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
| | | | | | Voting Matters and Board Recommendations |
Proposal
| | 1 | | Election of Directors The Board Voterecommends a voteFOReach nominee. Recommendation
| | Page
Reference ►See page 16.
|
| | Election of Directors
| | FOR each nominee
| | 56
|
Proposal 2 –
| | Ratification of the Selection of Independent Registered Public Accounting Firm | | The Board recommends a voteFORthis Proposal. FOR
| | 62►See page 24.
|
Proposal
3 – | | Non-Binding Advisory Vote to Approve the Compensation of the Company’sAltria’s Named Executive Officers | | The Board recommends a voteFORthis Proposal. FOR
| | 63►See page 62.
|
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 Report on Tobacco Product Constituents and Ingredients and Their Potential Health ConsequencesvoteAGAINSTthis Shareholder Proposal. | | AGAINST
| | 64►See page 72.
|
Proposal 5 –
6 | | Shareholder Proposal Regarding Participation in Mediation of Any Alleged Human Rights Violations Involving Altria’s OperationsReport on the Company’s Underage Tobacco Prevention Policies The Board recommends a voteAGAINSTthis Shareholder Proposal. ►See page 75. |
| | 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: 66
|
CASTING YOUR VOTE
| | | | | | |
| | | How to Vote |  | Shareholders of Record
(Shares registered in your name withInternet
Altria’s transfer agent, Computershare)
and Employee Benefit Plan Participantswww.proxyvote.com
| | Street Name Holders
(Shares held through a Broker,
Bank or Other Nominee)
|
|  | Telephone
In the U.S. or Canada, call toll-free: 1-800-690-6903. | |
| 
InternetIf you hold your shares through a broker, bank or other nominee* (Street Name Holders):
| | Visit the applicable voting
website:
| | www.investorvote.com/altria | | www.proxyvote.com |
| | Internet
www.proxyvote.com | |
| | 
Refer to voting instruction form for instructions on how to vote by telephone.
| |
| * If bank/broker makes these methods available | |
| Both Record Holders and Street Name Holders may also vote: | |
|  | Mobile Device | |
Scan the QR Code that appears on your proxy card, Notice of Internet Availability of Proxy Materials or voting instruction form to vote using
your mobile device: device. | | 
| | Refer to voting
instruction form.
|
| | | |
Telephone
|  | Within the United States, U.S.
Territories and Canada, call
toll-free:
| | 1-800-652-VOTE (8683) | | Refer to voting
instruction form.
|
| |
Mail | |
Complete, sign and mail your proxy card or voting instruction form in the self-addressed envelope provided.
provided.
| |
| |
In Person
|  | During Meeting
There is no physical location for the 2020 Annual Meeting. For instructions on attendingvoting remotely during the 20162020 Annual Meeting, in person, please see Question 16the instructions under “Instructions for the Virtual Annual Meeting” on page 9.81 of this Proxy Statement. We encourage you to vote in advance of the meeting using the other methods available. | |
| Altria Group, Inc. – Proxy Statement | i |
Table of Contents
ALTRIA GROUP, INC. – Proxy Statement 1
PROXY STATEMENT SUMMARY
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 | | 75 | | 2008 | | Retired Director and Chief Executive Officer, Miller Center of Public Affairs | | Yes | | CC, EC, IC, NC |
Martin J. Barrington | | 62 | | 2012 | | Chairman, Chief Executive Officer and President, Altria Group, Inc. | | No | | EC |
John T. Casteen III | | 72 | | 2010 | | President Emeritus, University of Virginia | | Yes | | AC, IC, NC |
Dinyar S. Devitre | | 68 | | 2008 | | Special Advisor, General Atlantic LLC | | Yes | | FC, IC |
Thomas F. Farrell II | | 61 | | 2008 | | Chairman, President and Chief Executive Officer, Dominion Resources, Inc. | | Yes | | CC, EC, NC |
Thomas W. Jones | | 66 | | 2002 | | Senior Partner, TWJ Capital LLC | | Yes | | AC, CC, EC, FC |
Debra J. Kelly-Ennis | | 59 | | 2013 | | Retired President and Chief Executive Officer, Diageo Canada, Inc. | | Yes | | AC, IC, NC |
W. Leo Kiely III | | 69 | | 2011 | | Retired Chief Executive Officer, MillerCoors LLC | | Yes | | CC, EC, FC, IC |
Kathryn B. McQuade | | 59 | | 2012 | | Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited | | Yes | | AC, CC, FC |
George Muñoz | | 64 | | 2004 | | Principal, Muñoz Investment Banking Group, LLC and Partner, Tobin & Muñoz | | Yes | | AC, EC, FC, NC |
Nabil Y. Sakkab | | 68 | | 2008 | | Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company | | Yes | | EC, FC, IC, NC |
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”). |
|
| |
Table of Contents
PROXY STATEMENT SUMMARY
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) |
* AC Audit Committee
CC Compensation Committee
| | | | EC Executive Committee
FC Finance Committee
| | | | IC Innovation Committee
NC Nominating, Corporate Governance & Social Responsibility Committee
|
CORPORATE GOVERNANCE HIGHLIGHTS
| ¡ | | Annual election of directors |
| ¡ | | Directors elected by majority voting |
| ¡ | | 10 of our 11 director nominees are independent |
| ¡ | | Resignation policy for directors in failed elections |
| ¡ | | Director retirement guidelines |
| ¡ | | Independent presiding director |
| ¡ | | All NYSE-required Board committees consist solely of independent directors |
¡ | | Regular executive sessions of independent directors |
¡ | | Over 90% average Board and Committee meeting attendance in 2015 |
¡ | | Annual Board and Committee self-evaluations |
¡ | | Comprehensive new director orientation |
¡ | | Ongoing director education programs |
¡ | | Comprehensive Code of Conduct and Corporate Governance Guidelines |
¡ | | No shareholder rights plan or “poison pill” |
¡ | | Robust political activity disclosure and compliance program |
¡ | | Board participation in executive succession planning |
¡ | | Strong pay-for-performance philosophy |
¡ | | Compensation “clawback” policy |
¡ | | Stock ownership guidelines for directors and executive officers | |
¡ | | Policy prohibiting hedging of our shares | |
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:
¡ | | Altria’s total shareholder return (“TSR”) of 23.1% far outpaced Altria’s Peer Group, the S&P Food, Beverage & Tobacco Index and the S&P 500 Index, marking the third consecutive year that TSR has exceeded 20%. |
 | | |  | | | |
 | |  |
| | | |
Source: | | Bloomberg Daily Return (December 31, 2014 -
December 31, 2015)
| | Source: | | Bloomberg Daily Return (December 31, 2012 -
December 31, 2015)
|
Note:
| | Assumes reinvestment of dividends as of the ex-
dividend date.
| | Note:
| | Assumes reinvestment of dividends as of the ex-
dividend date.
 |
¡■ | | Altria continued to deliver against our two long-term financial goals of growing adjustedReported diluted earnings per share (“EPS”) decreased more than 100% to $(0.70) while adjusted diluted EPS(2)2, which excludes the impact of special items, grew 5.8% to $4.22. |
| ■ | 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 annual rateprice of 7% to 9%, and maintaining a target dividend payout ratio of approximately 80% of adjusted diluted EPS.$51.24 per share. |
| Adjusted Diluted EPS | | | Dividend Payments | | | Share Repurchases |
| (12/31/16 - 12/31/19) | | | ($ 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”).
| (1) | For 2015, Altria’s Peer Group included The Kraft Heinz Company in addition to the other companies identified in the 2015 Altria Peer Group table on page 36. |
(2) | Adjusted diluted EPSOCI is a financial measure that is not consistent with generally accepted accounting principles in the United States (“GAAP”). See Annex AExhibit B to this Proxy Statement for information regarding non-GAAP financial measures used in this Proxy Statement and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures. |
ALTRIA GROUP, INC. – Proxy Statement 3
PROXY STATEMENT SUMMARY
| (2) | ¡ | | Full-year adjustedAdjusted diluted EPS which excludes the impact of special items, grew 8.9% in line with our long-term adjusted diluted EPS growth objectives. |
| ¡ | | Altria paid nearly $4.2 billion in dividends in 2015, consistent with our goal of paying out approximately 80% of adjusted diluted EPS. |
| ¡ | | In August 2015, Altria’s Board of Directors increased the regular quarterly dividend by 8.7%, which was Altria’s 49th dividend increase in the last 46 years. |
| ¡ | | Also, during 2015, Altria purchased 10.7 million shares of its common stock at an average price of $51.83 for a total cost of approximately $554 million. |
¡ | | Altria’s core businesses generated impressive and consistent income growth during the year behind the strength of their premium brands. |
| ¡ | | The smokeable products segment grew adjusted operating companies income (“OCI”)(3) by 10.9%, and Philip Morris USA Inc. (“PM USA”) grew the retail share ofMarlboro by 0.2 share points to 44.0%. |
| ¡ | | The smokeless products segment grew adjusted OCI by 4.9% and U.S. Smokeless Tobacco Company LLC (“USSTC”) grew the combined retail share ofCopenhagen andSkoal by 0.3 share points to 51.3%. |
| ¡ | | Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”) grew adjusted OCI by 13.4% and is one of the fastest growing premium wine companies in the United States. |
¡ | | In November 2015, Anheuser-Busch InBev SA/NV (“AB InBev”) and SABMiller plc (“SABMiller”) jointly announced that they had reached an agreement on the terms of AB InBev’s offer to effect a business combination with SABMiller. If the transaction is completed, Altria expects to receive an approximate 10.5% stake in the new, combined company and approximately $2.5 billion in pre-tax cash, have two seats on the new company’s board of directors, continue the use of equity accounting for the asset’s contribution to Altria’s earnings and achieve continued tax efficiency.(4) |
(3) | Adjusted OCI is a financial measure that is not consistent with GAAP. See Annex AExhibit B to this Proxy Statement for information regarding non-GAAP financial measures used in this Proxy Statement and reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures. |
(4)Altria Group, Inc. – Proxy Statement | Certain anticipated benefits are subject to proration, as described in our 2015 Annual Report on Form 10-K.iii |
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.
Table of Contents
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
President Emeritus, University of Virginia | | 76 | | 2010 | | ✓ | | ■ | ■ | | | ■ | |
Dinyar S. Devitre
Former Chief Financial Officer, Altria Group, Inc. | | 72 | | 2008 | | ✓ | | | | ■ | ■ | ■ | ■ |
Thomas F. Farrell II(2)
Chairman, President and Chief Executive Officer, Dominion Energy, Inc. | | 65 | | 2008 | | ✓ | | | ■ | ■ | | | ■ |
Debra J. Kelly-Ennis
Retired President and Chief Executive Officer, Diageo Canada, Inc. | | 63 | | 2013 | | ✓ | | ■ | | | | ■ | ■ |
W. Leo Kiely III
Retired Chief Executive Officer, MillerCoors LLC | | 73 | | 2011 | | ✓ | | | ■ | ■ | ■ | ■ | |
Kathryn B. McQuade
Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited | | 63 | | 2012 | | ✓ | | ■ | ■ | ■ | | | ■ |
George Muñoz
Principal, Muñoz Investment Banking Group, LLC and Partner, Tobin & Muñoz | | 68 | | 2004 | | ✓ | | ■ | | ■ | ■ | | ■ |
Mark E. Newman
Senior Vice President and Chief Operating Officer, The Chemours Company | | 56 | | 2018 | | ✓ | | ■ | | | ■ | ■ | |
Nabil Y. Sakkab
Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company | | 72 | | 2008 | | ✓ | | | | ■ | ■ | ■ | ■ |
Virginia E. Shanks
Former Executive Vice President and Chief Administrative Officer, Pinnacle Entertainment, Inc. | | 59 | | 2017 | | ✓ | | ■ | ■ | | | ■ | |
Howard A. Willard III
Chairman and Chief Executive Officer, Altria Group, Inc. | | 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 |
| | Annual incentive awards for the executive officers named in the Summary Compensation Table on page 43 (“named executive officers” or “NEOs”) reflect Altria’s excellent 2015 business performance and are consistent with or slightly higher than last year’s awards. Stock awards reflected in the Summary Compensation Table were granted in January 2015 and reflect 2014 performance. | | | | | |
| ■ | Chair | ■ | Member | | |
|
| (2) | Presiding Director | | | | |
| Altria Group, Inc. – Proxy Statement | v |
Table of Contents
PROXY STATEMENT SUMMARY
¡ | | At the 2015 Annual Meeting:Corporate Governance Highlights |
| | ¡ | | 96% of the votes cast approved, on an advisory basis, the compensation | |
| Board Independence and Composition ■10 of our NEOs, demonstrating strong alignment11 director nominees are independent ■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 shareholder interests withindependent directors ■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 programprograms to align with long-term strategies ■Participation in executive succession planning ■Updates to the Board on investor perspectives and philosophy;engagement ■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. | |
| | | | |
Table of Contents
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
perspectives
that we gain
through these
engagement
activities. |
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 Highlights |
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:
| | ¡ | | 95%Form of the votes cast approved our new five-year 2015
Compensation | Performance
Period | Award Criteria | Company Performance Incentive Plan, which includes changes from the prior plan that we believe reflect good governance practicesAlignment |
|  |  | Cash | Ongoing | Individual performance | |
|  |  | Cash | Annual | Company and further align our executive compensation programindividual performance | ■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 shareholder interests. For more informationrolling three-year vesting periods | Individual performance and advancement potential with additional payment criteria for PSUs based on the changes, please see page 62 of the proxy statement for our 2015 Annual Meeting (“2015 Proxy Statement”).company performance | ■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 |
Table of Contents
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:
| | | | | | | | |
What We Do |
| | | | What We Don’t Do
|
| | | | |
ü
| |  Pay for Performance
- A significant portion of our NEOs’ compensation is at-risk variable compensation. | | | | û
| | No Excessive Perquisites - Perquisites represent less than 2% Annual and long-term cash incentives and a significant portion of our NEOs’ compensation.
|
| | | | |
equity compensation are tied to performance measures. ü | | Double-Trigger Change in Control - Our shareholder-approved 2015 Performance Incentive Plan includes a double-trigger change in control provision.
| | | | û
| | No Individual Supplemental Executive Retirement Plans
|
| | | | |
ü
| | Multiple Performance Metrics
- Variable compensation is based on more than one measure to encourage balancedbalance incentives. | | | | û | | No Hedging - Our policy prohibits our executive officers from engaging in hedging activities with Altria stock.
|
| | | | |
ü
| | Stock Holding and Ownership GuidelinesRequirements
- All NEOs exceed Altria’s robust stock ownership requirements. | | | | û | | No Pledging - Our NEOs do not pledge their Altria shares.
|
| | | | |
ü
| | “Clawback” Provisions - Policy
Our policy provides for the adjustment or recovery of compensation in certain circumstances. | | | | û | | No Employment Agreements - All of our NEOs are employed on an at-will basis.
|
| | | | |
ü
| | Award Caps
- All our variable compensation plans have caps on plan formulas. | | | | û | | No Tax Gross-Ups
|
| | | | |
ü
| | Below Average Share Utilization
- The Company hasWe have below average run rates for equity compensation, as compared to S&P 500 and Food, Beverage & Tobacco Indices companies. | | | | û | | No Share Recycling
|
| | | | |
ü
| | Tally Sheets
- TheOur Compensation and Talent Development Committee reviews compensationuses tally sheets at least annually as part of making individual compensation decisions for our NEOs. | | | | | | |
| | | | |
ü | | Confidentiality & Non-Compete Agreements
- All NEOs are subject to confidentiality and non-compete agreements. | |
| |
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| |
| |
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| |
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| |
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ALTRIA GROUP, INC. – Proxy Statement 5
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
QUESTIONS AND ANSWERS
ABOUT THE 2016 ANNUAL MEETING AND VOTING
1. | WHY DID I RECEIVE THESE PROXY MATERIALS? |
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.
3. | WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN? |
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:
(a) | receive notice of the meeting; and |
4. | WHAT IS THE DIFFERENCE BETWEEN A SHAREHOLDER OF RECORD AND A SHAREHOLDER WHO HOLDS STOCK IN STREET NAME? |
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.
5. | WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK? |
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
6. | WHAT ITEMS WILL BE VOTED ON AT THE 2016 ANNUAL MEETING? |
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Proposal | | Voting Choices, Board Recommendation and Voting Requirement |
Proposal 1 –
Election of Directors
(pages 56 – 61)
| | Voting Choices
• Vote for a nominee;
• Vote against a nominee; or
• Abstain from voting on a nominee.
Board Recommendation
The Board recommends a vote “FOR” each of the nominees named in the Proxy Statement.
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 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 the Board in accordance with the Company’s Corporate Governance Guidelines. The Nominating, Corporate Governance and Social Responsibility Committee will consider the offer and recommend to the Board whether to accept the offer. The full Board will consider all factors it deems relevant to the best interests of the Company, make a determination and publicly disclose its decision and rationale within 90 days after confirmation of the election results.
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Proposal 2 –
Ratification of the
Selection of Independent
Registered Public
Accounting Firm
(page 62)
| | Voting Choices
• Vote for the ratification;
• Vote against the ratification; or
• Abstain from voting.
Board Recommendation
The Board recommends a vote “FOR” this proposal.
Voting Requirement
The selection of the independent registered public accounting firm will be ratified if the votes cast “FOR” exceed the votes cast “AGAINST.”
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Proposal 3 –
Non-Binding Advisory
Vote to Approve
the Compensation of the
Company’s Named
Executive Officers
(page 63)
| | Voting Choices
• Vote for the compensation of the Company’s named executive officers;
• Vote against the compensation of the Company’s named executive officers; or
• Abstain from voting.
Board Recommendation
The Board recommends a vote “FOR” this proposal.
Voting Requirement
The compensation of the Company’s 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 the Company, the Board or the Compensation Committee. Nevertheless, the Compensation 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 the Company’s named executive officers.
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ALTRIA GROUP, INC. – Proxy Statement 7
QUESTIONS AND ANSWERS ABOUT THE 2016 ANNUAL MEETING AND VOTING
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Proposal | |
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| | Voting Choices, Board Recommendation and Voting Requirement |
Proposal 4 –
Shareholder Proposal
Regarding a Report on
Tobacco Product
Constituents and Ingredients
and Their Potential Health
Consequences
(pages 64 – 65)
| | | |
Table of Contents
Board and Governance Matters
Voting Choices
• Vote for the proposal;
• Vote against the proposal; or
• Abstain from voting.
Board RecommendationThe Board recommends a vote “AGAINST” this shareholder proposal.
Voting Requirement
The shareholder proposal will be approved if the votes cast “FOR” exceed the votes cast “AGAINST.”
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Proposal 5 –
Shareholder Proposal
Regarding Participation in
Mediation of Any Alleged
Human Rights Violations
Involving Altria’s
Operations
(pages 66 – 67)
| | Voting Choices
• Vote for the proposal;
• Vote against the proposal; or
• Abstain from voting.
Board Recommendation
The Board recommends a vote “AGAINSTand Committee Governance” this shareholder proposal.
Voting Requirement
The shareholder proposal will be approved if the votes cast “FOR” exceed the votes cast “AGAINST.”
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7. | 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 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.
9. | WHAT IF I DO NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY? |
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.
10. | 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.
11. | 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 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
12. | 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 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.
13. | ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED? |
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.
14. | 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 the Corporate Secretary of the Company; |
(b) | delivering a later-dated proxy; or |
(c) | voting in person at 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.
15. | WHO WILL PAY THE COST OF THIS PROXY SOLICITATION? |
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.
16. | HOW DO I OBTAIN ADMISSION TO THE 2016 ANNUAL MEETING? |
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.
17. | MAY SHAREHOLDERS ASK QUESTIONS AT THE 2016 ANNUAL MEETING? |
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.
18. | HOW MANY VOTES MUST BE PRESENT TO HOLD THE 2016 ANNUAL 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
BOARD AND GOVERNANCE MATTERS
Board Responsibility
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.
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| Our Board devotes multi-day meetings each year reviewing our strategies and discussing them with management. | |
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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 |
Table of only independent directors led by the Presiding Director. Directors are expected to attend Board meetings, meetings of the Committees on which they serve and the annual meeting of shareholders, with the understanding that on occasion a director may be unable to attend a meeting. During 2015, all nominees for director attended at least 90% of the aggregate number of meetings of the Board during their respective terms of service and of all Committees on which they served. In addition, all directors attended the 2015 Annual Meeting.Contents
Board Composition
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. |
DIRECTOR SKILLS AND EXPERIENCE
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¡ Consumer goods experience
■ | | ¡Reputational and Governance Risk: PublicThrough its interaction with business functions responsible for our public policy expertise
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¡ Regulated industries experience
| | ¡ Public company board experience
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¡ Chief executive officer experience
| | ¡ Leadership in innovation
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¡ Financial expertise, including chief financial officer experience
| | ¡ Information technology/cybersecurity experience
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Board Leadership Structure and Governance
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The Board believes that it is important to retain the flexibility to allocate the responsibilities of the Chairman of the Board (the “Chairman”) and the Chief Executive Officer (“CEO”) in a way that it considers to be in the best interests of the Company. After due consideration bysocietal alignment activities and strategies, the Nominating, Corporate Governance and Social Responsibility Committee oversees the ways in which we manage public policy and reputational risk, including environmental and social risk. The Nominating, Corporate Governance and Social Responsibility Committee also oversees risks related to Board organization, membership and structure and other corporate governance matters.
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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 the Board has concluded that presently combining the roles of Chairman and CEO is in the best interests of the Company. The Company’s Mission is to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products. The Board believes that the combination of the roles of Chairman and CEO promotes the pursuit of the Company’s Mission by allowing the senior-most executive with accountability for the Company’s day-to-day operations and execution of the Company’s 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. The Board considers this effective and efficient structure to be particularly appropriate for the Company given the unique challenges that the Company has faced and continues to face in its businesses, particularly domestic tobacco, and the enhanced regulatory environment.The Board’s strict adherence to sound corporate governance practices, as reflected in the Company’s Corporate Governance Guidelines, has promoted, and continues to promote, the effective and independent exercise of Board leadership for the Company and its shareholders. The Company has a strong and experienced independent Presiding Director who, in discharging his responsibilities, promotes dialogue among independent members of the Board and directly, clearly and regularly communicates the views of the Board to management. Moreover,receives an annual update on our independent directors convene at each Board meeting in an executive session led by the Presiding Director.cybersecurity program.
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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/.
Table of Contents
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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| | RESPONSIBILITIES OF OURResponsibilities of Our Presiding DirectorPRESIDING DIRECTOR■¡Preside over executive sessions of the independent directors and at all meetings at which the Chairman is not present
¡■Call meetings of the independent directors as he or she deems necessary¡■Serve as a liaison between the Chairman and the independent directorsdirectorsƒ ¡■Together with the Chairman, approve agendas and schedules for Board meetings¡■Advise the Chairman of theour Board’s informational needs and, where appropriate, approve information sent to theour Board¡■Together with the Chair of the Compensation and Talent Development Committee, communicate goals and objectives to the Chairman and CEO and the results of the evaluation of histhe CEO’s performance¡■Be available for consultation and communication if requested by major shareholders |
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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 |
Table of the Nominating, Corporate Governance and Social Responsibility Committee is a highly effective method of conducting the self-evaluations. The Nominating, Corporate Governance and Social Responsibility Committee oversees the evaluation process, including determining the format, and presents to the Board the results of the self-evaluations to identify opportunities to enhance effectiveness. Self-evaluation topics generally include, among other matters, Board composition and structure, meeting topics and process, information flow, Board oversight of risk management and strategic planning, succession planning and access to management. The Board discusses the results of each annual self-evaluation and, as appropriate, implements enhancements and other modifications identified during the self-evaluation.
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 | | | |
Committee | | Primary ResponsibilitiesDebra J. Kelly-Ennis | | Mark E. Newman | | | | | | |
Audit
| | The Audit Committee assists theour Board in its oversight of (i) the integrity of the Company’sour financial statements and financial reporting processes and systems of internal control, (ii) the qualifications, independence and performance of the Company’sour independent registered public accounting firm, (iii) the internal auditors and the internal audit function, (iv) our risk assessment and (iv) the Company’srisk management policies and practices and (v) our compliance with legal and regulatory requirements. The Audit Committee also prepares the Audit Committee report that the rules of the SECU.S. Securities and Exchange Commission (“SEC”) require the Companyus to include in itsour proxy statement. See pages 21 to 22 for“Audit Committee Matters” beginning on page22for further matters related toinformation on the Audit Committee, including its report for the year ended December 31, 2015.2019. 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 Compensationand Talent Development Committee determines and approves CEO compensation and reviews and approves the compensation of theour other executive officers, including salary, annual incentive awards and long-term incentive awards. The Compensation Committee alsoofficers; oversees the development of executive succession plans and evaluates and makes recommendations to theour Board regarding potential CEO candidates. In addition, the Compensation Committeecandidates and candidates for other senior executive positions; evaluates the design and effectiveness of the Company’sour incentive programs.programs and monitors risks related to such design; and reviews initiatives and programs related to corporate culture and talent development. See pages 23 to 24“Executive Compensation” beginning on page 25 for further matters related toinformation on the Compensation and Talent Development Committee, including a discussion of its procedures and its report onreport.
The Compensation and Talent Development Committee consists entirely of non-management directors all of whom our Board has determined are independent within the Compensation Discussionmeaning of the listing standards of the NYSE and Analysis appearing on pages 26 through 42.non-employee directors for the purposes of Rule 16b-3 of the Exchange Act. |
Table of Contents
BOARD AND GOVERNANCE MATTERS
| Executive Committee | | | | | | 2019 Meetings:0 |
Executive
Chair | | 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 theour Board during intervals between Board meetings to the extent permitted by law. |
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 | | | | | | |
Committee | | Primary ResponsibilitiesGeorge Muñoz | | Nabil Y. Sakkab | | | | | | |
Finance
| | The Finance Committee monitors the Company’sour financial condition, oversees the sources and uses of cash flow and the investment of certain employee benefit plan assets and advises theour Board with respect to financing needs, dividend policy, share repurchase programs and other financial matters. |
| Innovation Committee | | | | | | 2019 Meetings:4 |
Innovation
Chair | | 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 theour Board in its oversight of the strategic goals and objectives of theour subsidiaries’ innovation programs of the Company’s subsidiaries, which include innovation strategy, adult consumerand marketing strategies, consumer/market understanding and brand plans, technological initiatives and research, and marketplace insights, development and engineering programsprograms. |
Nominating, Corporate Governance and technological initiatives.Social Responsibility Committee | | | | | | 2019 Meetings:4 |
Nominating,
Corporate
Governance
and Social
Responsibility
Chair | | 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 theour Board and described in the Company’sour Corporate Governance Guidelines, and recommends a slate of nominees for election at each annual meeting of shareholders; makes recommendations to theour Board concerning the appropriate size, function, needs and composition of theour Board and its Committees; reviews non-employee director compensation and recommends any changes in compensation to theour Board; advises theour Board on corporate governance matters; oversees the self-evaluation process of theannual Board and its Committees;Committee self-evaluation process; and provides oversight of the Company’sour public affairs, corporate reputation and societal alignment strategies. |
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* | | | | ü | | ü | | | | ü | | Chair |
Martin J. Barrington | | | | | | Chair | | | | | | |
John T. Casteen III* | | ü | | | | | | | | ü | | ü |
Dinyar S. Devitre* | | | | | | | | ü | | ü | | |
Thomas F. Farrell II* (4) | | | | ü | | ü | | | | | | ü |
Thomas W. Jones* | | ü | | ü | | ü | | Chair | | | | |
Debra J. Kelly-Ennis* | | ü | | | | | | | | ü | | ü |
W. Leo Kiely III* | | | | Chair | | ü | | ü | | ü | | |
Kathryn B. McQuade* | | ü | | ü | | | | ü | | | | |
George Muñoz* | | Chair | | | | ü | | ü | | | | ü |
Nabil Y. Sakkab* | | | | | | ü | | ü | | Chair | | ü |
2015 Meetings | | 7 | | 5 | | 0 | | 5 | | 4 | | 4 |
(1) | The Audit Committee consists entirely of non-management directors all of whom the Board has determined are independent within the meaning of the listing standards of the NYSE and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has determined that all members of the Audit Committee are financially literate and that George Muñoz is an “audit committee financial expert” within the meaning set forth in the regulations of the SEC. |
(2) | The Compensation Committee consists entirely of non-management directors all of whom the Board has determined are independent within the meaning of the listing standards of the NYSE; are non-employee directors for the purposes of Rule 16b-3 of the Exchange Act; and satisfy the requirements of Internal Revenue Code Section 162(m) for outside directors. |
(3) | The Nominating, Corporate Governance and Social Responsibility Committee consists entirely of non-management directors all of whom theour Board has determined are independent within the meaning of the listing standards of the NYSE. |
(4)Altria Group, Inc. – Proxy Statement | Presiding Director.5 |
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.
¡Format | Topics | LegalPresentation of Findings | Feedback Incorporated |
The Nominating, Corporate Governance and Regulatory Risk: The Board, both directly and throughSocial Responsibility Committee determines the Audit Committee, receives regular updates on various legal and regulatory matters, including developments in litigation and developments related to U.S. Food and Drug Administration (“FDA”) regulation of certainformat of the Company’s subsidiaries, thereby reviewing the Company’s management of legal and regulatory risk. In addition, reports to the Audit Committee at each of its meetingsevaluations, which may include interviews conducted by the Company’s Chief Compliance Officer and corporate audit personnel provide insight intoPresiding Director, interviews conducted by the Company’s risk assessment and risk management policies and processes, including enterprise risk management. |
¡ | | Financial and Accounting Risk: The Finance and Audit Committees oversee the Company’s managementChair of financial, accounting, internal controls and liquidity risks through interaction at each meeting with the Chief Financial Officer, management from the Company’s financial, accounting, auditing and treasury functions (as appropriate) and, for the Audit Committee, representatives from the Company’s independent registered public accounting firm. |
¡ | | Reputational and Governance Risk: Through its interaction with business functions responsible for the Company’s public policy and societal alignment activities and strategies, the Nominating, Corporate Governance and Social Responsibility Committee, oversees the ways in which the Company manages reputationalinterviews conducted by an independent third party or written surveys. | Self-evaluation topics generally include: ■Board composition and public policy risk. structure ■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 also oversees risks relatedpresents to our Board organization, membership and structurethe results of the self-evaluations. Our Board discusses the results to identify opportunities to enhance effectiveness. | Our Board implements enhancements and other corporate governance matters.modifications, as appropriate, identified during the self-evaluations. |
¡6 | | Executive Compensation Program Risk: The Compensation Committee considers the extent to which the executive compensation program may create risk for the Company (see page 35 for a more detailed description).www.altria.com |
¡ | | Technology, Intellectual Property and Research and Product Development Risk: The Innovation Committee oversees the Company’s management of the risks associated with technology, research and product development, including intellectual property. The Audit Committee oversees the Company’s information technology security program. |
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 |
Table of Contents
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.
|
In reviewing nominee candidates,At least annually, the Nominating, Corporate GovernanceChairman and Social ResponsibilityCEO meets with the Compensation and Talent Development Committee follows the process described above and in so doing, considers both (i) the Company’s Missionour Board to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products and (ii) its four related Mission goals – invest in leadership; align with society; satisfy adult consumers; and create substantial value for shareholders. The Committee has not established anydiscuss CEO succession planning (including specific minimum qualification standards for nominees to the Board; rather, in evaluating the suitability of individuals for Board membership, the Committee considers the ways in which it believes each nominee can assist the Company in pursuing its Mission and advancing one or more Mission goals.
candidates). The Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of directors that can best continue the Company’s successCompensation and represent shareholder interests through the exercise of sound judgment. 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 the Board in its deliberations. In determining whether to recommend a director for re-election, theTalent Development Committee also considers the director’s past attendance at meetingsprocedure for the timely and participationefficient transfer of CEO responsibilities in and contributions to the activitiesevent of an emergency or the sudden incapacity, departure or death of the Board.Chairman and CEO. | 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, the Committee considers whether theour 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 are set forth in the Company’s Corporate Governance Guidelines. Under “Proposal 1 – Election of Directors,” we provide an overview of each nominee’s principal occupation, business experienceexposure to succession candidates (CEO and otherwise) from across our companies through presentations, site visits and other directorships, together with the key attributes, experience and skills considered by the Committee and the Board as being particularly meaningful in pursuing the Company’s Mission and advancing one or more Mission goals.events.
| | | | EVALUATING BOARD DIVERSITY
The Company is committed to diversity, as reflected in its Mission goals, its Code of Conduct, its leadership development system and various other Company policies.
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 the Company’s diversity philosophy in its review and consideration of potential director nominees. In this regard, the Board and the Committee view diversity holistically. As set forth in the Company’s Corporate Governance Guidelines, the Board and the Committee consider:
¡ 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 the Company’s businesses and markets;
¡ the individual’s professional expertise and educational background; and
¡ other factors that promote diversity of views and experiences.
|
| | | |
| | | |
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:
codeofconduct.
| 8 |
Business Relationships and Transactions Considered |
Mr. Farrell is the Chief Executive Officer of Dominion Resources, Inc. (“Dominion”). A subsidiary of Dominion is a regulated public utility with which the Company or its subsidiaries has a commercial relationship for energy procurement. Amounts paid by the Company or its subsidiaries are set at rates fixed in accordance with the applicable regulatory authority. A Company subsidiary has an agreement with the same utility under which the Company 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 the Company or its subsidiaries, nor does Mr. Farrell materially benefit directly or indirectly from this relationship.
|
In July 2012, the Company and the Economic Development Authority of the City of Richmond (“EDA”) entered into an agreement concerning the renovation of the historic Landmark Theater in Richmond, Virginia. Under the agreement, the Company acquired from the EDA the naming rights to the theater for a 20-year period for $10 million payable to the EDA over five years. The agreement reflects the Company’s long-standing commitment to supporting cultural venues located in and around its communities. Messrs. Farrell and Barrington are non-employee directors of Richmond Performing Arts Center L.L.L.P., the entity responsible for overseeing various performing arts venues in the City of Richmond, including the Altria Theater (previously the Landmark Theater), for the benefit of the Richmond community. Neither Mr. Farrell nor Mr. Barrington materially benefits directly or indirectly from this relationship.
|
Mr. Devitre is a non-executive director of SABMiller, an entity in which the Company held approximately 27% of the economic and voting interest at December 31, 2015. Mr. Devitre serves at the Company’s request as a non-executive member of SABMiller’s 15-member Board of Directors in accordance with the Amended and Restated Relationship Agreement between the Company and SABMiller. Mr. Devitre’s compensation for his SABMiller board service is limited to director fees paid by SABMiller. Mr. Devitre does not materially benefit directly or indirectly from this relationship.
|
The Company or its 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. Farrell, Ms. Kelly-Ennis and Mr. Muñoz serve as non-executive directors or where immediate family members (as defined in the Company’s Policy on Related Person Transactions, which is discussed in “Related Person Transactions and Code of Conduct” on page 70) of Mr. Casteen, Mr. Devitre, Mr. Farrell, Mr. Kiely and Dr. Sakkab 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 the Company or its subsidiaries, and the respective payments made by the Company or its subsidiaries to the entities in 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, Mr. Muñoz or Dr. Sakkab, or their respective immediate family members, materially benefits directly or indirectly from these relationships.
www.altria.com |
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.
| | |
Philanthropic Relationships and Transactions ConsideredDirector Compensation |
The Company and the University of Virginia (the “University”) have a long-standing relationship that has included employment recruiting and charitable donations. In 2015, the Company or its subsidiaries made certain charitable donations to the University in an aggregate amount of $1,428,334, with the significant majority supporting the University’s Youth-Nex Center that promotes positive youth development and scholarships. These donations also included contributions under the Company’s Matching Gift Program, which is discussed on page 19. In addition, the Company made ordinary course trade payments to the University in the aggregate amount of $259,407. The sum of these 2015 contributions and payments represent 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 daughter-in-law, Laura Casteen, is employed by the University as an Associate Dean. Neither Mr. Casteen nor his daughter-in-law materially benefits directly or indirectly from this relationship.
|
The Company also has long-standing relationships with other educational and charitable organizations in the Richmond, Virginia region, where the Company and several of its subsidiaries are headquartered and employ approximately 3,800 people. In 2015, the Company made contributions to the following Richmond area educational and charitable organizations that exceeded $150,000:
|
| |
•
| | $472,950 to Virginia Commonwealth University in support of various academic programs and scholarships; and |
| |
•
| | $700,000 to the Virginia Museum of Fine Arts in support of exhibitions. |
|
Mr. Farrell served as a non-employee trustee of Virginia Commonwealth University until June 2015. He is no longer affiliated with the institution. Messrs. Farrell and Barrington are non-employee trustees of the Virginia Museum of Fine Arts. The contributions identified above did not in any case exceed the greater of $1 million or 2% of any such entity’s consolidated gross revenues. Neither Mr. Farrell nor Mr. Barrington materially benefits directly or indirectly from these contributions.
|
In addition, the Company makes various grants and charitable contributions, including matching gifts under the Company’s Matching Gift Program, to entities where Governor Baliles, Mr. Casteen, Mr. Farrell, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade and Mr. Muñoz and immediate family members of Governor Baliles, Mr. Casteen, Mr. Farrell, Mr. Jones, Mr. Kiely and Ms. McQuade serve as non-executive directors or trustees or non-executive employees. A substantial majority of these grants and contributions was made to non-profit entities that serve the communities in which the Company and its subsidiaries operate and to non-profit educational programs and institutions located in and around these communities. In each case, payments by the Company in 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 Governor Baliles, Mr. Casteen, Mr. Farrell, Mr. Jones, Ms. Kelly-Ennis, Mr. Kiely, Ms. McQuade or Mr. Muñoz, or their respective immediate family members, materially benefits directly or indirectly from these contributions.
|
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
Director Compensation
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 | $15,000 |
| (1) | | | | | The annual full value equity award is in the form of fully vested shares of Altria common stock. |
Type of Compensation
(2) | | Amount
($)
|
Annual Cash Board Retainer(1)
| | 100,000
|
Annual Cash Retainer for Presiding Director
| | 20,000
|
Annual Cash Retainer for Committee Chairs
| | |
Audit
Compensation
Finance
Innovation
Nominating, Corporate Governance and Social Responsibility
| | 20,000
20,000
10,000
10,000
10,000
|
Annual Cash Membership Retainer for each member of each committee above
| | 5,000
|
Annual Equity Award
| | 175,000
|
(1) | The Annual Cash Board Retainer is paidPaid in quarterly installments. |
| (3) | Committee Chairs also receive the Committee Member annual cash retainer. |
| Altria Group, Inc. – Proxy Statement | 9 |
Table of Contents
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.$201,265.
Other
ALTRIA GROUP, INC. – Proxy Statement 19
BOARD AND GOVERNANCE MATTERS
In addition to cash payments, stock awards and matching gifts, non-employee directors are covered under our Business Travel Accident Insurance Plan, which is available generally to all employees.
The following table presents the compensation received by the non-employee directors for service as directors in fiscal year 2015:
Non-Employee Director Compensation Table
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| Name | | Fees Earned or Paid in Cash ($) | | Stock Awards ($) (1) (2) | | All Other Compensation ($) (3) | | Total ($) |
Gerald L. Baliles | | 125,000 | | 175,029 | | 12,544 | | 312,573 |
John T. Casteen III | | 115,000 | | 175,029 | | 18,000 | | 308,029 |
Dinyar S. Devitre | | 110,000 | | 175,029 | | 30,000 | | 315,029 |
Thomas F. Farrell II | | 130,000 | | 175,029 | | 0 | | 305,029 |
Thomas W. Jones | | 125,000 | | 175,029 | | 29,335 | | 329,364 |
Debra J. Kelly-Ennis | | 115,000 | | 175,029 | | 10,000 | | 300,029 |
W. Leo Kiely III | | 135,000 | | 175,029 | | 30,000 | | 340,029 |
Kathryn B. McQuade | | 115,000 | | 175,029 | | 47,000 | | 337,029 |
George Muñoz | | 135,000 | | 175,029 | | 1,000 | | 311,029 |
Nabil Y. Sakkab | | 125,000 | | 175,029 | | 0 | | 300,029 |
2019.
| Non-Employee Director Compensation Table |
| Name | | Fees
Earned or
Paid in
Cash
($) | | 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 20, 2015,16, 2019, each non-employee director received 3,3643,345 shares of Altria common stock with an aggregate grant date fair market value of $175,029.$175,010. The dollar value is slightly higher than $175,000 because the grant is made in whole shares. The fair market value of the shares of $52.03$52.32 per share was based on the average of the high and low trading prices of Altria common stock on May 20, 2015.16, 2019. |
| (2) | As of December 31, 2015, there were no stock options outstanding. |
(3) | All Other Compensation consists of matching gifts paid in 20152019 under the Company’sour Matching Gift Program to charitable entities designated by the non-employee director, as more particularly described above. In the case of Ms. McQuade, the amount includes $17,000 in matching gift requests submitted for fiscal year 2014 that were paid by the Company in 2015 for administrative purposes.Program. |
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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 |
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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.
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| 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 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 |
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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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| 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 |
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| Proposal
1 | | | | | |
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| | | Election of Directors | | |
| | The Board recommends a voteFOReach nominee. | | |
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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. |
20 2020 Director Nominee Biographies and Qualifications | | | | | |
| | | | Position, Principal Occupation and Professional Experience:
President Emeritus, University of Virginia (Charlottesville, VA).Mr. Casteen became President Emeritus of the University of Virginia in August 2010 after having served as President of the University since 1990. He is both University Professor and Professor of English. Previously, Mr. Casteen served as President of the University of Connecticut from 1985 to 1990 and as Secretary of Education for the Commonwealth of Virginia from 1982 to 1985. Other Current Public Directorships:
Strategic Education, Inc. Prior Public Company Directorships (within the last five years):
None. Other Directorships, Trusteeships and Memberships:
Leifur Eiríksson Foundation; Institute for Shipboard Education (Semester at Sea); Echo360, Inc. Previously served on the boards of the Chesapeake Bay Foundation, Jamestown-Yorktown Foundation, Virginia Foundation for Community College Education and the Woodrow Wilson International Center for Scholars. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Casteen’s extensive professional, administrative, public policy and leadership experiences, particularly his role as former chief executive of a university system with top-ranking academic and medical divisions, provide clear support for his nomination for election to our Board. |
| John T. Casteen III Age:76 Director Since:2010 Board Committees: ■Audit ■Compensation and Talent Development ■Innovation | | |
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ALTRIA GROUP, INC. – Proxy StatementTable of Contents
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Position, Principal Occupation and Professional Experience:
Former Chief Financial Officer, Altria Group, Inc. (New York, NY).Mr. Devitre served as Special Advisor to General Atlantic LLC, a private equity firm, from June 2008 to January 2017. In March 2008, Mr. Devitre retired from his position as Senior Vice President and Chief Financial Officer of Altria Group, Inc. Prior to Mr. Devitre’s appointment to this position in April 2002, he held a number of senior management positions with Altria. Other Current Public Directorships:
IHS Markit Ltd. Prior Public Company Directorships (within the last five years):
SABMiller plc (2007 to October 2016); Western Union Company (2006 to May 2015). Other Directorships, Trusteeships and Memberships:
Pratham USA; Brooklyn Academy of Music. Previously served on the boards of The Lincoln Center for the Performing Arts, Inc., The Asia Society and Kraft Foods Inc. (now known as Mondelēz International, Inc.). Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Devitre’s significant knowledge and understanding of Altria and our businesses, together with his public company board service, his financial acumen, his public company chief financial officer experience and his general business (including international business) knowledge, provide clear support for his nomination for election to our Board. |
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| Dinyar S. Devitre Age:72 Director Since:2008 Board Committees: ■Executive ■Finance(Chair) ■Innovation ■Nominating, Corporate Governance and Social Responsibility | |
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Position, Principal Occupation and Professional Experience:
Chairman, President and Chief Executive Officer, Dominion Energy, Inc. (Richmond, VA).Mr. Farrell is the Chairman, President and Chief Executive Officer of Dominion Energy, Inc., one of the nation’s largest producers of energy. He became President and Chief Executive Officer of Dominion effective January 2006 and was elected Chairman in April 2007. From January 2004 through December 2005, he served as President and Chief Operating Officer of Dominion and prior to that as Executive Vice President. Other Current Public Directorships:
Dominion. Mr. Farrell also serves as a director of Dominion Energy Gas Holdings, LLC, Virginia Electric and Power Company and Dominion Energy South Carolina, Inc., which are wholly owned subsidiaries of Dominion that only issue registered debt. Prior Public Company Directorships (within the last five years):
Dominion Energy Midstream GP, LLC. (2014 to 2019). Other Directorships, Trusteeships and Memberships:
Associated Electric & Gas Insurance Services Limited; Edison Electric Institute; Institute of Nuclear Power Operations; Richmond Performing Arts Center L.L.L.P.; The NH Foundation; Virginia Foundation for Independent Colleges. Previously served on the board of trustees of the Virginia Museum of Fine Arts. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Farrell’s extensive business, administrative and leadership experiences, particularly his role as chief executive officer of a large public company in a regulated industry, provide clear support for his nomination for election to our Board. | | | |
| Thomas F. Farrell II Age:65 Director Since:2008 Presiding Director Board Committees: ■Compensation and Talent Development ■Executive ■Nominating, Corporate Governance and Social Responsibility | |
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| Altria Group, Inc. – Proxy Statement | 17 |
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| | | | Position, Principal Occupation and Professional Experience:
Retired President and Chief Executive Officer, Diageo Canada, Inc. (Etobicoke, Ontario, Canada).Ms. Kelly-Ennis was President and Chief Executive Officer of Diageo Canada, Inc., a subsidiary of Diageo plc, a global spirits, wine and beer company, from 2008 to June 2012. From 2005 to 2008, she was Chief Marketing Officer for Diageo North America, Inc., another subsidiary of Diageo plc. Ms. Kelly-Ennis has also held marketing, sales and general management positions with RJR/Nabisco, Inc., The Coca-Cola Company, General Motors Corporation and Grand Metropolitan PLC. Other Current Public Directorships:
TFI International Inc. Prior Public Company Directorships (within the last five years):
Carnival Corporation & plc (2012 to January 2020); Hertz Global Holdings, Inc. (2013 to October 2015); PulteGroup, Inc. (1997 to September 2016). Other Directorships, Trusteeships and Memberships:
Dress for Success Worldwide (Director Emeritus). Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. Kelly-Ennis’s leadership experiences, particularly her positions as an executive with several large, consumer-focused companies in multiple industries, and her significant marketing, innovation, sales and distribution experience at large publicly held companies, including companies in the consumer packaged goods industry, provide clear support for her nomination for election to our Board. |
| Debra J. Kelly-Ennis Age:63 Director Since:2013 Board Committees: ■Audit ■Innovation ■Nominating, Corporate Governance and Social Responsibility | | |
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| | | | Position, Principal Occupation and Professional Experience:
Retired Chief Executive Officer, MillerCoors LLC (Golden, CO).Mr. Kiely retired as Chief Executive Officer of MillerCoors LLC, a joint venture combining the U.S. and Puerto Rico operations of SABMiller plc and Molson Coors Brewing Company, in July 2011, a position he had held since July 2009. From February 2005 through July 2009, Mr. Kiely served as President and Chief Executive Officer of Molson Coors Brewing Company. From March 1993 to March 2005, he held a variety of executive positions at Coors Brewing Company, including Chief Executive Officer. Before joining Coors Brewing Company, he held executive positions with Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., and Ventura Coastal Corporation, a division of Seven Up Inc. Other Current Public Directorships:
None. Prior Public Company Directorships (within the last five years):
HC Government Realty Trust, Inc. (2016 to March 2019). Other Directorships, Trusteeships and Memberships:
Previously served on the boards of The Denver Center for the Performing Arts and Helen G. Bonfils Foundation. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Kiely’s extensive business, administrative and leadership experiences, particularly his various executive positions, including the role of chief executive officer, in the consumer packaged goods industry, provide clear support for his nomination for election to our Board. |
| W. Leo Kiely III Age:73 Director Since:2011 Board Committees: ■Compensation and Talent Development(Chair) ■Executive ■Finance ■Innovation | | |
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Position, Principal Occupation and Professional Experience:
Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited (Calgary, Alberta, Canada).Ms. McQuade served as Senior Advisor of Canadian Pacific Railway Limited (“Canadian Pacific”), a transcontinental railway in Canada and the United States, from November 2012 to May 2013, after previously serving as Executive Vice President and Chief Financial Officer of Canadian Pacific from September 2008 to her retirement in November 2012. Ms. McQuade joined Canadian Pacific in June 2007 as Executive Vice President and Chief Operating Officer. Prior to joining Canadian Pacific, Ms. McQuade served as Executive Vice President – Planning and Chief Information Officer at Norfolk Southern Corporation where she spent 27 years in key information technology, strategic planning and finance leadership positions. Other Current Public Directorships:
TransAlta Renewables Inc. Prior Public Company Directorships (within the last five years):
None. Other Directorships, Trusteeships and Memberships:
Previously served on the board of The College of William & Mary Foundation. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. McQuade’s significant financial and accounting expertise, particularly her experience as a public company chief financial officer, her information technology expertise, her general business knowledge and her management experience in a regulated industry, provide clear support for her nomination for election to our Board. |
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| Kathryn B. McQuade Age:63 Director Since:2012 Board Committees: ■Audit ■Compensation and Talent Development ■Executive ■Nominating, Corporate Governance and Social Responsibility(Chair) | |
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Position, Principal Occupation and Professional Experience:
Principal, Muñoz Investment Banking Group, LLC (Washington, D.C.) and Partner, Tobin & Muñoz (Chicago, IL).Mr. Muñoz is a principal of the Washington, D.C.-based firm of Muñoz Investment Banking Group, LLC. He is also a partner in the Chicago-based law firm of Tobin & Muñoz. He served as President and Chief Executive Officer of the Overseas Private Investment Corporation from 1997 to January 2001. From 1993 to 1997, Mr. Muñoz was Chief Financial Officer and Assistant Secretary of the United States Treasury Department. Other Current Public Directorships:
Marriott International, Inc.; Anixter International, Inc.; Laureate Education, Inc. Prior Public Company Directorships (within the last five years):
None. Other Directorships, Trusteeships and Memberships:
National Geographic Society; Direct Edge, Inc. Previously served on the boards of Esmark Incorporated and Archipelago Holdings, Inc. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Muñoz’s accounting, financial, legal and public policy expertise, along with his background in international business and his significant professional, administrative and leadership experiences in both the private and public sectors, provide clear support for his nomination for election to our Board. |
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| George Muñoz Age:68 Director Since:2004 Board Committees: ■Audit(Chair) ■Executive ■Finance ■Nominating, Corporate Governance and Social Responsibility | |
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| Altria Group, Inc. – Proxy Statement | 19 |
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| | | | Position, Principal Occupation and Professional Experience:
Senior Vice President and Chief Operating Officer, The Chemours Company (Wilmington, DE). Mr. Newman is Senior Vice President and Chief Operating Officer of The Chemours Company (“Chemours”), a global chemical company. He is also the executive sponsor of the Chemours Black Employee Network. He previously served as Senior Vice President and Chief Financial Officer of Chemours from 2015 to June 2019. Mr. Newman joined Chemours, then a subsidiary of E. I. du Pont de Nemours and Company, in 2014. From 2011 to 2014, he was Senior Vice President and Chief Financial Officer for SunCoke Energy Inc., a supplier of high-quality coke used in the blast furnace production of steel. Prior to 2011, Mr. Newman held financial and operational leadership positions at General Motors Corporation, GMAC Financial Services, LLC and Ally Financial Inc. Other Current Public Directorships:
None. Prior Public Company Directorships (within the last five years):
None. Other Directorships, Trusteeships and Memberships:
None. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Newman’s significant financial, accounting and operational expertise, particularly his roles as a chief financial officer and chief operating officer of a large public company in a regulated industry, along with his international business and transactional experience, including at consumer-focused companies, provide clear support for his nomination for election to our Board. |
| Mark E. Newman Age:56 Director Since:2018 Board Committees: ■Audit ■Finance ■Innovation | | |
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| | | | Position, Principal Occupation and Professional Experience:
Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company (Cincinnati, OH).Dr. Sakkab held a variety of positions at The Procter & Gamble Company beginning in 1974. He retired in November 2007 as Senior Vice President, Corporate Research and Development. Other Current Public Directorships:
PharNext. Prior Public Company Directorships (within the last five years):
Deinove (2010 to April 2016); Givaudan SA (2008 to March 2015). Other Directorships, Trusteeships and Memberships:
Several privately held companies. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Dr. Sakkab’s innovation expertise in the consumer packaged goods industry and his extensive overall business knowledge, including knowledge of regulated products, and experiences on boards of directors provide clear support for his nomination for election to our Board. |
| 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:
Former Executive Vice President and Chief Administrative Officer, Pinnacle Entertainment, Inc. (Las Vegas, NV).Ms. Shanks served as Executive Vice President and Chief Administrative Officer of Pinnacle Entertainment, Inc. (“Pinnacle”), a casino entertainment company, from July 2013 until October 15, 2018 when Pinnacle merged with Penn National Gaming, Inc. (“Penn National”), also a casino entertainment company. After the merger, she served as Strategic Advisor for Penn National until December 31, 2019. Previously, from October 2010 to June 2013, Ms. Shanks served as Executive Vice President and Chief Marketing Officer of Pinnacle. Prior to joining Pinnacle, she was Chief Marketing Officer for Multimedia Games Inc. from 2008 to 2010. Prior to 2008, Ms. Shanks held senior executive positions for more than 25 years at the property, division and corporate levels of Caesars Entertainment Corp., including Senior Vice President of Brand Management. Other Current Public Directorships:
None. Prior Public Company Directorships (within the last five years):
None. Other Directorships, Trusteeships and Memberships:
EPR Properties. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. Shanks’s significant regulated industry and consumer-oriented marketing expertise, particularly her extensive background in brand positioning and digital and database marketing, as well as her experience in information technology and cybersecurity, provide clear support for her nomination for election to our Board. | | | |
| Virginia E. Shanks Age:59 Director Since:2017 Board Committees: ■Audit ■Compensation and Talent Development ■Innovation | |
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Position, Principal Occupation and Professional Experience:
Chairman and Chief Executive Officer, Altria Group, Inc. (Richmond, VA).Mr. Willard serves as Chairman and Chief Executive Officer of Altria Group, Inc. Prior to his election as Chairman and Chief Executive Officer effective May 17, 2018, Mr. Willard served as Executive Vice President and Chief Operating Officer since March 2015. He previously served as Executive Vice President and Chief Financial Officer from January 2011 through February 2015. Since joining the Altria family of companies in 1992, Mr. Willard has held numerous other senior leadership roles. Other Current Public Directorships:
None. Prior Public Company Directorships (within the last five years):
SABMiller plc (2009 to July 2015). Other Directorships, Trusteeships and Memberships:
Catalyst Inc. Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Willard’s significant knowledge and understanding of Altria, its industries, its businesses and the external environment in which Altria’s businesses operate, together with his significant financial expertise and leadership experiences, provide clear support for his nomination for election to our Board. |
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| Howard A. Willard III Age:56 Director Since:2018 Chairman and Chief Executive Officer Board Committee: ■Executive(Chair) | |
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| Altria Group, Inc. – Proxy Statement | 21 |
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AUDIT COMMITTEE MATTERS
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 the Company’sour consolidated financial statements and internal control over financial reporting, including statutory audits of the financial statements of the Company’sour subsidiaries; (b) reviews of the Company’sour unaudited condensed consolidated interim financial statements; and (c) reviews of documents filed with the SEC. |
| (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 in 2015 were related to a cybersecurity simulation exercise.licenses for technical accounting tools. |
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Pre-Approval PolicyAUDIT COMMITTEE MATTERS
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 |
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AUDIT COMMITTEE MATTERS
| Proposal
2 | | | | | |
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| | | Ratification of the Selection of Independent Registered Public Accounting Firm | | |
| | Our Board recommends a voteFORratification of the selection of PricewaterhouseCoopers. | | |
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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 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.
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Executive Compensation – Proxy StatementTable of Contents
| Altria Group, Inc. – Proxy Statement | 25 |
Table of Contents
COMPENSATION COMMITTEE MATTERSExecutive Compensation
COMPENSATION COMMITTEE MATTERS
Introduction
| 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 |
Introduction
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.
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EXECUTIVE COMPENSATION
Overview
Compensation Philosophy
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 |
Financial Performance
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. |
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| 2019 TSR(12/31/2018 – 12/31/2019) (%) | | | Three-Year TSR(12/31/2016 - 12/31/2019) (%) |
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| 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 |
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EXECUTIVE COMPENSATION
Pay-For-Performance
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
94%
of the votes cast approved our NEO compensation on an advisory basis. | 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. |
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We periodically engage with large investors to discuss our executive compensation program. We value the perspectives we gain from these engagement activities.
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EXECUTIVE COMPENSATION
2019 Performance of NEOs
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.
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| Howard A. Willard III
Chairman of the Board and CEO Key Responsibilities
Mr. Willard provided strategic leadership to our Board, executive team and employees in a dynamic, competitive and highly regulated environment. | 2019 Achievements
Mr. Willard provided solid leadership to our Board, executive team and employees during a dynamic and challenging year in the tobacco industry. 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. | |
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| Altria Group, Inc. – Proxy Statement | 29 |
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EXECUTIVE COMPENSATION
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| William F. Gifford, Jr.
Vice Chairman and Chief Financial Officer Key Responsibilities
Mr. Gifford was responsible for Altria’s financial functions as well as its core tobacco businesses, sales and distribution business, and Consumer & Marketplace Insights team. He also serves as one of our designated directors on the Board of Directors of ABI. | 2019 Achievements
Mr. Gifford: ■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. | |
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| Murray R. Garnick
Executive Vice President and General Counsel Key Responsibilities
Mr. Garnick’s responsibilities included leading Altria’s Law and Regulatory Affairs functions and overseeing the development and execution of legal and regulatory strategies. | 2019 Achievements
Mr. Garnick: ■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
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| Salvatore Mancuso
Senior Vice President, Finance and Procurement Key Responsibilities
Mr. Mancuso’s responsibilities included overseeing Altria’s Tax, Treasury, Audit, Financial Planning & Analysis and Controller functions, while also overseeing Procurement, Real Estate & Security, Information Services and Philip Morris Management Corporation. | 2019 Achievements
Mr. Mancuso: ■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. | |
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| Jody L. Begley
Senior Vice President, Tobacco Products Key Responsibilities
Mr. Begley led Altria’s core tobacco businesses as well as Engineering, Quality and Product Development support. | 2019 Achievements
Mr. Begley: ■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. | |
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| Altria Group, Inc. – Proxy Statement | 31 |
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EXECUTIVE COMPENSATION
Executive Compensation Design
Principles
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
Elements
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 |
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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 $5,400,000), subject to applicable vesting and performance periods. The Committee did not approve a 2020 salary increase for Mr. Willard. |
| ■ | For Messrs. Gifford and Garnick, the Committee approved their awards under the 2019 Annual Incentive Award plan at target individual performance versus higher amounts for which they would have otherwise been eligible based on their 2019 individual performance. |
See “Annual Incentives” and “Long-Term Incentives” beginning on pages 36 and 37, respectively.
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Salary
The Committee considers several factors when reviewing and setting salaries for our NEOs, including each executive’s individual performance, level of responsibility and experience, the relationship between salaries paid to other Altria executives and the position of the executive’s salary within the applicable salary range. Additionally, the Committee periodically compares the salaries of our NEOs to others holding comparable positions at CSG companies. The Committee analyzes all these factors in the aggregate in determining NEO salaries.
Salaries are relevant in establishing annual and cash long-term incentive award targets and factor into retirement, group life insurance and certain other benefits available to all salaried employees. The Committee reviews salaries for our NEOs other than our CEO on an annual basis; effective May 2018, it reviews our CEO’s salary approximately every two years. Generally, any adjustments are effective March 1.
The 2019 salary ranges for our NEOs were as follows:
| | | 2019 Salary Range |
| Band | | Minimum
($) | | 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 |
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Annual Incentives
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
(Rating Range) | |  | | 75% | | 75% |
Adjusted Discretionary Cash Flow(1)
(Rating Range) | |  | | 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
(% of salary) | x | Business
Performance
Rating | x | Individual
Performance
Factor | = | Annual
Incentive
Award |
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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. |
Long-Term Incentives
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 |
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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%. |
| Altria Group, Inc. – Proxy Statement | 39 |
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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 |
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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.
Perquisites
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. |
Executive Transitions
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 |
Table of Contents
EXECUTIVE COMPENSATION
| ■ | 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:
review and approve the Company’s overall executive compensation philosophy and design;
review and approve corporate goals and objectives relevant to the compensation of our CEO, evaluate the performance of our CEO in light of these goals and objectives and determine and approve the compensation of our CEO based on this evaluation;
review and approve the compensation of all executive officers;
make recommendations to the Board with respect to incentive compensation plans and equity-based plans, administer and make awards under such plans and review the cumulative effect of its actions;
monitor compliance by executives with our stock ownership guidelines;
monitor risks related to the design of the Company’s compensation program;
review and assist with the development of executive succession plans, evaluate and make recommendations to the Board regarding potential candidates to become CEO and evaluate and approve candidates to fill other senior executive positions;
review and discuss with management our Compensation Discussion and Analysis; and
prepare and approve the Compensation Committee’s annual report for inclusion in our annual proxy statement.
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”).
Aon Hewitt conducts a survey of Compensation Survey Group companies. See page 35 for a description of the companies included in the Compensation Survey Group and the criteria and process for their selection. The survey collects compensation data and competitive practices. The Committee reviews the data to help it assess competitive levels of pay and the competitive mix of pay elements.
��
Based on parameters developed by management, Aon Hewitt provides competitive compensation information focused on chief executive officer pay primarily from public filings, including annual proxy filings, by companies within our Compensation Survey Group. The Committee also reviews this data.
Aon Hewitt provides background information on companies as reference for evaluating our Compensation Survey Group.
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.
The Company’s management provides input on overall executive compensation program design for the Compensation Committee’s consideration.
Each year, our Chairman and CEO presents to the
Compensation Committee compensation recommendations for
the Company’s namedour executive officers
as well as certain other
officers.than himself. The Committee reviews and discusses these recommendations with our CEO and, exercising its discretion, makes the final decision with respect to the compensation of these individuals.
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.
At the beginning of each year, our Chairman and CEO presents his proposed annual performance goals to the Compensation Committee for its consideration.
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
24 ConsultantsALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION – TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
ALTRIA GROUP, INC. – Proxy Statement 25
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
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:
| | |
Name
| | Position during 2015
|
Martin J. Barrington
| | Chairman of the Board, Chief Executive Officer and President, Altria Group, Inc.
|
William F. Gifford, Jr.
| | Executive Vice President and Chief Financial Officer, Altria Group, Inc.
|
Howard A. Willard
| | Executive Vice President and Chief Operating Officer, Altria Group, Inc.
|
Denise F. Keane
| | Executive Vice President and General Counsel, Altria Group, Inc.
|
Craig A. Johnson
| | President and Chief Executive Officer, Altria Group Distribution Company
|
James E. Dillard
| | Senior Vice President, Regulatory Affairs and Chief Innovation Officer,
Altria Client Services LLC
|
David R. Beran
| | Former President and Chief Operating Officer, Altria Group, Inc.
|
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.
Executive Summary
Compensation Philosophy
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:
clear alignment of the interests of our executives and shareholders;
clear articulation of corporate and individual performance goals;
transparent measurement of performance against those goals; and
a competitive, financially disciplined executive compensation program that rewards past success and creates the appropriate incentives for future conduct.
Say on Pay
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.
Shareholder Engagement
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.
Company Financial Performance
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
EXECUTIVE COMPENSATION
2015 Total Shareholder Return
(1) | For 2015, Altria’s Peer Group included The Kraft Heinz Company in addition to the other companies identified in the 2015 Altria Peer Group table on page 36. |
| Source: | Bloomberg Daily Return (December 31, 2014 – December 31, 2015) |
| Note: | Assumes reinvestment of dividends as of the ex-dividend date. |
Three-Year Total Shareholder Return
(2013 – 2015)
(1) | For 2015, Altria’s Peer Group included The Kraft Heinz Company in addition to the other companies identified in the 2015 Altria Peer Group table on page 36. |
| Source: | Bloomberg Daily Return (December 31, 2012 – December 31, 2015) |
| Note: | Assumes reinvestment of dividends as of the ex-dividend date. |
ALTRIA GROUP, INC. – Proxy Statement 27
EXECUTIVE COMPENSATION
Altria’s Adjusted Diluted EPS
(1) | Three-year compound annual growth rate (“CAGR”) based on 2012 adjusted diluted EPS of $2.21. |
Altria’s Dividend(1)
(1) | Annualized dividend based on quarterly dividend rate per common share declared in August of each year. |
(2) | Three-year CAGR based on the annualized dividend rate per common share of $1.76 that was declared in August 2012, with each August dividend similarly annualized. |
28 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
Pay For Performance
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)
(1) | CEO pay is calculated using an annualized allocation of the LTIP award. All other amounts are based on the Summary Compensation Table values. |
(2) | Indexed TSR reflects a December 31, 2012 starting point (with a nominal value of 100) and represents the total growth (including dividends) from that date through each December 31. |
2015 Performance of NEOs
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.
• | | Martin J. Barrington. Mr. Barrington served as Chairman, CEO and President of the Company. He provided extraordinary strategic leadership to the Board, the executive team and employees in a dynamic economic, regulatory and competitive environment. Among other accomplishments, Mr. Barrington drove execution of the Company’s strategy to maximize the core business while innovating for future value creation; pursued long-term strategic options for new revenue and income growth; made significant progress in strengthening the Company’s culture; and maintained strong relationships with key external stakeholders. Specifically, Mr. Barrington guided the efforts of Altria and its companies to: |
| • | | deliver $5.5 billion of adjusted net earnings,(1) a 2015 TSR of 23.1% (over 16 times the 2015 TSR of the S&P 500) and a dividend payout ratio of approximately 80% of adjusted diluted EPS (among the highest in the S&P Food, Beverage & Tobacco Index); |
| • | | support the proposed transaction to combine AB InBev and SABMiller, which, upon closing, is expected to capture a significant premium on our investment in SABMiller, continue our participation in the global beer profit pool, achieve continued tax efficiency, provide Altria with two seats on the new company’s board of directors, continue our use of equity accounting for the asset’s contribution to Altria’s earnings and provide Altria with approximately $2.5 billion in pre-tax cash;(2) |
enter into an agreement with Philip Morris International Inc. (“PMI”) to further accelerate development and commercialization of superior e-vapor products; and
strengthen the leadership capability of executives and the Company’s culture with a focus on innovation, business simplification and diversity and inclusion.
• | | William F. Gifford, Jr. Mr. Gifford was appointed Executive Vice President and Chief Financial Officer (“CFO”) of the Company effective March 1, 2015. His responsibilities included oversight of the Finance function, Strategy and Business Development, Investor Relations, and Philip Morris Capital Corporation. Mr. Gifford effectively managed the balance sheet, helped deliver adjusted diluted EPS growth of 8.9% and strong returns for our shareholders. Under his leadership, the Company continued to manage its debt profile by tendering $0.8 billion of 2018 high coupon debt generating significant interest expense savings. Mr. Gifford also oversaw the completion of a $1 billion share repurchase program and Altria’s announcement of a new $1 billion program in July 2015. Mr. Gifford also had extensive involvement in supporting the AB InBev and SABMiller transaction, working to capture attractive terms for Altria. |
• | | Howard A. Willard. Mr. Willard was appointed Executive Vice President and COO of the Company effective March 1, 2015. He oversaw PM USA, John Middleton Co. (“Middleton”), USSTC, Nu Mark LLC (“Nu Mark”), Ste. Michelle and Altria Group Distribution Company (“AGDC”), along with the Procurement, and Consumer & Marketplace Insights functions of Altria Client Services LLC (“Altria Client Services”). Under his leadership, the operating companies continued to deliver strong adjusted OCI growth and grow retail share in the smokeable and smokeless segments. The smokeable products segment had outstanding results, growing adjusted OCI by 10.9% while growingMarlboro’s retail share to a record 44.0%. The smokeless products segment continued to grow adjusted OCI and the combined retail share ofCopenhagen andSkoal in a very competitive environment. Significant improvements in new mobile capabilities expanded the reach of these key brands and strengthened connections with our adult tobacco consumers. Nu Mark developed a more efficient retail distribution model, improved its supply chain and launched newMarkTen XL products by leveraging technologies from the Green Smoke acquisition. Ste. Michelle delivered a strong year of adjusted OCI growth of 13.4%, continued to innovate new brands and line extensions to meet or exceed evolving adult consumer preferences and earned critical acclaim with over 250 ratings of 90 or better on its wines. |
• | | Denise F. Keane. Ms. Keane served as Executive Vice President and General Counsel of the Company. Her responsibilities included managing diverse litigation challenges and efficiently deploying the resources of the Law department to help the Company and its subsidiaries meet regulatory and business requirements. Her accomplishments included obtaining a favorable holding from the Illinois Supreme Court inMiles/Price and affirmation of the defense |
(1) | Adjusted net earnings is a non-GAAP financial measure. See Annex A 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) | Certain anticipated benefits are subject to proration, as described in our 2015 Annual Report on Form 10-K. |
30 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
| judgment for PM USA from the California Court of Appeals inBrown (the California certified lights class action). Under Ms. Keane’s leadership, the Company also successfully settled approximately 415 federalEngle-progeny cases. In addition, Ms. Keane oversaw the Law department’s outstanding delivery of legal services to our companies on a wide range of complex legal and regulatory issues. Ms. Keane also had extensive involvement in supporting the AB InBev and SABMiller transaction, working to capture attractive terms for Altria. |
• | | Craig A. Johnson. Mr. Johnson served as President and CEO of AGDC, which provides comprehensive sales, distribution and consumer engagement services to Altria’s tobacco operating companies. Under his leadership, AGDC: |
continued to drive engagement with adult tobacco consumers through enhanced branded websites and mobile technologies, including new mobile applications and mobile couponing capability;
identified new solutions to optimize the tobacco category space in traditional retail stores; and
began enhancing the retail engagement system to provide innovative solutions that better align our trade partners with our tobacco operating companies’ brands.
• | | James E. Dillard. Mr. Dillard served as Senior Vice President, Regulatory Affairs and Chief Innovation Officer of Altria Client Services. His responsibilities included managing Altria’s regulatory and innovation capabilities. In 2015, Mr. Dillard worked with the operating companies to enhance their five-year product portfolio plans to address adult tobacco consumers preferences, simplified and accelerated the product development process by conducting rapid experiments for new product concepts and developed innovation goals and metrics to track the organization’s progress. Mr. Dillard also successfully led the Company’s significant engagement efforts with the FDA. |
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.
Executive Compensation Design
Principles
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:
promote pursuit of business strategies that create substantial value for shareholders and are executed with integrity;
reward quality execution by making a significant portion of the compensation of our executives dependent on the achievement by the Company and the individual of financial and key strategic goals;
align the interests of shareholders and executives through equity and cash-based long-term incentive awards and stock ownership guidelines;
support the attraction, development and retention of world-class leaders; and
promote internal fairness and a disciplined qualitative and quantitative assessment of performance.
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):
a mix of fixed and at-risk variable compensation, with executives at higher levels having a higher proportion of variable compensation;
a mix of short-term and long-term compensation to appropriately reward and motivate the achievement of both annual and long-term goals and objectives; and
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.
2015 CEO and NEO Pay Mix (1)
(1) | Includes 2015 actual salary, annual incentive award, grant date fair value of long-term equity awards and target (annualized) cash LTIP award. Pay components may not add to 100% due to rounding. |
Elements
The table below provides a brief side-by-side comparison of the elements of our 2015 executive compensation program.
| | | | | | | | | | |
| | | | | | | | Long-Term Incentive Awards |
| | | | Salary | | Annual Incentive | | Equity | | Cash |
| | | | | | | | | | |
Form of Compensation
| | | | Cash
| | Cash
| | Restricted stock units
(“RSUs”)
| | Cash
|
| | | | | | | | | | |
Performance
Period
| | | | Ongoing
| | Annual
| | Annual with, in most
cases, three-year vesting
periods
| | Three years;
end-to-end cycles
|
| | | | | | | | | | |
Award
Criteria
| | | | Individual
performance
| | Company and
individual performance
| | Individual performance
and advancement
potential
| | Company and
individual
performance
|
| | | | | | | | | | |
Company
Performance
Alignment
| | | | | | • Adjusted diluted EPS growth
• Adjusted discretionary cash flow
• Strategic initiatives
| | • Stock price appreciation
| | • Adjusted diluted EPS growth
• Relative TSR
• Strategic initiatives
|
32 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
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
| | | | | | | | |
| | | | Element | | Summary Description | | Objective |
| | | | | | | | |
Annual
Compensation
| | | | Salary | | Fixed cash compensation based on role at the Company. | | • Provide financial stability
• Recognize individual role, experience, responsibility and performance
|
| | | | | | | | |
Aon:
| | | Annual Incentive Awards | | Cash-based incentive plan based on prior year’s performance. | ■ | • Recognize annual Company financialConducts a survey of CSG companies. The survey collects compensation data and strategic performance after it is delivered
• Recognize annual individual performance after it is delivered
competitive practices. |
| | | | | | | | |
Long-Term Incentive
Compensation
| | | | Equity Awards | | Equity awards based on prior year’s individual performance and advancement potential. For 2015, award delivered as RSUs with three-year vesting. | ■ | • Align NEOs’ interests with shareholders through stock ownership
• Recognize individual performance after it is delivered and advancement potential
• Build stock ownership
• Retain talented leaders
Based on parameters developed by management, provides competitive compensation information focused on chief executive officer pay primarily from public filings, including annual proxy filings, by companies within our CSG. |
| | | | | | | |
| | ■ | Long-Term
Incentive Plan
| | Cash-based incentive plan basedProvides background information on three-year financial and strategic goals.
| | • Align NEOs’ interests with shareholders
• Recognize long-term Company financial and strategic performance after it is delivered
• Recognize long-term individual performance after it is delivered
• Retain talented leaders
• No dilutive impact
companies as reference for evaluating our CSG. |
| | | | | | | | |
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, only employees hired prior to January 1, 2008 are eligible.
| | • Provide opportunity for financial security in retirement
|
| | | | | | | |
| | | Defined Contribution
Plans
| | Annual cash contribution by the Company based on a formula related to growth in adjusted diluted EPS for 2015 and, for certain employees, a supplemental Company contribution and Company matching contributions. Includes a Company 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 triggered by a defined change in the ownership of Altria. Change in control provisions are contained in the 2010 and 2015 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 health insurance based on years of service). Our NEOs are eligible for the same severance benefits asReviews our other salaried employees.
| | • Provide opportunity for protection upon an unexpected event
|
| | | | | | | | |
Perquisites | | | | | | For the Chairman, CEO and President for safety and security purposes, home security system and personal use of Company aircraft subject to an annual allowance. For all NEOs, annual financial counseling reimbursement, company-paid executive physical and leased Company vehicle (not used by the Chairman, CEO and President).
| | • Provide security and retention supplement
|
| | | | | | | | |
Other Benefits | | | | | | Medical coverage, group life insurance and other welfare benefits generally available to all salaried employees.
| | • Promote health and financial security
|
34 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
Decision-Making Process
Participants
For information on the various participants and their key decision-making responsibilities, please see the “Compensation Committee Matters” section on pages 23 to 24.
Risk Assessment
| | | | |
A cross-functional team of executives in the Human Resources & Compliance, Law, Corporate Audit and Finance departments annually reviews Altria’s 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. Management requested that the external compensation consultant, Aon Hewitt, review this risk assessment process – specifically the features identified as potentially encouraging excessive risk-taking, features that mitigate risk and management’s assessment of those features –with respect to confirm consistency with prevailing best practices.
After reviewing management’s assessment, the Compensation Committee believes that neither the compensation program’s design nor the individual elements ofour executive compensation encourage employees, including our NEOs, to take unnecessary or excessive risks. The executive compensation program also incorporates risk-mitigating features such as those shown in the chart on the right, which the Compensation Committee considered as part of its assessment. The Company believes that any risks arising from our compensation policies and practices are not likely to have a material adverse effect on the Company.
Benchmarking
| | | | RISK MITIGATING FEATURES
¡ Appropriate compensation mix of fixed versus at-risk variable pay, annual versus long-term pay and cash versus equity
¡ Multiple objective performance factors used for annual and long-term cash incentive awards, coupled with the Compensation Committee’s discretion to approve awards at lower than target
¡ Caps on annual and long-term incentive plan formulas
¡ Peer company benchmarking
¡ Significant stock ownership guidelines
¡ A “clawback” policy providing for the adjustment or recovery of executive compensation upon the restatement of the Company’s financial statements
¡ Individual performance assessments that emphasize behavior consistent with the Company’s Mission goals and Values
program. |
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.
Benchmarking
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.
Table of Contents
EXECUTIVE COMPENSATION
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:
are direct competitors;
have similar market capitalization;
are primarily focused on consumer products (excluding high technology and financial services);all or
have business generally focused within the United States.
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 | | | Market
Capitalization (1)
($B)
237 | | Altria
Peer
Group
|
The Coca-Cola Company
| | 187
| | ü
|
Merck & Co., Inc. | | 148
| 232 | |
PepsiCo, Inc. | | 146
| 191 | ü
|
Bristol-Myers Squibb Company | | | 151 | |
| McDonald’s Corporation | | | 149 | |
Philip Morris International Inc.(2) | | 136
| 132 | |
Bristol-Myers Squibb Company
| | 115
| | |
Altria
| | 114
| | |
McDonald’s Corporation
| | 108
| | |
3M Company
| | 93
| | |
Eli Lilly and Company | | 93
| 126 | |
Median
3M Company | | 71
| 102 | |
Altria | | | 93 | |
| Mondelēz International, Inc. | | 71
| 79 | ü
|
Reynolds American Inc.
Median(2) | | 66
| 59 | ü
|
Colgate-Palmolive Company | | 60
| 59 | ü
|
Kimberly-Clark Corporation | | 46
| 47 | ü
|
Keurig Dr Pepper Inc. | | | 41 | |
| The Kraft Heinz Company | | | 39 | |
| General Mills, Inc. | | 34
| 32 | ü
|
Kellogg Company
| | 26
| | ü
|
The Hershey Company | | 19
| 31 | ü
|
ConAgra Foods, Inc.
Kellogg Company | | 18
| 24 | ü
|
Conagra Brands, Inc. | | | 17 | |
| Campbell Soup Company | | 16
| 15 | ü
|
Lorillard, Inc.
Molson Coors Brewing Company | | N/A
| 12 | ü
|
Kraft Foods Group, Inc.
| | N/A
| | ü
|
| (1) | Market capitalization is calculated using shares outstanding as of the most recent public disclosure as of January 2, 20162020 per Bloomberg multiplied by the closing stock price as of December 31, 2015.2019. |
| (2) | Median market capitalization excludes Altria. |
(2)Altria Group, Inc. – Proxy Statement | Although Philip Morris International Inc. does not meet all of the criteria set forth above, we compete for executive talent.45 |
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.
After reviewing management’s assessment in
June and July 2015, respectively, and ceased trading as public companies. As a result,2019, the
Compensation Committee
madebelieves that neither the
following changes tocompensation program’s design nor the
CSG:removed Lorillard, Inc.; and
replaced Kraft Foods Group, Inc. with The Kraft Heinz Company, which meets the Company’s criteria discussed above.
36 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
2015 Executive Compensation Program Decisions
Salary
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 ($) |
A (Mr. Barrington) | | 910,000 | | 2,090,000 |
B (Other NEOs, excluding Mr. Dillard) | | 480,000 | | 1,100,000 |
D (Mr. Dillard) (1) | | 278,500 | | 640,500 |
(1) | Effective January 1, 2016, Mr. Dillard was promoted to the Band C role of Senior Vice President, Research, Development and Regulatory Affairs, Altria Group, Inc. |
The Compensation Committee increased the salaries of our NEOs (other than Mr. Beran) basedchart on the criteria noted above as follows, effective March 1, 2015:
2015 Salary Increases
| | | | |
Name | | 2014 Salary ($) | | 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 |
(1) | Effective March 1, 2015, Messrs. Gifford and Willard received both merit and either promotional or lateral increases in connection with their appointments as Executive Vice President and CFO and Executive Vice President and COO, respectively. |
(2) | Mr. Beran retired effective March 1, 2015. Please see “Retirement of President and COO” on page 42 of our 2015 Proxy Statement for more information. |
Annual Incentives
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%) | | | | |
(1) | Adjusted discretionary cash flow is a non-GAAP financial measure. See Annex A 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. |
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:
grow adjusted diluted EPS at an average annual rate of 7% to 9%; and
maintain a target dividend payout ratio of approximately 80% of adjusted diluted EPS.
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:
brand-building initiatives in Altria’s core businesses;
enhancing adult tobacco consumer engagement through innovative technologies;
advancing our innovation and harm reduction strategies;
productivity and business simplification initiatives; and
developing organizational talent and enhancing our culture to improve diversity and inclusion.
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:
Altria. | | | | | | | | | | | | | | | | | | |
Salary
| | | X
| | | Business
Performance
Factor
| | | X
| | | Individual
Performance
Factor
| | | =
| | | Annual
Incentive
Award
|
38 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
2015 Annual Incentive Award Target Percentages, Award Ranges and Actual Awards
| | | | | | | | | | | | | | | | |
Name | | Band | | Salary ($) | | 2015
Business Performance Factor (0 - 130%) | | Individual Performance
Factor Range (1) (%) | | Award Range for 2015 Performance ($) | | Actual Award
for 2015 Performance ($) |
| | | | | 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 |
(1) | The individualRisk-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 ranges are stated as a percentage of salary and are based on individual performance between “Valued” and “Extraordinary.” |
(2) | Mr. Beran received a prorated annual incentive award for 2015 (59 of 365 days) based on target business and individual performance in accordance with the terms of the plan. Please see “Retirement of President and COO” on page 42 of our 2015 Proxy Statement for more information. |
Long-Term Incentives
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
| | | | |
Equity awards in the form of RSUs focus executives on increasing long-term shareholder value, enhance executive retention and promote executive stock ownership. Awards recognize prior year performance and advancement potential and generally vest three years after the date of the award, subject to earlier vesting on change in control, death, disability or retirement on or after age 65. This vesting period is intended to retain and motivate executives, while promoting long-term performance. Recipients receive cash dividend equivalents during the vesting period. The Compensation Committee also infrequently grants special equity awards to select executives in key roles or with high advancement potential. These special awards generally have longer vesting periods. The Compensation Committee annually reviews equity award targets against competitive data and decided to maintain the current targets for each salary band for the 2015 grants. The awards are granted on the date of Compensation Committee approval, and no individual is guaranteed an award. | | | | 2015 EQUITY AWARD HIGHLIGHTS
¡ RSUs
¡ Vesting period of three years
¡ NEO awards based on:
– Executive’s individual performance in year prior to the grant;
– Executive’s advancement potential;
– Compensation Committee discretion; and
– Competitive benchmarking
¡ Number of shares awarded is based on fair market value of our stock on the date of the grant
|
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 | | – |
(1) | Ranges and actual awards are a function of individual performance and, for the NEOs other than Mr. Barrington, advancement potential. |
(2) | Represents the grant date fair value of stock awards granted in 2015 pursuant to Financial Accounting Standards Board (“FASB”) Codification Topic 718. Please see footnote 1 to the Summary Compensation Table on page 43. |
(3) | Messrs. Gifford, Willard and Dillard each received a special grant of RSUs on January 28, 2015, which will vest on February 11, 2020. These grants were made based on the criteria for special grants described above under “Long-Term Incentives: Equity Awards,” specifically, the Company’s advancement plans and these individuals’ subsequent appointments to key senior executive positions. |
(4) | Mr. Beran retired effective March 1, 2015 and did not receive a 2015 grant. Please see “Retirement of President and COO” on page 42 of our 2015 Proxy Statement for more information. |
Long-Term Incentives: 2014 – 2016 Long-Term Incentive Plan Awards
| | | | |
The LTIP is a long-term cash performance plan that uses a three-year, end-to-end performance cycle, an approach consistent with the Company’s long-term strategic planning process. At the beginning of each three-year cycle, the Compensation Committee approves long-term financial and strategic performance goals for the Company that can only be measured effectively after completion of the cycle. Awards are payable in cash after the end of each three-year cycle, based on an assessment of actual overall corporate and individual performance during the entire award cycle. Each executive has an award target based on his or her salary band, expressed as a percentage of each year-end salary over the three-year cycle. The Compensation Committee retains the discretion to adjust awards upward or downward, and no individual is guaranteed an award. | | | | LTIP HIGHLIGHTS
¡ Three-year, end-to-end performance cycle
¡ Awards based on Company performance against long-term financial and strategic goals and individual performance
¡ Because no LTIP cycle concluded in 2015 or 2014 (the current cycle concludes in 2016), total compensation in the Summary Compensation Table for 2015 and 2014 is less than 2013
|
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:
|
• Relative 2014 – 2016 TSR growth versus Altria Peer Group and major indices
|
• Adjusted Diluted EPS Growth
|
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:
| | | | | | |
Band
| | Individual
Award
Target (1)
(%)
| | Business
Performance
Factor
(%)
| | Individual
Performance
Factor
(%)
|
A
| | 250
| | 0 - 130
| | 0 - 150
|
B
| | 200
| | 0 - 130
| | 0 - 150
|
D
| | 75
| | 0 - 130
| | 0 - 150
|
(1) | Individual award target percentages are applied to each year-end base salary over the three-year performance cycle. |
Perquisites
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.
• | | Retirement Benefits. The NEOs participate in certain qualified and non-qualified retirement plans, which the Company believes promote executive retention and provide the opportunity for financial security in retirement. These retirement benefits are discussed in more detail in the narrative following the Pension Benefits table (pages 49 to 50) and the Non-Qualified Deferred Compensation table (page 51). |
• | | Change in Control Payments. Our 2010 Performance Incentive Plan provides for the vesting and acceleration of certain elements of compensation immediately upon a change in control. The 2015 Performance Incentive Plan includes a double-trigger provisionfactors used for annual incentive awards, equity awards and long-term incentive cash awards, providedcoupled with the Committee’s discretion to approve awards at lower than target■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 successor entity continues or assumes the plans and awards or replaces them with substantially similar awards. The detailsinterests of these provisions are discussed in the “Payments upon Change in Control or Termination of Employment” section (pages 52 to 55).shareholders |
|
ALTRIA GROUP, INC. – Proxy Statement 41
EXECUTIVE COMPENSATION
• | | Termination Payments. The Severance Pay Plan for Salaried Employees provides an opportunity for financial protection against the unexpected event of an involuntary termination of employment. The details of this plan are discussed in the “Payments upon Change in Control or Termination of Employment” section (pages 52 to 55). |
Other Considerations
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.
Table of Contents
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 $1.0 million deductibility limit due to other elements of annual compensation, such as vesting of certain stock grants, dividends or dividend equivalents paid on certain stock and perquisites.
42 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
Compensation Tablesand Talent Development Committee Interlocks and Insider Participation
During 2019, no Altria executive officer served on the board of directors or compensation committee of any company that employs a member of our Board or the Committee. No member of the Committee at any time during 2019 or at any other time had any relationship with us that would be required to be disclosed as a Related Person Transaction.
| Altria Group, Inc. – Proxy Statement | 47 |
Table of Contents
EXECUTIVE COMPENSATION
| Compensation Tables and Other Matters |
Summary Compensation Table
The following table provides the compensation information of our NEOs for 2015, 20142019, 2018 and 2013. The table does not show compensation information for Messrs. Gifford and Dillard prior to 2015 because they were not NEOs in those years.2017.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Non-Equity Incentive Plans | | | | | | |
| Name and Principal Position | | Year | | Salary | | Stock Awards Grant Value (1) ($) | | 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 by the Company in calculating these amountsthe grant date fair values of the RSUs and the PSUs awarded in 2019 are incorporated herein by referencedescribed in Note 12 “Stock Plans” to Note 2 to the Company’sour consolidated financial statements in the 2015 Annual Report on2019 Form 10-K. The table below provides the grant date fair value of the PSUs awarded in 2019 for each of our NEOs assuming the maximum performance level is achieved. |
| 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. |
Table of Contents
EXECUTIVE COMPENSATION
| (2) | The 2017 — 2019 LTIP usesused a three-year, end-to-end performance cycles. The Company payscycle. We paid executives in a lump sum cash award only after the end of the three-year performance cycle, based on an assessment of overall corporatebusiness and individual performance during the entire award cycle. End-to-endThis end-to-end performance cycles resultcycle significantly increased the NEOs’ 2019 total compensation in the Summary Compensation Table compared to 2018 and 2017, when no LTIP compensation shown in this column for 2013 only, and not for 2014 or 2015.payments were made. |
| The table below reflects the 2014 and 2015 allocation at target ofimpact on the 2014 – 2016 LTIP cycle, which will conclude on December 31, 2016. This target amount will be adjusted based on actual business and individualSummary Compensation Table if the lump sum value was allocated over the 2017 — 2019 performance at the end of the three-year plan period. There is no guarantee of any payment under the plan. |
| | | | | | | | | | | | | | |
| Year | | Martin J.
Barrington
($) | | William F.
Gifford, Jr.
($) | | Howard A.
Willard ($) | | Denise F.
Keane ($) | | Craig A.
Johnson ($) | | James E.
Dillard
($) | | David R.
Beran ($) |
2015 | | 3,375,000 | | 1,146,048 | | 1,600,000 | | 1,832,000 | | 1,750,000 | | 401,250 | | 300,334 |
2014 | | 3,125,000 | | 643,750 | | 1,364,000 | | 1,792,000 | | 1,712,000 | | 382,500 | | 1,858,000 |
| | | | | | | | | | | | Non-Equity
Incentive Plans | | | | | | |
| Name | | Year | | Salary
($) | | Stock Awards
Grant Value(1)
($) | | Annual
Incentive
Plan
($) | | Long-Term
Incentive
Plan(2)
($) | | Change in
Pension
Value(3)
($) | | All Other
Compensation(4)
($) | | Total
($) |
| 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 2014of the prior year to December 31 2015.of the applicable year (or date of termination for Messrs. Crosthwaite and Johnson). The change in 2015 is2019 was due to a variety of factors, including growth in benefit due to additional pay and service, (except that Mr. Dillard’s benefit increases for additional pay, but not additional service), passage of time and a change in the discount rate. The present value ofrate and mortality assumptions. Mr. Dillard’s aggregateGarnick was hired after January 1, 2008 and, therefore, is not covered under our pension benefit decreased $4,109 during 2015.plans. |
| (4) | Details of other compensation for each of theour NEOs appear in the All Other Compensation table shown below. |
| Altria Group, Inc. – Proxy Statement | 49 |
ALTRIA GROUP, INC. – Proxy Statement 43Table of Contents
EXECUTIVE COMPENSATION
All Other Compensation
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Year | | | Allocation to Defined Contribution Plans (a) ($) | | Personal Use of Company Aircraft (b) ($) | | Car Expenses (c) ($) | | Financial Counseling Services (d) ($) | | Security ($) | | Executive Physicals ($) | | Payments in
Regard to
Termination of Employment (e) ($) | | 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 Company allocations to tax-qualified and non-qualified supplemental defined contribution plans. |
| (b) | Mr. Barrington is required to use Company aircraft for all air travel for reasons of security and to maximize efficiency of his time. Pursuant to a time-sharing agreement with the Company, Messrs. Barrington and Beran agreed to reimburse the Company for annual personal aircraft usage in excess of $200,000 and $100,000, respectively. Mr. Beran’s time-sharing agreement expired upon Mr. Beran’s retirement effective March 1, 2015. Following Mr. Beran’s retirement, the aggregate allowance was reduced to $250,000, which is allocated to Mr. Barrington. |
| Personal use of Companyour aircraft reflects incremental costs, including trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hourly maintenance contracts, hangar or aircraft parking, fuel (based on the average monthly cost of fuel per hour flown) and other smaller variable costs. For purposes of calculating incremental costs, the Company includeswe include the incremental costs of any deadheadflights, or portions thereof, made in connection with personal travel. Fixed costs incurred in any event to operate Companyour aircraft (e.g.(e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips and flight crew salaries) are not included. Messrs. Barrington and Beran pay theirMr. Willard pays his own taxes on imputed taxable income resulting from personal use of Companyour aircraft. |
| (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 Company cars.leased vehicles. |
| (d) | For Mr. Barrington continuesWillard, this amount reflects security expenses. For Mr. Crosthwaite, this amount reflects cash payments of $2,654,817 in lieu of forfeited equity awards, based on the average of the closing prices of Altria common stock for the 20 trading days preceding and including September 18, 2019, and $2,500,000 for a special recognition bonus, in each case, made in connection with his resignation from Altria. For Mr. Johnson, this amount reflects aggregate payments in connection with the consulting agreement under which Mr. Johnson provided consulting services to decline this benefit. |
(d) | Effective January 1, 2016, the Company discontinued reimbursement for financial counseling services. |
(e) | The amount shown reflects payments made to Mr. Beran related toAltria following his retirement and includes prorated awards of $2,055,230 and $844,631 for his 2013 and 2014 restricted stock grants, respectively.(effective March 1, 2019) until December 31, 2019. |
44 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
EXECUTIVE COMPENSATION
Grants of Plan-Based Awards during 20152019
| | | | | | | | | | | | | | |
Name | | Grant Date | | Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards (1) | | All Other
Stock Awards: Number of Shares of Stock
or Units (2) (#) | | Grant Date Fair
Value of Stock Awards (2) ($) |
| | | 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 2015awards under the 2019 Annual Incentive Awards.Award plan. Actual awards paid under the 20152019 Annual Incentive Award programplan are foundshown in the Annual“Annual Incentive PlanPlan” column of the Summary Compensation Table. The maximum represents the maximum permitted under the 2010 Performance Incentive Plan. Awards covered by Internal Revenue Code Section 162(m) are also subject2015 PIP. |
| (2) | Reflects target and maximum PSUs granted to a maximum amount determined under a formula established byour NEOs on February 26, 2019. The actual number of units that vest will range between 0% and 130% of target, depending on actual performance during the Compensation Committee,performance period. Holders of PSUs will accrue dividend equivalents during the performance period, which could produce a maximum award lower than $10 million.will be paid at the end of the performance period on PSUs that vest. These grants will vest on February 28, 2022. |
(2)(3) | Reflects RSUs granted to our NEOs on JanuaryFebruary 26, 2019. Holders of RSUs receive cash dividend equivalents paid quarterly during the vesting period. These grants will vest on February 28, 2015.2022. |
| (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 share pricegrant date fair value of $54.555, which was$52.075. The RSU fair values were calculated as the average of the high and low trading prices of Altria’sAltria common stock on the grant date. The RSU |
| (6) | Under the terms of the award agreement, Mr. Crosthwaite forfeited his 2019 equity awards vest on February 7, 2018. Holdersupon his resignation effective September 24, 2019. |
| (7) | In light of restricted stock and RSUs are entitled to any cash dividends and cash dividend equivalents, respectively, paid quarterly throughout the restriction period. |
| (a) | These special grants vest on February 11, 2020. |
(3) | Mr. BeranJohnson’s retirement, he did not receive anyan equity grants during 2015 due to his retirement on March 1, 2015.award in 2019. |
| Altria Group, Inc. – Proxy Statement | 51 |
ALTRIA GROUP, INC. – Proxy Statement 45Table of Contents
EXECUTIVE COMPENSATION
Outstanding Equity Awards as of December 31, 20152019
| | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Securities Underlying Unexercised Options: Exercisable (#) | | Option Exercise Price ($) | | Option Expiration Date | | | | Stock Award Grant Date (1) | | Number of Shares or Units of Stock That Have Not
Vested (#) | | 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) | Awards vest 100% according to the following schedules: |
Mr. Crosthwaite resigned and Mr. Johnson retired during 2019. Neither had any outstanding equity awards as of December 31, 2019.
| | | | | | | | |
Annual Grants(2) | | | | Special Grants(a) |
Grant Date | | Vest Date | | | | Grant Date | | Vest Date |
1/28/2015 | | 2/07/2018 | | | | 1/28/2015 | | 2/11/2020 |
1/28/2014 | | 2/09/2017 | | | | 5/16/2012 | | 5/16/2017 |
1/29/2013 | | 2/11/2016 | | | | | | |
(2) | Market values are based on $58.21,$49.91, the closing price of Altria’sAltria common stock on December 31, 2015.2019, assuming target performance for PSUs. |
| (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. |
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
Realized on
Vesting
($) |
| Howard A. Willard III | | — | | — | | 28,802 | | 1,406,546 |
| William F. Gifford, Jr. | | — | | — | | 28,802 | | 1,406,546 |
| Murray R. Garnick | | — | | — | | 19,492 | | 951,892 |
| Salvatore Mancuso | | — | | — | | 11,978 | | 584,946 |
| Jody L. Begley | | — | | — | | 5,930 | | 289,592 |
| Kevin C. Crosthwaite, Jr. | | — | | — | | 2,745 | | 134,052 |
| Craig A. Johnson | | — | | — | | 68,753 | | 3,136,866 |
Pension Benefits
The Pension Benefits table and the Non-Qualified Deferred Compensation table below generally reflect amounts accumulated as a result of service over the NEO’s full career with the CompanyAltria and itsour affiliates. The increments related to 20152019 are reflected in the “Change in Pension Value” column of the Summary Compensation Table or, in the case of defined contribution plans, the “Allocation to Defined Contribution Plans” column of the All Other Compensation table. Mr. Garnick was hired after January 1, 2008 and, therefore, is not covered under our pension plans.
| | | | | | | | | | |
| Name | | Plan Name | | Number of Years of Credited Service (1) (#) | | Present Value of Accumulated Benefits (2) ($) | | 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, 2015,2019 (or date of termination of employment for Messrs. Crosthwaite and Johnson), each NEO’s total years of service with the CompanyAltria and itsour affiliates were: Mr. Barrington, 22.67Willard, 27.17 years; Mr. Gifford, 21.2525.25 years; Mr. Willard, 23.17 years; Ms. Keane, 39.00Mancuso, 29.25 years; Mr. Johnson, 24.75Begley, 24.50 years; Mr. Dillard, 14.08Crosthwaite, 22.33 years; and Mr. Beran, 38.75Johnson, 27.92 years. Years shown in this column are only those taken into accountconsidered for benefit accrual purposes under the named plan. Mr. Beran’s and Ms. Keane’s years of service taken into account under the applicable formula for the Benefit Equalization Plan (“BEP”) |
Altria Group, Inc. – Post-2004 are limited to 35.00 under the terms of that 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 and does not earn additional years of credited service under the plan, but his benefit may increase based on increases in his compensation.Proxy Statement | 53 |
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EXECUTIVE COMPENSATION
| (2) | The amounts shown in this column are based on a single life annuity (other than the amount shown for Mr. Beran, whichJohnson whose amount is based on the form of payment he selected at retirement, a 100% joint and survivor annuity) and otherwise use the same assumptions applied for year-end 20152019 financial disclosure under FASB authoritative guidance relating to retirement benefits, except that (a) the Benefit Equalization Plan (“BEP”) — Pre-2005 and BEP –— Post-2004 amounts for Mr. Johnson is based on the lump sum required to purchase an annuity providing the after-tax equivalent of the post-2004 pension component of that plan assuming an interest rate of 3.75%, (b) the BEP – Pre-2005 and BEP – Post-2004 amounts for Messrs. Barrington, Gifford and Willard and Ms. Keane are based on a lump sum form of payment assuming an interest rate of 3.75%3.50%, (b) BEP — Pre-2005 and BEP — Post-2004 amounts for Messrs. Gifford, Mancuso, Begley and Crosthwaite are based on a lump sum form of payment assuming an interest rate of 3.40%, and (c) in accordance with SEC requirements, all benefits are assumed to commence at the earliest date on which, assuming continued employment, the individual would be eligible for benefits that are not reduced for early commencement. See Note 1617 “Benefit Plans” to the Company’sour consolidated financial statements in the 2015 Annual Report on2019 Form 10-K for a description of the financial accounting assumptions referred to above. As a result of paymentsFunding Payments previously made to or for certain employees, including our NEOs other than |
48 ALTRIA GROUP, INC. – Proxy Statement
EXECUTIVE COMPENSATION
| Messrs. Gifford and Dillard,Mr. Willard, our liabilities or those of our operating subsidiaries under the BEP –— Pre-2005 will be less than that shown in the table. Our liability for BEP –— Post-2004 pension benefits for Mr. Willard will also be less than that reflected in this column because it is also reduced by the portion of the accumulated value, at the employee’s retirement or other termination of employment, of prior Target Payments paid to Mr. Willard that are attributed to supplemental pension benefits. The amounts by which these prior payments reduce our liabilities will fluctuate over time with investment performance and as credits for the amounts previously paid are reduced to reflect payments to cover taxes on earnings on these amounts. For further discussion, see “Defined Benefit Plans” below. |
| (3) | In connection with his retirement oneffective March 1, 2015,2019, Mr. BeranJohnson received lump sum payments of his pension benefitsBEP — Pre-2005 benefit in May 2015 (BEP – Pre-2005)2019 and his BEP — Post-2004 benefit in September 2015 (BEP – Post-2004). The payments did not include his benefit under the Retirement Plan, which is paid in the form of a joint and survivor annuity. Mr. Beran’s BEP – Pre-2005 and BEP – Post-2004 payments reflect that these2019. These amounts were reduced by Funding Payments and Target Payments that wewere paid to Mr. BeranJohnson in prior years (see “Defined Benefit Plans – BEP“BEP Pension” section on page 50)55). The Funding Payments and Target Payments were reported in the Company’s respectiveAltria’s proxy statements for those prior years. |
Defined Benefit Plans
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.
Retirement Plan
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 | | | | | | | | | | | | |
| | | | | | |
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 | | | ×x | | Years of credited service (up (up to a maximum of 35,
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.
Table of Contents
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).
BEP Pension
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
($) |
| Howard A. Willard III | | — | | — |
| William F. Gifford, Jr. | | 890,500 | | 890,500 |
The amounts payable by Altria under the BEP Pension are determined takingtake into account certain payments made to the executives before 2008, in order to prevent duplicative benefit payments.
| ■ | From 1996 through 2007, several employees, including Mr. Willard, received Funding Payments with respect to pre-2005 vested benefits that were made either to individual trusts established by the employee or directly to the employees themselves. |
| ■ | From 2005 through 2007, accruals under the BEP Pension ceased for several employees, including Mr. Willard, and these employees received annual Target Payments, calculated to approximate (after paying taxes on the payments) the after-tax value of the additional benefits they would have earned had they remained covered by the BEP Pension. Accruals under the BEP Pension commenced again effective January 1, 2008. |
| Altria Group, Inc. – Proxy Statement | 55 |
From 2005 through 2007, accruals under the BEP Pension ceased for a number of employees, including our NEOs (except Mr. Dillard), and these employees received annual Target Payments that were calculated to approximate (after paying taxes on the payments) the after-tax value of the additional benefits they would have earned had they remained covered by the BEP Pension. Accruals under the BEP Pension commenced again effective January 1, 2008.
50 ALTRIA GROUP, INC. – Proxy StatementContents
EXECUTIVE COMPENSATION
Non-Qualified Deferred Compensation
| | | | | | | | | | | | | | |
| Name | | Plan Name | | Executive Contributions in 2015 ($) | | 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
Equalization Plan | | – | | 64,767 | | 28,583 | | – | | 1,205,204 | | |
| | | | | | | |
| Craig A. Johnson | | Benefit
Equalization Plan | | – | | 60,683 | | 30,881 | | – | | 1,293,655 | | |
| | | | | | | |
| James E. Dillard | | Benefit
Equalization Plan | | – | | 52,575 | | 4,732 | | – | | 234,814 | | |
| | | | | | | |
| David R. Beran | | Benefit
Equalization 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 Company contributions to the non-qualified BEP for deferred profit-sharing purposes earned in 2015,2019, which were credited to the participant’s account as of the last business day of February 20162020 and are included in the “Allocation to Defined Contribution Plans” column of the All Other Compensation table on page 44.50. |
| (2) | The values in this column consist of amounts credited as earnings for 20152019 on BEP account balances. These amounts do not constitute above-market earnings and are not included in amounts reported in the Summary Compensation Table.Table on page 48. |
| (3) | In connection with his retirement as an employee on March 1, 2015,termination of employment, Mr. BeranJohnson received a lump sum payment of his BEP account from the Company in September 2015.2019. |
| (4) | The aggregate balances shown include allocations reported in the Summary Compensation Table for previous years for Mr. Barrington, $574,949;Willard, $438,839; for Mr. Willard, $175,453;Gifford, $172,134; for Ms. Keane, $480,259;Mr. Garnick, $165,482; for Mr. Crosthwaite, $13,075; and for Mr. Johnson, $403,718; and for Mr. Beran, $527,548.$674,984. Allocations were also made infor years when these individuals were not NEOs. As a result of payments made to trusts established by the NEOs,for Mr. Willard, as described in the “Defined Contribution Plans” section below, our liabilities are less than the amounts shown in the table. AmountsFor Messrs. Willard and Johnson, amounts credited for 2005 through 2007 under the BEP (including earnings adjustments on such amounts through December 31, 2007) are not reflected in the aggregate balances, because the BEP formula takes into account Target Payments previously made and reported. See the discussion below for further information concerning the 2008 supplemental retirement plan changes. |
Defined Contribution Plans
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
BEP DPS
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 or restricted stock would lapse;
any stock options and stock appreciation rights would become fully vested and exercisable;
| ■ | 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 |
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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
fully earned but unpaid 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.
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:
the restrictions on outstanding RSUs or restricted stock 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, unless the Compensation Committee determinesdetermined to treat the awards in a different manner, such as the acquiring company’s assumption or substitution of the awards;
fully earned but unpaid incentiveawards. However, those equity awards would become payable; and
annual and long-term incentive awards for performance cycles not yet completed as of the changehave since vested in control date would become payable, but only on a prorated basis applied to the maximum award opportunity (the number of full or partial months divided by the total number of months in the performance cycle).
February 2020.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 $58.21,$49.91, the closing price of Altria’sAltria common stock on December 31, 2015.2019. Reflects the 2015 equity awards granted under the 2010 PIP, which vested on February 11, 2020. |
| Change in Control and Either (1) Successor Fails to Assume/Replace Awards or (2) Qualifying Termination of Employment |
| Name | | Unvested
Restricted
Stock Units(1)
($) | | 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 prorated maximumexecutive having worked the entire performance period and the greater of the target award payable under the 20152019 Annual Incentive Award program andplan or the executive having worked 12average of the 12 monthsexecutive’s actual last three years’ awards. The 2019 Annual Incentive Award plan is subject to the terms of the performance period.2015 PIP. |
| (3) | Based on the prorated maximumtarget award payable under the 2014 – 20162017 — 2019 LTIP and the executive having worked 24 monthsthe full three-year performance period. Payment is subject to the discretion of the36-month performance period. |
(4) | Based on the prorated maximum award payable under the 2014 – 2016 LTIP Committee and the executive having worked 14 monthsterms of the36-month performance period due to retirement effective March 1, 2015. 2015 PIP. |
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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.
Termination Payments
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
($) |
NameHoward A. Willard III | | Severance
Payments
($)
1,538,462 |
Martin J. Barrington
| | 1,350,000 |
William F. Gifford, Jr. | | 610,0001,078,154 |
Howard A. Willard
Murray R. Garnick | | 800,000741,231 |
Denise F. Keane
Salvatore Mancuso | | 916,000640,000 |
Craig A. Johnson
Jody L. Begley | | 875,000 |
James E. Dillard
| | 432,115646,154 |
In the event of death or totallong-term disability, all salaried employees with awards of unvested RSUs or restricted stock,PSUs, including theour NEOs, become fully vested in those awards. In addition, theour NEOs, like other salaried employees, may become entitled to a prorated awards under the Annual Incentive Award plan and LTIP award based on the target payment amount, subject to the discretion of Altria and the Compensation Committee may pay a prorated Annual Incentive Award based on the target payment amount, at its discretion. TheCommittee. Our NEOs would also become entitled to the same life insurance and long-term disability plan benefits as other salaried employees upon a death or disability.
| Altria Group, Inc. – Proxy Statement | 59 |
54 ALTRIA GROUP, INC. – Proxy StatementTable of Contents
EXECUTIVE COMPENSATION
The following table shows the amounts that would be paid under the RSU, restricted stock and LTIP awards if theour eligible NEOs had died or become disabled as of December 31, 2015:2019 (other than Messrs. Crosthwaite and Johnson who resigned and retired, respectively, in 2019):
| | | | | | |
| Name | | Unvested RSUs and
Restricted Stock (1) ($) | | 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 Altria’sAltria common stock of $58.21$49.91 on December 31, 2015.2019. Reflects the 2017, 2018 and 2019 equity awards granted under the 2015 PIP and the 2015 equity awards granted under the 2010 PIP. |
| (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 2014 – 20162017 — 2019 LTIP and the executive having worked 24the full three-year performance period. Payment is subject to the discretion of the 36 monthsCommittee and the terms of the performance period.2015 PIP. |
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.
CEO Pay Ratio
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
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.
| Altria Group, Inc. – Proxy Statement | 61 |
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EXECUTIVE COMPENSATION
| Proposal
3 | | | | | |
Director Since: 2008
Board Committees:
• Compensation
• Executive
• Innovation
• Nominating, Corporate
Governance and Social
Responsibility (Chair)
| | | | GERALD L. BALILES, 75
|
| | | Position, Principal Occupation and Professional Experience:
Retired Director and Chief Executive Officer, Miller Center of Public Affairs (Charlottesville, VA). Governor Baliles was the Director and Chief Executive Officer of the Miller Center of Public Affairs, a leading public policy institution affiliated with the University of Virginia, from April 2006 to December 31, 2014. From 1990 to April 2006, he served as an international aviation and trade partner in the law firm of Hunton & Williams LLP. From 1986 through 1990, Governor Baliles served as the 65th Governor of the Commonwealth of Virginia. During his tenure as Governor, he served as Chairman of the National Governors Association.
Other Current Public Directorships:None.
Prior Public Company Directorships (within the last five years): Norfolk Southern Corporation (1990 to May 2013).
Other Directorships, Trusteeships and Memberships: Patrick County Education Foundation. Previously served on the boards of the Virginia Foundation for Community College Education, Center for the Study of the Presidency and Congress, PBS, Newport News Shipbuilding, Shenandoah Life Insurance Company,* the Nature Conservancy in Virginia and the Virginia Historical Society.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Governor Baliles’s significant expertise in public policy and law and his professional, administrative and leadership experiences, including his service as chief executive of the Commonwealth of Virginia, provide clear support for his nomination for election to the Board.
|
* | During 2009, Shenandoah Life Insurance Company entered into a receivership pursuant to a Virginia statutory procedure due to a sharp decline in value in certain of the company’s holdings that resulted in the company falling below minimum capitalization requirements. As part of this receivership, the Circuit Court in Richmond, Virginia, entered an order which, in accordance with required statutory provisions that apply to all such receiverships in Virginia, enjoined the directors from conducting any further business related to Shenandoah Life Insurance Company. The order contained no other findings or provisions related to the conduct of any directors of the entity. In May 2012, Shenandoah Life Insurance Company emerged from receivership and resumed possession of its property and the management of its affairs. The Nominating, Corporate Governance and Social Responsibility Committee considered this order with regard to the director’s qualification to serve as a director and has determined that the order does not impact the director’s ability or qualifications to serve as a director. |
56 ALTRIA GROUP, INC. – Proxy Statement
PROPOSALS REQUIRING YOUR VOTE
| | | | |
MARTIN J. BARRINGTON, 62 | | | | 
Director Since:2012
Chairman, Chief
Executive Officer and
President
Board Committee:
• Executive (Chair)
|
Position, Principal Occupation and Professional Experience:
Chairman, Chief Executive Officer and President, Altria Group, Inc. (Richmond, VA). Mr. Barrington serves as Chairman, Chief Executive Officer and President of Altria Group, Inc. He was appointed to the additional role of President effective March 1, 2015. Prior to his appointment as Chairman and Chief Executive Officer on May 17, 2012, Mr. Barrington’s previous positions at the Company included Vice Chairman and Executive Vice President and Chief Compliance and Administrative Officer. Mr. Barrington has been employed continuously by the Company and its subsidiaries in various capacities since 1993. Before joining the Altria family of companies, he practiced law in both the government and private sectors.
Other Current Public Directorships: None.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: Virginia Museum of Fine Arts; Richmond Performing Arts Center L.L.L.P. Previously served on the Board of Commissioners of the Virginia Port Authority and the advisory board of Points of Light Institute.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Barrington’s significant knowledge and understanding of the Company and its businesses and the external environment in which the Company’s businesses operate, including the regulatory environment, together with his various leadership experiences as described above, provide clear support for his nomination for election to the Board.
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JOHN T. CASTEEN III, 72 | | | | 
Director Since: 2010
Board Committees:
• Audit
• Innovation
• Nominating, Corporate
Governance and Social
Responsibility
|
Position, Principal Occupation and Professional Experience:
President Emeritus, University of Virginia (Charlottesville, VA). Mr. Casteen became President Emeritus of the University of Virginia in August 2010 after having served as President of the University since 1990. He is both University Professor and Professor of English. Previously, Mr. Casteen served as President of the University of Connecticut from 1985 to 1990 and as Secretary of Education for the Commonwealth of Virginia from 1982 to 1985.
Other Current Public Directorships: Strayer Education, Inc.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: Chesapeake Bay Foundation; Jamestown-Yorktown Foundation; Virginia Foundation for Community College Education; Woodrow Wilson International Center for Scholars; Leifur Eiríksson Foundation; several privately-held companies.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Casteen’s extensive professional, business, administrative and leadership experiences, particularly his role as a former chief executive of a university system with top-ranking academic and medical divisions, provide clear support for his nomination for election to the Board.
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ALTRIA GROUP, INC. – Proxy Statement 57
PROPOSALS REQUIRING YOUR VOTE
| | | | |
Director Since: 2008
Board Committees:
• Finance
• Innovation
| | | | DINYAR S. DEVITRE, 68
|
| | | Position, Principal Occupation and Professional Experience:
Special Advisor, General Atlantic LLC (Greenwich, CT). Mr. Devitre is Special Advisor to General Atlantic LLC, a private equity firm, a position he has held since June 2008. In March 2008, Mr. Devitre retired from his position as Senior Vice President and Chief Financial Officer of Altria Group, Inc. Prior to Mr. Devitre’s appointment to this position in April 2002, he held a number of senior management positions with the Company.
Other Current Public Directorships: Markit Ltd.; SABMiller plc.
Prior Public Company Directorships (within the last five years): Emdeon Inc. (2008 to 2011); Western Union Company (2006 to May 2015).
Other Directorships, Trusteeships and Memberships: Pratham USA; Brooklyn Academy of Music. Previously served on the boards of The Lincoln Center for the Performing Arts, Inc. and Kraft Foods Inc. (now known as Mondelēz International, Inc.).
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Devitre’s significant knowledge and understanding of the Company and its businesses, together with his public company board service (including SABMiller), his financial acumen, his public company chief financial officer experience and his general business knowledge, provide clear support for his nomination for election to the Board.
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| | | | |
Director Since: 2008
Presiding Director
Board Committees:
• Compensation
• Executive
• Nominating, Corporate
Governance and Social
Responsibility
| | | | THOMAS F. FARRELL II, 61
|
| | | Position, Principal Occupation and Professional Experience:
Chairman, President and Chief Executive Officer, Dominion Resources, Inc. (Richmond, VA).Mr. Farrell is the Chairman, President and Chief Executive Officer of Dominion Resources, Inc., one of the nation’s largest producers of energy. He became President and Chief Executive Officer of Dominion Resources, Inc. effective January 2006 and was elected Chairman in April 2007. From January 2004 through December 2005, he served as President and Chief Operating Officer of Dominion Resources, Inc. and prior to that as Executive Vice President.
Other Current Public Directorships: Dominion Resources, Inc.; Dominion Midstream GP, LLC. Mr. Farrell also serves as a director of Dominion Gas Holdings, LLC and Virginia Electric and Power Company, which are wholly-owned subsidiaries of Dominion Resources, Inc. that only issue registered debt.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: Associated Electric & Gas Insurance Services Limited; Edison Electric Institute; Institute of Nuclear Power Operations; Richmond Performing Arts Center L.L.L.P.; Richmond 2015, Inc.; Virginia Foundation for Independent Colleges; Virginia Museum of Fine Arts. Previously served on the board of trustees of Virginia Commonwealth University.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Farrell’s extensive business, administrative and leadership experiences, particularly his role as chief executive of a large public company in a regulated industry, provide clear support for his nomination for election to the Board.
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58 ALTRIA GROUP, INC. – Proxy Statement
PROPOSALS REQUIRING YOUR VOTE
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THOMAS W. JONES, 66 | | | | 
Director Since: 2002
Board Committees:
• Audit
• Compensation
• Executive
• Finance (Chair)
|
Position, Principal Occupation and Professional Experience:
Senior Partner, TWJ Capital LLC (Stamford, CT). Mr. Jones assumed his position as Senior Partner of TWJ Capital LLC, an investment company, in May 2005. From August 1999 to October 2004, he held the position of Chairman and Chief Executive Officer of Global Investment Management with Citigroup Inc. He joined Travelers Group as Vice Chairman in 1997 and served as Chairman and Chief Executive Officer of Smith Barney Asset Management until August 1999 when Travelers Group merged with Citibank to form Citigroup Inc. Prior to joining Travelers Group, Mr. Jones served as President and Chief Operating Officer and Vice Chairman of TIAA-CREF from 1993 to 1997.
Other Current Public Directorships: Assured Guaranty Ltd.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: Cornell University (Trustee Emeritus); several privately-held investment portfolio companies. Previously served on the boards of the Federal Reserve Bank of New York, Freddie Mac, Thomas & Betts Corp., Travelers Group, TIAA-CREF, Eastern Enterprises and Howard University.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Jones’s expertise in the areas of finance and investments and his extensive professional, business and leadership experiences, particularly his leadership and administrative roles at large publicly-held companies, provide clear support for his nomination for election to the Board.
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DEBRA J. KELLY-ENNIS, 59 | | | | 
Director Since: 2013
Board Committees:
• Audit
• Innovation
• Nominating, Corporate
Governance and Social
Responsibility
|
Position, Principal Occupation and Professional Experience:
Retired President and Chief Executive Officer, Diageo Canada, Inc. (Etobicoke, Ontario, Canada). Ms. Kelly-Ennis was President and Chief Executive Officer of Diageo Canada, Inc., a subsidiary of Diageo plc, a global spirits, wine and beer company, from 2008 to June 2012. From 2005 to 2008, she was Chief Marketing Officer for Diageo North America, Inc., another subsidiary of Diageo plc. Ms. Kelly-Ennis has also held marketing, sales and general management positions with RJR/Nabisco, Inc., The Coca-Cola Company, General Motors Corporation and Grand Metropolitan PLC.
Other Current Public Directorships: Carnival Corporation & plc; PulteGroup, Inc.
Prior Public Company Directorships (within the last five years): Hertz Global Holdings, Inc. (2013 to October 2015).
Other Directorships, Trusteeships and Memberships: Dress for Success Worldwide (Director Emeritus).
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. Kelly-Ennis’s leadership experiences, particularly her positions as an executive with several large, consumer-focused companies in multiple industries, and her significant marketing, sales and distribution experience at large publicly-held companies, including companies in the consumer packaged goods industry, provide clear support for her nomination for election to the Board.
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ALTRIA GROUP, INC. – Proxy Statement 59
PROPOSALS REQUIRING YOUR VOTE
| | | | |
Director Since: 2011
Board Committees:
• Compensation (Chair)
• Executive
• Finance
• Innovation
| | | | W. LEO KIELY III, 69
|
| | | Position, Principal Occupation and Professional Experience:
Retired Chief Executive Officer, MillerCoors LLC (Golden, CO). Mr. Kiely retired as Chief Executive Officer of MillerCoors LLC, a joint venture combining the U.S. and Puerto Rico operations of SABMiller plc and Molson Coors Brewing Company, in July 2011, a position he had held since July 2009. From February 2005 through July 2009, Mr. Kiely served as President and Chief Executive Officer of Molson Coors Brewing Company. From March 1993 to March 2005, he held a variety of executive positions at Coors Brewing Company, including Chief Executive Officer. Before joining Coors Brewing Company, he held executive positions with Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., and Ventura Coastal Corporation, a division of Seven Up Inc.
Other Current Public Directorships: None.
Prior Public Company Directorships (within the last five years): Medpro Safety Products, Inc. (2009 to March 2014).
Other Directorships, Trusteeships and Memberships: Previously served on the boards of The Denver Center for the Performing Arts and Helen G. Bonfils Foundation.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Kiely’s extensive business, administrative and leadership experiences, particularly his various executive positions, including the role of chief executive, in the consumer packaged goods industry, provide clear support for his nomination for election to the Board.
|
|
|
Director Since: 2012
Board Committees:
• Audit
• Compensation
• Finance
| | | | KATHRYN B. McQUADE, 59
|
| | | Position, Principal Occupation and Professional Experience:
Retired Executive Vice President and Chief Financial Officer, Canadian Pacific Railway Limited (Calgary, Alberta, Canada). Ms. McQuade served as Senior Advisor of Canadian Pacific Railway Limited (“Canadian Pacific”), a transcontinental railway in Canada and the United States, from November 2012 to May 2013, after previously serving as Executive Vice President and Chief Financial Officer of Canadian Pacific from September 2008 to her retirement in November 2012. Ms. McQuade joined Canadian Pacific in June 2007 as Executive Vice President and Chief Operating Officer. Prior to joining Canadian Pacific, Ms. McQuade served as Executive Vice President – Planning and Chief Information Officer at Norfolk Southern Corporation where she spent 27 years in key information technology, strategic planning and finance leadership positions.
Other Current Public Directorships: TransAlta Renewables Inc.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: Several privately-held companies. Previously served on the boards of The College of William & Mary Foundation and Shenandoah Life Insurance Company.*
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Ms. McQuade’s significant financial and accounting expertise, particularly her experience as a public company chief financial officer, her information technology expertise, her general business knowledge and her management experience in a regulated industry, provide clear support for her nomination for election to the Board.
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* | For more information, please refer to the footnote on page 56. |
60 ALTRIA GROUP, INC. – Proxy Statement
PROPOSALS REQUIRING YOUR VOTE
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GEORGE MUÑOZ, 64 | | | | 
Director Since: 2004
Board Committees:
• Audit (Chair)
• Executive
• Finance
• Nominating, Corporate
Governance and Social
Responsibility
|
Position, Principal Occupation and Professional Experience:
Principal, Muñoz Investment Banking Group, LLC (Washington, D.C.) and Partner, Tobin & Muñoz (Chicago, IL). Mr. Muñoz is a principal of the Washington, D.C.-based firm of Muñoz Investment Banking Group, LLC. He is also a partner in the Chicago-based law firm of Tobin & Muñoz. He served as President and Chief Executive Officer of the Overseas Private Investment Corporation from 1997 to January 2001. From 1993 to 1997, Mr. Muñoz was Chief Financial Officer and Assistant Secretary of the United States Treasury Department.
Other Current Public Directorships: Marriott International, Inc.; Anixter International, Inc.
Prior Public Company Directorships (within the last five years): None.
Other Directorships, Trusteeships and Memberships: National Geographic Society; several privately-held companies. Previously served on the boards of Esmark Incorporated and Archipelago Holdings, Inc.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Mr. Muñoz’s accounting, financial, legal and public policy expertise, along with his background in international business and his significant professional, administrative and leadership experiences in both the private and public sectors, provide clear support for his nomination for election to the Board.
| | | |
| | | Non-Binding Advisory Vote to Approve the Compensation of Altria’s Named Executive Officers | | |
| | Our Board recommends a voteFORthis Proposal. | | |
| | | | | |
NABIL Y. SAKKAB, 68 | | | | | 
Director Since: 2008
Board Committees:
• Executive
• Finance
• Innovation (Chair)
• Nominating, Corporate
Governance and Social
Responsibility
|
Position, Principal Occupation and Professional Experience:
Retired Senior Vice President, Corporate Research and Development, The Procter & Gamble Company (Cincinnati, OH). Dr. Sakkab held a variety of positions at The Procter & Gamble Company beginning in 1974. He retired in November 2007 as Senior Vice President, Corporate Research and Development.
Other Current Public Directorships: Deinove.
Prior Public Company Directorships (within the last five years): Givaudan SA (2008 to March 2015).
Other Directorships, Trusteeships and Memberships: Several privately-held companies.
Director Qualifications:
The Nominating, Corporate Governance and Social Responsibility Committee believes that Dr. Sakkab’s innovation expertise in the consumer packaged goods industry and his extensive overall business knowledge and experiences on boards of directors provide clear support for his nomination for election to the Board.
| | | |
The Board recommends a vote “FOR” each of the nominees for election as directors.
ALTRIA GROUP, INC. – Proxy Statement 61
PROPOSALS REQUIRING YOUR VOTE
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PROPOSAL 2 – RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
|
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.
62 ALTRIA GROUP, INC. – Proxy Statement
PROPOSALS REQUIRING YOUR VOTE
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PROPOSAL 3 – NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
|
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.
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. | | |
| | | | | |
| | | | | | |
Introduction
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.
| Altria Group, Inc. – Proxy Statement | 63 |
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EXECUTIVE COMPENSATION
Highlights of the 2020 PIP
| Shares Available | 25 million shares |
| Total Potential Dilution | Approximately 1.3%
(25 million shares / 1.86 billion shares outstanding as of March 23, 2020) |
| 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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EXECUTIVE COMPENSATION
Summary of 2020 PIP
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
| Altria Group, Inc. – Proxy Statement | 65 |
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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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EXECUTIVE COMPENSATION
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.
| Altria Group, Inc. – Proxy Statement | 67 |
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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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EXECUTIVE COMPENSATION
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.
| Altria Group, Inc. – Proxy Statement | 69 |
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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.
Other Information
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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EXECUTIVE COMPENSATION
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. |
| Altria Group, Inc. – Proxy Statement | 71 |
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Shareholder Proposals
PROPOSAL 4 – SHAREHOLDER PROPOSAL REGARDING A REPORT ON TOBACCO PRODUCT | Proposal
CONSTITUENTS AND INGREDIENTS AND THEIR POTENTIAL HEALTH CONSEQUENCES5 | | | | | |
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| | | Shareholder Proposal Regarding Disclosure of Lobbying Policies and Practices | | |
| | Our Board recommends a voteAGAINSTthis shareholder proposal. | | |
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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.
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| 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. | |
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| Altria Group, Inc. – Proxy Statement | 73 |
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SHAREHOLDER PROPOSALS
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| 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. | |
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Our Board recommends a voteAGAINSTthis shareholder proposal. |
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SHAREHOLDER PROPOSALS
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| | | Shareholder Proposal Regarding Report on the Company’s Underage Tobacco Prevention Policies | | |
| | Our Board recommends a voteAGAINSTthis shareholder proposal. | | |
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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.
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PROPOSAL 5Altria Group, Inc. – SHAREHOLDER PROPOSAL REGARDING PARTICIPATION IN MEDIATION OF ANY
ALLEGED HUMAN RIGHTS VIOLATIONS INVOLVING ALTRIA’S OPERATIONS
Proxy Statement | 75 |
American FederationTable of Labor and Congress of Industrial Organizations, 815 Sixteenth Street, N.W., Washington, D.C. 20006, claiming beneficial ownership of Altria common stock with a market value of at least $2,000, submitted the proposal set forth below. The Company is not responsible for the content of the shareholder proposal, which is printed below exactly as it was submitted.Contents
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:
| | (a) | freedom of association and the effective recognition of the right to collective bargaining; | | | | |
| | (b)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. | the elimination of all forms of forced or compulsory labor; |
| | (c) | the effective abolition of child labor; and |
| | (d) | the elimination of discrimination in respect of employment and occupation. |
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:
| | a. | A policy commitment to meet their responsibility to respect human rights; |
| | b. | A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights; |
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| Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute. |
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| Our Board recommends a voteAGAINSTthis shareholder proposal. |
(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
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) |
Name | | Amount and Nature
of Beneficial Ownership (1) (2)
|
GeraldJody L. BalilesBegley | | 45,223 | 121,996 | |
David R. Beran | | 500,457 |
Martin J. Barrington | | 636,764 |
| John T. Casteen III | | 35,289 | 55,916 | |
James E. Dillard IIIKevin C. Crosthwaite, Jr. | | 69,903 | 38,239 | |
| Dinyar S. Devitre | | 199,396 | 94,420 | |
| Thomas F. Farrell II | | 59,419 | 84,570 | |
| Murray R. Garnick | | | 48,553 | |
| William F. Gifford, Jr. | | 127,168 | 173,347 | |
| Craig A. Johnson | | 218,659 | 215,000 | |
Thomas W. Jones | | 100,362 |
Denise F. Keane | | 229,977 |
| Debra J. Kelly-Ennis | | 12,961 | 28,918 | |
| W. Leo Kiely III | | 17,329 | 29,099 | |
| Salvatore Mancuso | | | 74,771 | |
| Kathryn B. McQuade | | 19,935 | 36,728 | |
| George Muñoz | | 73,490 | 74,538 | |
| Mark E. Newman | | | 13,068 | |
| Nabil Y. Sakkab | | 24,851 | 43,005 | |
| Virginia E. Shanks | | | 9,914 | |
| Howard A. Willard III | | 211,847 | 260,242 | |
Group (24(22 persons) | | 2,892,676 | 1,587,357 | |
| (1) | Includes shares of restricted common stock as follows: Mr. Barrington, 292,960; Mr. Dillard, 17,700; Mr. Gifford, 31,320; Mr. Johnson, 34,720; Ms. Keane, 44,930; Mr. Willard, 44,930; and group, 529,600. Does not include RSUs or PSUs granted to executive officers.officers or Altria share equivalents allocated to the accounts of directors who participate in the Deferred Fee Plan. |
| (2) | Includes shares as to which beneficial ownership is disclaimed as follows: Mr. Johnson, 350 (30 shares held by son, 320 shares held by step-daughter); and Mr. Willard, 353 (shares held by spouse). Also includes shares as to which voting and/or investment power is shared with or controlled by another person and as to which beneficial ownership is not disclaimed as follows: Mr. Devitre, 77,25126,341 (shares held in grantor retained annuity trust); Dr. Sakkab, 13,74331,097 (shares held in joint tenancy); and group, 113,797.92,245. Also includes shares of deferred stock as follows: Governor Baliles, 9,664; Mr. Casteen, 35,289;55,916; Mr. Farrell, 56,919; Mr. Jones, 93,924;82,070; Ms. Kelly-Ennis, 12,961; 28,918; Ms. McQuade, 18,935; and33,644; Mr. Muñoz, 63,261.9,916; and Mr. Newman, 7,046. |
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 | | | | | | | |
| | | | |
Name and Address of Beneficial Owner(1) | | Number of Shares
Beneficially Owned
| | Percent of Common
Stock Ownership on
March 28, 2016
|
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
| | 122,598,322 (1) | | 6.3% |
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
| | 116,217,474 (2) | | 5.9% |
(1) | According to the Schedule 13G/A filed with the SEC by BlackRock, Inc. on January 25, 2016,February 5, 2020, disclosing the number of shares as of December 31, 2015.2019. |
| (2) | According to the Schedule 13G/A filed with the SEC by The Vanguard Group on February 10, 2016,12, 2020, disclosing the number of shares as of December 31, 2015.2019. |
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
RELATED 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 |
Table of Contents
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.
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.
| Altria Group, Inc. – Proxy Statement | 81 |
Table of Contents
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.
Table of Contents
QUESTIONS AND ANSWERS ABOUT COMMUNICATIONS, COMPANY DOCUMENTSTHE 2020 ANNUAL MEETING AND SHAREHOLDER PROPOSALSVOTING
5. How can I vote my shares of common stock?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.
| Altria Group, Inc. – Proxy Statement | 83 |
Table of Contents
QUESTIONS AND ANSWERS
ABOUT COMMUNICATIONS, COMPANY DOCUMENTS
THE 2020 ANNUAL MEETING AND SHAREHOLDER PROPOSALSVOTING
No Excessive Perquisites
