 | 478,586 | 420,000 | 966,397 | 4,242,895 |
(1) | Assumes a change in control price of $49.91, the closing price of Altria common stock on December 31, 2019 and payment at target for PSUs. Reflects the 2017, 2018 and 2019 equity awards granted under the 2015 PIP. Also reflects the 2015 equity awards granted under the 2010 PIP for Messrs. Willard, Gifford, Garnick and Begley, which vested on February 11, 2020. |
(2) | Based on the |
(3) | Based on the |
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ALTRIA GROUP, INC. – Proxy Statement 53Table of Contents
EXECUTIVE COMPENSATION
Upon a change in control, the retirement benefits under the BEP described above in “Pension Benefits” and “Non-Qualified Deferred Compensation” become payable, without any additional benefits or enhancements as a result of the change in control.
The Company maintainsWe maintain a non-qualified grantor trust (the “Trust”), commonly known as a “rabbi trust,” to provide a limited amount of financial security for the participants’ unfunded benefits under the BEP in the event of a change in control of the Company.Altria. The Trust is unfunded until funding is triggered by a change in control. In such an event, Trust assets would still be subject to the claims of our general creditors of the Company in cases of insolvency and bankruptcy. The Trust does not provide additional benefits or enhancements to the participants in the BEP.
Other than the BEP payments and Trust funding, none of our retirement plans or any other related agreements provide our NEOs with an additional enhancement, early vesting or other benefit in the event of a change in control or termination of employment, except for certain plan provisions applicable to all plan participants that, in the event of a change in control, ensure vesting and continuation of profit-sharing contributions for the year in which a change in control occurs and the following two years. All of our NEOs are already fully vested in suchthe retirement plans for which they are eligible and other related agreements. Similarly, no special provisions apply to any of our NEOs with respect to continued medical, life insurance or other insurance coverage following termination of employment whether or not in connection with a change in control.
In the event of certain involuntary terminations of employment, a majority of our salaried employees, including all of our NEOs, are eligible for severance benefits under the Severance Pay Plan for Salaried Employees (“Severance Plan”).Plan. The Severance Plan provides for severance pay (based on salary) and continuation of certain benefits for up to 12 months64 weeks depending on years of service. In order to receive any of these benefits, eligible employees must execute a general release of claims. Periods for which employees are entitled to severance payments may be counted toward vesting and eligibility(up to 52 weeks) for purposes of the Retirement Plan as well asand post-retirement medical coverage.
The following table shows the amount of severance that would be paid under the Severance Plan to each eligible NEO had he or she been involuntarily separated on December 31, 20152019 and eligible for these payments:
payments (other than Messrs. Crosthwaite and Johnson who resigned and retired, respectively, in 2019):
Name | Severance Payments ($) | |
| ||
| ||
William F. Gifford, Jr. | ||
| ||
| ||
| ||
|
In the event of death or totallong-term disability, all salaried employees with awards of unvested RSUs or restricted stock,PSUs, including theour NEOs, become fully vested in those awards. In addition, theour NEOs, like other salaried employees, may become entitled to a prorated awards under the Annual Incentive Award plan and LTIP award based on the target payment amount, subject to the discretion of Altria and the Compensation Committee may pay a prorated Annual Incentive Award based on the target payment amount, at its discretion. TheCommittee. Our NEOs would also become entitled to the same life insurance and long-term disability plan benefits as other salaried employees upon a death or disability.
Altria Group, Inc. – Proxy Statement | 59 |
54 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
EXECUTIVE COMPENSATION
The following table shows the amounts that would be paid under the RSU, restricted stock and LTIP awards if theour eligible NEOs had died or become disabled as of December 31, 2015:2019 (other than Messrs. Crosthwaite and Johnson who resigned and retired, respectively, in 2019):
Name | Unvested RSUs and Stock (1) ($) | 2014 – 2016 LTIP Cycle (2) ($) | ||||
Martin J. Barrington
| 32,342,059
| 6,500,000
| ||||
William F. Gifford, Jr.
| 6,548,625
| 1,789,798
| ||||
Howard A. Willard
| 8,823,472
| 2,964,000
| ||||
Denise F. Keane
| 7,222,697
| 3,624,000
| ||||
Craig A. Johnson
| 5,581,757
| 3,462,000
| ||||
James E. Dillard
| 3,977,489
| 783,750
|
Name | Unvested Restricted Stock Units(1) ($) | Unvested Performance Stock Units(1) ($) | 2019 Annual Incentive Cycle(2) ($) | 2017 — 2019 LTIP Cycle(3) ($) | Total ($) | |||||||||||||
Howard A. Willard III | 9,173,208 | 5,501,928 | 1,875,000 | 6,961,271 | 23,511,407 | |||||||||||||
William F. Gifford, Jr. | 7,039,007 | 2,166,244 | 832,200 | 3,354,400 | 13,391,851 | |||||||||||||
Murray R. Garnick | 4,777,585 | 1,804,796 | 832,200 | 3,397,551 | 10,812,132 | |||||||||||||
Salvatore Mancuso | 952,682 | 649,379 | 416,000 | 1,186,481 | 3,204,542 | |||||||||||||
Jody L. Begley | 2,377,912 | 478,586 | 420,000 | 966,397 | 4,242,895 |
(1) | Based on the closing price of |
(2) | Based on the executive having worked the entire performance period and the target award payable under the 2019 Annual Incentive Award plan. Payment is subject to the discretion of the Committee. The 2019 Annual Incentive Award plan is subject to the terms of the 2015 PIP. |
(3) | Based on the target award payable under the |
Upon reachingretiring at the normal retirement age of 65 and the completion of five years of service, all salaried employees, including theour NEOs, with unvested RSUs or restricted stock awardsPSUs become vested in the awards. None of theOur NEOs have not reached normal retirement age as of December 31, 2015.2019, other than Mr. Johnson, who retired on March 1, 2019.
In the event of a voluntary termination of employment or an involuntary termination of employment for cause, theour NEOs are not eligible to receive severance, equity vesting or other amounts or benefits other than those provided to other salaried employees. The Compensation Committee has the discretion, however, to fully or partially vest any employee holding aan RSU or restricted stockPSU or to pay a cash amount with respect to a forfeited award upon early retirement or upon other terminations of employment, as well as to provide for prorated payments of awards under the annual incentiveAnnual Incentive Award plan and LTIP awards in similar situations, and has exercised this discretion from time to time in appropriate circumstances.
Following any termination of employment, theeach of our NEOs is subject to a confidentiality and non-competition agreement and, like other salaried employees, areis entitled to the retirement plan benefits described under “Pension Benefits” and “Non-Qualified Deferred Compensation” above.
In addition,Additionally, in 2019 we made payments to Mr. Crosthwaite, who resigned effective September 24, 2019, and Mr. Johnson, who retired effective March 1, 2019. For more information regarding those payments, see “Executive Transitions” on page 43.
For 2019, our last completed fiscal year:
■ | the annual total compensation, including non-cash benefits, of our CEO (Mr. Willard) was $15,439,987; |
■ | the annual total compensation, including non-cash benefits, of the median Altria employee (excluding our CEO) was $142,246; and |
■ | the ratio of our CEO’s annual total compensation to that of the median Altria employee was 109 to 1. |
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EXECUTIVE COMPENSATION
To identify the median employee, we used the following any terminationmethodology:
■ | We compiled a list of all employees as of December 31, 2019, which showed 7,337 total employees. |
■ | As permitted by the de minimis exemption under applicable SEC rules, we then excluded all non-U.S. employees (47) located in Canada (46) and Germany (1), as they represented less than 5% of our total workforce. |
■ | We calculated the annual total compensation of each employee using a consistently applied compensation measure (“CACM”) defined as the sum of: |
■ | IRS Form W-2 Box 1 wages plus pre-tax benefit contributions; |
■ | an estimate of the annual change in pension value (if eligible for our defined benefit pension plan); |
■ | Altria’s 2019 contribution to each employee’s defined contribution plan account; and |
■ | the value of Altria-provided non-cash benefits for non-discriminatory benefit plans, including medical, dental, vision, life insurance, accidental death and dismemberment, short-term disability and long-term disability. |
■ | We annualized the 2019 compensation of all full- and part-time employees hired after January 1, 2019 who were not temporary or seasonal. We did not make a full-time equivalent adjustment for any employee. |
■ | Many of our employees participate in our defined benefit pension plan and receive company contributions to their defined contribution plan accounts. We believe that adding these components to the CACM not only results in a reasonable approximation of their annual total compensation, but also mitigates large fluctuations in the median employee total compensation from one year to the next. |
For purposes of employment,the ratio described above, we determined the median employee’s total compensation for 2019 in the same manner used to determine our CEO’s total compensation for 2019 as reported in the “Total” column in the Summary Compensation Table, except that, in each case, non-cash benefits were added.
Our median employee for 2019 was an Altria Client Services LLC employee. The majority of our NEOs is subjectemployees are long-tenured employees, and we employ few part-time employees.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a confidentialityvariety of methodologies, to apply certain exclusions and non-competition agreement.
to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As noted earlier, Mr. Beran retired on March 1, 2015. The compensation and benefits he received in connection with his retirement are described under “Retirement of President and COO” on page 42 of our 2015 Proxy Statement.
ALTRIA GROUP, INC. – Proxy Statement 55
PROPOSALS REQUIRING YOUR VOTE
PROPOSAL 1 – ELECTION OF DIRECTORS
It is proposed that 11 directors, 10 of whom are independent directors,a result, the pay ratio reported by other companies may not be elected to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified, subject to their earlier death, resignation or removal. The Nominating, Corporate Governance and Social Responsibility Committee has recommendedcomparable to the Board, and the Board has approved, the individuals named below.
We list in the biographies below the particular experiences, qualifications, attributes or skills of each nominee that the Nominating, Corporate Governance and Social Responsibility Committee believes will advance the Company’s Mission and one or more Mission goals. The Committee and the Board believe that each of the nominees for election at the 2016 Annual Meeting possesses strong and unique characteristics. The Committee and the Board believe that, as a group, these nominees provide the Board with an optimal balance of experience, leadership, competencies, qualifications and skills.
Although it is not anticipated that any of the persons named below will be unable or unwilling to stand for election, a proxy, in the event of such an occurrence, may be voted for a substitute designated by the Board. However, in lieu of designating a substitute, the Board may reduce the number of directors.
Director Nominee Biographies and Qualifications
pay ratio reported above.
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Non-Binding Advisory Vote to Approve the Compensation of Altria’s Named Executive Officers | |||||
Our Board recommends a voteFORthis Proposal. | |||||
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The Board recommends a vote “FOR” each of the nominees for election as directors.
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As reflected in the Audit Committee Charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retainedWe are required to audit the Company’s financial statements. The Audit Committee has selected PricewaterhouseCoopers as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 and has directed that management submit such selection to shareholders for ratification at the 2016 Annual Meeting. In selecting PricewaterhouseCoopers as Altria’s independent registered public accounting firm, the Audit Committee conducted its annual evaluation of PricewaterhouseCoopers. This evaluation considers various matters, such as the firm’s reputation, quality of services, communications (with management and the Audit Committee), technical competence, and industry and Company knowledge. The Audit Committee also evaluates PricewaterhouseCoopers’ independence program and quality control procedures, the results of PCAOB and peer reviews of PricewaterhouseCoopers’ quality controls and the appropriateness of the fees that PricewaterhouseCoopers charges the Company. Representatives of PricewaterhouseCoopers are expected to be present at the meeting, will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
The Audit Committee has the sole authority to approve all engagement fees and terms associated with the retention of PricewaterhouseCoopers. As noted in the Audit Committee Report, the Committee pre-approved all fees associated with the services that PricewaterhouseCoopers provided in 2015. In addition to assuring the rotation of the audit partners every five years as required by law, the Audit Committee is responsible for selecting, reviewing and evaluating the lead partner and senior members of the independent registered public accounting firm and considers whether, in order to assure continuing auditor independence, there should be a rotation of the independent registered public accounting firm. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders.
Shareholder ratification of the selection of PricewaterhouseCoopers as the Company’s independent registered public accounting firm is not required by the Company’s By-Laws or otherwise. However, we are submitting the selection of PricewaterhouseCoopers to the shareholders for ratification as a matter of good corporate governance. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of the Company and its shareholders.
The Board recommends a vote “FOR” ratification of the selection of PricewaterhouseCoopers.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and related regulations require that we provide shareholders with an annuala non-binding advisory vote to approve the compensation of the Company’sour named executive officers, as such compensation is disclosed in this Proxy Statement. In response to the preference expressed by the Company’sour shareholders at the Company’s 2011our 2019 Annual Meeting, of Shareholders, theour Board adopted a policy of holding this non-binding advisory vote annually.
At our 20152019 Annual Meeting, 96%over 94% of the shares voted were cast in support of the compensation of the Company’sour named executive officers. The Company recommendsWe recommend that shareholders again approve and support the decisions pertaining to the compensation of the Company’sour named executive officers and the Company’sour executive compensation program. The Company believesWe believe that itsour executive compensation program successfully aligns the interests of the Company’sour named executive officers with the interests of our shareholders by promoting the Company’s Missionour annual and long-term business strategies, rewarding the successful execution of those strategies in a fair and financially disciplined manner and supporting the ability to attract, develop and retain world-class leaders.
This alignment of interests was demonstrated during the 2015 compensation performance period. Under the leadership of our named executive officers, the Company achieved significant success during the year on both an absolute basis and a relative basis as compared to the 2015 Altria Peer Group, and our shareholders benefited from that success through strong TSR, solid adjusted diluted EPS growth and increased dividends. These successes are highlighted in the “2015 Business Highlights” section of the Proxy Statement Summary on pages 3 and 4.
The Company encourages We encourage shareholders to review carefully the Compensation“Compensation Discussion and AnalysisAnalysis” and accompanying compensation tables and narrative discussion beginning on page 26 for a more detailed description of the Company’sour executive compensation program and decisions, including the Company’sour pay-for-performance philosophy and alignment.
Pursuant to Section 14A of the Exchange Act,We are asking shareholders are being asked to vote on the following non-binding resolution:
“RESOLVED, that shareholders of Altria Group, Inc. approve on an advisory basis the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis section, the compensation tables, related footnotes and narrative discussion of this Proxy Statement.”
The Board recommends a vote “FOR” this proposal.
Our Board recommends a voteFORthis proposal. |
This vote is not binding upon the Company, theAltria, our Board or the Compensation Committee. Nevertheless, the Compensation Committee values the opinions expressed by shareholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
The CompanyWe currently intendsintend to hold the next non-binding advisory vote to approve the compensation of the Company’sour named executive officers at the Company’s 2017our 2021 Annual Meeting of Shareholders (the “2017“2021 Annual Meeting”), unless theour Board modifies its policy of holding a non-binding advisorythis vote to approve the compensation of the Company’s named executive officers on an annual basis.
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ALTRIA GROUP, INC. – Proxy Statement 63Table of Contents
PROPOSALS REQUIRING YOUR VOTE
EXECUTIVE COMPENSATION
Proposal 4 | ||||||
Approval of the 2020 Performance Incentive Plan | ||||||
Our Board recommends a voteFORthis Proposal. | ||||||
The equity awards granted to our management are made pursuant to the current 2015 PIP, which was approved by our shareholders in 2015. Under the terms of the 2015 PIP, no awards can be made after May 31, 2020. Consequently, on February 27, 2020, our Board adopted the 2020 Performance Incentive Plan (the “2020 PIP”), subject to approval of our shareholders. A copy of the 2020 PIP is attached to this Proxy Statement as Exhibit A.
The 2020 PIP is intended to be the successor to the 2015 PIP. Any shares remaining under the 2015 PIP will no longer be available for granting new awards after May 31, 2020. No awards can be made under the 2020 PIP unless it is approved by our shareholders.
The 2020 PIP provides for the potential issuance of up to 25 million shares of Altria common stock. This represents approximately 1.3% of all outstanding shares and 15 million fewer shares than authorized under the 2015 PIP.
Our Board believes that the 2020 PIP is an important part of Altria’s overall compensation program. The 2020 PIP will support our ongoing efforts to develop and retain world-class leaders and enable us to provide incentives that are directly linked to the profitability of our businesses and increases in shareholder value.
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EXECUTIVE COMPENSATION
Shares Available | 25 million shares |
Total Potential Dilution | Approximately 1.3% |
Share Recycling | Prohibited |
Eligibility | All employees |
Change in Control | Double-trigger Payments triggered due to change in control only if: ■acquirer does not assume awards or replace them with substantially similar awards; or ■employee is terminated for any reason other than cause; or ■employee separates for good reason |
Minimum Vesting Period | 12 months, subject to limited exceptions |
Limits on Dividends / Dividend Equivalents | ■Unvested PSUs: Dividend equivalents accrue but are not paid unless performance criteria are satisfied at the end of the vesting period; and ■Other unvested equity such as restricted stock or RSUs: Dividend or dividend equivalents permitted throughout vesting period |
Duration | Five years (June 1, 2020 – May 31, 2025) |
Type of Awards | ■annual incentive awards ■long-term incentive awards ■restricted stock ■RSUs ■PSUs ■stock options ■stock appreciation rights (“SARs”) |
Maximum Awards (individual limits) | ■annual incentive award: ■long-term incentive award: $10 million $8 million X number of calendar years in performance cycle ■stock options or SARs: ■other stock-based awards: 3 million shares 1 million shares |
Option Pricing | Discounted options and re-pricing of options are prohibited |
Forfeiture / Clawback | Awards are subject to recoupment under certain circumstances |
Administration | Compensation and Talent Development Committee (entirely comprised of independent directors) |
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The following general description of material features of the 2020 PIP is qualified in its entirety by reference to the provisions of the 2020 PIP set forth in Exhibit A.
Who may receive awards under the 2020 PIP?
Any employee of Altria or any subsidiary or affiliate, including any executive officer or employee director of Altria or a subsidiary or affiliate, will be eligible to receive awards under the 2020 PIP. While most recipients are senior management-level employees, this eligibility will provide the flexibility to grant awards to retain and incent a limited number of high potential, non-senior management employees. We have not yet determined which of those eligible employees will receive grants under the 2020 PIP. Therefore, we cannot, at this time, determine the benefits to be allocated to any individual or to any group of employees.
Does the 2020 PIP include maximum award amounts?
The 2020 PIP limits the awards that may be granted to any employee in any calendar year. Under the 2020 PIP, no employee may receive awards of more than:
■ | 1,000,000 shares of common stock (in total) in any calendar year, if such awards are restricted stock, RSUs, PSUs and other stock-based awards (except other stock-based awards with values based on spread values); |
■ | 3,000,000 shares of common stock (in total) in any calendar year, if such awards are stock options, SARs and other stock-based awards with values based on spread values; |
■ | $10,000,000 in total annual incentive awards (taking into account cash and the fair market value of any shares of common stock payable with respect to an award); and |
■ | $8,000,000 multiplied by the number of years in the applicable performance cycle for individual long-term incentive awards (taking into account cash and the fair market value of any common stock payable with respect to an award). |
No award will be subject to more than one of the previously-mentioned limitations.
Does the 2020 PIP have a minimum vesting period?
Stock-based awards will provide for a minimum 12-month vesting period, except that up to 5% of the shares of common stock available under the 2020 PIP can be used for stock-based awards with a vesting period less than the minimum 12-month vesting period. Our historical practice has been to use three- or five-year vesting periods. Also, awards may vest before the end of such minimum 12-month vesting period in the event of death, disability, retirement or a change in control, or in the case of an award that replaces or substitutes for a pre-existing award in connection with a corporate transaction, as described in “What happens to outstanding awards in the event of a corporate transaction?” below.
How many shares will be reserved for awards?
Twenty-five million shares of common stock (approximately 1.3% of the shares of common stock outstanding as of March 23, 2020) will be reserved and available for awards under the 2020 PIP. This represents a decrease of 15 million shares from the 40 million authorized in the previous shareholder-approved 2015 PIP. In determining the number of shares proposed under the 2020 PIP, the Committee considered historical and potential future equity grant practices and potential shareholder dilution, among other factors. The Committee expects the proposed number of shares to be sufficient for anticipated equity awards, while providing enough flexibility to use stock options or SARs in the future, if desired. We have historically used less than the approved plan amount because equity awards have consisted of RSUs and PSUs. Unused shares will be canceled and will not roll over when the 2020 PIP terminates. The expected dilution is substantially below the average equity compensation dilution within our peer group of 8.9%.
If any award under the 2020 PIP is exercised, cashed out or forfeited, or terminates or expires, without payment being made in the form of common stock, the shares underlying those unpaid awards will no longer be available for distribution under the 2020 PIP. Similarly, shares that are used by an employee to pay withholding taxes or as payment for the exercise price of
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EXECUTIVE COMPENSATION
an award will no longer be available for distribution under the 2020 PIP. If a SAR or similar award based on spread value with respect to shares of common stock is exercised, the total number of shares of common stock with respect to which such award is granted (rather than only the net number of shares issued) will be deemed delivered for purposes of determining the maximum number of shares available for delivery under the 2020 PIP. Unless otherwise determined by the Committee, a recipient may exercise stock options by paying cash or tendering common stock to us in full or partial payment of the exercise price. No new awards will be made under the 2015 PIP after May 31, 2020, which is the day prior to the effective date of the 2020 PIP, except for certain adjustments or substitutions with respect to previous awards as described in “What happens to outstanding awards in the event of a corporate transaction?” below.
What would happen in the event of a change in control?
The 2020 PIP provides that, in the event of a “change in control,” awards will not be paid unless the successor entity either (i) fails to assume outstanding awards or replace them with substantially similar awards or (ii) assumes or replaces outstanding awards, but the participant’s employment is terminated by the successor entity for any reason other than “cause” or by the participant with “good reason” before two years from the date of the change in control. In the event of such double-trigger, the following treatment shall apply:
■ | the restrictions applicable to outstanding restricted stock, RSUs, PSUs and other stock-based awards will lapse (for PSUs, based on target amounts); |
■ | all stock options and SARs will become fully vested and immediately exercisable; |
■ | awards described in the preceding two bullets will be cashed out based on the change in control price or, if applicable, the fair market value on the date of termination of employment; and |
■ | outstanding annual and long-term cash incentive awards will be vested and paid out on a prorated basis, based on (i) the greater of the target award amount or the average of the participant’s last three years’ awards for annual incentive awards and (ii) the target award amount for long-term cash incentive awards. |
The definition of “change in control” in the 2020 PIP is the same as in the 2015 PIP, as described under “Payments upon Change in Control or Termination of Employment” beginning on page 57.
The Committee may also make certain adjustments and substitutions in connection with a change in control or similar transactions or events as described below in “What happens to outstanding awards in the event of a corporate transaction?” below.
What types of awards are available under the 2020 PIP?
Annual and Long-Term Incentive Awards
Annual and long-term incentive awards may be granted under the 2020 PIP. Such awards will be earned only if corporate and business unit performance objectives over performance cycles, established by or under the direction of the Committee, are met. The performance objectives may vary from participant to participant, group to group and period to period. Awards may be paid in the form of cash, shares of common stock or any combination thereof, as determined by the Committee. Incentive awards have historically been paid in the form of cash.
Restricted Stock
Shares of restricted common stock may be awarded under the 2020 PIP. The restricted stock will vest and become transferable upon the satisfaction of conditions set forth in the respective restricted stock award agreement. Restricted stock awards may be forfeited if, for example, the recipient’s employment terminates before the award vests. Except as specified in the restricted stock award agreement, the holder of a restricted stock award will have all the rights of a holder of common stock with respect to his or her restricted shares, including the right to receive dividends and vote such shares.
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Restricted Stock Units and Performance Stock Units
Units representing the right to receive common stock, cash or both (as determined by the Committee) may also be awarded. RSUs and PSUs will vest upon the satisfaction of conditions set forth in the respective award agreements. For PSUs, additional vesting conditions apply based on performance goals. RSUs and PSUs may be forfeited if, for example, the recipient’s employment terminates before the award vests. Unless otherwise specified in a RSU or PSU award agreement, the holder of a RSU or PSU award will have none of the rights of a holder of common stock until shares of common stock are actually delivered in satisfaction of such units, though dividend equivalents with respect to such awards may be payable, as more particularly described below underDividends and Dividend Equivalents.
Stock Options
The 2020 PIP will permit the grant of non-qualified stock options and incentive stock options (“ISOs”), which qualify for special tax treatment. The exercise price for any stock option will not be less than the fair market value of common stock on the date of grant. No stock option may be exercised more than 10 years after the date of grant.
Stock Appreciation Rights
SARs may also be granted either alone or in combination with stock options. SARs entitle the holder upon exercise to receive an amount in any combination of cash or shares of common stock (as determined by the Committee) equal in value to the excess of the fair market value of the shares covered by such right over the grant price. The grant price for SARs will not be less than the fair market value of the common stock on the date of grant. No SARs may be exercised more than 10 years after the date of grant.
Other Stock-Based Awards
The 2020 PIP also provides for other awards that are denominated in, valued by reference to, or otherwise based on or related to common stock. The terms of grant, purchase, exercise, exchange or conversion of other stock-based awards will be specified by the Committee. Where the value of such stock-based award is based on the difference between the fair market value of the shares covered by such award and the exercise price, the grant price for such award will not be less than the fair market value on the date of grant. Such awards will have a term of no more than 10 years.
Dividends and Dividend Equivalents
The Committee may provide for the payment of dividends on shares of common stock (including restricted stock) granted in connection with awards or dividend equivalents with respect to any shares of common stock subject to an award (such as RSU and PSU awards) that have not actually been issued under the award. In the case of unvested awards that vest based on the satisfaction of performance goals (such as PSUs), dividends or dividend equivalents will not be paid before the Committee determines the extent to which performance goals associated with such awards have been satisfied.
What happens to outstanding awards in the event of a corporate transaction?
In the event of any transaction or event that affects the common stock, including a merger, share exchange, reorganization, consolidation, recapitalization, reclassification, distribution, stock dividend, stock split, reverse stock split, split-up, spin-off or issuance of rights or warrants, the Committee is authorized to make appropriate adjustments or substitutions with respect to awards granted under the 2020 PIP. It is intended that these adjustments and substitutions would only be those the Committee determines are appropriate to reflect the occurrence of such transaction or event to maintain substantially the same award value.
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EXECUTIVE COMPENSATION
Such adjustments may include adjustments to the number and kind of securities reserved for issuance under the 2020 PIP, the limits on awards described in the 2020 PIP, performance goals and performance cycles of any outstanding performance-based awards and the number and kind of securities subject to outstanding awards and, if applicable, the grant or exercise price or spread value of outstanding awards. In the event of an applicable transaction, the Committee will also have the authority to:
■ | grant awards (including stock options, SARs and other stock-based awards) with a grant price that is less than fair market value on the date of grant (notwithstanding any other provisions of the 2020 PIP that options, SARs, and other stock-based awards may not have an exercise price less than fair market value), but only in order to preserve an existing gain under any similar type of award previously granted by the Company or another entity; |
■ | cancel or adjust the terms of an outstanding award (except as otherwise provided under an award agreement), if appropriate to reflect a substitution of an award of equivalent value granted by another entity; |
■ | make certain adjustments in connection with a spin-off or similar transaction, including (i) imposing restrictions on a distribution with respect to restricted stock or similar awards and (ii) substituting comparable stock options to purchase the stock of another entity or substitution of comparable SARs, RSUs, PSUs or other stock-based awards denominated in the stock of another entity (in which case such stock of another entity will be treated in the same manner as common stock under the 2020 PIP), which may be settled in various forms, as determined by the Committee, including cash, common stock, stock of another entity or other securities or property; and |
■ | provide for payment of outstanding awards in cash (including cash in lieu of fractional awards). |
Any adjustments, substitutions or other actions described above that are made or taken in connection with corporate transactions or events described above and that affect outstanding awards previously granted under the 2015 PIP will be deemed made pursuant to such plan under which the award was granted and from shares of common stock reserved under such plan rather than from those available for awards under the 2020 PIP. The number of shares of common stock subject to awards granted in substitution of awards of an acquired company or business or a company or business with which the Company or an affiliate combines will not be counted against the shares of common stock available for distribution under the 2020 PIP.
Who administers the plan?
The Committee (or a subcommittee thereof) will administer the 2020 PIP. The Committee will select the groups of eligible employees to whom awards will be granted and will set the terms of such awards, including any performance goals applicable to annual and long-term incentive awards. The Committee may delegate its authority and power under the 2020 PIP to one or more of our officers of the Company, subject to guidelines prescribed by the Committee, but only to the extent consistent with Section 16 of the Exchange Act and any other securities law requirements.
Federal Income Tax Consequences
Restricted Stock
The recognition of income from an award of restricted stock for federal income tax purposes depends on the restrictions imposed on the shares. Generally, taxation will be deferred until the first taxable year the shares are no longer subject to substantial risk of forfeiture. At the time the restrictions lapse, the employee will recognize ordinary income equal to the then fair market value of the stock. The employee may, however, make an election to include the value of the shares in gross income in the year of award despite such restrictions. We will generally be entitled to deduct the fair market value of the shares transferred to the employee as a business expense in the year the employee includes the compensation in income.
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Restricted Stock Units and Performance Stock Units
Generally, an employee will not recognize ordinary income until common stock, cash or other property become payable under the RSU or PSU, even if the award vests in an earlier year. We will generally be entitled to deduct the amount the employee includes in income as a business expense in the year of payment.
Non-Qualified Stock Options
Non-qualified stock options will not be taxable to an employee at grant but generally will result in taxation at exercise, at which time the employee will recognize ordinary income in an amount equal to the difference between the option’s exercise price and the fair market value of the shares on the exercise date. We will generally be entitled to deduct a corresponding amount as a business expense in the year the employee recognizes this income.
Incentive Stock Options
An employee will generally not recognize ordinary income on receipt or exercise of an ISO so long as he or she has been an employee of Altria, our subsidiaries or our affiliates from the date the ISO was granted until three months before the date of exercise; however, the amount by which the fair market value of the shares on the exercise date exceeds the exercise price is an adjustment in computing the employee’s alternative minimum tax in the year of exercise. If the employee holds the shares of common stock received on exercise of the ISO for one year after the date of exercise (and for two years from the date of grant of the ISO), any difference between the amount realized upon the disposition of the shares and the amount paid for the shares will be treated as long-term capital gain (or loss, if applicable) to the employee. If the employee exercises an ISO and satisfies these holding period requirements, we may not deduct any amount in connection with the ISO.
If an employee exercises an ISO but engages in a “disqualifying disposition” by selling the shares acquired on exercise before the expiration of the one and two-year holding periods described above, the employee generally will recognize ordinary income (for regular income tax purposes only) in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price; and any excess of the amount realized on the disposition over the fair market value on the date of exercise will be taxed as long- or short-term capital gain (as applicable). If, however, the fair market value of the shares on the date of disqualifying disposition is less than on the date of exercise, the employee will recognize ordinary income equal only to the difference between the amount realized on the disqualifying disposition and the exercise price. In either event, we will generally be entitled to deduct an amount equal to the amount constituting ordinary income to the employee in the year of the disqualifying disposition.
Stock Appreciation Rights
To the extent that the requirements of the Internal Revenue Code are met, there are no immediate tax consequences to an employee when a SAR is granted. When an employee exercises the right to the appreciation in fair market value of shares represented by a SAR, payments made in common stock are normally includable in the employee’s gross income for regular income tax purposes. We will generally be entitled to deduct the same amount as a business expense in the same year. The includable amount and corresponding deduction each equal the fair market value of the common stock payable on the date of exercise.
Other Stock-Based Awards/Incentive Awards
Any cash payments or the fair market value of any common stock or other property an employee receives in connection with other stock-based awards, incentive awards or as unrestricted payments equivalent to dividends on unfunded awards or on restricted stock are includable in income in the year received or made available to the employee without substantial limitations or restrictions. Generally, we will be entitled to deduct the amount the employee includes in income as a business expense in the year of payment.
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EXECUTIVE COMPENSATION
Deductibility of Awards
Internal Revenue Code Section 162(m) places a $1,000,000 annual limit on the compensation deductible by us paid to certain of our executives, including compensation resulting from awards under the 2020 PIP. Although the Committee considers tax deductibility in making compensation decisions, the Committee does not believe that compensation decisions should be determined solely by how much compensation is deductible for federal income tax purposes. As a result, the Committee has authorized, and retains the discretion to authorize, payments that may not be deductible if it believes that they are in the best interests of Altria and our shareholders.
Deferred Compensation
Any deferrals made under the 2020 PIP, including awards granted under the 2020 PIP that are considered to be deferred compensation, are intended to satisfy the requirements of Internal Revenue Code Section 409A to avoid adverse tax consequences to participating employees. These requirements include limitations on election timing, acceleration of payments and distributions.
Other Tax Consequences
State tax consequences may in some cases differ from those described above. Awards under the 2020 PIP may in some instances be made to employees who are subject to tax in jurisdictions other than the United States and may result in tax consequences differing from those described above.
If approved by shareholders, the 2020 PIP will be effective on June 1, 2020, and, except as otherwise provided by the Board, no awards will be made under the 2020 PIP after May 31, 2025. Any awards granted on or before May 31, 2025 may extend beyond May 31, 2025.
Our Board may amend or terminate the 2020 PIP, and the Committee may amend any award thereunder, provided that no amendment will be made without shareholder approval if shareholder approval is required under applicable law, regulation or stock exchange rule. Amendments may not be made without shareholder approval if they (i) reprice an award in any manner that reduces the exercise price of any stock option or similar award; (ii) cancel, substitute, or repurchase any stock option or similar award in exchange for cash or other awards at a time when the exercise price of such stock option or similar award is higher than the fair market value of Altria common stock (except as may be necessary to comply with a change in the laws, regulations or accounting principles of a foreign country applicable to participants subject to the laws of such foreign country); or (iii) increase the number of shares of common stock available under the 2020 PIP.
On March 23, 2020, the closing price of Altria common stock was $31.38.
Our Board recommends a voteFORthis proposal. |
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Equity Compensation Plan Information
The number of shares of Altria common stock to be issued upon exercise or vesting and the number of shares remaining available for future issuance under our equity compensation plans at December 31, 2019, were as follows:
Plan Category | Number of Shares to be Issued upon Exercise of Outstanding Options and Vesting of Deferred Stock(a) | Weighted Average Exercise Price of Outstanding Options(b) | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans(c) | |||
Equity compensation plans approved by shareholders(1) | 2,378,531(2) | – | 36,909,792(3) |
(1) | The following plans have been approved by Altria shareholders and have shares referenced in column (a) or column (c): the 2010 PIP, the 2015 PIP and the 2015 Non-Employee Directors Plan. |
(2) | Represents 1,909,642 shares of RSUs and 468,889 shares that may be issued upon vesting of PSUs if maximum performance measures are achieved. |
(3) | Includes 36,078,232 shares available under the 2015 PIP and 831,560 shares available under the 2015 Non-Employee Directors Plan, and excludes shares reflected in column (a). No shares will be available for new grants or awards after May 31, 2020 under the 2015 PIP. |
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Trinity Health, 766 Brady Avenue, Apt. 635, Bronx, New York 10462, claiming beneficial ownership of Altria common stock with a market value of at least $2,000, together with two co-proponents, submitted the proposal set forth below. The names, addresses and shareholdings of the co-proponents will be furnished upon request made to our Corporate Secretary. Altria is not responsible for the content of the shareholder proposal, which is printed below exactly as it was submitted.
Whereas,we believe in full disclosure of Altria’s direct and indirect lobbying activities and expenditures to assess whether Altria’s lobbying is consistent with its expressed goals and in the best interests of shareholders.
Resolved,the shareholders of Altria request the preparation of a report, updated annually, disclosing:
1. | Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. |
2. | Payments by Altria used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient. |
3. | Altria’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. |
4. | Description of the decision making process and oversight by management and the Board for making payments described in section 2 and 3 above. |
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Altria is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Nominating, Corporate Governance and Social Responsibility Committee and posted on Altria’s website.
Supporting Statement
We encourage transparency in the use of corporate funds to influence legislation and regulation. Altria does not provide easily accessible aggregated lobbying expenditure information on its website. According to the Center for Responsive Politics, Altria spent over $10 million in 2018 on federal lobbying. This does not include lobbying at the state level, where Altria reportedly lobbies in all 50 states. As of September 2019, Altria and Juul, in which Altria has a 35% stake and which controls over 70% of the e-cigarette market, “together spent more on lobbying this year than the rest of the tobacco industry combined.”https://www.investopedia.com/e-cigarette-lobbying-fires-up-as-juul-spends-millions-4771268
Altria does not comprehensively disclose its memberships in, or payments to, trade associations, or the amounts used for lobbying. Altria only discloses trade association payments used for political contributions. This leaves a serious disclosure gap, as trade associations generally spend far more on lobbying than on political contributions. Nor does Altria disclose payments to tax-exempt organizations, such as the American Legislative Exchange Council (ALEC), that write and endorse model legislation. ALEC Action was a signatory to a February 2019 letter to the President of the United State criticizing the Food and Drug Administration’s “aggressive regulatory assault” on e-cigarettes.https://www.washingtonpost.com/national/health-science/ conservatives-bash-fda-for-regulatory-panic-on-e-cigarettes/2019/02/03/b1e8d326-27c7-11e9-8eef-0d74f4bf0295_story.html
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SHAREHOLDER PROPOSALS
Altria uses the Global Reporting Initiative (GRI) for sustainability reporting, but fails to report “any differences between its lobbying positions and any stated policies, goals, or other public positions” under GRI Standard 415, giving further indication that the company’s disclosures are currently inadequate.
Our Board recommends a voteAGAINSTthis shareholder proposal. We agree that our shareholders and the public should have confidence that a corporation’s lobbying and political activities are transparent and do not create unnecessary risks. That is why our Board and senior management exercise robust oversight of our political and lobbying activity and why we are a long-time, recognized leader in political and lobbying disclosure and compliance. This oversight, coupled with significant expansions to the information we provide about our activities, makes the additional report requested by this proposal unnecessary. Expansion of Already Extensive Disclosures Altria believes in providing transparency into our engagements on public policy issues. We have consistently demonstrated our commitment to disclosure with respect to our lobbying and political activities and are proud of our leadership role on these issues within the Fortune 500. When we began disclosing information on these activities in 2007, we were one of the few companies in the Fortune 500 to do so and, today, we believe that our wide-ranging disclosures surpass those of most companies. We voluntarily provide on our website significant and meaningful information regarding our lobbying activities. These disclosures include copies of our quarterly federal lobbying reports and direct links to the government databases that contain the over 400 state lobbying reports we file annually. Further, we provide detailed information on our political contributions twice a year and disclose all political action committee (“PAC”) and corporate political contributions, by recipient and amount, made to candidates, political parties, PACs, caucus committees, independent expenditure committees (also known as Super PACs), 527 organizations and ballot measure committees in the U.S. We also have a long history of providing insight into our relationships with trade associations. Since 2014, our website has disclosed the types of trade associations our companies support and currently includes a complete list of the public policy organizations where our Government Affairs employees serve on the board of directors, a key committee or an advisory council. Before contributing to any organization, we carefully evaluate the organization’s activities to determine whether a contribution would advance our companies’ interests and to confirm that the organization’s work is generally consistent with our strategies. Notwithstanding our already extensive voluntary disclosures, starting in 2020, we expanded the information we voluntarily disclose on our website to include: ●The aggregate total, on a state-by-state basis, of our reported state lobbying expenses, which supplements our direct links to the state lobbying reports. We believe that very few Fortune 500 companies provide such substantial, detailed insight into their lobbying activities, and that no Fortune 500 company currently provides the extensive itemized reports this proposal demands. ●Additional information on our evaluations of the trade associations and public policy organizations to which we contribute, noting that we conduct them on an annual basis and explaining how we might resolve any potential concerns with a trade association’s activities. ●Additional information about the oversight by our Nominating, Corporate Governance and Social Responsibility Committee of our legislative, political and regulatory engagements committing to updates to the Committee or our full Board a minimum of three times a year. | ||||||
Altria Group, Inc. – Proxy Statement | 73 |
SHAREHOLDER PROPOSALS
We believe that the significant disclosures that we have provided historically, supplemented with the expanded disclosures we implemented in 2020, provide our shareholders and other stakeholders with the ability to meaningfully assess our funding of lobbying and political activities as well as the benefits and risks that could arise from these activities. Nationally Recognized for Existing Disclosures Our longtime commitment to both transparency and compliance has been recognized by various third-party organizations. For the past nine years, the Center for Political Accountability-Zicklin Index has rated Altria in the top tier of companies for our voluntary disclosure of political activities. Since 2016, we have earned one of the Center for Political Accountability’s top five rankings among the S&P 500. These rankings and other constructive engagements, such as its participation in the Conference Board’s Committee on Corporate Political Spending, demonstrate our leadership in disclosure of lobbying and political activities. Oversight of Our Lobbying and Political Activities While transparency into our engagements on public policy issues is important, strong oversight of such activities is equally important. Consequently, we operate an extensive compliance program designed to mitigate legal or reputational risks that could arise from our lobbying and political activities. Under the oversight of our Board’s Nominating, Corporate Governance and Social Responsibility Committee, which is composed entirely of independent directors, we operate a comprehensive political law and ethics compliance program that incorporates rigorous internal controls and decision making processes that govern our lobbying and political activities. This program includes detailed, best-in-class policies and procedures directed at complying with laws related to lobbying and political activities. We believe the strong governance and oversight practices of our Board and senior management coupled with Altria’s compliance program and related controls and processes, serve to mitigate the legal and reputational risks that could arise from lobbying and political activities. Given the expanded, extensive information we provide on our website, which we believe fully addresses the concerns underlying the proposal, we view the proposal as unnecessary, duplicative, and would not be in the best interests of Altria or our shareholders. | ||||||
Our Board recommends a voteAGAINSTthis shareholder proposal. |
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SHAREHOLDER PROPOSALS
Proposal 6 | ||||||
Shareholder Proposal Regarding Report on the Company’s Underage Tobacco Prevention Policies | ||||||
Our Board recommends a voteAGAINSTthis shareholder proposal. | ||||||
The Sisters of St. Francis of Philadelphia, 609 South Convent Road, Aston, PA 19014-1207, claiming beneficial ownership of Altria common stock with a market value of at least $2,000, together with four co-proponents, submitted the proposal set forth below. The names, addresses and shareholdings of the co-proponents will be furnished upon request made to theour Corporate Secretary of the Company. The CompanySecretary. Altria is not responsible for the content of the shareholder proposal, which is printed below exactly as it was submitted.
WHEREAS: TheWhereas:
Altria has undertaken efforts in the United States Departmentto discourage smoking by minors and provides examples on its website.
The company notes on its website that “The significant rise in youth use of Healthe-vapor threatens to undermine the hard-fought gains made in preventing underage use of conventional tobacco products”http://www.altria.com/harm-reduction/Helping-Reduce-Underage-Tobacco-Use/Pages/default.aspx
In December 2018 Altria announced it invested $12. 8 billion in Juul, taking a 35% stake in the company. Altria said that it would allow Juul products to be sold alongside Marlboro and Human Services’ website, “The Real Cost,that it “will apply its logistics and distribution experience to help Juul expand its reach and efficiency and Juul will have the option to be supported by Altria’s sales organization, which covers approximately 230,000 retail locations.” outlinesJUUL currently commands three-quarters of the devastatinge-cigarette market.
Altria shares fell as much as 2.7% after Dow Jones reported the FTC is investigating the marketing practices of Juul Labs.https://www.bloomberg.com/amp/news/articles/2019-08-29/altria-falls-after-dow-jones-reports-ftc-investigation-of-juul-jzwwyspr?__twitter_impression=true
Data from the Centers for Disease Control and Prevention’s National Youth Tobacco Survey shows that 78.2% of middle and high school students had been exposed to e-cigarette advertising, and one in five high schoolers used e-cigarettes in 2018. Preliminary 2019 survey data indicates that more than one-fourth of high school students were current (past 30 days) e-cigarette users.https://www.fda.gov/news-events/press-announcements/trump-administration-combating-epidemic-youth-e-cigarette-use-plan-clear-market-unauthorized-non Use among middle schoolers increased eight-fold between 2011 and 2018.
The recent spate of vaping-related illnesses has a significant impact on youth populations with the CDC reporting that over half of tobacco on people’s health. After showing howall cases are impacting people become addictedunder 25 (vaping became popular approximately 9 years ago when this population was under 18), and 16% of the cases are impacting those 18 and younger.https://www.cdc.gov/tobacco/basic_information/e-cigarettes/severe-lung-disease.html andhttps://www.nytimes.com/2019/09/19/health/vaping-cdc.html
Under increasing scrutiny from federal and state governments as well as retailers, an Altria executive has been tapped as the new CEO for JUUL, affirming Altria’s intent to bolster the JUUL brand in the face of legislative and legal threats.
The FDA issued a warning letter to Juul admonishing it for illegally marketing its product as a safer alternative to cigarettes.https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/juul-labs-inc-590950-09092019
The Wall St. Journal reported that the Federal Trade Commission is investigating whether Juul used social media influencers and other marketing to appeal to minors.https://www.wsj.com/articles/juuls-marketing-practices-under-investigation-by-ftc-11567096073
RESOLVED: That shareholders request the Board of Directors to review corporate adherence to Altria’s principles and policies aimed at discouraging the use of their nicotine delivery products to young people, assess the effectiveness of those polices, and the health consequences of smoking, the highest number of pictorial examples (nine) show the harm resulting from use of tobacco products because of the chemicals used in them. “Do you know,” it asks: “More than 7,000 chemicals are found in a single puff of cigarette smoke;” “A menthol cigarette is still a cigarette with all the toxic chemicals;” “More than 70 chemicals in cigarette smoke can cause cancer;” “Carbon in car exhaust and cigarette smoke;” “Lead: once used in paint and found in cigarette smoke;” “Cadmium: found in batteries and cigarette smoke;” “Formaldehyde: used to preserve dead bodies and found in cigarette smoke;” “Nicotine, the addictive chemical occurs naturally in the tobacco plant;” and “At least 28 chemicals in smokeless tobacco are linked to cancer.”
While the U.S. tobacco companies provided the government a list of 599 ingredients used in cigarettes (1994), they did not describe the 4,000+ chemical compounds created from burning a cigarette (69 known to create cancer) nor other adverse pharmacological effects.
While many consumers ofdamage inflicted on our Company’s tobacco products, ranging from cigarettes to smokeless tobacco to e-cigarettes, are aware of their potentially addictive power from nicotine, few are cognizant of the serious harm that results from chemicals and additives contained in these products when they use them. Oftentimes typical testing is not sensitive enough to detect truly harmful levels, such as two chemicals known to cause permanent and sometimes fatal lung disease: diacetyl and its chemical cousin, 2,3-pentanedione.
In a front-page feature article, “Inhaling Dangerous Chemicals,” The Milwaukee Journal Sentinelstated (10.21.15): “There are no requirements that manufacturers test their e-liquids [the juices found in e-cigarettes], nor are there any standards to meet. What testing is done is driven largely by the desire of e-liquid makers to market the safety of their products.” However, the article immediately continues: “the Journal Sentinel’s testing led to yet another discovery: The method typically used to analyze e-liquids for the industry is not sensitive enough to detect levels that could be harmful. As a result e-liquid makers across the country claim their formulas are diacetyl free when sometimes they are not.”
In response, a spokesman for the U.S. Food and Drug Administration admitted: “We’re at a point where these are not regulated by anyone,” warning, “It’s a ‘Buyer Beware’ market.”
To enableall users of our tobacco products an awareness of the dangers of such liquids, additives and chemicals. . .
RESOLVED: shareholders request Altria Group, Inc. undertake a thorough analysis, engaging chemical and pharmacological experts as needed, of all the harmful liquids, additives and chemicals and their potential health consequences when each brand of our tobacco products is used as intended by consumersnation’s youth and report the results of the analysis on the Company’s website.
64 ALTRIA GROUP, INC. – Proxy Statement
PROPOSALS REQUIRING YOUR VOTE
The Board recommends a vote “AGAINST” this shareholder proposal.
Altria believes that the objectives of this proposal are appropriately addressedreview to shareholders by (i) the FDA’s comprehensive authority to regulate tobacco products, (ii) existing requirements for ingredient and constituent reporting and (iii) health warnings for tobacco products, and that the proposal would impose additional and unnecessary burdens and costs on Altria.
Altria agrees that tobacco product manufacturers should disclose ingredients and harmful or potentially harmful constituents to the public within the context of a science- and evidence-based regulatory framework administered by the FDA. That is among the reasons why Altria supported enactment in 2009 of the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”). The FSPTCA granted FDA comprehensive regulatory authority over tobacco products, including requirements for extensive product submissions to the FDA and authority for the FDA to disclose product information to the public. The FSPTCA also imposes fees on tobacco product manufacturers to pay for the cost of regulation. The FSPTCA applied immediately to cigarettes, cigarette tobacco, roll-your-own tobacco and smokeless tobacco products. FDA has announced regulations to extend its authority over all other tobacco products, including cigars and e-vapor products, which are expected to be finalized in the near future.
Since enactment of the FSPTCA, FDA has implemented a number of compliance requirements for regulated tobacco products, including requiring manufacturers to provide extensive ingredient information for all products sold in the United States. Additionally, the FSPTCA requires testing and reporting of levels of constituents in or produced by these tobacco products that FDA has identified as harmful or potentially harmful.
PM USA and USSTC have filed reports with FDA about both the ingredients used and the harmful and potentially harmful constituents produced by their tobacco products, and JMC and Nu Mark will comply with required disclosures as these requirements come into effect for their products. Under the FSPTCA, FDA has the authority to regulate nicotine yields and to reduce or eliminate constituents or ingredients that are or may be harmful.
FDA is also statutorily required to provide information to the public about harmful and potentially harmful constituents in tobacco products in a way that is not misleading to a lay person and is in the process of determining how to do so. We believe that FDA is in the best position to make determinations, based on science and evidence, about what information concerning harmful and potentially harmful constituents should be communicated to the public and how those communications should be executed.
Our tobacco companies report ingredient and constituent information to other federal agencies beyond FDA and also to certain states and other countries where such filings are required. For example, PM USA files a list of ingredients added to tobacco in the manufacture of cigarettes annually with the Centers for Disease Control. PM USA and USSTC also file annually with the Centers for Disease Control information about nicotine, pH and ingredients for their smokeless tobacco products. Our domestic tobacco companies also provide ingredient information on their respective websites and aim to strike a reasonable balance between providing this information while protecting their proprietary recipes from disclosure to competitors.
Additionally, our tobacco companies comply with laws or consent decrees requiring health warnings on the tobacco products they sell in various locations, including health warnings on cigarette, smokeless tobacco, e-vapor and cigar product packaging and advertising. FDA’s proposal to regulate other tobacco products, such as e-vapor products, cigars and pipe tobacco, requires health warnings.
Altria believes that the issues raised in this proposal are and will continue to be appropriately addressed by statutory and regulatory requirements and that the actions requested by the proponents would not be in the best interests of the Company or its shareholders.
The Board recommends a vote “AGAINST” this shareholder proposal.
ALTRIA GROUP, INC. – Proxy Statement 65
PROPOSALS REQUIRING YOUR VOTE
November 2020.
| 75 |
RESOLVEDSHAREHOLDER PROPOSALS, shareholders of Altria Group, Inc. (the “Company”) urge the Company to participate in mediation of any specific instances of alleged human rights violations involving the Company’s operations if mediation is offered by a governmental National Contact Point for the Organisation for Economic Cooperation and Development (the “OECD”) Guidelines for Multinational Enterprises.
For the purposes of this policy, the human rights subject to mediation shall include, at a minimum, those expressed in the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work:
Our Board recommends a voteAGAINSTthis shareholder proposal. We do not believe it is in the best interests of Altria or our shareholders to adopt this proposal because the actions requested by the proposal are already addressed through our existing communications and business practices. Tobacco products are among the most heavily regulated products sold in the United States, subject to federal, state and local marketing restrictions. Altria’s marketing practices are also subject to the extensive restrictions in the 1998 Tobacco Settlement Agreements for cigarettes and moist smokeless tobacco products, as well as FDA regulation for all tobacco products. These restrictions and regulations on our marketing practices are designed to focus tobacco product marketing on adult tobacco consumers. Our tobacco operating companies take these obligations seriously and are committed to complying with them. In reference to underage tobacco use, for more than 20 years Altria’s tobacco operating companies have worked to prevent underage use of tobacco products. These efforts began in 1998 with the formation of PM USA’s Youth Smoking Prevention department when youth smoking rates had reached peak levels of 28.3% in 1997. According to Monitoring the Future, in 2019, the past 30-day cigarette smoking rate was at a generational low of 3.7%. Currently, the industry is challenged by the rapid rise in youth vaping. In February 2019, we announced an additional $100 million underage tobacco prevention investment to help address the youth vaping epidemic. Additionally, Altria supported increasing the minimum age of purchase to 21, which is now federal law; created a new retailer trade program to reward responsible retailing through age-validation technology at the point of purchase; supported retailer compliance with Tobacco 21 laws through training and “Move to 21” signage kits; and funded the expansion of our Success 360 prevention and cessation grantees’ programming into new geographies and beyond middle school into high school. We are committed to driving positive change and to transparently communicating to our stakeholders about our programs, progress and opportunities for reducing underage tobacco use. We do this through our existing primary communication vehicles – Altria’s corporate website and our annual Corporate Responsibility Progress Report. Our website includes detailed content on our underage tobacco prevention efforts and marketing practices. We also share our Standards for Underage Tobacco Prevention. As part of these Standards, each year our tobacco operating companies and service companies develop underage tobacco prevention plans. We measure progress against these plans twice a year. Our annual Corporate Responsibility Progress Report, located on our website, has a significant amount of content dedicated to marketing responsibly and underage tobacco prevention. It includes our approach, practices and performance for each of these responsibility focus areas. Finally, Altria’s Senior Vice President, Corporate Citizenship provides regular updates to the Nominating, Corporate Governance and Social Responsibility Committee on corporate responsibility matters. In 2019, this included multiple reports and discussions focused on Altria’s efforts to prevent underage tobacco use. The Committee reports on these discussions to our Board. Leading the industry in operating responsibly and preventing underage tobacco use is essential for Altria’s long-term success. We remain committed to driving positive change and transparent communication with all stakeholders. Our practices and significant reporting on this issue, described above, reflect this commitment. For these reasons, Altria believes the issues raised in this proposal are, and will continue to be, appropriately addressed through existing communication and business practices. Moreover, the preparation of an additional report is duplicative, would impose additional and unnecessary burdens and costs and would not be in the best interests of Altria or our shareholders. |
Supporting Statement
The United Nation’s Guiding Principles on Business and Human Rights call on business enterprises to have in place the following policies and processes:
Our Board recommends a voteAGAINSTthis shareholder proposal. |
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(Guiding Principles on Business and Human Rights, United Nations, 2011, available athttp://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf). While our Company has taken steps to commit to respect human rights and to conduct due diligence, we believe the Company needs to provide adequate remedies for human rights violations involving the Company’s operations including its tobacco supply chain.
Non-judicial grievance mechanisms to remedy human rights violations are needed the most when formal legal mechanisms are inadequate. For example, in the United States, agricultural workers are excluded from the National Labor Relations Act that protects the rightsTable of workers to organize and collectively bargain. Agricultural child labor is also permitted in the United States under the Fair Labor Standards Act.
This proposal urges our Company to participate in mediation of alleged human rights violations if mediation is offered by a governmental National Contact Point pursuant to the OECD Guidelines for Multinational Enterprises. (OECD, 2011, available athttp://www.oecd.org/daf/inv/mne/48004323.pdf). In the United States, the State Department’s Office of the U.S. National Contact Point provides mediation of specific instances of human rights violations through the U.S. Federal Mediation and Conciliation Service. (“Specific Instance Process,” Office of the U.S. National Contact Point, U.S. Department of State, available athttp://www.state.gov/e/eb/oecd/usncp/specificinstance/index.htm).
Participation in the National Contact Point mediation process is voluntary and does not mean that the Company will be bound by the outcome of mediation. By agreeing to participate in National Contact Point mediation, our Company can affirmatively signal its commitment to remedy human rights violations should they arise in the future.
66 ALTRIA GROUP, INC. – Proxy StatementContents
PROPOSALS REQUIRING YOUR VOTE
The Board recommends a vote “AGAINST” this shareholder proposal.
Altria believes that (i) our companies’ responsible supply chain management practices appropriately address the objectivesOwnership of this proposal and (ii) management should retain its ability to evaluate, on a case-by-case basis, requests for mediationEquity Securities of complaints regarding alleged violations of the Organization for Economic Cooperation and Development (“OECD”) Guidelines for Multinational Enterprises (“OECD Guidelines”).
Altria and its companies respect human rights throughout their supply chains and take seriously issues related to freedom of association, employment discrimination, and forced, compulsory and child labor. We believe our suppliers and growers who provide agricultural products to our companies should understand and respect workers’ rights.
Our companies demonstrate this commitment through grower contracts and our Supplier Code of Conduct. They also develop solutions to supply chain issues, including those related to human rights, by working collaboratively with stakeholders. For example, PM USA and USSTC require their contracted domestic tobacco growers to attend training on good agricultural practices, which includes training on labor management practices, offered by a third party in partnership with the U.S. Department of Labor. In addition, PM USA and USSTC assess these growers’ operations, including farm safety training for workers, and expect growers to address any issues identified in these assessments. More information about our supply chain management practices, including our Supplier Code of Conduct, is available on our website at www.altria.com.
Furthermore, we consider it important for our management to retain the ability to consider any claim under the OECD Guidelines, including possible mediation requests, on a case-by-case basis as is the Company’s present right under those Guidelines. Each country that is a member of the OECD, including the United States, has an established contact point for assessing complaints regarding alleged violations of the OECD Guidelines and deciding whether to recommend mediation. When the contact point recommends mediation, the parties involved with the dispute have the right to decide whether to mediate that complaint. Because management is already actively engaged in supply chain matters, as noted above, it is in the best position to evaluate any such complaints and decide whether mediation or an alternative approach is the best path towards resolution. We believe that a case-by-case evaluation is best and that the blanket approach advocated in the proposal (specifically, prospective adoption of mediation in all cases where it is proposed) is not in the best interests of the Company or its shareholders.
The Board recommends a vote “AGAINST” this shareholder proposal.
ALTRIA GROUP, INC. – Proxy Statement 67
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
Directors and Executive Officers
Directors and Executive Officers |
The following table shows the number of shares of the Company’sAltria common stock beneficially owned as of March 1, 2016,February 28, 2020, by each director, nominee for director, NEO and theour directors and executive officers of the Company as a group. Unless otherwise indicated, each of the named individuals has sole voting and investment power with respect to the shares shown. The beneficial ownership of each director and executive officer, as well as all directors and executive officers as a group, is less than 1% of the outstanding shares.
Name | Amount and Nature of Beneficial Ownership(1)(2) | |||
| ||||
| 121,996 | |||
John T. Casteen III | 55,916 | |||
38,239 | ||||
Dinyar S. Devitre | 94,420 | |||
Thomas F. Farrell II | 84,570 | |||
Murray R. Garnick | 48,553 | |||
William F. Gifford, Jr. | 173,347 | |||
Craig A. Johnson | 215,000 | |||
Debra J. Kelly-Ennis | 28,918 | |||
W. Leo Kiely III | 29,099 | |||
Salvatore Mancuso | 74,771 | |||
Kathryn B. McQuade | 36,728 | |||
George Muñoz | 74,538 | |||
Mark E. Newman | 13,068 | |||
Nabil Y. Sakkab | 43,005 | |||
Virginia E. Shanks | 9,914 | |||
Howard A. Willard III | 260,242 | |||
Group | 1,587,357 |
(1) | Does not include RSUs or PSUs granted to executive |
(2) | Includes shares as to which beneficial ownership is disclaimed as follows: |
In addition to the shares shown in the table above, as of March 1, 2016,February 28, 2020, those directors who participate in the Company’s director deferred fee programDeferred Fee Plan had the following Altria share equivalents allocated to their accounts: Mr. Farrell, 24,685;35,339; Ms. Kelly-Ennis, 8,061;19,217; Ms. McQuade, 6,548;6,431; Mr. Muñoz, 12,570; and Mr. Muñoz, 12,392.Newman, 2,428. See “Board and Governance Matters – Directors – Director Compensation”“Deferred Fee Plan” on page 1910 for a description of the deferred fee programDeferred Fee Plan for directors.
Altria Group, Inc. – Proxy Statement | 77 |
68 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
Certain Other Beneficial OwnersALTRIA
Certain Other Beneficial Owners |
The following table sets forth information regarding persons or groups known to the Companyus to be beneficial owners of more than 5% of the Company’sour outstanding common stock:
Name and Address of Beneficial Owner | Shares Beneficially Owned (#) | Common Stock Ownership as of March 23, 2020 (%) | |||||
BlackRock, Inc. | 143,230,742 | (1) | 7.7% | ||||
55 East 52nd Street | |||||||
New York, NY 10055 | |||||||
The Vanguard Group | 149,816,115 | (2) | 8.1% | ||||
100 Vanguard Blvd. | |||||||
Malvern, PA 19355 |
|
| |||
| ||||
|
According to the Schedule 13G/A filed with the SEC by BlackRock, Inc. on |
(2) | According to the Schedule 13G/A filed with the SEC by The Vanguard Group on February |
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Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 2015 all reports for the Company’s directors and executive officers that were required to be filed under Section 16Table of the Exchange Act were filed on a timely basis.
ALTRIA GROUP, INC. – Proxy Statement 69Contents
RELATED PERSON TRANSACTIONS AND CODE OF CONDUCTRelated Person Transactions and Code of Conduct
TheOur Board has adopted a written Policy on Related Person Transactions that requires the Company’sour executive officers, directors and nominees for director to promptly notify theour Corporate Secretary in writing of any transaction in which (i) the amount exceeds $120,000, (ii) the Company is, waswe are, were or isare proposed to be a participant and (iii) such person or such person’s immediate family members (“Related Persons”) has had or may have a direct or indirect material interest (a “Related Person Transaction”). Subject to certain exceptions delineated in the policy, Related Person Transactions must be brought to the attention of the Nominating, Corporate Governance and Social Responsibility Committee or any other committee designated by theour Board that is comprised solely of independent directors for an assessment of whether the transaction or proposed transaction should be permitted to proceed. In deciding whether to approve, ratify or disapprove the Related Person Transaction, the Committee is required to consider all relevant facts and circumstances, including the commercial reasonableness of the terms of the transaction, the materiality of the Related Person’s direct or indirect interest in the Related Person Transaction, the materiality of the Related Person Transaction to the Company,us, the impact of the Related Person Transaction on the Related Person, the impact of the Related Person Transaction on the Related Person’s independence (as defined in the Corporate Governance Guidelines and the NYSE listing standards) and the actual or apparent conflict of interest of the Related Person participating in the Related Person Transaction. If the designated Committee determines that the Related Person has a direct or indirect material interest in any such transaction, the Committee must review and approve, ratify or disapprove the Related Person Transaction. Robert Newman, the husband of Heather A. Newman, Altria’s Senior Vice President, Corporate Strategy, was previously employed by one of our subsidiaries in a non-executive management position. During 2015, there were no Related Person Transactions.the period January 1, 2019 through April 2, 2020, he received total compensation of $342,232.
In addition to the Policy on Related Person Transactions, the Director Code and the Code of Conduct have specific provisions addressing actual and potential conflicts of interest. The Director Code specifies: “Our directors have an obligation to act in the best interest of the Company. All directors should endeavor to avoid situations that present a potential or actual conflict between their interest and the interest of the Company.” The Director Code defines conflict of interest to include any instance in which (i) a person’s private interest interferes in any way, or even appears to interfere, with theour interest, of the Company, including itsour subsidiaries and affiliates; (ii) a director or a director’s family member takes an action or has an interest that may make it difficult for that director to perform his or her work objectively and effectively; and (iii) a director (or his or her family member) receives improper personal benefits as a result of the director’s position in the Company.position. Similarly, theour Code of Conduct requires all our officers and employees of the Company to avoid situations where the officer’s or employee’s “personal, financial or other activity or relationship affects our ability to make loyal and objective business decisions on behalf of our companies.” The Code of Conduct lists specific types of transactions that might create an actual or apparent conflict of interest and provides guidance on how each situation must be handled.
All three of the policies discussed above are available on the Company’sour website at www.altria.com.
Altria Group, Inc. – Proxy Statement | 79 |
70 Prohibition on Hedging and Pledging
In order to align the interests of our directors and executive officers with those of our shareholders, we expect our directors and executive officers to hold a significant number of shares of Altria common stock. Because the hedging of shares may weaken the alignment of the interests of our directors and executive officers with those of our shareholders, we have a policy prohibiting our directors and executive officers, including our NEOs, from engaging in any transactions (such as puts, calls, options, swaps, collars, forward sales or other derivative instruments) with respect to Altria common stock held by them to hedge or offset any decrease in the market value of Altria common stock. In addition, we have a policy that discourages our officers and other employees from using derivative instruments to hedge the value of any Altria security.
We also have a policy that prohibits pledging of shares by our directors and executive officers.
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ALTRIA GROUP, INC. – Table of Contents
Instructions for the Virtual Annual Meeting
As a result of the coronavirus (COVID-19) outbreak, the 2020 Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will be conducted via live webcast. Shareholders will have the same rights and opportunities to participate in our virtual annual meeting as they would at an in-person meeting.
You are entitled to participate in the virtual meeting if you were a shareholder of record as of the close of business on March 23, 2020 or if you hold a valid proxy for the Annual Meeting. If you are not a shareholder or do not have a control number, you may still access the meeting as a guest, but you will not be able to submit questions or vote during the meeting.
To attend the virtual meeting, visit www.virtualshareholdermeeting.com/ALTRIA2020 and enter the 16-digit control number included on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form. The meeting will start at 9:00 a.m., Eastern Time, on Thursday, May 14, 2020. We encourage you to access the meeting prior to the start time to familiarize yourself with the virtual platform and ensure you can hear the streaming audio. Online access will be available starting at 8:30 a.m., Eastern Time, on May 14, 2020.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection from wherever they intend to participate in the meeting.
While we strongly encourage you to vote your shares prior to the meeting, shareholders may also vote during the meeting. Once logged in, you will be able to vote your shares by clicking the “Vote Here!” button.
Shareholders may submit written questions once logged into the virtual platform. Questions pertinent to meeting matters will be answered during the question and answer portion of meeting, subject to a time limit prescribed by the Rules of Conduct that will be posted to the virtual meeting platform on the day of the meeting. The Rules of Conduct will also provide additional information about the relevancy of questions to meeting matters.
During the meeting, proponents of the shareholder proposals included in this Proxy Statement will have a dedicated call-in line that will allow them to present their proposals.
If you are unable to attend the meeting, you may appoint a designee to attend in your place. Please contact Altria Shareholder Services at 804-484-8838 to learn how to properly appoint a designee.
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, you should call the technical support number that will be posted on the virtual shareholder meeting login page.
A webcast replay will be posted to our Investor Relations website at www.altria.com/investors following the meeting.
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Questions and Answers about the 2020 Annual Meeting and Voting
1. Why did I receive these proxy materials?
Our Board of Directors is furnishing you this Proxy Statement to solicit proxies on its behalf to be voted at the 2020 Annual Meeting on May 14, 2020 at 9:00 a.m., Eastern Time. The proxies also may be voted at any adjournments or postponements of the meeting.
All properly executed written proxies, and all properly completed proxies submitted by telephone or by the Internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy, unless the proxy is revoked before the completion of voting at the meeting.
2. What is a proxy?
It is your legal designation of another person to vote the shares you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card.
Our Board of Directors has designated Howard A. Willard III and Murray R. Garnick as proxies for the 2020 Annual Meeting.
3. What is the record date and what does it mean?
The record date for the 2020 Annual Meeting is March 23, 2020 (the “record date”). The record date was established by our Board of Directors as required by Virginia law. Only shareholders of record at the close of business on the record date are entitled to:
(a) | receive notice of the meeting; and |
(b) | vote at the meeting and any adjournments or postponements of the meeting. |
Each shareholder of record on the record date is entitled to one vote for each share of our common stock held. On the record date, there were 1,858,368,058 shares of our common stock outstanding.
4. What is the difference between a shareholder of record and a shareholder who holds shares in street name?
If your shares are registered in your name on the books and records of our transfer agent, Computershare Trust Company, N.A., you are a shareholder of record.
If your shares are held for you in the name of your broker, bank or other nominee, your shares are held in street name. The answer to Question 14 describes brokers’ discretionary voting authority and when your broker, bank or other nominee is permitted to vote your shares without instructions from you.
It is important that you vote your shares if you are a shareholder of record and, if you hold shares in street name, that you provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 14.
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QUESTIONS AND ANSWERS ABOUT COMMUNICATIONS, COMPANY DOCUMENTSTHE 2020 ANNUAL MEETING AND SHAREHOLDER PROPOSALSVOTING
By Telephone or Internet: All shareholders of record may vote their shares by telephone (within the United States, U.S. territories and Canada, there is no charge for the call) or by the Internet, using the procedures and instructions described on the Notice of Internet Availability of Proxy Materials, proxy card and other enclosures. Street name holders may vote by telephone or the Internet if their brokers, banks or other nominees make those methods available. If that is the case, each broker, bank or other nominee will enclose instructions with this Proxy Statement. The telephone and Internet voting procedures, including the use of control numbers, are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.
In Writing: All shareholders also may vote by mailing their completed and signed proxy card (in the case of shareholders of record) or their completed and signed voting instruction form (in the case of street name holders).
During the Meeting: All shareholders may vote during the meeting by entering the 16-digit control number included on their proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form once logged in to the virtual platform at www.virtualshareholdermeeting.com/ALTRIA2020.
See also “Proxy Statement Summary – Casting Your Vote” on page i.
6. May shareholders ask questions during the 2020 Annual Meeting?
During the question and answer portion of the meeting, shareholders will be able to submit written questions.
In order to ask a question, shareholders will be required to enter their 16-digit control number upon login to the virtual platform. Because this is a meeting of shareholders, only shareholders with a valid control number will be allowed to ask questions during the meeting.
Questions pertinent to meeting matters will be answered during the question and answer portion of the meeting, subject to a time limit prescribed by the Rules of Conduct that will be posted to the virtual meeting platform on the day of the meeting. The Rules of Conduct will also provide additional information about the relevancy of questions to meeting matters.
7. How do I vote if I participate in the dividend reinvestment plan?
The proxy card includes your dividend reinvestment plan shares. The answer to Question 5 above explains how you can vote.
8. How do I vote shares held in the Deferred Profit-Sharing Plan for Salaried Employees or the Deferred Profit-Sharing Plan for Hourly Employees?
If you own shares of Altria common stock through an account in our defined contribution plans (the Deferred Profit-Sharing Plan for Salaried Employees or the Deferred Profit-Sharing Plan for Hourly Employees), you can instruct the plan trustee to vote the shares held in your account by voting as explained in the answer to Question 5. Unless your proxy for your defined contribution plan shares is received by May 11, 2020, the trustee of such defined contribution plan will vote your plan shares in the same proportion as those plan shares for which instructions have been received, unless applicable law requires otherwise.
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QUESTIONS AND ANSWERS
ABOUT COMMUNICATIONS, COMPANY DOCUMENTS
THE 2020 ANNUAL MEETING AND SHAREHOLDER PROPOSALSVOTING
Proposal 1 | ||
Election of Directors | ||
See pages16-21. | ||
Voting Requirement Directors will be elected by a majority of the votes cast. A majority of the votes cast means that the number of votes FOR a nominee must exceed the number of votes AGAINST that nominee. Any incumbent director who receives a greater number of votes AGAINST his or her election than votes FOR such election is required to offer promptly in writing to submit his or her resignation to our Board in accordance with our Corporate Governance Guidelines. The Nominating, Corporate Governance and Social Responsibility Committee will consider the offer and recommend to our Board whether to accept the offer. The full Board will consider all factors it deems relevant to the best interests of Altria and our shareholders, make a determination and publicly disclose its decision and rationale within 90 days after confirmation of the election results. | Board Recommendation Our Board recommends a voteFOReach of the nominees named in the Proxy Statement. Voting Choices ■Vote for a nominee; ■Vote against a nominee; or ■Abstain from voting on a nominee. |
Proposal 2 | ||
Ratification of the Selection of Independent Registered Public Accounting Firm | ||
See page24. | ||
Voting Requirement The selection of the independent registered public accounting firm will be ratified if the votes cast FOR exceed the votes cast AGAINST. | Board Recommendation Our Board recommends a voteFORthis proposal. Voting Choices ■Vote for the ratification; ■Vote against the ratification; or ■Abstain from voting. |
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QUESTIONS AND ANSWERS ABOUT THE 2020 ANNUAL MEETING AND VOTING
Proposal 3 | ||
Non-Binding Advisory Vote to Approve the Compensation of Altria’s NEOs | ||
See page62. | ||
Voting Requirement The compensation of our named executive officers will be approved on an advisory basis if the votes cast FOR exceed the votes cast AGAINST. This vote is not binding upon Altria, our Board or the Compensation and Talent Development Committee. Nevertheless, the Committee values the opinions expressed by shareholders through their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our named executive officers. | Board Recommendation Our Board recommends a voteFORthis proposal. Voting Choices ■Vote for the compensation of our NEOs; ■Vote against the compensation of our NEOs; or ■Abstain from voting. |
Proposal 4 | ||
Approval of the 2020 Performance Incentive Plan | ||
See pages63-70. | ||
Voting Requirement The plan will be approved by the affirmative vote of a majority of the votes cast. | Board Recommendation Our Board recommends a voteFORthis proposal. Voting Choices ■Vote for the plan; ■Vote against the plan; or ■Abstain from voting. |
Proposal 5 | ||
Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices | ||
See pages72-74. | ||
Voting Requirement The shareholder proposal will be approved if the votes cast FOR exceed the votes cast AGAINST. | Board Recommendation Our Board recommends a voteAGAINSTthis shareholder proposal. Voting Choices ■Vote for the proposal; ■Vote against the proposal; or ■Abstain from voting. |
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QUESTIONS AND ANSWERS ABOUT THE 2020 ANNUAL MEETING AND VOTING
Proposal 6 | ||
Shareholder Proposal Regarding Report on the Company’s Underage Tobacco Prevention Policies | ||
See pages75-76. | ||
Voting Requirement The shareholder proposal will be approved if the votes cast FOR exceed the votes cast AGAINST. | Board Recommendation Our Board recommends a voteAGAINSTthis shareholder proposal. Voting Choices ■Vote for the proposal; ■Vote against the proposal; or ■Abstain from voting. |
10. | Are votes confidential? |
It is our long-standing practice to hold the votes of each shareholder in confidence from directors, officers and employees, except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against us; (b) in the case of a contested proxy solicitation; (c) if a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to us; or (d) to allow the independent inspectors of election to certify the results of the vote.
11. | Who counts the votes? |
As we have for many years, we retain an independent tabulator to receive and tabulate the proxies and appoint independent inspectors of election to certify the results.
12. | What if I do not specify a choice for a matter when returning a proxy? |
Shareholders should specify their voting choice for each matter. If you sign and return your proxy, yet you do not make a specific choice for one or more matters, unvoted matters will be voted FOR the election of each of the nominees for director, FOR the proposal to ratify the selection of PricewaterhouseCoopers, FOR the non-binding advisory vote to approve the compensation of Altria’s NEOs, FOR the 2020 Performance Incentive Plan and AGAINST each of the two shareholder proposals, as applicable.
13. | What does it mean if I receive more than one proxy card? |
It means that you have multiple accounts with brokers and/or our transfer agent.Please voteall shares represented by each proxy card. We recommend that you contact your broker or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Computershare Trust Company, N.A. Computershare’s address is P.O. Box 505005, Louisville, Kentucky 40233-5005; you can reach Computershare at 1-800-442-0077 (from within the United States or Canada) or 1-781-575-3572 (from outside the United States or Canada).
14. | Will my shares be voted if I do not provide my proxy or voting instructions? |
Shareholders of Record: If you are a shareholder of record (see Question 4), your shares will not be voted if you do not provide your proxy unless you vote during the meeting (see Question 5).It is, therefore, important that you vote your shares.
Street Name Holders: If your shares are held in street name (see Question 4) and you do not provide your voting instructions to your broker, bank or other nominee, your shares may be voted by your broker, bank or other nominee butonly under certain circumstances. Specifically, under the NYSE rules, shares held in the name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain “routine” matters if you do not provide
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QUESTIONS AND ANSWERS ABOUT THE 2020 ANNUAL MEETING AND VOTING
voting instructions. Only the ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at the meeting arenot considered “routine” under NYSE rules, so the broker, bank or other nominee cannot vote your shares on any of these other proposals unless you provide to the broker, bank or other nominee voting instructions for each of these matters. If you do not provide voting instructions on a non-routine matter, your shares will not be voted on that matter, which is referred to as a “broker non-vote.”It is, therefore, important that you vote your shares.
15. | Are abstentions and broker non-votes counted? |
For purposes of all proposals other than the proposal to approve the 2020 Performance Incentive Plan, abstentions and broker non-votes will not be considered votes cast and, therefore, will not affect the outcome of the vote on those proposals at the 2020 Annual Meeting. For purposes of the proposal to approve the 2020 Performance Incentive Plan, (a) abstentions will be considered votes cast under the rules of the NYSE and will have the effect of a vote against this proposal for purposes of the rules of the NYSE and (b) broker non-votes will not be considered votes cast and, therefore, will not affect the outcome of the vote on this proposal at the 2020 Annual Meeting. Broker non-votes are described more particularly in Question 14 above.
16. | How can I revoke a proxy or change my vote? |
If you are a shareholder of record, you can revoke a proxy or change your vote before the completion of voting at the meeting by:
(a) | giving written notice to our Corporate Secretary; |
(b) | delivering a later-dated proxy; or |
(c) | voting during the meeting. |
If your shares are held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions.
17. | Who will pay the cost of this proxy solicitation? |
We will pay the cost of this solicitation of proxies. In addition to the use of the mail, some of our officers and employees may solicit proxies by telephone or e-mail and will request brokerage houses, banks and other custodians, nominees and fiduciaries to forward soliciting materials to the beneficial owners of shares held of record by such persons. We will reimburse such persons for expenses incurred in forwarding such soliciting material. It is contemplated that additional solicitation of proxies will be made in the same manner under the engagement and direction of our proxy solicitor, D.F. King & Co., Inc., 48 Wall Street, New York, New York 10005, at an anticipated cost of $24,000, plus reimbursement of out-of-pocket expenses.
18. | How many votes must be present to hold the 2020 Annual Meeting? |
In order for us to conduct the meeting, a majority of our outstanding shares of common stock as of the record date must be present in person or by proxy at the meeting. This is referred to as a quorum. Shareholders who attend the meeting via the virtual meeting platform are deemed present for purposes of the quorum requirement.
Your shares are counted as present at the meeting if you attend the meeting and vote during the meeting or if you properly return a proxy by Internet, telephone or mail.
Abstentions and shares of record held by a broker, bank or other nominee (“broker shares”) that are voted on any matter are also included in determining the number of shares present. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
Altria Group, Inc. – Proxy Statement | 87 |
Questions and Answers about Communications, Altria Documents and Shareholder Proposals
1. How do I communicate with our Board of Directors?
Shareholders and other interested parties who wish to communicate with theour Board may do so by writing to the Presiding Director, Board of Directors of Altria Group, Inc., 6601 West Broad Street, Richmond, Virginia 23230. The non-management directors have established procedures for the handling of communications from shareholders and other interested parties and have directed theour Corporate Secretary to act as their agent in processing any communications received. Communications that relate to matters that are within the scope of the responsibilities of theour Board and its Committees are to be forwarded to the Presiding Director.
Communications that relate to matters that are within the responsibility of one of the Committees are also to be forwarded to the Chair of the appropriate Committee. Communications that relate to ordinary business matters that are not within the scope of theour Board’s responsibilities, such as customer complaints, are to be sent to the appropriate subsidiary. Solicitations, junk mail and obviously frivolous or inappropriate communications are not to be forwarded, but will be made available to any non-management director who wishes to review them.
2. How can a shareholder nominate a director or submit a proposal for next year’s annual meeting?
Business Proposals for Business for Inclusion in Next Year’s Proxy Statement (Rule 14a-8): SEC rules permit shareholders to submit proposals for inclusion in our proxy statement if the shareholder and the proposal meet the requirements specified in Rule 14a-8 of the Exchange Act. Proposals submitted in accordance with Rule 14a-8 for inclusion in the Company’sour proxy statement for the 20172021 Annual Meeting (presently anticipated to be held on May 18, 2017)20, 2021) must be received by the Company’sour Corporate Secretary no later than December 8, 2016.3, 2020.
Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access); Director Nominees and Other Business Proposals for Consideration at Next Year’s Annual Meeting: The Company’sOur By-Laws permit a shareholder (or group of shareholders (up to 20)) who has owned a significant amount of Altria common stock (at least 3%) of our outstanding shares) for a significant amount of time (at least three years) to submit director nominees (the greater of two or up to 20% of the Board) for inclusion in the Company’sour proxy statement ifthe shareholder(s) and the nominee(s)
satisfy therequirements specified in the Company’sour By-Laws. Director nominations submitted under this By-Law provision must be received by our Corporate Secretary between November 3 and December 3, 2020.
The Company’sDirector Nominees and Other Business Proposals for Consideration at Next Year’s Annual Meeting: Our By-Laws also set forth the procedures that a shareholder must follow to nominate a candidate for election as a director or to propose other business for consideration at shareholder meetings, in each case, not submitted for inclusion in next year’s proxy statement (either under proxy access or Rule 14a-8), but instead to be presented directly at shareholder meetings.
In each case, director nominations or proposals for other business for consideration at the 20172021 Annual Meeting submitted under these By-Law provisions must be received by the Company’sour Corporate Secretary between November 83 and December 8, 2016.3, 2020.
TheOur Corporate Secretary’s address is: 6601 West Broad Street, Richmond, Virginia 23230. Notice must include the information required by the Company’sour By-Laws, which are available on our website at www.altria.com or without charge upon written request to theour Corporate Secretary.
Questions and Answers about Communications, Altria Documents and Shareholder Proposals
3. What is householding?
Under SEC rules, companies and intermediaries such as brokers, banks and other nominees are permitted to satisfy proxy material delivery requirements by delivering one proxy statement and one annual report, or one notice of internet availability for each shareholder account, as applicable, in one envelope to all shareholders residing at the same address who share the same last name (or the company or intermediary reasonably believes are members of the same family). This method of delivery is known as “householding.”
Householding reduces the number of mailings that shareholders receive, saves on printing and
postage costs and conserves natural resources. Shareholders who participate in householding continue to receive separate proxy cards, voting instruction forms or notices of internet availability, as applicable, which will allow each individual to vote independently.
Registered Shareholders: If you are a registered shareholder and currently participate in householding and wish to receive a separate copy of this Proxy Statement and the 2015 Annual Report on2019 Form 10-K, or if you would like to opt out of householding for future deliveries of your annual proxy
ALTRIA GROUP, INC. – Proxy Statement 71
QUESTIONS AND ANSWERS ABOUT COMMUNICATIONS, COMPANY DOCUMENTS AND SHAREHOLDER PROPOSALS
materials, please contact our transfer agent, Computershare Trust Company, N.A., in writing to Computershare, P.O. Box 43078, Providence, Rhode Island 02940-3078,505005, Louisville, Kentucky 40233-5005, or by calling 1-800-442-0077. If you request a separate copy of this Proxy Statement and the 2015 Annual Report on2019 Form 10-K, they will be mailed within three business days from receipt of your request.
Street Name Shareholders:A street name shareholder who received this Proxy Statement and the 2015 Annual Report on2019 Form 10-K at a shared address may request a separate copy of the Proxy Statement and the 2015 Annual Report on
2019 Form 10-K by contacting Broadridge Financial Solutions, Inc. in writing to its Householding Department at 51 Mercedes Way, Edgewood, New York 11717, or by calling 1-800-542-1061.1-866-540-7095.
Street name shareholders sharing an address who received multiple copies of the annual proxy materials and wish to receive a single copy of these materials in the future should contact their broker, bank or other nominee to make this request. If you would like to opt out of householding for future deliveries of your annual proxy materials, please contact your broker, bank or other nominee.
4. Where can I find Altria’s Corporate Responsibility Progress Report, Code of Conduct, Corporate Governance Guidelines, Committee Charters, Director Code of Conduct or other governance documents?
Altria’s Corporate Responsibility Progress Report is available on our website at www.altria.com/responsibility. The Altria Code of Conduct is available on the Company’sour website at www.altria.com/codeofconduct. The Company’sOur Corporate Governance Guidelines, charters of the Committees, the Director Code and the Company’sour Articles of Incorporation and By-Laws are available on the Company’sour website at www.altria.com/governance.
Information on, or that can be accessed through, the Company’sour website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings the Company makeswe make with the SEC.
5. How can I obtain a copy of Altria’s 2019 Form 10-K and other SEC filings?
Our 2015 Annual Report on2019 Form 10-K was delivered or made available with this Proxy Statement. Additional copies of our 2015 Annual Report on2019 Form 10-K (not including exhibits and documents incorporated by reference) are available in print, free of charge, to shareholders requesting a copy by writing to:
Investor Relations, Altria Client Services LLC, 6601 West Broad Street, Richmond, Virginia 23230, or by calling1-804-484-8222. You may also review the Company’sour 2019 Form 10-K along with our other SEC filings with the SEC by visiting our website at www.altria.comwww.altria.com.
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72 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
OTHER BUSINESS
Management knows of no other business that will be presented to the meeting for a vote. If other matters properly come before the meeting, the persons named as proxies will vote on them in accordance with their best judgment.
W. Hildebrandt Surgner, Jr.
Vice President, Corporate Secretary
and Associate General Counsel
April 2, 2020
Richmond, Virginia
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Section 1. Purpose; Definitions.
The purpose of the 2020 Performance Incentive Plan is to support the ongoing efforts of Altria Group, Inc. to develop and retain world-class leaders for itself and its subsidiaries and affiliates and to provide incentives linked to the profitability of its businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth below:
(a) | “Annual Incentive Award” means an Incentive Award made pursuant to Section 5(a)(vii) with a Performance Cycle of one year or less. |
(b) | “Award” means the grant under the Plan or, to the extent relevant, under any Prior Plan, of Incentive Awards, Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock Units, or Other Stock-Based Awards. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Cause” means: |
(i) | the Participant’s continued failure to substantially perform the Participant’s duties (other than resulting from disability); | |
(ii) | the Participant’s gross negligence, dishonesty, or violation of a rule or regulation of the Company that has a material adverse effect on the Company; or | |
(iii) | the Participant’s conviction or plea ofnolo contenderewith respect to a felony. | |
(e) | “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. |
(f) | “Commission” means the Securities and Exchange Commission or any successor agency. |
(g) | “Committee” means the Compensation and Talent Development Committee of the Board or a subcommittee thereof, any successor thereto or such other committee or subcommittee as may be designated by the Board to administer the Plan. |
(h) | “Common Stock” or “Stock” means the Common Stock of the Company. |
(i) | “Company” means Altria Group, Inc., a corporation organized under the laws of the Commonwealth of Virginia, or any successor thereto. |
(j) | “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. |
(k) | “Fair Market Value” means, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stock on the New York Stock Exchange-Composite Transactions. If no such sale of Common Stock is reported on such date, the fair market value of the Stock shall be determined by the Committee in good faith; provided, however, that the Committee may in its discretion designate the actual sales price as Fair Market Value in the case of dispositions of Common Stock under the Plan. |
(l) | “Good Reason” means, without the Participant’s written consent: |
(i) | a material adverse change in the Participant’s job responsibilities, authority, or duties with the Company (or any of its subsidiaries or affiliates) as in effect immediately before the Change in Control; | |
(ii) | a material reduction in the Participant’s base salary, annual incentive opportunity, or equity or other long-term incentive opportunity as in effect immediately before the Change in Control; | |
| (iii) | a requirement that the Participant change his or her regular workplace by more than 50 miles from the Participant’s regular workplace immediately before the Change in Control; or |
| ||
(iv) | a requirement that the Participant travel on business to a substantially greater extent than required immediately before the Change in Control. |
April 7, 2016
Richmond, Virginia
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ALTRIA GROUP, INC. – Proxy Statement 73Table of Contents
ANNEXEXHIBIT A – ALTRIA GROUP, INC. NON-GAAP FINANCIAL MEASURES2020 PERFORMANCE INCENTIVE PLAN
An event shall not constitute Good Reason unless the Participant notifies the Company in writing of the event purporting to constitute Good Reason within 90 days of the occurrence of such event, and the Company fails to cure such event within 30 days of such written notice. | ||
(m) | “Incentive Award” means any Award that is either an Annual Incentive Award or a Long-Term Incentive Award. An Incentive Award shall not include an Award of Stock Options, SARs, Restricted Stock, Restricted Stock Units, Performance Stock Units, or Other Stock-Based Awards, regardless of whether such an Award includes a performance-based condition. | |
(n) | “Incentive Stock Option” means any Stock Option that complies with Section 422 (or any amended or successor provision) of the Code. | |
(o) | “Long-Term Incentive Award” means an Incentive Award made pursuant to Section 5(a)(vii) with a Performance Cycle of more than one year. | |
(p) | “Nonqualified Stock Option” means any Stock Option that is not an Incentive Stock Option. | |
(q) | “Other Stock-Based Award” means an Award granted pursuant to Section 5(a)(iii). | |
(r) | “Participant” means any eligible employee as set forth in Section 3 to whom an Award is granted. | |
(s) | “Performance Cycle” means the period selected by the Committee during which the performance of the Company or any subsidiary, affiliate or unit thereof or any individual is measured for the purpose of determining the extent to which an Award subject to Performance Goals has been earned. | |
(t) | “Performance Goals” mean the objectives for the Company or any subsidiary or affiliate or any unit thereof or any individual that may be established by the Committee, in its sole discretion, for a Performance Cycle with respect to any performance-based Awards contingently awarded under the Plan. | |
(u) | “Performance Stock Unit” means an Award granted pursuant to Section 5(a)(vi). | |
(v) | “Plan” means this 2020 Performance Incentive Plan, as amended from time to time. | |
(w) | “Prior Plan” means the 2015 Performance Incentive Plan. | |
(x) | “Restricted Period” means the period during which an Award is subject to forfeiture. | |
(y) | “Restricted Stock” means an Award of shares of Common Stock granted pursuant to Section 5(a)(iv). | |
(z) | “Restricted Stock Unit” means an Award granted pursuant to Section 5(a)(v). | |
(aa) | “Spread Value” means, with respect to a share of Common Stock subject to an Award, an amount equal to the excess of the Fair Market Value, on the date such value is determined, over the Award’s exercise or grant price, if any. | |
(bb) | “Stock Appreciation Right” or “SAR” means a right granted pursuant to Section 5(a)(ii). | |
(cc) | “Stock Option” means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to Section 5(a)(i). |
In addition, the terms “Affiliated Group,” “Business Combination,” “Change in Control,” “Change in Control Price,” “Change in Control Protection Period,” “Incumbent Board,” “Outstanding Company Stock,” “Outstanding Company Voting Securities” and “Person” have the meanings set forth in Section 6.
Section 2. | Administration. |
The Committee shall administer the Plan and shall have the power to interpret the Plan and adopt such rules and guidelines for carrying out the Plan as it may deem appropriate. Subject to the terms of the Plan, the Committee shall have the authority to determine those employees eligible to receive Awards and the amount, type and terms of each Award and to establish and administer any Performance Goals applicable to such Awards. The Committee may delegate its authority and power under the Plan to one or more officers of the Company, subject to guidelines prescribed by the Committee, but only to the extent consistent with Section 16 of the Exchange Act and any other securities law requirements.
Any determination made by the Committee or by one or more officers pursuant to delegated authority in accordance with the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate, and all decisions made by the Committee or any appropriately designated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Participants.
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EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
Section 3. | Eligibility. |
Any employee of the Company or any subsidiary or affiliate, including, but not limited to, any executive officer or employee director of the Company or a subsidiary or affiliate shall be eligible for Awards under this Plan. For purposes of the Plan, a joint venture in which the Company or a subsidiary has a substantial direct or indirect equity investment shall be deemed an affiliate, if so determined by the Committee.
Section 4. | Common Stock Subject to the Plan. |
(a) | Common Stock Available. | |
(i) | The total number of shares of Common Stock reserved and available for distribution pursuant to the Plan shall be 25,000,000. Except as otherwise provided herein, any Award made under any Prior Plan before the expiration of such Prior Plan shall continue to be subject to the terms and conditions of such Prior Plan and the applicable Award agreement. Any adjustments, substitutions, or other actions that may be made or taken in accordance with Section 4(b) below in connection with the corporate transactions or events described therein shall, to the extent applied to outstanding Awards made under a Prior Plan, be deemed made from shares reserved for issuance under such Prior Plan, rather than this Plan, pursuant to the authority of the Board under the Prior Plans to make adjustments or substitutions in such circumstances to the aggregate number and kind of shares reserved for issuance under the Prior Plans and to Awards granted under the Prior Plans. Except as provided in the preceding sentence, no new Awards shall be made under a Prior Plan on or after the effective date of this Plan. | |
(ii) | To the extent any Award under this Plan is exercised or cashed out or terminates or expires or is forfeited without a payment being made to the Participant in the form of Common Stock, the shares subject to such Award that were not so paid, if any, shall not again be available for distribution in connection with Awards under the Plan. If a SAR or similar Award based on Spread Value with respect to shares of Common Stock is exercised, the total number of shares of Common Stock with respect to which such Award is granted (rather than only the net number of shares issued) will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. | |
(iii) | Any shares of Common Stock that are used as full or partial payment of withholding or other taxes or as payment for the exercise or conversion price of an Award under the Plan shall not again be available for distribution in connection with Awards under the Plan. | |
(b) | Adjustments for Certain Corporate Transactions. In the event of any merger, stock or asset acquisition, share exchange, reorganization, consolidation, recapitalization, reclassification, distribution, stock dividend, stock split, reverse stock split, split-up, spin-off, issuance of rights or warrants or other similar transaction or event affecting the Common Stock after adoption of the Plan by the Board, the Committee is authorized to take the actions described in this Section 4(b) with respect to the Plan and any Prior Plan and to Awards granted thereunder. | |
(i) | The Committee may make such adjustments or substitutions as it deems appropriate to reflect the occurrence of the event, including, but not limited to, adjustments (A) to the aggregate number and kind of securities reserved for issuance under the Plan, (B) to the Award limits set forth in Section 5, (C) to the Performance Goals or Performance Cycles of any outstanding Performance-Based Awards, and (D) to the number and kind of securities subject to outstanding Awards and, if applicable, the grant or exercise price or Spread Value of outstanding Awards. | |
(ii) | The Committee may make an Award in substitution for incentive awards, stock awards, stock options, or similar awards held by an individual who is, previously was, or becomes an employee of the Company, a subsidiary, or an affiliate in connection with an event described in Section 4(b). Notwithstanding any provision of the Plan (other than the limitation set forth in Section 4(a)), the terms of such substituted Awards shall be as the Committee, in its discretion, determines are appropriate. The number of shares of Common Stock subject to Awards granted in substitution of awards of an acquired company or business or a company or business with which the Company or an affiliate combines shall not be counted against the shares of Common Stock available for distribution under this Plan under Section 4(a). |
Altria Group, Inc. – Proxy Statement | A-3 |
ALTRIA GROUP, INC.Table of Contents
NON-GAAP FINANCIAL MEASURESEXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
(iii) | The Committee may (A) grant Awards (including Stock Options, Stock Appreciation Rights, and Other Stock-Based Awards) with a grant price that is less than Fair Market Value on the date of grant in order to preserve existing gain under any similar type of award previously granted by the Company or another entity to the extent that the existing gain would otherwise be diminished without payment of adequate compensation to the holder of the award for such diminution, notwithstanding the provisions of Section 5(a) and (B) cancel or adjust the terms of an outstanding Award as appropriate to reflect the substitution for the outstanding Award of an award of equivalent value granted by another entity, except as may otherwise be required under an applicable Award agreement. | |
(iv) | In connection with a spin-off or similar corporate transaction, the adjustments described in this Section 4(b) may include, but are not limited to, (A) the imposition of restrictions on any distribution with respect to Restricted Stock or similar Awards and (B) the substitution of comparable Stock Options to purchase the stock of another entity or Stock Appreciation Rights, Restricted Stock Units, Performance Stock Units, or Other Stock-Based Awards denominated in the securities of another entity, which may be settled in the form of cash, Common Stock, stock of such other entity, or other securities or property, as determined by the Committee.In the event of such a substitution, references in this Plan and any Prior Plan and in the applicable Award agreements thereunder to “Common Stock” or “Stock” shall be deemed (except for purposes of Section 6(b) hereunder and for any similar provisions of Prior Plans or applicable Award agreements) to also refer to the securities of the other entity where appropriate. | |
(v) | The Committee may provide for the payment of any outstanding Awards in cash, including, but not limited to, payment of cash in lieu of any fractional Awards. | |
(vi) | In the event of any conflict between this Section 4(b) and other provisions of the Plan or any Prior Plan, the provisions of this section shall control. Receipt of an Award under the Plan shall constitute an acknowledgement by the Participant receiving such Award of the ability of the Company to adjust any award for which an Award under the Plan is substituted. |
Section 5. | Awards. |
(a) | General. The types of Awards that may be granted under the Plan are set forth below. Awards may be granted singly, in combination or in tandem with other Awards. | |
(i) | Stock Options. A Stock Option represents the right to purchase a share of Stock at a predetermined grant price. Stock Options granted under the Plan may be in the form of Incentive Stock Options or Nonqualified Stock Options, as specified in the Award agreement. The term of each Stock Option shall be set forth in the Award agreement, but no Stock Option shall be exercisable more than ten years after the grant date. The grant price per share of Common Stock purchasable under a Stock Option shall not be less than 100% of the Fair Market Value on the date of grant. Stock Options may be exercised, in whole or in part, by giving notice of exercise specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Company may accept (including a copy of instructions to a broker or bank acceptable to the Company to deliver promptly to the Company an amount sufficient to pay the purchase price). Unless otherwise determined by the Committee, payment in full or in part may also be made in the form of Common Stock already owned by the Participant valued at Fair Market Value. | |
(ii) | Stock Appreciation Rights. A SAR represents the right to receive a payment, in cash, shares of Common Stock, or both (as determined by the Committee), with a value equal to the Spread Value on the date the SAR is exercised. The term of each SAR shall be set forth in the Award agreement, but no SAR shall be exercisable more than ten years after the grant date. The grant price of a SAR shall be set forth in the applicable Award agreement and shall not be less than 100% of the Fair Market Value on the date of grant. A Participant shall exercise a SAR, in whole or in part, by giving notice of exercise. | |
(iii) | Other Stock-Based Awards. Other Stock-Based Awards are Awards, other than Stock Options, SARs, Restricted Stock, Restricted Stock Units, or Performance Stock Units that are denominated or valued in whole or in part by reference to, or otherwise based on or related to, Common Stock. The grant, purchase, exercise, exchange or conversion of Other Stock-Based Awards granted under this subsection (iii) shall be on such terms and |
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EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
conditions and by such methods as shall be specified by the Committee. Where the value of an Other Stock-Based Award is based on the Spread Value, the grant price for such an Award will not be less than 100% of the Fair Market Value on the date of grant, and the Award will have a term of no more than ten years. | ||
(iv) | Restricted Stock. Shares of Restricted Stock are shares of Common Stock awarded to a Participant. During the Restricted Period, the shares of Restricted Stock may be forfeitable to the Company upon such conditions as may be set forth in the applicable Award agreement. Except as provided in the applicable Award agreement, a participant shall have all the rights of a holder of Common Stock during the Restricted Period. | |
(v) | Restricted Stock Units. Restricted Stock Units represent the right to receive shares of Common Stock, cash, or both (as determined by the Committee) upon satisfaction of such conditions as may be set forth in the applicable Award agreement. A Participant shall have none of the rights of a holder of Common Stock unless and until shares of Common Stock are actually delivered in satisfaction of such Restricted Stock Units. | |
(vi) | Performance Stock Units. Performance Stock Units represent the right to receive shares of Common Stock, cash, or both (as determined by the Committee) upon satisfaction of Performance Goals and such other conditions as may be set forth in the applicable Award agreement. A Participant shall have none of the rights of a holder of Common Stock unless and until shares of Common Stock are actually delivered in satisfaction of such Performance Stock Units. | |
(vii) | Incentive Awards. Incentive Awards are performance-based Awards, other than Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock Units, or Other Stock-Based Awards, payable in the form of cash amounts or Common Stock or any combination thereof. Incentive Awards shall either be Annual Incentive Awards (Performance Cycle of one year or less) or Long-Term Incentive Awards (Performance Cycle of more than one year). | |
(viii) | Performance-Based Awards. Any Awards granted pursuant to the Plan may be in the form of performance-based Awards through the application of Performance Goals and Performance Cycles. | |
(b) | Maximum Awards. Subject to the exercise of the Committee’s authority pursuant to Section 4: | |
(i) | The total number of shares of Common Stock subject to Stock Options, Stock Appreciation Rights, and Other Stock-Based Awards with values based on Spread Values awarded during any calendar year to any Participant shall not exceed 3,000,000. | |
(ii) | The total number of shares of Common Stock subject to Restricted Stock, Restricted Stock Units, Performance Stock Units, and Other Stock-Based Awards (except Other Stock-Based Awards with values based on Spread Values) awarded during any calendar year to any Participant shall not exceed 1,000,000. | |
(iii) | The total amount of any Annual Incentive Award paid to any Participant with respect to any Performance Cycle, taking into account the cash and the Fair Market Value at the time of payment of any Common Stock payable with respect to such Award, shall not exceed $10,000,000. | |
(iv) | The total amount of any Long-Term Incentive Award paid to any Participant with respect to any Performance Cycle, taking into account the cash and the Fair Market Value at the time of payment of any Common Stock payable with respect to such Award, shall not exceed $8,000,000 multiplied by the number of calendar years in the Performance Cycle. | |
(v) | For the avoidance of doubt, an Award shall be subject to the one limitation described in clauses (i) through (iv) above that applies to that type of Award, and no Award shall be subject to more than one of the foregoing limitations. | |
(c) | Minimum Vesting. Stock Options, SARs, Restricted Stock, Restricted Stock Units, Performance Stock Units, and Other Stock-Based Awards shall provide for a minimum 12-month vesting period for the entire Award, provided, however, that (i) the minimum 12-month vesting period shall not apply to any Awards granted up to a maximum of five percent (5%) of the shares of Common Stock available for issuance under the Plan, and (ii) Awards may vest before the end of such minimum 12-month vesting period in the event of death, disability, retirement, or a Change in Control, or in the case of an Award that replaces or substitutes for a pre-existing award in connection with a corporate transaction described in Section 4(b)(i). |
Altria Group, Inc. – Proxy Statement | A-5 |
EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
Section 6. | Change in Control Provisions. |
(a) | Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control (as defined in Section 6(b)): |
(i) | If outstanding Awards are assumed or replaced in accordance with this Section 6(a)(i), then such Awards or replacements thereof shall remain outstanding and shall be governed by their respective terms and the provisions of the Plan, subject to Section 6(a)(ii) below. Awards are assumed in accordance with this Section 6(a)(i) if they are assumed by the successor corporation (or affiliate thereof). Awards other than Incentive Awards are replaced in accordance with this Section 6(a)(i) if they are replaced with equity awards that preserve the existing value of such Awards at the time of the Change in Control and provide for subsequent payout in accordance with a Restricted Period and Performance Goals, as applicable, that are the same or more favorable to the Participant than the Restricted Period and Performance Goals applicable to the Awards. Awards that are Incentive Awards are replaced in accordance with this Section 6(a)(i) if they are replaced with similar awards that have the same or more favorable Performance Goals, Restricted Periods (if applicable) and target, minimum, and maximum award opportunities and for which the Performance Cycles are the same or more favorable. The Committee, as constituted immediately before the Change in Control, shall determine, in its sole discretion, whether the conditions of this Section 6(a)(i) are satisfied with respect to such Change in Control. | |
(ii) | If (A) outstanding Awards are assumed or replaced in accordance with Section 6(a)(i) above and (B) a Participant’s employment is terminated by the Company (or its subsidiaries or affiliates, as the case may be) for any reason other than Cause or by such Participant for Good Reason, in each case, within the Change in Control Protection Period (as defined below), then, as of the date of such Participant’s termination, the Change in Control treatment set forth in Section 6(a)(iii) below shall apply to all assumed or replaced Awards of such Participant then outstanding. In applying the Change in Control treatment set forth in Section 6(a)(iii), the date of termination of employment shall be substituted for the date of the Change in Control in determining the pro rata Incentive Award in Section 6(a)(iii)(C), and the Fair Market Value of the equity underlying the assumed or replaced Award on the date of termination of employment shall be substituted for the Change in Control Price in Section 6(a)(iii)(B). Furthermore, any Awards subject to Section 409A of the Code shall be paid no earlier than the earliest permissible date under Section 409A of the Code. The “Change in Control Protection Period” means the period commencing on the date of the Change in Control and ending on the two-year anniversary of the date of the Change in Control. | |
(iii) | If outstanding Awards under the Plan are not assumed or replaced in accordance with Section 6(a)(i) above, then upon the Change in Control, the following treatment shall apply to such Awards: | |
(A) | All Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock Units, or Other Stock-Based Awards outstanding as of the date such Change in Control occurs shall become fully vested and free of all restrictions, and all such Stock Options, Stock Appreciation Rights, or Other Stock-Based Awards with values based on Spread Values shall become fully exercisable. | ||
(B) | The value of all outstanding Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock Units, and Other Stock-Based Awards shall, unless otherwise determined by the Committee before the date of the Change in Control, be cashed out on the basis of the “Change in Control Price,” as defined in Section 6(c), as of the date such Change in Control occurs, and, for any Performance Stock Units or performance-based Other Stock-Based Awards, assuming target performance, provided, however, that any Restricted Stock Units, Performance Stock Units, or similar Other Stock-Based Awards that are subject to Section 409A of the Code shall be paid at a time and in a manner that complies with Section 409A as provided in the relevant Award agreement. |
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EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
(C) | Any Incentive Awards relating to Performance Cycles prior to the Performance Cycle in which the Change in Control occurs that have been earned but not paid shall become immediately payable in cash. In addition, each Participant who has been awarded an Incentive Award for the Performance Cycle in which the Change in Control occurs shall be deemed to have earned a pro rata Incentive Award equal to: | ||
(1) | with respect to an Annual Incentive Award, the product of (A) the greater of such Participant’s target award opportunity for such Performance Cycle or the average of such Participant’s Annual Incentive Award for the three Performance Cycles immediately preceding such Performance Cycle, and (B) a fraction, the numerator of which is the number of days that have elapsed since the beginning of such Performance Cycle to the date on which the Change in Control occurs, and the denominator of which is the total number of days in such Performance Cycle, and | |||
(2) | with respect to a Long-Term Incentive Award, the product of (A) such Participant’s target award opportunity for such Performance Cycle, and (B) a fraction, the numerator of which is the number of days that have elapsed since the beginning of such Performance Cycle to the date on which the Change in Control occurs, and the denominator of which is the total number of days in such Performance Cycle. | |||
(b) | Definition of Change in Control. A “Change in Control” means the happening of any of the following events: |
(i) | Both (A) consummation of the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”) and (B) the election to the Board of at least one individual determined in good faith by a majority of the then serving members of the Board to be a representative or associate of such Person. However, the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company or any corporation or other entity controlled by the Company (the “Affiliated Group”), (2) any acquisition by a member of the Affiliated Group, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by a member of the Affiliated Group or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii) of this Section 6(b); or | |
(ii) | Individuals who, as of the effective date of the Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such effective date whose election, or nomination for election by the shareholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or | |
(iii) | Consummation of a reorganization, merger, share exchange or consolidation (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns such shares and voting power through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of any member of the Affiliated Group or such corporation resulting from such Business Combination) beneficially |
Altria Group, Inc. – Proxy Statement | A-7 |
EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or at the time of the action of the Board providing for such Business Combination or were elected, appointed or nominated by the Board; or | ||
(iv) | Consummation of a (A) complete liquidation or dissolution of the Company or (B) sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (1) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) less than 20% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of any member of the Affiliated Group or such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale or disposition and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or at the time of the action of the Board providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the Board. | |
(c) | Definition of Change in Control Price. Unless the Committee determines otherwise, “Change in Control Price” means the value of the consideration paid to holders of shares of Common Stock for such Common Stock in connection with a Change in Control transaction (or, if no consideration is paid in connection with a Change in Control transaction, the Fair Market Value of a share of Common Stock immediately prior to a Change in Control), except that, in the case of Stock Options, SARs, or similar Other Stock-Based Awards, such price shall not exceed the fair market value of shares of Common Stock as determined in accordance with Sections 409A and 422 of the Code and the regulations thereunder, as applicable. |
Section 7. | Plan Amendment and Termination. |
(a) | Amendment and Termination Authority. At any time without shareholder approval, the Board may amend or terminate the Plan and the Committee may amend any Award hereunder or adopt any modifications, procedures, or subplans as may be necessary or desirable to comply with the laws, regulations, or accounting practices of such foreign country; provided, however, that no such amendment or adoption shall be made without shareholder approval if such approval is required under applicable law, regulation, or stock exchange rule. |
(b) | Prohibition on Repricing and Other Actions. Notwithstanding Section 7(a), neither the Plan nor any Award hereunder may be amended without shareholder approval in a manner that would (i) reprice an outstanding Award in any manner that reduces the grant price of an outstanding Stock Option, SAR, or similar Other Stock-Based Award; (ii) cancel, exchange, substitute, buy out or surrender outstanding Stock Options, SARs, or similar Other Stock-Based Awards that have a grant price that is higher than Fair Market Value on the date of such transaction in exchange for cash, other Awards, or Stock Options, SARs, or similar Other Stock-Based Awards with a lower grant price, except as may be necessary to comply with a change in the laws, regulations, or accounting principles of a foreign country applicable to Participants subject to the laws of such foreign country, or (iii) increase the total number of shares of Common Stock that may be distributed under the Plan. |
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EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
(c) | Limitation on Amendments. Except as set forth in any Award agreement or as necessary to comply with applicable law or avoid adverse tax consequences to some or all Plan Participants, no amendment or termination of the Plan or an Award agreement may materially and adversely affect any outstanding Award under the Plan without the Award recipient’s consent. |
Section 8. | Payments and Payment Deferrals. |
Payment of Awards may be in the form of cash, Common Stock, other Awards or combinations thereof as the Committee shall determine, and with such restrictions as it may impose. The Committee, either at the time of grant or by subsequent amendment, may require or permit deferral of the payment of Awards under such rules and procedures as it may establish provided, however, that any Stock Option, SAR, and similar Other Stock-Based Award that are not subject to Section 409A of the Code but would be subject to Section 409A if a deferral were permitted, shall not be subject to any deferral. The Committee may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferred amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in Common Stock equivalents. Any deferral and related terms and conditions shall comply with Section 409A of the Code and any regulations and other guidance thereunder.
Section 9. | Dividends and Dividend Equivalents. |
The Committee may provide that any Awards under the Plan earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently (except as provided below with respect to unvested performance-based Awards) or may be credited to a Participant’s Plan account. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional shares of Common Stock or Common Stock equivalents. In the case of unvested Awards that vest based on the satisfaction of Performance Goals, dividends or dividend equivalents will not be paid before the Committee determines that all Performance Goals with respect to such Awards have been satisfied.
Section 10. | Transferability. |
Except as provided in the applicable Award agreement or otherwise required by law, Awards shall not be encumbered, pledged, transferred or assigned other than a transfer or assignment by will or the laws of descent and distribution.
Section 11. | Award Agreements. |
Each Award, other than an Incentive Award, under the Plan shall be evidenced by a written agreement (which need not be signed by the recipient unless otherwise specified by the Committee) that sets forth the terms, conditions and limitations for each Award. Such terms may include, but are not limited to, the term of the Award, vesting and forfeiture provisions, and the provisions applicable in the event the Participant’s employment terminates.
Section 12. | Unfunded Status of Plan. |
It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.
Section 13. | General Provisions. |
(a) | The Committee may require each Participant acquiring shares of Common Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares, if any, may include any legend that the Committee deems appropriate to reflect any restrictions on transfer. |
Altria Group, Inc. – Proxy Statement | A-9 |
EXHIBIT A – 2020 PERFORMANCE INCENTIVE PLAN
Shares of Common Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Commission, any stock exchange upon which the Common Stock is then listed, and any applicable federal, state or foreign securities law. Further, the Committee may cause a legend or legends to be put on any certificates for shares of Common Stock or other securities to make appropriate reference to such restrictions. | |
(b) | Nothing contained in the Plan shall prevent the Company, a subsidiary or an affiliate from adopting other or additional compensation arrangements for their respective employees. |
(c) | Neither the adoption of the Plan nor the granting of Awards under the Plan shall confer upon any employee any right to continued employment, nor shall they interfere in any way with the right of the Company, a subsidiary or an affiliate to terminate the employment of any employee at any time. |
(d) | All Awards hereunder shall be subject to the Company’s executive compensation policies regarding Award cancellation and/or repayment upon financial restatements or other events, hedging, and similar matters, as adopted or modified from time to time. |
(e) | Notwithstanding anything in this Plan to the contrary, the Plan shall be construed to reflect the intent of the Company that all Awards under the Plan and any elections to defer, distributions, and other aspects of the Plan shall, to the extent subject to Section 409A of the Code, comply with Section 409A and any regulations and other guidance thereunder. |
(f) | No later than the date as of which an amount first becomes includable in the gross income of the Participant for income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind that are required by law or applicable regulation to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising from an Award may be settled with Common Stock, including Common Stock that is part of, or is received upon exercise or conversion of, the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company, its subsidiaries and its affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settling of withholding obligations with Common Stock. |
(g) | The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in an Award, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Virginia, to resolve any and all issues that may arise out of or relate to the Plan or any related Award. |
(h) | If any provision of the Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be enforced and construed as if such provision had not been included. |
(i) | The terms of the Plan and any Awards hereunder shall be binding upon and shall inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company, and any permitted successors or assigns of a Participant. |
(j) | If approved by shareholders, the Plan shall be effective on June 1, 2020. Except as otherwise provided by the Board, no Awards shall be made after May 31, 2025, provided that any Awards granted prior to that date may extend beyond it. |
A-10 | www.altria.com |
Exhibit B – Altria Group, Inc. (“Altria”) reports itsNon-GAAP Financial Measures
While we report our financial resultsmeasures in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Altria’sGAAP, our management reviews operating companies income (“OCI”), whichcertain financial results, including diluted EPS and OCI (which is defined as operating income before amortization of intangibles and general corporate expenses to evaluate the performanceand amortization of and allocate resources to, the segments. Altria’s management also reviews net earnings, diluted earnings per share (“EPS”) and OCIintangibles) on an adjusted basis, which excludes certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, SABMiller plc (“SABMiller”)asset impairment charges, acquisition-related costs, equity investment-related special items certain Philip Morris Capital Corporation (“PMCC”) leveraged lease items,(including any changes in fair value for the equity investment and any related warrants and preemptive rights), certain tax items, charges associated with tobacco and health litigation items, and settlementsresolutions of and determinations made in connection with, certain non-participating manufacturer (“NPM”) adjustment disputes under the 1998 Master Settlement Agreement (such settlements and determinationsdispute resolutions are referred to collectively as “NPM Adjustment Items”). Altria’sOur management does not view any of these special items to be part of Altria’s sustainableour underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. In addition, Altria’sOur management also reviews adjusted discretionary cash flow, which is defined as the change in cash and cash equivalents with certain adjustments as shown in the reconciliation below. Adjusted discretionary cash flow is a measure of Altria’sour performance and is not a liquidity measure. Altria’sOur management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’sOur management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. Additional uses of these adjusted financial measures by the Compensation and Talent Development Committee are further discussed in the Proxy Statement. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of non-GAAPhistorical adjusted financial measures to corresponding GAAP measures are provided below.
Altria Group, Inc.
Reconciliation of Adjusted Diluted EPS
For the Years Ended December 31, | ||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||
Reported diluted EPS
| $
| 2.67
|
| $
| 2.56
|
| $
| 2.26
|
| $
| 2.06
|
| ||||
NPM Adjustment Items
|
| (0.03
| )
|
| (0.03
| )
|
| (0.21
| )
|
| –
|
| ||||
Tobacco and health litigation items
|
| 0.05
|
|
| 0.01
|
|
| 0.01
|
|
| –
|
| ||||
SABMiller special items
|
| 0.04
|
|
| 0.01
|
|
| 0.01
|
|
| (0.08
| )
| ||||
Loss on early extinguishment of debt
|
| 0.07
|
|
| 0.02
|
|
| 0.34
|
|
| 0.28
|
| ||||
Asset impairment, exit, integration, implementation and acquisition-related costs
|
| –
|
|
| 0.01
|
|
| –
|
|
| 0.01
|
| ||||
PMCC leveraged lease benefit
|
| –
|
|
| –
|
|
| –
|
|
| (0.03
| )
| ||||
Tax items(1)
|
| –
|
|
| (0.01
| )
|
| (0.03
| )
|
| (0.03
| )
| ||||
Adjusted diluted EPS
| $
| 2.80
|
| $
| 2.57
|
| $
| 2.38
|
| $
| 2.21
|
| ||||
Growth in annual adjusted diluted EPS vs. prior year | 8.9 | % | 8.0 | % | 7.7 | % | ||||||||||
Adjusted diluted EPS three-year compound annual growth rate
|
| 8.2
| %
|
Altria Group, Inc. | ||||||||||||||||||||
Earnings before Income Taxes | Provision for Income Taxes | Net (Losses) Earnings | Net (Losses) Earnings Attributable to Altria | Diluted EPS | ||||||||||||||||
2019 Reported | $ | 766 | $ | 2,064 | $ | (1,298 | ) | $ | (1,293 | ) | $ | (0.70 | ) | |||||||
ABI-related special items | (354 | ) | (74 | ) | (280 | ) | (280 | ) | (0.15 | ) | ||||||||||
Tobacco and health litigation items | 77 | 19 | 58 | 58 | 0.03 | |||||||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 331 | 62 | 269 | 269 | 0.15 | |||||||||||||||
Impairment of JUUL equity securities | 8,600 | — | 8,600 | 8,600 | 4.60 | |||||||||||||||
Cronos-related special items | 928 | 288 | 640 | 640 | 0.34 | |||||||||||||||
Tax items | — | 99 | (99 | ) | (99 | ) | (0.05 | ) | ||||||||||||
2019 Adjusted for Special Items | $ | 10,348 | $ | 2,458 | $ | 7,890 | $ | 7,895 | $ | 4.22 | ||||||||||
Growth in annual adjusted diluted EPS vs. prior year | 5.8 | % | ||||||||||||||||||
Adjusted diluted EPS three-year compound annual growth rate | 11.7 | % |
ALTRIA GROUP, INC. – Proxy Statement A-1Table of Contents
ANNEX AEXHIBIT B – ALTRIA GROUP, INC. NON-GAAP FINANCIAL MEASURES
Altria Group, Inc.
Selected Financial Data by Reporting Segment
Reconciliation of Adjusted OCI for Years Ended December 31,
(dollars in millions)
Smokeable Products | Smokeless Products | Wine | ||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
Reported OCI
| $
| 7,569
|
| $
| 6,873
|
| $
| 7,063
|
| $
| 1,108
|
| $
| 1,061
|
| $
| 1,023
|
| $
| 152
|
| $
| 134
|
| $
| 118
|
| |||||||||||||
NPM Adjustment Items
|
| (97
| )
|
| (43
| )
|
| (664)
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
| |||||||||||||
Asset impairment, exit and implementation costs
|
| –
|
|
| (6
| )
|
| 4
|
|
| 4
|
|
| (1)
|
|
| 3
|
|
| –
|
|
| –
|
|
| –
|
| |||||||||||||
Tobacco and health litigation items
|
| 127
|
|
| 27
|
|
| 18
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
|
| –
|
| |||||||||||||
Adjusted OCI
| $
| 7,599
|
| $
| 6,851
|
| $
| 6,421
|
| $
| 1,112
|
| $
| 1,060
|
| $
| 1,026
|
| $
| 152
|
| $
| 134
|
| $
| 118
|
| |||||||||||||
Change in adjusted OCI 2015 vs. 2014
|
| 10.9
| %
|
| 4.9
| %
|
| 13.4
| %
|
Altria Group, Inc.
Reconciliation of Adjusted Net Earnings
For the Year Ended December 31, 2015
(dollars in millions)
Altria Group, Inc. | ||||||||||||||||||||
Earnings before Income Taxes | Provision for Income Taxes | Net Earnings | Net Earnings Attributable to Altria | Diluted EPS | ||||||||||||||||
2018 Reported | $ | 9,341 | $ | 2,374 | $ | 6,967 | $ | 6,963 | $ | 3.68 | ||||||||||
NPM Adjustment Items | (145 | ) | (36 | ) | (109 | ) | (109 | ) | (0.06 | ) | ||||||||||
Tobacco and health litigation items | 131 | 33 | 98 | 98 | 0.05 | |||||||||||||||
ABI-related special items | (85 | ) | (17 | ) | (68 | ) | (68 | ) | (0.03 | ) | ||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 538 | 106 | 432 | 432 | 0.23 | |||||||||||||||
Loss on ABI/SABMiller business combination | 33 | 7 | 26 | 26 | 0.01 | |||||||||||||||
Tax items | — | (197 | ) | 197 | 197 | 0.11 | ||||||||||||||
2018 Adjusted for Special Items | $ | 9,813 | $ | 2,270 | $ | 7,543 | $ | 7,539 | $ | 3.99 |
Altria Group, Inc. | ||||||||||||||||||||
Earnings before Income Taxes | (Benefit) Provision for Income Taxes | Net Earnings | Net Earnings Attributable to Altria | Diluted EPS | ||||||||||||||||
2017 Reported | $ | 9,828 | $ | (399 | ) | $ | 10,227 | $ | 10,222 | $ | 5.31 | |||||||||
NPM Adjustment Items | 4 | 2 | 2 | 2 | — | |||||||||||||||
Tobacco and health litigation items | 80 | 30 | 50 | 50 | 0.03 | |||||||||||||||
ABI-related special items | 160 | 55 | 105 | 105 | 0.05 | |||||||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 89 | 34 | 55 | 55 | 0.03 | |||||||||||||||
Gain on ABI/SABMiller business combination | (445 | ) | (156 | ) | (289 | ) | (289 | ) | (0.15 | ) | ||||||||||
Settlement charge for lump sum pension payments | 81 | 32 | 49 | 49 | 0.03 | |||||||||||||||
Tax items | — | 3,674 | (3,674 | ) | (3,674 | ) | (1.91 | ) | ||||||||||||
2017 Adjusted for Special Items | $ | 9,797 | $ | 3,272 | $ | 6,525 | $ | 6,520 | $ | 3.39 |
B-2 | www.altria.com |
EXHIBIT B – ALTRIA GROUP, INC. NON-GAAP FINANCIAL MEASURES
Altria Group, Inc. | ||||||||||||||||||||
Earnings before Income Taxes | Provision for Income Taxes | Net Earnings | Net Earnings Attributable to Altria | Diluted EPS | ||||||||||||||||
2016 Reported | $ | 21,852 | $ | 7,608 | $ | 14,244 | $ | 14,239 | $ | 7.28 | ||||||||||
NPM Adjustment Items | 18 | 7 | 11 | 11 | 0.01 | |||||||||||||||
Tobacco and health litigation items | 105 | 34 | 71 | 71 | 0.04 | |||||||||||||||
SABMiller special items | (89 | ) | (32 | ) | (57 | ) | (57 | ) | (0.03 | ) | ||||||||||
Loss on early extinguishment of debt | 823 | 282 | 541 | 541 | 0.28 | |||||||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 206 | 71 | 135 | 135 | 0.07 | |||||||||||||||
Patent litigation settlement | 21 | 8 | 13 | 13 | 0.01 | |||||||||||||||
Gain on ABI/SABMiller business combination | (13,865 | ) | (4,864 | ) | (9,001 | ) | (9,001 | ) | (4.61 | ) | ||||||||||
Tax items | — | 30 | (30 | ) | (30 | ) | (0.02 | ) | ||||||||||||
2016 Adjusted for Special Items | $ | 9,071 | $ | 3,144 | $ | 5,927 | $ | 5,922 | $ | 3.03 |
Altria Group, Inc. | ||||||||||||||||||||||||||||||||
Smokeable Products | Smokeless Products | Wine | ||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||
Reported OCI (Loss) | $ | 9,009 | $ | 8,408 | $ | 8,426 | $ | 1,580 | $ | 1,431 | $ | 1,306 | $ | (3 | ) | $ | 50 | $ | 146 | |||||||||||||
NPM Adjustment Items | — | (145 | ) | (5 | ) | — | — | — | — | — | — | |||||||||||||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 92 | 83 | 28 | 26 | 23 | 56 | 76 | 54 | — | |||||||||||||||||||||||
Tobacco and health litigation items | 72 | 103 | 72 | — | 10 | — | — | — | — | |||||||||||||||||||||||
Adjusted OCI | $ | 9,173 | $ | 8,449 | $ | 8,521 | $ | 1,606 | $ | 1,464 | $ | 1,362 | $ | 73 | $ | 104 | $ | 146 | ||||||||||||||
Change in adjusted OCI 2019 vs. 2018 | 8.6 | % | 9.7 | % | (29.8 | )% |
Altria Group, Inc. | ||||
Increase in cash, cash equivalents and restricted cash | $ | 727 | ||
Short-term borrowing repaid | 12,800 | |||
Dividends paid on common stock | 6,069 | |||
Acquisition-related costs | 2,325 | |||
Long-term debt repaid | 1,144 | |||
Repurchases of common stock | 845 | |||
Long-term debt issued | (16,265 | ) | ||
Other(1) | 48 | |||
Adjusted discretionary cash flow | $ | 7,693 |
(1) | Primarily due to tobacco and health litigation payments, net of tax. |
Altria Group, Inc. – Proxy Statement | B-3 |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |||||
| KEEP THIS PORTION FOR YOUR RECORDS | ||||
| DETACH AND RETURN THIS PORTION ONLY | ||||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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| ALTRIA GROUP, INC. |
Altria Group, Inc.
Reconciliation of Adjusted Discretionary Cash Flow
For the Year Ended December 31, 2015
(dollars in millions)
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A-2 ALTRIA GROUP, INC. – Proxy Statement
PRE-REGISTRATION FORM FOR 2016 ANNUAL MEETING OF SHAREHOLDERS
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The Board of Directors recommends you voteFOR each of the listed nominees: | |||||||||
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q IF YOU HAVENOT VOTED VIA THE INTERNET OR TELEPHONE, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING. q
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1. | Election of | Directors | For | Against | Abstain | ||||||||||||||||||||
1a. | John T. Casteen III | ☐ | ☐ | ☐ | |||||||||||||||||||||
Dinyar S. Devitre | ☐ | ☐ | ☐ | ||||||||||||||||||||||
1c. | Thomas F. Farrell II | ☐ | ☐ | ||||||||||||||||||||||
☐ | ☐ | ||||||||||||||||||||||||
☐ | ☐ | ||||||||||||||||||||||||
1f. | Kathryn B. McQuade | ☐ | ☐ | ☐ | |||||
1g. | George Muñoz | ☐ | ☐ | ☐ | |||||
1h. | Mark E. Newman | ☐ | ☐ | ☐ | |||||
1i. | Nabil Y. Sakkab | ☐ | ☐ | ☐ | |||||
1j. | Virginia E. Shanks | ☐ | ☐ | ☐ | |||||
1k. | Howard A. Willard III | ☐ | ☐ | ☐ | |||||
Please sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments or postponements thereof. |
For | Against | Abstain | ||||||
2. | Ratification of the Selection of Independent Registered Public Accounting Firm | ☐ | ☐ | |||||
3. | Non-Binding Advisory Vote to Approve the Compensation of | ☐ | ☐ | |||||
4. | Approval of the 2020 Performance Incentive Plan | ☐ | ☐ | ☐ | |||||||||
The Board of Directors recommends you voteAGAINST the following proposals: | |||||||||||||
5. | Shareholder Proposal - Disclosure of Lobbying Policies and Practices | ☐ | ☐ | ☐ | |||||||||
6. | Shareholder Proposal - Report on the Company’s Underage Tobacco Prevention Policies | ☐ | ☐ | ☐ |
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Date | Date | |||||||||||
IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.Table of Contents
ALTRIA GROUP, INC.
2016
2020 ANNUAL MEETING OF
SHAREHOLDERS
Thursday, May 19, 2016
14, 2020
9:00 A.M. Eastern Timea.m. (Eastern Time)
www.virtualshareholdermeeting.com/ALTRIA2020
The Greater Richmond Convention Center
403 North 3rd Street
Richmond, VA 23219
In order to attend the Meeting you must submit a written request for an admission ticket. To request an admission ticket, please follow the instructions set forth in the accompanying proxy statement in response to Question 16.
It is important that your shares are represented at thethis Meeting, whether or not you attend the Meeting in person.Meeting. To make sure your shares are represented, we urge you to complete and mail this proxy cardORvote your shares over the Internet OR theor by telephone in accordance with the instructions provided on the reverse side OR by completing and mailing this proxy card.side.
Sign Up Today For Electronic Delivery
If you prefer to receive your future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet, sign up today at www.computershare-na.com/green.
www.proxyvote.comq IF YOU HAVENOT VOTED VIA THE INTERNET OR TELEPHONE, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING. q.
You are cordially invited to join us at the 2020 Annual Meeting of Shareholders of Altria Group, Inc. to be held on Thursday, May 14, 2020, at 9:00 a.m. (Eastern Time). This year’s annual meeting will be held via a live webcast (commonly referred to as a virtual annual meeting). Shareholders will have the same rights and opportunities to participate in the virtual annual meeting as they would at an in-person meeting. During the virtual annual meeting, shareholders will be able to vote their shares electronically and submit written questions during the meeting once logged into the virtual platform. In addition, a full webcast replay will be posted to our Investor Relations website at www.altria.com/investors following the meeting.
The Meeting will be hosted solely online at www.virtualshareholdermeeting.com/ALTRIA2020.To attend and participate, you will need to enter the 16-digit control number that is printed in the box marked by the arrow (located on the reverse side of this proxy card). For more information, see the “Instructions for the Virtual Annual Meeting” section in the Proxy Statement (page 81).
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting
The Notice and Proxy Statement and 2019 Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 are available at www.proxyvote.com.
D03022-P38650-Z76741 |
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Martin J. BarringtonHoward A. Willard III and Denise F. Keane,Murray R. Garnick, and each of them, are appointed attorneys, with power of substitution, to vote, as indicated on the matters set forth on the reverse hereof and in their discretion upon such other business as may properly come before the meeting,Meeting, all shares of common stock held by the undersigned in Altria Group, Inc. (the “Company”) at the Annual Meeting of Shareholders to be held at the Greater Richmond Convention Center,virtually on May 19, 2016,14, 2020 at 9:00 a.m., Eastern Time, (Eastern Time) at www.virtualshareholdermeeting.com/ALTRIA2020, and at all adjournments or postponements thereof.There will be no physical location for shareholders to attend.
This proxy, when properly executed, will be voted as specified. If no specification is made, this proxy will be votedFOR the election of each of the listed nominees,FOR the ratification of the selection of independent registered public accounting firm,FOR the non-binding advisory vote to approve the compensation of Altria’s named executive officers,FOR approval of the 2020 Performance Incentive Plan, andAGAINST each of the shareholder proposals.
This card also serves to instruct the administrator of the Company’s Direct Stock Purchase and Dividend Reinvestment Plan and the trustee of each defined contribution plan sponsored by the Company or any of its subsidiaries how to vote shares held for a participant in any such plan. Unless your proxy for your defined contribution plan shares is received by May 16, 2016,11, 2020, the trustee of such defined contribution plan will vote your plan shares in the same proportion as those plan shares for which instructions have been received.received, unless applicable law requires otherwise.
If you have voted by Internet or telephone, please DO NOT mail back this proxy card.
THANK YOU FOR VOTING