Preliminary Proxy Statement |
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| ☐ | Definitive |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
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2024 NOTICE AND PROXY STATEMENT AVERY DENNISON
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
| RECORD DATE | February 26, 2024 | |
| MEETING DATE | April 25, 2024 | |
| MEETING TIME | 2:30 p.m. Eastern Time | |
| MEETING FORMAT | Virtual at www.virtualshareholdermeeting.com/AVY2024 | |
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Section III 2021 Notice and Proxy Statement
NOTICE OF ANNUALMEETING OF STOCKHOLDERS
MEETING AGENDA
ITEMS OF BUSINESS FOR STOCKHOLDER VOTE | ||
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| 4 | Ratification of the appointment of | |
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Our Board recommends that you vote FOR each of our nine10 director nominees in Item 1 and FOR Items 2, 3 and 3.4.
Stockholders of record as of February 22, 202126, 2024 are entitled to notice of, and to vote during,in connection with, the meeting and any adjournment or postponement thereof. This notice and our definitive proxy materialsstatement are being distributedfirst mailed or made available to stockholders on or about March 8, 2021.[●], 2024.
We want your shares to be represented and voted.voted. We encourage you to vote promptly as this will save us the time and expense of additional proxy solicitation. As shown on the right,below, you can vote online, by telephone, by mail or, in certain circumstances, during the meeting.
On behalf of theour Board of Directors, management and employees of Avery Dennison,team members worldwide, thank you for your continued support.investing in us and our company. We look forward to talkingengaging with you during the virtual Annual Meeting.
By Order of the Board of Directors,
Vikas Arora
Vice President, Associate General Counsel and
Corporate Secretary
March 5, 2021
Online
You can vote online at www.proxyvote.com by 11:59 p.m. Eastern Time on April 21, 2021. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Telephone
In the U.S. and Canada, you can vote by calling 1.800.690.6903 by 11:59 p.m. Eastern Time on April 21, 2021. You will need the 16-digit control number on your Notice of Internet Availability or proxy card.
By Mail
You can vote by mail by completing, dating and signing your proxy card and returning it in the postage-paid envelope or otherwise to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.
During Meeting
Unless your shares are held through our Employee Savings Plan, you can vote during the Annual Meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting.
| ONLINE | | BY TELEPHONE | | BY MAIL | | DURING MEETING | |||||||||
| You can vote online using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | In the U.S. and Canada, you can vote by telephone using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | You can vote by mail by completing, dating and signing your proxy card or voting instruction form and returning it in the accompanying postage-paid envelope. | Registered holders can vote during the meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting. Shares held through our Employee Savings Plan may not be voted during the meeting. | ||||||||||||
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This proxy summary contains highlights of information described in greater detail in other parts ofincludes key messages related to this proxy statement and does not contain all the information you should consider before voting. We strongly encourage you to read the entire proxy statement before voting.
DISTRIBUTION OF PROXY MATERIALSINFORMATION REGARDING ANNUAL MEETING
Distribution of Proxy Materials
We will mailbegin mailing our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials online and vote your shares, on or about March 8, 2021.[●], 2024. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will mail you a proxy card and our 20202023 integrated financial and sustainability report (our “2023 Integrated Report”), which includes a letter to stockholders from our Chairman, President and President/Chief Executive Officer;Officer (CEO); a description of our 2020 annual report;businesses, stakeholders and values; highlights of our strategies, financial performance and sustainability progress; our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (our “2023 Annual Report”); and the notice and proxy statement for the 2021our 2024 Annual Meeting of Stockholders (the “Annual Meeting”); information regarding our businesses, financial achievements.
Time, Date and continued progress as it relates to environmental, social and governance (ESG) matters; and a proxy card, on or about March 8, 2021.Format of Annual Meeting
TIME, DATE AND FORMAT OF ANNUAL MEETING
The Annual Meeting will take place at 1:2:30 p.m. PacificEastern Time on April 22, 2021. Due 25, 2024. To allow stockholders to continued public health concerns about in-person gatherings givenattend without the coronavirus/COVID-19 pandemic (“COVID-19”), particularlytime and expense of doing so in Los Angeles County, California,person, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2021AVY2024 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials, proxy card or proxy card.voting instruction form.
TheOnline access to the live audio webcast of the Annual Meeting will begin promptly. Online access will open at 1:2:15 p.m. PacificEastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the meeting in advance of its start time as we plan to begin the start time.meeting promptly. For additional instructions on how to attend the virtual Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
ITEMS BEING VOTED ON DURING ANNUAL MEETINGItems Being Voted on During Annual Meeting
You are being asked to vote on the items of business shown below during the Annual Meeting. Our Board of Directors (our “Board”) recommends that you vote FORfor each of our 910 director nominees and FOR the other two items being brought before the stockholder vote.for Items 2, 3 and 4.
Item | Board Recommendation | Vote Required | Discretionary Broker Voting | Page Reference | ||||||||||||||||||||
ITEM OF BUSINESS | BOARD RECOMMENDATION | VOTE REQUIRED | DISCRETIONARY BROKER VOTING | PAGE | ||||||||||||||||||||
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| 1 | Election of directors |  | FOR each nominee | Majority of votes cast | No | 38 | Election of directors |  | FOR each nominee | Majority of votes cast |
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| 2 | Advisory vote to approve executive compensation | | FOR | Majority of shares represented and entitled to vote | No | 48 | ||||||||||||||||||
2 | Advisory vote to approve executive compensation | | FOR
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| 3 | Ratification of appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year 2021 | | FOR | Majority of shares represented and entitled to vote | Yes | 91 | ||||||||||||||||||
| 3 | Approval of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to provide that stockholders holding 25% of outstanding common stock have the right to request that we call special meetings of stockholders | | FOR | Majority of shares outstanding | No | 94 | ||||||||||||||||||
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| 4 | Ratification of appointment of PwC as our independent registered public accounting firm for FY 2024 | | FOR | Majority of shares represented and entitled to vote | Yes | 96 | ||||||||||||||||||
VOTING PRIOR TO OR DURING ANNUAL MEETINGVoting Prior to or During Annual Meeting
You may vote your shares by submitting a proxy at www.proxyvote.com in advance of the Annual Meeting online, by telephone or votingby mail; only in certain circumstances may you vote during the meeting at www.virtualshareholdermeeting.com/AVY2021.meeting. If you holdare a registered stockholder who has not previously voted or wants to change your shares in “street name,”vote, you may vote during the Annual Meeting. Beneficial holders may only vote during the meeting only if youthey properly request and receive a legal proxy in yourtheir name from the broker, bank or other nominee that holds yourtheir shares. Shares held through our Employee Savings Plan may not be voted during the meeting. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy in advancepromptly by following the instructions on your Notice of the meeting as described in the Voting and Meeting Q&A sectionInternet Availability of thisProxy Materials, proxy statement.card or voting instruction form.
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Asking Questions During Annual Meeting
ASKING QUESTIONS DURING ANNUAL MEETING
We have designed the format of thevirtual Annual Meeting to ensure that stockholders are affordedyou have the same rights and opportunities to participate as theyyou would at an in-person meeting, using with an easy-to-use online toolsplatform that allow stockholdersallows you to attend, vote and participate.ask questions. After the business portion ofwe have finished acting upon the Annual Meeting concludesitems of business and the meeting is adjourned, our Chairman/CEOExecutive Chairman will lead a Q&A session during which we intend to answer all questions submitted on the day of or during the meetingtimely that are pertinent to our company andor the items being brought before stockholder vote. Answers to any questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. For additional information on submittinghow to submit questions during the Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
OUR COMPANY
We are a global materials science and digital identification solutions company specializing in the design and manufacture ofthat provides a wide varietyrange of branding and information solutions that optimize labor and supply chain efficiency, reduce waste, advance sustainability, circularity and transparency, and better connect brands and consumers. Our products and solutions include labeling and functional materials. materials, radio frequency identification (RFID) inlays and tags, software applications that connect the physical and digital, and a variety of products and solutions that enhance branded packaging and carry or display information that improves the customer experience. We serve an array of industries worldwide, including home and personal care, apparel, general retail, e-commerce, logistics, food and grocery, pharmaceuticals and automotive.
Our products, which are used in nearly every major industry, includecompany is composed of two reportable segments, Materials Group and Solutions Group. Materials Group is a leading provider to pressure-sensitive materials for label and graphic applications; tapesgraphics industries worldwide. Our innovative products include label materials, graphics and otherreflective materials and functional bonding materials, such as tapes. Our label materials enhance shelf appeal for brands, inform shoppers, advance circularity, increase transparency, help reduce waste and improve operational supply chain efficiency. Our graphics portfolio offers highly engineered materials that range from vehicle wraps to architectural films. Materials Group plays a key role in advancing our fast-growing Intelligent Labels business, providing the materials science capabilities and process engineering expertise essential to developing and manufacturing intelligent labels at scale.
Solutions Group is a leading global provider of information and branding products and solutions for industrial, medicalthat cover a breadth of customer needs from digital identification and data management, branding and embellishment, as well as productivity, pricing and retail applications; tags, labelsmedia. We empower customers across multiple retail and embellishments for apparel;industry segments to connect the physical and radio-frequency identification (RFID)digital, leveraging our industry-leading RFID solutions. Our technology addresses complex customer challenges, provides transparency and visibility across supply chains, improves labor and waste efficiency, and enables better consumer experiences at the point of purchase and beyond. Market segments served include the global apparel, logistics, food and grocery, and general retail industries. As a large ultra-high frequency RFID solutions serving apparelprovider, we leverage our innovation and other markets. We employ more than 32,000 employeesdata management capabilities, global footprint and market access in more than 50 countries.the ongoing advancement of our Intelligent Labels business.
STRATEGY OVERVIEW
We are committed to ensuring the continuinglong-term success of all our stakeholders. In a challenging 2020 due to – our customers, investors, employees and communities. Over the extraordinary impact of COVID-19,past five years, we have focused on ensuring the healthdelivering to our potential by managing through macro volatility while evolving our aspirations. In 2023, we evolved our long-term strategies as shown below, adding a vital new one that reflects our growing Materials and well-beingSolutions connected capabilities and combining two of our employees, delivering forformer strategies into one.
Drive outsized growth in high-value product categories through market-driven innovation
Grow profitably in our customers, minimizingbase businesses
Lead at the impactintersection of the pandemic-driven recessionphysical and digital
Effectively allocate capital and relentlessly focus on productivity
Lead in an environmentally and socially responsible manner
Our customers are increasingly looking for our investors,help solving some of the most complex industry challenges, including labor efficiency and supporting our communities, while continuingsupply chain effectiveness; waste reduction, circularity and transparency; and better connection between brands and consumers. We believe that physical items will need a digital identity to invest insolve these challenges, and that we are well-positioned to help the long-term successindustries we serve overcome them. Our vision is to leverage the strengths of our company. We have refined how we present our key strategies shown belowMaterials and onSolutions businesses to lead at the following page, but our areasintersection of strategic focus are consistent with recent years.the physical and digital.
| 2024 Proxy Statement | Avery Dennison Corporation |
We plan to realize this vision through segment leadership, market-driven innovation, and advancement of integrated digital solutions, leveraging our Intelligent Labels business. Our areas of focus address key megatrends that present both risks and opportunities for our company as we seek to help our customers navigate the increasingly digital world and operate more sustainably.
Our strategies prioritize using our market insights, driving long-term innovation and enhancing the digital capability of our teams, while continuing to execute well in the core businesses that have been key to our success. Our five strategic pillars and 2023 achievements are shown below.
STRATEGIC PILLARS
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Drive outsized growth in high-value categories through market-driven innovation
We striveaim to increase, both organically and through acquisitions, the proportion of our portfolio in high-value products and solutions, both organically and through acquisitions; high-value categories that serve markets that are growing faster than gross domestic product (GDP), represent large pools of potential profit and leverage our core capabilities,capabilities. These products and solutions include our Intelligent Labels that use RFID tags and inlays, specialty and durable label materials, graphics and reflective solutions, industrial tapes, intelligent labels that use RFID tags and inlays, and external embellishments
In 2020, organic sales change in high-value product categories outpaced that of our base businesses by more than one point, driven by growth in specialty labels, external embellishments, and RFID; also advanced our RFID platform through our acquisition of the Transponder (RFID inlay) division of Smartrac, a manufacturer of RFID products (which we refer to as “Smartrac”)shelf-edge pricing, productivity and consumer engagement solutions.
| • | In 2023, we continued to increase the proportion of our portfolio in high-value product categories, with significant organic growth in Intelligent Labels, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions, and the acquisition of three companies that expand the external embellishment capabilities in our Solutions Group. Over the past five years, we more than doubled the size of our Intelligent Labels business, with net sales of ~$850 million in 2023. |
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Grow profitabilityprofitably in our base businesses
We strive to improve profitability in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies
In 2020, we protected, and even grew, operating margins in our base businesses
| • | We strive to grow profitably in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies. |
| • | In 2023, we protected margins in our base businesses through product reengineering and productivity actions to mitigate the impact of lower volume as the industries we serve experienced significant inventory destocking. |
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Focus relentlessly on productivityLead at the intersection of the physical and digital
We employ product reengineeringconnect the physical and enterprise lean sigmadigital, leveraging the core capabilities of our Materials and Solutions businesses to expandhelp our operating margins, enhance our competitiveness (particularly in our base businesses)customers optimize labor efficiency and provide a funding source for reinvestment
In 2020, we significantly expanded operating margins, showing agility in response to COVID-19 by delivering approximately $200 million of cost reduction through both structuralsupply chain effectiveness, reduce waste, advance circularity and temporary actionstransparency, and better connect brands with consumers.
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Effectively allocate capital and relentlessly focus on productivity
We balance our investmentscapital investment in organic growth, productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases
In 2020, leveraging our and ensure that we maintain a strong balance sheet with ample capacity to invest. In addition, we invested nearly $220 million in capital expenditurestake actions to support organic growth; completed two acquisitions;restructure our operations from time to time and increaseduse product reengineering and enterprise lean sigma principles to expand our quarterly dividend rate by 7% in October after having maintained it earlier in the yearmargins, enhance our competitiveness and resumed repurchase of shares in Q3 after having suspended it in March, in each case due to then-uncertain impact of COVID-19 on our businessesprovide a funding source for reinvestment.
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Lead in an environmentally and socially responsible manner
We work to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive culture; maintain a culture of health and safety; and support our communities primarily through the Avery Dennison Foundation
In 2020, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in innovation platforms focused on recyclability/enabling circularity and waste reduction/elimination; redoubling our efforts to drive sustainable change in diversity and inclusion, including by sharpening our focus on racial/ethnic workforce diversity, particularly in the U.S.; and contributing $10 million to the Avery Dennison Foundation to significantly increase the scope and pace of its grantmaking in the communities in which we operate
PERFORMANCE HIGHLIGHTS
COVID-19 Response
Our top priority in 2020 given the continuing public health crisis of COVID-19 was the health, safety and well-being of our employees, followed immediately by delivering for our customers. To minimize the impact of the pandemic-driven recession on our investors, we worked to mitigate the impact of COVID-19 on our supply chain, as well as ensure we maintained a strong balance sheet and financial flexibility as we confronted uncertain capital markets. We also took several actions to support our communities during this difficult time. The actions we took in response to COVID-19 are described in the chart on the following page.
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Lead in an environmentally and socially responsible manner
We aim to advance the environmental sustainability of our company and value chain by delivering innovations that advance the circular economy, reducing the environmental impact of our operations, and offering value-creation opportunities for our customers. We also seek to make a positive social sustainability impact by building a more diverse workforce and inclusive and equitable culture, maintaining operations that promote health and safety, and supporting our communities.
Supply Chain Risk
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Strong 2020
With these strategies in mind, our near-term priorities are to deliver on our high-value growth initiatives; achieve our financial objectives for the first half of the year; deepen our ecosystem engagement and expand our M&A pipeline; accelerate sustainability-related and digital innovation; and expand organizational capability in both Materials and Solutions.
PERFORMANCE HIGHLIGHTS
2023 Performance
In 2020,Although a lower demand environment driven primarily by consistently executingsignificant inventory destocking downstream from our strategies,company led to a challenging 2023, we delivered sequential improvement each quarter during the year and continued to proveadvancement in key growth areas such as Intelligent Labels. Market conditions were significantly worse than we initially anticipated, which resulted in our resilience across business cycles, delivering a year of strong earnings per share (EPS) growth, significant operating margin expansionnot realizing our annual performance expectations. Demonstrating strength and record free cash flow, despiteresiliency, we navigated the challenging macroeconomic environment, caused by COVID-19. These results reflectedprotecting margins; improving service for our customers; deepening our insights into the extraordinary efforts undertaken bydrivers of demand and inventory throughout our leadersvalue chain; continuing to shift our product portfolio toward high-value categories, particularly Intelligent Labels; and teams globally to respond to COVID-19generating strong cash flow. By leveraging our core strengths of productivity, cost management and mitigate itscapital stewardship and expanding our potential in intelligent label solutions, we mitigated the impact of the lower volume environment on our company. Although we could not have predicted the pandemic, our performance in its face evidences our rigorous scenario planning, which has enabled us to be prepared for a wide range of macroeconomic scenarios. We advanced all our key strategies and delivered strong performance, reflecting the preparedness and agility of our team members worldwide, who came together to help us navigate one of the most challenging periods in our company’s history.bottom line.
Our strong performance in fiscal year 2020 reflects the strength of our markets, our industry-leading positions, the strategic foundations we have laid, and our talented team. Our keyKey financial achievementsresults for the year are described below and onshown below.
| • | Net sales of $8.4 billion, down 7.5% from $9.0 billion in 2022, reflecting lower volume primarily as a result of inventory destocking |
Excluding the following page.
• Reported net sales of $6.97 billion, down 1.4% from prior year due to impact of COVID-19, with growth rebounding in 2H from its low in Q2, and roughly one-point benefit from extra week in 2020 fiscal year
• Excluding impact of currency, sales declined 1.7% due6.9%
| • | Reported earnings per share (EPS) decreased from $9.21 in 2022 to $6.20 in 2023 |
Adjusted EPS decreased 13.7% from $9.15 to impact of COVID-19; sales on organic basis declined$7.90, primarily reflecting lower volume, partially offset by 3.4%. Sales declined slightly in our Labelproductivity and Graphic Materials (LGM) reportable segment, where increase inrestructuring actions
| • | With net cash provided by operating activities of $826.0 million, delivered adjusted free cash flow of $591.9 million; adjusted free cash flow conversion, meaning the proportion of net income we were able to convert to cash, was more than 100% |
| • | On net income of $503.0 million, achieved return on total capital (ROTC) of 12.4% |
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• Reported EPS substantially increased from $3.57 in 2019 to $6.61 in 2020, reflecting prior-year settlement charges resulting from U.S. pension plan termination and significant operating margin expansion in 2020
• Adjusted EPS increased 8% from $6.60 to $7.10, driven by operating margin expansion; adjusted EPS was at high end of $6.90 to $7.15 annual guidance range provided to investors in January 2020
• With reportednet cash provided by operating activities of $751.3 million, delivered record free cash flow of $547.5 million, exceeding 2020 goal of $500+ million
• On reported net income of $555.9 million, achieved return on total capital (ROTC) of 18.1%
Sales change excluding the impact of currency (sales change ex. currency), organic sales change, adjusted EPS, adjusted free cash flow and ROTC – as well as organic sales change, adjusted earnings before interest, taxes depreciation and amortization (EBITDA) and adjusted EBITDA margin, which are used later in this proxy statement – are supplementalnon-GAAP financial measures that we use internally and provide to assist investors in assessing our performance, operating trends and operating trends.liquidity. These measures are defined, qualified and reconciled from generally accepted accounting principles in the United States of America (GAAP) in the last sectionAppendix A of this proxy statement. These non-GAAP financial measures are not a substitute for or superior to the comparable financial measures under GAAP.
The fundamentals of our business shown below continue to provide us with significant competitive advantage.
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AchievingWe are exposed to diverse and growing end markets, with catalysts for long-term growth
We are industry leaders in our primary businesses, with strength in scale and innovation
We have a clear set of strategies that have been key to our success over the long term across a wide range of business cycles
We are uniquely positioned to connect the physical and digital to help address some of the most complex problems facing the industries we serve
Progress Toward 2025 Financial Targets
In March 2017,2021, we announced five-yearfinancial goalstargets through 2021, including2025. Given the challenges we experienced in 2023, our progress toward these long-term targets for compound annual organic salesslowed during the year; however, we expect significant progress in 2024 as label and apparel markets rebound and growth 2021 GAAP operating margin, compound annual adjusted EPSin our Intelligent Labels business accelerates. We believe that our strategies, together with our team’s ability to execute in various environments, will allow us to continue generating long-term value creation through a balance of GDP+ growth and 2021 ROTC. The combination ofstrong returns, as we unlock significant growth opportunities and our growth and ROTC targets is a proxy for growth in economic value added (EVA), one of the performance objectives used in our long-term incentive (LTI) program. As shown below, based on our results for the first four years of this five-year period, we are largely on track to achieve these commitments. Our 2017-2020 compound annual organic sales growth of 2.0% was lower than our top-line target, but higher than forecasted global GDP growth (a key tenet of our top-line objective) of 1.5% over the same period.core businesses rebound.
For the 2017-2020 period,In 2021-2023, on a four-yearthree-year compound annual basis (with 20162020 as the base period), GAAP reported net sales and reported EPS increased by 3.5% and 16.9%6.3%, respectively, and reportedwhile GAAP operating income, net income increasedand EPS decreased by 14.7%1.1%, 3.3% and 2.1%, respectively. GAAP reported operating margin in 2023 was 9.4%.
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Effective Capital Allocation
We have been consistently effective in executing our approach to capital allocation, balancing our investments in organic growth, productivity, and acquisitions and venture investments with continuing to return cash to stockholders through dividends and share repurchases. In 2020, on net income of $555.9 million, we invested $218.6 million in capital expenditures to support our future growth and further productivity improvement and allocated $350.4 million to acquisitions and venture investments; we also paid $196.8 million in dividends and repurchased $104.3 million in shares of our common stock.
We have invested in our businesses to support organic growth and pursued complementary and synergistic acquisitions. Our spending on capital expendituresacquired companies that expand our capabilities in 2020 was 15% lower than 2019 but consistent with our externally communicated outlook for the year, during which we acceleratedhigh-value product categories, increase our pace of innovation and advance our sustainability priorities. Our fixed and IT capital spending in 2023 of $285.1 million was comparable to 2022, reflecting our continued investment in high-value categories, particularly RFID.our Intelligent Labels business. During the year, we acquired Thermopatch, Inc. (“Thermopatch”), a New York-based manufacturer specializing in labeling, embellishments and transfers for the sports, industrial laundry, workwear and hospitality industries; LG Group, Inc. (“Lion Brothers”), a Maryland-based designer and manufacturer of apparel brand embellishments; and Silver Crystal Group (“Silver Crystal”), a Canada-based provider of sports apparel customizations and application solutions across in-venue,direct-to-business and e-commerce platforms; together, these acquisitions expand the external embellishments portfolio in our Solutions Group. We also allocated over $350 million to acquisitions. In February 2020, we completed our acquisition of Smartrac for approximately $255 million. Together with our then-existing Intelligent Labels business, this acquisition createdmade one venture investment in a platform with over $500 million in annual revenues, with increased potential for long-term growth and profitability, enhanced research and development capabilities, expanded product lines and additional manufacturing capacity. In December 2020, we completed our acquisition of ACPO, Ltd., an Ohio-based manufacturer of self-wound (linerless) pressure-sensitive overlaminate products, for approximately $88 million. During 2020, we also invested in three startup companiescompany developing innovative technological solutions that we believe have the potential to advance our businesses.strategies.
In 2020,2023, we deployed $301.1paid $256.7 million to pay an annual dividendin dividends of $2.36$3.18 per share and repurchaserepurchased 0.8 million shares of our common stock. We raised our quarterly dividend rate by approximately 7%~8% in October 2020, after having maintained it earlier in the year due to the impact of COVID-19. Given the uncertain impact of COVID-19 at that time, in March 2020, we suspended our repurchase of shares and did not resume repurchases until the third quarter; as a result, in 2020, we allocated less than half the capital we deployed to share repurchases in 2019.April 2023.
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As shown below, over the last five years, we have allocateddeployed over $900 million$2 billion to acquisitions (including venture investments) and venture investments and nearlyreturned over $2 billion to stockholders in dividends and share repurchases.
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Longer-Term Total Stockholder Return (TSR) Outperformance
Our TSR in 2023 was modestly below the TSR of the S&P 500 Index and the S&P 500 Industrials Index and modestly above the Dow Jones U.S. Container & Packaging Index, three comparator groups we use to assess our relative performance. In 2023, we disaggregated our market basket comparator group used in previous years into the S&P 500 Industrials Index and the Dow Jones U.S. Container & Packaging Index, of which we are a member. We believe this presentation provides greater clarity on our relative performance, reflecting it in a manner more consistent with the methodology used by peer companies.
We believe that our longer-term TSR is a more meaningful measure than our one-year TSR, which can be impacted by short-term market volatility unrelated to our performance. Our five-year cumulative TSR significantly outperformed all three of these comparator groups.
5-YEAR CUMULATIVE TSR |
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2019 | 49% | 31% | 29% | 29% | ||||
2020 | 21% | 18% | 11% | 21% | ||||
2021 | 41% | 29% | 21% | 11% | ||||
2022 | (15)% | (18)% | (5)% | (18)% | ||||
2023 | 14% | 26% | 18% | 8% | ||||
3-Year TSR | 37% | 33% | 35% | (2)% | ||||
5-Year TSR | 145% | 107% | 94% | 53% | ||||
LEADERSHIP TRANSITION
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Mitch Butier | Deon Stander |
In May 2023, Mitch Butier announced his decision to step down as our CEO. Our Board elected Mr. Butier as Executive Chairman effective September 1, 2023 to ensure a smooth transition by providing counsel and guidance to our new CEO, noting that, during his tenure as CEO, our company delivered superior performance while creating even greater future potential, accelerated growth and expanded margins, and advanced our sustainability priorities.
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Our Board has a well-established CEO succession planning process that is part of its broader ongoing leadership succession planning. Reflecting a thoughtful succession process, in May 2023 our Board elected Deon Stander as President/CEO, effective September 1, 2023. Mr. Stander had been our President/Chief Operating Officer (COO) since March 2022, after having served as Vice President/General Manager of our business now known as Solutions Group since June 2015. Having evaluated his attributes, experiences and strengths as a leader during multiple discussions over the preceding 18-24 months, our Board determined that Mr. Stander, who has served in a number of leadership roles across the globe with increasing responsibility and impact during his 20-year career with our company, was the right individual to lead our company into the future. Mr. Stander has a proven track record, including leading the transformation of our Solutions business and helping accelerate growth in Intelligent Labels.
Total Stockholder Return (TSR) OutperformanceFor Mr. Stander, increased his annual base salary from $700,000 to $1.1 million and his target Annual Incentive Plan (AIP) opportunity from 75% to 135% of base salary, in each case effective September 1, 2023. The Compensation Committee preliminarily aligned to increase his target long-term incentive (LTI) opportunity from 300% to 550% of base salary, effective with the annual LTI award on March 1, 2024, subject to its review of market pay for similar roles at that time. In addition, the Compensation Committee approved a special promotion award of stock options on September 1, 2023 with a grant date fair value of approximately $3 million, 50% of which vests on each of the third and fourth anniversaries of the grant date, in each case subject to his continued service.
For Mr. Butier, reduced his annual base salary from $1.3 million to $1 million and his target AIP opportunity from 160% to 120% of base salary, in each case effective September 1, 2023. He received no special LTI award in connection with his role change.
2024 DIRECTOR NOMINEES (ITEM 1)
We experiencedAs previously disclosed, in February 2024, Julia Stewart notified our Board of her intention not to stand for reelection at the Annual Meeting. As a result, her membership on our Board will end on the date of the Annual Meeting.
Board Performance Highlights
Our Board provides strong TSRoversight of our management team and company, with highlights of its accomplishments in recent years described below.
Supported management in navigating our response to the pandemic, including related labor, freight and inflationary challenges, in 2020 despiteand 2021; pandemic-related challenges in China, the uncertain macroeconomic environment during mostRussia-Ukraine war, supply chain disruptions, sizable currency movements and inflationary pressures in 2022; and lower demand driven primarily by downstream inventory destocking in 2023
Oversaw management’s consistent execution of the yearour strategies, delivering performance that exceeded our 2021 financial targets and progressed us toward achieving our 2025 financial targets, as a result of COVID-19, deliveringwell as 2019-2023 TSR of over 20% and145%, significantly outperforming the S&P 500. However, we believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our performance (as occurred at various times during 2020). We focus on TSR because it measures value we create for our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). We compare ourselves to the median of the500 Index, S&P 500 Industrials Index and Materials subsets because we are a member of the Materials subset, and also share many characteristics with members of the Industrials subset; this practice is further informed by feedback from our investors, who have indicated that they look at both subsetsDow Jones U.S. Container & Packaging Index
Supported management in evaluating our performance relative to thatsynergistic acquisition targets, resulting in 15 companies becoming part of our peers.portfolio, adding new capabilities, expanding our position in high-value product categories and enhancing our opportunities in the marketplace
5-Year Cumulative TSR
1-, 3-Implemented thoughtful Board refreshment and 5-Year TSRdirector succession planning to ensure we maintain a high-caliber Board; mitigate the potential impact of concentrated mandatory retirements given the closeness in age of many of our directors; and further enhance overall Board diversity, leading to the appointment of three new independent directors in the last 18 months, two of whom increased the gender and/or ethnic diversity on our Board
| AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2016 | 15% | 12% | 21% | |||
2017 | 67% | 22% | 28% | |||
2018 | (20)% | (4)% | (14)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
3-Year TSR | 43% | 49% | 32% | |||
5-Year TSR | 173% | 103% | 116% | |||
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STOCKHOLDER ENGAGEMENT
In additionConducted regular executive succession planning, resulting in experienced leaders promoted to more senior positions, including our extensive investor relations program through which members of management engage with our investors throughout the year, we have a longstanding practice of supplemental engagement with stockholders to discuss our strategies, performance, governance, executive compensation, sustainabilitynew CEO and human capital management practices and solicit their feedback. This engagement program takes place throughout the year, as shown below.Solutions Group President, each appointed in 2023
Sharpened focus on advancing our sustainability agenda, with continuous progress toward achieving our 2025 sustainability goals and more ambitious 2030 goals, as well as enhanced sustainability reporting
Avery Dennison Corporation |
| 7
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Matrix of Director Nominee Skills, Qualifications and Demographic Backgrounds
SummaryOur director nominees bring a balance of 2020 Engagement Results
In 2020, we contacted our top 30 investors (representing 60-65%skills, qualifications and demographic backgrounds to their roles in providing oversight of our outstanding shares)company, as shown by individual in both the springmatrix below. This matrix, which has been revised and the fall. Board members,expanded from previous years to, among other things, specify key areas of industry and functional experience or expertise, reflects additional information we solicited from directors in particular our Lead Independent Director, and management were made available to answer questions and address concerns. In the aggregate, we received responses from and engaged with investors representing ~35% and ~30%, respectively,year-end 2023 questionnaire.
As part of our outstanding shares. We engaged with every stockholder who requested to meet, and our Lead Independent Director led the majority of our off-season engagements. We also discussed theits ongoing director succession planning process, results and feedback from our 2020 engagement with the Talent and Compensation Committee (the “Compensation Committee”) and the Governance Committee of our Board.
Our 2020 engagements focused primarily on two key areas of investor interest: our response to COVID-19’s impact on our employees, customers, investorsregularly discussed and communities, and our diversity and inclusion progress in light of the demonstrated need for greater racial and social justice in society. We also shared with our top 30 investors our first ESG Download, a report that consolidates our ESG policies and metrics, which we published in August 2020. This document spurred substantial discussion how we have incorporated ESG matters into our business strategies and progress made in meeting our ESG goals.
In addition, following the lower support director Mark Barrenechea received for his reelection at our 2020 Annual Meeting, we again solicited our stockholders’ views on his board commitments. In these discussions, we highlighted his contributionsreported to our Board demonstrated commitmentduring 2023 on the skills, qualifications and demographic backgrounds desirable for our Board to best serve the needs of our company. As part of this process, the Governance Committee initiated a search for new directors with retail/consumer packaged goods (CPG) or finance expertise, which led to the appointment of Maria Fernanda Mejia to our companyBoard in February 2024. The search for an independent director with finance expertise continues and management, industry experience and information technology expertise, skill alignment with our strategic priorities, and consistently strong attendance and engagement during his tenure.is expected to conclude in the coming months.
The results of our 2020 engagement with our top 30 stockholders on governance, executive compensation, sustainability and human capital management matters are shown below.
 |  |  |
Summary of 2020 Engagement Feedback
Our Board and management believe that regular stockholder engagement fosters a deeper understanding of investors’ evolving expectations on ESG matters and helps us ensure our programs continue to align with best practices.
Governance and Environmental Sustainability Matters
With respect to matters related to governance and environmental sustainability, inclusive of climate change, we discussed Board oversight of our strategies, our response to COVID-19 and progress toward our 2025 sustainability goals, including with respect to plastics recyclability and greenhouse gas emissions; our Board’s expanded stakeholder focus, as reflected in our strategies and evidenced in our ESG Download published in August 2020; and Board composition and refreshment, particularly the outside board commitments of one of our directors and the racial/ethnic and gender diversity on our Board.
Executive Compensation and Social Sustainability Matters
With respect to executive compensation and social sustainability, we discussed Board oversight of our strategies, our response to COVID-19 (including the potential for changes to executive compensation to address the impact of the pandemic, as well as measures implemented to support employees more broadly), and diversity and inclusion initiatives, particularly related to race/ethnicity in the U.S.; the potential for consideration of non-financial measures in our incentive compensation programs to address ESG topics while maintaining pay-for-performance alignment; the status of changes initially approved for 2020 CEO compensation but reversed due to COVID-19; and the Compensation Committee’s oversight of additional talent management topics such as succession planning, leadership development and pay equity.
8
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DIRECTOR NOMINEE MATRIX
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| Initial Criteria | ||||||||||||||||||||
Independent(1) | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ||||||||||
Public Company Leadership Exp.(2) | ✓ |
| ✓ |
| ✓ |
| ✓ | ✓ |
| ✓ | ||||||||||
Public Company Board Exp.(3) |
| ✓ |
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| ✓ | ✓ |
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| ✓ | ✓ | ||||||||||
| Industry Experience(4) | ||||||||||||||||||||
Digital/Technology |
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| ● |
| ● |
| ● | ● |
| ● | ||||||||||
Retail |
| ● | ● |
| ● | ● |
| ● | ● |
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Consumer Goods |
| ● |
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| ● | ● |
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| ● | ● | ||||||||||
Packaging | ● | ● | ● | ● | ● | ● |
| ● | ● |
| ||||||||||
Materials Science | ● |
| ● | ● |
|
| ● | ● | ● |
| ||||||||||
Industrial Goods | ● |
| ● | ● |
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| ● | ● | ● |
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| Functional Experience(4) | ||||||||||||||||||||
Finance | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
Marketing | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
M&A | ● | ● | ● |
| ● | ● | ● | ● | ● | ● | ||||||||||
Environmental Sustainability | ● |
| ● | ● | ● | ● | ● | ● | ● |
| ||||||||||
Cybersecurity | ● |
| ● |
| ● |
| ● | ● | ● | ● | ||||||||||
Science/Engineering/R&D | ● | ● | ● | ● |
| ● | ● | ● | ● | ● | ||||||||||
| Demographic Background(5) | ||||||||||||||||||||
Tenure (years as of YE 2023) | 63⁄4 | 133⁄4 | <1 | 3⁄4 | 161⁄2 | – | 103⁄4 | 73⁄4 | 183⁄4 | 11⁄4 | ||||||||||
Gender |
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Woman |
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| ✓ |
| ✓ | ✓ |
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Man | ✓ | ✓ | ✓ |
| ✓ |
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| ✓ | ✓ | ✓ | ||||||||||
Non-Binary |
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Age | 61 | 67 | 55 | 52 | 71 | 60 | 67 | 52 | 68 | 57 | ||||||||||
Mandatory Retirement Year | 2035 | 2029 | 2041 | 2044 | 2025 | 2036 | 2029 | 2044 | 2028 | 2039 | ||||||||||
Race/Ethnicity |
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Black or African American |
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Hispanic or Latino | ✓ |
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| ✓ |
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White | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Asian (including South Asian) |
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Native Hawaiian or Pacific Islander |
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Native American or Alaska Native |
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| ✓ |
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LGBTQ+ | ||||||||||||||||||||
Veteran |
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| ✓ |
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Works/Worked Outside U.S. | ✓ | ✓ | ✓ | ✓ |
| ✓ |
| ✓ | ✓ |
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| (1) | Determined by our Board as independent under NYSE listing standards. |
| (2) | Service as U.S. public company CEO, COO and/or CFO. |
| (3) | Prior or concurrent service on another U.S. public company board excluding companies at which individual served or serves as CEO, COO and/or CFO. |
| (4) | Key for industry and functional experience: |
| • | Technical expertise – Direct management experience or subject matter expertise during professional career. |
| • | Supervisory experience – Supervisory management experience during professional career. |
| • | Substantial knowledge – Knowledge from serving on board of another U.S. public company and/or gained from investment banking or private equity experience. |
| (5) | Classifications for gender, race/ethnicity, LGBTQ+, veteran and works/worked outside the U.S. based on directors’ responses to questionnaire. |
Avery Dennison Corporation | 2024 Proxy Statement | 9 |
SUSTAINABILITYBoard Governance Highlights
Highlights of our governance program are shown below.
Stockholder Rights | ✓ Market-standard proxy access ✓ If Item 3 is approved at Annual Meeting, stockholders will have the right to request that we call special meetings of stockholders at 25% ownership threshold ✓ No supermajority voting requirements ✓ No poison pill ✓ No exclusive forum or fee-shifting bylaws | |
Board Governance | ✓ Annual election of directors ✓ Majority voting in director elections ✓ Single class of outstanding voting stock ✓ Director nominees 80% independent ✓ Robust Lead Independent Director role ✓ Regular director succession planning and paced Board refreshment, including four new directors appointed within last 18 months ✓ Continuous executive succession planning and leadership development ✓ Annual Board/Committee evaluations and individual director feedback process ✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted ✓ Best practice Governance Guidelines ✓ Strong Board and Committee governance ✓ Direct access to management and experts |
SUSTAINABILITY
We have been consistently focused on advancing our sustainability agenda by establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustainability progress reflects the leadership of our management team and the engagement and oversight of our Board, as well as the commitment and passion of our team members worldwide.
Sustainability Governance
We believe that strong sustainability governance ensures consistency and accuracy of information we use to provide transparency to our stakeholders. Our governance structure is shown below.
| SUSTAINABILITY GOVERNANCE STRUCTURE |
10 | 2024 Proxy Statement | Avery Dennison Corporation |
Sustainability Data and Reporting
We continue to refine and expand the sustainability data we disclose, which has provided our stakeholders with regular insight into our progress. Our sustainability data is indexed to the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) frameworks to facilitate comparability of our results with those of other companies. We partnered with a third-party expert to assess our disclosures against the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) regarding the information that companies should disclose to allow their stakeholders to assess and price their climate-related risks and have developed a plan to align with TCFD requirements.We also report to Carbon Disclosure Project (CDP) Climate, Water and Forests and support the growing adoption of International Sustainability Standards Board (ISSB) standards. We plan to assess our reporting against ISSB standards, and other disclosures that incorporate those standards, as part of our ongoing sustainability reporting transparency efforts.
Our sustainability teams assess our reporting in accordance with external frameworks; engage with environmental, social and governance (ESG) rating agencies; manage our data collection and reporting processes; establish and monitor assurance guidance and controls; and approve reports, data and information. In addition, we engage an independent third party to validate our energy and greenhouse gas (GHG) emissions data. Having aligned with the Audit Committee to ensure Board oversight of sustainability governance, our reporting processes ensure data owner sign-off, Sustainability Disclosure Committee review and senior management approval prior to publication.
Our March 2024 ESG Download, being made available on our website at esg.averydennison.com on or before the filing of our definitive proxy statement, reflects our focus and progress on sustainability and governance matters. It includes ~140 metrics covering our policies, goals, strategies, risks, outcomes and certifications. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Sustainability Progress
Sustainability is one of our core values and has long been an integral partto our way of the waydoing business. To create value for all our stakeholders, we do business. Our aim is to improve theare advancing our sustainability of our productsstrategic innovation platform focused, among other things, on material circularity and processes, buildwaste reduction/elimination; building a more diverse workforce and an inclusive culture, maintain a culture ofand equitable culture; maintaining operations that promote health and safety,safety; and supportsupporting our communities to create value for all our stakeholders. Key to our progress has been integratingcommunities. Integrating sustainability into our business strategies and engaginghas helped us engage employees at all levels.levels to deliver sustained progress.
In our 2020 integrated sustainability and annual report, we present highlights of our achievements against our 2025 sustainability goals and announce our more ambitious 2030 sustainability goals, which are focused on delivering innovations that advance the circular economy, reducing the environmental impact in our operations and supply chain, and making a positive social impact by enhancing the livelihood of our people and communities.
Avery Dennison Corporation | 2024 Proxy Statement | 11 |
In the first fiveeight years of the 10-year horizon for our 2025 sustainability goals, we have made meaningfulsubstantial progress, including exceeding our goal for cumulative GHG emissions reduction, as shown in the scorecard shown below. You can find additional information on our sustainability progress in our 2020 integrated sustainability2023 Integrated Report being furnished to the Securities and annual report,Exchange Commission (SEC) prior to the distribution of our proxy materials, as well as on the sustainability section ofin our website.March 2024 ESG Download.
| 2023 SCORECARD OF PROGRESS TOWARD 2025 SUSTAINABILITY GOALS | ||||||
| Goal(s) | Baseline Year | Highlights of Progress | |||
Greenhouse Gas Emissions
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Achieve at least 3% absolute reduction year-over-year and at least 26% |
2015 |
Reduced | |||
Paper
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Source 100% certified paper, of which at least 70% is Forest Stewardship Council®-certified |
2015 |
Of total volume of paper procured in | |||
Films
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N/A |
~97% of | |||
Chemicals
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N/A |
~96% of | |||
Products and Solutions
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2015 |
~ | |||
Waste
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Be 95% landfill-free, with at least 75% of our waste reused, repurposed or recycled
|
2015 |
Diverted | |||
People
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Continue to cultivate diverse (40%+ female at level of manager and above), engaged, safe (recordable incident rate (RIR) of <0.25), productive and healthy workforce
|
2015 |
Increased female representation at level of manager and above by
Continued world-class safety record, with Employee engagement of ~80%* in 2023 | |||
Transparency
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Commit to goals publicly and be transparent in reporting progress |
N/A |
| |||
| * | Data reflects change in |
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After completing our biannual materiality assessment in 2020 to prioritize the most significant environmental and social sustainability challenges then facing our company and our stakeholders, we established an additional set of sustainability goals that we are aiming to achieve by 2030. Within these goals, we have specific targets. In 2022, we completed an enhanced materiality assessment, which included an updated mapping of our sustainability priorities throughout our value chain. This process included interviews with internal and external stakeholders such as members of management, customers and non-governmental organizations (NGOs), as well as industry analysis. The topics that ranked highest in the assessment also offer substantial value-creation opportunities for our company and customers. The most material topics identified in our 2022 materiality assessment – transition to a circular economy, advanced technologies and innovation, climate change, GHG emissions and reduction, supply chain, fair and inclusive marketplace, materials management and operational waste – are all reflected in our 2030 sustainability goals and targets. Our progress toward our 2030 goals through 2023 is shown below.
| 2023 SCORECARD OF PROGRESS TOWARD 2030 SUSTAINABILITY GOALS | ||||||
Goal | Targets | Baseline Year | Highlights of Progress | |||
Deliver innovations that advance the circular economy | Satisfy the recycling, composting or reuse requirements of all single-use consumer packaging and apparel with our products and solutions | |||||
Solutions Group: 100% of our core product categories (printed fabric labels, woven labels, paper, interior heat-transfer labels, packaging and RFID) will meet our Sustainable ADvantage standard | N/A | ~75% (based only on Apparel Solutions) | ||||
Materials Group: 100% of our standard label products will contain recycled or renewable content; all of our regions will have labels that enable circularity of plastics | N/A | ~61% (based only on Label and Graphic Materials) | ||||
Reduce the environmental impact in our operations and supply chain | Reduce our Scope 1 and 2 GHG emissions by 70% from our 2015 baseline. Work with our supply chain to reduce our 2018 baseline Scope 3 GHG emissions by 30%, with an ambition of net zero by 2050 | N/A | Scope 1 and 2: ~63%; as of Q3 2023, our most recently available data Scope 3: Prior-year calculations publicly available in our most recent CDP Climate response* | |||
Source 100% of paper fiber from certified sources focused on a deforestation-free future | 2015 | ~96% certified | ||||
Divert 95% of our waste away from landfills, with a minimum of 80% of our waste recycled and the remainder either reused, composted or sent to energy recovery | 2015 | ~89% landfill-free ~64% recycled | ||||
Deliver a 15% increase in water efficiency at our sites that are located in high- or extremely high-risk countries as identified in the World Resources Institute Aqueduct Tool | N/A | ~9% as of Q3 2023 | ||||
Make a positive social impact by enhancing the livelihood of our people and communities | Foster an engaged team and an inclusive workplace • Inclusion Index: 85% • Employee Engagement: 82% • Females in manager level or above positions: 40% • Safety: RIR of 0.20 | 2015 | ~76%** (N/A in 2015) ~80%** (from 80%) ~36% (from 32%) 0.22 (from 0.31) | |||
Support the participation of our employees in ADF grants and foster the well-being of the communities in which we and our supply chain operate • 85% of countries in which we operate receive ADF grants • 50% of all ADF grants incorporate volunteerism | N/A | Made ADF grants in ~72% of countries in which we operate 95% of grants incorporated employee volunteerism | ||||
| * | Our Scope 3 GHG emissions reporting is currently spend-based and fluctuates with market trends and inflation. |
| ** | Data reflects change in engagement survey platform and methodology. |
Avery Dennison Corporation | 2024 Proxy Statement | 13 |
DIVERSITYPEOPLE AND INCLUSIONCULTURE
Our employee experience depends on our culture, technology and work environment, whether in an office, remote or hybrid. To enhance this experience, we have advanced our professional-level onboarding and expanded digital access for our manufacturing and remote employees; enabled the continuous growth of our employee resource groups (ERGs), which are open to all employees; further enhanced flexible work arrangements; provided more targeted talent development programming; and matured our enterprise leader development program.
We have continued annually evaluating pay equity, making adjustments where appropriate. In 2023, we reviewed pay equity (considering total base and annual incentive compensation) with respect to gender for all non-manufacturing employees globally, as well as all manufacturing employees in the U.S. and certain other countries, and with respect to race/ethnicity for all U.S. employees. Our teams engaged with company leadership on our pay equity/transparency priorities and implemented several advancements, such as including employees from recently integrated acquisitions in our population data, expanding our analysis to include long-term incentives for director-level and above employees, and fine-tuning our analytic model in certain regions to reflect their unique circumstances. We also enhanced pay transparency to comply with evolving laws and regulations.
Diversity is one of our core values, reflecting our interest incommitment to ensuring an inclusive and respectfulequitable environment for people of all backgrounds and orientations andbackgrounds. It is our recognitionbelief that we gain strength from diverse ideas and teams. The importanceteams. Our DEI efforts are intended to foster an environment where our employees can grow and be increasingly productive and innovative, enhancing our reputation as a great place to work and allowing us to attract and retain talent for the benefit of diversity and inclusion (D+I) to our company is further evidenced by the diversity-related targets includedstakeholders. We hold ourselves accountable for our DEI progress in our 20252030 sustainability goals. Over the past several years, we have made consistent progress insignificantly advanced our D+IDEI journey, as shown below. In 2020, we redoubled our efforts to drive sustainable change, recognizing the need to accelerate our collective journey toward greater racial and social justice in society. We are for the first time making publicly available our Our 2023 EEO-1 statistics, which we collect as required by the U.S. Equal Opportunity Commission. This information, which reflectsreflect the voluntary self-identification by our U.S. employees, in 2020, can be found in our March 2024 ESG Download published in March 2021.Download.
HIGHLIGHTS OF DEI JOURNEY | |||
| • Established goal of 40%+ female at manager level and above • Employees established
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values • Established Regional •
• Began requiring gender-diverse hiring slates globally • Conducted unconscious bias training for managers globally • Added inclusion index to annual employee engagement survey • Expanded flexible work arrangements • Initiated Women.Empowered development program • Joined CEO Action for Diversity & Inclusion • Employees established several new ERGs, including for women and Black/African American, LGBTQ+ and Latinx employees | ||
2021
| • Formalized DEI strategy with four global pillars and supporting regional focus areas • Established DEI infrastructure with global leader and dedicated regional resources • Further enhanced pay equity review with third-party analysis of U.S. racial/ethnic data • Began annually publishing EEO-1 statistics • Reached milestone of 20+ ERGs, which are open to all our employees • Implemented more equitable benefits for LGBTQ+ employees and their families | ||
2022-2023
| • Made additional progress in female manager+ representation; on track to reach 40% by 2026 • Improved global female employee engagement and maintained rate of female departures in manager+ positions despite competitive talent market • Grew ERG membership globally by 30%+ • Launched AD Advocate, pairing executives to sponsor and mentor top diverse talent • Implemented new employee engagement survey, providing expanded set of questions more reflective of market best practices, enhanced comparability with peers, improved analytics and pulse survey capability • Completed foundational work focused on DEI strategic pillars of women leaders, fairness manufacturing, inclusion and underrepresented groups (from hiring to development and career growth) | ||
In 2024, we plan to maintain our focus on fair and transparent talent practices and standards, equitable access to opportunities for career growth and development, and manufacturing team communication and camaraderie.
14 | 2024 Proxy Statement | Avery Dennison Corporation |
STOCKHOLDER ENGAGEMENT
In addition to our ongoing investor relations program through which our CEO, Chief Financial Officer (CFO), business leaders and Investor Relations team engage with our investors throughout the year, for over a decade, we have semiannually engaged with stockholders to solicit feedback on our strategies, executive compensation and sustainability progress, offering to include directors as participants in scheduled meetings. The objectives of this program are to maintain regular and thoughtful engagement to directly obtain investor feedback; continue to strengthen our relationships with key investors; and gather perspectives on our sustainability and governance profile to identify potential improvement opportunities. Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of evolving investor expectations and helps ensure we continue to reflect best practices.
2023 Engagement Results
| 2023 ENGAGEMENT RESULTS* | ||||||
| Outreach | Conversations | |||||
In 2023, we contacted our top 35 investors in proxy season and the off-season. Board members, in particular our Lead Independent Director (LID), and management were made available to answer questions and discuss matters of investor interest. We engaged with every stockholder who requested a meeting or accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements. | |  | |  | ||
| * | Based on percentage of shares outstanding. |
We discussed the results and feedback from our 2023 engagement regarding executive compensation and social sustainability with the Compensation Committee and regarding governance and environmental sustainability with our Board’s Governance Committee. We also shared highlights with our Board to supplement the reports from those Committee Chairs.
In February 2024, giving consideration to the feedback we received from investors during our 2023 engagements, our Board approved, subject to stockholder approval at the Annual Meeting, a Certificate of Amendment to our Amended and Restated Articles of Incorporation to provide that stockholders holding 25% of our outstanding common stock have the right to request that we call special meetings of stockholders.
2023 Engagement Feedback
We discussed our leadership transition in all off-season engagements, with investors interested to learn about our Board’s executive succession planning process, engagement with the CEO successor in and outside the boardroom, and strategic rationale for determining Mr. Stander to be the right individual to guide our company in the next phase of its journey. Stockholders also sought to understand the role, responsibilities and anticipated tenure of our Executive Chairman.
Governance Feedback
Our 2023 engagements provided feedback on the governance matters described below.
| • | Board composition, including the appropriateness of the balance of skills, qualifications, demographic backgrounds and tenure distribution on our Board given our evolving strategies |
| • | Board refreshment and diversity, including our director succession planning process to ensure a robust pipeline of potential new directors, the rationale for recent director appointments and our Governance Committee’s search for new directors with retail/CPG or finance expertise |
| • | Board leadership structure, including our rationale for maintaining a non-independent Chairman complemented by a proactive and engaged Lead Independent Director |
| • | Our stockholder rights profile, particularly the inability of our stockholders to request that we call special meetings of stockholders |
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Environmental Sustainability Feedback
2021 DIRECTOR NOMINEES (ITEM 1)
MatrixEnvironmental sustainability was a significant area of Director Skills, Qualifications and Demographic Backgrounds
Our director nominees bring a balance of skills, qualifications and demographic backgrounds to their oversight offocus for the stockholders with which we engaged. Investors uniformly commended our company, as shownsustainability transparency in the matrix below. In 2020, we asked each of our directors to complete a Board diversity questionnaire, with a long list of demographic characteristics for them to indicate the categories with which they self-identify; as a result, this matrix has been significantly expanded from previous years based on the characteristics we includeddisclosures contained in our questionnaireIntegrated Reports, proxy statements and updated to reflectESG Downloads. During our directors’ responses. The Governance Committee regularly evaluatesconversations, we primarily discussed the skills, qualifications and demographic backgrounds desirable for our Board to best advance our business strategies and serve the interests of all our stakeholders.
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Independent | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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Senior Leadership Experience(1) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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Industry Experience(2) | ✓ |
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Global Exposure(3) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Board Experience(4) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
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Packaging | ✓ |
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Consumer Goods |
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Tenure (years) | 4 | 8 | 11 | 18 | 13 | 2 | 8 | 4 | 15 | |||||||||
Gender(6) |
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Female |
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Male | ✓ | ✓ | ✓ |
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Age | 58 | 65 | 64 | 65 | 68 | 56 | 64 | 49 | 65 | |||||||||
Mandatory Retirement Year | 2035 | 2028 | 2029 | 2028 | 2025 | 2037 | 2029 | 2044 | 2028 | |||||||||
Race/Ethnicity(6) |
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Black or African American |
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Hispanic or Latino | ✓ |
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White | ✓ |
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Lives/Has Lived Abroad | ✓ |
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| • | Our current focus areas, including goal attainment, actions to address increasing regulatory requirements, improved transparency and ESG ratings agency engagement, and approach to materiality |
| • | Our efforts to reduce Scope 3 GHG emissions, including our investment in internal infrastructure with dedicated procurement resources in each of our business segments; partnership with CDP Supply Chain to optimize engagement with our customers; and measurement methodology, including our potential transition from spend-based to materials-based measurement of these emissions |
| • | Our 2025 goal related to 70% sustainability-driven products, including our criteria for designation as sustainability-driven and our shift from our goals for 2025 focused on our products to our goals for 2030 focused on what our products enable for our customers and end users |
| • | Our efforts toward aligning with TCFD requirements, including our assessment with a third-party expert to understand our physical and transactional risks and our plans to incorporate TCFD into our enterprise risk management (ERM) and long-term strategic planning processes |
| • | Our net zero ambition, including internal strategy development, the impact of our progress reducing Scope 1 and Scope 2 GHG emissions, and our dependence on other parties to reduce Scope 3 GHG emissions |
Executive Compensation and Social Sustainability Feedback
The primary focus areas during our 2023 engagements were our leadership transition, Board refreshment and governance profile; executive compensation and social sustainability were not significant topics of discussion. Stockholders did express interest in the impacts of our leadership transition on executive compensation, including the compensation of our new CEO and our Executive Chairman, as well as any additional incentives provided to senior leaders in connection with the transition. Investors continued to want to learn more about the ways in which we incent our leaders to progress toward achieving our sustainability goals.
Engagement Process
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Board Performance Highlights
Our Board provides strong oversight of our management team and company, with many notable accomplishments in recent years, highlights of which are described below.
Supported management in navigating challenges presented by COVID-19, ensuring we protected employee well-being, delivered for customers, mitigated supply chain risk, maintained strong balance sheet and financial flexibility, and supported communities, while continuing focus on long-term business strategies and ongoing risk mitigation
Supported consistent execution of strategic priorities, which delivered significant operating margin expansion and double-digit compound adjusted EPS growth in first four years of our 2017-2021 financial targets, as well as 2016-2020 TSR of 173%, substantially outperforming S&P 500
Oversaw completion of seven acquisitions that advanced our capabilities and increased proportion of our portfolio consisting of high-value product categories
Oversaw executive leadership development and succession planning, with several experienced leaders promoted to senior executive positions and effectively transitioning into roles, including both our Chief Human Resources Officer and our Chief Legal Officer in 2020
Onboarded and mentored CEO after he became Chairman in 2019 and successfully transitioned Patrick Siewert into Lead Independent Director role in 2020 following departure of David Pyott
Implemented thoughtful Board refreshment and succession planning, with 4 new directors appointed in last 8 years, 2 of whom increased racial/ethnic or gender diversity
Board Governance Highlights
Our Board’s governance program reflects our company values and facilitates our directors’ independent oversight of our company. Highlights of our program, which we believe is generally consistent and aligned with the Investor Stewardship Group’s Corporate Governance Principles for U.S. Listed Companies, are shown below.
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APPROVAL OF EXECUTIVE COMPENSATION (ITEM 2)
The Compensation Committee designsoversees our executive compensation program, which is designed to motivate our leaders to execute our business strategies and deliverlong-term value for our investors. The program delivers pay for performance, with realized compensation dependent on our company achievingachievement of challenging annual and long-termfinancial performance targets and longer-term value creation objectives that advance the interests of our stockholders.
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Performance-Based Compensation
TargetThe substantial majority of Named Executive Officer (NEO) target total direct compensation (TDC) foris performance based, meaning that our corporate Named Executive Officers (NEOs) is comprisedexecutives ultimately may not realize the value of at-risk components if we fail to achieve the elements shown below.
ELEMENTS OF TARGET TDC FOR CORPORATE NEOs
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designated performance objectives.The Compensation Committee establishesapproves the target TDC of our NEOs to incent strong operational and financial performance and stockholder value creation, giving consideration to the market median, role responsibilities, individual performance, tenure, retentioncreation. The mix and succession. Aselements of NEO target TDC are shown below, the majority of this compensation is performance-based, meaning that our executives ultimately may not realize the value of the at-risk components of TDC if we fail to achieve our financial objectives.
| ANNUALIZED TARGET TDC MIX | 2023 TARGET TDC MIX | |||||||||
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| * | Mr. Stander’s annualized target TDC reflects his compensation package as CEO, excluding his special promotion award of stock options with a grant date fair value of approximately $3 million. |
| ** | Mr. Butier is excluded because his target 2023 TDC primarily reflected his compensation as CEO given the timing of our leadership transition. Francisco Melo’s target TDC mix included in the average reflects his target TDC as President, Solutions Group. |
| ELEMENTS OF NEO TARGET TDC | ||||||
 | LTI Compensation | |||||
| Performance Units (PUs) | Corporate NEOs | Solutions NEO | ||||
• 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Company EVA(1) (50%) - Company Relative TSR(2) (50%) | • 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Solutions Group EVA (75%) - Company Relative TSR (25%) | |||||
• Relative TSR payout capped at 100% if absolute TSR is negative | ||||||
Market-leveraged Stock Units (MSUs) | • 50% of LTI with payout = 0% to 200% of target award • 100% Absolute TSR(3) • 1-, 2-, 3- and 4-year performance periods | |||||
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• Drives performance consistent with annual company or business financial goals • Individual performance modifier based on achievement against predetermined strategic and sustainability objectives (generally capped at 100% for NEOs) | ||||||
| Base Salary | • Annual fixed-cash compensation generally set around market median | |||||
| (1) | Economic Value Added (EVA) is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit. |
| (2) | Relative TSR compares our TSR to the TSR of companies in a peer group satisfying certain objective criteria described in the Compensation Discussion and Analysis section of this proxy statement. |
| (3) | Absolute TSR measures the return that we provided our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). |
| (4) | AIP award for Mr. Melo reflects performance objectives and weightings for the nine months of the year he served as President, Solutions Group. He had different performance objectives and weightings for the three months of the year he served as SVP/GM, Avery Dennison Smartrac. His 2023 AIP award would have been prorated to reflect the respective performance objectives and weightings had not the payout been zero. |
Avery Dennison Corporation |
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Pay for Performance
As shown inIn the graph below, over the past fiveCEO compensation for 2019 through 2022 reflects Mr. Butier’s compensation as reported in our Summary Compensation Tables for those years and, for 2023, Mr. Stander’s compensation as reported in our 2023 Summary Compensation Table. Our CEO pay has generally reflected our cumulative TSR has increased by 173% while the annualexcept that Mr. Stander’s pay in 2023 was substantially lower than prior-year amounts for Mr. Butier because it primarily reflected his compensation as COO, which was significantly lower than Mr. Butier’s as CEO, as well as his special award of our CEO has remained relatively constant, except for 2016 when he receivedstock options with a one-time equity grant date fair value of approximately $3 million granted in connection with his promotion to CEO. See the Compensation Discussion and Analysis section of this proxy statement for more information.
Changes in 2020 Executive Compensation
Changes Approved in April 2020
Given the uncertain impact of COVID-19 on market conditions, our CEO recommended to the Compensation Committee in April 2020 that the base salary increases for our executive leadership team (which includes all of ourNEOs) approved by the committee in February 2020 be indefinitely postponed, and no such increases were given in 2020. In light of market conditions at the time and also at the recommendation of our CEO, the Compensation Committee determined that his 2020 target annual and long-term incentive opportunities should remain at 2019 levels. As a result, the Compensation Committee approved the reductions in CEO compensation for 2020 described below.
His target AIP opportunity for 2020 would remain at previous level of 125% of base salary rather than 140% of base salary approved by Compensation Committee in February 2020
His target LTI opportunity for 2020 would remain at previous level of 475% of base salary rather than 585% of base salary as approved by Compensation Committee in February 2020
Both target opportunities would be based on his 2019 year-end base salary of $1,133,000
In connection with these reductions, our CEO forfeited 5,811 PUs and 6,662 MSUs, with an aggregate grant date fair value of approximately $1.3 million, granted to him in February 2020.
Changes Approved in February 2021
Despite the adverse impact of COVID-19, no adjustments to short- or long-term incentive compensation were made for our corporate NEOs; their 2020 AIP awards and 2018-2020 PUs paid out on the basis of unadjusted company results. Similarly, the goals for their 2020-2022 PUs granted to them in February 2020 were not adjusted to reflect the impact of COVID-19.
COVID-19 had a disproportionate impact on RBIS’ results in 2020. As a result, although the business achieved its short-term objectives while managing a challenging environment during the year, the business did not achieve any of its original goals for 2020. However, RBIS delivered substantial temporary cost savings and accelerated restructuring actions to expand its operating margins; achieved its net income plan for the second half of the year and significantly grew sales on an organic basis in the fourth quarter; successfully integrated Smartrac and exceeded its 2020 performance targets for the acquisition; and achieved a high employee engagement score, despite having taken
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aggressive actions to reduce costs. Using its allowable discretion to exclude some of this impact, the Compensation Committee approved an AIP financial modifier of 60% for the RBIS team to recognize their achievements in navigating the challenges the business faced during the year. Given our business NEO’s 25% linkage to total company adjusted EPS, his overall adjusted AIP financial modifier was 76%.
The Compensation Committee also reviewed the performance of the 2018-2020 PUs for our business NEO. Noting that RBIS had entered 2020 with performance during the first two years of the three-year performance period in excess of the maximum level of performance and using its allowable discretion to exclude some of the extremely adverse impact, the Compensation Committee determined to increase the payouts for the 2018-2020 for all RBIS participants from 84% to 126% to recognize the team’s impressive EVA performance through 2019, as well as their achievements in navigating the challenges related to COVID-19 that the business faced during 2020. In addition, the Compensation Committee reviewed the performance of the 2020-2022 PUs for our business NEO. Noting that RBIS had taken substantial actions to protect operating margins during the year and using its allowable discretion to exclude some of this impact, the Compensation Committee determined to revise RBIS’ EVA goals originally approved in February 2020 for threshold, target and maximum EVA performance. The revised goals continue to require strong growth and margin improvement compared to the 2019 baseline for the business, although on a different trajectory than originally planned given the extraordinary impact of COVID-19 on RBIS’ markets in 2020.
2021 CEO Compensation
Based on expert advice provided by its independent compensation consultant, Willis Towers Watson, and giving further consideration to the feedback from investors received in 2019 and 2020, the Compensation Committee determined to reinstate the longer-term approach it intended for our CEO’s 2020 compensation for 2021. Consistent with the Committee’s initial decision in February 2020, our CEO’s 2021 target TDC was set between the market 50th and 75th percentiles of his market peers, reflecting his strong performance throughout his five-year tenure in the role, during which our company delivered top quartile performance. The committee’s current intent is not to revisit his compensation until 2024 unless warranted by market conditions or our company results.
Reviewing 2020 market pay rates and projected 2021 market pay rates for companies with annual revenues between $6 billion and $10 billion, the Compensation Committee determined to target our CEO’s target TDC for 2021 at $9.9 million by increasing (i) his base salary by 6% to $1.2 million, noting that his base salary had not been increased in the previous three years; (ii) his target AIP opportunity from 125% of base salary to 140% of base salary; and (iii) his target LTI opportunity from 475% of base salary to 585% of base salary. The Compensation Committee recognized that our CEO had delivered strong value creation for all our stakeholders by leading the execution of our strategies during his five-year tenure in the role and successfully navigating the impact of COVID-19 in 2020. The Compensation Committee noted that over 90% of his new target TDC would consist of at-risk, performance-based compensation; our CEO’s realized compensation will depend on our company achieving strong TSR performance, delivering our 2021 financial targets and 2025 sustainability goals, and continuing to engage our employees, serve our customers, deliver for our investors, and support the communities in which we operate.
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Executive Compensation Best Practices
As summarized below and described in further detail in the CD&ACompensation Discussion and Analysis section of this proxy statement, our executive compensation program aligns with our financial goals and business strategies and reflects best practices.
Pay for
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✓ Double-trigger equity vesting requires termination of employment after change of control
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✓ Compensation clawback policy for executive officers in event of accounting
✓ Independent compensation consultant
✓ Annual Compensation Committee evaluation and charter review
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✓ Releases from liability and restrictive covenants for departing executives
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18 | 2024 Proxy Statement | Avery Dennison Corporation |
APPROVAL OF CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (ITEM 3)
In February 2024, after giving consideration to the feedback we received from investors during our 2023 engagements and its review of market practices, upon the recommendation of the Governance Committee, our Board approved, subject to stockholder approval at the Annual Meeting, a Certificate of Amendment to our Amended and Restated Certificate of Incorporation (our “Charter”) to provide that stockholders holding 25% of our outstanding common stock have the right to request that we call special meetings of stockholders. The amendment also removes out-of-date references to the declassification of our Board that had been fully implemented by April 2014, providing that directors shall be elected annually for one-year terms, consistent with our existing Charter and best practices.
RATIFICATION OF APPOINTMENT OF PwC (ITEM 3)4)
Our Board’sThe Audit and Finance Committee has appointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for fiscal year 20212024 and our Board is seeking stockholder ratification of the appointment. PwC remainsis well-qualified to actcontinue serving as our independent registered public accounting firm, has a deep understanding of our operations and accounting practices, and maintains rigorous procedures to continuously ensure auditor independence. independence from our management and company, which are overseen by the Audit Committee.
The committeeAudit Committee considered the qualifications, performance independence and tenureindependence of PwC, the quality of its discussions with PwC, and the fees charged by PwC for the levelscope and quality of services provided by– as well as the firm during 2020,firm’s tenure as our independent auditor – and determined that the reappointmentappointment of PwC to befor 2024 is in the best interest of our company and stockholders.
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Under the oversight of our Board of Directors (our “Board”), we have designed our governance program to comply with applicable laws and regulations – including the rules of the Securities and Exchange Commission (SEC) and the listing standards of the New York Stock Exchange (NYSE) – and to reflect best practices as informed by the practices of other large public companies, recommendations from our outside advisors, the voting guidelines of our stockholders and the policies of proxy advisory firms.
The key features of our governance program are describedshown in the Board Governance Highlights section of the proxy summary; together they form a governance program that we believe is generally consistent and aligned with the Investor Stewardship Group’s Corporate Governance Principles for U.S. Listed Companies.
summary. We encourage you to visit the investors section of our website under Corporate Governance, where you can view and download current versions of the documents shown below, which are referenced inbelow. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement:statement.
Amended and Restated Certificate of IncorporationCharter
Amended and Restated Bylaws (our “Bylaws”)
Corporate Governance Guidelines (our “Governance Guidelines”)
Charters for our Board’s Audit and Finance Committee, (the “Audit Committee”), Talent and Compensation Committee, (the “Compensation Committee”),Governance Committee and GovernanceFinance Committee
Code of Conduct
Code of Ethics for the Chief Executive Officer (CEO)CEO and Senior Financial Officers
Audit Committee Complaint Procedures for Accounting and Auditing Matters
Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement. You can receiverequest copies of these documents, without charge, by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
CODE OFVALUES AND ETHICS
Code of Conduct, Talkabout Toolkits and Supplier Standards
Our Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. It includes messages from our CEO and Chief Compliance Officer; detailed information regarding higher risk areas such as anti-corruption/bribery, antitrust, conflicts of interest, insider trading, anti-harassment, and compliance with laws and regulations; and case studies to provide practical guidance on situations that raise complex ethical questions. The Code is available in 33 languages and our leaders affirm their commitment to complying with it when they first join our company and regularly thereafter as part of our compliance certification process described in the Related Person Transactions section of this proxy statement. We plan to update our Code of Conduct in 2024 to refresh its current content and include new topics.
We have adoptedregularly train employees on the Code of Conduct topics in instructor-led sessions held in person or virtually; in 2023, we held ~230 of these sessions globally. We also deploy mandatory online training for our computer-based employees; in 2023 we launched one enterprise-wide and five regional courses using a targeted risk-based approach, with an average completion rate of ~97%. Our three “Talkabout” Toolkits (also available in 33 languages) that we develop each year empower managers to engage in meaningful discussions with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, which are supplemented by internal social media campaigns that allow our team members to engage with their colleagues across the globe around our values and ethics.
Our global supplier standards extend our commitment to our third-party service providers, establishing our expectation that they do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may currently be reached by (i) calling 800.461.9330 toll-free in the U.S., toll-free outside of the U.S. using the country-specific numbers found in our Code of Conduct, or +1.720.514.4400 direct with applicable charges from any location or (ii) visiting www.averydennison.com/guidelinereport. The GuideLine is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with Board oversight primarily by the Governance Committee and, for certain finance-related matters, also by the Audit Committee. We prohibit retaliation for good-faith reporting.
20 | 2024 Proxy Statement | Avery Dennison Corporation |
Code of Ethics
Our Code of Ethics requires that requires our CEO, Chief Financial Officer (CFO)CFO and Chief Accounting Officer (CAO) toController act professionally and ethically in fulfilling their responsibilities. Only the Audit Committee or the Governance Committee can amend or waive the provisions of our Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014.2014 and have made no exemptions or granted any waivers since its inception.
CODE OF ETHICS RESPONSIBILITIES |
• Avoidactual or apparent conflicts of interest • Ensure complete and accurate SEC filings • Respect confidentiality of financial and other information • Employ corporate assets responsibly • Report Code of Ethics violations to Chair of Audit or Governance Committees
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Supporting fulfillment of these responsibilities, our controllership and internal audit functions ensure that we maintain a robust internal control environment, with the leaders of these functions regularly reporting to, and periodically meeting in executive session with, the Audit Committee.
CODE OF CONDUCT
Our Code of Conduct applies to all of our directors, officers and employees and reflects our values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. It includes leadership messages, detailed information regarding higher risk areas, and case studies to provide guidance on situations that raise complex ethical questions. Our Code of Conduct has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and thereafter as part of our annual compliance certification. We train employees on the Code at least biannually, in addition to our online training program generally consisting of four courses per year covering specific risk areas from the Code that computer-based employees are required to complete.
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To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees, we develop and launch three “Talkabout” toolkits (also in over 30 languages) globally each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides and an introductory subtitled video, which includes messages from our Chief Compliance Officer and other company leaders.
Ethics-Based Corporate Culture and Policies
Reflecting the culture of our company, the ethics-based corporate policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to our third party service providers, establishing our expectation that they also do business in an ethical manner.
Business Conduct GuideLine
Our Business Conduct GuideLine (the “GuideLine”) is a whistleblower hotline available at all hours for employees or third parties to report potential violations of our Code of Conduct or applicable laws, anonymously if they so choose.
The GuideLine may be reached by (i) calling 800.461.9330 toll-free in the U.S., 720.514.4400 direct with applicable charges from any location, or toll-free outside of the U.S. using the country-specific toll-free numbers found in our Code of Conduct or (ii) visiting averydennison.com/guidelinereport (averydennison.com/guidelinereport-eu in Europe). The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. Reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.
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COMPLAINT PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
The Audit Committee has adopted procedures for the confidential, anonymous submission of complaints related to accounting, accounting standards, internal accounting controls and audit practices.
These procedures relate to reports of (i) fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements or other financial reports; (ii) fraud or deliberate error in the recording or maintenance of our financial records; (iii) deficiencies in, or noncompliance with, our internal accounting controls; (iv) misrepresentation or false statement to or by a senior officer or accountant regarding any matter contained in our financial records, statements or other reports; or (v) deviation from full and fair reporting of our financial condition. Any person, including third parties, may submit a good faithgood-faith complaint regarding accounting and auditing matters and employees may do so without fear of retaliation. The Audit Committee oversees these procedures, with investigations conducted under the direction of our internal audit department in consultation with our Corporate Secretary, Chief ComplianceLegal Officer law department(CLO) and other members of senior management to the extent appropriate under the circumstances.
Stockholders and other interested parties interested in communicating regarding these matters may make a confidential, anonymous report by contacting the GuideLine or writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
STOCK OWNERSHIP POLICY
Our stock ownership policy requires that our (i)non-employee directors acquire and maintain a minimum ownership interest in our company of $500,000, (ii) Executive Chairman and our CEO and other current NEOs acquire and maintain a minimum ownership interest in our company equal toof 6x and 3x his or her annualtheir base salary respectively; atand (iii) Level 2 and Level 3 executives acquire and maintain minimum ownership of 3x and 2x their base salary, respectively. At least 50% of the applicable minimum ownership requirement must be held in vested shares.shares.
The values of the following shares/units are considered in measuring compliance with our stock ownership policy: (i) shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federalU.S. securities laws; (ii) for officers, shares or units held in qualified and non-qualified employee benefit plans and 50% of the value of unvested MSUs at the target payout level; (iii) for non-employee directors, deferred stock units (DSUs); and (iv) for officers and non-employee directors, unvested restricted stock units (RSUs) subject to time-based vesting, vesting. Unvested stock options and 50% of the value of unvested market-leveraged stock units (MSUs) at the target payout level; and, for non-employee directors, RSUs and deferred stock units (DSUs). Unvested performance units (PUs) and stock optionsPUs are not considered in measuring compliance. DSUs, which represent annual cash retainers deferred at a director’s election, are included as owned under the policy because they are earned upon receipt and would be paid out to a participating director upon his or her separation from our Board.
Avery Dennison Corporation | 2024 Proxy Statement | 21 |
IfUntil anon-employee director or officer fails to achieve or make reasonable progress towards achieving his or her respectiveachieves their minimum ownership requirement, he or she isthey are required to retain any shares acquired, net of taxes, from the exercise of stock options or vesting of stock awards until such level is met. These individuals areor exercise of stock options. Officers may not allowed to transact in company stock until they certify that they will remain in compliance with our stock ownership policy after giving effect to the transaction they plan to effectuate.
The Compensation Committee and the Governance Committee reviewed the stock ownership of our non-employee directors in December 20202023 and February 2021,2024, respectively. Both Committees determinedcommittees noted that all of – excluding the individuals appointed in 2022 and 2023 – our non-employeethen-serving non-employee directors were in compliance with our stock ownership policy, withhad average ownership of 10x12x the minimum ownership requirement,, helping ensurealigning their interests remain aligned with those of our stockholders and further incenting their focus on long-term stockholder value creation.All current non-employee directors have exceeded the minimum ownership required by our policy, except for Mr. Wagner and Mses. Mejia and Reverberi, who have five years from the date of their respective Board appointments to reach that level.
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The Compensation Committee reviewed executive stock ownership in December 20202023 and determined that, all with the exception of our most recently appointed executive officer who has five years from the date of her appointment to reach her level, our executive officers, including all NEOs, were inhad achieved their minimum ownership requirement. The compliance of our non-employee directors and NEOs with our stock ownership policy. at year-end 2023 is shown below.
| STOCK OWNERSHIP POLICY COMPLIANCE | STOCK OWNERSHIP POLICY COMPLIANCE | STOCK OWNERSHIP POLICY COMPLIANCE | ||||||||||||||||||||||||||||
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| Shares* as of 2020 FYE (#) | Minimum Requirement | % of Requirement | Policy Compliance | Minimum Requirement(1) | Ownership(2) as of YE 2023(#) | Requirement Achieved | Minimum Requirement Achieved | ||||||||||||||||||||||
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Non-Employee Directors(3) | ||||||||||||||||||||||||||||||
Non-Employee Directors(3) | ||||||||||||||||||||||||||||||
Non-Employee Directors(3) | ||||||||||||||||||||||||||||||
Non-Employee Directors(3) | $ | 500,000 |
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Bradley Alford | 41,050 |
| 1,266% | ✓ |
| 47,454 | 17x | ✓ | ||||||||||||||||||||||
Anthony Anderson | 16,992 |
| 524% | ✓ | ||||||||||||||||||||||||||
Peter Barker | 64,465 |
| 1,988% | ✓ | ||||||||||||||||||||||||||
Mark Barrenechea | 5,593 |
| 172% | ✓ | ||||||||||||||||||||||||||
Ken Hicks | 42,828 |
| 1,320% | ✓ | ||||||||||||||||||||||||||
Ken Hicks | ||||||||||||||||||||||||||||||
Ken Hicks | ||||||||||||||||||||||||||||||
Ken Hicks |
| 46,233 | 17x | ✓ | ||||||||||||||||||||||||||
Andres Lopez | 7,438 |
| 229% | ✓ | ||||||||||||||||||||||||||
Andres Lopez | ||||||||||||||||||||||||||||||
Andres Lopez | ||||||||||||||||||||||||||||||
Andres Lopez |
| 4,865 | 1x | ✓ | ||||||||||||||||||||||||||
Francesca Reverberi(4) | ||||||||||||||||||||||||||||||
Francesca Reverberi(4) | ||||||||||||||||||||||||||||||
Francesca Reverberi(4) | ||||||||||||||||||||||||||||||
Francesca Reverberi(4) |
| 1,126 | – | – | ||||||||||||||||||||||||||
Patrick Siewert | 16,485 |
| 508% | ✓ | ||||||||||||||||||||||||||
Patrick Siewert | ||||||||||||||||||||||||||||||
Patrick Siewert | ||||||||||||||||||||||||||||||
Patrick Siewert |
| 18,226 | 6x | ✓ | ||||||||||||||||||||||||||
Julia Stewart | 61,570 |
| 1,899% | ✓ | ||||||||||||||||||||||||||
Julia Stewart | ||||||||||||||||||||||||||||||
Julia Stewart | ||||||||||||||||||||||||||||||
Julia Stewart |
| 54,603 | 20x | ✓ | ||||||||||||||||||||||||||
Martha Sullivan | ||||||||||||||||||||||||||||||
Martha Sullivan | ||||||||||||||||||||||||||||||
Martha Sullivan | ||||||||||||||||||||||||||||||
Martha Sullivan | 27,184 |
| 838% | ✓ |
| 32,425 | 12x | ✓ | ||||||||||||||||||||||
Chairman, President & CEO |
| 6x Base Salary |
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William Wagner(4) | ||||||||||||||||||||||||||||||
William Wagner(4) | ||||||||||||||||||||||||||||||
William Wagner(4) | ||||||||||||||||||||||||||||||
William Wagner(4) |
| 1,481 | – | – | ||||||||||||||||||||||||||
Executive Chairman | ||||||||||||||||||||||||||||||
Executive Chairman | ||||||||||||||||||||||||||||||
Executive Chairman | ||||||||||||||||||||||||||||||
Executive Chairman |
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Mitchell Butier | 240,724 | $6,798,000 | 546% | ✓ | $ | 6,000,000 | 336,085 | 62x | ✓ | |||||||||||||||||||||
Other NEOs |
| 3x Base Salary |
|
| ||||||||||||||||||||||||||
CEO | ||||||||||||||||||||||||||||||
CEO | ||||||||||||||||||||||||||||||
CEO | ||||||||||||||||||||||||||||||
CEO |
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Deon Stander | $ | 6,600,000 | 61,861 | 10x | ✓ | |||||||||||||||||||||||||
Level 2 NEOs | ||||||||||||||||||||||||||||||
Level 2 NEOs | ||||||||||||||||||||||||||||||
Level 2 NEOs | ||||||||||||||||||||||||||||||
Level 2 NEOs |
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| ||||||||||||||||||||||||||
Gregory Lovins | 41,470 | $1,854,000 | 345% | ✓ | $ | 2,250,000 | 78,598 | 19x | ✓ | |||||||||||||||||||||
Deon Stander | 30,339 | $1,665,387 | 281% | ✓ | ||||||||||||||||||||||||||
Anne Hill | 24,120 | $1,644,018 | 226% | ✓ | ||||||||||||||||||||||||||
Susan Miller | 14,865 | $1,743,144 | 131% | ✓ | ||||||||||||||||||||||||||
Francisco Melo(5) | ||||||||||||||||||||||||||||||
Francisco Melo(5) | ||||||||||||||||||||||||||||||
Francisco Melo(5) | ||||||||||||||||||||||||||||||
Francisco Melo(5) | $ | 1,554,657 | 19,106 | 6x | ✓ | |||||||||||||||||||||||||
Level 3 NEOs | ||||||||||||||||||||||||||||||
Level 3 NEOs | ||||||||||||||||||||||||||||||
Level 3 NEOs | ||||||||||||||||||||||||||||||
Level 3 NEOs |
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| ||||||||||||||||||||||||||
Deena Baker-Nel | $ | 980,000 | 13,259 | 5x | ✓ | |||||||||||||||||||||||||
Nicholas Colisto | ||||||||||||||||||||||||||||||
Nicholas Colisto | ||||||||||||||||||||||||||||||
Nicholas Colisto | ||||||||||||||||||||||||||||||
Nicholas Colisto | $ | 913,540 | 10,779 | 4x | ✓ | |||||||||||||||||||||||||
| (1) | Minimum requirements for Executive Chairman and CEO, Level 2 NEOs and Level 3 NEOs reflect 6x, 3x and 2x, respectively, of year-end 2023 base salary. |
Reflects shares/units considered in measuring compliance with our stock ownership policy |
| (3) | Excludes Ms. Mejia who was appointed to our Board in February 2024. |
| (4) | Ms. Reverberi and Mr. Wagner were appointed to our Board in February 2023 and October 2022, respectively, and have five years from their respective date of appointment to achieve the minimum ownership requirement. |
| (5) | Amount for Mr. Melo was converted from euros using the average monthly exchange rate for December 2023. |
22 | 2024 Proxy Statement | Avery Dennison Corporation |
INSIDER TRADING POLICY
Our insider trading policy prohibits our Board members,directors, officers and employees from engaging in transactions in our company’s stock while in the possessionany type of material non-public information; engaging in transactions in the stock of other companiessecurity while in possession of material non-publicnonpublic information relating to the security or the issuer of the security in breach of a duty of trust or confidence, whether the issuer is our company or another company. In addition, (i) if they are in possession of material nonpublic information regarding any other publicly-traded company, including that of our suppliers, customers, competitors or potential acquisition targets, they become awaremay not trade in its securities until the information becomes public or is no longer material; (ii) they may not purchase or sell any security of any other company while in performingpossession of material nonpublic information obtained in the course of their duties;employment or service with our company; and disclosing(iii) they may not directly or indirectly communicate material non-publicnonpublic information to unauthorized personsanyone outside or within our company other than on a need-to-know basis.
Officer/Director 10b5-1 Plans
Our insider trading policy contains specific requirements regarding contracts, plans or instructions to trade in our company’s securities entered into in accordance with SEC Rule 10b5-1, including with respect to multiple plans and modifications or terminations of existing plans. We reserve the right to suspend, discontinue or otherwise prohibit transactions under a 10b5-1 trading plan if we determine that doing so is in the best interest of our company.
Limited Trading Windows
Our insider trading policy restricts trading in company stock by Board members, officers (including our NEOs) and director-level employees, or any other person designated by our Corporate Secretary, during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the releaseissuance of our earnings release for the quarter. Additional blackout periods may be imposed with or without notice, depending onas the circumstances.circumstances require. All transactions in company stock must be precleared by our Corporate Secretary. Except for transactions under a previously established Rule 10b5-1 trading plan, if precleared individuals become aware of material nonpublic information or become subject to a blackout period before their transaction is effectuated, they may not complete the transaction even if they previously received preclearance.
Prohibitions on Hedging and PledgingCertain Transactions
Our insider trading policy prohibits our directors, officers and employees from short-selling company stock; transacting in puts, calls or other derivative securities involving company stock; or purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of shares of our common stock they hold, directly or indirectly.company stock. In addition, directors and officers are expressly prohibited from – and our non-officer employees are strongly discouraged from – pledging any of their shares of our common stock to secure personal loansas collateral for a loan, purchasing company securities on margin or other obligations, including by holding such sharesplacing company securities in a margin account.
To our knowledge based on our review of their written representations in our annual director and officer questionnaire, all of our Board members and executive officers complied with our insider trading policy during 2020,2023 and none of them has hedged or pledged shares of our common stock.engaged in any transaction prohibited thereby.
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ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
Sustainability and Diversity are two of our core values, and have long been part of our approach to doing business, driving us to work within our company and across our entire value chain to address the environmental and social impacts of our products and practices. practices.
We aim to continually improve the environmental sustainability of our products, and processes, build a more diverse, equitable and inclusive workforce, maintain operations that promote health and safety, and provide meaningful support for our communities to create value for all our stakeholders.communities.
With strategic guidance and direction provided by Mitch Butier, our Chairman, President and CEO, responsibility over ensuring that we continue to make meaningful progress toward achieving our 2025 sustainability goals resides with Deon Stander, Vice President and General Manager of our Retail Branding and Information Solutions business. Our enterprise-wide Sustainability Council, led by Mr. Stander and comprised of a cross-divisional and cross-functional group of leaders to drive broad accountability and continually accelerate our progress, generally meets bimonthly and updates our executive leadership team quarterly.BOARD OVERSIGHT AND MANAGEMENT RESPONSIBILITY
Board oversight overof environmental sustainability and community investment is primarily conducted by the Governance Committee, which receives a report from management on each of these topics at least once a year.annually. In addition, our full Board engages with business leaders on their sustainability initiatives during its regular reviewdiscussion of their business strategies.strategies. In July and December 2020,October 2023, our Board held strategy sessions focusedengaged with senior management on environmentalour sustainability andprogress, having discussed with them throughout the year our innovation efforts to address the increasing need and demand for more sustainable products,. sustainability strategic innovation platform, and business and enterprise sustainability priorities. In early 2024, our Board reviewed our 2023 Integrated Report, which includes our progress against our 2025 and 2030 sustainability goals.
Board oversight overof social sustainability is primarily conducted primarily throughby the Compensation Committee, which discussed DEI, including pay equity and transparency, at multiple meetings in 2023 and regularly reviews our diversity and inclusion progress and discusses other matters related to human capital management.talent management, including the impact of executive promotions, role changes and exits on U.S. racial/ethnic diversity and global gender and generational representation. In December substantially all members of2023, our entire Board engaged with, and challenged management in an in-depth discussionon, our employee experience, including reviewing the results of our D+I journey,including by reviewing the initiatives being undertaken byemployee engagement survey obtained through a more advanced platform using updated questions, as well as our progress in each of Regional D+I Councilsour four DEI strategic pillars. They also discussed our 2024 plans to activate enterprise-wide standards to more consistently select, promote, develop and analyzing D+I statisticsreward talent; globally implement a mobile application to better enable our manufacturing employees to access company information; and develop a talent solution connecting everything our team members need for learning, skills advancement and career mobility.
With strategic guidance and direction provided by our CEO, management is responsible for ensuring that we continue to make progress toward achieving our sustainability goals through our Sustainability Council, which is led by our enterprise sustainability leader reporting in this capacity to our CEO, who is accountable for our executive leadership teamprogress. The council, which is composed of a cross-divisional and cross-functional group of management, met regularly during 2023 to ensure we progress toward our U.S. workforce.2025 sustainability goals, advance our roadmaps to achieve our 2030 sustainability goals and targets, and accurately report to our stakeholders. Our enterprise sustainability leader participated in substantially all our 2023 off-season stockholder engagements to report on our sustainability progress and answer questions from investors.
ENGAGINGENGAGEMENT OF OUR STAKEHOLDERS
We seek to ensure thatalign our sustainability efforts are consistentpriorities with the expectations of our stakeholders. We regularly communicate with individuals and organizations interested in how we do business generally andthem regarding our sustainability efforts in particular,progress and also conduct stakeholder interviewsinterview members of management responsible for key sustainability initiatives and third parties as part of our regularbiennial materiality assessments. These assessments help set ourOur material topics and the feedback we received engaging with investors on sustainability agenda, focusing us on the areas in which wematters during 2023 can have the most impact. In 2020, we partnered with Environmental Resources Management to refresh our materiality assessment and reprioritize the sustainability topics most significant to our stakeholders. An updated materiality map showing the importance of various ESG topics to our company and our external stakeholders described on the following page may be found in our second ESG Download published in March 2021.the proxy summary.
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SUSTAINABILITY STAKEHOLDERS
Industry
Working Groups Conferences
Customers and Brand Owners
Product Collaborations Surveys Site Audits Working Groups
Employees
Engagement Survey Works Councils Employee Resource Groups Intranet/Town Halls
Code of Conduct Training Business Conduct GuideLine
Investors
Annual Meetings Quarterly Earnings Calls Investor Meetings Stockholder Engagement Program
Non-Governmental Organizations
Consultations on Issues of Concern Specific Initiatives (e.g., responsibility sourcing paper, reducing GHG emissions)
Policymakers and Regulators
Permitting Audits Certifications
Communities
Foundation Grantmaking Employee Volunteerism Civic Collaboration
Suppliers
Supplier Standards Compliance Training Supplier Audits Joint Projects
PROGRESS TOWARD ACHIEVING OUR 2025 GOALS; NEWAND 2030 GOALS
InWe present our 2020 integrated sustainability and annual report, we present highlights of our2023 scorecards showing progress against our 2025 sustainability goals and announce our more ambitious 2030 sustainability goals. After updating our materiality assessment to better understand the environmental and social sustainability challenges facing our company and stakeholders, we reframed our eight 2025 goals into the following three broader goals that we are aiming to achieve by 2030: deliver innovations that advance the circular economy; reduce the environmental impact in our operations and supply chain; and make a positive social impact by enhancing the livelihood of our people and communities. Within each of these goals, we have specific targets related to environmental and social sustainability. Going forward, we will report our progress against both sets of goals.
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In the first five years of the 10-year horizon for our 2025 sustainability goals, we have made meaningful progress, as shown in the scorecard in the proxy summary. You can find additional information in our 2020 integrated sustainability and annual report, our ESG Downloads available in2023 Integrated Report being furnished to the investors sectionSEC prior to the distribution of our proxy materials and our March 2024 ESG Download being made available on our website andat esg.averydennison.com on or before the sustainability sectionfiling of our website.definitive proxy statement. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
In our ESG Downloads published at least annually, we
24 | 2024 Proxy Statement | Avery Dennison Corporation |
We disclose our ESGsustainability metrics usingin accordance with the SASB and GRI frameworks of the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) and annually report to CDP Worldwide. In November 2020, we joinedClimate, Water and Forests. We are a member of the United Nations Global Compact and have made commitments to the UNUnited Nations Sustainable Development Goals. and the Science Based Targets initiative (SBTi), with our Scope 1, 2 and 3 GHG emissions reduction targets having been approved by SBTi as consistent with reductions required to keep warming to no more than 1.5ºC.
DIVERSITY, EQUITY AND INCLUSION
Diversity is one of our core values, reflecting our desire to ensure an inclusive and respectful environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams.The importance of D+I to our company is further evidenced by the diversity-related targets included in our 2025 sustainability goals. D+I at our company is led by our cross-functional and cross-divisional D+I Council, chaired by our President/CEO and advised by our Chief Human Resources Officer. Highlights of our D+IDEI journey are shown in the proxy summary and further describedsummary. Our DEI strategy is grounded in the four global pillars shown below.
In recent years, among other initiatives, our D+I efforts have focused on training our managers globally on unconscious bias; increasing
Increasing the number of sites offering flexible work arrangements; adding anwomen who hold leadership positions
Enhancing the experience of our manufacturing employees
Increasing representation and inclusion indexfor underrepresented groups, with priority populations and actions established regionally
Making merit and transparency even more foundational to our annual employee engagement survey;experience
Members of our senior leadership formally sponsor or actively engage in progressing these DEI pillars. To ensure we achieve our goals, we employ a Global DEI Director and expandingadditional resources in each of our Women.Empowered program featuring interactive discussions among nominated female participants to facilitate and enhance their development. We joined CEO Action for Diversity & Inclusion, the largest CEO-driven business commitment to advance D+I in the workplace, externally committing ourselves to our internal value. We also began evaluating evaluated gender pay equity annually, making adjustments to compensation for both male and female employees where needed.
In 2019, we began formally encouraging and more actively supporting employee resource groups (ERGs), a few of which had already begun to form through the initiative of their individual founders. ERGs are voluntary executive-sponsored and employee-led groups comprised of individuals who join together based on common interests or demographic backgrounds such as race, ethnicity, sexual orientation and veteran status. Participation in these groups is not limited to individuals in these categories, but rather is open to all employees interested in learning about the experiences and challenges of their colleagues. Our ERGs expanded in number throughout 2019 and 2020, with increasing participation and engagement beyond the U.S. Our ERGs currently include groups centered around women, ethnic Chinese, Black employees, military veterans, Hispanic/Latinx employees, and LGBTQ+ individuals.
In 2020, we established Regional D+I Councils in North America; Latin America; Europe; Middle East and Africa; North Asia; and South Asia, which provide leadership of initiatives that more strongly resonate with employees in their respective regions. In addition, we established Regional D+I Executive Councils in certain of these regions to provide a direct avenue for the initiativesadvise and outcomes sought by thosesupport our Regional D+IDEI Councils and ERGs. We regularly report to, be heard, aligned upon and implemented by their regional business leaders. We also began evaluating racial/ethnic pay equity in the U.S.
Having delayed the launch of the program in 2020 due to COVID-19, we plan to launch global harassment prevention training in 2021 to supplement the anti-harassment messages we continually reinforce as part of our Values and Ethics program. We are also hiring a global D+I leader for our company, as well as similarly dedicated resources in the regions in which we operate. Most important, we are increasing external transparency into our D+I journeyengage with, more robust, ongoing ESG reporting so our stakeholders may criticallyso they can assess our DEI progress and help us achieveadvance our goals.journey.
OTHER HUMAN CAPITALTALENT MANAGEMENT MATTERS
Succession Planning
TheLeading up to its decision in May 2023 to appoint Deon Stander as our new CEO, our Board discussed leadership succession in multiple meetings during the preceding 18-24 months, helping ensure a smooth transition. In addition, in July 2023, the Compensation Committee reviewed leadership team changes, assessed key areas of leadership development and our full Board conduct executive succession planning at least semiannually, reviewing succession plans for our CEOfocus, and other senior executives. Consistent with this practice, in October 2020, the Compensation Committee discussed potential successors to the members of our CEO; in addition, in June 2020,Company Leadership Team, which includes the leaders of our businesses and corporate functions. In October and December 2023, the Compensation Committee again reviewed leadership changes and the key areas of focus in our Materials and Solutions businesses, as well as enterprise-wide, with a view to ensuring we have talent that is ready – or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready – to fill other senior executive positions in the event of a vacancy. These assessments were further discussed withvacancy. Our Compensation Committee Chair reported on these reviews to our full Board. Recognizing that we have had several recent leadership changes, including the recent appointments of our new CEO and Solutions Group President, our Board conducted leadership succession planning at all of its meetings during the first half of 2023.
The Compensation Committee also regularly reviewsreceives reports on executive new hires, promotions transfers and role changes, departures and open positions – as well as the impact of these developments on U.S. racial/ethnic and global gender and generational representation – to assist with executive succession planning and leadership development.planning.
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Leadership Development
Our Board is actively involved in overseeingThe Compensation Committee oversees our company’s human capitaltalent management program to assist with identifying and developing our future leaders. We maintain a robust performance review process and provideprogress leadership development opportunitiesplans for our employees. top talent, while also providing development opportunities to our employees more broadly. Senior management reports to the Compensation Committee oron our full Board on leadership at executive levels of our organization by identifying high-potential talent, and critical experts, cultivating the skills and capabilities to allowenable identified individuals to become our future leaders, and ensuring that they have appropriate development plans in place to progress them toward expanded responsibility.Through regular reports from management, ourroles with greater responsibility. Our Board has the opportunity to meetactively engage with our business leaders and functional leaders in law, finance, information technology and human resources.outside the boardroom. In addition, Board members have freedom of access to all our employees, and are encouraged toperiodically visit our facilities to meet with local management and attend company events.have the freedom to directly contact any of our employees.
Avery Dennison Corporation | 2024 Proxy Statement | 25 |
COMMUNITY INVESTMENT
With Board oversight fromby the Governance Committee, our community investment efforts help strengthen the locationscommunities around the world in which we operate. We make most of our community investments through the Avery Dennison Foundation (the “Foundation”),ADF, which annually distributes at least 5% of its assets from the prior year, historically to advance education, sustainability and women’s empowerment, as well as to encourage employee engagement with a spirit of invention and innovation. These priorities shifted in 2020 to supporting our communities respond to COVID-19. The Foundation supports communities by making grants to community-based organizations, promoting employee volunteerism and engagement, and awarding scholarships. In 2020, we made a $10 million contribution to the Foundation to ensure it is able to increase the scope and pace of its support for our communities, particularly at this time when they continue to be challenged by COVID-19.
In 2020, the Foundation shifted its resources and funds to help our communities respond to COVID-19. In a joint effort with our company, the Foundation provided nearly $3 million in grants to support the efforts of more than 100 nonprofit organizations actively assisting communities respond to the pandemic in over 30 countries, many of which were identified by our employees. These contributions helped serve basic human needs such as food, shelter, education and childcare.
Global Grantmaking
Foundationyear. ADF’s grantmaking the primary means of our giving, is aided by our employees worldwide, who help identify deserving nonprofit organizations serving their local communities where our employees livethat can advance their mission and work. impact with additional financial support.
In 2021, the Foundation plans2023, after undertaking a formal strategic review process, ADF updated and refined its vision, mission and grantmaking focus areas. ADF’s updated grantmaking strategy focuses funding on charitable organizations working to reviewincrease education access, advance environmental sustainability and support secure livelihoods. Alongside its grantmaking focus areas, of focus to ensure continued alignment with our company’s reframed strategiesADF continues supporting disaster response, DEI and advance our broader commitment to D+I, while continuing to support the communities in which we operate.
COVID-19 Employee Assistance Fund
In response to COVID-19, the Foundation launched an employee assistance fund to supportnonprofit organizations identified by our employees around the world who were furloughed, laid off, suspended or terminated. This fund was designed to help provide for basic needs such as housingaddressing challenges in their local communities.
ADF and utilities, medical care, dependent care,our company collectively made $5.5 million in grants and other expenses impacted byfinancial contributions during 2023.
Enhanced Focus on Grantmaking
In support of its enhanced vision and mission, ADF prioritizes grants to communities and geographies facing the pandemic. Grants were also made available to families of our employees who had died of COVID-19. A significantgreatest need, as well as organizations that demonstrate inclusivity and equity in their work. The total amount of grants in each pillar, as well as select grant recipients, made in 2023, 95% of which incorporated employee donations supplemented the Foundation funds earmarked for this effort. The fund is administered by Global Impact, an independent third party.
Employee Engagement
As the hands and heart of our company, our employeesvolunteerism, are critical to advancing the Foundation’s efforts. Because they better understand the needs of their communities, more than 150 employee teams coordinate volunteerism locally at our global locations.
In addition, our employees around the world gave their time and resources to support their communities respond to COVID-19. Their efforts included adapting manufacturing lines to make plastic face shields donated to healthcare facilities; collecting food and other essential goods for colleagues in need; and creating iron-on patches celebrating healthcare workers, with all sales proceeds benefiting Doctors Without Borders/Médecins Sans Frontières.shown below:
| 2023 ADF GRANT HIGHLIGHTS | ||||
| ~$980K TO INCREASE EDUCATION ACCESS | ~$650K TO ADVANCE ENVIRONMENTAL SUSTAINABILITY | ~$1.3M TO SUPPORT SECURE LIVELIHOODS | ||
• Fundacion Leer in support of literacy programming in Argentina • Institute of International Education to provide scholarships to children of company employees in countries with significant employee presence
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• Gift of the Givers to improve clean water access in rural Africa | • Universal Access Project of the UN Foundation to support the Resilience Fund for Women in Global Value Chains • Connecting Dreams Foundation to support India’s first LGBTQI Center of Excellence in Delhi • Islamic Relief USA to improve economic access for people in Pakistan and Kenya | ||
Supporting Employees in Times of Crisis
In 2020, ADF launched an Employee Assistance Fund to support company employees who had been significantly impacted by the pandemic; from 2020 to 2022, the fund distributed ~$4.6 million to more than 4,000 individuals in 27 countries. With the global impact of the pandemic having substantially diminished but the potential opportunity for further impact remaining, ADF converted the fund to an Employee Crisis Fund to provide financial assistance to our employees impacted by natural disasters and other humanitarian crises. In 2023, this fund provided support to 475 company employees in northern China impacted by severe flooding.
Supporting Disaster Relief Efforts
ADF partners with an independent nonprofit, GlobalGiving, to promote and supplement employee giving to disaster relief efforts around the globe. Employees are able to give to organizations supporting impacted communities. In 2023, 300+ employees made donations totaling ~$25,000 to organizations responding to earthquakes in Turkey and Syria and emergency and long-term support to people in need in Gaza, Israel and Ukraine. These donations were matched by ADF. In addition, ADF made a grant of $250,000 to a member organization of the International Committee of the Red Cross to support relief efforts in Israel, where we have a significant employee presence.
Promoting DEI
ADF supported organizations promoting DEI globally, with grants totaling $395,000. ADF continued to work with our company’s Regional DEI Councils and ERGs to ensure that it supported organizations making a difference in the communities in which our team members live and work. In addition to certain of the grants shown in the chart above, grants in 2023 included support for LGBTQ+ youth in Singapore, veterans in the U.S. and people with disabilities in Mexico.
26 | 2024 Proxy Statement | Avery Dennison Corporation
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Engaging Employees
The Foundation also engagesOur employees advance our community investment efforts at the local level through itstheir personal monetary contributions as well as volunteerism. Through ADF’s signature Granting Wishes program, which allows thememployees nominate local NGOs to recommend one-timereceive grants and organize volunteer events. In 2023, ADF made ~$1 million in grants in 37 countries through Granting Wishes.
Providing College Scholarships
Partnering with independent third parties to local NGOs. Employees often have a connection to the organizations they nominate through volunteerism or service on the organization’s board. In the eight years since the Foundation launched Granting Wishes, more than 2,000 of our employees have made recommendations, enabling grants to more than 360 organizations.
In 2020, in light of COVID-19, the Foundation adjusted its Granting Wishes program, supporting 48 former grantees that remained in good standing, had the capacity to deploy funds quickly, and had a stated purpose related to pandemic response. These grants served communities in nearly 30 countries.
Scholarships
The Foundationadvance education access, ADF provides college scholarships to the children of ourcompany employees. The U.S. employees. To date, over 650 scholarships have been awarded to U.S. Scholars. ThisScholars program, is administered byin partnership with Scholarship America, an independent third party.annually awards scholarships in the U.S. and Canada. In 2023, ADF partnered with the Institute of International Education to provide scholarships in Bangladesh, Honduras, India, Mexico, Sri Lanka and Vietnam, with plans to expand the program to additional countries in which we have a significant employee presence in future years.
In ChinaWhile 2022 marked the end of ADF’s Spirit of Invention (InvEnt) Scholarship Program, alumni from recent years gathered in person in 2023 having been unable to meet during their participation due to pandemic-related restrictions, giving them the opportunity to meet with regional leaders of our company and India,expand their professional network. Over 10 years, the Foundation’s InvEnt Scholarships have forprogram provided tuition assistance and professional development opportunities to more than a decade supported the next generation of innovators in100 talented science, technology, engineering and mathematics. By providing undergraduates in those communities with tuition assistance, an invention competition and professional development opportunities, the Foundation seeks to inspire the spirit of innovation in future engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year. To date, nearly 200 scholarships have been awarded to Chinese and Indian students who have demonstrated outstanding innovative spirit and strong practical competence.
Racial and Social Justice Funding
Following events in many of our communities globally during 2020 and recognizing the role we can play in accelerating society’s collective journey towards greater racial and social justice, we began taking a more public stand against racial and other forms of inequality. Our company is defining its goals and strategies related to this effort, and Foundation grantmaking will be part of the response. Initial focus areas in the U.S. include recruitment and retention of people of color and scholarships and internships with educational institutions and professional organizations. Beyond the U.S., the Foundation plans to support efforts to address issues involving not only racism, but also inequality and discrimination on the basis of other demographic characteristics such as caste, color, disability and LGBTQ+ status.mathematics scholars.
Avery Dennison Corporation |
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Our Board oversees, counsels and ensures management is serving the best interests of our company, and stockholders, with the goal ofa view toward maximizing the performance of our businesses and delivering long-term value for all our stakeholders.
PRIMARY BOARD RESPONSIBILITIESinvestors.
Establish strong governance, with Board/Committee structure ensuring independent oversight
Conduct director succession planning to maintain engaged and diverse Board with balance of skills, qualifications and demographic backgrounds
Oversee businesses, strategy execution and risk mitigation
Approve annual operating plan and significant strategic actions, including significant capital expenditures and acquisitions
Maintain integrity of financial statements
Evaluate performance of senior leaders and determine executive compensation
Conduct executive succession planning and ensure effective human capital management
PRIMARY BOARD RESPONSIBILITIES |
• Establish Board/Committee composition, structure and responsibilities to ensure strong independent oversight • Conduct director succession planning to maintain engaged and diverse Board with balance of skills, qualifications and demographic backgrounds • Oversee businesses, strategy execution, risk mitigation, sustainability progress and governance profile • Approve annual operating plan and strategic decisions, including significant fixed and IT capital expenditures and acquisitions • Maintain integrity of financial statements • Evaluate performance of senior leaders and determine executive compensation • Conduct CEO and other executive succession planning and help us develop leaders that advance our future growth and ensure high-performing teams, diverse talent and equitable and inclusive culture |
2024 Director Nominees
Our Board’s top priority in 2020 given the continuing public health crisis of COVID-19 was supporting management in protecting the health, safety and well-being of our employees, delivering for our customers, minimizing the impact of the pandemic-driven recession on our investors, and supporting our communities.We implemented rigorous protective measures at our operations worldwide, including requiring remote work for employees whose jobs allowed for it; implementing strict health screening measures at our facilities; mandating that masks be worn on our premises; more frequently disinfecting surfaces; suspending business travel and non-essential in-person meetings; and requiring team members having experienced COVID-19 exposure to quarantine in accordance with public health guidelines. WithGovernance Guidelines provide our Board’s oversight, we also took several other actions to support our employees and communities during this difficult time, including providing additional compensation and benefits in the early stage of the pandemic to reduce the financial impact on our employees in hard hit regions, providing supplemental payments to our frontline workers to thank them for their courage and agility in serving our customers, and increasing our commitment to community investment by, among other things, contributing $10 million to the Avery Dennison Foundation to increasing the scope and pace of its support of communities as they continue to be challenged by COVID-19.
2021 Director Nominees
Our Bylaws provideview that our Board be comprised ofa size between 8 and 12 directors withallows for effective Board functioning, although it may periodically comprise a larger or smaller number of directors. Under our Bylaws, the exact number of directors is fixed from time to time by Board resolution. As previously disclosed, in February 2024, Julia Stewart notified our Board of her intention not to stand for reelection at the Annual Meeting; she is continuing to serve as Compensation Committee Chair through April 2024. Our Board has fixedplans to fix the current number of directors at 10 and expects to reduce its size in April 2021 to reflect Peter Barker’s retirement on the date of the Annual Meeting as required byfollowing Ms. Stewart’s departure from our age-based mandatory retirement policy. The 9Board.
Our 2024 director nominees for election in 2021 are shown in the chart below. As shown by individual in the Director Nominee Matrix in the proxy summary, they collectively bring a balance of industry and functional experiences and demographic backgrounds in overseeing management in advancing our strategies and achieving our financial and sustainability goals.
| Name | Age | Director Since | Principal Occupation | Independent | AC | CC | GC | |||||||||||||||||||||||||
Bradley A. Alford | 64 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
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Anthony K. Anderson | 65 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | ✓ | ¡ |
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Mark J. Barrenechea | 56 | 2018 | Vice Chair, CEO & CTO, OpenText Corporation | ✓ |
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Mitchell R. Butier | 49 | 2016 | Chairman, President & CEO, Avery Dennison Corporation |
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Ken C. Hicks | 68 | 2007 | Chairman, President & CEO, Academy Sports + Outdoors | ✓ |
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Andres A. Lopez | 58 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ¡ |
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Patrick T. Siewert | 65 | 2005 | Managing Director & Partner, The Carlyle Group | ✓ | ¡ |
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Julia A. Stewart | 65 | 2003 | Chair & CEO, Alurx, Inc. | ✓ |
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Martha N. Sullivan | 64 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ¡ |
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| NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | FC | ||||||||||||
1 | Bradley A. Alford | 67 | 2010 | Retired Chairman & CEO, Nestlé USA | ✓ |
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2 | Mitchell R. Butier | 52 | 2016 | Executive Chairman, Avery Dennison Corporation | – |
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3 | Ken C. Hicks | 71 | 2007 | Executive Chairman, Academy Sports + Outdoors, Inc. | ✓ |
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4 | Andres A. Lopez | 61 | 2017 | President & CEO, O-I Glass, Inc. | ✓ | ● | ● |
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5 | Maria Fernanda Mejia^ | 60 | 2024 | Retired CEO, International, Newell Brands Inc. | ✓ | ● |
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6 | Francesca Reverberi | 52 | 2023 | SVP, Engineered Materials & CSO, Trinseo PLC | ✓ |
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7 | Patrick T. Siewert | 68 | 2005 | Retired Managing Director & Partner, The Carlyle Group | ✓ | ● |
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8 | Deon M. Stander | 55 | 2023 | President & CEO, Avery Dennison Corporation | – |
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9 | Martha N. Sullivan | 67 | 2013 | Retired CEO, Sensata Technologies Holding PLC | ✓ | ● |
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10 | William R. Wagner | 57 | 2022 | Retired President & CEO, GoTo Group, Inc. | ✓ | ● |
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AC = Audit and Finance Committee CC = Talent and Compensation Committee GC = Governance Committee FC = Finance Committee
= Lead Independent Director ¡● = Chair ¡● = Member^= New Director
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The ages of our director nominees range from 4952 to 68,71, with an average age of approximately 62.61. Their lengths of service range from 21⁄2less than one to 1819 years, with an average tenure on our Board of approximately 91⁄28 years.
Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeing our company, as shown by individual in the Board matrix shown in the proxy summary.
2020 Change in Board Leadership Structure
In February 2020, our then-serving Lead Independent Director, David Pyott, notified our Board of his intention not to stand for reelection at the 2020 Annual Meeting so that he could focus on other endeavors. As a result, his membership on our Board ended on the date of the 2020 Annual Meeting. Our Board regularly reviews its composition and assesses the need for refreshment, determining not to appoint an additional director at that time.
In February 2020, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Patrick Siewert be selected to replace Mr. Pyott as Lead Independent Director. The committee’s decision took into account his significant contribution to our Board’s responsibility for maintaining the integrity of our financial statements as a member of the Audit and Finance Committee for 15 years and its then-Chair for the last four years, as well as his extensive international experience in Asia, a region from which nearly 35% of our sales originated and approximately 60% of our employees were located at that time. The Governance Committee determined that Mr. Siewert was best positioned to provide independent leadership of our Board in overseeing our strategies to deliver long-term value for our employees, customers, investors and communities. Upon the recommendation of the Governance Committee, the independent directors on our Board unanimously selected Mr. Siewert (with him and Mr. Pyott abstaining) to serve as our Lead Independent Director, effective immediately after the 2020 Annual Meeting. In February 2021, upon the recommendation of the Governance Committee, the independent directors on our Board unanimously selected Mr. Siewert (with him abstaining) to continue serving as our Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.
2021 Nomination of Mr. Barrenechea
In nominating Mr. Barrenechea for reelection, the Board evaluatedthe overboarding policies of certain of our investors and proxy advisory firms. As part of our ongoing stockholder engagement program, members of our Board – including our Chairman and our Lead Independent Director – and management proactively discussed this matter with stockholders, reviewing Mr. Barrenechea’s consistent attendance and robust and active engagement not only with the Board and its committees, but also with management by sharing his information technology expertise and mentoring key leaders. Most notably, Mr. Barrenechea has been actively engaged in helping guide management to advance our Intelligent Labels platform, which is the highest priority in our strategy to drive outsized growth in high-value categories and which we believe will be a substantial driver of our long-term profitable growth. This business is expected to continue being a key area of Board and management strategic focus through at least fiscal year 2022, beyond the one-year term to which Mr. Barrenechea is being nominated to serve.
After giving much consideration to the feedback from investors as evidenced both by their prior votes on his reelection and our candid discussions with them in recent years, as well as its assessment of Mr. Barrenechea’s demonstrated ability to meet the time demands of the director role, our Board determined that it was in the best interests of the company and our stockholders to nominate Mr. Barrenechea for reelection. In light of his contributions, commitment to our company and management, and skill alignment with our strategic priorities, our Board recommends that stockholders vote in favor of Mr. Barrenechea’s reelection, as well as that of our other director nominees.
Board Meetings and Attendance
Our Board met fiveseven times and acted five times by unanimous written consent during 2020.2023. There were 1524 Board Committee meetings during the year. All incumbent directors attended at least 75% of their respective Board and Committee meetings; average attendance was 100%. In addition, our directors regularly discussed strategic, business and financial matters with each of critical importance with our Chairman/Executive Chairman and our CEO throughout the year outside of meetings, particularly with regard to our COVID-19 response. All directors attended 100% of their respective Board and Committee meetings during 2020. meetings. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines and all then-serving directors attended the virtual 20202023 Annual Meeting.
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Additional Board Engagement
Our Governance Guidelines provide the governance framework for our company and reflect the values of our Board, as highlighted below. They are reviewed at least annually and amended from time to time to reflect changes in regulatory requirements, evolving market practices, recommendations from our advisors and feedback from our stockholders.investors. Our Governance Guidelines were most recentlylast amended in FebruaryDecember 2021.
BOARD GOVERNANCE HIGHLIGHTS | ||
Board Composition | ✓
✓ Mandatory retirement after age
✓ On average, director nominee age of
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Director Independence | ✓
✓ Executive sessions of independent directors held at | |
Board Leadership Structure | ✓ Annual review of Board leadership structure
✓ Robust Lead Independent Director role and independent | |
Board Committees | ✓
✓ Act under
✓ Directors required to attend Board/Committee and stockholder meetings | |
Board Duties | ✓ Regular
✓ Ongoing review of long-term strategic plans, including key risks and mitigating strategies
✓ Directors entitled to rely on independent legal, financial or other advisors at our expense | |
Continuous Board Improvement | ✓ New directors
✓ Continuing education through meetings with management, visits to our facilities and participation in director education programs
✓ Annual evaluation process ensures Board, Committees, Chairman, Lead Independent Director and Committee Chairs are functioning ✓ Individual director feedback process advances continuous director development and assists with Board succession planning | |
Director Qualifications | ✓ Regular review of Board composition | |
Avery Dennison Corporation | 2024 Proxy Statement | 29 |
DIRECTOR INDEPENDENCE
Our Governance Guidelines require that our Board be comprised ofcomprise a majority of directors who satisfy the criteria for independence under NYSE listing standards and require that our audit, compensationAudit, Compensation and nominating committeesGovernance Committees be comprisedcomposed entirely of independent directors. An independent director is one who meets the independence requirements of the NYSE and who our Board affirmatively determines has no material relationship with our company, directly or indirectly as a partner, stockholder or officer of an entity with which we have a business relationship.
Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annualour Board’s independence determination, including allany relationships they have with our company, directly or indirectly through our company’s sale or purchase of products or services to or from theany companies or firms by which they are employed. The Governance Committee reviewsdiscusses any relevant disclosures made in the questionnaires relevant to its independence assessment with our Chief Legal Officer and our Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2021,2024, after review of the facts and circumstances relevant to all directors,their respective relationships, the Governance Committee concluded that only Mr.Messrs. Butier and Stander had a relationshiprelationships that waswere disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon the recommendation of the Governance Committee, our Board affirmatively determined the 9 current directors named on the following pagebelow serving for all or part of 2023, as well as our newest director appointed in February 2024, to be independent; 89% of our director nominees are independent.
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| DIRECTOR NOMINEE INDEPENDENCE* | |||
Bradley Alford Anthony Anderson
Ken Hicks Andres Lopez Francesca Reverberi Patrick Siewert Julia Stewart Martha Sullivan William Wagner |
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For a discussion of the potential impact of tenure on director independence, see the Board Refreshment and Director Succession Planning section of this proxy statement.
| EXECUTIVE CHAIRMAN | PRIMARY RESPONSIBILITIES | |
Mitch Butier Elected annually by our Board | In addition to customary duties of Chairman: • Provide Board’s collective input on company strategies to CEO • Engage with CEO on value-enhancing strategic opportunities, as well as other key relationships and strategic alliances • Support CEO and Company Leadership Team in expanding and deepening relationships with key stakeholders • Participate in certain Advisory Councils • Mentor CEO, acting as principal liaison between him and Board members | |
| LEAD INDEPENDENT DIRECTOR | PRIMARY RESPONSIBILITIES | |
Patrick Siewert Elected annually by independent directors | • Preside over executive sessions of independent directors and Board meetings where Executive Chairman is not present • Approve Board meeting agendas, schedules and other information sent to our Board • Call meetings of independent directors • Consult and meet with stockholders | |
30 | 2024 Proxy Statement | Avery Dennison Corporation |
Our Governance Guidelines give our Board – acting through its independent directors – the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following one-year termgiving consideration to, our independent directors taking into account, among other things, our financial position, business strategies and sustainability and governance priorities, as well as any feedback received from our stockholders.investors and other stakeholders.
During the first two-thirds of the year, we had a combined Chairman/CEO and a Lead Independent Director. In connection with our CEO transition, our other directors in July elected Mr. Butier as Executive Chairman effective September 2023 for the remainder of the term ending at the Annual Meeting based on their belief that his leadership would optimize the execution of our strategic priorities as he mentors Mr. Stander in his new role as CEO. At that time, the Chairman and CEO roles were separated, each filled by long-serving leaders of our company who have developed and executed our strategies effectively to deliver long-term value for our employees, customers, investors and communities. Because Mr. Butier remains our employee, Mr. Siewert was elected by our independent directors through the Annual Meeting to continue ensuring independent oversight of our Board.
Robust Lead Independent Director Role
Our robust Lead Independent Director role provides an effective balance withbalances our combined Chairman/CEOExecutive Chairman role, exercising critical duties to ensure independent Board decision-making in the boardroom. Mr. Siewert began serving as our Lead Independent Director in April 2020.2020 and was most recently reelected by our independent directors in February 2024 for a one-year term beginning after the Annual Meeting, subject to his reelection. Our Governance Guidelines clearly define his primary responsibilities, aswhich are shown below.
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In addition to these responsibilities,in the chart above. Mr. Siewert also performed the activities described below during his tenure as Lead Independent Director in 2020.2023.
Led majority of off-season stockholder engagement discussions
| • | Oversaw our new director search process, including meeting regularly with senior management and the external firm selected by the Governance Committee to lead the search; interviewing and assessing high-potential candidates; and leading director succession planning discussions with the Governance Committee he chairs, as well as with our Executive Chairman, our CEO and other Board members |
Regularly engaged with Chairman/CEO to help guide strategic direction, including COVID-19 response, review of business strategies, mitigation of related risks and assessment of potential acquisitions
| • | Directed our Board/Committee evaluation process, meeting individually with each other director to obtain verbal feedback to supplement their written evaluations |
Consulted frequently with other independent directors and interviewed each of them during Board/Committee evaluation process
| • | Led the majority of our off-seasonstockholder engagements |
Provided feedback to Chairman/CEO based on discussions with independent directors
| • | Oversaw our individual director feedback process through which each director was able to provide anonymous written feedback on their peers, giving consideration to their preparation, participation and engagement in and outside the boardroom with a view to enhancing their overall performance and assisting with director succession planning |
| • | Consulted frequently with our independent directors and provided feedback to our Executive Chairman and our CEO based on these discussions, including our Board’s evaluation of their 2023 performance with the Compensation Committee Chair |
Met with members of senior management other than Chairman/CEO
| • | Met regularly with our Executive Chairman and our CEO, as well as periodically with other members of management and representatives of our independent registered public accounting firm |
Supplementing our Lead Independent Director in providing independent Board leadership are our CommitteeAudit, Compensation and Governance Chairs, all of whom are independent.
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2021 Board Leadership StructureAssessment and Evaluation
Our Board currently has a Chairman/CEO and a Lead Independent Director. The Governance Committee oversaw the evaluation of their respective performance during theDuring our Board evaluation process conducted induring the fourth quarterquarters of 2020, noting that 2022 and 2023,Messrs. Butier and Siewert each received uniformly positive feedback from our independent directors in their respective roles. Based in part on these evaluations, we believe that our current Board leadership structure is providing effective oversight of our company. During our 2020 engagement with stockholders, none of them expressed concerns with our Board leadership structure, which we believe reflects support for our robustroles as Chairman and clearly delineated Lead Independent Director role as well as Mr. Siewert’s direct engagement in many of those meetings.Director.
In February 2021,May and July 2023, having delayed its planned discussion of these matters from April 2023 as a result of its leadership and Board succession planning work, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr. Butier be elected to continue serving asin the role of Chairman, noting that he has successfully led our company as CEO for the last five years and isremained best positioned to lead our Board in overseeing our strategies to deliver long-term value for our employees, customers, investors and communities. The committee further noted that Mr. Butier has articulated and worked to realize a long-term vision for our company that has delivered top quartile TSR performance, and that we can best continue our progress toward achieving our 2021 financial targets and 2025 sustainability goals – as well as our 2021-2025 financial targets and ambitious 2030 sustainability goals being announced contemporaneously with the issuance of this proxy statement – with combined leadership in the boardroom at this time.strategies. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr. Butier (with him abstaining) to servenot present for the discussion or vote) as ourExecutive Chairman effective immediately afterSeptember 1, 2023 through the Annual Meeting. In February 2024, giving consideration to the valuable mentorship he has provided our new CEO and his successful transition to the role of Executive Chairman, upon the recommendation of the Governance Committee, our Board (with him not present for the discussion or vote) elected Mr. Butier to continue serving as Executive Chairman for a one-year term ending at the 2025 Annual Meeting, subject to his reelection.
At the same time,
Avery Dennison Corporation | 2024 Proxy Statement | 31 |
In July 2023, the Governance Committee also recommended that Mr. Siewert (with him abstaining)not present for the discussion or vote) continue serving as Lead Independent Director.Director through the Annual Meeting. Having an experienceda long-serving director with financialfinance expertise and substantial internationalextensive experience working outside the U.S. serve as Lead Independent Director is providing Mr.has provided Messrs. Butier and Stander valuable mentorshipcounsel and guidance while ensuring robust independent Board oversight of management. The committee also recognized Mr. Siewert’s support and substantial effort with our stockholder engagement program. The Governance Committee determined that, in light of his demonstrated commitment, engagement and strong leadership, in the first year in which he served in such capacity, Mr. Siewert should continue in the role of ensuring independent stewardship of our Board in its oversight of our strategies to deliver long-term value for all our stakeholders.responsibilities. The committee’s decision took into account his significant contribution to the Board’s responsibilitiescontributions as a member and former Chair of the Audit Committee for 16 years and its Chair for four years,as the current Chair of the Governance Committee, andas well as his extensive international experiencemore than 25 years working in Asia Pacific, a region from which approximately 34%~30% of our 2023 sales originated and approximately 60%~56% of our employees were located in 2020.at year-end 2023. Upon the recommendation of the Governance Committee, ourthe independent directors unanimously selectedon our Board elected Mr. Siewert (with him abstaining) to servenot present for the discussion or vote) as Lead Independent Director effective immediately afterthrough the Annual Meeting. In February 2024, upon the recommendation of the Governance Committee, the independent directors on our Board elected Mr. Siewert (with him not present for the discussion or vote) to continue serving as Lead Independent Director for the term ending at the 2025 Annual Meeting, subject to his reelection.
During our 2023 stockholder engagements, while certain investors expressed a preference for an independent chairman, they appreciated the rationale for our current Board leadership structure given our recent CEO transition and other senior leadership changes.
BOARD COMMITTEES
Each of our Board committeesCommittees has a written charter that describes its purposes,purpose, membership and meeting structure, and responsibilities. These charters may be found on the investors section of our website under Corporate Governance and are reviewed by the respective committee at least annually, with any recommended changes adopted upon approval by our Board. Amended charters are promptly posted on our website. The Charterscharters of the Audit Committee, Compensation Committee and Governance CommitteesCommittee were most recently amended in FebruaryDecember 2023, December 2023 and October 2021, which included changes torespectively; the namescharter of the Compensation and Governance Committees.
Each ofFinance Committee was first adopted by our Board committees hasin December 2023.
Our Board Committees have the ability to form and delegate authority to subcommittees and may obtain advice and assistance from internal or external consultants, legal counsel or other advisors at our expense. In addition, each committee annually evaluates its performance. The primary responsibilities, current membership and 20202023 meeting and attendance information for the three standingindependent committees of our Board are summarized onbelow. In July 2023 and February 2024, upon the following pages.recommendation of the Governance Committee, our Board modestly adjusted the membership of its committees; the current Chairs and members are reflected in this proxy statement.
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 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Martha Sullivan (Chair)
Andres Lopez Maria Fernanda Mejia Patrick Siewert
Audit committee financial Siewert
All members satisfy NYSE enhanced independence standards
2023 meetings: 8 Avg. attendance: 90% | • Oversee financial statement and disclosure matters, including quarterly and annual earnings release documentation and SEC reports, internal controls, critical accounting policies and practices, and significant tax matters • Appoint and oversee independent registered public accounting firm, including preparing or issuing audit reports or related work or performing other audit review or attest services • Oversee internal audit function, including appointing/dismissing senior internal auditor, evaluating his performance, reviewing significant issues • Perform compliance oversight responsibilities, violations •
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 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Julia Stewart (Chair) Bradley Alford
Ken Hicks
All members satisfy NYSE enhanced independence standards and qualify as “non-employee directors” under Exchange Act Rule 16b-3 MEETINGS 2023 meetings: 5 Avg. attendance: 100% | • Review and approve • Review and approve senior executive compensation, including base salaries and incentive compensation • as well as executive diversity trends • Oversee • Review and provide oversight of talent management policies and strategies • Review stockholder engagement process, results and feedback related to executive compensation, and social sustainability • Approve CD&A and Talent and Compensation Committee Report for proxy statement • Oversee stockholder approval of executive compensation matters, including say-on-pay • • Recommend non-employee director compensation • Administer clawback policies providing for recoupment of incentive compensation determined to have been erroneously received by executive officers or other AIP or LTI recipients
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Patrick Siewert (Chair) Bradley Alford
Julia Stewart
All members satisfy NYSE independence standards
2023 meetings: 10 Avg. attendance: 95% | • nominees/appointees • Annuallyconsider Board leadership structure and recommend whether to • Recommend Board and Committee structure, Chairs and members • Recommend independent directors • Review and approve related person transactions • Overseeannual Board/Committee performance evaluation process, as well as individual director feedback process • Review Governance Guidelines and recommend changes • Review and provide oversight practices • Review stockholder engagement process, results and feedbackrelated to governance, environmental sustainability and community investment • Review stockholder proposals • Oversee
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Avery Dennison Corporation | 2024 Proxy Statement | 33 |
In addition to the above committees required by SEC rules and NYSE listing standards, upon the recommendation of the Governance Committee, our Board formed a standalone non-independent Finance Committee in July 2023, the responsibilities of which were previously performed by the Audit Committee.
 | MEMBERS | PRIMARY RESPONSIBILITIES | ||
Mitch Butier (Chair) Patrick Siewert Deon Stander MEETINGS 2023 meetings: 1 Avg. attendance: 100% | Conduct finance oversight responsibilities, includingreviewing and making recommendations to our Board regarding: • Capital structure in light of our financial plans, current operations and long-term strategies • Capital allocation strategy, including stockholder dividends, stock repurchase program and financial capacity for significant transactions such as strategic investments, acquisitions and divestitures • Financing plans including equity, debt or other securities offerings and private placements that may materially impact our financial position • Pension plan financing status • Other financial matters that management or our Board desires to have reviewed by the committee | |||
EXECUTIVE SESSIONS
Our Board believes it is important to have separate executive sessionsessions with our Chairman/CEOMr. Butier, with Mr. Stander, with both of them and without him or other memberseither of management present,them, each of which arewas generally held at all regular2023 Board meetings. Our independent directors have robust and candid discussions at the executive sessions that exclude Mr. Butierour Executive Chairman and/or our CEO during which they critically evaluate the performance of them, management as a whole and our company, Chairman/CEO and management. Patrickcompany. As Lead Independent Director, Mr. Siewert presided over the threesix executive sessions of independent directors held since he became Lead Independent Director in April 2020,during 2023.
Our Board generally began its 2023 meetings with David Pyott, our previous Lead Independent Director, presiding over theone of two such executive sessions held before that date.with Messrs. Butier and Stander to discuss key focus areas and frame meeting discussions; the second such session at the end of these meetings provided time for the Board to reflect and align on key priorities, after which our independent directors generally met in executive session.
Executive sessions arewere also scheduledgenerally held for regular meetings of the Audit, Compensation and Governance Committees.2023 Board Committee meetings. These executive sessions exclude our Chairman/CEO and otherexcluded members of management unless the Committee requestscommittee requested one or more of them to attend a portion of the session to provide additional information or perspective.perspective, in which case the committee generally met independently thereafter.
Management is responsible for managing the day-to-dayday-to-day risks confronting our businesses, and our Board has responsibility for overseeing enterprise riskoversees ERM. In performing its oversight role, our Board ensures that the ERM processes designed and implemented by management (ERM).are functioning effectively and promoting risk-adjusted decision-making. The teams leading our businesses have incorporated ERMERM-rooted thinking into developingtheir strategic development and executing their strategies,execution, assessing the risks impacting their businesses and identifyingimplementing and implementing appropriateadjusting mitigating actions on an ongoing basis. In addition, in consultation with our Chief Compliance Officerrisk management team and senior management, these teamsthey semiannually prepare a risk profileprofiles consisting of a heat map and a summary of their key risks and mitigating strategies, which are used to prepare a company risk profile based on identified business-specificbusiness risks as well as enterprise-wideenterprise risks. Among other things, these risks includinginclude the macroeconomic environment; climate change, environmental regulation and sustainability trends; cybersecurity; operational and supply chain disruptions; and M&A.
In 2023, we further enhanced our ERM program by assigning accountability for key risks relatedand mitigating strategies to ESG matters such as greenhouse gas emissionsidentified business or functional leaders and energy use; materials management;began prioritizing mitigation strategies based on discussions with business leaders led by risk champions from our law department. Our compliance and IT functions also continued their annual ERM reviews. These advancements have allowed our ERM Steering Committee to benefit from the critical thinking of a broader cross-section of company leaders. We aim to continue advancing the circular economy; diversity, inclusion and equal opportunity; waste; and employee health and safety.our ERM program, with oversight by our Board.
34 | 2024 Proxy Statement | Avery Dennison Corporation |
We have robust global processes that support a strong internal control environment toand promote the early identification and continuedongoing mitigation of risks by our company’s leadership.risks. Our legal and compliance functions, report intoincluding our Chief LegalCompliance Officer, report to our CLO to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit leader reports to the Audit Committee in the conduct of his operational responsibilities, ensuring hishelping ensure he maintains independence from management.
In performing its oversight role, our Board is responsible for ensuring that the ERM processes designed and implemented by management are functioning effectively, and that our culture promotes risk-adjusted decision-making.
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Our Board as a whole oversees risks related to our company and business strategies and operations,five-year strategic plan horizon, exercising this responsibility by considering the risks related to its decisions. Each year, ourmanagement’s strategies and execution plans. Our Board annually receives reports on the ERM process and the resulting company risk profile, engaging throughout the year with management on their strategic plans and risks facing our businesses and company as a whole; these risks include financial risks, geopolitical risks, legal and regulatory risks, supply chain risks, competitive risks, compliance risks, ESG risks, information technology risks, and other risks related to the ways in which we do business. key risks. Employees who lead various risk areas – such as law, information technology; environmental, health and safety; tax; compliance; sustainability;technology, tax, compliance, sustainability, DEI and community investment – report periodically to Board Committees and occasionally to our full Board.
OurAs shown below, our Board has delegated elements of its risk oversight responsibility to its Committees to bettermore efficiently coordinate with management to serve the long-term interests of all our stakeholders.in risk mitigation. Our Board receives reports from the Committee Chairs regarding topics discussed at committee meetings, including the areas of risk they primarily oversee.oversee, and engages on risk mitigation during its regular engagement with our leaders.
| RISK OVERSIGHT | ||||||
Board of Directors
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• Business strategies • Annual operating plan and significant fixed and IT capital expenditures • Corporate governance • Acquisitions, divestitures and other significant transactions • Enterprise risk management | ||||
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• Financial reporting processes and statements, and internal controls •
• |
| • Executive compensation and • • Compensation clawback policies • Non-employee director compensation • Social sustainability, | • Board and Committee structure and composition • Director succession planning • Governance, environmental sustainability and community investment • Values and Ethics/Code of Conduct • Conflicts of interest and related person transactions •
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Audit Committee
Compensation
| • Capital structure and allocation strategy, including stockholder dividends, stock repurchases and financial capacity for strategic transactions • Financing plans, including debt, liquidity and other securities offerings • Pension plan funding status | |||||||
The Audit Committee oversees our internal control environment and evaluates the effectiveness of our internal controls at least annually. Supplementing these processes, the Audit Committee periodically meets regularly in executive session with each of our CEO, CFO, CAO, Chief Legal Officer, Vice President ofController, Internal Audit leader, and representatives of our independent registered public accounting firm.firm, and as needed with other members of senior management such as our CEO and CLO. The Governance Committee meets semiannually with our Chief Compliance Officer to discuss, among other things, the investigation of allegations reported to the GuideLine.significant internal investigations.
Avery Dennison Corporation |
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During 2020,2023, our Board was particularly focused on overseeing the risk areas showndescribed below.
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| • | Navigating challenging near-term business environment – Addressing lower demand driven primarily by downstream inventory destocking, as well as preparing for potential recessionary environment through rigorous scenario planning and identified potential productivity and restructuring actions |
Impact of COVID-19 on our employees, customers, investors and communities – Prioritized health and well-being of global team members, followed immediately by delivering for customers. Among other things, COVID-19 response encompassed risks related to business continuity, governmental regulations impacting manufacturing operations, cybersecurity and information technology security in work-from-home environment for office-based employees, temporary cost-saving actions, and finance matters such as cash management, collections, liquidity, and stockholder distributions
Diversity and inclusion – Redoubled efforts to drive sustainable change in light of demonstrated societal need for enhanced focus on combatting inequality and enhancing social justice
| • | Further accelerating Intelligent Labels adoption – Executing key apparel and logistics programs, accelerating new segment and use case adoption, and expanding manufacturing capacity to ensure we can deliver for customers in this fast-growing business |
Intelligent Labels – Continued to advance primary long-term profitable growth driver, including risks related to acquisition and integration of Smartrac
| • | Advancing sustainable innovation initiatives – Accelerating our sustainable innovation efforts through governmental engagement and investment in new technologies to turn sustainability-related headwinds into opportunities for competitive differentiation |
Innovation – Significantly upgraded and reinvigorated innovation program, including assessing and addressing risks related to investment in disruptive technologies
| • | Advancing digital journey – Accelerating our digital strategies and evolving our Digital Advisory Council to advance our market insights, digital capabilities and innovation to lead at intersection of physical and digital |
Sustainability – Increased focus on sustainable packaging, including risks related to strategic platforms to recycle/enable circularity and reduce/eliminate waste
| • | Optimizing portfolio of businesses – Integrating previously separated businesses into Materials Group, executing and integrating acquisitions, and expanding our M&A pipeline and deal conversion |
M&A – Worked to maintain robust pipeline of acquisition opportunities, including evaluating risks related to our acquisitions of Smartrac and ACPO, integration of Smartrac and venture investments
New functional operating structure – Rationalized corporate/business functional support in areas of finance, law, human resources, and information technology
ESG and human capital managementrisks – Heightened focus on non-financial areas of stakeholder interest, resulting in more fulsome disclosures contained in first ESG Download published in August 2020; 2020 and 2021 integrated sustainability and annual reports; and second ESG Download published in March 2021
| • | Advancing cybersecurity preparedness – Addressing more volatile cybersecurity landscape with increasing threats on manufacturers, incorporating learnings from of our maturity assessments and publicly reported incidents at other companies |
Risks Associated with Compensation Policies and Practices
As described in the CD&ACompensation Discussion and Analysis section of this proxy statement, we maintain best practices in compensation that collectively encourage ongoing risk mitigation. The Compensation Committee annually discusses with management and its independent compensation consultant, Willis Towers Watson,WTW, whether our executive compensation programs areprogram is meeting the committee’s objectives. In addition, the Compensation Committee periodically requests Willis Towers Watsonengages WTW to undertake a more formal assessment of our compensation programs to ensure they dothat our program does not provide incentives that encourage our employees to take excessive risksrisk-taking in managingthe management of their respective businesses or functional areas. The committee most recently conducted its most recent formalthis evaluation in 2018.February 2024.
Based on the advice of Willis Towers Watson, theThe Compensation Committee noted the key risk-mitigating features of our executive compensation program described on the following page, which are substantially the same as what they were at the time of the committee’s most recent formal assessment.below.
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Governance and Oversight | ✓ Compensation Committee has discretion to decrease ✓ Clawback policy ✓ Incentive compensation plan structure and targets reviewed within context of ✓ Compensation Committee annually evaluates CEO/senior executive performance against ✓
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Pay Philosophy and Structure | ✓ ✓ Incentive compensation designed to incent strong annual financial performance and long-term economic and stockholder value creation, balance growth and efficient capital deployment, and consider sustainability progress and individual contributions thereto ✓ Substantial majority of leadership compensation delivered in long-term equity or cash-based ✓ Rigorous stock ownership policy, with minimum ownership requirement of 6x for CEO; requires net shares acquired to be retained until compliance is achieved and pre-transaction certifications of continued compliance ✓ Executive severance plans consistent with market practices, with double-trigger change of control severance benefits
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Incentive Program Design | ✓ AIP and LTI awards incent achievement of annual ✓ AIP awards ✓ Equity awards • •
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Based on
36 | 2024 Proxy Statement | Avery Dennison Corporation |
Given its assessed low risk in each of these categories and other factors, Willis Towers Watson determinedWTW advised the Compensation Committee that our compensationexecutive pay program strikes an appropriate pay-risk balance. balance and does not present risk-related concerns.
Based on the expert advice of Willis Towers Watson, theThe Compensation Committee has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company.
Initial Orientation
Our initial director orientation materials and discussions with management generally coverscover our (i) stakeholders, values, strategies, and financial and sustainability goals; (ii) business and company strategies, risks and mitigating actions; (iii) sustainability priorities and progress; (iv) Board succession planning objectives; (v) information regarding company leadership and recent Board/committee meetings; (vi) Board, governance and company policies, including our strategies, performanceGovernance Guidelines, Committee charters, conflict of interest policy, non-employee director compensation program, insider trading policy and leadership; (ii)Code of Conduct; (vii) investor messaging; (iii) the strategies and risks(viii) SEC filings and sustainably reporting.
In connection with her appointment to our Board in February 2024, we provided Ms. Mejia with information regarding these matters. Our Executive Chairman, CEO and other members of management met with Ms. Mejia to discuss them to ensure a smooth initial onboarding. Ms. Mejia also joined as an observer in select Board Committee meetings to better understand their respective responsibilities and was assigned two independent directors on our businesses; (iv) finance matters, including our financial reporting policies and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure; (v) legal and compliance matters, including our governance policies and procedures, ESG matters Values and Ethics program, and ERM; (vi) executive compensation and human captial management matters, including succession planning, leadership development, and diversity and inclusion; and (vii) information technology and cybersecurity.Board to help guide her continued onboarding process.
Continuing Education
Our continuingongoing director education program consists of regular interactions with and presentations from members of management regarding our businesses, strategies, financial performance and sustainability progress, as well as periodic visits to our facilities. In the spring of 2023, our Board visited our headquarters in Mentor, Ohio, which also serves as our Materials Group’s North American headquarters, and met informally with members of that business’ leadership. Visits to that facility, as well as to our Solutions Group innovation center in Miamisburg, Ohio and certain international facilities and management presentations regarding our business operations, performance, strategies, and risk mitigation activities. in Asia, are planned for 2024.
We provide updates on these topics to our Board during and between meetings throughout the year, and providedirectors with access to a boardroom news resource platform for them to keep informed of emerging best practices. We alsoregulatory developments and market practices, and reimburse directors who attend continuing director education programs for fees and related expenses.
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BOARD AND COMMITTEE EVALUATIONS
The Governance Committee oversees an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees,committees, including the Committee Chairs.As part of this process, our directors evaluate the performance of their peers serving on the Board, providing candid feedback to ensure continuous boardroom improvement and assist with director succession planning. Our Board views the evaluation process as integral to assessing its effectiveness and identifying opportunities for continued improvement. Through this process, we have continually improved Board functioning.
As part of this process, our directors historically had the opportunity to provide our Lead Independent Director candid feedback on other directors. In 2023, the Governance Committee implemented a more formal process for directors to provide anonymized individual feedback on their peers to advance continuous improvement opportunities inand assist with Board succession planning. The summary below focuses on the pursuit of continued excellence. We have made many improvements to our governance practices and Board processes in recent years as a result of the annualbroader Board/Committee evaluation process, as shown below.process.
Avery Dennison Corporation | 2024 Proxy Statement | 37 |
BOARD AND COMMITTEE EVALUATIONS
1 | ||||
Process
Written evaluations onof Board/Committee
Composition, including balance and diversity of skill, experienceskills, qualifications and demographic backgroundbackgrounds
Meeting materials
Meeting mechanics and structure
Fulfillment of responsibilities
Meeting content and conduct
Overall performance
Effectiveness of Chairman, Lead Independent Director and Committee Chairs
One-on-one interviews with Governance Committee Chair to provide more information and discuss feedback
Verbal peer reviews to identify potential improvement opportunities for individual directors
| • | One-on-one discussions with Governance Committee Chair to provide additional perspective on written evaluations |
2 | ||||
2023 Review of Results
Discussion of anonymized evaluation results and feedback
Chairman/CEO, Executive Chairman, Lead Independent Director/Governance Committee Chair/Lead Independent Director, Chief Legal OfficerChair and Corporate Secretary
All members of Governance Committee
Full Board meeting in executive session with Chairman/Executive Chairman and CEO, discussing potential improvement opportunities
Committees in executive session, discussing potential improvement opportunities
3 | ||||
Recent Improvement Actions
Sharpened focus on Board leadership roles in director succession planning, selecting new Lead Independent Director, appointing new Chairs for Audit and Governance Committees, and updating Committee memberships in 2020
Identified need for independent directors with packaging and information technology expertise, appointing Messrs. Lopez and Barrenechea within last 4 years
Expanded review of potential CEO successors and their development plans and increased engagement with leaders below NEO level to enhance executive succession planning and leadership development
Heightened focus on financial scenario planning and cybersecurity preparedness
Enhanced discussion of M&A pipeline and potential targets, as well as performance of acquired companies and integration learnings
Conducted annual post-investment reviews of returns on significant capital expenditures, acquisitions and information technology investments
Increased engagement on investor relations,stockholder engagement and competitive landscape to further bring external perspectives into boardroom
Increased Chairman/CEO engagement with directors between meetings, with frequent email updates and one-on-one calls/videoconferences between him and each director; particularly important in 2020 as we executed COVID-19 response, redoubled efforts on diversity and inclusion, and advanced ESG focus and transparency
Refined Board schedule and meeting process throughout 2020 to maintain robust dialogue despite move to virtual meetings given COVID-19, including beginning each meeting in executive session with Chairman/CEO to discuss management’s key focus areas and frame meeting discussions
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Sharpened focus on executive succession planning and leadership development, appointing new CEO after having evaluated his attributes, experiences and strengths and determined that he was best positioned to lead our company into the future in which we believe every product will have a digital identity |
| • | Enhanced director succession planning with view toward more regular refreshment, launching new director search in 2023 focused on candidates with retail/CPG or finance expertise that could also increase gender or racial/ethnic diversity on our Board, with Ms. Mejia being appointed to our Board in February 2024 |
| • | Advanced strategic oversight, expanding mentorships between individual directors and key business leaders and increasing Board engagement with members of management below senior leadership level |
| • | Heightened focus on strategic priorities of digital solutions and sustainability-driven innovation, as well as cybersecurity risk management |
| • | Continuous discussion of M&A pipeline and potential targets, as well as performance of acquired companies and integration learnings |
| • | Refined Board schedule and meeting process, implementing additional executive sessions with our Executive Chairman and our CEO, as well as ones with each of them, and conducting certain Committee meetings virtually to expand time for in-person full Board meetings |
| • | Continued regular Executive Chairman and CEO engagement with directors between meetings and increased time dedicated to executive sessions that exclude other members of management to provide greater time for Board-only discussion, after which independent directors generally meet in executive session |
STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS
We value stockholder feedback on our governance environmental sustainabilityprogram and community investment, and we actively solicit input through stockholder engagement to ensure that weour practices reflect not only our evolving business strategies but also the expectations of our investors. In addition to our extensive investor relations program through which members of management engage with our investors throughout the year, thisstakeholders. This supplemental engagement program takes place throughoutand the year, as depicted the graphic shownfeedback we received on governance matters are described in the proxy summary.
Stockholder Engagement on Governance and Environmental Sustainability Matters in 2020
With respect to matters related to governance and environmental sustainability, inclusive of climate risk, we discussed Board oversight of our strategies, our response to COVID-19 and progress toward our 2025 sustainability goals, including with respect to plastics recyclability and greenhouse gas emissions; our Board’s expanded stakeholder and ESG focus, as reflected in our strategies and evidenced in our ESG Download published in August 2020; and Board composition and refreshment, particularly the outside board commitments of one of our directors and the racial/ethnic and gender diversity on our Board.
Our Board welcomes feedback from all our stockholders.stakeholders. We review all correspondence submitted byreceived from stockholders, discussing any substantive feedback received with senior management and/or our Board as appropriate.
Stockholders and other interested parties may contact our Board, Executive Chairman, Lead Independent Director, any Committee Chair or any other individual director concerning business matters by writing to Board of Directors (or particular Board subgroup or individual director), c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060.
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ITEM 1 – ELECTION OF DIRECTORS
Our Bylaws provide for a Board of between 8 and 12 directors, withthat the exact number fixed by resolution of our Board. Our Board has fixed the current number of directors at 10;will be fixed from time to time by resolution duly approved by our Board. As previously disclosed, in April 2021,February 2024, Julia Stewart notified our Board expectsof her intention not to stand for reelection at the Annual Meeting. Our Board plans to fix the number of directors at 9 to reflect Peter Barker’s retirement on the date of the Annual Meeting as required by10 following Ms. Stewart’s departure from our age-based mandatory retirement policy. All nominees are standing for election for a one-year term expiring at the 2022 Annual Meeting.Board in April 2024.
Each of our nominees is presently serving on our Board and has consented to being named in this proxy statement and serving if elected by stockholders. All nominees are standing for election for a one-year term ending at the 2025 Annual Meeting.
Majority Voting Standard; Unelected Director Resignation Requirement
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting. Our Bylaws provide for the approval by a majority of votes cast for the election of directors in uncontested elections like this one and require that an incumbent director who is not reelected tender his or her resignation from our Board. Our Board, excluding the tendering director, iswould be required to determine whether to accept the resignation – taking into account the recommendation of the Governance Committee and any other factors it considers appropriate – and publicly disclose its decision regarding the tendered resignation, including theand rationale for its decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for the election of directors.
In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting.Board Recommendation
Recommendation of Board of Directors
Our Board recommends that you vote FOR each of our 10 director nominees. |
Our Board of Directors recommends that you vote FOR each of our 9 director nominees. The persons named as proxies will vote for their election, unless you specify otherwise. If any director nominee were to become unavailable prior to the Annual Meeting, your proxy would be voted for a substitute nominee designated by our Board or we would decrease the size of our Board.
SELECTION OF DIRECTOR NOMINEES
Director nomineesDirectors are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nomineesNew directors may also be recommended by the Governance Committee for appointment to our Board, with their election by stockholders taking place at the next Annual Meeting. Our Board believes thatAs shown in the Director Nominee Matrix in the proxy summary, our directors reflectdirector nominees bring a balance of skills, qualificationsindustry and functional experiences and reflect diverse demographic backgrounds, as shown in the Board matrix shown in the proxy summary, that allowsallowing them to effectively discharge their oversight responsibilities.
In evaluating whether to recommend a new or incumbent director nominee, the Governance Committee primarily usesconsiders the criteria in our Governance Guidelines, which are described below.
| • | Independence, to ensure substantial majority of our Board |
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| • | Board |
| • | Experience in finance, accounting and/or executive compensation |
| • | For incumbent directors, |
| • | Time commitments, |
| • | Potential conflicts of interest |
| • | Demographic |
| • | Ability to contribute to |
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For incumbent directors, the Governance Committee also considers their contributions to our Board and Committees and mandatory retirement dates to assist with director succession planning. The Governance Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all nominees.
The Governance Committee reviews the skills, qualifications and demographic background of any candidate with those of our current directors in assessing howto ensure our Board can most effectively fulfill its oversight responsibilities.has a broad diversity of experiences and viewpoints. Sources for identifying potential nominees include current Board members, senior management, executive search firms and investors.
The Governance Committee regularly reviewed the skills, qualifications, demographic backgrounds, ages, tenures and scheduled mandatory retirement dates of our directors and conducted Board succession planning to ensure that it continues to meet the needs of our businesses, effectively oversee management in executing our strategies and advance the interests of our stakeholders. Its search for new directors with retail/CPG or finance expertise led to Ms. Mejia’s appointment to our Board in February 2024; the search for an additional director with finance expertise continues.
Stockholder Submission of Director Nominees
The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
Advance Notice Nominees
Stockholders may recommend director candidates by submitting the candidate’s name, together with his or her biographical information, professional experience, and written consent to nomination and the other information required by our Bylaws, to Governance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.8080 Norton Parkway, Mentor, Ohio 44060. To be considered at the 20222025 Annual Meeting, advance notice stockholder nominations must comply with the deadlines and other requirements described in the Voting and Meeting Q&A section of this proxy statement. The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.
Proxy Access Nominees
A stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company’s stock continuously for at least three years is permitted to submit director nominees (up to 20% of the Board) for inclusion in our proxy materials, subject to the deadlines and other requirements specifieddescribed in our Bylaws. For information on submitting proxy access nominees for the 20222025 Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
BOARD REFRESHMENT AND DIRECTOR SUCCESSION PLANNING
Our Board’s ongoing director succession planning is designed to ensure an independent, well-qualified Board.
Our Governance Committee’s long-term objective is to position our Board for regular refreshment, ensure access to a broad new director candidate pool and achieve a more balanced tenure distribution with diversity in skills, qualificationsapproximately one-third comprised each of newer directors, medium-tenure directors and demographic backgrounds that aligns with our business strategies and enables effective oversight.longer-term directors.
No Term LimitsTenure
Our Governance Guidelines reflect our Board’s beliefcurrently provide that directors shouldare not be subject to termtenure limits. While termtenure limits could help facilitate fresh ideas and viewpoints being brought to the boardroom, ourensure regular Board believesrefreshment, they could also result in the premature loss of a director who over a longer period of time has gained expertise in assessing our strategies, operations and risksvaluable experience and is continuing to provide valuable contributionssignificantly contribute to our Board deliberations. We believe that our Board’s decision not to establish term limits at this time is consistent with the prevailing practice among companies in the S&P 500.and company.
Our Board recognizes that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity. However, our Board believes that, except as required by our mandatory retirement policy, removing knowledgeable directors and losing the oversight consistency they bring, particularly during periods of executive management change, such as our 2020 Chief Human Resources Officer and Chief Legal Officer transitions, or Board change, such as the 2019 departure of our former chairman and 2020 departure of our former Lead Independent Director, weighs against implementing term limits at this time. Ultimately, our Board believes that it isdetermines its responsibility to establish appropriate board refreshment policies in light of our evolving strategies leadership team and financial position, at any particular time, exercising its discretion in the best interest of our company and stockholders. To assist in discharging this responsibility, in November 2020, the Governance Committee reviewed the skills, qualifications and demographic backgroundsCertain of our Board membersstakeholders have suggested that longer-tenured directors may have decreased independence and conducted director succession planning to ensureobjectivity. However, we believe that the removal of knowledgeable directors and loss of oversight consistency they bring – particularly during periods of senior leadership change, such as our Board continues to meet the needs of our businesses, align with our strategiesrecent CEO and advance the interests of all our stakeholders.Solutions Group President appointments – are important counterbalancing considerations.
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Policies and Events Supporting Regular Board Refreshment
Our Board has adopted the policies described below to facilitate regular refreshment, of our Board and ensure that it continues to independently oversee, challenge and partner with our management team.the described events having occurred since last year’s Annual Meeting.
POLICY | DESCRIPTION | EVENTS OCCURRING AT/SINCE 2023 ANNUAL MEETING | ||
Mandatory Resignation Policy | Incumbent directors not elected by stockholders must tender their resignation | All incumbent directors then standing for election were elected at | ||
Mandatory Retirement Policy | Directors must retire on date of annual meeting of stockholders that follows their reaching age 72; | No directors | ||
Resignation Tendered Principal Employment | Directors who change their principal occupation, position or responsibility must volunteer to resign | |||
Prior Notice Requirement | Directors must give prior notice before accepting another U.S. public company directorship so that his/her ability to fulfill Board responsibilities may be evaluated if he/she serves on more than four other such boards | |||
Upon the recommendation of the Governance Committee, Messrs. BarrenecheaMr. Wagner and LopezMses. Mejia and Reverberi were appointed as independent directors to our Board as independent directors in September 2018October 2022, February 2024 and February 2017,2023, respectively. In connection with his becoming our CEO, Mr. ButierStander joined our Board when he became CEO in May 2016. Our former Chairman Dean Scarborough, and Messrs. Pyott and BarkerSeptember 2023. Mr. Anderson departed or are scheduled to depart from our Board in November 2023 and Ms. Stewart will leave our Board in April 2019, 2020 and 2021, respectively.2024. We believe that this recent experience with both joining and departing directors demonstrates our Board’s commitment to thoughtful and regular Board refreshment.
Both the Governance Committee and our full Board discussed director succession planning at multiple meetings held in 2023 to oversee a search for new directors focused on candidates with retail/CPG or finance expertise to complement and advance the collective experience on our Board and also further enhance Board diversity.
Avery Dennison Corporation | 2024 Proxy Statement | 41 |
BOARD COMPOSITION
Our Board supports and reflects our values, recognizing the benefits of diversity in the boardroom, including the healthy debate that results from different viewpoints that may stem from diverse backgrounds.backgrounds.
Age and Tenure
The average age of our director nominees is 62, which we believe is comparable to the average director age in the S&P 500 and within the 60-63-year band in which the plurality of these companies fall. The average tenure of our director nominees is 91⁄261 and 8 years, which we believe is comparable to the average tenure for companies in the S&P 500 and within the 6-10-year band in which the majority of these companies fall. respectively. Our director nominees reflect a balance betweeninclude newer directors who bringbringing fresh ideas and insights into the boardroom and longer-serving directors with deep institutional knowledge of our Board and company.company.
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Demographic BackgroundGender and Racial/Ethnic Diversity
Our Governance Guidelines reflect that the Governance Committee’s assessment of the qualifications of director candidates includes consideration of their demographic backgrounds, including, without limitation, race, gender and ethnicity. Although we have no formal policy regarding the consideration of diversity in selecting director nominees, the Governance Committee seeks to recommend individuals with a broad diversity of experience, profession, skill,skills, geographic representation and demographic background. While diversity is a consideration nominees are not chosen or excluded solely or primarily on that basis; rather,and an area of Board refreshment focus, the Governance Committee focuses on skills, experience and background that cana candidate’s overall profile to complement our existing Board in lightthose of the diverse and global natureexisting members of our businesses and operations. Board.When evaluating new nominees,director candidates, the committee will continue seekingGovernance Committee only considers (and requires any search firm engaged to increase the overall diversity onprovide) candidate slates that include highly qualified women and individuals from other underrepresented communities; two of our Board.
2 of 4three most recently appointed independent directors increased Boardthe gender and/or ethnic diversity on our Board.
The following pages provide information on the directors nominated for election,our 2024 director nominees, including his or hertheir age, length of service, independence, current Board roles and business experience during at least the past five years. We also indicate the name of any other U.S. public company board on which each nominee currently serves or has served during the past five years.
In addition to the information presented regardingFor each nominee’s experiencenominee, we present select skills and qualifications, that led our Board to conclude that he or she should serve as a director – which includes seniorU.S. public company leadership experience, industry experience, global exposure, U.S. public company board experience, areas of industry and financial expertise as defined infunctional experience, and experience working or having worked outside the U.S. The balance of skills, qualifications and demographic backgrounds on our Board matrixis shown in the Director Nominee Matrix in the proxy summary – we believesummary; consistent with that each of them has integritydisclosure, Select Skills and adheres to our high ethical standards. Each nominee also hasQualifications excludes board service at U.S. public companies at which the individual served or serves as CEO, COO or CFO. All director nominees have demonstrated the ability to exercise sound judgment, fulfill the time commitments necessary to serve on our Board and advance the long-term interests of all our stakeholders.stockholders, as well as those of our other stakeholders.
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| ANDRES A. LOPEZ | |||||
Age
Director since February 2017
Independent |
RECENT BUSINESS EXPERIENCE O-I Glass, Inc., a glass container manufacturer and supplier to food and beverage brands • President & CEO since January 2016 • COO & President, Glass Containers, from • President, O-I Americas, from July 2014 to • President, O-I Latin America, from April 2009 to July 2014
BOARD ROLES Audit Committee Member Compensation Committee Member OTHER PUBLIC COMPANY BOARDS Current: O-I Glass, Inc. Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS
• Oversees company with
Industry • •
Works/Has Worked Outside the U.S. • |
 
Age
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Director since April 2010
Independent |
RECENT BUSINESS EXPERIENCE Nestlé USA, a nutrition, health and wellness company • Chairman & CEO from January 2006 to October 2012
Nestlé Brands Company, an operating unit of Nestlé USA • President & CEO from 2003 to December 2005
BOARD ROLES Compensation Committee Member Governance Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Perrigo Company PLC Past Five Years: Conagra Brands, Inc. |
SELECT SKILLS AND QUALIFICATIONS
U.S. public company board experience • Concurrent service on one other board and prior service on other boards Industry experience • Technical expertise in consumer goods industry into which our Solutions Group sells with 42+ years in roles of increasing responsibility, as well as extensive experience in packaging, focused primarily on consumer goods Functional experience • Technical expertise in marketing, as well as supervisory experience in finance, M&A and R&D as regional CEO Works/Has Worked Outside the U.S. • Work assignments in Oceania |
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| DEON M. STANDER | ||||
Age
Director since
Not Independent | RECENT BUSINESS EXPERIENCE Avery Dennison Corporation • President & CEO since September 2023 • President & COO from March 2022 to August 2023 • VP/GM, RBIS (now Solutions Group), from June 2015 to February 2022 • VP/GM, Global Commercial and Innovation, RBIS, from January 2013 to May 2015 • VP/GM, Global Commercial, RBIS, from October 2010 to December 2012 BOARD ROLES Finance Committee Member OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None | SELECT SKILLS AND QUALIFICATIONS U.S. public company leadership experience • Held roles of increasing responsibility at our company, including COO and CEO Industry experience • Led our Solutions Group business and oversaw our Materials Group as COO, with packaging industry expertise and extensive experience in digital, materials science and industrial goods Functional experience • Technical environmental sustainability expertise having led our enterprise Sustainability Council, with supervisory experience in finance, marketing, M&A, cybersecurity and R&D as CEO Works/Has Worked Outside the U.S. • Work assignments in Europe and Asia Pacific |
Avery Dennison Corporation | 2024 Proxy Statement
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Dine Brands Global, Inc. (formerly DineEquity, Inc.), owner, operator and franchisor of IHOP and Applebee’s restaurants
• Chairman & CEO from June 2008 to March 2017
BOARD ROLES
Compensation Committee Chair
Governance Committee Member
OTHER PUBLIC COMPANY BOARDS
Current:
Bite Acquisition Corp.
Past Five Years:
Dine Brands Global, Inc.
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| FRANCESCA REVERBERI | ||||
 
Age Director since February 2023 Independent | RECENT BUSINESS EXPERIENCE Trinseo PLC, a specialty materials solutions provider • SVP, Engineered Materials & Chief Sustainability Officer since July 2023 • SVP, Sustainable Plastics & Chief Sustainability Officer from July 2021 to July 2023 • SVP, Engineered Materials & Synthetic Rubber, from March 2020 to December 2021 • General Manager, Engineered Materials, from October 2019 to May 2021 • Global Senior Business Director, Performance Plastics, from December 2017 to October 2019 BOARD ROLES Compensation Committee Member OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None | SELECT SKILLS AND QUALIFICATIONS Industry experience • Technical materials science expertise focused on applied science in plastics, as well as extensive experience in industrial goods, in each case complementing our Materials Group Functional experience • Serves as global sustainability leader, with technical expertise in environmental sustainability • Advanced educational and professional engineering expertise, with supervisory experience in marketing as divisional leader Works/Has Worked Outside the U.S. • Works in Europe, region leading sustainability-related requirements |
| KEN C. HICKS | ||||
 Age 71
Director since July 2007
Independent |
RECENT BUSINESS EXPERIENCE Academy Sports + Outdoors, a sports and recreation retailer • Executive Chairman since June 2023 • Chairman, President & CEO
Foot Locker, Inc., a specialty athletic retailer • Executive Chairman from December 2014 to May 2015 • Chairman, President & CEO from February 2010 to November 2014 • President
BOARD ROLES Compensation Committee Member
OTHER PUBLIC COMPANY BOARDS Current: Academy Sports + Outdoors Past Five Years: |
SELECT SKILLS AND QUALIFICATIONS
•
U.S. public company board experience • Industry experience • 35+ years of retail industry expertise into which our Solutions Group sells, as well as extensive experience in consumer goods and packaging industries Functional experience • 35+ years of technical marketing expertise, including roles as merchandising leader at two retail companies, and supervisory experience in finance, M&A, environmental sustainability and cybersecurity as CEO |
 
Age
Director since
Independent |
RECENT BUSINESS EXPERIENCE
•
Kellogg Company • SVP and President, Latin America, from November 2011 to February 2020 BOARD ROLES
OTHER PUBLIC COMPANY BOARDS Current:
Past Five Years: Grocery Outlet |
SELECT SKILLS AND QUALIFICATIONS
U.S. public company board experience • Industry experience • 25 years of consumer goods industry expertise into which our Solutions Group sells, as well as extensive experience in packaging, focused primarily on consumer goods Functional experience • Technical expertise in marketing, as well as supervisory experience in environmental sustainability and R&D as regional CEO Works/Has Worked Outside the U.S. • Work assignments in Latin America, Europe and Asia Pacific |
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| MARTHA N. SULLIVAN | |||||
Age
Director since February 2013
Independent |
Sensata Technologies Holding PLC, a supplier of sensors and controls • President & CEO from January 2013 to March 2020 • President & COO from • COO from
Texas Instruments, Inc., Sensata’s predecessor entity •
BOARD ROLES Audit Committee Chair
OTHER PUBLIC COMPANY BOARDS Current: Sensata Technologies Holding PLC Past Five Years: Goldman Sachs Acquisition Holding Company Corp II
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• Led company then with
Industry experience •
• |
| MITCHELL R. BUTIER | |||||
Age
Director since April 2016
Not Independent
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RECENT BUSINESS EXPERIENCE Avery Dennison Corporation • Executive Chairman since September 2023 • Chairman & CEO from March 2022 to August 2023 • Chairman, President & CEO • President & CEO from May 2016 to April 2019 • President & COO from November 2014 to April 2016 • •
BOARD ROLES Executive Chairman Finance Committee Chair
OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS
• Held roles of increasing responsibility at our company, including
Industry experience • Served in positions of increasing responsibility in what is now our Functional experience • Technical finance expertise having served as CAO and CFO and environmental sustainability expertise from advancing our sustainability goals value-creation opportunities • Supervisory experience in marketing, M&A, cybersecurity and R&D as CEO Works/Has Worked Outside the U.S. • Work assignments in Europe
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Avery Dennison Corporation | 2024 Proxy Statement | 45 |
| PATRICK T. SIEWERT | ||||
Age
Director since April 2005
Independent |
RECENT BUSINESS EXPERIENCE The Carlyle Group, a • Retired Managing Director and Partner
The Coca-Cola Company, a beverage company • Executive Committee member and Group President, Asia, from August 2001 to March 2007
BOARD ROLES Lead Independent Director Governance Committee Chair Audit Committee Member Finance Committee Member OTHER PUBLIC COMPANY BOARDS Current: Mondelēz International, Inc. Past Five Years: None |
SELECT SKILLS AND QUALIFICATIONS
U.S. public company board experience • Concurrent service on one other board Industry experience • Consumer goods industry expertise having led regional division of global beverage company into which our Solutions Group sells and extensive experience in materials science and industrial goods industries, complementing our Materials Group Functional experience • Finance and 15+ years of M&A expertise, advising on investments in consumer goods businesses and leading consumer, medial and retail investment practices in Asia Pacific, as well as supervisory experience in marketing and R&D as regional President Works/Has Worked Outside the U.S. • 25+ years working in Asia Pacific |
| WILLIAM R. WAGNER | ||||
Age 57 Director since October 2022 Independent | RECENT BUSINESS EXPERIENCE GoTo Group, Inc. (formerly LogMeIn, Inc.), a provider of software as a service and cloud-based remote work tools • President & CEO from December 2015 to January 2022 • President & COO from January 2015 to December 2015 • COO from May 2013 to December 2014 BOARD ROLES Audit Committee Member Governance Committee Member OTHER PUBLIC COMPANY BOARDS Current: BlackLine, Inc. Akamai Technologies, Inc. Semrush Holdings, Inc. Past Five Years: LogMeIn, Inc. | SELECT SKILLS AND QUALIFICATIONS U.S. public company leadership experience • Led company then with $1+ billion in annual revenues and ~4K employees U.S. public company board experience • Concurrent service on three other boards Industry experience • 25+ years of digital/technology industry expertise, as well as extensive experience in technology-based consumer goods, in each case complementing our Solutions Group and our strategy to lead at the intersection of the physical and digital Functional experience • Technical cybersecurity expertise, as well as marketing expertise as functional leader at two technology companies; supervisory experience in finance, M&A and R&D as CEO |
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In recommending non-employee director compensation to our Board, based on the independent expert advice of Willis Towers Watson, the Compensation Committee seeks to target compensation ataround the median of similar-sizecompanies similar in size, global scope and complexity with which we compete for director talent. Compensation is reviewed periodically (generally every three years) to ensure market competitiveness and consistency. The majority of compensation is delivered in equity to align director interests with those of our stockholders.
MedianAnnual Target Compensation
The components of our 2023 non-employee director compensation program are summarizedshown in the charts below and described thereafter.below.
2020 NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM |  | |||||
Target Grant Date Fair Value of Restricted Stock Units (RSUs) | $ | 155,000 |
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Cash Retainer | $ | 100,000 |
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Match of Charitable/Educational Contributions | $ | 10,000 |
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Additional Cash Retainer for Lead Independent Director | $ | 30,000 |
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Additional Cash Retainer for Audit Committee Chair | $ | 20,000 |
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Additional Cash Retainer for Compensation Committee Chair | $ | 15,000 |
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Additional Cash Retainer for Governance Committee Chair | $ | 15,000 |
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TARGETED AT MEDIAN
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| 2023 NON-EMPLOYEE DIRECTOR COMPENSATION | ||||||
Target Grant Date Fair Value of RSUs | $ | 170K |
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Board Retainer | $ | 100K | ||||
Match of Charitable/Educational Contributions | $ | 10K | ||||
Additional Retainers* | ||||||
Lead Independent Director | $ | 30K | ||||
Audit Committee Chair | $ | 25K | ||||
Compensation Committee Chair | $ | 20K | ||||
Governance Committee Chair | $ | 20K | ||||
| * | There is currently no additional Finance Committee Chair retainer because our Executive Chairman is serving in that capacity. |
Our 2017 Incentive Award Plan under which RSUs are granted to our non-employee directors, limits the sum of the grant date fair value of equity awards and the amount of any cash compensation in each case grantedprovided to any non-employee director directors during any calendar year to $600,000.In 2020, all but one of our non-employee directors received less than half of the maximum compensation amount.
Compensation Setting
Non-employee director compensation is reviewed by the Compensation Committee every three years. In early 2021, atFebruary 2024, the Compensation Committee’s request, Willis Towers Watsonindependent compensation consultant analyzed trends in non-employee director compensation and assessed our program’s market competitiveness.
Using benchmark data from public filings of companies in the competitivenessFortune 350-500, WTW recommended the following adjustments to non-employee director compensation: the target grant date fair value of the components of our program, including total cash compensation (Board and Committee Chair retainers), annual equity grant, charitable match, total direct compensation (annual cash plus equity) mix and amount, our stock ownership policy, andRSU award increase by $15,000; the Board retainer increase by $15,000; the additional retainer for our Lead Independent Director.
Using benchmarking data from public filings of companies ranked inDirector increase by $15,000; and the Fortune 350-500, Willis Towers Watson recommended that the additional cash retainers for our Audit, Compensation and Governance Committee Chairs each be increasedincrease by $10,000, $5,000 and $5,000, respectively. These modest increases would bring total direct compensation for regular Board service to $300,000 (or $310,000 with the charitable match), the projected median of Fortune 350-500 companies in 2027, the next time the Compensation Committee plans to review the program. Giving consideration to the advice of WTW, the Compensation Committee recommended to our Board that the target grant date fair value of ourthe annual equity grantaward of RSUs be increased to non-employee directors increase by $15,000, in each case$185,000; the Board retainer be increased to reflect$115,000; the current market median. This change would bring total direct compensation to $270,000 (or $280,000 with the charitable match), the projected median non-employee director compensationadditional retainer of our Fortune 350-500 peers in 2024,Lead Independent Director be increased to $45,000; and the next time the Compensation Committee expects to review the program. Based on Willis Towers Watson’s recommendation, the Compensation Committee recommended to our Board in February 2021 that the additional cash retainers for our Audit, Compensation and Governance Committee Chairs be increased to $35,000, $25,000 $20,000 and $20,000, respectively, and the target grant date fair value of RSUs granted annually to our non-employee directors be increased to $170,000.$25,000, respectively.
After consideration of the advice from the independent compensation consultant,Upon the recommendation of the Compensation Committee, and further discussion, our Board approved the revised non-employee director compensation program, effective as of the date of the Annual Meeting.
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Stock Ownership Policy
Our stock ownership policy requires non-employee directors to own at least $500,000 of our company stock, 50% of which must be held in vested shares. Stock option gains are not considered when measuring policy compliance; onlyOnly shares owned directly or in a trust, deferred stock units (DSUs)DSUs and unvested RSUs count for these purposes. Our non-employee directorssubject to time-based vesting are prohibited from hedging or pledging our common stock.measured to determine policy compliance.
All of our non-employee directors have achieved the minimum ownership required by our stock ownership policy; average non-employee director ownership was ~10xpolicy other than Mr. Wagner and Mses. Reverberi and Mejia who have five years from the required level at year-end 2020. Based on our reviewdate of their written representations in our 2020 director questionnaire, nonerespective Board appointment to achieve that level. The average ownership of our all other then-serving non-employee directors has hedged or pledged our common stock.was 12x the minimum ownership requirement at year-end 2023.
Avery Dennison Corporation | 2024 Proxy Statement | 47 |
Equity Compensation
The 2020annual equity grantaward to non-employee directors was made in the formconsists of RSUs that vest on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected. Unvested RSUs (i) fully vest upon a director’s death, disability, retirement from our Board after reaching age 72 or termination of service within 24 months after a change of control and (ii) are cancelled in the event a director voluntarily resigns, is not reelected by stockholders or is otherwise asked to leaveleaves our Board before vesting, unless otherwise determined by the Compensation Committee determines otherwise.Committee. On May 1, 2020,2023, each of our then-serving non-employee directors was granted 1,450awarded 971 RSUs with a grant date fair value of $151,600.$166,978.
InOn February 23, 2023, in connection with her appointment to our Board, Ms. Reverberi received an award of 155 RSUs with a grant date fair value of $27,817, reflecting the annual equity award of $170,000 prorated for the remaining two months of the term ending at the 2023 Annual Meeting.
Following his departure from our Board on the date of the 2020 Annual Meetingin November 2023 and as permitted by our 2017 Incentive Award Plan, the Compensation Committee determined to accelerate the vesting of the RSUs granted to Mr. Anderson on May 1, 2023 in May 2019 to David Pyott, our former Lead Independent Director. These RSUs were scheduled to vest a few days afterrecognition of his departure fromdecade-plus service on our Board. In making its determination, the Compensation Committee noted that Mr. Pyott had served nearly the entire one-year term for which he had been elected by stockholders.
Deferrable Cash Compensation
CashAnnual retainers are paid semiannually and prorated for any director’s partial service during the year. Directors are also reimbursed for travel expenses incurred to attend Board meetings and continuing director education events.
Our non-employee directors may chooseelect to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation Program (DDECP); or (iii) a combination of cash and DSUs. NoneIn 2023, none of our current then-serving non-employee directors participateparticipated in the DVDCP and eightfour of them currently participateparticipated in the DDECP. Dividend equivalents, representing the value of dividends paid on shares of our common stock calculated based on the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs.
When a director participatingparticipant in the DDECP retires or otherwise ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director’s service, with the resulting number of shares of our common stock, less fractional shares, issued to the director. Dividend equivalents, representing the value of dividends per share paid onIn connection with his departure from our Board effective November 30, 2023, Mr. Anderson was issued 13,102 shares of our common stock calculated with reference to the number of DSUs held as of a dividend record date, are reinvestedreflecting his DDECP account balance on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP.that date.
Charitable Match
We match up to $10,000 per year of each non-employee director’s documented contributions to charitable organizations or educational institutions.
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| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) | All Other Compensation(4) | Total | ||||||||||||||||||||
Bradley A. Alford | $ | 100,000 | $ | 151,600 | — | $ | 9,750 | $ | 261,350 | ||||||||||||||||
Anthony A. Anderson | $ | 100,000 | $ | 151,600 | — | — | $ | 251,600 | |||||||||||||||||
Peter K. Barker | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 276,600 | ||||||||||||||||
Mark J. Barrenechea | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 261,600 | ||||||||||||||||
Ken C. Hicks | $ | 100,000 | $ | 151,600 | — | $ | 10,000 | $ | 261,600 | ||||||||||||||||
Andres A. Lopez | $ | 100,000 | $ | 151,600 | — | — | $ | 251,600 | |||||||||||||||||
David E.I. Pyott(3)(5) | — | — | — | — | — | ||||||||||||||||||||
Patrick T. Siewert | $ | 145,000 | $ | 151,600 | — | $ | 10,000 | $ | 306,600 | ||||||||||||||||
Julia A. Stewart | $ | 115,000 | $ | 151,600 | — | $ | 10,000 | $ | 276,600 | ||||||||||||||||
Martha N. Sullivan | $ | 120,000 | $ | 151,600 | — | $ | 10,000 | $ | 281,600 | ||||||||||||||||
| Name(1) | Fees Earned or Paid in Cash(2) | Stock Awards(3) | All Other Compensation(4) | Total | ||||||||||||||||
Bradley A. Alford | $100,000 | $166,978 | $ 2,000 | $268,978 | ||||||||||||||||
Anthony A. Anderson(2) | $ 50,000 | $166,978 | — | $216,978 | ||||||||||||||||
Ken C. Hicks | $100,000 | $166,978 | $10,000 | $276,978 | ||||||||||||||||
Andres A. Lopez | $100,000 | $166,978 | — | $266,978 | ||||||||||||||||
Francesca Reverberi | $100,000 | $194,795 | — | $294,795 | ||||||||||||||||
Patrick T. Siewert | $150,000 | $166,978 | $10,000 | $326,978 | ||||||||||||||||
Julia A. Stewart | $120,000 | $166,978 | $10,000 | $296,978 | ||||||||||||||||
Martha N. Sullivan | $125,000 | $166,978 | $10,000 | $301,978 | ||||||||||||||||
William R. Wagner | $100,000 | $166,978 | $10,000 | $276,978 | ||||||||||||||||
| (1) |
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| (2) | Amounts represent retainers earned as shown in the table below. At their election, the following directors |
| Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | |||||||||||||
Alford |
| $ | 100,000 | — | — | ||||||||||||
Anderson |
| $ | 100,000 | — | — | ||||||||||||
Barker |
| $ | 100,000 | — | — | ||||||||||||
Barrenechea |
| $ | 100,000 | — | — | ||||||||||||
Hicks |
| $ | 100,000 | — | — | ||||||||||||
Lopez |
| $ | 100,000 | — | — | ||||||||||||
Pyott |
| — | — | — | |||||||||||||
Siewert | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 15,000 | $ | 30,000 | ||||||||||
Stewart | Compensation Committee Chair | $ | 100,000 | $ | 15,000 | — | |||||||||||
Sullivan | Audit Committee Chair | $ | 100,000 | $ | 20,000 | — | |||||||||||
| Director | Board Leadership Roles | Board Retainer | Committee Chair Retainer | Lead Director Retainer | |||||||||||||
Alford |
| $ | 100,000 | — | — | ||||||||||||
Anderson |
| $ | 50,000 | — | — | ||||||||||||
Hicks |
| $ | 100,000 | — | — | ||||||||||||
Lopez |
| $ | 100,000 | — | — | ||||||||||||
Reverberi |
| $ | 100,000 | — | — | ||||||||||||
Siewert | Lead Independent Director, Governance Committee Chair | $ | 100,000 | $ | 20,000 | $ | 30,000 | ||||||||||
Stewart | Compensation Committee Chair | $ | 100,000 | $ | 20,000 | — | |||||||||||
Sullivan | Audit Committee Chair | $ | 100,000 | $ | 25,000 | — | |||||||||||
Wagner |
| $ | 100,000 | — | — | ||||||||||||
Amounts reflect the grant date fair |
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| (4) | Amounts reflect our match of |
Avery Dennison Corporation |
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ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
After considering the preliminary voting results of the advisory vote on the frequency of our say-on-pay vote votes at our 2017the 2023 Annual Meeting, our Board determined to hold continue holding say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (which we expect to take place at our 2023 Annual Meeting).
In this Item 2, our stockholders are being asked to vote on the following resolution:
RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers (NEOs), as described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of the Company’s 2021 proxy statement.
Recommendation of Board of Directors
We are committed to maintaining ongoing engagement with our stockholders to seek their feedback and discuss why we believe our executive compensation program properly aligns with our strategies by incenting our leaders to deliver strong financial performance and create superior long-term, sustainable value for our customers, employees, investors and communities. Our Board of Directors recommends that you vote FOR approval, on an advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.
Meaning of Advisory Vote
annually. The advisory vote is a vote to approve the compensation of our NEOs, as described in the Compensation Discussion and Analysis (CD&A) and Executive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the compensation of our non-employee directors, our CEO pay ratio or pay vs. performance disclosures, or the features of our compensation program designed to preventthat mitigate excessive risk-taking as described in the Risks Associated with Compensation Policies and Practices section of this proxy statement.risk-taking.
The results of the advisory vote are not binding on our Board. However, in accordanceconsistent with SEC regulations,its historical practice, the Compensation Committee will disclose its consideration of the vote results of the vote in the CD&ACompensation Discussion and Analysis section of our 20222025 proxy statement.
Board Recommendation
We are committed to maintaining ongoing engagement with our investors to discuss the alignment of our executive compensation program with our strategies and the incentives it provides our leaders to deliver strong financial performance and continuous sustainability progress, creating superior long-term, sustainable value for our customers, investors, employees and communities.
Our Board recommends that you vote FOR approval, on an advisory basis, of our executive compensation. |
Properly dated and signed proxies will be so voted unless you specify otherwise.
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TALENT AND COMPENSATION COMMITTEE REPORT
The Talent and Compensation Committee (referred to in this report as the “Committee”) of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) of Regulation S-K with management and, based on its review and those discussions, has recommended to our Board of Directors that the CD&A be included in our 2021 proxy statement and incorporated by reference into our 2020 Annual Report on Form 10-K.
The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with the Committee by writing to the Talent and Compensation Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.
Julia A. Stewart, Chair
Bradley A. Alford
Mark J. Barrenechea
Ken C. Hicks
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This Compensation Discussion and Analysis* (CD&A)CD&A* describes our executive compensation program and the decisions made byof the Talent and Compensation Committee of our Board of Directors (referred to in this CD&A as the “Committee”) related to 2020regarding 2023 executive compensation. This CD&A containsIt includes the sections shown below.
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Overview of Pay Philosophy and Executive Compensation Components | 55 | ||||||
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Discussion of 2023 Compensation | |||||||
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OverOur strategic pillars and related 2023 achievements are described in the last several years, weproxy summary. We have successfullyconsistently executed our business strategies, which are designed to create delivering long-term, sustainable value for our employees, customers and investors and improve the communities in which we operate. From our stockholders’ perspective, weinvestors. We believe that this value is best measured by our total stockholder return (TSR)TSR and cumulative economic value added (EVA),EVA, both of which are performance objectives used in our long-term incentive (LTI)LTI program and inform how we set our goals for sales growth, operating margin improvement, asset efficiency, return on total capital (ROTC)ROTC and capital allocation.
Highlights of our financial performance are shown below. Our overriding focus remains on ensuring the long-term success of our stakeholders, and, as described in the proxy summary, we have a clear set of strategies to deliver for them.
Progress Toward 2025 Financial Targets
In March 2017,2021, we announced long-term goals forfinancial targets through 2025. Given the challenges we experienced in 2023, our three reportable segments – Labelprogress toward these long-term targets slowed during the year; however, we expect significant progress in 2024 as label and Graphic Materials (LGM), Retail Brandingapparel markets rebound and Information Solutions (RBIS) and Industrial and Healthcare Materials (IHM) – andgrowth in our company as a whole, targeting solid compound annual organic sales growth, significant operating margin expansion, double-digit compound annual adjusted earnings per share (EPS) growth, and the ROTC we planned to achieve by 2021.Intelligent Labels business accelerates.
| * | This CD&A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the expected results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our |
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We are committed to ensuring the continued success of all our stakeholders – our employees, customers, investors and communities. In a challenging 2020 due to the extraordinary impact of COVID-19, we focused on ensuring the health and well-being of our employees, delivering for our customers, minimizing the impact of the pandemic-driven recession for our investors, and supporting our communities, while continuing to invest in the long-term success of our company. For additional information on our COVID-19 response, please see the proxy summary. We have refined how we present our key strategies shown below, but our primary areas of strategic focus are consistent with recent years.
Drive outsized growth in high-value categories
We strive to increase the proportion of our portfolio in high-value products and solutions, both organically and through acquisitions
In 2020, organic sales change in high-value product categories outpaced that of our base businesses by more than one point, driven by growth in specialty labels, external embellishments and RFID; also advanced our RFID platform through our acquisition of the Transponder (RFID inlay) division of Smartrac, a manufacturer of RFID products (which we refer to as “Smartrac”)
Grow profitability in our base businesses
We strive to improve profitability in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies
In 2020, we protected, and even grew, operating margins in our base businesses
Focus relentlessly on productivity
We employ product reengineering and enterprise lean sigma to expand our operating margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment
In 2020, we significantly expanded operating margins, showing agility in response to COVID-19 by delivering approximately $200 million of cost reduction through both structural and temporary actions
Effectively allocate capital
We work to balance our investments in organic growth, productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases
In 2020, leveraging our strong balance sheet, we invested nearly $220 million in capital expenditures to support organic growth; completed two acquisitions; and increased our quarterly dividend rate by 7% in October after having maintained it earlier in the year and resumed the repurchase of shares in Q3 after having suspended it in March, in each case due to then-uncertain impact of COVID-19 on our businesses
Lead in an environmentally and socially responsible manner
We work to deliver innovations that advance the circular economy and reduce the environmental impact of our operations; build a more diverse workforce and inclusive culture; maintain a culture of health and safety; and support our communities primarily through the Avery Dennison Foundation
In 2020, we continued to make progress toward our 2025 sustainability goals, reducing the environmental impact of our operations and investing in innovation platforms focused on recyclability/enabling circularity and waste reduction/elimination; redoubling our efforts to drive sustainable change in diversity and inclusion, including by sharpening our focus on racial/ethnic workforce diversity, particularly in the U.S.; and contributing $10 million to the Avery Dennison Foundation to significantly increase the scope and pace of its grantmaking in the communities in which we operate
Avery Dennison Corporation |
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The five-year financial goals through 2021 that we announced in March 2017 included targets for compound annual organic sales growth, 2021 GAAP operating margin, compound annual adjusted EPS growth and 2021 ROTC. The combination of our growth and ROTC targets is a proxy for growth in EVA, one of the performance objectives used in our LTI program. As shown below, based on our results of the first four years of this five-year period, we are largely on track to achieve these commitments. Our 2017-2020 compound annual organic sales growth of 2.0% was lower than our top-line target, but higher than forecasted global GDP growth (a key tenet of our top-line objective) of 1.5% over the same period.
Sales change ex. currency, organic sales change, adjusted EPS and ROTC – as well as free cash flow, which is used later in this CD&A – are financial measures not in accordance with generally accepted accounting principles in the United States of America (GAAP), which we provide investors to assist them in assessing our performance and operating trends. These non-GAAP financial measures are not a substitute for or superior to progress toward the comparable financial measures under GAAP and are defined, qualified and reconciled from GAAP in the last section of this proxy statement.
For the 2017-2020 period,In 2021-2023, on a four-yearthree-year compound annual basis (with 20162020 as the base period), GAAP reported net sales and reported EPS increased by 3.5% and 16.9%6.3%, respectively, and reportedwhile GAAP operating income, net income increasedand EPS decreased by 14.7%1.1%, 3.3% and 2.1%, respectively. GAAP reported operating margin in 2023 was 9.4%.
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| (1) | Results for non-GAAP measures are reconciled from GAAP in |
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20202023 Financial Performance
In fiscalAlthough a lower demand environment driven primarily by inventory destocking downstream from our company resulted in a challenging year 2020,in which we did not realize our annual performance expectations, we delivered another year of strong EPSsequential improvement each quarter and continued advancement in key growth significant operating margin expansion and record free cash flow, despite the challenging macroeconomic environment during which the safety and well-being of our employees remained our top priority given the continuing public health crisis from COVID-19. Theseareas such as Intelligent Labels. Key financial results reflect the extraordinary efforts undertaken by our leaders, including our CEO and other NEOs, and teams globally respond to COVID-19 and mitigate its impact on our company. We achieved our adjusted EPS and free cash flow financial goals for the year with key financial resultsare shown below and on the following page. For detailed information regarding our 2020 performance, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and notes thereto contained in our 2020 Annual Report.below.
2023 FINANCIAL RESULTS | ||||||||
| Net Sales |
Reported EPS | Cash From Operating Activities | Net Income | |||||
| $8.4B | $6.20 | $826.0M | $503.0M | |||||
| Reported net sales | Reported EPS decreased from $9.21 in 2022; adjusted EPS decreased from $9.15 in 2022 to $7.90, primarily reflecting lower volume, partially offset by productivity and restructuring actions |
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| 12.4% |
We have been consistently effective in executing our approach to capital allocation, balancing our investments in organic growth, productivity, and acquisitions and venture investments with continuing to return cash to stockholders through dividends and share repurchases. In 2020, on net income of $555.9 million, we invested $218.6 million in capital expenditures to support our future growth and further productivity improvement and allocated $350.4 million to acquisitions and venture investments; we also paid $196.8 million in dividends and repurchased $104.3 million in shares of our common stock.
We have invested in our businesses to support organic growth and pursued complementary and synergistic acquisitions. Our spending on capital expendituresacquired companies that expand our capabilities in 2020 was 15% lower than 2019 but consistent with our externally communicated outlook for the year, during which we acceleratedhigh-value product categories, increase our pace of innovation and advance our sustainability priorities. Our fixed and IT capital spending in 2023 of $285.1 million was comparable to 2022, reflecting our continued investment in high-value categories, particularly RFID.our Intelligent Labels business. During the year, we acquired Thermopatch, Lion Brothers and Silver Crystal; together, these acquisitions expand the external embellishments portfolio in our Solutions Group. We also allocated over $350 million to acquisitions. In February 2020, we completed our acquisition of Smartrac for approximately $255 million. Together with our then-existing Intelligent Labels business, this acquisition createdmade one venture investment in a platform with over $500 million in annual revenues, with increased potential for long-term growth and profitability, enhanced research and development capabilities, expanded product lines and additional manufacturing capacity. In December 2020, we completed our acquisition of ACPO, Ltd., an Ohio-based manufacturer of self-wound (linerless) pressure-sensitive overlaminate products, for approximately $88 million. During 2020, we also invested in three startup companiescompany developing innovative technological solutions that we believe have the potential to advance our businesses.strategies.
In 2020,2023, we deployed $301.1paid $256.7 million to pay an annual dividendin dividends of $2.36$3.18 per share and repurchaserepurchased 0.8 million shares of our common stock. We raised our quarterly dividend rate by approximately 7%~8% in October 2020, after having maintained it earlier in the year due to the impact of COVID-19. Given the uncertain impact of COVID-19 at that time, in March 2020, we suspended our repurchase of shares and did not resume repurchases until the third quarter; as a result, in 2020, we allocated less than half the capital we deployed to share repurchases in 2019.April 2023.
52 | 2024 Proxy Statement | Avery Dennison Corporation |
As shown below, over the last five years, we have allocateddeployed over $900 million$2 billion to acquisitions (including venture investments) and venture investments and nearlyreturned over $2 billion to stockholders in dividends and share repurchases.
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Longer-Term TSR Outperformance
We experienced strongAlthough our TSR in 2020 despite2023 was modestly below the uncertain macroeconomic environment during most of the year as a result of COVID-19, delivering TSR of over 20% and outperforming the S&P 500. However, we believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our performance (as occurred at various times during 2020). We focus on TSR because it measures value we create for our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). We compare ourselves to the median of the S&P 500 Index and the S&P 500 Industrials Index and Materials subsets because we are a membermodestly above the Dow Jones U.S. Container & Packaging Index, our five-year cumulative TSR significantly outperformed all three of the Materials subset, and also share many characteristics with members of the Industrials subset; this practice is further informed by feedback from our investors, who have indicated that they look at both subsets in evaluating our performance relative to that of our peers.these comparator groups.
5-Year Cumulative TSR
5-YEAR CUMULATIVE TSR |
1-, 3- and 5-Year TSR
| AVY | S&P 500 | S&P Indus. & Mats.* | ||||
2016 | 15% | 12% | 21% | |||
2017 | 67% | 22% | 28% | |||
2018 | (20)% | (4)% | (14)% | |||
2019 | 49% | 32% | 34% | |||
2020 | 21% | 18% | 17% | |||
3-Year TSR | 43% | 49% | 32% | |||
5-Year TSR | 173% | 103% | 116% |
