UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Avon Products, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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A V O N
March 30, 2017
April 2, 2019
Dear Fellow Shareholders:
It is my pleasure to invite you to join me, the Board of Directors, senior leaders, and current and former employees at the 20172019 Annual Meeting of Shareholders in White Plains,New York, New York. Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
We hope that you will join us in person, but whether or not you plan to attend the Annual Meeting, your vote is important. I encourage you to vote by telephone, by internet or by signing, dating, and returning your proxy card by mail. Voting instructions are found on page 6 of the Proxy Statement.
On behalf of the Board of Directors and Avon management, thank you for your investment and interest in Avon.
Sincerely yours, | ||||
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Chief Executive Officer |
AVON PRODUCTS, INC.
Building 6, Chiswick Park
London W4 5HR
United Kingdom
NOTICEYOUR VOTE IS IMPORTANT – YOU CAN VOTE IN ONE OF ANNUAL MEETING OF SHAREHOLDERS
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VIA THE INTERNET Visit the website listed on your proxy card |
Call the telephone number on your proxy card |
BY MAIL Sign, date and return your proxy card in the enclosed envelope | ||||||||
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IN PERSON Attend the Annual Meeting | ||||||||
If your shares are held in a stock brokerage account or by a bank or other record holder, follow the voting instructions on the form that you receive from them. The availability of telephone and internet voting will depend on their voting process. |
Meeting Agenda
1 Elect as directors the eight nominees named in the Proxy Statement; |
2 Hold anon-binding, advisory vote to approve compensation of our named executive officers; |
3 Approve the Amended and Restated 2016 Omnibus Incentive Plan; |
4 Ratify the appointment of PricewaterhouseCoopers LLP, United Kingdom, as our independent registered public accounting firm for 2019; and |
5 Transact such other business as may properly come before the meeting.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS Thursday, May 16, 2019 9:00 a.m. Convene 810 Seventh Ave 22nd Floor New York, NY 10019 | How to Attend the Meeting | |||||
If you plan to attend the meeting in person, please see page 6 for admission requirements. | ||||||
The record date for the meeting is March 27, 2019. This means that you are entitled to receive notice of meeting and vote your shares at the meeting if you were a shareholder of record as of the close of business on March 27, 2019. | ||||||
By order of the Board of Directors, | ||||||
Ginny Edwards | ||||||
Vice President & Corporate Secretary | ||||||
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April 2, 2019
Important notice regarding the availability of proxy materials for the shareholder meeting to be held on May | |
Our Proxy Statement and Annual Report to Shareholders are available atwww.edocumentview.com/
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This summary highlights information contained elsewhere in the Proxy Statement and in Avon Products, Inc.’s (“Avon,” the “Company,” “we,” “us,” or “our”) Annual Report on Form10-K for the year ended December 31, 2016.2018. This summary is not a complete description and you should read the entire Proxy Statement carefully before voting. Proxy materials were first sent to shareholders on or about March 30, 2017.April 2, 2019.
Meeting Agenda
Matter | Board Vote Recommendation | Page Reference (for more detail) | ||||
PROPOSAL 1 | Election of the eight Director Nominees named in this Proxy Statement | |||||
| FOR EACH NOMINEE | 10 | ||||
PROPOSAL 2 | AnnualNon-Binding, Advisory Vote to Approve Compensation of our Named Executive Officers | |||||
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PROPOSAL 3 | Approval of the Amended and Restated 2016 Omnibus Incentive Plan | FOR | 73 | |||
PROPOSAL 4 | 2019 | FOR | 86 | |||
Board and Governance Highlights
The Company has adopted many leading governance practices that establish strong independent leadership in our boardroom and provide our shareholders with meaningful rights. Highlights include:
The Company has adopted many leading governance practices that establish strong independent leadership in our boardroom and provide our shareholders with meaningful rights. Highlights include: • Since 2016, over 60% Board member refreshment including new Chief Executive Officer (“CEO”) in 2018 •Annual election of directors | •Non-executive Chairman of the Board and Lead Independent Director |
• All directors are independent other than CEO •Proxy Access | ||||||||||
•Majority vote standard with resignation policy for election of directors in uncontested elections | •Directors may serve on limited number of other public boards | |||||||||||
• Regular Executive Sessions of independent directors • Annual board and committee evaluations •No supermajority voting with respect to common stock, except as provided under New York Business Corporation law |
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TENURE AVERAGE: 4 Years AVERAGE AGE: 61
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Board Independence Board Tenure Board Gender Median Age: 59 Average Age: 59
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Board Nominees and Designees
The following table provides summary information about each director nominated for election toby our Board of Directors (the “Board”) to the Board at the 20172019 Annual Meeting (the(collectively, the “Director Nominees”) and each director elected to the Board by holders of our Series C Preferred Stock (the(collectively, the “Series C Designees”). Director Nominees are elected annually by a majority of the votes cast by our shareholders, voting together as a single class. The Series C Designees have been elected by the holders of our Series C Preferred Stock, voting separately as a class.
Nominees and Designees
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Nominees and Designees
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Names | Director Since | Independent1 | Other Public Boards | Audit Committee | Compensation Management Development Committee
| Finance Committee | Nominating and Corporate Governance
| Director Since | Independent1 | Other Public Boards | Audit Committee | Compensation and Management Development Committee
| Finance Committee | Nominating and Corporate Governance Committee
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Jose Armario | 2016 | I | 1 |
2016
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W. Don Cornwell2 | 2002 | I | 2 |
2002
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Chan W. Galbato3,4 | 2016 | I | 1 |
2016
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Nancy Killefer | 2013 | I | 3 |
2013
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Susan J. Kropf | 2015 | I | 3 |
2015
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Steven F. Mayer4 | 2016 | I | 2 | |||||||||||||||||||||||||
Helen McCluskey | 2014 | I | 2 |
2014
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Sheri McCoy5 | 2012 | 0 | ||||||||||||||||||||||||||
Charles H. Noski | 2012 | I | 2 | |||||||||||||||||||||||||
Cathy D. Ross | 2016 | I | 1 | |||||||||||||||||||||||||
Andrew G. McMaster, Jr.
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James A. Mitarotonda
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Michael F. Sanford4 | 2016 | I | 0 |
2016
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Lenard B. Tessler4
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Jan Zijderveld5 |
2018 |
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1 Independent in accordance with NYSE listing standards, SEC regulations, and our Corporate Governance Guidelines
2 Lead Independent Director 3 Non-executive Chairman of the Board 4 Series C Designee 5 CEO | - Committee Chair - Member - Financial Expert
-Non-Voting Observer |
Attendance
Each Director Nominee and each Series C Designee is a current director and each Director Nominee and Series C Designee that served on the Board in 20162018 attended at least 75% of the aggregate number of 20162018 meetings of the Board and each Board Committee on which he or she served. Each of the Series C Designees was initially elected to the Board on March 1, 2016. Cathy D. Ross and Jose Armario were initially elected to the Board on March 24, 2016 and September 6, 2016, respectively.
2 | AVON 2019 Proxy Statement |
Business and Strategy Highlights
2016 wasFew companies have the brand recognition, extensive global reach or market-leading positions in beauty and direct selling that Avon has. In a world where trust in companies is becoming a scarcer commodity, a Representative’s strong relationship with her consumers continues to be highly relevant.
Avon is an important year for Avon as it marked the 130thanniversary of our iconic beauty company. It was alsoorganization with a year of significant change as Avon embarked on its first year of a thoroughclear and comprehensive three-year transformation plan (the “Transformation Plan”) that our CEO and Management Team shared with our investment community on January 21, 2016. The Transformation Plan contains three strategic pillars—Investing in Growth, Driving out Costand Improving Financial Resilience—as well as long-term financial goals ofmid-single digit constant dollar revenue growth, 1 to 2% Active Representative growthand low double-digitcompelling purpose, operating margin.
Following a strategic review of the business in 2015 undertaken to identify alternatives for improving shareholder value, we finalized a strategic partnership with Cerberus Capital Management, L.P. (collectively with its affiliates, “Cerberus”) in March 2016 and successfully separated Avon’s North America business on March 1, 2016 into a privately held company, operating as New Avon LLC, under the management of Cerberus. Avon Products, Inc. remains listed on the New York Stock Exchange and retains an approximate 20% interest in New Avon LLC. As part of the transaction, Cerberus made a $435 million investment in exchange for an approximate 16.6% interest in Avon Products, Inc. at the time of the investment.
The Transformation Plan was a key enabler of our 2016 financial performance. For the full year, total revenue for reportable segments was $5.7 billion, which declined 7% as a result of the impact of foreign currency, but grew 3% in constant dollars despite significant macroeconomic and sociopolitical and geopolitical challenges. For reportable segments, Active Representatives declined 1%, primarily due to Asia Pacific, while Ending Representatives were relatively unchanged compared to 2015. We were pleased with our full year operating margin that improved 5.6%, up 290 basis points, and our full year adjusted operating margin that improved 80 basis points to 6.5%, despite the negative impact from foreign exchange of approximately 310 basis points. We delivered solid overall year on year improvement in 2016, notwithstanding a deceleration in performance in the fourth quarter. In 2016 we focused on our Top 10 markets, representing approximately 70% of our revenue,beauty and produced better overall performance in these top markets.
As part of our Transformation Plan, we delivered approximately $120 million in cost savings, exceeding our targets and improving our profit margin. We also significantly strengthened our balance sheet and improved our financial resilience by achieving an approximate $260 million reduction in debt. Our transformation is on track andpersonal care categories across the steps we have taken in 2016 have laid the foundation for further progress in improving and growing the business. We have a strong set of building blocks including an iconic brand, leadership positions in many markets, a strong innovation pipeline and an incredible Representative base of approximately six million women who are Avon brand ambassadors.
We are pleased with the progress made during the first year of our Transformation Plan as well as our improvement in profitability and expanded operating margin. We achieved these results despite challenging and ever-changing macroeconomic and geopolitical trends. Our progress in 2016 was enabled by the key strategic decision made by our Board and CEO to enter into the partnership with Cerberus.
As we move into 2017, we are in a position to place more emphasis onInvesting in Growth.In January 2016, we outlined an investment of $350 million over three years which includes an estimated $150 million in media and social selling and $200 million in service model evolution and information technology to improve the Representative experience. We will also work to drive sustainable and more consistent revenue growth across our Top 15 markets, which represent approximately 80% of Avon’s revenue. We will continue to invest in Avon’s brand and strong innovationglobe with a focus on developing and growing markets. Through our millions of direct selling Representatives, we empower micro-entrepreneurs across the globe. Avon’s core purpose to provide part-time earnings to families and offer amazing products at great prices is as relevant today, if not more, than it was 130 years ago at the Company’s founding. Avon’s ongoing progress to unlocke-commerce, make Avon available to anyone, anywhere and enable our Representatives to be more competitive is powerful, and is at the heart of Avon’s value proposition. In 2018, Avon introduced digital mobile brochures in 60 countries,on-line stores for Representatives in 20 markets and relaunched oure-commerce positioning in China thereby driving significant early growth in thee-commerce channel.
Overall 2018 operating results were disappointing, total revenue from reportable segments was down 2% compared to the prior year, driven by declines in Brazil, Russia and the United Kingdom. The 2018 full year results reinforced the urgent need to execute Avon’s new strategic direction and we have made good progress.
In 2018 we made critical progress in addressing the key concerns of leadership and strategic direction. Throughout the year we continued to strengthen Avon’s leadership team, further recruiting seasoned and skilled senior executives. The process of putting in place a leadership team to accelerate change and to increase sustainable profit continued with the recruitment by the Board of a new CEO, Jan Zijderveld, who joined Avon in February 2018. Before joining Avon, Mr. Zijderveld was a senior executive and30-year veteran of Unilever N.V./PLC with a track record as a proven global leader driving profitable growth in large, multi-channel, complex consumer businesses across emerging, developing and developed markets. We also made other critical appointments in key markets resulting in Avon now having new leadership in markets that account for more than 50% of total revenue. We are confident that Avon has an energized, highly motivated leadership team in place with the skillset required to deliver our Value, Massnew Open Up Strategy and Upper Mass brandsthe experience needed to appealrestore Avon to growth in key emerging and developing markets.
Avon is operating in a broader spectrumdramatically changing and competitive environment, where business as usual is not an option for Avon. A year ago, the Board gave Mr. Zijderveld a clear mandate to lead a deep and comprehensive strategic and operating review of women,all facets of the business and evaluate ways to significantly accelerate Avon’s path to profitable growth. This review led to the development and launch of Avon’s new Open Up Strategy, which was communicated to shareholders in September 2018. Our Open Up Strategy is simple and clear, and we made important progress during Q3 and Q4 of 2018, including in the following areas: Reboot Direct Selling; Open Up Mindset; Deliver Fuel for Growth; Refresh and Strengthen the Brand. (See page 34 for a more detailed discussion.)
In 2018, we faced the reality of our situation and acted with focus and intent to launch a comprehensive corporate turn-around strategy, addressing all key areas of our business and achieved good early-stage progress. We laid the groundwork, strengthened the executive leadership team and put the right plan in place. We’ve started to fix the core and we’re moving in the right direction, but we need to do more. In 2019 we need to execute our Open Up Strategy with pace and drive, build momentum to see our financial results grow quarter over quarter and start delivering key strategic milestones necessary to achieve our business plan and implementing our strategy.
Shareholder Engagement & 2018 Compensation Highlights
At our 2018 annual meeting, shareholders representing approximately 85% of votes cast approved our“say-on-pay” proposal in support of our executive compensation program. While the vast majority of our shareholders are in favor of our executive compensation programs, we remain committed to shareholder engagement and value insights provided from our longer term goal of 1 to 2% Active Representative growth. Finally, we will continue to focus on increased cost savings as we strive to deliver the $350 million in cost reduction over three years. We are confident in our Transformation Plan, and we expect to deliver the long-term financial objectives ofmid-single digit constant revenue growth, 1% to 2% Active Representative growth and low double-digit operating margin.
Shareholder Engagement & 2016 Compensation Highlightsfellow shareholders.
During 2016,2018, we engagedcontinued our practice of engaging with our shareholders representing nearly 60% ofand soliciting feedback. Having received strong support for our shares outstanding as of December 31, 2016.2018say-on-pay proposal, in 2018 our shareholder engagement focused particularly on gaining feedback and input from shareholders who did not support oursay-on-pay proposal in 2018. As in previousrecent years, the Chair of the Compensation and Management Development Committee Chair(the “Committee”) conducted significant shareholder outreach to ensure shareholder perspectives and concerns were heard and well understood. We had discussions with our shareholders about our compensationShareholder outreach meetings were conducted as the 2019 incentive programs design was developing, which enabled the Committee to directly incorporate feedback and suggestions into the 2019 program and the changes made for 2016. In these conversations, we reviewed program changes, and discussed the Company’s transformation status and financial and strategic priorities.
design. The feedback received from our shareholders continues to be tremendously valuablevaluable. While shareholders raised different challenges and wasconcerns, they consistently agreed that the performance metrics for both the short and long-term programs should be directly tied to Avon’s strategy. This feedback has been incorporated into the Compensation and Management Development Committee’s (the “Committee’s”) determination ofour program design.
The 2018 executive compensation program changeswas highly performance-based and provided incentive opportunities that align with our shareholders’ interests and our strategic and financial goals. Performance goals were selected to fully align with our commitment to our shareholders. The Committee took the following specific actions with respect to the compensation of the NEOs for 2016 and beyond.2018:
– | Base Salary: No increase to base salaries |
AVON 2019 Proxy Statement | 3 |
– | Annual Cash Incentive: Even though our Open Up Strategy resulted in important progress during Q3 and Q4 of 2018, we were unable to achieve annual incentive plan threshold performance given the challenging macro environment and the robust nature of our goal setting process. Consistent with the formulaic nature of the program and the avoidance of positive discretion, there were no annual cash incentive award payouts to the NEOs with respect to 2018 performance (other than to Mr. Zijderveld, who was guaranteed a minimum annual incentive payout of 50% of target in his employment contract, solely for 2018; the rationale for this was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited). |
– | Long-Term Incentive Awards: |
◯ | Our CEO’s 2018 long-term incentive award has a target value of $3.25 million and is 100% performance-based with the following mix: |
◾ | 40% premium-priced stock options (“Premium Options”) with exercise price equal to 125% of the closing price of a share of Avon stock as of the grant date, and |
◾ | 60% performance-based restricted stock units (“Performance RSUs”) with a three-year performance period. |
◯ | Additionally, our CEO receivedone-timesign-on inducement awards in 2018, 50% of which were performance-based and in the form of Performance RSUs and the other 50% were service-based restricted stock units (“Service-based RSUs”). These performance-based inducement awards have three separate tranches, all of which are eligible to vest only after completion of the 2020 performance year. The Committee will establish at the beginning of each year (i.e., 2018, 2019 and 2020) the performance objectives required to earn the award – ensuring that the Committee can tailor the measures and their rigor to the business circumstances. Thenon-performance based restricted stock units were granted as a replacement of a portion of his prior employer forfeited equity awards, and to promote shareholder alignment and retention over the three-year vesting period. These inducement awards cliff vest after three years. |
◯ | For other NEOs, 2018 long-term incentive awards consisted of Performance RSUs, Service-based RSUs, and Premium Options, each representing one-third of the overall target award. |
Our Say on Pay Proposal is found on page 6771 and our Board recommends that our shareholders vote “For” this proposal. The following factors support this recommendation:
Our programs are designed to support anddrive |
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Ourprogram design incorporates shareholder feedback received during |
Our long-term incentive plan design isaligned with shareholder value, requiring significant stock price appreciation before target awards are realized. As a result, we have delivered long-term incentive compensation |
We have also maintained a focus onlimiting shareholder |
We benchmark our executives’ pay against apeer group that better reflects Avon’s business following the separation of our North America |
Key features of our 2016 compensation programs include the following:
20172019 Compensation Highlights
For 2017,We are committed to ensuring that Avon’s pay framework, particularly our incentive programs, are aligned with and reflect the Committee has maintained its commitment to the strong alignmentmost important task of our executive team – returning our business to profitable growth. Following the introduction of the Open Up Strategy the Committee undertook a detailed, thorough and holistic review of Avon’s incentive arrangements (fixed, short and long-term) to determine if our pay programsarrangements are aligned with our shareholders’ interests, while ensuring we can attractAvon’s new strategic direction, key priorities and retain key talent in the organization. As such,timelines.
Following this thorough review, the Committee believes that many elements of the 2016 design remainscurrent incentive program remain appropriate, as it has strong performance elements that support our three-year Transformation Planexternally communicated business goals and requires significant stock price appreciation for executives to realize target compensation. AsHowever, for 2019 the Committee made a result,number of adjustments to the detailsincentive arrangements, to further strengthen their alignment with Avon’s strategic direction and focus on delivering the turnaround strategy with urgency. For example, the 2019 long-term incentive program places a greater focus onone-year performance than our historical practice in order to explicitly reflect our shareholders’ feedback, which stressed the urgency of our compensation programs for 2017 are not significantly different from 2016,delivering the turnaround strategy as shown on page 36.
Key 2016-2017 Governance Highlights
On March 1, 2016,well as enabling the Board amended and restatedretention of critical staff needed to deliver the Company’sby-laws (the“By-Laws”) to, among other things, adopt a proxy access provision, as discussed on page 19 of this Proxy Statement. The Company believes the proxy accessBy-Law amendments adopted by the Board reflect shareholder feedback and are responsive to shareholders’ approval, during the 2015 annual meeting of shareholders, of anon-binding proposal requesting the Board provide for proxy access.
In 2016, as part of the strategic partnership with Cerberus, the Company reduced the size of its Board from twelve to eleven directors. The Board is now comprised of six of the Company’s incumbent directors, three directors designated by Cerberus, and two additional directors jointly selected by the Company and Cerberus, one of whom was approved by Barington, as further described below. In addition, so long as Cerberus maintains a certain ownership level in the Company (as described in more detail on page 29 of this Proxy Statement), Cerberus will continue to have the right to select the Chairman. A new Lead Independent Director role was also created on the Board in 2016. The Company believes this newly-reconstituted Board and the addition of a Lead Independent Director provides an effective governance framework in support of the Company’sgo-forward strategy and transformation.
4 | AVON 2019 Proxy Statement |
We have continued to engage our shareholders on these governance and related Company matters. For example, ournon-executive Chairman of the Board and Lead Independent Director have participated in meetings to address the strategic partnership with Cerberus and the Company’s Transformation Plan which we believe sets the Company on a solid path to profitability and growth by providing a solution for the North America business as well as capital, focus and resources to support the Company in the execution of its transformation. We will continue to engage investors on a regular basis to better understand and consider their views.
In addition, on March 27, 2016, the Company entered into an agreement (the “Barington Agreement”) with an investor group led by Barington Capital Group, L.P. (collectively, “Barington”) that, as of March 27, 2016, collectively owned over 3% of the outstanding shares of common stock of the Company. Under the terms of the Barington Agreement, the Company granted Barington the right to approve the appointment of a director to be jointly selected by the Company and Cerberus, which Barington exercised with its approval of Mr. Armario’s appointment.
Governance and Related Materials
The Company has established strong policies, practices and procedures which provide a framework for effective governance. Our Corporate Governance Guidelines describe our Board of Directors’Board’s governance policies and practices, including standards for director independence, qualifications for Board and Board Committee membership, Board and Board Committee responsibilities, and Board and CEO evaluations. Highlighted below are some of our key governance and related materials.materials:
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Corporate Governance Guidelines
Charters of Each Board Committee
Code of Conduct
Corporate Responsibility Report
The Corporate Governance Guidelines, charters of each Board Committee, and Corporate Responsibility Report are available on our investor website (www.avoninvestor.com)(investor.avonworldwide.com) and may be accessed by clicking on “Corporate Governance” or, in. Both the caseCode of ourConduct and Corporate Responsibility Report by clicking on “Corporate Responsibility.” The Code of Conduct isare available atwww.avoncompany.comwww.avonworldwide.com and may be accessed by clicking on “Ethics & Compliance” under the “About Avon” heading.
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VOTING AND MEETING INFORMATION
Purpose of Materials
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We are providing these proxy materials in connection with the solicitation by the Board of Directors of Avon Products, Inc. (“Avon,” the “Company,” “we,” “us,” or “our”) of proxies to be voted at our Annual Meeting of Shareholders, which will take place on | ||||
This Proxy Statement describes the matters to be voted on at the Annual Meeting and contains other required information. | ||||
Distribution of Proxy Materials
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We are providing access to our proxy materials over the Plan (“the PSA Plan”). | ||||
Shareholders Entitled to Vote
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Shareholders of our common stock and of our Series C Preferred Stock as of the close of business on March | ||||
How to Vote
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Shareholders can vote in one of several ways: | ||||
| • Via the Internet—Visit the website on the proxy notice or proxy card | |||
| • By Telephone—Call the telephone number on the proxy card | |||
| • By Mail—Sign, date and return your proxy card in the enclosed envelope | |||
| • In Person—Attend the Annual Meeting (follow instructions below) | |||
If your shares are held in a stock brokerage account or by a bank or other record holder, follow the voting instructions on the form that you receive from them. The availability of telephone and internet voting will depend on their voting process. If you do not give instructions to the broker, bank or other record holder holding your shares, it will not be authorized to vote with respect to Proposals 1, 2 or 3. We therefore urge you to provide instructions so that your shares may be voted. | ||||
Attending the Annual Meeting
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Shareholders who would like to attend the Annual Meeting in person are asked to follow the guidelines below. Anyone who arrives without an admission ticket orpre-registration will not be admitted to the Annual Meeting unless it can be verified that the individual was a shareholder as of March |
6 | AVON 2019 Proxy Statement |
Shareholders of Record (shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A.) | ||||
• | Please bring the admission ticket that is attached to your proxy notice and/or proxy card and photo identification. If you vote in advance of the Annual Meeting, please keep a copy of your admission ticket and bring it with you. |
• | If you do not have your admission ticket at the Annual Meeting, you must bring other proof of your Avon share ownership as of March | |||||
Beneficial Owners (shares are held in a stock brokerage account, in the PSA Plan, or by a bank or other record holder) | ||||||
• | We recommend that youpre-register to attend the meeting by sending a written request, along with proof of ownership (such as a current brokerage statement), to our Investor Relations Department, Avon Products, Inc., | |||||
| • You may attend withoutpre-registration; however, you must bring proof of your Avon share ownership as of March | |||||
Shares held through the PSA Plan must be voted through the PSA Plan Trustee as described below. | ||||||
Voting Instructions
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Your proxy, when properly signed and returned to us, or processed by telephone or via the internet, and not revoked, will be voted in accordance with your instructions. We are not aware of any other matter that may be properly presented at the meeting. If any other matter is properly presented, the persons named as proxies on the proxy card will have discretion to vote in their best judgment. | ||||||
Unless you give other instructions on your proxy card, or unless you give other instructions when you cast your vote by telephone or via the internet, the persons named as proxies will vote in accordance with the recommendations of | ||||||
Revoking Your Proxy or Changing Your Vote
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If your shares are held in a stock brokerage account or by a bank or other record holder, you may submit new voting instructions by contacting your broker, bank or other record holder or, if you have obtained a legal proxy from your broker, bank or other record holder giving you the right to vote your shares, by attending the meeting and voting in person. |
AVON 2019 Proxy Statement | 7 |
Quorum Requirements
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The presence at the meeting, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote at the Annual Meeting will constitute a quorum, permitting the meeting to conduct its business. | ||||
Abstentions and “brokernon-votes” are counted as present and entitled to vote for purposes of determining a quorum. A brokernon-vote occurs when a broker or other record holder holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power and has not received instructions from the beneficial owner. If you do not give instructions to the broker, bank or other record holder holding your shares, it will not be authorized to vote your shares with respect to Proposals 1, 2, or 3. We therefore urge you to provide instructions so that your shares held in a stock brokerage account or by a bank or other record holder may be voted. |
Approval of a Proposal
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Each of the Proposals requires the affirmative vote of a majority of the votes cast at the Annual Meeting. “Votes cast” means the votes actually cast “for” or “against” a particular proposal, whether in person or by proxy.
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Avon Associates—Personal Savings Account Plan
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The trustee of the
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Voting Deadline
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If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., and if you vote by telephone or the internet, your vote must be received by 1:00 A.M. (New York time) on May | ||||||
If your shares are held in a stock brokerage account or by a bank or other record holder, you should return your voting instructions in accordance with the instructions provided by the broker, bank or other record holder who holds the shares on your behalf. | ||||||
If you hold shares in the
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Tabulation of Votes
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Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of election.
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Vote Results
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We intend to announce preliminary voting results at the Annual Meeting and to publish final results in a | ||||||
All proxies, ballots and voting materials that identify the votes of specific shareholders will generally be kept confidential, except as necessary to meet applicable legal requirements, to allow for the tabulation |
8 | AVON 2019 Proxy Statement |
Householding
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Beneficial owners who share a single address may receive only one copy of the proxy notice or the proxy materials, as the case may be, unless their broker, bank or other nominee has received contrary instructions from any beneficial owner at that address. This practice, known as “householding,” is designed to reduce printing and mailing costs. If any beneficial owner(s) sharing a single address wish to discontinue householding and/or receive a separate copy of the proxy notice or the proxy materials, as the case may be, or wish to enroll in householding, they should contact their broker, bank or other nominee directly. Alternatively, if any such beneficial owners wish to receive a separate copy of the proxy materials, we will deliver them promptly upon written or oral request to Investor Relations Department, Avon Products, Inc., |
AVON 2019 Proxy Statement | 9 |
PROPOSAL 1—ELECTION OF DIRECTORS
On March 1, 2016, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with Cleveland Apple Investor L.P., a Delaware limited partnership (“Cerberus Investor”), an affiliate of Cerberus Capital Management, L.P., pursuant to which the Company reduced the size of theThe Board of Directors has fixed the number of the Company (the “Board”) from twelve directors to eleven directors.
at 11. The Board has nominated Jose Armario, W. Don Cornwell, Nancy Killefer, Susan J. Kropf, Helen McCluskey, Sheri McCoy, Charles H. NoskiAndrew G. McMaster, Jr., James A. Mitarotonda, and Cathy D. RossJan Zijderveld (the “Director Nominees”) for election to the Board, and Cerberus Investor, as the holder of the Company’s Series C Preferred Stock, has elected Chan W. Galbato, Steven F. Mayer and Michael F. Sanford and Lenard B. Tessler, (the “Series C Designees”) to serve as directors commencing immediately upon the conclusion of the 20172019 Annual Meeting. All Director Nominees and Series C Designeesnominees are current members of our Board. There are no family relationships among our directors or executive officers.
As set forth in further detail on page 20, on March 26, 2018, the Company entered into an agreement with certain shareholders (the “Nomination Agreement”), pursuant to which the Company agreed to nominate Mr. Mitarotonda for election to the Board at the 2018 Annual Meeting. With Mr. Mitarotonda’sre-nomination for election to the Board at the 2019 Annual Meeting, certain terms of the Nomination Agreement remain in effect.
Each of the Series C Designees will hold office until the next succeeding Annual Meeting or until his or her successor is elected and qualified. Each of the Director Nominees, if elected as a director at the 20172019 Annual Meeting, will generally hold office until the next succeeding Annual Meeting or until his or her successor is elected and qualified. As set forth in further detail on page 29, Cerberus Investor is required to vote its shares in favor of each Director Nominee. Each Director Nominee has consented to being named as a nominee in our proxy materials and to serve as a director, if elected. We have no reason to believe that any of the Director Nominees will be unable or unwilling to serve as a director.
Each Director Nominee who receives a majority of the votes cast will be elected to the Board, in an uncontested election.Board. If a Director Nominee is an incumbent director and he or she receives a greater number of votes “withheld” from his or her election than votes “for” such election, he or she is required to tender his or her resignation in accordance with our Corporate Governance Guidelines, as described under “Information Concerning The Board Of Directors—Board Policy Regarding Voting for Directors” on page 18.19.
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THE BOARD OF DIRECTORS RECOMMENDS
that you vote FOR the election of each of the Director Nominees listed below.
JOSE ARMARIO
| Director Nominee | |||
| Jose Armario is the Chief Executive Officer of Bojangles’ Restaurants, Inc. Prior to joining Bojangles’ Restaurants, Inc. in January 2019, he served as Corporate Executive Vice President of Worldwide Supply Chain, Development, and Franchising of McDonald’s Corporation from August 2011 until his retirement in October 2015. He served as Group President, McDonald’s Canada and Latin America of McDonald’s Corporation from February 2008 to August 2011. Prior to this, Mr. Armario was President, McDonald’s Latin America from 2004 to July 2008. Earlier in his career, Mr. Armario held operating roles of increasing responsibility at Lenscrafters, Inc. and Burger King Corporation. Mr. Armario is currently a director of USG Corporation. He also serves on the President’s Council of the University of Miami, Florida and the Governing Council of Advocate Good Samaritan Hospital, and | Director since:2016
COMMITTEES Audit Committee Compensation and |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Having served in a variety of key leadership positions in nearly two decades with McDonald’s Corporation, Mr. Armario brings to the Board substantial experience leading large complex operations in global marketing, branding, supply chain, franchising and strategic planning. His first-hand consumer experience and global responsibilities with McDonald’s Corporation, particularly in Latin America, provide him with valuable insights to guide Avon in its key geographies.
10 |
W. DON CORNWELL
| Director Nominee | |||
| Mr. Cornwell was Chairman and Chief Executive Officer of Granite Broadcasting Corporation from 1988 until his retirement in August 2009, and served as Vice Chairman until December 2009. Previously, Mr. Cornwell was Chief Operating Officer for the Corporate Finance Department at Goldman, Sachs & Co. from 1980 to 1988 and Vice President of the Investment Banking Division of Goldman Sachs from 1976 to 1988. He is a | Director since:2002
COMMITTEES Audit Committee Finance Committee (Chair) Nominating and
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SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Through Mr. Cornwell’s career as an entrepreneur driving the growth of a consumer focused-media company, an executive in the investment banking industry and as a director of several significant consumer product and health care companies, he has accumulated valuable business, leadership, and management experience and brings important perspectives on the issues facing the Company. Mr. Cornwell founded and built Granite Broadcasting Corporation, a consumer-focused media company, through acquisitions and operating growth, enabling him to provide insight and guidance on the Company’s strategic direction and growth. Mr. Cornwell’s strong financial background, including his work at Goldman Sachs prior toco-founding Granite and his service on the audit and investment committees of other companies’ boards, also provides financial expertise to the Board, including an understanding of financial statements, corporate finance, accounting, and capital markets.
NANCY KILLEFER
| Director Nominee | |||
| Ms. Killefer served as a Senior Partner at McKinsey & Company, an international management consulting firm, until her retirement in August 2013. She joined McKinsey in 1979 and held a number of leadership roles, including as a member of the firm’s governing board. Ms. Killefer led the firm’s recruiting and chaired several of the firm’s personnel committees. From 2000 to 2007, she ran McKinsey’s Washington, D.C. office. From 1997 to 2000, Ms. Killefer served as Assistant Secretary for Management, Chief Financial Officer and Chief Operating Officer at the U.S. Department of Treasury. In 2000, she returned to McKinsey to establish and lead the firm’s Public Sector Practice. She also served as a member of the IRS Oversight Board from 2000 to 2005 and as chair of that body from 2002 to 2004. Ms. Killefer is currently a director of Cardinal Health and Taubman Centers, Inc. She also served as a chairman and director of CSRA until 2018 and director of The Advisory Board | Director since:2013
COMMITTEES Compensation and Nominating and |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Having served in key leadership positions in both the public and private sectors and having provided strategic counsel to consumer-based companies during her 30 years with McKinsey & Company, Ms. Killefer brings to the Board substantial experience in the areas of strategic planning, including sales, marketing and brand building. Her experience as a partner of a global management consulting firm and as Chief Financial Officer and Chief Operating Officer of a government agency provides valuable expertise in the areas of executive leadership and finance. Ms. Killefer’s corporate governance experience as a director of other public companies, including as the former chairman of the board of directors of CSRA, is also highly valuable to the Board.
AVON 2019 Proxy Statement | 11 |
SUSAN J. KROPF
| Director Nominee | |||
| Ms. Kropf served as President and Chief Operating Officer of Avon Products, Inc. from January 2001 until her retirement in 2006. She also served as Avon’s Executive Vice President and Chief Operating Officer, North America and Global Business Operations from 1999 to 2001 and Executive Vice President and President, North America from 1998 to 1999. Ms. Kropf was a member of Avon’s Board of Directors from 1998 to 2006. Ms. Kropf is currently a director of Tapestry (formerly Coach, Inc.), The Kroger Co., New Avon LLC and The Sherwin-Williams Company. Ms. Kropf also served as a director of Mead Westvaco Inc. until 2015. | Director since:2015
COMMITTEES Finance Committee |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Having held various senior management positions during the course of her37-year career at Avon, including fullprofit-and-loss responsibility for all of Avon’s worldwide operations as its President and Chief Operating Officer, Ms. Kropf has extensive operational skills, a deep understanding of direct selling, and significant experience in marketing, research and development, product development, customer service, supply chain operations and manufacturing. Ms. Kropf has a strong financial background gained through her career at Avon and from her service on the boards of various public companies, including their compensation, audit, and corporate governance committees.
HELEN MCCLUSKEY
| Director Nominee | |||
| Ms. McCluskey was President, Chief Executive Officer and a member of the Board of Directors of The Warnaco Group, Inc. from February 2012 to February 2013, when it was acquired by PVH Corp., and she then served on the board of directors of PVH Corp. until June 2014. Ms. McCluskey also served in other leadership roles at Warnaco, including Chief Operating Officer from September 2010 to February 2012 and Group President from July 2004 to September 2010. Prior to joining Warnaco, Ms. McCluskey held positions of increasing responsibility at Liz Claiborne, Inc. from August 2001 to June 2004. | Director since:2014
COMMITTEES Compensation and |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Ms. McCluskey has a broad background in strategy, business planning and operations derived from a career spanning over 30 years with leading consumer goods companies. Having built women’s brands globally for sale through all channels of distribution worldwide, she brings a valuable blend of branding, merchandising, marketing and international expertise to the Board. Ms. McCluskey’s experience as a Chief Executive Officer of a global public company provides her with significant expertise in global business matters, corporate leadership and management which enables her to make important contributions to the oversight of the Company’s strategic direction and growth, and management development.
12 | AVON 2019 Proxy Statement |
ANDREW G. MCMASTER, JR. | Director Nominee | |||
Mr. McMaster served as Deputy Chief Executive Officer and Vice Chairman at Deloitte & Touche LLP (“Deloitte”) from 2002 until his retirement in May 2015. He joined Deloitte in 1976 and held a number of leadership roles, including National Managing Partner of Deloitte’s Office of the CEO client programs and of Deloitte’s U.S. and Global Forensic and Dispute Consulting practice. Mr. McMaster is currently a director of Black & Veatch Holding Company and UBS Americas Holding LLC, a subsidiary of UBS AG. Mr. McMaster also currently serves as Chairman of the Financial Accounting Standards Advisory Council (FASAC), an advisory body to the | Director since:2018 Age: 66 COMMITTEES Audit Committee (Chair) |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Mr. McMaster has substantial experience in the areas of finance, audit and accounting, having served as a senior executive during a39-year career with Deloitte, as the current Chair of the audit committees of Black & Veatch Holding Company and UBS Americas Holding LLC, and as the current Chairman of the Financial Accounting Standards Advisory Council. He also gained experience in a variety of operational, client service and firm leadership roles at Deloitte, serving many of the firm’s largest, most complex global clients as both a Lead Engagement partner and an Advisory Partner across diverse industries.
JAMES A. MITAROTONDA | Director Nominee | |||
Mr. Mitarotonda has served as the Chairman of the Board, President and Chief Executive Officer of | Director since:2018 Age: 64 COMMITTEES Finance Committee |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Through his over 25 years as Chairman of the Board of Directors, President and Chief Executive Officer of Barington Capital, Mr. Mitarotonda brings to the Board extensive financial, investment banking and executive leadership experience. He also has significant board of director and corporate governance experience through his service on numerous public company boards across diverse industries, including consumer-focused companies such as The Jones Group and The Pep Boys-Manny, Moe & Jack.
| Director Nominee | |||
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CEO |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Having spent 30 years with Unilever, a transnational consumer goods company, during which time he lived and worked in seven countries across three continents, Mr. Zijderveld possesses deep operating experience in multi-channel, complex consumer businesses across emerging, developing and developed markets. His particular experience in Europe, the Middle East and Asia enable him to provide insights and understanding into these areas and help guide the Company’s strategic decisions in these markets. His leadership positions at Unilever provide him with vast experience in marketing, sales and distribution, and make him uniquely qualified in making necessary decisions for the Company’s long-term growth, business goals and managing challenging market conditions.
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Series C Designee | ||||
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| Mr. Galbato was appointednon-executive Chairman of Avon’s Board of Directors in March 2016. Mr. Galbato is Chief Executive Officer of Cerberus Operations and Advisory Company, LLC. Prior to joining Cerberus in 2009, he owned and managed CWG Hillside Investments LLC, a consulting business, from 2007 to 2009. From 2005 to 2007, he served as President and CEO of the Controls Group of businesses for Invensys
Mr. Galbato was | Director since:2016
COMMITTEES Audit Committee (non-voting Observer) Nominating and Non-executive Chairman of the Board |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Through his 30 years of experience as an executive at public and private companies across a range of industries, including consumer products, Mr. Galbato has broad operational and business strategy expertise and significant skills in corporate leadership including as a Chief Executive Officer. Mr. Galbato is recognized for his experience in corporate turnarounds, which enables him to help guide the Company’s strategic direction and growth.
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| Series C Designee | |||
| Mr.
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Mr. Sanford was | Director since:2016
COMMITTEES Compensation and Management Development Committee Finance Committee |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Through his career in various roles with finance and private equity firms, Mr. Sanford has extensive experience in financing matters and private equity investments. Mr. Sanford’s insights into capital management, restructuring, and capital markets are highly valuable to the Board.
LENARD B. TESSLER | Series C Designee | |||
Mr. Tessler is currently Vice Chairman and Senior Managing Director of private investment firm Cerberus Capital Management, L.P., where he is a member of the Cerberus Capital Management Investment Committee. Prior to joining Cerberus in 2001, Mr. Tessler served as Managing Partner of TGV Partners from 1990 to 2001, a private equity firm which he founded. Earlier in his career, he was a founding partner of Levine, Tessler, Leichtman & Co., and a founder, Director and Executive Vice President of Walker Energy Partners. Mr. Tessler is currently Lead Director of Albertsons Companies, and a director of Keane Group, Inc. He is also a Trustee of the New York-Presbyterian Hospital where he is a member of the Investment Committee and the Budget and Finance Committee. Mr. Tessler wasre-elected to the Board of Directors commencing immediately upon the conclusion of the 2019 Annual Meeting by the holders of our Series C Preferred Stock, voting separately as a single class, and is not up for election by our shareholders at the 2019 Annual Meeting. | Director since:2018 Age:66 |
SKILLS & EXPERIENCE OF PARTICULAR RELEVANCE TO AVON:
Through his senior executive positions held during the course of over 30 years at private investment firms and his service on boards of directors of operating companies, Mr. Tessler has an extensive background in financing and private equity investments, which provides critical skills to the Board in its oversight of strategic planning and operations.
AVON 2019 Proxy Statement | 15 |
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Our Board of Directors held elevenseven meetings in 2016.2018. Directors are expected to attend all meetings of the Board and the Board Committees on which they serve and to attend the Annual Meeting of Shareholders. In 2016,2018, all directors then serving on the Board attended at least 75% of the aggregate number of 20162018 meetings of the Board and of each Board Committee on which he or she served. Nine out of ten of theAll directors then serving on the Board attended the 20162018 Annual Meeting. In addition to participation at Board and Committee meetings and the Annual Meeting of Shareholders, our directors discharge their duties throughout the year through communications with senior management.
Non-employee directors meet in regularly scheduled executive sessions, as needed, without the CEO or other members of management.
The Board currently separates the positions of Chairman, Lead Independent Director and CEO. Mr. Galbato serves as ournon-executive Chairman of the Board, Mr. Cornwell serves as our Lead Independent Director and Ms. McCoyMr. Zijderveld serves as our CEO.
The Board evaluates its leadership structure periodically and believes that separating the Chairman, Lead Independent Director and CEO roles is important as the Company focuses on its transformation and growth efforts. FollowingPer the amendment of theCompany’sBy-Laws, on March 1, 2016, the Chairman presides at all meetings of the Board, including executive sessions, at which the Chairman is present, and the Lead Independent Director presides at all meetings of the Board at which the Chairman is not present. Additional rights, duties and responsibilities of the Chairman and the Lead Independent Director are set forth in theBy-Laws and the Corporate Governance Guidelines. Pursuant to the Investor Rights Agreement, so long as Cerberus Investor maintains a certain ownership level in the Company (as described in more detail on page 29 of this Proxy Statement), Cerberus Investor has the right to select the director to be appointed as our Chairman.
The Board administers its risk oversight function primarily through the Audit Committee, which oversees the Company’s risk management practices. The Audit Committee is responsible for, among other things, discussing with management on a regular basis the Company’s guidelines and policies that govern the process for risk assessment and risk management. Management is responsible for assessing and managing the Company’s various risk exposures onaday-to-day basis. basis. In connection with this, the Audit Committee has oversight of the Company’s enterprise risk management (“ERM”) program, which includes a risk management committee composed of certain key executives. The cross-functional group of key executives who comprise the risk management committee identify, on a periodic basis, the top current and future risks facing the Company, including, but not limited to, strategic, operational, financial and compliance risks, and the associated risk owners are responsible for managing and mitigating these risks. The Board may assign certain ERM risks to a specific Board Committee to examine in detail if such Board Committee is in the best position to review and assess the risk. In line with this, the Company provides regular ERM updates to the Audit Committee on several risks, including cybersecurity and data privacy, and to other Board Committees, as appropriate, which may have certain ERM risks assigned to them by the Board.appropriate. The Audit Committee also periodically reports to the full Board on the Company’s risk managementERM program.
While the Board has overall responsibility for overseeing risk management, Board Committees oversee risk within their areas of responsibility, as appropriate. For example, as set forth in further detail on page 51,55, our Compensation and Management Development Committee, with support and advice from its independent consultant, reviews the risk and reward structure of executive compensation plans, policies and practices at least annually to confirm that there are no compensation-related risks that are reasonably likely to have a material adverse effect on the Company. As set forth in its charter, the Finance Committee is responsible for, among other things, reviewing periodically the Company’s strategy for and use of derivatives for hedging risks such as interest rate and foreign exchange risks.
For certain risks, oversight is conducted by the full Board, such as during the Board’s annual review of the Company’s strategic goals and initiatives and other significant issues that are expected to affect the Company in the future. We believe that the Chairman, Lead Independent Director, CEO, and roles of the Board and the Board Committees provide the appropriate leadership to help ensure effective risk oversight.
A shareholder or other interested person who wishes to contact the Chairman, the Lead Independent Director or thenon-employee or independent directors as a group may do so by addressing his or her correspondence to the Chairman, the Lead Independent Director or such directors, c/o Corporate Secretary, Avon Products, Inc., 601 Midland Avenue, Rye, NY 10580. All correspondence addressed to a director or group of directors will be forwarded to that director or group of directors.
16 |
The Board has the following regular standing committees: Audit Committee, Compensation and Management Development Committee, Nominating and Corporate Governance Committee, and Finance Committee. The charters of each Committee and our Corporate Governance Guidelines are available on the Corporate Governance tab of our investor website (www.avoninvestor.com)(investor.avonworldwide.com). Our Code of Conduct (which applies to the Company’s directors, officers and employees) is available aton the “Our Values” tab ofwww.avoncompany.com.www.avonworldwide.com.
Audit Committee
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Primary Responsibilities |
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Jose Armario W. Don Cornwell
Chan W. Galbato* *non-voting Observer |
• | Assists the Board in fulfilling its responsibility to oversee the integrity of our financial statements, controls and disclosures, our compliance with legal and regulatory requirements, the qualifications and independence of our independent registered public accounting firm, and the performance of our internal audit function and independent registered public accounting firm. The Committee has the authority to conduct any investigation appropriate to fulfilling its purpose and responsibilities. | ||||||||
• | The Board has determined that | |||||||||
• | A further description of the role of the Audit Committee is set forth on pages | |||||||||
Compensation and Management Development Committee
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Primary Responsibilities |
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Helen McCluskey (Chair) Jose Armario Nancy Killefer
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• | Discharges the responsibilities of the Board relating to executive compensation, including reviewing and establishing our overall executive compensation and benefits philosophy, including review of the risk and reward structure of executive compensation plans, policies and practices, as appropriate. In addition, the Committee, in consultation with the independent members of the Board, reviews and approves the goals and objectives relevant to the compensation of the CEO and determines the compensation of the CEO. It also determines the compensation of all senior officers and oversees incentive compensation plans, including establishing performance measures and evaluating and approving any incentive payouts thereunder. | ||||||||
• | Reviews and evaluates the Company’s talent management and succession planning approach, philosophy, and key processes, and is responsible for development and succession plans for members of the Company’s Executive Management Committee, and provides oversight of development plans for their potential successors. | |||||||||
• | The Committee may delegate responsibilities to a subcommittee composed of one or more members of the Committee, provided that any action taken shall be reported to the full Committee as soon as practicable, but in no event later than at the Committee’s next meeting. In addition, the Committee may delegate certain other responsibilities, as described in the Committee charter. For example, the Committee has delegated to | |||||||||
• | A description of the role of the compensation consultant engaged by the Committee, scope of authority of the Committee and the role of executive officers in determining executive compensation is set forth on page |
AVON 2019 Proxy Statement | 17 |
Nominating and Corporate Governance Committee
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Primary Responsibilities |
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Nancy Killefer (Chair) W. Don Cornwell Chan W. Galbato
| • | Identifies individuals qualified to become Board members, consistent with criteria approved by the Board, and recommends to the Board the candidates for directorships to be filled by the Board. A description of the Committee’s process for identifying and evaluating nominees for directorships is set forth on page | ||||||
• | Develops and recommends to the Board corporate governance principles, monitors developments in corporate governance, and makes recommendations to the Board regarding changes in governance policies and practices. | |||||||
• | Oversees the evaluation of the Board, including conducting an annual evaluation of the performance of the Board and Board committees. | |||||||
• | Reviews and recommends to the Board policies regarding the compensation ofnon-employee directors. | |||||||
• | A description of the compensation ofnon-employee directors and the Committee’s scope of authority with respect to such matters is set forth on page 22 under “Director | |||||||
Finance Committee
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Primary Responsibilities
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W. Don Cornwell (Chair) Susan J. Kropf James A. Mitarotonda Michael F. Sanford | • | Assists the Board in fulfilling its responsibilities to oversee our financial management, including oversight of our capital structure and financial strategies, investment strategies, banking relationships, and funding of the employee benefit plans. | ||||||
• | Responsible for the oversight of the deployment and management of our capital, including the oversight of certain key business initiatives. |
The Board has concluded that eachnon-employee director, Director Nominee and Series C Designee is independent.
The Board of Directors assesses the independence of itsnon-employee members at least annually in accordance with the listing standards of the New York Stock Exchange,NYSE, the regulations of the Securities and Exchange Commission,SEC, and our Corporate Governance Guidelines. As part of its assessment, the Board determines whether or not any such director has a material relationship with the Company, either directly or indirectly as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board broadly considers all relevant facts and circumstances and considers this issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. This consideration includes:
the nature of the relationship;
the significance of the relationship to Avon, the other organization and the individual director;
whether or not the relationship is solely a business relationship in the ordinary course of Avon’s and the other organization’s businesses and does not afford the director any special benefits; and
• | any commercial, industrial, banking, consulting, legal, accounting, charitable, familial and other relationships;provided, that ownership of a significant amount of our stock is not, by itself, a bar to independence. |
In assessing the independence of directors and the materiality of any relationship with Avon and the other organization, the Board has determined that a relationship in the ordinary course of business involving the sale, purchase or leasing of property or services will not be deemed material if the amounts involved, on an annual basis, do not exceed the greater of (i) $1,000,000 or (ii) one percent (1%) of Avon’s revenues or one percent (1%) of the revenues of the other organization involved.
In the ordinary course of business, the Company has business relationships with certain companies on which Avon directors also serve on the board of directors, including for example, advertising arrangements, software services, and insurance coverage. The Company also has ongoing business relationships with affiliates of Cerberus Investor, of which the Series C Designees serve as directors, officers or employees, as described in “Transactions with Related Persons” on page 27. Based on the standards described above, the Board has determined that none of these transactions or relationships, nor the associated amounts paid to the parties, was material such that it would impede the exercise of independent judgment.
18 |
Board Policy Regarding Voting for Directors
Our Corporate Governance Guidelines provide that any Director Nomineeincumbent director who receives a greater number of votes “withheld” than votes “for” his or her election in an uncontested election of directors will promptly tender his or her resignation. The Nominating and Corporate Governance Committee (the “Committee”“Nominating Committee”) will recommend to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. The Nominating and Corporate Governance Committee will consider any factors or other information that it considers appropriate or relevant. The Board, taking into account the Nominating and Corporate Governance Committee’s recommendation, will act on the tendered resignation and publicly disclose its decision and the rationale within 90 days from the date of the certification of the election results.
Board and Committee Self-Evaluations
Pursuant to the Company’s Corporate Governance Guidelines and each committee’s charter, the Board and each of its committees annually conducts a self-assessment. The Nominating Committee oversees the process. In recent years, the Board has used the Corporate Secretary or a third-party facilitator to interview each Director to obtain his or her feedback regarding the Board’s and each committee’s effectiveness, as well as feedback on each individual Director and the Chairman, Lead Independent Director and each committee chair in their respective roles. Self-evaluation topics generally include, among other matters, Board and committee composition and structure; effectiveness of the Board and committees; meeting topics and process; and Board interaction with management. The Board discusses the results of each annual self-evaluation and, based on the results, implements enhancements and other modifications as appropriate. Similarly, the results of each committee evaluation are generally discussed at subsequent committee meetings for the relevant committee. Individual feedback is provided to Directors by the Chairman and the Lead Independent Director.
Director Nomination Process & Shareholder Nominations
The Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and for making recommendations to the Board regarding: (i) nominees for Board membership to fill vacancies and newly created positions, and (ii) the persons to be nominated by the Board for election at the Company’s annual meeting of shareholders. The Nominating Committee actively considers potential director candidates on an ongoing basis as part of its director succession planning efforts.
The Nominating Committee’s process for considering all candidates for election as directors, including shareholder-recommended candidates, is designed to ensure that the Nominating Committee fulfills its responsibility to recommend candidates that are properly qualified and are not serving any special interest groups, but rather the best interest of all of the shareholders.
In making its recommendations, the Nominating Committee evaluates each candidate based on the independence standards described above and other qualification standards described below. For example, our Corporate Governance Guidelines and the charter of the Nominating and Corporate Governance Committee require that our directors possess the highest standards of personal and professional ethics, character and integrity and meet the standards set forth in our Corporate Governance Guidelines. In identifying candidates for membership on the Board, the Nominating Committee takes into account all factors it considers appropriate, consistent with criteria approved by the Board, which may include professional experience, knowledge, independence, diversity of backgrounds, and the extent to which the candidate would fill a present or evolving need on the Board. There is not a formal diversity policy; however, the Board values diversity of backgrounds, as one factor that the Committee may consider, is broadly construed to includein its broadest sense, including differences of viewpoint, personal and professional experience, skill, gender, race, ethnicity, geography, and other individual characteristics.
Pursuant to the Investor Rights Agreementcharacteristics, and the Nominating Committee endeavors to include women, minority, and geographically diverse candidates in the qualified pool from which Board candidates are chosen.
The Board takes an active and thoughtful approach to refreshment and strives to maintain a balance of longer-tenured directors and newer directors with fresh ideas and viewpoints to achieve an appropriate balance of continuity and refreshment. The Board does not believe in limiting the number of terms that a director may serve, as term limits could deprive the Company and its shareholders of valuable director experience and familiarity with the Company and its operations; however, there-nomination of incumbent directors is not automatic. In accordance with the Company’s Corporate Governance Guidelines, all directors serveone-yearterms and conditionsanynon-employee director who will be age 72 or older at the time of the election may not stand for reelection unless requested by the Board. The composition of our Series C Preferred Stock, Cerberus Investor,Board, as contemplated by our current slate of nominees, includes six new independent directors since 2016. In addition, in 2018, Jan Zijderveld joined the Board in connection with his appointment as the holderCompany’s Chief Executive Officer. As a result of the Series C Preferred Stock, is currently entitled to elect three directors to the Board. In connection with this, Cerberus Investor has elected each of Messrs. Galbato, Mayer and Sanford to servethese Board changes, tenure on the Board commencing immediately upon the conclusioncurrently ranges from less than one year to 17 years, with an average Board tenure of the 2017 Annual Meeting. So long as Cerberus Investor maintains a certain ownership level in the Company (as described in more detail on page 29 of this Proxy Statement), Cerberus Investor also has the right to select the director to be appointed as our Chairman and has selected Mr. Galbato to serve in this capacity. In addition, pursuant to the Investor Rights Agreement, the Company and Cerberus Investor jointly selected Ms. Ross and Mr. Armario for election to the Board in accordance with the process described below.4 years.
The Nominating Committee has retained a third-party search firmsfirm to locate candidates who may meet the needs of the Board.Board at that time. The firmsfirm typically provideprovides information on a number of candidates for review and discussion by the Nominating Committee. As appropriate, the Nominating Committee chair and other members of the Nominating Committee and the Board interview potential candidates. If the Nominating Committee determines that a potential candidate meets the needs of the Board, possesses the relevant qualifications, and meets the standards set forth in our Corporate Governance Guidelines, the Nominating Committee will vote to recommend to the Board the election of the candidate as a director. Following the completion of this process with respect to Ms. Ross and Mr. Armario, members of the Committee determined that Ms. Ross and Mr. Armario met these standards and, therefore, recommended to the Board their election as directors. Pursuant to the Investor Rights Agreement, each of
AVON 2019 Proxy Statement | 19 |
On March 26, 2018, the Company and Cerberus Investorcertain of its shareholders entered into the Nomination Agreement, pursuant to which the Company agreed to the election of Ms. Ross andnominate Mr. Armario to the Board based upon the recommendation of the Committee members. As described on page 4, pursuant to its agreement with the Company, Barington exercised its right to approve the appointment of Mr. Armario. Ms. Ross and Mr. Armario were elected to the Board on March 24 and September 9, 2016, respectively, by the directors then serving on the Board and Ms. Ross was again elected by our shareholders for aone-year term at our 2016 Annual Meeting. Both have been nominatedMitarotonda for election to the Board at the 20172018 Annual Meeting.
The Nominating Committee will consider director candidates recommended by shareholders if properly submitted to the Nominating Committee in accordance with ourBy-Laws and our Corporate Governance Guidelines. Shareholders wishing to recommend persons for consideration by the Nominating Committee as nominees for election to the Board of Directors can do so by writing to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Avon Products, Inc., 601 Midland Avenue, Rye,1 Avon Place, Suffern, NY 10580.10901. Recommendations must include the proposed nominee’s name, detailed biographical data, work history, qualifications and corporate and charitable affiliations. A written statement from the proposed nominee consenting to be named as a nominee and, if nominated and elected, to serve as a director is also required. The Nominating Committee will then consider the candidate and the candidate’s qualifications using the criteria as set forth above. The Nominating Committee may discuss with the shareholder making the nomination the reasons for making the nomination and the qualifications of the candidate. The Nominating Committee may then interview the candidate and may also use the services of a search firm to provide additional information about the candidate prior to making a recommendation to the Board.
Shareholders of record may also nominate candidates for election to the Board by following the procedures set forth in ourBy-Laws. On March 1, 2016, the Board amended and restated theThe Company’sBy-laws to, among other things, adoptinclude proxy access provisions whereby a shareholder, or a group of up to 20 shareholders, who owns 3% or more of the Company’s common stock continuously for at least three years, may nominate and include in the Company’s proxy materials candidates for election as directors of the Company. Such shareholder(s) or group(s) of shareholders may nominate up to the greater of two individuals or 20% of the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in theBy-Laws and comply with the other procedural requirements of our Corporate Governance Guidelines. Please also see Section 14(a) of Article 3 of ourBy-Laws for details regarding the nomination of a Director candidate through the Advance Notice Process which is separate from a proxy access nomination. Information regarding these procedures for nominations by shareholders will be provided upon request to our Corporate Secretary.
In addition, our Corporate Governance Guidelines provide that anyCommunications with Directors
A shareholder or other interested person who wishes to contact the Chairman, the Lead Independent Director or thenon-employee or independent directors as a group may do so by addressing his or her correspondence to the Chairman, the Lead Independent Director or such directors, c/o Corporate Secretary, Avon Products, Inc., 1 Avon Place, Suffern, NY 10901. All correspondence addressed to a director whoor group of directors will be age 72forwarded to that director or older at the timegroup of the election may not stand for reelection unless requested by the Board.directors.
In July and August 2010, derivative actions were filed in state court against certain presentThere are no material legal proceedings to which any of our directors, executive officers, or former officers and/or directorsbeneficial owners of more than 5% of the Company (Carol J. Parker, derivatively on behalfoutstanding shares of Avon Products, Inc. v. W. Don Cornwell, et al. and Avon Products, Inc. as nominal defendant (filed in the New York Supreme Court, Nassau County, Index No. 600570/2010); Lynne Schwartz, derivatively on behalf of Avon Products, Inc. v. Andrea Jung, et al. and Avon Products, Inc. as nominal defendant (filed in the New York Supreme Court, New York County, Index No. 651304/2010)). On November 22, 2013, a derivative action was filed in federal court against certain presentcommon stock, or former officers and/or directors of the Company and following the federal court’s dismissal, an additional action was subsequently filed in New York state court on May 1, 2015 (Sylvia Pritika, derivatively on behalf of Avon Products, Inc. v. Andrea Jung, et al. and Avon Products, Inc. as nominal defendant (filed in the New York Supreme Court, New York County, Index No. 651479/2015)). The claims asserted in one or more of these actions include alleged breach of fiduciary duty, abuse of control, waste of corporate assets, and unjust enrichment, relating to the Company’s compliance with the FCPA, including the adequacy of the Company’s internal controls. The relief sought against the individual defendants in one or more of these derivative actions include certain declaratory and equitable relief, restitution, damages, exemplary damages and interest. The Companyany affiliate thereof, is a nominal defendant, and no relief is sought against the Company itself. On April 28, 2015, an action was filedparty adverse to seek enforcement of demands for the inspection of certain of the Company’s books and records (Belle Cohen v. Avon Products, Inc. (filed in the New York Supreme Court, New York County, Index No. 651418/2015)). The parties reached agreementsus or has a material interest adverse to settle the derivative and books and records actions. The terms of settlement include certain corporate governance measures as well as releases of claims and payment of plaintiffs’ attorneys’ fees in the amount of $4 million. On March 30, 2016, the court granted preliminary approval of the settlement, and on August 1, 2016, the court entered an order and judgment granting final approval of the settlement. The $4 million was paid by the Company’s insurers. The order and judgment approving the settlement has become final. In light of the settlement, stipulations voluntarily dismissing or discontinuing the actions with prejudice have been filed in the Pritika and Parker actions.
Consistent with the Company’sBy-Laws and the New York Business Corporation Law, expenses in connection with all of the foregoing actions and certain other matters described in the Company’s Annual Report on Form10-K are being paid by the Company on behalf of certain present or former officers and/or directors.us.
Compensation and Management Development Committee Interlocks and Insider Participation
No member of our Board’s Compensation and Management Development Committee has served as one of our officers or employees at any time. None of our executive officers served during 20162018 as a member of the board of directors or as a member of a compensation committee of any other company that has an executive officer serving as a member of our Board of Directors or Compensation and Management Development Committee.
20 |
The following table discloses compensation received by ournon-employee directors during 2016.2018.
Director
| Fees Earned or Paid in Cash ($)1
| Stock Awards
| Nonqualified ($)3
| All Other Compensation ($)4
| Total ($)
| |||||
Mr. Armario7 | 27,798 | — | 25 | 27,823 | ||||||
Mr. Conant6 | 25,000 | — | 13 | 25,013 | ||||||
Mr. Cornwell8 | 203,000 | 115,000 | 31,075 | 349,075 | ||||||
Mr. Galbato5,8 | 219,500 | 125,411 | 62 | 344,973 | ||||||
Ms. Hailey6 | 25,000 | — | 13 | 25,013 | ||||||
Ms. Killefer | 93,000 | 115,000 | 75 | 208,075 | ||||||
Ms. Kropf | 81,000 | 115,000 | 75 | 196,075 | ||||||
Ms. Lagomasino6 | 25,000 | — | 13 | 25,013 | ||||||
Ms. Mathew6 | 25,000 | — | 13 | 25,013 | ||||||
Mr. Mayer5 | 69,500 | 125,411 | 62 | 194,973 | ||||||
Ms. McCluskey | 90,000 | 115,000 | 75 | 205,075 | ||||||
Mr. Noski | 101,000 | 115,000 | 75 | 216,075 | ||||||
Mr. Rodkin6 | 25,000 | — | 13 | 25,013 | ||||||
Ms. Ross | 68,946 | 125,411 | 54 | 194,411 | ||||||
Mr. Sanford5 | 69,500 | 125,411 | 62 | 194,973 | ||||||
Dr. Stern6
| 25,000
| —
| 214
| 10,862
| 36,076
|
Director
|
Fees Earned or ($)1
|
Stock Awards ($)2
|
All Other Compensation ($)3
| Total ($)
| ||||
Jose Armario
|
91,000
|
115,000
|
61
|
206,061
| ||||
W. Don Cornwell6
|
203,000
|
115,000
|
15,561
|
333,561
| ||||
Chan W. Galbato4,6
|
231,000
|
115,000
|
61
|
346,061
| ||||
Nancy Killefer
|
93,000
|
115,000
|
61
|
208,061
| ||||
Susan J. Kropf
|
81,000
|
115,000
|
61
|
196,061
| ||||
Steven F. Mayer4,5
|
18,750
|
-
|
15
|
18,765
| ||||
Helen McCluskey
|
90,000
|
115,000
|
61
|
205,061
| ||||
Andrew G. McMaster, Jr.
|
90,000
|
115,000
|
41
|
205,041
| ||||
James A. Mitarotonda
|
56,000
|
115,000
|
41
|
171,041
| ||||
Charles H. Noski5
|
25,000
|
-
|
15,526
|
40,526
| ||||
Cathy D. Ross5
|
25,000
|
-
|
26
|
25,026
| ||||
Michael F. Sanford4
|
87,000
|
115,000
|
61
|
202,061
| ||||
Lenard Tessler4
|
56,250
|
125,178
|
51
|
181,479
|
1 | This column represents the amount of cash compensation earned in |
2 | Fornon-employee directors (other than the Cerberus-appointed directors) who were elected to the Board of Directors at the |
3 |
This column includes payments of life and business travel accident insurance premiums and matching contributions made pursuant to the Avon Foundation Matching Gift Program.Non-employee directors |
4 | ||
All annual retainer fees payable to |
5 | Mr. Mayer resigned from the Board in March 2018. Mr. Noski and Ms. Ross chose not to stand forre-election at the 2018 Annual Meeting of Shareholders, and therefore their service as board members ended in May 2018. |
6 |
A fee of $150,000 |
AVON 2019 Proxy Statement | 21 |
Annual Retainer Fees
Directors who are employees of Avon Products, Inc., or any of our subsidiaries, receive no additional remuneration for services as a director. As in prior years, in 2016,2018 eachnon-employee director was entitled to an annual retainer of $190,000, consisting of $75,000 in cash plus an annual grant of RSUs having a market value as of the date of grant of approximately $115,000 based on the closing price of our common stock on the date of grant. Pursuant to the Avon Products, Inc. Compensation Plan forNon-Employee Directors (the “Plan”“Non-Employee Director Compensation Plan”), annual RSU awards are granted on the same date as the Annual Meeting of Shareholders and vest on the date of the next Annual Meeting of Shareholders, provided that suchnon-employee director has served as a member of the Board of Directors for the entirety of his or her annual term. Vested RSUs are settled upon a director’s departure fromterm, and provided further that the Board. Anon-employeeNon-Employee director is entitled to regular dividend equivalent payments (to the extent any dividends on common stock are declared and paid) on RSUs but does not have the right to vote RSUs until settlement.
In 2016, we amended theDirector Compensation Plan to provideprovides that the Board canmay accelerate vesting of the annual RSU grant in the event anon-employee director’s Board service ceases involuntarily and without cause or in the event of a similar cessation of Board service. Vested RSUs are settled upon a director’s departure from the Board. Anon-employee director is entitled to receive dividend equivalent payments (to the extent any dividends on common stock are declared and paid) on RSUs but does not have the right to vote RSUs until settlement.
Additionally, directors elected by Cerberus Investor pursuant to the terms of the Series C Preferred Stock and the Investor Rights Agreement are entitled to be compensated for their services in the same amounts described above. EachHowever, each of these directors’ compensation that would otherwise be in the form of an annual RSU award willis instead be in the form of phantom stock units (i.e., a contractual right to receive an amount in cash ofequal to the value of such units as of the date of vesting) in an amount equal to the value of the othernon-employee directors’ RSU awards as of the date of vesting, to beand is paid upon vesting.
In addition to the annual Board retainer, during 2016,2018 thenon-executive Chairman and Lead Independent Director received additional fees of $150,000 and $100,000, respectively. Furthermore, the Company paid aan additional $10,000 retainer for service on the Audit Committee and aan additional $6,000 retainer for service on each of the other Board committees. In 2016,2018, the chair of the Audit Committee received an additional fee of $10,000,$30,000, the chair of the Compensation and Management Development Committee received an additional fee of $9,000, and the chair of each other Committee received an additional fee of $6,000. At certain times, we provide directors with complimentary Avon products, such as samples of new product launches.
Pursuant to the Board of Directors of Avon Products, Inc. Deferred Compensation Plan,non-employee directors may elect to defer all or a portion of their cash retainer fees into a stock account or cash account. The amounts deferred into the stock account increase or decrease in value proportionately with the price of Avon’s common stock. In line with this, the amounts deferred into the cash account, inclusive of accumulated interest, earn interest equal to the prime rate.
Stock Ownership Guideline
The Board of Directors has adopted a stock ownership guideline which requiresnon-employee directors to own shares of our common stock having a value equal to or greater than $350,000 within five years from the date of their election to the Board. The Board may waive this stock ownership guideline for any director if the receipt of equity awards or the ownership of Company common stock by such director would violate any policies or procedures to which such director is subject in connection with his or her employment. In line with this, the stock ownership guideline has been waived for Messrs. Galbato, MayerSanford, and Sanford.Tessler. All other current directors were in compliance with this guideline for 2016 or are on track to satisfy it withinworking toward attaining the period allowed to satisfy the guideline.required ownership level.
Role of the Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for periodically reviewing and making recommendations to the full Board regarding the compensation ofnon-employee directors. In making its recommendations, the Nominating Committee typically considers:
the form and amount of compensation necessary to attract and retain individuals who are qualified to serve on the Board and to align the interests of the directors with those of shareholders.shareholders;
thenon-employee director compensation practices of other companies to assist it in the development of the compensation program and practices for ournon-employee directors.directors;
the impact on the perceived independence of the directors of compensation in excess of customary amounts and of indirect compensation.compensation; and
the advice of independent consultants retained from time to time by the Nominating Committee (whom the Nominating Committee did not retain in 2018).
During 2017, Pay Governance LLC (“Pay Governance”) provided independent compensation consulting services to the Nominating Committee on various director compensation matters including, but not limited to, retainers, chair fees, equity-based compensation,non-employee chairperson and Corporatelead director compensation, and stock ownership guidelines. Pay Governance conducted analysis and delivered presentations to the Nominating Committee regarding current and prospective director compensation matters. Pay Governance is engaged by and reports directly to the Nominating Committee for the services regarding director compensation and consults directly with the Chair of the Nominating Committee.
The Nominating and Corporate Governance Committee (the “Committee”) directly engaged an independent outside consulting firm, Pearl Meyer and Partners LLC (“Pearl Meyer”), to provide input on director compensation in 2016. Pearl Meyer reported to the Committee, which hadhas the sole authority to continue orretain and terminate Pay Governance for these services and to review and approve Pay Governance’s fees for these services and other terms of the relationship. In 2016, Pearl Meyer provided only limited services to theengagement. See page 51 for information regarding Pay Governance’s independence. The Nominating Committee on director compensation matters and provided no other services to the Company. The Committee reviewed the relationship with Pearl Meyer to identify conflicts of interest pursuant to Securities and Exchange Commission and New York Stock Exchange rules and did not identify any such conflicts for 2016.
22 | AVON 2019 Proxy Statement |
The executive officers of the Company as of the date hereof are listed below. Executive officers are generally designated by the Board of Directors at its first meeting following the Annual Meeting of Shareholders or in connection with the appointment to his or her role. Each executive officer holds office until the first meeting of the Board of Directors following the next Annual Meeting of Shareholders or until his or her successor is elected, except in the event of death, resignation, removal or the earlier termination of his or her term of office.
Name
| Title
| Age
| Year Designated Executive Officer
| |||||
Sheri McCoy | Chief Executive Officer | 58 | 2012 | |||||
James Wilson | Executive Vice President, Chief Financial Officer | 57 | 2017 | |||||
James S. Scully | Executive Vice President, Chief Operating Officer | 52 | 2015 | |||||
Fernando Acosta | Executive Vice President, Chief Marketing and Social Selling Officer | 49 | 2011 | |||||
John P. Higson | Executive Vice President, Chief Commercial Officer | 59 | 2006 | |||||
Jeff Benjamin | Senior Vice President, General Counsel and Chief Ethics & Compliance Officer | 71 | 2012 | |||||
Susan Ormiston | Senior Vice President, Human Resources and Chief Human Resources Officer | 46 | 2013 | |||||
Robert Loughran
| Group Vice President, Chief Accounting Officer
| 52
| 2012
|
Name
| Title
| Age
|
Year Designated Executive Officer
| |||
Jan Zijderveld
|
Chief Executive Officer
|
54
|
2018
| |||
Gustavo Arnal*
|
Executive Vice President, Chief Financial Officer
|
49
|
2019
| |||
Miguel Fernandez
|
Executive Vice President, Global President
|
47
|
2017
| |||
Jonathan Myers
|
Executive Vice President, Chief Operating Officer
|
49
|
2017
| |||
James E. Thompson**
|
Senior Vice President, General Counsel
|
58
|
2017
| |||
Vikram Agarwal
|
Senior Vice President & Chief Supply Chain Officer
|
54
|
2019
| |||
Kay Yukako Nemoto
|
Senior Vice President, Chief Strategy and HR Officer
|
47
|
2019
| |||
Laura Barbrook
|
Vice President, Corporate Controller (Principal Accounting Officer)
|
45
|
2018
|
* On December 13, 2018 the Company announced that Gustavo Arnal was appointed Executive Vice President and Chief Financial Officer (“CFO”), effective during Spring 2019. Mr. Arnal is expected to begin his employment and service as CFO on May 1, 2019.
**James E. Thompson’s last day of employment is expected to be effective no later than April 2019.
Sheri McCoyJan Zijderveld joined Avon as Chief Executive Officer in April 2012 and was electedappointed to the Board of Directors in May 2012. SheFebruary 2018. He joined Avon after 30 years with Johnson & Johnson,Unilever N.V./PLC, where shehe rose to Vice Chairmanserve as a member of the Executive Committee and President of Unilever’s European business in January 2011. Most recently at Johnson & Johnson, Ms. McCoyIn this position, Mr. Zijderveld oversaw Pharmaceutical, Consumer, Corporate Office of Science & Technology,25,000 employees and Information Technology divisions.operations in 34 countries. Prior to that, shehe served in a number of leadership roles, including Worldwide Chairman, Pharmaceuticals Group from 2009 to 2011; Worldwide Chairman, Surgical Care GroupExecutive Vice President of Unilever, South East Asia & Australasia from 2008 to 2009; and Company Group Chairman and Worldwide Franchise2011 while also acting asNon-Executive Chairman of Ethicon, Inc., a subsidiaryUnilever’s listed Indonesian business, and CEO of Johnson & Johnson,Unilever, Middle East and North Africa (MENA) from 2005 to 2008. Earlier in herhis career, she was Global President of the Babyhe served in numerous leadership positions across Europe, Australia and Wound Care franchise; Vice President, Marketing for a variety of global brands;New Zealand in general management, marketing, sales and Vice President, Research & Development for the Personal Products Worldwide Division. She serves on the boards of New Avon LLC, Catalyst, Stonehill College,distribution.
Gustavo Arnalis expected to begin his employment and thenon-profit science and technology organization FIRST.
James (Jamie) Wilsonhas beenservice as Avon’s Executive Vice President, Chief Financial Officer since January 2017.on May 1, 2019. Prior to joining Avon, he served as Senior Vice President, CFO of SABMiller, an international brewingInternational Divisions and beverage company headquartered in London from 2011 to 2015. He joined SABMiller in 2005 as Director of Strategic Projects and held numerous roles over his ten years at the company, including managing director in Russia as well as managing director of Central Europe.Global Functions for Walgreens Boots Alliance (WBA) since July 2017. Prior to joining SABMiller in 2005,WBA, Mr. Wilson served in keyArnal worked for over twenty years at Procter & Gamble (P&G), holding multiple executive roles as Strategyincluding Vice President and Projects Director at Scottish & NewcastleCFO of the India, Middle East and various positions including Group Finance Director at Highland Distillers. Mr. Wilson began his career at Deloitte Haskins & Sells.Africa region from 2014 to 2017.
James S. ScullyMiguel Fernandezhas been Avon’s Executive ViceGlobal President Chief Operating Officer since January 2016. He also served as Executive Vice President and Chief Financial Officer from March 2015 to December 2016.August 2017. Prior to joining Avon, Mr. Scully served as the Chief Operating Officer of the J. Crew Group, Inc., a specialty apparel and accessories retailer. Mr. Scully served as J. Crew’s Executive Vice President and Chief Financial Officer from September 2005 to May 2012 and Chief Administrative Officer from April 2008 to April 2013. Prior to joining J. Crew in 2005, Mr. Scully served in key roles at Saks Incorporated from 1997 to 2005, including at various times as Executive Vice President of Human Resources and Strategic Planning, Senior Vice President of Strategic and Financial Planning and Senior Vice President, Treasurer. Mr. Scully held the position of Senior Vice President of Corporate Finance at Bank of America (formerly NationsBank) from 1994 to 1997. Mr. Scully began his career in the banking industry at Connecticut National Bank, which was subsequently acquired by Shawmut Bank.
Fernando Acosta has been Avon’s Executive Vice President, Chief Marketing and Social Selling Officer since January 2016. Prior to this, he was Senior Vice President and President, North Latin America and Andean Cluster and Head of Global Brand Marketing from November 2014 to December 2015 and Senior Vice President and President Latin America from December 2011 to November 2014. Prior to joining Avon, Mr. AcostaFernandez spent 19nearly 10 years at Unilever,Herbalife, Ltd., where he advanced through a series of senior operating positions with increasing responsibility. He served as Unilever’sExecutive Vice President for the Americas and Worldwide Member Operations from December 2013 to June 2017. From July 2009 to November 2013, he was Senior Vice President Middle Americas beginningand Managing Director Mexico and prior to that he was Vice President Finance and Distributor Operations. Prior to joining Herbalife, Mr. Fernandez was Chief Financial Officer at OCC Mundial and also served as Business Controller and Business Development for Microsoft in November 2010.Mexico. His earlier career included roles in investment banking at JPMorgan Chase and financial management at Procter & Gamble (P&G).
Jonathan Myershas been Avon’s Executive Vice President, Chief Operating Officer since September 2017. Prior to joining Avon, Mr. Myers served as Vice President, Western European Markets and Managing Director, UK and Ireland for Kellogg Company from January 2012 to July 2016. Prior to joining Kellogg, Mr. Myers spent twenty years at Procter & Gamble (P&G) serving in various leadership roles for businesses spanning Europe, Asia and Latin America, including General Manager, Oral Care and Feminine Care, Greater China.
James E. Thompson has been Avon’s Senior Vice President, General Counsel since August 2017 and also served as Chief Ethics & Compliance Officer until February 2019. Prior to joining Avon, Mr. Thompson spent nine years at Chiquita Brands International, Inc. as Executive Vice President, General Counsel and Secretary from 2006 to 2015. Prior to that, he was Group Vice President and General Counsel to McLeodUSA from 2003 to 2006 and prior to that he served as Unilever’s Senior Vice President, Skin CareDirector, International Legal to Alticor Inc., the parent company of Amway Corporation from 1995 to 2002. Mr. Thompson began his career as an attorney at Jones Day where he gained significant experience working on U.S. and Cleansing from August 2008 to October 2010. Prior to that, he served as Senior Vice President, Dove Personal Care from July 2006 to July 2008. Prior to 2006, Mr. Acosta held various management positions within Unilever’s Deodorantsinternational antitrust and Hair Care businesses.
23 |
John P. HigsonVikram Agarwalhas been Avon’s Senior Vice President & Chief Supply Chain Officer since February 2019. Prior to joining Avon, Mr. Agarwal spent thirty years at Unilever, where he advanced through a series of senior positions in operations and supply chain in various roles around the world. His last role was as Executive Vice President, Chief Commercial Officer since fall 2016. PriorSupply Chain Unilever from August 2016 to this,January 2019, and prior to that from August 2013 to August 2016 he was Avon’s Executive Vice President Europe, Middle East & Africa (EMEA) and Latin America since January 2016, Senior Vice President and President, EMEA and Head of Global Field Operations from November 2014 to December 2015 and Senior Vice President and President, EMEA from March 2012 to November 2014. Mr. Higson served as Seniorthe Group Vice President, Global Commercial Operations from March 2011 to March 2012 and Senior Vice President, Global Direct Selling and Business Model Innovation from June 2009 to March 2011. Prior to that, Mr. Higson was Senior Vice President, Central and Eastern Europe from 2005 to 2009, Area Vice President, Central and Eastern Europe from 2002 to 2005 and, additionally during that period, was General Manager, Avon Poland from 2003 to 2005 and head of Global Sales Development from 1999 to 2002. Before that, he held various positions since joining Avon in 1985.Home Care Supply Chain.
Jeff BenjaminKay Yukako Nemoto has been Avon’s Senior Vice President, General CounselChief Strategy and Chief Ethics & ComplianceHR Officer since September 2012. Prior to joining Avon, he was employed by Novartis Corporation (formerly known as Ciba-Geigy Corporation) from April 1974 through December 2011. There he served in a variety of general counseling positions from 1986 until his retirement in December 2011. In addition, he was Chief Ethics & Compliance Officer at Novartis Corporation from 1997 through 2010 and Chair of the Ethics & Compliance Committee from 2010 through 2011.
Susan Ormiston has been Avon’s Senior Vice President, Human Resources and Chief Human Resources Officer since July 2013.February 2019. Prior to that, Ms. OrmistonNemoto served on secondment with Avon from Cerberus Operations & Advisory Company (COAC) as Group Vice President, Global Functions & HR Operational Excellence from November 2012 topart of strategic partnership since July 2013 and prior to that she held the position of Vice President, Human Resources, Global Brand Marketing since joining Avon in August 2010.2017. Prior to joining Avon, Ms. Ormiston was SeniorNemoto served as Operating Executive, for COAC since February 2015. Earlier in her career, Ms. Nemoto spent over 23 years in banking, consultancy and advisory roles at companies including Ernst & Young and Alix Partners, including as Director, Operational Transaction Services with Ernst & Young from July 2011 to June 2014.
Laura Barbrook has been Avon’s Vice President, Human Resources,Corporate Controller since September 2017 and was elected the Company’s Principal Accounting Officer in January 2018. Prior to joining Avon, Dr. Barbrook was Group Financial Controller at global life insurer New York Life International from June 2007 to July 2010.Travelex beginning in 2013. Earlier in her career, she spent 15 years at IBM, progressing through human resources management roles of increasing responsibilityworked for Rio Tinto and Ernst & Young in the U.S.finance and U.K.
Robert Loughran has been Avon’s Group Vice President, Chief Accounting Officer since March 2016 and prior to that Group Vice President, Corporate Controller since May 2015. He also served as Acting Chief Financial Officer from October 2014 to March 2015. Prior to that, Mr. Loughran served as Vice President and Corporate Controller from May 2012 to May 2015 and as Vice President and Assistant Controller from September 2009 to May 2012. Prior to that, he held the position of Executive Director, Assistant Controller since joining Avon in 2004.
24 | AVON 2019 Proxy Statement |
The following table shows information for beneficial owners of more than 5% of the outstanding shares of Avon common stock, as set forth in recent filings with the Securities and Exchange Commission (“SEC”).SEC. Beneficial ownership is determined in accordance with SEC rules. In computing a person’s percentage ownership of common stock, shares of common stock into which shares of Avon’s Series C Preferred Stock are convertible are deemed to be outstanding and beneficially owned only with respect to the person exercising voting and dispositive power over such shares of Series C Preferred Stock, as described in more detail in footnote 1 to the following table.
Name and Address
|
Amount and Nature of Beneficial Ownership Of Common Stock
| Percent of Class
| ||
Stephen Feinberg, Cerberus Investor and Avatar GP, LLC1 875 Third Avenue, 11th Floor New York, New York 10022
| 87,051,524 | 16.5% | ||
Capital Research Global Investors2 333 South Hope Street Los Angeles, CA 90071
| 53,358,441 | 12.1% | ||
BlackRock, Inc.3 55 East 52nd Street New York, NY 10055
| 45,037,423 | 10.3% | ||
The Vanguard Group4 100 Vanguard Blvd. Malvern, Pennsylvania 19355
| 38,614,629 | 8.8% |
Name and Address | Amount and Nature of Beneficial Ownership Of Common Stock | Percent of Class | ||||
Stephen Feinberg, Cerberus Investor and Avatar GP, LLC1 875 Third Avenue, 11th Floor New York, New York 10022
| 87,051,524 | 16.44% | ||||
BlackRock, Inc. 2 55 East 52nd Street New York, NY 10055
| 44,642,763 | 10.09% | ||||
Miller Value Partners, LLC, William H. Miller III Living Trusts3 One South Street, Suite 2550 Baltimore, MD 21202 | 35,578,463 | 8.04% |
1 | In its Schedule 13D filed on March 11, 2016 with the SEC, each of Stephen Feinberg, Cerberus Investor and Avatar GP, LLC reported that each may be deemed to beneficially own 435,000 shares of the Company’s Series C Preferred Stock, which represents 100% of the outstanding Series C Preferred Stock and was convertible into 87,000,000 shares of the Company’s common stock as of March 1, 2016. Such shares are held by Cerberus Investor. Mr. Feinberg exercises sole voting and sole dispositive power over all securities held by Cerberus Investor. The percentage of class noted in the table is on anas-converted basis. Stephen Feinberg is the president, sole director and sole shareholder of Craig Court, Inc., the managing member of Craig Court GP, LLC, which is the general partner of Cerberus Capital Management, L.P. As set forth in further detail on page 29, Cerberus Investor is required to vote its shares of Series C Preferred Stock and common stock in favor of (i) each director nominated to the Board, (ii) the Company’s“say-on-pay” proposal and any other approved equity compensation proposals and (iii) the ratification of the Company’s independent registered public accounting firm. In its Form 4 filed on March 4, 2016 with the SEC, each of Mr. Feinberg, Cerberus Investor and Avatar GP, LLC reported that each may be deemed to own an additional 51,524 shares of the Company’s common stock as of March 31, 2016 as a result of accrued and unpaid dividends on such date. |
2 | In its Schedule 13G/A filed |
In its Schedule |
25 |
The following table sets forth certain information as of March 1, 20172019 regarding the beneficial ownership of our common stock by each director, each named executive officer (“NEO”—those officers listed in the Summary Compensation Table), and all of our directors and executive officers as a group. The totalTotal shares individuallybeneficially owned by directors, NEOs and on an aggregate basis,executive officers individually represent less than 1% of Avon’s outstanding shares of common stock. Total shares beneficially owned by directors, NEOs and executive officers as a group represent 1.95% of Avon’s shares of common stock.
Name
| Shares of Common Stock1
| Stock Options Currently Exercisable or Exercisable within 60 Days
| Total Number of Shares Beneficially Owned
| Restricted Stock Units2
| Total
| |||||||||||||||||||||||||
Fernando Acosta
| 139,331 | 127,034 | 266,365 | 318,981 | 585,346 | |||||||||||||||||||||||||
Jose Armario
| 18,215 | 0 | 18,215 | 0 | 18,215 | |||||||||||||||||||||||||
Jeff Benjamin
| 118,156 | 76,045 | 194,201 | 191,104 | 385,305 | |||||||||||||||||||||||||
W. Don Cornwell
| 14,483 | 3,4 | 0 | 14,483 | 80,191 | 94,674 | ||||||||||||||||||||||||
Chan W. Galbato
| 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Nancy Killefer
| 0 | 0 | 0 | 60,614 | 60,614 | |||||||||||||||||||||||||
Susan J. Kropf
| 169,861 | 0 | 169,861 | 46,214 | 216,075 | |||||||||||||||||||||||||
John P. Higson
| 64,341 | 305,949 | 370,290 | 214,989 | 585,279 | |||||||||||||||||||||||||
Steven F. Mayer
| 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Helen McCluskey
| 0 | 0 | 0 | 59,769 | 59,769 | |||||||||||||||||||||||||
Sheri McCoy
| 384,750 | 462,000 | 846,750 | 40,000 | 886,750 | |||||||||||||||||||||||||
Charles H. Noski
| 1,000 | 4 | 0 | 1,000 | 63,162 | 64,162 | ||||||||||||||||||||||||
Cathy D. Ross
| 0 | 0 | 0 | 32,659 | 32,659 | |||||||||||||||||||||||||
Michael F. Sanford
| 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
James S. Scully
| 292,241 | 133,334 | 425,575 | 603,470 | 1,029,045 | |||||||||||||||||||||||||
17 directors, NEOs and executive officers as a group
| 2,523,664 | 5 | 1,202,412 | 3,726,076 | 1,918,407 | 5,644,483 |
Name | Shares of Common Stock1 | Stock Options Currently Exercisable or Exercisable within 60 Days | Total Number of Shares Beneficially Owned | Restricted Stock Units2 | Total | |||||
Jose Armario | 18,215 | 0 | 18,215 | 113,621 | 131,836 | |||||
W. Don Cornwell | 14,4834 | 0 | 14,483 | 173,847 | 188,330 | |||||
Miguel Fernandez | 100,000 | 202,612 | 302,612 | 243,134 | 545,746 | |||||
Chan W. Galbato7 | 0 | 0 | 0 | 0 | 0 | |||||
Nancy Killefer | 0 | 0 | 0 | 154,270 | 154,270 | |||||
Susan J. Kropf | 169,861 | 0 | 169,861 | 139,870 | 309,731 | |||||
Helen McCluskey | 0 | 0 | 0 | 153,425 | 153,425 | |||||
Sheri McCoy3 | 658,687 | 2,310,000 | 2,968,687 | 0 | 2,968,687 | |||||
Andrew G. McMaster, Jr. | 0 | 0 | 0 | 61,170 | 61,170 | |||||
James A. Mitarotonda | 4,167,2595 | 0 | 4,167,259 | 61,170 | 4,228,429 | |||||
Jonathan Myers | 0 | 141,189 | 141,189 | 169,427 | 310,616 | |||||
Michael F. Sanford7 | 0 | 0 | 0 | 0 | 0 | |||||
Lenard B. Tessler7 | 0 | 0 | 0 | 0 | 0 | |||||
James E. Thompson | 0 | 129,684 | 129,684 | 155,620 | 285,304 | |||||
James Wilson | 0 | 266,017 | 266,017 | 216,113 | 482,130 | |||||
Jan Zijderveld | 250,000 | 227,800 | 477,800 | 600,000 | 1,077,800 | |||||
19 directors, NEOs and executive officers as a group | 5,378,5056 | 3,292,563 | 8,671,068 | 2,346,416 | 11,017,484 |
1 | Shares reflect sole voting and investment power except as otherwise noted. |
2 | The numbers in this column include unvested Service-based RSUs and Service-based RSUs that have become vested but are not yet settled, and which therefore do not afford the holder voting or investment power. Performance RSUs held by executive officers, which will vest only if certain financial goals are met, have not been included and do not afford the holder voting or investment power. |
3 | Shares reflect amount of common stock ownership upon the date of Ms. McCoy’s departure from the Company. |
4 | Includes |
5 | Amount includes 4,057,105 shares beneficially owned by Barington Companies Equity Partners, L.P. (“Barington Companies”), 101,821 shares beneficially owned by Barington Companies Investors, LLC (“Barington Investors”) and 8,333 shares held directly. Each of Barington Companies and Barington Investors may be deemed to have sole power to vote and dispose of the shares it beneficially owns. Mr. Mitarotonda is the sole stockholder and director of LNA Capital Corp. (“LNA”), which is the general partner of Barington Capital Group, L.P. (“Barington Capital”), which is the majority member of Barington Investors. Barington Investors is the general partner of Barington Companies. Barington Investors may be deemed to have sole power to vote and dispose of the shares owned by Barington Companies. In addition, Mr. Mitarotonda, LNA and Barington Capital each may be deemed to have sole power to vote and dispose of the shares owned by Barington Companies and Barington Investors. Mr. Mitarotonda disclaims beneficial ownership of any such shares except to the extent of his pecuniary interest therein. |
6 | Includes shares as to which beneficial ownership is shared with others. |
7 | Cerberus policy prohibits its employees from personally owning stock in the companies of which they are board members. |
26 | AVON 2019 Proxy Statement |
TRANSACTIONS WITH RELATED PERSONS
Policies and Procedures
We have policies and procedures for the review, approval and ratification of “related person” transactions as defined under the rules and regulations of the Securities Exchange Act of 1934, as amended.
Under the written charter of the Audit Committee, related person transactions are subject to the review, evaluation and, as appropriate, approval or ratification of the transaction, by the Committee. The Committee considers any such related person transactions in a manner that best serves the interests of the Company and the interests of our shareholders.
In addition, our Code of Conduct (the “Code”), which is available on our Company website (www.avoncompany.comwww.avonworldwide.com) under “Our Values”, prohibits all conflicts of interest. Under the Code, conflicts of interest occur when personal, private or family interests interfere in any way, or even appear to interfere, with the interests of the Company. The Company also has a written global conflicts of interest policy for employees, including executive officers, which provides procedures and guidelines for addressing such matters. Under the policy, actual conflicts of interest are prohibited, and the appearance of a conflict necessitates the review and prior approval, as appropriate, by certain members of management.
We have multiple processes for identifying related person transactions and conflicts of interest. We annually distribute a questionnaire to our executive officers and members of the Board of Directors requesting certain information regarding, among other things, their immediate family members and employment and beneficial ownership interests, which information is then reviewed for any related person transactions and conflicts of interest. In addition, we periodically survey our global finance function, including accounts payable, for any amounts paid to any of our directors, executive officers or 5% shareholders, and certain of such persons’ affiliates. The global ethics & compliance function undertakes a regular survey of employees, including executive officers, which asks specific questions regarding conflicts of interest, and requires certification of compliance with the Code.
We also have other policies and procedures regarding related person transactions and conflicts of interest. For example, our Corporate Governance Guidelines, which are available on the Corporate Governance tab of our investor website (www.avoninvestor.com)(investor.avonworldwide.com), require that the Board of Directors assess the independence of itsnon-employee directors at least annually, including a requirement that it determine whether or not any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described under “Information Concerning the Board of Directors—Director Independence” on page 17.18. In addition, we maintain a number of controls and procedures, including a written global policy, for the proper review and approval of contracts and other financial commitments.
Transactions with Related Persons
Upon the completion of the Series C Preferred Stock investment in Avon on March 1, 2016 (as further described below), Cerberus Investor, an affiliate of Cerberus Capital Management, L.P., became a related person by virtue of obtaining beneficial ownership of approximately 16.6% of the voting rights of the Company’s common stock onanas-converted basis basis at the time of the investment. In connection with the Series C Preferred Stock investment, we participated in several other transactions with Cerberus Investor and one or more of Cerberus’ affiliates, all of which were reviewed and approved by the Board as in the best interests of the Company and its shareholders. The Audit Committee determined that no further action was required by it with respect to these transactions under its written charter, since these transactions were previously reviewed and approved by the Board prior to the completion of such transactions and prior to the time any of the Cerberus Investor-designated directors (including Mr. Mayer, who has an indirect material interest in such transactions) joined the Board. Since March 1, 2016, the Audit Committee has reviewed, evaluated and, as appropriate, approved or ratified any new related party transactions or modifications to previously disclosed related party transactions between the Company and Cerberus Investor or one or more of its affiliates. The Company may participate in additional transactions with Cerberus Investor or one or more of Cerberus’s affiliates in the future, which would be subject to the policies and procedures described above, as appropriate.
Separation of North America Business
On March 1, 2016, Cleveland NA Investor LLC (an affiliate of Cerberus) contributed $170 million of cash into New Avon LLC (“New Avon”) in exchange for 80.1% of its membership interests, and we contributed (i) assets primarily related to our North America business (including approximately $100 million of cash, subject to certain adjustments), (ii) certain assumed liabilities of our North America business and (iii) the employees of our North America business into New Avon and retained 19.9% of New Avon’s membership interests. The Company and certain of its subsidiaries entered into the following agreements with New Avon in connection with the closing of the Series C Preferred Stock investment and the separation of our North America business on March 1, 2016 and the establishment of New Avon as a standalone North America operating entity.
Transition Services Agreements. The Company and New Avon entered into both a Transition Services Agreement and a Reverse Transition Services Agreement pursuant to which the Company and New Avon provide each other with certain services, including related to sourcing and supply chain, treasury and financial shared services, human resources, technology, sales, legal and global packaging, for initial service periods of up to 24 months. In connection with these agreements, the Company received approximately |
27 |
• | Intellectual Property Agreements. The Company, certain of its subsidiaries and New Avon entered into an Intellectual Property License Agreement pursuant to which the Company and certain of its subsidiaries licensed to New Avon certain intellectual property rights that the Company and certain of its subsidiaries used in the conduct of the North America business prior to the separation. The Company and New Avon also entered into a |
• | Supply Agreements. The Company, certain of its subsidiaries and New Avon entered into a Manufacturing and Supply Agreement (“MSA”) pursuant to which the Company and certain of its subsidiaries, on the one hand, and New Avon, on the other hand, manufacture and supply certain products to each other for an initial term through December 31, 2018. |
• | Real Estate Agreements.The Company and New Avon entered into |
Preferred Stock Investment
On March 1, 2016, we issued and sold to Cerberus Investor 435,000 shares of newly issued Series C Preferred Stock for an aggregate purchase price of $435 million pursuant to an Investment Agreement among the Company, New Avon and Cerberus Investor. The Series C Preferred Stock ranks senior to the shares of our common stock with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of our affairs. The Series C Preferred Stock has a liquidation preference of $1,000 per share, representing an aggregate liquidation preference of $435 million upon issuance. Holders of Series C Preferred Stock are entitled to participate onanas-converted basis basis in any cash dividends paid to the holders of shares of the Company’s common stock. In addition, cumulative preferred dividends accrue daily on the Series C Preferred Stock and are payable at a rate of 1.25% per quarter (net of any dividends on the Company’s common stock and subject to increase up to a maximum rate of 5.00% per quarter if the Company breaches certain obligations). Except to the extent not otherwise previously paid by the Company, preferred dividends are payable on the seventh anniversary of the issuance date of the Series C Preferred Stock as and when declared by the Board of Directors and at the end of each quarter thereafter. Accrued and unpaid preferred dividends may be paid, at the Company’s option, (i) in cash, (ii) subject to certain conditions, in shares of the Company’s common stock or (iii) upon conversion of shares of Series C Preferred Stock, in shares of theCompany’snon-voting,non-convertible Series Series D Preferred Stock, par value $1.00 per share (the “Series D Preferred Stock”). Any such shares of Series D Preferred Stock issued would have similar preferential rights.
Series C Preferred Stock is convertible at the option of the holders at any time into shares of the Company’s common stock at an initial conversion price of $5.00 per share, which equals an initial conversion rate of 200 shares of the Company’s common stock per share of Series C Preferred Stock, subject to certain anti-dilution adjustments. If at any time the volume weighted average price of the common stock exceeds $10.00 per share (subject to certain anti-dilution adjustments) for a period of 30 consecutive trading days, the Company may cause all of the Series C Preferred Stock to be converted into shares of common stock based on the then applicable conversion price.
Holders of Series C Preferred Stock are entitled to vote generally with the holders of common stock onanas-converted basis. basis. Holders of Series C Preferred Stock will also be entitled to a separate class vote with respect to (i) amendments to the Company’s organizational documents that have an adverse effect on the Series C Preferred Stock, (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series C Preferred Stock or (iii) the delisting of the Company’s common stock, other than in connection with a change of control event.
Upon certain change of control events involving the Company, holders of Series C Preferred Stock can require the Company to repurchase the Series C Preferred Stock for an amount equal to the greater of (i) an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends or (ii) the consideration the holders would have received if they had converted their shares of Series C Preferred Stock into common stock immediately prior to the change of control event.
28 | AVON 2019 Proxy Statement |
Pursuant to an Investor Rights Agreement between the Company and Cerberus Investor, the Company reduced the size of the Board from twelve directors to eleven directors and granted Cerberus Investor certain minority rights relating to Board representation and other matters. Pursuant to the Investor Rights Agreement, the Board currently consists of six incumbent directors who served on the Board prior to Cerberus’ investment in the Company, two independent directors jointly selected by the Company and Cerberus Investor and three directors elected by Cerberus Investor (one of whom has been appointed as thenon-executive Chairman). Pursuant to the amendment to the Company’s Certificate of Incorporation classifying the Series C Preferred Stock and the Investor Rights Agreement, Cerberus Investor will continue to be entitled to elect: (i) three directors to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or shares of common stock that represent, onanas-converted basis, basis, at least 75% of Cerberus Investor’s initial shares of Series C Preferred Stock onanas-converted basis, basis, (ii) two directors to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or common stock that represent, onanas-converted basis, basis, at least 50% but less than 75% of Cerberus Investor’s initial shares of Series C Preferred Stock onanas-converted basis basis (the “50% Ownership Requirement”) and (iii) one director to the Board, so long as Cerberus Investor continues to beneficially own shares of Series C Preferred Stock and/or common stock that represent, onanas-converted basis, basis, at least 25% but less than 50% of Cerberus Investor’s initial shares of Series C Preferred Stock onanas-converted basis basis (the “25% Ownership Requirement”). Until Cerberus Investor no longer meets the 50% Ownership Requirement, Cerberus Investor has the right to select the director to be appointed as the Chairman of the Board. Until Cerberus Investor no longer meets the 25% Ownership Requirement, subject to certain exceptions and to satisfaction by such director designees of independence and other customary qualifications, Cerberus Investor has the right to have one of its director designees serve on each committee of the Board. The Investor Rights Agreement also contemplated the creation of the new Lead Independent Director of the Board, which role has certain customary rights and responsibilities identified inourBy-Laws.
Subject to maintaining certain levels of beneficial ownership of Series C Preferred Stock and/or common stock, Cerberus Investor has consent rights over certain actions taken by the Company, including increasing the size of the Board, reinstating the Company’s quarterly common stock dividend and incurring indebtedness in excess of certain thresholds. Subject to maintaining certain levels of beneficial ownership of Series C Preferred Stock and/or common stock and certain other factors, Cerberus Investor is required to vote its shares in favor of (i) each director nominated to the Board by the Board, (ii) the Company’s“say-on-pay” proposal and any other equity compensation proposals approved by the Compensation and Management Development Committee of the Board and (iii) ratification of the Company’s independent registered public accounting firm.
Cerberus Investor and its affiliates are subject to certain standstill restrictions, including that Cerberus Investor and its affiliates are restricted from acquiring additional securities of the Company in excess of a certain percentage, subject to certain exceptions. The standstill restrictions will terminate upon the occurrence of certain events, including upon the earlier of the date on which (i) Cerberus Investor no longer meets the 25% Ownership Requirement and (ii) the 25% Ownership Requirement remains satisfied (and the 50% Ownership Requirement is not satisfied), no Cerberus Investor designee serves on the Board and Cerberus Investor has irrevocably waived its director nomination and consent rights. Subject to certain exceptions, Cerberus Investor is restricted from transferring the Series C Preferred Stock, Series D Preferred Stock or shares of common stock issued upon conversion of the Series C Preferred Stock (“Conversion Common Stock”) until March 1, 2018.
Pursuant to the Investor Rights Agreement, Cerberus Investor and its affiliates have (i) certain customary registration rights with respect to Series C Preferred Stock, Series D Preferred Stock, Conversion Common Stock and shares of common stock issued pursuant to the terms of the Series C Preferred Stock, Series D Preferred Stock or the Investor Rights Agreement and (ii) certain customary preemptive rights with respect to the issuance of equity securities by the Company. On October 11, 2016, the Company filed a registration statement onFormS-3ASR with with the Securities and Exchange CommissionSEC registering for sale by Cerberus Investor 435,000 shares of Series C Preferred Stock, 142,800 shares of Series D Preferred Stock and 113,311,940 shares (plus an additional unspecified number) of common stock. As of the date of this filing, Cerberus Investor had not made any sales in reliance on suchFormS-3ASR.In accordance with the Company’s policies, due to potential conflicts of interest, the Series C Designees recused themselves from Board and committee votes concerning thisFormS-3ASR.
Other Agreements
On June 29,Since 2016, the Company has entered into agreements with an affiliate of Cerberus Investor, which provide for the secondment of Cerberus Investor affiliate personnel to the Company’s project management team responsible for assisting with the execution of the Transformation Plan announced in January 2016.2016 and the Open Up Avon Strategy announced in September 2018. For fiscal year 2016,2018, the Company paid approximately $2.7$1.2 million under these agreements to an affiliate of Cerberus Investor and for fiscal year 2017,2019, the Company expects to pay approximately $4.1$1.2 million.
As part of the separation of our North America business in 2016, the Company was required to issue credit support, in the form of letters of credit, for New Avon’s payment obligations under an equipment lease for assets that were transferred to New Avon. On January 31, 2019, the Audit Committee approved the extension of such letters of credit (from September 2020 through June 2022), in support of New Avon’s payment obligations under its expected refinanced equipment lease for those assets. The expected amount to maintain the letters of credit during 2019 is approximately $360,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and greater than 10% shareholders to file certain reports with respect to beneficial ownership of our equity securities. Based solely on a review of copies of reports furnished to us, or written representations that no reports were required, we believe that during 20162018 all Section 16 reports that were required to be filed were filed on a timely basis.
29 |
The Executive Compensation sectionSection is organized as follows:
Page
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LETTER FROM THE COMMITTEE CHAIR
| 31
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COMPENSATION DISCUSSION AND ANALYSIS
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35 | ||
51 | ||
COMPENSATION AND RISK MANAGEMENT
|
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COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
|
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30 | AVON 2019 Proxy Statement |
LETTER FROM THE COMMITTEE CHAIR
Dear Fellow Shareholders:
As ChairWe are eager to realize the benefits of Avon’sthe many significant efforts we have undertaken over the past year, including the hiring of a new Chief Executive Officer (“CEO”) and several other members of our senior team, the development of our Open Up Strategy and the ongoing review of options to reposition Avon for profitable growth.
The Compensation and Management Development Committee (the “Committee”), I am committed continues to workingwork with the Board of Directors and Avon’s management(the “Board”) to designensure compensation plans that are motivational for our executives and supportwhile driving business objectives that createand creating alignment with shareholder value.return. In our Compensation Discussiondiscussions with shareholders, the feedback on our executive compensation programs was supportive. The primary concern of our shareholders is the lack of operational, financial and Analysisstock price performance improvements.
Over the course of 2018 and early in 2019, we made important organizational steps to address these challenges, including:
Hiring Jan Zijderveld as our CEO; and
Making a number of changes to the senior leadership team to focus our investment in talent on key functions and operations.
Despite a very productive 2018, including the development of our Open Up Strategy, senior leadership reorganization, and ongoing transformation, our financial, operating and stock price results for 2018 were disappointing and not reflective of the performance objectives the Committee and the Board established.
The Committee reviewed the Company’s compensation programs during 2018 and affirmed their alignment with shareholders, through many factors, including:
Our CEO’s target annual compensation opportunity is below the median of our peer group, which is consistent with our performance and our share usage. We redefined our peer group in 2017 to better reflect our smaller revenue scope
Our CEO’s annual and long-term incentive opportunity is entirely performance-based andat-risk
Our named executive officers (“CD&A”NEOs”) disclosed last year,have, on average, approximately 75% of their total compensation tied to performance andat-risk
None of our executives earned a cash annual incentive award for 2018 as a result of the Company not meeting our performance goals (other than an employment inducement award to our new CEO of aone-time minimum 2018 annual incentive of 50% of target)
66% of the performance-based restricted stock units (”Performance RSUs”) awards granted in 2016 that were eligible to vest in early 2019 based on our relative total shareholder return (“TSR”) performance were forfeited due to underperformance.
For 2019, we discussed importantcontinue our commitment to improved financial and operating performance and tying executive compensation opportunities to the achievement of our goals. The Committee is also mindful that retention and attraction of key talent is challenging in light of significant headwinds and several years of low – and for 2018, zero – annual bonus payouts. For 2019:
The annual incentive opportunity will continue to be tied to four objective measures of performance, equally weighted: revenue growth, adjusted operating profit, cash flow from operations and Representative health.
Our long-term incentive program will measure annual relative TSR performance but only provide for vesting upon completion of the full three years of performance. We made other changes to our compensation plans implementedequity incentive awards to make them even more motivational and shareholder aligned, including creating immediate focus on 2019 share price improvement and limiting the number of shares delivered until share price recovers. (See pages 38 through 40)
Recognizing the urgency of improving our operating results in 2016 designed2019, we will provide additional long-term incentive (“LTI”) opportunity within our 2019 LTI program through the addition of “turnaround LTI performance awards”, which will provide additional emphasis on achieving our business plan and implementing our strategy. We awarded these Performance RSUs that are only eligible for vesting upon attainment of specific performance objectives during 2019. Any provisionally earned shares must be held for an additional two years to support our Transformation Plan and drive company performance. These changes also alignedalign executives with Avon’s partnership with Cerberus Capital Management L.P. (collectively with its affiliates, “Cerberus”), finalized in March 2016. For 2017, our annual and long-term compensation plansshareholders as we continue to generally followtransform the same design as those inbusiness.
Finally, we are requesting your approval of an increase to the share reserve under the Amended and Restated 2016 as we feel they remain appropriate, support current and long-term business objectives and are aligned with shareholder interests. We have provided full detailsOmnibus Incentive Plan. Equity comprises the majority of our 2016senior executives’ compensation plans,opportunity and is granted to leaders across our organization. While much of the equity we have granted in recent years has been forfeited, equity remains an important tool to align management with shareholders. A larger share request at this time would be more consistent with typical practice, but as well as highlights relatedthe Committee continues to 2017, in our CD&A starting on page 34.
The following areclosely monitor the key features of our 2016alignment between management incentives and shareholder value with a desire to minimize unnecessary shareholder dilution, we made the decision to request an annual incentive plan:allotment. We anticipate reverting to a normalized approach next year.
Changes to our long-term incentive plan for 2016 were thoughtfully made by the Committee in order to better align compensation with shareholders’ interests, minimize dilution and reflect the investment made by Cerberus. As a result, significant stock price improvement is required in order for senior officers to realize target long-term compensation. For 2016, the following are the key features of ourlong-term incentive plan:
In 2016, we also took the opportunity to make important changes to our peer group to be more reflective of our new size and geographic footprint.
We believe that our programs deliver compensation to our executives consistent with performance over time. The 2016 annual incentive plan paid out at approximately 53% of target, and the realized value of the 2014-2016 Performance RSUs was approximately 31% of the targeted award value.
Our Say on Pay Proposal isand our proposal related to the Amended and Restated 2016 Omnibus Incentive Plan are found on page 67pages 71 and our73 respectively of this proxy statement, and the Board recommends that you vote “FOR” this proposal. In support‘FOR’ both of this recommendation, wethese proposals. We also invite you to read our CD&A that follows for furtherconsider additional information on our compensation philosophy and decisions.decisions in the Compensation Discussion and Analysis which can be found on the following pages. I am encouraged by the strategic changes initiated and confident that our programs are designed to be motivational formotivate our executives and pay for performance that is aligned with shareholder interests. We look forward to maintaining ongoing dialogue with our shareholders.
Sincerely,
Helen McCluskey
Chair, Compensation and Management Development Committee
32 |
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we describe our executive compensation program for Named Executive Officers (“NEOs”). Our NEOs for 20162018 were the following individuals:
Name |
| |||
Jan Zijderveld* | Chief Executive Officer | |||
James | Former Executive Vice President, Chief Financial Officer | |||
Miguel Fernandez | Executive Vice President, Global President | |||
Jonathan Myers | Executive Vice President, Chief Operating Officer | |||
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Senior Vice President, General Counsel | ||||
Sheri McCoy* | Former Chief | |||
* During 2016, Mr. Scully was Chief Financial Officer of the Company. Effective January 1, 2017, heMs. McCoy ceased to be Chief FinancialExecutive Officer effective February 4, 2018, and her last day of employment with the Company but continues to serve aswas March 31, 2018. Mr. Zijderveld assumed the role of Chief Operating Officer.Executive Officer effective February 5, 2018.
** OnJames Wilson served as our Chief Financial Officer from January 1, 2017 through March 17, 2017, Mr. Benjamin notified the Board2019. Gustavo Arnal is expected to begin his employment and service as Avon’s Executive Vice President, Chief Financial Officer on May 1, 2019.
***James E. Thompson’s last day of Directors that he has decidedemployment is expected to retire from the Company. Mr. Benjamin intends to remain in his current position at the Company until a successor is namedbe effective no later this year.than April 2019.
This Compensation Discussion and Analysis (“CD&A”) is divided into the following sections:
Executive Summary (page 33)
Pay-for-Performance (page 41)
Competitive Positioning and Peer Group (page 45)
Elements of our Compensation Program (page 46)
Roles in Executive Compensation (page 51)
Compensation Governance Best Practices (page 52)
Additional Information (page 53)
2016Few companies have the brand recognition, extensive global reach or market-leading positions in beauty and direct selling that Avon has. In a world where trust in companies is becoming a scarcer commodity, a Representative’s strong relationship with her consumers continues to be highly relevant.
Avon is an organization with a clear and compelling purpose, operating in the beauty and personal care categories across the globe with a focus on developing and growing markets. Through our millions of direct selling Representatives, we empower micro-entrepreneurs across the globe. Avon’s core purpose to provide part-time earnings to families and offer amazing products at great prices is as relevant today, if not more, than it was an important year for Avon as it marked the 130thanniversary of our iconic beauty company. It was also a year of significant change as Avon embarked on its first year of a three-year transformation plan (the “Transformation Plan”). Following a strategic review of the business in 2015 undertaken to identify alternatives for improving shareholder value, we finalized a strategic partnership with Cerberus Capital Management, L.P. (collectively with its affiliates, “Cerberus”) in March 2016. The partnership with Cerberus has put Avon on a solid path to profitability and growth by providing a solution for the North America business as well as the capital, focus, and resources to support growth of Avon Products, Inc. through the execution of the Transformation Plan. We successfully separated Avon’s North America business on March 1, 2016 into a privately held company, operating as New Avon LLC, under the management of Cerberus. Avon Products, Inc. remains listed on the New York Stock Exchange and retains an approximate 20% interest in New Avon LLC. As part of the transaction, Cerberus made a $435 million investment in exchange for an approximate 16.6% interest in Avon Products, Inc. years ago at the timeCompany’s founding. Avon’s ongoing progress to unlocke-commerce, make Avon available to anyone, anywhere and enable our Representatives to be more competitive is powerful, and is at the heart of Avon’s value proposition. In 2018, Avon introduced digital mobile brochures in 60 countries,on-line stores for Representatives in 20 markets and relaunched oure-commerce positioning in China thereby driving significant early growth in the investment.e-commerce channel.
On January 21, 2016, our CEO and Management Team shared with our investment community a thorough and comprehensive Transformation Plan. The Transformation Plan contains three strategic pillars—Investing in Growth, Driving out Costand Improving Financial Resilience—as well as long-term financial goals ofmid-single digit constant dollar revenue growth, 1 to 2% Active Representative growthand low double-digitOverall 2018 operating margin.
The Transformation Plan was a key enabler of our 2016 financial performance. For the full year,results were disappointing, total revenue forfrom reportable segments was $5.7 billion, which declined 7% as a result of the impact of foreign currency, but grew 3% in constant dollars despite significant macroeconomic, sociopolitical and geopolitical challenges. For reportable segments, Active Representatives declined 1%, primarily due to Asia Pacific, while Ending Representatives were relatively unchangeddown 2% compared to 2015. We were pleased with ourthe prior year, driven by declines in Brazil, Russia and the UK. The 2018 full year operating margin that improved 5.6%, up 290 basis points,results reinforced the urgent need to execute Avon’s new strategic direction and our full year adjusted operating margin that improved 80 basis points to 6.5%, despite the negative impact from foreign exchange of approximately 310 basis points. We delivered solid overall year on year improvement in 2016, notwithstanding a deceleration in performance in the fourth quarter. In 2016, we focused on our Top 10 markets, representing approximately 70% of our revenue, and produced better overall performance in these top markets.
As part of our Transformation Plan, we delivered approximately $120 million in cost savings, exceeding our targets and improving our profit margin. We also significantly strengthened our balance sheet and improved our financial resilience by achieving an approximate $260 million reduction in debt.
Our transformation is on track and the steps we have taken in 2016 have laid the foundation for furthermade good progress.
In 2018 we made critical progress in improvingaddressing the key concerns of leadership and growingstrategic direction. Throughout the business. We haveyear we continued to strengthen Avon’s leadership team, further recruiting seasoned and skilled senior executives. The process of putting in place a strong set of building blocks including an iconic brand, leadership positions in many markets, a strong innovation pipelineteam to accelerate change and an incredible Representative base of approximately six million women who are Avon brand ambassadors. We are confident in our Transformation Plan, and know that while we’ve seen some significant successes this year, there are still steps to be taken to deliverincrease sustainable and consistent revenue growth and further enhance shareholder value. We look forward to continuing to building upon these strengths in 2017.
Progress in 2016 against our Transformation Plan
We are pleasedprofit continued with the progress made during the first year of our Transformation Plan as well as our improvement in profitability and expanded operating margin. We achieved these results despite challenging and ever-changing macroeconomic and geopolitical trends. Our progress in 2016 was enabledrecruitment by the strategic decision made by our Board and CEO to enter into the partnership with Cerberus.
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33 |
During 2016 we also continued solidifying our Executive Management Team to support (the move“Board”) of our Corporate Headquarters to the UK. In August 2016, we announced that Sheri McCoy,a new Chief Executive Officer, would relocate to the UK, along with other key membersOffice (“CEO”), Jan Zijderveld, who joined Avon in February 2018. Before joining Avon, Mr. Zijderveld was a senior executive and30-year veteran of the Executive Team. Jamie Wilson joined us on January 1, 2017 as Executive Vice President and Chief Financial Officer, based in the UK. Jamie is an experienced, global executive who is well prepared to continue the work we have begun to establish sustainable, profitable growth. Jim Scully continues as Avon’s Chief Operating Officer leading Avon’s Global Supply Chain and Information Technology functions, as well as the Project Management Office. As we move into 2017, we are in a position to place more emphasis onInvesting in Growth.In January 2016, we outlined an investment of $350 million over three years which includes an estimated $150 million in media and social selling and $200 million in service model evolution and information technology to improve the Representative experience. We will also work to drive sustainable and more consistent revenue growth across our Top 15 markets, which represent approximately 80% of Avon’s revenue. We will continue to invest in Avon’s brand and strong innovationUnilever N.V./PLC with a focus ontrack record as a proven global leader driving our Value, Massprofitable growth in large, multi-channel, complex consumer businesses across emerging, developing and Upper Mass brands to appeal to a broader spectrum of women and we remain committed to our longer term goal of 1 to 2% Active Representative growth. Finally, we will continue to focus on increased cost savings as we strive to deliver the $350 million in cost reduction over three years. We are confident in our Transformation Plan, and we expect to deliver the long-term financial objectives ofmid-single digit constant revenue growth, 1% to 2% Active Representative growthand low double-digit operating margin.developed markets.
During 2016, we engaged with shareholders representing nearly 60% of our shares outstanding as of December 31, 2016. As in previous years, the Compensation and Management Development Committee Chair conducted significant shareholder outreach to ensure shareholder perspectives and concerns were heard and well understood. We had discussions with our shareholders about our compensation program and the changes made for 2016. In these conversations, we reviewed program changes, and discussed the Company’s transformation status and financial and strategic priorities.
The feedback received from our shareholders continues to be tremendously valuable and was incorporated into the Compensation and Management Development Committee’s (the “Committee’s”) determination of compensation program changes for 2016 and beyond. We listened and responded to our shareholders, and yielded an improvedsay-on-pay vote in 2016 to 82%. In 2017, we will continue to ensure the alignment of our compensation programs with our shareholders’ interests.
KEY 2016 COMPENSATION CHANGES AND SAY ON PAY
Our Say on Pay Proposal is found on page 67 and our Board recommends that our shareholders vote “For” this proposal. The following factors support this recommendation:Other key appointments include:
Brazil, José Vicente Marino – Direct selling, local and |
Asia Pacific, Bill Rahn – Seasoned direct selling Asia Pacific executive |
Italy & Mediterranean, Marco Brandolini – Significant direct selling and local experience |
India, Dronacharya Chakraborty – Track record in driving growth in direct selling |
Central America and Dominican Republic, Leonardo Palomera Ruiz – Seasoned direct selling executive |
Chief Financial Officer, Gustavo Arnal – Seasoned finance executive, strong international experience |
- | Digital & IT, Benedetto Conversano – Strong track record in leading digital strategy |
- | Beauty & Brand Marketing, James E.M. Thompson – Strong international, turnaround and digital marketing experience |
As a result of these critical appointments, combined with other senior leadership appointments in key markets, Avon now has new leadership in markets that account for more than 50% of total revenue. We are confident that Avon has an energized, highly motivated leadership team in place with the skillset required to deliver our new Open Up Strategy and the experience needed to restore Avon to growth in key emerging and developing markets.
Avon is operating in a dramatically changing and competitive environment, where business as usual is not an option for Avon. A year ago the Board gave Mr. Zijderveld a clear mandate to lead a deep and comprehensive strategic and operating review of all facets of the business and evaluate ways to significantly accelerate Avon’s path to profitable growth.
This review led to the development and launch of Avon’s new Open Up Strategy, which was communicated to shareholders in September 2018. Our Open Up Strategy is simple and clear, and we made important progress during Q3 and Q4 of 2018, including the following:
- | Reboot Direct Selling -re-establish a trusted relationship with our millions of Representatives, whom we consider our bosses. In 2018 we spoke with over 60,000 of our bosses, we moved quickly to fix some of the core issues by improving box and product damage and we launched our segmented service models to ensure we provide tailored and targeted services and support to our bosses. We continue to identify repeatable models in recruiting and training that can be globalized to maximize reach and impact. These were critical steps necessary to ensure we recruit, train and retain quality Representatives and enable them to increase her earnings. |
- | Open Up Mindset – unlockinge-commerce is critical to achieving sustainable growth. We need to make it easier for our bosses to earn money by providing them with the tools, skills and products they need to grow her business. In 2018 we launchedon-line stores in 20 markets, giving our bosses the capability to sell online to anyone, anywhere. We also launched oure-brochure which is now live in 60 countries, allowing our bosses to quickly and effectively connect with their customer via social media. These are just some of the critical steps taken in 2018 to enable Avon to unlock oure-commerce potential. Open Up Avon is broader thane-commerce. It includes unleashing the power of data and analytics, as Avon becomes a more data and analytics driven company; opening up Avon’seco-system, utilizing outside resources, creating more external innovation and partnerships; and opening up assets and infrastructure including optimizing manufacturing and distribution. |
- | Deliver Fuel for Growth – we need to deliver savings to allow us to invest to grow. In 2018, we completed the previously announced Transformation Plan and launched the $400 million Fuel for Growth plan. In 2018 we recognized $20 million in early stage savings under the Fuel for Growth plan. In early 2019, we announced an incremental 10% reduction in overall head count and a 25% reduction in our global SKU count. We expect to recognize additional savings through Supply Chain and procurement over the course of 2019. |
- | Refresh and Strengthen the Brand – we need to leverage Avon’s 98% brand awareness and become a contemporary brand to rebuild our customer base. Focusing on becoming more accessible and relevant through technology and through faster, moreon-trend product innovations can continue to help increase purchase intent of Avon brands. In 2018 we started changing how we work and focused on getting to market faster with innovativeon-trend products. By leveraging external development expertise, we launched Lip Tattoo in the UK in under 23 weeks, approximately half of the historical time to market. We are also leveraging external relationships to introduce high end, premium products in select markets, such as the Mission Y line in Central Europe. |
In 2018, we faced the reality of our situation and acted with focus and intent to launch a comprehensive corporate turn-around strategy, addressing all key areas of our business and achieved good early-stage progress. We laid the groundwork, strengthened the executive leadership team and put the right plan in place. We’ve started to fix the core and we’re moving in the right direction, but we need to do more. In 2019 we need to execute our Open Up Strategy with pace and drive, build momentum to see our financial results grow quarter over quarter and start delivering key strategic milestones necessary to achieve our business plan and implementing our strategy.
34 | AVON 2019 Proxy Statement |
KEY 2018 COMPENSATION HIGHLIGHTS
CEO Compensation Aligns with Performance
The chart below shows the differences in Mr. Zijderveld’s annual target compensation, grant-date compensation and realizable pay at December 31, 2018, as a result of the payout of the cash incentive awards at less than target and the stock price at year end.
Thevalue of ourCEO’s performance-based awards continues to remainsignificantly below target. |
1. | ‘Value at Target’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) target value of short-term cash incentives and (iii) the target value of the CEOs 2018 long-term Incentive (“LTI”) awards, exclusive of anyone-time sign on inducement awards. |
Highlights
2. | ‘Value @ Grant’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) target value of short-term cash incentives and (iii) the grant date fair value of the CEOs 2018 LTI incentive awards, exclusive of anyone-time sign on inducement awards. |
3. | ‘Value @ 31 December 18’ equals the sum of (i) annual salary (annualized for 2018 to provide a full year view, which is higher than as reported in the Summary Compensation Table on page 57), (ii) actual value of 2018 short-term cash incentives (as reported in the Summary Compensation Table on page 57) and (iii) the face value of the CEOs 2018 LTI awards, exclusive of anyone-time sign on inducement awards, based on the closing share price at December 31, 2018. |
Summary of 2018 Compensation Actions
The Compensation and Management Development Committee (the “Committee”) took the following specific actions with respect to the compensation of the NEOs for 2018:
– | Base Salary: No increase to base salaries |
– | Annual Cash Incentive: Even though our Open Up Strategy resulted in important progress during Q3 and Q4 of 2018, we were unable to achieve annual incentive plan threshold performance given the challenging macro environment and the robust nature of our goal setting process. Consistent with the formulaic nature of the program and the avoidance of positive discretion, there were no annual cash incentive award payouts to the NEOs with respect to 2018 performance (other than to Mr. Zijderveld, who was guaranteed a minimum annual incentive payout of 50% of target in his employment contract, solely for 2018; the rationale for this was to balance the following considerations: (1) recruiting a high-quality CEO, (2) recognition that some new CEOs receive a first-year minimum of 100% of target and (3) given his date of hire, his impact on the 2018 budget process was limited). |
AVON 2019 Proxy Statement | 35 |
– | Long-Term Incentive Awards: |
◯ | Our CEO’s 2018 long-term incentive award has a target value of $3.25 million and is 100% performance-based with the following mix: |
– | 40% premium-priced stock options (“Premium Options”) with exercise price equal to 125% of the closing price of a share of Avon stock as of the grant date, and |
– | 60% performance-based restricted stock units (“Performance RSUs”) with a three-year performance period. |
◯ | Additionally, our CEO receivedone-timesign-on inducement awards in 2018, 50% of which were performance-based and in the form of Performance RSUs and the other 50% were service-based restricted stock units (“Service-based RSUs”). |
– | These performance-based inducement awards have three separate trances, all of which are eligible to vest only after completion of the 2020 performance year. The Committee will establish at the beginning of each year (i.e., 2018, 2019 and 2020) the performance objectives required to earn the award – ensuring that the Committee can tailor the measures and their rigor to the business circumstances. |
– | Thenon-performance based restricted stock units were granted as a replacement of a portion of his prior employer forfeited equity awards, and to promote shareholder alignment and retention over the three-year vesting period. These inducement awards cliff vest after three years. |
◯ | For other NEOs, 2018 long-term incentive awards consisted of Performance RSUs, Service-based RSUs, and Premium Options, each representingone-third of the overall target award. |
The table below sets out the key focus areas for our 2016 changes2018 compensation program for our senior executives and the primary reasons for each change are described below:rationales.
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Eliminated companies with minimal international focus and outsized revenue for 2018 to better tailor the peer group • Removed Colgate-Palmolive and General Mills due to their high revenue
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As a result of the changes described above, grant date fair value for NEOs, including our CEO, decreased, requiring significant stock price improvement to realize target value under the compensation plans.
36 | AVON 2019 Proxy Statement |
SHAREHOLDER ENGAGEMENT AND RESPONSIVENESS
At our 2018 annual meeting, shareholders representing approximately 85% of votes cast approved our“say-on-pay” proposal in support of our executive compensation program. While the vast majority of our shareholders are in favor of our executive compensation programs, we remain committed to shareholder engagement and value insights provided from our fellow shareholders.
During 2018, we continued our practice of engaging with our shareholders and soliciting feedback. Having received strong support for 2016,our 2018say-on-pay proposal, in 2018 our shareholder engagement focused particularly on gaining feedback and input from shareholders who did not support oursay-on-pay proposal in 2018. As in recent years, the Chair of the Committee conducted shareholder outreach to ensure shareholder perspectives and concerns were heard and well understood. Shareholder outreach meetings were conducted as the 2019 incentive programs design was developing, which enabled the Committee to directly incorporate feedback and suggestions into the 2019 program design. The feedback received from our shareholders continues to be tremendously valuable. While shareholders raised different challenges and concerns, they consistently agreed that the performance metrics for both the short and long-term programs should be directly tied to Avon’s strategy. As you will see on the following pages, this feedback has been incorporated into our program design.
Highlights of the feedback we received from shareholders are as follows:
What We Heard | What We Did | |
Ensure incentive metrics drive the turnaround | ✓ In 2018 and continuing in 2019, increased weighting on the Representative Improvement metric in the annual incentive plan to 25% with equal emphasis on both attracting and retaining Representatives ✓ In 2019, aligned performance measurement period of Performance RSUs with our strategic and financial goals ✓ In 2019, introduced a supplementary LTI Award (the “2019 LTI Turnaround Performance Awards” or “Turnaround LTI Performance Awards”), directly aligned with Open Up strategy and short-term financial milestones | |
Drive urgency and focus on delivering 2019 performance and building momentum | ✓ In 2019, reassessed the incentive metrics and confirmed that the metrics (Revenue, Operating Profit, Cash Flow from Operations and Representative Improvement) continue to be the best short-term indicator of our turnaround success ✓ Retained relative TSR for 2019 LTI Awards, but performance will be measured over threeone-year periods to create stronger alignment with our key goals and focus management on delivering year on year growth.One-year measures of rTSR will focus our team on constant year-over-year improvement in share price, which is imperative to our turnaround. | |
Continue to provide strongpay-for-performance alignment and significant proportion of payat-risk | ✓ For 2018, over 83% of CEO compensation is variable, performance-based compensation ✓ In 2018 and continuing in 2019, used Premium Option exercise price 25% above stock price at grant ✓ In 2018 and continuing in 2019, maintained relative TSR as a performance metric for Performance RSUs with target set above median compared to the S&P 400 Index | |
Enable the retention of critical staff needed to deliver the turnaround | ✓ In 2019, reintroduced equity (rather than cash) below senior officer levels to better align all management level incentives with shareholder interests, with above median performance targets relative to the S&P 400 Index peer group |
AVON 2019 Proxy Statement | 37 |
✓ in 2019, grantedone-time Turnaround LTI Performance Awards to select members of the management team to create enhanced focus on the critical 2019 financial goals. The performance goals for these awards are set to be more challenging than the business plan and are capped at target. | ||
Positive feedback about our rigorous management of shareholder dilution | ✓ In 2018 we continued to use a $5.00 divisor, rather than stock price at grant, to determine number of shares to grant. Share awards for 2019 were granted in the same number of shares as in 2018 to recognize remaining need for share price appreciation. |
In 2019, we will continue to ensure the alignment of our compensation programs with our shareholders’ interests with a strong pay for performance alignment and payouts of incentive plans based on business performance and stock price appreciation.
We are committed to ensuring that Avon’s pay framework, particularly our incentive programs, are aligned with and reflect the most important task of our executive team – returning our business to profitable growth. Following the introduction of the Open Up Strategy the Committee undertook a detailed, thorough and holistic review of Avon’s incentive arrangements (fixed, short and long-term) to determine if our pay arrangements are aligned with Avon’s new strategic direction, key priorities and timelines.
Our shareholder outreach reinforced our belief that our 2019 incentive programs should:
Incorporate metrics that drive the turnaround
Drive urgency and focus on delivering 2019 targets and building momentum
Continue to provide strongpay-for-performance alignment and significant proportion of payat-risk; and
Enable the retention of critical staff needed to deliver the turnaround.
Following this thorough review, the Committee believes that many elements of the current incentive program remain appropriate, as it has strong performance elements that support our externally communicated business goals and requires significant stock price appreciation for executives to realize target compensation. However, for 2019 the Committee made a number of adjustments to the incentive arrangements, to further strengthen their alignment with Avon’s strategic direction and focus on delivering the turnaround strategy with urgency. For example, the 2019 Long-Term Incentive Program places a greater focus onone-year performance than our historical practice in order to explicitly reflect our shareholders’ feedback, which stressed the urgency of delivering the turnaround strategy as well as enabling the retention of critical staff needed to deliver the turnaround. Details of our compensation programs for 2019 are as follows:
2019 Annual Incentive Program
For our annual incentive plan, the same key financial metrics and strategic goals used in 2018 that link to our externally communicated business goals remain appropriate and are fully formulaic.
2019 Long-Term Incentive Program (“LTIP”)
For our 2019 LTI, the number of shares granted to executives were fixed to align with those granted in recent years, rather than the stock price at grant ($2.75). The fixed 2019 LTI grant resulted in a 43% reduction in grant date fair value. When combined with the Turnaround LTI Performance Awards, the combined value of NEO’s 2019 LTI award was, on average, 76% of target. 2019 Performance RSUs will be measured based on relative TSR goals compared with the S&P 400 peer group, where performance above median will be required to achieve target pay out.
Performance for the 2019 Performance RSUs will be measured over threeone-year performance periods, to increase focus and emphasis on delivering immediate results and achievingyear-on-year improvements in line with our turnaround plan.One-year measures of rTSR will focus our team on constant year-over-year improvement in share price, which is imperative to our turnaround.
Equity awards were reintroduced into LTI award mix in lieu of certain LTI cash awards for business leaders below the NEO level, to enhance alignment with shareholder interests while continuing to focus on minimizing shareholder dilution.
2019 Long-Term Incentive Turnaround Awards
The Committee approved theone-time grant of Turnaround LTI Performance Awards for 2019 to select members of the management team. The purpose of this award is (i) to increase focus on delivering key 2019 operational results and building momentum to deliver the turnaround and (ii) to bridge some, but not all, of the significant gap in value between actual LTI awards and target LTI awards.
38 | AVON 2019 Proxy Statement |
2019 LTI Turnaround Performance Awards will be delivered in the form of Performance RSUs. Performance for these awards will be measured against operational metrics over aone-year performance period (2019) with atwo-year holding period.
Theseone-time Turnaround LTI Performance Awards are not additive as the combined value of participants’ regular 2019 LTIP and the Turnaround LTI Performance Awards will not exceed 80% of their target 2019 LTI opportunity. The shortfall reflects the performance-based nature of the LTIP and requires a significant stock price improvement to realize target value under the compensation plans. The table below comparesperformance goals for these Turnaround LTI Performance Awards are set to be more challenging than the business plan and are capped at target.
Highlights of our CEO’s 2016 target grant date value delivered with2019 compensation programs and the prior year:rationale are described below:
Component
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| 2016 Target Delivered
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Base Salary | $1,200,000 | $1,200,000 | 0% | |||
Annual Incentive | $1,800,000 | $1,800,000 | 0% | |||
Long-Term Incentive | $7,700,000* | $5,322,517** | -31% | |||
Total Target Compensation | $10,700,000 | $8,322,517 | -22% |