UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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☐ | Soliciting Material Pursuant to §240.14a-12 | |||
THE J. M. SMUCKER COMPANY | ||||
(Name of Registrant as Specified In Its Charter)
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THE J. M. SMUCKER COMPANY
20172019 Proxy Statement and
Notice of Annual Meeting of Shareholders
Annual Meeting
Wednesday, August 16, 2017
11:00 a.m., Eastern Time
The Ritz-Carlton
1515 West Third Street, Cleveland, Ohio 44113
THE J. M. SMUCKER COMPANY
June 30, 201728, 2019
Dear Shareholder:
It isAs a shareholder in our pleasureCompany, you are a partner in our continued success. We are pleased to invite you to attend The J. M. Smucker Company’sour Annual Meeting of Shareholders on Wednesday, August 16, 2017.14, 2019. The annual meeting will begin at 11:00 a.m., Eastern Time, at The Ritz-Carlton, 1515 West Third Street, Cleveland, Ohio 44113.
We are concluding a period of necessary and exciting transformation that has positioned us to deliver sustained growth. We achieved many important milestones toward this objective in the past year, including transforming our brand portfolio to better align with consumer preferences, launching a new innovation model, enhancing our efforts to deliver world-class marketing, making crucial investments to further our technology capabilities, and continuing to deliver against our established environmental sustainability goals. Following this tremendous evolution, we truly feel the best is yet to come.
Included with this letter is aour Notice of the 20172019 Annual Meeting of Shareholders and theour proxy statement, which is first being mailed to our shareholders on or about June 30, 2017.28, 2019. Please review this material for information about the nominees named in the proxy statement for election as Directors and the Company’s appointed independent registered public accounting firm.Independent Registered Public Accounting Firm. In addition, details regarding executive officer and Director compensation, corporate governance matters, and the business to be conducted at the annual meeting are also described.
Whether or not you plan to attend the annual meeting, please cast your vote, at your earliest convenience, as instructed in the Notice of Internet Availability of Proxy Materials or in the proxy card. Your vote is very important.Your vote before the annual meeting will ensure representation of your common shares at the annual meeting even if you are unable to attend.
We are eager to demonstrate we can build on the momentum we have created in fiscal year 2019 to continue delivering value on your investment and look forward to sharing more information with you about The J. M. Smucker Companythe Company’s performance and the value of your investmentour plans at the annual meeting.
Sincerely,
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Timothy P. Smucker | Richard K. Smucker | Mark T. Smucker |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON AUGUST 16, 2017
This proxy statement and the 2017
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 14, 2019 This proxy statement and the 2019 Annual Report are available at www.proxyvote.com |
Notice of 2017 Annual Meeting
of Shareholders
Notice of 2019 Annual Meeting of Shareholders | ||||
Wednesday, August 16, 201714, 2019
11:00 a.m., Eastern Time
The Ritz-Carlton
1515 West Third Street
Cleveland, Ohio 44113
The Annual Meeting of Shareholders of The J. M. Smucker Company (the “Company,” “we,” “us,” or “our”) will be held for the following purposes:
1. | To elect as Directors the |
2. | To ratify the appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the |
3. | To approve, on anon-binding, advisory basis, the Company’s executive compensation as disclosed in these proxy materials; and |
4. |
To consider and act upon any other matter that may properly come before the annual meeting. |
Shareholders of record at the close of business onJune 19, 2017 17, 2019 are entitled to vote at the annual meeting. You may cast your vote via the Internet, as instructed in the Notice of Internet Availability of Proxy Materials, or if you received your proxy materials by mail, you may also vote by mail or by telephone.
All shareholders are invited to attend the annual meeting. However, seating at the annual meeting will be on a first-come, first-served basis, and we cannot guarantee seating for all shareholders.
Jeannette L. Knudsen
Senior Vice President, General Counsel and Secretary
THE J. M. SMUCKER COMPANY
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This summary highlights information contained elsewhere in this proxy statement. YouThis summary does not contain all of the information you should consider. Please carefully read the entire proxy statement before casting your vote.voting.
PERFORMANCE HIGHLIGHTS
20172019 Annual Meeting of Shareholders
When: August 16, 2017
Where: The Ritz-Carlton, 1515 West Third Street, Cleveland, Ohio 44113
You are entitled to vote at the meeting if you were a holder of record of our common stock at the close of business on June 19, 2017. Please see page 7 for instructions on how to vote your shares.
Date and Time Place Record Date Wednesday, August 14, 2019 11:00 a.m. Eastern Time The Ritz-Carlton 1515 West Third Street Cleveland, Ohio 44113 Shareholders of record at the close of business onJune 17, 2019 are entitled to vote at the annual meeting. Voting Recommendations of the Board Proposal Proposal Summary FOR AGAINST Page 1 Election of the Board nominees named in this proxy statement with terms expiring at the 2018 annual meeting of shareholders Election of the Board nominees named in this proxy statement with terms expiring at the 2020 annual meeting of shareholders 2 Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 2020 fiscal year 3 Advisory approval of the Company’s executive compensation 4 5 Performance Highlights REVENUE ADJUSTED EARNINGS PER SHARE* FREE CASH FLOW* SHAREHOLDER RETURN $8.29 IN FY19 $383M IN FY19 Primarily Dividends +7% 5 YEAR CAGR +6% 5 YEAR CAGR GENERATED $781M IN FCF DURING FY19 RETURNED $2.6B OVER THE PAST 5 YEARS For a reconciliation of adjusted earnings per share and free cash flow, seeAppendix A. For a description of how we calculate adjusted earnings per share and free cash flow, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Annual Report on Form 10-K, which can be found on our website atwww.jmsmucker.com/investor-relations.The J. M. Smucker Company 2017 Proxy Statement 1PROXY SUMMARY Proposal Summary FOR AGAINST Page ✓ 20 14 Ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 2018 fiscal year ✓ 36 31 Advisory approval of the Company’s executive compensation ✓ 37 32 Advisory approval on the frequency of holding future advisory votes on executive compensation Every
Year 39 Shareholder proposal requesting that the Company issue a renewable energy sourcing and/or production report by January 2018 ✓ 76 * The J. M. Smucker Company 2019 Proxy Statement 1
PROXY SUMMARY
Director Nominees
The following table provides summary information about each of our directorDirector nominees. This year’s nominees include two new nominees: Kirk L. Perry and Dawn C. Willoughby.
Board Committees | ||||||||||||||||
Name | Age | Director Since | Professional Background | Inde- pendent | AC | ECC | NCGC | Other Public Company Boards | ||||||||
Kathryn W. Dindo | 68 | 1996 | Retired Vice President and Chief Risk Officer, FirstEnergy Corp. | ✓ | C, F | ✓ | ALLETE, Inc. | |||||||||
Paul J. Dolan | 58 | 2006 | Chairman and CEO, Cleveland Indians | ✓ | ✓ | MSG Networks Inc. | ||||||||||
Jay L. Henderson | 61 | 2016 | Retired Vice Chairman, Client Service, PricewaterhouseCoopers LLP | ✓ | F | Illinois Tools Works Inc. Northern Trust Corp. | ||||||||||
Nancy Lopez Knight | 60 | 2006 | Founder, Nancy Lopez Golf Company | ✓ | ✓ | |||||||||||
Elizabeth Valk Long | 67 | 1997 | Former Executive Vice President, Time, Inc. | ✓ | ✓ | C | Edgewell Personal Care Co. | |||||||||
Gary A. Oatey | 68 | 2003 | Executive Chairman, Oatey Co. | ✓ | C | |||||||||||
Kirk L. Perry | 50 | 2017 | President, Brand Solutions Google Inc. | ✓ | ✓ | e.l.f. Beauty, Inc. | ||||||||||
Sandra Pianalto | 62 | 2014 | Retired President and CEO, Federal Reserve Bank of Cleveland | ✓ | F | Eaton Corporation PLC Prudential Financial Inc. | ||||||||||
Alex Shumate | 67 | 2009 | Managing Partner, North America, Squire Patton Boggs (US) LLP | ✓ | ✓ | CyrusOne Inc. | ||||||||||
Mark T. Smucker | 47 | 2009 | President and CEO, The J. M. Smucker Company | |||||||||||||
Richard K. Smucker | 69 | 1975 | Executive Chairman, The J. M. Smucker Company | |||||||||||||
Timothy P. Smucker | 73 | 1973 | Chairman Emeritus, The J. M. Smucker Company | |||||||||||||
Dawn C. Willoughby | 48 | 2017 | Executive Vice President and Chief Operating Officer The Clorox Company | ✓ | ✓ | |||||||||||
AC = Audit Committee ECC = Executive Compensation Committee NCGC = Nominating and Corporate Governance Committee | C = Committee Chair F = Financial Expert |
Board Committees | ||||||||||||||||||
Name
| Age
| Director
| Professional Background
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AC
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ECC
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NGCR
| Other Public Company Boards
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Kathryn W. Dindo* |
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70 |
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1996 |
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Retired Vice President and
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ALLETE, Inc. | |||||||||
Paul J. Dolan* |
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60 |
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2006 |
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Chairman and CEO,
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MSG Networks Inc. | ||||||||||
Jay L. Henderson* |
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63 |
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2016 |
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Retired Vice Chairman,
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Illinois Tools Works Inc. Northern Trust Corp. | |||||||||
Gary A. Oatey* |
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70 |
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2003 |
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Executive Chairman,
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Kirk L. Perry* |
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52 |
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2017 |
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President, Brand Solutions, Google Inc.
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e.l.f. Beauty, Inc. | ||||||||||
Sandra Pianalto* |
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64 |
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2014 |
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Retired President and CEO, Federal Reserve Bank of Cleveland
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Eaton Corporation plc Prudential Financial Inc. FirstEnergy Corp. | |||||||||
Nancy Lopez Russell* |
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62 |
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2006 |
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Founder, Nancy Lopez Golf Company
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Alex Shumate* |
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69 |
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2009 |
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Managing Partner, North America,
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CyrusOne Inc. | ||||||||||
Mark T. Smucker |
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49 |
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2009 |
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President and CEO,
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Richard K. Smucker |
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71 |
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1975 |
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Executive Chairman,
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Timothy P. Smucker |
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75 |
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1973 |
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Chairman Emeritus,
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Dawn C. Willoughby* |
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50 |
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2017 |
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Former Executive Vice President and Chief Operating Officer,
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* Independent Director ChairF Financial Expert Member
AC = Audit Committee;ECC = Executive Compensation Committee;NGCR = Nominating, Governance, and Corporate Responsibility Committee
2 | The J. M. Smucker Company 2019 Proxy Statement |
PROXY SUMMARY
Governance Highlights
Our Governance Philosophy
We place a strong focus on our governance practices and continually evaluate our practices, taking into consideration evolving expectations and the perspectives of our shareholders. We would like to share with you, our shareholders, our governance activities over this past year, along with some of our key governance practices and perspectives.
The Makeup of ourOur Board
We consider on a regular basis the skills and expertise of our Directors, along with our Board makeup, to ensure we have the right individuals to fulfill the Board’s responsibilities of strategic oversight, succession planning, compliance oversight, and risk management. We continuallyregularly consider new Director candidates, and we utilizedutilize the assistance of an external search firm to identify new potential candidates this year.candidates. In developing our Director criteria, we considered feedback from interviews with our Board and management, input from key external advisors, and interviews with our investors conducted by an external third party. WeIn fiscal year 2018, we decided to increase the size of our Board to accommodate the addition of two new Directors for fiscal year 2018 who will bringbrought strong expertise and insights in the areas of operations, marketing, digital media, sustainability, and consumer goods industry.goods. We believe that it is important to maintain the continuity of our Board by retaining long-tenured Directors while also adding additional Directors who provide new insights and bring different expertise and experiences to the Board. Although Elizabeth Valk Long will be retiring from the Board on August 14, 2019, we decided not to nominate a replacement and to reduce the size of the Board to 12 Directors. Mark T. Smucker and his leadership team are highly qualified to execute our strategy and to continue our Company’s long history of generating attractive returns for our shareholders, and our Directors will help to support these efforts and provide guidance based on their deep knowledge of our Company and its strategic vision, product categories, innovation platforms, risks, and opportunities.
We also believe that periodic rotations of our Directors are important. Since 2013, we have added four new Directors to our Board and had three individuals representing the sellers of Big Heart Pet Brands (“Big Heart”) serve as observers on our Board. We will continue to consider the appropriate timing for Director rotations to ensure we have the appropriate mix of skills based on our strategic goals and challenges, and to ensure we maintain a diverse Board in regardsregard to expertise, gender, ethnicity, race, age, gender, and ethnicity,cultural and other backgrounds, because a strong, diverse Board provides differing perspectives that yield better decisions.
To facilitate our Director succession planning, we plan to rotaterotated and appointappointed new Committee members and chairs for the Audit Committee, Executive Compensation Committee (the “Compensation Committee”), and Nominating, Governance, and Corporate Governance Committees commencingResponsibility Committee (the “Nominating Committee” and, collectively with the Audit Committee and the Compensation Committee, the “Committees”) in August 2017. Each independent Director sits on only one Committee. We are developing an improved program to orientfocused on orienting new Committee members appropriately for their roles, and we will continue to provideon-going education sessions for all our Directors. We also encourage our Directors to attend at least one external director educational session each year, and the Company provides reimbursement of expenses for such sessions.
We consider the ratio between independent andnon-independent Directors and will have 10nine independent Directors and 3 threenon-independent Directors if our current Director nominees are elected. Since 2015, we have reduced the number ofnon-independent Directors from 5five members to 3three members. The 3 threenon-independent Directors are all Smucker family members, and we believe that including Smucker family members strengthens our Board because of their deep knowledge of the Company, their commitment to the Company and its ourBasic BeliefsofQuality,People,Ethics,Growth, andIndependence (our “Basic Beliefs”), their passion for ensuring continued growth for the Company bearing their namesake, and their vested interest in ensuring shareholder value.
Following the annual meeting:
The J. M. Smucker Company 2017 Proxy Statement 3BOARD SIZE
12 Directors
Since 2019
BOARD REFRESHMENT
4 new Directors
Since 2013
BOARD DIVERSITY
4of12are women
2of12are ethnically diverse
BOARD INDEPENDENCE
9of12are independent
The J. M. Smucker Company 2019 Proxy Statement | 3 |
PROXY SUMMARY
How We View Risk Management
Our Company has always understood the importance of having strong compliance and enterprise risk management practices to protect our business and employees. In fact,Ethics is one of ourBasic Beliefs and is core to our culture. Over the past several years, we have taken a more formal approach to managing these two important areas and have expanded the Compliance and Enterprise Risk functions to bring additional focus and visibility to our management and the Board. The functions report to the Senior Vice President, General Counsel and Secretary, and the Vice ChairmanChair and Chief Financial Officer provides additional leadership and guidance for the Enterprise Risk function. We believe that these leaders have the appropriate expertise and visibility within the organization to best develop and execute these programs, and such individuals have strong relationships and trust with, as well as direct access to, our Board. This year, weOur Enterprise Risk Committee, which is comprised of our executive leadership team, has completed an in-depth analysisits annual assessment of our enterprise risks, led by our Enterprise Risk team with input from leadership and numerous cross-functional teams. Leaders within our organization have been assigned responsibility for each key risk identified, and we have developed a system for monitoring and reporting these risks to the Board and its Committees. Each Committee is assigned responsibility for specific risks, which we have outlined in our Committee charters and which are further described in this proxy statement.
Our Corporate Responsibility Philosophy
Our philosophy of corporate responsibility builds upon the wisdom of our founder, J.M.J. M. Smucker, a deeply principled man also known for his forward thinking. For our Company, being responsible meansdoing the right things anddoing things right for our consumers, customers, employees, suppliers, communities, and shareholders. We take our responsibility as global citizens seriously and, with ourBasic Beliefs as guideposts and a continuous improvement mindset, we strive to have a positive impact on the lives and livelihoods of those we serve. We consider environmental, economic, and social sustainability and responsibility to be among our many responsibilitiesroles as a good corporate citizen. We have recently issuedThis year, we will issue our seventh Corporate Responsibility Report, which providesninth public report updating constituents on the positive impact we are having on the environment, animals, consumers, employees, and our communities. Similar to previous years, it will provide an update on the progress we have achieved in our sustainability strategy that calls for us to create a better tomorrow by focusing on: preserving our culture, ensuring our long-term economic viability, driving positive environmental impact, and being socially responsible. We are proud to advance our business goals without sacrificing our respect forwhile respecting the environment, people, and support foranimals and supporting the communities we serve. Over the past year, we have madeWe continue to make progress in such areas as responsible sourcing, sustainable agriculture, environmental responsibility, animal welfare, and community impact. To learn more, we invite you to read about our Corporate Responsibility Reportcorporate responsibility efforts on our website at www.jmsmucker.com.www.jmsmucker.com.
KEY GOVERNANCE PRACTICES
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✓ No poison pill ✓ Annual election of all Directors ✓ Majority voting standard for all Directors ✓ No cumulative voting for election of Directors ✓ Separation of the Chairman and Chief Executive Officer ✓ ✓Annual Board and Committee self-assessment evaluations ✓ Executive sessions of independent Directors are scheduled at the end of each regular Board and Committee meeting ✓ Directors have complete access to management
✓ Strategic, business, financial, and ✓ Annual advisory vote on executive compensation ✓ Independent compensation consultant ✓
✓ Annual compensation risk assessment ✓ Clawback policy ✓ Director and executive officer stock ownership guidelines ✓ No hedging and no pledging stock policies ✓ Financial statements independently audited |
4 The J. M. Smucker Company 2017 Proxy Statement
We are furnishing this document to you in connection with the solicitation by our Board of the enclosed form of proxy for our annual meeting to be held on August 16, 2017. In addition to solicitation by mail, we may solicit proxies in person, by telephone, facsimile, or e-mail. We will bear all costs of the proxy solicitation and have engaged a professional proxy solicitation firm, D.F. King & Co., Inc., to assist us in soliciting proxies. We will pay a fee of approximately $15,000, plus expenses, for such services.
We pay for the preparation and mailing of the Notice of 2017 Annual Meeting of Shareholders and proxy statement, and we have also made arrangements with brokerage firms and other custodians, nominees, and fiduciaries for the forwarding of this proxy statement and other annual meeting materials to the beneficial owners of our common shares at our expense. This proxy statement is dated June 30, 2017, and is first being mailed to our shareholders on or about June 30, 2017.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these proxy materials?
You received these proxy materials because you are a shareholder of the Company. The Board is providing these proxy materials to you in connection with our annual meeting to be held on August 16, 2017. As a shareholder of the Company, you are entitled to vote on the important proposals described in this proxy statement. Since it is not practical for all shareholders to attend the annual meeting and vote in person, the Board is seeking your proxy to vote on these matters.
What is a proxy?
A proxy is your legal designation of another person (“proxy”) to vote the common shares you own at the annual meeting. By completing and returning the proxy card(s), which identifies the individuals or trustees authorized to act as your proxy, you are giving each of those individuals authority to vote your common shares as you have instructed. By voting via proxy, each shareholder is able to cast his or her vote without having to attend the annual meeting in person.
Why did I receive more than one proxy card?
You will receive multiple proxy cards if you hold your common shares in different ways (e.g.,trusts, custodial accounts, joint tenancy) or in multiple accounts. If your common shares are held by a broker or bank (i.e., in “street name”), you will receive your proxy card and other voting information from your broker, bank, trust, or other nominee. It is important that you complete, sign, date, and return each proxy card you receive, or vote using the telephone, or by using the Internet (as described in the instructions included with your proxy card(s) or in the Notice of Internet Availability of Proxy Materials).
Why didn’t I receive paper copies of the proxy materials?
As permitted by the Securities and Exchange Commission (the “SEC”), we are making this proxy statement and our annual report available to our shareholders electronically via the Internet. We believe this delivery method expedites your receipt of materials, while also lowering costs and reducing the environmental impact of our annual meeting. The Notice of Internet Availability of Proxy Materials contains instructions on how to access this proxy statement and our annual report and how to vote online.
If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one in accordance with the instructions provided in the notice. The Notice of Internet Availability of Proxy Materials has been mailed to shareholders on or about June 30, 2017 and provides instructions on how you may access and review the proxy materials on the Internet.
The J. M. Smucker Company 2017 Proxy Statement 5
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is the record date and what does it mean?
The Board has established June 19, 2017 as the record date for the annual meeting of shareholders to be held on August 16, 2017. Shareholders who own common shares of the Company at the close of business on the record date are entitled to notice of and to vote at the annual meeting.
What is the difference between a “registered shareholder” and a “street name shareholder”?
These terms describe how your common shares are held. If your common shares are registered directly in your name with Computershare Investor Services, LLC (“Computershare”), our transfer agent, you are a “registered shareholder.” If your common shares are held in the name of a brokerage, bank, trust, or other nominee as a custodian, you are a “street name shareholder.”
How many common shares are entitled to vote at the annual meeting?
As of the record date, there were 113,403,782 common shares outstanding and entitled to vote at the annual meeting.
How many votes must be present to hold the annual meeting?
A majority of the Company’s outstanding common shares as of the record date must be present in order for us to hold the annual meeting. This is called a quorum. Broker “non-votes” and abstentions are counted as present for purposes of determining whether a quorum exists. A broker “non-vote” occurs when a nominee, such as a bank or broker holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have discretionary voting power for the particular item and has not received instructions from the beneficial owner. Proposal 2 is the only routine matter on this year’s ballot that may be voted on by brokers.
Who will count the votes?
A representative from Broadridge Financial Solutions, Inc. (“Broadridge”), or its designee, will determine if a quorum is present, tabulate the votes, and serve as our inspector of election at the annual meeting.
What vote is required to approve each proposal?
Under our Amended Articles of Incorporation (the “Articles”), shareholders may be entitled, on certain matters, to cast ten votes per share with regard to certain common shares and only one vote per share with regard to others. The total voting power of all of the common shares can be determined only at the time of a shareholder meeting due to the need to obtain certifications as to beneficial ownership of common shares not held as of record in the name of individuals. There are no proposals on this year’s ballot for which the ten-votes- per-share provisions apply.
Abstentions, broker non-votes, and shares not in attendance and not voted at the annual meeting will not be counted as votes cast “for” or “against” a candidate and will have no effect with regard to the election of Directors in Proposal 1 (See “Corporate Governance—Director Resignation Policy”). In addition, abstentions, broker non-votes (if any), and shares not in attendance and not voted at the annual meeting will not be counted as votes cast “for” or “against” Proposals 2, 3, 4, or 5 and, therefore, will have no effect on the vote for those proposals.
Proposal 1: Because this is an uncontested election, a candidate will be elected as a Director only if the votes cast for the candidate exceed the votes cast against the candidate, based upon one vote for each common share owned as of the record date. A plurality voting standard would be used if this were a contested election. Under the plurality voting standard, the candidates receiving the most “for” votes would be elected.
6 The J. M. Smucker Company 2017 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Under our Director resignation policy, in an uncontested election, any nominee for Director who receives a greater number of “against” votes than “for” votes is required to tender his or her resignation for consideration by the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”). We have provided more information about our Director resignation policy under the heading “Corporate Governance—Director Resignation Policy.”
Proposal 2: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to ratify the appointment of the Independent Registered Public Accounting Firm (the “Independent Auditors”).
Proposal 3: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the Company’s executive compensation. This vote is advisory and not binding on the Company, the Board, or the Executive Compensation Committee of the Board (the “Compensation Committee”) in any way. To the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate what actions, if any, may be necessary to address the concerns of shareholders. Under the Articles, shareholders are entitled to cast ten votes per share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is a non-binding, advisory vote, we have determined that such ten-votes-per-share provisions will not apply to this proposal.
Proposal 4: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the frequency of holding future advisory votes on executive compensation. Shareholders may vote in favor of holding future advisory votes on executive compensation every year, every two years, or every three years, or shareholders may choose to abstain. If the holders of a majority of the votes cast on this proposal do not approve the Board’s recommendation to have an annual vote, then the option receiving the highest number of votes will be deemed the frequency selected by the shareholders. In such case, the Board may decide that it is in the best interests of shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by shareholders. Under the Articles, shareholders are entitled to cast ten-votes-per-share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is a non-binding, advisory vote, we have determined that such ten-votes-per-share provisions will not apply to this proposal.
Proposal 5: The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve the shareholder proposal requesting that the Company issue a report by January 2018 analyzing and proposing how the Company can increase its renewable energy sourcing and/or production.
Where will I be able to find voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting. We will also publish final voting results in a Current Report on Form 8-K to be filed with the SEC within four business days after the annual meeting.
How do I vote my common shares?
If you are aregistered shareholder and you received your proxy materials by mail, you can vote your shares in one of the following manners:
by attending the annual meeting and voting;
by completing, signing, dating, and returning the enclosed proxy card(s);
by telephone, by calling 1-800-690-6903; or
by using the Internet and accessing www.proxyvote.com.
The J. M. Smucker Company 2017 Proxy Statement 7
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Please refer to the specific instructions set forth on the proxy card(s) that you received. If you are a registered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can vote your shares in one of the following manners:
by attending the annual meeting and voting;
by using the Internet and accessing www.proxyvote.com; or
by mail if you request a paper copy of the materials by calling 1-800-579-1639.
Please refer to the specific instructions set forth in the Notice of Internet Availability of Proxy Materials.
If you are a street name shareholder, your broker, bank, trustee, or other nominee will provide you with materials and instructions for voting your common shares. If you wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy obtained from your broker, bank, trust, or other nominee to the annual meeting in order to vote in person.
Can I change my vote after I have mailed in my proxy card(s) or submitted my vote using the Internet or telephone?
Yes, if you are aregistered shareholder and you received your proxy materials by mail, you can change your vote in any one of the following ways:
sending a written notice to our Corporate Secretary that is received prior to the annual meeting and stating that you revoke your proxy;
signing, dating, and submitting a new proxy card(s) to Broadridge so that it is received prior to the annual meeting;
voting by telephone or by using the Internet prior to the annual meeting in accordance with the instructions provided with the proxy card(s); or
attending the annual meeting and voting in person.
Yes, if you are aregistered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can change your vote in any one of the following ways:
sending a written notice to our Corporate Secretary that is received prior to the annual meeting and stating that you revoke your proxy;
voting by using the Internet prior to the annual meeting, in accordance with the instructions provided in the Notice of Internet Availability of Proxy Materials;
attending the annual meeting and voting in person; or
requesting a paper copy of the materials by calling 1-800-579-1639, and then signing and dating the proxy card(s) and submitting the proxy card(s) to Broadridge so that it is received prior to the annual meeting.
Your mere presence at the annual meeting will not revoke your proxy. You must vote in person at the annual meeting in order to revoke your proxy.
If you are a street name shareholder, you must contact your broker, bank, trust, or other nominee in order to revoke your proxy.
How will my proxy be voted?
If you complete, sign, date, and return your proxy card(s) or vote by telephone or by using the Internet, your proxy will be voted in accordance with your instructions. If you sign and date your proxy card(s) but do not indicate how you want to vote, your common shares will be voted for each of the proposals as the Board recommends.
8 The J. M. Smucker Company 2017 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What if my common shares are held in “street name” by my broker?
You should instruct your broker how you would like to vote your shares by using the written instruction form and envelope provided by your broker. If you do not provide your broker with instructions, under the rules of the New York Stock Exchange (the “NYSE”), your broker may, but is not required to, vote your common shares with respect to certain “routine” matters. However, on other matters, when the broker has not received voting instructions from its customers, the broker cannot vote the shares on the matter and a “broker non-vote” occurs. Proposal 2 is the only routine matter on this year’s ballot to be voted on by our shareholders. Proposals 1, 3, 4, and 5 are not considered routine matters under the NYSE rules. This means that brokers may not vote your common shares on such proposals if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted. If you hold your common shares in your broker’s name and wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy to the annual meeting in order to vote in person.
What are the Board’s recommendations on how I should vote my common shares?
The Board recommends that you vote your common shares as follows:
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Does the Company have cumulative voting?
No. In 2009, the shareholders of the Company amended the Articles to eliminate cumulative voting.
Who may attend the annual meeting?
All shareholders are eligible to attend the annual meeting. However, only those shareholders of record at the close of business on June 19, 2017 are entitled to vote at the annual meeting.
Do I need an admission ticket to attend the annual meeting?
Admission tickets are not required to attend the annual meeting. If you are a registered shareholder, properly mark your proxy to indicate that you will be attending the annual meeting. If you hold your common shares through a nominee or you are a street name shareholder, you are required to bring evidence of share ownership to the annual meeting (e.g.,account statement, broker verification). Seating at the annual meeting will be on a first-come, first-served basis, and we cannot guarantee seating for all shareholders.
What type of accommodations can the Company make at the annual meeting for people with disabilities?
We can provide reasonable assistance to help you participate in the annual meeting if you notify the Corporate Secretary at The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667, at least two weeks prior to the annual meeting about your disability and how you plan to attend.
The J. M. Smucker Company 2017 Proxy Statement 9
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Who can answer my questions?
If you need additional copies of the proxy materials, you should contact:
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, New York 11717
Call Toll Free: 1-866-602-0762
If you have any questions about the proxy materials or the annual meeting, or need assistance in voting your common shares, you should contact:
D.F. King & Co., Inc.
48 Wall Street
New York, New York 10005
Call Toll Free: 1-877-536-1562
Call Collect: 212-269-5550
If you have any questions about the proxy materials or the annual meeting, you may also contact:
Shareholder Services
The J. M. Smucker Company
One Strawberry Lane
Orrville, Ohio 44667
Telephone: 330-684-3838
Call Toll Free: 1-866-362-5369
10 The J. M. Smucker Company 2017 Proxy Statement
Corporate Governance Guidelines
Our Corporate Governance Guidelines (the “Guidelines”) are designed to formalize the Board’s role and to confirm its independence from management and its role of aligning management and Board interests with the interests of shareholders. The Guidelines provide in pertinent part that:
a majority of Directors will be “independent,” as set forth under the rules of the NYSE and the SEC, and as further set forth in the Guidelines;
a majority of Directors will be independent, as set forth under the rules of the New York Stock Exchange (the “NYSE”) and the Securities and Exchange Commission (the “SEC”), and as further set forth in the Guidelines; |
all members of the Nominating Committee, the Compensation Committee, and the Audit Committee (collectively, the “Committees”) will be “independent,” and there will be at least three members on each of the Committees;
all members of the Committees will be independent, and there will be at least three members on each of the Committees; |
the “independent” Directors will meet in executive session on a regular basis in conjunction with regularly scheduled Board meetings (other than the meeting held on the day of the annual meeting), and such meetings will be chaired by the Chair of each of the Committees for each Committee executive session and by the Chair of each of the Committees on a rotating term of one year for each Board executive session;
the independent Directors will meet in executive session on a regular basis in conjunction with regularly scheduled meetings of the Board and the Committees, and such meetings will be chaired by the Chair of each of the Committees for each Committee executive session and by the Chair of each of the Committees on a rotating term of two years for each Board executive session (in such role, the “Lead Independent Director”); |
the Board and each of the Committees will conduct an annual self-evaluation;
the Lead Independent Director will coordinate the activities of the other independent Directors and perform such other duties and responsibilities as the Board may determine, including those set forth below under the heading “Executive Sessions and Lead Independent Director;” |
all non-employee Directors will own a minimum amount of the Company’s common shares as established in our Stock Ownership Guidelines for Directors and Executive Officers, which currently require that non-employee Directors own common shares with a value of no less than five times the annual cash retainer paid to each non-employee Director and that each non-employee Director should strive to attain this ownership threshold within five years of joining the Board;
the Board and each of the Committees will conduct an annual self-evaluation; |
each Director will attend at least 75% of all regular and special Board meetings;
allnon-employee Directors will own a minimum amount of the Company’s common shares as established in our Stock Ownership Guidelines for Directors and Officers, which currently require thatnon-employee Directors own common shares with a value of no less than five times the annual cash retainer paid to eachnon-employee Director and that eachnon-employee Director should strive to attain this ownership threshold within five years of joining the Board; |
absent specific action by the Directors, non-employee Directors will not be eligible for nomination after attaining age 72;
each Director will attend at least 75% of all regular and special meetings of the Board; |
each Director will advise the Executive Chairman whenever he or she accepts an invitation to serve on another public company board;
absent specific action by the Board,non-employee Directors will not be eligible for nomination after reaching 72 years of age; |
each Director will advise the Nominating Committee, and offer to resign, if his or her primary professional position or responsibility materially changes to provide the Board an opportunity to review the qualifications of the Director;
each Director will advise the Executive Chairman in advance of accepting an invitation to serve on the board of another public company; |
each Director will not serve concurrently on more than three public company boards, including the Company, without prior, unanimous consent of the Board; and
each Director will advise the Nominating Committee, and offer to resign, if his or her primary professional position or responsibility materially changes to provide the Board an opportunity to review the qualifications of the Director; |
no Director will serve concurrently on more than three public company boards, including the Company, without prior, unanimous consent of the Board; |
the Nominating Committee and the Board will consider a Director’s length of tenure when reviewing Board composition and will seek to maintain an overall balance of experience and continuity, along with fresh perspectives. The Board does not have a Director tenure limit but will consider the impact of a Director’s tenure after he or she has served on the Board for more than 15 years; and |
the Corporate Secretary will provide all newly-elected Directors with materials and training in our Director orientation program and will also provide such additional Director training and orientation as appropriate. |
The J. M. Smucker Company 2019 Proxy Statement | 5 |
the Corporate Secretary will provide all new Directors with materials and training in our Director orientation program and will also provide such additional Director training and orientation as appropriate.CORPORATE GOVERNANCE
The Guidelines are posted on our website at www.jmsmucker.com.www.jmsmucker.com. A copy of the Guidelines is available free of charge to any shareholder who submits a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.
Shareholder Recommendations for Director Nominees
The Nominating Committee is responsible for identifying, evaluating, and recommending qualified candidates to the Board for nomination. During fiscal year 2017, the Nominating Committee retained a third-party search firm to locate and identify potential candidates who may meet the needs of the Board and who, with the Chair of the Nominating Committee, recommended Kirk L. Perry and Dawn C. Willoughby to the Nominating Committee and worked with the Board in reviewing and advancing their candidacies. The Nominating Committee considers all suggestions for membership on the Board, including nominations made by our shareholders. Shareholders’ nominations for Directors must be made in writing and include the nominee’s written consent to the nomination and detailed background information sufficient for the Nominating
The J. M. Smucker Company 2017 Proxy Statement 11
CORPORATE GOVERNANCE
Committee to evaluate the nominee’s qualifications. Nominations should be submitted to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Corporate Secretary will then forward nominations to the Chair of the Nominating Committee. All recommendations must include qualifications that meet, at a minimum, the following criteria:
candidates must be committed to our culture and Basic Beliefs of Quality, People, Ethics, Growth, and Independence (our “Basic Beliefs”), and will possess integrity, intelligence, and strength of character having a balance of skills, knowledge, diversity, background, and experience beneficial to the Company;
Director candidates must be committed to our culture and ourBasic Beliefs and will be individuals of integrity, intelligence, and strength of character having a balance of skills, knowledge, diversity, background, and experience beneficial to the Company; |
non-employee Director candidates must meet the independence requirements set forth below under the heading “Director Independence;”
Non-employee Director candidates must meet the independence requirements set forth below under the heading “Director Independence”; |
non-employee Director candidates must be able to effectively carry out responsibilities of oversight of our strategy;
Non-employee Director candidates must be able to effectively carry out responsibilities of oversight of our strategy; |
candidates should have either significant experience in a senior executive role with a major business organization or relevant experience from other professional backgrounds, together with knowledge of corporate governance issues and a commitment to attend and participate in Board meetings and related Board activities; and
Director candidates should have either significant experience in a senior executive role with a major business organization or relevant experience from other professional backgrounds; |
Director candidates should have a working knowledge of corporate governance and corporate responsibility issues and the changing role of boards; |
Director candidates should have a firm commitment to attend and participate in Board meetings and related Board activities; |
Director candidates should not have any affiliations or relationships with competitive businesses, organizations, or other activities, which could lead to a real or perceived conflict of interest; and |
Director candidates should not serve on more than three public company boards, including the Company, at any one time without the prior consent of the directors. |
6 | The J. M. Smucker Company 2019 Proxy Statement |
candidates should not have any affiliations or relationships which could lead to a real or perceived conflict of interest.CORPORATE GOVERNANCE
Board Diversity
TheWe greatly value diversity and the varying perspectives and experiences that emerge from a diverse group of people. Therefore, the Nominating Committee and the Board consider a diverse group of experiences, characteristics, attributes, and skills, including diversity in gender, ethnicity, race, age, and cultural background, and age,other backgrounds, in determining whether an individual is qualified to serve as a Director of the Company. While the Board does not maintain a formal policy regarding diversity, it does consider the diversity of the Board when evaluating Director nominees. Diversity is important because a variety of viewpoints contribute to a more effective decision-making process. The Nominating Committee and the Board also consider the composition of the Board as a whole in evaluating whether a particular individual should serve on the Board, as the Board seeks to comprise itself of members who, collectively, possess a range of relevant skills, experience, and expertise.
The J. M. Smucker Company 2019 Proxy Statement | 7 |
CORPORATE GOVERNANCE
Experience, Qualifications, Attributes, Skills, and Diversity of Director Nominees
As mentioned above, in considering each Director nominee and the composition of the Board as a whole, the Nominating Committee looks for a diverse group of experiences, characteristics, attributes, and skills that relate directly to our management and operations. Success in specific categories is a key factor in our overall operational success and creating shareholder value. The Nominating Committee believes that Directors who possess some or all of the following experiences, characteristics, attributes, and skills are better able to provide oversight of our management and long-term and strategic objectives.
Adherence to the Company’s Basic Beliefs | We seek Directors who have an understanding of, and are committed to, ourBasic Beliefs. TheseBasic Beliefs are our values and principles that serve as guideposts for decisions at every level of the Company and cultivate a culture of commitment to each other and to our constituents. Further information regarding ourBasic Beliefs can be found on our website atwww.jmsmucker.com. | |
Leadership and Operating Experience | We seek Directors who have significant leadership and operating experience. Strong leaders bring vision, strategic agility, diverse and global perspectives, and broad business insight to the Company. They also demonstrate a practical understanding of organizations, processes, strategy, risk management, and the methods to drive change and growth. People with experience in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others. | |
Independence | We require that a majority of our Directors satisfy the independence requirements of the NYSE and the SEC. | |
Finance Experience | We believe that it is important for Directors to have an understanding of finance and financial reporting processes. Accurate financial reporting is critical to our success and reputation. We seek to have at least two independent Directors who qualify as “audit committee financial experts,” within the meaning of RegulationS-K promulgated by the SEC (“RegulationS-K”), particularly for service on the Audit Committee. We expect all of our Directors to be financially knowledgeable. | |
Public Company Board and Corporate Governance Experience | We seek Directors who have experience serving on the boards of other large, publicly traded | |
Corporate Responsibility and Sustainability Experience | We seek Directors who have knowledge of and experience with corporate responsibility and sustainability initiatives to help inform us on best practices and assist us in establishing goals and delivering against those goals. | |
Operations Experience | We seek | |
Knowledge of the Company | We deem it important to have Directors who havein-depth knowledge of the Company and our industry, operations, business segments, products, compliance requirements, risks, strategy, and culture. | |
Minority; Diversity | We greatly value diversity and the varying perspectives and experiences that emerge from a diverse group of people. Because of this, we believe | |
Marketing or Public Relations Experience | As a manufacturer and marketer of branded food products, we seek Directors who have a diverse range of marketing or public relations experience. | |
Mergers and Acquisitions Experience | We have been, and believe we will continue to be, active in acquiring other companies that fit our strategy and, therefore, seek
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8 | The J. M. Smucker Company |
CORPORATE GOVERNANCE
The Board believes that all of the Directors are highly qualified and have specific employment and leadership experiences, qualifications, and skills that qualify them for service on the Board. The specific experiences, qualifications, and skills that the Board considered in determining that each such person should serve as a Director are included in their individual biographies and also summarized further in the following table:
Director Qualifications and Experience |
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Adherence to the Company’sBasic Beliefs Understand and adhere to the Company’s Basic Beliefs | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Leadership and Operating Experience Significant leadership and operating experience | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||
Independence Satisfy the independence requirements of the NYSE and the SEC | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||
Finance Experience Possess the background, knowledge, and experience to provide the Company with valuable insight in overseeing the Company’s finances | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||
Public Company Board and Corporate Governance Experience Experience serving on the boards of other large, publicly traded companies | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||
Corporate Responsibility and Sustainability Experience Knowledge of and experience with corporate responsibility and sustainability initiatives | ● | ● | ● | ● | ||||||||||||||||||||
Operations Experience General management or distribution operations experience in the consumer goods industry | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||
Knowledge of the Company Experience with the Company for a period in excess of ten years | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||
Minority; Diversity Contribute to the Board in a way that enhances perspectives through diversity in gender, ethnicity, race, age, and cultural and other backgrounds | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||
Marketing or Public Relations Experience Possess unique experience or insight into marketing or public relations matters | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||
Mergers and Acquisition Experience Possess experience or insight related to the mergers and acquisitions area | ● | ● | ● | ● | ● | ● | ● | ● | ● |
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CORPORATE GOVERNANCE
Director Resignation Policy
In connection with the adoption of a majority voting standard for uncontested elections of Directors, the Board adopted a Director resignation policy to address the situation in which one or more incumbent Directors fail to receive the required majority vote forre-election in an uncontested election. Under Ohio law, an incumbent Director who is notre-elected would remain in office as a “holdover” Director until his or her successor is elected. This Director resignation policy provides that an incumbent Director who is notre-elected
Director Resignation Policy
In connection with the adoption of a majority voting standard for uncontested elections of Directors, the Board adopted a Director resignation policy to address the situation in which one or more incumbent Directors fail to receive the required majority vote for re-election in an uncontested election. Under Ohio law, an incumbent Director who is not re-elected would remain in office as a “holdover” Director until his or her successor is elected. This Director resignation policy provides that an incumbent Director who is not re-elected with more “for” votes than “against” votes in an uncontested election will be expected to tender to the Board his or her resignation as a Director promptly following the certification of the election results. The Nominating Committee would then consider each tendered resignation and recommend to the Board whether to accept or reject each such tendered resignation. The Board would act on each tendered resignation, taking into account its fiduciary duties to the Company and our shareholders and the Nominating Committee’s recommendation, within 90 days following the certification of the election results. The Nominating Committee, in making its recommendation, and the Board in making its decision, may consider any factors or other information with respect to any tendered resignation that they consider appropriate, including, without limitation:
the stated reason for such Director’s failure to receive the approval of a majority of votes cast; |
the percentage of votes cast against such Director; and |
the performance of such Director.
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Following the Nominating Committee’s recommendation and the Board’s decision, the Board will promptly and publicly disclose its decision whether to accept or reject each tendered resignation and, if applicable, the reasons for rejecting a tendered resignation. If a Director’s tendered resignation is rejected, he or she would continue to serve until his or her successor is elected, or until his or her earlier resignation, removal from office, or death. If a Director’s tendered resignation is accepted, then the Board would have the sole discretion to fill any resulting vacancy or decrease the number of Directors, in each case pursuant to the provisions of and to the extent permitted by the Company’s Amended Regulations (the “Regulations”). Any Director who tenders his or her resignation pursuant to this policy would abstain from providing input or voting on the Nominating Committee’s recommendation or the Board’s action regarding whether to accept or reject the tendered resignation. While this description reflects the terms of the Board’s current Director resignation policy, the Board retains the power to amend and administer the policy as the Board, in its sole discretion, determines is appropriate. The Director resignation policy is posted on our website atwww.jmsmucker.com and a copy will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.
Director Independence
We require that a majority of our Directors be “independent” as defined by the rules of the NYSE and the SEC. We may, in the future, amend the Guidelines to establish such additional criteria as the Board determines to be appropriate. The Board makes a determination as to the independence of each Director on an annual basis. The Board has determined that the following ninenon-employee Directors are independent Directors: Kathryn W. Dindo, Paul J. Dolan, Jay L. Henderson, Gary A. Oatey, Kirk L. Perry, Sandra Pianalto, Nancy Lopez Russell, Alex Shumate, and Dawn C. Willoughby.
In general, “independent” means that a Director has no material relationship with us or any of our subsidiaries. The existence of a material relationship is determined upon a review of all relevant facts and circumstances and, generally, is a relationship that might reasonably be expected to compromise the Director’s ability to maintain his or her independence from our management.
The Board considers the issue of materiality from the standpoint of the persons or organizations with which the Director has an affiliation, as well as from the standpoint of the Director.
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CORPORATE GOVERNANCE
The following standards will be applied by the Board in determining whether individual Directors qualify as “independent” under the rules of the NYSE and the SEC. To the extent that these standards are more stringent than the rules of the NYSE or the SEC, such standards will apply. References to the Company include our consolidated subsidiaries.
No Director will be qualified as independent unless the Board affirmatively determines that the Director has no material relationship with us, either directly or as a partner, shareholder, or officer of an organization that has a relationship with us. We will disclose these affirmative |
No Director who is a former employee of ours can be deemed independent until three years after the end of his or her employment relationship with us. |
No Director whose immediate family member is |
No Director who |
No Director can be deemed independent if the Director (i) is a current partner or employee of a firm that is our internal or external auditor; (ii) has an immediate family member who is a current partner of such a firm; (iii) has an immediate family member who is a current employee of such a firm and personally works on our audit; or (iv) was, or an immediate family member was, within the last three years, a partner or employee of such a firm and personally worked on our audit within that time. |
No Director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of our present executive officers serve on that company’s compensation committee can be independent until three years after the end of such service or employment relationship. |
No Director who is an executive officer or employee, or whose immediate family member is an executive officer, of a company (excluding charitable organizations) that makes payments to, or receives payments from, us for property or services in an amount which, in any single fiscal year, exceeds the greater of $1,000,000 or 2% of such other company’s consolidated gross revenues can be deemed independent until three years after falling below such threshold. |
No Director can be independent if we have made charitable contributions to any charitable organization in which such Director serves as an executive officer if, within the preceding three years, contributions by us to such charitable organization in any single fiscal year of such charitable organization exceeded the greater of $1,000,000 or 2% of such charitable organization’s consolidated gross revenues.
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In its review and application of the criteria used to determine independence, the Board considered the fact that we do business with organizations directly or indirectly affiliated with Paul J. Dolan and Kirk L. Perry, and affirmatively determined that the amounts paid to the entities affiliated with these individuals do not meet the threshold which would create an issue under the standards for determining independence.
The value of advertising and promotional activities sponsored with the Cleveland Indians organization, of which Mr. Dolan is the Chairman and Chief Executive Officer, in fiscal year 2019 was approximately $371,000 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of the Cleveland Indians.
The value of advertising services provided to us by Google Inc., of which Kirk L. Perry is the President, Brand Solutions, in fiscal year 2019 was approximately $12,257,000 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of Google Inc.
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CORPORATE GOVERNANCE
Structure of the Board of Directors
CORPORATE GOVERNANCE
The value of advertising and promotional activities sponsored with the Ladies Professional Golf Association (“LPGA”), of which Ms. Lopez Knight is associated as a former player and as a current member of the Commissioner Advisory Board and the Foundation Board, in fiscal year 2017 was approximately $240,000 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of the LPGA.
The value of advertising services provided to us by Google Inc., of which Kirk L. Perry, a nominee for Director, is the President, Brand Solutions, in fiscal year 2017 was approximately $525,500 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of Google Inc.
Structure of the Board of Directors
Executive Chairman and Chief Executive Officer as Directors
The Regulations provide that one person may hold the positions of Executive Chairman and Chief Executive Officer. However, our Executive Chairman and Chief Executive Officer roles are currently held by different individuals. AlthoughIn addition, a majority of our Directors are independent, and, commencing in fiscal year 2020, the Board does not havehas a lead independent Director but does have a rotating presiding Director for executive sessions in which only independent Directors are present.Lead Independent Director. Richard K. Smucker, our former Chief Executive Officer, currently serves as Executive Chairman. The Board believes that a current or former Chief Executive Officer is best situated to serve as Executive Chairman because he is one of the Directors most familiar with our business and industry. The Board also believes that having a current or former Chief Executive Officer serve as Executive Chairman provides an efficient and effective leadership model for us by fostering clear accountability, effective decision-making, and alignment of corporate strategy. The Board’s independent Directors bring experience, oversight, and expertise from outside the Company and industry, while the Executive Chairman and the Chief Executive Officer bring Company and industry-specific experience and expertise. One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for the execution of its strategy once it is developed. The Board believes that its current management structure, together with independent Directors having the duties described above, is in the best interests of shareholders because it strikes an appropriate balance for us; with a current or former Chief Executive Officer serving as Executive Chairman, there is unified leadership and a focus on strategic development and execution, while the independent Directors help assure independent oversight of management.
Board’s Role in Risk Oversight
Risk is inherent in any business, and our management is responsible for theday-to-day management of risks that we face. The Board, on the other hand, has responsibility for the oversight of risk management. In its risk oversightthat role, the Board has the responsibility to evaluate the risk management process to ensure its adequacy and that it is implemented properly by management.
The Board believes that full and open communication between management and the Board is essential for effective risk management and oversight. The Board meets regularly with senior management, including the executive officers, to discuss strategy and risks facing the Company. Senior management attends the Board’s quarterly meetings, as well as certain Committee meetings, in order to address any questions or concerns raised by the Board on risk management and any other matters. The Company’s Senior Vice President, General Counsel and Secretary manages the Company’s compliance function and, enterprise risk function (alongalong with the Vice Chair and Chief Financial Officer),Officer, the enterprise risk function, attends all Board meetings and Committee meetings that do not overlap, and provides periodic updates on risks and compliance issues facing the Company and the industry. Each quarter, the Board receives presentations from senior management on business operations, financial results, and strategic, risk, and compliance issues. In addition, senior management holds an annual strategic planning retreat, as well as periodic strategic planning sessions, to discuss strategies, key challenges, and risks and opportunities for the Company. Senior management then reviews the results of each strategic planning session with the Board.
The Committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to management of major financial risk exposures, including in the areas of financial reporting, internal controls, hedging strategies, cybersecurity, and hedging strategies.
The J. M. Smucker Company 2017 Proxy Statement 17
CORPORATE GOVERNANCE
reviewing potential conflicts of interest. Risk assessment reports are regularly provided by management and our internal auditors to the Audit Committee.
The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from the Company’s compensation policies and programs, including overseeing the Company’s compensation-related risk assessment described further below in this proxy statement and developing stock ownership and clawback guidelines for our executive officers. The Nominating Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for Directors and executive officers, and corporate governance, including the annual monitoring of corporate governance issues and developing Director self-evaluations, and reviewing potential conflicts of interest. self-evaluations.
12 | The J. M. Smucker Company 2019 Proxy Statement |
CORPORATE GOVERNANCE
All of these Committees report back to the full Board at Board meetings as to the Committees’Committee’s activities and matters discussed and reviewed at the Committees’ meetings. Non-employee Directors are encouraged to attend all Committee meetings, and employee Directors are encouraged to, and generally do, attend all Committee meetings other than meetings where there are matters being discussed that would create a conflict of interest, such as matters related to compensation.Committee’s meeting. In addition, the Board is encouraged to participate in internal and external Director education courses to keep apprised of current issues, including areas of risk.
Communications with the Board
Shareholders and other interested parties who wish to communicate with members of the Board as a group, withnon-employee Directors as a group, or with individual Directors, may do so by writing to Board Members c/o Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Directors have requested that the Corporate Secretary act as their agent in processing any communications received. All communications that relate to matters within the scope of responsibilities of the Board and its Committees will be forwarded to the appropriate Directors. Communications relating to matters within the responsibility of one of the Committees will be forwarded to the Chair of the appropriate Committee. Communications relating to ordinary business matters are not within the scope of the Board’s responsibility and will be forwarded to the appropriate executive officer at the Company. Solicitations, advertising materials, and frivolous or inappropriate communications will not be forwarded.
Code of Business Conduct and Ethics
Ethics is one of ourBasic Beliefs and is fundamental to our business. We emphasize that ethical conduct is vital to ensure successful, sustained business and business relationships.
Our Code of Business Conduct and Ethics (the “Code of Conduct”) is an extension of our long-standing principles and values. It applies to all of our employees, andofficers, Directors, and the employees and directors of our subsidiaries and affiliates.contingent workers. The Code of Conduct details specifics concerningis a resource which guides daily conduct in the manner in whichworkplace, and employees and Directors are expected to conduct themselves and reminds each personreference it frequently. The Code of their responsibility for making ethical choices. It outlinesConductoutlines our expectations across numerous areas and situations includingin which ethical choices might be necessary, such as creating a positive work environment; engaging with customers, suppliers, and competitors; handling confidential information; avoidinginformation and conflicts of interest; the exchange of gifts, meals, and entertainment; avoiding bribery and corruption;corruption and avoiding insider trading. We train our employeestrading; and rules regarding advertising and product labeling. Employees and Directors onare required to review and acknowledge the Code of Conduct on an annual basis and provide additionalreceive training at least every three years. Additionally, employees receive annual compliance training on key topics on a periodic basis throughout the year.
Any changes toamendments of the Code of Conduct and any waivers of the Code of Conduct for or on behalf of any Director, executive officer, or senior financial officer of the Company must be approved by the Board or by a Committee of the Board to which authority to issue such waivers has been delegated by the Board. Any suchamendments or waivers of the Code of Conduct will be promptly disclosed to the public, as required by applicable law, and will be disclosed on our website at www.jmsmucker.com.www.jmsmucker.com. Waivers of the Code of Conduct for any other employee may be made only by an authorized officer of the Company.
The Code of Conduct is posted on our website atwww.jmsmucker.com and a copy will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.
18 The J. M. Smucker Company 2017 Proxy Statement
CORPORATE GOVERNANCE
Procedures for Reporting Ethical, Accounting, Auditing and Financial Related Issues
The Board has established procedures for employees to report violations of ourthe Code of Conduct or complaints regarding accounting, auditing, and financial-related matters to their manager or supervisor, to the General Counsel, or directly to the Audit Committee. Reports to the General Counsel may be made in writing, by telephone, in person, or may be submitted anonymously through the Smucker’s Voice Line, which is managed by an independent third partythird-party service provider and is available 24 hours a day, seven7 days a week, in multiple languages, and can be accessed via phone or through the Internet.Internet atwww.jmsmucker.ethicspoint.com. Specifically, via phone in the U.S. and Canada, employees or concerned individuals can call toll-free1-844-319-9352; in other countries, employees or concerned individuals can access the applicable country number atwww.jmsmucker.ethicspoint.com. We forbid retaliation, or threats of retaliation, against our employees who, in good faith, report violations of the Code of Conduct.
The J. M. Smucker Company 2017 Proxy Statement 19The J. M. Smucker Company 2019 Proxy Statement 13
(Proposal 1 on the proxy card)
The Board currently has 1113 Directors, and the Regulations fix the number of Directors at 11.but Elizabeth Valk Long will not be up forre-election when her current term expires on August 14, 2019. Effective August 16, 2017,on that date, the number of Directors will be set at 1312 pursuant to the Regulations. AllRegulations, and all remaining Directors will be up for election at this annual meeting to hold office for a term of one year. In addition, Kirk L. Perry and Dawn C. Willoughby have been nominated by the Board to stand for election at the annual meeting. Unless instructed otherwise, the proxies intend to vote FOR the election of these 12 nominees.
After many years of distinguished service, Elizabeth Valk Long will be retiring from the Board on August 14, 2019, at the expiration of her current term. We appreciate Ms. Long’s years of service and thank her for her valuable guidance during her tenure with the Company.
Each nominee has agreed to serve if elected. If any nominee declines, is unable to accept such nomination, or is unable to serve (an event which is not expected), the Board reserves the right in its discretion to substitute another person or nominee or to reduce the number of nominees. In this event, the proxy, with respect to such nominee or nominees, will be voted for such other person or persons as the Board may recommend.
The members of the Board, including those who are listed in this proxy statement as nominees for election, with information about each of them based on data furnished to us by these persons as of June 30, 2017,28, 2019, are as follows:
Nominees for Election as Directors Whose Proposed Terms Would Expire at the 20182020 Annual Meeting
KATHRYN W. DINDO Age:70 Director Since:1996 Committee:Audit |
Ms. Dindo commenced her career with FirstEnergy Corp., a utility holding company, in 1998, and retired as Vice President and Chief Risk Officer in 2007, a position she held since November 2001. Prior to that time, she was Vice President, Controller, and Chief Accounting Officer of Caliber System, Inc., formerly Roadway Services, Inc., a transportation services company. Ms. Dindo is a director and chairs the audit committees of both Bush Brothers & Company, a Skills and Qualifications
The Board concluded that Ms. Dindo should serve as a Director primarily due to her extensive experience in managing and overseeing businesses, her experience serving as a director of other private and public companies, and her significant knowledge of the Company, having served on the Board since 1996. Specifically, Ms. Dindo gained significant leadership, operating, finance, and |
20 The J. M. Smucker Company 2017 Proxy Statement
ELECTION OF DIRECTORS
14 | The J. M. Smucker Company 2019 Proxy Statement |
ELECTION OF DIRECTORS
PAUL J. DOLAN Age:60 Director Since:2006 Committee: Executive Compensation (Chair) |
Mr. Dolan has been the Chairman and Chief Executive Officer of the Cleveland Indians, the Major League Baseball team operating in Cleveland, Ohio, since November 2010, after having served as President since January 2004 and as Vice President and General Counsel since February 2000. He is also a director of MSG Networks Inc., a publicly traded sports and entertainment media company, and Dix & Eaton, a
Skills and Qualifications The Board concluded that Mr. Dolan should serve as a Director primarily due to his long experience in managing businesses, his experience serving on the boards of other companies and numerousnon-profit organizations, and his significant knowledge of the evolving needs and preferences of consumers. Specifically, Mr. Dolan has gained significant leadership, operating, and marketing experience in his positions with the Cleveland Indians and Fast Ball Sports Productions. This background enables Mr. Dolan to provide valuable insights to the Board, particularly in setting corporate strategy and overseeing executive compensation practices. |
JAY L. HENDERSON Age:63 Director Since:2016 Committee: Audit (Chair) |
Mr. Henderson retired as Vice Chairman, Client Service at PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) in June 2016, a position he held since 2007. He also served as PricewaterhouseCoopers’ Managing Partner of the Greater Chicago Market from 2003 through 2013 and Managing Partner of the Cleveland Office from 1993 through 2002. During his career at PricewaterhouseCoopers, Mr. Henderson gained significant experience working with the boards and audit committees of Fortune 500 companies and has managed major client relationships across multiple markets and industry sectors. He is the lead director and a Skills and Qualifications
The Board concluded that Mr. Henderson should serve as a Director primarily due to his extensive experience in managing and overseeing businesses, his experience working with the boards and audit committees of large public companies, and his experience serving as a director of public companies andnon-profit organizations. Specifically, Mr. Henderson brings leadership and operating skills through his former roles with PricewaterhouseCoopers. He has also been a Certified Public Accountant since 1977. Mr. Henderson’s background enables him to provide valuable insights to the Board, particularly in overseeing the Company’s finances. |
The J. M. Smucker Company 2017 Proxy Statement 21The J. M. Smucker Company 2019 Proxy Statement 15
ELECTION OF DIRECTORS
| ||
GARY A. OATEY Age:70 Director Since:2003 Committee: Executive Compensation |
|
22 The J. M. Smucker Company 2017 Proxy StatementProfessional Experience
ELECTION OF DIRECTORS
Mr. Oatey has been the Executive Chairman of Oatey Co., a
Skills and Qualifications The Board concluded that Mr. Oatey should serve as a Director primarily due to his extensive experience in managing businesses, his experience in serving as a director of other public and private companies, as well as severalnon-profits, and his significant knowledge of the Company, having served on the Board since 2003. As the Executive Chairman and former Chief Executive Officer of Oatey Co., Mr. Oatey has gained significant leadership, operating, and corporate governance experience. This background enables Mr. Oatey to provide valuable insights to the Board, particularly in setting corporate strategy and overseeing our |
KIRK L. PERRY Age:52 Director Since:2017 Committee: Executive Compensation |
Mr. Perry has been the President, Brand Solutions of Google Inc., a multinational technology company, since December 2013. Prior to his career at Google Inc., Mr. Perry spent twenty-three years with The Procter & Gamble Company, where he held several positions of increasing responsibility in marketing and general management roles, including President, Global Family Care from May 2011 to December 2013. Mr. Perry has served as a director of e.l.f. Beauty, Inc., a publicly traded cosmetics company, since September 2016, and he previously served as a director of the Hillerich & Bradsby Co. (Louisville Slugger), a Skills and Qualifications
The Board concluded that Mr. Perry should serve as a Director primarily due to his extensive operational experience in marketing and brand management and his experience serving as a director of other organizations. Specifically, Mr. Perry brings leadership and operating skills through his current and former roles with Google Inc. and The Procter & Gamble Company. Mr. Perry’s background enables him to provide valuable insights to the Board, particularly in marketing, operations, general management, consumer products, technology, and digital media. |
The J. M. Smucker Company 2017 Proxy Statement 23
ELECTION OF DIRECTORS
16 | The J. M. Smucker Company 2019 Proxy Statement |
ELECTION OF DIRECTORS
SANDRA PIANALTO Age:64 Director Since:2014 Committee: Audit |
Ms. Pianalto retired in May 2014 as President and Chief Executive Officer of the Federal Reserve Bank of Cleveland, a position she held since 2003. Prior to that time, she served as First Vice President and Chief Operating Officer, since 1993, Vice President and Secretary to the Board of Directors, since 1988, and Assistant Vice President of Public Affairs, since 1984. Prior to retiring, Ms. Pianalto also chaired the Federal Reserve’s Financial Services Policy Committee, which is a committee of senior Federal Reserve Bank officials responsible for overall direction of financial services and related support functions for the Federal Reserve Banks and for leadership in the evolving U.S. payment system. She is a director, Skills and Qualifications
The Board concluded that Ms. Pianalto should serve as a Director primarily due to her vast experience in monetary policy and financial services and her experience serving as a director of other public companies. Specifically, Ms. Pianalto brings leadership and operating skills through her former roles with the Federal Reserve Bank of Cleveland. As the President and Chief Executive Officer of the Federal Reserve Bank of Cleveland, she oversaw 950 employees in Cleveland, Cincinnati, and Pittsburgh who conducted economic research and supervised financial institutions. Ms. Pianalto’s background enables her to provide valuable insights to the Board, particularly in overseeing the Company’s finances. |
NANCY LOPEZ RUSSELL Age:62 Director Since:2006 Committee: Nominating |
In 2000, Ms. Lopez Russell founded the Nancy Lopez Golf Company, which focuses on the design and manufacture oftop-quality golf equipment and clothing for women. In 2015, she founded Nancy Lopez Golf Adventures, which provides golf instruction and golf travel adventures domestically and internationally. Ms. Lopez Russell is also an accomplished professional golfer, having won 48 career titles, including three majors, on the Ladies Professional Golf Association (“LPGA”) Tour. She is a member of the LPGA Hall of Fame and captained the 2005 U.S. Solheim Cup Team to victory. She also serves as a member of the Commissioner Advisory Board and the Foundation Board of the LPGA. In 2003, Ms. Lopez Russell was named to the Hispanic Business magazine’s list of 80 Elite Hispanic Women. Skills and Qualifications The Board concluded that Ms. Lopez Russell should serve as a Director |
The J. M. Smucker Company 2019 Proxy Statement | 17 |
ELECTION OF DIRECTORS
ALEX SHUMATE Age:69 Director Since:2009 Committee: Nominating | Professional Experience
Mr. Shumate is the Managing Partner, North America of Squire Patton Boggs (US) LLP, where he has practiced law since February 1988. Mr. Shumate is also the chairman of the board, lead director, and a member of the governance and nominating committee of CyrusOne Inc., a publicly traded provider of data center consulting services, and a trustee
Skills and Qualifications The Board concluded that Mr. Shumate should serve as a Director primarily due to his significant legal background and his experience in managing a business and serving as a director of other public companies and as a trustee of severalnon-profit organizations. Mr. Shumate has practiced law for nearly 40 years and was named a Lawyer of the Year |
24 The J. M. Smucker Company 2017 Proxy Statement
ELECTION OF DIRECTORS
MARK T. SMUCKER Age:49 Director Since:2009 Committee:None |
Mr. Smucker has been our President and Chief Executive Officer since May 2016. Prior to that time, he served as President and President, Consumer and Natural Foods, from April 2015 through April 2016, President, U.S. Retail Coffee, from May 2011 through March 2015, President, Special Markets, from August 2008 through April 2011, Vice President, International, from July 2007 through July 2008, and Vice President, International and Managing Director, Canada, from May 2006 through June 2007. Mr. Smucker is the son of Timothy P. Smucker, who serves as a Director of the Company, and the nephew of Richard K. Smucker, who serves as a Director and executive officer of the Company.
Skills and Qualifications The Board concluded that Mr. Smucker should serve as a Director largely due to his role as our President and Chief Executive Officer, his significant knowledge of the Company gained from more than |
18 | The J. M. Smucker Company 2019 Proxy Statement |
ELECTION OF DIRECTORS
RICHARD K. SMUCKER Age:71 Director Since:1975 Committee:None |
Mr. Smucker has been our Executive Chairman since May 2016. He served as Chief Executive Officer from August 2011 through April 2016,Co-Chief Executive Officer from February 2001 through August 2011, Executive Chairman from August 2008 through August 2011, and President from August 1987 through April 2011. He was a director of The Sherwin-Williams Company, a publicly traded manufacturer of coatings and related products, from September 1991 through April 2016. Mr. Smucker also served as a director of the Cleveland Federal Reserve Bank from January 2010 through December 2015. Mr. Smucker is the brother of Timothy P. Smucker, who serves as a Director of the Company, and the uncle of Mark T. Smucker, who serves as Skills and Qualifications
The Board concluded that Mr. Smucker should serve as a Director largely due to his role as our Executive Chairman and former Chief Executive Officer, his intimate knowledge of the Company, his experience serving as a director of other private and public companies, and his financial knowledge and experience. The Board believes that Mr. Smucker’s extensive experience in and knowledge of our business gained as a result of his long-time service as a member of management is essential to the Board’s oversight of the Company and our business operations. The Board also believes that continuing participation by qualified members of the Smucker family on the Board is an important part of our corporate culture that has contributed significantly to our long-term success. |
The J. M. Smucker Company 2017 Proxy Statement 25
ELECTION OF DIRECTORS
TIMOTHY P. SMUCKER Age:75 Director Since:1973 Committee:None |
Mr. Smucker has been our Chairman Emeritus since May 2016. He served as Chairman of the Board from August 1987 through April 2016 and asCo-Chief Executive Officer from February 2001 through August 2011. Mr. Smucker is the Chairman Emeritus of the GS1 Management Board, a leading global organization dedicated to the design and implementation of global standards and solutions to improve the efficiency and visibility of the supply and demand chains globally and across sectors. In addition, Mr. Smucker serves as a trustee on The Ohio State University Board of Trustees. Mr. Smucker is the brother of Richard K. Smucker and the father of Mark T. Smucker, both of whom serve as Directors and executive officers of the Company. The Board unanimously approved Mr. Smucker’s nomination as a Director although he has attained age 72 as required under the Guidelines. Skills and Qualifications
The Board concluded that Mr. Smucker should serve as a Director largely due to his role as our Chairman Emeritus, his intimate knowledge of the Company, and his experience serving as a director of other private and public companies. The Board believes that Mr. Smucker’s extensive experience in and knowledge of our business gained as a result of his long-time service as a member of management is essential to the Board’s oversight of the Company and our business operations. The Board also believes that continuing participation by qualified members of the Smucker family on the Board is an important part of our corporate culture that has contributed significantly to our long-term success. |
The J. M. Smucker Company 2019 Proxy Statement | 19 |
ELECTION OF DIRECTORS
DAWN C. WILLOUGHBY Age:50 Director Since:2017 Committee: Nominating |
Ms. Willoughby
Skills and Qualifications The Board concluded that Ms. Willoughby should serve as a Director primarily due to her extensive leadership experience at consumer goods companies and her experience serving as a director of severalnon-profit organizations. Specifically, Ms. Willoughby brings leadership and operating skills through her |
The Board unanimously recommends a vote FOR each of the nominees named in this |
The Board unanimously recommends a vote FOR each of the nominees named in this
proxy statement for election to the Board.
20 | The J. M. Smucker Company 2019 Proxy Statement |
26 The J. M. Smucker Company 2017 Proxy Statement
Board Meetings
During fiscal year 2017,2019, there were tensix meetings of the Board. All Directors are required to attend at least 75% of the total number of Board and did, attendCommittee meetings for which they were eligible. During fiscal year 2019, all Directors attended at least 75% of the total number of Board and Committee meetings for which they were eligible. We have not adopted a formal policy requiring Directors to attend the annual meeting of shareholders. However, ten of ourall Directors attended our 2016the 2018 annual meeting.meeting of shareholders.
The Board has a Nominating Committee, a Compensation Committee, and an Audit Committee. All of the Committees are comprised entirely of independent Directors in accordance with the NYSE listing standards. Charters for eachEach Committee areoperates under a written charter, which is posted on our website at www.jmsmucker.com.www.jmsmucker.com. A copy of each Chartercharter will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. Each Committee believes that its charter is an accurate and adequate statement of such Committee’s responsibilities, and each Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities.
The table below shows current members of each of the Committees and the number of meetings held by each Committee in fiscal year 2017.2019.
Name | Audit Committee | Compensation Committee | Nominating Committee | Audit Committee
| Compensation Committee |
Nominating Committee | ||||||
Kathryn W. Dindo | Chair | ✓ | F | |||||||||
Paul J. Dolan | ✓ |
| ||||||||||
Jay L. Henderson | ✓ | F | ||||||||||
Nancy Lopez Knight | ✓ | |||||||||||
Elizabeth Valk Long | ✓ | Chair | ||||||||||
Gary A. Oatey | Chair | |||||||||||
Kirk L. Perry | ||||||||||||
Sandra Pianalto | ✓ | F | ||||||||||
Nancy Lopez Russell | ||||||||||||
Alex Shumate | ✓ |
| ||||||||||
Dawn C. Willoughby | ||||||||||||
Number of Meetings | 8 | 5 | 5 | 12 | 4 | 3 | ||||||
Chair Member F Financial Expert |
Chair Member F Financial Expert |
If Kirk L. Perry and Dawn C. Willoughby are elected to the Board, the Board intends to appoint Mr. Perry to the Compensation Committee and Ms. Willoughby to the Nominating Committee.
Director Compensation
We use a combination of cash and stock-based compensation to attract, compensate, and retainnon-employee Directors who serve on the Board. The Compensation Committee engages its outside compensation consultant, Frederic W. Cook & Co., Inc.Semler Brossy Consulting Group (“Frederic Cook & Co.”Semler Brossy”), to perform an annual review of Director compensation in order to remain aware of current trends in Director compensation. At the Compensation Committee’s January 20172019 meeting, Frederic Cook & Co.Semler Brossy presented a competitive review of Director compensation (which is benchmarkedevaluated against the peer group set forth on page 47)40 of this proxy statement) and Director compensation trends. Based on this review, the Compensation Committee and the Board approved an increase in the compensation to be paid to ournon-employee Directors, as set forth below, which became effective as of May 1, 2017.2019. Employee Directors do not receive compensation for their services as Directors.
The J. M. Smucker Company 2019 Proxy Statement | 21 |
BOARD AND COMMITTEE MEETINGS
For fiscal year 2018, 2020,non-employee Directors will be eligible to receive the following compensation:
Type of Compensation | Amount | |
Annual Retainer | $100,000 per year | |
Additional Annual Retainer for Lead Independent Director | $ 20,000 per year | |
Additional Annual Retainer for Audit Committee Members | $ 5,000 per year | |
Additional Annual Retainer for Audit Committee Chair | $ 15,000 per year | |
Additional Annual Retainer for | $ 15,000 per year | |
Additional Annual Retainer for Nominating | $ | |
Annual Grant of Deferred Stock Units | $ |
The J. M. Smucker Company 2017 Proxy Statement 27
BOARD AND COMMITTEE MEETINGS
The annual grant of deferred stock units having a value of $135,000$150,000 is made in October of each year. The deferred stock units are awarded under The J. M. Smucker Company 2010 Equity and Incentive Compensation Plan (the “2010 Plan”), which was approved by our shareholders at our 2010 and 2015 annual meetings. The deferred stock units vest immediately upon grant and are entitled to dividends in an amount paid to all shareholders. These dividends are reinvested in additional deferred stock units.
During fiscal year 2018, 2020,non-employee Directors may elect to receive a portion of their annual retainer and meeting fees in the form of deferred stock units. Such amounts will beare deferred under the Nonemployee Director Deferred Compensation Plan, which was initially adopted by the Board on January 1, 2007 and amended and restated on January 1, 2014 (the “Nonemployee Director Deferred Compensation Plan”). All deferred stock units, together with dividends credited on those deferred stock units, will be paid out in the form of common shares upon termination of service as anon-employee Director (subject to a waiting period for deferred stock units granted in certain years).
For fiscal year 2017, 2019,non-employee Directors were eligible to receive the following compensation:
Type of Compensation | Amount | |
Annual Retainer | $ | |
Additional Annual Retainer for | $ | |
Additional Annual Retainer for | $ 15,000 per year | |
| $ | |
Additional Annual Retainer for Nominating Committee Chair | $ 12,500 per year | |
Annual Grant of Deferred Stock Units | $ |
The annual grant of deferred stock units having a value of $125,000$135,000 was issued out of the 2010 Plan. The deferred stock units vested immediately upon grant and are entitled to dividends in an amount paid to all shareholders. These dividends are reinvested in additional deferred stock units.
During fiscal year 2017, 2019,non-employee Directors could have elected to receive a portion of their annual retainer and meeting fees in the form of deferred stock units. Such amounts were deferred under the Nonemployee Director Deferred Compensation Plan. All deferred stock units, together with dividends credited on those deferred stock units, will be paid out in the form of common shares upon termination of service as anon-employee Director (subject to a waiting period for deferred stock units granted in certain years).
28 The J. M. Smucker Company 2017 Proxy Statement22 The J. M. Smucker Company 2019 Proxy Statement
BOARD AND COMMITTEE MEETINGS
The following table reflects compensation earned by thenon-employee Directors for fiscal year 2017:2019:
20172019 Director Compensation
Name (1)(2) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(3) | Option Awards ($)(4) | All Other ($)(5)(6) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (3) | Option Awards ($) (4) | All Other Compensation ($) (5) (6) | Total ($) | ||||||||||||||||
Vincent C. Byrd | 22,500 | — | — | — | 22,500 | |||||||||||||||||||||
Kathryn W. Dindo | 124,500 | 125,000 | — | 1,000 | 250,500 | $105,000 | $135,000 | — | $2,500 | $242,500 | ||||||||||||||||
Paul J. Dolan | 97,500 | 125,000 | — | — | 222,500 | $115,000 | $135,000 | — | — | $250,000 | ||||||||||||||||
Robert B. Heisler, Jr. (7) | 30,000 | — | — | 100,000 | 130,000 | |||||||||||||||||||||
Jay L. Henderson | 61,500 | 125,000 | — | — | 186,500 | $120,000 | $135,000 | — | — | $255,000 | ||||||||||||||||
Nancy Lopez Knight | 96,000 | 125,000 | — | — | 221,000 | |||||||||||||||||||||
Elizabeth Valk Long | 122,000 | 125,000 | — | 1,000 | 248,000 | |||||||||||||||||||||
Elizabeth Valk Long (7) | $100,000 | $135,000 | — | $2,500 | $237,500 | |||||||||||||||||||||
Gary A. Oatey | 108,500 | 125,000 | — | — | 233,500 | $100,000 | $135,000 | — | — | $235,000 | ||||||||||||||||
Kirk L. Perry | $100,000 | $135,000 | — | — | $235,000 | |||||||||||||||||||||
Sandra Pianalto | 102,000 | 125,000 | — | 1,000 | 228,000 | $105,000 | $135,000 | — | $2,500 | $242,500 | ||||||||||||||||
Nancy Lopez Russell | $100,000 | $135,000 | — | — | $235,000 | |||||||||||||||||||||
Alex Shumate | 96,000 | 125,000 | — | — | 221,000 | $112,500 | $135,000 | — | — | $247,500 | ||||||||||||||||
Timothy P. Smucker | 82,500 | 125,000 | — | — | 207,500 | $100,000 | $135,000 | — | $76,760 | $311,760 | ||||||||||||||||
David J. West | 30,000 | — | — | — | 30,000 | |||||||||||||||||||||
Dawn C. Willoughby | $100,000 | $135,000 | — | — | $235,000 |
(1) | Mark T. Smucker and Richard K. Smucker are not included in this table as they are employees of the Company and receive no compensation for their services as Directors. |
(2) | As of April 30, |
Name | Deferred Stock Units | Stock Options | ||||||
Kathryn W. Dindo | 40,835 | — | ||||||
Paul J. Dolan | ||||||||
| — | |||||||
Jay L. Henderson | ||||||||
| — | |||||||
Elizabeth Valk Long | 62,547 | — | ||||||
Gary A. Oatey | 39,134 | — | ||||||
Kirk L. Perry | 4,326 | — | ||||||
Sandra Pianalto | 6,198 | — | ||||||
Nancy Lopez Russell | 20,345 | — | ||||||
Alex Shumate | 14,624 | — | ||||||
Timothy P. Smucker | 4,526 | — | ||||||
Dawn C. Willoughby | 3,173 | — |
(3) | The amounts set forth in this column reflect the aggregate grant date fair value, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), for stock awards granted to thenon-employee Directors in the fiscal year ended April 30, |
The J. M. Smucker Company 2017 Proxy Statement 29The J. M. Smucker Company 2019 Proxy Statement 23
BOARD AND COMMITTEE MEETINGS
(4) | No stock options were awarded tonon-employee Directors in fiscal year |
(5) | The amounts set forth in this column for Kathryn W. Dindo, Elizabeth Valk Long, and Sandra Pianalto reflect charitable matching gifts under our matching gift program, which is available to all of our full-time employees, Directors, and |
(6) | Non-employee Directors occasionally receive perquisites provided by or paid by us. During fiscal year |
(7) | After many years of distinguished service, Elizabeth Valk Long will be retiring from the Board on August 14, 2019, at the |
Stock Ownership Requirements
The Board has established a minimum amounts of stockshare ownership requirement fornon-employee Directors equal in value to no less than five times the annual cash retainer paid to eachnon-employee Director. The Board policy also provides that eachnon-employee Director should attain this ownership threshold within five years of joining the Board. Allnon-employee Directors have met or exceeded the ownership requirement, with the exception of Sandra PianaltoDawn C. Willoughby (who was elected to the Board in August 20142017 and has until August 2019 to meet the ownership threshold) and Jay L. Henderson (who was elected to the Board in August 2016 and has until August 20212022 to meet the ownership threshold).
Executive Sessions and PresidingLead Independent Director
On a regular basis, the independent Directors hold meetings in executive session without the presence of management. In fiscal year 2017,2019, the Board held four regularly scheduled executive sessions and one special executive session in which only the independent Directors were present. As provided in the Guidelines (prior to their amendment effective April 17, 2019), these meetings were chaired by Elizabeth Valk Long,Alex Shumate, the Chair of the CompensationNominating Committee. In
Commencing in fiscal year 2018,2020, meetings of the independent Directors will be chaired by the Lead Independent Director, who will be the Chair of one of the Audit Committee will chair the executive sessions, and in fiscal year 2019,Committees on a rotating term of two years, commencing with the Chair of the Nominating Committee, will chairfollowed by the executive sessions. Executive sessionsChair of the Board are held in conjunction with regularly scheduled meetingsCompensation Committee, and then the Chair of the Board, except that there is no executive session held onAudit Committee. The Lead Independent Director will coordinate the dayactivities of the annual meeting, unless specifically requested by a Director.
Nominatingother independent Directors and Corporate Governance Committee
The Nominating Committee has three membersperform such other duties and met four times during fiscal year 2017. The principal functions ofresponsibilities as the Nominating Committee include:Board may determine, including the following:
developing qualifications/criteria for selecting and evaluating Director nominees and evaluating current Directors;
Preside at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent Directors; |
evaluating the performance of our Chief Executive Officer and our incumbent Directors, including our Executive Chairman;
Serve as a liaison between the Executive Chairman and the Chief Executive Officer and the independent Directors; |
considering and proposing Director nominees for election at the annual meeting;
Call executive sessions or meetings of the independent Directors; |
recommending candidates to fill Board vacancies as they may occur;
Provide input regarding meeting materials sent to the Board, including the quality, quantity, appropriateness, and timeliness of such information; |
making recommendations to the Board regarding the Committees’ memberships;
Provide input regarding meeting agendas and schedules for the Board meetings; and |
Serve as an advisor to the Committee chairs in fulfilling their designated roles and responsibilities to the Board. |
30 The J. M. Smucker Company 2017 Proxy Statement
24 | The J. M. Smucker Company 2019 Proxy Statement |
BOARD AND COMMITTEE MEETINGS
considering key management succession planning issues as presented annually by management;
Nominating, Governance, and Corporate Responsibility Committee Meetings in fiscal year 2019:3 Current Committee Members: Alex Shumate (Chair) Nancy Lopez Russell Dawn C. Willoughby | Primary Responsibilities Developing qualifications/criteria for selecting and evaluating Director nominees and evaluating current Directors Evaluating the performance of our Chief Executive Officer and our incumbent Directors, including our Executive Chairman Considering and proposing Director nominees for election at the annual meeting Recommending candidates to fill Board vacancies as they may occur Making recommendations to the Board regarding the Committees’ memberships Developing and generally monitoring the Guidelines and, at least annually, leading the Directors in a discussion of major corporate governance issues Developing an annual self-evaluation process of the Directors and implementing such process upon approval by the Directors Considering key management succession planning issues as presented annually by management Making recommendations to the Board regarding Director orientation and continuing training Developing procedures for shareholders to communicate with the Board Administering the annual evaluation of the Board Reviewing and discussing with senior management the Company’s risks associated with the Board’s organization, membership, and structure, succession planning for Directors and officers, and corporate governance Overseeing the Company’s corporate responsibility and sustainability programs, including environmental, social, and corporate citizenship matters Performing other functions or duties deemed appropriate by the Board |
developing and generally monitoring the Guidelines and, at least annually, leading the Directors in a discussion of major corporate governance issues;
reviewing and approving, as appropriate, related party transactions consistent with the guidelines set forth in the Code of Conduct and our related party transaction policy;
making recommendations to the Board regarding Director orientation and continuing training;
developing procedures for shareholders to communicate with the Board;
administering the annual evaluation of the Board;
reviewing and discussing with senior management the Company’s risks associated with the Board’s organization, membership, and structure, succession planning for Directors and officers, and corporate governance; and
performing other functions or duties deemed appropriate by the Board.
The Nominating Committee operates under a written charter, which is posted on our website at www.jmsmucker.com. A copy of the Nominating Committee charter is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Nominating Committee believes its charter is an accurate and adequate statement of the Nominating Committee’s responsibilities. The Nominating Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities.
Executive Compensation Committee
The Compensation Committee has three members and met five times during fiscal year 2017. The principal functions of the Compensation Committee include:
establishing, regularly reviewing, and implementing our compensation philosophy;
determining the total compensation packages and performance goals of our executive officers;
assuring that the total compensation paid to our executive officers is fair, equitable, and competitive, based on an internal review and as compared to external market data;
approving and administering the terms and policies of our long-term incentive compensation programs (including our restricted stock program) for executive officers;
approving and administering the terms and policies of our short-term incentive compensation programs (including the cash bonus program) for executive officers;
reviewing and approving any new benefit programs, or changes to existing benefit programs, that are unique to the executive officers;
reviewing the compensation paid to non-employee Directors and, as appropriate, making recommendations to the Board;
with the assistance of our management and any outside consultants the Compensation Committee deems appropriate, overseeing the risk assessment of our compensation arrangements and reviewing, at least annually, the relationship (if any) between our risk management policies and practices and our compensation arrangements;
overseeing shareholder communications on executive compensation matters, including shareholder votes on executive compensation, and assessing the results of shareholder advisory votes on executive compensation;
The J. M. Smucker Company 2017 Proxy Statement 31The J. M. Smucker Company 2019 Proxy Statement 25
BOARD AND COMMITTEE MEETINGS
developing stock ownership guidelines for our Directors and executive officers;
selecting an appropriate peer group of companies of similar size in similar industries, targeting an appropriate total pay positioning in relation to such peer group, and monitoring the competitiveness of executive officer pay against such peer group in relation to the Company’s relative performance;
assessing the independence of, setting the fees or other retention terms for, and engaging compensation consultants and other advisers to help evaluate non-employee Director and executive officer compensation; and
performing other functions or duties deemed appropriate by the Board.
The Compensation Committee operates under a written charter, which is posted on our website at www.jmsmucker.com. A copy of the Compensation Committee charter is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Compensation Committee believes its charter is an accurate and adequate statement of the Compensation Committee’s responsibilities. The Compensation Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities. More
Executive Compensation Committee Meetings in fiscal year 2019:4 Current Committee Members: Paul J. Dolan (Chair) Elizabeth Valk Long* Kirk L. Perry Gary A. Oatey * Ms. Long will retire from the Board on August 14, 2019 and, therefore, will no longer serve on the Compensation Committee. | Primary Responsibilities Establishing, regularly reviewing, and implementing our compensation philosophy Determining the total compensation packages of our executive officers Reviewing and approving any proposed employment, consulting, or other agreement, or any proposed severance or retention plan with our executive officers Reviewing and approving corporate performance goals and objectives relating to compensation of our executive officers, and evaluating our executive officers’ performance against these goals Approving and administering the terms and policies of our long-term incentive compensation programs (including our restricted stock program) for executive officers Reviewing and approving any new benefit programs, or changes to existing benefit programs, that are unique to the executive officers Reviewing compensation issues related to key management succession Overseeing regulatory compliance with respect to compensation matters Reviewing the compensation paid tonon-employee Directors and, as appropriate, making recommendations to the Board With the assistance of our management and any outside consultants the Compensation Committee deems appropriate, overseeing the risk assessment of our compensation arrangements and reviewing, at least annually, the relationship (if any) between our risk management policies and practices and our compensation arrangements Overseeing shareholder communications on executive compensation matters, including shareholder votes on executive compensation, and assessing the results of shareholder advisory votes on executive compensation Developing stock ownership guidelines for our Directors and executive officers and monitoring compliance with such guidelines Selecting an appropriate peer group of companies of similar size in similar industries, targeting an appropriate total pay positioning in relation to such peer group, and monitoring the competitiveness of executive officer pay against such peer group in relation to the Company’s relative performance Assessing the independence of, setting the fees or other retention terms for, and engaging compensation consultants and other advisers to help evaluatenon-employee Director and executive officer compensation Performing other functions or duties deemed appropriate by the Board Additional information about the Compensation Committee and related topics is provided in the “Compensation Discussion and Analysis” section of this proxy statement. Report The Compensation Committee Report is set forth on page 68 of this proxy statement. |
26 | The J. M. Smucker Company 2019 Proxy Statement |
BOARD AND COMMITTEE MEETINGS
Audit Committee
Meetings in fiscal year (includes telephonic orin-person meetings to review the Company’s quarterly filings with the SEC on Form
Jay L. Henderson (Chair) Kathryn W. Dindo Sandra Pianalto | Primary Responsibilities Determining annually that at least one of its members meets the definition of “audit committee financial
Reviewing with the Independent Auditors the scope and thoroughness of the Independent Auditors’ examination and considering recommendations of the Independent
Overseeing the Internal Audit function, including approving the appointment of the lead internal auditor, reviewing summaries and reports from Internal Audit, and approving the annual Internal Audit plan Reviewing and monitoring, with our senior management, our
risk management process, including reviewing
Reviewing and approving, as appropriate, related party transactions consistent with the guidelines set forth in the Code of Conduct and our related party transaction policy Reviewing and approving the independent auditors of our pension plans and reviewing the pension plans’ audit results Performing other functions or duties deemed appropriate by the
Financial Literacy and
The Audit Committee reviewed the financial literacy of each of its members, as required by the listing standards of the NYSE, and determined that each of its members meets the criteria established by the NYSE. The Audit Committee also reviewed the definition of an “audit committee financial expert” as set forth in Regulation
Report The Audit Committee
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The J. M. Smucker Company
| 27 |
The Audit Committee Members
The Audit Committee is composed of three independent Directors, each of whom satisfies the independence requirement of Rule10A-3 under the Securities Exchange Act of 1934, as amended. The Board has determined that all of our Audit Committee members, Mr. Henderson, Ms. Dindo, and Ms. Pianalto, satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an “audit committee financial expert” as that term is defined by the rules of the SEC.
Roles and Responsibilities
The Audit Committee operates under a written charter adopted by the Audit Committee and approved by the Board. The charter was most recently amended in April 2019. The Audit Committee oversees our financial reporting process on behalf of the Board and serves as the primary communication link between the Board as the representative of our shareholders, the Independent Auditors, Ernst & Young LLP, and our internal auditors. Our management is responsible for the preparation, presentation, and integrity of our financial statements and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Independent Auditors are responsible for auditing our consolidated financial statements and expressing an opinion as to their conformity with generally accepted accounting principles and on the effectiveness of the Company’s internal controls over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (the “PCAOB”).
Required Disclosures and Discussions
In fulfilling its responsibilities during the fiscal year, the Audit Committee reviewed and discussed with management and the Independent Auditors the financial statements and related financial statement disclosures included in our Quarterly Reports onForm 10-Q and the audited financial statements and related financial statement disclosures included in our Annual Report on Form10-K for the fiscal year ended April 30, 2019. The Audit Committee also reviewed with the Independent Auditors their judgments as to the Company’s internal controls over financial reporting and the quality and acceptability of our accounting policies, management judgments, and accounting estimates. The Audit Committee’s review with the Independent Auditors included a discussion of other matters required to be discussed under Auditing Standards promulgated by the PCAOB. The Independent Auditors have provided the Audit Committee with the written disclosures required by the PCAOB standards regarding communications with the Audit Committee concerning independence and has discussed those disclosures with the Independent Auditors. The Audit Committee also considered the compatibility ofnon-audit services with the Independent Auditors’ independence andpre-approved allnon-audit services to be provided by the Independent Auditors in accordance with the Audit Committee’s policies and procedures and applicable laws and regulations.
Committee Recommendation to Include Financial Statements in Annual Report
The Audit Committee discussed with our internal auditors and Independent Auditors the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and Independent Auditors, with and without management present, to discuss the results of the auditors’ examinations, their evaluations of our internal controls, including a review of the disclosure control process, and the overall quality of our financial reporting. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report onForm 10-K for the fiscal year ended April 30, 2019.
AUDIT COMMITTEE
Jay L. Henderson, Chair
Kathryn W. Dindo
Sandra Pianalto
28 | The J. M. Smucker Company 2019 Proxy Statement |
SERVICE FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table summarizes the aggregate fees, including out of pocket expenses, paid to the Independent Auditors for the fiscal years ended April 30, 2019 and April 30, 2018:
2019 Fees (in thousands) | 2018 Fees (in thousands) | Description | ||||||||||
Audit Fees | $ | 4,277 | $ | 3,676 | Audit fees primarily relate to (i) the audit of our consolidated financial statements as of and for the fiscal years ended April 30, 2019 and April 30, 2018; (ii) statutory audits of certain international subsidiaries; (iii) the audit of the effectiveness of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002; and (iv) the reviews of our unaudited condensed consolidated interim financial statements as of July 31, October 31, and January 31 for fiscal years 2019 and 2018. The increase in audit fees in fiscal year 2019 is primarily due to the work required related to acquisitions. These procedures did not occur in fiscal year 2018.
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Audit-Related Fees | $ | 175 | $ | 193 | Fees for services that are related to the performance of the audit or review of financial statements and are not included in “Audit Fees,” including financial reporting advisory services, acquisition-related due diligence, audits of certain employee benefit plans, subscription toon-line research services, and other attest services.
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Tax Fees | $ | 2,121 | $ | 1,110 | Tax fees are primarily for tax work in connection with strategic transactions and for tax compliance, preparation, and planning services. The increase in tax fees in fiscal year 2019 is primarily due to an increased amount of tax work for domestic tax advisory and acquisition related services during such fiscal year.
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All Other Fees | $ | 0 | $ | 423 | Fees for services that are not included in the above categories. The fees for fiscal year 2018 were primarily for strategic transactions.
| |||||||
TOTAL
|
$
|
6,573
|
|
$
|
5,402
|
|
AUDIT COMMITTEEPRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee charter, as well as the policies and procedures adopted by the Audit Committee, require that all audit and permittednon-audit services provided by the Independent Auditors bepre-approved by the Audit Committee. These services may include audit services, audit-related services, tax services and, in limited circumstances, other services. In determining whether topre-approve any such services, the Audit Committee considers whether such services are consistent with the SEC’s and PCAOB’s rules on auditor independence and whether the provision of such services by an independent auditor would impair the independent auditor’s independence. The Audit Committee’spre-approval identifies with particularity the type of service to be provided and the fixed amount or range of estimated fees. Such service descriptions contain sufficient detail so that management is not required to exercise discretion in interpreting the scope of thepre-approved service.
Should it be necessary to engage the Independent Auditors for additional services between scheduled Audit Committee meetings, the Chair of the Audit Committee has been delegated the authority to approve such permitted services up to $250,000 for a specific engagement. The Chair of the Audit Committee then reports suchpre-approval at the next Audit Committee meeting. The approval policies and procedures of the Audit Committee do not include delegation of the Audit Committee’s responsibility to our management.
All of the services described above werepre-approved by the Audit Committee, or the Chair of the Audit Committee, before the Independent Auditors were engaged to render the services and in accordance with the approval policies and procedures adopted by the Audit Committee.
The J. M. Smucker Company 2019 Proxy Statement | 29 |
INDEPENDENT AUDITOR REVIEW AND APPOINTMENT PROCESS
The Audit Committee has the primary responsibility for the appointment, compensation, and oversight of the Independent Auditors and the approval and ratification of the lead audit partner selected by the Independent Auditors. The Audit Committee evaluates the performance of the Independent Auditors, including the senior audit engagement team members, each year and determines whether tore-engage the current Independent Auditors or consider other audit firms. The Audit Committee has implemented a formal written evaluation process to evaluate the performance of the current Independent Auditors. The evaluation includes, among other things:
A review of the
|
The experience, knowledge, capabilities, technical expertise, and skills of the |
The communications, interaction, and accessibility of the engagement partner and audit team with the Audit Committee and the Chair of the Audit Committee; |
The independence, objectivity, integrity, and professional skepticism of the firm, engagement partner, and audit team; |
The development and management of the audit budget and audit fees paid; and |
Other questions related to the independence of the Independent Auditors and the ability of the Independent Auditors to remain independent. |
Based on these evaluations, the Audit Committee decided that it was in the best interest of the Company and its shareholders to engage Ernst & Young LLP as our Independent Auditors for fiscal year 2020. Although the Audit Committee has the sole authority to appoint the Independent Auditors, the Audit Committee has continued its long-standing practice of recommending that the Board ask our shareholders to ratify the appointment of the Independent Auditors at our annual meeting of shareholders.
BENEFITS OF A LONG-TENURED AUDITOR
The Audit Committee considered the tenure of the Independent Auditor and determined that a number of benefits of a long-tenured auditor exist, including:
Through more than 60 years of experience with the Company, the Independent Auditors |
Efficiencies have been gained in the audit process, resulting in an efficient fee structure that is competitive with our |
Appointing a new auditor would require a significant amount of
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COMMUNICATIONS WITH THE AUDIT COMMITTEE
The Code of Conduct has established procedures for receiving confidential, anonymous complaints by employees and from third parties regarding accounting, internal accounting controls, or auditing matters. The Senior Vice President, General Counsel and Secretary and Director, Internal Audit advise the Audit Committee regarding any reports or investigations related to accounting, internal accounting controls, or auditing matters. The Chair of the Audit Committee receives an automatic notification if a significant financial issue is reported. The Code of Conduct is posted on our website atwww.jmsmucker.com and is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 2 on the proxy card)
The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the independent external audit firm retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent external auditor for the fiscal year ending April 30, 2020. Ernst & Young LLP has served as our independent external auditor continuously since fiscal year 1955. The Audit Committee is responsible for the audit fee negotiations associated with the retention of Ernst & Young LLP. In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent external audit firm. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as our independent external auditor is in the best interests of our shareholders. The Audit Committee has requested that our shareholders ratify this decision.
A representative of Ernst & Young LLP will be present at the annual meeting with an opportunity to make a statement, if so desired, and to respond to appropriate questions with respect to that firm’s examination of our financial statements for the fiscal year ended April 30, 2019.
Although shareholder ratification is not required under the laws of the State of Ohio, we are submitting the appointment of Ernst & Young LLP to our shareholders for ratification at the annual meeting as a matter of good corporate practice and in order to provide a means by which shareholders may communicate their opinion to the Audit Committee. If our shareholders fail to vote on an advisory basis in favor of the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP and may retain that firm or another firm withoutre-submitting the matter to our shareholders. Even if our shareholders ratify the appointment, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and the interests of our shareholders.
The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to ratify the appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm. Abstentions, brokernon-votes,
SERVICE FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table summarizes the aggregate fees, including out of pocket expenses, paid to the Independent Auditors for the fiscal years ended April 30, 2017 and April 30, 2016:
Type of Fees (In thousands) | 2017 | 2016 | ||||||
Audit Fees(1) | $ | 3,924 | $ | 4,638 | ||||
Audit-Related Fees(2) | $ | 155 | $ | 155 | ||||
Tax Fees(3) | $ | 3,223 | $ | 2,972 | ||||
All Other Fees | — | $ | 44 | |||||
Total Fees | $ | 7,302 | $ | 7,809 |
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee charter, as well as the policies and procedures adopted by the Audit Committee, require that all audit and permitted non-audit services provided by the Independent Auditors be pre-approved by the Audit Committee. These services may include audit services, audit-related services, tax services and, in limited circumstances, other services. The Audit Committee’s pre-approval identifies the particular type of service and is subject to a specific engagement authorization.
Should it be necessary to engage the Independent Auditors for additional, permitted services between scheduled Audit Committee meetings, the Audit Committee Chair has been delegated the authority to approve up to $250,000 for additional services for a specific engagement. The Audit Committee Chair then reports such pre-approval at the next meeting of the Audit Committee. The approval policies and procedures of the Audit Committee do not include delegation of the Audit Committee’s responsibility to our management.
All of the services described above were approved by the Audit Committee, or the Audit Committee Chair, before the Independent Auditors were engaged to render the services or otherwise in accordance with the approval process adopted by the Audit Committee.
COMMUNICATIONS WITH THE AUDIT COMMITTEE
The Code of Conduct has established procedures for receiving confidential, anonymous complaints by employees and from third parties regarding accounting, internal accounting controls, or auditing matters. The Code of Conduct is posted on our website at www.jmsmucker.com and is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.
The J. M. Smucker Company 2017 Proxy Statement 35
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 2 on the proxy card)
The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the independent external audit firm retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent external auditor for the fiscal year ending April 30, 2018. Ernst & Young LLP has served as our independent external auditor continuously since fiscal year 1955. The Audit Committee is responsible for the audit fee negotiations associated with the retention of Ernst & Young LLP. In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent external audit firm. Further, in conjunction with the mandated rotation of the auditing firm’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of Ernst & Young LLP’s new lead engagement partner. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as our independent external auditor is in the best interests of our shareholders. The Audit Committee has requested that our shareholders ratify this decision.
A representative of Ernst & Young LLP will be present at the annual meeting with an opportunity to make a statement, if so desired, and to respond to appropriate questions with respect to that firm’s examination of our financial statements for the fiscal year ended April 30, 2017.
Although shareholder ratification is not required under the laws of the State of Ohio, we are submitting the appointment of Ernst & Young LLP to our shareholders for ratification at the annual meeting as a matter of good corporate practice and in order to provide a means by which shareholders may communicate their opinion to the Audit Committee. If our shareholders fail to vote on an advisory basis in favor of the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP and may retain that firm or another firm without re-submitting the matter to our shareholders. Even if our shareholders ratify the appointment, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and the interests of our shareholders.
The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to ratify the appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm. Abstentions, broker non-votes, and shares not in attendance and not voted at the annual meeting will have no effect on the vote for this proposal. Unless otherwise directed, common shares represented by proxy will be voted “FOR” the approval of this proposal.
The Board unanimously recommends a vote FOR ratification of the appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION(“SAY-ON-PAY”) (Proposal 3 on the proxy card) The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010 (the “Dodd-Frank Act”), requires that we provide our shareholders with the opportunity to vote to approve, on anon-binding, advisory basis, the compensation of our Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers (collectively, the “Named Executive Officers”) as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC under Section 14A of the Securities Exchange Act of 1934, as amended. In 2017, our shareholders voted to conduct this advisory vote on an annual basis until at least 2023. As described in detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of the Named Executive Officers with the interests of our shareholders. Our compensation programs are designed to reward the Named Executive Officers for the achievement of short-term and long-term strategic and operational goals and the creation of long-term shareholder value, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of the Named Executive Officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on us, the Board, or the Compensation Committee. To the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate what actions, if any, may be necessary to address the concerns of shareholders. At our 2018 annual meeting, our executive compensation program received approval from approximately 95% of the votes cast on such proposal. We believe that this result demonstrates our shareholders’ endorsement of the Compensation Committee’s executive compensation decisions and policies. Nonetheless, we have continued to make improvements to our short-term and long-term incentive awards programs, as set forth in more detail below in the “Compensation Discussion and Analysis” section of this proxy statement. The affirmative vote of the holders of a majority of the votes cast on this proposal, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, our executive compensation. Abstentions, brokernon-votes, and shares not in attendance and not voted at the annual meeting will have no effect on the vote for this proposal. Unless otherwise directed, common shares represented by proxy will be voted “FOR” the approval of this proposal. Under our Amended Articles of Incorporation (the “Articles”), shareholders are entitled to cast ten votes per share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on this proposal is anon-binding, advisory vote, we have determined that suchten-votes-per-share provisions will not apply to this proposal. Accordingly, we ask our shareholders to vote on the following resolution at our annual meeting: “RESOLVED, that our shareholders approve, on an advisory basis, the compensation of our Named Executive Officers, as disclosed in our proxy statement for the 2019 Annual Meeting of Shareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table, and the other related tables and disclosures.”
Compensation Discussion and Analysis The Compensation Committee regularly reviews our compensation philosophy and objectives. The Compensation Committee is also responsible for reviewing and approving compensation for our executive officers on an annual basis. A description of the Compensation Committee’s responsibilities is set forth in detail in its charter, which is posted on our website atwww.jmsmucker.com. Set forth below is a detailed discussion of our compensation program for our executive officers organized as follows:
We manage our business with the long-term objective of providing value to all of our constituents — namely, consumers, customers, employees, suppliers, communities in which we have a presence, and shareholders. Our compensation philosophy is that compensation for all employees, including our executive officers, should be:
We have designed our compensation programs to reflect each of these characteristics. The performance-based incentives (comprised of corporate performance, and in some cases, individual performance and strategic business area performance) seek to reward both short-term and long-term results and to align the interests of our executive officers and other participants with the interests of our shareholders. Our executive officers receive a compensation package that primarily consists of an annual base salary, short-term incentive awards, and long-term incentive awards.
The Compensation Committee sets performance targets for participants, including executive officers, in June of each year for the fiscal year commencing the prior May 1st. We believe that the performance targets established by the Compensation Committee, based on adjusted operating income, adjusted earnings per share, free cash flow, and, in some cases, strategic business area performance, require participants, including executive officers, to perform at a high level. During the five-year period from fiscal year 2015 through fiscal year 2019, our annual compounded growth rate in adjusted earnings per share (excluding the impacts described on the following page) was approximately 6%, with a total shareholder return of approximately 8%. In addition, we increased our dividend rate payable to shareholders every year during this period.
EXECUTIVE COMPENSATION In addition, beginning with awards made in June 2019 for fiscal year 2020, the Compensation Committee has approved significant changes to our long-term incentive compensation program in order to strengthen the alignment of our management incentives with our long-term business objectives, to better align the interests of management with the interests of our shareholders, and to increase the market competitiveness of our long-term plan design, as set forth below under the heading “Changes to Long-Term Incentive Compensation Program.” Fiscal Year 2019 Financial Performance The chart below summarizes our key financial results for fiscal year 2019 compared to fiscal year 2018.
Generally, adjusted operating income, adjusted earnings per share, and free cash flow are calculated as defined for incentive compensation purposes, but, as permitted by the plan, may be modified to exclude other items as determined by the Compensation Committee to adjust for any undue benefit or unintended detriment as a result of significant unplannedone-time items. Fiscal year 2019 financial results have not been modified; however, in fiscal year 2018, adjusted earnings per share was modified to partially exclude the unplanned earnings benefit resulting from the lower effective tax rate associated with U.S. tax reform legislation. For fiscal year 2018, the Compensation Committee used the adjusted earnings per share (as modified) amount to evaluate our performance in relation to our adjusted earnings per share goal for the fiscal year. For a reconciliation of adjusted operating income, adjusted earnings per share (as modified), and free cash flow for fiscal years 2019 and 2018, seeAppendix A. For a description of how we calculate adjusted operating income, adjusted earnings per share, and free cash flow, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K, which can be found on our website atwww.jmsmucker.com/investor-relations.
EXECUTIVE COMPENSATION
Our fiscal year 2019 performance was one of the key factors in the compensation decisions for the fiscal year, as more specifically discussed below. Elements of Executive Officers’ Compensation for Fiscal Year 2019
Annual Base Salary Salary ranges are determined in the same manner for each of our salaried employees, including each executive officer. The base salaries paid to each executive officer are
Short-Term Incentive Awards for Fiscal Year 2019 (Cash-Based) Our short-term, performance-based incentive compensation program is cash-based and is designed to reward key employees, including executive officers, for their contributions to the Company based on clear, measurable criteria. The Compensation Committee evaluates the following criteria and information when approving the short-term incentive awards for executive officers:
The Compensation Committee reviews attainment of relevant profit goals for these areas each year. Short-term incentive awards can range from 0% of the target award amount if we fail to achieve at least 80% of our adjusted Short-Term Award Snapshot (Cash-Based)
EXECUTIVE COMPENSATION
Long-Term Incentive Awards for Fiscal Year 2019 (Stock-Based) Our long-term, performance-based compensation is stock-based and is designed to align the interests of management with the interests of our shareholders. Actual long-term incentive awards are based 75% on our annual performance Long-Term Award Snapshot (Stock-Based)
Target Pay Mix Summary
EXECUTIVE COMPENSATION
Significant Compensation Practices and Recent Modifications Our compensation programs, practices, and policies are reviewed and reevaluated on an ongoing basis. We modify our compensation programs and practices to address evolving best practices and changing regulatory requirements. Listed below are some of our more significant practices and recent modifications.
EXECUTIVE COMPENSATION
2018
At our
Our executive officers receive a compensation package which consists of the following components:
EXECUTIVE COMPENSATION
Pursuant to the Compensation Committee charter, the Compensation Committee has the sole authority to (i) engage compensation consultants to assist in the evaluation ofnon-employee Director and executive officer compensation, (ii) set the fees and other retention terms of such compensation consultants, and (iii) assess the independence of such compensation consultants. Such consultants report directly to the Compensation Committee and do not perform any services directly on behalf of our management team. Before selecting a compensation consultant, the Compensation Committee takes into account all factors relevant to assessing such compensation consultant’s independence,
The Compensation Committee has retained In accordance with its corporate governance model, the Compensation Committee makes all decisions concerning compensation and benefits for our executive officers, and the Compensation Committee relies on
EXECUTIVE COMPENSATION During fiscal year
The Compensation Committee authorized
We believe that the compensation paid to our executive officers must be fair, Compensation In an effort to provide competitive, fair, and equitable compensation, target compensation opportunities for our executive officers are The two survey databases used included the Willis Towers Watson
EXECUTIVE COMPENSATION The peer group was selected by the Compensation Committee, with the assistance of
The Compensation Committee targets all compensation relative to a range around the 50th percentile of the competitive market data for the applicable fiscal year discussed above (the “Target Range”). We used the Target Range, plus or minus 20% of the midpoint, for assessing the pay for each salaried employee, including the Named Executive Officers, for fiscal year In addition, the Compensation Study indicated that the current long-term incentive targets were below the market median for many of the executive officers. The
Compensation Committee’s intent is to increase the long-term incentive targets and other compensation components that fall below the 50th percentile of the competitive market over time to ensure that we are providing a competitive, attractive, and retentive compensation opportunity to each of the Named Executive Officers. When approving compensation for executive officers, the Compensation Committee also considers:
Base Salary and Compensation Determination Salary ranges are determined in the same manner for each of our salaried employees, including each executive officer. The base salaries paid to each executive officer are designed to fall within an established range based on market practice. Actual base salary reflects the experience of the executive officer and the scope of his or her responsibility.
It is the normal practice that each April, the Compensation Committee requests that management submit compensation recommendations for executive officers, other than for the Executive Chairman and the Chief Executive Officer, using all of the considerations outlined above. In addition, the recommendations have been focused on increasing the market competitiveness of long-term incentive awards. These recommendations generally result in salary increases for the executive officers that are aligned with our salary increase budget for other salaried employees. The Compensation Committee reviews all of the above considerations with no single factor necessarily weighted more heavily than another. In setting and approving compensation for the Executive Chairman and the Chief Executive Officer, the Compensation Committee holds the Executive Chairman and the Chief Executive Officer responsible for ensuring that each of the objectives set forth above are achieved and each is assessed in their respective roles in regard to:
At the Compensation Committee’s June
Our short-term, performance-based incentive compensation program is cash-based and is designed to reward key employees, including executive officers, for their contributions to the Company based on clear, measurable criteria. After the end of each fiscal year, the Compensation Committee reviews management’s recommendations for Cash Incentive Awards for executive officers (other than for the Executive Chairman and the Chief Executive Officer for whom management makes no recommendation). The Compensation Committee evaluates the following criteria and information in approving Cash Incentive Awards for executive officers:
Participants in the short-term incentive compensation program receive a percentage of their target award based on our performance as shown in the following table. No awards are made unless we first achieve at least 80% of our adjusted
In the event performance is between the ranges set forth in the table above, the Compensation Committee determines the percentage of the award that is earned by mathematical interpolation: (i) for each increase of 1% above the threshold performance level but at or below 90% of the target performance level, the percentage of the target award earned increases by 2.5%; (ii) for each increase of 1% above 90% of the target performance level but below the target performance level, the percentage of the target award earned increases by 5%; and (iii) for each increase of 1% above
EXECUTIVE COMPENSATION the target performance level and up to the maximum performance level, the percentage of target award earned increases by 10%. For the Named Executive Officers, the target award is tied solely to the corporate performance target or a combination of the strategic business area and the corporate performance targets. If a Named Executive Officer manages or has significant influence over a strategic business area, 50% of the target award is generally tied to the performance of the strategic business area. In other words, individual performance is not a factor in determining Cash Incentive Awards for the Named Executive Officers. The Compensation Committee, however, does have discretion to reduce a Named Executive Officer’s award but did not reduce any Named Executive A chart illustrating this allocation is as follows:
For fiscal year Short-Term Incentive Compensation Program Weighting of Target Award for Named Executive Officers for Fiscal Year 2019
Set forth below is an example of the calculation of a Cash Incentive Award for a corporate participant: Example: An executive officer with corporate responsibilities, an annual base salary of $200,000, and a Cash Incentive Award target award of 50% of base salary would receive the following Cash Incentive Award based on achievement of target performance for all categories as shown below:
EXECUTIVE COMPENSATION Specifically, with respect to fiscal year 2019, the Compensation Committee approved the target corporate-adjusted operating income goal of $1,511 million. In order to receive 100% of the target opportunity under the corporate component of the short-term incentive compensation program, we had to achieve adjusted operating income of $1,511 million, representing approximately 5% growth over the prior year. For fiscal year 2019, we achieved adjusted operating income of $1,492, representing 99% of the target amount. As a result of exceeding the adjusted operating income threshold but not the target, the corporate performance portion of the awards was paid at 95% of the target award for all participants. The short-term incentive compensation program corporate performance goals for fiscal year 2019 were as shown in the following table: Short-Term Incentive Compensation Program Corporate Performance Goals for Fiscal Year 2019
We believe that the performance targets established by the Compensation Committee for fiscal year 2019 required participants, including executive officers, to perform at a high level in order to achieve the target performance levels. During the five-year period from fiscal year 2015 through fiscal year 2019, we achieved performance in excess of the target level two times (and did not achieve the maximum performance level) and failed to achieve the target performance level three times. During the same time period, our annual compounded growth rate in adjusted earnings per share was approximately 6%, with a total shareholder return of approximately 8%. Generally, the Compensation Committee sets the minimum, target, and maximum levels such that the relative difficulty of achieving the target level is consistent from year to year. What Our Long-Term Incentive Compensation Program (Performance-Based Restricted Stock) Is Designed to Reward and How It Works Our long-term, performance-based compensation is stock-based and designed to align the interests of management with the interests of our shareholders. Restricted Stock Awards are currently issued under the 2010 Plan. We grant restricted stock units (in lieu of restricted shares) to certain participants who reside outside of the United States in order to comply with local laws and to
EXECUTIVE COMPENSATION provide favorable tax treatment to foreign recipients. For fiscal year 2019, none of the Named Executive Officers received restricted stock units. Discussion in this “Compensation Discussion and Analysis” relating to restricted shares also applies to the limited awards of restricted stock units granted to participants residing outside of the United States. For fiscal year 2019, the
The essential features of the Restricted Stock Awards are as follows:
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