UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMERICAN EAGLE OUTFITTERS, INC.
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April 24, 2019
Dear Fellow Stockholders,
Fiscal 2018 was an exceptional year for American Eagle Outfitters, Inc. (“AEO”). We delivered industry-leading results in all brands, markets and channels.AEO INC. PROXY REPORT 2021 Our financial performance allowed us to reward our stockholders and make key investments in our business, while also giving back to the customers and communities that contributed to our success. I am proud not only of what we achieved, but also how we accomplished it. We grew responsibly, executing on our strategic growth pillars and reinforcing a compelling corporate purpose that we believe will continue to drive future growth in Fiscal 2019 and beyond.
We reached a number of significant milestones this past year. Both the American Eagle (“AE”) and Aerie brands achieved record sales, while AEO posted record revenues of $4 billion. A comparable sales(1) increase of 8% marked four straight years and 16 consecutive quarters of positive growth, demonstrating remarkable consistency. All quarters of the year saw broad-based strength across brands and channels, with both stores ande-commerce posting solid results. AE and Aerie gained meaningful market share and improved profitability, with operating income growing by 11% year-over-year even as we made significant investments in our business to support future growth and the customer experience.
Our performance allowed us to end the year in an excellent financial position, with $425 million in cash and short-term investments and no debt. This was after investing $189 million in capital expenditures to fuel our growth and returning $242 million to stockholders in share repurchases and dividends, which included a 10% increase in March 2018.
I am proud of our team’s unwavering focus on our strategic growth pillars this past year, including:
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At AEO, our purpose is to show the world that there isthere’s REAL power in the optimism of youth. Our brands have always stood
AMERICAN EAGLE We’re an American jeans and apparel brand that’s true in everything we do. Rooted in authenticity, powered by positivity, and inspired by our community — we welcome all and believe that putting on a really great pair of #AEjeans gives you the freedom to be true to you. Because when you’re at your best, you put good vibes out there, and get good things back in return. AE. True to you. aerie The Aerie mission is to empower all women to love their real selves. We make products that feel REAL good. We celebrate body positivity — all bodies should be happy and free of retouching. We stand for inclusivity authenticity, optimism and accountability—valuesreal representation. Every woman should see herself in Aerie. We are a community that permeate throughout our organization. Our REAL purpose guides all thatcelebrates one another. Because we do and is key to our strong company culture and continued success.show up stronger, together. Let the real you shine.TM
In Fiscal 2018, we reinforced our commitment to building a better world by reducing our environmental impact and increasing sustainability throughout our supply chain. Over the next five years, we have set goals to (1) reduce water output and manage the environmental impact of water use; (2) improve raw materials and focus on more sustainable sources; (3) lower our carbon footprint; and (4) reduce apparel waste and use higher recycled content in our shopping bags.
April 21, 2021
Dear Fellow Stockholders, The Last March, in | ||||||
Protecting Our People: Recognizing that we were facing unprecedented challenges to the health and safety of our associates, customers and communities, we took immediate steps to ensure that we had the very best health and safety measures in place across our stores and facilities. We secured masks, gloves, sanitizers, state-of-the art cleaning and air filtration systems and thermometers for our corporate offices, distribution centers and stores. We hired a medical consultant and placed nurses in our offices and distribution centers. We offered mental health programs and support to all of our teams. We also redesigned the store experience, removing fixtures, installing safety glass at the cash wrap, creating touchless experiences and self-checkout, and simplifying returns, as well as offering curbside pickup, to create the best and safest customer experience. We spared no expense to ensure that our people—our most valuable asset—were both physically and mentally secure.
Preserving Financial Strength: In light of the macroeconomic changes brought by 2020, we reviewed all of our processes and expenses with an eye to improving our bottom line while navigating store closures, myriad capacity restrictions, and increasing supply chain complexity and rising costs caused by growing digital demands. We narrowed and focused our investments in inventory, wisely managed our promotional cadence, and invested in our supply-chain capabilities. We ended the year in excellent financial health, well positioned for the future.
Preparing for a New Future: Our third major priority in 2020 was to prepare for a new future of retail. We saw that 2020 would accelerate trends that were already a focus for AEO, such as a growing demand for digital commerce, improved store technology and supply-chain innovations. We also recognized the importance of our corporate purpose and on having a positive impact on all of our stakeholders as well as our society. We executed all of our initiatives in 2020 with an eye to the future, and I believe that our willingness to embrace change and remain agile drove our success throughout the year.
A few of our specific milestones from 2020 include the following:
Aerie reached its first billion dollars in revenue, fueled by 24% growth in 2020. The fourth quarter marked 25 consecutive quarters of double-digit growth for the Aerie brand. With its unique and wildly popular brand position of positivity and acceptance, Aerie has emerged as one of the most exciting brands in retail today, with meaningful runway for future growth. Entering new markets, building on core intimates and growing the customer base remained our focuses. We introduced an active wear sub-brand, OFFL/NE by Aerie, which expanded our presence in an exciting new growth category. We believe we can double Aerie to $2 billion by 2023, and that is just the beginning of a several-billion-dollar future opportunity.
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Our corporate giving supports causes that makeonline business grew 36% to $1.7 billion in profitable revenue. Our brands have a real difference in the livesmeaningful digital presence, which has been expanding at a double-digit pace for several years. In 2020, when stores closed, online demand quickly accelerated and represented 45% of our customerstotal revenue for the year. Our teams and platform seamlessly managed significantly higher traffic and transactions. The investments we made over the past several years in technology and our associates.omni platform delivered results.
• | Margins and profitability sequentially improved throughout 2020 and the fourth-quarter adjusted operating profit (1) rose 38% from 2019 to $106 million. This is a remarkable achievement in the face of pandemic-related traffic pressures in stores – and it demonstrated the strength of our brands and product — and exceptional execution by our teams. We saw rising profitability across brands, which is a testament to our return on investment (“ROI”) mindset and strategic execution. We expect to achieve 10% operating margins by 2023. As demonstrated in the most recent quarter, we are on a solid path toward this goal. |
Cash flow was strong, and we ended Fiscal 2020 with $850 million in cash and approximately $1.2 billion in total liquidity. In Fiscal 2018,March, we empowered our AE customers to make their voices heard through our continued partnership with Rockreinstated the Votequarterly cash dividend and helped to promote love and inclusion with the It Gets Better Project. We strengthened our commitment to body positivity and wellness through Aerie’s work with the National Eating Disorders Association and Bright Pink. Throughout the year, our associates donated thousands of hours volunteering their time in our local neighborhoods. And when tragedy struck in our own backyard in Pittsburgh at the Tree of Life Congregation, we turned our pain and sorrow into meaningful action by partnering with the Anti-Defamation League’s No Place for Hate, which educates and empowers youth across the country to prevent acts of hatred and create an inclusive environment for all students.
The talent, passion and innovationunsuspended share repurchases. I am very proud of our associates continueslong history of returning cash to inspire me.stockholders.
We generated strong Total Stockholder Returns (“TSR”). As of this writing, our TSR has meaningfully outpaced the peer group median for the past one-, three- and five-year periods.
We made significant progress on our environmental, social, and governance initiatives in 2020:
o | In support of our comprehensive sustainability goals, which includes a plan to be carbon-neutral in our operations by 2023, we are using more sustainable raw materials and reducing water and energy usage. Our factories are saving more than one billion gallons of water each year. We also recently launched our environmentally positive Real Good product lines in American Eagle and Aerie to a very favorable customer response. |
o | In 2020, we appointed a Chief Inclusion and Diversity Officer to formalize our focus on equity and diversity through hiring, career development and a strong and inclusive corporate culture. In keeping with this work, last year we introduced the Real Change Scholarship for Social Justice, a $5 million commitment to advance educational opportunities for associates who are actively driving anti-racism and social justice initiatives. We look forward to awarding our first round of scholarships this spring. |
o | Through AEO and the AEO Foundation, we support numerous causes that further enable our corporate purpose, giving back to our local communities. In 2020, we donated more than one million face masks to first responders and health-care providers. We also contributed more than $1 million for COVID-19 relief efforts. Together with our customers, we donated more than $5.4 million in support of causes that empower teens and young adults and combat hatred and violence. |
o | I was thrilled to welcome Steven Davis to our board of directors last year, expanding the board to nine and building on our knowledge, expertise and diversity. Our board is highly engaged, providing regular counsel on strategic initiatives and priorities. |
Our success this past year would not have been possible if not for the power of our people, the power of our brands, and the power of our operations. Building on these capabilities, we have developed a long-term value-creation plan aimed at fueling our brands for significant growth and profitability. I want to express my gratitude tothank all of our AEO teams—amazing associates, customers and stakeholders for their optimism, innovation and support in our stores, distribution centers, corporate campuses and international offices. Our people are2020; together we will accomplish great things no matter what keep this great company at the forefront of retail. We are REAL, and our dedication to our purpose and our values will allow us to continue to deliver stockholder value in Fiscal 2019 and beyond.adversity confronts us.
Thank you for your support.
Jay L. Schottenstein
Executive Chairman of the Board and Chief Executive Officer
(1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures. |
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Notice of Annual Meeting of Stockholders of American Eagle Outfitters, Inc.
Meeting Time and Date: 11:00 a.m., Eastern Daylight Savings Time on Thursday, June Virtual Meeting Location: Due to continued concerns relating to the coronavirus pandemic (COVID-19), and to support the health and well-being of our stockholders, American Eagle Outfitters, Inc. will have a virtual-only meeting of stockholders in 2021 (the “2021 Annual Meeting”), conducted exclusively via live audiocast. There will not be a physical location for the 2021 Annual Meeting, and you will not be able to attend the meeting in person. See below for important information.
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To Our Stockholders: | Vote Your Shares Right Away | |||||||||
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On April
To participate in the 2021 Annual Meeting, you must first register at http://viewproxy.com/ae/2021/htype.asp. You will receive a meeting invitation by e-mail with your unique join link, along with a password, prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting. Whether
By order of the Board of Directors,
Jennifer B. Stoecklein Corporate Secretary April |
HOW TO VOTE
Your vote is important. You are eligible to vote if you were a stockholder of record at the close of business on April
Please read the Proxy Statement and vote right away using any of the following methods.
STOCKHOLDERS OF RECORD | |||||||||
Vote by Internet |
www.AALvote.com/AEO
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Vote by Telephone |
1 (866)804-9616
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Vote by Mail |
Mail your signed proxy card | |||||||||
BENEFICIAL STOCKHOLDERS
If you are a beneficial owner, you will receive instructions from your bank, broker or other nominee that you must follow in order for your shares to be voted. Many of these institutions offer telephone and online voting.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING The Notice of Annual Meeting, the accompanying Proxy Statement, and our Annual Report are all available, free of charge, at |
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PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES | ||||
PROPOSAL THREE: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS | ||||
COMPENSATION COMMITTEE REPORT |
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This summary highlights information contained in this Proxy Statement. It does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting. Please see “Information about this Proxy Statement and the Annual Meeting” beginning on page 86 for important information about proxy materials, voting, the virtual annual meeting, Company documents, and communications.
This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of American Eagle Outfitters, Inc., a Delaware corporation, for use at the Annual Meeting of Stockholders to be held on June 6, 2019,3, 2021, at 11:00 a.m., localEastern Daylight Savings time, at Langham Place, New York, located at 400 Fifth Avenue, New York, New York and at any adjournment or postponement thereof. It is first being mailed or released to the stockholders on April 24, 2019.21, 2021. (“We,” “our,” “AEO,” “us”“us,” and the “Company” refer to American Eagle Outfitters, Inc.) References throughout this Proxy Statement to “Fiscal 2018”2020” refer to our fiscal year ended February 2, 2019.January 30, 2021.
We will hold a virtual Annual Meeting of Stockholders. In order to attend the meeting, you must register at http://viewproxy. com/ae/2021/htype.asp by 11:59 PM ET on May 31, 2021. On the day of the 2021 Annual Meeting, if you have properly registered, you may enter the meeting by clicking on the link provided and the password you received via e-mail in your registration confirmations. There will not be a physical meeting location, and you will not be able to attend the meeting in person. Please see page 87 for important information.
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Voting Matters | ||||||||||
Your vote is very important to us and our business. Please cast your vote immediately on all of the proposals to ensure that | ||||||||||
Board Recommendation | For Information | Votes Required for Approval | Impact of Abstentions | Impact of
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PROPOSAL 1 — Election of Class | FOR | See page 19 | Majority of the votes cast | |||||||
The three Class | ||||||||||
PROPOSAL 2 — | FOR | See page 45 | Majority of of common stock present at the meeting, in person or by proxy, and entitled to vote | Not applicable, as brokers have discretion to vote on Proposal 2 | ||||||
The Board’s Audit Committee has approved the | ||||||||||
PROPOSAL 3 Executive Officer Compensation for Fiscal 2020 | FOR | Majority of the shares of common stock present at the meeting, in person or by proxy, and entitled to vote | None | None | ||||||
The Company’s executive compensation programs are designed to create a direct link between |
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PROXY STATEMENT SUMMARY |
Forward-Looking Statements and Website Information
This Proxy Statement contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), including, without limitation, in our CEO’s letter to our stockholders and our Compensation Discussion and Analysis, which represent our expectations or beliefs concerning future events, including with respect to merchandise innovation and product focused marketing, customer engagement, brand growth, new technologies, and improved customer experience.our forward look. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. These forward-looking statements rely on assumptions and involve risks and uncertainties, many of which are beyond our control, including, but not limited to, factors detailed herein and under Part I, “Item 1A. Risk Factors” and in other sections of our most recent Annual Report on Form10-K and in our other filings with the Securities and Exchange Commission (“SEC”).
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on our forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and, except as required by law, we undertake no duty to update or revise any forward-looking statement.
This document includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this Proxy Statement.
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Business Highlights from Fiscal 20182020: Overview
Our business in Fiscal 20182020 was significantly impacted by the disruptions caused by the COVID-19 pandemic, including the mandated closure of our stores in March 2020, and continued capacity restrictions and pressure on mall traffic throughout Fiscal 2020. In response to the macroeconomic challenges, we defined a clear set of Fiscal 2020 priorities that we termed our “Pandemic Pillars,” which included the following: (1) Protect Our People; (2) Preserve Cash; and (3) Prepare for a New Future of Retail.
We executed on our strategies and delivered results. AEO’s online business accelerated throughout the year, rising 36% to $1.7 billion, and represented 45% of our total revenue, with revenue up across brands, fueled by strong customer demand. We are extremely proud of the growth at Aerie, which reached a record $1 billion milestone and continued to generate double-digit growth, with revenue up 24% year-over-year – a truly extraordinary accomplishment in light of the pandemic. We successfully operated our stores with leading health and safety measures, and our business strengthened each quarter throughout Fiscal 2020. In the fourth quarter, we achieved a meaningful recovery, posting $106 million in adjusted operating income,(1) a 38% increase from Fiscal 2019, with margins increasing across brands. We ended the year as we reached $4in strong financial condition with $850 million in cash and approximately $1.2 billion in annual revenue with increased operating profit. American Eagle and Aerie continued to deliver consistent performance by combining great merchandise with an improved customer experience across channels. Net income was $1.47 per diluted share this year, compared to $1.13 per diluted share last year. On an adjusted basis, net income per diluted share this year increased 28% to $1.48, compared to adjusted net income per diluted share of $1.16 last year(1).total liquidity.
Other highlights include:Key Operating Highlights:
Strong Sales Performance.TSR That Significantly Outperformed Peers. InBased on our competitive strengths and exciting growth opportunities for our brands, Aerie and American Eagle, we were pleased to see AEO’s TSR exceed those of our retail peers. Our Fiscal 2018, AEO posted record revenues2020 TSR was approximately 59%, significantly above our peer group median of $4 billion, rising 6% over15%. Our three-year TSR of 36% and five-year TSR of 70% were each significantly above the previous year despite the adverse impact of approximately $40 million in lost revenue due to operating one less week in Fiscal 2018 than Fiscal 2017 as a result of the retail calendar. Both the AEpeer group medians, which were negative 8% and Aerie brands achieved record sales. Fiscal 2018 represented our fourth consecutive year of comparable sales growth, and sixteenth consecutive quarter of positive comparable sales growth, demonstrating remarkable consistency. Consolidated comparable sales rose 8% for the year, with broad-based strength across brands and channels. The AE brand delivered comparable sales growth of 5% and Aerie posted a comparable sales gain of 29%.0%, respectively.
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Significant Growth in Operating Income. Operating income increased to $337 million from $303 million in the prior year, representing an increase of 11%, primarily driven by an 8% increase in gross profit year over year.
Bottom Line Flow-Through. Net income increased to $262 million, or by over 28%, for Fiscal 2018 compared to Fiscal 2017.
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(1) | See Appendix A of this Proxy Statement for additional detail on |
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PROXY STATEMENT SUMMARY |
Delivery of Stockholder Returns Versus Peers.Digital Sales Accelerated.Our During Fiscal 2018 total shareholder return (“TSR”) was approximately 20%2020, online revenues grew by $450 million, or 36% year-over-year, to $1.7 billion, and our three-year relative TSR is at the toprepresented 45% of our proxy peer group (described on page 38 herein), as demonstrated below.total revenue. Driven by strong customer demand, we saw digital growth across all of our brands, with Aerie rising 85% and American Eagle up 17% for Fiscal 2020 compared to Fiscal 2019. Our digital channel generated strong profit margins and posted positive sales metrics, including traffic and transaction value.
Corporate Governance Highlights from Fiscal 2018
We are committed to the highest standards of corporate governance, which we believe promote the long-term interests of our Company and maximize stockholder value, while strengthening Board and management accountability. Key areas of our governance framework include:
Highly Talented, Skilled BoardContinued Aerie Momentum. During Fiscal 2020, Aerie’s revenue rose 24% year-over-year, to $1 billion. Demand for the brand has been very consistent over the past several years, with the fourth quarter of Directors. In Fiscal 2018,2020 marking the Board initiated a search for a new director with global consumer brand experience to join its already multi-talented group25th consecutive quarter of directors. This search culminated in the appointment of our third female director, Deborah A. Henretta, in February 2019, increasing the Board’s diversitydouble-digit growth. New customer growth was strong, and further aligning the skills of our directors with our strategic initiatives.sales rose across channels and all major categories.
Name | Age | Director Since | Occupation | Independent | Current Committee Memberships | |||||
Sujatha Chandrasekaran | 51 | 2018 | Former Chief Information Officer and Head Of Digital of Kimberly-Clark Corporation | Yes | • AC | |||||
Deborah A. Henretta | 57 | 2019 | Retired Group President, P&G Global Beauty | Yes | • AC | |||||
Thomas R. Ketteler | 76 | 2011 | Retired Chief Operating Officer of Schottenstein Stores Corp. (“SSC”) | Yes | • AC • CC • NC | |||||
Cary D. McMillan | 61 | 2007 | Chief Executive Officer of True Partners Consulting, LLC | Yes | • AC • CC† • NC | |||||
Janice E. Page | 70 | 2004 | Retired Group Vice President of Sears Roebuck & Company | Yes | • AC • NC† • CC | |||||
David M. Sable | 65 | 2013 | Non-Executive Chairman, WPP plc | Yes | • AC | |||||
Jay L. Schottenstein | 64 | 1992 | Chief Executive Officer | No | — | |||||
Noel J. Spiegel* | 71 | 2011 | Retired partner at Deloitte & Touche, LLP | Yes | • AC† • CC • NC |
AC Audit Committee
CC Compensation Committee
NC Nominating and Corporate Governance Committee
• | Sequential Margins and Profitability Strength. During Fiscal 2020, margins and profitability strengthened sequentially, with fourth quarter 2020 adjusted operating profit(1) of $106 million up 38% from the fourth quarter of Fiscal 2019, and the second half of Fiscal 2020 posting adjusted operating profit(1) of $209 million. After the abrupt closure of our stores in March 2020, our team took quick, decisive action to reduce inventory, cut spending and find efficiencies. The stores team also redesigned the store experience to reopen locations when it was safe to do so and with leading safety protocols in place. Through feedback from our customers and associates, as well as national recognition in various publications, we are confident that these efforts were appreciated. Although store traffic remained under pressure, demand strengthened throughout the year, driving sequential quarterly sales and profit improvement. |
† Committee Chair
* Lead Independent Director
(1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures. |
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PROXY STATEMENT SUMMARY |
Strong Balance Sheet and Commitment to Cash Returns. We ended Fiscal 2020 with $850 million in cash and approximately $1.2 billion in total liquidity. Excluding net proceeds from our April 2020 convertible note issuance, we ended Fiscal 2020 with $444 million in cash, up 7% from Fiscal 2019. Early in the year, we took actions to preserve our financial strength, which allowed us to generate free cash flow in the second half of Fiscal 2020 in line with last year despite the reduction in revenue related to COVID-19. The recovery in cash flow enabled us to pay our previously deferred first quarter 2020 cash dividend in December 2020, and on March 3, 2021 we announced the reinstatement of our regularly quarterly cash dividend and unsuspended our share-repurchase program.
All Directors Are Independent, ExceptOutstanding Stock Price Performance. As of April 2021, AEO’s stock price performance was up over 300% from a year ago, fueled by a significant and consistent recovery in our CEO.business after the abrupt COVID-19 related store closures in the first quarter of 2020. Through the team’s swift actions and strong management, we saw sequential improvement in our sales, margins and profit in each quarter of 2020. Aerie grew revenue 24% for the year, digital increased 36% and we ended 2020 with strong liquidity and cash flow. In January 2021, we also unveiled our Real Power. Real Growth value-creation plan and long-term financial targets, providing investors with greater transparency into our future growth plans.
AEO Stock Price Performance
(1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures. |
2021 Proxy Statement | | | 9 |
PROXY STATEMENT SUMMARY |
Our Look Forward
Unveiled Real Power. Real Growth Strategy Plan. The Board is composedunforeseen events of eight directors with only onenon-independent director,2020 accelerated the pace of global change and innovation. In response to the challenges posed by the COVID-19 pandemic and the continued success of Aerie and acceleration in our CEO.digital channel, we refocused our priorities and in January 2021 unveiled our “Real Power. Real Growth” strategy plan aimed at fueling AEO for further growth and profitability. The Real Power. Real Growth long-term plan leverages the power of our people, brands and operations and the momentum we have generated in 2021. The pillars of Real Power. Real Growth include the following goals:
Double Aerie to $2 billion in revenue;
Independent Committees.All Board committees are composed of independent directors.Reignite American Eagle for profit growth;
Diversity. ThreeLeverage customer-focused capabilities;
Strengthen ROI discipline; and
Embrace the power of our eightpeople, culture and purpose.
Corporate Governance Highlights
We are committed to operating with effective corporate governance and the highest ethical standards, which we believe promote the long-term interests of our Company and maximize stockholder value, while strengthening Board and management accountability. We continuously review governance practices and consider adoption of best practice principles. Key areas of our governance framework are set out in detail below. This framework is described in more detail in our Corporate Governance Guidelines and Code of Ethics, which can be found in the environmental, social, and governance (“ESG”) section of investors.ae.com.
Highly Talented, Skilled Board of Directors. Our Board embodies a broad and diverse set of experiences, qualifications, attributes, and skills that are vital to the success of our Company. Our directors’ skills, qualifications, and viewpoints strengthen the Board’s ability to carry out its oversight role on behalf of our stockholders. See the table on page 30 for a summary of the range of skills and experiences that each director brings to the Board, and that we find to be relevant to our business. Our Board believes in the importance of diversity of thought, experiences, and backgrounds. Four of our nine directors, representing nearly 40%over 44% of our Board, are diverse in terms of gender and/or ethnicity. We also promote diversity within Board leadership, as evidenced by Ms. Page’s service as Chair of the Nominating, Governance and Corporate Social Responsibility Committee (the “Nominating Committee”).
All Directors Are Independent, Except Our CEO. The Board is composed of nine directors, with only one non-independent director, our CEO.
Independent Committees. All of the committees of the Board (the “Committees” and each a “Committee”) are composed of independent directors.
Robust Lead Independent Director Role. Our current Lead Independent Director, Mr. Spiegel, has substantial duties specifically documented in our Corporate Governance Guidelines, including presiding over meetings of our independent directors, providing input on materials sent to the Board, and approving Board meeting schedules to ensure that there is sufficient time for Board discussion and deliberation.
Highly Engaged Board of Directors Guides the Strategic Direction of our Company. Our Board actively overseas long-term strategic planning and capital allocation decisions, including the Company’s Real Power. Real Growth value-creation plan and long-term financial outlook.
Protections Against Director Overboarding. The Board appreciates that serving on a public board of directors is a significant responsibility and time commitment. To this end, the Board has approved a policy in our Corporate Governance Guidelines to review and limit the number of public company boards on which our directors may serve. Directors who are full-time employees of other companies generally may not serve on more than two public company boards at one time, and directors who are retired from full-time employment generally may not serve on more than four public company boards at one time. Our CEO may not serve on more than one other public company board unless otherwise determined by the Nominating and Corporate Governance Committee.
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Focused and Thoughtful Board Refreshment and Tenure Policy.Refreshment. Our Corporate Governance Guidelines include a mechanism for the Board to refresh its members over time. We maintain a director retirement policy under which no director may be appointed or nominated to aroutinely engages in succession planning and adds new term if he or she would be age 78 or older at the time of election, unless otherwise determined by the Board.directors on an opportunistic basis when it identifies candidates whom it believes have experience, skill sets and other characteristics that will enhance Board effectiveness.
Director Average Age and Average Board Tenure Snapshot
Robust Director Evaluation Process.We conduct annual self-assessments of the Board and its Committees annually.Committees. The Board believes it is important to assess both its overall performance and the performance of its Committees, and to solicit and act upon feedback received, where appropriate. As part of the Board’s self-assessment process, directors consider various topics related to Board composition, structure, effectiveness, and responsibilities, as well as the overall mix of director skills, experience and backgrounds.
Annual Review of Committee Charters and Corporate Governance Guidelines. We continuously review governance practices and consider adoption of best practice principles.
Human Capital Management Oversight by Board and Committees. Our Board plays an important role in the oversight of talent and culture at AEO and devotes time each quarter to receiving updates from management on culture, including both internal and external benchmarking of employee engagement, turnover, retention, and recruiting metrics as well as progress on inclusion and diversity, talent development, leadership, and succession planning initiatives.
Meaningful Stock Ownership Requirements.We maintain stock ownership guidelines that are applicable to our directors and executives. Ournon-employee directors must, within five years of joining the Board, hold Company stock worth at least five times their annual cash retainer. In the case of our CEO, the stock ownership guideline is six times his base salary and, in the case of our other named executives,executive officers, the guideline is three times their respective base salaries.
Director Elections by Majority Vote with Resignation Policy.In an uncontested election, our directors are elected by a majority of votes cast and, if a director does not receive a majority of votes cast, he or she must promptly tender his or her resignation to the Board (with the Board determining whether to accept or reject such resignation).
Prohibition on Hedging or Pledging Company Stock. We maintain “no hedging” and “no pledging” policies that generally prohibit directors and employees from engaging in hedging or pledging transactions with respect to our stock.
Ongoing Stockholder Engagement. We welcome feedback and value regular dialogue with our stockholders. In Fiscal 2018,2020, the Company continued to have extensive stockholder engagement. On a regular basis, we invite stockholders to visit with senior management. Throughout the year, our CEO and senior management held numerous meetings with investors and participated in several virtual investor conferences, during which we met with current and prospective stockholders. We expect to continue such discussions prior to the 2021 Annual Meeting and, as a matter of policy and practice, foster, and encourage engagement with our stockholders on an ongoing basis.
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PROXY STATEMENT SUMMARY |
SummarySnapshot of Director Skills. Our directors bring to our Board a wide variety of skills, qualificationsExperience and viewpoints that strengthen the Board’s ability to carry out its oversight role on behalf of our stockholders. See the table on page 21 for a summary of the range of skillsDiversity
Name | Age | Director Since | Occupation | Independent | Current Committee Memberships | |||||
Sujatha Chandrasekaran | 53 | 2018 | Senior Executive Vice President, Chief Digital and Information Officer, CommonSpirit Health | Yes | • AC • CC • NC | |||||
Steven A. Davis | 62 | 2020 | Former Chairman and Chief Executive Officer of Bob Evans Farms, Inc. | Yes | • AC | |||||
Deborah A. Henretta | 59 | 2019 | Retired Group President, Procter & Gamble Global Beauty | Yes | • AC • CC • NC | |||||
Thomas R. Ketteler | 78 | 2011 | Retired Chief Operating Officer of Schottenstein Stores Corp. (“SSC”) | Yes | • AC • CC • NC | |||||
Cary D. McMillan | 63 | 2007 | Chairman Emeritus of True Partners Consulting, LLC | Yes | • AC • CC† • NC | |||||
Janice E. Page | 72 | 2004 | Retired Group Vice President of Sears Roebuck & Company | Yes | • AC • NC† • CC | |||||
David M. Sable | 67 | 2013 | Former Global Chief Executive Officer of Y&R | Yes | • AC • CC • NC | |||||
Jay L. Schottenstein | 66 | 1992 | Chief Executive Officer | No | — | |||||
Noel J. Spiegel* | 73 | 2011 | Retired Deputy Managing Partner at Deloitte & Touche, LLP | Yes | • AC† • CC • NC |
AC Audit Committee
CC Compensation Committee
NC Nominating, Governance and experiences that each director brings to the Board, and which we find to be relevant to our business.Corporate Social Responsibility Committee
† Committee Chair
* Lead Independent Director
Diversity of Directors | Tenure of Independent Directors | Age Distribution of Independent Directors | ||
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Charitable Giving, Human Capital and Sustainability
PROXY STATEMENT SUMMARY |
Corporate Citizenship: ESG Highlights from Fiscal 20182020
AEO is committed to good corporate citizenship, and we aim to forge a path that balancespromotes both principles and profit. An integral component of our Company culture is driving positive change without compromising who we are;are: a REAL brand that our customers and associates can understand and are proud to support. Our purpose is to show the world there is REAL power in the optimism of youth. During Fiscal 2020, we focused on the following ESG issues, which we believe are most relevant to our Company.
The following provides a brief summary of our Corporate Citizenship practices, initiatives, and accomplishments for Fiscal 2020; for additional detail regarding Human Capital Management, Charitable Giving, and Sustainability, please see page 37. For more information regarding our ESG initiatives, including corporate governance, corporate giving, sustainability efforts, and social responsibility initiatives, we believe weplease visit investors.ae.com/esg/. Our website and ESG information contained therein are not part of or incorporated into this proxy statement.
Human Capital Management
Our values of People, Innovation, Passion, Integrity, and Teamwork are the backbone of our Company and are at the center of every decision, every product, and every interaction - they represent the foundation of our REAL culture. We all have a responsibilityvital role to do better…play in creating an environment where everyone feels respected and empowered while we continue to be better…to buildgrow as a better world.community that promotes individuality and difference. We celebrate the diversity of one through the inclusion of many.
Inclusion & Diversity (I&D) |
We believe that a truly diverse workplace is a result of an inclusive culture (all information is as of January 30, 2021): • In the U.S. alone, approximately 40% of our associates self-identified as a Person of Color (“POC”); • Our U.S. associate population is approximately 59% White, 23% Hispanic, 9% Black, 4% Asian, 4% two or more races or other, and 1% not reported; and • Globally, 78% of our associates self-identified as women. During Fiscal 2020, we believe that we made significant strides in I&D efforts, including: • Inclusive leadership and functional I&D trainings and the incorporation of training and educational content into our Learning Management System; • Announcement of the Real Change Scholarship for Social Justice, a $5 million commitment created to advance educational opportunities for full- and part-time AEO associates, who are actively driving anti-racism, equality, and social justice initiatives; |
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PROXY STATEMENT SUMMARY |
• Appointment of the Company’s first Chief Inclusion & Diversity Officer; • Expanding on the ethnic diversity of our Board; • Implementation of a hiring policy designed to increase candidate and new-hire diversity; • Outreach to Historically Black Colleges and Universities (“HBCUs”) and Minority Student Groups through retail education and co-mentoring programs as well as the establishment with peers of a dedicated program to educate diverse students about career opportunities within the retail industry, the Retail Education Program (“REP”); and, • Inclusion of I&D progress as one of our Fiscal 2020 annual incentive plan metrics to drive accountability for our commitments. For more information regarding our I&D initiatives, see page 37. |
Total Rewards |
Our compensation and benefits programs serve to reinforce the Company’s values and culture and they work in tandem to deliver a competitive, equitable, and relevant overall package that supports, attracts, and retains our talented teams. Our compensation programs are composed of these key elements: • Competitive base-pay rates, which are aligned to specific roles and skills, local market rates, and relevant experience; • Incentive bonuses for full-time associates that are structured to deliver financial rewards for the delivery of monthly, quarterly, or annual results; • Annual stock awards for over 300 leaders throughout areas of the business, including the senior management team, that provide a commonality of interest between our leaders and stockholders; and • Extensive benefits that range from a variety of medical, dental, and vision plan offerings to a gym/online fitness discount program and pet insurance. For more information regarding our compensation and benefits programs, see page 38. |
Health and Safety |
The health and safety of our workforce and customers is deeply rooted in our culture and business. Our response to the COVID-19 pandemic was immediate and deliberate. We put our people first and we implemented best-in-class health and safety measures to care for our associates, customers and partners. In addition to implementing industry-leading safety protocols across our operations, we hired an AEO medical consultant and on-site nurses. During Fiscal 2020, we also created the COVID-19 Associate Relief Fund to provide grants to eligible AEO associates who were adversely impacted by COVID-19. For more information regarding our commitment to the health and safety of our workforce and customers, see page 39. |
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PROXY STATEMENT SUMMARY |
Charitable Giving
We are committed to showing the world that there is REAL power in the optimism of youth by supporting causes that empower youthteens and young adults by rolling up our sleeves to make a REAL difference in our communities.
In 1999, we established the American Eagle Outfitters Foundation (“AEO Foundation”) to maximize the impact of our efforts and to formalize our commitment to giving back. ThroughIn Fiscal 2020, AEO, the AEO Foundation, we strive to create positive change in areas that are important to bothand our customers and our associates, including youth empowerment and young women’s health. In Fiscal 2018, AEO and the AEO Foundation donated approximately $2.4more than $5.4 million to causes that are important to us. We also facilitated customer donationsour associates and customers.
American Eagle and Aerie Charity Partners American Eagle and Aerie empowered their customers to support causes they care about, including equality, the fight against hunger, voter registration, mental health, body positivity and environmental issues. |
COVID-19 Assistance
The COVID-19 pandemic impacted every person in our AEO family and in our communities. Together, with the AEO Foundation, American Eagle and Aerie, AEO has contributed more than $1 million to COVID-19 relief efforts and has donated more than one million facemasks. In addition, 2,200 American Eagle and Aerie gift cards were distributed to boost morale of medical personnel. The AEO Foundation COVID-19 Assistance fund supported more than 125 associates in need during the pandemic.
For more information regarding our charitable giving partnerships and practices, see page 39.
Sustainability
We aspire to do the right thing, continually innovate and care about the global community. These goals are foundational to AEO’s culture. In Fiscal 2019, AEO introduced a comprehensive plan to be carbon neutral in our own operations by offering merchandise2030 with a commitment to water reduction, energy reduction, and the use of more sustainable raw materials. In December 2020 our Board adopted a climate policy, which addresses our goals of achieving carbon neutrality in AEO owned and operated facilities (offices, stores, and distribution centers) and employee business travel by 2030, and reducing carbon emissions 40% by 2030.
Our key sustainability initiatives include the following:
Reduce water used in jean production and increase water recycling;
Improve the sustainability of materials (cotton, polyester, and cellulosics) used in our clothing and other products;
Reduce carbon emissions in our manufacturing facilities 40% by 2030; and
Continue recycling initiatives that saw 100% of proceeds go to charities. These efforts raised another $845,000include apparel waste diversion from landfills and reduction in donations. We empowered our customers to make their voices heard through our continued partnership with Rock the Vote, strengthenedplastic usage.
During Fiscal 2020, we believe that we made significant strides in our commitment to body positivity and wellness through Aerie’s work with the National Eating Disorders Association and Bright Pink, and helped to promote love and inclusion with the It Gets Better Project. The communities where we work and play are important to us, and our associates donated thousands of hours volunteering their time in our local neighborhoods. When tragedy struck in our own backyard at the Tree of Life Congregation in Pittsburgh, just miles from our corporate offices, we turned our pain and sorrow into meaningful action by partnering with the Anti-Defamation League to expand No Place for Hate, a program that educates and empowers youth in more than 1,600 schools across the county to prevent acts of brutality and hatred. We know that we have a responsibility to lead by example, which is why we believe we must do our part to create positive change in the world.
Human Capital
The vitality of AEO resides in people. We value and respect different backgrounds, unique talents and eclectic tastes; they strengthen our ability to succeed. We care about our associates: we empower them, we reward them. We aim to give back generously to the communities where we work and play. From hiring the best talent, to inclusion and diversity initiatives, and through career development, compensation, and wellness, we are invested in creating programs and resources that enhance our workplace environment, our associate experience, and retain and engage our most valuable resource: our people. Our initiatives during Fiscal 2018 included:sustainability, including:
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Joined RE100, a global initiative run by The Climate Group in partnership with CDP that brings together industry-leading businesses committed to the use of renewable power.
Signed the UN Fashion Industry Charter for Climate Action to drive the fashion industry to net-zero emissions no later than 2050.
Developed Science Based Targets (greenhouse gas reduction goals aligned with climate science) and submitted these targets to the Science Based Targets initiative (“SBTi”), an NGO consortium that validates company commitments.
Launched REAL GOOD, an offering of the most sustainable items in our collection.
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PROXY STATEMENT SUMMARY |
ESG Oversight
The full Board ensures the ESG risks and opportunities are integrated into the Company’s long-term strategy. Each of the Committees of the Board has responsibility for the oversight of our ongoing ESG-related activities as outlined on page 42, and provides regular reports to the full Board.
Compensation Highlights from Fiscal 2020
The year 2020 presented unprecedented challenges across the globe related to the impact of COVID-19. In mid-March, we had to quickly determine the most critical areas of focus and develop a responsive and flexible plan to ensure the safety of our associates while also preserving the continuity of the business. The Company quickly established three key pillars, which served as our guiding principles throughout the balance of the year: Protect our People & Business, Preserve Cash, and Prepare for a New Future.
These objectives provided a common set of priorities for the team, serving as a filter for decisions as we navigated uncertainty and new challenges on a daily basis. We chose to incorporate our pillars into our executive compensation program for Fiscal 2020 as a way to evaluate, motivate, and focus the leadership team to stabilize the business and ultimately regain lost profits from the effects of COVID-19, which disproportionately impacted our results during the first half of the year. The priorities continued to appropriately align the interests of our leaders with those of our stockholders and contributed to our strong second-half Fiscal 2020 performance. Specific executive compensation highlights include:
Pay for Performance Focus. A full 86% of our CEO’s compensation is subject to the achievement of performance goals and changes in stockholder value and “total at-risk,” as demonstrated in the chart below.
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We celebrate the diversity of one through the inclusion of many. Our employees are actively encouraged and empowered to share their perspectives. Female leadership comprises nearly a third of our executive leadership team and more than
(2) | NSOs are defined as nonqualified stock options |
(3) | PSUs are defined as performance-based restricted stock units |
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PROXY STATEMENT SUMMARY |
70 percent of our global workforce is female. In 2018, we created guiding principles to identify behaviors and actions that promote inclusion and diversity at AEO, and delivered training as well as team and individual coaching to assist associates in raising their own self-awareness, appreciating the differences in others, and improving collaboration overall.
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Sustainability
We are committed to responsibly source and create the products that our customers love to wear. Our Vendor Code of Conduct is based on international labor standards and implemented in all of our manufacturing facilities. We believe that our compliance program focus should be about engagement and capacity building, and not just strictly following the law. We are members of the Accord in Bangladesh and have worked with our suppliers and factories there to improve safety conditions, and taken that experience to focus deeply on safety in other countries. We have conducted worker surveys in many of our strategic factories in order to hear from workers directly and understand their needs and concerns and ensure that their voices can also be heard by factory management. Finally, we have invested, with our factories, in the HERproject, a program that focuses on training women on health, financial planning, and gender equality.
We recently refined our sustainability strategy to focus on four key pillars: Reduce Water, Reduce & Recycle, Improve Raw Materials, and Save Energy. For water conservation, we are planning to reduce the amount of water we use per jean, increase the amount of water recycling in our supply chain, and implement our wastewater standards across factories and mills. For addressing waste, we plan to divert garment waste from landfills and decrease our plastic usage. Our raw materials focus is to switch to more sustainable options for cotton, polyester and viscose. Finally, to save energy, we set a new carbon reduction goal and are researching how to move to more renewable sources of energy.
For additional information on AEO’s corporate giving, sustainability efforts and social responsibility initiatives, please visitwww.aeo-inc.com/social-responsibility/.
Compensation Highlights from Fiscal 2018
We believe our executive compensation program appropriately aligns the interest of our leaders with our stockholders and contributes to our strong performance. Specific executive compensation highlights include:
Pay for Performance Focus. 84% of our CEO’s compensation is performance-based and“at-risk” in the form of annual and long-term incentive compensation, as demonstrated in the chart below.
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Alignment of CEO Pay Relative to Peers.Our three-year TSR was significantly above the peer group median. When examining our CEO’s total direct compensation as disclosed in the Summary Compensation Table (“SCT”) relative to our peer group over a three-year period, Mr. Schottenstein’s compensation, shown on the vertical axis, ranks in the 65th70th percentile, while AEO’s relative TSR performance over the same period was in the 88th81st percentile.
AEO vs. PEER Group Pay Alignment
3-Year CEO Total Direct Compensation & TSR*
* | Compensation is measured using |
Independent Compensation Consultant.The Compensation Committee retained an independent compensation consulting firm, Frederic W. Cook & Co., Inc. (“FW Cook,Cook”), to advise on matters related to CEOthe CEO’s and other executiveexecutives’ compensation. FW Cook does not provide any other services to the Company (other than its services for the Compensation Committee).
Long-Term Retentive Equity Awards to Promote Leadership Continuity. In light of the tight competitive landscape for top talent, the Compensation Committee determined it was in the best interests of the Company and our stockholders to grant long-term equity-based retention awards to our named executive officers (“NEOs”) other than our CEO. These awards will enable us to retain our strong leadership team using a collaborative approach and further align our executives’ interests with those of our stockholders.
No Payment of Dividends on Unearned/Unvested Awards. We do not pay dividends or dividend equivalents on unearned and/or unvested equity incentive awards.
Executive Compensation Clawback Policy. We maintain a clawback policy that generally provides the Compensation Committee with the discretion to seek recovery of performance-based cash and equity compensation paid to an executive officer in connection with an event of misconduct related to:to (a) acts in competition with the Company;Company, (b) disclosure of confidential or proprietary information;information, (c) failure to cooperate with the Company in regard to a legal suit;suit, or (d) restatement of financial statements.
No Guaranteed Employment or Compensation.We do not maintain employment contracts of defined length with our CEO or other named executives, nor do we provide multi-year guarantees for base salary increases, bonuses, or long-term incentives.
Double-Trigger Change in Control Benefits and Vesting.In the event of a change in control, our executives, other than Mr. Schottenstein, will only receive benefits if there is a qualifying termination of employment (i.e., a double-trigger). Our CEO does not have a change in control agreement with the Company. All of our executives’ equity incentive awards are double-trigger.
No Change in Control TaxGross-Ups. We do not provide taxgross-ups on change in control benefits.
Stock Ownership Guidelines. We have stock ownership guidelines for both the Board and Management to ensure a commonality of interest with stockholders.
Anti-hedging and anti-pledging policy. Policies are in place that prohibit both employees and Board members from engaging in these practices.
Limited perquisites. We do not provide significant perquisites.
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PROXY STATEMENT SUMMARY |
Historical Say on Pay Votes
We are proud of |
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PROPOSAL ONE: ELECTION OF DIRECTORS
The Board is divided into three classes.classes, with each class consisting of an equal number of directors. Each class of directors is elected for a three-year term. On the recommendation of the Nominating and Corporate Governance Committee, (the “Nominating Committee”), the Board has fixed the size of the board at eightnine directors and nominated three candidates, each of whom areis currently directorsa director of the Company, to be elected as Class IIIII directors at the 2021 Annual Meeting. Ifre-elected, the Class IIIII directors will serve for three-year terms ending at the 20222024 annual meeting, or when their successors are duly elected and qualified. The terms of the remaining Class I and Class IIIII directors are scheduled to expire at the annual meetings to be held in 20202023 and 2021,2022, respectively.
Biographical information regarding each nominee and each incumbent director is set forth below as of April 1, 2019, together2021. In addition, information about each director’s specific experience, attributes and skills that led the Board to the conclusion that each of the directors is highly qualified to serve as a member of the Board is set forth below.
The Board believes that each of the Company’s directors is highly qualified to serve as a member of the Board. Each of our directors has contributed to the mix of skills, core competencies and qualifications of the Board. Our directors are highly educated and have diverse backgrounds and talents and extensive track records of success in what we believe are highly relevant positions with a brief descriptionvariety of each individual’s business experience, skillswell-respected companies in a wide range of industries. The Board believes that through their varying backgrounds, our directors bring a wealth of experiences, new ideas and qualifications.solutions to our Board.
Each of the nominees has consented to be named as a nominee. If any nominee should become unavailable to serve, the Board may decrease the number of directors pursuant to our Amended and Restated Bylaws (the “Bylaws”) or may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board. The Board has no reason to believe that any nominee will be unavailable or, if elected, unable to serve.
The Board of Directors recommends that the stockholders vote “FOR”
the following nomineesClass II director nominees:
Janice E. Page | ||
Age: 72 Director since: June 2004 Independent Committees: • Audit • Compensation • Nominating (Chair) Current Public Company Directorships: • None | BACKGROUND Ms. Page spent 27 years in apparel retailing, holding numerous merchandising, marketing and operating positions with Sears Roebuck & Company (“Sears”), including Group Vice President from 1992 to 1997. While at Sears, Ms. Page launched the direct-to-consumer business and oversaw sporting goods, men’s, women’s and children’s apparel, footwear and accessories, and beauty and fragrances, among other responsibilities. She holds a B.A. from Pennsylvania State University. | |
SKILLS AND QUALIFICATIONS | ||
Ms. Page has extensive knowledge of the apparel retail industry and brings to the Board in-depth experience across diverse consumer product categories as well as retail operations. Her service and tenure on public company boards allows her to provide the Board with a variety of perspectives on corporate governance issues. | ||
SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS Ms. Page serves on the advisory boards for the Daveler Entrepreneurship Scholarship of the University of South Florida and Champions For Learning Center for Innovation. | ||
PREVIOUS DIRECTORSHIPS Ms. Page previously served as a director of R.G. Barry Corporation (2000-2014), Hampshire Group, Limited (2009-2011) and Kellwood Company (2000-2008). Ms. Page also served as Trustee of Glimcher Realty Trust, a real estate investment trust that owns, manages, acquires and develops malls and community shopping centers (2001-2004). | ||
2021 Proxy Statement | | | 19 |
PROPOSAL ONE: ELECTION OF DIRECTORS |
David M. Sable | ||
Age: 67 Director since: June 2013 Independent Committees: • Audit • Compensation • Nominating Current Public Company Directorships: • None | BACKGROUND Mr. Sable is Co-Founder and Partner of DoAble, a Marketing Consultancy focused on branding, positioning and big ideas. As Senior Advisor to WPP plc (“WPP”), a multinational communications, advertising, public relations, technology, and commerce holding company, he mentored and consulted across the company. Previously he was Chairman of VMLY&R. He propelled Y&R to a top-five global creative firm at Cannes, developed new resources and practices, expanded the global footprint of subsidiary company VML, and ultimately helped unify Y&R and VML into VMLY&R, one of the most successful agencies in the industry today. Prior to his time at Y&R, Mr. Sable served at Wunderman, Inc., a leading customer relationship manager and digital unit of WPP, as Vice Chairman and Chief Operating Officer, from August 2000 to February 2011. Mr. Sable was a Founding Partner and served as Executive Vice President and Chief Marketing Officer of Genesis Direct, Inc., a pioneer digital omni-channel retailer, from June 1996 to September 2000. Mr. Sable attended New York University and Hunter College in New York. A frequent keynote speaker and author, Mr. Sable is a designated LinkedIn Influencer, where he ranks among the most widely-read business leaders in the world. | |
SKILLS AND QUALIFICATIONS | ||
With more than 30 years of experience in digital leadership and marketing communications, Mr. Sable brings to the Board his strategic insight and ability to connect talent across marketing disciplines and geographies. The Board also benefits from his extensive involvement with community programs. | ||
SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS In 2013, Fast Company named Mr. Sable one of the 10 Most Generous Marketing Geniuses. He currently serves on the Board of Directors of both UNICEF/USA and the International Special Olympics, as well as on the Executive Board of UNCF and he was Executive Producer on MTV’s highly acclaimed REBEL MUSIC series. |
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PROPOSAL ONE: ELECTION OF DIRECTORS |
Noel J. Spiegel | ||
Age: 73 Director since: June 2011 Independent (Lead Committees: • Audit (Chair) • Compensation • Nominating Current Public Company Directorships: • Radian Group Inc. (NYSE:RDN) • vTv Therapeutics Inc. (Nasdaq: VTVT) | BACKGROUND Mr. Spiegel was a partner at Deloitte & Touche, LLP (“Deloitte”), where he practiced from September 1969 until his retirement in May 2010. In his over 40-year career at Deloitte, he served in numerous management positions, including as Deputy Managing Partner, member of the Executive Committee, Managing Partner of Deloitte’s Transaction Assurance practice, Global Offerings and IFRS practice and Technology, Media and Telecommunications practice (Northeast Region), and as Partner-in-Charge of Audit Operations in Deloitte’s New York office. Mr. Spiegel holds a B.S. from Long Island University and he attended the Advanced Management Program at Harvard Business School. | |
SKILLS AND QUALIFICATIONS Mr. Spiegel provides expertise in public company accounting, disclosure and financial system management to the Board and, more specifically, to the Audit Committee. | ||
SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS Mr. Spiegel was named one of the National Association of Corporate Directors (“NACD”) Top 100 for 2020. The annual listing honors the most influential individuals in corporate governance who exemplify knowledge, leadership, and excellence. From 2006 to 2017, Mr. Spiegel was a Trustee, Chair of the Executive Committee and President of the Jewish Communal Fund of New York, a 503(C) donor advised fund. | ||
PREVIOUS DIRECTORSHIPS Mr. Spiegel previously served as a director at Vringo, Inc. (2013-2016). | ||
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PROPOSAL ONE: ELECTION OF DIRECTORS |
The following Class III Director:Directors have terms that expire
as of the 2022 Annual Meeting:
Deborah A. Henretta
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Age:
Director since: February 2019
Independent
Committees: • Audit • Compensation • Nominating
Current Public Company Directorships: • Corning, Inc.(NYSE:GLW) • Meritage Homes Corporation (NYSE:MTH) • NiSource, Inc. (NYSE:NI) |
BACKGROUND Ms. Henretta has over 30 years of business leadership experience across both developed and developing markets, as well as expertise in brand building, marketing, philanthropic program development, and government relations. She joined Procter & Gamble (“P&G”) in 1985. In 2005, she was appointed President acting as Senior Executive Officer of P&G’s business in Association of Southeast Asian Nations, Australia and India. She was appointed group president of P&G Asia in 2007, group president of P&G Global Beauty Sector in June 2013, and group president of P&GE-Business in February 2015. She retired from P&G in June 2015.
Ms. Henretta currently is a partner at Council Advisors and a Senior Advisor to World 50 including the G100 CEO Network. She previously was partner at G100 companies, a position she has held since 2015, where she assisted in establishing a Board Excellence program that provides director education on board oversight and governance responsibilities, including in the areas of digital transformation and cyber security, as well as a partnership program for New Director Training. She holds an M.A. in advertising from Syracuse University and a B.A. in communications and a Hobart degree in humane letters from St. Bonaventure. | |
SKILLS AND QUALIFICATIONS | ||
Ms. Henretta has significant experience in business leadership and global and international operations. She is skilled in brand building, marketing, and emerging market management. She also brings significant knowledge of digital transformation and cyber security to the Board. Ms. Henretta’s experience as Chairperson of the Environmental, Social and Sustainability Committee at Meritage Homes Corporation also provides a deep understanding of ESG risks and opportunities. | ||
SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS | ||
Ms. Henretta was a member of Singapore’s Economic Development Board (“EDB”) from 2007 to 2013. She contributed to the growth strategies for Singapore, and was selected to serve on the EDB’s Economic Strategies Committee between 2009 and 2011. In 2008, she received a U.S. State Department appointment to the Asia-Pacific Economic Cooperation’s Business Advisory Council. In 2011, she was appointed chair of this21-economy council, becoming the first woman to hold the position. In that role, she advised top government officials, including former President Barack Obama and former Secretary of State Hillary Clinton.
Ms. Henretta
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Ms. Henretta previously served as a director of Staples, Inc. (2016-2017).
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PROPOSAL ONE: ELECTION OF DIRECTORS |
Thomas R. Ketteler
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Age:
Director since: February 2011
Independent
Committees: • Audit • Compensation • Nominating
Current Public Company Directorships: • None
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BACKGROUND Prior to his retirement in 2005 from SSC, a private company,
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SKILLS AND QUALIFICATIONS | ||
Mr. Ketteler provides expertise, including through his background as a CPA and experience holding several executive-level positions, in financial and accounting issues and his historical experience with the Company is invaluable to the Board.
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SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS | ||
Mr. Ketteler volunteers with several nonprofit organizations in Southwest Florida. These organizations provide assistance to families in need and to the Hispanic community. He also serves on the finance committee for his local community association. | ||
PREVIOUS DIRECTORSHIPS | ||
Mr. Ketteler previously served on the Board of Encompass Group, Inc. (2007-2011). | ||
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PROPOSAL ONE: ELECTION OF DIRECTORS |
Cary D. McMillan
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Age:
Director since: June 2007
Independent
Committees: • Audit • Compensation (Chair) • Nominating
Current Public Company Directorships: • Hyatt Corporation (NYSE:H)
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BACKGROUND Mr. McMillan
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SKILLS AND QUALIFICATIONS | ||
Mr. McMillan brings to the Board demonstrated leadership abilities as a Chief Executive Officer and a deep understanding of business, both domestically and internationally. His experience as a former audit partner and CPA also provides him with extensive knowledge of financial and accounting issues. Furthermore, Mr. McMillan’s current and prior service on other public boards provides the Board with a diversified knowledge of best corporate governance and compensation practices.
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SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS | ||
Mr. McMillan serves on the AEO Foundation Board and brings a wealth of philanthropic experience to the position. He serves on a number of non-profit boards in Chicago including as Treasurer of both the Millenium Park Foundation and WTTW, the local PBS station. He is also a Trustee of the Art Institute of Chicago. | ||
PREVIOUS DIRECTORSHIPS | ||
Mr. McMillan previously served as a director of McDonald’s Corporation (2003-2015), Hewitt Associates, Inc. (2002-2010) and Sara Lee Corporation (2000-2004).
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PROPOSAL ONE: ELECTION OF DIRECTORS |
The following Class I Directors have terms that expire
as of the 20202023 Annual Meeting:
Jay L. Schottenstein
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Age:
Director since: March 1992
Executive
Committees: • None
Current Public Company Directorships: • • Designer Brands Inc.(NYSE: DBI) |
BACKGROUND Mr. Schottenstein has served as our Chief Executive Officer since December 2015. Prior thereto, he served as our Interim Chief Executive Officer from January 2014 to December 2015. He has served as Chairman of the Board since March 1992. He previously served the Company as Chief Executive Officer from March 1992 until December 2002 and as a Vice President and Director of the Company’s predecessors since 1980. He has also served as Chairman of the Board and Chief Executive Officer of SSC since March 1992 and as President of SSC since 2001. Prior thereto, Mr. Schottenstein served as Vice Chairman of SSC from 1986 to 1992. He has been a Director of SSC since 1982. Mr. Schottenstein also has served since March 2005 as Executive Chairman of the Board of Directors of Designer Brands Inc. (f/k/a DSW Inc.) (NYSE:DBI) and formerly served as that company’s Chief Executive Officer from March 2005 to April
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SKILLS AND QUALIFICATIONS | ||
Mr. Schottenstein has deep knowledge and extensive experience with respect to the Company’s operations and the retail industry in general. His
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SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS Mr. Schottenstein dedicates significant time to civic and cultural organizations. In 1985, he and his wife founded the Jay and Jeanie Schottenstein Foundation, the couple’s personal philanthropic organization. Together, they have donated millions of dollars to causes dear to their hearts, from arts and culture to cardiovascular research. The Schottensteins support many local organizations, including the Columbus Museum of Art, the United Way of Central Ohio, and The Ohio State University. In 2008, the Schottensteins endowed the biennial Jay and Jeanie Schottenstein Prize in Cardiovascular Sciences at The Ohio State University, an esteemed award given to outstanding medical and research professionals in the field. In 2010, Mr. and Mrs. Schottenstein were named Humanitarians of the Year by the American Red Cross of Central Ohio. Mr. Schottenstein continues to dedicate his time to helping his home city of Columbus prosper and grow. He is a member of the board of directors at the Columbus Partnership and the Columbus Development Corporation. | ||
2021 Proxy Statement | | | 25 |
PROPOSAL ONE: ELECTION OF DIRECTORS |
Sujatha Chandrasekaran
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Age:
Director since: March 2018
Independent
Committees: • Audit • Compensation • Nominating
Current Public Company Directorships: • |
BACKGROUND Ms. Chandrasekaran has over 25 years of business operations, technology and digital experience in retail and consumer goods in a global context, across customer engagement, marketing, store operations, supply chain and
Ms. Chandrasekaran holds a
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SKILLS AND QUALIFICATIONS | ||
With her expertise in enabling profitable growth in global entities, business operations, transformation, digital and technology and cyber security, Ms. Chandrasekaran brings vast information and digital technology expertise and a wealth of leadership experience in the global retail, eCommerce and consumer industries to the
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SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS | ||
Ms. Chandrasekaran was named a 2019 Director to Watch by Directors & Boards magazine. She was also named a Governance Fellow by the National Association of Corporate Directors (“NACD”) in 2018. NACD Fellowship is the highest standard of credentialing for corporate directors based on a comprehensive and continuous program of study that empowers them with the latest boardroom insights, intelligence, and practices. The fellowship was earned as a result of various Ms. Chandrasekaran serves as a director of Blume Global Technologies, a privately-held digital supply chain platform company.
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PREVIOUS DIRECTORSHIPS | ||
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PROPOSAL ONE: ELECTION OF DIRECTORS |
The following Class II Directors have terms that expire
as of the 2021 Annual Meeting:
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Age:
Director since:
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Independent
Committees: • Audit
Current Public Company Directorships: • • Marathon Petroleum Corporation (NYSE: MPC) • PPG Industries Inc. (NYSE: PPG) |
BACKGROUND Mr. Mr. Davis holds a master of business administration degree in marketing and finance from the
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SKILLS AND QUALIFICATIONS | ||
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SELECT PROFESSIONAL AND COMMUNITY CONTRIBUTIONS | ||
Mr. Davis is active in the nonprofit sector and currently serves on the International Board of the Juvenile Diabetes Research Foundation. He previously served on the board of directors of JobsOhio, Ohio’s private nonprofit corporation leading the way in job creation and economic development. Additionally, he served on the James Cancer Hospital Foundation Board at The Ohio State University. In 2014, Mr. Davis received The Lifetime Achievement Award from the University of Wisconsin at Milwaukee. Over the course of his | ||
PREVIOUS DIRECTORSHIPS | ||
Mr. Davis previously served on the Boards of Legacy Acquisition Co. (2017–2020), CenturyLink (2006–2009), Walgreens Boots Alliance (2009–2015) and
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Each of the nominees has consented to be named as a nominee. If any nominee should become unavailable to serve, the Board may decrease the number of directors pursuant to our Amended and Restated Bylaws (the “Bylaws”) or may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board. The Board has no reason to believe that any nominee will be unavailable or, if elected, unable to serve.
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The following section discusses the Company’s corporate governance, including the role of the Board and its Committees. Additional information regarding corporate governance, including our Corporate Governance Guidelines, the charters of our Audit, Compensation, and Nominating Committees and our Code of Ethics, which applies to all of our directors, officers (including the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) and employees, may be found on our Investors website atinvestors.ae.com. Any amendments or waivers to our Code of Ethics will also be available on our website. A copy of the corporate governance materials is available in print to any stockholder upon request.
The Board is responsible for overseeing management, which is, in turn, responsible for the operations of the Company. The Board’s primary areas of focus are strategy, risk management, corporate governance and compliance, as well as evaluating management and guiding changes as circumstances warrant. In many of these areas, significant responsibilities are delegated to the Board’s Committees, which are responsible for reporting to the Board on their activities and actions. Please refer to “Board Committees” for additional information on our Committees.
Board Oversight of AEO’s Strategy
The Board is actively engaged in developing our strategy and overseeing the execution of our strategy, including major business and organizational initiatives, capital allocation priorities and potential business development opportunities. The Board devotes time throughout the year to reviewing and formulating our strategy. The Board uses its experience in retail operations, real estate, brand building, international operations, consumer brands and marketing to oversee the execution of our strategy and capital allocation and works with senior management to guide our strategy. At each Board meeting, directors engage with AEO’s senior leadership in robust discussions about the Company’s overall strategy, priorities for its businesses, and long-term financial targets aimed at creating lasting value for stockholders.
Board Oversight of Risk Management
The Board as a whole has the responsibility for risk oversight and management, with a focus on the most significant risks facing the Company, including strategic, competitive, economic, operational, financial, legal, regulatory, cybersecurity, ESG, compliance, and reputational risks. In addition, Board Committees oversee and review risk areas that are particularly relevant to their respective areas of responsibility and oversight. The risk oversight responsibility of the Board and its Committees is supported by our management reporting processes, which are designed to provide visibility to the Board to those Company personnel responsible for risk assessment, including ourmanagement-led Enterprise Risk Management Committee, and information about management’s identification, assessment, and mitigation strategies for critical risks. The Company’s Enterprise Risk Management Committee is chaired by the Chief Financial Officer and is composed of all members of our executive leadership team, as well as other key financial controlfinancial-control representatives. The Board receives a quarterly Enterprise Risk Management risk report from the Chief Financial Officer during routine board meetings. In addition, our Company employs a Chief Compliance Officer who provides regular updates to the Audit Committee on compliance-related matters.
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CORPORATE GOVERNANCE |
The Board
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• Assesses major risks facing the Company and reviews options for risk mitigation with the assistance of management and the Board Committees
• Monitors risks that have been delegated to a particular Committee through regular reports provided by the respective Board Committees
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Audit Committee | Compensation Committee | Nominating Committee | ||
• Assesses major financial risk exposures and steps taken by management to address the same • Responsible for the review and assessment of information technology and cybersecurity risk exposures and the steps taken to monitor and control those exposures (see details below) • Reviews risks identified during the internal and external auditors’ risk assessment | • Oversees risk management related to employee compensation plans and arrangements • Assesses whether the Company’s compensation plans and practices may incentivize excessive risk-taking and the relationship between risk management policies and | • Manages risks associated with corporate governance policies and practices • Reviews any risks and exposures relating to director and executive succession planning • Oversees risk management related to the Company’s governance, |
Cybersecurity Oversight |
The Board recognizes the importance of maintaining the trust and confidence of our various stakeholders. To more effectively prevent, detect and respond to information security threats, the Company has a dedicated Chief Information Security Officer whose team is responsible for leading enterprise-wide security strategy, policy, standards, architecture and processes. The Audit Committee receives quarterly reports from the Chief Information Security Officer on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen our information security systems, assessments of the Company’s cyber security program, the Company’s cyber insurance coverage and the emerging threats in this area. |
Director Selection and Nominations
The Nominating Committee periodically reviews the appropriate size of the Board, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the Board. In evaluating and determining whether to recommend a candidate to the Board, the Nominating Committee reviews the appropriate skills and characteristics required of Board members in the context of the background of existing members and in light of the perceived needs for the future growth of our business. This includes a review of issues of diversity in background and experience in different substantive areas such as retail operations, marketing, technology, distribution, mergers and acquisitions, and finance. The Board seeks the best director candidates based on the skills and characteristics required without regard to race, color, national origin, religion, disability, marital status, age, sexual orientation, gender, gender identity and expression, or any other basis protected by federal, state, or local law. In March 2019, the Nominating Committee formalized its diversity focus by approving new Corporate Governance Guidelines mandating that any search that the Nominating Committee engages for a new director must include women and minority candidates in the pool from which the Nominating Committee selects director candidates; the Nominating and Corporate Governance Committee will review the efficacy of this focus on a going-forward basis. Board diversity is valued and provides many benefits, including creativity, variety in approaches to problem solving, and the ability to work effectively in our various markets. We also value a Board that reflects the diverse makeup of our associate and customer base.
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CORPORATE GOVERNANCE |
Director Skills and Qualifications
The Nominating Committee believes that the current members of the Board collectively have the level and balance of skills, experience, diversity, and character to execute the Board’s responsibilities. The followingtable below is a summary of those qualifications:the range of skills and experiences that each director brings to the Board, each of which we find to be relevant to our business. Because it is a summary, it does not include all of the skills, experiences, and qualifications that each director offers, and the fact that a particular experience, skill, or qualification is not listed does not mean that a director does not possess it. All of our directors exhibit high integrity, an appreciation for diversity of background and thought, innovative thinking, a proven record of success, and deep knowledge of corporate governance requirements and best practices.
Attributes, Experience and Skills |
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Leadership Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Retail Industry Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Financial Literacy | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Audit Committee Financial Expertise | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Risk Management Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
International Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Marketing and Consumer Insight | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Technology and Digital Expertise | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Real Estate Experience | ✓ | ✓ | ✓ | ✓ | ||||||||||||||
Crisis Management Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||
Mergers and Acquisitions Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Corporate Social Responsibility Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Other Public Company Board Service | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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CORPORATE GOVERNANCE |
Director Tenure
The Nominating Committee and the Board believe it is important for the Board to be “refreshed” by adding new directors from time to time, balanced against the importance of having directors who have a deep, historical experience, and institutional knowledge of the Company, its strategies and market opportunities and challenges. In February 2019,Accordingly, the Company does not have a mandatory retirement age or term limits for its directors.
The Board appointed Ms. HenrettaMr. Davis as a Class III director. Ms. HenrettaI director effective October 1, 2020. Mr. Davis brings a fresh perspective, significantto the Board deep consumer knowledge, of digital transformation and cyber securitymarketing expertise and a wealthtrack record of leadership experience in global and international operationsscaling growth brands to the Board. The Nominating Committee and the Board also believe that our long-serving directors bring critical skills and a historical perspective to the Board, whichthat are highly relevant in a cyclical business such as retail. In addition, the Nominating Committee and the Board believe that longer-serving directors have a deep knowledge and understanding of our business, balanced against the fresh information and perspectives brought by our newer directors.
BALANCED TENURES of INDEPENDENT DIRECTORS | ||
< 4 years: | 3 Directors | |
4 – 10 years: | 3 Directors | |
> 10 years: | 2 Directors |
Protections Against Director Overboarding
The Board appreciates that serving on a public board of directors is a significant responsibility and time commitment. To this end, the Board has approved a policy in our Corporate Governance Guidelines to review and limit the number of public company boards on which our directors may serve. Directors who are full-time employees of other companies generally may not serve on more than two public company boards (including our Board) at one time, and directors who are retired from full-time employment generally may not serve on more than four public company boards (including our Board) at one time unless otherwise determined by the Nominating Committee. Our CEO may not serve on more than one other public company board unless otherwise determined by the Nominating Committee. The Nominating Committee has reviewed Mr. Schottenstein’s service on the boards of directors of Albertsons Companies Inc. and Designer Brands Inc. and has determined that it does not impair his ability to serve on the Company’s Board.
Director Nominations
Candidates may come to the attention of the Nominating Committee from a variety of sources, including current Board members, stockholders and management. All candidates are reviewed in the same manner, regardless of the source of the recommendation. The Nominating Committee has in the past retained the services of a search firm to assist in identifying and evaluating qualified director candidates. Ms. Henretta,Mr. Davis, who was added to the Board in February 2019,October 2020, was identified as a candidate through a search firm.an existing member of the Board. The Nominating Committee will consider the recommendations of stockholders regarding potential director candidates. See “Submission of Nominations and Proposals for the 20202022 Annual Meeting” for information regarding the submission of director nominee recommendations.
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CORPORATE GOVERNANCE |
Our Board is 88%89% independent and such independent oversight bolsters our success. Our Board has determined that each of the followingnon-employee directors qualifies as “independent” in accordance with the listing requirements of the New York Stock Exchange (“NYSE”) and applicable SEC rules:
Sujatha Chandrasekaran |
Steven A. Davis
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Deborah A. Henretta
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Thomas R. Ketteler
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Cary D. McMillan
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Janice E. Page
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David M. Sable
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Noel J. Spiegel
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In particular, the Board affirmatively determined that none of these directors had relationships that would cause them not to be independent under the specific criteria of Section 303A.02 of the NYSE Listed Company Manual. The Board also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE listing standards and applicable SEC rules, and considered the additional factors under the NYSE listing standards relating to members of the Compensation Committee before determining that each member of the Compensation Committee is independent.
In making these determinations, the Board took into account all factors and circumstances that it considered relevant, including the following:
Whether the director is currently, or at any time during the last three years was, an employee of the Company or any of its subsidiaries;
Whether any immediate family member of the director is currently, or at any time during the last three years was, an executive officer of the Company or any of its subsidiaries;
Whether the director is an employee or any immediate family member of the director is an executive officer of a company that has made payments to, or received payments from, the Company or any of its subsidiaries for property or services in an amount that is in excess of the greater of $1 million, or 2% of such other company’s consolidated fiscal gross revenues in the current year or any of the past three fiscal years;
Whether the director is an executive officer of a charitable organization that received contributions from the Company or any of its subsidiaries in the past three years in an amount that exceeds the greater of $1 million, or 2% of the charitable organization’s consolidated gross revenues;
Whether the director or any of the director’s immediate family members is, or has been in the past three years, employed by a company that has or had, during the same period, an executive officer of the Company on its compensation committee;
Whether the director or any of the director’s immediate family members is, or has been in the past three years, a partner or employee of the Company’s independent registered public accounting firm; and
Whether the director or any of the director’s immediate family members accepted any payment from the Company or any of its subsidiaries in excess of $120,000 during the current fiscal year or any of the past three fiscal years, other than compensation for Board or Boardboard committee service and pension or other forms of deferred compensation for prior service.
Mr. Schottenstein is not independent because he is an executive officer of the Company. See “Related Party Transactions” for information regarding our policy on related party transactions and transactions with affiliates of Mr. Schottenstein, who is our sole employee director.
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CORPORATE GOVERNANCE |
The current leadership structure of our Board consists of a combined Executive Chairman and Chief Executive Officer position that is held by Mr. Schottenstein and a Lead Independent Director appointed annually by the independent directors. The Board
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has determined that combining the positions of Executive Chairman and Chief Executive Officer is most appropriate for the Company at this time. Having Mr. Schottenstein in this combined position provides unified leadership and direction to the Company and strengthens his ability to develop and implement strategic initiatives. His duties include presiding over meetings of the Board, setting meeting agendas and schedules of the Board in collaboration with the Lead Independent Director, and providing strategic insight and guidance to the Board. Our Board believes that the current Board composition, along with an emphasis on Board independence, provides effective independent oversight of management. Mr. Spiegel served as our Lead Independent Director for Fiscal 2018.2020.
Our Corporate Governance Guidelines establish robust and well-defined duties for our Lead Independent Director. Our Board’s support of the current leadership structure is premised on these duties being transparently disclosed, comprehensive in nature, and actively exercised. The Lead Independent Director is responsible for:
Presiding over the meetings of independent directors;
Serving as a liaison between the Executive Chair and independent directors;
Having input on information sent to the Board;
Collaborating with the Executive Chair on meeting agendas for the Board; and
Approving meeting schedules to ensure that there is sufficient time for discussion of all agenda items.
The Lead Independent Director also has the authority to call meetings of the independent directors, and, if requested by major stockholders, is available, when appropriate, for consultation and direct communication with our stockholders. We believe that this leadership structure provides our Board with the greatest depth of leadership and experience, while also providing independent oversight of the Company. Mr. Spiegel also meets regularly with members of Management across the Company between Board and Committee meetings.
Meetings of Independent Directors
The Board’s policy is to have the independent directors meet separately in executive session in connection with each regularly scheduled Board meeting (at least four times annually). During each meeting of the independent directors, the Lead Independent Director will preside and lead the discussion.
Self-Assessments
We annually evaluate the performance of the Board and its Committees. The Board believes it is important to assess both its overall performance and the performance of its Committees, and to solicit and act upon feedback received, where appropriate. As part of the Board’s self-assessment process, directors consider various topics related to Board composition, structure, effectiveness, and responsibilities, as well as the overall mix of director skills, experience, and backgrounds.
Director Education/Orientation
Our Board believes that director education is vital to the ability of directors to fulfill their roles, and supports Board members in their continuous learning. The Board encourages directors to participate annually in external continuing director education programs, and we reimburse directors for their expenses associated with this participation. Our directors also attend professional development forums and industry-leading conferences convened by the NACD, external accounting firms, and retail/brand organizations focused on topics that are relevant to their duties as a director. Continuing director education is also provided during Board meetings and other Board discussions as part of the formal meetings, and as stand-alone information sessions outside of meetings. Each year,In March 2020 we holdheld atwo-day educational program covering topics such as business developments and strategy, developments in corporate governance,sustainability, evolving retail trends, and fiduciary duties. Duringleadership. Throughout Fiscal 2018,2020, our Board participated in roundtable discussions with our advisors on topics including governance matters, executive compensation, regulatory developments, and workplace culture and anti-harassment; andanti-harassment. The Board also participated in learning opportunities with management on numerous subjects, including learnings fromthose related to our stockholder engagement activities, regulatory developments, technology, crisis management, and cybersecurity.cybersecurity matters.
2021 Proxy Statement | | | 33 |
CORPORATE GOVERNANCE |
All new directors also participate in our director orientation program during their first six months on our Board. The Board believes that it is important for each newly elected director to have an understanding of our Company, the specialty retail industry, and his or her duties as a director. We provide this initial information through a combination of reference materials, formal meetings with
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business leaders and in years past, tours of our facilities/store locations. The orientation program is designed to familiarize new directors with the Company’s businesses, strategies and challenges. We believe thison-boarding approach over the first six months of Board service, coupled with participation in regular Board and committeeCommittee meetings, provides new directors with a strong foundation in our company’sCompany’s businesses, connects directors with members of management with whom they will interact and oversee, and accelerates their effectiveness to engage fully in Board deliberations.
The Board has a standing Audit Committee, a standing Compensation Committee and a standing Nominating Committee. These Committees are governed by written charters, which were approved by the Board and are available on our Investors website atinvestors.ae.com.
The following sets forth Committee memberships as of the date of this Proxy Statement.
Director | Audit Committee | Compensation Committee | Nominating Committee | |||
Jay L. Schottenstein,Executive Chairman of the Board and Chief Executive Officer | — | — | — | |||
Sujatha Chandrasekaran |
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David M. Sable | ||||||
Noel J. Spiegel,Lead Independent Director |
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= Member | = Committee Chair | = Audit Committee Financial Expert |
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CORPORATE GOVERNANCE |
Board Committee Responsibilities | ||||||||||
Responsibilities | Committee Members | Meetings in Fiscal | ||||||||
AUDIT COMMITTEE | The primary function of the Audit Committee is to assist the Board with oversight of:
• the integrity of the financial statements;
• the qualifications, performance and independence of the independent registered public accounting firm;
• the performance of the internal audit function; and
• our compliance with regulatory and legal requirements, including the financial reporting and disclosure process.
The Audit Committee also reviews, approves, and
The Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements under the NYSE listing standards. | Sujatha Chandrasekaran Steven A. Davis *
Deborah A. Henretta *
Thomas R. Ketteler *
Cary D. McMillan *
Janice E. Page *
David M. Sable
Noel J. Spiegel (Chair)*
* Audit Committee financial experts |
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COMPENSATION COMMITTEE | The primary function of the Compensation Committee is to aid the Board in meeting its responsibilities with regard to oversight and determination of executive compensation. Among other matters, the Compensation Committee:
• reviews, recommends, and approves salaries and other compensation of executive officers;
• administers our stock award and incentive plans (including reviewing, recommending, and approving stock award grants to executive officers)
• reviews and makes recommendations to the Board regarding director compensation. • The Compensation Committee has the authority to retain a compensation consultant after taking into consideration all factors relevant to the adviser’s independence from management, including those specified in Section 303A.05(c) of the NYSE Listed Company Manual.
The Compensation Committee has the authority to delegate its authority to subcommittees, including subcommittees consisting solely of one or more persons, other Board members, and/or officers. Additionally, the Compensation Committee may delegate to the CEO the authority to review and grant equity awards to employees who are not executive officers. All members of the Compensation Committee | Sujatha Chandrasekaran Deborah A. Henretta
Thomas R. Ketteler
Cary D. McMillan (Chair)
Janice E. Page
David M. Sable Noel J. Spiegel |
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CORPORATE GOVERNANCE |
Board Committee Responsibilities | ||||||||||
Responsibilities | Committee Members | Meetings in Fiscal | ||||||||
NOMINATING COMMITTEE | The function of the Nominating Committee is to aid the Board in meeting its responsibilities with regard to:
• the organization and operation of the Board;
• selection of nominees for election to the Board;
• the evaluation of Board procedures and performance; and
• social corporate responsibility, sustainability, and other corporate governance matters.
The Nominating Committee developed and reviews annually our Corporate Governance Guidelines, which were adopted by the Board and are available under the All members of the Nominating Committee are independent under NYSE listing standards. | Sujatha Chandrasekaran Deborah A. Henretta
Thomas R. Ketteler
Cary D. McMillan
Janice E. Page (Chair)
David M. Sable Noel J. Spiegel
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We welcome feedback and value regular dialogue with our stockholders. On a regular basis, we invite stockholders to meet with senior management. In Fiscal 2018,2020, the Company continued to have extensive engagement with our stockholders. On a regular basis, we invite stockholders to visitThroughout the year, our CEO and senior management held numerous meetings with senior management. These meetings generally include our Executive Chairmaninvestors and Chief Executive Officer, our Chief Financial Officer, Brand Presidents and Investor Relations Officer. We also participateparticipated in numerousseveral virtual investor conferences, and events, during which we meetmet with current and prospective shareholders.stockholders. These meetings arewere generally focused on companyCompany performance, specific measures to successfully manage through the COVID-19 pandemic and our long-term strategic initiatives aimed at driving growth and stockholder returns. TheseAdditionally, management hosted a virtual investor meeting in January 2021 during which we presented our Real Power. Real Growth value creation plan and unveiled our long-term financial outlook. The content of these meetings and discussions were consistently reported to the Board, and management and the Board discussed comments and business insights provided by suchthese stockholders. We expect to continue such discussions prior to the 2021 Annual Meeting and, as a matter of policy and practice, foster and encourage engagement with our stockholders on an ongoing basis.
The Board provides a process for stockholders and all interested parties to send communications to the independent members of the Board, as described on our Investors website atinvestors.ae.com.
Stockholders wishing to communicate with the Board may send an email toboardofdirectors@ae.com or write to: American Eagle Outfitters, Inc. at our principal executive offices located at 77 Hot Metal Street, Pittsburgh, PA 15203, c/o the Corporate Secretary. Communications intended for a specific director or directors (such as the Lead Independent Director or independent directors) should be addressed to his, her or their attention c/o the Corporate Secretary at this address. Communications received from stockholders are provided directly to Board members following receipt of the communications (other than spam, junk mail, mass mailings, solicitations, resumes, job inquiries, or other matters unrelated to the Company).
During Fiscal 2018,2020, the Board met fivenineteen times and each member of the Board attended no fewer than 75% of the total number of meetings of the Board and of the Board Committee(s) on which such director served for the period of such service. It is our expectation, but not a requirement, that all current directors attend the Annual Meeting of Stockholders. All members of the Board then serving on the Board, except for one director who could not attend due to a medical reason,virtually attended our 20182020 Annual Meeting.
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CORPORATE GOVERNANCE |
An integral component of our Company culture is driving positive change without compromising who we are: a REAL brand that our customers and associates are proud to support. Our purpose is to show the world that there is REAL power in the optimism of youth. Throughout Fiscal 2020, we continued a strong emphasis on sustainability, philanthropy, and associate engagement, consistent with AEO’s REAL culture in the areas of human capital management – including I&D – as well as charitable giving and sustainability.
Human Capital Management
Our values of People, Innovation, Passion, Integrity, and Teamwork are the backbone of our Company and are at the center of every decision, every product and every interaction - they represent the foundation of our REAL culture. We all have a vital role to play in creating an environment in which everyone feels respected and empowered while we continue to grow as a community that promotes individuality and difference. We celebrate the diversity of one through the inclusion of many.
To evaluate our REAL culture, we look holistically at all the beliefs, values and behaviors that reflect how our best work is done. We aim to ensure that there is alignment between what is espoused and what is practiced. Our consistently positive culture internal employee satisfaction scores, exit survey data, and external Glassdoor ratings demonstrate the achievement of this goal.
Listening, Observing, Supporting, and Informing comprises our culture model by:
Listening to our associates, customers and candidates through reviews of culture surveys, exit surveys, Glassdoor reporting, LinkedIn responses, and hotline reporting; we also conduct open door engagement, Company-wide town halls, and roundtables on a periodic basis.
Observing who we are and what our associates are doing by studying our demographic data and turnover.
Supporting a positive Company culture through programs and processes that promote our strong values and address leadership development opportunities, work-life integration, well-being initiatives, fair pay initiatives, family support, and inclusion and diversity programs.
Informing and clearly communicating our values, modeling the behaviors we expect, and providing training and feedback.
Our Board plays an important role in the oversight of our talent and culture and devotes time each quarter to receiving updates from senior management on employee engagement, turnover, and retention, I&D, talent development, leadership, and succession planning initiatives.
During Fiscal 2020, we included I&D and health and safety objectives in our corporate annual incentive compensation goals, reinforcing the Company’s priorities to Protect our People.
Talent Management Programs
We utilize an integrated set of talent management tools and programs, rooted in our values that thread through the entire talent lifecycle. Consistent talent reviews, performance evaluations and succession planning have contributed to a full-time voluntary turnover rate, including our store associates, of approximately 19% for Fiscal 2020, which is consistent with our retail peer group and compares to a 24% five-year AEO average. We also have a full-time promotion rate of approximately 15% for Fiscal 2020. Associate development is supported through numerous programs, including AEO Academy, an online training platform that provides associates with continuous learning opportunities. Over 1,300 modules gained over 2.7 million views through this platform during Fiscal 2020.
Inclusion & Diversity
We believe that truly diverse workplace is a result of an inclusive culture. It is about more than simply bringing together people who are different; it is about celebrating what makes us REAL. Our values are at the center of every decision, product, and interaction. This means making sure that all people are respected and feel that being their authentic selves will not be a barrier to personal or professional fulfillment and growth.
We are a global company with people from many different backgrounds. In the U.S. alone, as of January 30, 2021, approximately 40% of our associates self-identified as a POC. Specifically, our U.S. population is approximately 59% White, 23% Hispanic, 9% Black, 4% Asian, 4% two or more races or other, and 1% not reported. Globally, 78% of our associates self-identified as women.
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We have three I&D pillars:
Hiring | Culture | Development | ||
Focuses on increasing the representation of diverse candidates and new hires by developing and executing inclusive recruitment and hiring practices and strategies. | Focuses on the continued development of an inclusive workplace through the expansion and support of associate groups, promoting educational opportunities, and building awareness around cultural celebrations and community partnerships. | Focuses on equipping our leaders and our associates with the necessary resources to create and maintain an inclusive workplace while advancing the careers of associates from historically marginalized groups. |
During Fiscal 2020, we believe that we made significant strides in I&D efforts, including:
Inclusive leadership and functional I&D trainings and incorporation of training and educational content into our Learning Management System;
Announcement of the Real Change Scholarship for Social Justice, a $5 million commitment created to advance educational opportunities for full- and part-time AEO associates, who are actively driving anti-racism, equality and social justice initiatives;
Appointment of the Company’s first Chief Inclusion & Diversity Officer;
Expanding on the ethnic diversity of our Board;
Implementation of a hiring policy designed to increase candidate and new hire diversity;
Outreach to HBCUs and Minority Student Groups through retail education and co-mentoring programs as well as the establishment with peers of a dedicated program to educate diverse students about career opportunities within the retail industry, the REP; and,
Inclusion of I&D progress in our Fiscal 2020 annual incentive plan metrics to drive accountability for our commitments.
Total Rewards
Our compensation and benefits programs serve to reinforce the Company’s values and culture and they work in tandem to deliver a competitive, equitable, and relevant overall package that supports, attracts and retains our talented teams.
Our compensation programs are designed to attract and retain highly skilled, performance-oriented associates who live our brands and embody the spirit of authenticity and innovation that we cultivate. We focus on delivering simple, straightforward compensation programs that our associates can easily understand ensuring that our teams are rewarded for delivering results is a key priority. We reinforce the importance of each individual’s contributions towards achieving our larger company goals and share in our success as a team.
We aspire to compensation decisions that are fair and equitable, consistently evaluating compensation through both an internal and external lens. We focus on internal pay equity and conduct regular benchmarking to ensure competitiveness to the external market.
Our compensation programs are composed of three key elements:
Competitive base pay rates, which are aligned to specific roles and skills, local market rates, and relevant experience;
Incentive bonuses for full-time associates that are structured to deliver financial rewards for the delivery of monthly, quarterly, or annual results; and
Annual stock awards for over 300 leaders throughout areas of the business, including the senior management team, that provide a commonality of interest between our leaders and stockholders.
We recognize that benefits are highly personal, and we offer a broad suite of benefits to our workforce, recognizing the varied needs and priorities of our associates. Our full-time associates have access to a variety of medical, dental and vision plan offerings, ensuring that associates can select plans that satisfy their individual and family needs. In the U.S., our largest market, we also offer the following benefits to our workforce:
We recognize the importance of many aspects of health and wellness and focus on plans that support physical, medical, and financial health. All associates have access to digital behavioral health therapy, a gym/online fitness discount program, AEO’s Employee Stock Purchase Plan, pet insurance, discounts on merchandise, and 401(k) benefits with Company match;
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All associates that are enrolled in our medical insurance have access to: 100% employer-paid behavioral telehealth and medical telemedicine to ensure consistent access to convenient care; behavioral health programs to support mental health; fertility management benefits for our associates who are focused on expanding their families; digital management programs for chronic conditions and digital physical therapy; prescription drug savings programs; and access to second opinions, surgical and medical decision support and claims advocacy; and
All full-time associates have the following additional employer-paid benefits: paid time off; life insurance, short-term and long-term disability insurance; well-being programs, inclusive of access to health coaches and lifestyle programs to assist with managing chronic conditions, nutrition, smoking cessation and weight loss; employee assistance programs; flexible spending accounts; benefits to support parents of children with disabilities and/or challenges brought forth by the pandemic; mobile apps for fertility, maternity, and parenting; support for nursing mothers on business travel; and additional caregiver programs.
In light of the COVID-19 pandemic, we introduced additional caregiver benefits to support those working at home and/or trying to support children attending school virtually by providing access to subsidized back-up care through calendar 2021.
Health and Safety
The health and safety of our workforce and customers is deeply rooted in our culture and business. Our response to the COVID-19 pandemic was immediate and deliberate. We put our people first and we implemented the following health and safety measures to care for our associates, customers and partners:
We instituted industry-leading safety protocols across our operations, including the procurement of masks and personal protective equipment (“PPE”) for all teams, the hiring of an AEO medical consultant, physical construction to enable social distancing mandates, temperature check stations, installing infrared lighting and air filtration systems in the distribution centers, new breakroom and cafeteria protocols, creating training and videos to explain new safety measures and expectations, and on-site nurses.
After temporary store closures in the spring, we drafted and deployed a comprehensive global store re-opening playbook (ensuring customer safety, managing capacity restrictions, reduced operating hours, curbside pickup, and touchless checkout).
During Fiscal 2020, we created the COVID-19 Associate Relief Fund to provide grants to eligible AEO associates who have been adversely impacted by COVID-19; distributed AEO Foundation grants to non-profits in local communities; and donated over $1 million nationally to COVID-19 relief efforts, including donating gift cards and more than one million masks to front-line workers in cities most in need.
Charitable Giving
We are committed to showing the world that there is REAL power in the optimism of youth by supporting causes that empower teens and young adults and by rolling up our sleeves to make a REAL difference in our communities.
In 1999, we established the AEO Foundation to maximize the impact of our efforts and to formalize our commitment to giving back. AEO Foundation board members and officers consist of associates across the organization who bring a wealth of knowledge and experience on charitable giving. Cary McMillan, a member of the AEO Board of Directors also joined the AEO Foundation Board in Fiscal 2019. Management provides updates quarterly to the Nominating Committee on various philanthropic topics and activities involving AEO and the AEO Foundation including national charity partnerships, customer engagement activations, major community initiatives, and associate activities.
In Fiscal 2020, AEO, the AEO Foundation, and our customers donated more than $5.4 million to causes that are important to our associates and customers.
Aerie continued to promote body acceptance as well as health and wellness among its customers through partnerships with the National Eating Disorders Association, Bright Pink and the Special Olympics’ Global Week of Inclusion:
Aerie proudly partnered once again with the National Eating Disorders Association to support prevention and reduce the stigma associated with eating disorders. Aerie’s 2020 campaign raised more than $200,000 through a limited-edition body confidence T-shirt with 100% of sales benefiting NEDA, customer donations in stores, and a $1 donation for every unretouched photo shared on social media with #AerieREAL.
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Fiscal 2020 marked the 11th year that Aerie has honored Breast Cancer Awareness Month and joined forces with Bright Pink, a non-profit dedicated to saving lives from breast and ovarian cancers by empowering women to be proactive about their health at a young age.
Aerie celebrated Special Olympics’ Global Week of Inclusion and raised $245,000 for Special Olympics via a limited-edition Better Together T-shirt with 100% of sales being donated and in partnership with customer donations.
American Eagle empowered its customers to support causes they care about including equality, the fight against hunger, voter registration and mental health.
In partnership with Aerie and the AEO Foundation, we pledged $500,000 in support to the NAACP Legal Defense and Educational Fund, Inc., which fights for criminal justice reform, voting rights protections, education equity, economic justice and an end to systemic bias and racism.
For Pride, we are proud to partner with It Gets Better Project, an organization that uplifts, empowers and connects LGBTQ+ youth around the world. Since our partnership launch in 2017, American Eagle and our customers have donated more than $1.8 million including sales of our AE Pride Collection.
During the holiday season, AE and Aerie partnered with Feeding America to help in the fight to end hunger. American Eagle, Aerie and our customers raised enough funds to provide more than 15.8 million meals to those in need.
In 2020, AE launched This Is Our Time, a campaign mobilizing customers and associates to register to vote in the presidential election. The initiative included a partnership with HeadCount, a non-partisan organization that uses the power of music to register young people to vote and participate in democracy. Thanks to support from AE and Aerie, HeadCount more than doubled its goal of voter registrations during this election cycle by registering more than 432,000 Americans to vote. In addition, AE, Aerie and our customers stepped up in a huge way by raising more than $400,000 to support Headcount’s work.
Throughout Fiscal 2020, we partnered with Crisis Text Line, a 24/7 support line for those in crisis, to help provide access to free, confidential support.
To commemorate the 50th anniversary of Earth Day, AE and Aerie partnered with One Tree Planted to underwrite and plant 5,000 trees. Together, with our AE and Aerie customers, we have enabled One Tree Planted to plant more than 160,000 trees across the U.S. and Canada since 2019.
COVID-19 Assistance
The COVID-19 pandemic impacted every person in our AEO family and in our communities. Together, with the AEO Foundation, American Eagle and Aerie, AEO has contributed more than $1 million to COVID-19 relief efforts and has donated more than one million facemasks. In addition, 2,200 American Eagle and Aerie gift cards were distributed to boost morale of medical personnel. The AEO Foundation established a COVID-19 Assistance Fund for associates and their family members who have been impacted by COVID-19. Additionally, the AEO Foundation issued grants and much needed protective masks and gloves to first responders and local medical centers in our distribution center communities.
Sustainability
Doing the right thing, continually innovating and caring about the global community are foundational to AEO’s culture.
Environmental
In Fiscal 2019, AEO introduced a comprehensive plan to be carbon-neutral in our own operations by 2030 with a commitment to water reduction, energy reduction, and the use of more sustainable raw materials as follows:
Achieve carbon neutrality in all of AEO’s owned and operated facilities (offices, stores, and distribution centers) and employee business travel by 2030.
Reduce carbon emissions 40% by 2030 and 60% by 2040 in AEO’s manufacturing from a 2018 base year.
Implement the following throughout the supply chain by 2023:
o | Increase the amount of water being recycled by our laundries to 50%. |
o | Reduce water usage in jeans production by 30%. |
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o | Ensure that wastewater from water-intensive facilities is free from hazardous chemicals. |
o | All cotton used in products will be 100% sustainably sourced. |
o | Use 50% sustainable polyester. |
o | Ensure that 100% of viscose is from non-endangered forests and increase sourcing of sustainably produced viscose fibers. |
AEO’s commitment to sustainability is ongoing and we will continue to:
Work together as an industry leader to build partnerships in order to contribute to broad changes within garment manufacturing.
Reduce the use of plastic in stores, offices, and throughout the supply chain, and shift to recycled plastic content where possible.
Strategically partner with industry initiatives and multi-stakeholder organizations to influence policy change.
Uphold a commitment to recycling and paper reduction in our owned facilities.
Encourage customers to reduce apparel waste through jeans recycling in American Eagle stores and bra recycling in Aerie stores.
During Fiscal 2020, we also shared that we:
• | Adopted a Climate Policy in December 2020 that can be found at www.aeo-inc.com/sustainability/; |
Joined RE100, a global initiative run by The Climate Group in partnership with CDP that brings together industry-leading businesses committed to the use of renewable power;
Signed the UN Fashion Industry Charter for Climate Action to drive the fashion industry to net-zero emissions no later than 2050;
Developed Science Based Targets (greenhouse gas reduction goals aligned with climate science) and submitted these targets to the SBTi, an NGO consortium that validates company commitments; and
Launched REAL GOOD, an offering of the most sustainable items in our collection.
Supply Chain
We are also committed to responsibly sourcing and creating the products that our customers love to wear. During Fiscal 2020, we launched REAL GOOD, an offering of the most sustainable items in our collection. Real Good styles include feel-good, good for the planet materials that have been sustainably produced and/or sourced, such as: recycled polyester; recycled nylon; and cotton that’s recycled, organic and/or sustainably sourced through the Better Cotton initiative. Real Good jeans are made in factories that meet expectations for our Water Leadership Program. Those expectations include water reduction and management, wastewater without restricted or hazardous chemicals, and water recycling. Our jeans factories are saving more than one billion gallons of water each year and we’ve used the equivalent of sixty million plastic bottles through recycled polyester.
We are dedicated to the highest level of social responsibility. Our Vendor Code of Conduct is based on international labor standards and implemented in all of our manufacturing facilities. We believe that our compliance program focus should be about engagement and capacity building, and not just strictly following the law. We are members of the Accord on Fire and Building Safety in Bangladesh and have worked with our suppliers and factories there to improve safety conditions, and have taken that experience to focus deeply on safety in other countries. We have conducted worker surveys in many of our strategic factories in order to hear from workers directly and understand their needs and concerns and ensure that their voices can also be heard by factory management. Finally, we have invested, with our factories, in the HERproject, a program that focuses on training women on health, financial planning, and gender equality.
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ESG Oversight Structure
The full Board ensures that the ESG risks and opportunities are integrated into the Company’s long-term strategy. Each of the Committees has responsibility for the oversight of our ongoing ESG-related activities as outlined below and provide regular reports to the full Board.
ENVIRONMENTAL | SOCIAL | GOVERNANCE | ||
Climate change (NGCSR) | Culture / Workplace Inclusion and Diversity (AC) | Executive compensation (CC) | ||
Energy management (NGCSR) | Human Capital Management (CC ) | Business Ethics (AC) | ||
Water use and sourcing (NGCSR) | Human Rights (NGCSR) | Compliance (AC) | ||
Natural resources scarcity (NGCSR) | Health and Wellness (CC) | Board Structure (NGCSR) | ||
Environmental impact of product portfolio (NGCSR) | Product Safety (NGCSR) | Board composition and diversity (NGCSR) | ||
Emissions (NGCSR) | Labor Practices (CC) | Shareholder rights (NGCSR) | ||
Raw material sourcing(NGCSR) | Privacy and Data Security (AC) | Anti-Corruption, Bribery (AC) | ||
Packaging material and waste (NGCSR) | Charitable Giving (NGCSR) |
✓ | Audit Committee (AC) |
✓ | Compensation Committee (CC) |
✓ | Nominating, Governance and Corporate Social Responsibility Committee (NGCSR) |
We have a Related Party Transaction Policy (the “Policy”) to allow us to identify, document, and properly disclose related party transactions. The Policy applies to our directors and executive officers, as well as all associates who have authority to enter into commitments on behalf of the Company. Under the Policy, a related party transaction is any transaction to which we or any of our subsidiaries is a participant and in which a related party has a direct or indirect material interest. Examples of transactions include without limitation, those for the purchase or sale of goods, the provision of services, the rental of property, or the licensing of intellectual property rights. Additionally, ifthe following constitute related party transactions: (1) transactions where a related party or a member of such related party’s immediate family is a supplier of goods or services, or owns or is employed by a business that supplies us; or if(2) the employment of a member of such related party’s immediate family is employed by us; or if(3) an applicable related party servesparty’s service on the board of directors of a business that supplies goods or services to us, that transaction is a related party transaction.us. Certain related party transactions must be approved in advance by the Audit Committee if they involve a significant stockholder, director, or executive officer. All other related party transactions must be disclosed in writing to, and approved in advance by, our General Counsel and our Chief Financial Officer. Each quarter, each individual covered by the Policy is required to provide a certification regarding the existence ofcertify that any related party transactions which have nottransaction has been fully and accurately disclosed in our filings with the SEC.
In the ordinary course of business, we have entered into agreements with affiliates of Jay L. Schottenstein, our Executive Chairman of the Board and Chief Executive Officer. We believe that each of these agreements is on terms at least as favorable to us as could be obtained in an arm’s length transaction with an unaffiliated third party. The material terms of these transactions are described below. In each case, the transaction was approved in advance by the Audit Committee in accordance with our Policy.
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Leases
During Fiscal 2016, we entered into a store lease for an AE flagship store in Las Vegas with SG Island Plaza LLC (“SG Island Plaza”), an entity in which an affiliate of Mr. Schottenstein has a 25% interest. Pursuant to that lease, we incurredpaid rent and other expenses (net of COVID-19 rent abatements) of approximately $2.7$2.5 million during Fiscal 2018.2020. In addition to these charges, we also may incur an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. The Company did not incur any such percentage rent payments related to this lease in Fiscal 2018.2020. The lease expires in September 2027.
In April 2018, we entered into a store lease for an Aerie store in Las Vegas with SG Island Plaza. Pursuant to that lease, we expect to paypaid rent together withand other expenses (net of COVID-19 rent abatements) of approximately $1.6$1.5 million annually (subjectduring Fiscal 2020. In addition to annual adjustments), in addition tothese charges, we also may incur an annual payment equal to a percentage of the applicable store’s gross sales in excess of specified thresholds. We incurred rent and other expenses under the lease of approximately $0.5 million during Fiscal 2018. The Company did not incur any such percentage rent payments related to this lease in Fiscal 2018.2020. The lease expires in January 2029.
During Fiscal 2020, we entered into leases for three open air lifestyle stores with wholly owned subsidiaries of Schottenstein Realty LLC, an affiliate of Mr. Schottenstein. Pursuant to the leases, we incur rent equal to 5% of the applicable store’s gross sales plus other expenses. An immaterial amount of rent was incurred for these leases during Fiscal 2020 due to the stores opening just prior to year end. The Company currently anticipates that rent incurred from these leases will exceed $120,000 during Fiscal 2021. These leases have terms expiring in January 2023 and January 2026 and each has a renewal option.
Agreement for Media ServicesSujatha Chandrasekaran
The Company has an agreement with Retail Entertainment Design, LLC (“R.E.D.”)
Steven A. Davis
Deborah A. Henretta
Thomas R. Ketteler
Cary D. McMillan
Janice E. Page
David M. Sable
Noel J. Spiegel
In particular, the Board affirmatively determined that none of these directors had relationships that would cause them not to be independent under the specific criteria of Section 303A.02 of the NYSE Listed Company Manual. The Board also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE listing standards and applicable SEC rules, and considered the additional factors under the NYSE listing standards relating to members of the Compensation Committee before determining that each member of the Compensation Committee is independent.
In making these determinations, the Board took into account all factors and circumstances that it considered relevant, including the following:
Whether the director is currently, or at any time during the last three years was, an employee of the Company or any of its subsidiaries;
Whether any immediate family member of the director is currently, or at any time during the last three years was, an executive officer of the Company or any of its subsidiaries;
Whether the director is an employee or any immediate family member of the director is an executive officer of a company that has made payments to, or received payments from, the Company or any of its subsidiaries for property or services in an amount that is in excess of the greater of $1 million, or 2% of such other company’s consolidated fiscal gross revenues in the current year or any of the past three fiscal years;
Whether the director is an executive officer of a charitable organization that received contributions from the Company or any of its subsidiaries in the past three years in an amount that exceeds the greater of $1 million, or 2% of the charitable organization’s consolidated gross revenues;
Whether the director or any of the director’s immediate family members is, or has been in the past three years, employed by a company that has or had, during the same period, an executive officer of the Company on its compensation committee;
Whether the director or any of the director’s immediate family members is, or has been in the past three years, a partner or employee of the Company’s independent registered public accounting firm; and
Whether the director or any of the director’s immediate family members accepted any payment from the Company or any of its subsidiaries in excess of $120,000 during the current fiscal year or any of the past three fiscal years, other than compensation for Board or board committee service and pension or other forms of deferred compensation for prior service.
Mr. Schottenstein is not independent because he is an executive officer of the Company. See “Related Party Transactions” for information regarding our policy on related party transactions and transactions with affiliates of Mr. Schottenstein, who is our sole employee director.
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The current leadership structure of our Board consists of a combined Executive Chairman and Chief Executive Officer position that is held by trusts for which Mr. Schottenstein and a Lead Independent Director appointed annually by the independent directors. The Board has determined that combining the positions of Executive Chairman and Chief Executive Officer is most appropriate for the Company at this time. Having Mr. Schottenstein in this combined position provides unified leadership and direction to the Company and strengthens his ability to develop and implement strategic initiatives. His duties include presiding over meetings of the Board, setting meeting agendas and schedules of the Board in collaboration with the Lead Independent Director, and providing strategic insight and guidance to the Board. Our Board believes that the current Board composition, along with an emphasis on Board independence, provides effective independent oversight of management. Mr. Spiegel served as our Lead Independent Director for Fiscal 2020.
Our Corporate Governance Guidelines establish robust and well-defined duties for our Lead Independent Director. Our Board’s support of the current leadership structure is premised on these duties being transparently disclosed, comprehensive in nature, and actively exercised. The Lead Independent Director is responsible for:
Presiding over the meetings of independent directors;
Serving as a liaison between the Executive Chair and independent directors;
Having input on information sent to the Board;
Collaborating with the Executive Chair on meeting agendas for the Board; and
Approving meeting schedules to ensure that there is sufficient time for discussion of all agenda items.
The Lead Independent Director also has the authority to call meetings of the independent directors, and, if requested by major stockholders, is available, when appropriate, for consultation and direct communication with our stockholders. We believe that this leadership structure provides our Board with the greatest depth of leadership and experience, while also providing independent oversight of the Company. Mr. Spiegel also meets regularly with members of Management across the Company between Board and Committee meetings.
Meetings of Independent Directors
The Board’s policy is to have the independent directors meet separately in executive session in connection with each regularly scheduled Board meeting (at least four times annually). During each meeting of the independent directors, the Lead Independent Director will preside and lead the discussion.
Self-Assessments
We annually evaluate the performance of the Board and its Committees. The Board believes it is important to assess both its overall performance and the performance of its Committees, and to solicit and act upon feedback received, where appropriate. As part of the Board’s self-assessment process, directors consider various topics related to Board composition, structure, effectiveness, and responsibilities, as well as the overall mix of director skills, experience, and backgrounds.
Director Education/Orientation
Our Board believes that director education is vital to the ability of directors to fulfill their roles, and supports Board members in their continuous learning. The Board encourages directors to participate annually in external continuing director education programs, and we reimburse directors for their expenses associated with this participation. Our directors also attend professional development forums and industry-leading conferences convened by the NACD, external accounting firms, and retail/brand organizations focused on topics that are relevant to their duties as a director. Continuing director education is also provided during Board meetings and other Board discussions as part of the formal meetings, and as stand-alone information sessions outside of meetings. In March 2020 we held a two-day educational program covering topics such as business developments and strategy, sustainability, evolving retail trends, and leadership. Throughout Fiscal 2020, our Board participated in roundtable discussions with our advisors on topics including governance matters, executive compensation, regulatory developments, and workplace culture and anti-harassment. The Board also participated in learning opportunities with management on numerous subjects, including those related to our stockholder engagement activities, regulatory developments, technology, crisis management, and cybersecurity matters.
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All new directors also participate in our director orientation program during their first six months on our Board. The Board believes that it is important for each newly elected director to have an understanding of our Company, the specialty retail industry, and his or her duties as a director. We provide this initial information through a combination of reference materials, formal meetings with business leaders and in years past, tours of our facilities/store locations. The orientation program is designed to familiarize new directors with the Company’s businesses, strategies and challenges. We believe this on-boarding approach over the first six months of Board service, coupled with participation in regular Board and Committee meetings, provides new directors with a strong foundation in our Company’s businesses, connects directors with members of management with whom they will interact and oversee, and accelerates their effectiveness to engage fully in Board deliberations.
The Board has a standing Audit Committee, a standing Compensation Committee and a standing Nominating Committee. These Committees are governed by written charters, which were approved by the Board and are available on our Investors website at investors.ae.com.
The following sets forth Committee memberships as of the date of this Proxy Statement.
Director | Audit Committee | Compensation Committee | Nominating Committee | |||
Jay L. Schottenstein,
| — | — | — | |||
Sujatha Chandrasekaran | ||||||
Steven A. Davis | ||||||
Deborah A. Henretta | ||||||
Thomas R. Ketteler | ||||||
Cary D. McMillan | ||||||
Janice E. Page | ||||||
David M. Sable | ||||||
Noel J. Spiegel, Lead Independent Director |
= Member | = Committee Chair | = Audit Committee Financial Expert |
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