UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
☑ Filed by the Registrant | ☐ | Filed by a Party other than the Registrant |
CHECK THE APPROPRIATE BOX: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, | |
☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material |
The Gap, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY):
☑ | No fee | ||
☐ | Fee paid previously with preliminary materials | ||
☐ | Fee computed on table | ||
NOTICE OF ANNUAL MEETING OF GAP INC. SHAREHOLDERS
PROXY STATEMENT
May 21, 2019San Francisco, California
NOTICE OF ANNUAL MEETING OFSHAREHOLDERS
DATE AND TIME | Tuesday, May | |
PLACE |
| Via the Internet at www.virtualshareholdermeeting.com/GAP2022 |
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| • Elect as directors the |
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• Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending | ||
January 28, 2023; • Hold an advisory vote to approve the | ||
• Transact such other business as may properly come before the meeting. | ||
RECORD DATE | You must have been a shareholder of record at the close of business on March 14, 2022 to vote at the Annual Meeting. | |
INTERNET AVAILABILITY | In accordance with U.S. Securities and Exchange Commission rules, we are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending them a notice with instructions for accessing the materials and voting via the Internet. We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2021 Annual Report to Shareholders are available at www.gapinc.com (follow the Investors link). | |
ATTENDING THE ANNUAL MEETING | You are entitled to attend the Annual Meeting, which will be held via the Internet through a virtual web conference at www.virtualshareholdermeeting.com/GAP2022 on May 10, 2022 at 10:00 a.m., Eastern Time, and any adjournments or postponements thereof. You will be able to attend the Annual Meeting online, vote your shares electronically and submit questions online during the Annual Meeting by logging into the website listed above using the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials. We recommend that you log in a few minutes before the Annual Meeting to ensure you are logged in when the Annual Meeting starts. We have decided to use a virtual meeting format for our Annual Meeting, which allows us to continue to proceed with the Annual Meeting while mitigating the health and safety risks to participants and avoid costs and travel inconveniences for our shareholders associated with an in-person format. The platform for the virtual Annual Meeting includes functionality that affords validated shareholders substantially the same meeting participation rights and opportunities they would have at an in-person meeting. This technology will allow us to expand access to the Annual Meeting, improve communications and lower the cost to us, our shareholders and the environment. | |
PROXY VOTING | Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. | |
By Order of the Board of Directors, | ||
Julie Gruber Corporate Secretary March 30, 2022 |
INTERNET AVAILABILITY
In accordance with U.S. Securities and Exchange Commission rules, we are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending them a notice with instructions for accessing the materials and voting via the Internet. We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on the environment. This Proxy Statement and our 2018 Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors, Annual Reports & Proxy links).
PROXY VOTING
Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card.
ADMISSION TO THE ANNUAL MEETING
You are entitled to attend the Annual Meeting only if you were a Gap Inc. shareholder as of the close of business on March 25, 2019 or you hold a valid proxy for the Annual Meeting.Photo identification is required for admittance. In addition, if you are not a shareholder of record but hold shares through a broker, bank, trustee or nominee (i.e., in street name), you will be required to provide proof of beneficial ownership as of the Record Date.Proof of beneficial ownership can take the form of your most recent account statement prior to the Record Date, a copy of the voting instruction card provided by your broker, bank, trustee or nominee, a copy of the Notice of Internet Availability of Proxy Materials if one was mailed to you, or similar evidence of ownership.
By Order of the Board of Directors,
Julie GruberCorporate SecretaryApril 9, 2019
PROXYSUMMARY
Proxy Summary
References in this Proxy Statement to “Gap Inc.,” “the Company,” “we,” “us,” and “our” refer to The Gap, Inc.
These proxy materials are being delivered in connection with the solicitation of proxies by the Board of Directors (the "Board") of The Gap, Inc. for use at our Annual Meeting of Shareholders to be held via the Internet through a virtual web conference at www.virtualshareholdermeeting.com/GAP2022 on May 21, 2019,10, 2022, at 10:00 a.m., San FranciscoEastern Time, at Gap Inc. Headquarters, Two Folsom Street, San Francisco, California 94105 and at any adjournment or postponement thereof (the “Annual“2022 Annual Meeting”). You will be able to attend the 2022 Annual Meeting online, vote your shares electronically and submit questions online during the 2022 Annual Meeting by logging into the website listed above using the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials. The platform for the virtual 2022 Annual Meeting includes functionality that affords validated shareholders substantially the same meeting participation rights and opportunities they would have at an in-person meeting. We recommend that you log in a few minutes before the 2022 Annual Meeting to ensure you are logged in when the 2022 Annual Meeting starts.
On or about April 9, 2019,March 30, 2022, we commenced distribution of this Proxy Statement and the form of proxy to our shareholders entitled to vote at the Annual Meeting.
AGENDA
VOTING SHARES
The holders of our common stock at the close of business on March 25, 201914, 2022 (the “Record Date”) are entitled to one vote per share on each matter voted upon at the Annual Meeting or any adjournment or postponement thereof. As of the Record Date, there were 379,014,042369,785,233 shares of common stock outstanding.
For a period of at least 10 days prior to the Annual Meeting, a complete list of shareholders entitled to vote at the Annual Meeting will be open to the examination of any shareholder during ordinary business hours by contacting Investor Relations at investor_relations@gap.com. In addition, a complete list of shareholders entitled to vote at the Annual Meeting will be open to the examination of any shareholder during the meeting by following the instructions on the Annual Meeting website once they enter the meeting.
How to Vote Your Shares
by Internet, mail or phone.
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If you vote by Internet or by phone, you will need to have a proxy card or voting instruction card, or the Notice of Internet Availability, in hand when you access the voting website or call to vote by phone. And ifIf you vote by Internet or phone, you do not need to return anything by mail. Specific voting instructions are found on the proxy card, voting instruction card, or the Notice of Internet Availability of Proxy Materials.Availability.
By Internet www.proxyvote.com (or scan the QR code on the proxy card or voting instruction card) | By Mail Sign and return a proxy card (for shareholders of record) or voting instruction card (for beneficial owners of shares) | By Phone 1-800-690-6903 |
During the 2022 Annual Meeting: www.virtualshareholdermeeting.com/GAP2022 |
Proposal 1 – Election of Directors (Page 1)
The Board of Directors Recommends a Vote “FOR” each Director Nominee. |
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Name and Occupation |
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Elisabeth B. Donohue Former CEO, Publicis Spine |
| 56 |
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| 2021 |
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| Yes |
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| 2 |
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| M |
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Robert J. Fisher Managing Director, Pisces, Inc. |
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| 67 |
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| 1990 |
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| Yes |
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William S. Fisher Founder and CEO, Manzanita Capital Limited |
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| 64 |
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| 2009 |
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| Yes |
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Tracy Gardner Principal, Tracy Gardner Consultancy |
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| 58 |
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| 2015 |
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| Yes |
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Kathryn Hall Founder & Co-Chair, Hall Capital Partners |
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| Yes |
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Bob L. Martin Executive Chair and Director, Gap Inc. |
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| 73 |
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| 2002 |
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Amy Miles Former Chair and CEO, Regal Entertainment Group |
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| 55 |
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| 2020 |
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| Yes |
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Chris O'Neill Chief Business Officer, Glean Technologies, Inc. |
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| 49 |
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| 2018 |
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| Yes |
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Mayo A. Shattuck III Non-Executive Chairman, Exelon Corporation |
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| 67 |
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| Yes |
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Salaam Coleman Smith Former Executive Vice President, Disney ABC Television Group |
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| 52 |
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| 2021 |
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| Yes |
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Sonia Syngal CEO and Director, Gap Inc. |
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| 52 |
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| 2020 |
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| C Chair M Member F Financial Expert |
AC: Audit and Finance Committee
CC: Compensation and Management Development Committee
GC: Governance and Sustainability Committee
Director Nominee Demographics, Skills and Experience
* Tenure and age are measured as of the filing date of this Proxy Statement.
Proposal 2 – Ratification of Auditors (Page 28)
The Board of Directors Recommends a Vote “FOR” the Selection of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm for Fiscal 2022. |
Based on Audit and Finance Committee’s assessment of Deloitte & Touche LLP’s qualifications and performance, the Board believes that retention of Deloitte & Touche for fiscal 2022 is in our shareholders’ best interests.
Proposal 3 – Say-on-Pay (Page 31)
The Board of Directors Recommends a Vote “FOR” the Approval, on an Advisory Basis, of the Overall Compensation of the Company’s Named Executive Officers. |
Table of Contents |
www.gapinc.com |
Proposal No. 1 – Election of Directors | 1 |
YOUR VOTE
PROPOSAL NO.Proposal No. 1 — ELECTION OF DIRECTORSElection of Directors
Nominees for Election as Directors
ELECTION PROCESS
Directors will be elected atThe Board, upon recommendation of the Annual MeetingGovernance and Sustainability Committee, has nominated the eleven people whose names are set forth below for election as directors, each nominated to serve for a one-year term until the next2023 Annual Meeting and until their successors are elected. The Governanceduly elected and Sustainability Committee of the Board of Directors has nominated the persons whose names are set forth below, all of whom arequalified. Each director nominee other than Ms. Hall is a current directors.
DIRECTOR NOMINATIONSdirector.
The Board of Directors has no reason to believe that any of the nominees will be unable to serve. However, if any nominee should for any reason be unavailable to serve, the Board of Directors may reduce the numbersize of directors fixedour Board in accordance with our Bylaws, or the proxies may be voted for the election of such other person to the office of director as the Board of Directors may recommend in place of the nominee. Set forth below is certain information concerning the nominees, including age, experience, qualifications and principal occupation during at least the last five years, based on data furnished by each nominee.
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Amy Bohutinsky
www.gapinc.com |
2 | Proposal No. 1 – Election of Directors |
Elisabeth B. Donohue | ||||
Age: Director Committee Membership: Compensation and Management Development Current Public Company Directorships: • NRG Energy, Inc. • AcuityAds Holdings Inc. Former Public Company Directorships Held in Last Five Years: • Synacor, Inc. | ||||
Biography: • Former Chief
Experience: • Ms. | ||||
John J. Fisher
Robert J. Fisher | ||||
Age: Director Committee Membership: |
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Robert J. Fisher
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Biography: • Managing Director of Pisces, Inc. Experience: • Mr. Fisher has vast retail business experience specific to Gap Inc. and its global operations, as a result of his many years serving in a variety of high-level Gap Inc. positions. His previous leadership and oversight roles at | ||||
William S. Fisher
2022 Proxy Statement |
Proposal No. 1 – Election of Directors | 3 |
William S. Fisher | ||||
Age: Director Committee Membership: None | ||||
Biography: • Founder and Chief Executive Officer of Manzanita Capital Limited, a private equity fund, since 2001. Executive Vice Chairman of Pisces, Inc. Experience: • Mr. Fisher brings extensive global retail and business experience to the Board as a result of his many years serving in a variety of high-level positions across Gap Inc., including President of the International Division. In addition, as a director on the boards of a number of private retail companies, including Space NK and Diptyque, he brings extensive knowledge of the global retail industry and risk oversight expertise. | ||||
Tracy Gardner
Tracy Gardner | ||||
Age: Director Committee Membership: Compensation and Management Development (Chair) Governance and Sustainability Current Public Company Directorships: • Crocs, Inc. | ||||
Biography: • Principal of Tracy Gardner Consultancy since 2010. Chief Executive Officer of dELiA*s Inc., an omni-channel retail company primarily marketing to teenage girls, Experience: • With over 30 years of experience, Ms. Gardner is a retail industry veteran who brings deep product and operational expertise and | ||||
Isabella D. Goren
www.gapinc.com |
4 | Proposal No. 1 – Election of Directors |
Kathryn Hall | ||||
Age: Director since: N/A (New Nominee) Current Public Company Directorships: • Cohn Robbins Holding Corporation | ||||
Biography: • Founder and Co-Chair of Hall Capital Partners, an SEC-registered investment advisor, since 1994, and a member of the firm’s Executive Committee and Investment Review Committee. Founder and Co-Executive Chair of Galvanize Climate Solutions, a mission-driven investment platform, since 2021, and a member of the firm’s Operating Committee. General Partner of Laurel Arbitrage Partners from 1989 to 1994. Experience: • Ms. Hall brings extensive financial and investment experience, as well as senior management and leadership experience, including as the Founder and Co-Chair of an institutional investment management firm with approximately $48 billion in assets under management. Additionally, she has substantial insights from her experience leading and developing a senior management team that is 50% women and in supporting full consequence investing, which integrates sustainability into the firm’s investment framework. | ||||
Bob L. Martin | ||||
Age: 73 Director Committee Membership: None Current Public Company Directorships: • Conns, Inc. |
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Bob L. Martin
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Biography: • Executive Chair, an employee role, of Gap Inc. since March 2020. Lead Independent Director of Gap Inc. from 2003 to Experience: • Mr. Martin is a retail industry veteran with over | |||||
Jorge P. Montoya
2022 Proxy Statement |
Proposal No. 1 – Election of Directors | 5 |
Amy Miles | ||||
Age: Director Committee Membership: Audit Current Public Company Directorships: • Norfolk Southern Corporation • Amgen Inc. Former Public Company Directorships Held in Last Five Years: • Regal Entertainment Group | ||||
Biography: • Former Chair and Chief Executive Officer of Regal Entertainment Group, a leading theater chain, from 2015 to 2018. Chief Executive Officer of Regal Entertainment Group from 2009 to 2015. Executive Vice President, Chief Financial Officer and Treasurer of Regal Entertainment Group from 2002 to 2009. Experience: • As a former Chair, Chief Executive Officer and Chief Financial Officer, Ms. Miles has extensive finance, accounting and management experience. In addition, she brings expertise in information technology, marketing and strategic planning. | ||||
Chris O'Neill | ||||
Age: 49 Director since: 2018 Committee Membership: Audit and Finance |
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Chris O'Neill
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Biography: • Chief Business Officer of Glean Technologies, Inc. since 2021. Senior Advisor to Portage Ventures, the venture capital arm of Sagard Holdings, since 2021, and General Partner from 2020 to 2021. Chairman, President and Chief Executive Officer of Evernote Corporation, a global cloud-based technology company, Experience: • Mr. O’Neill's experience as | |||||
Arthur Peck
www.gapinc.com |
6 | Proposal No. 1 – Election of Directors |
Mayo A. Shattuck III | ||||
Age: Director Committee Membership: Audit and Finance Governance and Sustainability Current Public Company Directorships: • Capital One Financial Corporation • Exelon Corporation (not standing for reelection) Former Public Company Directorships Held in Last Five Years: • Alarm.com Holdings, Inc. |
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Lexi Reese
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Mayo A. Shattuck III
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Biography: • Non-Executive Chairman of Exelon Corporation, an energy company, since Experience: • With his experience | ||||
John J. Fisher,
Salaam Coleman Smith | ||||
Age: 52 Director since: 2021 Committee Membership: Compensation and Management Development Current Public Company Directorships: • Pinterest, Inc. • Enjoy Technology, Inc. | ||||
Biography: • Former Executive Vice President at The Walt Disney Company’s Disney ABC Television Group from 2014 to 2016, overseeing strategy and programming for ABC Family’s Freeform channel. Various senior executive roles at Comcast NBCUniversal from 2003 to 2014, including President of Style Network from 2008 to 2013. Senior executive at Viacom from 1993 to 2002, including serving as a senior executive within MTV Networks International Division and helping Nickelodeon’s global expansion in Europe, Asia, and Latin America. Experience: • With over 23 years of media and entertainment industry experience at three global companies, Ms. Coleman Smith brings experience in strategy and change management, leading organizations through periods of significant transformation and growth. Additionally, she has substantial insights from her experience developing and leading a diverse and inclusive management team in the media industry. | ||||
2022 Proxy Statement |
Proposal No. 1 – Election of Directors | 7 |
Sonia Syngal | ||||
Age: 52 Director since: 2020 Committee Membership: None | ||||
Biography: • Chief Executive Officer of Gap Inc. since March 2020. President and Chief Executive Officer, Old Navy from April 2016 to March 2020. Executive Vice President, Global Supply Chain and Product Operations of Gap Inc. from February 2015 to April 2016. Executive Vice President, Global Supply Chain of Gap Inc. from November 2013 to January 2015. Since joining Gap Inc. in 2004, Ms. Syngal has served in key leadership and general management roles including Managing Director for Gap Inc.'s Europe business, Senior Vice President for Gap Inc.'s International division and Senior Vice President for Gap Inc.'s International Outlet division. Prior to joining Gap Inc., Ms. Syngalhad a long career in Fortune 500 product companies, including Sun Microsystems where she led manufacturing operations, logistics and supply chain management, and at Ford Motor Company where she held roles in product design, quality and manufacturing engineering. Experience: • As a result of her service as President and Chief Executive Officer of Gap Inc. and Old Navy, as well as her service in other senior positions at Gap Inc., Ms. Syngal has extensive experience as a leader in the global retail industry, including specific expertise in management, talent development, supply chain and global operations. | ||||
Robert J. Fisher and William S. Fisher are brothers. InformationBiographical information concerning our executive officers who are not also directors is set forth in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019.January 29, 2022.
Departing Directors
John J. Fisher, who has served as a director of the Company since 2018, and Jorge P. Montoya, who has served as a director of the Company since 2004, are not standing for reelection at our 2022 Annual Meeting. The Board thanks Mr. Fisher and Mr. Montoya for their years of dedicated service to the Board and significant contributions to the Company.
www.gapinc.com |
8 | Proposal No. 1 – Election of Directors |
Director Selection and Qualification
DIRECTOR INDEPENDENCEDirectors are elected at each Annual Meeting to serve until the next Annual Meeting and until their successors are duly elected and qualified. Pursuant to our Bylaws, in the event of a vacancy on the Board (resulting from an increase in the authorized number of directors or otherwise), the Board will appoint a director to serve until his or her successor is duly elected and qualified.
The Governance and Sustainability Committee understands the vital role that a strong board composition with a diverse set of skills plays in effective oversight. The Committee is responsible for identifying, evaluating, and recommending qualified candidates to the Board and it regularly assesses the current needs of the Board to help ensure that directors possess an appropriate mix of skills considering the Company’s current and anticipated strategic needs. In addition, the Board believes that varying tenures and perspectives create a balance between directors with a deeper knowledge of the Company's business, operations and history, and directors who bring new and fresh perspectives, which is important to the effectiveness of the Board’s oversight of the Company.
When assessing desired characteristics, skills, and backgrounds, the Committee considers, among other things, the Board’s current skill set, the Company’s long-term strategic plan and objectives, potential director retirements, and director feedback provided in connection with the Board’s annual self-assessment process. Director nominees are then identified and considered on the basis of knowledge, experience, integrity, leadership, reputation, and ability to understand the company’s business, as well as their inclination to engage and intellectual approach. In addition, nominees are expected to possess certain core competencies, some of which may include experience in retail, consumer products, international business/markets, real estate, store operations, logistics, product design, merchandising, marketing, general operations, strategy, human resources, technology, media or public relations, finance or accounting, or experience as a CEO or CFO.
Nominees are pre-screened to ensure each candidate has qualifications which complement the overall core competencies of the Board, including background evaluations and independence determinations. The Chair of the Board, CEO, and at least two independent directors interview any qualified candidates prior to nomination. Other directors and members of management interview each candidate as requested by the Chair of the Board, CEO, or Chair of the Governance and Sustainability Committee.
The Board believes that diversity, including differences in backgrounds, qualifications, experiences, and personal characteristics, including gender and ethnicity/race, is important to the effectiveness of the Board’s oversight of the Company, and considers diversity as a factor when evaluating and recommending potential nominees. The Board believes that its criteria for selecting nominees are effective in promoting overall diversity.
The Governance and Sustainability Committee engages third-party search firms to identify potential director nominees. The Committee, in collaboration with the search firm, may develop targeted search specifications. Any search firm used to identify potential nominees is instructed to include qualified candidates who reflect diverse backgrounds in its initial list of candidates. These consultants have assisted the Committee in identifying a diverse pool of qualified candidates and in evaluating and pursuing individual candidates at the direction of the Committee. Ms. Donohue was identified as a potential candidate by a third-party search firm.
The Governance and Sustainability Committee will also consider director nominees recommended by our shareholders pursuant to our Bylaws. See “Other Information—Questions and Answers about the Annual Meeting and Voting” for more information.
Director Nominee Demographics
* Tenure and age are measured as of the filing date of this Proxy Statement.
2022 Proxy Statement |
Proposal No. 1 – Election of Directors | 9 |
Board Self-Assessment
Annually, the Board conducts a formal review process to assess the composition and performance of the Board, each standing committee of the Board, and each individual director. The Governance and Sustainability Committee oversees the annual review process. The self-assessment is conducted to identify opportunities for improvement and skill set needs, as well as to ensure that the Board, the standing committees, and individual directors have the appropriate blend of diverse experiences and backgrounds, and are effective and productive.
As part of the process, each director completes a survey, or participates in an interview or other method the Governance and Sustainability Committee utilizes to seek feedback. Results are aggregated and summarized for discussion purposes. Responses are not attributed to any individual director and are kept confidential to ensure honest and candid feedback is received. The Chief Legal Officer also meets privately with individual directors to solicit additional feedback. Following these discussions, the Committee reviews the self-assessment results and discusses opportunities and makes recommendations for improvement as appropriate with the full Board, which implements agreed upon improvements A director will not be nominated for reelection to the Board unless it is affirmatively determined that he or she is substantially contributing to the overall effectiveness of the Board.
2021 Board Self-Assessment Process
www.gapinc.com |
10 | Proposal No. 1 – Election of Directors |
The Board endeavors to represent a range of skills, characteristics, and qualifications that contribute to the Board’s oversight responsibilities. The following matrix displays the most significant skills, characteristics, and qualifications that each director nominee possesses, and that the Board believes are relevant to oversight of our business strategy. The Committee and the Board considered these skills, characteristics, and qualifications in determining to recommend each director to be nominated for election.
Director Nominee Skills and Qualifications
2022 Proxy Statement |
Proposal No. 1 – Election of Directors | 11 |
There will be at least a majority of independent directors as defined under SEC and NYSE rules on the Board. In addition, the Board believes that it is most desirable for independent directors to constitute two-thirds or more of the Board, and is committed to maintaining such levels barring unforeseen circumstances, including mid-year resignations. For a nominee to be considered an independent director, the Board must affirmatively determine that the director has no material relationship with the Company.
The Board evaluated the independence of each person who served as a director during fiscal 2021 and has determined that Elisabeth B. Donohue, John J. Fisher, Robert J. Fisher, William S. Fisher, Tracy Gardner, Isabella Goren, Amy Miles, Jorge P. Montoya, Chris O’Neill, Mayo A. Shattuck III, Elizabeth Smith and Salaam Coleman Smith are, or in the followingcase of former directors, arewere independent under the New York Stock Exchange (“NYSE”)SEC and NYSE rules and have or had no direct or indirect material relationships with the Company:
*Mr. Goldner isCompany. The Board also evaluated the independence of each other director nominee and has determined that Kathryn Hall, if elected, would be independent under SEC and NYSE rules and would not standing for reelection.
have a direct or indirect material relationship with the Company. In particular, the Board has determined that none of these directors hasor director nominees have or would have relationships that would cause them not to be independent under the specific criteria of Section 303A.02 of the NYSE Listed Company Manual. In making this determination with respect to John, Robert and William Fisher, the Board considered the following factors: (i) with the exception of Robert Fisher’s brief periodperiods of service during 2007 and 2019 to 2020 as Interim President and Chief Executive Officer (“CEO”)CEO of the Company during a CEO transition,transitions, neither John, Robert nor William Fisher has served as an officer of the Company in over 1520 years; and (ii) NYSE guidance indicates that ownership of even a significant amount of stock does not preclude a finding of independence. After consideration of these factors, the Board concluded that there is no material relationship between the Company and John, Robert and William Fisher that would impact their independence under NYSE rules. Mr. Martin and Ms. Syngal were determined to not be independent by virtue of their employment with the Company.
Director Nominee Independence
www.gapinc.com |
12 | Corporate Governance |
CORPORATE GOVERNANCE GUIDELINESCorporate Governance Highlights
ACCOUNTABILITY TO SHAREHOLDERS | ||
Annual Board Elections | All directors are elected annually. We do not have a classified/staggered Board. | |
Majority Voting Standard for Uncontested Director Elections | Our Bylaws provide for a majority voting standard in uncontested director elections. Any incumbent director who does not meet the majority voting standard must offer to resign from the Board. | |
Shareholder Action by Written Consent | Our Bylaws provide for shareholders to act by written consent to approve any action that would otherwise be required or permitted to be taken at a meeting of shareholders. | |
Shareholder Ability to Call Special Meetings | Our Bylaws provide for shareholders holding 10% or more of our common stock to call special meetings. | |
No Shareholder Rights Plan / Poison Pill | We have not adopted a shareholder rights plan / poison pill. |
2022 Proxy Statement |
Corporate Governance | 13 |
BOARD STRUCTURE | ||
Director Diversity | Our directors have diversity of backgrounds, qualifications, experiences, and personal characteristics, including gender and ethnicity/race. As described in our Corporate Governance Guidelines, the Board believes that diversity is important to the effectiveness of the Board’s oversight of the Company. | |
Director Overboarding Policy | As described in our Corporate Governance Guidelines, directors who are full-time employees of other companies should not serve on more than three public company Boards, and directors who are retired from full-time employment should not serve on more than four public company Boards (in each case, including the Company’s). | |
Annual Self-Assessment | Annually, the Board conducts a formal review process to assess the composition and performance of the Board, each standing committee of the Board, and each individual director | |
Annual Board Independence Assessment | Annually, we review the independence status of our directors. We require directors to inform us of changes in circumstances that would affect their independence status. | |
Director Onboarding and Education | Directors are expected to complete a formal onboarding program within six months of joining the Board. Directors are encouraged to periodically attend appropriate continuing education programs. |
COMPENSATION PRACTICES | ||
Compensation Consultant Independence Policy | We require our compensation consultant to be independent under NYSE rules, and we review its independence status annually. | |
Director and Executive Stock Ownership Guidelines | We have director and executive stock ownership guidelines. All directors and covered executives either meet the requirements or are on track to meet them within the required timeframe as of the date of this Proxy Statement. | |
Anti-Hedging and Pledging Policies | Directors and covered executives are prohibited from hedging Company stock or pledging Company stock as collateral. | |
No Single-Trigger Change in Control Arrangements | We do not have arrangements that provide for single-trigger change in control benefits. | |
Executive Compensation Recoupment Policy | We have adopted a policy regarding the recoupment of incentive compensation for covered executives in certain situations, including when management misconduct or gross negligence results in material financial, reputational or other harm to the Company. |
www.gapinc.com |
14 | Corporate Governance |
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines that outline, among other matters, the role and functions of the Board, the responsibilities of the various Board committees, and the procedures for reportingshareholders to communicate with and report concerns to the Board. We review our Corporate Governance Guidelines annually to align with new requirements and developing best practices.
OurCorporate Governance Guidelinesare available at www.gapinc.com (follow the Investors, Governance |
ADDITIONAL CORPORATE GOVERNANCE INFORMATION
Additional Corporate Governance Information
If you would like further information regarding our corporate governance practices, please visit the Governance and Corporate Compliance sections of www.gapinc.com (follow the Investors, link)Governance and Investors, Corporate Compliance links). Those sections include:
Our Corporate Governance Guidelines; Our Code of Business Conduct; Our Committee Charters; Our Certificate of Incorporation; Our Bylaws; Our Executive Stock Ownership Policy; Our Executive Compensation Recoupment Policy; Our Political Engagement Policy; How interested parties may communicate with our Board of Directors and with our Corporate Secretary; and How employees and others may report suspected violations of our Code of Business Conduct, including accounting or auditing concerns, directly to our Global Integrity team. Accounting, auditing, and other significant concerns are escalated by the Global Integrity team, as appropriate, including to |
RISK OVERSIGHT
BOARD OVERSIGHT OF RISK
The Board has an active role in overseeing the management of the Company’s risks. Annually, the Company’s Internal Audit department performs a comprehensive enterprise risk assessment encompassing a number of significant areas of risk identified using a risk framework, including strategic, operational, compliance, financial, and reputational risks. The Company has established a Risk Committee, which includes the heads of Finance, Legal, Strategy, Human Resources, Supply Chain, and Internal Audit, as well as a brand president. The Risk Committee is responsible for overseeing the assessment process designed to gather data regarding key enterprise risks that could impact the Company’s ability to achieve its objectives and execute its strategies. Primary assessment methods include interviews (either in-person or via the use of technology-enabled collaboration sessions) and surveys with employees, key executives and Board members, review of critical Company strategies and initiatives, regulatory changes and monitoring of emerging industry trends and issues. The assessment results are reviewed by the CEO and the Risk Committee, and are presented to the Board to facilitate discussion of high risk areas. The results provide the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board oversight. The Risk Committee meets periodically to monitor key enterprise risks and review and adjust the risk mitigation plans accordingly. In addition, on a regular basis, management communicates with the Board, both formally and informally, about key initiatives, strategies and industry developments, in part to assess and manage the potential risks.
While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit and Finance Committee, focusesas required.
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BOARD OVERSIGHT OF RISK
Enterprise Risk Assessment Annually, the Company’s Internal Audit department performs a comprehensive enterprise risk assessment encompassing a number of significant areas of risk identified using a risk framework, including strategic, operational, compliance, financial, sustainability, and reputational risks, and the economic impact of climate change. The Company has established a Risk Committee, which includes the heads of Finance, Legal, Digital/Tech, Human Resources, Operations & Supply Chain, and Internal Audit, as well as a rotating brand president. The Risk Committee is responsible for overseeing the assessment process designed to gather data regarding key enterprise risks, emerging risks and key third-party dependencies that could impact the Company’s ability to achieve its objectives and execute its strategies. Primary assessment methods include interviews and surveys with employees, key executives and Board members, review of critical Company strategies and initiatives, regulatory changes and monitoring of emerging industry trends and issues. | ||||||
The assessment results are reviewed by the CEO and the Risk Committee and are presented to the Board to facilitate discussion of high-risk areas. The results provide the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board oversight. The Risk Committee meets periodically to monitor key enterprise risks and review and adjust the risk mitigation plans accordingly. In addition, on a regular basis, management communicates with the Board, both formally and informally, about key initiatives, strategies and industry developments, in part to assess and manage the potential risks. |
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COVID-19 PANDEMIC RESPONSE
The Board together with management continues to oversee our ongoing efforts to mitigate financial and compliance risks,human capital management risk exposures associated with the COVID-19 pandemic. We remain committed to protecting the health and overseessafety of our employees and their families, as well as the data privacyhealth and cybersecurity programs,safety of our customers. In 2020, we committed to evolving our health and safety practices as we safely reopened stores with a strategic plan to deliver a safe shopping experience for our communities. We will continue to base our safety protocols on the standards of the Centers for Disease Control and Prevention (CDC) and the CompensationWorld Health Organization (WHO), as well as local government mandates.
Further information regarding our response to the COVID-19 pandemic is available at www.gapinc.com (follow the News, Coronavirus Response links). |
CYBERSECURITY RISK OVERSIGHT
Securing the information we receive and Management Developmentstore about our customers, employees, vendors, and other third parties is a priority. We have systems in place to safely receive and store that information and to detect, contain, and respond to data security incidents. While everyone at the Company plays a part in managing these risks, oversight responsibility is shared by the Board, the Audit and Finance Committee, sets employee incentives withand management.
To respond to the goalthreat of encouragingsecurity breaches and cyberattacks, the Company’s Chief Information Security Officer oversees a program that is designed to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. The program includes the annual cybersecurity training of all employees as well as targeted cybersecurity awareness and education activities throughout the year. The program also includes a cybersecurity incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. Additionally, the Company maintains a cybersecurity risk insurance policy. The Audit and Finance Committee receives quarterly reports from the Chief Information Security Officer and the Chief Information Officer. The Audit and Finance Committee regularly briefs the Board on these matters, and the Board also receives periodic briefings on cybersecurity threats to augment our directors’ literacy on cybersecurity issues.
COMPENSATION RISK ASSESSMENT
One of the goals of the Company’s compensation programs is to encourage an appropriate level of risk-taking, consistent with the Company’s business strategies.
COMPENSATION RISK ASSESSMENT
On an annual basis, management conducts a comprehensive overall review of each of the Company’s compensation policies and practices for the purpose of determining whether any risks arising from those policies and practices are reasonably likely to have a material adverse effect on the Company. As a part of this review, each of the Company’s compensation policies and practices were compared to a number of specific factors that could potentially increase risk, including the specific factors that the SEC has identified as potentially triggering disclosure. The Company balanced these factors against a variety of mitigating factors. Examples of some of the mitigating factors are:
Compensation policies and practices are structured similarly across business units;
The risk of declines in performance in our largest business units is well understood and managed;
Incentive compensation expense is not a significant percentage of any unit’s revenues;
For executives, a significant portion of variable pay is delivered through long-term incentives, which carry vesting schedules over multiple years;
A mix of compensation vehicles and performance measures is used;
Stock ownership requirements for executives are in place;
Payouts of material cash and equity incentive plans are capped at all levels;
Threshold levels of performance must be achieved for the bulk of variable pay opportunities; and
A clawback policy is in place allowing for recoupment in the event of management misconduct or gross negligence resulting in a financial restatement or material financial, reputational or other harm to the Company.
Management’s assessment was also presented to the Company’s Chief Compliance Officer and the Chair of the Board’s Compensation and Management Development Committee. As a result of management’s review, the Company determined that any risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
COMMUNICATION WITH DIRECTORS
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Environmental, Social & Governance (ESG)
BOARD OVERSIGHT OF ESG
The Board is actively involved in oversight of our ESG strategy, given the importance that the Company believes ESG strategies have in achieving its long-term growth objectives. The Board and/or certain of its committees receive regular updates from the Chief Growth Transformation Officer, who oversees the Company’s ESG activities and strategies, as well as from other senior leaders. The Governance and Sustainability Committee oversees the Company’s ESG activities and goals, including strategies to support the sustainable growth of the Company’s business, and regularly discusses ESG issues at its meetings, and provides regular updates to the full Board regarding the Company’s ESG activities and strategies. Additionally, the Compensation and Management Development Committee oversees the Company’s policies and strategies relating to its human capital management function, including, among others, policies and strategies relating to equal pay and workforce diversity, and provides regular updates to the full Board regarding the Company’s human capital management, equal pay, and workplace diversity activities and strategies. The Board, taking into account its committees’ reports, monitors ESG risks and opportunities as part of its risk management responsibility.
The Chief Growth Transformation Officer is part of the Senior Leadership Team and meets regularly with leaders across the Company, including from our Sourcing, Production, Brand and Operations teams. The ESG team works closely with our brands’ Product and Marketing teams, and our Equality & Belonging, Human Resources, Supply Chain, Government Affairs and Legal teams, among others.
As described above, our Internal Audit department and Risk Committee, with representatives from our Senior Leadership Team, perform an annual enterprise risk assessment that encompasses risks related to sustainability and climate change, which is reviewed by the CEO, the Board and the Senior Leadership Team. In addition, the ESG team works with business partners and experts to assess and manage business risks, including the risks that climate change and environmental impacts could pose to our business.
OUR ESG STRATEGY
Our ESG strategy aligns with the global sustainable development agenda and is guided by frameworks including, but not limited to, the United Nations (UN) Guiding Principles on Business and Human Rights and the Paris Agreement on climate change. We are integrating ESG more deeply into our business to create greater impact across our value chain and support our long-term strategies. We focus on issues where we have the greatest opportunities for influence and impact: advancing people and communities, improving working conditions, water stewardship, climate resilience, waste and circularity and product sustainability.
Gap Inc. is committed to respecting the dignity of all people and communities. Our Human Rights Policy is available at www.gapinc.com (follow the Values, Sustainability, Social links). |
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CORE ESG FOCUS AREAS
We are striving to build a more sustainable future for our business, global community, people and planet. To accomplish this, our ESG team is focused on the following three core pillars, which have enabled us to make strides towards our goals:
Enriching Communities | ||
We believe that a clean and healthy planet is a fundamental human right. Our environmental approach centers on addressing climate, waste and water issues by creating more sustainable products. We strive to create a net positive impact for communities that are disproportionately affected by environmental issues like climate change and the water crisis. In 2021, we earned two A- scores from CDP for transparently acting to protect the climate and use water responsibly. The USAID Gap Inc. Women + Water Alliance aims to empower women and improve community water resilience in a part of India where water stress and poverty are acute aspects of daily life. With the support of our partners—CARE, Water.org, WaterAid and the Institute for Sustainable Communities—this program already has helped 1.5 million people in Madhya Pradesh and Maharashtra. Because most of our climate and water impacts originate in our supply chain production, we engage suppliers directly with our Mill Sustainability and Water Quality Programs to improve resource efficiency and reduce emissions. | ||
Empowering Women and Labor & Human Rights | ||
We believe that all women and girls deserve to reach their full potential and to find and use their voices. Leveraging strategic partnerships with our suppliers, local governments and schools, we reached over one million women and girls through our Personal Advancement & Career Enhancement (P.A.C.E.) program since launching in 2007, which helps women reach their full potential and change the power structures that marginalize them at work and in their communities. We use our Assessment and Remediation Program to evaluate our suppliers and incentivize improvements by driving more business toward the highest-performing facilities. Our approach begins with assessments conducted by Gap Inc., ILO Better Work and the Social & Labor Convergence (SLCP) and through these assessments, we rate each facility using a color-coded system with “green” designated to high-performing facilities with no critical and few violations. At the end of 2021, 67% of our facilities were green-rated, and we are on track to reach 80% green-rated factories by 2025. These programs work together to protect human rights, remove barriers and enhance women’s empowerment and opportunity. | ||
Enabling Opportunity | ||
We believe that enabling opportunity means ensuring employees have the skills they need to build truly fulfilling careers with us. Our purpose to be “Inclusive, by Design” drives our work on programs that ensure diversity is a major feature of our talent pipeline. Old Navy’s This Way ONward program provides first jobs and career development for opportunity youth, growing our diverse and inclusive teams. In 2021, Old Navy hired 3% of entry-level store employees through This Way ONward and is on track to meet its goal of 5% by 2025. We released our first standalone Equality & Belonging (E&B) report, summarizing developments, actions and progress towards our goal to foster a strong culture of inclusivity. We also received a perfect score on the Human Rights Campaign Foundation’s Corporate Equality Index for the 15th year in a row. | ||
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OUR MANAGEMENT APPROACH TO ESG
We take the following approach in all our social and environmental programs:
Integrate sustainability into our business – We seek to integrate ESG as part of our end-to-end business strategy, through the creation of our products and through all our operations. We create accountability for our ESG strategy by setting goals across Gap Inc. that are shared with the relevant business units. Our ESG team is integrated into our brands and operations to enable sustainability outcomes.
Set ambitious goals – We focus on key indicators across our company so that we can measure our progress on delivering real benefits to the people and communities we serve.
Make progress towards our commitments – We strive to contribute in a meaningful way to the people and places we rely on for our business—which we believe also helps our company succeed.
Partner with civil society, governments and other sectors to increase collective impact – By partnering with organizations from the local to the global level, we are helping to deliver impact on a bigger scale and create long-term, sustainable progress.
For more information regarding our commitment to sustainability, please see our most recent Annual ESG Report available at www.gapinc.com (follow the Values, Sustainability links). Our most recent Equality & Belonging Report is also available at www.gapinc.com (follow the Values, Equality & Belonging links). |
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Communication with Directors
Shareholders and other interested parties can send direct communications to our Board of Directors (through our |
CODE OF BUSINESS CONDUCT
Code of Business Conduct
Our Code of Business Conduct is designed to promote a responsible and ethical work environment forand applies to all Gap Inc. employees and directors. The Code contains guidelinesour policies and expectations on a number of topics, including workplace standards, conflicts of interest, legal compliance, Company information and assets, and political contributions and activities. All employees worldwide receive a copy of the Code when they join the Company, and are required to complete an overview training course and agree in writing to comply with it. On an annual basis, senior employees are required to certify compliance with the Code.
In addition, the Audit and Finance Committee oversees the Company’s Corporate Compliance Program, which includes procedures for the (i) receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and (ii) confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters and other matters under the Company’s Code of Business Conduct.
OurCode of Business Conductis available at www.gapinc.com (follow the Investors, Corporate Compliance |
Political Engagement Policy
The Company believes that it is important to participate in the political and regulatory processes on issues that affect our business and community interests. We have adopted a Political Engagement Policy that covers, among other things, the use of Contentscorporate funds to make political contributions. The Government Affairs team manages and oversees the Company’s political activities. Corporate contributions are reviewed annually by the Board. The Board also receives periodic updates regarding the Company’s political activities.
The Company also provides employees with the opportunity to contribute to the Gap Inc. Political Action Committee (“Gap PAC”). Gap PAC is a separate legal entity with its own oversight council that is funded solely from voluntary contributions made by eligible employees, directors, shareholders, and their families. The Senior Director of Government Affairs manages and oversees all Gap PAC contributions after consultation and approval by the Gap PAC oversight council.
Our Political Engagement Policy is available at www.gapinc.com (follow the Investors, Governance links). |
POLICIES AND PROCEDURES WITH RESPECT TO RELATED PARTY TRANSACTIONSPolicies and Procedures with Respect to Related Party Transactions
The Board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest. The Compensation and Management Development Committee’s charter requires that the members of that Committee, all of whom are independent directors, approve all of the Company’s executive compensation policies and programs and all compensation awarded to executive officers. The Audit and Finance Committee’s charter requires that the members of the Audit and Finance Committee, all of whom are independent directors, review and approve all related party transactions with the Company involving management and/or members of the Board of Directors that are not otherwise subjectrequired to the approval of the Compensation and Management Development Committee and would require disclosurebe disclosed under SEC rules. In the event a transaction involves a committee member, that member will recuse him or herself from the approval of the transaction.
In addition,Certain Relationships and Related Transactions
There are no transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K.
See "Policies and Procedures with Respect to Related Party Transactions" for a description of the AuditCompany's policies and Finance Committee oversees the Company’s Corporate Compliance Program, which includes procedures for the (i) receipt, retentionreview and treatmentapproval of complaints regarding accounting, internal accounting controls or auditing matters,Related Party Transactions.
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Board Leadership Structure and (ii) confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters and other matters under the Company’s Code of Business Conduct.Independent Oversight
BOARD LEADERSHIP STRUCTURE AND SUCCESSION
Our Amended and Restated Bylaws provide that our ChairmanBob Martin was appointed Executive Chair of the Board, shallan employee role, in March 2020. At the Board’s request, Mr. Martin serves as an advisor to our CEO and as a member of management. As a result of his service to the Company as an employee, Mr. Martin is not considered an independent director. The Board believes that Mr. Martin’s service as Executive Chair and as an advisor to our CEO continues to be an officer or employeein the best interests of the Company. Robert Fisher, an independent director, has servedCompany and its shareholders, as our ChairmanCEO and the Board are both able to benefit from his extensive knowledge of the Board since February 2015.retail industry and experience overseeing global retail companies.
We believe in the importance of independent oversight. We ensure that this oversight is truly independent and effective through a variety of means, including:
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GOVERNANCE AND SUSTAINABILITY COMMITTEEWe have separated the positions of CEO and Chair of the Board since February 2015 (other than during the period from November 2019 to March 2020 when Robert Fisher served as Interim President and CEO). We believe that separating these positions provides the mostappropriate leadership structure at this time. Our CEO is responsible for day-to-day leadership and for setting thestrategic direction of the Company, while the Chair of the Board oversees the functioning of the Board and its oversight responsibilities and acts as a strategic advisor to our CEO.
Our Corporate Governance Guidelines provide that at least two-thirds of our directors should be independent.Currently, all of our directors other than Mr. Martin and Ms. Syngal are independent.
Our Corporate Governance Guidelines provide that if the Chair of the Board is not anindependent director and the Board determines it is appropriate, the independent directors will designate an independent director to serve as Lead Independent Director. If no Lead Independent Director is designated, the independent directors will designate at each meeting an independent director to lead the executive sessions of the independent directors. Currently, an independent director is designated to lead each executive session and no Lead Independent Director has been designated.
At each regularly scheduled Board meeting, all independent directors are typically scheduled to meet in anexecutive session without the presence of any management directors.
Each standing Board committee (Governance and Sustainability,Audit and Finance, and Compensation and Management Development) is required to be composed solely of independent directors.
Governance and Sustainability Committee
Members: Robert J. Fisher (Chair); Tracy Gardner; Mayo A. Shattuck III.
The Board’s Governance and Sustainability Committee is composed solely of independent directors.
This Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to theto:
The Company’s corporate governance matters, including the developmentannual review of corporate governance guidelines,our Corporate Governance Guidelines.
The annual evaluationself-assessment of the Board, its committees and individual directors,directors.
The identification and selection of director nominees, oversightnominees.
Oversight of the Company’s programs, policies and practices relating to environmental, social and environmentalcommunity, and governance issues and impacts and strategies, and suchto support the sustainable growth of the Company’s business.
Such other duties as directed by the Board of Directors.
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Governance and Sustainability Committee Charter links). |
NOMINATION OF DIRECTORS
The GovernanceAudit and SustainabilityFinance Committee has
Members: Amy Miles (Chair); Chris O’Neill; Mayo A. Shattuck III. Isabella D. Goren, who resigned from the responsibility to identify, evaluate,Board effective December 31, 2021, served on the Audit and recommend qualified candidates to the Board. The Chairman, CEO, and at least two independent directors interview any qualified candidates prior to nomination. Other directors and members of management interview each candidate as requested by the Chairman, CEO, or chair of the Committee. Mr. Fisher was identified as a potential candidate by the Board. Ms. Bohutinsky and Ms. Reese were identified as potential candidates by a third-party search firm.
The Committee identifies desired attributes and experience – classifying those that are prioritized and mandatory versus those that are ideal but not mandatory – and engages third-party search firms as independent consultants to identify potential director nominees based on these criteria and a needs assessment. TheFinance Committee in collaboration with the
consultant, may develop targeted search specifications. These consultants have assisted the Committee in identifying a diverse pool of qualified candidates and in evaluating and pursuing individual candidates at the direction of the Committee.
The Committee will also consider director nominees recommended by shareholders. Our Bylaws provide that a shareholder may propose director nominations at the meeting of shareholders in 2020 by giving written notice to our Corporate Secretary by no later than the close of business (San Francisco Time) on February 21, 2020, and no earlier than January 22, 2020 (i.e., not less than 90 days nor more than 120 days prior to the first anniversary of the date of our 2019 Annual Meeting). The notice must contain information required by our Bylaws about the identity and background of each nominee and the shareholder making the nomination, including interests in derivative securities or arrangements with persons holding derivative securities, relationships or arrangements between the nominee and the shareholder making the nomination, and information that would enable the Board to determine a nominee’s eligibility to serve as an independent director. The notice also must contain other information that must be disclosed in proxy solicitations for election of directors under the proxy rules of the SEC (including information regarding the director nominee’s experience, qualifications, attributes and/or skills), the nominee’s consent to the nomination and to serve if elected, and certain other information required by our Bylaws. If a shareholder fails to submit the notice by February 21, 2020, then the proposed nominee(s) of the shareholder will not be considered at our Annual Meeting in 2020 in accordance with our Bylaws. Notifications must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105.
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QUALIFICATIONS AND DIVERSITY OF BOARD MEMBERS
All director nominees must possess certain core competencies, some of which include experience in retail, consumer products, international business/markets, real estate, store operations, logistics, product design, merchandising, marketing, general operations, strategy, human resources, technology, media or public relations, finance or accounting, or experience as a CEO or CFO. In addition to having one or more of these core competencies, director nominees are identified and considered based on knowledge, experience, integrity, leadership, reputation, background, viewpoint, qualifications, gender, race/ethnicity, personal characteristics, and ability to understand the Company’s business, as well as their integrity, inclination to engage and intellectual approach. The Board believes that varying tenures and backgrounds create a balance between directors with a deeper knowledge of the Company's business, operations and history, and directors who bring new and fresh perspectives, and that this overall tenure, professional, personal, gender, and racial/ethnic diversity is important to the effectiveness of the Board’s oversight of the Company. Accordingly, diversity is a factor that is considered in the identification and recommendation of potential director candidates. In this regard, of the twelve nominees for director, four are women and one is ethnically diverse. In addition, all director nominees are pre-screened to ensure that each candidate has qualifications and experience that complement the overall core competencies of the Board. The screening process also includes conducting a background evaluation and an independence determination. The Board believes that its criteria for selecting board nominees are effective in promoting overall diversity.
EVALUATION OF DIRECTORS
The Governance and Sustainability Committee is responsible for overseeing a formal evaluation process to assess the composition and performance of the Board, each committee, and each individual director on an annual basis. The assessment is conducted to identify opportunities for improvement and skill set needs, as well as to ensure that the Board, committees, and individual members have the appropriate blend of diverse experiences and backgrounds, and are effective and productive. As part of the process, each member completes a survey, or participates in an interview or other method the Committee utilizes to seek feedback. While results are aggregated and summarized for discussion purposes, individual responses are not attributed to any individual and are kept confidential to ensure honest and candid feedback is received. The Committee discusses opportunities and makes recommendations for improvement as appropriate to the full Board, which implements agreed upon improvements. The Committee Chair also meets privately with individual Board members to provide feedback specific to each director received during the evaluation process. A director will not be nominated for reelection unless it is affirmatively determined that he or she is substantially contributing to the overall effectiveness of the Board.
SUSTAINABILITY
The Governance and Sustainability Committee is also responsible for reviewing and evaluating Company programs, policies and practices relating to social and environmental issues and impact, and strategies to support the sustainable growth of the Company’s businesses. The Committee regularly discusses social and environmental issues at its meetings, and oversees the Company’s development of industry-leading programs and initiatives.
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AUDIT AND FINANCE COMMITTEEfiscal 2021.
The Board’s Audit and Finance Committee is composed solely of independent directors.
This Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to theto:
The integrity of our financial statements,statements.
The adequacy of our internal controls, compliancecontrols.
Compliance with legal and regulatory requirements, therequirements.
The qualifications and independence of the independent registered public accounting firm and the performance of their audits, theits audits.
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The performance of the Internal Audit function, the effectivenessfunction.
Oversight of the corporate compliance program, finance matters,our Corporate Compliance program.
Finance matters.
Oversight of our Data Privacy and suchCybersecurity programs.
Such other duties as directed by the Board of Directors. Directors.
In addition, the Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm.
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Audit and Finance Committee Charter links). |
AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that the Audit and Finance Committee has two current members who are “audit committee financial experts” as determined under Regulation S-K Item 407(d)(5) of the Securities Exchange Act of 1934: Ms. Miles and Mr. Shattuck, and Ms. Goren, botheach of whom areis an independent directors.director. See Ms. Miles’ and Mr. Shattuck’s and Ms. Goren’s biographies on pages 6-8in "Nominees for Election as Directors" for information regarding their relevant experience.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEECompensation and Management Development Committee
Members: Tracy Gardner (Chair); Elisabeth B. Donohue; Jorge P. Montoya (not standing for reelection); Salaam Coleman Smith. Elizabeth A. Smith, who resigned from the Board effective June 18, 2021, and Chris O’Neill served on the Compensation and Management Development Committee in fiscal 2021.
The Board’s Compensation and Management Development Committee is composed solely of independent directors.
This Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to executiveto:
Executive officer and director compensation, successioncompensation.
Succession planning for senior management, developmentmanagement.
Development and retention of senior management, and suchmanagement.
Human capital management.
Such other duties as directed by the Board of Directors.
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Compensation and Management Development Committee Charter links). |
The Committee approves all of the Company’s executive compensation policies and programs and all compensation awarded to executive officers. Our CEO evaluates each executive officer and discusses with the Committee hisher assessment and recommendations for compensation. The CEO is not present during the Committee’s deliberations about hisher own compensation. The Committee also oversees senior management development, retention, and succession plans.
The Committee approves grants of stock units and stock options to employees at the Vice President level or above, and has delegated authority, within defined parameters, to the CEO or, in the CEO’s absence, the Committee Chair to approve grants of stock units to employees below the Vice President level (see “Long-Term“Executive Compensation and Related Information—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentives” beginning on page 30 for more details). The Committee has also delegated authority, within defined parameters, to the Company’s Human Resources personnel to make certain non-material changes to the Company’s employee benefit plans.
INDEPENDENT COMPENSATION CONSULTANT
The Committee has engaged Frederic W. Cook & Co. as its independent executive compensation consultant. The consultant provides advice to the Committee from time to time on theour executive compensation program structure and specific individual compensation arrangements (see the “Role“Executive Compensation and Related Information—Compensation Discussion and Analysis—Role of the CEO and Compensation Consultant” section on page 36Consultant” for more details). In addition, under NYSE rules, the Committee can only retain a compensation advisor after considering six independence factors: (a) whether the advisor’s firm provides other services to the Company, (b) the fees received by the advisor’s firm from the Company as a percentage of the firm’s overall revenue, (c) the policies and procedures of the advisor’s firm designed to prevent conflicts of interest, (d) any business or personal relationship between the advisor and a member of the Committee, (e) any stock of the Company owned by the advisor, and (f) any business or
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personal relationship of the advisor or advisor’s firm with an executive officer of the Company. Based on a review of the Committee’s relationship with its compensation consultant and an assessment considering these six independence factors, the Committee has identified no conflicts of interest and confirmed the independence of Frederic W. Cook & Co.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2018, Mr. Goldner (who is not standing for reelection), Mr. Martin,2021, Ms. Donohue, Ms. Gardner, Jorge P. Montoya, Mr. O’Neill, Elizabeth A. Smith, and Ms. Tsang (who did not stand for reelection in May 2018)Coleman Smith served on the Compensation and Management Development Committee of the Board of Directors. Ms. Gardner was previously an officer of the Company from 1999 to 2004. No member of the Committee, while serving on the Committee, was at any time during fiscal 2018 or at any other time2021 an officer or employee of the Company, and no member of the Committee had any relationship requiring disclosure under Item 404 of Regulation S-K. During fiscal 2018,2021, none of our executive officers served on the board of directors or compensation committee of any company where one of that company’s executive officers served as one of our directors.
BOARD MEETINGSBoard and Committee Meetings in Fiscal 2021
The Board met seven8 times during fiscal 2018.2021. The following table lists the current members of each of the committeesBoard committee and the number of committee meetings held during fiscal 2018:2021:
Name | Audit & Finance | Compensation & Management Development | Governance & Sustainability | |||
Amy Bohutinsky | ||||||
John J. Fisher | ||||||
Robert J. Fisher | Chair | |||||
William S. Fisher | ||||||
Tracy Gardner | ● | |||||
Brian Goldner(not standing for reelection) | ● | |||||
Isabella D. Goren | ● | |||||
Bob L. Martin | Chair | ● | ||||
Jorge P. Montoya | ● | |||||
Chris O'Neill | ● | |||||
Arthur Peck | ||||||
Lexi Reese | ||||||
Mayo A. Shattuck III | Chair | ● | ||||
Number of Meetings | 7 | 7 | 5 |
Name |
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| Governance & Sustainability |
Elisabeth B. Donohue |
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Robert J. Fisher |
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| Chair |
William S. Fisher |
|
|
|
|
|
|
Tracy Gardner |
|
|
| Chair |
| ● |
Amy Miles(2) |
| Chair |
|
|
|
|
Bob L. Martin |
|
|
|
|
|
|
Jorge P. Montoya(3) |
|
|
| ● |
|
|
Chris O'Neill |
| ● |
|
|
|
|
Mayo A. Shattuck III |
| ● |
|
|
| ● |
Salaam Coleman Smith |
|
|
| ● |
|
|
Sonia Syngal |
|
|
|
|
|
|
Number of Meetings |
| 8 |
| 6 |
| 5 |
(1) | Mr. Fisher is not standing for reelection at the 2022 Annual Meeting. |
(2) | Ms. Miles was appointed to serve as the Chair of the Audit and Finance Committee in November 2021. |
(3) | Mr. Montoya is not standing for reelection at the 2022 Annual Meeting. |
Directors are expected to attend all meetings of the Board and committees on which they sit. Each incumbent director nominee attended at least 75% of the meetings of the Board and committees on which he or she served.served in fiscal 2021. In addition, individual Board members often work together and with management outside of formal meetings.
The non-managementindependent directors are typically scheduled to meet without the presence of management directors during each regularly scheduled Board meeting. Our Chairman, Robert Fisher, ismeeting. As no Lead Independent Director has currently been designated, the independent directors designate at each meeting an independent director responsible for organizing, managing and presiding over the non-management and independent director sessions of the Board, and reporting on outcomes of thesuch sessions to the CEO, as appropriate.
ATTENDANCE OF DIRECTORS AT ANNUAL MEETINGS OF SHAREHOLDERSAttendance of Directors at Annual Meetings of Shareholders
Our policy regarding attendance by directors at our Annual Meeting of Shareholders states that our ChairmanChair of the Board and committee chairs should attend and be available to answer questions at our Annual Meeting, if reasonably practicable. Our policy also encourages all other directors to attend. All12 of 13 of our then current director nomineesdirectors attended our 2018 Annual Meeting in person, with the exception of Ms. Bohutinsky and Ms. Reese, who both joined the Board of Directors in November 2018, after our 20182021 Annual Meeting.
STOCK OWNERSHIP GUIDELINES FOR DIRECTORS
www.gapinc.com |
24 | Corporate Governance |
Stock Ownership Guidelines for Directors
We have adopted minimum stock ownership guidelines for our directors. Each non-management director should, within three years of joining the Board of Directors, hold stock (which includes deferred stock units) of the Company worth at least five times the annual base retainer then in effect. Management directors are required to own stock of the Company in accordance with our stock ownership requirements for executives, described in “Executive Compensation and Related Information—Compensation Discussion and Analysis—Stock Ownership Requirements for Executive Officers / Hedging and Pledging Prohibitions.” All directors are either in compliance with our stock ownership guidelines or had remaining time and were on page 34. track to do so as of the date of this Proxy Statement.
Insider Trading Policy and Restrictions on Hedging and Pledging
Our Code of Business Conduct prohibits all Company employees from trading in the Company’s stock while in possession of material non-public information and from tipping others with that information. Additionally, our Securities Law Compliance Manual prohibits trading in the Company’s stock by all Company insiders, including directors, during designated blackout periods (which may be extended or invoked during unscheduled periods). All Company insiders must confirm by email that a blackout period is not in effect prior to trading. Members of the Senior Leadership Team, Finance Department Vice Presidents and above, all Chief Financial Officers and directors must also contact our Legal Department for trading clearance.
Our Securities Law Compliance Manual, which is applicable to all companyCompany insiders, including our directors, employees at the Vice President level or above, and others who have access to Company-wide financial or sensitive nonpublic information, prohibits speculation in the Company’s stock, including short sales, hedging or publicly-traded option transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds, all of which are prohibited. All Company officers subject to Rule 16a-1(f) of the Securities Exchange Act of 1934 and directors are also prohibited from holding the Company’s stock in a margin account as collateral for a margin loan or otherwise pledging Company stock as collateral.
2022 Proxy Statement |
Compensation of Directors | 25 |
RETAINER AND MEETING FEESAnnual Retainers
The table below shows the annual retainer, attendance fees, and committee chair retainerretainers we paid to our non-employee directors in fiscal 2018,2021 as well as the amounts payable for fiscal 2019:2022 (which will remain the same).
FISCAL YEAR 20182021 AND 2019 2022 DIRECTOR CASH COMPENSATIONCOMPENSATION(1)
2018 | 2019 | |||||
Annual Retainer | $ | 80,000 | $ | 80,000 | ||
Annual Retainer for Committee Members | ||||||
Audit and Finance Committee | 16,000 | 16,000 | ||||
Compensation and Management Development Committee | 12,000 | 12,000 | ||||
Governance and Sustainability Committee | 8,000 | 8,000 | ||||
Additional Annual Retainer for Committee Chairs | ||||||
Audit and Finance Committee | 20,000 | 20,000 | ||||
Compensation and Management Development Committee | 20,000 | 20,000 | ||||
Governance and Sustainability Committee | 15,000 | 15,000 | ||||
Additional Annual Retainer for Chairman of the Board | 200,000 | 200,000 |
|
| 2021 |
|
| 2022 |
| ||
Annual Retainer |
| $ | 90,000 |
|
| $ | 90,000 |
|
Annual Retainer for Committee Members |
|
|
|
|
|
|
|
|
Audit and Finance Committee |
|
| 16,000 |
|
|
| 16,000 |
|
Compensation and Management Development Committee |
|
| 12,000 |
|
|
| 12,000 |
|
Governance and Sustainability Committee |
|
| 10,000 |
|
|
| 10,000 |
|
Additional Annual Retainer for Committee Chairs |
|
|
|
|
|
|
|
|
Audit and Finance Committee |
|
| 25,000 |
|
|
| 25,000 |
|
Compensation and Management Development Committee |
|
| 20,000 |
|
|
| 20,000 |
|
Governance and Sustainability Committee |
|
| 15,000 |
|
|
| 15,000 |
|
Additional Annual Retainer for Chairman of the Board(2) |
|
| 200,000 |
|
|
| 200,000 |
|
Additional Annual Retainer for Lead Independent Director(3) |
|
| 40,000 |
|
|
| 40,000 |
|
(1) | Non-employee directors who reside primarily outside of North America receive an additional fee of $2,000 for each trip to the United States for Board and/or committee meetings. No director received this fee in fiscal 2021. |
(2) | Not applicable to any director in fiscal 2021. Mr. Martin received compensation in fiscal 2021 for his role as Executive Chair and as an advisor to our CEO as set forth below. |
(3) | Not applicable to any director in fiscal 2021. |
Employee directors (including Mr. Martin and Ms. Syngal in fiscal 2021) are not eligible for theto receive annual retainer fees and are not eligible to serve on committees.
EQUITYBOARD CHAIR ROLE AND ADVISOR COMPENSATION
In fiscal 2021, in connection with Mr. Martin's service as Executive Chair of the Board and as an advisor to our CEO, an employee role, Mr. Martin was eligible to earn an annual base salary of $750,000 and an annual target bonus of 100% of base salary, based on the same financial metrics as our CEO, with a potential payout that could range from 0% to 200% (for more information on the bonus program, see "Executive Compensation and Related Information—Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Bonus”). In fiscal 2021, Mr. Martin’s annual bonus was earned at 123% of his annual target amount, based on performance against the same financial metrics as our CEO that exceeded the targets set by the Compensation Committee at the beginning of the year. In light of Mr. Martin’s exceptional service to the Company in fiscal 2021, which included his strong support of our CEO during a year of significant macroeconomic challenges in addition to significant and extensive contributions to the Board, the Compensation Committee increased Mr. Martin’s fiscal 2021 bonus to an actual payout of 200% of his annual target amount, resulting in a bonus payout to Mr. Martin of $1,500,000.
In fiscal 2021, Mr. Martin also received a grant of time-based restricted stock units with a grant value of approximately $3,700,000, which vested one year following the date of grant. Mr. Martin has agreed to hold and not sell or transfer any shares issued to him following the vesting of such restricted stock units for two years following the vesting date, except in the event he no longer provides services to the Company in any capacity (whether as an employee, director or consultant). The time-based vesting condition will accelerate if Mr. Martin is involuntarily terminated by the Company for reasons other than cause, or death or disability. Mr. Martin is not entitled to any compensation under our non-employee director compensation program while he serves in an executive capacity as an advisor to our CEO.
www.gapinc.com |
26 | Compensation of Directors |
Non-employee directors receive the following under our 2016 Long-Term Incentive Plan:
| |
|
Each new non-employee director automatically receives stock units with an initial value of $170,000 based on the then-current fair market value of the Company’s common stock; and
Each continuing non-employee director automatically receives, on an annual basis, stock units with an initial value of $170,000 at the then-current fair market value of the Company’s common stock; provided that newly-appointed non-employee directors who were appointed after the Company’s last annual shareholders’ meeting will receive their first annual stock unit grant on a prorated basis based on the number of days that the director has served between his or her appointment and the date of the first annual stock unit grant.
The annual stock units granted to continuing non-employee directors following the Company’s annual shareholders’ meeting, as well as the initial grant made to any non-employee director who is first elected to the Board at the Company’s annual shareholders’ meeting, are granted on June 30 of each year; provided, however, that if the Company’s annual shareholders’ meeting takes place after June 30, then the related stock unit grants will be granted on the first business day following that meeting. All initial stock units granted to new non-employee directors who are appointed other than at the annual shareholders’ meeting are granted on the date of appointment. The number of stock units is rounded down to the nearest whole share. These stock units are fully-vested but are subject to a three-year deferral period. During the deferral period, the stock units earn dividend equivalents which are reinvested in additional units annually. Following the deferral period, shares in an amount equal in value to the stock units, including units acquired through dividend equivalent reinvestment, will be issued to each non-employee director unless a further deferral election has been made; provided, however, that shares and accumulated dividend equivalents will be issued immediately upon ceasing to be a director of the Company.
EXPENSE REIMBURSEMENT AND OTHER BENEFITSExpense Reimbursement and Other Benefits
We also pay for or reimburse directors for approved educational seminars and for travel expenses related to attending Board, committee, and approved Company business meetings. Additionally, we provide non-employee directors access to office space and administrative support for Company business from time to time.
Directors and their spouses are eligible to receive discounts on our merchandise on terms similar to the Gap Inc. corporate employee merchandise discount policy.
We establishedDirectors are eligible to participate in The Gap, Inc. Deferred Compensation Plan (“DCP”) whereby. Under the DCP, highly compensated employees, including executive officers, and non-employee directors may elect to defer receipt of certain eligible income. The DCP allows eligible employees to defer a percentage of their salary and bonus on a pre-tax basis, and allows non-employee directors to defer their retainers and meeting fees.retainers. The deferred amounts are indexed to reflect the performance of the participant’s choice of approved investment funds. Non-employee director deferrals are not matched, and above-market or preferential interest rate options are not available on deferred compensation.
Directors are eligible to participate in our Gift Match Program available to all employees, under which we match contributions to eligible nonprofit organizations, up to certain annual limits. In calendar year 2018,2021, the annual limit for non-employee directors (including our CEO) was $15,000 under the Gift Match Program. Art Peck, our CEO, had an annual matching limit
2022 Proxy Statement |
DIRECTOR COMPENSATION SUMMARY
Compensation of Directors | 27 |
Director Compensation Summary
The following table sets forth certain information regarding the compensation of our directors who served in fiscal 2018,2021, which ended February 2, 2019.January 29, 2022.
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(4) | Total ($) | ||||||
Amy Bohutinsky | 20,000 | 159,993 | 0 | 0 | 500 | 180,493 | ||||||
John J. Fisher | 20,000 | 159,993 | 0 | 0 | 0 | 179,993 | ||||||
Robert J. Fisher | 303,000 | 159,974 | 0 | 0 | 15,000 | 477,974 | ||||||
William S. Fisher | 80,000 | 159,974 | 0 | 0 | 15,000 | 254,974 | ||||||
Tracy Gardner | 84,000 | 159,974 | 0 | 0 | 0 | 243,974 | ||||||
Brian Goldner | 92,000 | 159,974 | 0 | 0 | 0 | 251,974 | ||||||
Isabella D. Goren | 96,000 | 159,974 | 0 | 0 | 10,000 | 265,974 | ||||||
Bob L. Martin | 120,000 | 159,974 | 0 | 0 | 10,000 | 289,974 | ||||||
Jorge P. Montoya | 106,000 | 159,974 | 0 | 0 | 10,000 | 275,974 | ||||||
Chris O’Neill | 89,000 | 223,939 | 0 | 0 | 4,100 | 317,039 | ||||||
Lexi Reese | 20,000 | 159,993 | 0 | 0 | 0 | 179,993 | ||||||
Mayo A. Shattuck III | 124,000 | 159,974 | 0 | 0 | 15,000 | 298,974 | ||||||
Katherine Tsang | 48,000 | 0 | 0 | 0 | 0 | 48,000 |
Name(1) |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($)(2) |
|
| Option Awards ($)(3) |
|
| Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($)(4) |
|
| Total ($) |
| ||||||
Elisabeth Donohue(5) |
| 22,978 |
|
|
| 169,983 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 192,961 |
| |
John J. Fisher(6) |
| 90,000 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 260,000 |
| |
Robert J. Fisher |
| 115,001 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
|
| 300,001 |
| ||
William S. Fisher |
| 90,000 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
|
| 275,000 |
| ||
Tracy Gardner |
| 132,000 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 302,000 |
| |
Isabella D. Goren(7) |
| 114,706 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
|
| 299,706 |
| ||
Bob L. Martin(8) |
|
| — |
|
|
| 3,662,071 |
|
|
| — |
|
|
| — |
|
| 2,265,000 |
|
|
| 5,927,071 |
| |
Amy Miles |
| 111,563 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 281,563 |
| |
Jorge P. Montoya(9) |
| 102,001 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
| 287,001 |
| |||
Christopher O’Neill |
| 105,000 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 275,000 |
| |
Mayo A. Shattuck III |
| 116,000 |
|
|
| 170,000 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
|
| 301,000 |
| ||
Elizabeth Smith(10) |
| 38,950 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38,950 |
| |
Salaam Coleman Smith(11) |
| 86,638 |
|
|
| 216,567 |
|
|
| — |
|
|
| — |
|
| 15,000 |
|
|
| 318,205 |
|
(1) | Under applicable SEC rules, we have omitted Ms. |
|
(2) |
|
(3) | No stock |
| Amounts in this column primarily consist of Company matching contributions under the Company’s Gift Match Program (see |
(5) | Ms. Donohue was appointed to the Board effective November 9, 2021. |
(6) | Mr. Fisher is not standing for reelection at the 2022 Annual Meeting. |
(7) | Ms. Goren resigned from the Board effective December 31, 2021. |
(8) | In fiscal 2021, Mr. Martin received cash compensation and stock unit awards as described above in "Board Chair Role and Advisor Compensation" in his role as Executive Chair and an advisor to our CEO. |
(9) | Mr. Montoya is not standing for reelection at the 2022 Annual Meeting. |
(10) | Ms. Smith resigned from the Board effective June 18, 2021. |
(11) | Ms. Coleman Smith was appointed to the Board effective March 4, 2021. |
www.gapinc.com |
28 | Proposal No. 2 – Ratification of Selection of Independent Registered Public Accounting Firm |
PROPOSAL NO.Proposal No. 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMRatification of Selection of Independent Registered Public Accounting Firm
The Audit and Finance Committee of the Board of Directors has selected Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2020.January 28, 2023. Deloitte & Touche LLP (or its predecessor firm) has been retained as our independent registered public accounting firm since 1976. If shareholders fail to ratify the selection of Deloitte & Touche LLP, the Audit and Finance Committee will reconsider the selection. If the selection of Deloitte & Touche LLP is approved, the Audit and Finance Committee, in its discretion, may still direct the appointment of a different independent auditing firm at any time and without shareholder approval if the Audit and Finance Committee believes that such a change would be in the best interests of the Company and our shareholders.
The Board of Directors Recommends a Vote “ |
Representatives of Deloitte & Touche LLP are expected to be present, available to make statements, and available to respond to appropriate shareholder questions at the 2022 Annual Meeting.
2022 Proxy Statement |
Proposal No. 2 — Ratification of Selection of Independent Registered Public Accounting Firm | 29 |
Principal Accounting Firm Fees
The following table sets forth the aggregate fees paid and accrued by us for audit and other services for the fiscal years ended February 2, 2019January 30, 2021 and February 3, 2018January 29, 2022 that were provided by our principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively “Deloitte & Touche”).
FISCAL YEAR 20182020 AND 20172021 ACCOUNTING FEES
Fees (see notes below) | Fiscal Year 2018 | Fiscal Year 2017 | ||||
Audit Fees | $ | 5,185,400 | $ | 5,046,200 | ||
Audit-Related Fees | 208,521 | 226,396 | ||||
Tax Fees | 941,700 | 984,400 | ||||
All Other Fees | 86,895 | 7,392 | ||||
Total | $ | 6,422,516 | $ | 6,264,388 |
Fees (in thousands) (see notes below) |
|
| Fiscal Year 2020 |
|
| Fiscal Year 2021 |
| |
|
|
|
|
|
|
|
|
|
Audit Fees |
| $ | 5,110 |
| $ |
| 5,645 |
|
Audit-Related Fees |
|
| 370 |
|
|
| 390 |
|
Tax Fees |
|
| 1,644 |
|
| 1,598 |
| |
All Other Fees |
|
| 1,178 |
|
|
| 652 |
|
Total |
| $ | 8,302 |
| $ |
| 8,285 |
|
“Audit Fees” consists of fees for professional services rendered in connection with the integrated audit of our consolidated annual financial statements and internal controls over financial reporting, the review of our interim condensed consolidated financial statements included in quarterly reports, and the audits in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” consists primarily of fees for professional services rendered in connection with the audit of our employee benefit plans, audit procedures required by store leases and capital verification reports.
“Tax Fees” consists of fees billed for professional services rendered for tax compliance and tax advice. These services include assistance regarding federal, state and international tax compliance, and competent authority proceedings.
“All Other Fees” consists of Deloitte & Touchesubscription fees.fees and fees for non-audit services. In fiscal years 2020 and 2021, includes approximately $1.1 million and $700,000, respectively, for permissible project consulting services.
The Audit and Finance Committee approves the terms, including compensation, of the engagement of our independent registered public accounting firm on an annual basis, and has a policy requiring pre-approval of all services performed by the firm. This policy requires that all services performed by Deloitte & Touche, whether audit or non-audit services, must be pre-approved by the Audit and Finance Committee or a designated member of the Audit and Finance Committee, with any such services reported to the entire Audit and Finance Committee at the next scheduled meeting. The Audit Committee pre-approved all services performed by the Company’s independent registered public accounting firm for fiscal years 2020 and 2021.
The Audit and Finance Committee periodically reviews and evaluates the performance of Deloitte & Touche’s lead audit partner, oversees the required five-year rotation of the lead audit partner responsible for our audit, oversees the required seven-year rotation of other audit partners who are engaged on our audit and, through the Committee’s Chair as representative of the Audit and Finance Committee, reviews and considers the selection of the lead audit partner. In addition, the Audit and Finance Committee periodically considers whether there should be a rotation of the independent registered public accounting firm. At this time, the Audit and Finance Committee and the Board believe that the continued retention of Deloitte & Touche to serve as our independent registered public accounting firm is in the best interests of the Company and our shareholders.
www.gapinc.com |
30 | Report of the Audit and Finance Committee |
Report of the Audit and Finance Committee
The Audit and Finance Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the integrity of the Company’s financial statements, the adequacy of the Company’s internal controls, compliance with legal and regulatory requirements, the qualifications and independence of the independent registered public accounting firm and the performance of theirits audits, the performance of the Internal Audit function, the effectivenessoversight of the corporate complianceCompany’s Corporate Compliance program, finance matters, oversight of the Company’s Data Privacy and Cybersecurity programs, and such other duties as directed by the Board of Directors. The Committee operates under a written charter (available at www.gapinc.com, follow the Investors, Governance, Audit and Finance Committee Charter links) adopted by the Board of Directors. The Committee is composed exclusively of directors who are independent under New York Stock Exchange listing standards and Securities and Exchange Commission rules.
The Committee has reviewed and discussed the audited financial statements of the Company for the fiscal year ended February 2, 2019January 29, 2022 with the Company’s management. In addition, the Committee has discussed with Deloitte & Touche LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by the applicable Public Company Accounting Oversight Board and Securities and Exchange Commission requirements.
The Committee also has received the communications, including written disclosures and the letter from Deloitte & Touche LLP, required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Committee concerning independence, and the Committee has discussed the independence of Deloitte & Touche LLP with that firm.
Based on the Committee’s review and discussions noted above, the Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019January 29, 2022 for filing with the Securities and Exchange Commission.
Amy Miles (Chair)
Chris O’Neill
Mayo A. Shattuck III (Chair)Tracy GardnerIsabella D. GorenJorge P. Montoya
Notwithstanding anything to the contrary in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, this report shall not be deemed to be incorporated by reference into any such filing.
2022 Proxy Statement |
Proposal No. 3 — Advisory Vote on the Overall Compensation of The Gap, Inc.’s Named Executive Officers | 31 |
Proposal No. 3 — ADVISORY VOTE ON THE OVERALL COMPENSATION OF THE GAP, INC.’S NAMED EXECUTIVE OFFICERSAdvisory Vote on the Overall Compensation of The Gap, Inc.’s Named Executive Officers
Pursuant to Section 95114A of the Dodd-Frank Wall Street Reform and Consumer ProtectionSecurities Exchange Act, the Company is providing shareholders with an annual advisory (non-binding) vote on the overall compensation of our named executive officers. Accordingly, the following resolution will be submitted for a shareholder vote at the 20192022 Annual Meeting:
“RESOLVED, that the shareholders of The Gap, Inc. (the ”Company““Company”) approve, on an advisory basis, the overall compensation of the Company’sCompany���s named executive officers, as described in the Compensation“Compensation Discussion and AnalysisAnalysis” section, the accompanying compensation tables, and the related narrative disclosure pursuant to Item 402 of Regulation S-K, set forth in thethis Proxy Statement for this Annual Meeting.”Meeting”.
The Board and the Compensation and Management Development Committee, which is comprised entirely of independent directors, will consider the outcome of the shareholders’ non-binding advisory vote when making future executive compensation decisions.
As described in detail under the section entitled “Compensation“Compensation Discussion and Analysis,” our executive compensation program is designed to provide the level of compensation necessary to attract and retain talented and experienced executives, and to motivate them to achieve short-term and long-term goals, thereby enhancing shareholder value and creating a successful company. We are committed to tie pay to performance and continue to believe our executive compensation program meets each of our compensation objectives.
We were pleasedalso continue to have received approximately 98% of all votes cast in support of the overall compensation of our executives at our 2018 Annual Meeting of Shareholders. The Compensation and Management Development Committee continued to apply the same philosophy and protocol it used in prior years to determine fiscal 2018 compensation. In addition, as described on page 25, we have several compensation governance programs in place to manage compensation risk and align the Company’sput executive compensation with long-termto an annual advisory shareholder interests.vote.
Shareholders are encouraged to read the “Compensation“Compensation Discussion and Analysis”Analysis” section of this Proxy Statement, the accompanying compensation tables, and the related narrative disclosures, which more thoroughly discuss how our compensation policies and procedures implement our compensation philosophy. It is expected that the next advisory vote on the compensation of our named executive officers will occur at the 2023 Annual Meeting.
The Board of Directors Recommends a Vote “ |
www.gapinc.com |
32 | Compensation Discussion and Analysis |
EXECUTIVE COMPENSATIONAND RELATED INFORMATION
Compensation Discussion and Analysis
This Compensation Discussion &and Analysis explains the key elements of our executive compensation program and compensation decisions for our named executive officers, (“Executives”).who we refer to in this section as our Executives. The Compensation and Management Development Committee of our Board of Directors, (the “Committee”)which we refer to in this section as the Compensation Committee or the Committee, oversees these programs and determines compensation for our Executives.
In this Compensation Discussion and Analysis, we discuss the following:
Page 32 | ||
Page 40 | ||
Page 40 | ||
Page 50 |
EXECUTIVE SUMMARY
2021 Key Events
In October 2020, the Company’s management team articulated a series of goals and strategies, which we named Power Plan 2023, intended to drive focus and efficiency within operations and expand our long-term profitability prospects. The focus for fiscal 2021 was to emerge from the pandemic downturn of 2020 with a return to profitable growth. Specifically, our Power Plan strategy includes the following three pillars:
Power of our Brands – Grow our four purpose-driven, billion-dollar lifestyle brands.
Power of our Portfolio – Extend our customer reach across every age, body and occasion through our collective power.
Power of our Platform – Leverage our omni capabilities and scaled operations and extend our engineered approach to cost and growth.
In fiscal 2021, we achieved significant progress under each of our Power Plan pillars. Old Navy and Athleta both launched inclusive sizing, bringing Gap Inc.’s mission to be “Inclusive, by Design” to life and tapping into an underserved portion of the women’s apparel market. Athleta started its international expansion, launching in Canada and opening its first partner-operated freestanding store outside of North America. Gap brand continued to regain cultural relevance demonstrated by strong two-year comparable sales in its core North America market. Banana Republic launched its transition away from a workwear positioning to a versatile all-occasion brand focused on creativity and quality.
Additionally, the Company continued to execute on its plan to rationalize the portfolio through divestitures, partnerships and strategic closures, which we expect will enable future growth for a smaller, healthier store fleet. We have now completed over 70% of our 350-store closure plan for the Gap and Banana Republic North America fleet. Additionally, we divested two smaller brands as we focused on growing each of our four purpose-driven, billion-dollar lifestyle brands. We also pursued our strategy to Partner to Amplify that involves driving growth through a more capital efficient model. With this in mind, we conducted a strategic review of our European business, and entered into agreements to partner our UK, Ireland, France and Italy markets, which we believe will drive continued global growth, recognition and relevance while reducing overhead and operating expenses within international markets.
Additionally, we employed our Partner to Amplify strategy to reach new addressable markets. We made significant progress in growing our licensing business, launching a strategic partnership with Walmart to introduce Gap Home, and are currently expanding the universe of licensed categories to include eyewear, baby gear and accessories.
2022 Proxy Statement |
Compensation Discussion and Analysis | 33 |
We launched our integrated loyalty program, that we believe will be a key driver in building enduring customer relationships and driving sustained sales growth. We know that our loyalists shop more often and have a significantly higher lifetime value than non-loyalty members. We believe that our new, tiered program will help capture this value while providing valuable benefits to our customers and improving the effectiveness of our marketing and promotional messaging and customer retention.
We also made investments into demand generation technology, that we believe will drive growth and optimize our operations. We acquired artificial intelligence and machine learning company Context-Based 4 Casting Ltd. The acquisition directly supports our Power Plan strategy and we expect that it will help transform our retail operations and improve our customer experience through predictive analytics and demand sensing.
2021 Business Performance
In fiscal 2018,2021, many of our customers began returning to work and school and participating again in social activities. We experienced improvements in store traffic compared to 2020 levels and continued to see growth compared to prior years in the online channel. The impact of reduced store closures compared to 2020 as well as stimulus payments and elevated customer demand contributed to strong year-over-year sales growth and earnings during each of the first two quarters of the year. During the second half of the year, demand remained high but sales were impacted as inventory was constrained, driven primarily by supply chain delays and COVID-related factory closures, in particular in Vietnam.
Despite the macroeconomic challenges we experienced during the second half of the year, in fiscal 2021 we delivered total net sales of $16.7 billion, the highest in the Company’s history. Below are certain highlights of our brands’ fiscal 2021 performance.
Old Navy. Old Navy delivered strong positive sales growth, ending the year with net sales up 21% compared to 2020 and up 14% compared to 2019.
Athleta. Athleta continued to grow its market share and increased customer awareness by over five points compared to 2020 through strong product offerings and partnerships with world-class talent.
Gap. Gap made significant progress in its transformation efforts, closing 36 stores net of openings in North America, partnering the European business, and achieving three quarters of positive double-digit comparable sales on a two-year basis in its North America business. The brand also launched partnerships including Gap Home with Walmart and Yeezy Gap.
Banana Republic. Banana Republic relaunched the brand in September 2021 with a focus on affordable luxury and an elevated customer experience and achieved lower discount rates in the third and fourth quarters.
2021 Executive Pay Highlights
In fiscal 2021, we continued to execute against our Balanced Growth Strategy, which focuses on leveraging our iconic brandsalign pay delivery with performance and significant scale to deliver sustainable growth by investing strategically while also maintaining our operating expense discipline through our productivity initiative. At a glance:
The Transformationachievement of our Operating Model and Balanced Growth Strategystrategic objectives, including our Power Plan strategy. Certain highlights of our fiscal 2021 compensation program are discussed below.
• |
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Long-Term Incentives. Each Executive was granted a mix of stock options, time-based restricted stock units and performance-based restricted stock units. The Compensation Committee selected this mix to align incentive opportunities with an appropriate balance of performance-related risk. Measured by target grant value, 64% and 60% of long-term incentives for our CEO and other Executives, respectively, are granted in the form of performance-based restricted stock units that require the achievement of performance goals. In addition, inclusive of stock options, 82% and 80% of long-term incentives for our CEO and other Executives, respectively, require the achievement of performance goals or share price appreciation, to promote sustained improvement in financial performance and long-term value creation for shareholders.
PRSU Program and Outstanding LGP Grants. Performance-based restricted stock units comprise the largest single element of our Executives’ compensation by target grant value and, since 2020, are earned under the PRSU program based on attainment of a three-year EBIT goal measured at the Gap Inc. level, with the award modified based on relative total shareholder return, which measures our stock performance against the S&P Retail Select Index during the same three-year period. Accordingly, total shareholder return is a metric that will impact our Executives’ realized compensation starting in fiscal 2023 (when awards under the PRSU program for the 2020-2022 performance period are determined). The Compensation Committee selected these goals to focus
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34 |
| Compensation Discussion and Analysis |
employees on the Power of the Portfolio and operating margin goals included in our Power Plan strategy, and believes they provide a |
Named Executive Officers and Roles in Fiscal 2021
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Subsequent Events
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Table of ContentsSonia Syngal
EXECUTIVES
Gap Inc. |
Executive Vice President & Chief Financial Officer, Gap Inc. | Mark Breitbard |
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President & Chief | Mary Beth Laughton President & Chief Executive Officer, Athleta |
Business Performance & Pay
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Pay for Performance
For fiscal 2018, despite strong performance against our operating model transformation goals, we applied a discretionary reductionListening to annual bonus payouts in light of business performance, which was below expectations. Consistent with our philosophy of aligning Executive pay to performance, annual bonuses paid were at 0 – 55% of target for all Executives, except Mr. Fiske, who received a guaranteed target bonus, prorated based on his hire date, as part of his employment agreement.
Our Long-Term Growth Program (“LGP”) awards with a 2016-2018 performance period paid out at 70% of target for Mr. Peck. For our 2018-2020 LGP awards, based on our fiscal 2018 performance, if target is achieved in future periods, the actual awards earned would not exceed the target shares for any of the executives, demonstrating alignment of Executive pay to performance.Shareholders
LISTENING TO OUR SHAREHOLDERS
OurThe Compensation Committee is comprised solely of experienced independent directors and has established effective means for communicating with shareholders. Our shareholders also have the opportunity to cast a non-binding advisory vote on executive compensation at our Annual Meeting.
directors. The Committee is very interested inactively considers the ideas and any concerns of our shareholders regarding executive compensation. Ancompensation and the results of the advisory vote on executive compensation, commonly referred to as a Say-on-Pay vote, when assessing our compensation practices and policies.
A Say-on-Pay vote was presented to our shareholders at last year’sour 2021 Annual Meeting and approved by 98%88% of shareholder votes,shareholders present and entitled to vote thereon, consistent with prior favorable advisory votes by our shareholders on executive compensation.compensation in 2020 and prior to 2019. In evaluatingaddition, on an annual basis, we engage directly with some of our compensation practices in fiscal 2018,largest shareholders as another means to gather their input and concerns, and management informs the Compensation Committee was mindfulof any compensation-related feedback they receive. Prior to our 2021 Annual Meeting, we invited our top 30 shareholders (not including members of the supportFisher family), representing approximately 45% of our outstanding ownership at that time, to engage in discussion with us on a variety of ESG-related matters including our Executives’ compensation.
Based on our shareholder discussions, we believe our shareholders expressed forviewed our changes to align performance-based restricted stock units to the Company’s philosophy of linking compensation to operationaleconomic objectives and the enhancement of shareholder value.outlined in our Power Plan strategy as positive. As a result, the Compensation Committee retained its general approach to executive compensation and continued to apply the same generalpay-for-performance principles and philosophy as in the prior fiscal yearyears.
As in determining executiveprior years, we continue to set rigorous incentive compensation goals and made no material structural changes during fiscal 2018.align pay delivery with performance and achievement of our strategic objectives, including with our Power Plan strategy. We also continue to put executive compensation to an annual advisory shareholder vote annually.vote.
2022 Proxy Statement |
Compensation Discussion and Analysis | 35 |
CEO COMPENSATION SUMMARYCompensation Summary
The structure of our CEO’s ongoing compensation package is similar to our other Executives. The packageExecutives’ compensation packages and is intended to reward him for sustained improvement of the Company’s financial performance in line with our strategic objectives and pay-for-performance philosophy. Payout of 2021 annual bonus was based on the achievement of EBIT and net sales goals across our brands, and the performance target for the 2021 grant of performance-based restricted stock units was set based on achievement of a three-year Gap Inc. EBIT goal. After determining the payout of her performance-based restricted stock units based on the three-year EBIT results, the payout for such awards will then be subject to a modifier based on the Company’s three-year relative total shareholder return against companies in the S&P Retail Select Index. The Compensation Committee selected these goals to align our CEO’s performance objectives with our Power Plan strategy and shareholder returns to shareholders while helping to promotepromoting alignment of interests across the executive team. The Committee based its determination onconsidered the same factors outlined under “Compensation“Compensation Analysis Framework” below. MostFramework” below to determine the structure and value of Mr. Peck’s total ongoing compensation opportunity (excluding one-time actions) requires achievement of performance goals or share price appreciation. Mr. Peckthe package. Our CEO receives similaressentially the same benefits and limited perquisites asprovided to our other Executives, except that heshe is provided limited personal use of a Company airplane.airplane to provide an efficient and safer way for her to manage travel and time commitments. The Committee also received advice from its independent compensation consultant on our CEO’s compensation structure, as described more fully below.
Our CEO’s 2021 compensation package is described more fully below:
Our CEO’s base salary was not increased and remained at $1,300,000.
Our CEO’s annual cash incentive bonus target remained unchanged at 175% of her base salary. Bonus for fiscal 2021 was based on the weighted average of EBIT and net sales attainments across our brands – 50% on EBIT and 50% on net sales for each brand, in each case, subject to certain adjustments. For fiscal 2021, annual bonus was earned at 123% of her annual target amount, resulting in a bonus payout to our CEO of $2,793,796, based on performance that exceeded the targets set by the Committee at the beginning of the year.
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36 | Compensation Discussion and Analysis |
Fiscal 2021 Compensation Mix
CEO COMPENSATION
This chart reflects reported pay derived from the 2018 Annual Meeting, shareholders were very supportive“2021 Summary Compensation Table” for Ms. Syngal.
AVERAGE OTHER EXECUTIVE COMPENSATION
This chart reflects the average reported pay derived from the “2021 Summary Compensation Table” for Executives other than Ms. Syngal. Does not include the earned portion of the structure and philosophysign-on bonus that Ms. Laughton received in 2019, which is disclosed in the “2021 Summary Compensation Table.”
2022 Proxy Statement |
Compensation Discussion and Analysis | 37 |
Key Elements of Compensation
The table below summarizes the key elements of our pay program during fiscal 2017. Consequently, we made no material structural changes during fiscal 2018. We continued to set rigorous goals and align pay delivery with performance.
Mr. Peck’s pay since appointment to CEO on February 1, 2015 (2015 – 2018) is set forth below:”
$12,857,022Average Annual Reported Pay
$4,748,226Average Annual Realized Pay
Component |
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Base Salary |
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Annual Cash Incentive Bonus | The annual cash incentive bonus is intended to incent the |
Long-Term Incentives |
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• Stock options comprised 18% of the long-term incentive target grant value for Ms. Syngal and 20% for all other Executives in 2021. Stock options further align Executives with shareholder interests, as • Time-based restricted stock units |
The chart below shows the proportion of each component of our CEO’s fiscal 2018 compensation, as reported in the Summary Compensation Table on page 38, the majority of which is weighted toward incentive compensation tied to rigorous goals and aligned with the long-term return to shareholders.
FISCAL 2018 CEO COMPENSATION
www.gapinc.com |
COMPENSATION GOVERNANCE
38 | Compensation Discussion and Analysis |
Compensation Governance
Overall, we believe that our fiscal 2021 executive compensation program met each of our compensation objectives described below and continues to demonstrate our strong commitment to pay for performance.pay-for-performance. The tabletables below highlightshighlight our key compensation practices – both the practices we believe support strong compensation governance principles and the practices we have not implemented because we do not believe they would serve our shareholders’ long-term interests.
What | ||
Pay-for-Performance | ✓ | We tie pay to performance. Our |
Total Shareholder Return | ✓ | Our Executives’ performance-based restricted stock units are earned in part based on relative total shareholder return to align Executives to shareholders. |
Regular Compensation Review | ✓ | We annually review opportunities remain appropriate. |
Recoupment/Clawback Policy | ✓ | Our incentive compensation |
Culture of Stock Ownership | ✓ | We have executive stock ownership requirements needed to ensure strong alignment of Executive and shareholder interests. |
Annual Risk Assessment | ✓ | We |
Independent Compensation Consultant | ✓ | The Committee |
Maximum Award Amounts | ✓ | The Committee establishes |
Annual Say-on-Pay Vote | ✓ | We have conducted an annual advisory vote on our executive compensation every year since 2011 and consider the results when assessing our Executive compensation practices and policies. |
Compensation Committee is comprised of only Independent Directors | ✓ | Pursuant to our Corporate Governance Guidelines, our Compensation Committee is comprised solely of independent directors. |
2022 Proxy Statement |
Compensation Discussion and Analysis | 39 |
What | ||
No | ꭗ | We do not have employment contracts of defined length with our Executives or multi-year guarantees for base salary increases, bonuses or equity compensation. |
No Golden Parachute Tax Gross-Ups | ꭗ | None of our Executives are entitled to tax |
No Repricing or | ꭗ | We have not repriced or cashed-out underwater stock options |
No | ꭗ | We do not provide Executives with a supplemental retirement plan or a pension plan. |
No Single-Trigger Change in Control Arrangements | ꭗ | We do not have |
No Material Compensation Risk | ꭗ | We do not have incentive compensation arrangements for Executives that create potential material adverse risk for the Company, based on a risk assessment conducted by the |
No Dividends on Unearned | ꭗ | We do not pay or accrue dividends on Executives’ unearned |
No Hedging | ꭗ | We prohibit Company employees at the level of Vice President and above, as well as other insiders, from engaging in any hedging or publicly traded derivative transactions in Company stock. |
No Pledging | ꭗ | We prohibit Executives from pledging Company stock as collateral for a loan or for any other purpose. |
www.gapinc.com |
COMPENSATION OBJECTIVES
40 | Compensation Discussion and Analysis |
Our fiscal 2021 compensation program is intendeddesigned to align Executives’ total compensation for executives with the shortshort- and long-term financial performance of the Company, our shareholders’ interests and our strategic objectives, while enabling us to attract and retain executivetop talent. Specifically, the program is designed to:
Drive a performance-oriented culture;
Support our business by motivating and rewarding achievement of short and long-term financial and strategic objectives, as well as individual contributions;
Attract and retain top talent;
Link Executives’ rewards to shareholder returns and value creation; and
Promote a culture of executive stock ownership, aligning our Executives with our shareholders.
Our compensation program rewards executivesExecutives for the achievement of corporateCompany-wide and divisional financial and non-financialstrategic objectives, for their individual contributions to these results, and for optimizing long-term returns to shareholders. The majority of each executive’sExecutive’s total compensation opportunity requires achievement of performance goals or share price appreciation and is weighted toward incentive compensation tied to these objectives. In particular, the financial performance of the Company andmulti-year EBIT goal for Executives’ performance-based restricted stock units that were granted in 2021 is aligned to achieving the long-term return tooperating margin goals included in our shareholders.Power Plan strategy. When we do not achieve targeted performance levels and/or our stock price does not appreciate, the total compensation that can be realized by our executivesExecutives is substantially reduced. In the case of performance-based awards, our Executives will not earn any performance-based incentive compensation if we do not reach threshold performance levels. When we exceed targeted performance levels and/or our stock price appreciates, the compensation that can be realized by our executives is substantially increased.Executives may exceed target compensation levels subject to maximum payout caps established by the Committee. We believe that this is the most effective means of aligning executive pay with our financial and strategic goals and shareholders’ interests.
ELEMENTS OF COMPENSATIONElements of Compensation
The main elements of our fiscal 2021 executive compensation program are:were:
Base salary;
Annual cash incentive bonus;
Long-term incentives; and
Benefits and limited perquisites.
We have choseninclude these elements in our executive compensation program because we believe each element supports the achievement of one or more of our compensation objectives described above, and that together they have been and will continue to be effective in this regard. The Compensation Committee determines the use and weight of each compensation element is based on the judgment of the Committee regarding the importance of each compensation objective in supporting our business and talent strategies, as well as the structure of these elements forand benchmarks them against similar executives at other companies.companies in our peer group. Base salary, benefits and perquisites representrepresented less than half8% of each Executive’s potential compensation at target performance levels to emphasizefor Ms. Syngal and less than 17% of potential compensation at target levels for each other Executive in 2021, which demonstrates the importance ofemphasis we place on compensation that is performance-based compensation.
Table of Contentsand/or at-risk.
Base salaries are set at a level that the Committee believes will effectively attract and retain top talent, considering the factors described below under “Compensation“Compensation Analysis Framework.Framework”. In addition, the Committee considers the impact of base salary changes on other compensation components (such as annual cash incentive bonus and long-term incentives) where applicable. The Committee reviews base salaries for Executives in the first fiscal quarter, and as needed throughout the year in connection with promotions or other changes in responsibilities.
2022 Proxy Statement |
Compensation Discussion and Analysis | 41 |
The table below summarizes base salaries during fiscal 2018,2021, and any changes that occurred during the year.
Name | Base Salary on 2/3/2018 | Base Salary on 2/2/2019 | Comments | |||||
Arthur Peck | $ | 1,375,000 | $ | 1,550,000 | Salary was increased in March 2018 as part of the annual review to improve competitiveness and position Mr. Peck appropriately relative to other executives, as well as to promote retention as further described on page 33. | |||
Teri List-Stoll | $ | 875,000 | $ | 925,000 | Salary was increased in March 2018 as part of the annual review in light of expanded responsibilities and to improve competitiveness as well as to position Ms. List-Stoll appropriately relative to other executives. | |||
Mark Breitbard | $ | 950,000 | $ | 950,000 | ||||
Neil Fiske | N/A | $ | 950,000 | Mr. Fiske joined the Company in June 2018 as President & CEO, Gap. | ||||
Brent Hyder | $ | 600,000 | $ | 700,000 | Salary was increased in March 2018 as part of the annual review in light of expanded responsibilities and to improve competitiveness as well as to position Mr. Hyder appropriately relative to other executives. |
ANNUAL CASH INCENTIVE BONUS
Name |
| Base Salary on 1/31/2021 |
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| Base Salary on 1/29/2022 |
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| Comments | ||
Sonia Syngal |
| $ | 1,300,000 |
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| $ | 1,300,000 |
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| No change in 2021. |
Katrina O’Connell |
| $ | 750,000 |
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| $ | 825,000 |
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| Salary was increased in 2021 to improve competitiveness and to position Ms. O’Connell appropriately relative to internal and external benchmarks. |
Mark Breitbard |
| $ | 1,100,000 |
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| $ | 1,100,000 |
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| No change in 2021. |
Nancy Green |
| $ | 1,100,000 |
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| $ | 1,100,000 |
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| No change in 2021. |
Mary Beth Laughton |
| $ | 810,000 |
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| $ | 900,000 |
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| Salary was increased in 2021 to improve competitiveness and to position Ms. Laughton appropriately relative to internal and external benchmarks. |
www.gapinc.com |
42 | Compensation Discussion and Analysis |
Fiscal 20182021 Annual Bonus
Our annual bonus program is intended to directly support our longer-term strategic objectives and the Power of our Brands pillar of our Power Plan strategy by focusing on driving sales and market share through revenue growth, while also delivering profitability and improving operating efficiency. In setting the fiscal 20182021 annual bonus structure, the Compensation Committee considered our business and talent priorities, as well as the factors described below under “Compensation“Compensation Analysis Framework.Framework.” We determined that there was a continued need to incent the achievement of objectives related to our transformation initiatives and balanced growth strategy, in addition to our financial commitments to exceed pre-COVID performance levels and make progress against our strategic objectives in order to successfully position the Companyus for long-term success. To support this goal,these goals, the Committee approved continuation of the existingan annual cash incentive structure which equally emphasizesbased solely on financial resultsperformance for the fiscal yearyear. The Committee weighted 50% of the total opportunity on EBIT, given the importance of accountability for operating efficiency and accomplishments related to our operating model transformationresults, and balanced growth strategy. In addition, measurement of objectives related to our operating model transformation and balanced growth strategy were measured at the company level to enhance collaboration across the organization. However, the underlying objectives continue to be a priority for the organization. The table below describes the target annual bonus and potential payout range for each Executive. The annual incentive bonusremaining 50% was based on two components:
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Bonus payments are generally made under the Executive Management Incentive Compensation Award Plan (“Executive MICAP”), which has been approved by our shareholders. For fiscal 2018, the Committee set a minimum performance goal that needed to be achieved before payment of any bonus. Satisfaction of this goal established the maximum bonus that could be paiddrive top-line focus and to each Executive (equal to the maximum set forth in the table above), subject to downward adjustment by the Committee based on achievement of the financial and transformation goals and other factors determined by the Committee in its sole discretion. For fiscal 2018, this goal was positive net income, as adjusted for certain objective and nondiscretionary items relating to changes in accounting principles, acquisitions and dispositions, employee termination benefits, termination of real estate leases, legal claims, and certain business interruptions, as applicable.promote continued market share growth. The Committee determined thatbelieves this minimum performance goal for fiscal 2018 had been achieved. The Committee then used negative discretion to determine the actual payout to each Executive based on performance against the financialweighting provides an appropriate balance between cost management and transformation goals as described below, as well as a qualitative assessment of individualtop line performance. Actual bonuses were paid in March 2019.
Financial Performance Component
The Committee approves threshold, target and maximum performance goals at the beginning of each performance period. Payouts are made under the financial performance component only if threshold goals are achieved.
Bonuses for fiscal 2018 financial performance were based on earnings before interest and taxes (“earnings”), weighted 75%, and net sales, weighted 25%. EarningsEBIT and net sales were used to measure both Company anda weighted brand average or division performance, depending on the Executive's scope of responsibility, in both cases subject to potential adjustment for certain pre-established items that are unusual in nature or infrequently occur. To incent the focus on and the success of our brands, financial performance for Ms. Syngal and Ms. O’Connell was based on the following weighted average of the brand attainments: 50% Old Navy, 25% Athleta, and 10% Gap, 10% Banana Republic and 5% Asia Retail, which includes brand retail financials in the Asia region (collectively referred to in the table below as the Weighted Brand Average). Financial performance for Mr. Breitbard, Ms. Green and Ms. Laughton was based on the organizations they lead: 80% Gap Brand / 20% Asia Retail, 100% Old Navy and 100% Athleta, respectively.
The earnings measuretable below describes the target annual bonus and potential payout range for each Executive.
Name | Brand Performance | Target Percentage of Base Salary | Potential Payout Range as a Percentage of Target | |||||
Sonia Syngal | Weighted Brand Average | 175 | % | 0 – 200% | ||||
Katrina O’Connell | Weighted Brand Average | 100 | % | 0 – 200% | ||||
Mark Breitbard | 80% Gap Brand/ 20% Asia Retail | 150 | % | 0 – 200% | ||||
Nancy Green | 100% Old Navy | 150 | % | 0 – 200% | ||||
Mary Beth Laughton | 100% Athleta | 100/150 | % | (1) | 0 – 200% |
(1) | Ms. Laughton’s target annual cash incentive bonus opportunity was increased in 2021 to improve competitiveness and to position her appropriately relative to internal and external benchmarks. |
Bonus payments are made under the Executive Management Incentive Compensation Award Plan. Pursuant to the plan, which was selecteddesigned to comply with an exemption under Section 162(m) of the Internal Revenue Code to maximize the deductibility of compensation paid to certain executive officers, which has since been eliminated, the Committee sets a minimum performance goal that needs to be achieved before determination and payment of any bonus. Satisfaction of the minimum goal results in the maximum bonus that could be paid to each Executive being established, and the Committee then determines actual payouts to each Executive based on performance against pre-established financial goals and individual performance. The minimum goal the Committee established in 2021 was positive net income. The Committee determined that the minimum goal was achieved in 2021, and after applying the adjustments described below under “Financial Performance” certified actual payouts to each Executive based on performance against pre-established threshold, target and maximum financial goals, as well as a qualitative assessment of individual performance, as described below.
The Compensation Committee approved threshold, target and maximum financial performance goals for fiscal 20182021 and weighted more heavily because the Committee believeddetermined that earnings should continue topayouts would be a primary focus of Executives and is a good measure of actual operatingmade only if threshold performance within their control and accountability. The net sales measure is intended to drive top-line focus and to promote continued market share growth. Measuring both earnings and net sales diversifies performance metrics, and we believe it provides an appropriate balance between cost management and top line performance.was achieved.
The following table showstables show fiscal 2018 earnings2021 EBIT and net sales goals expressed as a percentage of fiscal 20172019 actual results. GoalsThe Committee selected 2019 actual results as a basis for comparison when setting the 2021 EBIT and net
2022 Proxy Statement |
Compensation Discussion and Analysis | 43 |
sales goals due to the unprecedented impact and disruption of COVID-19 in 2020. The Committee set these goals for fiscal 2018 were set2021 at what it considered to be realistic levels given our expected performance at the time they were established and were intended to provide a meaningful incentive for Executives to improve performance.performance in light of our expected performance at the time they were established. Also shown below are the actual weighted percentages achieved expressed as a percentage of fiscal 20172019 actual results, after adjustments to exclude items that were not considered when the goals were set, which included any restructuring costs.costs, government-mandated full day store closures, and the Gap Europe franchise transition. No otheradditional adjustments to the results were made other than the neutralization of foreign exchange rate fluctuations.
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| 2021 EBIT Goals as a Percentage of Fiscal 2019 Actual EBIT |
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| Actual Fiscal 2021 Percentage Achieved After Adjustments |
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Division |
| Threshold |
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| Target |
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| Maximum |
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| EBIT |
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Old Navy |
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| 82.7 | % |
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| 86.8 | % |
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| 94.2 | % |
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| 90.2 | % |
Athleta |
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| 116.0 | % |
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| 119.7 | % |
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| 129.2 | % |
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| 121.8 | % |
Banana Republic |
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| 3.3 | % |
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| 8.6 | % |
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| 15.8 | % |
|
| 7.6 | % |
Gap |
| N/A |
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| N/A |
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| N/A |
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| N/A |
| ||||
Asia Retail |
| N/A |
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| N/A |
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| N/A |
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| N/A |
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Table of ContentsPercentages are not shown where the numerator or denominator was below zero, as the earnings growth calculation does not reflect a meaningful result.
2018 Earnings / Net Sales Goals as a Percentage of Fiscal 2017 Actual Earnings / Net Sales | Actual Fiscal 2018 Percentage Achieved After Adjustments | |||||||||||||
Name | Company / Division | Threshold | Target | Maximum | Earnings | Net Sales | ||||||||
Arthur Peck | Gap Inc. | 94.1% / 100.6% | 105.6% / | 120.5% / 104.6% | 88.0 | % | 101.1 | % | ||||||
103.6% | ||||||||||||||
Teri List-Stoll | Gap Inc. | 94.1% / 100.6% | 105.6% / | 120.5% / 104.6% | 88.0 | % | 101.1 | % | ||||||
103.6% | ||||||||||||||
Mark Breitbard | Banana | 111.1% / 97.8% | 126.2% / | 151.5% / 101.3% | 125.4 | % | 99.0 | % | ||||||
Republic | 100.3% | |||||||||||||
Neil Fiske | Gap Global | N/A(1)/ 98.6% | N/A(1)/ 101.0% | N/A(1)/ 102.0% | N/A | 94.0 | % | |||||||
Brent Hyder | Gap Inc. | 94.1% / 100.6% | 105.6% / | 120.5% / 104.6% | 88.0 | % | 101.1 | % | ||||||
103.6% |
Ms. Syngal’s and Ms. O’Connell’s bonus was | |
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Operating Model Transformation Component
Executives were eligible to receive bonuses based on achievement of seven operating model transformation goals in four areas critical toGap Inc., which was based on the long-term successfollowing weighted average of the Company, including 1) our product operating model; 2) customer acquisition, retentionbrands: 50% Old Navy, 25% Athleta, 10% Gap, 10% Banana Republic and engagement; 3) productivity,5% Asia Retail.
Mr. Breitbard’s bonus was based on 80% Gap brand and 4) talent. Goals were measured at20% Asia Retail. Ms. Green’s bonus was 100% based on Old Navy. Ms. Laughton’s bonus was 100% based on Athleta.
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| 2021 Net Sales Goals as a Percentage of Fiscal 2019 Actual Net Sales |
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| Actual Fiscal 2021 Percentage Achieved After Adjustments |
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Division |
| Threshold |
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| Target |
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| Maximum |
|
| Net Sales |
| ||||
Old Navy |
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| 109.8 | % |
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| 113.2 | % |
|
| 116.6 | % |
|
| 113.5 | % |
Athleta |
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| 141.1 | % |
|
| 145.4 | % |
|
| 149.8 | % |
|
| 147.7 | % |
Banana Republic |
|
| 80.0 | % |
|
| 82.5 | % |
|
| 85.0 | % |
|
| 82.0 | % |
Gap |
|
| 86.3 | % |
|
| 89.0 | % |
|
| 91.6 | % |
|
| 89.5 | % |
Asia Retail |
|
| 98.1 | % |
|
| 101.2 | % |
|
| 104.2 | % |
|
| 77.2 | % |
Ms. Syngal’s and Ms. O’Connell’s bonus was based on Gap Inc., which was based on the company levelfollowing weighted average of the brands: 50% Old Navy, 25% Athleta, 10% Gap, 10% Banana Republic and were weighted equally, with maximum achievement set at 175% for this component.5% Asia Retail.
Mr. Breitbard’s bonus was based on 80% Gap brand and 20% Asia Retail. Ms. Green’s bonus was 100% based on Old Navy. Ms. Laughton’s bonus was 100% based on Athleta.
Individual Performance Adjustment
Prior to determining the final bonus payout, if any, for each Executive, individual performance is assessed to determine if an adjustment is warranted. The CEO makes recommendations to the Committee for adjustments, if any, for Executives that report to him,her, and the Committee decides whether any adjustment is warranted for the CEO in a private session.session without the CEO present. In assessing each Executive’s individual performance, any additional initiatives outside those described above, challenges that the Executive faced over the course of the year, and financial performance are considered in determining final payouts. Our bonus program allows the Committee to assess Executives’ individual performance, including whether Executives demonstrated our “Words to Live By,” which are eight behaviors that reinforce our Company culture. In particular, “Champion Inclusion” and “Do the Right Thing” are aligned to our commitments on equality and belonging and environmental, social and governance.
Actual Bonuses
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44 | Compensation Discussion and Analysis |
For fiscal 2018,2021, performance against the operating model transformation goals applicable to each Executive was at the maximum level. We observed notable progress against our FY18 transformation goals. In 2018, all of our brands leveraged responsive capabilities that allowed us to test new products and adjust investments and exceed customer expectations, our customer database grew, we continue to evaluate price architecture across categories and identify opportunities to improve yield, we identified significant expense savings as part of our productivity goal outlined in our balanced growth strategy and we continue to leverage a talent management and succession planning process in every business and function. Despite notable progress, performance against the earningsEBIT and net sales goals applicable to each Executive generally exceeded the targets set by the Compensation Committee at the beginning of the year other than Asia Retail, which was below target levels for all Executives. threshold. We observed notable progress against our Power Plan goals as we navigated COVID-driven supply chain constraints in the retail industry.
The Committee considered overall business performance and financial results that did not meet expectations and in order to appropriately align pay with performance, applied a discretionary reduction to bonus payouts. Mr. Peck volunteered to forgo his bonus and the Committee used discretion to reduce it to zero.
Tablecalculation of Contentsbonuses is as follows.
The following table describes the calculation of the actual bonusbonuses to be paid to each Executive for fiscal 2018 for each eligible Executive.2021 performance.
Name | Base Salary(1) | x | Target Percentage of Base Salary | x | ( | Actual Percentage Achieved: Financial Performance Component(2) | x | Weight | + | Transformation Component(2) | x | Actual Percentage Achieved: Weight) | = | Funded Bonus | - | Negative Discretion | = | Actual Bonus | ||||||
Art Peck | $ | 1,526,439 | x | 175% | x | ( | 9% | x | 50% | + | 175% | x | 50%) | = | $ | 2,464,193 | - | $ | 2,464,193 | = | $ | 0 | ||
Teri List-Stoll | $ | 918,267 | x | 100% | x | ( | 9% | x | 50% | + | 175% | x | 50%) | = | $ | 847,084 | - | $ | 654,152 | = | $ | 192,932 | ||
Mark Breitbard | $ | 949,998 | x | 125% | x | ( | 87% | x | 50% | + | 175% | x | 50%) | = | $ | 1,556,194 | - | $ | 900,555 | = | $ | 655,639 | ||
Neil Fiske(3) | $ | 595,053 | x | 125% | x | ( | N/A | x | 50% | + | N/A | x | 50%) | = | N/A | - | N/A | = | $ | 743,819 | ||||
Brent Hyder | $ | 686,537 | x | 80% | x | ( | 9% | x | 50% | + | 175% | x | 50%) | = | $ | 506,654 | - | $ | 391,258 | = | $ | 115,396 |
Name |
| Base Salary(1) |
| x |
| Target Percentage of Base Salary(2)(3) |
| x | ( | 50% |
| x | Actual Percentage Achieved: FY21 EBIT Performance |
| + |
| 50% |
| x | Actual Percentage Achieved: FY21 Revenue Performance | ) | = |
| Funded Bonus |
| + |
| Individual Adjustment |
| = |
| Actual Bonus |
Sonia Syngal |
| $1,300,000 |
| x |
| 175% |
| x | ( | 50% |
| x | 132% |
| + |
| 50% |
| x | 113% | ) | = |
| $2,793,796 |
| + |
| $0 |
| = |
| $2,793,796 |
Katrina O’Connell |
| $814,904 |
| x |
| 100% |
| x | ( | 50% |
| x | 132% |
| + |
| 50% |
| x | 113% | ) | = |
| $1,000,736 |
| + |
| $0 |
| = |
| $1,000,736 |
Mark Breitbard |
| $1,100,000 |
| x |
| 150% |
| x | ( | 50% |
| x | 160% |
| + |
| 50% |
| x | 97% | ) | = |
| $2,120,705 |
| + |
| $0 |
| = |
| $2,120,705 |
Nancy Green |
| $1,100,000 |
| x |
| 150% |
| x | ( | 50% |
| x | 147% |
| + |
| 50% |
| x | 109% | ) | = |
| $2,107,266 |
| + |
| $0 |
| = |
| $2,107,266 |
Mary Beth Laughton |
| $855,192 |
| x |
| 100 / 150% |
| x | ( | 50% |
| x | 122% |
| + |
| 50% |
| x | 152% | ) | = |
| $1,686,067 |
| + |
| $0 |
| = |
| $1,686,067 |
(1) | Base salaries are prorated based on any changes during the fiscal year. |
(2) |
|
|
(3) | Ms. Laughton’s bonus target was increased in 2021 to improve competitiveness and to position her appropriately relative to internal and external benchmarks. |
(4) | The weighted average attainments, as described above, are displayed for Ms. Syngal, Ms. O’Connell, and Mr. Breitbard. |
LONG-TERM INCENTIVES
Stock-basedLong-Term Incentives
Overview
We believe that stock-based long-term incentives align executive compensation with our Company’s financial performance and shareholder returns. Unlike some of the members of our peer group, we do not have a pension plan, and we rely on long-term incentives to provide a substantial percentage of each Executive’s potential retirement savings. Long-term incentives have typically consisted of stock options, time-based restricted stock units and/or performance shares. We have aperformance-based restricted stock units.
For fiscal 2021, the set equity mix chosen by the Committee and measured by target grant value consists of different grant types64% performance-based restricted stock units, 18% stock options and 18% time-based restricted stock units for executivesthe CEO and 60% performance-based restricted stock units, 20% stock options and 20% time-based restricted stock units for all other Executives. Shares granted were based on the 20-trading day simple average of our closing stock price between February 12, 2021 and March 12, 2021. The mix was selected by the Committee to balance performance focus and potential compensation-related risk, but at leastalign incentive opportunities with an appropriate level of performance-related risk. The mix also ensures that more than half of our regular annual long-term incentive grant value is intended to be in the form of performance sharesperformance-based restricted stock units for performance-based long-term pay delivery and shareholder value alignment. The table below summarizes each long-term incentive award.
2022 Proxy Statement |
Compensation Discussion and Analysis | 45 |
Long-Term Incentive Award | Mechanics | Objectives |
Performance-Based Restricted Stock Units | • 64% for CEO and 60% for all other Executives of the long-term incentive target grant value. • Grants are earned after a three-year performance period with 50% of shares delivered after year three and 50% one year later. • Measure: Three-year cumulative Gap Inc. EBIT (awards earned at 0% – 250% of target prior to being modified). • Modifier: Relative Total Shareholder Return (TSR) vs. S&P Retail Select Index (awards modified up or down by 20%, for a total potential payout of 0% – 300% of target). | • Long-term EBIT goals in the performance-based restricted stock units focus on the importance of long-term operating performance within the Executive's control and accountability. • TSR provides an external metric that aligns Executives’ pay to shareholder returns relative to a peer index. • The goals and time horizon differ from the annual bonus plan that focuses on brand EBIT and net sales goals, and provide a focus on sustained company-wide achievement over a multi-year period. |
Stock Options | • 18% for CEO and 20% for all other Executives of the long-term incentive target grant value. • Time-based. • Vesting 25% per year over four years. | •Align Executives with shareholder interests, as the value from the option is only realized if our share price appreciates, and drives talent retention through a four-year service period. |
Time-Based Restricted Stock Units | • 18% for CEO and 20% for all other Executives of the long-term incentive target grant value. • Time-based. • Vesting 25% per year over four years. | • Drives talent retention through a four-year service period and shareholder alignment as their value is tied to our share price. |
It has been our practice to grant long-term incentives to Executives on an annual basis, usually in the first quarter of each fiscal year. This timing was selected because it follows the release of our annual financial results for the prior year and completion of annual compensation reviews. We also grant long-term incentives on other dates to newly hired Executivesexecutives and periodically in connection with promotions or for special recognition and retention.promotions. Grants are typically approved by the Committee at a meeting and are effective on the meeting date. However, the effective grant date for new hires is no earlier than thetheir first day of employment. Stock-based awards are granted under our 2016 Long-Term Incentive Plan, which was last amended and approved by our shareholders.shareholders in 2021.
In determining the fiscal 2021 long-term incentive structure and award amounts, the Committee considered the factors described below under “Compensation“Compensation Analysis Framework,” including a review of market data for comparable positions and each individual’s accumulated vested and unvested awards, current and potential realizable value over time using stock appreciation assumptions, vesting schedules, comparison of individual awards between Executives and in relation to other compensation elements, shareholder dilution and accounting expense.
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46 | Compensation Discussion and Analysis |
Stock Options
In fiscal 2021, stock options comprised 18% and 20% of the long-term incentive grant value for our CEO and all other Executives, respectively. We believe stock options focusare performance-based compensation that focuses Executives on managing the Company from the long-term perspective of an owner.a shareholder. Stock options provide value to the recipient only if the price of our stock increases.appreciates from the date of grant. All stock options granted to employeesExecutives during fiscal 20182021 had an exercise price equal to 100% of the closing price of our stock on the date of grant. The stock option grants received by our Executives are described in more detail in the"2021 Grants of Plan-Based Awards table on page 41.
Stock options granted to Executives typically vest based on continued service at a rate of 25% annually beginning one year from the grant date, which we have determined helps meetsupport our talent retention objectives. We have also used other vesting schedules to align with timing of compensation being forfeited at a prior employer for new hires or to align with critical retention periods. Stock options are typically granted with a maximum term of ten years, and vested options are normally exercisable foruntil the earlier of the expiration date or three months following employment termination. Vesting is generally accelerated upon death, disability or retirement (if retirement-eligible) if the stock options are held forgranted at least one year.
Stock Units and Performance Shares
A portionyear prior to the event. Additional circumstances under which vesting of long-term incentives is deliveredmay be accelerated are described in "2021 Potential Payments Upon Termination."
Time-Based Restricted Stock Units
Time-based restricted stock units representingrepresent full-value shares of our stock to drive performance, promote retention and foster a long-term shareholder ownership perspective. Unlike stock options, full-value share awards, in combination with our stock ownership requirements, subject Executives to the same downside riskstock price fluctuations experienced by shareholders but still encourage retention if our stock price does not appreciate, and help to focus Executives on sustaining the value of the Company. In fiscal 2021 we granted 18% and 20% of the long-term incentive grant value in time-based restricted stock units to our CEO and all other Executives, respectively. The time-based restricted stock unit grants received by our Executives are described in more detail in "2021 Grants of Plan-Based Awards."
Time-based restricted stock units granted to Executives typically vest based on continued service at a rate of 25% annually beginning one year from the grant date. Executives generally must be employed on the vesting date or awards are forfeited. Vesting is generally accelerated upon death, disability or retirement (if retirement-eligible) if the awards are granted at least one year from the event. Additional circumstances under which vesting of long-term incentives may be accelerated are described in "2021 Potential Payments Upon Termination."
Performance-Based Restricted Stock Units
Performance-based restricted stock units are intended to promote sustained improvement in financial performance and long-term value creation for shareholders. Additionally, they represent full-value shares of our stock to drive performance, promote retention and foster a long-term shareholder ownership perspective. In general, we believe the grant or vesting of a significant percentage of full-value shares for Executives should be based on performance against annual or long-term objectives unless they are made to offset compensation from prior employmentand therefore in fiscal 2021 granted 64% and 60% of the case of new hires. However, to balance our performance, retention, and ownership objectives,long-term incentive target grant value in the past we have grantedperformance-based restricted stock units orto our CEO and all other full-value shares that vest only for continued service with the Company, and we may do so in the future.Executives, respectively. The performance-based stock unit grants received by our Executives are described in more detail in the"2021 Grants of Plan-Based Awards table on page 41.."
StockPerformance-based restricted stock units that are granted to Executives other thantypically vest at a rate of 50% at the CEOend of the performance period, generally subject to continued service through the date the Committee determines the number of shares that are normally scheduled to vest over three or four years, althoughearned, if any, and 50% on the schedule may differone-year anniversary of the determination date based on critical retention or performance periods, orcontinued service with the vesting of compensation being forfeited at a prior employer for new hires. Executives generally must be employed on the vesting date or awards are forfeited.Company. Vesting is generally accelerated upon death, disability or retirement (if retirement-eligible) if the awards are held forgranted at least one year from the event and any performance conditions have been previously satisfied. Additional circumstances under which vesting of long-term incentives may be accelerated are described on pages 48-49 of this Proxy Statement.in "2021 Potential Payments Upon Termination."
LGP (Long-Term Growth Program)PRSU Program
Executives are currently eligible to earn performance-based restricted stock units under our PRSU program. The key features of the PRSU program are described below:
In 2021, each Executive was eligible to receive an annual award. Performance-based restricted stock units give the Executive the right to receive shares of our stock based on achievement against performance goals during a specified three-year performance period, subject to certain service requirements. Actual shares paid out, if any, will vary based on achievement of the performance goals. When establishing the three-year cumulative EBIT target, the Committee set a target level of performance they considered to be challenging but realistic in order to
2022 Proxy Statement |
Compensation Discussion and Analysis | 47 |
provide a meaningful incentive for Executives in light of our expected performance at the time the target was established. |
The number of actual shares that an Executive may earn after the end of the performance period is based on the attainment of a three-year cumulative EBIT goal measured at the Gap Inc. level. The award is then modified based on relative total shareholder return, which measures our stock performance against the S&P Retail Select Index during the same three-year period. The potential payout range as a percentage of the target award based on the three-year EBIT goal attainment is 0% to 250%. The award will then be modified up or down by up to 20% (for a total opportunity of 0% to 300% of target) based on the level of relative total shareholder return performance.
50% of the award is payable at the end of the three-year performance period, generally subject to continued service with the Company through the date that the Committee determines the number of shares that are earned, if any, and the remaining 50% will vest on the one-year anniversary of such determination date based on continued service with the Company.
The table below describes the potential payout range as a percentage of the target award for performance-based restricted stock units granted in fiscal 2021 (for the fiscal 2021 - fiscal 2023 performance period). The target number of shares was determined using the 20-trading day simple average of our closing stock price between February 12, 2021 and March 12, 2021 and the performance-based restricted stock unit target grant value, which was 64% and 60% of the total long-term incentive target grant value for our CEO and all other Executives, respectively. The performance-based restricted stock unit grants represent only an opportunity to earn actual shares of our stock for achievement of performance goals over the performance period. The associated amount listed in the “2021 Summary Compensation Table” under Stock Awards is the grant date fair value for accounting purposes, which is the required disclosure under SEC rules, and is not necessarily the compensation that will be actually realized by each Executive and also differs from the intended target value at grant in March 2021. All payments are made in shares at vesting and dividends are not paid or accrued on unvested shares.
|
| Fiscal 2021 Award Potential Payout | ||||||||
Name |
| Target Value |
|
| Target Number of Performance Shares |
|
| Potential Payout Range as Percentage of Target Shares | ||
Sonia Syngal |
| $ | 6,400,000 |
|
|
| 245,903 |
|
| 0 – 300% |
Katrina O’Connell |
| $ | 1,500,000 |
|
|
| 57,633 |
|
| 0 – 300% |
Mark Breitbard |
| $ | 1,650,000 |
|
|
| 63,396 |
|
| 0 – 300% |
Nancy Green |
| $ | 2,400,000 |
|
|
| 92,213 |
|
| 0 – 300% |
Mary Beth Laughton |
| $ | 1,200,000 |
|
|
| 46,106 |
|
| 0 – 300% |
Target values for Ms. Syngal, Ms. O’Connell, Mr. Breitbard, Ms. Green and Ms. Laughton represent the approximate value of the target shares in March 2021. Long-term incentives to Executives were granted in March 2021 as part of our regular annual grant cycle. The value at grant in March 2021 differs from the Summary Compensation Table (SCT) value because the performance-based restricted stock unit value in the SCT represents the fair value for accounting purposes.
The following table shows the potential award modification based on the level of relative total shareholder return performance. Gap Inc. total shareholder return will be compared to the total shareholder return of the companies comprising the S&P Retail Select Index. Payouts between the 25th and 75th percentiles are interpolated.
Percentile Rank | Modifier Payout | ||
75th Percentile or Higher | 120% | ||
50th Percentile | 100% | ||
25th Percentile or Lower | 80% |
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48 | Compensation Discussion and Analysis |
Outstanding Long-Term Growth Plan (LGP) Grants
After fiscal 2019, no new grants were made under the LGP and we transitioned to the new PRSU program, described above, with new metrics for Executives starting in fiscal 2020.
Executives were eligible to participate in the LGP prior to fiscal 2020, which iswas intended to promote sustained improvement in financial performance and long-term value creation for shareholders, while recognizing the inherent difficulty in setting long-term performance goals in the volatile retail industry. The key features of the program are described below:
Each Executive was eligible to receive an annual award of performance-based restricted stock units. Performance-based restricted stock units gave the Executive the right to receive a number of shares of our stock based on achievement against performance goals during a specified three-year performance period, subject to certain service requirements. Actual shares paid out, if any, varied based on achievement of the performance goals. The number of actual shares that an Executive was eligible to earn after the performance period was based on the average attainment of separate annual EBIT goals that were established each year over three years, measured at the division level for those with division responsibilities and the corporate level for those with Company-wide responsibilities. The award was then modified based on the attainment of a three-year cumulative Company EBIT goal set at the beginning of the same three-year period. The | |
The table below describes the potential payout range as a percentage of the target award for the fiscal 2018-2020 performance period.based on average annual EBIT attainment was 0% to 250%. The target numberaward was then modified up or down by up to 20% (for a total opportunity of shares was determined using our closing stock price0% to 300% of target) based on the datelevel of grant and a percentageattainment of base salary. Mr. Fiske joinedthe cumulative Company EBIT goal.
50% of the award was payable at the end of the three-year performance period, generally subject to continued service with the Company in June 2018 as President & CEO, Gap brand and received a prorated LGP grant for fiscal 2018. The performance share grants represent only anopportunity to earn actual shares of our stock for achievement of performance goals over three years. The associated amount listed inthrough the Summary Compensation Table under Stock Awards isdate that the grant date fair value for accounting purposes, which isCommittee determined the required disclosure under SEC rules, not necessarily the compensation that will be actually realized by each Executive. The same threshold, target, maximum earnings goals, and adjustments (except any favorable impact from the discretionary bonus reduction is excluded), described above under “Fiscal 2018 Annual Bonus” applied to the 2018 performance year under the LGP. The same minimum performance goal used for the fiscal 2018 annual bonus was also used for the LGP and established the maximum number of shares that could be paid to each Executive, subject to downward adjustment bywere earned, if any, with the remaining 50% vesting on the one-year anniversary of such determination date based on continued service with the Company.
The following table shows the fiscal 2021 EBIT goal expressed as a percentage of fiscal 2019 actual results. The goal for fiscal 2021 was set at what the Committee based uponconsidered to be a realistic level to provide a meaningful incentive for Executives to improve performance in light of our expected performance at the achievementtime it was established. Also shown below is the actual percentage achieved expressed as a percentage of fiscal 2019 actual results, after adjustments to exclude items that were not considered when the goals were set, which included any restructuring costs, government-mandated full day store closures, and the Gap Europe franchise transition. No additional adjustments to the results were made other than the neutralization of foreign exchange rate fluctuations.
|
| FY2021 EBIT Goal as a Percentage of FY2019 Actual EBIT |
| Actual Fiscal 2021 Percentage Achieved After Adjustments | ||||
|
| Threshold |
| Target |
| Maximum |
| Actual |
Gap Inc. Annual EBIT |
| 81.0% |
| 88.3% |
| 100.6% |
| 93.3% |
The following table shows the annualized fiscal 2019 through fiscal 2021 cumulative EBIT goal expressed as a percentage of fiscal 2018 actual results. Although the 3-year EBIT goal is not assessed on an annual basis, the table below shows the annualized 3-year EBIT goal relative to the most recently completed fiscal year prior to the performance cycle in order to provide a meaningful comparison of the financial performance goals and other factors determined byEBIT goal against prior performance. The goal for fiscal 2019 through fiscal 2021 was set at what the Committee considered to be a realistic level to provide a meaningful incentive for Executives to improve performance in its sole discretion. We use earnings for both annual cash awards and performance-based long-term incentives because we believe thatlight of our expected performance at the time it was established. Also shown below is the best metric to drive shareholder value. The useactual percentage achieved expressed as a percentage of annual goals over a three-year period allows us to set realistic goals while focusing on overall long-term Companyfiscal 2018 actual results. All payments are made in shares at vesting and dividends are not paid or accrued on unvested shares.
Fiscal 2018 Award Potential Payout | ||||||||
Name | Target Percentage of Base Salary | Target Number of Performance Shares | Potential Payout Range as Percentage of Target Shares | |||||
Arthur Peck | 550 | % | 264,505 | 0 – 300 | % | |||
Teri List-Stoll | 180 | % | 51,659 | 0 – 300 | % | |||
Mark Breitbard | 275 | % | 81,058 | 0 – 300 | % | |||
Neil Fiske | 275 | % | 60,793 | 0 – 300 | % | |||
Brent Hyder | 120 | % | 26,062 | 0 – 300 | % |
Company / |
| Annualized FY2019-2021 EBIT Goal as a Percentage of FY2018 Actual EBIT |
| Actual Fiscal 2019-2021 EBIT Percentage Achieved | ||||
Division |
| Threshold |
| Target |
| Maximum |
| Actual |
Gap Inc. Cumulative EBIT |
| 62.0% |
| 67.6% |
| 77.0% |
| 30.5% |
2022 Proxy Statement |
Compensation Discussion and Analysis | 49 |
The following table describes the actual achievement levels and actual shares earned for the LGP awards for the completed fiscal 2016-20182019-2021 performance period for each eligible Executive.Ms. Syngal and Mr. Breitbard. Ms. O’Connell, Ms. Green and Ms. Laughton were not granted a fiscal 2019 LGP award.
Fiscal 2016 Award Achievement | ||||||||||||||||||||
Name | Target Shares | Year 1, Year 2, & Year 3 (2016-2018) Actual Percentage Achieved | Three Year Average | Actual Cumulative Company Earnings Goal Modifier | Actual Percentage Achieved(1) | Actual Shares(1) | ||||||||||||||
Arthur Peck | 221,172 | 76% | 188% | 0 | % | 88 | % | -20 | % | 70 | % | 155,636 |
|
| Fiscal 2019 Award Achievement | ||||||||||||||||||||
Name |
| Target Shares |
|
| Year 1, Year 2, & Year 3 (2019-2021) Actual Percentage Achieved(1) |
| Three Year Average |
| Actual Cumulative Company EBIT Goal Modifier |
| Actual Percentage Achieved(2) |
| Actual Shares Earned(3) | |||||||||
Sonia Syngal |
|
| 118,348 |
|
|
| 0 | % |
|
| 125 | % |
| 155% |
| 93% |
| -20% |
| 75% |
| 88,510 |
Mark Breitbard |
|
| 102,210 |
|
|
| 0 | % |
|
| 125 | % |
| 155% |
| 93% |
| -20% |
| 75% |
| 76,440 |
(1) | Due to the unprecedented impact that COVID-19 had on our business, fiscal 2020 was divided into two halves. Attainment was 0% for the first half and 250% for the second half, and as a result the average attainment for fiscal 2020 was 125%. |
(2) | "Actual |
(3) | "Actual |
The table below describes, for each eligible Executive, the actual percentage achievement levels for the completed fiscal years under the LGP awards for the fiscal 2017-2019Benefits and fiscal 2018-2020 performance periods. These outstanding awards are still subject to the remaining performance periods and the cumulative Company earnings goal over the same three-year performance period.
Fiscal 2017 Award Achievement | Fiscal 2018 Award Achievement | ||||||||||||
Name | Target Shares | Year 1 (2017) Actual Percentage Achieved | Year 2 (2018) Actual Percentage Achieved | Target Shares | Year 1 (2018) Actual Percentage Achieved | ||||||||
Arthur Peck | 321,261 | 188 | % | 0 | % | 264,505 | 0 | % | |||||
Teri List-Stoll | 66,907 | 188 | % | 0 | % | 51,659 | 0 | % | |||||
Mark Breitbard | 83,759 | 0 | % | 0 | % | 81,058 | 0 | % | |||||
Neil Fiske | N/A | N/A | N/A | 60,793 | 0 | % | |||||||
Brent Hyder | 23,083 | 188 | % | 0 | % | 26,062 | 0 | % |
CEO RETENTION ACTIONS
The Committee, in consultation with the Board of Directors, reviewed the salary and long-term incentives in place for Mr. Peck in light of the significant organization and strategic changes the Company is making under his leadership to transform and position the Company to achieve its core growth and financial performance objectives. As the Company is in a critical phase of the transformation, the Committee, in consultation with the Board of Directors, determined it was crucial to retain him and increase his ownership stake in the Company, to create further alignment with shareholder interests. In light of this, the Committee approved an increase to his salary to $1,550,000 and a restricted stock unit grant of 345,303 shares in May 2018. The grant will vest 100% on the third anniversary of the grant date to promote long-term retention. The net shares released or acquired upon vesting, must be held for one year and the holding period remains in effect regardless of employment status. In addition, to further ensure Mr. Peck retains a substantial ownership position, he has agreed that no shares currently owned or acquired through the Company stock programs will be sold, transferred or encumbered other than to satisfy tax withholding obligations, or, in the case of transfers by gift to nonprofits and transfers for estate planning purposes, the transferred shares will be restricted from sale during the same period. This grant is intended to be a one-time action and we do not expect to make similar grants to Mr. Peck in the future.
OTHER NEW HIRE AND RETENTION ACTIONS
Ms. List-Stoll and Mr. Hyder received a stock unit grant of 125,000 shares and 100,000 shares, respectively, in March 2018 in light of expanded responsibilities, as well as to position the retention value of their long-term incentives appropriately relative to other Executives and to create further alignment with shareholder interests.
Mr. Fiske was paid a $400,000 signing bonus to recruit him from his prior employer. The bonus is repayable in full to the Company in the case of a voluntary termination or termination for cause within one year of his hire date, and half must be repaid should such a termination occur between one and two years from his hire date. Mr. Fiske also received an initial stock option grant covering 250,000 shares and an initial stock unit grant covering 130,000 shares to induce him to join the Company. Both the stock options and stock units vest based on continued service at a rate of 25% annually beginning one year from the grant date. In addition, Mr. Fiske received an annual bonus guaranteed at the target amount, prorated for the time he was in the role during the fiscal year.
BENEFITS AND PERQUISITESPerquisites
Executives generally are eligible for the same health and welfare plans as other full-time Gap Inc. employees, including medical, dental, life and disability insurance, and retirement plans. Although not a significant part of total compensation, we also provide limited additional benefits and perquisites to our Executives, which we believe are reasonable and consistent with our overall compensation objectives. These perquisites and benefits include:include financial planningcounseling services, or an allowance to cover these services, ashelp Executives typically haveconcentrate on their responsibilities while supporting financial wellness and managing more complex financial planning requirements; participation in a deferred compensation plan that is offered to all highly compensated employees, as a means to help Executives meet their retirement savings goals; and matching charitable donations, up to certain annual limits, which are available to all employees.employees given the value that we place on supporting communities. For Mr. PeckMs. Syngal only, we allow limited personal use of a Company airplane at an amount not to exceed $150,000 per year based on the incremental cost to the Company in order to provide ana safer and efficient way for Mr. PeckMs. Syngal to manage travel and time commitments.commitments, particularly during the pandemic.
The value of the benefits and perquisites received by our Executives are described in more detail in the footnotes to the “2021 Summary Compensation Table beginning on page 40..”
STOCK OWNERSHIP REQUIREMENTS FOR EXECUTIVE OFFICERSStock Ownership Requirements for Executive Officers / HEDGING AND PLEDGING PROHIBITIONSHedging and Pledging Prohibitions
We have minimum stock ownership requirements for certain executive positions, including for all Executives, to more closely link executive and shareholder interests, to balance potential rewards and risks, and to encourage a long-term perspective in managing the Company. Each covered executive has five years from the date of his or her appointment to reach the requirement. Mr. Peck has also agreed to additional holding requirements for the 345,303 shares of restricted stock units granted in May 2018 as well as for any shares he currently owns or acquires, which is further described in the CEO Retention Actions section on page 33.
As of February 2, 2019, allAll Executives had either met the shares requirement in the table below or had remaining time and were on track to do so.so as of the date of this Proxy Statement.
Requirements (shares) | ||||
CEO, Gap Inc. | 300,000 | |||
Brand President & CEO | 75,000 | |||
Corporate Executive Vice President | 40,000 |
Executives not yet meeting the requirement must retain 50% of their after-tax shares acquired through our stock compensation programs until the requirement is reached.
For purposes of determining stock ownership levels, in addition to shares held directly, certain forms of equity interests in the Company count towards the stock ownership requirement, including non-performance-basedtime-based restricted stock units (vested or unvested). A complete description
www.gapinc.com |
50 | Compensation Discussion and Analysis |
Our insider trading policy applicable to executivesCompany officers prohibits speculation in our stock, including short sales, hedging or publicly-tradedpublicly traded option transactions. We also prohibit executivesExecutives from pledging Company stock as collateral for a loan or for any other purpose.
Our hedging policy is described in more detail in Table of Contents"Corporate Governance—Stock Ownership Guidelines for Directors."
TERMINATION PAYMENTSTermination Payments
Various agreements, as described in more detail beginning on page 48,in "2021 Potential Payments Upon Termination," provide for severance benefits in the event of a termination of employment. These benefits were selected considering competitive conditions and customary practices at the time of their implementation. We have no severance arrangements specific to a change in control.
COMPENSATION ANALYSIS FRAMEWORKCompensation Analysis Framework
The Compensation Committee reviews executive compensation at least annually. The Committee’s review includesCommittee approaches executive compensation as part of the overall strategic framework for total rewards at the Company. This framework applies to all employees at the Company and reflects our global rewards principles, which include:
Sharing in the success of the Company;
Rewarding for performance; and
Being fair and equitable.
The Committee reviews base salary, annual incentives, long-term incentives, and the value of benefits and perquisites. Each element is reviewedperquisites, both individually and inas part of the total using tally sheets, which are intended to summarize all elements of total actual and potential compensation and wealth accumulation. The tally sheets present the dollar value of each compensation component, including accumulated vested and unvested long-term incentive gains and potential gains using stock price assumptions, vesting schedules for long-term incentive awards, accumulated deferred compensation and potential termination-related payments.package.
The Compensation Committee also uses a summary of compensation data covering other peer companies to support its analysis. The Committee selected a broad spectrum of retail and consumer products companies presented by Pay Governance LLC for purposes of comparing market compensation levels (the “peer group”) because we have both recruited from and lost executive talent to these industriesthis industry in the past, and to ensure appropriate scope and complexity relative to the Company. These companies were selected based upon their strong brand recognition and global presence, omnichannel strategies, complexity of operations with multiple brand businesses, and comparable financial and valuation characteristics. Because the size of thecompanies in our peer group companies varies considerably, regression analysis is used where appropriate to adjust the compensation data for differences in CompanyGap Inc. and division revenues.
The peer group is reviewed by the Committee each year. The peer group used in 20182021 was comprised of the companies listed below, and was unchangedwhich did not change from 2017.the prior year.
Peer Group
Best Buy Co., Inc. | McDonald’s Corporation | Starbucks Corporation | ||
Booking Holdings Inc. | Nike, Inc. | Target Corporation | ||
Costco Wholesale Corporation | Nordstrom, Inc. | The TJX Companies, Inc. | ||
eBay Inc. | PVH Corporation | VF Corporation | ||
L Brands, Inc.(1) | Qurate Retail, Inc. | Wayfair, Inc. | ||
Levi Strauss & Co. | Ross Stores, Inc. | |||
(1) | L Brands separated into Bath & Body Works and Victoria’s Secret in 2021. Fiscal year 2020 L Brands data was used for benchmarking purposes. |
The majority of the peer group providesCompensation Committee reviews compensation data throughfor Executives based on an analysis of commercial surveys and proxy-reported data conducted by Willis Towers Watson, an international consulting company.Pay Governance LLC. The surveys provideanalysis provides levels of base salary, annual incentives, and long-term incentive grant values in a summarized form, and we believe that this data provides a reasonable indicator of total compensation values for the peer group.form. This data is supplemented by information obtained through proxy statement disclosures and other public sources. The Compensation Committee uses the peer group data along with the tally sheet data as a frame of reference to inform its compensation review and decisions, but compensation is not set to meet specific benchmarks or percentiles.
In conducting its analysis and determining compensation, the Committee also considers the following factors, where relevant:
Business and talent strategies; The nature of each Executive’s role;
Individual performance (based on specific financial and operating objectives for each Executive, as well as the demonstration of leadership behaviors); Future potential contributions by the Executive; Internal comparisons to other Executives; Internal consistency with our broad-based practices and programs; Comparisons of the value and nature of the compensation elements to each other and in total; and Retention risk. As described below, the Committee also considers management’s recommendations and advice from the Committee’s independent compensation consultant when appropriate. The Committee periodically reviews the accounting and tax implications of each compensation element, and shareholder dilution in the case of equity awards.
The Committee has engaged Frederic W. Cook & Co. as its independent compensation consultant to advise the Committee
Accounting and Tax Considerations Accounting, tax and related financial implications to the Company and Executives are considered during the analysis of our compensation and benefits program and individual elements. Overall, the Committee seeks to balance attainment of our compensation objectives with the need to maximize current tax deductibility of compensation that may impact In general, base salary, annual cash incentive bonus payments, and the costs related to benefits and perquisites are generally recognized as compensation expense at the time they are earned or provided. Share-based compensation expense is recognized in our consolidated Subject to the exceptions and limits below, we generally deduct for federal income tax purposes all payments of compensation and other benefits to Executives. We do not deduct deferred compensation until the year that the deferred compensation is paid to an Executive. Section 162(m) of the Internal Revenue Code Section 4999 and Section 280G of the Internal Revenue Code provide that executives could be subject to additional taxes if they receive payments or benefits that exceed certain limits in connection with a change in control of the Company and that the Company could lose an income tax deduction for such payments. We have not provided any Executive with tax gross-ups or other reimbursement for tax amounts the Executive might be required to pay under Section 4999.
Recovery and Adjustments to Awards The Company’s clawback policy for executive officers
The Compensation and Management Development Committee (the “Committee”) has reviewed and discussed this Compensation Discussion and Analysis with management. Based on the review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be
Lisa Donohue Jorge P. Montoya Salaam Coleman Smith Notwithstanding anything to the contrary in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, this report shall not be deemed to be incorporated by reference into any such filing.
2021 Summary Compensation Table The following table shows compensation information for fiscal
Details on the figures included in this column for 2021 are reflected in the following table. Details on the figures included in this column for 2020 and 2019 are included in our 2021 and 2020 Proxy Statements.
The total grant date fair value of LGP 4 detailed in the following table is calculated based on the share price as of the last day of each respective fiscal year and a maximum performance condition achievement over the three-year period. The grant date fair value for year 1 of LGP 4 is $14.13, for year 2 of LGP 4 is $20.25 and for year 3 of LGP 4 is $17.29. The grant date fair value of PRSU 2, which is earned based on performance goals that are measured over a three-year performance period, is $34.91. For a description of the Company’s Long-Term Growth Program and Performance Restricted Stock Unit Program, please see "Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentives—Outstanding Long-Term Growth Plan (LGP) Grants" and "Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentives—PRSU Program."
2021 Grants of Plan-Based Awards The following table shows all plan-based awards granted to the named executive officers during fiscal
2021 Outstanding Equity Awards at Fiscal Year-End The following table shows all outstanding equity awards held by the named executive officers at the end of fiscal
2021 Option Exercises and Stock Vested The following table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the named executive officers during fiscal
2021 Nonqualified Deferred Compensation The table below provides information on the nonqualified deferred compensation activity for the named executive officers in fiscal
The
Gap Inc. is one of the largest retailers in the United States. While our employees work in a variety of roles and settings, the majority of our employees work in stores. Our store workforce consists largely of part-time, hourly employees who weave their part-time schedule together with other life commitments, such as education or family responsibilities. Equal pay for equal work is a core value at Gap Inc. Our co-founders Don and Doris Fisher each contributed equal amounts of money to open the first Gap store on Ocean Avenue in San Francisco. They continued to run the business as equals and established a culture of equality that continues to inspire us today. Our commitment to equality began with our co-founders and continues to be a cornerstone of our company. In 2014, we were the first Fortune 500 company to announce that we strive to pay employees equally for equal work. We continue to conduct annual pay equity assessments that are periodically validated by a third party in order to help us target and maintain pay equity across our workforce. For fiscal year To identify the median employee and determine the annual total compensation of the median employee, we used the following methodology:
2021 Potential Payments Upon Termination
The Company has entered into agreements with These agreements provide that, if the executive is involuntarily terminated without cause (as specified in each respective agreement) prior to
The following table shows the amounts that each executive would have been eligible to receive under the agreements described above assuming that they had been terminated without cause on
Acceleration of Equity Upon Change in Control Under the 2016 Long-Term Incentive Plan, in the event of a change in control, any acquiror may assume or substitute outstanding awards with substantially equivalent awards of the acquiror's stock. Except as set forth in an award agreement, outstanding awards which are neither assumed nor substituted by the acquiror in the change in control become fully vested immediately prior to the change in control. The table below shows the value of all unvested options and unvested stock awards that would have become vested in the event of a change in control on
Death, Disability or Retirement Each of our named executive officers is generally entitled to the following additional death, disability or retirement benefits:
The table below shows the value of all unvested stock options and unvested stock awards that would have become vested in the event of the named executive officer’s death (and, in the case of stock options, termination on account of disability) or, in the case of Ms. Green, also in the event of her retirement, on January 29, 2022, the last day of our 2021 fiscal year.
Equity Compensation Plan Information The following table provides information as of
The following table sets forth certain information as of March
Note Regarding Various Fisher Family Holdings SEC rules require reporting of beneficial ownership of certain shares by multiple parties where voting and/or dispositive power over those shares is shared by those multiple parties. As a result, the following shares are listed multiple times in the table above. The shares described in footnotes (3), (4) and (5) above for which voting and investment power is shared by Messrs. John J. Fisher, Robert J. Fisher, and/or William S. Fisher actually represent an aggregate of In addition, the shares described in footnotes (3), (4) and (5) above for which sole dispositive power is held by one person and, pursuant to irrevocable proxies, sole voting power is held by a different person actually represent an aggregate of For purposes of the above table, removing the shares counted multiple times (described above) results in an aggregate total beneficial ownership of The aggregate total beneficial ownership of Mrs. Doris F. Fisher and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher, including charitable entities for which one or more of the Fishers is a trustee, is
Questions and Answers About the Annual Meeting and Voting Who are the proxyholders and how were they selected? The proxyholders are How much did this proxy solicitation cost and who pays for it? The Company will pay all expenses in connection with the solicitation of the proxies relating to this Proxy Statement, including the charges of brokerage houses and other custodians, nominees or fiduciaries for forwarding documents to security owners. In addition to solicitation by mail, certain of our officers, directors and employees (who will receive no extra compensation for their services) may solicit proxies by email, by telephone, by fax or in person. We have also retained the services of D.F. King & Co. to solicit the proxies of certain shareholders for the Annual Meeting and provide other consultation services. The cost of D.F. King’s services is estimated to be How can I electronically access the proxy materials? We are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we are sending a Notice of Internet Availability of Proxy Materials. That Notice contains instructions for accessing the materials and voting via the Internet. The Notice also contains information on how to request a paper copy of the proxy materials by mail. We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on the environment. This Proxy Statement and our Can I receive proxy materials for future annual meetings by email rather than receiving a paper copy of the Notice? If you are a Shareholder of Record or a Beneficial Owner, you may elect to receive the Notice or other future proxy materials by email by logging into www.proxyvote.com. If you are a Beneficial Owner, you can also contact your broker directly to opt for email delivery of proxy materials. If you choose to receive proxy materials by email, next year you will receive an email with instructions on how to view those materials and vote before the next annual meeting. Your choice to obtain documents by email will remain in effect until you notify us or your broker otherwise. Delivering future notices by email will help us further reduce the cost and environmental impact of our shareholder meetings. What is “householding”? Under SEC rules, a single package of Notices may be sent to any household at which two or more shareholders reside if they appear to be members of the same family, unless contrary instructions have been received. Each shareholder continues to receive a separate Notice within the package. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting Broadridge toll free at 1-866-540-7095, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders who wish to receive a separate set of proxy materials should contact Broadridge at the same phone number or mailing address. What is the difference between a shareholder of record and a beneficial owner of shares? Shareholder If your shares are registered directly in your name with the Company’s transfer agent, Equiniti Trust Company, you are considered the shareholder of record with respect to those shares. Beneficial Owner If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street
What is the date, time and format of the Annual Meeting?
How do I attend the 2022 annual meeting? In order to access the virtual Annual Meeting, you will be asked to provide your 16-digit control number. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of share ownership, are posted at www.virtualshareholdermeeting.com/GAP2022. If you hold shares beneficially in street name, you may only vote at the virtual annual meeting if you obtain a control number from the broker, trustee or Will the Annual Meeting Yes. You may attend the Annual Meeting
How do I submit a question at the Annual Meeting? You may submit a question during the Annual Meeting via our virtual shareholder meeting website, www.virtualshareholdermeeting.com/GAP2022. If your question is properly submitted during the relevant portion of the meeting agenda, the chair of the meeting intends to respond to your question during the live webcast. Questions on similar topics may be combined and answered together. A webcast replay of the Annual Meeting, including the Q&A session, will also be archived on www.gapinc.com (follow the Investors link). The webcast will be recorded and available for replay on www.gapinc.com for at least 30 days following the Annual Meeting. What if the Company encounters technical difficulties during the Annual Meeting? If we experience technical difficulties during the Annual Meeting (e.g., a temporary or prolonged power outage), the chair of the meeting will determine whether the Annual Meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Annual Meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify shareholders of the decision via www.virutalshareholdermeeting.com/GAP2022. If you encounter technical difficulties accessing our Annual Meeting or asking questions during the Annual Meeting, a support line will be available on the login page of the virtual meeting website. Who may vote at the Annual Meeting? You can vote your shares via the Internet at our Annual Meeting if you were a shareholder at the close of business on the Record Date. Are votes confidential? Who counts the votes? Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects the voting privacy of our shareholders. Your vote will not be disclosed to anyone, except: As required to tabulate and certify the vote; As required by law; and/or If you provide written comments on your proxy card (the proxy card and comments would then be forwarded to us for review). We retain an independent tabulator and inspector of election to receive and tabulate the proxies and to certify the voting results. What happens if I do not give specific voting instructions? Shareholder If you are a shareholder of record and you sign, date and return a proxy card but do not specify how to vote, your shares will be voted in accordance with the recommendations of the Board of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the Annual Meeting or any adjournments or postponements thereof.
Beneficial Owner If you are a beneficial owner and hold your shares through a broker, bank, or other similar organization, and you do not provide the broker or other nominee that holds your shares with voting instructions, the broker or other nominee will determine if it has the discretionary authority to vote on a particular matter. Brokers and other nominees have the discretion to vote on routine matters such as Proposal 2 (ratification of the selection of independent registered public accounting firm), but do not have the discretion to vote on non-routine matters such as Proposal 1 (election of directors) What constitutes a “quorum” for the Annual Meeting? The holders of a majority of the outstanding shares of our common stock must be present Abstentions are included in the determination of shares present for quorum purposes. Because abstentions represent shares entitled to vote, the effect of an abstention will generally be the same as a vote against a proposal. However, abstentions will have no effect on the election of directors. How do I vote my shares? You may direct your vote by Internet, telephone or mail. Your vote must be received by the deadline specified on the proxy card or voting instruction form, as applicable.
What are broker non-votes and how are they counted? Broker non-votes occur when nominees, such as brokers and banks holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. Brokers and other nominees may vote without instruction only on “routine” proposals. On “non-routine” proposals, nominees cannot vote without instructions from the beneficial owner, resulting in so-called “broker
firm is the only routine proposal on the agenda for our Annual Meeting. The other So long as the broker has discretion to vote on at least one proposal, broker non-votes are counted in determining a quorum but are not counted for purposes of What vote is required to approve each proposal? Election Election of directors by shareholders will be determined by a majority of the votes cast with respect to each director Other Proposals The other How will any other items be voted upon at the Annual Meeting? If any other matter not mentioned in this Proxy Statement is properly brought before the meeting, including without limitation (i) matters about which the proponent failed to notify us on or before February May I change my vote? You may revoke your proxy at any time before its exercise by writing to our Corporate Secretary at our principal executive offices as follows: Corporate Secretary Gap Inc. Two Folsom Street San Francisco, California 94105 You may also revoke your proxy by timely delivery of a properly executed, later-dated proxy (including a telephone or Internet vote) or by voting When are shareholder proposals for the If a shareholder would like us to consider including a proposal in our Proxy Statement and form of proxy for our Annual Meeting in
When do I need to notify the Company of any proposed business or director nominees for the 2023 Annual Meeting? Our Amended and Restated Bylaws provide that in order for a shareholder to bring business before our Annual Meeting in In order for a shareholder to propose director nominees to be considered for election to the Board at our Annual Meeting in 2023, the notice must also contain the additional information required by our Bylaws, including the identity and background of each nominee, the number of shares of the Company’s stock beneficially owned by each nominee, any arrangements or understandings between the nominee and the shareholder and any other persons pursuant to which the nomination is being made, any other information relating to the nominee that must be disclosed in proxy solicitations or is otherwise required for the election of directors under the proxy rules of the SEC (including such nominee’s written consent to being named in the proxy statement and to serving as a director if elected), and certain information regarding material relationships between the shareholder and the nominee. If a shareholder fails to submit the notice by February A copy of the full text of the Bylaw provisions relating to our advance notice In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended, no later than March 11, 2023. By Order of the Board of Directors,
Julie Gruber Corporate Secretary
In this Proxy Statement, the Company has disclosed information which may be considered forward-looking within the meaning of Information Referenced In this Proxy Statement The content of the websites referred to in this Proxy Statement are not incorporated by reference into this Proxy Statement.
Gap Inc.
SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com - Go to www.virtualshareholdermeeting.com/GAP2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS VOTE BY PHONE - 1-800-690-6903 VOTE BY MAIL
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D71621-P66175 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY THE GAP, INC. The Board of Directors recommends you vote "FOR" each listed director nominee. 1. Election of Directors. For Against Abstain Nominees: 1a. Elisabeth B. Donohue 1b. Robert J. Fisher 1c. William S. Fisher 1d. Tracy Gardner 1e. Kathryn Hall 1f. Bob L. Martin 1g. Amy Miles 1h. Chris O'Neill 1i. Mayo A. Shattuck III 1j. Salaam Coleman Smith 1k. Sonia Syngal The Board of Directors recommends you vote "FOR" Items 2 and 3. For Against Abstain 2. Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending on January 28, 2023. 3. Approval, on an advisory basis, of the overall compensation of the named executive officers. 4. Transact such other business as may properly come before the meeting. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: D71622-P66175 THE GAP, INC. The undersigned hereby appoint(s) This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.
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